Q3 2024 BlackBerry Ltd Earnings Call

Good afternoon and welcome to the BlackBerry Third Quarter Fiscal Year 2024 Results Conference Call. My name is Chuck and I'll be your conference moderator for today's call. During the presentation, all participants will be in a listening mode. We will be facilitating a question and answer session towards the end of the conference.

Good afternoon, and welcome to the Blackberry third quarter fiscal year 2024 results Conference call. My name is Chuck and I'll be your conference moderator for today's call. During the presentation. All participants will be in a listen only mode. We will be facilitating a question and answer session towards the end of the conference should you need assistance during the call.

And should you need assistance during the call, please signal a conference specialist by pressing the star key followed by zero. As a reminder, this conference is being recorded for replay purposes. I would now like to turn today's call over to Mr. Tim Foote, Vice President of BlackBerry Investor Relations. Please go ahead, sir.

These signal a conference specialist by pressing the star key followed by zero.

As a reminder, this conference is being recorded for replay purposes, I would now like to turn today's call over to Mr. Tim foot Vice President of Blackberry Investor Relations. Please go ahead Sir.

Thank you Chuck. Good afternoon everyone and welcome to BlackBrey's third quarter 2024 earnings conference call.

Tim Foot: Thank you Charles Good afternoon, everyone and welcome to Blackberrys third quarter 2024 earnings Conference call.

I'm delighted to say that joining me on today's call is Blackberry's new Chief Executive Officer, John Giamateo, and Chief Financial Officer, Steve Ray.

Tim Foot: I'm delighted to say that joining me on today's call is Blackberry <unk>, New Chief Executive Officer, John <unk>.

Tim Foot: Chief Financial Officer, Steve right.

After I read our cautionary note regarding forward-looking statements, John will provide a business update and Steve will review the financial results. We will then open the call for a brief Q&A session. This call is available to the general public via calling numbers and via webcast in the investor information section at blackberry.com.

Tim Foot: After I read our cautionary note regarding forward looking statements John will provide a business update and staying forward. It to you the financial results.

Speaker Change: Open the call for a brief Q&A session.

Speaker Change: This call is available to the general public.

Colin numbers I'm, sorry web com in the Investor information section at Blackberry Com.

A replay will also be available on the BlackBerry.com website.

Speaker Change: A replay will also be available on the Blackberry Com website. Some of the statements are we 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 shoot.

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

Speaker Change: All right.

Speaker Change: Great.

Speaker Change: Expressions.

Forward-looking statements are based on estimates and assumptions made by the company in light of its experience and its perception of historical trends, current conditions, unexpected future developments, as well as other factors that the company believes are relevant.

Speaker Change: Forward looking statements are based on estimates and assumptions made by the company in light of its experience and expert section 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 statement.

Speaker Change: 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 discussed in the company's annual findings and MD&A. You should not place undue reliance on the company's forward-looking statements. Any forward-looking statements are made only as of today and the company has no intention and undertakes no obligation to update or revise any of them except as required by law.

Speaker Change: These factors include the risk practices that discussed in the company's annual filings and empty and I you should not place undue reliance on the company's fault.

Speaker Change: Any forward looking statements are made only as of today and the company has no intention and undertakes no obligation.

Speaker Change: <unk> or revise any of them, except as required by law.

As is customary during the call, Joe and Steve will reference non-GUT numbers in their summary of our quarterly results.

Speaker Change: As is customary during the cold Chairman, Steve will reference non-GAAP numbers and a summary of our quarterly results for a reconciliation between our GAAP and non-GAAP numbers. They see the earnings press release published earlier today, which is available on the Edgar and SEDAR puffs and Blackberry com websites.

for reconciliation between our GAP and non-GAP numbers, they see the earnings press release published earlier today, which is available on the EDGAR, CDER Plus, and blackberry.com website. And with that, I'll turn the call over to John .

Speaker Change: And with that I'll turn the call language Charles.

Speaker Change: Okay.

Charles: Thanks, Tim.

And hello, everyone. My name is John G. Matteo, and I'm delighted to be joining you all today as Blackberry's new CEO .

John Matteo: And Hello, everyone. My name is John Matteo and I'm delighted to be joining you all today as Blackberry <unk> new CEO.

I'm sure some of you will already know me from my time as President of the Cyber Security Business Unit, where while we still have work to do, the team has made significant progress with products, go-to-market, and overall operational efficiency during the past couple of years.

John Matteo: I'm sure. Some of you will already know me from my time as President of the cyber security business unit, where while we still have work to do the team has made significant progress with product go to market and overall operational efficiency during the past couple of years.

As president I've been at the heart of Blackberry's operations and I'm already very familiar with how things work, the challenges we face, and the steps we

John Matteo: As president I've been at the heart of Blackberries operations, and I'm already very familiar with how things work.

John Matteo: The challenges, we face and the steps we need to take going forward.

I stepped into this role at a pivotal time for BlackBerry as we have a lot of work ahead of us.

John Matteo: I stepped into this role at a pivotal time for Blackberry as we have a lot of work ahead of us.

John Matteo: Okay.

Among my first priorities is to fully separate the IoT and cybersecurity business unit.

John Matteo: Among my first priorities is to fully separate the Iot and cyber security business units.

rightsizing our operations and driving efficiencies in the process. But I'll come back to this.

John Matteo: Right sizing, our operations and driving efficiencies in the process.

John Matteo: But I'll come back to this more later in the call.

Let me first discuss our performance this quarter, starting with the IoT business.

John Matteo: Well, let me first discuss our performance this quarter, starting with the Iot business.

The IoT team delivered the strongest quarter for revenue for several years despite a number of industry level headwinds.

John Matteo: The I O T team delivered the strongest quarter for revenue for several years, despite a number of industry level headwinds.

Revenue for the quarter increased 12% sequentially and 8% year on year to 55 million.

John Matteo: Revenue for the quarter increased 12% sequentially and 8% year on year to $55 million.

Gross margin remained at a strong 84%.

Gross margin remained at a strong 84%.

Okay.

The main driver for revenue growth this quarter was the automotive and in particular advanced driver assistance systems or ADAS.

John Matteo: The main driver for revenue growth this quarter with the automotive and in particular advanced driver assistance systems or Adas.

Revenue from royalties increased sequentially and while still below the long-term average represented 44 percent of QNX revenue.

John Matteo: Revenue from royalties increased sequentially and while still below the long term average represented 44% of Q N X revenue.

Development seats was 32% and services 24% of revenue in the quarter.

John Matteo: Development seats was 32% and services, 24% of revenue in the quarter.

In addition to delivering solid revenue, we maintain our design-win momentum, adding meaningfully to our QNX royalty backlog.

John Matteo: In addition to delivering solid revenue, we maintained our design win momentum, adding meaningfully to our Q N X royalty backlog.

This was a strong quarter for a new ADAS-related design win.

John Matteo: This was a strong quarter for new a das related design wins.

We secured a design win for our R-Tars for Safety and Secure C++ Libraries for use in a front-facing camera solution that will be deployed by a leading European automaker.

John Matteo: We secured a design win for our our cars for safety and secure C plus plus libraries for use in a front facing camera solution that will be deployed by a leading European automaker.

QNX would also be the foundation for an ADAS platform to be developed by a global tier one supplier and used by two leading Asian OEMs.

John Matteo: <unk> was also be the foundation for an Adas platform to be developed by a global tier one supplier and used by two leading Asian Oems.

John Matteo: Among other Adas wins wasn't designed with one of the largest automakers in the world, who will use Q&A X O S for safety as its operating system.

John Matteo: But this wasn't fully a good quarter for automotive automotive.

But this wasn't only a good quarter for automotive.

John Matteo: We secured a number of new Gen design wins as well.

John Matteo: The use cases secured this quarter were broad.

John Matteo: They included displacing a rival product with Q1, <unk> Hypervisor for an industrial automation controller that will be used in applications, such as petroleum refineries factory automation and wastewater treatment.

John Matteo: In medical we secured a significant design for infusion pumps for bedside medication delivery.

John Matteo: At our Hypervisor and Black channel products will be used in autonomous all throw defense vehicles as well.

John Matteo: We continue to be excited about the large and growing opportunities outside of auto where the need for safety critical high performance software at the edge is growing fast.

John Matteo: And speaking of high performance, we remain firmly on track for general access release for our Q N X S. T. P. Eight Dod O next generation platform.

And speaking of high performance, we remain firmly on track for general access release for our QNX STP 8.0 Next Generation Platform.

This will be a really significant product launch and everybody at BlackBerry couldn't be more excited about it.

John Matteo: This will be a really significant product launch and everybody at Blackberry couldn't be more excited about it.

The step change in performance and scalability will enable developers to fully harness the significant levels of additional compute that next generation processors offer.

John Matteo: This step change in performance and scalability will enable developers so fully harness the significant levels of additional compute that.

John Matteo: That next generation processors offer.

So look out for more information on this and other exciting developments as we gear up for CBS in January .

John Matteo: So look out for more information on this and other exciting developments as we gear up for CES in January.

Turning now to a brief update on Ivy, we continue to make progress in what is a long sales cycle business.

John Matteo: Turning now to a brief update on IV, we continue to make progress in what is a long sales cycle business.

Proof of concept trials are progressing well, and feedback from customers remains strong.

John Matteo: Proof of concept trials are progressing well and feedback from customers remained strong.

We remain focused on converting POCs into design wins and hope to announce another win at CES in January .

John Matteo: We remain focused on converting P O sees into design wins and hope to announce another win at CES in January.

John Matteo: Yeah.

The IV ecosystem continues to grow strongly, and a CES will be demonstrating more than 20 use cases with 12 partners and expect there to be three third-party booths demonstrating IV-based products.

John Matteo: P. IV ecosystem continues to grow strongly and at CES will be demonstrating more than 20 use cases with 12 partners and expect there to be three third party books, demonstrating I D based products.

Moving now to Outlook for the IoT business in Q4.

John Matteo: Moving now to outlook for the Iot business in Q4.

As mentioned, the strong revenue growth and continued design win momentum in Q3 was achieved despite some macro headwinds.

John Matteo: As mentioned the strong revenue growth and continued design win momentum in Q3 was achieved despite some macro headwinds.

The first was the UAW labor disputes which naturally has had a negative impact on production volumes for some of our largest customers and we expect this impact to be felt in our fiscal Q4.

John Matteo: The first was the UAW labor disputes, which naturally has had a negative impact on production volumes for some of our largest customers and we expect this impact to be felt in our fiscal Q4.

The second is ongoing slippage of software programs at major automakers.

John Matteo: The second is ongoing slippage of software programs at major automakers.

Leading OEMs continue to deal with the challenges of delivering very complex automotive software solutions and while there is no change in strategic direction towards software-defined vehicles, some of the timeline

John Matteo: Leading Oems continue to deal with the challenges of delivering very complex automotive software solutions and while there is no change in strategic direction towards software defined vehicles.

John Matteo: Some of the timelines have pushed back.

John Matteo: Because of these near term headwinds, we're taking a more conservative view on our Q4 outlook.

Because of these near-term headwinds, we're taking a more conservative view on our Q4 Outlook.

That said, we continue to expect UNX to have its strongest quarter ever with revenue in the range of $62 million to $66 million.

That said, we continue to expect Q&A.

John Matteo: <unk> strongest quarter ever with revenue in the range of $62 million to $66 million.

Now, let me turn to the Cybersecurity Business Unit.

John Matteo: Now, let me turn to the cyber security business unit.

This was a strong year for cyber, strong, I'm sorry, strong quarter for cyber.

John Matteo: This was a strong year for cyber shrunk I'm, sorry strong quarter for Ciber.

Revenue in Q3 was $114 million, growing 44% sequentially and 8% year-over-year.

John Matteo: Revenue in Q3 was $114 million growing 44% sequentially and 8% year over year.

John Matteo: Gross margin improved by 14 percentage points to 68%.

gross margin improved by 14 percentage points to 68 percent.

while ARR of $273 million showed a sequential decrease.

John Matteo: While a R. R of 273 million showed a sequential decrease.

It was the smallest decrease in the last two years, pointing to a stabilization in Q4 before an anticipated return to growth next fiscal year.

John Matteo: It was the smallest decrease in the last two years pointing to a stabilization in Q4 before an anticipated return to growth next fiscal year.

The dollar-based net retention rate improved one percentage point to 82%.

John Matteo: The dollar based net retention rate improved one one percentage point to 82%.

John Matteo: Cyber total contract value or T. C V. Billings was 109 million, representing solid sequential growth of 47% and year over year growth of 6%.

Cyber Total Contract Value, or TCV Billings, was $109 million, representing solid sequential growth of 47% and year-over-year growth of 6%.

The cyber business has a very strong foothold in the government space where leading governments around the world trust BlackBerry software to secure their environments, communications, and data.

John Matteo: The cyber business has a very strong foothold in the government space, where leading governments around the World Trust Blackberry software just to ensure their environments communications and data.

While this type of business often has longer sales cycles, the partnerships that are built are often very long term.

While this type of business often has longer sales cycles. The partnerships that are built are often very long term.

We're delighted to build such a partnership with the government of Malaysia this quarter by securing a significant multi-year contract to provide a full range of product.

John Matteo: We are delighted to build such a partnership with the government of Malaysia. This quarter by securing a significant multi year contract to provide a full range of products.

The deal included our SILAMs, UEM, ad hoc, and SecuSmart offerings.

John Matteo: The deal included our silence UE, an ad hoc and secchi smart offerings.

John Matteo: As part of the deal Blackberry will establish a cyber security center of excellence in quality encore during calendar year 2024.

As part of the deal, BlackBerry will establish a cybersecurity center of excellence in Kuala Lumpur during calendar year 2024.

We were also very pleased to land a significant seven-year ad hoc contract with the U.S. Department of Homeland Security.

John Matteo: We were also very pleased to land a significant seven year AD hoc contract with the U S Department of Homeland Security.

ad hoc, which is the leading critical events management solution in the U.S. federal government with 75 percent market share will be used to power the DHS's new personal emergency notification system.

John Matteo: AD hoc, which is the leading critical event management solution in the U S. Federal government with 75% market share will be used to power. The DHS is new personal emergency notification system.

Yeah.

Revenue recognition on some of the products in the portfolio result in significant in-quarter revenue. In particular, our SECI SMART Secure communication software offerings

John Matteo: Revenue recognition on some of the products in the portfolio resulted in significant in quarter revenue.

In particular, our secchi smart secure communication software offerings.

and some elements of our UEM endpoint manager.

John Matteo: And some elements of arguing in endpoint management.

John Matteo: The remainder in contrast are generally recognized on a ratable basis.

The remainder, in contrast, are generally recognized on a ratable basis.

Given the strong Stecky Smart content this quarter, this was a significant tailwind, helping in part to drive both revenue and gross margin improvements.

John Matteo: Given the strong second smart content. This quarter. This was a significant tailwind helping in part to drive both revenue and gross margin improvements.

While deals of this magnitude don't necessarily land every quarter, we're very pleased with the overall traction we're seeing with SecuSmart outside of its core German market.

John Matteo: While deals of this magnitude don't necessarily land every quarter, we're very pleased with the overall traction we're seeing with second smart outside of its core German market.

Let me now switch to some of the key product developments that we have going on in cyber.

John Matteo: Let me now switch to some of the key product developments that we have going on in cyber.

Over the past couple of years, the cyber product team has been busy bringing leading solutions to market.

John Matteo: Over the past couple of years, the cyber product team has been busy bringing leading solutions to market.

closing a number of product gaps and positioning us to compete.

John Matteo: Closing, a number of product gaps and positioning us to compete.

John Matteo: During the quarter, we announced the latest of these with a launch of the generative AI powered cyber security soccer assistant.

During the quarter, we announced the latest of these with a launch of the generative AI-powered cybersecurity stock assistance.

This solution helps customers to quickly understand threat alerts and prioritize their response with inline generative AI assistance without needing to be an expert in prompt engineering.

John Matteo: This solution helps customers to quickly understand the threat alerts and prioritize their response when inline generous AI assistance without needing to be an expert in prompt engineering.

We also announced a number of enhancements to our SecuSmart product suite for secure communications. This included encrypted video and group audio calls along with additional compliance tools and administrative features as well.

John Matteo: We also announced a number of enhancements to our secchi smart product suite for secure communications.

John Matteo: This included encrypted video and group audio calls along with additional compliance tools and administrative features as well.

Moving now to outlook for a cyber business in Q4, we expect revenue to be in the range of 83 to 88 million for the quarter.

John Matteo: Moving now to outlook for the cyber business in Q4, we expect revenue to be in the range of $83 million to $88 million for the quarter.

This is lower than our previous outlook, primarily because of the reassessment of the likelihood, size, and timing of some of the large government deals in the pipeline.

John Matteo: This is lower than our previous outlook, primarily because of the reassessment of the likelihood size and timing of some of the large government deals in the pipeline.

We also expect ARR to stabilize and to be flat sequentially.

We also expect <unk> to stabilize and to be flat sequentially.

Touching briefly on licensing, revenue for the quarter was $6 million, and we continue to expect Q4 to be approximately $5 million as before.

John Matteo: Touching briefly on licensing revenue for the quarter was $6 million and we continue to expect Q4 to be approximately $5 million as before.

So let me now hand the call over to Steve, who will provide you more color on our financials.

John Matteo: So let me now hand, the call over to Steve who will provide you more color on our financials, Steve over to you. Thank you John.

Steve, over to you. Thank you, John . As always, my comments on our financial performance will be in non-gap terms, unless otherwise noted.

Steve: As always my comments on our financial performance will be in non-GAAP terms, unless otherwise noted.

Steve: Total company revenue for the third quarter was 175 million.

Total company revenue for the third quarter was $175 million.

IOT revenue was $55 million, cybersecurity revenue was $114 million, and licensing revenue was $6 million.

Steve: Iot revenue was $55 million.

Steve: Cyber security revenue was $114 million and licensing revenue was six months.

The percentage of software product revenue that was recurring decreased to approximately 70%, 70%.

Steve: The percentage of software product revenue that was recurring decreased to approximately 70% seven zero.

primarily driven by the impact of SecuSmart revenue related to the Malaysia deal that John referenced.

Steve: Primarily driven by the impact of Sucky smart revenue related to the Malaysian deal that John referenced.

Steve: Okay.

Total company gross margin improved to 73 percent, also largely driven by Malaysian.

Steve: Total company gross margin improved to 73% also largely driven by Malaysia.

Steve: Yeah.

Operating expenses were 115 million, broadly flat quarter on quarter, but as in Q2, benefiting from some one-time items such as reaching benefit caps for the calendar year.

Steve: Operating expenses were 115 million broadly flat quarter on quarter.

Steve: But as in Q2 benefiting from some one time items, such as reaching benefit caps for the calendar year.

non-gap operating expenses exclude a 13 million fair value gain on the convertible to ventures.

Steve: non-GAAP operating expenses exclude 13 million fair value gain on the convertible debentures.

11 million in impairment of long-lived assets.

Steve: 11 million and impairment of long lived assets.

nine million, an amortization of acquired intangibles.

Steve: 9 million and amortization of acquired intangibles.

$9 million in restructuring expenses and $7 million in stock compensation.

Steve: 9 million and restructuring expenses.

Steve: And 7 million and stock compensation expense.

Steve: The non-GAAP operating profit was $13 million and non-GAAP net profit for the third quarter was $3 million.

The non-GAAP operating profit was $13 million and non-GAAP net profit for the third quarter was $3 million.

Blackberry delivered one cent of non-gap basic earnings per share for the quarter, feeding expectations.

Steve: Blackberry and delivered one of non-GAAP basic earnings per share for the quarter, beating expectations.

Steve: Adjusted EBITDA, excluding the non-GAAP adjustments outlined was $18 million.

adjusted EBITDA excluding the amount gap adjustments outlined was 18 million.

Total cash, cash equivalents and investments decreased to $271 million as of November 30th.

Steve: Total cash cash equivalents and investments decreased 271 million as at November 30th.

do in part to cash use by operating activities of 31 million, but primarily to a 215 million net reduction in outstanding debt.

Steve: Due in part to cash used by operating activities of 31 million.

Steve: But primarily to a 215 million net reduction in outstanding debt.

During the quarter, the 365 million of convertible debentures issued in September 2020 were fully repaid as previously communicated.

Steve: During the quarter the $365 million of convertible debentures issued in September 2020 were fully repaid as previously communicated.

Steve: A smaller $150 million of short term convertible debentures were then issued.

A smaller 150 million of short-term convertible debentures were then issued, which matured in February 2024, with an option to extend to May 2024 should both parties agree.

Steve: Which mature in February 2024, with an option to extend to May 2024 should both parties agree.

Steve: Yeah.

Despite significant increases in the level of interest rates since 2020,

Steve: Despite significant increases in the level of interest rates since 2020.

The coupon rate on these extension debentures remains at 1.75 percent and the conversion price remains at $6.

Steve: The coupon rate on these extension debentures remained at 175%.

And the conversion price remains at $6.

This provides Blackberry with meaningful additional liquidity at attractive rates while we evaluate longer-term financing needs. That concludes my comments and I'll

Steve: This provides blackberry with meaningful additional liquidity at attractive rates, while we are evaluating longer term financing needs.

Steve: Yeah.

Steve: That concludes my comments and I'll turn it back to John.

John Matteo: Thank you Stacey.

John Matteo: Yeah.

Last week, we announced a change in strategic direction of the company.

Last week, we announced a change in strategic direction of the company.

The Board, with input from its advisors, has reassessed the earlier decision to pursue a subsidiary IPO of the IoT business.

John Matteo: The board with input from its advisors has reassessed the earlier decision to pursue a subsidiary IPO of the Iot business.

We believe there is increased optionality for optimizing shareholder value by stepping back from that path and instead focusing on fully separating the IoT and cyber business

John Matteo: We believe.

John Matteo: There is increased optionality for optimizing shareholder value by stepping back from that path and instead, focusing on fully separating the Iot and cyber businesses.

John Matteo: As part of this we will have the opportunity to optimize and streamline processes building, even stronger standalone divisions.

As part of this, we will have the opportunity to optimize and streamline processes building even stronger standalone divisions.

A key focus is to return BlackBerry to profitability and positive cash flow.

John Matteo: Our key focus is to return Blackberry to profitability and positive cash flow.

And this requires us to take some tough decisions on our cost structure.

John Matteo: And this requires us to take some tough decisions on our cost structure.

In Q3, we took a number of actions to reduce expenses in the cyber business and the back office that will reduce our cost run rate by about 50 million per year.

John Matteo: In Q3, we took a number of actions to reduce expenses in the cyber business and the back office that will reduce our cost run rate by about 50 million per year.

these decisions along with strong collection receivables.

John Matteo: These decisions along with strong collection receivables played.

played a part in almost having our operating cash usage from 56 million last quarter to 31 million in Q3.

John Matteo: Played a part in almost having our operating cash usage from $56 million last quarter to $31 million in Q3.

Given the combination of strong buildings this past quarter.

John Matteo: Given the combination of strong billings this past quarter.

and the benefit of a full quarter of cost reductions.

John Matteo: And the benefit of a full quarter of cost reductions.

we expect to further improve operating cash flow in Q4.

John Matteo: We expect to further improve operating cash flow in Q4.

However, we believe that we can go further.

John Matteo: However, we believe that we can go further.

Blackberry has been in an investment mode, particularly in cyber, and now that a number of key product enhancements have been brought to market, we're in a position to return investment levels closer to industry averages.

John Matteo: Blackberry has it been in an investment mode, particularly in cyber and know that a number of key product enhancements have been brought to market. We're in a position to return investment levels closer to industry averages.

John Matteo: Furthermore, blackberries business has significantly pivoted and made a number of acquisitions over the years and we see ways to streamline our back office works.

Furthermore, Blackberry's business has significantly pivoted and made a number of acquisitions over the years, and we see ways to streamline how our back office works.

For instance, despite recent cost reduction efforts, we still have 36 offices worldwide.

John Matteo: For instance, despite recent cost reduction efforts, we still have 36 offices worldwide.

John Matteo: We have some to put as a duplicate of teams.

To illustrate the potential opportunities, let me outline current OPEX expectations for Q4.

John Matteo: To illustrate the potential opportunities, let me outline current opex expectations for Q4.

As mentioned, we expect total company revenue to be in the range of 150 to 159 million.

John Matteo: As mentioned, we expect total company revenue to be in the range of $150 million to $159 million.

On a non-gap basis, sales and marketing is expected to be approximately 27 percent, while R&D 30 percent and G&A excluding amortization at 20 percent.

John Matteo: On a non-GAAP basis sales and marketing is expected to be approximately 27%.

John Matteo: While R&D, 30% and G&A, excluding amortization at 20%.

Both R&D and G&A are high compared to our long-term targets.

John Matteo: Both are in D and G&A are high compared to our long term targets.

John Matteo: But we see opportunities to.

So significantly right size across the board, while continuing to nurture the exciting growth opportunities in our two divisions.

We are targeting the completion of the separation process in two fully standalone divisions with a much lighter weight corporate overlay in calendar year 2023.

John Matteo: We are targeting the completion of the separation process into fully standalone divisions with a much lighter weight corporate overlay in calendar year 2023.

So before we open the lines for Q&A, let me quickly summarize the key messages.

John Matteo: So before we open the lines for Q&A, Let me quick quickly summarize the key messages.

John Matteo: This was a good quarter for Blackberry.

The IoT business unit delivered its strongest quarterly revenue for the past two years and maintained strong momentum in adding royalty backlog from design wins in auto and gem.

John Matteo: The Iot business unit delivered its strongest quarterly revenue for the past two years maintained strong momentum in adding royalty backlog from design wins in auto and Jim.

The cyber business secured large government deals that help drive stroke, sequential revenue growth, and ARR continues to stabilize.

John Matteo: The cyber business secured large government deals that helped drive strong sequential revenue growth.

John Matteo: A R. R continues to stabilize.

we took actions relating to our cost structure that, in part, contributed to a significantly lower operating cash flow usage.

John Matteo: We took actions relating to our cost structure that in part contributed to a significantly lower operating cash flow usage and.

and we are targeting significant further reductions in the future.

John Matteo: And we are targeting significant further reductions in the future.

And we have begun to work to separate our IoT and cyber business units into fully standalone divisions that we believe will position BlackBerry from more strategic alternatives to drive increased shareholder

John Matteo: And we have begun to work to separate our Iot and cyber business units into a fully standalone divisions that we believe will position Blackberry for more strategic strategic alternatives to drive increased shareholder value.

Let's now move to Q&A. Operator, can you please open the lines? Yes, sir. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touchtone phone. If you're using a speaker phone, please pick up your handset before pressing the keys.

Speaker Change: Let's now move to Q&A operator can you. Please open the lines yes.

Speaker Change: Yes, Sir we will now begin the question and answer session to ask a question you May Press Star then one on your Touchtone phone.

Speaker Change: If youre using a speakerphone please pick up your handset before pressing the keys.

And to withdraw your question, please press star then 2. And at this time, we'll pause momentarily to assemble our roster.

Speaker Change: To withdraw your question. Please press Star then two and at this time, we'll pause momentarily to assemble our roster.

And the first question will come from Mike Walkley with Canachore Genuity. Please go ahead.

Speaker Change: And the first question will come from Mike Walkley with Canaccord Genuity. Please go ahead.

Great. Thanks for taking my questions, and John , congratulations on promotion to CEO .

Mike Walkley: Great. Thanks for taking my questions and John Congratulations on the promotion to CEO.

Speaker Change: Thank you.

I just want to dig in, I guess, to start with on the cybersecurity outlook, given the probability of some of the larger government deals. Are these deals just taking longer to close, which is common for some of the large deals in this tough macro environment, or have some been lost?

Speaker Change: I just wanted to dig in I guess to start with on the cyber security outlook.

Speaker Change: Given the profitability of some of the larger government deals are these deals just taking longer to close which is common for some of the large deals in this tougher macro environment.

Speaker Change: Or if something lost it and I guess, given the lumpiness within cyber security you know how should we think maybe about a run rate for the business you know off of what you're guiding to this year in the 25, I know you're not providing long term guidance, but do you think this business grows off of what you put up for 2024. Thank you.

And I guess given the lumpiness within cybersecurity, you know, how should we think maybe about a run rate for the business, you know, off of what your guidance is this year into, into 25, I know you're not providing long term guidance, but you think this business grows off of what you put up for 2024. Thank you.

Yeah, great questions across the board and I think, you know, a couple of things. One, to the first question around, you know, the deals and the lumpiness of them and did they go away or is it timing, you know, a couple of things. I think a number of them are more timing related activities that tends to be, you know, the way it is. I think some of the dynamics that's happening right now with

Speaker Change: Yeah, great questions a across the board and I think.

Speaker Change: A couple of things one to the first question around you know.

Speaker Change: The deals and the Lumpiness of them and did they go away or is it timing.

Speaker Change: A couple of things I think are a number of them are more timing related activities. Yeah that tends to be you know the way. It is I think some of the dynamics that's happening right now with.

You know, whether it's the continuing resolution activity in the US government that tends to.

Speaker Change: You know whether it's are they continuing resolution activity in the U S government that tends to slow things down a little bit and there's similar kinds of things happening in the German government, which obviously, we have a big footprint with our secchi smart business. So I think a number of them are are more timing related.

slow things down a little bit. And there's similar kinds of things happening in the German government, which obviously we have a big footprint with our SecuSmart business. So I think a number of them are more timing related. And some of them

And you know some of them.

Speaker Change: There was one deal in particular, where they decided to go more towards an I O T. I O S solution that Android solution and that that lowers a little bit of the addressable market for us as as they make a decision to operate door adapt another op.

And that lowers a little bit of the addressable market for us as they make a decision to operate or adapt another operating system.

Speaker Change: The rating system. So so on that perspective, it's some of it's timing a little bit of a customer moving into a different technology that tends to use a little bit less of what we offer but I think that's how I would address that as far as longer term with governments, which it does represent.

So on that perspective, some of its timing, a little bit of a customer moving into a different technology that

tends to use a little bit less of what we offer, but I think that's how I would address that. As far as longer term with governments, it just does represent

It's naturally a pretty lumpy business just the way that works.

Speaker Change: It's naturally a pretty lumpy business just the way that works yeah. We're fortunate enough. This quarter. The lumps went our way you know with with Malaysia, and DHS and a couple of other things. So yeah. My commitment is to just give you the best transparent realistic view of this.

You know, we're fortunate enough this quarter the lumps went our way, you know, with with Malaysia and DHS and a couple other things.

So, you know, my commitment is to just give you the best transparent, realistic view of this business that I possibly have, which is why I'd love to be able to say some of these opportunities are in the forecast and give you a bit of a higher guidance. But I want to be balanced, improved, and pragmatic about it. And that's my commitment as I move into this new role to try and give you as much transparency as I can.

Speaker Change: Business that debt that I, possibly half, which is why I'd love to be able to say some of these opportunities are in the forecast and give you a bit of a higher guidance, but I want to be I want to be balanced and prudent and pragmatic about it and that's my commitment as I move into this new role to try and give you as much.

Speaker Change: Parity as I can.

And maybe just a follow-up question for you on a bigger picture. It just sounds like you've already made some really hard decisions on cutting costs on the cybersecurity side, but it sounds like maybe IoT, you're leaving alone, or does that business have areas you can streamline also? I know you've been in COC for a short time, but how are you thinking about allocating resources to the two businesses that you work towards reporting them separately?

Speaker Change: Okay, Great and maybe just a follow up question for you on a bigger picture just it sounds like you've already made some really hard decisions on cutting costs.

Speaker Change: On the cyber security side, but it sounds like maybe Iot youre, leaving alone or is that business have areas. You can streamline also just I know you've been CEO seat for a short time, but you know how you're thinking about allocating resources to the two businesses that you work towards reporting them separately.

Yeah, you know, I think that's probably something it's worth coming back to next next quarter as we as we dig into it. I mean, I think it's fair to say the business is.

Speaker Change: Yeah, I you know I think that's probably something it's worth coming back to next next quarter as we as we dig into it.

Speaker Change: I mean, I think it's fair to say the Iot business is.

You know, in a more stable place, it's definitely been more of a growth trajectory. So, naturally, we take that into account. You know, we don't want to disrupt the momentum that we're seeing on the IoT side at all. But, you know, since it's day seven in the job in this new role, if you give me a little more time, we'll come back to you with some more insights next quarter.

Speaker Change: Yeah, much more in a bit.

Speaker Change: And in a more stable place, it's definitely been more of a growth trajectory. So naturally we take that into account you know we don't want to disrupt the momentum that we're seeing on the Iot side at all but.

Speaker Change: Since it's a day seven and the job in this in this new role.

Speaker Change: If you give me a little more time, we'll come back to us with some more insight next quarter.

Well, if fair enough, best wishes for success in a new role and happy holidays to everybody on the call. Thank you. Thank you. The next question will come from Paul Tiber with RBC Capital Markets. Please go ahead.

Speaker Change: Yeah Fair enough. That's my sense for success in your new role and happy holidays to everybody on the call.

Speaker Change: Same to you. Thank you.

Speaker Change: Next question will come from Paul Tiber with RBC capital markets. Please go ahead.

Paul Tiber: Oh, Thanks for taking the question and good afternoon, just a high level question just in regards to the the separating of Q&A and cyber you mentioned, you know better position the company for strategic alternatives now what specifically do you mean by that I mean are you looking at divesting some segments during an entire segment here.

Speaker Change: I think it gives us a you know Paul just more a more flexible I think in the past they've been a little bit blended yeah. We had cyber we had our I O T. We had Ah Ah corporate convergent strategy, which sometimes I think limits you know some of the optionality.

I think limits some of the optionality that we have out there, so making a very decisive

Speaker Change: That we have out there so making a very decisive.

decision around two business units.

Speaker Change: Decision around two business units independent are driving towards.

independent, driving towards profitability.

Speaker Change: Profitability.

We think that gives us more optionality, whatever they may be, whether that's a

Speaker Change: We think that gives us more optionality, whether whatever they may be whether that's a.

a spin-off, a sale, we're going to, our board will consider the best options that maximize our shareholder value and in the interim getting them aligned independently focused on their large, each of them have large respective tams in the industry.

Speaker Change: Spin off a sale where we're not.

Speaker Change: Our board will consider the best options that maximize our shareholder value and in the interim getting them aligned independently focused on their large each of them have large respective terms in the industry.

We kind of just felt that's a better approach and gives us better options for the future.

Speaker Change: Are we kind of felt that that's a better approach and it gives us a better option for the future.

Okay, thanks for that color. The second question, just on liquidity and cash flow and your comments on Q4 cash flow improving is helpful, but how do we think about liquidity here, particularly with the converts, you know, is an option to extend them. But as you separate the two businesses, how do you think about managing cash and how much cash would be consumed in the short term just within a restructuring payout?

Speaker Change: Okay. Thanks for that color.

Speaker Change: Second question, just on liquidity and cash flow and your comments on Q4 cash flow improving it is helpful. But how do we think about them with liquidity here, particularly with the converts and you know there's an option to extend them, but as you separate the two businesses. How do you think about managing cash and how much.

Speaker Change: Cash will be consumed in the short term just with any restructuring payouts.

So.

So a couple of things, Paul, so we're obviously

Speaker Change: A couple of things Paul So we're obviously.

you know, as John said, next quarter, which would be our year end, will be in a position to provide more color, you know, concretely on those plans and, you know, there will be updates, of course, with respect to the financing structure that, you know, certainly we're pursuing and exploring, you know, longer term financing and looking at the different options to put that in place, which is being actively worked.

Speaker Change: You know as John said next quarter, what would what should be our year end, we'll be in a position to provide more more color.

Concretely on those plans and you know there there will be updates of course with respect to.

Speaker Change: The financing structure.

Speaker Change: Certainly we're pursuing and exploring.

Speaker Change: You know longer term.

Speaker Change: Financing and looking at the different options to put that in place, which is being actively work, we've got sufficient liquidity and access to capital to kind of execute on the plan obviously that.

We've got sufficient liquidity and access to capital to kind of execute on the plan, obviously the.

The goal in the very short term is to get both businesses generating positive cash flow.

Speaker Change: That's the goal and the.

Speaker Change: And the very.

Speaker Change: You know short term is to is to get both businesses are.

Generating positive cash flow.

So there isn't a, there shouldn't be a significant drag in the business after a relatively short period of time, but we're working on those plans.

Speaker Change: So so there isn't a there shouldn't be a significant.

Speaker Change: Drag in the business after after a relatively short period of time, but we're working on those plans.

And then just a last question for me, just back to John , you've been head of the cyber business for a couple of years. You've seen the investments in product and go to market. Where do you see the business that strategically in terms of product, in terms of trying to capture mind share with customers, and how do you see the growth trajectory going forward in that business?

Speaker Change: And then just last question for me just.

Speaker Change: Back to John D. I mean, you've been I'm head of the cyber business for a couple of years, you've seen the investments in product and go to market them.

Speaker Change: Where where do you see the business that strategically in terms of product in terms of them trying to capture mind share with with customers in and how do you see that the growth trajectory going forward in that business.

Yeah, the cyber business unit is, you know, a number of different dynamics because we have a number of different products that address different, but one thing, you know,

Speaker Change: Yeah.

Speaker Change: Cyber.

Speaker Change: Business unit.

Yeah, a number of different dynamics, because we have a number of different products that address different but one thing.

I will call out was like the Malaysia deal was actually an interesting example of how they bought into our whole, you know, vision of the portfolio, you know, and maybe, you know, one product in the portfolio.

Well I won't call out was.

Speaker Change: Like the Malaysia deal was it was actually an interesting example of how they bought into our whole you know our vision of the portfolio.

Speaker Change: Maybe you know one product in the portfolio.

maybe it's maybe there's a better product out there you know maybe you know but the overall historic holistic solution and how we delivered it really caught their attention and you know convinced them that we were the right company to partner with so I do think the entire portfolio approach is helpful in certain accounts like a big government like that that's looking for a broad set of solutions

Speaker Change: Maybe it's maybe there's a better product out there maybe but the overall historic holistic solution and how we delivered it.

Speaker Change: Really caught their attention and and and you know.

Speaker Change: Convinced them that we were the right company to partner with so I do think the entire portfolio approaches.

Speaker Change: Approaches is helpful in certain accounts like a big government like that that's looking for a broad set of solutions.

Um, and, but, you know, if, you know, our ad hoc business is

Speaker Change: And but you know it from our AD hoc business is.

firing on all cylinders, gaining market share, our SECI smart business, very, very strong in the German government and we've got some nice wind outside of Germany this year, which we think is a step in the right direction.

Speaker Change: Firing on all cylinders, gaining market share our secchi smart business, a very very strong and the German government and we've got some nice wins outside of of Germany. This year, which we think is a step in the right direction UES, we've been focused on the silence part for it to really get that product.

UES, we've been focused on the SILANCE platform to really get that product back to where we needed to be. There were some gaps in the portfolio, there were some quality issues.

Speaker Change: Back to where we needed to be you know there were some gaps in the portfolio there were some quality issues. So so each.

you know, each of them have a number and UEM is a very mature, you know, product that has a little bit less growth. So, you know, holistically, you know, we think there's an opportunity for this business to grow. We're looking very closely at what

Speaker Change: Each of them have a number in <unk> is a very mature product.

That has a little bit less growth so yeah holistically.

Speaker Change: We think there is an opportunity for.

For this business to grow we're looking very closely at what.

you know, as we think about next year's plans and AOP and we'll come back to you with a projection for next quarter. But a lot of different dynamics in the cyber business, which is why sometimes it's hard to handicap growth because of these

Speaker Change: As we think about next year's plans and a L P and and and and we'll come back to you with yeah with a projection for next quarter, but a lot of different dynamics in the cyber business, which is why it's sometimes it's hard to handicap growth because of these these factors that kind of run with it.

these factors that kind of run within it. So we'll come back to you with more details next quarter, but hopefully that gives you a few snippets.

Speaker Change: So we'll come back to you with more details next quarter, but hopefully that gives you a few snippets.

Speaker Change: Okay. Thanks.

The next question will come from Luke Young with Baird, please go ahead. Good afternoon, thanks for taking questions. I want to start with IoT, just hoping you could comment at a high level on the bookings environment and automotive. Just wondering if you're seeing any impact of moderating EV demand on the software side, realizing that these macro issues we've been dealing with have been pre-existing for a few quarters now, but is EV interplaying with that at all, John ?

Speaker Change: The next question will come from Luke Young with Baird. Please go ahead.

Luke Young: Good afternoon, and thanks for taking the questions I'll start with Iot just hoping you could comment at a high level on the bookings environment in automotive just wondering if you're seeing any impact of moderating E V demand on the software side you know realizing that these macro issues. We've been dealing with have been you know pre existing for a few quarters now.

Luke Young: But as E V inner playing with that at all John.

Luke Young:

Yeah, we've definitely seen that, you know, EV, some of the big next generation EV projects has been some delays by some of the big OEMs, so absolutely we're seeing it. But I would say on this one, we are more

Speaker Change: Yeah, we we yeah, we've definitely seen that you know E V. Some of some of the Big next generation EV projects Theres been some delays by some of the big.

Speaker Change: Big Oems so absolutely we're seeing it but I I would say on this one we are more.

You know, the underlying fundamentals of our IoT business, I believe just couldn't be stronger.

Speaker Change: So you know the underlying fundamentals of our Iot business Ah I I believe just couldn't be stronger.

right now. When I think about the backlog that we have for our royalties, when you think about the design wins, that number of design wins, automotive and otherwise with Gem and other things that we're getting, we think that's an opportunity. IV as a bit of a, when we think of how well positioned we are into that market, I think we're in a really good position to weather some of these.

Speaker Change: Right now, but when I think about Oh the <unk>.

Speaker Change: Backlog that we have for our royalties when you think about the design win set a number of design wins automotive and otherwise with jamming and other things that we're getting are we think that's an opportunity I V is that there's a bit of a you know when we think of how well positioned we are to that mark.

Speaker Change: I think we're in a really good position to weather some of these.

you know these headwinds that come from time to time and this you know the last couple quarters has been some headwinds between the strikes with UAW between you know some of the as a result some of the the manufacturers pull back a little bit on some of their more sophisticated vehicles

Speaker Change: You know these headwinds that come from time to time and this you know the last couple of quarters, there's been some headwinds between the strikes with UAW between you know.

Speaker Change: Some of the as a result, some of the manufacturers have pulled back a little bit on some of their.

Speaker Change: More sophisticated.

Vehicles.

But, you know, I think all in all we're really well positioned as these headwinds subside and we start seeing more things rolling off the lines and more of these new designs which inevitably are going to come to market, we think we're really well positioned.

Speaker Change: But.

Speaker Change: I think all in all we're really well positioned as these headwinds subside and we start seeing more things rolling off the lines and no more of these new designs, which inevitably you're going to come to market. We think we're really well positioned.

very strong backlog, which I think sets us up well for the future.

Speaker Change: Very strong backlog.

Speaker Change: Which I think sets us up well for the future.

Thanks for that. And then a bigger picture question, you know, I appreciate the color on your looking at the cost structure, cash flows, those sorts of things. And, John , I'm just hoping to understand your approach and really just waiting of time between looking at Blackberry overall operations at the segment level. Should we think of you having sort of a player coach mentality?

Speaker Change: Thanks for that and then a bigger picture question you know I appreciate the color on you're looking at the cost structure cash flows those sorts of things and John I'm, just hoping to understand your approach and really just waiting of time between looking at Blackberry overall operations.

Speaker Change: At the segment level should we think of you having sort of a player coach mentality.

a player coach mentality. Well, maybe that's an interesting way to describe it. We do, we got a great team in IOT, great strong leadership, built a really strong business there, so absolutely we want to give them the resources, the support, the financial back, anything that you know, the bigger company can provide.

Speaker Change: A player coach mentality, well and you know me.

That's a that's an interesting way to describe it we do we got a great great team in Iot Great strong leadership has built a really strong business there.

Speaker Change: So absolutely we want to give them the resources to support the financial back any anything that you know the bigger company can provide so yeah definitely look at it as a two companies on their own driving their own businesses and.

So, you know, definitely look at it as two companies.

on their own, driving their own businesses, and with a kind of a holding company structure that's there, you know, to support them with.

Speaker Change: The kind of a holding company structure that's there.

Speaker Change: To support them with Hum with all the things that they need to drive their business forward. So I don't know if you call that player coach, but certainly you know maybe parent child.

with all the things that they need to drive their business forward. So I don't know if you call that player coach, but certainly, you know, maybe parent-child. You know, you want your children to get up and run and reach for the stars, and we're going to do everything we can to give them everything they need to do it.

Speaker Change: Do you want your children to get up and running and.

Speaker Change: And reach for the stars and we're going to do everything we can to give them everything they need to do it.

Speaker Change: Okay I'll leave it there thank you.

Thanks, Luke. The next question will come from Tripp Chandra with Global Equities Research. Please go ahead.

Speaker Change: Thanks, Luke the next question will come from trip Chowdhry with Global Equities Research. Please go ahead.

Thank you so much and a very good quarter. I had a couple of questions first on cyber security. Traditional machine learning created a new set of challenges in cyber security, which SILENCE and BlackBerry addressed very well. And now we are having these generative AI, including transformer models, which are coming into the marketplace.

Thank you so much and a very good quarter I had a couple of questions Oh first around cyber security.

Speaker Change: Traditional machine learning created a new set of <unk>.

Speaker Change: <unk> enjoys in cyber security, which silence and like what he addressed very round and now behind US we are having these generative AI, including transformer models.

Speaker Change: Coming into the market place.

I was wondering what kind of a market expansion you see these new technologies posed to BlackBerry and how does BlackBerry plan to

Speaker Change: Was wondering what kind of a market expansion you see these new technologies boost to Blackberry and who does Blackberry plan too.

monetize or capitalize on these new threads that are going to come because of these new generative technologies. And then I have a follow-up.

Speaker Change: Monetize uncapped capitalize on these new threats that are going to come because of these new generative technologies and then I have a follow up.

Thanks, Tripp. Yeah, absolutely. We think, you know, AI has a, you know, a big role to play in this industry. It's actually one of the things that we think is one of our differentiators is our machine learning, our, you know, AI technology that underpins our entire portfolio. You know, silence was...

Speaker Change: Thanks, Tripp, Yeah, Yeah, absolutely, we think AI has a.

Speaker Change: You.

You know a big role to play in this industry. It's actually one of the things that we think is one of our Differentiators is our machine learning our our AI technology that underpins our entire portfolio you know silence was.

You know, I would say the inventor, the creator of AIML Cyber Secure, we're on our seventh generation.

Speaker Change: You know I would say the inventor of the creator of AI ml cyber secure we're on our seventh generation.

of machine learning where our efficacy rates are the best that they've ever been. So this is something that we watch closely, we invest closely, we incorporate some of the

Speaker Change: Of of machine learning, where where are our efficacy efficacy rates are the best that they've ever been so.

Speaker Change: This is something that we watch closely we invest close we incorporate some of the technology not only into our cyber threat intelligence, but just.

technology not only into our cyber threat intelligence but

Just, you know, how we, even in our EDR capabilities, when a notification comes up, how can we help our

Speaker Change: Just you know how we even in our edr capabilities when a notification comes up how can we help our <unk>.

our stock analysts, our customers identify these issues.

Speaker Change: Our sock analysts sarkar, our customers identify these issues much more quickly using our AI technology. So we think it has a very big role to play we're going to continue to invest in it and leverage it as a way for us to grow our revenue.

much more quickly using AI technology. So we think it has a very big role to play. We're going to continue to invest in it and

Um, leverage it as a way for us to grow our revenue.

Perfect. The second question is like some of the previous

Speaker Change: Okay. The second question is like some of the previous.

Speaker Change: People also ask about software.

Speaker Change: And these new generation cause including Evs and.

And even as of today.

Speaker Change: Porsche has not gone to software.

Speaker Change: Hum system in in place of the software continues to be the weakest link you, including these new generation.

Speaker Change: Companies you said.

or the fiscal, you name them, and traditional companies too. So I was wondering, like,

Speaker Change: And Fisker, you name them and traditional companies do.

So I was wondering like.

What is preventing these established automakers from fully embracing BlackBerry and QNX and why are they still going on the path of pretty much failure to do it themselves when they can't even, they don't even have the software skills. I think they can just buy versus make decision should be.

Speaker Change: What is preventing these establish automakers from fully embracing.

Speaker Change: Blackberry and Q&A X and they are they still going in the on the part of pretty much failure to do it themselves when they come to you when they don't even have the social skills I think they can just buy versus make decision should be.

no-brainer. Why are these companies not embracing QNX and have a jumpstart on the software-defined vehicles? Any thoughts, I'll appreciate it. And thanks again. Good execution.

Speaker Change: No brainer.

Speaker Change: Why are these companies not embracing kubernetes and have a jumpstart on the software defined Michaels and he taught and appreciate it and thanks again good execution this quarter.

Thanks, Tripp. Tripp, I was just wondering if you want to come over and join our sales team because I love it. Absolutely, you know, we have

Speaker Change: Thanks, [laughter] trip I was just wondering if you want to come over and join our sales team because I I I I I I love it.

Speaker Change: Absolutely you know.

Speaker Change: We have.

We feel, you know, the thing that there's software-defined vehicles and bringing that technology in just is good for everybody. It's good for the OEMs, good for their customers, good for us.

Speaker Change: We feel the same that there's software defined vehicles and bring that technology and just as good for everybody. It's good for the Oems is good for their customers and good for us.

We're, you know, fortunate the team has done a great job. We have very entrenched where, you know, with over 235 billion vehicles that have QNX today, the design wins with our big, you know, customers today. I think, you know, we've got a lot of people that are interested in QNX today.

Speaker Change: We're fortunate the team's done a great job.

Speaker Change: We have a very entrenched.

Where hum you know with over 235 billion vehicles that have Q N X today, the design wins with our are big.

Speaker Change: Customers today, I think positions us.

positions us really well. I think we're getting our fair share of the market. And I think there's more to be had. I think there has been some headwinds this year with just everything going on with the economy and strikes and whatever that's

Speaker Change: Really well I think we're getting our fair share of the market and I think there's more more to be had and I think there has been some headwinds this year with everything going on with the.

The economy and strikes and whatever that's maybe having them pull back a little bit, but when the floodgates open and they bring in these next generation EV vehicles that have more software than ever before.

maybe having them pull back a little bit but when you know the floodgates open and they bring in these next generation EV vehicles and that have more software in them than ever before.

I think we couldn't be better positioned to capture even more of that market share, particularly with things like our most recent release, SDP 8.0. I think, you know, that leverages the processor capacity and that next generation capability.

Speaker Change: I think we couldn't be better positioned to capture even more.

Speaker Change: More of that market share, particularly with things like our most.

Speaker Change: Recent release STP aimed at all I think you know that Leverages the processor capacity in that next generation capability, So something where we're all over it we're going to continue to be all over and.

So, something we're all over, we're going to continue to be all over and we're hopeful to be announcing more and more design wins for you guys, you know, in the future. Thank you so much.

Speaker Change: We're hopeful that.

Speaker Change: I'll be announcing more and more design wins for you guys.

Speaker Change: In the future. Thanks.

Speaker Change: Thank you so much all the best.

Thanks, Tripp. The next question will come from Todd Copeland with CIBC. Please go ahead.

Speaker Change: The next question will come from Todd Copeland with CIBC. Please go ahead.

Good evening. I just had a couple of cash questions.

Todd Copeland: Yeah good evening.

Todd Copeland: Had a couple of cash questions.

What's the expectation for cash restructuring costs relating to sideways?

Todd Copeland: What are what's the expectation for our cash our restructuring costs relating to cyber.

Todd Copeland: Okay.

So we're working through that, you know, but it's not going to be astronomical, you know, it'll be, you know, well within our means to handle with the availability.

Todd Copeland: So oh.

Todd Copeland: We're working through that.

Right.

Todd Copeland: It's not gonna be astronomical.

Todd Copeland: It'll be well within our means to them.

Todd Copeland: Now to handle what's with the available resources.

And, well, is that expected to be booked in the fourth quarter?

Todd Copeland: Okay and will that is that expected to be booked in the AR in the fourth quarter.

You'll have to stay tuned. We'll provide an update, you know, we're working through that.

Speaker Change: You'll you'll have to stay tuned well will provide an update.

We're working through that.

And, you know, at this point...

Speaker Change: And I you know at this point.

What is the expected timing to get cyber cash flow positive with the track year?

Speaker Change: What is the expected timing to get cyber are cash flow positive.

Speaker Change: With the with the track you're you're getting yourself one.

Todd, I think that's something we're going to have to come back to you on. We made great strides over the course of the last couple of years. We've got more plans that we're working through now, and I think it's probably best for us to give you a more comprehensive update in the next quarter after we've done some of that work.

Speaker Change: Todd I think that's something we're gonna have to come back to you on our we are made great strides over the course of the last couple of years.

We've got more plans that we're working through now and I think it's probably best for us to give you a more comprehensive update.

Speaker Change: In in next quarter after we've done some of that work.

Speaker Change: I see okay, and then I just wanted to make sure I had this <unk>.

And then I just wanted to make sure I had this right, it sounded like you said you expected to have the separation complete next fiscal year. So it sounds like it's going to take a little while to work through the redundancies, the 36 offices and whatever other optimization plans you want to put in place. Can you just talk us through a rough timeline on that? Thanks a lot.

Speaker Change: Right.

Speaker Change: It sounded like you said you expect to do have the separation complete next fiscal year. So it sounds like it's going to take a little while to work through the redundancies the 36 offices.

Speaker Change: And whatever other opt.

Speaker Change: Optimization plans do you want to put in place can you just talk us through a rough time line on that thanks a lot.

Yeah, I think on this one.

Yeah I think.

Speaker Change: On this one.

I think it's going to be one of those things where as we go through the process.

Speaker Change: I think it's gonna be one of those things, where we're going as we as we go through the process, there's going to be some low hanging fruit. Some quick wins some things that we can do really quickly that are.

There's going to be some low-hanging fruit, some quick wins, some things that we can do really quickly that, you know, will, you know, save us some money, get the team.

Speaker Change: Well you know.

Speaker Change: Saved us some money get the teams aligned et cetera.

And then there'll be, you know, other ones that are going to take a little bit longer, but I think, you know, mid calendar year, getting into a position where we can have

Speaker Change: And then and then there'll be other ones that are going to take a little bit longer but I think you know me.

Calendar year getting into a position where we can have the majority of.

the majority of the functions and capabilities within the two business units up and running and standalone. I think that would be success for us. I think there'll be some straggling things. There might be some IT related things that, you know, take a little bit longer to untangle and unwind.

Speaker Change: The functions and capabilities within the two business units up and running and stand alone I think that would be success for us I I think there'll be there'll be some straggling things there might be some I T related things that are you know take a little bit longer to untangle and unwind.

and get them set up properly within the divisions.

And get them set up properly within the divisions, but.

But, you know, that's how we feel about we want to move as fast as we possibly can.

Speaker Change: You know that's that's that's how we feel about we want to move as fast as we possibly can.

Speaker Change: That's all for me Thanks, a lot. Thanks.

Speaker Change: Thanks Todd.

Speaker Change: The next question will come from Daniel Chan with TD Cowen. Please go ahead.

Yes, thanks John . I think your contract calls out some incentive for you to get the business to cash flow positive by Q1 fiscal 25

Yes, Thanks, John I think a contract calls out some incentive for you to get the business to cash flow positive by Q1 fiscal 'twenty five.

which isn't a lot of time considering how much work there is to do. So appreciate that you highlighted some of the organic cost cuts that you're thinking about. Just wonder if there are any other options you're weighing at this point. In particular, your predecessor said he wasn't really considering any asset sales to bring the business to profitability. Just wondering whether there are other options outside of the organic cost cuts you're thinking about.

Speaker Change: Which isn't a lot of time, considering how much work there is to do so I appreciate that Oh, you highlighted some of the organic cost cuts that you're thinking about just wondering if there are any other options you're weighing at this point in particular your predecessor said he didn't it wasn't really considering any asset sales to bring the business to profitability just wondering whether there.

Speaker Change: Other options outside of the organic cost cuts youre thinking about.

Speaker Change: Yeah.

You know, as I come into this, just a different, you know, fresh, you know, a new approach, not fresh, but just, you know,

Speaker Change: Yeah as I as I come into this just Uh huh.

Speaker Change: A different a fresh new approach are not fresh, but just you know it's I want to look at it I'm Gonna look at all all of our options.

I want to look at all of our options. I think obviously the organic things that you mentioned, Daniel.

Speaker Change: I think obviously the the organic things that you mentioned Daniel Tomatoes are yeah that should be the majority of our time, yeah, what streamline things, let's get let's get the.

To me, that should be the majority of our time. Let's streamline things. Let's get the divisions up and running. That's where the big money's going to be. At the same time, me coming in with just a different perspective, I've been with the company for a couple of years. I've come from the start to take a look at some of the other assets that we have and decide whether or not do they make sense to be part of the company should.

Speaker Change: Divisions up and running that's where the big you know the big money is going to be at the same time me coming in was it just a different perspective, but I'm with the company for a couple of years have come from that.

Speaker Change: To take a look at some of the other assets that we have and decide whether or not you know.

Speaker Change: Do they make sense to be part of the company should or is there opportunity to monetize it in some other way you know the answer is yes, I think well my my I'd be open to looking at all those kinds of things, but you know kind of in the spirit of 80 2080, 80% of getting to cash flow.

Is there opportunity to monetize it in some other way?

Um, you know, the answer is yes. I think we'll, uh, my, my, um,

I would be open to looking at all those kinds of things, but, you know, kind of in the spirit of 80-20, you know, 80% of getting to cash flow pauses is probably going to come from the organic stuff, but to the extent that we can find the 10, 15, 20% through some other things, that's something we'll absolutely take a look at.

Speaker Change: <unk> is probably going to come from the organic stuff, but to the extent that we can find a 10 15, 20% through some other things that's something we'll absolutely take a look at.

That's helpful. Thanks. Can you get to your targets just by cost cuts alone?

Speaker Change: That's helpful. Thanks can you get to your targets just by cost cuts alone.

How about we'll come back to you next quarter? I'd love to. But, you know, honestly, I'd love for us to get a little more growth out of the business. You know, there's two ways of getting to, you know, getting to cash flow positives and part of that's growth and part of that's taking the cost structure down. Obviously, since we've

Speaker Change: How about we'll come back to you next quarter I I I I love to but yeah honestly I'd love for us to get a little more growth out of the business.

There's two ways of getting to.

Speaker Change: Getting to cash flow positive and part of that is growth and part of that's taken the cost structure down obviously since we.

you know revenue's been a little um uh you know a little bit lumpy um we've been focusing more on the cost side of things but between trying to drive revenue trying to focus on the cost maybe looking at some of the assets as you mentioned uh all of these things going to the equation to get us to a better place a year from now.

Speaker Change: Revenue has been a little.

Speaker Change: You know a little bit lumpy.

We've been focusing more on the cost side of things, but between trying to drive revenue trying to focus on the cost maybe looking at some of the assets as you mentioned are all.

Speaker Change: All of these things go into the equation to get us to a better place a year from now.

Okay, that's great. Maybe on the ARR a little bit, that metric continues to decline, and as you pointed out, it's slowing, it's declined, but I think the expectation was for that to have stabilizer even growing by now.

Speaker Change: Okay, that's great maybe.

Speaker Change: Maybe on the ear are a little bit.

Speaker Change: That metric continues to decline and as you pointed out its slowing its decline, but I think the expectation was for that to have stabilized or even growing by now.

What has been the source of its continued declines? And you called out it's stabilizing by next quarter. What's giving you the confidence that it's going to stabilize next quarter? Thank you.

Speaker Change: What what has been the source of its continued declines and you called out it is stabilizing by next quarter of what's giving you confidence that it's going to stabilize next quarter. Thank you.

Yeah, we've had, you know, from

Speaker Change: Yeah, We we've had you know from Hum.

you know, a stabilizing ARR perspective, we've had some

Speaker Change: <unk> a R. R perspective, we've had some.

I would say some churn that mostly, you know, has come from.

Speaker Change: I would say some churn that mostly has come from.

You know, some of our UES customers, the smaller UES customers.

Speaker Change: Some of our our UE.

Speaker Change: <unk> customers are smaller UAS customers, we've had yeah, a little bit of a little bit of UBM, you know churn. So yeah renewal rates is something you know that.

We've had, you know, a little bit of, a little bit of UEM, you know, churn. So, you know, renewal rates is something, you know, that.

we're focused on. Some of that will be, you know, improving the product, making it more stable, our customers will stay with it. That's part of the equation. The other is, you know, some contestors that maybe debt and said they're going to move on, you know, that'll get, you know, that'll get flushed out. We'll get to that low point.

Speaker Change: We're focused on some of that will be you know improving the product, making it more stable our customers will stay with it that's part of the equation. The other is some competitors that may be that instead, they're going to move on.

Speaker Change: That that'll get yeah, that'll get flushed out we will get to that that low point and I really do believe between the product stabilizing and then the customers that may be vocally said they were unhappy and have moved on have moved on and I think we are really getting now to a point, where we've had the word.

And I really do believe between the product stabilizing and the customers that maybe vocally said they were unhappy and have moved on, have moved on, I think we're really getting now to a point where we're bottoming out, we're hitting that point and now as we get

Speaker Change: <unk> out we're hitting that at that point and now as we get you know wins like Malaysia onto the board you know that'll start moving us in the in the other direction. We've had some other net new logo wins that will start us moving in a in a better direction. So I know, where we might be a quarter or so you know.

You know, wins like Malaysia onto the board, you know, that'll start moving us in the in the other direction. We've had some other net logo wins that'll start us moving in a better direction. So, um,

I know we might be a quarter or so behind where we hope to be at this point.

Speaker Change: And where we hope to be at this point.

But I really am optimistic that we're leveling that off and looking for, you know, seeing prospects for growth as we go into next year. Thanks.

Speaker Change: But I really am optimistic that where we're where we're leveling that off and looking for you know seeing prospects for growth as we go into next year.

Speaker Change: Thanks, Sean.

Sean: Thanks Daniel.

This concludes our question and answer session. I would like to turn the conference back over to Mr. John Geo-Matea, CEO of Blackberry for any closing remarks. Please go ahead, sir. Perfect. Thank you, Operator. Thank you.

Speaker Change: This concludes our question and answer session I would like to turn the conference back over to Mr. John Gio Matteo.

Speaker Change: Oh, a blackberry for any closing remarks. Please go ahead sir.

Speaker Change: Perfect. Thank you operator M. So.

So let me just finish today just by reminding everybody that our IoT division will be showcasing a number of exciting developments in both QNX and IDF CES in Las Vegas from January 9th to the 12th.

Speaker Change: So let me just finish today, just by reminding everybody that our Iot division will be show craze.

Speaker Change: Showcasing a number of exciting developments.

Speaker Change: And both <unk> and IV at CES in Las Vegas from January 19th to the 12.

as well as we'll be hosting the Motor Trend Software Defined Vehicle Innovator Awards as well.

As well as we'll be hosting the motor trend software defined vehicle innovator awards as well.

So they'll be an investor focused Q and A on Wednesday, January 10th, featuring members of the IOT leadership team. So please look out for further details earlier in the new year on how you can join via livestream. So thank you all for joining us here today. And I look forward to speaking to you again soon. Bye everyone.

Speaker Change: So there'll be an investor focus Q&A on Wednesday January 10th featuring members of the Iot leadership team. So please look out for further details earlier in the new year on how you can join US via live stream. So thank you all for joining US here today and I look forward to speaking to you again soon.

Speaker Change: Everyone.

The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.

Speaker Change: The conference has now concluded. Thank you for attending today's presentation you may now disconnect.

Thank you for watching.

Speaker Change: [music].

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