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BlackBerry Limited (NYSE: BB; TSX: BB) has announced its long-term financial targets during its annual analyst summit event. The company has released its revenue targets for the coming years and outlined its goals for non-GAAP gross margin, profitability, and cash flow. Here are the details:
Revenue Targets
- FY23 Actual: $624 million
- FY24 Outlook: $665 – $700 million
- FY26 Target: $880 – $960 million
- 3-year CAGR: 12% – 15%
The revenue targets are divided into two main segments:
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IoT: The revenue for IoT is expected to increase from $206 million in FY23 to $340 – $370 million in FY26. The compound annual growth rate (CAGR) for IoT revenue is projected to be 18% – 22%.
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Cybersecurity: The revenue for cybersecurity is expected to grow from $418 million in FY23 to $540 – $590 million in FY26. The CAGR for cybersecurity revenue is estimated to be 9% – 12%.
Please note that these revenue targets exclude potential revenue from BlackBerry IVY™ and revenue from Licensing & Other for comparability.
Non-GAAP Gross Margin
BlackBerry aims to achieve an average annual increase of 200+ basis points in non-GAAP gross margin until FY26.
Profitability and Cash Flow
The company plans to deliver significant improvements in non-GAAP EPS loss and cash flow usage in FY24. It aims to achieve non-GAAP profitability in Q4 FY24 and generate positive full-year non-GAAP EPS and cash flow starting in FY25.
IoT Outlook
In the IoT segment, BlackBerry QNX’s revenue is generated from two main sources:
- Design Phase Revenue: Approximately 20% of BlackBerry QNX’s revenue comes from development seats and 20% from professional services.
- Production Phase Revenue: The remaining 60% of revenue comes from production-based royalties.
Due to strong design wins in FY23 and macroeconomic headwinds for production-based royalties, design phase revenues currently form a larger percentage of revenue relative to production phase revenue. However, as production-based royalties return to the long-term average proportion of total IoT revenue, it is expected that gross margins for the IoT business unit will increase.
BlackBerry is targeting additional IVY design wins in FY24, and the management considers BlackBerry QNX royalty backlog as the most relevant key metric for the IoT business.
Cybersecurity Outlook
For the cybersecurity segment, BlackBerry aims to increase the gross margin by 400 – 600 basis points by FY26. The total addressable market (TAM) for the endpoint security market is expected to grow at 15% per year until 2026, while the TAM for the managed security services market is expected to grow at 14% per year until 2026.
BlackBerry expects the annual recurring revenue (ARR) for the cybersecurity business unit to return to sequential growth in the second half of the current fiscal year. The total contract value (TCV) billings are projected to be in the range of $430 – $480 million for FY24. ARR and TCV billings are considered the most relevant key metrics for the cybersecurity business.
Conclusion
BlackBerry has set long-term financial targets for its IoT and cybersecurity segments. The company aims to achieve revenue growth, increase gross margin, and achieve profitability and positive cash flow in the coming years. With its focus on IoT and cybersecurity solutions, BlackBerry is positioning itself for long-term success in the market.
Please note that this press release contains forward-looking statements, and readers should refer to the original press release for more information and caution regarding these statements.