Blackberry reported its sixth consecutive profitable quarter on Thursday.MIKE BLAKE/Reuters
BlackBerry Ltd. BB-T reported stronger-than-expected second-quarter results Thursday and increased its financial forecasts for the second time this year.
The Waterloo, Ont.-based company said it generated US$163-million in revenue in the quarter ended Aug. 31, an increase of 26 per cent from the same period a year ago. That was driven by a 27-per-cent increase in sales from its vehicle software unit, QNX. Analysts had expected revenues of US$145.3-million, according to consensus estimates from S&P Global Market Intelligence. The company in June forecast quarterly revenue would be no higher than US$148-million.
Chief financial officer Tim Foote attributed the higher revenue to better-than-expected royalties as vehicles with QNX software rolled off the line. The company’s slower-growing but profitable secure communications business generated revenue of US$60.9-million, in line with expectations.
Much of the surprise gain also came from BlackBerry’s licensing business, which collects payments from other companies for use of its intellectual property. BlackBerry generated US$22.1-million in high-margin licensing revenue, more than double the expected amount. Chief executive officer John Giamatteo cautioned analysts on a conference call that licensing deals are typically one-time payments and unpredictable, and that BlackBerry typically expects $24-million in revenue from the unit per year.
The higher overall topline number translated into US$47-million in operating earnings, up 81 per cent year-over-year. BlackBerry and analysts had forecast operating earnings would be US$30-million or less.
BlackBerry also reported operating cash flow of US$29.3-million, up more than eightfold year-over-year, and delivered adjusted earnings of 7 cents per share, close to double what analysts and the company had forecast. It was BlackBerry’s sixth straight profitable quarter, after three years of losses, as it reported 6 cents of net earnings per share.
“This is another rock solid beat-and-raise quarter for BlackBerry, our third quarter in a row of 20-per-cent-plus revenue growth on the QNX side, and we’re projecting another strong quarter” in the period ending Nov. 30, Mr. Giamatteo said in an interview.
He added QNX had booked more new contracts with customers, by revenue, in the first half of the fiscal year than in any prior entire year. Mr. Giamatteo said QNX has also built “a tremendous pipeline” of demand for non-automotive applications for QNX, which already account for 20 per cent of the unit’s revenues. Those include potential contracts to power real-time physical AI operating systems underpinning robotics, medical devices and automated industrial equipment. He also said Uber had signed on as a QNX customer to build software for its robotaxis.
The company also increased its financial forecasts for the year. It now foresees revenue of between US$616-million and US$636-million, up from a prior range of US$594-million to US$621-million. It increased its adjusted EBITDA forecast to as much as US$158-million, up from a previous high limit of US$139-million, and predicted adjusted earnings per share of up to 22 US cents.
In a research note, Stifel analyst Suthan Sukumar called the results “a strong beat and raise,” and said QNX’s vigorous revenue growth was “the key driver for the stock.”
BlackBerry secures $100-million-plus deal for new automotive software, Alloy Kore
But BlackBerry also slightly trimmed its secure communications revenue and operating earnings forecasts for the year to between US$260-million and US$270-million, and US$50-million to US$58-million, respectively, citing the uncertain impact of geopolitical developments on potential new business. Mr. Giamatteo encouraged investors to “avoid getting too fixated” on quarterly numbers. “The long-term trajectory of the business is in a healthy place.”
The Canadian tech stalwart has been on a roll since Mr. Giamatteo became CEO in 2023 after serving as head of its cybersecurity division under his predecessor John Chen. BlackBerry stock in July reached its highest level since 2021, when it was one of several faded brands that became “meme” stocks driven by speculative traders. Its shares closed up 4 per cent Thursday.
On Mr. Giamatteo’s watch, BlackBerry slashed costs, sold a money-sucking cybersecurity unit and achieved positive operating cash flows. He refocused BlackBerry on its QNX business, which provides operating system software that powers advanced driver assistance and safety systems and digital cockpits in increasingly digitized vehicles. And this year, Mr. Giamatteo started touting BlackBerry as a growth company, which it hasn’t been since it sold smartphones.
BlackBerry is hanging much of its hopes on a new full-scale automobile software platform called Alloy Kore, developed in partnership with German tech company Vector Informatik GmbH, which it thinks can generate three times the revenues per vehicle as QNX’s platform.
BlackBerry announced its first Alloy Kore contract Tuesday, with Coretura AB, a joint venture between truck-making giants Daimler Truck and Volvo Group. The contract is expected to deliver US$100-million-plus in royalty revenue. “We believe this is just the beginning” as discussions continue with other automakers, Mr. Giamatteo told analysts.
Mr. Foote also said BlackBerry is “selectively evaluating” potential acquisitions to accelerate QNX’s non-automotive business.