Q2 2025 BlackBerry Ltd Earnings Call
Good day and welcome to Blackberries, second quarter fiscal year 2025 earnings call.
John Korder: John Korder, fiscal year, 2025 earnings call.
Operator: Paul participants will be in listen-only mode.
Operator: Did you need assistance?
Operator: Please signally confirm specialists by pressing the star key followed by zero.
Speaker Change: Paul Parkis, then Skullby and Listen Only Mode, did you need assistance to be signaling conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask a question.
Operator: After today's presentation, there will be an opportunity to ask a question. To ask a question, you may press star, then one on a touch-tone phone. Do a draw your question, then star, then two.
Speaker Change: Do ask a question, you may press star, then one on a touch phone phone.
Operator: Please note this event is being recorded.
Martha Gonder: Do a draw your question, and start then too. Please note the seatben is being recorded. I would now like to turn the conference over to Martha Gonder, Director of Investor Relations Blackberry. Please go ahead.
Martha Gonder: I would now like to turn the conference over to Martha Gonder, Director of Invest Relations, BlackBerry. Please go ahead.
Martha Gonder: Thank you, Dave.
Martha Gonder: Good afternoon, everyone, and welcome to BlackBerry's second 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, Tim Foote. After I read our cautionary note regarding forward-looking statements, John will provide a business update, and Tim will review the financial results.
Martha Gonder: Thank you Dave. Good afternoon everyone and welcome to Blackberry Second Quarter fiscal year 2025 for Gernings Conference Call. Joining me on today's call is Blackberry's Chief Executive Officer, John Giamatteo, and Chief Financial Officer Tim Foote.
Speaker Change: Rai read our cautionary note regarding forward-looking statements. John will provide a business update and Tim will review the financial result.
Martha Gonder: 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 webcasts and the investor information section at BlackBerry.com. A replay will also be available on the BlackBerry.com website. Some of the statements will be making today constitute forward-looking statements that are made pursuant to the safe harbor provisions of collectible US and Canadian securities law. We'll indicate forward-looking statements by using words such as expect, will, should, model, intend, believe, and similar expressions. Forward-looking statements are based on estimates and assumptions made by the company in light of its experience and its perception of historical trends, current conditions, and expected future developments, as well as other factors that the company believes are relevant.
Speaker Change: We will then open the call for a brief Q&A session.
Speaker Change: This call is available to the general public, public via Colin Numbers and via Webcast and the investor information section at BlackBerry.com.
Speaker Change: A replay will also be available on the blackfairy.com website.
Speaker Change: Then with the statements we'll be making today constitute forward-looking statements that are made pursuant to the safe harbor provisions of applicable U.S. and Canadian securities law.
Speaker Change: Well, indicate forward-looking statements by using words such as expect, will, should model, intent, beliefs, and similar expressions.
Speaker Change: For 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.
Martha Gonder: 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 statement. Any forward-looking statements are made only as of today, and the company has no intention or undertakes no obligation to update or revise any of them, except as required by law. As is customary during the call, John and Tim will reference non-GAAP numbers in their summary for our quarterly results.
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 statement.
Speaker Change: These factors include a risk factors that are discussed in the company's annual filing and MDNA. You should not place undue reliance on the company's forward-looking statement.
Speaker Change: Any forward-looking statements are made only as of today and the company has no intention or undertakes no obligation to update or revise any of them except as required by law.
Speaker Change: As it's cut to Mary during the call, John and Tim will reference non-gap numbers in their summary for our quarterly results.
Martha Gonder: For a reconciliation between our GAAP and non-GAAP numbers, please see the earnings press release published earlier today, which is available on the Edgar Cedar Plus and BlackBerry.com website.
Speaker Change: For reconciliation between our gap and non-gap numbers, please see the earnings pressure release published earlier today, which is available on the Edgar, Cedar Plus, and BlackBerry.com website and with that, I'll turn the call over to John.
John Giamatteo: And with that, I'll turn the call over to John. Thanks, Martha, and congratulations on your new role as Director of Investor Relations for the company. Q2 was another good quarter for BlackBerry, as we're making significant progress in delivering on our strategy. Both the IoT and cybersecurity divisions delivered solid year-over-year, as well as sequential revenue growth. The combination of this and the ongoing benefit from the actions to improve our cost profile drove year-over-year improvements in non-GAAP EPS and adjusted EBITDA, with BlackBerry achieving break-even ahead of plans.
Speaker Change: [inaudible]
John: Thanks, Martha and congratulations on your new role as director of Investor Relations for the Company.
John: Q2 was another good quarter for Blackberry as we're making significant progress in delivering on our strategy.
John: Both the IOT and cybersecurity divisions delivered solid year over year as well as sequential revenue growth.
Speaker Change: The combination of this and the ongoing benefit from the actions to improve our cost profile, drove you over year improvements in non-gap EPS and adjusted EBITDA with Blackberry achieving break even ahead of plan.
John Giamatteo: Grant. Likewise, cash used by operations also came in better than expected. This past quarter, the IOT division delivered revenue of 55 million, representing 12% year-over-year growth and 4% sequential growth, and also exceeded the top end of the guidance range that we provided. Growth margin improved by 1% its points sequentially to 82% due to favorable product mix. This quarter followed a similar trend to last in that strong royalty revenue has driven a significant portion of the better-than-expected results. Production-based royalties were strong for both sequentially and year-over-year. This improvement is, in part, a consequence of the growth and royalty backlog that we've built from the considerable amount of design wins that we've secured in recent years.
Speaker Change: Likewise, cash used by operations also came in better than expected.
Speaker Change: This past quarter, the IOT Division delivered revenue of 55 million, representing 12% year over year growth and 4% sequential growth and also exceeded the top end of the guidance range that we provided.
Speaker Change: Rose margin improved by 1 percentage points sequentially to 82% due to favorable product mix.
Speaker Change: This quarter followed a similar trend to last in that strong royalty revenue has driven a significant portion of the better than expected results.
Speaker Change: Production-based royalties were stronger both sequentially and year-over-year.
Speaker Change: This improvement is, in part, a consequence of the growth and royalty backlog that we've built from the considerable amount of design wins that we've secured in recent years.
John Giamatteo: On the flip side, as in Q1, development seat revenue for Q2 remains somewhat subdued. Development seat consumption is generally driven by the timing of the ramp-up of automaker software development programs, and as we've mentioned in recent quarters, these programs have experienced significant delays. We've seen some improvement in recent months, but these delays continue to hold back development seat revenue in the near term. In addition to revenue recognized in the quarter, in Q2, we secured a number of new design wins that will generate future revenue. In particular, we secured a number of large automotive Advanced Driver Assistance Systems or ADAS wins.
Speaker Change: On the flip side, as in Q1, development seat revenue for Q2 remains somewhat subdued.
Speaker Change: Development Seek Consumption is generally driven by the timing of the ramp up of auto-maker software development programs. And as we've mentioned in recent quarters, these programs have experienced significant delays.
Speaker Change: We've seen some improvement in recent months, but these delays continue to hold back development seat revenue in the near term.
Speaker Change: In addition to revenue recognized in the quarter, in Q2, we secured a number of new design wins that will generate future revenue.
Speaker Change: In particular, we secured a number of large automotive advanced driver assistance systems for ADAS wins.
John Giamatteo: Among them, in Japan, we secured two design wins with leading OEMs to power ADAS functionality that includes surround camera and millivave radar for identifying objects. Among the design wins in digital cockpit, we secured a follow-on win to that announced last year with Hyundai Mobis, a subsidiary of South Korea's largest automaker, Hyundai. Running on a Qualcomm chipset that Q&X hypervisor and advanced virtual frameworks will provide the safety-critical foundation for integrated digital cluster, infotainment, and safety applications. We've made large investments in our Q&X product portfolio in recent years, resulting in a number of significant product launches being announced at CES in January.
Speaker Change: Among them, in Japan, we secure two design wins, with leading OEMs to power A-DAS functionality that includes surround camera and milli-wave radar for identifying objects.
Speaker Change: Among the design wins in digital cockpit, we secured a follow-on win to that announced last year with Hyundai Mobis.
Speaker Change: The subsidiary of South Korea's largest automaker Hyundai.
Speaker Change: Running on a Qualcomm chipset that Q and X hypervisor and advanced virtual frameworks will provide the safety critical foundation for integrated digital cluster, infotainment and safety applications.
Speaker Change: We've made large investments in our Q&AX product portfolio in recent years, resulting in a number of significant product launches being announced at CES in January.
John Giamatteo: Generally speaking, new product adoption in automotive has a relatively long lead time, but we're pleased with the traction we've seen for these new products since their launch. In the quarter, we secured further design wins in our next generation SDP-8.0 platform. SDP-8.0 is the flagship. Next generation product in the Q&X portfolio and provides customers with a step change increase in performance while maintaining the incredibly high level of functional safety that Q&X is right out for. One of the world's largest industrial OEMs upgraded from SDP 7.1 to SDP 8.0, where their next generation of design bore an optical guiding system to be used in airport shuttle buses.
Speaker Change: Generally speaking, new product adoption in automotive has a relatively long lead type. But we're pleased with the traction we've seen for these new products since they're launched.
Speaker Change: In the quarter, we secured further design wins and our next generation STP 8.0 platform.
Speaker Change: STP8.0 is the flagship, next generation product in the Q&AX portfolio will provide customers with a step change increase in performance.
Speaker Change: while maintaining the incredibly high level of functional safety that Q and X is right now for.
Speaker Change: One of the world's largest industrial OEMs upgraded from SD.
Speaker Change: P-7.1-the-s-c-p-8.0, where they're next generation of design or an optical guiding system to be used in airport shuttle buses.
John Giamatteo: In addition, we secured a design win with a German specialized machine manufacturer for SDP8.0 to power the control unit for pharmaceutical tablet presses. During the quarter, we announced an exciting development for Q&X Sound, our new software defined acoustics platform. Hayley Tech, a Swedish developer of Android-based infotainment systems, announced that they're building Q&X Sound into their digital cockpit architecture, the foundation for which is the Q&X's hypervisor. Q&X sound is a true value ad proposition enabling both significant build material savings by eliminating expensive audio hardware, as well as potential net new revenue streams from custom audio experiences.
Speaker Change: In addition, we secured a design win with a German specialized machine manufacturer for SDT8.0 to power the control unit for pharmaceutical tablet presses.
Speaker Change: During the quarter, we announced an exciting development for Q&A sound. Our new software defined acoustic platform.
Speaker Change: Hayley Tech, a Swedish developer of Android based infotainment systems, announced that they're building Q and X sound into their digital cockpit architecture, the foundation for which is Q and X is hypervisor.
Speaker Change: Q and X sound is a true value add proposition, enabling both significant bill of material savings by eliminating expensive audio hardware, as well as potential net new revenue streams from custom audio experiences.
John Giamatteo: Finally, on the product side, you may recall that at CES, we announced that Stellantis had leveraged Q&X in the cloud to develop a digital twin of their cockpit architecture. This was a specific deployment which our engineers have now productized for sale to the industry in general. We're in early discussions with a number of automakers and feel optimistic that this product will gain traction in coming quarters. In addition to our core automotive market, we also see a large opportunity to build on our presence in adjacent verticals, or what we call the general embedded market.
Speaker Change: Finally, on the product side, you may recall that at CES, we announced that still at this had leverage Q and X in the cloud to develop a digital twin of their cockpit architecture.
Speaker Change: This was a specific deployment which our engineers have now productized for sale to the industry in general.
Speaker Change: We're in early discussions with a number of automakers and feel optimistic that this product will gain traction in coming quarters.
Speaker Change: In addition to our core automotive market, we also see a large opportunity to build on our presence in adjacent verticals, or what we call the general embedded market.
John Giamatteo: This past quarter, we took another step forward by adding a senior go-to-market executive with strong relevant experience to help drive our efforts in this space.
Speaker Change: This past quarter, we took another step forward by adding a senior go-to-market executive with strong, relevant experience to help drive our efforts in this space.
John Giamatteo: Finally, a quick update on IV. The auto software program delays that we've spoken about that have extended Q&X development cycles have had an even greater impact on IV. When automakers are fully focusing their efforts on delivering core systems on time, they have less bandwidth for new functionality like IV. Despite this, we progress multiple proof of concepts with major OEMs this fiscal year and are working on a number of potential opportunities for IV, but it is unlikely that we'll see material revenue in the near term. On the cost side, now that IV is through the significant investment required for its initial development, we've integrated the sales and R&D efforts into the core Q&X team.
Speaker Change: Finally, a quick update on I.B.
Speaker Change: The Auto Software Program Belays that we've spoken about that have extended Q&A's development cycles have had an even greater impact on Ivy.
Speaker Change: When automakers are fully focusing their efforts on delivering core systems on time, they have less bandwidth for new functionality like Ivy.
Speaker Change: Despite this, we progress in multiple proof of concepts with major OEMs this fiscal year and are working on a number of potential opportunities for Ivy, but it is unlikely that we'll be material revenue in the near term.
Speaker Change: On the course side, now that Ivy is through the significant investment required for its initial development, we've integrated the sales and R&D efforts into the core Q&AX team.
John Giamatteo: We believe this not only drives efficiencies, but also leverages the reach and expertise of our Q&X team.
Speaker Change: We believe this not only drives efficiencies, but also leverages the reach and expertise of our Q&AX team.
John Giamatteo: Let me now move over to our cybersecurity division. Similar to IoT, this was a solid quarter for cyber. Revenue was 87 million, meaning we exceeded the top end of the guidance range we provided last quarter and achieved 10% year-over-year growth.
Speaker Change: Let me now move over to our cybersecurity division.
Speaker Change: Simura IoT, this was a solid quarter for cyber.
Speaker Change: Revitant with 87 million, meaning we exceeded the top ends of the guidance range we provided last quarter, and a key 10% year over year growth.
John Giamatteo: Bill. This performance was driven by the three product groups that reflect BlackBerry's strong heritage and secure communications. That is, UEM endpoint management, ad hoc critical events management, and SecuSmart encrypted voice and data. All three components delivered year-over-year growth, and collectively revenue increased by 24 percent. While the UEM market is mature and there are strong competition and cloud-based deployments, our product has a niche with on-premise deployments in particular, particularly where data, sovereignty, and security are a significant concern. We typically see this need most in government and financial services. And as other UEM providers have ceased to invest due to the strength of the competition, we continue to strategically enhance the features that resonate most with our target market and deepen our competitive mode.
Speaker Change: This performance was driven by the three product groups that reflect Blackberries strong heritage and secure communications.
Speaker Change: That is UEM endpoint management.
Speaker Change: AdTalk, Critical Events Management, and Seky Smart and Crypted Voice and Data.
Speaker Change: All three components delivered year over year growth and collectively, revenue increased by 24%.
Speaker Change: While the UEM market is mature and there are strong competition and cloud-based deployments.
Speaker Change: Our product has a niche on premise deployments in particular, particularly where data, sovereignty and security are significant concern.
Speaker Change: We typically see this need most in government and financial services.
Speaker Change: And as other UEM providers have ceased to invest due to the strength of the competition, we continue to strategically enhance the features that resonate most with our target market and deepen our competitive mode.
John Giamatteo: This helped UEM to deliver both sequential and year-over-year revenue growth for Q2. While there are still some churn in our broader customer base, we're all setting this with new logos and customer expansions. In the quarter, we secured important renewal and upsells, in particular, with a number of government agencies, including the U.S. Immigration and Customs Enforcement, the U.S. Department of Energy, the U.S. Army Corps of Engineers, and the U.K. Ministry of Defense. Similarly, ad hoc had a solid quarter, with revenue growing both sequentially and year-over-year. We secured a significant renewal and expansion with the United States Department of State, as well as a large expansion with the Air Force, among other deals.
Speaker Change: This helped you we end to deliver both sequential and year-over-year revenue growth for Q2.
Speaker Change: While there is still some churn in our broader customer base, we're all setting this with new logos and customer expansions.
Speaker Change: In the quarter, we secure important renewal and upsells, in particular with the number of government agencies, including the U.S. immigration and customs enforcement, the U.S. Department of Energy.
Speaker Change: the U.S. Army Corps of Engineers.
Speaker Change: and the UK Ministry of Defence.
Speaker Change: Timmerly, AdTalk, had a solid quarter with revenue growing both sequentially and year over year.
Speaker Change: We secured a significant renewal on expansion with the United States Department of State as well as a large expansion with the air force among other deals.
John Giamatteo: Renewal rates for ad hoc remain very high at close to 100%, which speaks to how integrated our product is in U.S. Federal deployments in particular. Finally, our second smart business had a good year to date. Revenue in both Q1 and Q2 has been meaningfully ahead of the prior fiscal year. This strength has been driven by deals from its core customer base within the German government, where our full solution, typically sold along with hardware, is most commonly used. Because these licenses are tied to hardware, these customers typically buy new licenses to coincide with device refresh cycles.
Speaker Change: Renewal rates for ad hoc remain very high at close to 100% which speaks to how integrated our product is in U.S. several deployments in particular.
Speaker Change: Finally, our second smart business had a good year today. Revenue in both Q1 and Q2 has been meaningfully ahead of the prior fiscal year.
Speaker Change: This strength has been driven by deals from its core customer base within the German government where our full solution typically sold along with hardware is most commonly used.
Speaker Change: Because these licenses are tied to hardware, these customers typically buy new licenses to coincide with device refresh cycles.
John Giamatteo: Together with the fact that the software is deployed on premise and therefore revenue was largely recognized up front. This means there can be some variability in the top line for SecuSmart from quarter to quarter. However, this past quarter we saw further traction for our software-only solution, with a major net new logo government in Europe purchasing our SecuSweep product for deployment in military applications.
Speaker Change: Together with the fact that the software is deployed on premise and therefore, revenue was largely recognized up front. This means there can be some variability in the top line for seconds mark from quarter-to-quarter.
Speaker Change: However, this past quarter we saw further traction for our software holy solution with a major net new logo government in Europe purchasing our second suite product for deployment in military applications.
John Giamatteo: Let me now move from secure communications to our silent endpoint security business. This remains a very competitive market, and this quarter we continue to see some churn in our customer base that purchases product only, not managed services, and this drove year-over-year decline in silence revenue. The change of options to suit their needs and budgets from our on-demand product right up to our newly launched XDR Focus MDR Pro offering. New logo and upsell of MDR offset some of the churn we saw in the customer base this quarter. We've invested heavily in our silence product in recent years, and we're pleased that our solution was recognized by customers as a Customer's Choice winner in Gartner's recent evaluation.
Speaker Change: Let me now move from secure communications to our silence and point security business.
Speaker Change: This remains a very competitive market, and this quarter we continue to see some churn in our customer base that purchases product only, not managed services.
Speaker Change: and this drove year-old for year decline in silence revenue.
Speaker Change: That said, we're pleased with the ongoing traction from the customers adopting managed services or MDR this quarter.
Speaker Change: Our silence and the our offerings provide customers with a wide range of options to suit their needs and budgets.
Speaker Change: from our on-demand product right up to our newly launched XDR Focus MDR Pro offering.
Speaker Change: New logo and upsell of NDR offset some of the churn we saw in the customer base this quarter.
Speaker Change: We've invested heavily in our silenced product in recent years and we're pleased that our solution was recognized by customers as a customer's choice winner in Gartner's recent evaluation.
John Giamatteo: In terms of key metrics for a cyber business, annual recurring revenue or ARR remains largely stable. Flat year over year at 279 million. The dollar based net retention rate or DBN, ARR, improved year on year by 7 percentage points and sequentially for the fourth consecutive quarter by 1 percentage point to 88%. Let me comment briefly on our licensing business, which came in broadly in line with guidance at $3 million. This revenue relates largely to legacy deals to predate the sale of a non-core portion of the portfolio of Tomology. Gross margins remain at 67% after allowing for amortization on the patents that generated this revenue.
Speaker Change: In terms of key metrics for a cyber business, annual recurring revenue or ARR remains largely stable.
Speaker Change: Flat, year over year, 279 million. The dollar-based net retention rate or DBN RR improved year on year by 7 percentage points and sequentially for the fourth consecutive quarter by 1 percentage point to 88%.
Speaker Change: Let me tell my briefly on our licensing business, which came in broadly in line with guidance at $3 million.
Speaker Change: This revenue relates largely to legacy deals to predate the sale of the non-corporation of the portfolio, the tomoyote.
Speaker Change: Gross margins remained at 67% after allowing for amortization on the patents that generated this revenue.
John Giamatteo: Now, during the quarter, we announced that 10 Foot was appointed as BlackBerry's new CFO. 10 had previously served as a CFO for the cybersecurity division and in a number of other senior finance positions of BlackBerry, including as the head of investor relations. This deep knowledge of both BlackBerry and more broadly the finance function, as well as a strong appreciation for our shareholder base and financial, and what financial analysts are focused on, positions him really well in this role. I look forward to continuing my partnership with him as we keep moving the BlackBerry strategy forward.
Tim Foote: Now, during the quarter, we announced that Tim Foote was appointed as Blackberries New CFO.
Speaker Change: had previously served as a CFO for the cybersecurity division and in a number of other senior finance positions of Blackberry, including as the head of investor relations.
Speaker Change: This deep knowledge of both Blackberry and more broadly the finance function, as well as a strong appreciation for our shareholder base and financial and what financial analysts are focused on positions him really well in this role.
Speaker Change: I look forward to continuing my partnership with him as we keep moving the blackberry strategy forward.
Tim Foote: So, with that, let me turn the call over to Tim, who can provide some more color around our financials. Thank you, John, and good afternoon, everyone.
Speaker Change: So, with that, let me turn the call over to Tim, who can provide some more color around our financials.
Tim Foote: I'm incredibly proud to be joining this call with CFO. My top priority in this role is clear: to increase shareholder value. In my opinion, BlackBerry has a significant amount of value that is underappreciated. And as we continue to execute on our strategy, I'm focused on seeing that it's recognised. As usual, the numbers I'll reference except for revenue will be non-GAAP. As John mentioned earlier, BlackBerry's second quarter results not only met but exceeded the guidance range that we provided last quarter.
Tim Foote: Good afternoon everyone. I'm incredibly proud to be joining this school with CFO. I top priority in this role is clear to increase shareholder value.
Tim Foote: In my opinion, Blackberry has a significant amount of value that is underappreciated.
Speaker Change: and as we continue to execute an our strategy, I'm focused on seeing that it's recognized.
Speaker Change: As usual, the numbers are reference, except for revenue, will be known gap.
Speaker Change: was John mentioned earlier, like very second quarter results, not only met, but exceeded the guidance range that we provided last quarter.
Tim Foote: Carter. Total company revenue was 145 million, exceeding the upper end of the range of 144 million. Total company gross margin was consistent year on year at 66%. This year we've made tremendous progress on our cost structure, with operating expenses this past quarter decreasing to 99 million. That is 31 million or 24% lower than the 130 million baseline for OPEX that we provided as a reference point prior to recent cost reductions. It is also 10% lower than the guidance we gave for the FY25 average quarterly OPEX of 110 million. Cost remains a key focus going into the second half, and during September we announced the number of further back office headcount reductions and facilities closures as we continue to streamline operations.
John: So to company revenue was 145 million, exceeding the upper end of the range of 144 million.
Speaker Change: So some company Grace Margem was consistent year on the air at 66 to the same.
Speaker Change: This year we've made tremendous progress on our cost structure, with operating expenses as past quarter, decreasing to 99 million.
Speaker Change: that is 31 million or 24% lower than 130 million baseline prospects that we provided as a reference point prior to recent cost reductions.
Speaker Change: It is also 10% lower than the guidance we gave for the FY-25 average costly of tax of 110 million.
Speaker Change: Post remains a key focus going into the second half.
Speaker Change: and during September, we announced the number of third of back office headcount reductions and facilities closures as we continue to streamline operations.
Tim Foote: The new management team at BlackBerry has managed to thread the needle of significantly reducing costs, while at the same time managing to stabilize the top line and even drive growth. As a result, we've delivered substantially improved profitability and cash usage. For Q2, the non-GAAP operating loss was 4 million, and adjusted EBITDA beat expectations by finishing at break-even for the quarter. Adjusted EBITDA this quarter is $22 million better on a year-on-year basis. Non-gap EPS also beat guidance at break even. Further, cash usage continues to improve. You may recall that during our last earnings school, we outlined that, due largely to the timing of certain cash receipts and payments, we expected a sequential increase in operating cash usage.
Speaker Change: The new management team at Blackberry has managed to thread the needle of significantly reducing costs while at the same time managing to stabilize the top line and even drive grave.
Speaker Change: As a result, we've delivered substantially improved profitability and cash usage.
Speaker Change: The Q2, the non-gap operating loss was 4 million and the just little EBITDA beat expectations by finishing a break even for the quarter.
Speaker Change: The Justice Ebit Dardis Quarter is $22 million better on a year-on-year basis.
Speaker Change: [inaudible]
Speaker Change: Further, cash usage continues to improve.
Speaker Change: He may recall that during our last standing school, we outlined that due largely to timing of certain cash receipts and payments.
Speaker Change: We expected a sequential increase in operating cash usage.
Tim Foote: However, operating cash usage came in better than expected, improving by 2 million sequentially to 13 million. This is $43 million better than for Q2 last year, and in total, operating cash usage is $100 million better for the first half than the prior year, before allowing for the proceeds from the patent sale.
Speaker Change: However, operating class usage came in better than expected, improving by 2 million sequentially to 13 million.
Speaker Change: This is $43 million better than for Q2 last year and in total, operating cash usage is $100 million better for the first half than the prior year.
Speaker Change: before allowing for the proceeds from the patent itself.
Tim Foote: Let me now provide the financial outlook for Q3 and the fiscal year as a whole. For IoT, we expect revenue this quarter to increase sequentially and to be in a range of $56 million to $60 million. For the four year, we are raising the bottom end of our guidance range for IoT revenue, such that the range is now 225 to 235 million. For cyber, we expect revenue for Q3 to be in a range of $86 to $90 million, and we're reiterating the four-year guidance range at $350 to $365 million. In terms of profitability, we expect adjusted EBITDA for Q3 to be in a range of break even to positive $10 million, and non-GAAP EPS up between minus 1 cent to positive 1 cent.
Speaker Change: Let me now provide financial outlook for Q3 and the first school year is a whole.
Speaker Change: IOT, we expect revenue this quarter to increase sequentially and to be in a range of 56 to 60 million dollars.
Speaker Change: For the full year, we are raising the bottom end of our guidance range for IoT revenue, such that the range is now 225 to 235 million.
Speaker Change: The Cyber, we expect revenue for Q3 to be in the range of 86 to 90 million dollars. And we're reiterating the four-year guidance range at 350 to 365 million.
Speaker Change: In terms of profitability, we expect to just leave it there for Q3, it's being a range of break even to positive $10 million and non-gapyps, up between minus 1 cent to positive 1 cent.
Tim Foote: The full fiscal year we expect adjusted EBITDA to be in a range of break even to positive 10 million, and non-GAAP EPS to be in a now higher range of between negative 5 cents to negative 2 cents. Finally, we expect a sequential improvement in cash flow for Q3 and for BlackBerry to return to positive cash flow and EBITDA in Q4.
Speaker Change: The full fiscal year, we expect to just leave it dark, to be in the range of break even to positive 10 million. And non-gap GPS to be in the now higher range of between negative five cents to negative two cents.
Speaker Change: Finally, we expect a sequential improvement in cash flow for Q3 and for Blackberry to return to positive cash flow and EBITDA in Q4.
John Giamatteo: And with that, let me now return the call to John. Thanks for that, Tim.
Speaker Change: And with that, let me now return the call to John.
John Giamatteo: Before we move to Q&A, let me quickly summarize the key takeaways from this past quarter. This was a good quarter for BlackBerry. Both our IoT and cyber divisions be tough line expectations and delivered year-on-year growth. The hard work that the team has done with managing costs is really paying off, with operating expenses now significantly lower than prior year and below $100 million a quarter. BlackBerry reached a significant milestone on the path to profitability by achieving break even for both EBITDA and non-GAAP EPS this quarter. And finally, cash burn for the quarter was $43 million better than last year and $100 million better year on year for the first half before allowing for the impact of the patent sale.
John: Thanks for that Tim.
John: Before we move to Q&A, let me quickly summarize the key takeaways from this past quarter.
John: This was a good quarter for Blackberry, both our IOT and Cyber Divisions be top line expectations and delivered year on year growth.
Speaker Change: The hard work that the team is done with managing cost is really paying off, with operating expenses now significantly lower than prior year and below $100 million a quarter.
Speaker Change: Blackberry reached the significant milestone on the path to profitability by achieving break-even for both EBITDA and non-GAP-EPS this quarter.
Speaker Change: And finally, cash firm for the quarter was $43 million better than last year and 100 million better year on year for the first half before allowing for the impact of the patent sale.
Operator: I'm incredibly proud of the progress that everyone at BlackBerry has made as we find ourselves in a significantly stronger position going into the second half of the fiscal year. And with that, let's move to Q&A.
Speaker Change: I'm incredibly proud of the progress that everyone at Blackbury is made as we find ourselves in a significantly stronger position going into the second half of the fiscal year.
Operator: So, operator Dave, can you please open up the lines?
Speaker Change: and with that, let's move to Q&A. So, operator Dave, can you please open up the lines?
Operator: We will now begin the question in the answer session. To ask a question, you may press star, then one on your touch tone phone. If you're using a speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star and then two.
Speaker Change: We will now begin the question in the answer session, to ask a question, you may press star then one on your touch zone, if you are using a speaker phone, please pick up your hand set before pressing the keys. If at any time your question is then a drafts and you would like to withdraw your question, please press star and then two.
King's Lee Crane: Our first question comes from King's Lee Crane with Canacorn Genuity. Please go ahead. Hi, thanks so much for taking the question. Congrats on continued execution. First question, what magnitude of opportunity does Q&X containers and the Hayley Tech integration in launch open up on that side of the business? How can we think about new product unlocking design ones?
Speaker Change: Our first question comes from Kingsley Crane with Canacorgenuities. Please go ahead.
Kingsley Crane: Hi, I think so much for taking the question, congrats on continued execution. First question, what magnitude of opportunity does Q and X containers and the Hayley Tech integration in launch open up on that side of the business? How can we think about new products on locking design wins?
John Giamatteo: Yeah, excellent question.
John Giamatteo: Should I tell that John? Yeah, so containers is something that we've heard a fair amount in this industry in the last few courses. Ultimately, it's just part of the expansion, the ongoing expansion of the town, King's Lee, to be honest. It's containers is something that people are very familiar with working in a cloud environment, sort of a Docker type approach. So, as we move Q&X towards the clouds, people are obviously looking towards safely certified containers as a way of working. So, this is a natural evolution of that. And John mentioned in his remarks that we're starting to see some traction from the cloud side of things as we productised what we did with Stellantis that we showed you at CES.
Kingsley Crane: Yeah, excellent question. Should I tell that John? Yeah, so containers is something that we've heard a fair amount in this industry in the last few courses.
Kingsley Crane: Ultimately, it's just part of the expansion, the ongoing expansion of the town, Kingsley, to be honest.
Speaker Change: Containers is something that people are very familiar with working in a cloud environment for the Docker type approach.
Speaker Change: So, as we move Q and X towards the clouds, people obviously looking towards safety certified containers as a way of working. This is a natural evolution of that.
Speaker Change: and John mentioned in his remarks that was starting to cease and traction from the cloud side of things as we've productized.
John Giamatteo: What was the second part of the question? It was around sound. Yeah, so yeah, it was Hayley Tech. So, on the sound side of things, this is another one of the new products that we launched earlier this year, and we're pleased that although there are long sales cycles here, it just opens up from another aspect. So, in the past, we talked about the more sockets, more layers narrative, which is about saying we want more Q&X content in each and every vehicle. And not only just the operating system, but adding elements of middleware up the stack, and sound is definitely one of those elements.
Speaker Change: What we did with Stellantis, we showed you at CES.
Speaker Change: What was the second part of the question? It was around sound.
Speaker Change: Yeah, so yeah, it was a daily take. So on the sound side of things, this is another one of the new products that we launched earlier this year and we're pleased that, well, they don't have our long sales cycles here, it just opens up another aspect.
Speaker Change: In the past we talked about the more sockets, more layers narrative.
Speaker Change: which is about saying we want more Q and X content.
Speaker Change: in each and every vehicle.
Speaker Change: and not only just the operating system but adding...
Speaker Change: Elimance the middleware up the stack and sound is definitely one of those elements. So, seeing traction, seeing someone actually commit to, to build this product into vehicles, obviously a significant progress so we're pleased with that.
John Giamatteo: So, scene traction, scene someone actually commit to build this product into vehicles. Obviously, it's significant progress. So, we're thanks for that.
King's Lee Crane: Awesome, that's crazy here.
King's Lee Crane: And then on the financials, just, you know, Q-3 guidance implies a modest sequential increase for cyber before a markedly sharper increase in Q-4. I think it's been a historically been a seasonally lighter quarter. So just anything that we should consider there this year would be helpful. Thank you. Yeah, good question. So I would say actually at the midpoint, it's kind of, it's just a continuation of the trend of what we're seeing. Traditionally, Q-4 is strongest for us; actually, from a billing standpoint. Q-3 last year we had some significant one-time deals, which helped drive the Humping Q-3.
Speaker Change: Also, that's crazy here. And then on the financials, just you're two, three guidance implies a modest sequential increase for cyber before a market these sharper increasing Q4. I think it's been a historically been a seasonally lighter quarter, so just anything that we should consider there in the share would be helpful.
Speaker Change: Yeah, good question. So I would say actually at the midpoint it's...
Speaker Change: is just a continuation of the trend of what we're seeing. Tradition E. Key 4 is strongest for us, actually, from a billing standpoint. Key 3 last year we had some significant one-time deals which
Luke Jung: But if you take the midpoint, Kingsley, actually just see sequential growth, Q-3, Q-4. Perfect, thank you.
Speaker Change: which helped drive the Humping Q3. But if you take the midpoint, Kingsley, actually you just see sequential growth, 3Q3, Q4.
Tim Foote: And the next question comes from Luke Jung with Air, please go ahead. Good afternoon, thanks for taking questions. First, just a question related to the EBITDA progression, reaching break even sooner than expecting the quarter, a great achievement. Just trying to reconcile that with the full year EBITDA guidance being maintained in the range of break even to 10 million. And there's something in timing we should be considering, or some sort of offset in the back half. I guess if I look at the op-ax trajectory, it seems to be coming down quicker than you had anticipated. And that would seem to suggest maybe some upsides the full year.
Kingsley Crane: Thank you.
Speaker Change: and the next question comes from Luke Jung with aired. Please go ahead.
Luke Jung: Good afternoon, thanks for checking the questions.
Luke Jung: First, just a question related to the EBITDA progression, reaching breaking in the suitor that expecting the quarter of grade of sheben, just trying to reconcile that with the full EBITDA guidance being maintained in the range of break even to 10 million.
Speaker Change: There's something in, you know, timing we should be considering or some sort of offset in the back half, I guess if I look at the up-extrajectory, it seems to be coming down quicker than you had anticipated and that would seem to suggest maybe some upsides of the flavor.
Tim Foote: Thank you. Yeah, so, you know, we're obviously trying to be prudent with our guidance here, Luke. So Q-1 was a negative 7. We're delighted to be breaking even ahead of schedule and Q-2. But at the midpoint, we still go a little bit to do to make the full year positive in terms of EBITDA. So, if you take, you can assume that there's these financial improvements going from Q-2 and Q-3 and Q-3 and Q-4. So, hopefully, that house.
Speaker Change: Yeah, so, you know, we're obviously trying to be prudent with our guidance here Luke, so, Q1 was there.
Luke Jung: and Naked 7, we're delighted to be break even ahead of schedule and Q2, but at the midpoint, we still got a little bit to do to make the full year.
Speaker Change: and Paul Steve for that.
Speaker Change: in terms of evit. So if you take, you can assume that there's these financial improvements going from U2 and Q3, and Q3 and Q3 and Q4, so hopefully that house.
John Giamatteo: And then second, just hoping you could just double-click on the organizational changes in IV and integrating that more into the Q-Next organization on a go-forward basis, just relative to retaining key talent there while also reducing cost, maybe if you could just kind of square the balancing of those two things. Yeah, look, this is John. We've actually invested a lot into IV over the last few years, really. And we did it by virtue of a very dedicated team that was really focused on building out the IV platform, you know, as a holistic project. I think, you know, I think we came to the conclusion that now, once you get a product to a certain level, where there's a baseline, you're meeting a lot of the features and capabilities that we're looking to deliver to the market, we kind of felt like, you know, there's some operational efficiencies that we could gain by bringing that team together very synergistically with, you know, other Q-&X members, whether it's on the sales front-end sales side or on the R&D side.
Speaker Change: It does, makes him
Speaker Change: and then second just hoping you could just double click on the organizational changes and IV and integrating that more.
Speaker Change: into the Q&AX organization on a Gulf War basis just relative to retaining key talent there while also reducing cost maybe if you could just kind of square the balancing of those two things.
Speaker Change: Yeah, look, this is John, it's...
John: We've actually invested a lot into Ivy over the last few years, really, and we did it for a virtue of a very dedicated team that was really focused on building out the Ivy platform.
Speaker Change: I think we came to the conclusion that now once you get a product to a certain level where there's a baseline, you're meeting a lot of the features and capabilities that we're looking to deliver to the market.
Speaker Change: We kind of felt like there's some operational efficiencies that we could gain by bringing that team together very synergistically with other Q&A members, whether it's on the sales, front-end sales side or on the R&D side.
John Giamatteo: So I think we kind of came to the conclusion in the first half of the year that, you know, leveraging some of those efficiencies. These, since we've made so much progress on moving that platform along, that this was the right time to do that.
Speaker Change: So I think we kind of came to the conclusion in the first half of the year that you know leveraging some of those officials.
Speaker Change: We've made so much progress on moving that platform along that this was the right time to do that.
Paul Treiber: I'll leave it there. Thank you. And the next question comes from Paul Treiber with RBC Capital Markets. Please go ahead. Oh, thanks so much for taking the question. Could you provide an update on the separation process? You know, I think last quarter, you mentioned you're working through splitting up some of the IT systems and reorganizing that and just changes to the organizational structure. What's remaining to go from an operational perspective here? Yeah, Paul, we made tremendous progress on that. In fact, we were just having some review, some deep dive reviews on that over the course of the last couple of weeks and, you know, a lot of the kind of low hanging fruits of splitting it out, aligning it to the BUs.
Speaker Change: I understand I'll leave it there thinking.
Speaker Change: and the next question comes from Paul Fraiber with RBC Capital Markets. Please go ahead.
Paul Fraiber: Well, thanks so much for taking the question. Could you provide an update on the separation process? I think last quarter you mentioned you're working through splitting up some of the IT systems and reorganizing that and just...
Speaker Change: and the changes to the organizational structure, you know, what's remaining to go from the operational perspective.
Speaker Change: Paul, we made tremendous progress on that. In fact, we just haven't reviewed some deep dive reviews on that over the course of the last couple of weeks.
Paul: You know, a lot of the kind of low hanging fruits of...
John Giamatteo: We think we've achieved that. We've got that largely in place. There are some components within the networking, some of our cyber, you know, protection solutions within the CSO organization. I think we've probably mentioned before some of these things are naturally a little bit more intertwined that takes a little bit more time to, you know, unravel. So we're trying to strike the right balance on move these resources, move the cost, put them into the BUs, let them operate them in a very agile way. But at the same time, you know, don't go too far where we start to introduce this energy.
Paul: Sporting it out, aligning it to the B-use.
Paul: We think we've achieved that, we've got that largely in place.
Paul: There are some components within the networking, some of our cyber protection solutions within the CISO organization.
Paul: I think we've probably mentioned before. Some of these things are naturally a little bit more intertwined that takes a little bit more time to unravel. So we're trying to strike the right balance on
Paul: Moved these resources, moved the cost, put them into the BUs, let them operate them in a very agile way. But at the same time, you know, don't go too far where we start to introduce disenergies.
John Giamatteo: So we kind of feel like we're striking the right balance where the business is operating. You can see, you know, we're generating, you know, the revenues that we want, the design wins, the progress that we're making and how we operate it, but, you know, at the same time, driving the significant costs out of the business. So we feel like we're striking, you know, right at the right balance. At this point, we'll continue to look at that with an eye towards don't. We made so much progress on reducing our cost structure. We don't want to overstep it and now start to introduce additional costs just for the sake of saying things are separated.
Paul: So...
Paul: So, we kind of feel like we're striking the right balance, we're...
Paul: We're the business is operating, you can see we're generating the revenues that we want, the design wins, the progress that we're making, and how we operate it. But at the same time, driving the significant cost out of the business.
Paul: We feel like we're striking right at the right balance at this point. We'll continue to look at that with an eye towards...
Paul: Don't we made so much progress on reducing our cost structure. We don't want to oversteep it and now start to introduce additional costs just for the sake of saying things are separated. So we're trying to strike that right balance.
John Giamatteo: So we're trying to strike that right balance.
John Giamatteo: That's helpful to understand just on, you know, as you sort of untangle the two organizations. Are you seeing structural differences and in profitability between the two? How should we, how should we think about that here? Yeah, so I would say this whole process has given us the opportunity to take a fresh look. And while I'll say is if you tune into the Investor Day on October 16th, we're definitely going to be providing a lot more color on that around divisional profitability. So we'll leave it till then if that's so capable.
Speaker Change: I hope you'll understand just on as you as you sort of
Speaker Change: and Untangle the two organizations. Are you seeing structural differences in profitability between the two? How should we think about that here?
Speaker Change: Yes, so I would say this whole process has given us the opportunity to take you fresh look.
Speaker Change: Well, so, if you tune into the investor day on October 16th, we're definitely going to be providing a lot more colour on that around divisional profitability. So we'll leave it till then if that's so capable.
Paul Treiber: Sure, just one last. John Sivery, does look like the mix of license revenue was higher this quarter, was that?
Speaker Change: Sure, just one last one.
Speaker Change: I'm sorry, you know, it does look like the mix of licensed revenue was higher this quarter was that. The primary driver of one of the major drivers of the upside relative to guidance. And then
John Giamatteo: The primary driver of one of the major drivers of the upside relative to guidance, and then how do we think about that from a timing point of view, was that a patch of from prior quarters, was it pulled forward from future quarters versus your expectations? Yeah, I think it was a combination of both license and hardware, as we mentioned. Seki Smart and some of our German customers, they had a device refresh cycle that they're working through, that generated some upside orders that were helpful to the business, but we were really encouraged with the durability of the UEM business this quarter.
Speaker Change: How do we think about that from a timing point of view? Was that a catch-up from prior quarters? Was it pulled forward from future quarters versus your expectations?
Speaker Change: Yeah, I think it was a combination of both licensed and hardware, as we mentioned. Sexy smart and some of our German customers, they added the vice-refresh cycle that they're working through. That generated some...
Speaker Change: some upside orders that were helpful to the business but
Speaker Change: We were really encouraged with the durability of the U.N. business this quarter. We're encouraged with the ad hoc business and some of the...
John Giamatteo: We're encouraged with the ad hoc business and some of the large customers that we renewed and did some expansions on. So, I think it's been the achievement for this particular quarter was really kind of broad-based across license, service, and hardware.
Speaker Change: a large customer that we renewed and did some expansions on.
Speaker Change: I think it's been the achievement for this particular quarter was really kind of broad-based across licensed service and hardware.
Paul Treiber: Thanks for taking the questions.
Daniel Chan: Thanks, Paul. And again, if you have a question, please press star and then one. Our next question comes from Daniel Chan with PD Cowan. Please go ahead. Hi, thanks for taking my questions.
Speaker Change: Thanks for taking the questions.
Speaker Change: Thank you for.
Speaker Change: And again, if you have a question, please press star and then one. Our next question comes from Daniel Chan with TD Cowan. Please go ahead.
John Giamatteo: Any potential impact from the proposed ban of Chinese hot-o software and hardware, and maybe not just in the US, but the potential of it expanding to other countries? It's a really good question. Obviously, something we're watching very closely. The good news for Q and X is we're very well diversified geographically and also from an industrial standpoint. I guess being a proud Canadian company kind of puts us slightly more on the neutral bucket, but it's fair to say we're definitely watching closely. China is an important market for us, so we need to see what develops from that.
Daniel Chan: Hi, thanks for taking my questions. Any potential impact from the proposed ban of Chinese Hado software and hardware, and maybe not just in the US, but the potential of it expanding to other countries?
Speaker Change: It's a really good question. Obviously something we're watching very closely. The good news for Q&AX is we're very well diversified, geographically and also...
Speaker Change: from the Industrial standpoint. I guess being a proud Canadian company kind of puts us slightly more on the neutral bucket. But it's fair to say we're definitely watching, watching closely, China's an important market for us, so we need to see what the end.
John Giamatteo: Thanks for that.
John Giamatteo: And then the delayed or canceled programs that you design programs that you're seeing now. How should we think about those impacting the potential royalty revenue in several years? Yeah, it's a good question. Ultimately, the way we think about it down is that this works not gone away. The secular trends are still very much there. It's just a question of timing how quickly the OEMs can actually get to the stage of developing this software and then ultimately moving it into production. The good news for us is this is a very long-term business. As you know, we win a design and we've got a revenue stream kind of locked in for the next 10 years, and we've already got $850 million in our backlog, which gives us a really solid base.
Speaker Change: from that.
Speaker Change: Thanks for that, and then the delayed or cancelled programs that you design programs that you're seeing now. How should we think about those impacting the potential royalty revenue in several years?
Speaker Change: Yeah, it's a good question. Ultimately, the way we think about it down is that this work's not gone away, the secular trends are still very much there. It's a question of timing how quickly the OEMs can actually get to the stage of
Speaker Change: of developing this software and then ultimately moving it into production.
Speaker Change: The good news for us is this is a very long term business, as you know, we win a design and we've got a revenue stream kind of locked in for the next 10 years.
Speaker Change: and we've already got $815 million in our backlog, which gives us a really solid day. So, as these kinks in this...
John Giamatteo: So, as these kinks in this, or bumps in the road, if you like, kind of get worked through, we're very confident that the secular trends that powering this industry have not gone away. And we'll continue to might progress.
Speaker Change: Bumps in the road, if you like, can't get worked through, but very confident that the secular trends that are powering this industry are not going away and will continue to make progress.
Tim Foote: Thanks, Tim.
Tim Foote: Just a couple of questions on cybersecurity. If I may, the ARR kind of reverse trajectory kind of improved in Q1 and in this quarter kind of declined sequentially. What changed over the last three months to reverse that momentum? Yeah, that's a good, really good question. You know, I would say, you know, overall, you know, year over year was relatively flat. I think from quarter to quarter, there's going to be a little bit of variability, some bumps in it. It's probably more of it is associated with some of the silence churn that we've experienced over the course of the last quarter or two.
Speaker Change: Thank you. Just a couple of questions on the cybersecurity by May. The ARR kind of reverse trajectory kind of improved in Q1 and in this quarter kind of declined sequentially. What changed over the last three months to reverse that momentum?
Speaker Change: Yeah, that's a good, really good question.
Speaker Change: I would say, you know, overall, you know, year-over-year was relatively flat. I think from quarter to quarter there's going to be a little bit of variability, some bumps in it.
Speaker Change: is probably more of it, is associated with some of the silence turned that we experience the divorce.
Tim Foote: So that was probably part of some of the downward pressure, you know, but at the same time, some of the trends that we've seen with UEM and ATHOC were offsetting some of that. So, you know, there'll always be, I think, a little bit of variability from quarter to quarter, just based on the nature of our businesses and the markets that they serve. You know, but, you know, from a long-term perspective, you know, we're pleased that it's relatively, it's much more stable than it's been in the last couple of years.
Speaker Change: of the last quarter or two, so that was probably part of some of the downward pressure. You know, but at the same time, some of the trends that we've seen with UEM and at Hock.
Speaker Change: We're offsetting some of that so you know though always be I think a little bit of variability from quarter to quarter just based on the nature of our businesses and the markets that they serve.
Speaker Change: You know, but you know, from a long-term perspective, you know, we're pleased that it's relic. It's much more stable than it's been in the last couple of years.
Tim Foote: Thanks. And last one for me, nice to see the net revenue retention improving. Is it improving because the churn's getting better, or are you doing a better job with the upsell and cross-sell? Any color would be helpful.
Speaker Change: Thanks, and last one for me, nice to see the net revenue retention and improving. Is it improving? Because it's the turns getting better, or are you doing a better job with the upsell across the line in color would be helpful? Thank you.
Tim Foote: Thank you. Combination of all of it, a little bit of a mixed bag. I think there's some definitely some really good upsell on the ATHOC side, some really good upsell on the UEM side. You know, that's offset a little bit with some of the, you know, the silence churn. So, across the portfolio, it's good to see, you know, whatever the seven points for consecutive quarters of a movie in the right, or it's still not where we want it to be by any means, but it's good to see it stabilizing a movie in the right direction.
Speaker Change: A combination of all of it, a little bit of a mixed bag. I think there's some definitely some really good upsell on the ad hoc side, some really good upsell on the UEM side.
Speaker Change: Um, you know, that's, uh, offset a little bit with some of the, you know, the, the silenced turn.
Speaker Change: So across the portfolio, it's good to see, you know
Speaker Change: Whatever the 7 points for consecutive quarters of...
Speaker Change: of moving in the right direction, still not where we wanted to be, by any means, but it's good to see it stabilize it and moving in the right direction.
Tim Foote: Great.
Tripp Toudry: Thank you very much.
Tripp Toudry: The next question comes from Tripp Toudry with Global Equities Research. Please go ahead. Thank you. A very exciting quarter. I think the way I look at your company is very underappreciated startup.
Rai: Rai, thank you very much.
Strip Dowry: The next question comes from strip, dowry, with global equities research. Please go ahead.
Strip Dowry: Thank you, thank you very exciting quarter. I think the way I look at your company is very under-appreciated startup.
Tripp Toudry: Why I say that is, in every business you are, there is so much opportunity to create and shape the new and the new future based on the technologies and the platforms you have. I was just thinking, if your team is thinking on these three emerging opportunities that I think, if you have a different narrative and a different perspective, you could be doing a lot better versus, you know, if I'm looking at other analyst questions, they are very backward looking because they are thinking Blackberry from a very traditional sense versus if you look at the Blackberry as a startup which is not well understood.
Strip Dowry: Why is here that is in every business you are?
Speaker Change: There is so much opportunity to create and shape the new and the new future based on the technologies and the platforms you have. I was just thinking if your team is thinking on the three emerging opportunities that I think.
Speaker Change: If you have a different narrative and a different perspective,
Speaker Change: You could be doing a lot better versus if I am looking at other analyst questions. They are very bad for looking.
Speaker Change: [inaudible]
Vosis: Vosis, if you look at the blackberry as a startup, which is not well understood. Let me give a point 2, 3 points here. First, there is a emergence of
Tripp Toudry: Let me give a point, two, three points here. First, there's an emergence of generative AI devices. There's only one instance right now where Johnny Ive and OpenAI are trying to create those devices. And if we can fast forward it, it could be no less popular than iPhones down the road. This is, I'm extrapolating, but that's one new thing that has emerged over the last three, four months. Marks. Second, when you think in terms of generative AI and various models that are coming, including small language models, and now a lot of intelligence is being done on Intel AI PCs, for example.
Speaker Change: Giamatteo, AI Devices. There's only one instance right now where Johnny Ives and Open AI are trying to create those devices.
Speaker Change: and if we can force forward it,
Speaker Change: It could be no less popular than iPhones down the road. This is I am extrapolating, but that's one new thing that is the most of the last 3 for months.
Speaker Change: Second, when you think in terms of genetic AI and various models that are coming, including small language models, and now.
Speaker Change: Uh...
Speaker Change: Lodofy intelligence is being done on Intel AI P6 by example.
Tripp Toudry: Now, as in the prepared remarks, you talked about UEM product being very good for on premises. If we extrapolated, because you have a wonderful CEO came from my cafe, that is an opportunity when you have AI's and there is so much they call it injection, that is prompt injection that are happening, it is just old paradigm in a new situation.
Speaker Change: Now, as in the prepared remarks you talked about UEM product being very good for on-premises, if we extrapolate it because you have a wonderful CO-kin from my cafe, that is an opportunity when you have a eyes and there is so much.
Speaker Change: and the call it the injection that is prompt injection that are happening. It is just...
Speaker Change: Orpada Day in the new situation.
Tripp Toudry: So something that is dead is getting exciting now; the only thing that there are many others can go offline, but the way I am thinking is we should be looking at BlackBerry as a start-up, attacking new problems with the technologies and experiences you have.
Speaker Change: So, something that is dead is getting exciting now, the only thing that as many others we can go offline, but the way I am thinking is...
Speaker Change: We should be looking at Blackberry as a startup.
Speaker Change: I'm taking new problems with the technologies and the experiences you have.
John Giamatteo: So Tim, since I happened to know you very well and you are one of the sharpest, I was a technologist CFOs, I was thinking if you have thought about it and what are your initial views on it. Of course, this industry has been created right in front of our eyes. I really want BlackBerry to go and capture it, so that is all for me. Thank you so much, Tripp.
Speaker Change: So, Tim, since I happened to know you very well and you're one of the most sharpest, I would take acknowledges see a post.
Speaker Change: I was thinking if you have thought about it and what are your initial views on it? Of course, this industry has been created right in front of our eyes. I really want black worry to go and capture it. So that's our for me and from today, it's my honor.
John Giamatteo: John, did you want to... I really resonate with Tripp with how you talk about it as a start-up, taking a step back and taking a look at what businesses are we in, what could we be, you know, turbocharged growth with our AI-centric. I think one of the things that really has helped us is this whole strategy around setting up to be used. It has really given us some interesting insights on to our product portfolios, and which ones are more next generation things that can lead to more dynamic growth in the markets that you are describing, and which ones maybe from a capital allocation we have got to pull back on.
Speaker Change: Thank you so much, Tripp. John, did you want to... You know, just one thing I would...
John: I really resonate with how you talk about it as a startup, taking a step back and taking a look at what businesses are doing, what can we turbocharged growth with our ARS AI centric?
Speaker Change: and I think one of the things that really has helped us is this whole...
Speaker Change: Schraddiger around setting up to be used. It's really given us some interesting insights on to our product portfolios.
Speaker Change: and which ones are more next generation things that can lead to.
Speaker Change: Moore dynamic growth in the markets that you're describing and which ones maybe.
John Giamatteo: So definitely tune in more for some more details on that at the upcoming Investor Day, where we will share kind of more of a portfolio look at the company and how we are shaping our investments and our capital allocations to invest in the kinds of things that you are talking about, Tripp.
Speaker Change: from a capital allocation, we've got to pull back on, so...
Speaker Change: Definitely tune in more for some more details on that at the upcoming investor day where we'll share kind of more of a portfolio look at the company and how we're...
Speaker Change: Shaping our investments in our capital allocations to invest in the kinds of things that you're talking about.
Tripp Toudry: You have phenomenal. Thank you so much.
Operator: Thank you, Tripp.
Speaker Change: You have found all of us. Thank you so much. Thank you, Trevor.
Stephen Leeds: The next question comes from Stephen Leeds with Raymond James. Please go ahead. Hey, thanks. John, I'm not sure if I may hurt you, but on cyber, I think I heard you say more customers are adopting your managed services offering, and that drove the year where you are declining assignments, right? Did I miss you, or can we elaborate?
Speaker Change: The next question.
Speaker Change: comes from Steve and Lee, this Rayman James.
Speaker Change: Please go ahead.
Speaker Change: I'm not sure if I'm the third you
Speaker Change: I think I heard you say more customers are adopting your money services offering and that drove the year with your declining finance revenue. Did I miss you or will I be in the lobby?
John Giamatteo: Yeah, let me, maybe I wasn't clear, Stephen, just, and within silences, there's kind of two components. Our historical, we bought the company; it was a very product-centric company, endpoint protection, and we built out our EDR capability with optics, and that's the classic product where our customers license it on a product-only basis. That part of the business we're seeing as just trends in the market in general, that's where we've had some sluggishness. That's where we've had some renewal rates, some defections, but where we saw some upside is existing customers that moving from product-only scenario to MDR, where we manage people that don't have the resources or the wherewithal to manage their own environments, and they look for us to do it from an MDR perspective.
Speaker Change: Yeah, maybe I wasn't clear, even just, within silancers.
Speaker Change: is kind of two components. Our historical and we bought the company, it was a very product-centric company, endpoint protection, and we built out our EBR capability with optics.
Speaker Change: and that's the classic product where our customers license it on a product holy basis.
Speaker Change: That part of the business we're seeing as just trends in the market in general.
Speaker Change: That's where we've had some sluggishness, that's where we've had some renewal rates, some defections, but where we saw some upside is existing customers that moving from product-only scenario.
Speaker Change: to MDR, where we manage.
Speaker Change: People that don't have the resources or the wear with all to manage their own environments and they look for us to do it from an MDR perspective.
John Giamatteo: That part of the business we've actually seen good pipeline, some good conversions, some interesting wins in the quarter, but that was kind of offset by some of the downside weakness on the product-only segment of our customer base.
Speaker Change: So that part of the business we've actually seen.
Speaker Change: Good pipeline, some good conversions, some interesting wins in the quarter, but that was kind of all set by some of the downside weakness on the product only segment of our customer base.
Stephen Leeds: You got it, that's our presentation.
Speaker Change: Garuda, that's our adventure.
John Giamatteo: This concludes our question in the answer session.
Speaker Change: [inaudible]
John Giamatteo: I would like to turn the conference back over to John Diamatteo for any closing remarks. Terrific. Thank you, Dave. So before we wrap up, I just want to remind everybody about our upcoming Investor Day at the New York Stock Exchange on October 16th. At this event, for the first time, we're going to be providing segmented P&Ls for both our IoT and cybersecurity divisions, as well as the new outlook for fiscal years 26 and 27. We'll take a deeper dive into the performance of our four cybersecurity product groups and review our capital allocation priorities. It will also showcase the depth of expertise that we have in both IoT and our cyber teams as they explain the market opportunities and where our products are positioned to capitalize on them.
Speaker Change: This concludes our question in the answer session. I would like to turn the conference back over to John D. Amateo for any closing remarks.
Speaker Change: Terrific. Thank you, Dave.
Speaker Change: So before we wrap up, I just want to remind everybody about our upcoming investor day at the New York Stock Exchange on October 16th.
Speaker Change: At this event to the first time, we're going to be providing segmented P&Ls for both our IOT and cybersecurity divisions, as well as the new Outlook for fiscal years 26 and 27.
Speaker Change: We'll take a deeper dive into the performance of our four cybersecurity product groups and review our capital allocation priorities.
Speaker Change: and we'll also showcase the depth of expertise that we have in both IoT and our cyber teams as they explain the market opportunities and where our products are positioned to capitalize on them.
John Giamatteo: The event is available to the general public via webcast, and you can sign up on the investor relations web page.
Speaker Change: The event is available to the general public via webcast and you can sign up on the Investor Relations webpage.
John Giamatteo: So thanks again for joining today, and look forward to seeing you all next time.
Speaker Change: So, thanks again for joining today and we'll look forward to seeing you all next time.
Operator: The conference has now concluded. Thank you for attending today's presentation.
Speaker Change: The conference is now concluded, thank you for attending, today's presentation, you may now disconnect.
Operator: You may now disconnect.
Speaker Change: I'm John Giamatteo, Tim Foote, Tim Foote, Tim Foote, Tim Foote, Tim Foote, Tim Foote, Tim Foote, Tim Foote,