Q1 2021 BlackBerry Ltd Earnings Call
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One result conference.
My name is Josh and I will be a conference moderator for two days call. During the presentation, all participants will be in a lesson only mode.
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[noise] now like it turned today's call over to Christopher Lee Vice President of Finance. Please go ahead.
Thank you Josh welcome to the Blackberry physical 20th 21 first quarter results Conference call with me on the call today are executive Chair and Chief Executive Officer, John Chen and Chief Financial Officer, Steve right. After I read R. Cautionary note regarding for looking statements John will provide a business update and Steve well then reviewed.
[noise] financial results.
We will that open to call for a brief Q&A session.
This call is available to the general public by a calling numbers and buy a webcast in the investor information section that Blackberry Dot Com a replay will also be available on the Blackberry Dot com website.
Some of the savings will be making today constitute forward looking statements and are made pursuant to the safe Harbor provisions of Clickable you asked some Canadian securities laws will indicate forward looking statements by using word such as expect will should model intend believe in similar expression for looking statements are based on estimates and assumptions made by the company.
[noise], it's experienced and it's perception of historical trends current conditions unexpected future developments as well as other factors at the company believes irrelevant.
Many factors could cause the company's actual results or performance differ materially from those expressed or implied by the four looking statements. These factors include the risk factors are disgusting the company's animal filings an M. D N a and the Kobe 19, pandemic, which is negatively impacting public health financial markets and global economic activity, you should not place undue rely on.
And the company's forward looking statement.
He has no intention and undertakes no obligation to update or revise any forward looking forward looking statements, except as required by law as is customary during the call John Duboe reference non gap numbers in their summary of our quarterly results for a reconciliation between our gap in non gap numbers. Please see the earnings press release and supplement published earlier today, which are.
<unk> on the Edgar SEDAR, and Blackberry Dot Com website, I will now turn the <unk> call over to John.
Thank you the state of course, sorry, I was looking to see.
Thank you Chris good good afternoon, everybody I hope that all of you and your families and your loved ones.
Saying safe and healthy doing this very unprecedented times.
[noise] this fiscal quarter of violence, which happened to March April and May overlap directly.
[noise] cold at 19 business Constringe restarting in both headwinds and two words.
The entire company moved to working from home in early March and operation has been reasonably smoothed.
Ah we start with a financial high like in a quarter and then move into a business commentary I will <unk> number in my summary.
[noise] you know first physical quarter, we reported total company revenue of 214 million.
All the businesses perform in line or better than our expectation, except for Q N X, which was negatively affected by global auto production shutdowns.
However, I'll enterprise, probably going to surfaces that feature security in productivity benefits from the increased in remote working business continuity in crisis management is use cases with our customers.
Total company buildings were also down yoga year due to depend AMIC, but the buildings declined rate was less than the revenue declined right. This is of course be positive for future revenue.
Gross margin was 71%.
We we achieve a profit of two cents for sure.
Blackberry continues to balance profitability, an investment for a long term.
Cashews, an operation was 31 million versus 64 million and cashed shoes.
An operation last year.
As you were aware, our first physical quarter typically as a high use of cash due to the commission, Indiana, you'll bonuses payment.
This year, we spread the annual bonus payment over to the first two borders.
Total handing cash an investment balance at May 31st was for 955 million.
Before I move onto business commentary peacefully reminded that we have fully integrated silence into Blackberry on March one to start off our current fiscal year.
That's a result, we are now operating and two reporting groups.
The software and surfaces group and the licensing and others group.
Let me start with the licensing and other groups.
Revenue was $58 million in the quarter.
In line with our expectation.
The vast majority of the revenue is from IP licensing.
We're off to a solid start for the fiscal year.
Moving onto the software and services group <unk>.
Revenue was came in at $156 million 156.
<unk> was approximately 500 million and one dollar based net retention race, what's 93%.
Going forward, we intend to provide these metrics on a quarterly basis.
Ned customer churn was closest zero percent and there has been no changed this net churn right for the last several quarters.
Let me click down a key product component of the group, let's start with Q N X.
Development seat professional surfaces and royalty revenue, we're all negatively impacted primarily due to the auto shut down production shut down and.
And a project delays.
That said, we're starting to see signs of recovery in the auto sector evidenced by the reopening although production facilities.
Engagement with our auto in general embedded customer has increased on projects that we were working on prior to to shut down as well as new opportunity that came up <unk>.
We anticipated a slow and gradual recover April Q N X.
Throughout the year it would take time for the production to run back to food capacity.
[noise] and a quarter <unk> was chosen for 10 design wins six of which we're in the in general embedded market.
For industrial and medical applications.
The remaining for where an auto.
Including a dos advantage drive with this software design wins with <unk>.
<unk>.
<unk>, sorry, <unk> and an acoustic win design when we have with Volvo.
The other two auto design awards were for the secure gateway and and infotainment systems.
This continuing to design winds.
When momentum supports a leadership positions our latest automotive install base number is over $175 million.
An increase from $150 million last year.
This matrix, which we January update once a year have been validated by strategy analytics, an independent third party.
In an attempt to provide more information about on <unk> business, we have decided to share a royalty revenue backlog on an annual basis.
The backlog space on the customer estimate of lifetime volume of the design when it is awarded.
As of today, the estimated royalty revenue backlog is that $450 million.
<unk> is a recognized name associated with safety and trust.
And we continue to expect a cute <unk> will be selected for many design we into the future.
These design winds will add an incremental revenue from development seats professional surfaces as well as royalties.
A four four year historical compound annual growth rate, Okay gotcha.
13%.
Which is well ahead as a 5% market CAGR over the same period.
Over the next five years, we plan to achieve a CAGR above the market grow very of 11%, which is cited by mckinzie for automotive operating system and middle where.
Middleware over the next decade.
Our plan to accelerate acute aches growth rate increase increase investment to gain market share in both the auto in general embedded markets.
And to grow out professional was surfaces business.
We recently launch I'll first surfaced package that all for this type of security assessments and testing.
Moving onto AD hoc Ah prices communication lifecycle solution.
At Hogwarts, a performance leader this quarter.
At harvest very well suited for business continuity preparedness and execution and the current environment.
We had a number of new customer Winston competitive wins, a competitive situations alright, including Windsor is first responder agency and energy companies. We also had a strong quarter expansion in renews.
After the quarter, we announced several notable new logos, including United States Department of Transportation and a U S. Federal Trade Commission. We also expanded our business with the U S Department of health and human surfaces.
Moving onto the silence and Udf, which going forward will be referred to as the spark platform.
Blackberry Silence was slightly ahead of consensus expectation for the quarter, we added 279 new customers.
A new active sufficient customer grow with about 15% one five.
This is michelle on a year over year basis.
Notable new customers include General Motors.
Acton Bacton Dickinson Phillips healthcare.
S K F, which is one of the Sweden largest manufacturer the New Zealand Defense Force and the United States Census Bureau, just to name a field.
We have been we have seen revenue steadily increase with a bundle that includes optics, which is R. E D.
<unk> and protect which happens to be R. E. P P product.
Interest in our managed service offering guard continues to be strong since this launch lots of July resulting in sequential revenue growth of over 885%, which was spot I have to caution. This is up a small base.
Library silence perform extraordinary well in the recent Mitre evaluation, which is regarded by the industry is the most objective and transparent standards currently in the market.
We clearly demonstrated I'll ains solution and managed service attack.
<unk> customers from global threat actors, we will especially please.
Bye the performance of optics, which surpassed many edr players who happened to be rancour bowflex industry analysts reported.
<unk> business also executed well benefitted benefitted from the increase need to prepay more endpoint, especially mobile.
Demand with strong from a regulated industry customers Ah, let me named with some notable wins nowhere to customers.
They are include a crude American express.
CIBC.
European Bank for reconstruction and development.
Carter National Bank.
National commercial bank <unk>.
<unk> Bank the development development Bank of Singapore, Mister Vichy <unk> financial group.
And the Republic of India with the Republic of India. When we now have 18 of the <unk> <unk> government as customers.
<unk>. So I hope you agree with solidify a strained into financial surfaces and government political.
Let me wrap up with a spark suites enterprise today face and increasingly chaotic environment, where cyber threads, however, more sophisticated and pervasive.
Attacker primary target and points in 70% of successful bleaches, especially in the form of mobile.
The <unk> road out will lead us to a significant increase in attack on mobile endpoints.
At the same time enterprise and point in the amount of data sure at the edge I'll also growing exponentially.
Together cyber security threats, an endpoint chaos Ah, putting organization that risk, while cutting into the employee productivity and increasing the I T costs.
A reason assessment by frozen Sullivan.
Define the cyber threat studio entire Iot landscape.
This reports recognize how blackberry solution address over 96% other after collective threats.
A copy of this assessment is available on our website.
A big part of Blackberry value proposition is is our ability to address these threats with our Spock Street, a platform that combines and point security as well as endpoint management.
<unk> Sparkes suites, where only launched on May 19, which was maybe four or five weeks ago. They have been extremely well, we see bipolar customers and partners.
Seems to launch over 15, one five.
15 customers that purchase one of our spark suites, including Deutsche Boy Boss a G.
One of the largest provider of financial market transaction.
Infrastructure worldwide.
After the quarter, we announced the partnership with Bell Canada.
Like Barry becomes spelled Bell Canada's prefer partners for mobile threat detection.
In defense, sorry, Mtt's, sometimes use as mobile bread defense Val will offer our mcd product.
<unk> enterprise customers are AI, driven ante MTV product, it's one of the corner pillows and our spark suites.
We're adding more features we are on scheduled to ship data lots protection and secure gateway later this year.
We anticipated these additional ability at pillars will increase revenue. We also believe this will increase our addressable market because of the way we architect <unk> security layer too into operate with competitors <unk> solutions.
Let me wrap up this.
This session on the personnel front.
We recently announced that Tom Echo Bazzi has been appointed as Blackberry News newest president.
Comps row would be to lead all business activities for the software and surfaces group.
Thomas and accomplish software sales executive funds Citrix.
[noise] excuse me with over 20 years, so enterprise customer facing experience.
Thomas sled, all facet of the global sales organization.
In addition to Tom We also had recently recruited two of his senior level of industry leaders focus on go to market. The first is our new head of software services business. This is development. The second is I heard of corporate marketing.
Both started on June 15 already.
The hiring I hope is it good indicator of industry talent interested in joining Blackberry and demonstrate I'll conviction to build a stronger go to market engine.
With that Fat, let me turn to call with Steve to provide more details about our financial performance.
Thank you John.
My comments on our financial performance for the fiscal quarter will be in non gap terms unless otherwise noted.
Please refer to the supplemental table in the press release for the gap and non gap details and reconciliation.
We delivered first quarter non gap total company revenue of $214 million and gap total company revenue of $206 million.
Breakdown revenue shortly.
First quarter total company gross margin was 71%.
Versus 75% reported in the first quarter of fiscal 2020.
The change is due primarily to a decline in to annex royalty revenue.
Or non gap gross margin include software deferred revenue acquired but not recognized $8 million and excludes stock compensation expense of $2 million.
First quarter operating expenses of $150 million were down sequentially by $22 million.
We continued our investment and product development and go to market, while maintaining strong control over spending given the current macro landscape and of course, the global shutdown did help to reduce spending.
Or non gap operating expenses exclude a 594 million non-cash accounting goodwill impairment charge.
This represents an impact of 162 gap earnings per share.
This assessment was required in accordance with accounting rules.
And was driven by the broad based economic decline and corresponding impact on our market capitalization.
Further details will be available in our form 10-Q.
In addition are non gap operating expenses exclude $33 million in amortization of acquired intangibles $12 million in stock compensation expense 3 million for software deferred commissions expense acquired.
$1 million and restructuring costs and a charge of 1 million related to the fair value adjustment on the convertible debenture.
First quarter non gap operating income was 3 million and first quarter non gap net income was $12 million.
Non gap earnings per share it was too and the quarter.
Our adjusted EBITDA was $20 million this quarter, excluding the non gap adjustments previously mentioned.
So this equates too and adjusted EBITDA margin of 9%.
I will now provide a breakdown of our revenue in the quarter.
And our software and services group or product revenue was between 80 and 85% of the groups revenue mix with professional services comprising the rest of the mix.
Recurring software product revenue was above 90% in the quarter.
And our licensing another group.
John noted earlier the vast majority of revenue is from IP licensing.
And service access fees were about 2 million.
<unk> about this amount for each remaining quarter and fiscal 2021.
Now moving to a balance sheet and cash flow performance.
Total cash cash equivalents on investments where $955 million at May 31, 2020.
Which decreased by $35 million from February 29, 2020.
Our net cash position was $350 million at the end of the quarter.
First quarter free cash flow before considering the impact of acquisition and integration expenses restructuring costs and legal proceedings was negative $30 million.
Some cash used in operations was $31 million with capital expenditures at $1 million.
That concludes my prepared remarks, I'll know turn the call back to John for additional comments.
Thank you Steve.
Blackberry remains strongly focus on achieving profitability Grove.
Profitable growth, while investing for the long term.
Now given the continue uncertainty across the global economy due to the pandemic. It is still cruder for us not to provide a specific fiscal 2021 outlook.
However, that said he'd like to provide some directional comments on the rest of the Blackberry fiscal year.
We are expecting a good second fiscal quarter.
Because one we anticipated modest.
Sequential grow for our software and surfaces group.
And two we expect a strong sequential growth in a licensing group.
We anticipating and anticipate licensing revenue to be around $250 million for the full fiscal year.
Not cue to fool fiscal year.
In line with our normal intra year seasonally like decision analogy.
We anticipated a also a strong fiscal fourth quarter.
I also wanted to reiterate day, Blackberry continue to be financially healthy.
Even during these on certain times, we demonstrated fiscal discipline generated profitability and maintain liquidity.
We have ran recently ran another set of financial stress has assuming up to 30% of revenue decline and no new financing. The result showed that would continue to be solving in liquid for the Knicks several years.
We anticipate ending the year in a positive free cash flow position and at and therefore, adding to all the cash balance.
And we plan to redeem the debenture this coming November when they mature.
This will save about $23 million, a year and interest payment going forward.
We believe back very well capitalised on the secular trends on securing and connecting endpoints.
A business strategy in technology Ah definitely in place, we're competing in the right markets and now the most important tasks right now is profitable revenue growth and market share expansion.
And we are very focus on that.
Before I opened up with Q&A I would like to make a statement about yesterday's annual shoulder meeting.
Two cream of any confusion.
The fact.
We did hold a Q&A session.
Unfortunately, only one registry shareholders the question.
We enter the question.
That may have been others, who wish to ask question, but could not because they will actually get.
So there was no glitch on the on the technology <unk>.
A proxy materials are clear that gas will not be able to ask questions.
I will now opened a question up for Q&A Josh.
And now we need will leave again the question and answer session to ask a question you May pass star one on your telephone.
If you're using a speaker phone. Please make sure your immune function as turned off to allow your signal to reach our equipment again.
To ask a question will pass for just a moment until now everyone an opportunity to single for questions.
The limit yourself to one question on one follow up.
Your first question comes from dusk, Palo, Georgia with Ti financial Please go ahead.
Alright, thanks, Thanks for taking my question.
Couple of questions just first on <unk>.
Personally I believe it was yesterday and it should you are.
Soon and install base increase my about 25 million automobiles, which is about 25% of the market year over year I'm wondering if you could comment on.
The market share with and automobiles year over year. So if it's roughly 25% now what was it a year ago.
And then just secondly, thanks for provide giving some sort of sense of what the rest of the year is going to.
Like.
Just on your kind of on the enterprise software side, obviously subdue saw a strong demand and this quarter. What do you expect demand will be like for the rest of the year and that segment.
Okay guys. Thank you.
So.
$175 million cause.
Actually I know you had done a ton of research on on the auto space as we spoke many times in the past.
Roughly.
Big numbers says that roughly a 1 billion cause in the world running around every day.
And I would dare say maybe.
60% plus Arctic caused that are interconnected connected car <unk>.
<unk> see very little India autonomous call by the end of connected cause I would I would there too I mean, I guess, it's going to be about 60, 70% and so you look at that number.
Look at the fact that we have 175 million cars that have our software.
On the road today, I mean, you could calculate a market share I mean, we definitely are.
Would you take about 600, you divide by that.
I'm guessing, we're a monthly about 30% market share.
That's that will be my best gas.
Nonscientific I just walk you through how I look at the numbers.
I'm sure somebody else my pointed out.
Maybe to point out for in my.
And my thinking but that's that.
So regarding.
The year.
I think when I look at maybe maybe I'll start with the industry.
Consensus.
Let's start with that.
[noise] consensus.
In about a midnight hundred million dollars for the year.
Looks reasonable.
Definitely an a ballpark.
And we expect.
Small sequential growth.
In the software and services business.
We expect our IP business licensing piece of this has to come in about $250 million for the year.
So so you could you could kind of triangulate that back to the consensus I think.
We're pretty much in the same ballpark as you guys are.
Okay Alright.
Okay, I'm going to be leg.
Sorry.
Profitability.
Oh Unprofitably.
I think it's a good shot of us being profitable.
We demonstrated.
Yeah for the four year, yes.
Okay.
Great and I already said cause said we will.
Looking like we're going to be cashflow positive for the year free cash flow positive for the year. So I believe will will be able to be <unk>.
Profitable for the year also on a non gap basis.
Perfect. Thank you very much.
Thank you that.
Your next question comes from Daniel Chan with TD Securities. Please go ahead.
Hi, Thanks for taking my questions.
The <unk> royalty backlog did I hear correctly is 450 $450 million.
Yes.
So how did you guys calculate that number I actually thought that number would be higher considering you do annual <unk>, an extra revenue I know, there's a whole bunch of other stuff in there, but daniel to an extra revenue.
That's about what like.
Around $200 million or so no.
How did you calculate that backlog considering us a lot of the programs that you're involved and have a long lifecycle.
Yeah.
So we generate.
I'll give you some historical number.
Not this year, obviously, the year ago, regenerating awfully about $150 million and royalty and the year.
Some of those will become revenue in the year.
We also generated somewhere between in a ballpark 72 $100 million.
From developers seats.
And.
And professional surfaces.
So if you add that together I think you'll get close to the number.
That that you just cited.
Okay.
Is that Apple.
Yes, that's helpful. I, just I just assumed that the lifecycle if some of these automotive programs, where really long so.
When you want one of the design winds you've got a very long tail continued royalty rooms, I thought it would probably attitude I suspect I expect a much larger limit.
Okay Yeah.
Yes.
I would say I would say that would probably on the conservative Si.
Outsells. These are the numbers that was given to us.
Bye the customers at the time of the win.
They usually adjusted.
So I mean, it could go down or you could go up and and there will also be derivative when like for example, when we way when certain motto and within OEM.
Like the most likely will give us.
Different models at the same thing and we have seen that rado repeatedly I think one thing you could take away that we are very comfortable with our competitiveness in our relationship with our customers on a global basis. So.
That's a business start returning and the design wind start.
Warded, we will get we'll get a good sure of it.
Okay. Yeah, that's helpful. Thanks.
And then on the delayed programs.
Started to kick in last quarter.
Sounds like things are starting to move again any any word on somebody delayed programs thinking back up.
Yes, we.
Our team our team.
It told me that to us.
That the.
The customers are back.
Talking about the design.
And talking about new projects and talking about the schedule. So they do project their schedules. That's a number one most important thing is they have to have the scheduled one.
Then danville enhanced our ability to win.
So.
So that's that's what we are.
A good start.
Okay. Thank you.
Sure.
Your next question comes from fifth Chowdhry with Global equity Research. Please go ahead.
Hi, Thank you.
Hello Hello.
Bedroom.
Then I wasn't expecting.
Very good execution in a very difficult environment I had a couple of questions.
Would you be comfortable saying that the one first quarter raw, it's pretty much the bottom.
Seeing signs of economy opening up and recovery happening.
Well, we <unk>.
My kind of earlier when I still got said.
That that I'm comfortable where in the right ballpark with the consensus.
Is is to assume a gradual reopening of the economy.
And like earlier, we talk about Q N X design winds.
Despite all the very difficult quarter I was actually positively surprised that we 110 designs and a quarter I mean.
It doesn't try and stay too.
A lot of immediate revenue, but I thought that was.
That was such a better than I thought because nobody is going to work.
So so.
I have a surgeon Ah we have a certain expectation that things are getting better. Although we are being very cautious we believe you're going to get better slowly.
So this is where I said, okay, we're going to see incremental small incremental improvement in the software and surfaces on the enterprise side.
A soul incrementally.
<unk> and Q&A.
Maybe maybe at the same a difficult quarter and Q too, but we expected.
<unk> have to be better and then we feel comfortable with the pipeline of our IP. This is how we all grew everything together and I'll spending and everything else, though so that leads to our belief that we could be profitable over the year, we have positive cash flow so for the year.
That's kind of a trip that's the environment that I'm expecting and that's tied to the number.
Beautiful beautiful John you're always been very innovative and all the head of the Coke. We all are working from home, we're doing the more to working with.
Did the challenge when it comes to selling.
Most selling so I was wondering like how.
Hi, both you turn the whole industry upside down.
Then we think about remote sending what you think you had putting in please in Hawaii, differentiating and making it feasible because your number definitely down that you'll see the institution.
Bedroom.
I was expecting so what <unk>.
Processes, you may have put in please.
You have success and when rates better in the environment bedroom what's.
Going to be somewhat of a gnome.
Okay. Thank thank you well, we're not we're not as good as you said, we are but because we better spot on the trend that I think most of all my peers in an industry see that.
Because we provide a security software cyber security software, because we provide crisis management software.
In mobile.
That that helps facilitate the remote working from home and and what we have seen in the first three months, although three months that what's the most severely impacted what we have seen it.
New customers extremely hard to come by.
Existing customers upset up selling do them and they have a building requirement to need more software more seats more licenses and in some cases ad hoc.
Where people are on the fence and say why I don't really know I need it whatever they have decided they needed.
And so so there.
And because unfortunately, because of the prices kind of like the only silver lining to this.
This pandemic situation so so.
I traded notes with other CEO.
Other Tech company I pretty much everybody is saying the same thing upselling.
And.
Especially you have the right type of software is a good expansion.
It.
It's okay to sell the remote this is where the relationship are are very important and we Fortunately Blackberry has a lot a good relationship, especially in the regulator industry like the banks in the medical field.
And the government.
So.
Help us to put some kind of anchor intuitive business.
The upset that the new project, a new customer base I will have to say is much more difficult to come by.
Okay.
You're you're on the list.
Thank you trip.
Your next question comes from Mike Luckily with Canaccord Genuity. Please go ahead.
Hey, Mike.
Hey, John.
Sure Yeah, Yeah, with you pulled out ad-hoc on the calls areas strength with with the changing work in government safety environment. How are you leveraging ad-hoc strong position with federal government into opportunities to Pete more maybe at the state local and even enterprise level compete.
Made with Edenbridge offering.
HM.
Mhm.
That's a very good questions.
So so the federal space.
The.
<unk>.
The five.
Countries, United States, Canada.
We do have.
Good good customer of recognition and we have a big install base, especially the United States. For example, multimillion licenses that we have so those are good thing we have traditionally not been strong and stay local.
And that is about to change.
Putting.
A a team of people does just responding to RFP and rsi.
Dedicated team we also have.
Recognize the fact that we need a more.
SMB type salesforce, rather than a enterprise salesforce like selling to the government agency.
That's a lot. So so we're adding we're adding.
Resources in both areas I talk about it.
So.
So we go after the RFP to the state and local then education market and the other SMB market that we go after with a more of an S&P.
Sales team so.
And I think it will it will work well the good news is.
We also have upgraded our product.
Have a complete lifecycle products and we also.
Deliver the managed to surface brought up and so that fits two the smaller enterprise because we never have to add some managed surface product that just recently announced I forgot literally days.
So.
So we are equipped now.
Both in the managed surface with the way we laid out.
Approach.
And is a great it's a great market.
To say.
Time like this is a really great market.
Okay, and just following up on that.
Any metrics you can share in the business, maybe the size of been on the annual basis or growth metrics and then also how do you view, the positioning or you're adding salespeople to attack the EU mandate in the opportunities for magnification over there.
Coming years.
I don't have the answer to your question right now, but let me do this.
Let me see what metrics I could I could deliver and provide.
Because.
Early we're actually early to a nonfederal.
The federal Phase very easy metrics, you know all winds you know all logos.
The renewal as a strong.
And.
We had seats like in the United States, our licenses are over 2 million seats.
So, but they're very concentrated to the federal government any armed forces.
And so far so so we are starting to expand so still a little early for me to give you. These metrics, but I will I will go work on it and look into it and I'd like to know too.
Okay.
Great last question for me just switching gears any update on radar on the Iot business and would that be mapped into software and services going forward also thank you.
Yes, we really the only.
Radar is actually doing reasonably well.
Fortunately the numbers are not high each day did get affected somewhat.
Bye bye the pandemic, because we are unable to visit customers.
Because radars really very radar team is very focused on winning new customers, because we will new customer we got recurring revenue for radar. So that's the focus on.
But it's been done well I mean, it was nothing negative.
We have some wins increased some usage.
And.
But nothing too at this point nothing mood nieto's on that.
On the I O T.
You all know merging under software and surfaces. So I don't I don't really look at it that way.
Separated at all.
Alright, Thank you very much that's swishes for the year.
Sure. Thank you.
Your next question comes from Daniel Bartus with Bank of America. Please go ahead.
Hi, louder.
Great.
Yes, hi, taking the question.
First I just wanted to clarify what was the.
Number that you said in the beginning.
500, <unk> about $500 million.
Okay got Ya is that up year over year.
Hello. This is the first time, we actually.
Laxton and disclose it so.
Those I don't know, where there's a whole year over year.
At all.
Okay, Okay got Ya and then.
What was the silence consensus number that you reference.
Just for each of silence grew year over year.
Yeah, <unk> is relatively flat.
And.
I think the silence numbers like 48 $49 million for a quarter.
That's probably right okay.
Yeah.
Yes.
So sorry about that number.
Gotcha, and then just saw last one of them surprise SG&A so low.
Can you just talked about if you feel like you're investing enough for growth and does it makes sense. This is kind of the trough level for for SG&A. Thanks, Yes.
Sure you asked this question.
We.
We are spending.
We did two things to fund I'll go to market engine.
We move a lot of the head counts and unfortunately, some other head cause we have to reduce and then high back and some other area, we've done a little bit of that.
But in the beginning earlier on but I'm not doing to spend demick period.
We have.
We moved the resources from the back office as to the frontline so the back offices.
Reduce and streamline quite a bit and with deutsches pretty much across the board, whereas finance HR illegal icke, we have really streamlined it.
Because one of the good one of the benefit of.
Grouping does that company.
The businesses together is we actually could reduce overhead.
For example, you don't need three different finance.
Finance team you only need one you don't need three different.
Groups of contracts people, you only need one so.
Maybe a bigger one but one so it helps a lot and then we moved out and this is my design and we moved that I called at 10% moved we moved 10% our resources on the back Officer front, and then hire the people that way. So a lot of these people are willing to who trainings and so we also increased I'll executive Grand Bye Bye.
By recruiting more talent south on the outside.
In our men that people we have here today so.
Basically all in and to do sales and marketing.
Feeling very comfortable and that we actually hiring a lot of people name you a couple of executive we probably had another 100 racks that being recruited right now in sales and marketing at this as we speak.
Great. It's really helpful. Thank you.
Sure.
Your next question comes from Paul cheaper with RBC capital markets. Please go ahead.
Idaho, Thanks, so much.
Sure.
First high level question on strategy with this environment <unk> seem tremendous uptake video conferencing Blackberry is known for secure communications.
Cross email Bvm and boys, but no video how do you think about video as a category is it something that you see.
Critical or not synergistic with your.
Bigger pieces portfolio that you're building.
It's not critical pause.
It could get synergistic, but I'd, rather do it with partners.
Like for example.
We're doing a tunnel.
Security work with the number of the name players that you could probably close your eyes and recite.
So we Wanna do it that way.
Now messaging and voice is different.
We have good product and we're pushing the data.
Messaging and voice, but the reason why I didn't really attend into video is I find out a really crowded place.
And I'm not quite sure that I wanted to dilute I'll sell yet to yet it one more thing.
Eventually.
If the market and therefore, our customers say you got to integrate video I bought a we integrate zoom that wetbacks and all the other team.
Well nobody of call me and said, Hey, I can't buy your software because it didn't work with a video.
Confidence thing that I wanted.
And in some cases, we use container under <unk>.
To manage the security of some of these conferences.
So.
So today I am I'm trying not to dilute more.
Two shows you get my <unk>, yes large properly.
And a future my something would be of interest, but I'll radical through partner.
Alright, thanks to helpful perspective.
Just the in regards to IP licensing I mean, obviously it sound positive going into this quarter.
Now given there are travel restrictions and social distancing and whatnot challenges.
What's the process for closing deals in this environment and can you do a lot of it or all of it remotely or you're assuming.
Some relaxation measures to have in person negotiating negotiations.
Alright, you know you know I hope everybody will give me credit as a reasonably save Guy Conservative Guy. So when I told you that we're going to have a reasonable Q too.
A quick Q too, especially with the licensing.
Pretty much.
We use the word in the bag, but we'll deliver that now.
The answer to your question earliest stages, if I'm approaching a licensee potential licensee for the first time.
And especially overseas.
That is going to be delayed it could be delay indefinitely.
That's a function of.
When you're in the beginning you don't send people a letter and say Oh by the way why don't you license for me you really have to have a face to face conversation and talk about design talk about clean charts.
Is ending cane charter, there's a there's a processor. This sales. So now at the end, we you really talking about term site. Okay. So how long would I be cross licensing with.
What category are not included when you're down to that conversation you could do all of that by video content single phone. So so.
It's really be the stages of the pipe.
So in this particular case, we believe that.
We have the Q2 under control.
One last one for me is.
Lost corner, you mentioned, you had $30 million in new pipeline from that free trial that you're offering can you provide an update on on the line or perhaps how the convergence I've been going.
I don't I didn't keep track of it but the conversion usually of those spices reasonably good.
Pipeline at that stage I think normally you convert 2521.
And this one maybe a little better than that because because the trial is a pretty much driven by.
Special circumstances so.
I say the conventions are reasonably good.
Alright, thanks for taking my questions.
Absolutely.
Your next question comes from Todd Coplin with CIBC. Please go ahead.
Hi.
Hey, there.
Quick question Opex follow up from the SG&A question. So if we think about the 151 in the quarter.
How should we think about that flexing over the course of the year.
Okay. We are okay. So we have like steepest mentioned.
We benefited a lot from no travel we benefited a lot from.
Shut down.
But I will tell you I'm here at right now sitting in San Ramon office.
Unfortunately, looking at Chris, but but.
I have to do I have do.
And we are gradually opening up.
There are.
Six offices.
In multiple faces around the world that's open up.
And so.
Hi, Derek about another 20, or so that will be opening up now that we say opening up.
This is a good time to talk about we have internal Ah process that industry, well accepted which is a we follow the the government guidelines around the world.
We do it by faces like right now San Ramon was opening on my face month meeting about only 20% of our population saw allowed to return back to work and then everybody else still remain working from home and then the 50% and face to which I'll have to do a lot you would do it the country to county to.
The provisions in the provinces and so forth so to see how those health situation or glasses. So so and then the phase three is 90%.
And it ties to school opening and childcare and all that stuff. So so we have a very thoughtful process that we laid out.
Now the reason on both I'll take your download.
Answering your question I'll expensive is that we will see expenses to start going up and in addition to that we are hiring a lot of people on a global basis.
Interestingly enough.
This is not a bad time to a higher challenge.
I don't know why.
Oh, yeah as long as I'm the beneficiary of this.
I'm not complaining.
And so.
So you'll see hour ow.
Sales and marketing costs to go up now the virtual since we're doing most of being virtual we should still save money on travel.
We will save money on.
An actual shows that we go to that we no longer going to for example, so there is a give and take that but you should see is trending up.
Okay. That's very helpful. And then my second question you gave it to you hints on <unk>.
Longer term growth rates seems like for software and services group, the new new bundle.
You're getting into the 10% to 15% range is that the way to think about that business once we get through the pandemic.
Well, yeah, I mean, I would like to see double digit growth yes.
Great. Thank you.
Of course, thank you. Thank you.
I would like to turn the call back over to John Chen Executive Chair and Cel's Blackberry for closing remarks.
Thank you Josh Okay, just before I close I'd like to mention.
One of our recent announcement.
And demonstrating ultimate them into the sustainable development go initiated by the United Nation.
I'm very proud of Blackberry continues to contribute towards making the world a better place and I hope, but a lot of you agree with me I'm sure you do and we have made significant progress towards I'll go to be combo neutral by 2021, we'll get two combo neutral by next year. So.
I'm sorry. This is a later in the day for the for the East Coast.
Friends of ours.
Thank you very much for joining us today and stay safe stay healthy I hope to see you guys in person soon.
This concludes today's call. Thank you for your participation you may know disconnect.
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