Q2 2024 BlackBerry Ltd Earnings Call

Good afternoon and welcome to the Blackberry second quarter fiscal year 2024 results conference call.

Good afternoon, and welcome to the Blackberry second quarter fiscal year 2024 results conference call.

My name is Rocco and I will be your conference moderator for today's call.

My name is Rocco and I will be your conference moderator for today's call.

During the presentation, all participants will be in a listen-only mode.

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.

We will be facilitating a brief question and answer session towards the end of the conference.

Should you need assistance during the call, please send a local conference specialist by pressing star then zero.

You need assistance during the call. Please signal conference specialist by pressing Star then zero.

As a reminder, this conference is being recorded for replay purposes.

As a reminder, this conference is being recorded for replay purposes.

I would now like to turn today's call over to Tim Flutt, Vice President of Blackberry Investment Relations. Please go ahead.

I would now like to turn today's call over to Tom Ward, Vice President of a Blackberry Investor Relations. Please go ahead.

Thank you, Rocco. Good afternoon and welcome to Blackberry's second quarter 2024 earnings conference.

Thank you <unk> good afternoon, and welcome to Blackberrys second 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 Rudd.

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.

After I read our cautionary note regarding forward looking statements John will provide a business update and Steve will review the financial results.

We would then like to Nicole for a brief Q&A session.

This call is available to the general public via call-in numbers and via webcast in the investor information section at blackberry.com

This call is available to the general public via call it numbers and probably a webcast in the investor information section.

Uh huh.

Replay will also be available on the blackberry.com web

A replay will also be available on the Blackberry Com website.

Some of the statements we'll be making today constitute forward-looking.

Some of the statements, we'll be making today constitute forward looking statements.

and are made pursuant to the safe harbour provisions of applicable US and Canadian Securities laws.

Pursuant to the safe Harbor provisions of applicable U S and Canadian Securities laws.

will indicate forward-looking statements by using words such as expect, will, should, model, intend, believe, and similar expression.

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 for centralEM.OMI- Wars. Tetris,

Forward looking statements are based on estimates and assumptions My brother 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 statement.

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 at M D and E.

These factors include the risk factors that are discussed in the company's annual filings and MD&A.

you should not place undue reliance on the company's forward-looking statement.

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.

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 in their summary of our quarterly results.

As is customary during the call John and Steve will reference non-GAAP numbers and a summary of our quarterly 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.

For reconciliation between our GAAP and non-GAAP numbers, please see the earnings press release published earlier today, which is available on the EDGA, feeder and blackberry.com web page.

And with that, I'll turn the call over to John . Thanks Tim. Good afternoon everyone and thank you for joining us today.

With that I'll turn the call over to Joe <unk>.

Good afternoon, everyone and thank you for joining us today, let.

Let me start with your Iot business unit.

Revenue for the quarter increased 9% sequentially to $49 million and gross margin increased by 400 basis point to 84%.

Revenue for the quarter increased 9% sequentially to $49 million, and gross margin increased by 400 basis points to 80 points.

The most important long term leading indicator of the health of this business is securing new design wins and Royal and building loyalty backlog.

The most important long-term leading indicator of the health of this business is securing new design wins and building royalty backlog.

And we have and that we had another strong quarter.

In fact, by the end of the first half, we have secured more than two-thirds of our FY24 annual targets for new backlog and expect to exceed it.

In fact by the end of the first half we have secured more than two thirds of our FY 'twenty four and you would target for new backlog and expect to exceed it.

In the quarter to enact secure 20, new design wins in auto and seven in general embedded market verticals.

In a quarter, QNX secured 20 news design waves in auto and 7 in general embedded market verticals.

The largest of these was an eight-figure estimate lifetime revenue, $8 win.

The largest of these was an eight figure estimate lifetime revenue eight das win.

with one of the top five global automakers to deploy our QNXOS for safety.

We one of the top five global automakers to deployed our <unk> OS for safety.

This wins illustrate a strong secular trend of consolidation of software into centralized compute domain.

This Wednesday illustrates a strong secular trend of consolidation of software into centralized compute domains with this adolf's module powering drive monitoring.

With this ADAS module powering drive monitoring, surround view, lane keep assist, adaptive cruise control, and other safety features all on a single chip.

Surround view lane keep assist adaptive cruise control and other safety features all on a single chip.

As automotive software stacks becomes more complex and requires significantly higher compute power, it places the QNX strength. In addition to our strong win rate for ADAS, we are also the clear market leader for foundational software in the digital copy of the new software, the new software that will be available in the future. And we are also the clear market leader for foundational software in the digital copy of the new software.

S automate the automotive software stacks becomes more complex and require significantly higher compute power. It places the Q&A extremes. In addition to our strong win rate for Adas. We have we are also the clear market leader with a foundation of software in the digital cockpit.

The combination of our high performance safety critical RTOS and hypervisors allows for mixed criticality in this domain.

The combination of our high performance safety critical our course and Hypervisor allows.

Allows for mixed criticality in this domain.

Given our market leading positions, our design wins continue to be well diversified across all major global markets.

Given our market leading positions our design wins continue to be well diversified across all major global markets.

In Asia, we secure design with LG Electronics, that include our hypervisor, and will be deploying a number of vehicle models for a top 10 global automata.

In Asia, we secured design win with LG electronics that include our Hypervisor and will be deployed in a number of vehicle models or a top 10 global auto automakers.

We also secure winces with Viseon and leading OEM Cherry via Bosch.

We also secured wins it was busy on and leading OEM chery.

Via Bosch among others.

Yeah.

In Europe , a digital carpet win also includes our acoustic middleware. And this is exciting because feedback from customers suggests that this relatively new market opportunity for software-defined acoustic is likely to be fast growing.

In Europe.

Digital cockpit win also and grew our acoustic middleware and this is an exciting this is exciting because feedback from customers suggest that this relatively new market opportunity for software defined acoustics is slightly to be fast growing.

As well as our strong footprint in auto, QNX is well diversified in other verticals, particularly medical and industrial.

As well as our strong footprint in auto <unk> is well diversified in other verticals.

Particularly medical and industrial.

Building on our position in the surgical robotics.

This quarter, we secure a design win for our QNX medical OS for safety to be deployed in a robotic arms for dentistry.

This quarter, we secured design win for all <unk> medical loss for safety to be deployed in a robotic arms or dentistry.

These design wins confirm that <unk> business is strongly positioned for long for the long term.

These design wins confirm that QNX business is strongly positioned for the long term.

With revenue for Q2 being largely in line with expectation, we continue to expect IoT to deliver solid year over year growth this fiscal year.

Revenue for Q2 being largely in line with expectation, we continue to expect Iot to deliver solid year over year growth this fiscal year.

That said, we are taking a prudent view on our IoT revenue outlook for the next two quarters. Automakers are currently addressing a number of significant challenges, including the industrial industry strike action.

That said.

We are taking a prudent view on our Iot revenue outlook for the next two quarters automakers are currently addressing a number of significant challenges, including the industrial industry strike action.

transition to software-defined vehicles as well as electrification, pivot and

Transition to software defined vehicles as well as seeing electrification pivot.

Subprime chain challenges.

delayed to either pre-production software development programs or the production schedule could impact our revenue this fiscal year. However...

Les to either pre production software development programs auto production schedule could impact our revenue this fiscal year. However.

We expect these to be relatively short term timing issues.

We expect these to be relatively short term timing issue.

As a result, we revised and broadened our IOT revenue outlook range to 225 million to 240 million.

As a result, we've revised and broaden our Iot revenue outlook range to.

225 million to $240 million.

This represents a 9% to 17% year-over-year growth.

This represent a 9% to 17% year over year growth.

This means that we still expect a strong second half of the fiscal year. We expect further sequential growth into Q3.

This means that we still expect a strong second half of the fiscal year, we expect further sequential growth into Q3.

And we currently expect Q4 to be the strongest quarter for revenue in QNX history.

And we currently expect Q4 to be the strongest quarter for revenue in <unk> history.

This confidence is based on a combination of the pipeline of potential new design wins, our service schedule, and royalty expected from the back.

This confidence is based on a combination of the pipeline of potential new design wins.

Service is scheduled.

Royalty expected from the backlog.

Turning now to product, at our analyst's day in May, we announced the upcoming launch of our new generation QNX real-time operating system, QNX 8.0, targeted for December . This release will make a fundamental shift in market performance, and we expect it to further cement QNX leadership position in automotive and beyond.

Turning now to product at our analyst day in May we announced the upcoming launch of our new generation <unk> real time operating system <unk> eight Dod O targeted for December this release will make a fundamental shift in market performance and we expect it to furthest emasculate next leadership position.

In automotive and beyond.

Feedback from the beta trial has been very positive. With customer and partners impressed with performance scalability and functionality, perhaps some of these will convert into revenue.

Feedback from the beta trial has been very positive with customer and partners impressed with performance scalability and functionality, perhaps some of these will convert into revenue in Q4.

This significant enhancement of performance and scalability comes at a time when chipmakers are focused on developing hardware to power Gen. Generally just AI.

This significant enhancement of performance and scalability comes at a time when chipmakers are focused on developing hardware to power generative AI.

We believe that our QNX 8.0 software is uniquely positioned to maximize the potential of Gen AI in embedded systems, particularly in safety critical use cases.

We believe that our <unk> 808, odd Oh software is uniquely positioned to maximize the potential of gen AI and embedded systems, particularly the safety critical use cases.

QNS8 will combine best of brief performance with the ability to run mission critical processes safely and securely alongside Gen AI stack on the same chip.

Two N S. Eight will combine best of breed performance, where the ability to run mission critical process safely and securely alongside Jenny I stack on the same chip.

Now moving on to IV.

We were delighted to announce that IV was selected by tier one so probably I'm missing Vichy that trick who powers new flax connect op ex in cabin systems.

We were delighted to announce that Ivy was selected by Tier 1 Surprise and Mr. Vichy Electric to power his new Flax Connect.X in-cabin.

IV Edge technology and the high quality real-time insight that it provides will help enhance road safety and enable new in-vehicle experience.

I V etch technology under high quality real time insight that it provides will help enhance road safety and enable new in vehicle experience.

In addition, we have solid traction with new I-V proof of concept trials. Currently, we are progressing POC with a number of major OEMs, including a top-10 global automaker and also a leading commercial vehicle OEM Scania.

In addition, we have solid traction with new IV proof of concept trials. Currently we are progressed, we're progressing POC with a number of major Oems, including a top 10 global automaker and and also a leading vehicle commercial vehicle OEM Scania.

The strong level of interest for IV, POC clearly confirms our strategy.

The strong level of interest for IV POC clearly confirms our strategy.

On the product front, this month we released an updated version with significant enhancement to cloud features and increased hardware and software support. IV's development has moved from the early heavy lifting phase and the focus is now on refinements, enhancing stability, expanding sensor supports and improving the developer experience.

On the product front. This month, we released an updated version with significant enhancement to cloud features and increased hardware and software support.

Ivs development have moved from the earlier heavy lifting phase and our focus is now on refinements enhancing stability expanding sensor supports and improving the developer experience.

The IV ecosystem continues to expand and mature. We now have over 40 partners currently building on IV, and there are more than 20 pre-integrated solutions that are being used by customers in POC trial and at industry events.

The IV ecosystem continue to expand inventory.

We now have over 40 partners currently building on IV and there are more than 20 pre integrated solutions that are being used by customer and POC trial and at industry events.

This month, the IV innovations and make his latest investment this time in core actions.

This month, the IV Innovation Fund makes its latest investment, this time in core action.

and exciting Israeli startup. Core Actions has developed an AI-powered application that will leverage the IV platform's sensor insight to detect potential driver awareness issues.

And exciting Israeli startup.

Core actions has developed an AI power application that will leverage the IV platform sensor insight to detect potential driver awareness issues.

Their AI model analyzed micro-muscles movement, such as through steering wheel sensor data, to understand brain activity, and we are pleased to add them to the ecosystems.

Their AI motto analyzed micro muscles movement, such as through steering wheel sensor data to understand brain activity and we are pleased to add them to the ecosystems.

Moving now to cyber business unit.

Revenue for the quarter was 79 million and total contract value of buildings was 74 million.

Revenue for the quarter was 79 million and total contract value billings were $74 million.

Gross margin was 54%.

Gross margin was 54%. AR came in at $279,279 million. The dollar base net retention rate was stable at 81%.

<unk> came in at 270 $579 million to $79 million. The dollar based net retention rate was stable at 81%.

Revenue this quarter was lower than expectation due to due slippage.

Revenue this quarter was lower than expectation due to do slippage backwards, along with many others in the cyber security space is experiencing elongated deal cycles do so required multiple rounds of review and scrutiny and while this isn't impacting win rates is having a real impact on the timing of when the deal close.

factory along with many others in the fiber security space is experiencing elongated view cycles

Dues that require multiple rounds of review and scrutiny. And while this isn't impacting win rates, it's having a real impact on the timing of when the deal closes.

This is especially true in government, where Blackberry has a very strong presence. In particular, a small number of large, mainly perpetual deals, which therefore had a significant portion of in-quarter revenue, flipped to later quarters. While this material will impact Q2 reported revenue, we will remain confident with how these deals are progressing and expect them to close this fiscal year.

This is especially true.

And government were Blackberry has a very strong presence in particular.

A small number of large mainly perpetual deals, which definitely had a significant portion of in quarter revenue slipped to later quarters.

Why does this materially impact Q2 reported revenue we remain confident with how these deals are progressing and expect them to close this fiscal year.

Further, we have a well-defined pipeline of significant deals that are progressing well. These deals are primarily in the government vertical where Bakery is well known and trusted and we have strong customer relations.

Further we have a well defined pipeline of significant do stab progressing well these.

These deals are primarily in the government vertical went backwards is well known and trusted and we have strong customer relationship.

Due to the overall confidence in the strong improvement in revenue in the second half compared to the first, we are reiterating the full-year cyber revenue outlook for the current fiscal year.

Due to your overall confidence in the strong improvement in revenue in the second half compared to the first we are reiterating the full year cyber revenue outlook for the current fiscal year.

Because large government deals like these are both complex and binary, we will of course update you on the progress made in closing them during the next earnings call.

Because large couple of and deals like these are both complex and binary we'll of course update you on the progress made in closing them during the next earnings call.

Let me now highlight some of the deals closed during the quarter.

Let me now highlight some of the deals closed during the quarter. In government, we secure new deals with the US Department of Justice.

In government, we secured new dues at U S Department of Justice.

The department of States.

Department of Energy and Department of Education. Also, the Internal Revenue Services, the Canadian Revenue Agency, the US National Nuclear Security Administration, Customs and Border Patrol Protection, and the Ministry of Justice.

Department of energy and Department of Education also the internal revenue surfaces. The Canadian revenue agency. The U S National Nuclear Security administration custom and border patrol protection.

And the Ministry of Justice and go back.

Outside of North America, we secured business with the bank of Italy, Netherlands search share service centers that ICT.

Outside of North America, we secure business with the Bank of Italy, Nederland-Surfs-Share-Service-Center-ICT

as well as the Federal Court of Australia, the Australian Federal Police, and the Director General of Force Intelligence in Bangladesh.

As well as a federal court or in Australia.

The Australian Federal police.

And the director general of false intelligence and Bangladesh.

In fact, we see a good pipeline of opportunities developing in Asia Pacific.

In fact, we see a good pipeline of opportunities developing in Asia Pacific currently.

In addition to government customers, we secure Windsor's leading banks including Morgan Stanley and Santander, as well as with leading technology firms LG, Philips and Toshiba, just to name a few.

In addition to government customers, we secure Windsor, leading banks, including Morgan Stanley and Santander as well as with leading technology firms LG.

Philips and Toshiba just to name a few.

Moving now to product, moving now to product, moving now to product, Syland is the pioneer in the use of AI in cybersecurity, with AI at the very core of its suites of products, long before it became today's buzzword.

Moving now to product Siloed as the pioneer in the use of AI in cyber security with AI at the very core of the suites of products long before it became today's buzzwords.

Our battle hardened AI motto has been trained for many years continually learning to distinguish threats from non threats by referencing trillions of data points last month, we released a major update to this model, which has been rolled out to our customers, providing an increased level of protection.

Our battle hardened AI model has been trained for many years, continually learning to distinguish threats from non-threats by referencing trillions of data.

Last month, we released a major update to this model, which has been rolled out to our customers, providing an increased level of protection. The model has driven even stronger threat prevention rates than before and further reduced false positive.

<unk> has driven even stronger threat prevention rates than before and further reduced false positive.

This release is part of the investment we made in our product portfolio, and these enhancements are being well received by our customers. This is validated by Silence Endpoint, our AI-driven prevention, detection, and response solution being placed in the top right-hand quadrant for the Gartner Pure Insight customers' choice.

This release is part of the investment we made in our product portfolio and these enhancements are being well received by our customers. This is validated by silence endpoint, our AI driven prevention detection and response solution being placed in the top right hand quadrant for the <unk>.

Garnered pure inside customers' choice.

This positioning is based on feedback from real customers, reflecting their experience of our product and us as a company.

This position. This decisioning is based on feedback from real customers, reflecting their experience of a product and us as a company.

This pairs nicely with the same recognition received by BlackBerry UEM in February , where was the only endpoint management solution identified as a customer choice.

This parents nicely with the same recognition we received by Blackberry UBM in February where it was the only endpoint management solution identify as a customer choice.

Let me now hand the call over to Steve, who will provide more color on our financial...

Let me now hand, the call over to Steve who will provide more color on our financial.

Yeah.

Thank you, John . As usual, my comments on our financial performance for the second quarter will be in non-GAAP terms unless otherwise noted.

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 $132 million.

Total company revenue for the quarter was $132 million.

IoT revenue was $49 million, cybersecurity revenue was $79 million, and licensing revenue was $4 million.

Iot revenue was $49 million cyber security revenue was $79 million in licensing revenue was $4 million.

Software product revenue as a percentage of total revenue remained in the range of 85 to 90 percent, with professional services making up the balance.

Software product revenue as a percentage of total revenue remained in the range of 85% to 90% with professional services, making up the balance.

Rockow: Good afternoon, and welcome to the BlackBerry's second quarter fiscal year 2024 Result Conference Call. My name is Rockow and I will be your conference moderator for today's call. During the presentation, all participants will be in a listen-only mode.

The percentage of software product revenue that was recurring remained at approximately 90%.

The percentage of software product revenue that was recurring remained at approximately 90%.

Rockow: We will be facilitating a brief question and an intercession towards the end of the conference. Should you need assistance during the call, please do no conference specialist by pressing star then zero. As a reminder, this conference is being recorded for replay purposes.

Total company gross margin was 65%.

Total company gross margin was 65%.

Operating expenses for the second quarter were $114 million, lower sequentially in part due to one-time costs associated with the patent sale in Q1 that did not recur.

Operating expenses for the second quarter were $114 million.

Lower sequentially in part due to onetime costs associated with the patent sale in Q1 that did not recur.

Tim Foote: I would now like to turn today's call over to Tim Foote, Vice President of BlackBerry and us relations. Please go ahead. Thank you, Rockow.

and the release of some IP related accruals in Q2.

And the release of some IP related accruals in Q2.

non-GAAP operating expenses exclude 6 million fair value gain on the convertible debentures.

Tim Foote: Good afternoon and welcome to BlackBerry's second quarter 2024 earnings conference call.

non-GAAP operating expenses exclude 6 million fair value gain on the convertible debentures.

Tim Foote: With me on the call today are Executive Chair and Chief Executive Officer John Chen and Chief Financial Officer Steve Ray. After I read our cautionary note regarding forward-looking statements, John will provide a business update and Steve will review the financial results.

$10 million in amortization of acquired intangibles, $10 million in stock-based

$10 million in amortization of acquired intangibles.

$10 million in stock based compensation expense.

$3 million and restructuring expenses and $1 million and impairment of long lived assets.

$3 million in restructuring expenses, and $1 million in impairment of long-lived acts.

The non-GAAP operating loss was 28 million and non-GAAP net loss for the second quarter was $23 million.

The non-GAAP operating loss was $28 million, and non-GAAP net loss for the second quarter was $23 million.

Tim Foote: We will then open the call for a brief Q&A session. This call is available to the general public via call-in numbers and via webcast in the investor information section at BlackBerry.com. A replay will also be available on the BlackBerry.com website. Some of the statements will be making today constitute forward-looking statements and are made pursuant to the safe harbor provisions of applicable US and Canadian securities laws. We'll indicate forward-looking statements by using words such as expect, will, shirt, model, intent, bleed and similar expressions.

<unk> non-GAAP basic loss per share for the quarter beat expectations.

4 cent non-GAAP basic loss per share for the quarter beat expectation.

Adjusted EBITDA, excluding the non-GAAP adjustments previously mentioned was negative $22 million.

Adjusted EBITDA, excluding the non-GAAP adjustments previously mentioned, was negative 22 milli-

Tim Foote: Forward-looking lights 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 that are asked in the company's annual filings and MDNA. You should not place undue reliance on the company's forward-looking statements.

Blackberry remains laser focused on maximizing efficiency and expanding margins, and we remain on course for both positive operating cash flow and non-GAAP EPS in the fourth quarter, and for the fiscal year as a whole.

Blackberry remains laser focused on maximizing efficiency and expanding margins and we remain on course for both positive operating cash flow and non-GAAP EPS in the fourth quarter and for the fiscal year as a whole.

Total cash cash equivalents and investments decreased by 59 million to $519 million as of August 31, 2023.

Total cash, cash equivalents and investments decreased by $59 million to $519 million as of August 31, 2020.

Net cash used by operations this quarter was $56 million.

Net cash used by operations this quarter was 56 mils.

The current debentures mature in November and we intend to fully repave.

The current debentures mature in November and we intend to fully repay them.

With respect to raising any new debt, the outcome of Project Imperium will obviously have a significant bearing on future needs.

With respect to raising any new debt the outcome of project Imperium will obviously have a significant bearing on future needs.

Accordingly, we are developing clear executable plans for a number of potential scenarios that could arise.

Accordingly, we are developing clear executable plans for a number of potential scenarios that could arise. That concludes my conversation.

Tim Foote: 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-gap numbers in their summary of our call-flight results. Per reconciliation between our gap and non-gap numbers, please feed the earnings press release published earlier today, which is available on the Edgar, feeder and BlackBerry.com website.

That concludes my comments and I'll turn the call back to John.

Thank you, Steve. Before we open the line for Q&A, let me quickly summarize the key message.

Thank you Steve before we open the line for Q&A, Let me quickly summarize the key messages.

While this quarter saw some volatility in reported revenue due to slip deal, we remain confident in the pipeline of opportunities for our cyber.

While this quarter saw some volatility in reported revenue due to <unk>, we remain confident in the pipeline of opportunities for a cyber business we.

We expect this to translate into a much stronger second half, as subject to successfully closing a number of our larger government opportunities. We expect to finish within our re-interior full year revenue range for cyber.

We expect this to translate into much stronger second half as subject to successfully closing a number of our larger government opportunities, we expect to finish within our reach.

We reiterate our full year revenue range for Ciber.

Tim Foote: And with that, I'll turn the call over to John. Thanks, Tim.

We also remain very confident and excited about the fundamentals of our IoT business. And like fiber, expect a stronger second half, albeit we're taking a prudent view, given delay in the start of some development programs, as well as the auto industry labor actions.

We also remain very confident and excited about the fundamentals of our Iot business and like cyber expect a stronger second half, albeit we're talking we're taking a prudent view given delaying the start of some development programs as well as the auto industry and labor pressures.

John Chen: Good afternoon, everyone, and thank you for joining us today. Let me start with the growth margin increased by 400 basis point to 84%. The most important long-term leading indicator of the health of this business is securing new design wins and building royalty. Backlock. And that, we had another strong quarter. In fact, by the end of the first half, we have secured more than two-thirds of our FY24 annual targets for new backlog and expect to exceed it.

Let me also provide you an update regarding Project Imperium. The Fortnite survivors are very actively engaged in the process and recognize that it is in everyone's interest.

Let me also provide you an update regarding project in period.

The board and its advisers.

<unk> actively engaged in the process and recognize that it is in everyone's interest.

that it will be completed as soon as possible. All stakeholders should rest assured that we will provide an update as soon as we possibly can. That concludes my prepared remarks. We will now take your questions.

That will be completed as soon as possible all stakeholders should rest assured that we will provide an update as soon as we possibly can.

That concludes my prepared remarks.

John Chen: In the quarter, QNX secured 20 news design waves in auto and seven in general embedded market verticals. The largest of these was an eight-figure estimate lifetime revenue, ADAS wind, with one of the top five global automakers to deploy our QNXOS for safety. This wind illustrates a strong secular trend of consolidation of software into centralized compute domains. With this ADAS module, powering drive monitoring, surround view, lane keep assist, adaptive cruise control, and other safety features all on a single chip.

We will now take your questions operator.

Operator could you. Please open the line for Q&A.

Absolutely we will now begin the question and answer session.

Absolutely. 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 unmuted. 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 you limit yourself to one question and one follow-up.

Ask a question. Please press star one on your telephone keypad.

Please make sure your line is muted.

Again star one to ask a question.

Well pause for just a moment to allow everyone an opportunity to signal for questions.

I'm supposed to limit yourself to one question and one follow up.

Okay.

And ladies and gentlemen, our first question today comes from Mike Walkley with Canaccord Genuities. Please go ahead. Hi, Mike. Hey, John . Thank you for taking my question. The first one is just really on the cybersecurity business. Can you provide a little more granularity on which parts of the cybersecurity driving these big perpetual government contracts that you expect to close? Is it mainly Secchismart or is it kind of evenly spread across the portfolio?

And ladies and gentlemen, our first question today comes from Mike Walkley with Canaccord Genuity. Please go ahead.

Hey, Mike Hey.

John Chen: As automotive software stacks because more complex and requires significant higher compute power, it plays to the QNX strength. In addition to our strong wind rate for ADAS, we are also the clear market leader for foundational software in the digital cockpit. The combination of our high-performance safety critical ARTOS and hypervisors allows for mixed criticality in this domain. Given our market leading positions, our design winds continue to be well-diversified across all major global markets.

John.

Thank you for taking my question. The first one is just really on the cyber security business can provide a little more granularity on which parts of the cyber security are driving these big perpetual government contracts that you expect to close that mainly secchi smart or is it kind of evenly spread across the portfolio.

Mainly Secchi Smart, also UEM, the SPARC profile.

Mainly set key smart also.

U E M.

The spark platform, so mainly those two.

Alright, Thank you and then I guess.

Great, thank you. And then I guess my follow up question, just any update on how silences is trending in the market? You have some good technology there, but you're

Follow up question.

John Chen: In Asia, we secure design winds with LG electronics, they improve our hypervisor and will be deployed in a number of vehicle models for top 10 global automakers. We also secure winds with Vizion and leading OEM Cherry via Bosch among others. In Europe, a digital cockpit wind also includes our acoustic middleware and this is an exciting because feedback from customers suggests that this relatively new market opportunity for software-defined acoustic is slightly to be fast growing.

Any update on how <unk> is trending in the market.

Some good technology there but.

larger companies such as CrowdStrike and others are moving more into the SMB market? Can you maybe talk about how silences are faring in the marketplace? Yeah, we do actually reasonably well. The numbers are obviously smaller than the competitors, but we do reasonably well in the win rates on SMB. We actually have a pretty good quarters in new local.

Larger companies such as crowd strike and others are moving more into the SMB market can you maybe talk about how silences that bearing in the marketplace yeah.

We do actually reasonably well.

Numbers, obviously smaller than the competitors, but we do reasonably well in the win rates on SMB, we actually have a pretty good quarters in new logo.

And it will continue. You know, I said it many times, you know, our products are now up to class. It took us a while. We are working very hard with channel partners to swing them our way.

John Chen: As well as our strong footprint in auto, QNX is well-diversified in other verticals, particularly medical and industrial. Building on our position in the surgical robotics, this quarter we secure a design wind for our QNX medical OS for safety to be deployed in a robotic arms for dentistry. These design winds confirm that QNX business is strongly positioned for a long for the long term. We've revenue for Q2 being largely in line with expectation.

And it will continue.

I've said it many times at all.

All products are now up to class took us a while.

We are working very hard with channel partners to swing down my way.

And so once we have more achievement there, we'll have more leverage. But clearly, the product could win, and God is a good solution.

And so once we have more achievement there we will have more leverage but clearly the product could win and God is a good solution.

That's helpful. Thanks for taking my two questions I'll pass the line.

John Chen: We continue to expect IoT to deliver solid you over your growth this fiscal year. That's that. We are taking a prudent view on our IoT revenue outlook for the next two quarters. Automakers are currently addressing a number of significant challenges, including the industrial industry stri-action, the transition to software divine vehicles, as well as the electrification, pivot, and supply chain challenges. We lay to either pre-productions for our development programs or the production schedule could impact our revenue this fiscal year.

Got it. Thank you. Thank you.

Thank you. Thank you. And our next question today comes from Luke Young with Baird. Please go ahead.

Our next question today comes from Luke Young with Baird. Please go ahead.

John Chen: However, we expect these to be relatively short-term timing. As a result, we revised and brought in our IoT revenue outlook range to 225 million to 240 million This represents a 9 to 17% year-over-year growth This means that we still expect of a strong second half of the fiscal year, we expect further sequential growth into Q3 and we currently expect Q4 to be the strongest quarter for revenue in QNX history. This confidence is based on a combination of pipeline of potential new design wins, our service schedule, and royalty expected from the backlog.

Good afternoon. Thanks for taking the questions. John , for starters, last few quarters here, customer software delays have been a theme that we've seen repeat a few times. It'd just be great to get your perspective on how widespread this issue is within your customer bases right now, and most importantly, what the affected customers are telling you needs to get done to get back on track. You mentioned in the script that you have confidence this will be a relatively short-term timing issue. Could you just expand on the reasons why you believe that to be the case? Thank you.

Good afternoon, thanks for taking the questions.

John for starters, our last few quarters here your customer software delays have been a theme that we've seen repeated a few times. It just be great to get your perspective on how widespread this issue within your customer base is right now and most importantly, what the affected customers are telling you needs to get done to get back on track you mentioned in this.

Great that you have confidence this will be a relatively short term timing issue could you just expand on the reasons why you believe that to be the case I think you're right.

Right, okay, that's a good question. So the

Right, Okay, well that's good good question.

So.

The company that are.

looking at their software divine vehicle effort and to push out some and to delay either the start of the design, so starting into the production, auto really big.

Looking at there is software defined vehicle effort and have pushed out some.

And the delay the either the start of the designs are starting into the production at a really big companies.

And some of them are very visible. They announce RE-ORG that actually the outcome favors the software-defined vehicles strategy. And Toyota has announced RE-ORG.

And some of them are very visible.

Announce.

<unk>.

That actually the outcome favors a separated by vehicles strategy.

Toyota has announced New York.

VW has announced reorg and a number of others that we have not announced reorg and pardon me for not being able to repeat that because that's

VW has announced New York.

John Chen: Turning now to product and our analyst stay in May, we announced the upcoming launch of our new generation QNX real-time operating system, QNX 8.0, targeted for December. This release will make a fundamental shift in market performance, and we expect it to further semantic QNX leadership position in automotive and beyond. Feedback from the beta trial has been very positive, with customer and partners impressed with performance scalability and functionality, perhaps some of these will convert into revenue in Q4.

And I you know I mean in a number of others that we have not announced where you are and then pardon me for not being able to repeat that because that's.

that's customer proprietary information. So they will not be happy with it.

That's customer proprietary information they will they will not be happy with me.

So you could get that sense. However, everybody has kind of tell us it's like a, you know, not in a precision way, but it's kind of like a one year move, Fall apprehensive in its making of the things you see.

So so you could suggest that sense, however, everybody who has kind of tell us this cycle.

You know not in a position way, but it's kind of like a one year move full quarter move.

And frankly speaking, we are in the third of the fourth quarter.

And frankly speaking we are in the third or fourth quarter already.

So this is one of the reasons why the team has some really strong pipeline that they believe in for Q4. And as I want to repeat this, we expect you for the best quarter in revenue for QNX.

So this is one of the reason why the team has some really strong pipeline that they believe in for Q4 and as I want to repeat this we expect Q4, the best quarter in revenue for Q Nx ever.

John Chen: This significant enhancement of performance scalability comes at a time when chimicas are focused on developing hardware to power generative AI. We believe that our QNX 8.0 software is uniquely positioned to maximize the potential of GNI in embedded systems, particularly in safety critical use cases. QNX 8 will combine best with pre-performance with the ability to run mission critical process safely and securely alongside GNI stack on the same chip.

Ever.

Okay, great. Thank you for that, John . And then for my follow-up, I'll stay within IoT. Going back to the analyst's day earlier this year, one of the things that you mentioned strategically was looking to continue to engage more directly with OEMs as a Tier 1 and accelerating your OEM account coverage. I'm just wondering to what extent the current delays you're seeing impact your appetite for those sorts of investments in IoT that are outward-facing and just reconcile that with the overall desire to expand margins? We have, because we believe our fundamental social...

Okay, great. Thank you for that John and then for my follow up I'll stay on within Iot I'm going back to the analyst day earlier. This year one of the things that you'd mentioned strategically was looking to continue to engage more directly with the Oems as a tier one in accelerating your.

Oh am account coverage and I'm, just wondering to what extent the current delays youre seeing impact your appetite for those sorts of investments in Iot that are outward facing.

John Chen: Now moving on to IV.

John Chen: We were delighted to announce that IV was selected by Q1 supplier, Mississippi Electric, to power this new FlaxConnect.x in cabin systems. IVH technology and the high-quality real-time insight that it provides will help enhance road safety and enable new in-vehicle experience. In addition, we have solid traction with new IV proof-of-concept trials. Currently, we are progressing POC with a number of major OEMs, including a top-time global automaker and also a leading commercial vehicle OEM, Scania. The strong level of interest for IV POC clearly confirms our strategy.

And just reconcile that with the overall desire to expand margin.

Yeah.

Because we believe our fundamentals are so strong and because we believe our new product eight O scalability are so good.

And because we believe our new product 8.0, scalability is so good.

We are not slowing down any of our appetite.

We are not slowing down any of our appetite.

at all. We are steadfast moving forward.

At all.

Staff fast moving forward.

IoT is hiring people. So we don't worry about us kind of...

Iot's hiring people.

So we don't worry about us kind of ticking.

taking our foot off the gas pedal. That's not going to happen.

Taking all foot off the gas pedal that that's not going to happen.

John Chen: On the product front, this month we release an updated version with significant enhancement to cloud features and increase hardware and software support. IVs development have moved from the early heavy lifting phase and the focus is now on refinements, enhancing stability, expanding census supports and improving the developer experience. The IV ecosystem continue to expand in the tour. We now have over 40 partners currently building on IV and there are more than 20 pre-integrated solutions that are being used by customers in POC trial and at industry events.

Understood. Thank you.

And our next question today comes from Trip Chaldree with Global Equity Research. Please go ahead. Hi Trip. Thank you very much. Hello John . The auto industry seems to be super exciting with QNX and now at least companies like NXP, they term something like you talk IoT as edge square.

And our next question today comes from trip Chowdhry with Global Equities Research. Please go ahead.

Hello, John.

The auto industry seems to be superb.

Exciting.

Then Q&A and no at least like companies like NXP that something like you talk Iot as square.

where they put a lot of AI and they call TinyML that powers these devices. I was wondering like QNX definitely with the low footprint and real time operating system is ideal.

They put a lot of AI and they called tiny ml.

All of these devices.

Wondering like Q&A definitely with the no footprint and real time operating system is ideal.

John Chen: This month, the IV Innovation Fund makes its latest investment, this time in core action, and exciting Israeli startup. Core actions have developed an AI-power application that will leverage the IV-performs sensing site to detect potential driver awareness issues. Their AI model analyzed Michael Musso's movement, such as through steering review sensor data, to understand brain activity and we are pleased to add them to the ecosystems. Moving now to the fiber-traces unit, revenue for the quarter was 79 million and total contract value billings were only 4 million. Rose margin was 54%, AR came in at 279 million, the dollar-based net retention rate was stable at 81%.

But I was also wondering, have you come across some new sensors?

But I was also wondering have you come across some new sensors.

the categories that may have been created because of AI in the edge and these neural network processes like an X-Feed that they make.

Categories that may have been created because of.

AI and edge.

And these neural network processes like NXP that they make.

The industry is trying to industry structure is changing that's my basic question is eight.

the industry is trying to, industry structure is changing, that's my big question is, if any ML, edge square,

If any of them.

Scanner Q&A.

and some new use cases that may be evolving so I was wondering if you have any thoughts on that?

And some new use cases that may be three.

All the things I was wondering if you have any thoughts on that.

Yeah, it's a good point. I think what you're explaining, I read it, it's still early in the industry. And I also want to emphasize the fact that

Yeah.

It's a good it's a good point I think there is still what youre.

<unk> as I read it it's still early in.

In the industry.

And I also want to emphasize the fact that.

that we are a embedded operating system, you know, real-time secure operating systems. And so we tend to go into the MPU type, the central complex, computing complex.

We are a embedded operating system.

John Chen: Revenue to the quarter was lowered in expectation due to due slippage. BlackBerry, along with many others in the fiber security space, is experiencing elongated due cycles. Due to requiring multiple rounds of review and scrutiny, and while this isn't impacting windrace, it's having a real impact on the timing of when the deal grows. This is especially true in government where BlackBerry has a very strong presence. In particular, a small number of large mainly perpetual dues which Deborah had a significant portion of in-quarter revenue flipped to later quarters.

No time secure operating systems and so we tend to go into the <unk> type that the central complex computing complex.

So the edge of this, which will be driven with different new use cases, some of them are AI based and all that, but that's a level higher than us.

So.

The agile days, which will be driven with different new use cases.

Some of them are AI based and all that but that's a level of higher than us.

So, and of course we will be benefiting from it from needing more central compute power. So, I guess we do benefit from it. We don't directly go create a selling motion into the edge.

So and of course, we will be benefiting from it from needing more central compute power.

John Chen: While this material impact Q2 reported revenue, we remain confident with how these deals are progressing and expect them to close this fiscal year. Further, we have a well-defined pipeline of significant dues that are progressing well. These deals are primary in the government vertical where BlackBerry is well-known and trusted, and we have strong customer relationship.

So so.

So I guess, we had we do benefit from it we don't directly go create a selling motion into the edge.

And that edge selling motion and use cases, I'll create it by the code that is on the stack.

And that adds selling motion.

Use cases are created by the code that is.

On the stack, there's one level above us.

Excellent.

excellent. Yes, I got it. The second question is regarding IV, a phenomenal traction on the developer side.

Yes, I got it.

John Chen: Due to the overall confidence in the strong improvement in revenue in the second half compared to the first, we are reiterating the full-year cyber revenue outlook for the current fiscal year. Because large government deals like these are both complex and binary, we will of course update you on the progress made in closing them during the next earnings call.

The second question is regarding I V.

Phenomenal traction on the developer side.

Yes.

I don't know probably we are about six, eight months away from it. But I was wondering, have you come across any new categories of apps that may be coming on top of IV? And that's all for me. Thank you very much. Well, it did.

No probably about six to eight months away from it.

I was wondering have you come across any new categories of apps.

That may be coming on top of IV and that's all for me. Thank you very much.

John Chen: Let me now highlight some of the deals closed during the quarter. In government, we secure new deals with U.S. Department of Justice, the Department of States, Department of Energy, and Department of Education. Also, the internal revenue surfaces, the Canadian revenue agency, the U.S. National New Clear Security Administration, Custom and Border Protection, and the Ministry of Justice in Quebec.

Hum.

Uh huh.

the AI and sensing um

The AI and sensing.

Oh, I actually interesting that tie back to your first question. The different types of sensors that's being demanded in a car, you know, we have seen different types and more increased and more complex. And like one of the examples when I talk about core action was they monitor the sensors on the steering wheel.

Oh actually interesting that tie back to your first question.

The different type of sensors, that's being demanded in the car.

We have seen differ.

Different types and more increased and more complex.

And like one of the example, when I talk about core action was they monitor the sensors on the steering wheel.

John Chen: I will file another America. We secure business with the Bank of Italy, Netherlands, SIRS, Shares of the Center, DASH, ICT, as well as the Federal Court or Australia, the Australian Federal Police, and the Director General of Force Intelligence in Bangladesh. In fact, we see a good pipeline of opportunities developing in Asia-Pacific currently. In addition to government customers, we secure wins with leading banks, including Morgan Stanley and Santander, as well as with leading technology firms, LG, Phillips, and Toshiba, just to name a field.

And then through that, the monitor, and they help define the micromasso.

And then through that they monitor and.

They they helped define the micro muscles.

of the individual. So and then dictate or indicate.

All the individuals so and then then dictate or indicates.

what the status is of the driver.

You know what was the status of the driver.

So on a learner's basis and awareness basis. So this is a little bit more esoteric than it does measure whether the you know how much gas you have in the tanks.

So on a on a learning spaces and awareness spaces. So so this is a little bit more esoteric than just, you know, measure whether the, you know, how much gas you have in the tank.

or how much charging amps that you still have before you need to do the next charge. So we have seen more and more modern type applications, but I still believe for the initial usage of IV, it's gonna be very fundamentally managing the safety and the comfort of the car.

Or how much charging M stay you still have before you need to do to next chart. So.

John Chen: Moving now to product, Thailand is the pioneer in the use of AI as I was with AI at the very core of the sweetest products, long before it became today's buzzword. Our battle-hardened AI model has been trained for many years, continually learning to distinguish threats from non-threats by referencing trillions of data points. Last month we released a major update to this model, which has been rolled out to our customers, providing an increased level of protection.

So we have seen more and more modern type applications.

But I still believe for the initial usage of IV, it's going to be very fundamentally managing the safety and comfort of.

John Chen: The model has driven even stronger threat prevention rates than before, and further reduced false positive. This release is part of the investment we made in our product portfolio, and these enhancement are being well received by our customers. This is validated by Thailand's endpoint, our AI-driven prevention detection and response solution, being placed in the top right hand quadrant for the garnered pure inside customer's choice. This position, this positioning is based on feedback from real customers, refracting the experience of our product and us as a company.

Of the car.

Got it.

Thank you so much thank you.

And then the next question today is from Paul Treber with RBC Capital Markets. Please go ahead.

And our next question today comes from Paul <unk> with RBC capital markets. Please go ahead.

Hi, Jon Good afternoon, just in regards to your comments about Q4 being the best quarter for Iot, how do we think about the momentum.

Hi John , good afternoon. Just in regards to your comments about Q4 being the best quarter for IoT, how do we think about the momentum beyond Q4? Do you expect it to be carried through to the subsequent year, or is it more to a one quarter phenomenon?

Beyond Q4, like do you expect it to be carried through to the subsequent year or is it is it more just a one quarter phenomenon.

Oh no. So, good question. I don't believe we're gonna have a Q1 FY25 bigger than Q4. That's what you're asking. But I do believe that we're still following the 20% growth on your year where we are presented. You are in the May meeting.

No.

It's a good question I don't I don't believe we're going to have a Q1 FY 'twenty five bigger than Q4.

That's what you're asking but I do believe that we have we're still fall into 20% growth on year over year weather. When we presented to you all in the meantime in May may the May meeting.

John Chen: This pairs nicely with the same recognition received by BlackBerry UEM in February, where was the only endpoint management solution identified as a customer choice.

So, you do expect us to double digit growth and pushing to a 20% growth year over year. And by then, I hope that these so-called software define vehicle efforts delay. And hopefully, everybody seems to have a reasonable hand those on the price chain despite of the political situation between US, China, Western world, and so forth. And so let's...

So you do expect us to have double digit growth in pushing to a 20% growth year over year.

Steve Rai: Let me now hand a call over to Steve, who will provide more color on our financial. Thank you, John. As usual, my comments on our financial performance for the second quarter will be in non-gap terms unless otherwise noted. Total company revenue for the quarter was 132 million. IoT revenue was 49 million, cybersecurity revenue was 79 million, and licensing revenue was 4 million. Software product revenue as a percentage of total revenue remained in the range of 85 to 90 percent with professional services making up the balance. The percentage of software product revenue that was recurring remained at approximately 90 percent. Total company gross margin was 65 percent. Operating expenses for the second quarter were 114 million.

And by then I hope that these so called software defined vehicle efforts delay and hoping everybody seems to have a reasonable handles on supply chain. Despite all the political situation between U S, China Western World and so forth.

So let's grab.

Gradually getting under control, electrifications is on everybody's, it's in their products backs, so to speak. Although to us, it's really hoping that that drive more volume of a car, not so much as electric versus gas, we have a difference there. And so if that is removed,

Gradually getting under control.

Verifications is on everybody's in.

And their products box so to speak.

Although to US is really hoping that that drive more volume of a car not so much as electric versus gas we have a difference there.

And so if that is.

Moved.

Then we will start seeing design wins that will turn into a developer seats to turn into professional surfaces engagement and then we'll ultimately turn into royalty facts.

Then we will start seeing design wins that will turn into a developer seats to come into professional services engagement and then what will ultimately turn into.

Royalty back.

RIO T so so Fundamentally, we see nothing concerning at all. We see this as a purely attending issues And is we see it, you know starting to get better in Q4

Our royalty so so fundamentally we see nothing concerning at all and we see this as a purely a timing issues.

Steve Rai: Lower, sequentially, in part due to one time costs associated with the patent sale in Q1 that did not recur, and the release of some IP related to Cruels in Q2. Non-gap operating expenses exclude 6 million fair value gain on the convertible debentures, 10 million in expense, 3 million in restructuring expenses, and 1 million in impairment of long-lived assets. The non-gap operating loss was 28 million, and non-gap net loss for the second quarter was 23 million. The force that non-gap basic loss per share for the quarter beat expectations. Adjusted EBITDA excluding the non-gap adjustments previously mentioned was negative 22 million.

And as we see it starting to get better in.

In Q4.

and left and left to some other industry events by the U-8W strikes that last longer. Then we, that's a little bit of our control. And even though even the U-8W strikes,

Unless unless there's some other industry events like the UAW strikes that lasts longer then we'll then we that's a little bit of a controlling but even though even the UAW strikes.

It's not going to last as you probably know this very well. It's not going to last in perpetuity. And because both sides got hurt.

It's not going to allow us as you probably know this very well, it's not going to allow us.

In perpetuity.

And because both sides got hurt.

So I think they will resolve it. I certainly hope they will. And then we'll get back on.

I think they will resolve it.

I certainly hope they will and then we will get back on track.

Okay, and then my second question, you know, I don't know how much you can answer it, but I'll throw it out there. Just in regards to project and perium, you know, I know you can't give specifics, but have you or the board reach the point we've narrowed down to a few high level paths and he sort of share the high level paths? Yes. I can comment on it, but the answer is yes. Okay.

Okay and then my second question.

How much you can answer it but I'll throw it out there just in regards to protect and Purion <unk>.

I know you can't give specifics, but have you or the board reached the point, we've narrowed down to a few high level path.

Steve Rai: Blackberry remains laser focused on maximizing efficiency and expanding margins, and we remain on course for both positive operating cash flow and non-gap EPS in the fourth quarter, and for the fiscal year as a whole. Total cash, cash equivalent and investments decreased by $59 million to $519 million as of August 31, 2023. Net cash used by operations this quarter was $56 million. The current debentures mature in November and we intend to fully repay them. With respect to raising any new debt, the outcome of Project Imperium will obviously have a significant bearing on future needs.

Sure that the high level parts.

Yes, I can.

Can't comment on it but the answer is yes.

Okay. Thanks, Thanks for taking my call.

And our next question today comes from Daniel Chan with TD Colin. Please go ahead.

And our next question today comes from Daniel Jr. and Lutini Cowan. Please go ahead.

Hey, John.

Hey, John . Hey. You expected the strategic review to conclude by the end of summer and your contract with BlackBerry is quickly approaching. Would it be possible that this review goes past November or should we expect something in the next month or so?

Do you expect that the strategic review to conclude by the end of summer and your contract with Blackberry is quickly approaching would it be possible that this review goes past November or should we expect something in the next month or so.

I think there is better than 5050 trends usually expect some.

[laughter] Ah I think there is better than 50 50 chance you should expect something sooner.

Okay, that's helpful. And then maybe another question on the timing. To what extent do you think the uncertainty from the strategic reviews having an impact on the near term financial performance, whether it be from staff productivity or even customers waiting for a conclusion?

Okay. That's helpful. And then maybe another question on the timing to what extent do you think the uncertainty from the strategic review is having an impact on the near term financial performance, whether it would be from staff productivity or even customers waiting for a conclusion.

Steve Rai: Accordingly, we are developing clear, executable plans for a number of potential scenarios that could arise.

No, actually, I, I mean, really seriously, I checked this a lot because that's, that's an obvious concern.

No actually I mean, it really Suzy I check this a lot because that's an obvious concern.

Steve Rai: That concludes my comments and I'll turn it call back to John. Thank you, Steve.

John Chen: Before we open the line for Q&A, let me quickly summarize the key messages. While this quarter saw some volatility in reported revenue due to the slip deal, we remain confident in the pipeline of opportunities for our cyber business. We expect us to translate to much stronger second half as Project II is successfully closing a number of our larger government opportunities, we expect to finish within our reintegrated full-year revenue range for cyber.

And from a customer point of view, no, I don't, I don't see that might be one or two conversations I had, but it was like

From a customer point of view and no I don't I don't see that might be one or two conversation I had but it was like.

kind of like, oh, by the way, when I talk to a customer, they say, oh, by the way, what's going on there? That kind of thing. And all of a sudden, what he asked me as part of the long conversation and also and then said, should I be concerned about this? I said, nope, nope. You have nothing to be concerned about. We stand behind everything we do and build and deliver it.

Kind of like Oh by the way when I talk to a customer they said oh by the way what's.

What's going on there.

A thing.

Somebody asked me as part of the long compensation and then all of sudden they set or should I be concerned about this I said no no nothing.

John Chen: We also remain very confident excited about the fundamentals of our IoT business. And like cyber, expect a stronger second half, albeit we're taking a prudent view, given delay in the start of some development programs, as well as the auto industry labor actions.

Nothing to be concerned about where you stand behind everything, we do and build and deliver them.

So not much really coming on, and the cells who hasn't stepped back to me about this being a grove rock or any sort. But haven't set that. The long-

So not much really coming out and the sales fall Hasnt fed back to me about this being a a roadblock or signings thoughts, but having said that.

The longer lingers on.

John Chen: Let me also provide you with an update regarding Project Imperium. The borderless advisors are very actively engaged in the process and recognize that it is in everyone's interest that it will be completed as soon as possible. All stakeholders should rest assured that we will provide an update as soon as we possibly can.

the worst it's going to get. And even though it is not a big, big worse, it is the, so I have no intention. It's because of being an operator. I got employees, partners, customers.

The worst is going to get.

And you know, even though it is not a big big worse.

So I have no intention at all.

Because of being an operator I got employees partners customers.

shareholders to worry about. So we're not gonna let this thing, it might take a long time multiple steps, but there will be some decisions. So.

Shareholders.

John Chen: That concludes my brief.

To worry about so we're not going to let this thing it might take a long time multiple steps.

Rockow: We will now take your questions.

Operator: Operator, could you please open the line for Q&A? Absolutely. We will now begin the question and intercession. To ask a question, please press star one on your telephone keypad. Please make sure your line is unmuted. Again, press star one to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions.

<unk>.

Operator: We'll request you to remain yourself to one question and one follow-up.

There will be some decision made.

That's helpful. Thanks, Sean sure.

Thank you I would like to turn the call back over to John Chen Executive Chairman and CEO of Blackberry for closing remarks.

Thank you. I would like to turn the call back over to John Chum, Executive Chair and CEO of Blackberry for closing the work.

Okay, thank you, thank you operator. Before we end today's call, I'd like to remind everyone of a upcoming back very summit on October 17th at the Conrad Hotel in New York downtown.

Okay. Thank you. Thank you operator.

Before we end today's call I'd like to remind everyone of upcoming Blackberry Summit on October 17 at the Conrad Hotel in New York downtown.

The event, anchor around the theme of trust, has been expanded this year to include IoT, and we have a strong line of Akinos, as well as product demos and breakout sessions.

The event anchor around the theme of trust has been expanded this year to increase Iot and we have a strong lineup of keynote.

Mike Walkley: And ladies and gentlemen, our first question today comes from Mike Walkley with kind of originality. Please go ahead. Hi, Mike. Hey, John. Thank you for taking my question. The first one is just really on the cybersecurity business key. Provide a little more granularity on which parts of the cybersecurity driving these big perpetual government contracts that you expect to close is it mainly secular smart or is it kind of evenly spread across the portfolio. Mainly secular smart. Also, UEM, the spark platform. So mainly those two.

As well as product demos and breakout sessions, you can register to attend Brookwood at Blackberry Dot Com Slash summit stay.

You can register to attend at Blackberry.com slash summit.

Stay tuned for more announcement around the event. I thank everybody again for joining the call. I look forward to speaking with you very soon.

Stay tuned for more announcements around the event I. Thank everybody again for joining the call I look forward to speaking with you very soon.

Thank you.

And thank you, sir. This concludes today's call. Thank you for your participation. You may now disconnect.

And thank you Sir this concludes today's call. Thank you for your participation you may now disconnect.

Mike Walkley: Great. Thank you. And then I guess I might follow up question. Just any update on how Sri Lanka is trending in the market. You have some good technology there, but you and larger companies such as CrowdStrike and others are moving more into the SMB market. He may be talking about how violence is appearing in the marketplace. Yeah, we do actually reasonably well. The number is obviously smaller than the competitors, but we do reasonably well in the wind rates on SMB.

Mike Walkley: We actually have a pretty good quarters in new and local. So, anyone continue? You know, I've said it many times, you know, our products are now up to class, took us a while. We are working very hard with channel partners to swing them our way. And so once we have more achievement there, we'll have more leverage. But clearly, the product could win and God is a good solution. That's helpful. Thanks. Take my two questions. I'll pass the line. Joe, thank you. Thank you.

Luke Young: And our question today comes from Luke Young with Baird. Please go ahead. Good afternoon. Thanks for taking the questions. John, for starters, last few quarters here, customer software delays have been a theme that we've seen repeat a few times. It just be great to get your perspective on how widespread this issue within your customer bases right now. And most importantly, what the effective customers are telling you needs to get done, to get back on track. You mentioned in the script that you have confidence this will be a relatively short-term timing issue. You could use this expand on the reasons why you believe that can be the case. Thank you. Right. Okay.

John Chen: That's a good question. So the company that are looking at their software divine vehicle effort and to push out some in the delay, the either the start of the design, so starting into the production are the really big companies. And some of them are very visible. They announce, you know, REARC that actually they outcome favors their software divine vehicles strategy. And Toyota has announced REARC. VW has announced REARC. And I, you know, I mean, and a number of others that we have not announced REARC, and then pardon me for not being able to repeat that because that's that's customer proprietary information.

John Chen: So they will they will not be happy with me. So you could get that sense. However, everybody who has kind of tell us it's like a, you know, not in a position way, but it's kind of like a one-year move, full-quarter move. And frankly speaking, we are in the third or the full-quarter already. So this is one of the reason why the team has some really strong pipeline that they believe in for Q4. And as I want to repeat this, we expect Q4 the best quarter in revenue for QNX ever. Okay, great. Thank you for that, John.

John Chen: And then for my follow-up, all famous in IoT, going back to the analyst day earlier this year, one of the things that you'd mentioned strategically was looking to continue to engage more directly with OEMs is it's year one and it's governing your OEM account coverage. I'm just wondering to what extent the current delays you're seeing impact your appetite for both sorts of investments in IoT that are outward facing and just reconcile that with the overall desire to expand margin.

John Chen: Right. We have, because we believe our fundamentals are so strong and because we believe our new product 80 scalability is so good, we are not slowing down any of our appetite, at all. We staff fast moving forward, IOTs hiring people, so we don't worry about us kind of taking our food off the gas pedal, that's not going to happen. Understood, thank you.

Tripat Chowdhry: The other next question today comes from Tripat Chowdhry with Globe Walk with his research. Please go ahead. Thank you very much.

John Chen: Hello, John. The auto industry seems to be super exciting with QNX and now at least companies like NXP, they term something like Utalk IOT as Edge Square, where they put a lot of AI and they call tiny ML that powers these devices. I was wondering like QNX definitely with the low footprint and real time operating system is ideal. But I was also wondering have you come across some new sensors, the categories that may have been created because of AI in the Edge and these neural network processors like NXP that they make.

John Chen: The industry is trying to, industry structure is changing, that's my big question is, if any ML, Edge Square, QNX and some new use cases that may be evolving. I was wondering if you have any thoughts on that. Yeah, it's a good point. I think what you're explaining is, I read it, it's still early in the industry and I also want to emphasize the fact that we are a embedded operating system, real time secure operating systems.

John Chen: And so we tend to go into the MPU type, the central complex, computing complex. So the edge of this, which will be driven with different new use cases, some of them are AI based and all that, but that's a level higher than us. And of course we will be benefiting from it from needing more central compute power. So I guess we do benefit from it. We don't directly go create a selling motion into the edge. And that edge selling motion and use cases are created by the code that is on the stack that is one level above us.

John Chen: Excellent. Yes, I got it.

Tripat Chowdhry: The second question is regarding IV, a phenomenal traction on the developer side apps. I don't know probably we are about six, eight months away from it.

John Chen: But I was wondering, have you come across any new categories of apps that may be coming on top of IV? And that's all for me. Thank you very much. Well, the AI and sensing. Oh, actually interesting. The type back to your first question. The different type of sensors that's being demanded in a car, you know, we have seen different types and more increased and more complex. And like one of the example when I talk about core action was they monitor the sensors on the steering wheel.

John Chen: And then through that they monitor and they help define the micromassos of the individual. And then dictate or indicates what the status is of the driver. So on an alertness basis and awareness basis. So this is a little bit more esoteric than just measure whether how much gas you have in the tank or how much charging amps you still have before you need to do the next charge. So we have seen more and more and more than type applications. But I still believe for the initial usage of IV it's going to be very fundamentally managing the safety and the comfort of the car. Got it. Thank you so much. Thank you.

Paul Trieber: The next question today is from Paul Trieber with RBC Capital Markets. Please go ahead. Hi John. Good afternoon. In regards to your comments about Q4 being the best quarter for IoT, how do we think about the momentum beyond Q4? Like do you expect to be carried through to the subsequent year or is it more to say a one quarter phenomenon? Oh no. So good question. I don't I don't believe we're going to have a Q1 FY25 bigger than Q4.

Paul Trieber: That's what you're asking. But I do believe that we have we're still falling to 20% growth on the over year. Where would we and where we presented you are in the may time in may the may meeting. So so you do expect us to double digit growth and pushing to a 20% growth year over year. And by then, I hope that these so-called software define vehicle efforts delay. And hopefully, you know, everybody seems to have a reasonable handles on the price chain despite of the political situation between US, China, Western world and so forth.

Paul Trieber: And so let's gradually getting under control. Electrification is is on everybody's in it's in their products backs, so to speak. Although to us is really hoping that that drive more volume of car, not so much as electric versus gas, we we have a difference there. And so if that is removed, then we will start seeing design wins that will turn into developers seats to come into professional services engagement. And then ultimately turn into royalty background, a royalty.

Paul Trieber: So so fundamentally, we see nothing concerning at all. We see this as a purely timing issues. And if we see it, you know, starting to get better in Q4, unless there's some other industry events by the U8W strikes that last longer, then we then we that that's a little bit of our control. But even though even the U8W strikes is not going to last, as you probably know this very well, it's not going to last in perpetuity and because both sides got hurt.

John Chen: So, I think they will resolve it, I certainly hope they will, and then we'll get back on track.

Paul Trieber: Okay, and then my second question, I don't know how much you can answer it, but I'll throw it out there, just in regards to Project Imperium.

John Chen: I know you can't give specifics, but have you or the board reached the point we've narrowed down to a few high-level paths and he sort of share the high-level paths? Yes, I can comment on it, but the answer is yes. Okay, thanks for taking the question.

Daniel Treiber: And our next question today comes from Daniel Treiber Ltd. Kerwin.

Daniel Treiber: Please come ahead. Hey, John. You expected the strategic review to conclude by the end of summer, and your contract with BlackBerry is quickly approaching. Would it be possible that this review goes past November or should we expect something in the next month or so? I think there is better than 50-50 transfers to expect something sooner. Okay, that's helpful.

John Chen: And then maybe another question on the timing. To what extent do you think the uncertainty from the strategic reviews having an impact on the near-term financial performance, whether it be from staff productivity or even customers waiting for a conclusion? No, actually, I mean, really seriously, I checked this a lot because that's an obvious concern. And from a customer point of view, no, I don't see, there might be one or two conversations I had, but it was like kind of like, oh, by the way, when I talk to a customer, they say, oh, by the way, what's, you know, what's going on there, you know, that kind of thing.

John Chen: And somebody asked me a part of the long conversation and also they said, oh, should I be concerned about this? I said, no, no, you have nothing to be concerned about when you stand behind everything we do and build and deliver it. So not much really coming on, and the sales flow hasn't set back to me about this being a, a grove rock or any sorts, but haven't set that. The longer it lingers on the worse it's going to get on, and you know, even though it is not a big, big worse.

John Chen: So I have no intention. It's because of being an operator. I got employees, partners, customers. Shareholders to worry about. So we're not going to let this thing. It might take a long time, multiple steps, but there will be some decision made.

John Chen: That's awful, thanks John. Thank you.

John Chen: I want to turn the call back over to John Chen, executive chair and CEO of Blackberry for closing the works. Okay, thank you. Thank you operator.

John Chen: Before we end today's call, I like to remind everyone of a upcoming backberry summit on October 17th at the Conrad Hotel in New York downtown. The event anchor around the theme of trust has been expanded this year to includes IoT, and we have a strong line of a keynote so as well as product demos and breakout sessions. You can register to attend BlackBerry.com slash summit. Stay tuned for more announcement around the event. I thank everybody again for joining the call.

John Chen: I look forward to speaking with you very soon.

John Chen: Thank you.