Strong uptake of BlackBerry software, including in enterprise mobility, crisis communications and connected cars, drove a second-straight quarter of operating profitability for BlackBerry.
For Q2 FY17 ended August 31, BlackBerry booked $156 million in software and services revenue on a non-GAAP basis, up 111% from the prior year’s quarter (89% by GAAP). The shift to higher-margin software revenue enabled BlackBerry to record its highest (non-GAAP) gross margins in its history – 62% – and record $16 million in operating profit (non-GAAP).
“We are reaching an inflection point with our financial picture stable and our pivot to software taking hold,” said CEO John Chen during the earnings call today.
BlackBerry won 3,000 enterprise customer orders in the quarter, including 692 purchasing our BlackBerry Enterprise Mobility Suite (formerly known as Good Secure EMM Suites). That’s up 33% from Q1. Our leadership in enterprise mobility management was highlighted by a Gartner report last month, which ranked BlackBerry number one among all vendors in all six use cases for critical capabilities for high-security EMM.
BlackBerry’s AtHoc crisis communications software also won numerous customers. Overall, marquee software customers this quarter included the U.S. Army, TSA, U.S. Coast Guard and Denso.
As the Internet of Things proliferates, businesses are waking up to the potential threats in IoT and seeking secure, productive solutions. In our emerging IoT software business, we announced our first production customer, Caravan Transport Group, which has 500 units of our BlackBerry Radar asset tracking solution installed in their trucks, with plans to roll out to all 1,500 trucks. BlackBerry also signed Karma Automotive as our first connected car customer. Karma is using our over-the-air software update application to simplify secure updates of the software running on cars.
Chen reiterated BlackBerry is on track to grow software and services revenue 30% for the full FY17. Profitability also looks set to continue to rise, as BlackBerry eases out of smartphone hardware and leverages third parties to manufacture and sell BlackBerry-branded smartphones. Read Mobility Solutions COO Ralph Pini’s blog on the new joint venture BB Merah Putih in Indonesia to whom we are licensing our smartphone expertise. The JV partners there include affiliates of the country’s dominant mobile carrier, with twice the market share of the next largest player.
BB Merah Putih will make, distribute and market our secure Android devices, allowing BlackBerry to concentrate on developing security and productivity software (such as Hub). In an unrelated transaction, BlackBerry also licensed operation of its BBM consumer mobile messaging service to an Indonesian partner, Emtek, in the quarter.
“We focus all of our efforts on where we can deliver differentiation—in software and security,” said Chen. “This plays to our strengths and is aligned with where the market is going.”