Canadian tech major BlackBerry (BBRY, Financial) gave the investors a pleasant surprise as it came out with its fiscal 2015 fourth-quarter and full-year earnings. For the quarter the company reported a bottom line that was in the green – a refreshing and reassuring change after several quarters of losses (excluding the third quarter which also saw positive earnings). However, for the full year the net income was still negative. So, what was it that made investors smile? Well, the much-improved bottom line. Last year, the full year loss came to a flabbergasting $5.9 billion which was reduced to only $304 million this year – that’s surely a great improvement especially considering the time span in play. Let’s take a look at the numbers and other significant developments.
Numbers of the quarter
First let’s take a look at the fourth-quarter numbers. For the three-month period BlackBerry reported consolidated revenues of $660 million, down from a year ago period’s $793 million or 16.8%. Despite lower revenues, operating loss improved from $139 million in fourth quarter of last year to $106 million. All this resulted in net income of $28 million, up from prior year period’s loss of $148 million; 42% of the quarter’s revenue came from hardware, 47% came from services and software contributed 10% to the figure.
In the fourth quarter alone BlackBerry recorded hardware revenue coming from 1.3 million devices, and the average selling price of handsets was up 16.7%. Turning to cash, the company has started being cash-flow positive this year. BlackBerry’s cash balance now stands at $3.27 billion which according to CEO John Chen is “the highest balance in the company history which we last achieved in May of 2010, and an increase of 608 million compared to the end of FY14.”
“This past quarter we remain disciplined in our expense management and increasing our free cash flow to 190 million which is 12% up sequentially and reversing the over $0.5 billion cash used in the prior year same quarter.” – John Chen during fiscal 2015 fourth quarter earnings call
Now coming to the full-year numbers, consolidated revenues dropped 51.4% to $3.3 billion from last year’s $6.8 billion. But at the same time net loss also dropped massively – FY 2014’s net loss came to $5.9 billion and this year’s net loss was just $304 million. Earnings per share came to $0.05 for the fourth quarter, and -$0.58 for the full year. The Canadian company was able to improve its performance on the back of improved management efforts, good control over margins and expenses and investing in the core competencies.
Significant developments
There was a point in time when BlackBerry was at the top of the smartphone game. However, with time that phase faded. But the company never fell from being the leader in terms of software security. That’s happened through years of expertise and developing its core. The company now plans to invest further to develop features that will lead to higher product differentiation and help it maintain its leadership position.
After losing out to peers such as Apple (AAPL, Financial) and Samsung (SSNLF, Financial) in the smartphone game, BlackBerry’s focus had shifted from hardware to software, though the handset business continued to function. Lately the company has been witnessing some success in respect to the new handsets that it launched, and the company expects the average selling price of its devices to rise. This will help BlackBerry quickly turn to higher profits by the end of the new financial year. Apart from this, BlackBerry’s technology licensing program is expected to kick in and start contributing to company profits.
Another strong development during the quarter was the partnership with Samsung to provide security solution to the SecuTablet, a smart device that comes bundled with software which helps to make the device highly secured through a combination of a number of cryptographic chips. This move clearly hints at the company’s aggressive efforts to expand the base of its enterprise and government solutions.
Parting thoughts
BlackBerry has already covered half of the two-year turnaround plan CEO John Chen had devised, and the progress seems to be in tune with the overall strategy. Last quarter (FY 15 Q3) when BlackBerry came out with earnings, despite reporting a positive bottom line, investors weren’t pleased since the figure dropped year on year. At that point Chen had explained the company’s strategy in play was to minimize costs and losses; maximizing profit would come later.
It seems the time is approaching fast, and the company is on the right path. Like the CEO mentioned during the fourth quarter earnings call, “Our financial viability is no longer in question,” further adding, “We are now turning our attention to revenue stabilization, while staying cash-flow positive and achieving sustainable profitability sometime starting this fiscal year [FY 2016].”
