Q4 2023 BlackBerry Ltd Earnings Call
[music].
Good afternoon, and welcome to the Blackberry fourth quarter and full fiscal year 'twenty twenty-three results conference call. My name is Jason that I will be your conference moderator for today's call. During the presentation. All participants will be in listen only mode, we'll be facilitating a brief question and.
Answer session towards the end of the conference.
Should you need assistance during the call. Please signal conference specialist by pressing the star key followed by zero.
As a reminder, this conference is being recorded for replay purposes, I would now like to turn today's call over to Tim foot Vice President of Blackberry Investor Relations. Please go ahead.
Thank you Jason Good afternoon, and welcome to Blackberrys fourth quarter and full fiscal year 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 Joe will provide a business update.
Steve will review the financial results.
We will then open Nicole for a brief Q&A session.
This call is available to the general public for a call in numbers and by webcast in the Investor information section at Blackberry Com.
A replay will also be available on the Blackberry dot com websites.
Some of the statements, we'll be making today constitute forward looking statements and are made pursuant to the safe Harbor provisions of applicable U S and Canadian Securities laws.
We'll indicate forward looking statements by using words, such as expect will should model intends believes 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 unexpected 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 that I'll discuss.
Costs in the company's annual filings and empty Eni.
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 John and Steve will reference non-GAAP numbers, and a summary of our quarterly and full year results.
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 com websites and with that I'll turn the call over to Joe.
Thanks, Tim Good afternoon, everybody and thanks for joining our call today.
Let me start my review today with the Iot business unit.
This has been a very good year, despite a challenging macro environment Blackberry Iot you called this out a year with strong 16% year over year revenue growth to $206 million.
Is this in line with the outlook range. We provided this time last year.
U N access a record year for adding new royalty backlog from design, which in fact backlog from the end at the end of fiscal 'twenty three has grown to a new record high of 640 million 640.
<unk> forward, we will report this annually in Q4, rather than in Q1 to enable a more in depth discussion during our analyst day, which is typically happen in may.
There is salaries, yet more tangible evidence that our strategy for Q&A acts in Iot is really paying off.
The business is executing and capitalizing on the strong secular trends.
The move towards high performance safety critical software running on more powerful chipsets is opening up significant opportunities for <unk>.
In addition to generating royalty backlog the new design wins also drove near record levels for preproduction revenue in Q4 that is revenue from development seat licenses as well as professional services.
Furthermore, the Iot business unit deliver a strong 81% gross margin eight one.
In the quarter, we secured a total of 36, new design wins with fixed in auto and 30 and Jim.
<unk> is winning in multiple auto domains in particular, we continue to perform well in the fast growing eight ours and the digital cockpit cockpits domain.
In addition to auto in adjacent verticals. We also see similar trends towards high performance safety critical software a D edge medic.
Medical and industrials are amount a number of verticals, making this transition and <unk> is capitalizing on it.
Example, this quarter, including a win with the Abbott labs for the real time medical analyzer, and with Corin does vascular boy robotic stroke treatment application.
There were also Windsor, So Korean Tucson, so a nuclear power plant controllers, and Honeywell for industrial conveyor control units.
Some of you on our call today, we have join us either in person or virtually at CES that happened in January .
This is this was a very successful event, but a gene with significant interest from and meetings with leading Oems and tier ones.
Okay.
Let's see yes, we also co host the first software defined vehicle innovation awards with motor trend.
This event brought together and celebrate our best and brightest in software development across the auto industry. This was a key marketing event for us.
One of our major announcement at CES was that let's start the Q&A. Our Cos is now available in the cloud through the AWS marketplace.
This both extends the reach of acute annex to AWS developer community and eliminates the need for physical hardware.
The initial response has been positive with auto and jam developers assessing Q N X from locations around the world.
Yeah.
Let me now move to Ivy.
This quarter, we made a significant step forward with Ivy announcing the first design win.
Following a successful POC trials Dong Fang one of the China's leading automakers selected a digital cockpit solution from tier one supplier per tail.
That includes factory Ivy Duran in Daboia range of electric vehicles.
As she is to team demonstrate ivy running on three commercially available platforms, including Bosch had kao Andy AWS graviton.
It was particularly strong inches is seeing Ivy running lies in the Jeep Grand Cherokee at the Booth.
Not only was Ivy an important feature of the Blackberry Booth. It was also featured prominently at the AWS Booth.
Overall E S January significant interest from potential new proof of concept.
New proof of concept trials for Ivy.
Product development remains on track as we announced at CES, we're targeting this G. A degenerative ability that is the G. A release in May. This is an important step in scaling the Ivy go to market and POC athletes.
The Ivy ecosystem is also developing well one of the Ivy funds investment Electra vehicle, a smart battery management application was successfully included as part of our first Ivy design win.
This quarter, we added a partner specializing in AI power driver monitoring technology aim of fleet customers call I drive.
I draw is a California based company that plans to leverage Ivy sensor data to improve driver safety and screen efficiency.
Let me now turn to outlook for this coming fiscal year.
Headwinds for the auto production from the macro environment and supply chain challenges persist, although they appear to be easing a bit.
Global light vehicle production, which is a key driver for our royalty revenue is expected to increase by around 4% in 2023 to around 85 million vehicles.
Despite this improvement production will remain well below the 95 million vehicles in 2018 that is prior to both the pandemic and the supply chain difficulties.
Even with these industrial why industry wide challenges, we expect strong growth for Blackberry Iot this fiscal year and for revenue to be in the range of $240 million to $250 million.
This translates to 17% or seven from 17% to 21% year on year growth and is in line with the outlook given at our analyst day last may.
We see this growth coming from a combination of both ongoing momentum in new design wins as well as an uptick in royalties.
Given the anticipated timing of design wins throughout the year, we see the growth largely weighted to the second half we expect revenue for Q1 to be in a ratio of 50 to 53 million.
Turning now to the cyber security business unit revenue for the quarter was $88 million billing increased sequentially for the third consecutive quarter to 107 million gross margin was 59%.
A R was $298 million and a dollar based net retention rate was 81%.
Excuse me this was a challenging quarter for closing large deals in the government space. We saw elongation of sales cycle in this vertical with additional layers of approval and reviews.
In particular, we saw a number of key deals slip into later quarters, and we don't consider those deal with loss of router delay.
Given the product makes up these deals that included mostly perpetual licenses the impact on this quarters in quarter revenue was significant.
However, strong billing growth of them, others, nongovernment verticals, including financial services, we saw in cyber buildings to increase overall for the third consecutive quarter.
You may recall that we recently outlined a strong opportunity that we see for our silence products in our mid market space.
For our SMB wins this year as well as feedback from customers, we learned that having simple, but effective turnkey products is the key to scaling dismissive.
Therefore, we are product types. According to the market needs and launched two new offerings under the headline more security less complexity.
These these new offerings are designed to be simple to use a simpler to use more cost effective and deliver leading edge security.
The first product is silence endpoint that brings together and augments our suite of Sino Mr endpoint products into one easy to use cost effective solution.
The product Leverages, our battle hard to AI engine, along with our major user experience overhaul.
This includes the addition of new one alert council that combines the xdr data, although external data sources and machine learning for simple intuitive prioritize alert.
Silence endpoint is also available as a managed service through silence Guard MTR.
The second product is silence etch a product that connects user to their work is after literally and securely right out of box.
Customers can securely SaaS cloud based SaaS application S was gain visibility into how sensitive data store and shared.
The third development that I'd like to highlight an exciting point of differentiation, a blackberry versus our competitors, we integrated our AD hoc critical event management into guard managed service to provide unified communications with cyber crisis response.
Even if communication channels like E mails are compromised.
We will provide significantly more detail and demonstrate this new product at RSA in San Francisco next month. So please stay tuned.
Turning now to you Yeah, we were delighted when Gardner the announced that Blackberry <unk> was the only vendor voted in the top right quadrant by customers for deployment capabilities and support.
Receiving this recognition based on review for some of the most security conscious customers in the world demonstrated level of performance that only Blackberry can provide.
In a market, we're seeing a tailwind from the return to corporate issued devices.
Given concerns around security and lack of control for customer, making this transition, particularly in the financial services, but in other vertical as well back Barry is seen as a go to most secure solution in the market and we see does driving interests.
One key competitive advantage for our product is the Microsoft <unk> is unable to block specific apps represent a security or privacy risk across all devices, where Blackberry you yet again.
On the product development front, we announced new feature for <unk>. This quarter. This includes being the first in the industry to integrate with the Adobe experience manager, enabling secure document signing on mobile what at least the vigorous government security centers.
Okay.
Once again, we secured sales with leading customers in our core regulated vertical.
Especially government and financial services this quarter amount.
Among those who are able to name our bank of America Deutsche Bank TD Ameritrade, the bank of Italy, The Swiss National Bank, and the bank of India.
In government wins, including U S Air Force Scottish government. The U S Department of Treasury, the Netherlands government SSC ICT, the shared service Center, and Australia, and Department of Health and human services.
Turning now to the outlook for the cyber Bu.
For the coming fiscal year, and allowing factors such as the macro economic backdrop, we expect revenue to be in the range of $425 million to $450 million.
While responding Lee we expect billings to be in the range of $430 million to $480 million, an increase of between 7% to 20% year over year.
For Q1, and we expect the revenue to increase sequentially and be in the range of $100 million to $110 million.
That's what the as was the case in the past quarter, we expect billings to continue to exceed revenue. This fiscal year, which is strong leading indicator of a return to revenue growth.
Furthermore, we expect <unk> to return to sequential growth in the second half of this fiscal years.
Yeah.
Moving now to a licensing.
Last week, we were pleased to announce the patent sale agreement with key patent innovation.
For up to 900 million Blackberry will receive a combination of cash at closing and potential future royalties as a share of profits generated from the portfolio.
K P E B I, whose team is space in Ireland.
Brings significant experience and expertise for maximizing the value of the patents and with it was at the overall deal value for Blackberry Importantly, the agreement with J P. I has no financing condition and Ddos secure audio fundings from a leading U S based investment firm with more than 30 billion in assets under management.
Adding meaningfully to the overall deal value of Blackberry will retain approximately 2000 patents that would have been so under the periods two transaction was catapult as well as Blackberry, keeping all existing revenue generating contracts.
Considering all these factors, especially the S assessed the level of certainty and ability to execute we consider this do to have a higher overall value and Deb will be the best outcome for our shareholders.
The transaction is subject to the standard regulatory approval and we expected to close in Q2.
Following the completion of the sale, we plan to leverage third parties to Opportunistically monetize the remaining patches. However, this is likely to take some time to ramp up so revenue excluding proceeds.
From the patent sale is expected to be approximately 5 million per quarter. This fiscal year.
In the quarter, we recognized $10 million of revenue related to a past patent deals.
These these revenues its not as the result was net new agreements and had no impact on the sale of our patent portfolio.
Let me now turn the call over to Steve for more details on our financials.
Thank you John .
As usual my comments on our financial performance for the fourth quarter will be in non-GAAP terms unless otherwise noted.
Total company revenue for the quarter was $151 million.
Iot revenue was $53 million and cyber security revenue was $88 million.
Software product revenue as a percentage of total revenue remained in the range of 85% to 90% and professional services made up the balance.
The percentage of software product revenue that was recurring increase to around 90%.
Given the delay of some large mainly perpetual deals that John mentioned earlier.
Licensing and other revenue was $10 million.
Total company gross margin was 67%.
Operating expenses for the fourth quarter were $118 million.
These non-GAAP operating expenses exclude.
26 million fair value gain on the convertible debentures 50.
$15 million and amortization of acquired intangibles.
9 million and stock compensation expense.
And 7 million in restructuring expenses as a result of steps taken in the quarter to streamline costs, including facilities and it infrastructure.
non-GAAP operating expenses also exclude a 476 million noncash accounting impairment of goodwill and long lived assets for the spark reporting unit.
This represents a noncash charge of 82 cents to GAAP earnings per share.
In accordance with accounting rules, we were required to perform a goodwill impairment review by determining a fair value for all our reporting units. The total of which is required to reconcile to our market capitalization.
Blackberries market capitalization at the test date had declined year on year.
Similar to the broad based market decline over the same period.
Further details will be disclosed in our Form 10-K.
The non-GAAP operating loss for the fourth quarter was $17 million.
And non-GAAP net loss was $13 million.
The two cent non-GAAP basic loss per share for the quarter beat expectations.
Adjusted EBITDA, excluding the non-GAAP adjustments previously mentioned was negative $12 million.
Total cash cash equivalents and investments were $487 million as at February 28, 2023.
And free cash usage in the quarter reduced to $9 million.
And this coming fiscal year, we will be focused on driving towards both profitable growth and being cash flow positive.
And our Iot business, we will continue to invest given the relatively high level of visibility we have for growth.
On the cyber side, we have identified a clear plan to deliver expansion of both gross margin and operating margin.
The outlook for the coming year is for a significantly lower E. P S loss and cash flow usage.
That concludes my comments and I'll turn it back to John .
Thank you Steve.
Before we open the line for Q&A, Let me recap on the key message from the quarter.
This was a strong quarter and a record year for Cuba, and ex royalty backlog for Blackberry Iot.
We enter FY 'twenty four with significant designed.
Momentum and although we still face macroeconomic and supply chain headwind, we expect revenue growth of approximately 20% this coming fiscal year.
This cyber says the cyber business unit was impacted this quarter by elongated sales cycle in government, causing a number of large deals to slip to later quarters. However, the nongovernment business drove sequential billing growth for the third consecutive quarter.
We expect to deliver revenue growth of approximately 5%.
And billings growth of approximately 15% this fiscal year and to return to sequential growth for the cyber security business.
But somehow.
Excuse me for a cyber severity quest business unit in the second half.
And finally, we enter into a fully funded agreement to sell the non core patent portfolio were up to $900 million, while also retaining more patches and retaining existing revenue contracts.
That concludes my remark Jason can you. Please open the line for Q&A.
Thank you we will now begin the question and answer session to ask a question. Please press star one on your telephone keypad. Please make sure. 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 a question we.
We request that you limit yourself to one question and one follow up.
Our first question comes from Luke junk from Baird. Please go ahead.
Good afternoon. Thank you for taking the questions.
To start hoping you could expand please on where you were able to take costs out of the P&L already this quarter, so opex down sequentially and looking forward, what you envision with respect to your plan to deliver gross margin and operating margin expansion, especially in cyber security, maybe if you could just speak.
To some specific actions and areas of the cost stack that you're focused on thank you.
Okay, we have been.
We we have been focusing on improving gross margin.
And operating margin for the cyber business for quite some time and.
And this past quarter, we just see that some of the results.
Shifting costs.
To a lower cost base area are higher.
Hiring people in those areas more so than hiring people in a more expensive area is certainly one one way of doing that.
Put to particularly mostly in the replacement of attrition.
And.
A little bit more disciplined on.
On the pricing and discounting.
It's also being put in place so by and large you know we were able to do that and we and our planning costs to continue to do that.
For the balance of the year, although the new the new fiscal year. So.
And versus the difference between that and Oh, and then we also reduce G&A costs.
Where we can and are and we've done we've done a lot.
For 30 causes another aspects of it so so many many different areas. So it's a very concerted effort.
Let's say from.
On the Iot perspective. This is a unit that has been exempt from focusing on that day of just focusing on growth and they have.
I think they are still going to hire 200 some people.
This year, Oh, if they could right now.
Assuming we have the candidates.
So so so those are the.
Kind of how we allocate capital and spending.
That's good.
Yeah.
Thank you for that John very helpful. And then for my follow up hoping to take a step back and just talk about the bigger picture in Iot and in auto specifically and just love to get your perspective on the focus of that market going forward from here.
<unk> takeaways at CES. This year walking the floor was the prevalence of just increase in centralized architectures, which also has very clear applications for auto software and ultimately software defined vehicles can you just speak to where you're finding your auto customers right now in terms of their readiness for a software forward future in auto.
And do you think there is an increasing sense of urgency, especially Oems trying to figure out software. Thank you yeah, yeah, very very much. So I think you said everything.
It's consistent with what we have been learning from customers and analysts.
Also.
So you talked to each of the Oems They all have.
Sure.
Strong investment in S. D. G. I mean, there's software defined vehicle.
And.
Our approach and they need foundational software and a needed from safety perspective.
A number of years back there were a couple of the large OEM attempted to do the foundational software themselves and they have all decided to join forces with us.
And work with us directly and these are the very big name.
And we of course welcome to partnership so if you look at our win rate and.
I don't want to jinx, it but is extremely extremely high.
In fact I think.
I think our team wins.
90% of the deals out there or something like that.
So and then in addition to that our.
Our products are related to hydro advisors $8.
Related to our core.
Cockpit are all very popular.
Wins out there and usage out there and then I also wanted to say beyond auto. We also seeing a lot of strong interest as I said in my script all.
All the chips Chip technology company is pushing a multicore.
And multi positive same parallel processing and all that good stuff and so and they need a safety and they need a container a container they need a hypervisor.
And so.
And so we seem to have a very good strong track record.
In the eyes of the customer so.
I'm pretty I'm pretty comfortable that we're going to see continued growth at least for the for the immediate future.
Hi, Thank you for that I'll go ahead and leave it there okay. Thank you.
Our next question comes from Daniel Chan from TD Securities. Please go high.
Alright, thank you when.
When you're mining.
When you're monetizing the remaining patents are you looking to license the Mount or are you looking to sell them, if you're looking to license or should we expect it to be faster and more broadly licensed considering their standards essential patents.
Yeah. It is.
Licensing take the remaining so the remaining pattern is now in two groups are once a transaction is not a one group is the embedded and the cyber security patents.
And the other group is the the mobile pattern.
<unk> phones and related networking patents so.
The the ladder.
We will monetize true.
Third party.
And probably in some cases, we'll trim the patent down a little bit biased.
By selling Sun.
And the former we haven't really decided they the overall plan yet.
And of course, we will always be interested in licensing.
To people, but it's probably not going to be a active process.
Okay. Thanks for that John and then John around five around this time five years ago. The board extended your arrangement to lead the company until November . This year, just wondering whether you can share with us what your plans are as we get closer to November .
No no I I mean, we started the conversation between me and the board so stay tuned stay tuned on that.
So we don't we don't have anything to report at this point.
Yeah.
Okay. Thank you sure.
Our next question comes from Mike Walkley from Canaccord. Please go ahead, Hi, Omar.
Hey, John .
Just wanted to dig a little bit more into the cyber security business.
It's great to hear on the SMB side simplified approach manage responses.
Hear that more and more Keith can you talk about.
Competition within that business and.
This new approach how quickly you get that Clinton is that given your confidence in returning to growth second half of the year Mhm mhm.
A quick question. So so there's a lot of competition I think you folks are here different cyber security company, all kind of gone in for the SMB or the <unk>.
Good things about the SMB market is a bake and b. They lack the security the ability to have their own security team nor.
Normally so they are very sensitive to our MTR solution. Our guard solution and then we're now streamlining those eastern keep product set just to make sure that they don't need to have a certain level of capability or knowledge before they could put it in use at either they use it themselves.
They use us to help them to use it.
Now, but it is a very popular I think you're going to hear from you you already heard it I'm sure for most of the other key players of the good news is the market is big it's growing.
I think the the Theres a lot of SMB for the first time take this investment quite seriously because they have to given where the trend of the cyber security world looks like and the ransomware it looks like and and there is a lot of.
White space for replacement of prior technology. The first generation. So so there is so that would that two combination the market is big but the competition is fierce too.
I would agree with that.
Okay.
That's helpful and simplified approaches, but he's really looking for just as my follow up question just digging a little more on the cyber security.
It's a R R.
Stable to growing outside the U M business and maybe you can update us on OUI and kind of where that is on churning off some customers.
That you wanted to kind of end of life had you focus more on the large government type deals.
Yeah.
<unk> has in the last couple of quarters are a are in the business is stable.
And which is a which is a good sign gave us some level of comfort.
Okay. Okay. Thank you sure.
Our next question comes from Paul Treiber from RBC capital markets. Please go ahead.
Thanks, and good afternoon.
We're on the topic of cyber security could you speak to the the the traction that you've seen our cross selling cyber into U M bass sandwiches promptly large enterprise.
Yeah.
Let's see we see some but not dominant because our U yes, as our silent base is typically S. M. B and all you young base are typically very large name.
But on the other hand, there has been some upsell I wouldn't so I would say that.
Is promising but not very high volume at this point, but however, this is something that we will we will go to and <unk>.
And mostly doing that I have to go after the the Mcafee and.
And the Symantec in the trend micro base.
And what fundamentally has been the challenge is it is it product is it is it pricing is it sales.
But I understand that yeah. It three years ago. It was the product we all we lack.
Our E D. R was not as up to snuff as everybody else, we have better E. P. P.
But the world wants both.
So we slipped from that you know now is really more on <unk>.
And what leverage we can create now product is now get back and in competitive mode.
We have some differentiated things that based on our AI motto and the silence OE I motto, and the lightweight and the and the offline mode and all that so we had some really strong reasons for people to cut.
Customer to take a look at it and used it and but we need to look better attraction in the in the indirect sales side.
Our direct salespeople and after the last year year plus.
You know building and so far we feel comfortable that the productivity is there.
Then now we need to get some leverage we need more deals and.
And the only way that we could do that is to engage a third party better and that's the number one focus.
In this year's plan.
That's helpful. And then just one more if I may just in regards to Iot you mentioned very strong win rates could you speak to the pricing and in how <unk> are tracking and in all honestly Oems are hard to sell into do you still see opportunities to expand our who.
When you were targeting a couple of years ago. I think there was a number like $25 or so per well out there now is that still an.
And achievable long term target absolutely in fact, I would say to you today.
I hope I don't have the EDI switch myself I would say to you today and I'll explain why too.
Today I have more confidence in the 25.
Per car AVO than than when I first come out with that as a goal a number of years back.
And then in the pump and the reason is now we are basically.
Being accepted as a foundational software.
A major auto company named said I could review like Volvo and.
And and BMW and Volkswagen and these are all public public information. So they are all standardized on on Blackberry <unk>.
So when you have a foundation with software and earlier the conversation regarding <unk> sorry.
Software defined vehicle allow us to upsell modules.
And that's so that brings that brings the different type of economics because in the past we're talking about one copy in charge at one time now we're talking about building on on that platform and Upselling. So I think our People's eye very excited.
About it.
And then and rightfully so I see the same trend Custer.
Customers are more receptive in buying more adapted modules.
From and then popped onto the cyber attack.
Brought onto the platform and which of course, we have safety certification.
Across everything we sell.
Thanks for taking the question.
Our next question comes from Todd Coupland from CIBC. Please go ahead.
Hi, John Good evening I want to follow up on that last <unk> question.
Maybe I'll ask it a little differently when you when you look at the.
Iot backlog that you quote.
What would be the.
Double digits and that are at $25 range can you give us any color on.
Actually yeah, yeah. So.
There are a handful of wins that could push us in that area of 20 to $25, but most of them I would say in high single digit and low double digit.
Okay.
And and I mean, obviously, if you are $10 or higher that's quite a bit higher than just the <unk>.
Infotainment, Oss, where you've come from.
When would you see production volume of those double digit type rfps starting to kick in.
Well, a part of our reason that we feel Ivy.
I don't know, whether I should say comfortable but we feel okay with our.
17% to 20% growth. This year is because we expect to see some of this.
So called startup production Sop.
And so.
I believe FY 'twenty five 'twenty six.
We have a higher growth number.
If you remember we set a five year compounded growth rate of 20%.
So we came in the first year of 16.
This year is going to be 17 to 20, and so that imply the mab sets there.
That would have to be over 20% of the next couple of years.
Yes.
So so what youre, saying with that those.
Handful of like higher arc two deals later in the year that that that's what you are.
That's what gets you to that.
Don't know exactly where that number lands in Q2, but let's call it.
$65 million to $75 million a quarter implied for Q3 and Q4, if you take your guide at face value, Yes, that's correct.
We map into production.
The only wrinkle is something that we would not be it within our control the wrinkle will be a macroeconomic issue of high interest rate debt.
Slow down production.
A deterioration of the supply chain.
A chip availability that will slow down production that will put a wrinkle on us or the second half, but given everything we know today and all the conversation with the Oems.
The team feel very comfortable.
We're quite comfortable I have two.
I'm, usually very optimistic so so you have to you have to factor that in that they feel comfortable delivering the what what my outlook.
What I provided earlier and.
Baked into the outlook is that $85 million.
Production volume for the market and then Youll get that higher <unk>, even if you don't get back to those 2018 levels is that is not yet read the debt. That's that's.
That's the math that we base it on gifts correct okay.
And my second question has to do with the outstanding debentures.
What's your thinking on our target balance sheet with the extra cash in a patent sale would you.
Look to repay that debt or would you look to roll it over just talk about your thoughts.
Our plan is to we paid a debt.
We pay all of it yes.
If somebody wants to roll a small portion over we will be open to it but that's not that's not our current planning.
Yep Yep.
Okay. Okay. That's great. Thanks, a lot sure.
I would like to turn the call back over to John Chen Executive Chair and CEO of Blackberry for closing remarks. Thank you. Thank you Jason before we end the call today I'd like to remind you of a few events coming up.
Between the April 24th and 27, the Blackberry will be at RSA conference and we will be demonstrating the new product offerings that I mentioned earlier. So if you happen to be there. Please please do drop out on.
On May 17, we will be hosting a virtual analyst day in which management will provide a comprehensive overview of our long term strategy product innovation market opportunities go to market approach and of course the financial outlook.
Then on May 23rd will be hosting a retail investor focus live Q&A in which John <unk>, the president of Blackberry Cyber security and materials Erickson President of Blackberry Iot will answer your questions. So please feel free to send them to Tim and events at Investor Relations one word parole.
At Blackberry Dot com or you can submit them through the quarter on that date.
We provide more detail on all these events in the coming weeks. So stay tuned as always I. Thank every one of you for joining today's call and I hope to speak to you soon.
Okay.
This concludes today's call. Thank you for your participation you may now disconnect.
Okay.
[music].