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A BlackBerry employee works at the company’s Network Operating Centre in Waterloo, Ont.Andrew Ryan/The Canadian Press
BlackBerry Ltd. BB-T delivered another strong quarter that exceeded analysts’ expectations and its own projections Thursday and raised its financial outlook for the year.
The Waterloo, Ont.-based software company, whose stock has been one of the top performers in technology this year, said it generated US$152.9-million in revenue in its fiscal first quarter ended May 31, up 26 per cent from the same period a year earlier. Adjusted operating earnings were US$36.3-million, up 144 per cent, while adjusted earnings were 4 US cents per share. The company earned 1 US cent per share based on generally accepted accounting principles (GAAP), up from zero.
BlackBerry had forecast in April it would generate up to US$140-million in revenue, between US$14-million and US$22-million in operating earnings, and 2 US cents to 3 US cents in adjusted earnings per share. It was the fourth time in five quarters that BlackBerry posted a net profit after not doing so for three years.
The company got a boost from the expansion of a contract with the government of Canada to significantly expand the deployment of its SecuSUITE encrypted communications product to staff through 2033. That contributed a one-time revenue boost to the secure communications business, driving most of the unit’s 24-per-cent year-over-year revenue increase, chief financial officer Tim Foote said in an interview. The division, which is expected to typically deliver single-digit year-over-year revenue gains, generated US$73.6-million in revenue in the quarter.
But BlackBerry’s two other units – its QNX embedded software division and a patent licensing business – also exceeded revenue and earnings projections.
In an interview, chief executive officer John Giamatteo called it a “rock solid start” to the fiscal year after the completion of two-plus years of restructuring. “The company is in a really solid place from a financial foundation perspective, from a technology perspective, and I haven’t seen the pipeline look as strong as it does now.”
BlackBerry also increased its forecast for the year: it now expects to generate US$594-million to US$621-million in revenues, up from a forecast of US$584-million to US$611-million in April. It shifted its operating earnings range up to between US$119-million and US$139-million and boosted its earnings per share guidance for the year.
Investors have noticed the improvement. The stock took off in April and was up 127 per cent year-to-date as of Wednesday.
BlackBerry also got a boost this week as Stifel analyst Suthan Sukumar initiated coverage of the stock with a buy recommendation and US$12 price target (the stock closed at US$8.63 on the New York Stock Exchange Wednesday). He argued in a note “the market still misdefines BlackBerry” and said it stands to benefit as demand for physical artificial intelligence technology grows.
The Canadian technology stalwart, best known for popularizing the smartphone, has been on a roll under Mr. Giamatteo, who became CEO in late 2023 after serving as head of its cybersecurity division under predecessor John Chen. On Mr. Giamatteo’s watch, BlackBerry has slashed costs, sold a money-sucking cybersecurity unit and achieved positive operating cash flows.
He also refocused the company on its QNX business, a dominant supplier of embedded systems used to manage software-defined vehicles. That market is growing as more cars roll off the line with autonomous and driver-assistance functionality such as lane keeping.
QNX revenues increased by 26 per cent, to US$72.3-million, in the quarter, its adjusted operating earnings increased by 52 per cent year-over-year to $19.3-million, representing a 27-per-cent margin. That combination of revenue growth and operating profitability makes QNX a top performer by software industry standards.
QNX is expected to continue delivering brisk growth by seeking new markets for its software embedded in robots, automated industrial applications and medical devices and equipment. The unit is also introducing software functionality to its vehicle offerings this year that could generate three times the amount of revenue per unit that QNX now derives.
BlackBerry’s secure communications unit, which had been declining until recently, in April reported its first full year of revenue growth since its fiscal year ended Feb. 29, 2020. Annual recurring revenue in the unit, which sells ultra-secure messaging and crisis management communications products, reached US$220-million in the quarter, up 5.3 per cent year-over-year, marking its fourth consecutive quarter-to-quarter gain.
The unit continues to benefit from geopolitical factors, notably concerns over digital sovereignty. But growing QNX continues to be the company’s focus, and some market observers believe BlackBerry could eventually sell Secure Communications. “We don’t feel like we’re in an urgent need” to sell the profitable, cash-generating unit, Mr. Giamatteo said.
