Enterprise Software, IP Licensing Drive BlackBerry’s Q3
BlackBerry (NASDAQ:BBRY) published its Q3 fiscal 2018 results on Wednesday, December 20, beating market expectations on both earnings and revenues, driven by continued growth in its core enterprise software business and stronger-than-expected revenues from intellectual property and licensing. BlackBerry’s gross margins also soared to record highs of about 74% on a GAAP basis, as the higher-margin software and services operations account for roughly 84% of BlackBerry’s revenues. Below we take a look at some of the key takeaways from the software business.
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Government Orders Drive Enterprise Business
BlackBerry’s core enterprise software and services sales grew by 11.5% year-over-year to $97 million on a GAAP basis, driven by about 3,000 orders which primarily came from government agencies and customers in regulated industries. Key customer wins during the quarter include NATO, the United States Department of Defense, U.S. Department of Treasury and U.S. Department of Justice. BlackBerry could have more room to grow in the long run, as the broader enterprise mobility management space is expected grow at a rate of about 18% over the next four years, rising from $1.86 billion in 2017 to about $3.39 billion in 2021, per the Radicati group. Moreover, revenue stability is also likely, given that BlackBerry’s enterprise mobility offering, Unified Endpoint Management, operates on a subscription basis. The company said that 75% of third quarter software and services revenue (excluding IP licensing and professional services) was recurring.
Technology Solutions And Patent Licensing
BlackBerry’s Technology Solution group, which houses emerging businesses including the QNX software and fleet tracking solutions– saw revenues remain flat year-over-year at $43 million. However, BlackBerry signed new deals and secured key design wins, which could drive growth over the longer-term. Firstly, the company saw a strategic expansion of its relationship with Qualcomm in the connected and autonomous vehicle space. With the agreement, BlackBerry says that it has now partnered with all the largest automotive industry chip suppliers. The company also announced a partnership with automotive supplier DENSO to work on integrated human-machine interface platform. With this deal, BlackBerry will have partnerships with the top three tier-1 auto suppliers – Bosch, DENSO, and Magna.
BlackBerry’s revenue from intellectual property and licensing grew by 67% year-over-year to $50 million. During the quarter, BlackBerry signed an agreement with Teletry to sublicense a range of BlackBerry patents to smartphone manufacturers worldwide, while also adding 3 new channel partners for the licensing of its BlackBerry Secure security software. (related: How BlackBerry Is Looking To Better Monetize Its Patents)
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