BlackBerry reported a smaller-than-expected quarterly loss on Thursday, as the smartphone company's cost cutting and other turnaround efforts started to pay off.
Shares jumped more than 10 percent in early trade after BlackBerry burned through less cash than many expected and its gross profit margin rose from a year earlier.
"The short trade is over in this name for now—for now," said BGC analyst Colin Gillis. "They've got enough liquidity, (and) they've given us clear profitability targets."
Excluding special items, the company drew down $255 million in cash in the period, significantly less than the $784 million it used in the fiscal fourth quarter.
BlackBerry has been slashing costs and has more than halved its workforce over the last two years as part of a do-or-die attempt to turn its business around after losing ground to Apple's iPhone and Samsung Electronics' devices that run on Google's Android system.
Last year it forged a partnership with FIH Mobile, the Hong Kong-listed unit of Taiwanese electronics company Foxconn Technology, to help design, manufacture and sell some of its devices.
As part of the deal it no longer pays the full upfront costs for parts used in its devices. Instead, Foxconn, the trading name of Hon Hai Precision Industry, takes a share of profits on each device in return for taking on the risk of inventory management.
On a call with analysts and investors on Thursday, Chief Executive John Chen was upbeat on the Z3, a new phone built under the Foxconn deal and launched in Indonesia earlier this year. He said demand was strong and inventory has run low at some points.
Gross profit margin rose to 46.7 percent in the fiscal first quarter to May 31, from 33.9 percent a year earlier.
"All areas of our business are making very good progress," said Chen on the call. "Financial objectives are on track, and strategy is on track, and the bottom line is we feel good about where we are."
The Waterloo, Ontario-based company reported net income of $23 million, or 4 cents a share, compared with a loss of $84 million, or 16 cents, a year earlier.
Excluding a one-time non-cash accounting gain and certain restructuring charges, the loss was $60 million, or 11 cents a share. Analysts, on average, had expected a loss of 25 cents a share, according to Thomson Reuters I/B/E/S. Quarterly revenue dropped to $966 million from $3.07 billion a year earlier.
Cash rose to $3.1 billion from $2.7 billion on a sequential basis, helped by gains from the sale of real estate assets and a tax refund.
BlackBerry's Nasdaq-listed shares rose 10.2 percent to $9.14 in premarket trading. (Click here to get the latest quotes.)