BlackBerry Limited BB reported lackluster results for the first quarter of fiscal 2023 (ended May 31, 2022), as revenue contracted year-over-year. Nonetheless, accretive design gains and partnerships with major players bode well for the Canadian-based company. Sustained demand for cybersecurity and IoT products is a significant tailwind.
The company reported an adjusted loss per share of 5 cents, in line with levels in the prior year quarter. The Zacks consensus estimate was pegged at a loss of 6 cents per share. Quarterly total revenue decreased 3.4% year over year to $168 million.
Following the earnings announcement, shares of BlackBerry rose 0.4% in premarket trading on June 24.
The company outlined its long-term goals, established at its analyst day in May 2022. BlackBerry expects to achieve revenue of $1.213 billion by fiscal year 2027 at a five-year CAGR of 13%. The company had reported revenue of $718 million in the 2022 fiscal year ended Feb. 28, down 19.6% year-over-year.
BlackBerry Limited Price, Consensus, and EPS Surprise
BlackBerry Limited price-consensus-eps-surprise-chart | BlackBerry Limited Quote
Quarter in detail
Cybersecurity revenue totaled $113 million, up 6% year-over-year. IoT revenue totaled $51 million, up 19% year over year. Licensing and others contributed $4 million.
Software and services revenue increased 9% year over year to $164 million.
In the IoT business unit, the company’s QNX platform won nine new automotive design contracts and five in the general embedded market.
BlackBerry added that QNX software is now installed in more than 215 million vehicles, up 20 million year-over-year, according to independent research firm – Strategy Analytics. The company’s QNX royalty backlog saw a 14% year-over-year increase to $560 million at the end of the first quarter of fiscal 2023.
In the automotive sector, the growing consolidation of digital cockpits bodes well for BlackBerry. During the quarter under review, the company won design awards from Bosch and Visteon, BICV and for the new electric sedan from Renault-Jiangling.
During the first fiscal quarter, BlackBerry partnered with Magna International. Under the agreement, Magna sought to leverage BlackBerry’s QNX software, including the QNX software development platform, the QNX platform for ADAS and QNX OS for security, and professional engineering services for solution validation, system level integration and performance optimization.
The auto industry is facing headwinds from global chip shortages due to supply chain disruptions and the Ukraine crisis. However, the company noted that it was seeing signs of stabilization.
In cybersecurity, the company saw strong traction for the latest security product launches and benefited from expanding its footprint. The segment also saw solid growth in sequential billings.
Gross profit decreased 8.8% from the prior year quarter to $104 million. Gross margin contracted 360 basis points (bps) to 61.9%. Non-GAAP gross margin contracted 360 basis points to 62.5%.
Total non-GAAP operating expenses were $132 million. The adjusted operating loss was $27 million compared to an adjusted operating loss of $23 million a year ago. The Adjusted EBITDA loss was $21 million, compared to an Adjusted EBITDA loss of $6 in the prior year quarter.
Cash flow and liquidity
During the quarter under review, BlackBerry used $42 million of net cash in operating activities compared to $33 million used in the prior year quarter. The company recorded a net free cash outflow of $43 million, compared to a free cash outflow of $35 million in the prior year.
As of May 31, 2022, BB had $721 million in cash and cash equivalents with $459 million in long-term debentures.
For fiscal 2023, BlackBerry expects IoT revenue of between $200 million and $210 million, representing year-over-year growth of 12-18 percent. Cyber business billing growth is expected to be between 8-12% due to increased adoption of security products. For the IoT business, BlackBerry expects strong growth despite headwinds from the automotive industry.
Zacks Ranking and Stocks to Consider
BlackBerry currently has a Zacks rank of #3 (Hold).
Some top-ranked stocks in the broader tech sector are worth considering. InterDigital IDCC, Avnet AVT and Vishay Intertechnology VSH. While Avnet and InterDIgital carry a Zacks #1 rank, Vishay Intertechnology carries a Zacks #2 rank. You can see the full list of today’s Zacks #1 Rank stocks here.
Zacks’ consensus estimate for Vishay Intertechnology’s earnings in 2022 is pegged at $2.68 per share, up 10.3% over the past 60 days. The long-term earnings growth rate is expected to be 22.7%.
Vishay Intertechnology’s earnings have exceeded the Zacks consensus estimate for the past four quarters, averaging 5%. Shares of VSH are down 20.2% over the past year.
The Zacks consensus estimate for InterDigital 2022 earnings is pegged at $3.33 per share, up 46.1% over the past 60 days. IDCC’s long-term earnings growth rate is set at 17.4%.
InterDigital’s earnings have exceeded the Zacks consensus estimate in the previous four quarters, averaging 141.1%. IDCC shares have lost 17.4% of their value over the past year.
Zacks’ consensus estimate for Avnet’s fiscal 2022 earnings is pegged at $6.83 per share, up 20.5% over the past 60 days. The long-term earnings growth rate is expected to be 37.2%.
Avnet’s earnings have exceeded the Zacks consensus estimate for the past four quarters, averaging 21.2%. Avnet’s shares have risen 2.9% over the past year.
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