Q2 2025 BlackBerry Ltd Earnings Call
Good day and welcome to Blackberries's second quarter fiscal year 2025 earnings call.
Speaker Change: Paul, our distance will be in listen-only mode, did you need a system, please signally conference specialists by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask a question.
Speaker Change: Do ask a question, you may press star, then one on a touch phone phone.
Martha Gondor: Do a draw your question, start then too. Please note that C-Bent is being recorded. I would now like to turn the conference over to Martha Gondor, Director of Investor Relations Blackberry. Please go ahead.
Martha Gondor: Thank you Dave. Good afternoon everyone and welcome to Blackberry's 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: After I read our cautionary note regarding forward-looking statements, John will provide a business update and Tim will review the financial results.
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 call and numbers and via webcasts and the investor information section at BlackBerry.com
Speaker Change: A replay will also be available on the BlackBerry.com website.
Speaker Change: Some of the statements we'll be making today constitute forward-looking statements that are made pursuant to the safe harbor provisions of a clickable US and Canadian security law.
Speaker Change: We'll 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.
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.
Speaker Change: These factors include the 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. As is cutsumeria during the call, John and Tim will reference non-gap numbers in their summary for our quarterly results.
Speaker Change: For a 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.
Speaker Change: I'm sorry.
John Giamatteo: Thanks, Martha, and congratulations on your new role as director of Investor Relations for the Company.
John Giamatteo: Q2 was another good quarter for Blackberry as we're making significant progress in delivering on our strategy.
John Giamatteo: 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 year-over year improvements in non-cap EPS and adjusted EBITDA with Blackberry achieving break even ahead of plan.
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 provide.
Speaker Change: Gross margin improved by 1% its 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.
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 or ADAS wins.
Speaker Change: Among them, in Japan, we secure two design wins, with leading OEMs to power A-DAS functionality that includes surround camera and millivade 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 a large investments in our Q&AX product portfolio in recent years, resulting in a number of significant product launches being announced at CEF in January.
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 much.
Speaker Change: In the quarter we secured further design wins, and our next generation, STP8.0 platform.
Speaker Change: STP8.0 is the flagship, next generation product and 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 out of 4th.
Speaker Change: One of the world's largest industrial OEMs upgraded from SD.
Speaker Change: P-7.1-S-B-P-8.0, for their next generation of design, for an optical guiding system to be used in airport shuttle buss.
Speaker Change: 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.
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 their building Q and X sound into their digital cockpit architecture, the foundation for which is Q and X's 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.
Speaker Change: Finally, on the product side, you may recall that at CES, we announced that Stellantis had leveraged 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 an 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.
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.
Speaker Change: Finally, a quick update on I.B.
Speaker Change: The Auto Software program delays 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 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 see material revenue in the near term.
Speaker Change: On the cross 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&AX team.
Speaker Change: We believe this not only drives efficiencies, but also leverages the reach and expertise of our Q&AX team.
Speaker Change: Let me now move over to our cybersecurity division. Similar to IOT, this was a solid quarter for cyber. Revitably 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.
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, ad hoc critical events management, and secu smart encrypted voice and data.
Speaker Change: All three components delivered year over year growth and collectively, revenue increase 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 with on-premise deployments of 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.
Speaker Change: This helped UEM 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.
Speaker Change: 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: Hi, I'm Tim Foote, I'm Steve Rai, I'm Steve Rai, I'm Steve Rai,
Speaker Change: Simmerly, that thought 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.
Speaker Change: Renewal rates for ad hoc remain very high at close to 100%, which speaks to how integrated our product is in US 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.
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: Now, however, this past quarter we saw further traction for our software holy solution. With a major net new logo government in Europe purchasing our sexy sweep product for deployment in military applications.
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 MDR offset some of the churn we saw in the customer base this quarter.
Speaker Change: We've invested heavily in our sidelines, product, and 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: In terms of key metrics for a cyber business annual recurring revenue or ARR remains largely stable.
Speaker Change: Flat, year over year, a 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 comment 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 pre-date the sale of the non-corporation of the portfolio of tomoyote.
Speaker Change: Gross margins remained at 67% after allowing for amortization on the patents that generated this revenue.
Speaker Change: Now during the quarter, we announced that Tim Foote was appointed as Blackberries New CFO.
Speaker Change: Kim 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.
Speaker Change: So with that, let me turn the call over to Tim who can provide some more color around our financials.
Tim Foote: Thank you, John, and good afternoon, everyone. I'm incredibly proud to be joining this school with CFO. My top priority in this role is clear to increase shareholder value.
Speaker Change: In my opinion, Blackberry has a significant amount of value that is underappreciated.
Tim Foote: And as we continue to execute on 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: The John mentioned earlier, like very second quarter results, not only met, but exceeded the guidance range that we provided last quarter.
John Giamatteo: Total company revenue was 145 million, exceeding the upper end of the range of 144 million.
John Giamatteo: Total company Grace Margin was consistent year on the air at 66%.
John Giamatteo: This year we've made tremendous progress on our cost structure with operating expenses as cost quarter decreasing to 99 million.
John Giamatteo: That is 31 million or 24% lower than 130 million baseline prospects that we provided as a reference point prior to recent cost reductions.
John Giamatteo: It is also 10% lower than the guidance we gave for the FY-25s average costly of £110 million.
John Giamatteo: Cost remains the key focus going into the second half.
John Giamatteo: In during September, we announced a number of further back office headcount reductions and facilities clasers as we continue to streamline operations.
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 growth.
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 3 bit da beat expectations by finishing a break even for the quarter.
Speaker Change: for Justice EBITDA, this quarter is $22 million better on a year-on-year basis.
Speaker Change: NonGap GPS, also bait bait guideers at Rai Keven.
Speaker Change: Further, cash usage continues to improve.
Speaker Change: You may recall that during our last ending school, we outlined that due largely to timing of accepting cash receipts and payments.
Speaker Change: We expected a sequential increase in operating cash usage.
Speaker Change: However, operating cash 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.
Speaker Change: and in total operating cash usage is $100 million better for the first half than the prior year, before allowing for the proceeds for the patent self.
Speaker Change: Let me now provide financial outlook for Q3 and the fifth school year is a whole.
Speaker Change: For 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 at the range is now 225 to 235 minutes.
Speaker Change: We expect revenue for Q3 to be in the range of 86 to $90 million and we're reiterating the guidance range at 350 to 365 million.
Speaker Change: In terms of profitability, we expect to adjust the EBITDA for Q3, to be in the range of break even to positive $10 million. And non-gapyps, up between minus 1 cent to positive 1 cent.
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.
Speaker Change: And with that, let me now return the call to John.
John Giamatteo: Thanks for that Tim.
John Giamatteo: Before we move to Q&A, let me quickly summarize the key takeaways from this past quarter.
John Giamatteo: This was a good quarter for Blackberries, both our IOT and Cyber Divisions, feet top line expectations and delivered year on year growth.
Speaker Change: The hard work that the team is done with managing costs 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.
Speaker Change: 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.
Speaker Change: And with that, let's move to Q&A. So, operator date, can you please open up the lines?
Speaker Change: We will now begin the question in the answer session, so ask a question, you may press star then one on your touch-to-one phone. If you're using a speaker phone, please pick up your hand set before pressing the keys. If at any time your question is been addressed and you would like to withdraw your question, please press star and then two.
Speaker Change: Our first question comes from Kingsley Crane with Canacorn Genuities. Please go ahead.
Kingsley Crane: Hi and thanks so much for taking the question, congrats on continued execution. First question, what magnitude of opportunity does Q&AX containers and the Hayley Tech integration and launch open-up on that set of the business? How can we think about new product on locking design ones?
Speaker Change: Yeah, excellent question, shall I tell that John? Yeah, so containers is something that we've heard.
Speaker Change: a fair amount in the...
Speaker Change: and the last few courses. Ultimately, it's just partly expansion, the ongoing expansion of the town, King's Leeds, we all made.
Speaker Change: Containers is something that people are very familiar with working in a cloud environment or a docket 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 we're starting to see some traction from the cloud side of things as we product ties.
Speaker Change: What we did with Stellantis that we showed you at CES.
Speaker Change: What was the second part of the question? It was around sounds.
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 although there are long sales cycles here, it just opens up another aspect.
Speaker Change: In the past we talked about the more socket, 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: Elements of 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.
Speaker Change: Also, that's crazy here and then on the financials just ear to three guidance implies a modest sequential increase
Speaker Change: for Cyber before a market that you share for increasing food for, I think it's been historically been a seasonally lighter quarter, so just anything that we should consider there in this year 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. K4 is strong against us, actually, from a billing standpoint. K3 last year we had some significant one-time deals, which helped drive.
Speaker Change: the Humping Q3. But if you take the midpoint, Kingsley actually just sees sequential growth 3, Q3, Q4.
Speaker Change: for good. Thank you.
Speaker Change: And the next question comes from Luke Jung with, fear, please go ahead.
Luke Jung: Good afternoon, thanks for checking the questions.
Luke Jung: First, just a question related to the even of progression reaching you.
Speaker Change: Breaky then, super in the spectrum recorder, great achievement, just trying to reconcile that with Steve.
Steve Foote: Foote, you're able to get in speed, maintain 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 op-extrajectory, it seems to be coming down quicker than you had anticipated, and that would seem to suggest maybe some upsides of the floor here.
Speaker Change: Yeah, so, you know, we obviously trying to be prudent with our guidance here, Luke. So, Q1 was there.
Luke Jung: And they said seven, we're delighted to be breakeven 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 EVITDA. So if you take, you can assume that there's these financial improvements going from E2 into Q3, and Q3 into Q4. So hopefully that house.
Speaker Change: and get those, make them.
Speaker Change: and then um
Speaker Change: Second just hoping you could.
Speaker Change: Just double-click on the organizational changes and IV and integrating them more into the Q&AX 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.
Speaker Change: Yeah, look, this is John. I, it's, um...
John Giamatteo: We invested a lot into Ivy over the last few years really and we did it by a virtue of a very dedicated team that was really focused on building out the Ivy platform.
John Giamatteo: 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.
John Giamatteo: 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 and X members, whether it's on the sales front end sales side or on the R and 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 officials.
John Giamatteo: See since we've made so much progress on moving that platform along that this was the right time to do that.
Speaker Change: I understand I'll leave it there, thank you.
Al Praiber: And the next question comes from all Praiber with RBC Capital Markets. Please go ahead.
Al Praiber: 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...
Speaker Change: Changes to the organizational structure, you know, what's remaining to go from the operational perspective here?
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 weeks. You know, a lot of the kind of low hanging fruits of
Paul Steve: splitting it out, aligning it to the B-use.
Paul Steve: We think we've achieved that. We've got that largely in place. There are some components within the networking, some of our, our cyber, you know, protection solutions within the CISO organization.
Paul Steve: 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 too.
Paul Steve: 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 disenergies.
Paul Steve: So...
Paul Steve: So, we kind of feel like we're striking the right balance, where 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.
Paul Steve: at the same time driving the significant cost out of the business.
Paul Steve: 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 Steve: 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. So we're trying to strike that right balance.
Paul Steve: I hope you understand. Just on, you know, as you as you sort of, uh, uh,
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 is given us the opportunity to take a fresh look.
Speaker Change: Well, so, if you tune in to 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.
Speaker Change: Sure, just one last one.
Speaker Change: Foote.
Speaker Change: and Desan Saverino 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
Speaker Change: How do we think about that from a timing point of view? Was that, you know, the 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 license and hardware, as we mentioned. Seki 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...
Speaker Change: A large customer that we renewed and did some expansions on.
Speaker Change: I think it's been, you know, the achievement for this particular quarter was really kind of broad-based across licensed service and hardware.
Speaker Change: Thanks for taking the questions.
Speaker Change: Thank you for watching.
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.
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 can put 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
Speaker Change: Water Bellabs from that.
Speaker Change: Thanks for that, and then the delayed or cancelled 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 of way, 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...
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 into the next 10 years.
Speaker Change: and we've already got $815 million in our backlog, which gives us a really solid base. So, as these kinks in this...
Speaker Change: Well, bumps in the road if you like, can I get worked through? We're very confident that the secular trends that are powering this industry are not going away and will continue to make progress.
Speaker Change: Thank you. Just a couple of questions on the type of screen 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?
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 silenced turn that we've experienced over the course 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 ad hoc.
Speaker Change: 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.
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 years.
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 and cross-selling and color would be helpful? Thank you.
Speaker Change: A combination of all of it, a little bit of a mixed bag. I think there's definitely some really good upsell on the ad hoc sides and really good upsell on the UEM side.
Speaker Change: You know that's offset a little bit with some of the, you know, the silenced turn.
Speaker Change: So across the portfolio, it's good to see, you know.
Speaker Change: would ever at 7.4 consecutive quarters of a movie in the right direction. Still not where we want it to be, by any means, but it's good to see it stabilize the movie in the right direction.
Speaker Change: Great, thank you very much.
Speaker Change: In the next question comes from Trip, Toudry with Global Equities Research. Please go ahead.
Trip Toudry: Thank you, thank you very exciting quarter. I think the way I look at your company is very under-appreciated startup. Why I say that is in every business you are?
Speaker Change: There is so much opportunity to create and shape 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, you can see that there is
Speaker Change: You could be doing a lot better versus if I am looking at other analytics questions. They are very bad for looking.
Speaker Change: Because, they are thinking blackberry from a very traditional sense versus if you look at the blackberry as a start of which is not well understood. Let me give a point 2, 3 points here. First there is a emergence of
John Giamatteo: Hi, this is John Giamatteo, a.I. 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 moment of the last three for months.
Speaker Change: Second, when you think in terms of relative 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 PC by example.
Speaker Change: Now, as in the prepared remarks, you talked about UEM product being very good for on-premises if the extra-polated because you have a wonderful COC in from my cafe, that is an opportunity when you have AI's and they're so much.
Speaker Change: The call it the injection that is prompt injection that are happening. It is just...
Speaker Change: Olt, better dive in the new situation.
Speaker Change: So, something that is dead is getting exciting now, the only thing that as many of us we can go offline. But the way I'm thinking is we should be looking at...
Speaker Change: Blackberry as a startup.
Speaker Change: Attacking new problems with the technologies and the experiences you have.
Speaker Change: So, Tim, since I happened to know you very well and you are one of the most sharpest technologists see, of course.
Tim Foote: I'm 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's what I mean. And from Chile, it's on the big water.
Tim Foote: Thanks so much, John, did you want to... You know, just... I want to...
Speaker Change: I really resonate with how you talk about it as a startup, taking a step back and taking a look at what businesses are we in, what can we turbo charge growth for their ARS-Ai
Speaker Change: and I think one of the things that really has helped us is this whole...
Speaker Change: Strategy 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 may be.
Speaker Change: from a capital allocation, we've got to pull back on.
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 shaping our investments and our capital allocations to invest in the kinds of things that you're talking about.
Speaker Change: You are phenomenal. Thank you so much. Thank you, Trevor.
Speaker Change: In the next question comes from...
Speaker Change: Steven Lee, this Rayman James.
Speaker Change: Please go ahead.
Steven Lee: I'm not sure if I'm necessary to you, but on cyber I think I heard you say more customers or adopting your many services offering and that drove the year with your declining diamonds revenue. Did I miss you or will I miss you or will I miss you?
Steven Lee: Yeah, maybe I wasn't clear, uh, Steven just...
Speaker Change: and within silencers.
Speaker Change: There's 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 EDR capability with optics.
Speaker Change: and that's the classic product where our customers license it on a product the only 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.
Speaker Change: or the wear with all to manage their own environments.
Speaker Change: and they look for us to do it from an MDR perspective.
Speaker Change: So that part of the business we've actually seen good pipeline, some good conversions, some interesting winds 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.
Speaker Change: This concludes our question in the answer session. I would like to turn the conference back over to John Ciamatteo for any closing remarks.
John Ciamatteo: Perfect. Thank you, Dave.
John Ciamatteo: 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 #100: 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 #100: We'll take a deeper dive into the performance of our four cyber security product groups and review our capital allocation priorities.
Speaker Change #100: and 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 #100: The event is available to the general public, the webcast, and you can sign up on the Investor Relations webpage.
Speaker Change #101: So thanks again for joining today and we'll look forward to seeing you all next time.