Q1 2024 BlackBerry Ltd Earnings Call
[music].
Good afternoon, and welcome to the Blackberry first quarter fiscal year 'twenty 'twenty four results conference call.
My name is Andrea and I will 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.
Should you need assistance during the call. We're signaling conference specialist a question Star then zero.
As a reminder, this conference is being recorded for replay purposes.
I would now like to turn today's call over to chip.
President Oh, sorry, investor.
Go ahead.
Thank you Andrew good afternoon, and welcome to Blackberrys first quarter 'twenty 'twenty four 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.
They score was available to the general public via calling numbers.
A webcast in the Investor information section at Blackberry 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 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 extra section 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 discussed in the company's annual filings and empty and I.
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.
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 and SEDAR.
<unk> dot com websites, and we thought authentical over to Joe.
Thanks, Jim Hi, Jim.
Good afternoon, everybody and thanks for joining the call today.
Let me start with the Iot business unit.
Revenue for the quarter was 45 million and gross margin remained strong at 80%.
Revenue came in lower than expected for two main reasons.
The first related to a number of leading industry players that are revising their development plans as they step up their software defined vehicle efforts.
This has caused some program to be delayed.
While seeing our customer facing a higher priority on the S. T V transition is a good thing for both Q N S. N Ivy the delay rolled out of Q1 next developments seats license has therefore pushed our revenue this quarter.
So this was purely a timing issue.
As we have outlined in the past from quarter to quarter design face revenues will fluctuate depending on the timing of large design awards and win the work begins.
However, we haven't seen any weakening of the strong secular trends driving the business, we remain confident in our ability to win new designs.
The second factor is the macro environment, which has impacted some regional production volumes and with did royalty revenues.
As has been the case in recent quarters, the impact appears to be mixed across Oems and geographies, while production in China in the early part of this year was much softer than I expected elsewhere in North America, Europe , Japan, and Korea, all could continues to look relatively steady.
Hello are caused by an easing of supply side constraints.
We will closely monitor the situation and assess for any potential impact for the year.
And at this time, we continue to expect to achieve our full year revenue consensus for Iot.
Further we are reiterating to 18% to 22% three year revenue kicker that we provided at our analyst day last month.
These targets are based on a number of factors.
<unk>.
Our strong Q N X backlog, which.
Which we reported as being 640 million at last fiscal year end.
Yeah.
A data point that illustrates that I, though those trends and our leadership position in the market, It's our annual vehicle count.
Pac insight, a leading technology analyst analysis, sorry, a leading technology analysis and market research firm has probably <unk> is now embedded in over 235 million vehicles a year.
Year on year, a net increase of $20 million or 9%.
When compared to annual global vehicle production. This supports a growing market share for <unk>.
Yeah.
Excuse me.
<unk> remains the foundation of the software of choice for leading automakers and tier one suppliers around the globe as we continue to add new design wins.
In the quarter <unk> of seven design wins in auto and seven in general embedded market verticals in.
In auto we continue to secure design wins in the digital cockpit domain.
This fast growing domain has largely led the way and consolidating various software stacks onto a single high powered chip in the car.
This quarter, we recorded wins with two of the top five global automakers.
The first win in cruise, our real time operating systems as well as a hypervisor and acoustic middleware.
The second win will deploy two instances of <unk> supporting the digital cockpit and main body domain, both running on high performance compute engines.
We also secured a win with a leading U S based EV automaker with multiple instances of human eggs being deployed.
U N X in that case will support a solo and central compute architecture, including the digital cockpit and the vehicle telematics.
These wins demonstrate how we expanded both the number of domains deploy into an X and a number of layers of Q N X deploy in each of the domains.
Outside of auto we recorded wins supporting a range of different applications in industrial.
We secure an adas platform for heavy industry machinery and requires both a hypervisor and O S for safety.
We also secured wins for industrial testing and control, including our next generation controller for use in marine and aerospace applications and a win with a leading global household appliance sorry also apprised manufacturer for production line testing equipment.
In medical wins include medical laser equipment, with a leading surgical with technology manufacturer.
These designs and operational technologies like medical and industry.
Industrial sorry, my medical and industrial demonstrate our ability to win in this very large and growing market.
These verticals are showing similar trends to auto including significantly higher compute at the edge and the need for complex safety critical software stacks, which is where you are in excess of market leader.
On the product front last month, we announced the early access release of our next generation Crinone. This is a significant step change for Q&A.
The new release helped deliver <unk>.
Significantly higher performance and particularly scaling almost linear.
As the number of course on the underlying should be increased up to 64 cores.
While a safety and reliability of your essential part so the Q&A value proposition. It is also a leading performance in complex compute stack that helps differentiate us from our competitors. This release will position <unk> to support the future of rapidly increased compute power at the edge for many years to come.
Moving onto Ivy as planned it we have now released the January the Daddy version of Ivy.
This is a much more standalone version of the product that's 10 before requires far less support from the Ivy technical team.
We see this as a significant step forward for scaling our go to market efforts, allowing us to support a much wider range of proof of concept trials than before.
We are making good progress with building the Ivy ecosystem and important part of the overall value proposition.
This past quarter, we announced an investment in our Michigan based Cerebro Max.
Bored so lantus and Toyota are all currently working with some rebound in eggs and they offer AI driven solutions that annualized vehicle data on driver behavior and vehicle health.
The harness this data to deliver application such as fleet management and personal life insurance plan.
Ivy and two an edge to cloud platform will provide <unk> with higher quality easier to use data in a stabilized abominate environment.
We also announced a go to market partnership with a leading automaker automotive cyber security firm upstream security upstream security partners with BMW Volvo and re note as they already protecting over 20 million vehicles against cyber attacks would there be D. R stanfill vehicle detection and response.
Bonds.
Platform.
This new partnership with Blackberry will allow them to leverage the ivs etch kept the capabilities to pre process data in near real time, maintaining cyber security was significantly reduce cloud overhead.
Yeah.
The strategic decision by Blackberry and AWS to develop a primarily etch space architecture is proven to be the right call, especially at some cloud only players such as <unk> and autonomous has struggled to achieve profitability.
Turning now to the cyber security units.
Revenue for the quarter was $93 million, representing 6% sequential growth.
Like many others in this market we have seen we have also seen delays from an elongated sales cycles, we've additional layer of approval compared to periods quarter slowing our ability to convert our growing pipelines into revenue.
That's sad a leading indicator for revenue for this business its billings and this quarter, we booked total contract value or T. C. B buildings are $122 million.
Significantly higher than revenue for the second consecutive quarter.
T C V building grew for the fourth consecutive quarters, with 14% sequentially and 37% 37, 37% year on year growth.
This growth was anchor on multiyear deals in our core government vertical where.
Where we continue to have a lot of success in the quarter. We closed one of the deals that slipped from Q4 with the other two still progressing well and likely to close later in the year.
We also see two new large potential deals in government ever enter the pipeline.
Given this pipeline in billings momentum, we expect to achieve full year revenue consensus and expect to see the billings for the year to be in the range of $430 million to $480 million.
Finally, we are reiterating the three year revenue growth CAGR of 9% to 12% that we call. It that we gave at our analyst day.
Gross margin for the quarter improved to 60%, which is 700 basis points higher than the prior year largely due to product mix.
In addition, the decline in a R slowed and came in at $289 million. This trend is encouraging as we remain on track to return to sequential growth in the second half of this fiscal year.
The dollar based net retention rate or D. B N are all also stabilize at 81%.
As a reminder D.
D B N L. O doesn't include new logos.
As mentioned in the quarter, we secured new renewed new renewed and expanded business with a number of leading government institutions. This includes shared services, Canada transport, Canada. The Canadian household common the U S. Special Ops command the U S Navy the U S Army.
The corps of engineers.
White House Communication agency and the U S Transportation Security administration or no one S. T S. A.
Outside North America, we secured business with the French Ministry of Defense, The German State police, the Netherlands Ministry of General Affairs than you.
<unk> Zealand Ministry of Foreign Affairs, and the British transfer police just to name a field.
We also closed business in health care, and financial services, including John Muir Health, Kaiser Permanente, and Hartford Health care in a number of leading international banks.
On the channel front, a critical element of scaling our SMB go to market presence. This quarter, we saw promising sign up good progress from our renew channel programs.
In North America deal registration and new logos brought by the channel increased significantly both sequentially and year over year.
Turning briefly to product, leading independent test lab to totally group <unk>.
Recently perform an assessment of a number of endpoint protection platforms E P pes, including silence endpoint, Microsoft defender and others.
And tested performance with detection rates CPU utilization in total scanning times.
Silence endpoint came out on top of our market, leading 98, 9% detection rate both online and offline. While also using the lowest amount of CPU capacity in comparison competitors allow between 952 times more malware through then silence.
Moving now to licensing.
Past quarter, we were pleased to have closed the deal with key patent innovations for the sale of the noncore portions of the patent portfolio.
The deal includes an initial 170 million cash payment, which we have received and do value could total as much as 900 million overtime.
P. I has already started to ramp up their monetization activities, including adding to the experienced team by hiring executives from patent lawyers as well as starting to engage with potential licensees.
That said it would take some time to be fully ramped up and.
And we do not expect any meaningful additional revenue from the sale to be recognized this fiscal year.
Under the terms of the deal we retained ongoing revenue for any licensing arrangement in place prior to the sale and in this quarter.
This was $17 million.
We expect revenue to be approximately 5 million per quarter for the remaining of this fiscal year.
Let me now hand, the call over to Steve who will provide more color on our financials Steve.
Thank you John .
As usual my comments on our financial performance for the first quarter will be in non-GAAP terms unless otherwise noted.
Total company revenue for the quarter was $373 million.
Iot revenue was $45 million.
Cyber security revenue was $93 million and licensing revenue was 235 million.
Software product revenue as a percentage of total revenue remained in the range of 85% to 90%.
With professional services, forming the balance.
The percentage of software product revenue that was recurring remained at approximately 90%.
The $235 million of licensing and other revenue represents the $17 million of revenue from preexisting arrangements.
Okay.
That John mentioned earlier, and 218 million relating to the patent sale.
More details will be available in our 10-Q.
Related to this are 147, there was $147 million of intellectual property assets previously classified as held for sale on our balance sheet.
Which were sold as part of the transaction.
Accordingly, with the sale completed in Q1.
These were reclassified to cost of sales.
Total company gross margin was 48%.
22 percentage points higher when excluding the patent sale.
Operating expenses for the first quarter were $145 million.
These non-GAAP operating expenses exclude 22 million fair value expense on the convertible debentures.
$10 million and amortization of acquired intangibles.
8 million and stock compensation expense and $5 million and restructuring expenses.
Both the non-GAAP operating profit and non-GAAP net profit for the first quarter were $35 million.
Yeah.
The 6% non-GAAP basic earnings per share for the quarter beat expectations.
Adjusted EBITDA, excluding the non-GAAP adjustments previously mentioned was $41 million.
Total cash cash equivalents and investments increased by 91 million to 578 million as at May 31st 2023.
Net cash generated from operations was 19 9 million.
The cash generated from the patent sale strengthens our balance sheet and helps finance or plans for profitable growth.
Given the macroeconomic backdrop, we remain selective on potential investments and remain committed to significantly reducing the level of E. P. S loss and operating cash flow usage this fiscal year.
That concludes my comments and I'll turn it back to John .
Thank you Steve.
Before we open the line up for Q&A I'd like to touch on an announcement, we made in May regarding the strategic review of our portfolio.
Our strategy is clear we have a robust operating plans for both our business units to address their large and growing market opportunities.
In addition, we see potential upside to the pieces from the convergence of cyber security with the Iot.
Indeed, Mckinsey recently issued a report on this trend of convergence and named Blackberry as a as being well positioned.
Capitalized on what the estimate to be at $750 billion Tam.
We believe that executing we believe that executing against the strategy hitting all three years targets and a true achieving profitable growth will generate significant shareholder value.
Notwithstanding the board and management are constantly focus on optimizing showed the values and have therefore ask the question as to whether their alternative approaches for delivering greater shareholder returns. For example by for example by means of the two business operating as Standalone companies.
As per our press release on May 1st we have engaged leading investment bankers Morgan Stanley Ambarella Weinberg.
In establishing <unk> as well as establishing internal program management office to support this review and I could tell investors that there was a lot of activity ongoing.
Although the review is in the early stage a lot of progress has already been made and the team is focusing on performing a thorough process as quickly as we practically can.
It wouldn't be appropriate to provide further commentary until the board has approved a specific outcome or has terminated its review.
That ends my prepared remarks, Andrea could you. Please open the line for Q&A.
And we will now begin the question and answer session. You ask a question. Please press Star then one on your telephone keypad.
Please make sure that your line is on mute.
I guess press Star then one to ask a question, we'll pause for just a moment.
One is all for today.
Question.
Request that you limit yourself to one question and one follow up.
And our first question will come from.
Young Baird. Please go ahead.
Hi, there.
Good afternoon, thanks for taking the questions.
First question wanted to ask about Iot. So you said had some temporary delays the start of new programs and a few of your customers you can view their software defined vehicle plans I guess, what I'm trying to understand is how close you are to these customers as they made that change and your level of confidence that this is solely a timing issue versus something that could be.
More disruptive and related to that should we be thinking about the low end of full year guidance or where would you expect to be within the guidance range. Given this result.
Good question.
So.
So.
From the design delay.
It's usually bay, we base all of forecast on the project being awarded to Us.
Mostly.
So it is embedded into our $640 million backlog.
That we announced so.
We already won that design, that's why we're expecting the developer's development seat.
So we have very high confidence in very close contact with these customers.
And these are.
The huge big customer name around the world. So.
I feel comfortable with that there are of course design wins that may get affected in Q2, three and four.
We wanted to make sure that we see that first before we made the adjustment.
I personally believe that there might be some minor.
Shifting of time, Spain, but but nothing that we expected to and not winning it or I don't actually expected there will be delayed for too long.
So that's that that question what is the the.
The outlet Joel would you be towards the bottom end well.
Kim let's look at the the consensus number and when we look at our range in our forecast we feel comfortable with the consensus number and I I don't know what is high or low end tool.
Towards the low range okay.
Yes.
But I think if.
You estimated based on the consensus number does that should be reasonable for now.
Okay. Thank you for that and then for my follow up on the stay within Iot John could you just comment on the level of engagement that you've seen since Ivy is G. A release earlier. This month I'm curious both with respect to Oems and tier one partners. If you could comment and is there anything that has surprised you.
And in the first month post to at least thank you.
While the Ivy.
I.
Rather not tell you the number of POC that is requested are ongoing.
But it is.
It's a reasonably significant I'll just leave it at that.
So a very high level of interest.
Usually ivy runs into the competition of Ivy Ivy is quite unique right now in the market. The competition that we run into is say is that if the customer themselves. They believed that they could they could bill or they are building a data and analytics platform.
That may not be as much as say edge to cloud, maybe it's mostly cloud.
Implementation, but once they see the simplicity of our solution and a number of.
Application that we have lined up and we will continue to do a lineup. This as almost like a building at App store.
For the car.
They wanted a lot of them wanted to.
Cas Ivy on under the POC, and then and then make a determination whether they should continue doing their own or they come through a pause some of them already decided.
They are coming with us so.
That that's to the extent that I could comment on.
I will leave it there thank you very much.
The next question comes from Mike Walkley of Canaccord Genuity.
Sure.
Hi, Hey, Jeff Hey, John .
Switching gears, maybe to the cyber security business.
Fourth consecutive quarter of billings growth can you share a little more color just what's driving the improving billings or maybe more specifically what solutions in the portfolio or some of these are.
Multiyear government contracts choosing.
I think there's a number of first of all you know we had a challenge we had two challenges in the past you've got one challenge is the SME for the OEM.
Challenge <unk>, where they were they were leaving us and there was a lot of churn in that.
And that churn over the quarters over the time is now stabilized.
So that's number one number two our new yes, the silence product line as you know we were having trouble integrating it and.
And we did integrated it and then we caught up on their Edr technology, we're now winning bake off.
So so we're comfortable with that and the customers are seeing that so that our renewal rate are now trending up nicely.
That is and winning new new logo.
Replacing kind of the legacy folks.
In the SMB market and that's why I also commented on the channel the channel that spring is a lot more business than usual due so so those are the second part of it.
And then on.
We have a growth although now based on a little smaller number for both at Hawk for their critical event management software as.
As well as the secure secure communication software and they are typically tied to government.
And government problem is that it takes a long time, [laughter], but but but there that they are all they're all in very high renewal rate.
Very high in fact, we seldom ever lose one it would be a rare was to lose their renewal.
And we are winning new ones, but that takes time as I said, so I feel that all the four components.
What makes up our cyber offering.
R R.
Building some level of momentum.
And and you're racing or addressing some of the issue the pain point that we had.
Great.
Very very helpful.
Maybe just a follow up question just going back to Iot.
Your big pipeline, there I know it's tough.
Tough on the development timing, but as these new design wins turned into production.
What are you thinking about in terms of revenue.
Uptick in terms of what you what you're getting today from current royalties.
Oh.
So the first set of revenue.
Oh the design win that we had is to develop developers seat as they get into.
A very strong development cycle.
Typically every every OEM will buy more seats.
And so that's number one and then they sometimes will require professional services out.
Which we'd also offer to make sure they get to use the Q&A X. The most efficient way. So those are second one typically and that's O P, which is the startup production.
On a design win three to four years from the day, we win it.
But you see that I think that it is going to accelerate partly because of competition from China and some of the other Asian countries like Vietnam and that they would they will I think they will compress the cycle.
And so that's kind of I don't know whether I answered. Your question, that's kind of where we expect the revenue come in so the $640 million.
I literally beyond that this is only royalty. This is this is not doesn't include professional services doesn't include.
Bella per seat.
So we will eventually get all that.
Hopefully get.
Not all the majority of the 640 and we of course will continue to grow the 640.
Yeah.
Alright, well, thanks, taking my questions and congrats on finalizing the licensing too.
Thank you.
Okay.
The next question comes from Paul Treiber of RBC capital markets.
Thanks.
Oh, Hi, John .
Beyond that.
Going to apologize upfront for asking a quick accounting question, but just on the can you explain that the high level reason for the revenue recognition on the patent sale.
You received 170 million cash and you're recognizing $218 million, what's the reason for the difference there.
I could ask Steve to tell you because I think we should recognize a lot more but my accounting.
Gurus all set that this is this just arrived proper.
Constrained revenue I think they use a word constraint I.
I Havent never use that term before but I'll, let Steve answer the question.
I Havent never use that term before but I'll, let Steve answer the question.
Of how this come about sure so as we disclosed.
The details of the of the terms of the deal there's a.
Beyond the initial payment of the 170 million, which we did receive there's they're there's a there's a fixed amount does do no later than than you know.
A few years out and then there's some also a royalty component as well so it's those other elements in our and.
In short our debt under the accounting framework, where you know the the fixed piece, obviously, there's some discounting there that you apply to kind of net present value it back and then.
You know only a very small component of the just the the very near term are on.
On the royalty component. So the rest obviously will will be recorded.
In future periods, when whereas as the amounts become known over the next several years.
And they they didn't hit their earn out per se or the the future royalties like is it a risk adjusted measure or like how do you how do your accountants arrive at that number.
There's a.
Basically there is a you know.
A lot of factors that go into it in and there is a there is some risk weighting.
Waiting in it but but by no means.
Does the accounting framework.
You know allow you to kind of look at the full stream in and value the full stream over the remaining period. So it's it's.
Don't don't think of it as a as a fair value because the accounting does not represent the full fair value of the <unk>.
Uh huh.
What I understand doesn't in terms of cash flow, though the yeah. If you take out the patent sale this quarter cash flow from operations was.
Negative what what were the headwinds to cash flow this quarter.
Our first I mean at the beginning of the year.
Usually that are typical profile is.
Is to have a net cash usage in the early part of the year. So in that regard. It you know if you're if you remove the amount related to the IP sale. It's.
It's a similar profile to what we typically have over the course of the year and then and then generate in later periods.
And is it driven by mainly by.
Bonuses for last year.
So cloud VIP payment and compensation.
Okay good to know.
Last question I'm not sure you can answer it but I'll throw it out there. This this arbitration in regards to the patent sale now any any comments, there or any sort of outlook on that.
Well.
It's it's.
Is something that I shouldnt comment on I think the lawyer won't like me to comment on it but it's there is no merit to it and we will we will fight vigorously in that I I don't think you need to worry about it.
Okay. Thanks for taking the questions.
The next question comes from Daniel Chan of TD Cowen.
Yeah.
Hey, John .
On the.
The new software defined vehicle plans, you mentioned that there was timing differences, but just wondering if there's any changes to the scope of those programs that could either generate potential upside to what you originally had agreed to them.
Yeah.
Yeah.
I will you or anyone of the people in your firm.
<unk> gone to the motor trend event in CES in Vegas, this beginning of the year.
The reason I asked that question is because nearly every OEM.
We should try to get tickets for you guys in the future. Even every OEM is having a S. S. DB planned software defined vehicle. So yes. The scopes are expanding we just don't want to get overly.
Carry away with our estimates, but the scope is definitely expanding it is truly a timing thing we in the particular one case, we're relying on some really good developers seats that didn't come in.
And that is purely a timing issue because they they wanted to step up the program and there is some very visible public thing.
Public announcements.
That they are real OEM.
OEM major Oems are we always reorganizing some of their efforts.
And step out some of the car.
Release days because the software.
There are at least a handful of them.
They all my customer I prefer not to mention here.
Yeah.
Okay. That's helpful. Thanks for that and then on the cyber security side the.
Billings that you won any color on whether how much of those were renewals versus new business. Thank you.
Oh.
Uh huh.
That's interesting.
I don't have it we could have him follow up with you I don't I don't have the breakdown the 122.
Okay. Thanks, and just looking for some color on how much of that is just back filling.
I would tell you the biggest the biggest one that was the most significant one was an extension of multiple number of years and also expanded the footprint a number of licenses.
So that's on that basis, the bulk is both.
Great. Thank you.
Of course.
Our next question comes from trip Chowdhry Global Equities research.
Patriot.
Calculations very good backlog and billing numbers I think question in.
In terms of the Ivy you have a very strong machine learning models.
Silence.
And I was wondering is there are we using maybe some transfer of learning or some other secret sauce that this intellectual horsepower you have in the.
In the silence machine learning AI products, we could transpose it into Ivy and if so that'd be great any thoughts you may have on that end.
Yeah, we we like.
Like every company. We all obviously are looking at this plan you. So first saw our threat hunting.
Group is always uses the AI.
And and we recently just offer the threat hunting surfaces to customers.
So in a in a way that.
It's all AI driven model, it's like four four generation of that and we got billions. So.
We got literally billions of malware profile.
And the experience that we build the will build a model based on the machine learning. So that's that's.
So you probably see.
That being a push now as if other AI capability going into products, we haven't finalized that we're in the mall business.
As a boeing through it in a process of going through it except I wanted to kind of we wanted to make sure that we don't.
Generate too much of a.
Reveal too much of our internal model.
You know when we go into the open AI World.
So so we're we're in literally in that kind of.
Internal analysis of it and we also are waiting for the government I think the government will have something to say about.
How how the how the AI are allowed to use and not allowed to use in the product because we're very sensitive to governments.
We were a big provider of Av system or software to governments around the world. So we were that it would be very careful that we don't run a file with their with their loose. So those are the.
I have people working on both the developing the product as far as understanding the policy.
Very good I'll follow up on the same Ivy and battery management system, which is very critical.
Component of the modern.
Electric Michael.
And again, you have technologies like in silence and I was wondering if you may have talked about using the machine learning models that you already have maybe it needs to be trained on a different set of data to automate they may be battery management system for some performance enhancements Mitch could you.
It really differentiate yourself and maybe you will be the only player who can offer in a software defined Michaels complete intelligence in the battery management solutions any thoughts on that and that's helpful.
Yeah, Yeah trip.
Our our lab people will know a lot more about that.
And we of course, we will try to take advantage of it too.
From a business side.
But it's it's not something that we.
We are deep into yet, but that's a good suggestions.
Thank you so much very good alright, thanks trip.
The next question comes from Todd Coupland of CIBC. Please go ahead.
Hey, John .
I was wondering if you could talk about the expected quarterly cadence.
Iot and cyber.
What does it look like for Q2, and then the back half of the year.
[laughter] I don't holiday provide quarterly outlook.
That's a good one yeah.
Given the environment out there I think we should be a little bit more cautious short term.
And.
But the year as I said, we feel good about our pipeline on all the deals that we're working on.
Particularly the government deals from the cyber side.
We're waiting for.
The Oems on the vehicle side.
To kind of release there their development schedules so to speak.
So.
So those are the two major thing that we have to look forward to look like.
Examined very carefully and watch very carefully so I would say.
I expect.
Yeah.
Q2 to be probably a little better than Q1.
And then I expect second half as I said, particularly on the cyber side I expect the a R to return.
Sequentially.
Okay.
I appreciate that and then.
What are your thoughts on.
Your contract extension, which is which is coming up this year I know you've talked about it in the past if you have anything incremental to say there we'd be interested thanks a lot.
It's a little complicated with the Imperium project I'm waiting for kind of where the imperium comes up with.
I then than I will.
Kind of made my own decision of what I wanted to do but it's all in good hands. So don't don't worry about it.
I told the board less wasteful, where the Imperium project is at and then we'll make that decision right.
Alright.
And you had indicated there was a lot of lot of activity around around that.
Uh huh.
The project would you would you expect it still to take at least this summer before you get your initial findings or can it happen sooner than that.
I am I My guess it will take us because we're having a lot of effort going on in Europe .
When you look at separating the business you have to look at the separating the income statement. That's the easy one thing you have to separate the two.
The balance sheets, and then you have to look at the tax side of the equation and then you have to look at.
What the market offer or not offer and there's a there's just a ton of thing that when you cannot just.
Skip it and so I I still expect this to be the end of summer type thing.
I appreciate that color. Thanks, a lot absolutely.
Yeah.
I would now like to turn the call back to John Chen Executive Chair and CEO of Blackberry for any closing remarks.
Oh I don't have any closing remarks, thank you everybody for participating and we're always cognizant of the fact that you're in the east coast.
And then you know slightly you folks and I I I appreciate it so I will talk to you guys more and hopefully sooner than next quarter, if not at least next quarter.
Thank you all very much have a good evening.
That concludes today's conference. Thank you for attending today's presentation and you may now disconnect.
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