Blackberry’s Subscription Bleed Continues After Change in Revenue Recognition Policy
Company hemorrhages subscription revenue in effort to mask deterioration in acquisitions.
September 27, 2021
Ninety days ago we warned investors about a counterintuitive change in Blackberry’s (BB) Revenue Recognition Policy that, at first blush, presents quarterly results less favorably. The impact, according to our analysis, had the following impact on last quarter’s results:
“The change, according to our analysis, removed $8 million from non-GAAP sales Blackberry reported in the prior year’s comparable quarter. It also increased Blackberry’s gross margin by 2.1%. The metric also inflated Blackberry’s adjusted net income for the quarter from $4 million to $12 million, or 200%”
Though the change may have a negative impact on reported results in the near term, our analysis suggests the change was made to hide possible deterioration in deferred revenue in companies Blackberry has acquired. These problems will ultimately result in declines in Blackberry’s annual recurring revenue (ARR).
In its latest 10-Q, Blackberry continued to hemorrhage ARR year-over-year. The latest quarter reveals annual recurring revenue down by $3 million in both Blackberry’s cybersecurity and IoT segments. Similarly, Blackberry’s Net Retention Rate in the cybersecurity segment declined 5%.
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