It has been about a month since the las t earnings report for BlackBerry (BB). Shares have added about 3.5% in that time frame, underperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is BlackBerry due for a pullback? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at its most recen t earnings report in order to get a better handle on the important catalysts.
BlackBerry Q4 Earnings Top Estimates on Higher Revenues
BlackBerry reported solid fourth-quarter fiscal 2019 (ended Feb 28, 2019) financial results, primarily driven by growth in software and services business, and lower overall operating expenses.
Net Income
On a GAAP basis, net income for the quarter was $51 million or 8 cents per share against net loss of $10 million or loss of 6 cents per share in the year-ago quarter. The year-over-year improvement was driven by top-line growth and lower operating expenses. For fiscal 2019, net income was $93 million compared with $405 million in fiscal 2018.
Quarterly non-GAAP net income came in at $60 million or 11 cents per share, beating the Zacks Consensus Estimate by 7 cents.
Revenues
Quarterly GAAP revenues increased 9.4% year over year to $255 million. Software and services revenues were $246 million, up 16%. Geographically, North America generated revenues of $176 million compared with $147 million in the year-ago quarter. Revenues from Europe, Middle East and Africa were $61 million, down 3.2% year over year, while revenues from other regions totaled $18 million, down 21.7%. For fiscal 2019, revenues decreased 3% year over year to $904 million.
Quarterly non-GAAP revenues were $257 million compared with $239 million in the year-earlier quarter. The top line surpassed the consensus estimate of $227 million.
Quarterly Segmental Performance
Non-GAAP revenues from Enterprise software and services decreased 17.5% year over year to $94 million. BlackBerry Technology Solutions non-GAAP revenues increased 19.6% to $55 million, primarily driven by BlackBerry QNX. Software development license, services and royalty revenues grew in double-digit percentage across various applications in the automotive and general embedded market, underscoring an increase in the number of design wins.
Non-GAAP revenues from Licensing, IP and other were $99 million, up 70.7% year over year. The company did not generate any non-GAAP revenues from Handheld devices in the reported quarter, while generating $2 million in the year-earlier quarter. SAF (service access fees) non-GAAP revenues continued its downtrend and decreased to $9 million from $19 million in the year-earlier quarter.
Other Quarterly Details
Gross profit was $206 million or 80.8% of revenues compared with $177 million or 76% of revenues in the year-ago quarter. Total operating expenses decreased to $178 million from $194 million. This was primarily due to lower selling, marketing and administration expenses, and favorable adjustment of debentures fair value. Operating income improved to $28 million against operating loss of $17 million in the prior-year quarter. Non-GAAP operating income was $58 million and positive for the 12th consecutive quarter.
During the reported quarter, BlackBerry completed the acquisition of Irvine, CA-based cybersecurity firm Cylance. The buyout will boost the company’s software and services business as it will provide additional cyber security capabilities with advanced AI and machine learning technology.
Cash Flow
During fiscal 2019, BlackBerry generated $100 million of cash from operations compared with $704 million a year ago. On a reported basis, the company generated $83 million of free cash flow in fiscal 2019.
Liquidity
As of Feb 28, 2019, BlackBerry had $548 million in cash and equivalents with $665 million of long-term debt compared with the respective tallies of $816 million and $782 million a year ago. The cybersecurity software and services company’s total cash, cash equivalents, short-term and long-term investments were $1 billion as of the same day.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended downward during the past month. The consensus estimate has shifted -400% due to these changes.
VGM Scores
Currently, BlackBerry has a great Growth Score of A, though it is lagging a bit on the Momentum Score front with a B. However, the stock was allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.
Overall, the stock has an aggregate VGM Score of B. If you aren’t focused on one strategy, this score is the one you should be interested in.
Outlook
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, BlackBerry has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.
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