BlackBerry (BB) tumbles to second-quarter loss, revenue drops year-over-year

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BlackBerry Limited BB reported lackluster results for the second quarter of fiscal 2023 (ended Aug. 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 IoT products is a significant tailwind.

The company reported an adjusted loss per share of 5 cents compared to the prior year quarter loss of 6 cents per share. The Zacks consensus estimate is pegged to a loss of 7 cents per share. Quarterly total revenue was down 4% year-over-year to $168 million.

Following the earnings announcement, shares of BlackBerry fell significantly in premarket trading on Sept. 28, as investors likely expected healthy revenue growth.

BlackBerry Limited Price, Consensus, and EPS Surprise

BlackBerry Limited price-consensus-eps-surprise-chart | BlackBerry Limited Quote

Quarter in detail

Cybersecurity revenue totaled $111 million, down 7.5% year-over-year. IoT revenue totaled $51 million, up 28% year-over-year. Licensing and others contributed $6 million, up from $11 million a year ago.

Software and services revenue increased 1.3% year-over-year to $162 million.

In the IoT business unit, the company’s QNX platform won nine new automotive design contracts and 10 in the general embedded market.

In the second quarter, the company announced that its QNX technology and QNX operating system for security 2.2 will be used by the Volkswagen Group’s software company CARIAD. Blackberry QNX and OS for Safety 2.2 will be integrated with VW.OS to serve as an efficient source for the development of advanced driver assistance systems and automated driving functions.

In the automotive sector, the growing consolidation of digital cockpits bodes well for BlackBerry. During the reported quarter, the company announced that Hozon New Energy Automotive has selected BlackBerry QNX technology to power its upcoming sedan, the NETA S. The company will leverage BlackBerry QNX Neutrino RTOS and QNX Hypervisor for the vehicle’s intelligent technology cockpit.

During the second fiscal quarter, Blackberry partnered with LeapXpert to enable the use of the BlackBerry Dynamics platform on popular messaging apps such as WhatsApp, iMessage, WeChat, SMS, Telegram, Signal, etc. The collaboration will provide customers with secure storage for important information and data. leak protection. It will also ensure that interactions between employees and customers are encrypted and captured end-to-end.

In cybersecurity, the company has seen strong traction within the government and financial services verticals. The continued momentum of BlackBerry’s Cylance product portfolio bodes well for the segment. The segment also saw double-digit growth in sequential billings.

Other details

Gross profit fell 5.4% from the prior year quarter to $106 million. Gross margin contracted by 90 basis points (bps) to 63.1%. Non-GAAP gross margin contracted 100 basis points to 64%.

Total non-GAAP operating expenses were $129 million. Adjusted operating loss was $22 million, compared to an adjusted operating loss of $30 million a year ago. The Adjusted EBITDA loss was $16 million, compared to an Adjusted EBITDA loss of $14 in the prior year quarter.

Cash flow and liquidity

For the first six months of fiscal 2023, BlackBerry used $66 million of net cash in operating activities. As of August 31, 2022, BB had $431 million in cash and cash equivalents with $449 million in long-term debentures.

Outlook

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 space are Synopsis NPS, Pure storage PSTG and Arista Networks A NET. Arista Networks and Pure Storage currently sport a Zacks Rank #1 (Strong Buy), while Synopsys currently sport a Zacks Rank #2 (Buy). You can see the full list of today’s Zacks #1 Rank stocks here.

The Zacks consensus estimate for Synopsys 2022 earnings is pegged at $8.84 per share, up 4.4% over the past 60 days. The long-term earnings growth rate is expected to be 16.2%.

Synopsys earnings have exceeded the Zacks consensus estimate for the past four quarters, averaging 3%. Shares of SNPS are up 1.4% over the past year.

The Zacks consensus estimate for 2022 PSTG earnings is pegged at $1.18 per share, up 24.2% over the past 60 days. The long-term earnings growth rate is expected to be 35.5%.

Pure Storage’s earnings have exceeded Zacks’ consensus estimate for the past four quarters, averaging 171.8%. Shares of PSTG are up 2.8% over the past year.

Zacks’ consensus estimate for Arista Network’s 2022 earnings is pegged at $4.04 per share, up 10.1% over the past 60 days. The long-term earnings growth rate is expected to be 18.6%.

Arista Network’s earnings have exceeded Zacks’ consensus estimate for the past four quarters, averaging 10.1%. ANET shares are up 28% over the past year

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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