Earlier this Morning BlackBerry Limited released it’s End of the Year results and Fiscal Q4 Highlights. You can see the results below. Earning’s call expected at 8am Eastern today.
Waterloo, ON – BlackBerry Limited (NASDAQ: BBRY; TSX: BB), a global leader in mobile communications, today reported financial results for the three months and fiscal year ended March 1, 2014 (all figures in U.S. dollars and U.S. GAAP, except where otherwise indicated).
Q4 Highlights:
• Cash and investments balance of $2.7B at the end of the fiscal fourth quarter
• Adjusted Q4 gross margin of 43%, up from 34% in the prior quarter
• Channel inventory down 30% from the prior quarter
• Reduced adjusted operating expenses by approximately 51% from Q1FY14
• Revenue for the fourth quarter of approximately $976 million
Q4 Results
Revenue for the fourth quarter of fiscal 2014 was approximately $976 million, down $217 million or 18% from approximately $1.2 billion in the previous quarter and down 64% from $2.7 billion in the same quarter of fiscal 2013. The revenue breakdown for the quarter was approximately 37% for hardware, 56% for services and 7% for software and other revenue. During the fourth quarter, the Company recognized hardware revenue on approximately 1.3 million BlackBerry smartphones compared to approximately 1.9 million BlackBerry smartphones in the previous quarter. During the fourth quarter, approximately 3.4 million BlackBerry smartphones were sold through to end customers, which included shipments made and recognized prior to the fourth quarter and which reduced the Company’s inventory in channel. Of the BlackBerry smartphones sold through to end customers in the fourth quarter, approximately 2.3 million were BlackBerry 7 devices.
GAAP loss from continuing operations for the fourth quarter was $423 million, or $0.80 per share diluted. The loss includes a non-cash charge associated with the change in the fair value of the Debentures of approximately $382 million (the “Q4 Fiscal 2014 Debentures Fair Value Adjustment”), a pre-tax recovery of previously recorded inventory charges of approximately $149 million (the “Q4 Fiscal 2014 Inventory Recovery”) and pre-tax restructuring charges of approximately $148 million related to the Cost Optimization and Resource Efficiency (“CORE”) program. This compares with a GAAP loss from continuing operations of $4.4 billion, or $8.37 per share diluted in the prior quarter, and GAAP income from continuing operations of $94 million, or $0.18 per share diluted, in the same quarter last year.
Adjusted loss from continuing operations for the fourth quarter was $42 million, or $0.08 per share diluted. Adjusted loss from continuing operations and adjusted diluted loss per share exclude the impact of the non-cash Q4 Fiscal 2014 Debentures Fair Value Adjustment of approximately $382 million ($382 million after tax), the Q4 Fiscal 2014 Inventory Recovery of approximately $149 million ($106 million after tax), and pre-tax restructuring charges of approximately $148 million ($105 million after tax) related to the CORE program incurred in the fourth 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 approximately $2.7 billion as of March 1, 2014, compared to $3.2 billion at the end of the previous quarter. Cash flow used in operations in the fourth quarter was approximately $553 million. Cash flows provided by financing activities in the fourth quarter were approximately $251 million, which includes the additional issuance of $250 million of convertible debentures. Cash flows used in investing activities included intangible asset additions of approximately $243 million. Purchase obligations and other commitments amounted to approximately $1.9 billion as at March 1, 2014, with purchase orders with contract manufacturers representing approximately $586 million of the total.
“I am very pleased with our progress and execution in fiscal Q4 against the strategy we laid out three months ago. We have significantly streamlined operations, allowing us to reach our expense reduction target one quarter ahead of schedule,” said John Chen, Executive Chairman and Chief Executive Officer of BlackBerry. “BlackBerry is on sounder financial footing today with a path to returning to growth and profitability.”
Outlook
The Company anticipates maintaining its strong cash position and continuing to look for opportunities to streamline operations. The Company is targeting break even cash flow results by the end of fiscal 2015.
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)
|
Gross Margin(1)(before taxes) |
Gross Margin %(1) (before taxes) |
Loss from continuing operations before income taxes |
Loss from Continuing Operations |
Diluted loss per share from continuing operations |
|||||||||||||||
| As reported | $ |
553 |
|
57 |
% |
|
$ |
(557 |
) |
|
$ |
(423 |
) |
|
$ |
(0.80 |
) | ||
| Adjustments: |
|
|
|
|
|
|
|
|
|
||||||||||
| CORE charges (2) |
17 |
|
2 |
% |
|
148 |
|
105 |
|
0.20 |
|||||||||
| Q4 Fiscal 2014 Debenture Fair Value Adjustment (3) |
|
|
|
|
382 |
|
382 |
|
0.73 |
||||||||||
| Q4 Fiscal 2014 Inventory Recovery (4) |
(149 |
) |
|
(15 |
)% |
|
(149 |
) |
|
(106 |
) |
|
(0.20 |
) | |||||
| Adjusted | $ |
421 |
|
43 |
% |
|
$ |
(176 |
) |
|
$ |
(42 |
) |
|
$ |
(0.08 |
) | ||
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 fourth quarter of fiscal 2014, the Company reported GAAP gross margin of $553 million or 57% of revenue. Excluding the impact of the CORE charges included in cost of sales and the Q4 Fiscal 2014 Inventory Recovery, the adjusted gross margin was $421 million, or 43%.
(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 fourth quarter of fiscal 2014, the Company incurred charges related to the CORE program of approximately $148 million pre-tax, or $105 million after tax. Substantially all of the pre-tax charges are related to one-time employee termination benefits, facilities and manufacturing costs. During the fourth quarter of fiscal 2014, charges of approximately $17 million were included in cost of sales, charges of approximately $21 million were included in research and development and charges of approximately $110 million were included in selling, marketing, and administration expenses.
(3) During the fourth quarter of fiscal 2014, the Company recorded a non-cash charge associated with the change in the fair value of the Debentures of approximately $382 million. This adjustment was presented on a separate line in the Statements of Operations.
(4) During the fourth quarter of fiscal 2014, the Company recorded a recovery of previous charges against inventory and supply commitments of approximately $149 million, or $106 million after tax, to reflect increased sell through rates, relative to the estimates and assumptions previously considered, resulting from discounted pricing and revised orders on hand for devices and components of BlackBerry 10 products.
Fiscal 2014 Results
Revenue from continuing operations for the fiscal year ended March 1, 2014 was $6.8 billion, down 38% from $11.1 billion in fiscal 2013. The Company’s GAAP net loss from continuing operations for fiscal 2014 was $5.9 billion, or $11.18 per share diluted, compared with GAAP net loss from continuing operations of $628 million, or $1.20 per share diluted in fiscal 2013. Adjusted net loss from continuing operations for fiscal 2014 was $711 million, or $1.35 per share diluted. Adjusted net loss from continuing operations and adjusted diluted loss per share for fiscal 2014 exclude the pre-tax impacts of an LLA impairment charge of $2.7 billion ($2.5 billion after tax), the Q4 Fiscal 2014 Inventory Recovery of $1.6 billion ($1.3 billion after tax), the Z10 inventory charge of $934 million ($666 million after tax), the Q4 Fiscal 2014 Debentures Fair Value Adjustment of $382 million ($382 million after tax), charges of $512 million ($398 million after tax) related to the Company’s CORE program and strategic review process and the Q4 Fiscal 2014 Inventory Recovery of $149 million ($106 million after tax). These charges and their related impacts on GAAP net loss from continuing operations and diluted loss per share from continuing operations are summarized in the table below.
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)
|
For the fiscal year ended March 1, 2014 |
|||||||||||||||||||
|
Gross Margin(1)(before taxes) |
Gross Margin %(1)(before taxes) |
Loss from continuing operations before income taxes |
Loss from Continuing Operations |
Diluted loss per share from continuing operations |
|||||||||||||||
| As reported | $ |
(43 |
) |
|
(1 |
)% |
|
$ |
(7,184 |
) |
|
$ |
(5,873 |
) |
|
$ |
(11.18 |
) | |
| Adjustments: |
|
|
|
|
|
|
|
|
|
||||||||||
| CORE charges (1) |
103 |
|
2 |
% |
|
512 |
|
398 |
|
0.76 |
|||||||||
| Q4 Fiscal 2014 Debenture Fair Value Adjustment (2) |
|
|
|
|
382 |
|
382 |
|
0.73 |
||||||||||
| Q4 Fiscal 2014 Inventory Recovery(3) |
(149 |
) |
|
(2 |
)% |
|
(149 |
) |
|
(106 |
) |
|
(0.20 |
) | |||||
| LLA Impairment Charge (4) |
|
|
|
|
2,748 |
|
2,475 |
|
4.71 |
||||||||||
| Q3 Fiscal 2014 Inventory Charge (5) |
1,592 |
|
23 |
% |
|
1,592 |
|
1,347 |
|
2.56 |
|||||||||
| Z10 Inventory Charge (6) |
934 |
|
14 |
% |
|
934 |
|
666 |
|
1.27 |
|||||||||
| Adjusted | $ |
2,437 |
|
36 |
% |
|
$ |
(1,165 |
) |
|
$ |
(711 |
) |
|
$ |
(1.35 |
) | ||
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) As part of the Company’s ongoing effort to streamline its operations and increase efficiency, the Company commenced the CORE program in March 2012. Further, the Company announced the formation of a special committee to conduct an organizational strategic review on August 12, 2013. During fiscal 2014, the Company incurred approximately $512 million in total pre-tax charges related to the CORE program and strategic review process. Substantially all of the pre-tax charges are related to one-time employee termination benefits, facilities and manufacturing costs related to the CORE program and legal and financial advisory costs related to the strategic review process. During fiscal 2014, pre-tax charges of approximately $103 million were included in cost of sales, charges of approximately $76 million were included in research and development and charges of approximately $333 million were included in selling, marketing, and administration expenses.
(2) During the fourth quarter of fiscal 2014, the Company recorded a non-cash charge associated with the change in the fair value of the Debentures of approximately $382 million. This adjustment was presented on a separate line in the Statements of Operations.
(3) During the fourth quarter of fiscal 2014, the Company recorded a recovery of previous charges against inventory and supply commitments of approximately $149 million, or $106 million after tax, to reflect increased sell through rates, relative to the estimates and assumptions previously considered, resulting from discounted pricing and revised orders on hand for devices and components of BlackBerry 10 products.
(4) During the third quarter of fiscal 2014 the Company performed a long-lived asset impairment test and based on the results of that test, the Company recorded a non-cash LLA Impairment Charge of approximately $2.7 billion pre-tax, or $2.5 billion after tax.
(5) During the third quarter of fiscal 2014, the Company recorded a primarily non-cash, pre-tax charge against inventory and supply commitments of approximately $1.6 billion, or $1.3 billion after tax, which was primarily attributable to BlackBerry 10 devices.
(6) 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, or $666 million after tax, which was primarily attributable to BlackBerry Z10 devices.
Supplementary Geographic Revenue Breakdown
BlackBerry Limited
(United States dollars, in millions)
Revenue by Region
|
For the quarter ended |
|||||||||||||||||||||||||||||||||||
|
March 1, 2014 |
|
November 30, 2013 |
|
August 31, 2013 |
|
June 1, 2013 |
|
March 2, 2013 |
|||||||||||||||||||||||||||
| North America | $ |
297 |
|
30.4 |
% |
|
$ |
340 |
|
28.5 |
% |
|
$ |
414 |
|
26.3 |
% |
|
$ |
761 |
|
24.8 |
% |
|
$ |
587 |
|
21.9 |
% | ||||||
| Europe, Middle East and Africa |
412 |
|
42.2 |
% |
|
549 |
|
46.0 |
% |
|
686 |
|
43.6 |
% |
|
1,343 |
|
43.7 |
% |
|
1,227 |
|
45.8 |
% | |||||||||||
| Latin America |
127 |
|
13.0 |
% |
|
135 |
|
11.3 |
% |
|
196 |
|
12.5 |
% |
|
449 |
|
14.6 |
% |
|
479 |
|
17.9 |
% | |||||||||||
| Asia Pacific |
140 |
|
14.4 |
% |
|
169 |
|
14.2 |
% |
|
277 |
|
17.6 |
% |
|
518 |
|
16.9 |
% |
|
385 |
|
14.4 |
% | |||||||||||
| Total | $ |
976 |
|
100.0 |
% |
|
$ |
1,193 |
|
100.0 |
% |
|
$ |
1,573 |
|
100.0 |
% |
|
$ |
3,071 |
|
100.0 |
% |
|
$ |
2,678 |
|
100.0 |
% | ||||||