Q1 2021 BlackBerry Ltd Earnings Call
[music].
Good afternoon, and welcome to the Blackberry first quarter fiscal year 2021 results conference call.
My name is Josh and I will be a conference moderator for today's call.
During the presentation, all participants will be in listen only mode.
<unk> facilitating a brief question answer session towards the end of the conference should you need assistance during the call. Please signal a conference specialist by pressing Star Zero as a reminder, this conference is being recorded for replay purposes.
I would now let me turn todays call over to Christopher Lee. Thanks.
Thank you Josh well welcome to the Blackberry fiscal 2021 first quarter results conference call with me on the call today, our executive Chair and Chief Executive Officer, John Chen and Chief Financial Officer, Steve right. After I read our cautionary note regarding forward looking statements John will provide a business update and Steve.
I will then review the financial results.
Well then open the call for a brief Una Sasha.
This call is available to the general public by I call in numbers in via webcast in the Investor information section of Blackberry Dotcom, a replay will also be available on the Blackberry Dot com website.
With the savings will be making today constitute forward looking statements in are made pursuant to the safe Harbor provisions of likable U.S. Some Canadian securities laws will indicate forward looking statements by using words, such as expect will should model intend believe and similar expressions forward looking statements are based on estimates and assumptions made by the company in light of.
It's experience and its perception of historical trends current conditions and expected future developments as well as other factors that the company believes are relevant.
Many factors could cause the company's actual results or performance differ materially from those expressed or implied by the forward looking statements. These factors include the risk factors that are discussed in the company's annual filings in M. DNA and the coping 19 pandemic, which is negatively impacting public health financial markets and global economic activity, you should not place undue reliance.
So the company's forward looking statements.
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 and Steve will reference non-GAAP numbers in there summary of our quarterly results.
A reconciliation between our GAAP and non-GAAP numbers. Please see the earnings press release and supplement published earlier today, which are available on the Edgar feed our and Blackberry Dot Com website, I'll now turn the call over to John.
Thank you see that Chris and sorry, I was hoping as Steve.
Thank you Chris good good afternoon, everybody I hope that all of you and your families and your loved ones are staying safe and healthy doing does a very unprecedented times.
[noise] this fiscal quarter of hours, which happened due in March April and May overlap directly with cold in 19 business kind of strange reselling in both headwinds and Tailwinds.
The entire company moved to working from home in early March and operation has been reasonably smoothed.
Oh, we start with the financial highlight in the quarter and then move into a business commentary.
I will reference non-GAAP number in my summary.
You know first fiscal quarter, we reported total company revenue of 214 million.
All the businesses perform in line or better than our expectation, except for QNX, which was negatively affected by global auto production shutdowns.
However, our enterprise product gonna surfaces stuff features security and productivity benefits from the increase in remote working business continuity and crisis management is used cases without customers.
Total company Billings were also down year over year due to depend downtick, but the buildings decline rate was less than the revenue declined rate. This is of course speak positive for future revenue.
Gross margin was 71%.
We achieved we achieved a profit of two cents per share.
Blackberry continues to balance profitability and investment for a long term.
Cashews and operation was 31 million versus 64 million in cash shoes in operation last year.
Yes, you are aware our first fiscal quarter typically has a high use of cash due to the commission and the annual bonuses payment.
This year, we spread the annual bonus payment over to the first two quarters.
Total ending cash and investment balance at May 31st what's fun, I hundred and 55 million.
Before I move onto business commentary peacefully reminded that we have fully integrated silence into Blackberry on March one the start of how current fiscal year.
That's a result, we're now operating in two reporting groups.
The software and services group and the licensing and others group.
Let me start with the licensing and other groups.
Revenue was 58 million into quarter.
Inline with our expectation.
Vast majority to revenue is from IP licensing.
We're off to a solid start for the fiscal year.
Moving onto the software and services group.
Revenue was came in as 156 million 156.
Hey, our was approximately 500 million and the dollar based net retention race, what's 93%.
Going forward, we intend to provide these metrics on a quarterly basis.
Net customer churn was close to zero percent and there has been no change to that does this net churn rate for the last several quarters.
Let me kick down on a key product component of the group, let's start with QNX.
Development seat professional services and royalty revenue, we're all negatively impacted primarily due to the auto shutdown production shut down and a project delays.
That said, we're starting to see signs of recovery in the auto sector evidenced by the reopening of the production facilities.
Engagement with our auto and generally embedded customer has increased.
On projects that we were working on prior to the shutdown as well as new opportunity that came out.
We anticipate a slow and gradual recovery for QNX.
Two throughout the year it would take time for the production to run back to Fu capacity.
[noise] into quarter QNX was chosen but 10 design wins six of which were Andy in general embedded market for industrial and medical applications.
The remaining for we're in auto.
Including a dog advanced driver assist software design wins with.
And I are true I'll try and so you can dial itron and an acoustic when design win we have with Volvo.
The other two auto design awards were for the secure gateway and infotainment systems.
This continued design wins a win momentum supports our leadership positions. Our latest automotive is store base number is over 175 million.
An increase from 150 million last year.
This metrics, which we January update once a year have been validated by strategy analytics and independent third party.
In an attempt to provide more information about on QNX business, we have decided to share our royalty revenue backlog on an annual basis.
The backlog is space on the customer estimate of lifetime volume, although design when it gets awarded.
That's up to date the estimated royalty revenue backlog is that 450 million.
QNX is I recognize name associated with safety and trust.
And we continue to expect acute QNX will be selected well many design wins into future.
These design wins will add on incremental revenue from developments seats professional surfaces as well as royalties.
Oh full quarter four year historical compound annual growth rate. Okay. Good is.
18%.
Which is well ahead of the 5% market cagar over the same period.
Over the next five years, we plan to achieving Cagar about your market grow ray of 11% in which is cited by Mckinsey well automotive operating system and middleware middleware over the next decade.
Our plan to accelerate acuity mix growth rate includes increased investment to gain market share in both the auto and general embedded markets.
And to grow our professional services business.
We recently launch our food service package that all for cyber security assessments and testing.
Moving onto AD hoc a crisis communication lifecycle solution.
AD hoc lets say performance leader this quarter.
At harvest very well suited for business continuity preparedness and execution in the current environment.
We had a number of new customer wins and competitive wins, a competitive situations, sorry, including wins with first responder agency and energy companies. We also had a strong quarter expansion and renewals.
After the quarter, we announced several notable new logos, including United States Department of Transportation and the U.S. Federal Trade Commission. We also expanded our business with the U.S. Department of health and human services.
Moving onto silence, and you yen, 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.
And new active sufficient customer grow with about 15% Onefive.
Oh this is measured on a year over year basis.
Notable new customers include General Motors.
Action packed and Dickinson.
Philips healthcare.
S.K. App, 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 for the bundle that includes optics, which is our enterprise products and protax, which happens to be our EVP product.
Interest in our managed service offering guard continues to be strong since this law launch last July resulting in sequential revenue growth of over eight at 85%, which is thought I have to caution. This is up a small base.
Library side as coupon extraordinary well in the recent Mitre evaluation, which is regarded by the industry. That's the most objective and transparent standards currently in the market.
We clearly demonstrate that all AI that solution and managed service with tax.
Protect customers from global threat actors, we were especially pleased.
By the performance of optics, which surpassed many EDI, our players who happen to be rank about bucketing industry analyst report.
Oh, you yen business also executed well that is the benefited from the increase need to pinpoint more endpoint, especially mobile.
Demand was strong for my regulated industry customers I, let me name to some notable wins no. Other customers. They are included in crude American Express.
See I B C. The European Bank for reconstruction and development.
Cotton National Bank.
The National commercial bank.
Perhaps sort of bank the development development Banco Singapore visibility you have changed financial group.
And then Republic of India with the Republic of India. When we now have 18 of the Gtwenty Gtwenty government as customers.
These wins I hope you agree with solidify a strain in the financial services and government vertical.
Let me wrap up with a Spock suites enterprise today basin increasingly chaotic environment with cyber threats I ever more sophisticated ample basis.
Attacker primary target endpoints in 70% of successful breaches.
Especially early in the form of mobile.
The Fiveg rode out will lead us to a significant increase in attack on mobile endpoints.
At the same time enterprise endpoint in the amount of data share at the edge also growing exponentially.
Together cyber security threats and endpoint chaos of putting organization that risk, while cutting into the employee productivity and increasing the idling costs.
A reason assessment by Frost <unk> Sullivan.
Declines to cyber threats to the entire Aiotv landscape.
This reports recognize how Blackberry solution address over 96% article after collector threats.
A copy of this assessment is available on our website.
A big part of Bradbury value proposition is is our ability to address these threats with our Spock suites are platform that combines endpoint security as well as endpoint management.
Though to spark suite for only launched on May 19, which was maybe four or five weeks ago. They have been extremely well, we see by both customers and partners.
Since the launch over 15, one fight.
15 customers have purchased one of our spark suites.
One of the largest provider so financial market transaction.
Infrastructure worldwide.
After the quarter, we announced a partnership with Bell Canada.
Barry become spelled Bell, Canada is for for partners for mobile threat detection.
And defense, sorry, MTTS sometime use as mobile threat defense.
Well, we will offer our MTD product.
Today, our enterprise customers, how AI driven NT MTD Prada, it's one of the core pillars and I'll spark suites.
We're adding more features.
Protection and secure gateway. The later this year.
We anticipated these additional below at pillars will increase revenue.
We also believe this will increase our addressable market because of the way we architect our you, yes security layer two inter operate with competitors you Yemm solutions.
Let me wrap up this on this session on the on the personnel front.
We recently announced that Tom Echo Basi has been appointed as Blackberry newsprint newest president.
Tom Spiro.
Two will be to lead all business activities for the software and services group.
Executive from Citrix.
Excuse me with over 20 years, so enterprise customer facing experience.
Thomas flat all facets of the global sales organization.
In addition to Tom We also have recently recruited two other senior level industry leaders. The first is our new head of software.
Services business. This is development and the second is our head of corporate marketing.
Well we started.
On June 15 already.
The hiring I hope, it's a good indicator of industry talent interested in joining Blackberry and demonstrate our conviction to build a stronger go to market engine.
With that Fat, let me turn the call would you 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-GAAP terms unless otherwise noted.
Please refer to the supplemental table in the press release for the GAAP and non-GAAP details and reconciliations.
We delivered first quarter non-GAAP total company revenue of $214 million and GAAP total company revenue of 206 million.
We'll break down revenue shortly.
First quarter total company gross margin was 71% versus 75% group reported in the first quarter fiscal 2020.
The change is due primarily to a decline in QNX royalty revenue.
Our non-GAAP 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 in product development and go to market, while maintaining strong control overspending given the current macro landscape and of course, the global shutdown did help to reduce spending.
Our non-GAAP operating expenses exclude a $594 million noncash accounting goodwill impairment charge.
This represents an impact of one dollar and six cents to GAAP earnings per share.
This assessment was required in accordance with accounting rules.
That 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 says exclude 33 million and amortization of acquired intangibles 12 million and stock compensation expense 3 million for software deferred commissions expense acquired.
1 million in restructuring costs, and a charge of 1 million related to the fair value adjustment on the convertible debenture.
First quarter non-GAAP operating income was 3 million and first quarter non-GAAP net income was 12 million.
Non-GAAP earnings per share was two cents in the quarter.
Our adjusted EBITDA was 20 million this quarter, excluding the non-GAAP adjustments previously mentioned.
Well this equates to an adjusted EBITDA margin of 9%.
I will now provide a breakdown of our revenue in the quarter.
In our software and services group, our product revenue was between 80 and 85% of the group's revenue mix with professional services comprising the rest of the mix.
Recurring software product revenue was above 90% in the quarter.
In our licensing and other.
Earlier, the vast majority of revenue is from IP licensing.
And service access fees were about $2 million and we anticipate about this amount for each remaining quarter in fiscal 2000.
From 21.
Now moving to our balance sheet and cash flow performance.
Total cash cash equivalents and investments were 955 million at May 31st 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.
Cash used in operations was 31 million capital expenditures at $1 million.
That concludes my prepared remarks, I'll now turn the call back to John for additional comments.
Thank you Steve.
Blackberry remains strongly focused on achieving profitability growth.
A profitable growth while investing for the long term.
Now given the continue uncertainty across the global economy due to the pandemic. It is still prudent for us not to provide a specific fiscal 2021 outlook.
However, that said I 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 growth for our software and services group.
Sequential growth in our license in group.
We anticipating and anticipate licensing revenue to be around 250 million for the full fiscal year.
Q2 full fiscal year.
Inline with our normal intra year.
Seasonal like decision that already.
We anticipate is a also a strong fiscal fourth quarter.
I also want to you reiterate day back very continued to be financially healthy.
Even during these uncertain times, we demonstrated fiscal discipline generated profitability and maintain liquidity.
We have ran recently ran a new set of financial stress has assuming up to 30% of revenue decline and no new financing. The result showed that we continue to be solvent and liquid for the next several years.
We anticipate ending the year in a positive free cash flow position and at and therefore, adding draw the cash balance.
And we plan to read.
Sure when they mature.
This will save about $23 million a year interest payment going forward.
We believe Blackberry, who will capitalize on the secular trends on securing and connecting endpoints are.
Our business strategy and.
Technology, a definitely in pace, we're competing in the right markets and now the most important tests right now is profitable revenue growth and market share expansion.
And we are very focused on that.
Before I open up for Q, and eight I would like to make a statement about yesterday's annual shareholder meeting.
Our two Korea of any confusion.
The fact that we did hold a Q and a session.
Unfortunately, only one register shareholder somebody that a question.
We answered the question.
That may have been others, who wish to ask question, but could not because they were actually gets.
So there was no glitch on the tech on the technology.
Our proxy materials a clear questions.
I will now open the question up for Q and eight Josh.
And now leaving only begin the question answer session to ask a question press star one on your telephone.
If you are using a speakerphone. Please make sure your mute function is turned off to allow your signal to retire Clinton again, so I want to ask the question, we'll pause for just a moment till now everyone and opportunity to single for questions.
Your question you limit yourself to one question and one follow up.
Your first question comes from Dust, how does your shield the P.I. financial Please go ahead.
Oh. Thanks. Thanks for taking my question just couple of questions just first on QNX and to be you wish to actually some leaves. It was yesterday that showed you you're increasing the installed base increase maybe 25 million automobiles, which is about 20% in the market year over year I'm wondering if you could comment on.
The market share within automobiles year over year. So if it's roughly 25% now what was it a year ago.
And then just secondly, thanks for by giving some sort of sense of what the rest of the year is going to.
I would like it just on on your comes on the Enterprise software side. Obviously, you said you saw strong demand in this quarter. What do you expect demand will be like for the rest of year in that segment.
Oh, Okay guys. Thank you.
So.
175 million cars.
Actually I know you attend the tundra research on on the auto space as we spoke many times in a pad.
There are roughly.
In a big Big numbers says that roughly 1 billion, causing the world running around every day.
And I would dare say maybe.
60% plus.
Our that caused that are interconnected space connected car.
Obviously very little in the autonomous car, but interconnected cause I would I would dare to I mean, our guess is going to be about 60, 70% and so you look at that number and you look at the fact that we are 175 million cars that have I'll software.
On the road today, I mean, you can calculate a market share I mean, we definitely are.
If you take about 600, you divide that you know I'm guessing were monthly about 30% market share.
That that's that will be my best guess non scientific I would like just walk you through how I look at the numbers I'm sure somebody else My point out you know.
Maybe 2.04 in my [laughter] am I thinking but that that.
So regarding the.
The year.
Yeah.
I think when I look at maybe maybe I'll start with the industry.
Consensus.
That's how would that.
The consensus in about a mid 900 million for the year.
Looks reasonable.
Definitely in the ballpark.
And we expect.
You know my small sequential growth.
In the software and services business.
We expect our IP business a licensing Pete a piece of this has to come in about 200.
50 million for the year.
So so you could you could kind of triangulate that back to the consensus I think we're in the we're pretty much in the same ballpark as you guys are.
Okay, all right on the on the odd.
I'm glad to be let it got sorry, thats kind of profitability.
Oh Unprofitability I I think it's a good shot of us being profitable Oh, we demonstrate it.
For the full year, yes.
Great and I already said cost that we will we were looking like we're gonna be cash flow positive for the year free cash flow positive for the year. So I believe we'll we'll be able to be.
Profitable for the year also on a on a non-GAAP basis.
Perfect. Thank you very much I. Thank you Beth.
Your next question comes from Daniel Chan with TD Securities. Please go ahead.
Hi, Thanks for taking my questions.
Did the QNX royalty backlog did I hear correctly was 450 $450 million.
Yes funded 50 million. So how did you guys calculate that number I actually thought the number would be higher considering you do annual QNX revenue I know, there's a whole bunch of other stuff in there, but Daniel QNX revenue.
That's it that's a about what like like around 200 million or so.
So.
How did you calculate that backlog considering that a lot of the programs, which are involved and have a long lifecycle.
Yeah, So we generate.
Well I'll give you some historical number I'm not this year, obviously in a year ago, we generate roughly about $150 million in royalty in a year.
Some of those will become revenue into Europe.
Oh, we also generated somewhere between in a ballpark 70 to 100 million from developers seats.
And and professional services.
So if you ask that together I think you'll get close to the number.
That that you just cited.
Okay is that helpful.
Yeah, Yeah. That's helpful. I, just I just assume that the lifecycle of some of these automotive programs were really long. So when you get on one of the design wins, you've got a very long tail. Those continued royalty revenues I thought it would.
All the attitude I suspect I I expect a much larger number that's okay. Yeah, yeah, we will what I would say I would say that would probably on them conservative side.
Outsells a these are the numbers that was given to us by the customers at the time with the win a they usually adjusted and so I mean, it could go down or it could go up and and and then also be derivative when like for example, when we win win.
So that in motto and within OEM they'd like you know they most likely will give us a different models at the same set and we've seen that broader repeatedly I I think one thing you could take away that we have very comfortable without competitiveness and our relationship with our customer.
Yes, and on a global basis, so as SD that's a business start returning being awarded we will get we'll get a good share of it.
Yeah that's helpful. Thanks.
And then on the delayed programs that started to kick in last quarter Uh-huh. The sounds like things are starting to move again any any word on somebody to lead programs are picking back up.
Yeah, we admit I'll team I'll team.
I've told me that onto us.
That they that's 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 number one on most important thing is they have to have a schedule first a then then Dan will enhance our ability to win so.
So that's a that's where we are they did a good shot.
Okay. Thank you.
Okay.
Your next question comes from fit Chowdhry Global equity research. Please go ahead.
I Trust you.
Hello Hello.
Not back on a number then.
I think.
Hi, good execution in a very difficult environment I had a couple of questions or would you be comfortable saying that the one plus quarter wrong, it's pretty much the bottom.
And you're not seeing signs of economy opening up and recovery happening.
In my kind of earlier on ice cold cuts that that I'm comfortable.
We're in the right for part with the consensus.
It is too to assume a gradual reopening of the economy.
Like earlier, we talk about QNX design wins are despite all the very difficult quarter I was actually positively surprised that we won 10 designed in a quarter I mean.
He doesn't translate to impact yet.
I thought that was I.
Well that was such a better then.
So so yeah I have a certain oh, we have a certain expectation that things are getting better. Although we're being very cautious we would leave you are going to get better slowly.
So this is where I said, okay, we're going to see incremental smalling nomad to improvement in software and services on the enterprise side.
A sole incremental improvement in QNX, maybe maybe a same a difficult quarter in Q2, but we expect this you know the second half to be better and then we feel comfortable the pipeline of IP. This is how we all grew everything together and outspending and everything else, though so that that Lee.
Each to our belief that we could be profitable over the year.
So for the year Hum so that that's kind of the trip that's the environment that I'm.
Expecting a and that's tied to the number.
Beautiful beautiful, John Youre always being very innovative and all the head of the Coke. We all know working from home we are doing remote working.
What did the challenge when it comes to selling a in.
<unk> selling.
I'm wondering like God.
You bet, you turned the whole industry upside down.
When we think about remote to selling what.
Thank you are putting in place and well use the contributing and making it easy both because your numbers definitely down that you'll see us execution in the well not back then I was expecting so what.
Processes, you may have put in place to have success and when dates back to an environment bad remotes and you're going to be somewhat of a norm.
Oh, Hey, thanks, Thank you well, we're not we're not as good as you said, we are but because we benefit but first of all my peers in the industry see that and because we provide security software cyber security software because we provide crisis management software.
And mobile.
That that helps facility.
Hey, they remove 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've seen it a new customers by extremely hard to combine.
Existing customers upset up selling to them and they have a billion requirement to need more software more seats more licenses and and in some cases add hawk, where people are on the fans and say Wow I don't really know I needed I, you or whatever they have decided they needed and so.
So there and because unfortunately because of the price is kinda like the only silver lining to this led to this pandemic situation, so sorry, but but I I traded nodes with other CEO of other Tech company I pretty much everybody is saying the same thing upselling.
Oh, and I'm expecting you have to write tied with software it's a good expansion.
It is it's a it's okay to sell the remote this is where the relationship are a very important and we Fortunately Blackberry has a lot of good relationship, especially in the regulated industry like the banks in the medical feel in a and and the and the government.
So so that that help us to put some kind of anchor into the bus business or the upset that the new project, a new customer base I would have to say, it's much more difficult to combine.
Thank you John on the best.
Thank you trip.
Your next question comes from like walking with Canaccord Genuity. Please go ahead.
Mike [noise].
Hey, John.
My question for you.
Sure Yeah, Yeah with Ah, we get called out AD hoc on on the call is an area of strength you know with with the changing work and government safety environment. You. How are you leveraging went into opportunities to compete more maybe to state local and even enterprise level. He will compete more may with ample bridge offering.
<unk> get guys. That's a very good questions are so so those at the federal space. The you know the gtwenty to the five high countries United States, Canada, We do how are you.
Good good customer 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 being strong and stay local and that it's about your change we're putting it.
A a team of people, there's just responding to RFP and RF I.
Dedicated team. We also recognize the fact that we need a more SMB type service flaws Rod and a enterprise sales was like selling to the government agency. That's that's a how large that so so we're adding we're adding.
Resources in both areas I talk about what we so so we go after the RFP to what the state and local then education market and the other SMB market. We go after with a more than SMP. So sales team so and I think he will it will work well the good news is.
We also have upgraded our product and to have a complete lifecycle products and we also met or deliver the manish surface brought up and so that fits to the smaller enterprise because we never have to ask them. It doesn't matter surface product that just recently announced I forgot literally days right.
So.
So were equipped now.
Both into managed services with the way we laid out of service approach.
And it's a great. It's a great market I have to say ugly.
No time like this is a really great market.
Yes.
Hi, Thanks, and just following up on that on there any metrics you can share on the business maybe yeah. The size of that on an annual basis or growth metrics and then also how do you view. The positioning are you, adding salespeople to attack the mandate and opportunities for mass notification over there and in the upcoming years.
I don't have the answer to your question right now, but let me do this oh, yeah, let me see what metrics I could I could deliver and provide.
Because we're we're early we are actually early to a non federal a bloody the federal play it's very easy metrics you know our wins you know arlon logos.
You know the renewal is a strong and you know we had seat site in the United States Oh licenses are over 2 million seats. So you know, but they're very concentrated through the federal government any armed forces and so far so though 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 like to know too.
Okay.
Last question for me just switching gears to any update on radar on the Io tea business and so that the mapped into software and services going forward also thank you.
Yeah, We Rochelle and radar is actually doing reasonably well and fortunes are numbers are not high eight they did get affected somewhat by the by to fight a pandemic because we're unable to visit customers that you know because radar, it's really very the radar team is very.
He focused on winning new customers, because we win new customer we got recurring revenue for pro radar and so that's the focus on but but it's been done well I mean, it was nothing negative we have some wins, we've increased some usage and and that's been but nothing to at this point nothing would a news.
Cheetos on on that or on the I O T. They are all now merge and on the software and surfaces. So I don't I don't really look at it that way.
Oh separated out at all.
Right. Thank you very much that's switches for the year.
Sure. Thank you.
Your next question comes from Daniel Burke with Bank of America. Please go ahead.
Hello there.
Great.
Yeah I think my second question first I just wanted to clarify what was the a our number that you said in the beginning.
Hi, good dreaming about 500 million.
Okay Gotcha is is that up year over year.
Oh. This is a first time, we actually have collection and disclose it so.
<unk>.
Those I don't I don't know what are some of your your at all.
Okay, Okay, Gotcha, and then I'm just.
It was the the silence consensus number that you referenced.
I'm just for silence grew year over year.
Yeah ill tell you it's relatively flat.
And Ah I think the silence numbers, it's like 48 49 million for the quarter.
That's probably right I'm using.
Yep Yep got because they're not that number on it.
Gotcha, and then just last one I'm surprised as teenagers. So low can you just talked about if you feel like you're investing enough for growth and does it make sense is this kind of the trough level for press unit. Thanks, Yes, I'm glad you asked this question.
We.
We are spending.
Well, we did two things to fund our go to market engine.
We move a lot of the headcounts and unfortunately, some of their headcount we have to reduce and then high back ends in some other area, we've done a little bit of that but but in a beginning earlier on but I'm not doing to spend dynamic period.
We have we moved the resources from the back office is through the front line.
So the back office is has reduced and streamlined quite a bit and which is pretty much across the board whether his finance HR legal IP, we have really you know streamlined it.
We got one of the good one of the benefit of golf approach you know grouping does the company.
No the businesses together, it's we actually could reduce overhead.
So for example, you don't need three different finance or.
You know finance team you really need one you don't need a three different you know oh groups of contracts people you only need one so maybe a bigger one but you know you won so it helps a lot and then we move data. This is by design and we moved that I call. It 10% move we moved 10% of research.
Just wanted to back office are fun, and then hired the people that way. So a lot of these people are willing to trainings and so we also increase I'll executive ranks bye bye bye recruiting more talent south from the outside a in in all men. The people we have here today, so where we're basically all in and introduce sales and marketing.
Okay.
Feeling very comfortable in that we actually hiring a lot of people. His name you a couple of executives, we probably had another 100 racks that being recruited right now in sales and marketing at this as we speak.
Great that's really helpful. Thank you.
Sure.
Your next question comes from Paul cheaper with RBC capital markets. Please go ahead, hi, I'd ever thanks very much.
First a high level question on strategy, just you know with this environment, we've seen tremendous uptake of video conferencing. Blackberry is known for secure communications you have cross email BB and boys, but no video you know how do you think about video as a category is it something that you see in critical or.
Or not synergistic with your either the bigger peach portfolio that you're building.
It's not critical pause I mean, it could get synergistic, but I'd rather do it with partners. Like for example, you know we've done we're doing a ton of.
No security work with a number of the name players that you could probably close your eyes and new site. So we want to do it that way now messaging so that and voice is different you know we we have good product that we're pushing while the dad and messaging and voice, but the reason why.
I Didnt really attendant to video, it's I find out a really crowded phase.
And I'm not quite sure that you know I wanted to dilute I'll sell yet to yet one more thing.
Now eventually if the if if the market and therefore, our customers say Hey, you Gotta integrate video I bought a we gave we integrate zoom that went back then you know odey other team and you know so well nobody I'm, calling me and said Hey, I cant buyer software because it didn't work with I video.
A convincing that I want it.
And in some cases, we used container well under you Yeah. Two managed security of some of these conferences.
So so so today I'm trying not to do more.
The two shows do you don't get my you you, yes launch properly.
In a future my something a bit of interest, but I radical group partner.
Okay. Thanks, that's helpful perspective, just in regards to IP licensing and obviously you sound positive going into this quarter now given you know there are travel restrictions on social distancing and whatnot challenges now what's the process for closing deals in this environment can you.
Do a lot of it or all of it remotely or are you assuming you know some relaxation of in the measure savvy in person negotiating and negotiations.
Right you know you know I'm, Oh, I hope everybody, who will give me credit as a reasonably safe died conservative guy. So when I tell you that we go to have a reasonable Q2 and a good Q2, especially for licensing hub, we pretty much yeah, I mean, I will use away.
In the back, but but we will deliver that now it's the answer to your question really is the stages, if I'm approaching a licensee of potential licensee for the first time.
Yeah, especially overseas.
That is gonna be delayed or it could be delayed indefinitely.
And that that's a function of the where you were you in the beginning you don't send people a letter and sale by the way you know why didn't you license for me you really have to have a face to face conversation and talk about design talk about same charts. You know presenting came charge. So there's a there's a processor this cells. So now etsy.
And we 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 that by videoconferencing ofone. So so it's really the stages of the pipe sodium.
This particular case, we believed that Oh, we have the Q2 under control.
One last one for me is adding last quarter. You mentioned, you had $30 million new pipeline from not free trial that you're offering can you provide an update on on the pipeline or perhaps you know how the conversions I mean going.
I don't I didn't keep track of it but the conversion unusually of those places reasonably good a meal pipeline at that stage I think normally you convert two and a half to one you know and this one maybe a little better than that because because the trial is a pretty much driven by.
Special circumstances, I'm, so I I say the conversions are reasonably good.
Thanks for taking my question absolutely.
Your next question comes from Tod Carpenter CBC. Please go ahead.
Hi.
Getting me there.
A quick question on Opex follow up from the asking 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, and we are well okay. So we just like exceed the mentioned we benefited a lot from no travel or we benefited a lot from to shutdown or but I would tell you I'm here right now sitting in outside remote office.
Unfortunately, looking at Chris, but you know but.
I have to do I do.
And we are gradually opening up yeah, there are six offices.
In multiple faces around the world that's open up.
And and so I doubt about another 20 or so that we'll be opening up now the we say opening up a way of Iowa is this is a good time to talk about you know we haven't turned all in all of a process that industry well accepted with just a we follow the the government guidelines around the world I'll be.
We do it by faces like right now is San Ramon has opened they don't have faced one meeting about only 20% to allow populations are allowed to return back to work and then and then everybody else still remain working from home and then to 50% in phase two which I have to do a lot to move you do it the country the county to you know the.
The provisions and the provinces himself up so to see how does your health situation or glasses. So so and then the phase three is 90% and it ties to school opening and child care and all that it goes stuff. So so we have a very thoughtful process that we laid out.
Now the recent amble I'll take you down this on answering your question on like friends that 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 you know this is not a bad time to higher talents I don't know why [laughter].
Oh, Yeah, it's always I'm the beneficiary of this that's that's okay, I'm not complaining and so.
You see our our sales and marketing costs to go up now the virtual since we doing most of being virtual or we should still safe money on travel or we will save money on on actual shows that we go to that we no longer go into for example, so there is that.
Give and take that but you should see is trending up.
Okay. That's a that's very helpful. And then my second question you gave a few hints on a longer term growth rate seems like for software and services group the new new bundle up here are getting into the 10% to 15% range is that the way to think about that business. Once we get three the pandemic.
Well, yeah, I mean, I would like to see double digit growth yes.
Great. Thank you.
Sure of course, thanks, Thank you.
I would like to turn the call back over to John Chen Executive Chair and CEO factoring for closing remarks.
Thank you Josh Okay, just before I close I'd like to mention one of our recent announcement out in demonstrating our commitment to the sustainable development go initiated by the United Nation.
I'm very proud that Blackberry continues or contributed towards making to whirl, a better price and I hold a lot of you agree with me I'm sure you do and we have made significant progress towards our go to be carbon neutral by 2021, we'll we'll get to carbon neutral by next year. So Oh I'm sorry. This is a later in the day for the for the East coast or Fran.
As of hours, but Ah. Thank you very much for joining us today and stay say stay healthy I hope to see you guys in person soon.
This concludes today's call. Thank you for your participation you may now disconnect.
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