BlackBerry Reports Second Quarter Fiscal 2014 Results

BlackBerry Logo Black BlackBerry Reports Second Quarter Fiscal 2014 Results

BlackBerry reports second quarter fiscal 2014 results, while they released a preliminary report last week, here is the full detailed version. BlackBerry also canceled their earnings call today as well as the webcast. See what BlackBerry CEO Thorsten Heins had to say below as well has the detailed Q2 fiscal 2014 results.

“We are very disappointed with our operational and financial results this quarter and have announced a series of major changes to address the competitive hardware environment and our cost structure,” said Thorsten Heins, President and CEO of BlackBerry. “While our company goes through the necessary changes to create the best business model for our hardware business, we continue to see confidence from our customers through the increasing penetration of BES 10, where we now have more than 25,000 commercial and test servers installed to date, up from 19,000 in July 2013. We understand how some of the activities we are going through create uncertainty, but we remain a financially strong company with $2.6 billion in cash and no debt. We are focused on our targeted markets, and are committed to completing our transition quickly in order to establish a more focused and efficient company.”

WATERLOO, ONTARIO–(Marketwired – Sept. 27, 2013) – BlackBerry (NASDAQ:BBRY)(TSX:BB), a world leader in the mobile communications market, today reported second quarter results for the three months ended August 31, 2013 (all figures in U.S. dollars and U.S. GAAP, except where otherwise indicated).

Q2 Highlights:

--  Revenue for the second quarter of approximately $1.6 billion; company
    recognizes revenue on approximately 3.7 million smartphones in the
    second quarter 
--  GAAP loss from continuing operations of $965 million, or $1.84 per share
    diluted; includes a primarily non-cash, pre-tax charge against inventory
    and supply commitments of approximately $934 million and pre-tax
    restructuring charges of approximately $72 million 
--  Adjusted loss from continuing operations of $248 million, or $0.47 per
    share diluted; adjusted gross margin of $570 million, or 36% 
--  Company sees increasing penetration of BlackBerry Enterprise Service 10
    (BES 10) with more than 25,000 commercial and test servers installed to
    date, up from 19,000 in July 2013 
--  Cash and investments balance of $2.6 billion

Q2 Results

Revenue for the second quarter of fiscal 2014 was approximately $1.6 billion, down 49% from $3.1 billion in the previous quarter and down 45% from $2.9 billion in the same quarter of fiscal 2013. The revenue breakdown for the quarter was approximately 49% for hardware, 46% for service and 5% for software and other revenue. During the second quarter the company recognized hardware revenue on approximately 3.7 million BlackBerry smartphones. Most of the units recognized are BlackBerry 7 devices, in part because certain BlackBerry 10 devices that were shipped in the second quarter of fiscal 2014 will not be recognized until those devices are sold through to end customers. During the quarter, approximately 5.9 million BlackBerry smartphones were sold through to end customers, which included shipments made prior to the second quarter and which reduced the Company’s inventory in the channel.

The GAAP loss from continuing operations for the quarter was $965 million, or $1.84 per share diluted, including a primarily non-cash, pre-tax charge against inventory and supply commitments of approximately $934 million (the “Z10 Inventory Charge”), and pre-tax restructuring charges of approximately $72 million related to the Cost Optimization and Resource Efficiency (“CORE”) program. This is compared with a GAAP loss from continuing operations of $84 million, or $0.16 per share diluted in the prior quarter and GAAP loss from continuing operations of $229 million, or $0.44 per share diluted, in the same quarter last year.

The adjusted loss from continuing operations for the second quarter was $248 million, or $0.47 per share diluted. The adjusted loss from continuing operations and adjusted diluted loss per share exclude the impact of the Z10 Inventory Charge of approximately $934 million ($666 million after tax) and pre-tax restructuring charges of approximately $72 million ($51 million after tax) related to the CORE program incurred in the second quarter of fiscal 2014. These impacts on GAAP loss from continuing operations and diluted loss per share from continuing operations are summarized in the table below.

The total of cash, cash equivalents, short-term and long-term investments was $2.6 billion as of August 31, 2013, compared to $3.1 billion at the end of the previous quarter. Cash flow used in operations in the second quarter was approximately $136 million. Uses of cash included intangible asset additions of approximately $268 million and capital expenditures of approximately $112 million.

“We are very disappointed with our operational and financial results this quarter and have announced a series of major changes to address the competitive hardware environment and our cost structure,” said Thorsten Heins, President and CEO of BlackBerry. “While our company goes through the necessary changes to create the best business model for our hardware business, we continue to see confidence from our customers through the increasing penetration of BES 10, where we now have more than 25,000 commercial and test servers installed to date, up from 19,000 in July 2013. We understand how some of the activities we are going through create uncertainty, but we remain a financially strong company with $2.6 billion in cash and no debt. We are focused on our targeted markets, and are committed to completing our transition quickly in order to establish a more focused and efficient company.”

Reconciliation of GAAP gross margin, gross margin percentage, loss from continuing operations before income taxes, loss from continuing operations and diluted loss per share from continuing operations to adjusted gross margin, adjusted gross margin percentage, adjusted loss from continuing operations before income taxes, adjusted loss from continuing operations and adjusted diluted loss per share from continuing operations:

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

                                                                            
                ------------------------------------------------------------
                                          Loss from                 Diluted 
                                Gross    continuing                    loss 
                      Gross    Margin    operations               per share 
                 Margin(1)       %(1)        before  Loss from         from 
                    (before   (before        income  Continuing  continuing 
                     taxes)    taxes)         taxes  Operations  operations 
                ------------------------------------------------------------
As reported      $     (374)      (24%) $    (1,438) $     (965) $    (1.84)
Adjustments:                                                                
CORE charges (2)         10         1%           72          51        0.10 
Z10 inventory                                                               
 provision (3)          934        59%          934         666        1.27 
                ------------------------------------------------------------
Adjusted         $      570        36%  $      (432) $     (248) $    (0.47)
                ------------------------------------------------------------
                ------------------------------------------------------------

------                                                                      
Note: Adjusted gross margin, adjusted gross margin percentage, adjusted loss
from continuing operations before tax, adjusted 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 these non-GAAP measures 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)   During the second quarter of fiscal 2014, the Company reported a GAAP 
      gross margin of ($374) million or (24%) of revenue. Excluding the     
      impact the Z10 Inventory Charge and CORE charges included in cost of  
      sales, the adjusted gross margin was $570 million, or 36%.            
(2)   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 second quarter of fiscal 2014, the Company     
      incurred approximately $72 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 and facilities costs. During
      the second quarter of fiscal 2014, charges of approximately $10       
      million were included in cost of sales, charges of approximately $8   
      million were included in research and development and charges of      
      approximately $54 million were included in selling, marketing, and    
      administration expenses.                                              
(3)   During the second quarter of fiscal 2014, the Company recorded a      
      primarily non-cash, pre-tax charge against inventory and supply       
      commitments of approximately $934 million, $666 million after tax,    
      which is primarily attributable to BlackBerry Z10 devices.

Supplementary Geographic Revenue Breakdown

                             BlackBerry Limited                             
                    (United States dollars, in millions)                    
                              Revenue by Region
                                                                            
                                      For the quarter ended                 
                    --------------------------------------------------------

                                August                                      
                              31, 2013      June 1, 2013      March 2, 2013 
                    --------------------------------------------------------
North America        $     414    26.3% $    761    24.8% $     587    21.9%
Europe, Middle East                                                         
 and Africa                686    43.6%    1,343    43.7%     1,227    45.8%
Latin America              196    12.5%      449    14.6%       479    17.9%
Asia Pacific               277    17.6%      518    16.9%       385    14.4%
                    --------------------------------------------------------

Total                $   1,573   100.0% $  3,071   100.0% $   2,678   100.0%
                    --------------------------------------------------------
                    --------------------------------------------------------

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

                              December         September 
                               1, 2012           1, 2012 
                    -------------------------------------
North America        $     647    23.7% $    868    30.3%
Europe, Middle East                                      
 and Africa              1,160    42.5%    1,087    38.0%
Latin America              535    19.6%      520    18.2%
Asia Pacific               385    14.1%      386    13.5%
                    -------------------------------------

Total                $   2,727   100.0% $  2,861   100.0%
                    -------------------------------------
                    -------------------------------------

About BlackBerry

A global leader in wireless innovation, BlackBerry(R) revolutionized the mobile industry when it was introduced in 1999. Today, BlackBerry aims to inspire the success of our millions of customers around the world by continuously pushing the boundaries of mobile experiences. Founded in 1984 and based in Waterloo, Ontario, BlackBerry operates offices in North America, Europe, Asia Pacific and Latin America. BlackBerry is listed on the NASDAQ Stock Market (NASDAQ:BBRY) and the Toronto Stock Exchange (TSX:BB). For more information, visit www.blackberry.com.

This news release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities laws. The terms and phrases “expects”, “believe”, “focused”, “getting”, “opportunities”, “we are seeing”, “continuing”, “drive”, “improve”, “should”, “will”, “increasing”, “anticipated”, and similar terms and phrases are intended to identify these forward-looking statements. Forward-looking statements are based on estimates and assumptions made by BlackBerry in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that BlackBerry believes are appropriate in the circumstances. Many factors could cause BlackBerry’s actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, including those described in the “Risk Factors” section of BlackBerry’s Annual Information Form, which is included in its Annual Report on Form 40-F and the “Cautionary Note Regarding Forward-Looking Statements” section of BlackBerry’s MD&A (copies of which filings may be obtained at www.sedar.com or www.sec.gov). These factors should be considered carefully, and readers should not place undue reliance on BlackBerry’s forward-looking statements. BlackBerry has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

                             BlackBerry Limited                             
                   Incorporated under the Laws of Ontario                   
  (United States dollars, in millions except share and per share amounts)   
                                 (unaudited)                                

                   Consolidated Statements of Operations                    

                     For the three months ended    For the six months ended 
                 -----------------------------------------------------------
                       August      June   September    August     September 
                     31, 2013   1, 2013     1, 2012  31, 2013       1, 2012 
----------------------------------------------------------------------------

Revenue           $   1,573   $   3,071  $   2,861  $   4,644  $      5,669 
Cost of sales         1,947       2,029      2,117      3,976         4,139 
                 -----------------------------------------------------------
Gross margin           (374)      1,042        744        668         1,530 
                 -----------------------------------------------------------

  Gross margin %      (23.8%)      33.9%      26.0%      14.4%         27.0%

Operating                                                                   
 expenses                                                                   
  Research and                                                              
   development          360         358        366        718           733 
  Selling,                                                                  
   marketing and                                                            
   administration       527         673        556      1,200         1,103 
  Amortization          171         180        180        351           352 
  Impairment of                                                             
   goodwill               -           -          -          -           335 
                 -----------------------------------------------------------
                      1,058       1,211      1,102      2,269         2,523 
                 -----------------------------------------------------------

Operating loss       (1,432)       (169)      (358)    (1,601)         (993)

  Investment                                                                
   income (loss),                                                           
   net                   (6)          5          -         (1)            3 
                 -----------------------------------------------------------

Loss from                                                                   
 continuing                                                                 
 operations                                                                 
 before income                                                              
 taxes               (1,438)       (164)      (358)    (1,602)         (990)

Recovery of                                                                 
 income taxes          (473)        (80)      (129)      (553)         (251)
                 -----------------------------------------------------------

  Loss from                                                                 
   continuing                                                               
   operations          (965)        (84)      (229) $  (1,049) $       (739)

  Loss from                                                                 
   discontinued                                                             
   operations,                                                              
   net of tax             -           -         (6)         -  $        (14)
                 -----------------------------------------------------------

Net loss          $    (965)  $     (84) $    (235) $  (1,049) $       (753)
                 -----------------------------------------------------------
                 -----------------------------------------------------------

Loss per share                                                              
Basic and diluted                                                           
 loss per share                                                             
 from continuing                                                            
 operations       $   (1.84)  $   (0.16) $   (0.44) $   (2.00) $      (1.41)
Basic and diluted                                                           
 loss per share                                                             
 from                                                                       
 discontinued                                                               
 operations               -           -      (0.01)         -         (0.03)
                 -----------------------------------------------------------
Total basic and                                                             
 diluted loss per                                                           
 share            $   (1.84)  $   (0.16) $   (0.45) $   (2.00) $      (1.44)
                 -----------------------------------------------------------
                 -----------------------------------------------------------

Weighted-average                                                            
 number of common                                                           
 shares                                                                     
 outstanding                                                                
 (000's)                                                                    
  Basic             524,481     524,160    524,160    524,320       524,160 
  Diluted           524,481     524,160    524,160    524,320       524,160 

Total common                                                                
 shares                                                                     
 outstanding                                                                
 (000's)            524,639     524,160    524,160    524,639       524,160 

                             BlackBerry Limited                             
                   Incorporated under the Laws of Ontario                   
  (United States dollars, in millions except share and per share amounts)   
                                 (unaudited)                                

                        Consolidated Balance Sheets                         

                                                      August          March 
As at                                               31, 2013        2, 2013 
----------------------------------------------------------------------------

Assets                                                                      
Current                                                                     
  Cash and cash equivalents                    $       1,181  $       1,549 
  Short-term investments                               1,163          1,105 
  Accounts receivable, net                             1,743          2,353 
  Other receivables                                      223            272 
  Inventories                                            941            603 
  Income taxes receivable                                462            597 
  Other current assets                                   696            469 
  Deferred income tax asset                              128            139 
  Assets held for sale                                   122            145 
                                              ------------------------------
                                                       6,659          7,232 
Long-term investments                                    225            221 
Property, plant and equipment, net                     2,119          2,264 
Intangible assets, net                                 3,505          3,448 
                                              ------------------------------
                                               $      12,508  $      13,165 
                                              ------------------------------
                                              ------------------------------

Liabilities                                                                 
Current                                                                     
  Accounts payable                             $       1,130  $       1,064 
  Accrued liabilities                                  1,909          1,842 
  Deferred revenue                                       834            542 
                                              ------------------------------
                                                       3,873          3,448 
Deferred income tax liability                            202            245 
Income taxes payable                                       9             12 
                                              ------------------------------
                                                       4,084          3,705 
                                              ------------------------------

Shareholders' Equity                                                        
Capital stock and additional paid-in capital           2,451          2,431 
Treasury stock                                          (234)          (234)
Retained earnings                                      6,218          7,267 
Accumulated other comprehensive income                   (11)            (4)
                                              ------------------------------
                                                       8,424          9,460 
                                              ------------------------------
                                               $      12,508  $      13,165 
                                              ------------------------------
                                              ------------------------------

                             BlackBerry Limited                             
                   Incorporated under the Laws of Ontario                   
  (United States dollars, in millions except share and per share amounts)   
                                 (unaudited)                                

                   Consolidated Statements of Cash Flows                    

                                               For the six months ended     
                                         -----------------------------------
                                                   August         September 
                                                 31, 2013           1, 2012 
----------------------------------------------------------------------------

Cash flows from operating activities                                        
Loss from continuing operations          $         (1,049) $           (739)
Loss from discontinued operations                       -               (14)
                                         -----------------------------------
Net loss                                           (1,049)             (753)

Adjustments to reconcile net loss to net                                    
 cash provided by operating activities:                                     
  Amortization                                        756             1,001 
  Deferred income taxes                               (32)               10 
  Income taxes payable                                 (3)                6 
  Stock-based compensation                             38                42 
  Impairment of goodwill                                -               335 
  Other                                                39                11 
Net changes in working capital items                  737               483 
                                         -----------------------------------
Net cash provided by operating activities             486             1,135 
                                         -----------------------------------

Cash flows from investing activities                                        
Acquisition of long-term investments                 (220)             (161)
Proceeds on sale or maturity of long-term                                   
 investments                                          180                85 
Acquisition of property, plant and                                          
 equipment                                           (195)             (240)
Acquisition of intangible assets                     (603)             (537)
Business acquisitions, net of cash                                          
 acquired                                              (7)             (105)
Acquisition of short-term investments                (917)             (397)
Proceeds on sale or maturity of short-                                      
 term investments                                     930               204 
                                         -----------------------------------
Net cash used in investing activities                (832)           (1,151)
                                         -----------------------------------

Cash flows from financing activities                                        
Tax deficiencies related to stock-based                                     
 compensation                                          (2)               (5)
Purchase of treasury stock                            (16)                - 
                                         -----------------------------------
Net cash used in financing activities                 (18)               (5)
                                         -----------------------------------
                                         -----------------------------------
Effect of foreign exchange gain (loss) on                                   
 cash and cash equivalents                             (4)                5 
                                         -----------------------------------
                                         -----------------------------------
Net decrease in cash and cash equivalents                                   
 for the period                                      (368)              (16)
Cash and cash equivalents, beginning of                                     
 period                                             1,549             1,527 
                                         -----------------------------------
Cash and cash equivalents, end of period $          1,181  $          1,511 
                                         -----------------------------------
                                         -----------------------------------

As at                                     August 31, 2013      June 1, 2013 
----------------------------------------------------------------------------

Cash and cash equivalents                $          1,181  $          1,591 
Short-term investments                              1,163             1,233 
Long-term investments                                 225               247 
                                         -----------------------------------
                                         $          2,569  $          3,071 
                                         -----------------------------------
                                         -----------------------------------

 BlackBerry Reports Second Quarter Fiscal 2014 Results
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 BlackBerry Reports Second Quarter Fiscal 2014 Results

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