Q1 2025 BlackBerry Ltd Earnings Call
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Cole: Good afternoon, and welcome to the BlackBerry First Quarter Fiscal Year 2025 results conference call. My name is Cole, and I'll be your conference moderator for today's call. During the presentation, all participants will be in a listen-only mode. We'll be facilitating a brief question and answer session towards the end of the conference. Should you need assistance during the call, please signal conference specialists by pressing the star key followed by zero. And, as a reminder, this conference is being recorded for replay purposes. I would now like to turn today's call over to Tim Foote, CFO, Cybersecurity Division and Head of Investor Relations. Please go ahead.
Cole: Good afternoon and welcome to the BlackBerry First Quarter Fiscal Year 2025 results conference call. My name is Cole and I'll be your conference moderator for today's call. During the presentation, all participants will be in a listen-only mode. We'll be facilitating a brief question and answer session towards the end of the conference.
Cole: Should you need assistance during the call, please signal conference specialists by pressing the star key followed by zero. And as a reminder, this conference is being recorded for replay purposes.
Speaker Change: I would now like to turn today's call over to Tim Foote, CFO , Cyber Security Division and Head of Investor Relations. Please go ahead.
Tim Foote: Thank you, Cole. Good afternoon everyone, and welcome to BlackBerry's first quarter fiscal year 2025 earnings conference call. Joining me on today's call is BlackBerry's Chief Executive Officer, John Giamatteo, and Chief Financial Officer, Steve Rai. 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 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.
Tim Foote: Thank you, Cole. Good afternoon, everyone, and welcome to BlackBerry's first quarter fiscal year 2025 earnings conference call.
Tim Foote: Joining me on today's call is BlackBerry's Chief Executive Officer John Giamatteo and Chief Financial Officer Steve Rai.
Speaker Change: After I read our cautionary note regarding forward-looking statements, John will provide a business update and Steve will review the financial results.
Speaker Change: 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.
Speaker Change: A replay will also be available on the BlackBerry.com website.
Tim Foote: Some of the statements we 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 will indicate forward-looking statements by using words such as expect, will, should, model, intend, believe, and similar expressions. Forward-looking statements are based on estimates and assumptions made by the company in light of its experience and its perception of historical trends, current conditions, and expected future developments, as well as other factors that the company believes are relevant.
Speaker Change: Some of the statements we will be making today constitute forward-looking statements and are made pursuant to the safe harbor provisions of applicable U.S. and Canadian securities laws.
Speaker Change: will indicate forward-looking statements by using words such as expect, will, should, model, intend, believe and similar expressions.
Speaker Change: Forward-looking statements are based on estimates and assumptions made by the company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that the company believes are relevant.
Tim Foote: 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 filings and MD&A. You should not place undue reliance on the company's forward-looking statements. Any forward-looking statements are made only as of today, and the company has no intention and undertakes no obligation to update or revise any of them, except as required by law.
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 filings and MD&A.
Speaker Change: You should not place undue reliance on the company's forward-looking statements.
Speaker Change: 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.
Tim Foote: As is customary during the call, John and Steve will reference non-GAP numbers in their summary of our quarterly results. For reconciliation between our GAPs and non-GAP members, please see the earnings press release published earlier today, which is available on EDGA, CedarPlus, and BlackBerry.com. And with that, I'll turn the call over to John.
Speaker Change: As is customary during the call, John and Steve will reference non-GAP numbers in their summary of our quarterly results.
Speaker Change: For reconciliation between our GAT and non-GAT members, please see the earnings press release published earlier today, which is available on EDGA, CedarPlus and BlackBerry.com websites. And with that, I'll turn the call over to John .
Unknown Executive: Terrific, thanks Tim, and thanks to everyone for joining us today.
John Joseph Giamatteo: Terrific. Thanks, Tim.
John Joseph Giamatteo: Terrific. Thanks Tim and thanks to everyone for joining us today. I'm pleased to report another solid quarter from BlackBerry.
John Joseph Giamatteo: And thanks to everyone for joining us today. I'm pleased to report another solid quarter for BlackBerry. We believe our strategy is working. This past quarter, we made further progress with establishing our IoT and cybersecurity businesses as standalone divisions, while at the same time, driving additional cost efficiency. We delivered our third consecutive quarter of sequentially better free cash usage, despite the impact of seasonality.
Unknown Executive: I'm pleased to report another solid quarter from BlackBerry. We believe our strategy is working. This past quarter we made further progress with establishing our IoT and cybersecurity businesses as standalone divisions, while at the same time driving additional cost efficiencies. We delivered our third consecutive quarter of sequentially better free cash usage, despite the impact of seasonality. We also move further along the path to profitability by improving both adjusted EBITDA and non-GAAP earnings per share. On the top line, both our IoT and cybersecurity divisions delivered better than expected revenue, and our cybersecurity business achieved improvements in its key ARR and dollar-based retention rate metrics.
John Joseph Giamatteo: We believe our strategy is working. This past quarter, we made further progress with establishing our IOT and cybersecurity businesses as stand-alone divisions while at the same time driving additional cost efficiencies.
John Joseph Giamatteo: We delivered our third consecutive quarter of sequentially better free cash usage despite the impact of seasonality.
John Joseph Giamatteo: We also moved further along the path to profitability by improving both adjusted EBITDA and non-GAAP earnings per share. On the top line, both our IoT and cybersecurity divisions delivered better than expected revenue, and our cybersecurity business achieved improvement in its key ARR and dollar-based retention rate metrics. So, let me begin with the IoT division.
John Joseph Giamatteo: We also move further along the path to profitability by improving both adjusted EBITDA and non-GAAP earnings per share.
John Joseph Giamatteo: On the top line, both our IoT and cybersecurity divisions delivered better-than-expected revenue, and our cybersecurity business achieved improvement in its key ARR and dollar-based retention rate metrics.
Unknown Executive: So let me begin with the IoT division. Revenue for the quarter was $53 million, above the top end of the range we provided previously. Gross margin remains strong at 81%. As expected due to the timing of OEM programs, development seat revenue returns to a more typical lower level than the record set in Q4. However, both royalties and professional services remain strong and at near-record levels. In fact, royalties were stronger than expected and largely drove the IOT revenue outperformance. Double-clicking a little further, automotive accounted for approximately 80% of the total revenue in the first quarter, above the more typical 75%, driven in particular by digital cockpit and ADS.
John Joseph Giamatteo: Revenue for the quarter was $53 million above the top end of the range we provided previously. Gross margin remains strong at 81%. As expected, due to the timing of OEM programs, development seat revenue returned to a more typical lower level than the record set in Q4. However, both royalties and professional services remain strong and at near record levels. In fact, royalties were stronger than expected and largely drove the IOT revenue outperformance.
John Joseph Giamatteo: So let me begin with the IoT division. Revenue for the quarter was $53 million above the top end of the range we provided previously.
John Joseph Giamatteo: Gross Margin remains strong at 81%.
John Joseph Giamatteo: As expected, due to the timing of OEM programs, development seat revenue returned to a more typical lower level than the record set in Q4.
John Joseph Giamatteo: However, both royalties and professional services remain strong and at near record levels.
John Joseph Giamatteo: In fact, royalties were stronger than expected and largely drove the IOT revenue outperformance.
John Joseph Giamatteo: Looking a little further, automotive accounted for approximately 80% of the total revenue in the first quarter, above the more typical 75% driven in particular by digital cockpit and ADAS. Meanwhile, our professional services team is operating at near record levels.
John Joseph Giamatteo: Double-clicking a little further, automotive accounted for approximately 80% of the total revenue in the first quarter, above the more typical 75% driven in particular by Digital Cockpit and ADAS.
Unknown Executive: Our professional services team is operating at near record levels. To support our customers in their development programs, we continue to invest in scaling our services team. This not only helps drive near to revenue, but also assists customers in starting production and unlocking our $815 million royalty backlog.
John Joseph Giamatteo: Our professional services team is operating at near record levels. To support our customers and their development programs, we continue to invest in scaling our services team.
John Joseph Giamatteo: To support our customers and their development programs, we continue to invest in scaling our services team. This not only helps drive near-term revenue but also assists customers in starting production and unlocking our $815 million royalty backlog. Within Automotive, this quarter, we won a number of new design wins for Digital Cockpit and ADAS.
John Joseph Giamatteo: This not only helps drive near-term revenue, but also assists customers in starting production and unlocking our $815 million royalty backlog.
John Joseph Giamatteo: Among the largest was a top five global automaker that is utilizing the QNX hypervisor and acoustics module as well as the QNX ADAS sensor framework in a global deployment. Another win was with a leading European OEM that will leverage a high-performance Qualcomm Snapdragon chipset in the cockpit and a leading electric vehicle OEM that will deploy QNX in their latest range of SUVs and pickups. In ADAS, we secured a win with Geely, a top five Chinese automaker that will leverage the QNX RTOS and a Black Sesame chipset to power an L2 plus ADAS stack.
Unknown Executive: Within automotive, this quarter we won a number of new design wins for digital cockpit and ADS. Among the largest was a top five global automaker that is utilizing the QNX hypervisor and acoustic module, as well as the QNX ADS sensor framework in a global deployment. Another win was with a leading European OEM that will leverage a high performance Qualcomm Snapdragon chipset in the cockpit and a leading electrical vehicle OEM that will deploy QNX in their latest range of SUVs and pickups. In ADS, we secure the win with GLE, a top five Chinese automaker that will leverage the QNX R toss and a black sesame chipset to power an L2 plus ADS back.
John Joseph Giamatteo: Within automotive, this quarter we won a number of new design wins for digital cockpit and ADAS.
John Joseph Giamatteo: Among the largest was a top 5 global automaker that is utilizing the QNX hypervisor and acoustics module as well as the QNX ADAS sensor framework in a global deployment.
John Joseph Giamatteo: Another win was with a leading European OEM that will leverage a high-performance Qualcomm Snapdragon chipset in the cockpit, and a leading electrical vehicle OEM that will deploy QNX in their latest range of SUVs and pickups.
John Joseph Giamatteo: In ADAS, we secured a win with Geely, a top 5 Chinese automaker that will leverage the QNX RTOS and a Black Sesame chipset to power an L2 plus ADAS stack.
John Joseph Giamatteo: The stack includes navigation on autopilot, automated lane control, adaptive cruise control, and other high-performance features. Building on the initial design wins in Q4 for the latest next-generation version of our RTOS SDP 8.0, this past quarter, we secured further new business for this high performance, highly scalable operating system. DigiCare Biomedical, a U.S.-based medical equipment OEM, selected QNX SDP 8.0 to power a multi-parameter patient monitoring system.
John Joseph Giamatteo: The SPAC includes navigation on autopilot, automated lane control, adaptive cruise control, and other high-performance features.
John Joseph Giamatteo: Building on the initial design wins in Q4 for the latest, next-generation version of our RTOS, SDP 8.0, this past quarter we secured further new business for this high-performance, highly scalable operating system.
John Joseph Giamatteo: DigiCare Biomedical, a U.S.-based medical equipment OEM, selected QNX SDP 8.0 to power a multi-parameter patient monitoring system.
John Joseph Giamatteo: In other non-automotive general embedded market wins, QNX will be used for an orthopedic surgical robot that will be utilized in knee, hip, spine, and other complex surgical procedures; in industrial automation, among other ones, with a next-generation robotic controller that will run on NXP silicon. Last quarter, we mentioned how customers are increasingly requesting that we provide more of the software plumbing, including integrating third-party software products directly into QNX. Interest in this continues to build, and we held a number of customer workshops this past quarter.
John Joseph Giamatteo: In other non-automotive general embedded market wins, QNX will be used for an orthopedic surgical robot that will be utilized in knee, hip, spine, and other complex surgical procedures.
John Joseph Giamatteo: In industrial automation, among other wins, we're the next generation robotic controller that will run on NXP silicon.
John Joseph Giamatteo: Now last quarter we mentioned how customers are increasingly requesting that we provide more of the software plumbing including integrating third-party software products directly into QNX.
John Joseph Giamatteo: Interest for this continues to build and we held a number of customer workshops this past quarter.
John Joseph Giamatteo: Turning to market conditions, leading analysts expect global light vehicle production in calendar year 2024 to be stable compared to 2023, at approximately 90 million units. QNX's growth is being driven by a greater penetration of this total number of units, as well as increased content per vehicle as they become progressively smarter and more software defined. Despite a pullback in electric vehicle demand, global battery electric vehicle, or BEV, production is still expected to grow approximately 27% in 2024.
John Joseph Giamatteo: Turning to market conditions, leading analysts expect global light vehicle production in calendar year 2024 to be stable compared to 2023 at approximately 90 million units.
John Joseph Giamatteo: QNX's growth is being driven by a greater penetration of this total number of units as well as an increased content per vehicle as they become progressively smarter and more software defined.
John Joseph Giamatteo: Despite a pullback in electric vehicle demand, global battery electric vehicle, or BEV, production is still expected to grow approximately 27% in 2024.
John Joseph Giamatteo: It's important to emphasize that the systems that QNX supports, the digital cockpit, ADAS, chassis, and others, are just as applicable to internal combustion engine vehicles as they are to electric vehicles. QNX is well diversified and largely agnostic to the mix of powertrains.
John Joseph Giamatteo: It's important to emphasize that the systems that QNX supports, the digital cockpit, ADAS, chassis, and others, are just as applicable to internal combustion engine vehicles as they are to EVs.
John Joseph Giamatteo: QNX is well-diversified and largely agnostic to the mix of powertrain.
John Joseph Giamatteo: That said, in the near term, the challenges automakers are experiencing in delivering software development programs continue. These industry-level challenges remain a headwind for the QNX business this fiscal year. However, despite this, we continue to expect revenue for the full year to be in the range of $220 to $235 million. For the second fiscal quarter, we expect revenue to be in the range of $50 to $54 million.
John Joseph Giamatteo: That said, in the near term, the challenges automakers are experiencing in delivering software development programs continue.
John Joseph Giamatteo: These industry level challenges remain a headwind for the QNX business this fiscal year.
John Joseph Giamatteo: However, despite this, we continue to expect revenue for the full year to be in the range of $220 to $235 million.
John Joseph Giamatteo: For the second fiscal quarter, we expect revenue to be in the range of $50 to $54 million.
John Joseph Giamatteo: We expect solid revenue from royalties and professional services, with potential for some sequential uplift in development seat license revenue. So, switching now to the cybersecurity division, this was a good quarter where we continue to see the benefits from the product and go-to-market changes that we've made. We saw further modest but encouraging improvement in two key metrics for this division. Annual Recurring Revenue, or ARR, increased for the second consecutive quarter to $285 million. The Dollar-Based Net Retention Rate, or DBNRR, also increased for the third consecutive quarter to 87%.
John Joseph Giamatteo: We expect solid revenue from royalties and professional services with potential for sequential uplift in development seat license revenue.
Unknown Executive: So switching now to the cybersecurity division, this was a good quarter where we continued to see the benefits from the product and go-to-market changes that we've made. We saw further modest but encouraging improvement in 2 key metrics for this division. Annual recurring revenue or ARR increased for the consecutive quarter to 285 million. The dollar-based retention rate or DBNR are also increased for the third consecutive quarter to 87%. Revenue with 85 million and above our guidance range. This out performance was largely driven by improved ARR and other strong, another strong quarter for our second smart business.
John Joseph Giamatteo: So switching now to the Cybersecurity Division, this was a good quarter where we continue to see the benefits from the product and go-to-market changes that we've made.
John Joseph Giamatteo: We saw further modest but encouraging improvement in two key metrics for this division. Annual Recurring Revenue, or ARR, increased for the second consecutive quarter to $285 million.
John Joseph Giamatteo: The Dollar-Based Net Retention Rate, or DBNRR, also increased for the third consecutive quarter to 87%.
John Joseph Giamatteo: Revenue was $85 million and above our guidance range. This outperformance was largely driven by improved ARR and another strong quarter for our Secchi smart business. Cybersecurity gross margin was 59% sequentially lower again due to the strength in SecuSmart. SecuSMART's market-leading, NSA-certified, end-to-end encryption voice solution is really resonating in mission-critical environments, especially large governments.
John Joseph Giamatteo: Revenue was $85 million and above our guidance range.
John Joseph Giamatteo: This outperformance was largely driven by improved ARR and another strong quarter for our Secchi Smart business.
Unknown Executive: Cyber security grows more to a 59% sequentially lower, again due to the strength in secondary smart. Second smart market leading NSA certified end to end encryption voice solution is really resonating in mission critical environments, especially large governments. This quarter, BlackBerry secured two large renewal and expansions that deliver both in-quarter revenue as well as ARR. Given the strong book of business, we expect Q2 to be another solid quarter for Seconds Smart.
John Joseph Giamatteo: Cybersecurity gross margin was 59% sequentially lower again due to the strength in SecuSmart.
John Joseph Giamatteo: SecuSMART's market-leading, NSA-certified, end-to-end encryption voice solution is really resonating in mission-critical environments, especially large governments.
John Joseph Giamatteo: This quarter, BlackBerry secured two large renewals and expansions that delivered both in-quarter revenue as well as ARR. Given the strong book of business, we expect Q2 to be another solid quarter for SecuSmart. This is likely to mean that cyber gross margins will remain lower this coming quarter. For SciLance, over the last couple of quarters, we focused on the segments where our win rates are strongest, and we're pleased with the traction we're getting. These segments include operational technology and small and medium-sized enterprises.
John Joseph Giamatteo: This quarter, BlackBerry secured two large renewal and expansions that delivered both in-quarter revenue as well as ARR.
John Joseph Giamatteo: Given the strong book of business, we expect Q2 to be another solid quarter for SecchiSmart.
Unknown Executive: This is likely to mean that cyber-growth margins will remain lower this coming quarter. For silence, over the last couple quarters, we focused on the segments where our wind rates are strongest and where pleased with the traction we're getting. These segments include operational technology and small immediate size enterprises. Further, in managed services, we see a large opportunity in a highly fragmented market that has no clear leader. To better address this market, this past quarter we rebranded our guard solution as Silence NDR for clarity and launched an on-demand solution that allows customers to attain support from our NDR soft team for issues where they need some additional help.
John Joseph Giamatteo: This is likely to mean that cyber gross margins will remain lower this coming quarter.
John Joseph Giamatteo: For SciLance, over the last couple quarters, we focused on the segments where our win rates are strongest, and we're pleased with the traction we're getting.
John Joseph Giamatteo: These segments include operational technology and small and medium-sized enterprises.
John Joseph Giamatteo: Further, in managed services, we see a large opportunity in a highly fragmented market that has no clear leader. To better address this market, this past quarter, we rebranded our guard solution as Silance MDR for clarity and launched an on-demand solution that allows customers to obtain support from our MDR SOC team for issues where they need some additional help. We see this as a bridge between software only and full 24x7 MDR coverage.
John Joseph Giamatteo: Further, in managed services, we see a large opportunity in a highly fragmented market that has no clear leader.
John Joseph Giamatteo: To better address this market,
John Joseph Giamatteo: This past quarter we rebranded our guard solution as SilanceMDR for clarity and launched an on-demand solution
John Joseph Giamatteo: that allows customers to obtain support.
John Joseph Giamatteo: from our NDR SOC team for issues where they need some additional help.
Unknown Executive: We see this as a bridge between software only and full 24 by 7 NDR coverage. We're encouraged by the pipeline that these NDR initiatives are generating, as well as the amount of new business already secured. Another focus area has been to ensure customers are using the latest versions of our Silence product. These are the most feature-rich and included capabilities such as our new AI assistant. More than 80% of Silence customer endpoints now use version 3.0 or newer, and customer satisfaction is high.
John Joseph Giamatteo: We see this as a bridge between software only and full 24x7 MDR coverage.
John Joseph Giamatteo: We're encouraged by the pipeline that these MDR initiatives are generating as well as the amount of new business already secured. Another focus area has been to ensure customers are using the latest versions of our Silance products. These are the most feature-rich and include capabilities, such as our new AI assistant. More than 80% of Cylance customer endpoints now use version 3.0 or newer, and customer satisfaction is high.
John Joseph Giamatteo: We're encouraged by the pipeline that these MDR initiatives are generating, as well as the amount of new business already secured.
John Joseph Giamatteo: Another focus area has been to ensure customers are using the latest versions of our Silance product.
John Joseph Giamatteo: These are the most feature-rich and included capabilities, such as our new AI assistant. More than 80% of Cylance customer endpoints now use version 3.0 or newer, and customer satisfaction is high.
John Joseph Giamatteo: This was demonstrated by Cylance recently winning Gartner's Customer's Choice Award for Endpoint Protection Platforms for the second year in a row. The impact of this, and upselling customers to our MDR offering, has helped drive a third consecutive quarter of sequential DBNRR improvement for Silam. Our UEM product delivered better than expected renewal rates. Its high security offering, especially in on-premise environments, continues to resonate with our core customers. In the quarter, we secured a number of significant renewals in government and financial services, including a top five U.S. bank, Top 5 Canadian Bank CIBC, The U.S. Transportation Security Administration, or TSA, among others.
Unknown Executive: This was demonstrated by Silence recently winning Guard Nurse Customers Choice Award for Endpoint Protection Platforms for the second year in a row.
John Joseph Giamatteo: This was demonstrated by Cylance, recently winning Gartner's Customer's Choice Award for endpoint protection platforms for the second year in a row.
John Joseph Giamatteo: The impact of this and upselling customers to our NDR offering has helped drive a third consecutive quarter of sequential DBNRR improvement for Silance.
John Joseph Giamatteo: Our UEM product delivered better than expected renewal rates.
John Joseph Giamatteo: It's high security offering, especially in on-premise environments, continues to resonate with our core customers.
John Joseph Giamatteo: In the quarter, we secured a number of significant renewals in government and financial services, including a top five U.S. bank.
Speaker Change: Top 5 Canadian Bank CIBC
Speaker Change: The U.S. Transportation Security Administration, or TSA, among others.
John Joseph Giamatteo: Finally, turning to Ad Hoc, our critical events management platform, customer retention rates remain very strong, particularly among our federal government and emergency services customers. On the product front, this month, we launched a new geofencing feature that enables more accurate tracking of key personnel in preparation for and during critical events. Feedback from leading emergency services agencies has been very positive.
Speaker Change: Finally, turning to Ad Hoc, our critical events management platform, customer retention rates remain very strong, particularly among our federal government and emergency services.
Speaker Change: On the product front, this month we launched a new geofencing feature that enables more accurate tracking of key personnel in preparation for and during critical events.
Speaker Change: Feedback from leading emergency services agencies has been very positive.
John Joseph Giamatteo: In addition to revenue, costs for the cybersecurity business came in better than planned, driven in part by initiatives to significantly streamline our public cloud costs. So moving on to the outlook for the cyber business, despite a challenging macro environment that continues to elongate sales cycles across the industry, we are reiterating our full year outlook. We continue to expect cybersecurity revenue for the full fiscal year to be in the range of $350 to $365 million.
Speaker Change: In addition to revenue, costs for cybersecurity business came in better than planned, driven in part by initiatives to significantly streamline our public cloud costs.
Speaker Change: So, moving on to the outlook for the cyber business, despite a challenging macro environment that continues to elongate sales cycles across the industry, we are reiterating our full year outlook.
Speaker Change: We continue to expect cybersecurity revenue for the full fiscal year to be in the range of $350 to $365 million.
John Joseph Giamatteo: For the second fiscal quarter, we expect revenue to be in the range of $82 to $86 million. Well, let me comment briefly on our licensing business. Revenue came in a little better than we expected at $6 million, and the gross margin was at 67%.
Speaker Change: For the second fiscal quarter, we expect revenue to be in the range of $82 to $86 billion.
Speaker Change: Let me comment briefly on our licensing business. Revenue came in a little better than we expected at $6 million. The gross margin was at 67%.
Speaker Change: We understand from Maliki, the party that purchased our non-core patent portfolio, that they're making good progress in ramping up their efforts.
Speaker Change: And while we aren't expecting any further revenue from that arrangement this fiscal year, it does present a significant potential upside for future years.
John Joseph Giamatteo: We understand from Maliki, the party that purchased our non-core patent portfolio, that they're making good progress in ramping up their efforts. And while we aren't expecting any further revenue from that arrangement this fiscal year, it does present a significant potential upside for future years. So before I turn the call over to Steve, let me provide a quick update on the efforts to separate and streamline our two core businesses. Significant progress was made this past quarter in separating and tailoring internal processes to fit the two businesses. This includes further delegating decision-making authority to divisional management teams.
Speaker Change: So, before I turn the call over to Steve, let me provide a quick update on the efforts to separate and streamline our two core businesses.
Steve Rai: Significant progress was made this past quarter in separating and tailoring internal processes to fit the two businesses.
Steve Rai: This includes further delegating decision-making authority to the divisional management teams.
John Joseph Giamatteo: Work has begun on a number of IT systems projects that we expect to deliver both a more custom-fit product for each of the two businesses as well as drive significant cost reductions. On costs, non-GAAP OPEX this past quarter came in at $109 million, a sequential decrease of $4 million. The $109 million was $21 million better than the $130 million baseline we gave you during the last earnings call, or $84 million better on an annualized basis.
Steve Rai: Work has begun on a number of IT systems projects that we expect to deliver both a more custom-fit product for each of the two businesses, as well as drive significant cost reductions.
Steve Rai: On costs, non-GAAP OPEX this past quarter came in at $109 million, a sequential decrease of $4 million.
Steve Rai: The $109 million was $21 million better than the $130 million baseline we gave you during the last earnings call, or $84 million better on an annualized basis.
John Joseph Giamatteo: This demonstrates the significant impact of the actions that we've taken. All of this comes against the backdrop of improving fundamentals, as illustrated by improvements in cybersecurity, ARR, and DBNRR. However, we haven't stopped there. This past quarter, we took further actions that will, in the fullness of time, drive incremental annual cost savings of approximately $20 million. The actions taken included reductions in back office headcount and facilities. The $20 million of additional cost reduction builds on the $50 million from Q3 of last year and $55 million from Q4, meeting a total of approximately $125 million to date.
Steve Rai: This demonstrates the significant impact of the actions that we've taken.
Steve Rai: All of this comes against the backdrop of improving fundamentals as illustrated by improvements in cybersecurity, ARR, and DBNRR.
Steve Rai: However, we haven't stopped there. This past quarter, we took further actions that will, in the fullness of time, drive incremental annual cost savings of approximately $20 million.
Steve Rai: The actions taken included reductions in back office headcount and facilities.
Steve Rai: The $20 million of additional cost reduction builds on the $50 million from Q3 of last year and $55 million from Q4, meaning a total of approximately $125 million to date.
John Joseph Giamatteo: This is a significant achievement by the BlackBerry team, and I'm proud of how far we've come in such a short period of time. Given the progress that we've made and continue to make, we are reiterating our expectation of generating positive cash flow and adjusted EBITDA in our fourth fiscal quarter. So, I now turn the call over to Steve, who will discuss our financials in more detail.
Steve Rai: This is a significant achievement by the BlackBerry team, and I'm proud of how far we've come in such a short period of time.
Steve Rai: Given the progress that we've made and continue to make, we are reiterating our expectation of generating positive cash flow and adjusted EBITDA in our fourth fiscal quarter.
Speaker Change: So let me now turn the call over to Steve who will discuss with you our financials in more detail. Steve?
Steve Rai: Thank you, John, and good afternoon, everyone. As a reminder, unless otherwise noted, all numbers provided during my remarks, except for revenue, will be non-GAAP. Total company revenue was $144 million, which exceeded the upper end of our previously provided outlook range. As John mentioned, revenue was comprised of $53 million for IOT. $85 million for cybersecurity, and $6 million for licensing and others. Software products were approximately 85% of revenue, and professional services were the balance at approximately 15%. Of the software product component, approximately 80% was recurrence.
Steve Rai: Thank you, John , and good afternoon, everyone.
Steve Rai: As a reminder, unless otherwise noted, all numbers provided during my remarks, except for revenue, will be non-GAAP .
Steve Rai: Total company revenue was $144 million, which exceeded the upper end of our previously provided outlook range.
Steve Rai: As John mentioned, revenue was comprised of $53 million for IOT, $85 million for cyber security and $6 million for licensing and others.
Steve Rai: Software product was approximately 85% of revenue and professional services was the balance at approximately 15%.
Steve Rai: Of the software product component, approximately 80% was recurrence. We're pleased that such a meaningful portion of our business is repeatable and reliable.
Steve Rai: We're pleased that such a meaningful portion of our business is repeatable and reliable. Total company gross margin was 67%. As John mentioned, we continue to make great progress on cost reduction. Operating expenses came in $4 million lower sequentially at $109 million. Research and development was 28% of revenue for the quarter, Sales and Marketing 25%, and G&A 20%.
Steve Rai: Total company gross margin was 67%.
Steve Rai: As John mentioned, we continue to make great progress on cost reductions.
Speaker Change: Operating expenses came in $4 million lower sequentially at $109 million.
Speaker Change: Research and development was 28% of revenue for the quarter.
Speaker Change: Sales and marketing 25% and G&A 20%.
Steve Rai: Non-GAAP operating loss was $12 million, and Adjusted EBITDA meaningfully beat expectations at negative $7 million. We beat expectations for net cash used in operations at $15 million, won $ 5, and free cash usage was $16 million, a $1 million sequential improvement compared to Q4. Given the timing of some larger customer payments, we do expect a sequential increase in operating cash usage in Q2, although still significantly better than the $56 million used in Q2 last year.
Speaker Change: non-GAAP operating loss was $12 million.
Speaker Change: and Adjusted EBITDA meaningfully beat expectations at negative $7 million.
Speaker Change: We beat expectations for net cash used in operations at $15 million.
Speaker Change: And free cash usage was $16 million, a $1 million sequential improvement compared to Q4.
Speaker Change: Given timing of some larger customer payments, we do expect a sequential increase in operating cash usage in Q2, although still significantly better than the $56 million used in Q2 last year.
Steve Rai: For the second half, we expect operating cash flow to improve sequentially in Q3, before achieving positive operating cash flow in Q4, as John mentioned. We expect adjusted EBITDA for Q2 to be in the range of negative $5 million to negative $15 million, at non-GAAP EPS of negative two cents to negative four cents. For the full fiscal year, we are reiterating our expectations. We expect adjusted EBITDA to be in the range of break-even to positive $10 million, and non-GAAP EPS to be between negative three cents and negative seven cents. With that, I'll pass the call back to John.
Speaker Change: For the second half, we expect operating cash flow to improve sequentially in Q3.
Speaker Change: before achieving positive operating cash flow in Q4 as John mentioned.
Speaker Change: We expect adjusted EBITDA for Q2 to be in the range of negative $5 million to negative $15 million.
Speaker Change: at non-GAAP EPS of negative two cents to negative four cents.
Speaker Change: For the full fiscal year, we are reiterating our expectations.
Speaker Change: We expect Adjusted EBITDA to be in the range of break-even to positive $10 million.
Speaker Change: and non-GAAP EPS to be between negative three cents and negative seven cents.
Speaker Change: With that, I'll pass the call back to John .
Steve Rai: Terrific. Thank you, Steve.
John Joseph Giamatteo: Terrific. Thank you, Steve.
John Joseph Giamatteo: So why don't we go ahead and proceed now to Q&A? So, Carl, if you don't mind opening the lines, we can take some questions.
John Joseph Giamatteo: So, why don't we go ahead and proceed now to Q&A, so Carl, if you don't mind opening the lines, we can take some questions.
Operator: Certainly, and we will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. Please make sure your line is unmuted.
Speaker Change: Certainly, and we will now begin the question and answer session. To ask a question, you may press star then 1 on your telephone keypad. Please make sure your line is unmuted. Again, press star then 1 to ask a question.
Speaker Change: We'll pause for just a moment to allow everyone the opportunity to signal for questions, and we request that you please limit yourself to one question and one follow-up.
Operator: Again, press star then 1 to ask a question. We'll pause for just a moment to allow everyone the opportunity to signal for questions, and we request that you please limit yourself to one question and one follow-up. And our first question today will come from Luke Junk with Baird. Please go ahead.
Speaker Change: And our first question today will come from Luke Junk with Baird. Please go ahead.
Luke L. Junk: Good afternoon, thanks for taking the question. John, I'm hoping on your turn you could just unpack what's driving the improvement that you're seeing in the IoT royalties. Is it some new launches coming online? Is it ramping up prior launches? And given what's driving it, just how sustainable would you think that improvement we're seeing in the royalties is?
Luke L. Junk: Good afternoon. Thanks for taking the question. John , I'm hoping on your term you could just unpack what's driving the improvement that you're seeing in the IoT royalties. Is it some new launches coming online? Is it ramping up prior launches? And given what's driving it, just how sustainable would you think that improvement that we're seeing in the royalties is right now? Thank you.
John Joseph Giamatteo: Thank you very much. Thank you.
John Joseph Giamatteo: Yeah, no, that's really being driven by, you know, obviously the $815 million backlog behind a number of major design wins that have some pent-up demand, but it's a bit of both. It's, you know, existing design wins, things that are rolling off the line, as well as some new implementations. So, overall, we're really pleased to see, kind of broadly across both sides of the business, that volume picked up a little bit in the first quarter.
Speaker Change: Thank you. Thank you.
Speaker Change: Yeah, no, I...
John Joseph Giamatteo: That's really being driven by, you know, obviously the $815 million backlog and a number of major design wins that
John Joseph Giamatteo: have some pent-up demand, but it's a bit of both. It's existing design wins, things that are rolling off the line, as well as some new implementations.
John Joseph Giamatteo: Overall, we're really pleased to see more broadly across both sides of the business that volume had picked up a little bit in the first quarter.
Luke L. Junk: And then for my follow-up, maybe a bigger picture question, you know, there's been some investor concern emerging about auto software suppliers and compute and whatnot being supplanted by OEM partnerships, potentially, in the wake of VW and Rivian last night. I would just be curious to get your perspective on that. And especially, you know, this is pretty real-time, but I'd be maybe even more curious about just your insight from ongoing dialogue with your customers and what the OEMs you're engaged with are thinking.
Speaker Change: And then for my follow up, maybe a bigger picture question, you know, there's been some investor concern emerging about auto software suppliers and compute and why not being supplanted by only in partnerships potentially.
Speaker Change: in the wake of VW and Rivian last night. I'd just be curious to get your perspective on that, and especially, you know, this is pretty real time, but I'd be maybe even more curious about just your insight from ongoing dialogue with your customers and what the OEMs you're engaged with are thinking and saying. Thank you.
John Joseph Giamatteo: You know, I think in a lot of ways our customers kind of look to us as a trusted advisor who understands the software side of this business better than anyone. So we work really closely with them. We're definitely collaborating with them on, you know, future designs both from EV as well as internal combustion. But, you know, overall, we kind of feel like we're becoming an increasingly trusted advisor to them on these kinds of matters and going deeper into their organization. We're providing a little bit more value around, you know, software defined vehicle capabilities.
Speaker Change: You know, I think in a lot of ways our customers kind of look to us as a trusted
Speaker Change: Yeah, an advisor who understands the software, you know, side of this business.
Speaker Change: better than anyone. So we work really closely with them. We're definitely
Speaker Change: collaborating with them on
Speaker Change: you know, future designs, both from EV as well as in...
Speaker Change: Internal Combustion, but you know overall we kind of feel like we're becoming an increasingly more trusted advisor to them on these kind of matters and going deeper into their organization. We're providing a little bit more value around you know software-defined vehicle capabilities.
Steve Rai: And I'll just probably add to that, Luke, if I may, that I don't think that those recent announcements really change anything. The competitive moat around this QNX business continues to remain very deep. And to John's point, if anything, we're in a fairly strong position here where OEMs are coming to us and asking us to do more. So yeah, I don't see any significant headwinds as a result of announcements like last night.
Speaker Change: And I'll just probably add to that, Luke, if I may, that...
Speaker Change: I don't think that those recent announcements really change anything.
Speaker Change: The competitive moat around this QNX business continues to remain very deep.
John Joseph Giamatteo: To John's point, if anything, we're in a fairly strong position here that OEMs are coming to us and asking us to do more. So I don't see any significant headwinds as a result of announcements like last night's.
Operator: That's just a couple of colors.
Speaker Change: That's a couple of colors you can...
Paul Treiber: And our next question will come from Paul Treiber with RBC Capital Markets. Please go ahead.
Speaker Change: And our next question will come from Paul Treiber with RBC Capital Markets. Please go ahead.
Paul Treiber: Thanks for taking the question. Just a question in regards to the cost reductions. It's good to see more progress, and I think you're up to $125 million. How do you think about the path or the opportunity to achieve the remaining $25 million to reach your target of $150 million?
Paul Treiber: Thanks for taking the question. Just a comment in regards or question in regards to the cost reductions. It's good to see more progress and I think you're at year up to $125 million.
Speaker Change: How do we think about the path or the opportunity to achieve the remaining $25 million to reach your target of $150 million?
John Joseph Giamatteo: Yeah, thanks for the question, Paul. We feel really good about it. I think we've got a comprehensive program around it. We've obviously executed on the $125 million. We're taking further actions to simplify some of the more complex things. I think I mentioned before, things like our IT systems that are kind of hardwired into both of the divisions as we go to the next level of, you know, unwinding some of that and building, you know, capabilities that are just right for the size of those businesses.
Paul: Yeah, thanks for the question, Paul. We feel really good about it. I think...
Speaker Change: We've got a comprehensive...
Paul: you know, program around it, we've
Speaker Change: Obviously executed on the $125 million, we're taking further actions to simplify some of the more complex things I think I mentioned before. Things like our IT systems that are kind of hardwired into both of the divisions.
Speaker Change: As we go to the next level of, you know, unwinding some of that and building, you know, capabilities that are just right for the size of those businesses.
John Joseph Giamatteo: We see a good line of sight to getting to that additional $25 million. So, just as you said, $50 million in Q3. We did an additional $55 million in Q4, $20 million in Q1, and we feel really good about our line of sight to get to the rest.
Speaker Change: We see a good line of sight to getting to that.
Speaker Change: Additional $25 million. So, just as you said, $50 million in Q3, we did an additional $55 million in Q4, $20 million in Q1, and we feel really good about our line of sight to get to the rest.
Paul Treiber: And then a follow-up on the IT systems, which isn't the bottleneck or the constraint in terms of the separation of the business units at this point. And then once you get through that, will you be effectively ready to separate or split the two units?
Speaker Change: And then a follow-up on the IT systems, is that the bottleneck?
John Joseph Giamatteo: Yeah, I think so. I think, you know, when you have systems like Microsoft or Salesforce.com or NetSuite from Oracle that permeate both parts of the businesses, unwinding, you know, we have existing agreements at the parent level, unwinding that, aligning them into, you know, the divisions, I think is the next step of really firmly separating the two. But that being said, I will tell you where we are now, from where we were at the beginning of the year; these are systems that kind of connect the two business units to one another because of the nature of how the parents, you know, licensed them over the years.
Speaker Change: Yeah, I think so. I think, you know, like when you have systems like Microsoft or Salesforce.com or NetSuite from Oracle that permeates both.
Speaker Change: Parts of the business is unwinding, you know, we have existing agreements at the parent level unwinding that aligning them into
Speaker Change: You know, the divisions, I think, is the next step of really firmly separating the two. But that being said, I will tell you, where we are now from where we were in the beginning of the year,
John Joseph Giamatteo: But operationally, we've got their separate leadership teams with their separate governance structures. They're operating, I would tell you, faster from a decision-making perspective than we've ever seen them operate. And in my mind, that's the bigger, you know, honestly, that's the bigger lift and the bigger benefit is the fact that these teams can be much more agile and quicker to market opportunities than maybe we were when we were all one big kind of integrated BlackBerry.
Speaker Change: We've got their separate leadership teams with their separate governance structures. They're operating, I would tell you, faster from a decision-making perspective than we've ever seen them operate. And in my mind, that's the bigger, you know, honestly, that's the bigger lift and the bigger benefit.
Speaker Change: is the fact that these teams can be much more agile and quicker to market opportunities than maybe we were when we were all one big kind of integrated BlackBerry.
Operator: Thanks for taking the questions.
Speaker Change: Thanks for taking the questions.
Todd Adair Coupland: And our next question will come from Todd Coupland with CIBC. Please go ahead.
Speaker Change: Thanks, Paul.
Speaker Change: And our next question will come from Todd Coupland with CIBC. Please go ahead.
Todd Adair Coupland: I'll continue along the lines of the split of the business. When would you expect to provide segmented results for the two units below the revenue level?
Todd Adair Coupland: I'll continue along the lines of the split of the business. When would you expect to provide segmented results for the two units below the revenue line?
John Joseph Giamatteo: Yeah, Todd, that's a great, great question. It's top of mind for us. You know, honestly, we've kind of got some pro forma things here in the room right now that we're working on, and we're getting them ready for prime Time and planning on introducing them to all of you at our analyst update in October.
Speaker Change: Yeah, Todd, that's a great, great question. Top of mind for us.
Speaker Change: You know, honestly, we've kind of got some pro forma things here in the room right now we're working on, and we're getting them ready for prime time and planning on introducing it to all of you at our analyst update in October .
John Joseph Giamatteo: Right. So you'll break it out. I guess with the summer quarter, the summer quarter's results, and you'll present that at analyst day.
Speaker Change: Okay, great. So you'll break it out, I guess, with the summer quarter, summer quarter's results, and you'll present that at the Analysts' Day?
John Joseph Giamatteo: So we'll have an earnings call, Todd, as usual, so that'll be at the end of September, and then just a couple of weeks later, you've kind of front-run the wrap for John's prepared remarks, actually, which is that we'll have an investor day on October 16th.
Speaker Change: So we'll have an earnings call, Todd, as normal, so that'll be at the end of September , and then just a couple of weeks later you can kind of front-run the wrap for John's prepared remarks actually, which is that we'll have an investor day on October 16th.
Todd Adair Coupland: October 16th. And October 16th is when you plan to unveil the segmented reporting below.
Speaker Change: October 16th is when you plan to unveil the segmented reporting below the revenue line.
John Joseph Giamatteo: Correct. Absolutely not.
Todd Adair Coupland: My second question is I didn't quite understand the headwind comment and IOT. So I understood the, you know, the upside from royalties in the quarter, but then you went on to talk about, you know, the mix of drivetrains, and that's a headwind to the business. And so I just wanted to make sure I understood, you know, what's causing that, and is that going to cause the IOT growth rate to settle below 18% as we go through the year? Just just talk through that again.
Speaker Change: Correct. Absolutely.
Speaker Change: My second question is, I didn't quite understand.
Speaker Change: The headwind comment and IOT so I got the you know the upside from royalties in the quarter but then you went on to talk about you know mix of drivetrains and
Speaker Change: That's a headwind to the business, and so I just wanted to make sure I understood, you know, what's causing that, and is that going to cause the IOT growth rate to settle below the 18% as we go through the year? Just talk through that again, please. Thank you.
Steve Rai: Yeah, of course. So, I'll take this one.
Speaker Change: Yeah, of course. So I'll take this one. So the point there, Todd, was that we're agnostic.
Steve Rai: So, the point there, Todd, was that we're largely agnostic about the drivetrain, and there's obviously a lot of talk at this point around some softness on the EV side of the house. But the point was, if we see some softness in EV, that almost certainly means there's going to be strength in hybrid or ICE engines. So, we don't actually see that as necessarily a headwind due to the diversification that QNX enjoys.
Speaker Change: largely to the drive train and there's obviously a lot of talk at this point around some softness on the EV side of the house
Speaker Change: The point there was, if we see some softness in EV, that almost certainly means there's going to be strength in hybrid or ICE engines, so we don't actually see that as necessarily a headwind due to the diversification that QNX enjoys.
Steve Rai: We did reiterate, however, though, that the programs that we've been talking about that have been delayed, well, we still see that. We'd say there are some signs, some encouraging signs, that things are getting better on that front, but it's still very much a headwind. So, when we reiterated our four-year outlook, you need to keep those headwinds in mind when thinking about it. Does that help?
Speaker Change: We did reiterate however though that the programs that we've been talking about that have been delayed, well we still see that.
Speaker Change: There's some signs, some encouraging signs that things are getting better on that front, but it's still very much a headwind. So when we we reiterated our four-year outlook, you need to keep those those headwinds in mind when thinking about it. Does that help?
Todd Adair Coupland: Yeah, that does help. And those headwinds for the programs, that's not new. That's been going on for a little while, right? Yeah, we've been talking about that for several quarters now, and what breaks the logjam on that with what you talk through how you're thinking about that.
Speaker Change: Yeah, that does help. And those headwinds for the programs, that's not new, that's been going on for a little while, right? Yeah, we've been talking about that for several quarters now.
Speaker Change: And what breaks the logjam on that with what you see today? Just talk through how you're thinking about that. Thanks very much.
Steve Rai: Well, it's going to vary by OEM. Ultimately, we've described it as really having to go through a huge transformation from being traditional automakers turning to be software developers, and what they've had to do is ramp up their software development teams, Todd, and that comes with huge challenges, and it's not an easy task. So, yeah, we've been talking about this for a while. Ultimately, this is not going to be a problem forever, the OEMs will get their hands around it, and they will make progress, and I think we're seeing some early signs that that's happening.
Speaker Change: Well, it's going to vary by OEM, ultimately.
Speaker Change: We've described it as really having to...
Speaker Change: And to go through a huge transformation from being traditional automakers to having to be software developers and
Speaker Change: And what they've had to do is ramp up software development teams, Todd, and that comes with huge challenges and it's not an easy task. So, yeah, we've been talking about this for some time. I think...
Speaker Change: Ultimately this is not going to be a problem forever. The OEMs will get their hands around it and they will make progress and I think we're seeing some early signs of that's happening. On our side we're definitely committed to helping all our customers and
Steve Rai: On our side, we're definitely committed to helping all our customers, and the demand for our professional services is possibly an indicator of that, and we're helping to fire that engine by adding some additional headcount into that side of the business. So we're doing everything we can to help lighten the load for OEMs, but ultimately, they're going to get there in the end regardless, so stay tuned on that one.
Speaker Change: The demand for our professional services is possibly an indicator of that and we're helping to...
Speaker Change: fire that engine by adding
Speaker Change: some additional headcount into that side of the business so so we're doing everything we can to help lighten the load for OEMs but ultimately they're going to get there in the end regardless so yeah stay tuned on that one.
Operator: I appreciate it. Thank you.
Kingsley Crane: And once again, if you would like to ask a question, please press star and then 1. Our next question will come from Kingsley Crane with Canaccord Genuity. Please go ahead.
Speaker Change: Great, appreciate it, thank you.
Speaker Change: And once again, if you would like to ask a question, please press star then 1. Our next question will come from Kingsley Crane with Canaccord Genuity. Please go ahead.
Kingsley Crane: Can you talk more about the expansion opportunities you have with respect to endpoints outside of bringing more endpoints under coverage?
Kingsley Crane: Hi, thanks for taking the question. So between Ciland's MDR and MDR on demand, can you talk more about the expansion opportunities you have with respect to endpoint outside of bringing more endpoints under coverage?
John Joseph Giamatteo: Well, I think obviously a multi-faceted approach that we, from the growth of the Silance business, certainly we've got a large installed base of Silance customers, many of them which are just licensing today, you know, our software directly and upselling and upgrading them to MDR services is one kind of track that we're running hard on. You know, another thing we do is, you know, focus on particular verticals where we tend to perform exceptionally, you know, very well.
Speaker Change: Well, I think, obviously, a multifaceted approach that we, from a growth of the Silance business,
Speaker Change: Certainly, we've got a large installed base of Silance customers, many of them which are just licensing today our software.
Speaker Change: directly, and upselling and upgrading them to MDR services.
Speaker Change: is one kind of track that we're running hard on. You know, another is, you know, focusing on particular.
Speaker Change: verticals where we tend to perform you know exceptionally
John Joseph Giamatteo: I think of OT, I think of healthcare customers, you know, customers that have, you know, old operating systems that have a variety of different devices, healthcare devices that need to be secured with a small agent, and the AI capabilities that we provide are another, you know, very, very focused target for us to do there. And then third, I would say is, you know, kind of that mid and small level market. These are smaller companies that are, you know, say 2,000 seats or smaller. They generally don't have, you know, the cyber talent or the cyber resources to manage those environments.
Speaker Change: I think on OT, I think on healthcare, customers that have old operating systems.
Speaker Change: that have a variety of different devices, healthcare devices that need to be secured with a small agent and the AI capabilities that we provide is another, you know, very, very focused target for us to do there. And then third, I would say is
Speaker Change: you know, kind of that mid and small, you know, level market. These are smaller companies that are, you know, say 2,000 seats or smaller.
Speaker Change: They generally don't have, you know, the...
Speaker Change: the cyber talent, the cyber resources to manage those environments.
John Joseph Giamatteo: So, we see that as a huge opportunity. It's a growing market. MDR is a growing space because they're looking for vendors like us to provide more of that capability. So, those are probably the three main areas that we're focused on to, you know, keep that silenced business, the renewal rates, and the AIR moving in the right direction.
Speaker Change: We see that as a huge opportunity. It's a growing market.
Speaker Change: MDR is a growing space because they're looking for vendors like us to provide more of that capability. So those are probably the three main tracks that we're focused on to, you know, keep that
Speaker Change: That's Sideland's business, the renewal rates and the ARR moving in the right direction.
Kingsley Crane: Right, okay, that's really helpful, and so on the cyber business as a whole, you've done a remarkable job rationalizing costs. Can you talk about what product initiatives you are excited about investing in and how you expect those to drive growth?
Speaker Change: Right, okay, that's really helpful and so on the cyber business as a whole you've done a remarkable job rationalizing costs. Can you talk about what product initiatives you are excited about investing in and how you expect those could drive growth?
John Joseph Giamatteo: Yeah, I mean, I would say, you know, everything we just talked about within Silence has been an investment over the course of the past few years. But one thing, you know, I would call out that maybe we don't talk enough about is our SecchiSmart, you know, our SecchiSuite portfolio, which has been really working well for us on that. We pivoted that business from a very hardware-centric type of approach to a more software token-based approach, which we found opens up a tremendous amount of new use cases and a tremendous amount of new opportunities.
Speaker Change: Yeah, I mean, I would say, you know, everything we just talked about within silence has been investments over the course of the past few years.
Speaker Change: But one thing, you know, I would call out that maybe we don't talk enough about is our SecchiSmart, you know, our SecchiSuite portfolio, which
Speaker Change: We've been really working well for us on that is we pivoted that business from a very hardware centric type of business.
Speaker Change: approach to a more software token-based approach, which we found is open up a tremendous amount of new use cases and a tremendous amount of new opportunities.
John Joseph Giamatteo: So this was a business, and when you look back a few years, it was primarily coming out of this special relationship we had with the German government. When you look at the overall diversification of that business globally with some of our deployments in Canada and the U.S. and Malaysia and Bangladesh and others that we've got some interesting pipeline, that's an investment that we made in the SecuSuite platform to really address a completely different segment of the market. That'd be another one; I would say above and beyond that.
Speaker Change: So, you know, this was a business, when you look back a few years, it was primarily coming out of this special relationship we had with the German government. When you look at the overall diversification of that business globally with
Speaker Change: You know, some of our deployments in Canada and the U.S. and Malaysia and Bangladesh and others that we've got, you know, some interesting pipeline.
Speaker Change: That's an investment that we made in the Secchi suite.
Speaker Change: you know, platform.
Speaker Change: to really address a completely different segment of the market. That'd be another one, I would say, above and beyond that.
Operator: And then, you know, we're very excited about, ad hoc, you know, releasing our geofencing capability. It's a unique capability that differentiates our solution from other solutions that are out there in the market. And we've seen a tremendous amount of demand from governments, police organizations, and emergency services. So it's probably something we haven't talked enough about, but the investments we've made in AdHoc and in SecchiSmart have driven growth and driven some nice pipeline for us. Thank you.
Kingsley Crane: Thank you. I appreciate the time. It's great to see the progress.
Speaker Change: And then, you know, we're very excited, you know, Ad Hoc, you know, we're releasing our geofencing capability. It's a unique capability that differentiates our solution from other solutions that are out there in the market.
Speaker Change: And we've seen a tremendous amount of demands in governments, police organizations, emergency services.
Speaker Change: So, you know, it's probably something we haven't talked enough about, but investments we've made in AdHoc and in SecchiSmart that have driven growth and driven some nice pipeline for us.
Speaker Change: Thank you, appreciate the time, great to see the progress.
Operator: And this will conclude our question and answer session. I'd like to turn the conference back over to John Giamatteo, CEO of BlackBerry, for any closing remarks. Terrific. Thank you, Carl.
Speaker Change: And this will conclude our question and answer session. I'd like to turn the conference back over to John Giamatteo, CEO for BlackBerry, for any closing remarks.
John Joseph Giamatteo: Terrific. Thank you, Carl.
John Joseph Giamatteo: So let me just quickly summarize the quarter one more time. We still have a lot of work to do. We know that, but we do believe our strategy is starting to deliver results. We have made significant progress in separating our IoT and cyber business and towards profitability. Test usage in the quarter was better than expected, and we improved, and revenue for both IOT and cyber beat expectations. IoT had a number of design wins in the quarter, including SDP 8.0, and we saw further small but important improvements in our key metrics like Cyber ARR and DBNRR.
John Joseph Giamatteo: Thank you Carl. So let me just quickly one more time summarize the quarter.
John Joseph Giamatteo: So before we end the call, I guess we've kind of preempted this in one of the previous questions. But, you know, we do want to let you know that we're excited to be hosting an Investor Day at the New York Stock Exchange on October 16th, where during this event, we'll perform a deep dive on the products, the markets, some of the financial profiles that we talked about before, both divisions, and I'm sure you'll find it valuable. The event will be hybrid, with the sessions being live streamed on the day. So thanks again for joining us today; we'll look forward to seeing you next time.
John Joseph Giamatteo: We still have a lot of work to do, we know that, but we do believe our strategy is starting to deliver results.
John Joseph Giamatteo: We've made significant progress in separating our IOT and cyber business and towards profitability. Cash usage in the quarter was better than expected and we improved both adjusted EBITDA and non-GAAP EPS.
John Joseph Giamatteo: Their revenue for both IOT and cyber beat expectations.
John Joseph Giamatteo: IOT had a number of design wins in the quarter, including SDP 8.0, and we saw further small but important improvements in our key metrics like Cyber ARR and DBNRR.
John Joseph Giamatteo: So before we end the call, I guess we've kind of preempted this in one of the previous questions, but we do want to let you know that we're excited to be hosting an Investor Day at the New York Stock Exchange on October 16th.
John Joseph Giamatteo: where during this event, we'll perform a deep dive on the products, the markets, some of the financial profiles that we talked about before, both divisions, and I'm sure you're going to find it valuable. The event will be hybrid with the sessions being live streamed on the day.
Unknown Executive: The event will be hybrid, with the sessions being live streams on the day. So thanks again for joining us today, and we'll look forward to seeing you next time.
John Joseph Giamatteo: So, thanks again for joining us today. We look forward to seeing you next time.
Unknown Executive: This concludes today's call. Thank you for your participation, and you may now disconnect. Thank you for joining us today, and we'll see you next time.
Operator: This concludes today's call. Thank you for your participation, and you may now disconnect.
Speaker Change: This concludes today's call. Thank you for your participation and you may now disconnect.