Canadian-based BlackBerry (BB 10.22, +1.34, +15.09%) moves
to near six-month highs on Friday in view of the company’s fourth quarter beat
and calls for solid revenue growth in fiscal year 2020.
Once a pocket mainstay for both former President Barack Obama and Kim Kardashian alike, gone are the old days of the BlackBerry Bold, which have given way to a robust software and services giant that shows signs of staying power.
Enter BlackBerry’s transition to software for applications for everything from connected cars to the wide array of solutions in the Internet of Things (IoT). Quite simply, the transition has found traction of late with BB’s revenue growth on a year-over-year basis just in the last four quarters progressing from -11.1% to -14.1% to flat to now 10.3% growth in this morning’s Q4 print.
So this quarter was a pleasant surprise for BlackBerry investors, who read that the company reported Q4 profit of $0.11 per share on sales that, as mentioned, grew 10.3% to $257 mln. Additionally, non-GAAP gross margins were 82%, primarily a result of a higher mix of licensing revenue.
Total Software and Services revenues were up 14% to $248 mln with about 93% of this revenue (excluding IP licensing and professional services) classified as “recurring” after including perpetual licenses that are now recognized ratably.
BlackBerry Enterprise software and services business saw revenues fall to $92 mln in Q4 from $108 mln in the same period last year. BlackBerry Technology Solutions revenue was $55 mln, up from $46 mln last year, and Licensing, IP and other sales were $99 mln in the quarter, up from $58 mln a year ago. The shrinking Handheld devices and SAF segment saw sales fall to $9 mln in Q4 from $19 mln last year.
Breaking down the revenue transition a bit further, BlackBerry management highlighted that in Q4, Enterprise software accounted for 37% of total revenues, BlackBerry Technology Solutions accounted for 22%, licensing accounted for 40%, and Cylance – the company’s endpoint security technology arm – accounted for 1%. BlackBerry forked over some $1.4 bln for Cylance last year in a deal that closed at about the end of Q4.
The guidance from the conference call was a point for the turnaround, too, as BlackBerry management outlined guidance for fiscal year 2020 total revenue growth between 23-27%, well ahead of analyst expectations, driven by a double-digit percentage increase in billings. The company also expects FY20 license revenues to decline 5% yr/yr as BlackBerry focuses on closing opportunities that will extend its recurring licensing revenue base.
Again looking to FY20, BlackBerry outlined guidance for the combination of IoT and its licensing business unit to deliver organic growth between 8-10%. The company also expects BlackBerry Cylance growth between 25-30% from a base of around $170 mln for the 12 months ending February 28, 2019.
In sum, this quarter was validation to both management and investors alike who’ve now got proof that BlackBerry’s transition to an enterprise software company has legs. Shares had posted a tidy +25% advance into this morning's open since the start of 2019, though admittedly had given back a portion of their gains this last week owing to weakness in the overall tech/software sector.
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