PRESS RELEASE
WATERLOO, Ontario, Feb. 12, 2024 /PRNewswire/ — BlackBerry Limited (NYSE: BB; TSX:BB) provided an update today on the previously announced process to separate the IoT and Cybersecurity businesses as autonomous divisions and drive the company towards profitability and positive cash flow.
Progress on the path to profitability
As previously mentioned, BlackBerry took actions in the previous quarter that, when implemented, will reduce annual costs by approximately $50 million. These actions were largely focused on the Cybersecurity business and resulted in approximately 200 headcount reductions.
During the current quarter, BlackBerry is taking further actions to rationalize its cost structure. In cybersecurity, additional headcount reductions are expected to generate annualized savings of approximately $27 million and non-headcount actions of an increase of $8 million. Efficiencies were identified across all functions, but particularly within costs of goods sold and research and development. Supported by robust, industry-typical levels of R&D investment, the Cybersecurity business is advancing its exciting product roadmap in a focused and efficient manner.
Within G&A functions, actions are being taken during the current quarter to achieve annualized operating cost savings of approximately $20 million. As part of these savings, BlackBerry has abandoned 6 of its 36 global locations, including San Ramon, California, which are expected to realize annualized savings of approximately $7 million. Other reductions in place are expected to deliver annualized savings of approximately $13 million.
Costs associated with these actions in the current quarter are expected to be approximately $12 million.
Expected return to positive cash flow
In the current fiscal year, operating cash utilization in the second quarter was $56 million and improved significantly to $31 million in the third quarter. As previously mentioned, BlackBerry expects a further sequential reduction in operating cash usage for the current fourth quarter.
Given the cost-cutting actions taken, as outlined above, and expected additional operational efficiencies during fiscal year 25, BlackBerry expects to maintain a positive net cash position throughout the next fiscal year, despite the fiscal first quarter being a seasonal low for liquidity, and to be operating cash flow positive in the fourth quarter of fiscal 2025.
Progress with separation
BlackBerry has made solid progress toward establishing its IoT and Cybersecurity business units as fully autonomous divisions. The Company has established a project management office and has appointed leading management consultants, Alvarez & Marsal, to assist in the process.
They have been appointed division Chief Financial Officer, Chief People Officer and General Counsel for IoT and Cybersecurity activities and are in the process of establishing divisional back-office teams that will integrate the already autonomous sales, marketing and research and development functions for each company .
Solid balance sheet
AS previously disclosed, BlackBerry secured long-term financing last month through the issuance of convertible senior notes in an aggregate principal amount of $200 million. The Board was pleased with the significant level of interest in the offering and the Company will use the net proceeds primarily to repay $150 million of short-term notes due February 15, 2024. Following this redemption, BlackBerry will have reduced the own debt of 45%. % compared to November 2023 and, with the expected return to positive operating cash flow, expects to be well positioned with a strong balance sheet.
“I would like to thank the BlackBerry team for the significant progress we have made toward separating our core businesses and achieving profitability and positive cash flow. The steps we have taken have required difficult decisions, and I appreciate the thoughtful and rigorous approach that has been taken,” said John J. Giamatteo, BlackBerry CEO. “The Company is fully focused and working urgently towards our goals. We are directing our resources where we believe we can maximize returns and continue to satisfy our customers. Our balance sheet is strong post-refinancing and we believe BlackBerry is well positioned to put our strategy into practice.”
Information call for investors
An investor briefing call and live webcast will be held tomorrow, Tuesday, February 13, 2024, starting at 8:00 AM ET, which can be accessed using the following link (Here) or via the Company’s investor web page (BlackBerry.com/Investors) or by dialing toll-free +1 (844) 512-2926 and entering Elite access number 6312676. Slides used during the presentation will be available for download via the Company’s website investor web page.
A replay of the conference call will be available around 12:00 PM ET on February 13, 2024, using the same webcast link (Here) or by dialing Canada toll-free +1 (855) 669-9658 or US toll-free +1 (877) 344-7529 and entering Replay access code 3593353.
About BlackBerry
BlackBerry (NYSE: BB; TSX:BB) provides intelligent security software and services to businesses and governments around the world. The company’s software powers more than 235 million vehicles. Headquartered in Waterloo, Ontario, the company leverages artificial intelligence and machine learning to provide innovative solutions in the areas of cybersecurity, data security and privacy and is a leader in the areas of endpoint security management, cryptography and integrated systems. BlackBerry’s vision is clear: to deliver a connected future you can trust.