BlackBerry posts profit in Q4, but loses 3 million subscribers

BlackBerry ended the fourth quarter of fiscal 2013 — the first to include sales of the Z10 — in, well … the black.

The Waterloo-based communications company today announced its quarterly results and, while it’s managed to stay profitable things are far from back to booming at the company.

Revenue for the quarter was approximately US$2.7-billion, down US$49-million or two percent from approximately US$2.7-billion in the previous quarter and down 36% from US$4.2-billion in the same quarter of fiscal 2012. Ouch.

Despite revenue falling though, its profit margin actually increased slightly. The company reported GAAP income from continuing operations of US$94-million during the quarter. That’s a lot tidier than the US$14-million it reported in the previous quarter and a hell of a lot better than the US$118-million it reported in the same quarter a year ago.

During the quarter, it also lost some three-million subscribers. It reports some 76-million down from 79-million in the previous quarter and 80-million a year ago. It says it sold six-million BlackBerry devices over the past three months, but only one-million of them were running BlackBerry 10. You might be thinking that puts its claims that nearly half of the people buying BlackBerry 10 devices are switching over from Android and iOS. It’s worth bearing in mind however, that the report doesn’t include data from a number of markets where the device was yet to launch.

The other big news form the company was the BlackBerrry co-founder Mike Lazaridis would be stepping down from the company’s board.

“I admire Mike for his many achievements and for his vision in helping bring BlackBerry 10 to fruition,” said CEO Thorsten Heins. “On a personal level, I am grateful to Mike for his help, guidance and advice during my first 15 months as CEO of BlackBerry. I wish him all the best.”

“With the launch of BlackBerry 10, I believe I have fulfilled my commitment to the Board,” Lazaridis said. “Thorsten and his team did an excellent job in completing BlackBerry 10. We have a great deal of which to be proud. I believe I am leaving the company in good hands. I remain a huge fan of BlackBerry and, of course, wish the company and its people well.”

Lazaridis will apparently concentrate on his new venture Quantum Valley Investments.

“We have implemented numerous changes at BlackBerry over the past year and those changes have resulted in the company returning to profitability in the fourth quarter,” Heins said of the company results. “With the launch of BlackBerry 10, we have introduced the newest and what we believe to be the most innovative mobile computing platform in the market today”.

“As we go into our new fiscal year, we are excited with the opportunities for the BlackBerry 10 platform, and the commitments we are seeing from our global developers and partners,” he said, adding “We have built an engine that is able to drive improved financial performance at lower volumes, which should allow us to generate additional benefits from higher volumes in the future.”

See the full release below:

WATERLOO, ONTARIO–(Marketwire – March 28, 2013) – Research In Motion Limited (doing business as BlackBerry) (NASDAQ:BBRY)(TSX:BB), a world leader in the mobile communications market, today reported financial results for the three months and fiscal year ended March 2, 2013 (all figures in U.S. dollars and U.S. GAAP, except where otherwise indicated).

Q4 Highlights:
Revenue of $2.7 billion
GAAP income from continuing operations of $94 million, or $0.18 per share diluted
Adjusted income from continuing operations of $114 million, or $0.22 per share diluted
Gross margin of 40% driven by higher average selling prices and hardware margins
Shipments of 6 million smartphones, including approximately 1 million BlackBerry 10 units
Subscriber base of approximately 76 million
Cash flow from operations of $219 million, cash and investments balance of $2.9 billion

Q4 Results
Revenue for the fourth quarter of fiscal 2013 was approximately $2.7 billion, down $49 million or 2% from approximately $2.7 billion in the previous quarter and down 36% from $4.2 billion in the same quarter of fiscal 2012. The revenue breakdown for the quarter was approximately 61% for hardware, 36% for service and 3% for software and other revenue. During the quarter, BlackBerry shipped approximately 6 million BlackBerry smartphones and approximately 370,000 BlackBerry PlayBook tablets.

GAAP income for the quarter from continuing operations was $94 million, or $0.18 per share diluted, compared with the GAAP income from continuing operations of $14 million, or $0.03 per share diluted, in the prior quarter and a GAAP loss from continuing operations of $118 million, or $0.23 per share diluted, in the same quarter of fiscal 2012. GAAP income for the quarter, including income from discontinued operations, was $98 million, or $0.19 per share diluted, compared with the GAAP income including loss from discontinued operations of $9 million, or $0.02 per share diluted, in the prior quarter and a GAAP loss, including loss from discontinued operations of $125 million, or $0.24 per share diluted, in the same quarter of fiscal 2012.

Adjusted income from continuing operations for the fourth quarter was $114 million, or $0.22 per share diluted. Adjusted income and adjusted diluted earnings per share (“EPS”) exclude the impact of pre-tax charges of $29 million ($20 million on an after-tax basis) related to the Cost Optimization and Resource Efficiency (“CORE”) program. This impact on GAAP income from continuing operations and diluted EPS are summarized in the table below.

The total of cash, cash equivalents, short-term and long-term investments was approximately $2.9 billion as of March 2, 2013 and at the end of the previous quarter. Cash flow from operations in the fourth quarter was approximately $219 million. Uses of cash included intangible asset additions of approximately $235 million and capital expenditures of approximately $88 million.

“We have implemented numerous changes at BlackBerry over the past year and those changes have resulted in the Company returning to profitability in the fourth quarter,” said Thorsten Heins, President and CEO. “With the launch of BlackBerry 10, we have introduced the newest and what we believe to be the most innovative mobile computing platform in the market today. Customers love the device and the user experience, and our teams and partners are now focused on getting those devices into the hands of BlackBerry consumer and enterprise customers.”

Heins added, “As we go into our new fiscal year, we are excited with the opportunities for the BlackBerry 10 platform, and the commitments we are seeing from our global developers and partners. We are also excited about the new, dynamic culture at BlackBerry, where we are laser-focused on continuing to drive efficiency and improve the Company’s profitability while driving innovation. We have built an engine that is able to drive improved financial performance at lower volumes, which should allow us to generate additional benefits from higher volumes in the future.”

Outlook
The Company will be increasing its marketing investment in the first quarter of fiscal 2014 in support of the global launch of BlackBerry 10. Including the anticipated 50% sequential increase in marketing spending, the Company believes it will approach breakeven financial results in the first quarter based on its lower cost base, more efficient supply chain, and improved hardware margins.

Board Update
The Company also announced that Mike Lazaridis, having fulfilled the commitment he made to the Board in January 2012, has decided to retire as Vice Chair and a Director of the Company. Lazaridis co-founded BlackBerry nearly 30 years ago and served as a co-CEO of the company until last year when he was elected Vice Chair of the Board. Lazaridis, who last week announced the launch of his new venture, Quantum Valley Investments, will step down from the BlackBerry Board effective May 1, 2013.

“We are grateful to Mike for his contributions to BlackBerry during the past three decades,” said Barbara Stymiest, Chairman of BlackBerry’s Board of Directors. “Mike invented the BlackBerry and is widely recognized as one of Canada’s greatest innovators. Mike played a pivotal role for the past 15 months in helping with the leadership transition and the successful launch of BlackBerry 10. We deeply respect and appreciate Mike’s desire to devote his full-time efforts to his exciting new venture, and we wish him all the best.”

“I admire Mike for his many achievements and for his vision in helping bring BlackBerry 10 to fruition,” said CEO Thorsten Heins. “On a personal level, I am grateful to Mike for his help, guidance and advice during my first 15 months as CEO of BlackBerry. I wish him all the best.”

“With the launch of BlackBerry 10, I believe I have fulfilled my commitment to the Board,” Lazaridis said. “Thorsten and his team did an excellent job in completing BlackBerry 10. We have a great deal of which to be proud. I believe I am leaving the company in good hands. I remain a huge fan of BlackBerry and, of course, wish the company and its people well.”

Reconciliation of GAAP loss from continuing operations before income taxes and diluted EPS from continuing operations to adjusted income from continuing operations before income taxes and adjusted diluted EPS from continuing operations: