BlackBerry (BB) Q4 2020 earnings call highlights; blames COVID-19 for not providing fiscal 2021 outlook

Immediately after BlackBerry’s (NYSE: BB) fourth-quarter 2020 results came out last evening, its stock traded in the green for quite some time in the after-hours. However, when the company announced in the earnings conference call that it will not provide guidance for fiscal 2021 due to the current uncertainty relating to COVID-19, the stock started to trade in the negative territory. Today, BB stock slumped more than 15% during the midday.

Check out BlackBerry’s Q4 2020 earnings infograph

When discussing the business conditions last evening, CEO John Chen stated that BlackBerry Technology Solutions segment got hurt by the slowdown in the auto industry supply chain due to the COVID-19, which reduced Internet of Things business revenue by 12% for the quarter ended February 29, 2020. The company had projected this trend to continue for the near future due to the temporary global auto production shutdowns and related slowdowns of auto sales. The two large transactions that were expected to occur in the quarter with reliable customers got delayed.

Like last year, BlackBerry stated in the earnings press release that it will provide the current fiscal year 2021 outlook in the earnings conference call. However, the company gave a shock to its investors by saying that it will not provide the FY21 outlook due to the current macroeconomic environment.

CEO John Chen quoted, “Currently, I’m sure you all agree there is a lot of uncertainty across the global economy due to the COVID-19. Therefore. it is not prudent for BlackBerry to provide any specific fiscal 2021 financial outlook as things are changing on almost on a daily basis.”

He foresees BlackBerry’s revenue to be negatively impacted by continued headwinds in global auto production and sales as there will be a delay in capital spending in the auto and other industries that the company serves. Because of COVID-19, the Waterloo, Ontario-based company anticipates a tough first quarter and the toughness to continue in the second quarter. BlackBerry targets its second half to be stronger than the first half of fiscal 2021.

While answering Mike Walkley of Canaccord Genuity on the operating expenses for the current calendar year, CEO John Chen said the given the current environment, the company will continue to hire people. However, he added that in certain areas the hiring might slow down because of the difficulties in interviewing and doing the background checks. Apart from reducing the traveling expenses, the company expects to cut down costs in the infrastructures and facilities areas.

When the PI Financial analyst Gus Papageorgiou asked about the goodwill impairment charges for the quarter, CFO Steve Rai stated that the impairment charge of $22 million was related to a BBM segment consumer as the company stopped service for that consumer during the year.

Currently, I’m sure you all agree there is a lot of uncertainty across the global economy due to the COVID-19. Therefore. it is not prudent for BlackBerry to provide any specific fiscal 2021 financial outlook as things are changing on almost on a daily basis.

While the former smartphone giant, which now focuses on cybersecurity software and services, surpassed the Street’s earnings estimates, it failed to meet the revenue expectations in the recently ended fourth quarter of 2020. During the third-quarter, BlackBerry increased its FY20 non-GAAP EPS by 2 cents to 8 cents and maintained the non-GAAP revenue target of approximately $1.1 billion. For fiscal 2020, the non-GAAP EPS bettered the company’s expectations by 5 cents and non-GAAP revenue of $1.099 billion met the target.

As more and more employees have started working from home due to the Coronavirus pandemic, companies want to bolster their networks’ security, which has benefitted the cybersecurity companies in recent times.

While some of the new players like CrowdStrike (NASDAQ: CRWD), CloudFlare (NYSE: NET) and Okta (NASDAQ: OKTA) have increased 8%, 38%, and 2%, respectively so far this year, BlackBerry stock has lost 45% of its value. The company is expected to provide further details on its plans for fiscal 2021 in the upcoming analyst day meeting on April 21 in San Roman, California.

Read the full transcript of BlackBerry Q4 2020 Earnings Call