Q2 2023 BlackBerry Ltd Earnings Call
I'll be your conference moderator for today's call.
During the presentation, all participants will be in a listen only mode.
We will be facilitating a brief question and answer session towards the end of the conference.
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As a reminder, this conference is being recorded for replay purposes.
I would now like to turn today's call over to Mr. Tim <unk>, Vice President of Blackberry Investor Relations. Sir. Please go ahead.
Thank you, Brian and good afternoon, welcome to Blackberrys second quarter fiscal 2023 earnings 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 our cautionary note regarding forward looking statements John will provide a business update and Steve will review the financial results.
We will then open the call for a brief Q&A session.
This call is available to the general public buyer pool in numbers and by webcast in the Investor information section at Blackberry Dot Com.
A replay will also be available on the Blackberry Dot com website.
Some of the statements, we'll be making today constitute forward looking statements are made.
Made pursuant to the safe Harbor provisions of applicable U S and Canadian Securities laws willing.
We'll 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 its 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 to differ materially from those expressed or implied by the forward looking statements.
These factors include the risk factors discussed in the company's annual filings and MD&A.
You should not place undue reliance on the company's forward looking statements.
Any forward looking statements are made only as of today and the company has no intention and undertakes no obligation to update or revise any of them except as required by law.
As is customary during the call gentlemen, Steve will reference non-GAAP numbers and a summary of our quarterly results for.
For a reconciliation between our GAAP and non-GAAP numbers. Please see the earnings press release published earlier today, which is available on the Edgar SEDAR and Blackberry Dot com website, and with that I'll turn the call over to John .
Thank you. Thank you Tim good afternoon, everyone and thanks for joining today's call.
This was a solid quarter for Blackberry delivering revenue in line with expectations and based on the earnings.
I'll start to day review of the Iot business unit.
This quarter Iot delivered a strong 28% year over year revenue growth.
<unk> design face revenue remains the top performer that is revenue from developer development seats and professional services.
Q1 was the third consecutive quarter that we set an all time record in this category and this quarter, we almost had another.
When we win a new design. This revenue is the first to be recognized with royalties coming later when a vehicle enters into production.
This strength in design phase revenue is expected to continue given the significant amount of professional services, we already have lined up and the pipeline of potential new design wins in the next few quarters.
On the production front, we saw an uptick in royalty revenue, but it remains below the pre pandemic level, mainly due to supply chain headwinds gross margin came in at 82%.
The strength of design wins was clearly illustrated by Volkswagen one of the worlds largest automobile selecting Blackberry <unk>, new VW Dot Oss platform.
This platform will be deployed in all brands across the Volkswagen group with Blackberry, leading trusted powered a safety critical Adas and autonomous driving applications, where <unk> is currently the market leader.
This builds on design wins in recent quarters with BMW Volvo and a long list of electric vehicle players in China.
Blackberry continues to win market share in core safety critical domains. A couple of example included an $8 design win with one guy.
And a digital copy of design with one of the world's largest tier one supplier that utilize <unk> HIFU devices.
The Hypervisor will host the safety critical instrument cluster, along non safety critical infotainment applications on the same chip.
On the EV front, we won another eight are designed with the Chinese automaker and Blackberry <unk> is now embedded in seven of the China 10 larger CE Oems.
In addition to our strong position in auto we have significant opportunities in the outerwear that goes through.
This quarter, we announced additional support for the aerospace and defense market with Q&A, achieving the latest technical standard known as the future airborne capability environment of pace.
Face is a software standard Johnny development by government and industry that establish a common operating environment. It enables the reuse of software components across different hardware, reducing developer friction and costs.
In addition to aerospace and defense, we saw progress in our medical and industrial markets with wins that included surgical robotics, a retail distribution pick and pack robot as far as control for a nuclear power plant.
Overall in the quarter, we $1 19, new designs with nine in auto and 10 in the general embedded market.
We successfully added talent to our Iot team this quarter, despite a tight labor market.
This investment is supported by the large and growing scheduled professional services secure through the recent design wins and by adding head count will be able to do it.
<unk> will enable additional revenue.
The macro environment for auto remains a mixed picture.
With varying dynamics across regions and Oems the Chinese market, where Blackberry has won a number of designs recently appears to be bouncing back to the end due to the end of some COVID-19 related shutdowns and the impact of robust stimulus measures.
In North America and in Europe . However, there appears to be a short term contraction in silicon chip surprise constraining the ability of OEM to build inventory and meet demand.
Going forward the impact of rising interest rates on consumer financing together with economic uncertainty created by the possibility.
Creating creates the possibility of future choppiness.
Despite this ongoing challenge, we delivering we're delivering strong year over year growth and have a solid pipeline of potential new designs and are coming in the upcoming quarters.
Normally given the strength of the Q&A <unk> business, we will adjust our revenue outlook upwards.
However, given the macro headwinds, we are being prudent and holding our outlook is we.
We expect fiscal year 'twenty three revenue for the Iot business unit to still be in the range of the $200 million to $210 million as previously stated.
On the IP front, we made good progress our product development Roadmaps remains firmly on track Okay. Another new release in August that enabling support for a greater range of the in vehicle hardware and software.
This new release incorporates not only rolling out features but also valuable real time feedback that we're getting from the ongoing proof of concept trials.
You may recall that we are currently running a limited number of these trials, including the top OEM and tier ones and these are progressing well we continue to receive requests for additional trials and this ongoing demand remains a positive sign that the customer reception of the customer receptivity of IV.
On the ecosystem side, we were excited to close another investment by the Ivy funds this quarter in a German startup named Com predict.
Comp Redig uses AI to enable automakers three providers to utilize predictive maintenance I E. Using vehicles sensor data to get ahead of the maintenance issues.
The predictive maintenance use case.
Our added too many other set ivs, enabling including usage based insurance intelligent EV battery management.
Vehicle payments and a next generation 911 emergency response, just to name a few.
Looking ahead, we expect our product our next product released in December and we remain focused on IV design wins, which we currently expect to secure in calendar year 2023.
We are also planning to showcase more exciting capabilities and use cases at CES in January . So please stay tuned for more details on that in the coming months.
Moving on to the cyber security business unit revenue for the quarter was in line with expectations at $111 million. The business also delivered sequential building growth of 15% to $102 million cyber.
<unk> for the first half of this fiscal year grew 6% year over year.
Gross margin was 55%.
<unk> came in at $321 million dollar based net retention rate was 85%.
In the quarter, we closed business with a wide range of customers, but saw particular strength in our core verticals of government and financial services.
In North America, we secured business with department of Treasury, The Federal Trade Commission.
<unk> of energy the IRS, the New York stock exchange in the U S Mint.
We also won business with leading military agency such as the U S. Army Corps of Engineers U S. Central Command U S Marine Corps ups and other branches of the department of defense.
Internationally, we secured business with UK aid or <unk> I guess, we changed that now measure see treasury the UAE Ministry of a presidential affairs there.
The new sealant parliamentary services.
Australian Electoral commission and the Polish Ministry of Foreign Affairs, just to name a few.
In financial services, we won new logos as well as renewals and up sells with leading Bang in U S U K, Switzerland, Japan, Israel, Italy and more.
In addition to these core verticals, we recorded a strong quarter for new business in the middle market.
This is a large segment of the market dominated by legacy players offering legacy solutions and one way outside <unk> product portfolio is resonating well.
Blackberry is very well placed to grow in this market for a number of reasons.
The level of cyber risk for mid market customer is high with Australia research team identified at Smbs phases upwards, so 11% cyber attacks per device per day.
F&B are also often those are the lowest level of insurance against ransomware demands.
As our study with a core versus insurance shown meaning that they can they can often ill afford a breach.
Customer in this segment in particular like a lightweight agent and how effective our products are detecting threats.
Our AI engine the most mature in the market as seen billions of data points, both malicious and non malicious and use machine learning over several years to effectively distinguish between the two.
Further midmarket customers amount those with the fewest resources and expertise to staff a 24 by seven security operating center and.
Customer like how our managed service offering silence guards helps solve the issues for them.
As we described in previous quarter, there has been some headwinds for sideway or however, we expect <unk> to return to growth early next fiscal year.
A lot of efficient and investment made in the past few quarters are starting to bear fruit and we see some data points that give us confidence in this outlook.
First we sold a total pipeline of potential opportunity for our <unk> product at the end of Q2 increased by 23% year over year and four new logos, specifically the increase was 73%.
Second significant progress have been made with the product portfolio in recent quarter and is continuing for example, I'll give you. An example, recent enhancement to our protect ETP products have positively impact our false positive rates as evidenced by trusted third party virus total.
Third are the go to market front, we're working to replicate the success, we've already had particularly with our mid market customer. We added a lot of cyber security industry experienced this year and we expect to see more traction at these new hires fully ramp up.
For this coming quarter, we're commencing a program to reduce strong relationship with key channel partners and distributors that are well established players in the cyber security market.
We will also receive a lot of positive feedback following the site silence product rebrand, including a significant increase in both website traffic and new leads.
Turning to the overall demand environment for cyber security the rest of the FY 'twenty looks fairly solid.
As I mentioned earlier, Blackberry as a strong government footprint and demand in this vertical appears to still be robust.
Overall, we're not seeing customer coming back on the cyber security budgets EBIT in the dental market given how critical it is to maintain their cyber defense. Therefore, there are no change to the outlook that we have provided previously.
We continue to expect our cyber security versus units revenue to be broadly in line with fiscal year 'twenty two.
Let me now turn to licensing revenue in the quarter came in at $6 million.
The sales process for the non core patent portfolio continues.
We understand that the length of time that is taken is frustrating for shareholders and we are equally as frustrated if not more as we work on it everyday.
However, we firmly believe that divesting the portfolio remains the best option for shareholder value. While the portfolio is still relatively fresh the IP. That's part of the deal in a business of monetizing it is not related to our core business.
At the time, we were required to announce the deal we understand that getting the government approval could take up to 210 days, if not longer but we were pleased with the process were completed much sooner.
Category, we're working to conclude our financing in parallel to getting government approval and.
Unfortunately, we believe the turmoil in the financial markets created unexpected challenges for the original financing syndicate.
However, there has been much interest from other parties wanting to step in to take their place and capable of currently working working to lock down their final syndicate.
In parallel to this we're actively working on alternatives.
Our financing is not a contingency as well as final final as far as finalizing a plan to restart the monetization engine ourselves should that be necessary.
We will of course keep shareholder posted until final outcome is achieved.
Let me now hand over the call to Steve who will provide additional color on our financial results for the quarter.
Thank you John .
As usual my comments on our financial performance for the second quarter will be in non-GAAP terms unless otherwise noted.
Total company revenue for the quarter was $168 million.
Total company gross margin was 64%.
Our non-GAAP gross margin excludes stock compensation expense of $1 million.
Operating expenses for the second quarter were $129 million.
And these non-GAAP operating expenses exclude $22 million in amortization of acquired intangibles.
A $10 million fair value gain on the convertible debentures.
<unk> 5 million and stock compensation expense.
$4 million from the impairment of long term real estate lease assets and $3 million of restructuring expenses.
Yes.
Blackberry continues to make carefully considered investments for topline growth.
Such as adding additional head count to the Iot team in response to a strong schedule of professional services from design wins as well as expanding our reach in the cyber market as John outlined earlier.
The non-GAAP operating loss for the second quarter was 22 million.
And non-GAAP net loss was $29 million.
With GAAP basic loss per share was <unk>.
On a non-GAAP loss per share was <unk>.
<unk> EBITDA, excluding the non-GAAP adjustments previously mentioned was negative $16 million.
Now breaking down revenue in the quarter.
Iot revenue was $51 million in cyber security revenue was $111 million.
Software product revenue remained in the range of 80% to 85% of total revenue.
And professional services form the balance.
As before approximately 80% of software product revenue was returning.
Licensing and other revenue was $6 million.
Now turning to the balance sheet and cash flow.
Total cash cash equivalents and investments were $699 million at August 31, 2022.
Free cash flow was negative $26 million with cash used by operations of 23 million and capital expenditures of $3 million.
That concludes my comments I will now turn the call back to John .
Thank you Steve.
Before we open the lineup for Q&A, let me summarize the key points for the quarter.
Number one our Iot business unit delivered strong year over year revenue growth in large part driven by ongoing strength from design phase revenue.
Ivy remains firmly on track with proof of concept trials progressing well and the team is executing on our product development roadmap roadmap as planned.
Our cyber security business unit met our revenue expectations, delivering strong sequential bookings growth and continue to implement a strategy to grow the business with AAR expect to return to growth early next fiscal year.
Despite the volatility in the macro market, we are maintaining our revenue outlook for both business units and continue to execute against our plan.
That concludes my remarks, and operator could you. Please open the line for Q&A.
We will now begin the question and answer session to ask a question. Please press star one on your telephone keypad.
These make sure also that your line is on mute. It again press star one to ask a question, we'll pause for just a moment to allow everyone an opportunity to signal for questions. We request that you limit yourself to one question and one follow up.
Okay.
Your first question comes from the line of Mike Walkley with Canaccord Genuity. Your line is open.
Hi, Mike.
Hey, John .
For taking my questions sure.
Delving, a little bit more to the cyber security business you know the billings commentary it sounds sounds promising can you just update us maybe on the OEM side.
Where we are in that falling off.
And.
The Conference Center.
Or will it start to grow next year.
Yeah.
So the <unk> as you know.
It's a very price sensitive market on the mid and low end.
And in particular, the particularly dominated by one major player in the market.
Coding and site license and sofa.
For the higher end markets.
Absolutely needed better security.
We tend to hold onto those business as well and in some cases expand on it.
We also have in addition to <unk>.
Secure communication and also an opportunity to upsell.
Our <unk> product to the finance product.
So.
On the whole for the OEM, we kind of expected I'll sell to holding a pretty flat.
And then we will have a way to grow the business next year by bundling some some more of the stuff.
And new products that come out and features the final point I'd like to make is you.
Microsoft for example, they're in tune, it's really a a mobile application manager. This is really not an OEM. So the customers are beginning to recognize that the security side of the equation theyre not theyre not fulfilling the requirements. So I.
I think there might be a good strong argument for us to either.
Overcome the attack from Microsoft in June .
Or actually coexist with them in accounts that absolutely needed mission critical security.
So thats kind of our game plan and our current thinking.
We feel reasonably good about what I just said in terms of what the market validation has been associated with that customer.
Okay.
As a follow up question.
Pricing in the endpoint security market as you go head to head with both legacy and some of the other next generation vendors in.
And then also with the progress on your platform.
<unk> metrics or give any rough color on <unk> and how maybe some of your new customers.
With more than just one product.
First I got the first part about the legacy.
What's the second part was about the platform and the ability to upsell and Dr. Brian Mike.
Platform.
Or is it just retail platform, how youre upselling any metrics on the customers taking more than one silent module.
Oh, I see I don't have that information handy with me.
So either we're going to have to follow up with you.
Youll likely to catch up with John <unk> on that on those on those information.
And.
The legacy product lines, it's interesting.
We see actually the most progress we made against the legacy player, particularly in the mid market.
Were the mid market doesn't really have a seasonal the center of our socks.
What we offer.
Particularly guide.
Which is the managed service.
That's very well resonate extremely well and we see a pretty big strong growth.
<unk> are not huge in terms of the actual amount of dollars, but a number of accounts that were winning a bid is reasonably sizable.
Okay. Thanks for taking my questions I'll pass the line.
Thank you.
Your next question is from the line of junk with Baird. Your line is open.
Good afternoon, and thank you for taking my questions.
First question, maybe a little bit of a bigger question bigger picture question, John I'd be curious to get your updated perspective on the auto software competitive landscape. Congrats on the Iot business in the last few months here. We've seen both companies that haven't traditionally played in auto looking to make inroads here and in some cases announcements with customers and some of the chip companies as well.
Talking a bigger game of our other software it what are your thoughts on both the especially any comments that you build offer on your direct engagement with the chip companies and how thats evolved or incrementally grown recently thank you.
Okay and Thats a good question.
So.
<unk> is probably the biggest player in the auto.
And that is software space, particularly in the area of operating system.
And so we by far.
Touchwood when most of the big deal.
I will I will refer you to the loss.
Two or three quarters, a big win in BMW and.
Volvo Volkswagen.
And a lot of the electric vehicle player and because we occupy a pretty unique position on the stack. Most people. When you talk about the company once again into auto software DSD tend to be more on the UI Si user interfaces.
On the infotainment side, but sell them on the core side of the of the deck.
Case in point is the announcement of that we won VW Dod U S.
Most wagon intended to build their own software stack.
Intend to work with just a few player.
And in the chip level up so and so we have one other player they picked as because of operating system.
Sorry your question, so we feel pretty.
Good about where we focus and the more mission critical and safety certified components of our product.
And there'll be more that will come out and we have just in case.
I don't remember this but we have the highest level of ISO certification in safety.
No.
No.
So we feel pretty good about our position.
As far as the question on chipset.
Probably the two or three biggest chip player that we work with.
I am very committed to each other for a very long time.
In particularly two of them are Qualcomm and in video.
And as you know Qualcomm Nvidia are quite dominant in the auto auto space.
So we feel very comfortable in both our partnership and their position in the market and our position in the market that doesn't overlap.
So I think.
I hate to just being overly I don't want to jinx. It obviously, but we feel pretty good and in in addition to that.
Even players like Google.
I'll give you a quarter ago or two quarters ago as the Doctor a hydro Liza.
Sir.
Google Android auto play.
So that will tell you something about the unique position, we occupy we're not really in contradiction to what they offer.
Okay. Thank you for that a lot of great color there and then staying within our key from my follow up you recently announced that you've gained certification in the aerospace market and I was just hoping you can expand on the strategic approach to that market or are there any parts of the market that you're focusing on initially how are you investing in <unk>.
<unk> done initiatives and anything similar that would be worth adding thank you.
Yes. This is a little this is still early for us, but we do have the intent.
So when we look at.
The success in our autos auto market.
Really all rely on the highest level of safety certification. So so we then and we have a new product that comes out that focus on.
High level of scalability.
And so if you think about this.
We think about okay, who else, which vertical exhibit the same requirements. So needed. The same requirement. So medical is one industrial is one and we've been we've been doing reasonably well.
Called the gel market generating general embedded market.
Which medical and industrial is in there but.
We are very interested.
And the cycle of replacing some of the legacy software and the <unk>.
Aerospace.
Particularly aircraft area.
And so this is why we want to make sure that we are certified.
So the developer to reuse the code.
And.
And we likely will work through large system integrators.
I'd like to Raytheon in the world.
To the extent that I can share at this point.
I understand.
Helpful color, so just to understand where you're headed thank you alright.
Alright, thank you.
Your next question comes from the line of Paul Treiber with RBC capital markets. Your line is.
Hi, Bonnie.
Hi, John Good afternoon.
I just wanted to follow up on your previous comments about auto softer whats changed in your mind in terms of the mentality of these auto Oems and even Google to adopt <unk> as a foundational layer.
Well it's a.
So first of all Q&A X.
The operating system have been in the business for over 30 years.
And you all remember that.
Some of US are now in a different number.
But it was a way back line and whats the infotainment.
Company is accurately long to Harman.
And Blackberry bought it before my time, they bought it and whats kind of creating an operating system with it. So the safety certification has always been.
The claim to fame.
And if they want a lot of infotainment, so what we have done.
Since the time I arrived.
What we have done is to expand from infotainment into areas of more safety oriented.
And and secure area oriented on the oriented applications.
Is it related to a car and of course, then in parallel the world started to move towards the software software defined vehicle.
So therefore, the Oems are taking more control of the design the stack.
Software stack.
And but they also know that they can just sit there and replicate and operating system and get it certified now some people try to use the auto grade Linux AGL and AGL Couldnt get it certified and is an open source also was at his own business challenges to it.
So <unk> gradually all came back to <unk> the Q&A kicks in.
And that's the reason why an NPA.
Having over $200 million caused that uses our software today actively.
<unk>, a pretty sizable market for a lot of other players to ignore.
So.
Our players to be acknowledged so so this is why.
<unk> will work with us and Qualcomm work evolves and video work with us and Ti work with us and arm work with us and it's a long list of players.
That all uses us as a foundational piece.
And then we will continue to expand applications of different type of features in that foundation piece.
Yeah.
That's helpful.
Our next question like how do we think about the economics within the foundational layer and what's the strategy to try to maximize economics over the long term.
H.
While our strategy is always to use more of our more of our foundational modules in the stack.
And so that's that.
That's a basic strategy and then if you have multiple copies and and then as we as we get deeper into the engine and deeper into the safety side of the equation of our core operation.
It will <unk> will be able to demand.
Then a little bit more.
Our crew.
So we have more copies and higher value copies like Hypervisor is have a higher valued in infotainment. For example, that's kind of move up the stack in our pool and broader natively multiple copy and of course. This is our is our strategy in general.
For the business strategy side, and then don't forget IV.
Because <unk> is our next generation push into ash into ash to cloud.
And it not only provides security and privacy.
It also provide economics, because cloud only solution is too expensive and too much data being generated.
<unk>.
The operation of a car. So so don't forget about that so we feel that we have a pretty good one to three punches.
On the auto space or at least on the Iot side, and we're going to expand it beyond auto as I said.
But today, we're very focused on auto.
And then just if I can just squeeze in one more.
Just in regards to the patent portfolio.
You are limited in terms of what you can say, but how should we think about.
The timeframe.
Clock is ticking in terms of the ability to monetize the patents.
At the time goes on does it.
<unk> decreased to you or to a potential buyer or is there a way to get back damages per se or backwards, yes.
Time and for US that's critical.
Yes, so there are two.
Two data points you already answered one.
Wishes.
Those that needed our license.
We'll have to address Steve the past deployment.
So it's not just <unk>.
Time ticking away and therefore, so so.
That's one of the answer.
No question. The other one is a series of myths out there above.
All the time.
<unk>.
There was an article published.
It is fair.
Factually incorrect and in fact, you and correct roughly.
Throughout the entire article about a number of years slab at our portfolio and at the end of the value of that is absolutely not true because it had been true that you would have you wouldn't have the syndicate still wanted to make this thing happened. So so I will just leave it at that I don't want to do it.
A public debate with the writer, but I'm sorry, the writer is absolutely wrong.
Even though this article has been around for a little while and this was we print by a newspaper that would like to I guess sensationalize something that is not true.
And I'll leave it at that so yes, we could capture the pass.
Deployment.
And no it's not that showed a life.
Okay. Thank you for clarifying.
Absolutely.
Your next question is from the line of Todd Copeland with CIBC. Your line is China.
Hi, Don.
Hey, there good evening.
Wanted to ask you about the cyber unit.
I think you indicated you still expect revenue to be roughly flat.
Year on year.
Implied in that comment is a seasonal uptick in the fourth quarter.
And I'm just wondering.
Is that also still.
Still expected in line with prior expectations and I just wanted you to close.
Logic on that point with growth expected.
Early in fiscal 2024.
Earlier in fiscal 2024, Okay, Tom commented on AOR growth expected.
Of course of course, yes, yes, yes, yes, yes, yes of course of course so.
It's a little bit of a.
Complicated set of math, but I'll.
Our focus on the kind of the high level itself.
Yes, our Q4 pipeline.
Yes.
A lot more bigger than Q3.
And so.
So we believe that therefore.
My statement about.
The revenue relatively flat.
In line with the last fiscal year, it's a proper is a proper statement.
And then there will be some billings growth because of that and then we also take a look at.
What the head where there were headwinds that if you look at all the headwinds from all the deals that we expected to either get a renew.
And once that are being attacked especially the mid market state.
We believe that the the major part of our headwind.
Is behind us.
It will be behind us after Q4, sorry, I should say that because we we kind of look through it.
The basis. So therefore next fiscal year I don't know whether its Q1.
Definitely in Q2.
We expect <unk> to have a year over year increase and we should continue that trend going forward.
Does that mean doesn't harm that does that answer your question.
Oh, yes, that's clear and on that point, just remind us what you think the potential growth in cyber is.
Once you start to benefit from.
Improved product line.
Selling and go to market.
<unk>.
You saw the three year plan that we put out three and five year frame further release.
In fact.
<unk> recently presented to the board.
We have not deviated from that with deviating from that at all so you could see that from a John <unk> groups, the cyber security group.
Competent at compounded annual growth <unk> roughly about 10%.
So that will be what we will focus on getting.
Okay. Thank you very much for the Clair procure of course.
Your final question comes from the line of Calgary with Global Equities research.
Hydrant Hydra.
Very solid execution in a brutal environment.
Your question please.
The Nevada Youll Volkswagen.
This is very significant.
Can you give me some directional guidance.
But this is like you won that design, it's a design win.
Sure.
Thank you.
Paul.
Yes.
Revenues.
<unk> Blanco production, how should we think that is.
Is that one.
Yes.
Design.
<unk> revenues.
Can you really more that design win any color on that would be helpful. And then I have a follow up question. Okay. Okay. So in general.
I'll speak to auto because all our background number are based on the auto.
So in general if you look at a cycle of a auto win somewhere between seven to 10 years.
So you will see upfront is dead.
<unk> on an overall, let's say, let's say a deal will bring US a million dollars I'm, making this up okay. On total lifetime, obviously is a lot bigger than that but let's just start with a $1 million.
I would say the 10% upfront.
Probably is is something that we should expect and could expect on development seats.
And then probably there is some professional services revenue.
So I would I will put it again in a range of 5% 10%.
Now the bulk of the production.
We will come in year.
Normally for 5678.
However, we see that compressing.
Cause of all the because were going electrified rail electrification the electric vehicle market times turns of product cycle, a lot faster and particularly with the Chinese the Chinese is turning it around.
Our cycle of three to five years instead of seven to 10, so and everybody else will probably have to keep up now whether they will get two or three or five years, who knows.
But it will shorten the seven to 10 years so.
We get a little bit of upfront.
<unk>.
Which is always nice.
Then we get some professional services.
And then we will get the <unk>.
Production production royalty.
Now I was also wondering you have a very solid offering in terms of IV and so on.
You mentioned the hybrid approach that is in cloud and on device such as the vehicles, which is I think very very novel.
Because the.
You don't go on the OEM will be finalized.
So it looks like the modem.
And the whole objective is to put everything into the cloud.
Claude you, Greg what insurance the OEM currently like that EBITDA level.
So I'd like that strategy.
But I was wondering if you can.
Well like.
Volkswagen which is already.
The OLED.
Are there any plans you may have to make migration or at least experimentations with IV.
Just mostly colby.
Anything like that in plan.
Thank you.
Yes.
It is.
That's a good question.
I don't want to turn this into a.
An announcement, but let me just say that it is logical it will be maybe put it differently. It will be logical for Blackberry not to take advantage of all the assets.
And there is a good reason why.
Both IV and <unk> is in the same Iot group.
Very good.
Thanks, Thank you.
I would now like to turn the call back over to John Chen.
Decorative chair and CEO of Blackberry for closing remarks.
Thank you. Thank you operator.
Before we conclude today's call I'd like to remind everyone of our upcoming Blackberry Security Summit on October 27, investigate SaaS SSD keto addresses with Blackberry executives customer led case studies interactive talk on cyber security innovation and best practices from <unk>.
Surgeon intelligence team and more all virtual NR on demand <unk> Register for the event on the Investor page of our Blackberry Dot Com website.
And I want to thank you all for joining our call and I am sorry. It is always late in the East coast.
And I truly appreciate it thank you and see what next time.
Okay.
This concludes today's call. Thank you for your participation you may now disconnect.