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Summary

  • BlackBerry posted a small profit during the quarter.
  • The company achieved flat revenue, while containing costs and generating positive cash flows.
  • BlackBerry is shaping up to be a phenomenal turnaround story.

BlackBerry Limited (NASDAQ:BBRY) did it! The company posted net income of $23 million or $0.04/share for the quarter ended May 31, 2014 ("QEMay14"). The stock was up 10% in late day trading due to massive short covering. Volume was 62.4 million shares, versus average volume of 9.8 million. Analysts were expecting a loss of 0.26/share. Here are the details:

Revenue

  • Revenue during the quarter was flat; the company generated revenue of $966 million versus $976 million during the previous quarter.
  • The revenue was broken down between hardware (39%), services (54%), software and other (7%).
  • The company recognized revenue on approximately 1.6 million smartphones during the quarter, up 23% (1.3 million) over the previous quarter.
  • On the conference call, CEO John Chen said its new Z3 was selling well in India. The company plans to roll out the Z3 in India and a host of other countries soon.

Gross Margin

  • BlackBerry achieved gross margin of $451 million or 46.7%, as compared to 56.7% in the previous quarter.
  • Excluding $12 million of costs related to CORE - its headcount reduction program started in March 2012, gross margin would have been $463 million.

Net Income

  • BlackBerry earned net income of $23 million or $0.04/share, prior to non-core items.
  • CORE had negative net income impact of $204 million. The company also had a fair value adjustment for debentures which improved earnings by $287 million.
  • Excluding the impact of CORE (+204 million) and the fair value adjustment (-287 million), BlackBerry would have had a net loss of $60 million or a loss of 0.11/share.

Cash Burn

Cash flow from operations was $302 million during the quarter, which was positively impacted by income tax receivable of $298 million.

  • Total cash increased by $131 million, leaving cash on hand of $1.7 billion. Cash flow was positively impacted by $292 million from proceeds from the sale of property, plant and equipment.

Conclusion

BlackBerry is back. The CEO has been able to stabilize revenue, while containing costs. The benefits from the CORE may finally be kicking in. Cash flow from operations was positive, even excluding the tax pickup from the government. With a market cap of $4.7 billion, I rate the company a hold until the CEO and Wall Street can give further guidance on full year projections.

Source: BlackBerry: Phenomenal Turnaround In The Making