BlackBerry Reports Fiscal 2020 Third Quarter Results

- Total company non-GAAP revenue of $280 million, or 23% growth year-over-year; total company GAAP revenue of $267 million, or 18% growth year-over-year

- Total non-GAAP Software and Services revenue of $275 million, or 26% growth year-over-year; total GAAP Software and Services revenue of $262 million, or 21% growth year-over-year; both are record quarterly highs

- Total company non-GAAP earnings per basic and diluted share of $0.03; GAAP loss per basic share of $0.06 and GAAP loss per diluted share of $0.07

- Total company free cash flow generated of $37 million, as reported

WATERLOO, Ontario, Dec. 20, 2019 /PRNewswire/ -- BlackBerry Limited (NYSE: BB; TSX: BB) today reported financial results for the three months ended November 30, 2019 (all figures in U.S. dollars and U.S. GAAP, except where otherwise indicated).

Third Quarter Fiscal 2020 Results

    --  Total company non-GAAP revenue for the third quarter of fiscal 2020 was
        $280 million, up 23% year-over-year. Total company GAAP revenue for the
        third quarter of fiscal 2020 was $267 million, up 18% year-over-year.
        Total non-GAAP software and services revenue was $275 million, up 26%
        year-over-year. Total GAAP software and services revenue was $262
        million, up 21% year-over-year. Third quarter recurring non-GAAP
        software and services revenue (excluding IP licensing and professional
        services) was over 90%. Non-GAAP gross margin was 77% and GAAP gross
        margin was 74%.
    --  Total company non-GAAP operating earnings was $20 million. Total company
        GAAP operating loss was $29 million. Non-GAAP earnings per share was
        $0.03 (basic and diluted). GAAP net loss was $0.06 per basic share and
        $0.07 per diluted share. GAAP net loss includes $35 million for acquired
        intangibles amortization expense, $15 million in stock compensation
        expense, $10 million in restructuring charges, a benefit of $20 million
        related to the fair value adjustment on the debentures, and other
        amounts as summarized in a table below.
    --  Total cash, cash equivalents, short-term and long-term investments was
        $970 million as of November 30, 2019. Free cash flow generated, before
        considering the impact of acquisition and integration expenses,
        restructuring costs and legal proceedings, was $41 million. Cash
        generated from operations was $40 million and capital expenditures were
        $3 million.

"BlackBerry achieved sequential growth in revenue across all of our software businesses while generating healthy non-GAAP profitability and free cash flow as we continue to invest in our future," said John Chen, Executive Chairman and CEO, BlackBerry. "I am pleased with our progress. Our pipeline is growing as we deliver against our product roadmap and execute on our go-to-market expansion."

Outlook
BlackBerry will provide fiscal year 2020 outlook in connection with the quarterly earnings announcement on its earnings conference call. The earnings call transcript will be made available on our website and on SEDAR.

Reconciliation of GAAP revenue, gross margin, gross margin percentage, income (loss) before income taxes, net income (loss) and basic earnings (loss) per share to Non-GAAP revenue, gross margin, gross margin percentage, income before income taxes, net income and basic earnings per share for the three months ended November 30, 2019:


                    
            Q3 Fiscal 2020 Non-GAAP Adjustments                                                                                                  
            For the Three Months Ended November 30, 2019

                                        ---

                                                                                    
      
     (in millions, except for per share amounts)


                                              
            
              Income statement                         Revenue                                 Gross    Gross margin %                                      Income (loss)                  Net income              Basic earnings
                                                            location                                                                     margin                 (before                                    before                        (loss)                 (loss) per
                                                                                                                                     (before taxes)              taxes)                                 income taxes                                               share



                As reported                                                                                          $
            267                                            $
            198                                                             74.2
                                                                                                                                                                                                                                                         %                             $
       (30)        $
        (32)  $
        (0.06)


     Debentures fair value
      adjustment (2)                       
            Debentures fair value adjustment                                                                                                                                               
       %                                          (20)            (20)


     Restructuring charges (3)                       
            Cost of sales                                                                              3                                                                  1.1
                                                                                                                                                                                                                             %                                3                                 3


     Restructuring charges (3)          
            Selling, marketing and administration                                                                                                                                           
       %                                             7                7


     Software deferred revenue                          
            Revenue                                        13                                       13                                                                  1.1
      acquired (4)                                                                                                                                                                                                           %                               13                                13


     Software deferred
      commission expense
      acquired (5)                      
            Selling, marketing and administration                                                                                                                                             
       %                                           (4)             (4)


     Stock compensation                              
            Cost of sales                                                                              1                                                                  0.4
      expense (6)                                                                                                                                                                                                            %                                1                                 1


     Stock compensation
      expense (6)                              
            Research and development                                                                                                                                                   
       %                                             4                4


     Stock compensation
      expense (6)                       
            Selling, marketing and administration                                                                                                                                             
       %                                            10               10


     Acquired intangibles
      amortization (7)                               
            Amortization                                                                                                                                                         
       %                                            35               35



                Adjusted                                                                                             $
            280                                            $
            215                                                             76.8
                                                                                                                                                                                                                                                         %                               $
       19           $
        17    $
         0.03

Note: Non-GAAP revenue, non-GAAP gross margin, non-GAAP gross margin percentage, non-GAAP income before income taxes, non-GAAP net income and non-GAAP basic earnings per share 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 third quarter of fiscal
                                  2020, the Company reported GAAP
                                  gross margin of $198 million or
                                  74.2% of revenue. Excluding the
                                  impact of stock compensation
                                  expense and restructuring charges
                                  included in cost of sales and
                                  software deferred revenue acquired
                                  included in revenue, non-GAAP
                                  gross margin was $215 million, or
                                  76.8% of revenue.



              (2)              During the third quarter of fiscal
                                  2020, the Company recorded the Q3
                                  Fiscal 2020 Debentures Fair Value
                                  Adjustment of $20 million. This
                                  adjustment was presented on a
                                  separate line in the Consolidated
                                  Statements of Operations.



              (3)              During the third quarter of fiscal
                                  2020, the Company incurred
                                  restructuring charges of
                                  approximately $10 million, of
                                  which $3 million was included in
                                  cost of sales and $7 million was
                                  included selling, marketing and
                                  administration expense.



              (4)              During the third quarter of fiscal
                                  2020, the Company recorded
                                  software deferred revenue acquired
                                  but not recognized due to business
                                  combination accounting rules of
                                  $13 million, which was included in
                                  BlackBerry Cylance revenue.



              (5)              During the third quarter of fiscal
                                  2020, the Company recorded
                                  deferred commission expense
                                  acquired but not recognized due to
                                  business combination accounting
                                  rules of approximately of $4
                                  million.



              (6)              During the third quarter of fiscal
                                  2020, the Company recorded stock
                                  compensation expense of $15
                                  million, of which $1 million was
                                  included in cost of sales, $4
                                  million was included in research
                                  and development, and $10 million
                                  was included in selling, marketing
                                  and administration expense.



              (7)              During the third quarter of fiscal
                                  2020, the Company recorded
                                  amortization of intangible assets
                                  acquired through business
                                  combinations of $35 million, which
                                  was included in amortization
                                  expense.

Supplementary Geographic Revenue Breakdown


                                                                                                         
       
              BlackBerry Limited


                                                                                                
              
       (United States dollars, in millions)


                                                                                                         
       
              Revenue by Region




                                                                  
        For the Quarters Ended


                        November 30, 2019   
         August 31, 2019             
              May 31, 2019                            February 28, 2019           November 30, 2018


     North America     $
              188          70.4                            $
              179                  73.4                               $
       160                     64.8         $
     176       69.0        $
     151    66.8
                                                  %                                                              %                                                             %                        %                     %


     Europe, Middle
      East and                              %                                                         %                                                %                               %                        %
      Africa        60                    22.5                      47                                19.3                       61                      24.7                       61   23.9        56           24.8


     Other regions  19                     7.1                      18                                 7.3                       26                      10.5                       18    7.1        19            8.4
                                            %                                                         %                                                %                               %                        %



     Total             $
              267         100.0                            $
              244                 100.0                               $
       247                    100.0         $
     255      100.0        $
     226   100.0

                                                  %                                                              %                                                             %                        %                     %

Supplementary Revenue by Product and Service Type Breakdown


                                                                                                            
         
                BlackBerry Limited


                                                                                                   
              
           (United States dollars, in millions)


                                                                                                   
              
           Revenue by Product and Service Type




                                            U.S. GAAP                                           Adjustments                                                 Non-GAAP

                                                                                                                                                                    ---

                             For the Three Months Ended                           For the Three Months Ended                                For the Three Months Ended



                November 30,                            November 30,     November 30,                           November 30,                       November 30,            November 30,
                        2019                                     2018              2019                                    2018                                2019                     2018

                                                                                                                                                                                    ---

     IoT                       $
              145                                           $
              148                                             
              $                                $
      2      $
      145  $
      150


     BlackBerry
      Cylance             40                                           1                                                    13                                                                53          1


     Licensing            77                                          68                                                                                                                     77         68


     Other                 5                                           9                                                                                                                      5          9



     Total                     $
              267                                           $
              226                                                             $
     13                        $
      2      $
      280  $
      228

Conference Call and Webcast
A conference call and live webcast will be held today beginning at 8 a.m. ET, which can be accessed by dialing 1- 877-682-6267 or by logging on at BlackBerry.com/Investors. A replay of the conference call will also be available at approximately 11 a.m. ET by dialing 1-800-585-8367 and entering Conference ID #9608207 and at the link above.

About BlackBerry
BlackBerry (NYSE: BB; TSX: BB) is a trusted security software and services company that provides enterprises and governments with the technology they need to secure the Internet of Things. Based in Waterloo, Ontario, the company is unwavering in its commitment to safety, cybersecurity and data privacy, and leads in key areas such as artificial intelligence, endpoint security and management, encryption and embedded systems. For more information, visit BlackBerry.com and follow @BlackBerry.

Investor Contact:
BlackBerry Investor Relations
+1-519-888-7465
investor_relations@blackberry.com

Media Contact:
BlackBerry Media Relations
(519) 597-7273
mediarelations@blackberry.com

This news release contains forward-looking statements within the meaning of certain securities laws, including under the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws, including statements regarding: BlackBerry's plans, strategies and objectives including the anticipated benefits of its strategic initiatives and its intentions to expand and enhance its product and service offerings.

The words "expect", "anticipate", "estimate", "may", "will", "should", "could", "intend", "believe", "target", "plan" and similar expressions 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, 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 the following risks: BlackBerry's ability to enhance, develop, introduce or monetize products and services for the enterprise market in a timely manner with competitive pricing, features and performance; BlackBerry's ability to maintain or expand its customer base for its software and services offerings to grow revenue or achieve sustained profitability; the intense competition faced by BlackBerry; the occurrence or perception of a breach of BlackBerry's network or product security measures or an inappropriate disclosure of confidential or personal information could significantly harm its business; risks related to BlackBerry's continuing ability to attract new personnel, retain existing key personnel and manage its staffing effectively; BlackBerry's dependence on its relationships with resellers and channel partners; risks related to acquisitions, divestitures, investments and other business initiatives, which may negatively affect BlackBerry's results of operations; risks related to BlackBerry's products and services being dependent upon interoperability with rapidly changing systems provided by third parties; the risk that failure to protect BlackBerry's intellectual property could harm its ability to compete effectively and BlackBerry may not earn the revenues it expects from intellectual property rights; the risk that BlackBerry could be found to have infringed on the intellectual property rights of others; the risk that litigation against BlackBerry may result in adverse outcomes; risks related to the use and management of user data and personal information, which could give rise to liabilities as a result of legal, customer and other third-party requirements; BlackBerry's ability to obtain rights to use third-party software; the risk that network disruptions or other business interruptions could have a material adverse effect on BlackBerry's business and harm its reputation; BlackBerry's ability to generate revenue and profitability through the licensing of security software and services or the BlackBerry brand to device manufacturers; the substantial asset risk faced by BlackBerry, including the potential for charges related to its long-lived assets and goodwill; risks related to BlackBerry's indebtedness, which could adversely affect its operating flexibility and financial condition; risks related to government regulations applicable to BlackBerry's products and services, including products containing encryption capabilities, which could negatively impact BlackBerry's business; risks related to foreign operations, including fluctuations in foreign currencies; risks associated with any errors in BlackBerry's products and services, which can be difficult to remedy and could have a material adverse effect on BlackBerry's business; risks related to the failure of BlackBerry's suppliers, subcontractors, channel partners and representatives to use acceptable ethical business practices or to comply with applicable laws, which could negatively impact BlackBerry's business; BlackBerry's reliance on third parties to manufacture and repair its hardware products; risks related to the Company's success in fostering an ecosystem of third-party application developers; risks related to regulations regarding health and safety, hazardous materials usage and conflict minerals, and to product certification risks; risks related to tax provision changes, the adoption of new tax legislation or exposure to additional tax liabilities, which could materially impact BlackBerry's financial condition; risks related to the fluctuation of BlackBerry's quarterly revenue and operating results; the volatility of the market price of BlackBerry's common shares; and risks related to adverse economic and geopolitical conditions, which may negatively affect BlackBerry.

These risk factors and others relating to BlackBerry are discussed in greater detail in 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). All of these factors should be considered carefully, and readers should not place undue reliance on BlackBerry's forward-looking statements. Any statements that are forward-looking statements are intended to enable BlackBerry's shareholders to view the anticipated performance and prospects of BlackBerry from management's perspective at the time such statements are made, and they are subject to the risks that are inherent in all forward-looking statements, as described above, as well as difficulties in forecasting BlackBerry's financial results and performance for future periods, particularly over longer periods, given changes in technology and BlackBerry's business strategy, evolving industry standards, intense competition and short product life cycles that characterize the industries in which BlackBerry operates. 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 applicable 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 Nine Months Ended


                                                        November 30,                                               August 31,                                    November 30,                                               November 30,                      November 30,
                                                                2019                                                      2019                                             2018                                                        2019                               2018



                            Revenue                                     $
          
          267                                                                                          $
              244                                                                               $
          226               $
           758        $
            649


                            Cost of sales                         69                                                                 68                                                                                                 56                                                 207       157



                            Gross margin                         198                                                                176                                                                                                170                                                 551       492



    Gross margin %                                            74.2
                                                                                                                                     %                                                                                                 %                                                  %        %
                                                                   %                                                              72.1                                                                                               75.2                                                72.7      75.8


                            Operating expenses


               Research and development                           66                                                                 62                                                                                                 55                                                 199       167


               Selling, marketing and
                administration                                   132                                                                132                                                                                                 93                                                 385       299



              Amortization                                       49                                                                 48                                                                                                 33                                                 146       105


               Debentures fair value
                adjustment                                      (20)                                                              (23)                                                                                              (69)                                               (71)    (111)


                                                                 227                                                                219                                                                                                112                                                 659       460



                            Operating income (loss)             (29)                                                              (43)                                                                                                58                                               (108)       32


               Investment income (loss), net                     (1)                                                                                                                                                                   2                                                   2        13



                            Income (loss) before income
                             taxes                              (30)                                                              (43)                                                                                                60                                               (106)       45


                            Provision for income taxes             2                                                                  1                                                                                                  1                                                   5         3



                            Net income (loss)                          $
          
          (32)                                                                                        $
              (44)                                                                               $
          59              $
          (111)        $
            42



                            Earnings (loss) per share



              Basic                                                 $
          
          (0.06)                                                                                      $
              (0.08)                                                                             $
          0.11             $
          (0.20)      $
            0.08




              Diluted                                               $
          
          (0.07)                                                                                      $
              (0.10)                                                                           $
          (0.01)            $
          (0.27)    $
            (0.09)





               Weighted-average number of
                common shares outstanding
                (000s)



              Basic                                         554,585                                                            552,343                                                                                            540,406                                             552,931   538,251



              Diluted                                       615,085                                                            612,843                                                                                            600,906                                             613,431   598,751


               Total common shares
                outstanding (000s)                           552,132                                                            548,336                                                                                            547,084                                             552,132   547,084


                                                        
              
                BlackBerry Limited


                                                      
            Incorporated under the Laws of Ontario


                                                   
          (United States dollars, in millions) (unaudited)




                                                     
            
                Consolidated Balance Sheets




                                                                           
              
                As at


                                                             November 30,                                  February 28,
                                                                  2019                                           2019




     
                Assets



     
                Current


      Cash and cash equivalents                                               $
              
                515                      $
        548


      Short-term investments                                          367                                                 368


      Accounts receivable, net                                        216                                                 233



     Other receivables                                                13                                                  19


      Income taxes receivable                                          10                                                   9



     Other current assets                                             58                                                  56



                                                                    1,179                                               1,233


                   Restricted cash and cash
                    equivalents                                        32                                                  34


                   Long-term investments                               56                                                  55


                   Other long-term assets                              23                                                  28


                   Deferred income tax assets                                                                              2


                   Operating lease right-of-use
                    assets                                            133


                   Property, plant and equipment,
                    net                                                76                                                  85



     
                Goodwill                                         1,459                                               1,463


                   Intangible assets, net                             955                                               1,068



                                                                            $
              
                3,913                    $
        3,968



                   Liabilities



     
                Current



     Accounts payable                                                         $
              
                27                       $
        48



     Accrued liabilities                                             193                                                 192



     Income taxes payable                                             19                                                  17



     Debentures                                                      609


      Deferred revenue, current                                       264                                                 253



                                                                    1,112                                                 510


                   Deferred revenue, non-current                      117                                                 136


                   Operating lease liabilities                        127


                   Other long-term liabilities                          8                                                  19


                   Long-term debentures                                                                                  665


                   Deferred income tax liabilities                      1                                                   2



                                                                    1,365                                               1,332



                   Shareholders' equity


                   Capital stock and additional
                    paid-in capital                                 2,742                                               2,688



     
                Deficit                                          (157)                                               (32)


                   Accumulated other comprehensive
                    loss                                             (37)                                               (20)



                                                                    2,548                                               2,636



                                                                            $
              
                3,913                    $
        3,968


                                                                 
              
                BlackBerry Limited


                                                              
              Incorporated under the Laws of Ontario


                                                           
            (United States dollars, in millions) (unaudited)




                                                          
            
                Consolidated Statements of Cash Flows




                                                                                              For the Nine Months Ended


                                                             November 30, 2019                                          November 30, 2018

                                                                                                                                      ---

                     Cash flows from operating activities


        Net income (loss)                                                        $
              
                (111)                                      $
        42


        Adjustments to reconcile net income (loss)
         to net cash used in operating activities:



       Amortization                                                       160                                                                 116


        Stock-based compensation                                            46                                                                  53


        Non-cash consideration
         received from contract
         with a customer                                                   (8)


        Debentures fair value
         adjustment                                                       (71)                                                              (111)


        Other long-term assets                                               -                                                                  2


        Operating leases                                                  (12)



       Other                                                                9                                                                   4


        Net changes in working capital items:


        Accounts receivable, net                                            17                                                                  13


        Other receivables                                                    6                                                                  46


        Income taxes receivable                                            (1)                                                                 13



       Other assets                                                         3                                                                 (1)


        Accounts payable                                                  (21)                                                               (14)


        Income taxes payable                                                 2                                                                 (1)


        Accrued liabilities                                               (24)                                                               (57)


        Deferred revenue                                                  (10)                                                               (23)


        Other long-term
         liabilities                                                         7



                     Net cash provided by
                      (used in) operating
                      activities                                           (8)                                                                 82



                     Cash flows from investing activities


        Acquisition of long-term
         investments                                                       (1)                                                                (2)


        Proceeds on sale or
         maturity of long-term
         investments                                                         -                                                                  2


        Acquisition of property,
         plant and equipment                                               (9)                                                               (14)


        Proceeds on sale of
         property, plant and
         equipment                                                           -                                                                  1


        Acquisition of intangible
         assets                                                           (24)                                                               (24)


        Business acquisitions,
         net of cash acquired                                                1


        Acquisition of short-
         term investments                                                (829)                                                            (2,754)


        Proceeds on sale or
         maturity of short-term
         investments                                                       830                                                               2,962



                     Net cash provided by
                      (used in) investing
                      activities                                          (32)                                                                171



                     Cash flows from financing activities


        Issuance of common shares                                            8                                                                   5


        Finance lease liability                                            (2)



                     Net cash provided by
                      financing activities                                   6                                                                   5



                     Effect of foreign
                      exchange loss on cash,
                      cash equivalents,
                      restricted cash, and
                      restricted cash
                      equivalents                                          (1)                                                                (3)



                     Net increase (decrease)
                      in cash, cash
                      equivalents, restricted
                      cash, and restricted
                      cash equivalents during
                      the period                                          (35)                                                                255


                     Cash, cash equivalents,
                      restricted cash, and
                      restricted cash
                      equivalents, beginning
                      of period                                            582                                                                 855



                     Cash, cash equivalents,
                      restricted cash, and
                      restricted cash
                      equivalents, end of
                      period                                                       $
              
                547                                    $
        1,110





                     As at                                   November 30, 2019                                          February 28, 2019

    ---                                                                                                                               ---

        Cash and cash equivalents                                                  $
              
                515                                      $
        548


        Restricted cash and cash
         equivalents                                                                $
              
                32                                       $
        34


        Short-term investments                                                     $
              
                367                                      $
        368


        Long-term investments                                                       $
              
                56                                       $
        55

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SOURCE BlackBerry Limited