BlackBerry’s (NYSE:BB) fourth-quarter earnings featured strong results and decent guidance. Going forward, BB and BlackBerry stock continue to have multiple strong, positive drivers, including continued expansion of QNX, synergies between core BlackBerry offerings and those of Cylance, continuous, strong licensing revenue and an effective executive team.

Despite all of these positive catalysts, some on Wall Street, as I previously predicted might happen, were concerned about the impact of the Cylance deal on the company’s near-term profit margins. Those concerns weighed heavily on BlackBerry stock on Monday.

Although BB stock may drop back to $8.50 or so over the next month, investors with a time horizon of a year or more should buy BB stock on pullbacks, since the company’s longer-term outlook is definitely extraordinarily bright.

Here are five key takeaways from the company’s Q4 results and its earnings conference call.

Impressive Q4 Results and Decent Guidance, Attractive Valuation

BlackBerry’s overall fourth-quarter results easily beat expectations on both the top and bottom lines. The revenue of the company’s BlackBerry Technology Solutions unit jumped nearly 20% year-over-year to $55 million, an encouraging increase that indicates that the company’s previous QNX deals are starting to generate rapidly increasing revenue. BlackBerry’s licensing and IP revenue jumped over 70% to $99 million. The unit is likely to continue generating strong revenue going forward.

Finally, the top line of BlackBerry’s Enterprise Software and Services (ESS) fell roughly 15% year-over-year, but both the company and multiple analysts blamed the decline on a new accounting standard. One analyst, TD Securities’ Daniel Chan, said that the timing of a major deal also contributed to the YoY decline.

Moreover, BlackBerry CEO John Chen said during the company’s earnings conference call that ESS’ “billings grew strongly on a sequential basis,” while BB expects the unit’s revenue to rise this year. The CEO noted that he expects the top line of the company’s unified endpoint management (UEM) offerings, which make up much of ESS’ revenue, to rise by about 10% in FY20, which began in February. He also reported that BB had received over 400 orders from banking customers during the quarter, while the unit also received orders from all three major branches of the U.S. military. All of that information certainly bodes well for the futures of the ESS unit, BB overall and BlackBerry stock.

Turning to the company’s guidance, using the data Chen provided, BB appears to expect, at the mid-point of its 23%-27% FY20 revenue growth guidance, about $1.13 billion of overall revenue in FY20.

Chen explained that the company is “investing for growth,” and will have to spend money on integrating Cylance, causing its expenses to rise meaningfully. But the CEO emphasized that the company’s profitability will rise throughout the year, meaning after Q1, it will likely be profitable after the current quarter. Additionally, BlackBerry did not clarify the extent to which the guidance includes potential large settlement deals, with court verdicts against a number of companies that BB has sued for patent infringement, including Facebook (NASDAQ:FB), Twitter (NYSE:TWTR) and Snap (NYSE:SNAP).

Based on price-sales and price-book ratios, the current valuation of BlackBerry stock is meaningfully lower than that of a number of other companies that focus on IT security. For example, using Chen’s guidance and excluding cash, the forward price-sales ratio of BB stock is 4.66, versus forward price-sales ratios, excluding cash and based on analysts’ consensus 2019 revenue estimates of 9 for Check Point (NASDAQ:CHKP), 7.5 for CyberArk (NASDAQ:CYBR) and 6.1 for Fortinet (NASDAQ:FTNT). The price-book ratios of CyberArk, CheckPoint and Fortinet are 12.8,  5.2 and 14.3, respectively, versus 2 for BB stock, according to Yahoo Finance.

QNX and Radar Are Rapidly Expanding

QNX generated a huge number of design wins — 22 — in Q4. Moreover, the operating system’s design wins expanded to areas beyond automotive, with eight of the design wins in areas other than automotive. Chen said he expects QNX’s revenue to rise 16% this year. Both the high number of design wins and the expansion beyond automotive bode very well for BlackBerry’s results and for BlackBerry stock over the long term.

Radar, the company’s asset-tracking system, added eight new customers in Q4 and received nine repeat orders from existing customers. Additionally, “a number of very large customers” are interested in Radar, Chen stated.

Licensing/IP Revenue Will Continue to Be Strong Indefinitely

Some analysts and investors who have been bearish on BlackBerry stock have sought to portray the company’s licensing and IP revenue as “lumpy” and unreliable.  Meanwhile, the fact that the unit’s revenue jumped $41 million or 71% YoY in Q4 led some on the Street to assert that it was primarily responsible for the company’s better-than-expected results. Taken together, these views may have caused the Street to discount BlackBerry’s overall Q4 beat as a one-time phenomenon.

But during last week’s conference call, Chen and the company’s CFO, Steve Capelli, took pains to demonstrate that the licensing and IP revenue will continue to flow indefinitely.

Capelli said that the company has been able to deliver “consistent” IP and licensing revenue due to its “pipeline” of patents, while Chen said that the company expects the unit’s revenue to drop only 5% this year. He also noted that BB has 10 or 11 years remaining on most of its current patents, has applied for over 100 more patents. and acquired more patents through its Cylance deal. So the owners of BlackBerry stock should expect the company’s licensing and IP revenue to be consistently strong going forward.

Strong Synergies Between BB and Cylance

The only disappointing part of BlackBerry’s results was the guidance for Cylance, which is not expected to be profitable until next year and whose revenue is expected to rise “only” 25%-30%.

Nonetheless, it’s clear why Chen decided to acquire Cylance. It’s strong in PCs and laptops, Chen said, while BlackBerry’s strength lies with mobile devices. The acquisition will enable BlackBerry to sell more of its core products to companies that emphasize PCs and laptops, while introducing Cylance’s products to companies that focus on securing their mobile devices. Companies that worry about the security of both mobile devices and PCs will now be able to meet all of their security needs with BB.

As I’ve noted previously, Cylance should make BlackBerry’s offerings more appealing to governments. Meanwhile, QNX should be strengthened when Cylance is integrated into the operating system, and BlackBerry should be able to sell its products to many of Cylance’s small and medium-sized customers. Finally, the fact that Verizon (NYSE:VZ) recently decided to offer Cylance’s products to its customers should boost BlackBerry’s results and is a tremendous vote of confidence in Cylance’s technology.

The Executive Team Has Been Strengthened

Chen announced that he was dividing the company into three units; COO Bryan Palma, who has worked for multiple Fortune 500 companies and has a cybersecurity background, will lead BTS (dominated by QNX) and ESS, along with the company’s other Internet of Things businesses; Cylance co-founder and CEO Stuart McClure will continue to head Cylance and Capelli will be in charge of the Licensing and IP unit.

All three men will report to Chen.

I believe that the change is a vote of confidence by Chen in the company’s business and outlook, as it indicates that he believes the company is healthy enough for him to step back from managing its day-to-day operations. Additionally, Palma’s success at high-level positions in Fortune 500 companies and McClure’s track record of building Cylance into a top-notch IT security company indicate that their leadership should be positive for BlackBerry and BlackBerry stock. Finally, the move should free up Chen to focus more on making higher-level deals and partnerships.

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