BlackBerry Reports Fourth Quarter and Year-end Fiscal 2013 Results

BlackBerry-Logo-Black

“We have implemented numerous changes at BlackBerry over the past year and those changes have resulted in the Company returning to profitability in the fourth quarter,” said Thorsten Heins, President and CEO. “With the launch of BlackBerry 10, we have introduced the newest and what we believe to be the most innovative mobile computing platform in the market today. Customers love the device and the user experience, and our teams and partners are now focused on getting those devices into the hands of BlackBerry consumer and enterprise customers.”

WATERLOO, ONTARIO–(Marketwire – March 28, 2013) – Research In Motion Limited (doing business as BlackBerry) (NASDAQ:BBRY)(TSX:BB), a world leader in the mobile communications market, today reported financial results for the three months and fiscal year ended March 2, 2013 (all figures in U.S. dollars and U.S. GAAP, except where otherwise indicated).

Q4 Highlights:

— Revenue of $2.7 billion
— GAAP income from continuing operations of $94 million, or $0.18 per
share diluted
— Adjusted income from continuing operations of $114 million, or $0.22 per
share diluted
— Gross margin of 40% driven by higher average selling prices and hardware
margins
— Shipments of 6 million smartphones, including approximately 1 million
BlackBerry 10 units
— Subscriber base of approximately 76 million
— Cash flow from operations of $219 million, cash and investments balance
of $2.9 billion

Q4 Results

Revenue for the fourth quarter of fiscal 2013 was approximately $2.7 billion, down $49 million or 2% from approximately $2.7 billion in the previous quarter and down 36% from $4.2 billion in the same quarter of fiscal 2012. The revenue breakdown for the quarter was approximately 61% for hardware, 36% for service and 3% for software and other revenue. During the quarter, BlackBerry shipped approximately 6 million BlackBerry smartphones and approximately 370,000 BlackBerry PlayBook tablets.

GAAP income for the quarter from continuing operations was $94 million, or $0.18 per share diluted, compared with the GAAP income from continuing operations of $14 million, or $0.03 per share diluted, in the prior quarter and a GAAP loss from continuing operations of $118 million, or $0.23 per share diluted, in the same quarter of fiscal 2012. GAAP income for the quarter, including income from discontinued operations, was $98 million, or $0.19 per share diluted, compared with the GAAP income including loss from discontinued operations of $9 million, or $0.02 per share diluted, in the prior quarter and a GAAP loss, including loss from discontinued operations of $125 million, or $0.24 per share diluted, in the same quarter of fiscal 2012.

Adjusted income from continuing operations for the fourth quarter was $114 million, or $0.22 per share diluted. Adjusted income and adjusted diluted earnings per share (“EPS”) exclude the impact of pre-tax charges of $29 million ($20 million on an after-tax basis) related to the Cost Optimization and Resource Efficiency (“CORE”) program. This impact on GAAP income from continuing operations and diluted EPS are summarized in the table below.

The total of cash, cash equivalents, short-term and long-term investments was approximately $2.9 billion as of March 2, 2013 and at the end of the previous quarter. Cash flow from operations in the fourth quarter was approximately $219 million. Uses of cash included intangible asset additions of approximately $235 million and capital expenditures of approximately $88 million.

“We have implemented numerous changes at BlackBerry over the past year and those changes have resulted in the Company returning to profitability in the fourth quarter,” said Thorsten Heins, President and CEO. “With the launch of BlackBerry 10, we have introduced the newest and what we believe to be the most innovative mobile computing platform in the market today. Customers love the device and the user experience, and our teams and partners are now focused on getting those devices into the hands of BlackBerry consumer and enterprise customers.”

Heins added, “As we go into our new fiscal year, we are excited with the opportunities for the BlackBerry 10 platform, and the commitments we are seeing from our global developers and partners. We are also excited about the new, dynamic culture at BlackBerry, where we are laser-focused on continuing to drive efficiency and improve the Company’s profitability while driving innovation. We have built an engine that is able to drive improved financial performance at lower volumes, which should allow us to generate additional benefits from higher volumes in the future.”

Outlook

The Company will be increasing its marketing investment in the first quarter of fiscal 2014 in support of the global launch of BlackBerry 10. Including the anticipated 50% sequential increase in marketing spending, the Company believes it will approach breakeven financial results in the first quarter based on its lower cost base, more efficient supply chain, and improved hardware margins.

Board Update

The Company also announced that Mike Lazaridis, having fulfilled the commitment he made to the Board in January 2012, has decided to retire as Vice Chair and a Director of the Company. Lazaridis co-founded BlackBerry nearly 30 years ago and served as a co-CEO of the company until last year when he was elected Vice Chair of the Board. Lazaridis, who last week announced the launch of his new venture, Quantum Valley Investments, will step down from the BlackBerry Board effective May 1, 2013.

“We are grateful to Mike for his contributions to BlackBerry during the past three decades,” said Barbara Stymiest, Chairman of BlackBerry’s Board of Directors. “Mike invented the BlackBerry and is widely recognized as one of Canada’s greatest innovators. Mike played a pivotal role for the past 15 months in helping with the leadership transition and the successful launch of BlackBerry 10. We deeply respect and appreciate Mike’s desire to devote his full-time efforts to his exciting new venture, and we wish him all the best.”

“I admire Mike for his many achievements and for his vision in helping bring BlackBerry 10 to fruition,” said CEO Thorsten Heins. “On a personal level, I am grateful to Mike for his help, guidance and advice during my first 15 months as CEO of BlackBerry. I wish him all the best.”

“With the launch of BlackBerry 10, I believe I have fulfilled my commitment to the Board,” Lazaridis said. “Thorsten and his team did an excellent job in completing BlackBerry 10. We have a great deal of which to be proud. I believe I am leaving the company in good hands. I remain a huge fan of BlackBerry and, of course, wish the company and its people well.”

Reconciliation of GAAP loss from continuing operations before income taxes and diluted EPS from continuing operations to adjusted income from continuing operations before income taxes and adjusted diluted EPS from continuing operations:

(United States dollars, in millions except per share data)

For the three months ended
March 2, 2013
—————————————-
CORE
GAAP Charges (1) Adjusted
—————————————-
As reported:

Income (loss) from continuing
operations before income taxes $ (18) $ 29 $ 11

Income from continuing operations 94 20 114
—————————————-

Diluted EPS from continuing
operations $ 0.18 $ 0.04 $ 0.22
—————————————-
—————————————-

Note: Adjusted income from continuing operations and adjusted diluted EPS from continuing operations do not have a standardized meaning prescribed by GAAP and thus are not comparable to similarly titled measures presented by other issuers. The Company believes that the presentation of adjusted income from continuing operations and adjusted diluted EPS from continuing operations enables the Company and its shareholders to better assess the Company’s operating results relative to its operating results in prior periods and improves the comparability of the information presented. Investors should consider these non-GAAP measures in the context of the Company’s GAAP results.

(1) As part of the Company’s ongoing effort to streamline its operations
and increase efficiency, the Company commenced the CORE program in
March 2012. During the fourth quarter of fiscal 2013, the Company
incurred approximately $29 million in total pre-tax charges related to
the CORE program. Substantially all of the pre-tax charges are related
to one-time employee termination benefits, facilities costs and
manufacturing network simplification costs. During the fourth quarter
of fiscal 2013, a pre-tax recovery of approximately $4 million was
included in cost of sales, charges of approximately $3 million were
included in research and development and charges of approximately $30
million were included in selling, marketing, and administration
expenses. The Company will continue to execute on the mandate of the
CORE program throughout fiscal 2014.

Fiscal 2013 Results

Revenue from continuing operations for the fiscal year ended March 2, 2013 was $11.1 billion, down 40% from $18.4 billion in fiscal 2012. The Company’s GAAP net loss from continuing operations for fiscal 2013 was $628 million, or $1.20 per share diluted, compared with GAAP net income from continuing operations of $1.2 billion, or $2.23 per share diluted in fiscal 2012. Adjusted net loss from continuing operations for fiscal 2013 was $317 million, or $0.60 per share diluted. Adjusted net loss from continuing operations and adjusted diluted loss per share for fiscal 2013 exclude the adjustments described above as well as the impact of a pre-tax goodwill impairment charge of $335 million ($326 million after tax), an income tax benefit of $166 million, and charges of $220 million ($151 million after tax) related to the Company’s CORE program that commenced in March 2012. These charges and their related impacts on GAAP net income and diluted earnings per share are summarized in the tables below.

Reconciliation of GAAP net loss from continued operations and diluted loss per share from continuing operations to adjusted net loss from continued operations and diluted loss per share from continuing operations:

(United States dollars, in millions except per share data)

For the fiscal year ended
March 2, 2013
————————————
Diluted loss per
Net loss from share from
continuing continuing
operations (net operations (net
of income tax) of income tax)
————————————
As reported $ (628) $ (1.20)

Adjustment:
CORE Program (net of tax)(1) 151 0.30
Impairment of Goodwill (2) 326 0.62
Income Tax Benefit (3) (166) (0.32)
————————————
Adjusted $ (317) $ (0.60)
————————————
————————————

—————————————————————————-

Note: Adjusted net loss from continuing operations and adjusted diluted loss per share from continuing operations do not have a standardized meaning prescribed by GAAP and thus are not comparable to similarly titled measures presented by other issuers. The Company believes that the presentation of adjusted net loss from continuing operations and adjusted diluted loss per share from continuing operations enables the Company and its shareholders to better assess the Company’s operating results relative to its operating results in prior periods and improves the comparability of the information presented. Investors should consider these non-GAAP measures in the context of the Company’s GAAP results.

(1) As part of the Company’s ongoing effort to streamline its operations
and increase efficiency, the Company commenced the CORE program in
March 2012. During fiscal 2013, the Company incurred approximately
$220 million in total pre-tax charges related to the CORE program.
Substantially all of the pre-tax charges are related to one-time
employee termination benefits, facilities costs and manufacturing
network simplification costs. During fiscal 2013, pre-tax charges of
approximately $96 million were included in cost of sales, charges of
approximately $27 million were included in research and development
and charges of approximately $97 million were included in selling,
marketing, and administration expenses. The Company will continue to
execute on the mandate of the CORE program throughout fiscal 2014.
(2) During the first quarter of fiscal 2013, the Company performed a
goodwill impairment test and based on the results of that test, the
Company recorded a pre-tax, non-cash goodwill impairment charge of
approximately $335 million, or $326 million after tax.
(3) Reflects the favorable impact of the settlement of uncertain income
tax positions, including related interest and foreign exchange gains,
the Company recorded in the third quarter of fiscal 2013 that resulted
from the restructuring of the Company’s international operations.

Supplementary Geographic Revenue Breakdown

Research In Motion Limited (doing business as BlackBerry)
(United States dollars, in millions)
Revenue by Region

For the year
ended
—————–

March
2, 2013
—————–
North
America $ 2,896 26.2%
Europe,
Middle
East
and
Africa 4,502 40.7%
Latin
America 2,114 19.1%
Asia
Pacific 1,561 14.1%
—————–

Total $ 11,073 100.0%
—————–

For the quarter ended
——————————————————————-

March December September June
2, 2013 1, 2012 1, 2012 2, 2012
——————————————————————-
North
America $ 587 21.9% $ 647 23.7% $ 868 30.3% $ 794 28.3%
Europe,
Middle
East
and
Africa 1,227 45.8% 1,160 42.5% 1,087 38.0% 1,028 36.6%
Latin
America 479 17.9% 535 19.6% 520 18.2% 580 20.7%
Asia
Pacific 385 14.4% 385 14.1% 386 13.5% 405 14.4%
——————————————————————-

Total $ 2,678 100.0% $ 2,727 100.0% $ 2,861 100.0% $ 2,807 100.0%
——————————————————————-

Conference Call and Webcast

A conference call and live webcast will be held beginning at 8am ET, which can be accessed by dialing 1-800-814-4859 or through your BlackBerry(R) 10 smartphone, personal computer or BlackBerry(R) PlayBook(TM) tablet at http://ca.blackberry.com/company/investors/events.html. A replay of the conference call will also be available at approximately 10 am by dialing (+1)416-640-1917 and entering pass code 4501383# or by clicking the link above on your BlackBerry(R) 10 smartphone, personal computer or BlackBerry(R) PlayBook(TM) tablet. This replay will be available until midnight ET April 11, 2013.