BlackBerry Shares Collapse After Reporting Disappointing Financial Results

Shares of BlackBerry Ltd. were down over 22% on Tuesday after the cybersecurity company posted disappointing fiscal second quarter results with nonstandard numbers.

BlackBerry led its second-quarter report with non-GAAP revenue, which is revenue that does not conform with Generally Accepted Accounting Principles.

The Waterloo, Ontario–based company came to that number by adding revenue from an acquisition, an accounting presentation that is not allowed under GAAP rules according to a MarketWatch report from last quarter.

BlackBerry additionally adjusted numbers to recognize commission expenses on the revenue added back in, even though it won’t recognize either sum on its books.

“The chasm between GAAP and this elaborate non-GAAP accounting is that it makes it impossible for investors to understand the true financial condition of the company,” remarked Drew Bernstein, co-managing partner at Marcum Bernstein & Pinchuk.

“It’s why I feel so strongly that stakeholders need to come together and develop reliable standards that people can look at.”

For the second quarter, BlackBerry reported a net loss of $44 million, or 10 cents a share, after posting a profit of $43 million, but a loss of 4 cents a share, in the year-earlier period.

The loss for the latest quarter includes $36 million for an acquired intangibles amortization expense, $14 million in stock-compensation expenses, $2 million in acquisition and integration charges, a benefit of $23 million related to the fair-value adjustment on the debentures, among other items.

Excluding these items, the non-GAAP per-share number had the company breaking even, as compared with a FactSet consensus for a 1-cent-a-share loss.

The company reported revenue of $244 million, up from $210 million a year earlier, but below the $268 million FactSet consensus. The non-GAAP revenue number of $261 million also failed to hit expectations.

BlackBerry said, “During the second quarter of fiscal 2020, the company recorded software deferred revenue acquired but not recognized due to business combination accounting rules of $17 million, of which $16 million was included in BlackBerry Cylance and $1 million was included in IoT.”

It also “recorded deferred commission expense acquired but not recognized due to business combination accounting rules of approximately of $4 million,” said a company footnote.

Chief Executive John Chen led with non-GAAP numbers and did not identify them properly. SEC rules require that GAAP numbers be presented with equal, or greater, prominence to non-GAAP figures.

“In our second fiscal quarter, total company revenue was $261 million,” he told analysts. “It grew 22% year-over-year. Total software and services was $256 million, growing 30% year-over-year and driven by double-digit percentage growth in software and services billings in the same period.”

Disclaimer: We have no position in BlackBerry Ltd (NYSE: BB) and have not been compensated for this article.