BlackBerry Ltd. signalled that the turnaround is well and truly over as it reported fourth-quarter earnings Friday. The former smartphone maker is now expecting sustained revenue growth on the back of its secure software business.
The company recorded US$857 million in adjusted revenue, with the overwhelming majority of it coming from software and services, and net income of US$93 million for the year.
In the most recent quarter, BlackBerry also closed a US$1.4 billion acquisition of fast-growing cybersecurity firm Cylance, the biggest acquisition in the company’s history.
When you deem a turnaround successful, that means the business has to be growing
BlackBerry CEO John Chen
But for CEO John Chen, speaking to the Financial Post after the company’s earnings call, the future guidance was what’s really exciting.
“Everyone lost the significance that we finally have year-over-year growth,” he said.
“Nobody said anything about it. But the more important thing is that we expect year-over-year growth every quarter next year.”
BlackBerry is giving guidance that they expect total revenue growth between 23 and 27 per cent in the coming year, with further growth expected the following year as Cylance moves to profitability and the company’s Spark internet-of-things platform hits the market.
For the second quarter in a row, BlackBerry recorded no revenue from handset sales.
Chen said growth being driven almost entirely by software and licensing is a clear mark that the company’s turnaround is over, and a new phase is underway.
“When you deem a turnaround successful, that means the business has to be growing. Now, the growing business is usually not the same business that got the company into trouble in the first place,” he said.
“From a company that does US$6 billion in revenue but losing money and it’s burning cash, to a company that is over US$1 billion in software (revenue) making money and generating cash, I’d say those would be on my resume.”
On Friday’s earnings call, the Cylance acquisition dominated the questions, as the company works to incorporate the artificial intelligence cybersecurity technology into other lines of business — namely, the company’s Unified Endpoint Management enterprise system, and the QNX automotive operating system.
Chen said one of his big jobs for the coming year is incorporating Cylance into other parts of the BlackBerry business, while still maintaining the high growth in the newly acquired company’s core business.
Chen said he anticipates Cylance will reach profitability later this year or early the following year, but he said he wants to get there by growing revenue rather than cutting costs.
But Chen joked that Cylance’s growth depends to some extent on factors beyond his control, like the broader cyber threat landscape.
“I’m turning ourselves into those pharmaceutical companies that put out flu vaccines, kind of like I need the flu to grow my revenues,” he joked.
“In the last couple years, (Cylance has) grown anywhere from 30 per cent year-over-year to a 90 per cent year-over-year revenue growth. And the difference is, when they were smaller WannaCry and Petabyte, both of those viruses … were quite prominent, and they were a big part in helping the industry to address those issues.”