BlackBerry Earnings: Q3 2015 Brings Back Profitable Days?

  • BlackBerry beat bottom line estimates while missing on top line.
  • BlackBerry’s handset sales are down 5% QoQ.
  • BlackBerry shares are down in pre-market trade due to growth concerns.

Continuing the trend, BlackBerry (NASDAQ:BBRY) delivered earnings surprise for the fourth quarter in a row. The company reported Non-GAAP EPS of $0.01 against analysts’ consensus of -$0.05. The turn in profitability comes much ahead of John Chen’s target of 2016, lending credence to BlackBerry's turnaround possibility. However the company’s revenues were disappointing at $793 million against analysts’ estimate of $937.41 million.


BlackBerry’s Revenue Decline

BlackBerry’s revenue of $793 million is a decline of 33% from Q3 2014 revenue of $1.19 billion. BlackBerry’s segment wise revenues remained largely unchanged from previous quarter with each of hardware and services segments generating 46% of total revenue, and software division generating 8% of revenue. BlackBerry’s revenue from SAF declined 13%, lesser than 15% anticipated by the management. BlackBerry’s management continues to expect decline in SAF.

BlackBerry Turn's Profitable

BlackBerry’s gross margin increased to 52% on the back of high margin hardware sales. Non-GAAP profit for the third quarter was $6 million, or $0.01 per share, reversing a loss of $0.02 last quarter. GAAP net loss for the quarter was $148 million, or $0.28 per share. Efficient cost management largely contributed to Non-GAAP profitability, with operating expenses declining from last year.

Handset Sales Were Below Expectation

BlackBerry recorded sales of approximately 2 million handset units, down 5% from the previous quarter. Revenue from handsets declined by 12% QoQ to $365 million resulting in average selling price of $182, down 27% YoY. BlackBerry is still struggling to meet Passport orders.

BlackBerry has also shown an impressive performance on BES 10 front. Total number of licenses issued stood at 6.8 million at the end of Q3 2015, an improvement of 100% from previous quarter, thanks largely to EZ Pass Program, which it is ending this quarter. John Chen has repeatedly said that BlackBerry enterprise solutions is the future the company.

Positive Operating Cash Flow

BlackBerry finally achieved a positive cash flow of $43 million compared to cash burn of $36 million in the previous quarter. This is a huge positive for the company. BlackBerry achieved positive operating cash flow well before its target. BlackBerry was able to achieve positive operating cash flow by cutting down expenses. BlackBerry also has a cash pile of $3.1 billion. In the conference call John Chen also expressed his confidence that operating cash flows are going to remain positive in coming quarters.


BlackBerry has delivered an earnings surprise, handsomely beating analysts estimate and also delivered a positive operating cash flow. This was unthinkable just a few hours ago. However, stock is down in pre-market trade. While, normally this would have been surprising, investor’s are concerned with BlackBerry’s decline in revenues. BlackBerry’s huge miss on top line has got investors worried.

BlackBerry was able to generate profit by cutting down on expenses, and there is only so much you can do on the expense management front. BlackBerry needs to grow its revenue. While existing orders for Passport and Classic will have a positive impact on next quarter revenue, BlackBerry needs to get its software and enterprise solutions right for a sustainable source of revenue.

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Neither Amigobulls, nor any members of its staff hold positions in any of the stocks discussed in this post. The author may not be a certified/registered investment advisor, and the opinions expressed should not be treated as investment advice. Buying and selling of securities carries the risk of monetary losses. Readers/Viewers are advised to carry out their own due diligence and consult their investment advisors before making any investment decisions. Neither Amigobulls, nor the author have any business relationship with any of the companies covered in this post.

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Comments on this article and BBRY stock

Just reporting profits for a quarter won't save blackberry. The CEO needs to focus on top line growth. If handsets are not selling, move on to enterprise software and messenger revenue. There is no hope for Nokia (msft) & Blackberry in the smartphone markets now, world has moved over to android and iphones.
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