BlackBerry (NYSE:BB) published its Q1 FY’20 results on Wednesday, June 26, reporting earnings that were roughly in line with analysts’ estimates. In this note, we take a look at trends that drove the company’s results over Q1 and Trefis’ expectations for Q2.
View our interactive dashboard analysis on Key Takeaways From BlackBerry’s Q1 Results & What To Expect In Q2
BlackBerry’s IoT Business Growth Driven By QNX Embedded Software
- BlackBerry has combined its Technology solutions and Enterprise Software business into a single unit called IoT starting from Q1 FY’20.
- Revenues grew by 8% YoY to $136 million on a GAAP basis, coming in below expectations.
- As the technology solutions business has been witnessing strong momentum with the QNX embedded software garnering more design wins in the automotive markets, it is likely that BlackBerry’s bread-and-butter unified endpoint management solutions business is slowing down.
- However, we expect sales to improve over Q2 FY’20.
Licensing & IP Revenues Remain Volatile
- This segment is engaged in the licensing of BlackBerry’s technology and patents.
- Revenues declined QoQ to about $72 million in Q1, although it grew by about 14% YoY.
- While licensing revenues are quite volatile, BlackBerry is focusing on bringing in more recurring IP revenues.
Cylance Segment Will Benefit From Growing Subscriptions
- Q1 marked the first full quarter since the company closed its acquisition of AI-based cybersecurity player Cylance.
- Revenues for the division came in at $32 million for the quarter on a GAAP basis, and we expect them to grow to close to $40 million in Q2.
- Growth in the division is being driven by rising subscriptions from the professional services sector, manufacturing, as well as the government.
- Sales could expand further as BlackBerry integrates Cylance technology into UEM offering (likely by next Spring).
SAF Business Trends Steadily Lower
- BlackBerry’s Service Access Fees revenues have been trending steadily lower, driven by attrition from the Blackberry platform.
- We expect the trend to continue going forward.
BlackBerry’s Net Margins Have Been Trending Lower Partly Due To Cylance
- BlackBerry’s net margins have declined, due to higher operating expenses and lower gross margins following the Cylance deal.
- We expect net margins and net income to improve modestly over Q2.
BlackBerry’s EPS Trended Lower But Should Improve Modestly In Q2
What’s behind Trefis? See How it’s Powering New Collaboration and What-Ifs