Q3 2025 BlackBerry Ltd Earnings Call
Unknown Executive: Good afternoon and welcome to the BlackBerry third quarter fiscal year 2025 results conference call.
Good afternoon, and welcome to the Blackberry third quarter fiscal year 2025 results conference call.
Alicia: My name is Alicia and I'll be your conference moderator for today's call. During the presentation, all the participants will be in a listen-only mode.
Alicia: My name is Alicia and I'll be your conference moderator for today's call.
Alicia: During the presentation, all participants will be in a listen only mode.
Alicia: We will be facilitating a brief question and answer session towards the end of the conference.
Alicia: We'll be facilitating a brief question and answer answer session towards the end of the conference should you need assistance during the call. Please signal a conference specialist by prices.
Alicia: Should you need assistance during the call, please signal a conference specialist by pressing 1-800-637-8255.
Alicia: for pressing star zero. As a reminder, this conference is being recorded for replay purposes.
Alicia: Pressing star Zero as a reminder, this conference is being recorded for replay purposes.
Martha Gonder: I would now like to turn today's call over to Martha Gonder, Director of Investor Relations, BlackBerry. Please go ahead.
Alicia: I would now like to turn today's call over to Martha Gondar Director of Investor Relations Blackberry. Please go ahead.
Martha Gonder: Thank you, Alicia. Good afternoon, everyone, and welcome to BlackBerry's third 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.
Alicia: Thank you Alicia good afternoon, everyone and welcome to Blackberrys third quarter fiscal year 2025 earnings Conference call. Joining me on today's call is blackberries, Chief Executive Officer, John Jim Matteo and Chief Financial Officer, Jim Foote. After I read our cautionary note regarding forward looking statements John will provide a busy.
This update and Tim will review the financial results. We will then open the call for a brief Q&A session.
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 webcast in the investor information section at BlackBerry.com. A replay will also be available on BlackBerry.com website. Some of the statements we will be making today constitute forward-looking statements and are made pursuant to the safe harbor provisions of applicable U.S. and Canadian securities laws. 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.
Alicia: This call is available to the general public via calling numbers and via webcast in the Investor information section at Blackberry Dot Com a replay will also be available on Blackberry Dot com website.
Some of the statements, we'll be making today constitute forward looking statements.
Alicia: Made pursuant to the safe Harbor provisions of applicable U S and Canadian Securities laws, we'll indicate forward looking statements by using words, such as expect will should model intend believe and similar expressions.
Alicia: 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 many factors could cause the company's actual results or performance to differ materially from those expressed or implied by the.
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 statement. These factors include the risk factors that are discussed in the company's annual filings and MD&A, as well as risks associated with our ability to consummate the sale of the Silance business on the timeline anticipated, or at all. You should not place undue reliance on the company's forward-looking statement. Any forward-looking statements are made only as of today.
Alicia: <unk> looking statements.
Alicia: These factors include the risk factors that are discussed in the company's annual filings and M. D N a as well as risks associated with our ability to consummate the sale of the <unk> business on the timeline anticipated or at all.
Should not place undue reliance on the company's forward looking statements.
Alicia: Any forward looking statements are made only as of today.
Martha Gonder: The company has no intention and undertakes no obligation to update or revise any of them, except as required by law. As is customary during the call, John and Tim will reference non-GAAP numbers in their summary of our quarterly results. For a reconciliation between our GAAP and non-GAAP numbers, please see the earnings price release published earlier today, which is available on the Edgar, CedarPlus, and BlackBerry.com website. Additionally, given that we've entered into a definitive agreement for the sale of Silence, in accordance with GAAP accounting rules, Silence's results will now be shown as a discontinued operation and its assets and liabilities as held for sale.
Alicia: The company has no intention and undertakes no obligation to update or revise any of them except as required by law.
Speaker Change: As is customary during the call John and Tim will reference non-GAAP numbers in their summary of our quarterly results for.
Speaker Change: For a reconciliation between our GAAP and non-GAAP numbers. Please see the earnings press release published earlier today, which is available on the Edgar SEDAR and Blackberry Dot Com website.
Speaker Change: Additionally, given that we've entered into a definitive agreement for the sale of silence in accordance with GAAP accounting rules silences results will now be shown as a discontinued operation and its assets and liabilities as held for sale. Therefore, when referencing results for the cyber Security Division and Blackberry in total John and Tim.
Martha Gonder: Therefore, when referencing results for the Cybersecurity Division and BlackBerry in total, John and Tim will be referring to the results of both continuing and discontinued operations. We believe that this will be helpful to investors, especially given that the Silence agreement was entered into after the end of the quarter.
Speaker Change: We will be referring to the results of both continuing and discontinued operations. We believe that this will be helpful to investors, especially given that the silencer agreement was entered into after the end of the quarter and with that let me now turn the call over to John.
John Giamatteo: And with that, let me now turn the call over to John. Thanks, Martha. And thanks to everyone for joining today's call.
John: Thanks, Martha and thanks to everyone for joining today's call.
John Giamatteo: This past quarter marked a significant inflection point for BlackBerry. We delivered solid top-line performance for our IOT and cybersecurity divisions, both of which exceeded the top end of our guidance range. This strong top line and continued focus on cost control and efficiency has enabled the company to pivot back to profitability, recording both positive EBITDA and EPS in the quarter. BlackBerry was able to convert this profitability into a return to positive operating and free cash flow generation for the first time since Q3 of fiscal year 2022, when controlling for the impact of the Maliki sale last fiscal Q1.
Speaker Change: This past quarter marked a significant inflection point for Blackberry.
Speaker Change: We delivered solid top line performance for our Iot and cyber security divisions, both of which exceeded the top end of our guidance ranges.
Speaker Change: This strong topline and continued focus on cost control and efficiency.
Speaker Change: Has enabled the company to pivot back to profitability recording both positive EBITDA and EPS in the quarter.
Speaker Change: Blackberry was able to convert this profitability into a return to positive operating and free cash flow generation.
For the first time since Q3 of fiscal year 2022.
Speaker Change: When controlling for the impact of the molecule sale last fiscal Q1.
John Giamatteo: That means this is the first time in 12 quarters that BlackBerry has generated both positive operating and free cash flow. In fact, excluding the Maliki transaction, year-to-date for Q1 to Q3, Operating cash flow is $136 million better this year than last. This strong performance illustrates just how far we've come as a company in the past year.
Speaker Change: That means this is the first time in 12 quarters that Blackberry has generated both positive operating and free cash flow.
Speaker Change: In fact, excluding the molecule transaction year to date for Q1 to Q3.
Speaker Change: Operating cash flow is 136 million better this year than last.
Speaker Change: This strong performance illustrates just how far we've come as a company in the past year.
John Giamatteo: In addition, as we announced earlier this week, we've signed a definitive agreement with Arctic Wolf for the sale of Silam. This deal, which is subject to closing conditions, will quickly address the challenges of the CyLance financial profile and simultaneously further strengthen our balance sheet. This is a transformational move for BlackBerry that aligns with our clear strategic direction we outlined at our recent investor day and places the company on a strong trajectory going forward.
In addition, as we announced earlier this week, we signed a definitive agreement with Arctic Wolf for the sale of silence.
Speaker Change: This deal, which is subject to closing conditions will quickly address the challenges of the sign last financial profile and simultaneously further strengthen our balance sheet.
Speaker Change: This is a transformational move for Blackberry that aligns with our clear strategic direction, we outlined at our recent Investor Day and places the company on a strong trajectory going forward.
John Giamatteo: So let me begin by reviewing what was another good quarter for our IOT division. IOT overcame the ongoing difficult backdrop in the automotive space to deliver revenue of $62 million above the top end of our guidance range. This represents 13% year-over-year and sequential growth. The strength this past quarter was predominantly driven by both royalties and development seat licenses. Automotive was the strongest performer led by revenue from both the digital cockpit and advanced driver assistance systems or ADAS. In terms of design wins, the two largest this past quarter were with leading automakers. The first was with a German luxury automaker for the QNX hypervisor to form the foundation of a digital cockpit software stack on a next generation chipset that will be used across a full range of vehicles.
Speaker Change: So let me begin by reviewing what was another good quarter for our Iot Division.
Speaker Change: Iot overcame the ongoing difficult backdrop in the automotive space to deliver revenue of $62 million above the top end of our guidance range.
Speaker Change: This represents 13% year over year and sequential growth.
Speaker Change: The strength this past quarter was predominantly driven by both royalties and development seat licenses.
Speaker Change: Automotive was the strongest performer led by revenue from both the digital cockpit and advanced driver assistance systems or Adas.
Speaker Change: In terms of design wins, the two largest this past quarter with leading automakers.
Speaker Change: The first was with a German luxury automaker for the Q N X hypervisor to form the foundation of a digital cockpit or a cockpit software stack on a next generation chipset that will be used across a full range of vehicles.
John Giamatteo: The second was with one of Asia's largest auto OEMs for the QNX operating system to be deployed in the ADAS domain. We continue to see strong traction for our next generation version of QNX operating system, SDP 8.0. Despite having only been launched earlier this year, prior to Q3, we had already secured a number of exciting partnerships and design wins. At Investor Day in October, we announced that more than 10 leading silicon vendors have already committed to supporting SDP8. The momentum is absolutely building. This past quarter, we secured one of our largest ever gem wins with one of the leading industrial automation OEMs who elected to upgrade from version 7 to version 8.
Speaker Change: The second was with one of Asia's largest auto Oems for the Q N X operating system to be deployed in the Adas domain.
Speaker Change: We continue to see strong traction for our next generation version of <unk> operating system S. C. P eight downhill.
Speaker Change: Despite having only been launched earlier this year prior to Q3, we had already secured a number of exciting partnerships and design wins.
Speaker Change: At Investor Day in October, we announced that more than 10, leading silicon vendors have already committed to supporting S. P. A.
Speaker Change: The momentum is absolutely buildings.
Speaker Change: This past quarter, we secured one of our largest ever Gen wins with one of the leading industrial auto automation Oems who elected to upgrade from version seven to version eight.
John Giamatteo: This design is for a high performance OS to be used in a number of industrial use cases. The data point illustrates the significant market opportunity that we have in verticals outside of automotive. In fact, we made significant progress across medical, industrial, and rail verticals. This past quarter, in rail, we secured a number of net new logos, including Universal Signaling and Progress Rail. We are also pleased with the customer reception of our QNX cabin offering. As a reminder, this is a platform that allows for QNX development in the cloud and the creation of a digital twin of a vehicle's digital cockpit.
Speaker Change: This design is for a high performance O S to be used in a number of industrial use cases.
Speaker Change: The data point Elisa illustrates the significant market opportunity that we have in verticals outside of automotive.
Speaker Change: In fact, we made significant progress across medical industrial and rail verticals. This past quarter in rail we secured a number of net new logos, including universal signaling and progress rail.
Speaker Change: We are also pleased with the customer reception of our Q N X cabin offering.
Speaker Change: As a reminder, this is a platform that allows for Q N X development in the cloud and the creation of a digital twin of our vehicles digital cockpit.
John Giamatteo: In the quarter, we made a huge step forward by securing an order for this subscription-based product from a major Japanese OEM. They will start by developing their next generation cockpit with a cloud first approach to drive down client time to market as well as achieve scale and cost In addition, we are continuing discussions with a number of other leading auto OEMs. I'm very proud of the results for IoT. The solid growth in the face of a challenging backdrop reflects QNX's strong position in the markets we address.
Speaker Change: In the quarter, we made a huge step forward by securing an order for this subscription based product from a major Japanese OEM.
Speaker Change: They will start by developing their next generation cockpit with a cloud first approach to drive downtime time to market as well as achieve scale and cost efficiency.
Speaker Change: In addition, we are continuing discussions with a number of other leading auto Oems.
Speaker Change: I'm very proud of the results for Iot.
This solid growth in the face of a challenging backdrop reflects Q N X has strong position in the markets we address.
John Giamatteo: Let me now move over to our Cybersecurity Division. This was a really good quarter for Cyber as well. We delivered revenue of $93 million exceeding the top end of our guidance range we provided last quarter. Cyber achieved 7% sequential revenue growth when including Sylance, or 10% for the Secure Communications Division that is UEM, Ad Hoc, and Secchi Smart Collective. On a year-over-year basis, the division had a tough compare due to significant revenue relating to the large multi-year deal with the Malaysian government that we secured this time last year. Within the Secure Communications Division, UEM Endpoint Management had a solid quarter, recording both sequential and year-over-year growth.
Let me now move over to our cyber Security Division.
Speaker Change: This was a really good quarter for cyber as well.
Speaker Change: We delivered revenue of $93 million exceeding the top end of our guidance range, we provided last quarter.
Speaker Change: Ciber achieved 7% sequential revenue growth, when including silence or 10% for the secure communications division that is UN AD hoc and secchi smart collectively.
Speaker Change: On a year over year basis, the division had a tough compare due to significant revenue relating to the large multi year deal with the Malaysian government that we secured this time last year.
Within the secure Communications Division UE M endpoint management had a solid quarter recording both sequential and year over year growth.
John Giamatteo: We secured a number of wins this past quarter within our core government sector and also large deals with financial services. These included renewals and expansions with leading global banks, including German bank KfW. Other deals included the Scottish Police. Johns Hopkins University and the Dutch Water Ministry. Ad Hoc also had a solid quarter. It continued to demonstrate its strong position in the US federal government by securing a significant renewal and expansion with the Department of Homeland Security. Other wins included the U.S. Department of Justice. We're further strengthening Ad Hoc's competitive position with a number of new product enhancements, including new alert approval workflows and native Android and iOS applications.
Speaker Change: We secured a number of wins this past quarter within our core government sector.
Speaker Change: And also large deals with financial services.
Speaker Change: These included renewals and expansions with leading global banks, including German Bank K F. W.
Speaker Change: Other deals included the Scottish police.
Speaker Change: Johns Hopkins University, and the Dutch water Ministry.
Speaker Change: AD hoc also had a solid quarter. It continued to demonstrate its strong position in the U S. Federal government by securing a significant renewal and expansion with.
The department of Homeland Security.
Speaker Change: Other wins included the U S Department of Justice.
Speaker Change: We're further strengthening AD hoc competitive position with a number of new product enhancements, including new alert approval workflows and native Android and iOS applications.
John Giamatteo: Moving over to SecuSmart, we've been pleased with our ability to grow outside of Germany where we leverage our software-based version of the product. However, Q3's solid performance was largely driven by some strong renewals within the German market. where we have strong relationships with a number of government agencies. The Annual Recurring Revenue, or ARR, metric for cybersecurity, including silence, remained largely stable, recording a small sequential increase and a 3% increase on a year-over-year basis to $281 million. For secure communications, that is, excluding silence, the increase was even more pronounced. ARR increased by 3% sequentially and 8% year-over-year to $215 million.
Speaker Change: Moving over to <unk> smart, we've been pleased with our ability to grow outside of Germany, where we leverage our software based version of the product.
Speaker Change: However, Q3s solid performance was largely driven by some strong renewals with within the German market.
Speaker Change: Where we have strong relationships with a number of government agencies.
Speaker Change: The annual recurring revenue or a R. R metric for cyber security, including silence remained largely stable recording a small sequential increase and a 3% increase on a year over year basis to $281 million.
Speaker Change: For secure communications that is excluding silence the increase was even more pronounced where a R. R increased by 3% sequentially.
Speaker Change: And 8% year over year to $215 million.
John Giamatteo: The Dollar-Based Net Retention Rate, or DBNRR, for cybersecurity continued to improve, increasing by 2 percentage points sequentially and 8 percentage points year-over-year to 90%. Similar to ARR, DBNRR for Secure Communications Division is much stronger. The dollar-based net retention rate for this past quarter was 95%.
Speaker Change: The dollar based net retention rate or D. B N IRR for cyber security continued to improve increasing by two percentage points sequentially and eight percentage points year over year to 90%.
Speaker Change: Similar to a R. R D B N IRR for secure Communications Division is much stronger the dollar based and our dollar based net retention rate for this past quarter was 95%.
John Giamatteo: So, in summary, this was a really solid quarter for the cybersecurity division where we beat expectations. As we head towards the close of the silence deal with Arctic Wolf, we are focusing our attention on the operational strategy for our secure communications business and maximizing the growth engines within it.
Speaker Change: So in summary, this was a really solid quarter for the cyber security Division, where we beat expectations.
Speaker Change: As we head towards the close of the silence deal with Arctic Wolf, we are focusing our attention on the operational strategy for our secure communications business and maximizing the growth engines within it.
John Giamatteo: Turning now briefly to IP Licensing. Revenue came in slightly better than guidance at $7 million which drove a sequential improvement in gross margin to 71%. This revenue continues to relate largely to legacy deals that predate the sale of our non-core portion of the portfolio to Maliki. So bringing this all together, this past quarter, BlackBerry delivered revenue of $162 million, exceeding the upper end of the previously provided guidance range. Total company gross margins improved both sequentially and year-over-year to 74%.
Speaker Change: Turning now briefly to IP licensing.
Revenue came in slightly better than guidance at $7 million, which drove a sequential improvement in gross margin to 71%.
Speaker Change: This revenue continues to relate largely to legacy deals that predate the sale of our noncore portion of the portfolio symbology.
Speaker Change: So bringing this all together this past quarter Blackberry delivered revenue of 162 million exceeding the upper end of the previously provided guidance range.
Speaker Change: Total company gross margins improved both sequentially and year over year to 74%.
Tim Foote: With that, let me now turn the call over to our CFO, Tim. who will provide further details on our finances.
Tim: With that let me now turn the call over to our CFO Tim.
Tim: Who will provide further details on our financials.
Tim Foote: Thank you John and good afternoon everyone. As usual the numbers I'll reference will be non-GAP. At our Investor Day in October, we delivered on our commitment to provide profitability by division. I'm happy to report that the IoT division delivered $18 million of EBITDA, representing 38% sequential growth. Given the strong top-line performance that John mentioned earlier, gross margins expanded from the prior quarter to 85%. Cybersecurity, including both secure communications and silence, delivered positive EBITDA of $8 million, which was a $14 million sequential improvement. Excluding Cylance, EBITDA for the Secure Communications Division was £22 million, meaning a strong 30% EBITDA margin.
Thank you John and good afternoon, everyone.
Tim: As usual the numbers I'll reference will be non-GAAP.
Tim: Our Investor Day in October we delivered on our commitments to provide profitability by division.
Tim: I'm happy to report that the Iot Division delivered $18 million of EBITDA, representing 38% sequential growth.
Given the strong top line performance that Joe mentioned earlier.
Gross margins expanded from the prior quarter to 85%.
Tim: Cyber security, including <unk> secure communications and silence.
Tim: I've heard positive EBIT of.
<unk> 8 million, which was a $14 million sequential improvement.
Tim: Excluding silence EBITA for the secure Communications Division was 22 million, meaning a strong 30% EBITDA margin.
Tim Foote: Gross margins for cyber security improved by 12 percentage points versus the prior quarter to 67%, primarily due to a strong mix of SecuSmart software licenses. And for Secure Communications, gross margins were 73%. Finally, our licensing division delivered stronger-than-expected revenue at £7 million, which drove a solid £6 million of EBIT up. The new management team maintains a close focus on cost control and operating expenses this quarter remain broadly in line with Q2 at £101 million and significantly below the £130 million baseline for OPEX that we provided as a reference point prior to cost streamlining over the past year.
Tim: Gross margins for cyber security improved by 12 percentage points versus the prior quarter to 67% primarily due to a strong mix of sexual small software licenses.
And for secure communications gross margins was 73%.
Tim: Finally, our licensing division delivered stronger than expected revenue at 7 million, which drove a solid 6 million of EBITDA.
Tim: The new management team maintains a close focus on cost control.
Tim: Operating expenses this quarter remained broadly in line with Q2 at $101 million.
Tim: And significantly below the 130 million baseline for Opex that we provided as a reference point prior to call streamlining over the past year.
Tim Foote: Given the strong top line and tight cost control, BlackBerry has delivered solid profitability this quarter, with positive adjusted EBITDA above the top end of our guidance range at $23 million. Adjusted net income for Q3 was £12m and non-GAAP EPS beat expectations at plus 2c. In addition to a returned profitability, BlackBerry achieved both positive operating and free cash flow of plus three million. This was one quarter ahead of schedule and represents a year-over-year operating cash flow improvement of £34 million when compared to the third fiscal quarter of the prior year.
Tim: Given the strong topline and tight cost control Blackberry has delivered solid profitability this quarter.
Tim: Positive adjusted EBITDA above the top end of our guidance range at $23 million.
Tim: Adjusted net income for Q3 was 12 million, our non-GAAP EPS beats expectations at plus two cents.
Tim: In addition to our returns profitability Blackberry achieved both positive operating and free cash flow of plus $3 million.
Tim: This was one quarter ahead of schedule and represents a year over year operating cash flow improvements of 34 million when compared to the third fiscal quarter of the prior year.
Tim Foote: Turning now to Financial Outlook for the fourth fiscal quarter. Giving the pending closure of the sale of Cylance to Arctic Wolf, and reporting Cylance as a discontinued operation, we are standing down all previously provided guidance relating to the Cyber Security Division, and with it, guidance for the full company. Instead, we'll provide guidance only for the new Secure Communications Division. And then, only for the current fourth fiscal quarter, and we'll provide revised guidance for fiscal year 26. for both our Secure Communications Division and Total BlackBerry during our Q4 earnings. We expect revenue for the Secure Comms division to be in the range of $62 million to $66 million in the fourth quarter.
Tim: Turning now to financial outlook for the fourth fiscal quarter.
Tim: Giving the pending closure of the sale of silence to articles I'm reporting silence as a discontinued operation.
Tim: We are standing down all previously provided guidance relating to the cyber security division and with its guidance for the full company.
Tim: Instead, we will provide guidance only for the new secured communications division.
Tim: And then only for the current fourth fiscal quarter.
Tim: We'll provide revised guidance for fiscal year 'twenty six.
Tim: Both our secure communications division.
Tim: So to Blackberry during our Q4 earnings.
Tim: We expect revenue for the secure Combs division to be in the range of $62 million to $66 million in the fourth quarter.
Tim Foote: We also expect EBITDA for SecureComms to be in the range of positive 4 to positive 6 million. For IoT, we expect revenue this quarter to be in the range of $60 to $65 million, which means, once again, we are raising the bottom end of our four-year guidance range for IoT revenue. such that the range is now 230 to 235 million. For IoT, we expect EBITDA for Q4 to be in the range of 8 to 10 million. We continue to expect revenue for our licensing business to be approximately £4 million for the fourth fiscal quarter and for EBITDA to be approximately £3 million.
Tim: We also expect to EBITA for secure columns spanning a range of pulse to full supposed to $6 million.
Tim: So Iot we expect revenue this quarter to be in the range of $60 million to $65 million, which means once again, we are raising the bottom end of our full year guidance range for Iot revenue.
Tim: The range is now $230 million to $235 million.
Tim: Well all I O T. We expect EBITDA for Q4, it's being in the range of eight to 10 million.
We continue to expect revenue for our licensing business to be approximately 4 million for the fourth fiscal quarter I'm, sorry, EBITDA would be approximately $3 million.
Tim Foote: At a total company level, we expect Adjusted EBITDA from continuing operations for Q4 to be in the range of positive 10 to positive 20 million. meaning we expect BlackBerry on a continuing basis. that is excluding silence to generate between 60 and 70 million of EBITDA this fiscal year. This is a significant shift in the profitability of this company. For non-GAAP EPS, which will include discontinued operations, we expect it to be between minus one cent to plus one cent in the fourth quarter. Finally, we expect a further sequential improvement in operating cash flow for Q4.
Tim: That's a total company level, we expect adjusted EBITDA from continuing operations for Q4, it's being in the range of positive trends as opposed to a $20 million means.
Tim: Meaning we expect Blackberry on a continuing basis.
Tim: Lastly, as excluding silence to generate between 60 and 70 million, albeit all this fiscal year.
Tim: This is a significant shift in the profitability of this company.
Tim: For non-GAAP EPS, which will include discontinued operations, we expect it to be between minus one to.
Tim: Plus one sentence in the fourth quarter.
Finally, we expect a further sequential improvement in operating cash flow for Q4.
John Giamatteo: And with that, let me now turn the call back to John. Thanks for the summary, Tim.
Joe: And with that let me now turn the call back to Joe.
Joe: Thanks for the summary, Tim.
John Giamatteo: And before we move to Q&A, let me quickly summarize the key takeaways for this past quarter. Q3, as I said before, was an inflection point for BlackBerry. The announced sale of Cylance to Arctic Wolf will provide a true win-win for stakeholders including providing BlackBerry with a rapid path to increasing profitability and cash flow generation. Even including Silance, this past quarter BlackBerry achieved profitability and positive cash flow ahead of expectation. This was powered in part by revenue for both IOT and the Cybersecurity Division, exceeding the top end of our guidance range. Standing back from this, we see that this past quarter, all three engines were profitable.
Joe: And before we move to Q&A, let me quickly summarize the key takeaways for this past quarter.
Speaker Change: Q3, as I said before was an inflection point for Blackberry.
The announced sale of silence to Arctic Wolf will provide a true win win for stakeholders, including providing blackberry with a rapid path to increasing profitability and cash flow generation.
Speaker Change: Even including silence this past quarter, Blackberry achieved profitability and positive cash flow ahead of expectations.
Speaker Change: This was powered in part by revenue for both Iot and cyber security division exceeding the top end of our guidance range.
Speaker Change: Standing back from this we see that this past quarter all three engines were profitable.
John Giamatteo: Cyber generated $8 million of EBITDA and excluding Silance, Secure Communications generated $22 million. IoT generated $18 million and our licensing business contributed a further $6 million. I'm excited about the tremendous progress that we've made the past year here at BlackBerry and about the path that we've charted ahead.
Speaker Change: Labour generated $8 million of EBITDA, and excluding silence secure communications generated $22 million.
Speaker Change: Iot generated $18 million.
Speaker Change: And our licensed a licensing business contributed a further $6 million.
Speaker Change: I'm excited about the tremendous progress that we've made the past year here of Blackberry and about the path that we've chartered ahead.
Alicia: So now why don't we move to Q&A and Alicia, maybe you can open up the lines.
Alicia: So now why don't we move to Q&A and Alicia.
Speaker Change: Maybe you can open up the lines.
Of course.
Alicia: We will now begin the question and answer session. To ask a question, please press star 1. at this time. We will pause for just a moment to allow everyone an opportunity to signal for questions. We request that you limit yourself to one question and one follow-up. One moment, please.
We will now begin the question and answer session to ask a question. Please press star one.
Speaker Change: At this time.
Speaker Change: We will pause for just a moment to allow everyone an opportunity to signal for questions. We request that you limit yourself to one question and one follow up.
Speaker Change: One moment please.
Todd Coupland: Our first question comes from the line of Todd Coupland with CIBC, please proceed. Oh, great. Good evening, everyone. Appreciate the additional disclosure. I was wondering if you could, this is a small adjustment question, the EBITDA by segment and for the guide, is that X corporate costs? That'd be the first question.
Speaker Change: Our first question comes from the line of Todd Copeland with CIBC. Please proceed.
Oh, great. Good evening, everyone I appreciate the additional disclosure.
Speaker Change: I was wondering if you could.
Speaker Change: This is a smaller adjustment question.
Speaker Change: The EBITDA by segment and for the guide is that ex corporate costs.
Speaker Change: That'd be the first question.
Tim Foote: And then my follow-up is just give us a bridge to what is very strong segmented EBITDA in Q3 and then the sequential step down on EBITDA with more or less flat revenue sequentially. Just talk us through that. Thanks.
Speaker Change: And then my follow up is just give us a bridge too.
Speaker Change: What is very strong segmented EBITDA in Q3, and then the sequential step down step down on EBITDA with more or less flat revenue sequentially, just talk us through that thanks a lot.
Tim Foote: Yes, hi Todd, always nice to hear from you. So the first part of the question, well let's take the second part. So the second part is, it's really a function of mix. Mix is the main driver there. So as I mentioned in my prepared remarks, This was a strong quarter for licensing revenue for the SecuSmart business, which is a very strong margin. In Q4, we see that mix shifting more towards some of the hardware components, which is just at a lower margin. On the Q&X side, we had some strong royalties this time round. Next time, we see that being a little bit more of a regular mix.
Todd Copeland: Yes, Hi, Todd.
Speaker Change: Always nice to hear from you. So the first part of the question.
Todd Copeland: The second part.
Todd Copeland: The second part is is really a function of mix mix is the main driver there. So as I mentioned in my prepared remarks.
Todd Copeland: This was a strong quarter of licensing revenue.
Todd Copeland: For the second smart business, which is very strong margin in Q4, we see that mix shifting more towards some of the hardware components switch is.
Todd Copeland: Is it just a lower margin.
On the Q&A sides, we had some strong strong royalties. This this time round next time, we see that being a little bit more of a regular mix you know that from quarter to quarter. There can be some shifts, particularly around development seat licenses, although it goes up and down.
Tim Foote: You know that from quarter to quarter, there can be some shifts, particularly around development seat licenses, where that goes up and down. And finally, on the Q&X side, we're continuing to invest. So one of the things we said at our invest today was that pending this transaction, which we've managed to achieve much quicker potentially than some might have expected, we would focus our attention on the growth opportunities that we have for the Q&X business. So we're actively increasing headcount and expensing our R&D and sales and marketing functions on that.
Todd Copeland: Finally on the Q&A side, where we're continuing to invest so one of the things we said at our Investor day.
Todd Copeland: Pending this this transaction, which we've.
Todd Copeland: Managed to achieve much greater potential than some might have expected.
Todd Copeland: We would focus our attention on the growth opportunities that we have for the Q&A business. So.
Todd Copeland: We're actively increasing head count and expenses and.
Todd Copeland: Our R&D and sales marketing functions on that side.
Tim Foote: and oh sorry no please go ahead well I was just going to say if you could just clean up These segmented results, you know, at the analyst day you gave pre-corporate, overhead, EBITDA, is this pre- or post-corporate? Yeah, so when we, when we look at the segments, the three segments of IoT, secure comms and licensing, then you also have corporate, you can find that in the, in the reconciliation, I think it was around about 9 million this quarter, but it doesn't show as a standalone segment. That's really just an accounting thing. So you need to add that in to the other components to get to the total for the companies.
Todd Copeland: And.
Please go ahead, while I was just going to say if you could just clean up.
Todd Copeland: He is.
Todd Copeland: The segmented results.
Todd Copeland: At the Analyst day, you gave free free.
Todd Copeland: <unk> corporate overhead Ebitdas is is this pre or post corporate overhead. Thanks, a lot yeah. So when we when we look at the segments three segments of Iot secure columns and licensing then you also have corporate.
Todd Copeland: You can find that in the in the Brexit cilia you shouldn't I think it was round about 9 million this quarter, but it doesn't show up as a standalone segment and that was really just.
Todd Copeland: Accounting things, so you need to add that in to the other components to get to the total for the company because that makes sense.
Todd Coupland: Does that make sense? That does. Thanks a lot.
Todd Copeland: That does thanks a lot.
Todd Copeland: Of course.
Unknown Executive: Thank you.
Todd Copeland: Thank you.
Luke Junk: Our next question comes from the line of Luke Junk with Baird.
Speaker Change: Our next question comes from the line of Luke junk with Baird.
Luke Junk: Please proceed. Great, thanks for taking the questions. John, maybe if I could start just with a higher level question and your preliminary thinking just with priorities.
Todd Copeland: Proceed.
Luke Junk: Oh, great. Thanks for taking the questions John maybe if I could start just with a higher level question and your preliminary thinking just with price priorities no. When you know assuming the timeline do you closes what youre going to do with that consideration just allocation between strengthening the balance sheet and investing back into the <unk>.
John Giamatteo: Now, when, you know, assuming the Sineland deal closes, what you're going to do with that consideration, just allocation between strengthening the balance sheet and investing back into the business, maybe leaning into some of the things that Tim mentioned relative to QNX, especially. Yeah, yeah.
Speaker Change: This may be leaning into some of the things that you mentioned relative to <unk>, especially thank you.
Luke Junk: Yeah Yeah.
John Giamatteo: Luke, it's great to get this kind of question again, because I guess this time last year, we were in a little bit of a different position. So being able to talk about, you know, where we would utilize or deploy some of this capital, that's something that's definitely on our minds. As you mentioned, you know, first things first, let's get this thing to closing. We think there's a really good, strong path there. The relationship and the dynamics with Arctic Vault has been excellent. So we're going to work diligently to kind of get to the finish line on the closing of that.
Luke Junk: Lou.
Lucas it's great to.
Luke Junk: Get this kind of question again says I guess this time last year, we were in a little bit of a different.
Position, so being able to talk about.
Luke Junk: Where we would.
Luke Junk: Utilize or deploy some of this capital that's something that's definitely on our minds. As you mentioned you know first things first let's get this thing to closing.
Luke Junk: We think there's a really good strong path there the the relationship and the dynamics with Arctic Wolf has been excellent. So so we're going to have we're going to work diligently to kind of get to the finish line on the closing of that and.
John Giamatteo: And then from there, you know, we'll take a look at all the different options, as you mentioned, like strengthening the balance sheet is something that, you know, from a conservative perspective, we love to do. But at the same time, deploying capital to drive growth, to drive more earnings, to drive more shareholder value, we're going to be exploring those kinds of opportunities as well. Most likely short term, I would say, you know, kind of organically, you know, through, as Tim mentioned, we still think there's tremendous growth opportunities in IoT. We're going to make sure that we're placing the right bets to drive and propel that business forward.
Luke Junk: And then from there well.
Luke Junk: We'll take a look at all the different options as you've mentioned.
Luke Junk: Strengthening the balance sheet.
Luke Junk: Is something that you know from a conservative perspective, we love to do but at the same time deploying capital to drive growth to drive more earnings to drive more shareholder value, we're going to be exploring those kinds of opportunities as well.
Luke Junk: Most likely short term I would say kind of organically through as Tim mentioned, we still think there is tremendous growth opportunities in Iot and we're going to make sure that we're placing the right bets to drive and propel that business forward.
John Giamatteo: You know, at some point, I would say more longer term, for sure. I think we take a look at things like, you know, a little, you know, small tuck in M&A that gives us better scale in the IoT space. And finally, you know, I think there's always a consideration that we have to have with the board on, you know, when we look at the stock price where it is today, is buybacks a good utilization of some of that capital?
Luke Junk: You know at some point I would say more longer term.
Luke Junk: For sure I think we take a look at it.
Luke Junk: Things like.
Luke Junk: You know a little small tuck in M&A that gives us a better scale and are in the Iot space.
Luke Junk: And and finally, and I think Theres always always a consideration that we have to have with the board on.
Luke Junk: I look at the stock price, where it is today is is buybacks a a good utilization of some of that capital. So those are the things that once we get the Arctic Wolf transaction over the line that's on our mind right now and as we come to some more firmer decisions, both me and Tim.
Luke Junk: So those are the things that once we get the Arctic Wolf transaction over the line that's on our mind right now, and as we come to, you know, some more firmer decisions, both me and Tim in consultation with our board will certainly be disclosing and communicating with all of you. Thanks for that, John. That was really helpful.
Luke Junk: In consultation with our board will certainly be disclosing and communicating with all of you.
Speaker Change: Thanks for that John and that was really helpful. Maybe for my follow up just for Tim.
Tim Foote: Maybe for my follow-up, just for Tim, you mentioned in the remarks that Strength was predominantly driven in QNX by royalties this quarter in terms of the margin flow-through, but also some seat license in there. Can you just level-set us on where mix in QNX is across the major revenue streams kind of on a run rate basis right now, and maybe give us some high-level thoughts as to the moving parts into Fiscal 26? Yeah, great question. So I think I've given you that kind of shorthand cheat sheet answer of 20% dev 20% services and 60% royalties.
Luke Junk: Hmm.
Speaker Change: Mentioned in the remarks that strength was predominantly driven in <unk> by royalties this quarter in terms of the margin flow through but also some seat license in there can you just level set us on where mix in Q N X is across the major revenue streams kind of on a run rate basis, right now and maybe give us some high low.
Speaker Change: Thoughts as to the moving parts into fiscal 'twenty six.
Yeah, Great question. So I think I've, given you that kind of Shaw hands, she she sort of 20% a 20%.
Speaker Change: Services and 60% royalties.
Tim Foote: You know, that mix shifts around from quarter to quarter, particularly with the dev seat piece being the main wildcard. And as we've discussed before, you know, there's been some challenges in terms of getting design programs up and running at OEM. So as things kind of come back in and go back out, there can be some up and down. I'd say generally speaking, overall, we're still kind of tracking broadly to where where we've we've mentioned in the long run that, yeah, just from quarter to quarter can be a little bit, a little bit flexible going into the new year.
Speaker Change: That mix shifts around from quarter to quarter, particularly with the dead Sea piece being the main wildcards and as we've discussed before.
Speaker Change: There's been some challenges in terms of getting design programs up from running the Oems So.
Speaker Change: As things kind of come back in and go back out there can be some up and down I'd say generally speaking April was still kind of tracking broadly to where where we've we've.
Speaker Change: We've mentioned in the long run, but yes, just from quarter to quarter, it can be a little bit a little bit flexible.
Speaker Change: Going into the new year.
Tim Foote: You know, we're hopeful. I mean, it's still a challenging backdrop out there, but you know, OEMs do have to get their arms around some of these challenges eventually. And when it does, we hope to see an uptick in the Dev-C revenue, which has been a bit challenged this fiscal year. But then ultimately, we'll start to see some of these richer designs that we've been winning over the last few years, come into the number and come out of our backlog.
Speaker Change: And I, we're hopeful I mean, its still challenging backdrop out there, but you know Oems do you have to get their arms around some of these challenges eventually.
Speaker Change: When it does.
Speaker Change: Hope to see an uptick in <unk>.
Speaker Change: In the type C revenue, which has been a bit challenged this fiscal year, but then ultimately we will start to see some of these rich of designs that we've been winning over the last few years come into the numbers come out of our backlog side.
Unknown Executive: So I think we're in we're in a good place going forward but right now obviously there's still still some Got it, I'll leave it there, thank you.
Speaker Change:
Speaker Change: I think we're in we're in a good place going forward, but right now obviously, that's still still some challenges.
Got it I'll leave it there. Thank you thanks Luke.
Unknown Executive: Thanks Luke. Thank you.
Speaker Change: Yes.
Speaker Change: Thank you. Our next question comes from the line of Kings, the Crane with Canaccord Genuity. Please proceed.
Kingsley Crane: Our next question comes from the line of Kingsley Crane with Canaccord Genuity. Please proceed.
Kingsley Crane: Hey, thanks for taking the question. 95% DBNR for secure comms. Can you talk about how you felt that segment performed in the quarter? Now that that's an independent segment, like how that DBNR trended and then, you know, where we should expect it's going to move forward.
Speaker Change: Hey, Thanks for taking the question.
Speaker Change: 95% D V NR for secure comps can you talk about how you felt that segment performed in the quarter.
Speaker Change: Now that that's an independent segment like how that trended and then.
You know, where we should expect it is going to move forward.
Tim Foote: Thanks. um Yeah, good question. It's we're really pleased to see it move in that direction. As I'm sure you know, it's been a number that we've been working really hard at to try to stabilize and now it's nice to see it generate some growth out of it. Across the board, you know, it's, I would say all the products within SecureComms pretty much contributed, mostly. It was a strong, very resilient UEM quarter with some nice government renewals, a couple of big banks not only renewed but added some licenses. So, I think that was helpful in this particular quarter.
Speaker Change:
Speaker Change: Yeah. Good question Casey it's.
Speaker Change: We're really pleased to see it move in that direction.
Speaker Change: As I am sure you know it's been.
Speaker Change: A number that we've been working really hard to try to stabilize and now it's nice to see it.
Speaker Change: You know generate some.
Speaker Change: Some growth out of it.
Speaker Change: Across the board.
Speaker Change: I would say all the the products within secure comms pretty much contributed mostly.
Speaker Change: It was a strong very resilient quarter with some nice government renewals some a couple of big banks.
Speaker Change: Not only renewed but added some reserves.
Speaker Change: Some licenses. So I think that was that was helpful. In this particular quarter.
Tim Foote: The ad hoc business tends to run pretty well. I would say that they're probably our best in class strongest renewal rates, ARR, DBNRR. So, you know, I think, you know, we're always trying to target that between 95 and, you know, ambitiously or aspirationally, how do we get it to 100 plus, but there can be, you know, some fluctuations quarter to quarter. You know, this is, so I wouldn't be that surprised if we did have one quarter, it dropped a couple of points and in another quarter maybe it goes up, you know, a couple of points closer to 100.
Speaker Change: The AD hoc business tends to.
Run run pretty well I would say that they're probably our best in class strongest renewal rates.
Speaker Change: <unk> D B N R R.
Speaker Change: So yeah.
Speaker Change: I think you know, we're always trying to target that between 95, and you know ambitiously are aspirational or how do we get it to a 100 plus but there can be some fluctuations quarter to quarter. You know this is.
Speaker Change: So I wouldn't it wouldn't be that surprised if we did have one quarter. It dropped a couple of points and then another quarter, maybe it goes up a.
Speaker Change: A couple of points closer to 100.
Tim Foote: So, a little bit of volatility in there, but I think it's what you'll find is it's going to be much more stable than it was Well, with the silence without the silence business, because that that drove a lot of volatility. And I think you'll probably see a much stronger performance around that going forward.
Speaker Change: A little bit of volatility in there, but I think it's what you'll find is this going to be much more stable than it was.
Speaker Change: With the sidelines without the <unk> business, because that that drove a lot of volatility and I think you'll probably see a much stronger performance around that going forward.
Kingsley Crane: Thanks, John, that's really helpful. And then for ad hoc, that's in process for achieving FedRAMP-HI.
Speaker Change: Thanks, John that's really helpful.
Speaker Change: And then for AD hoc that's in process for achieving fed ramp high I'm curious do you think thats going to be meaningful unlock and then.
John Giamatteo: I'm curious, do you think that's going to be a meaningful unlock? And then how do you feel about the timing of that being finished for potentially the next fiscal three-year? Yeah, it's my guess is, to be honest, the heavy lifting is done. At this point, we've done a lot of the, you know, all the configurations, the, the product and the networking investments. It's a big documentation component associated with FedRAMPi. So a lot of that heavy, now it's a matter of filing, going through the government's process, getting them, you know, to give us their kind of their checkmark.
Speaker Change: How do you feel about the timing of that being finished for potentially the next fiscal year.
Speaker Change: Yeah, It's my guess is.
Speaker Change: To be honest the heavy lifting is done at this point, we've done a lot of the you know all the configurations. The the product that the networking investments so big documentation component associated with February up high. So a lot of that heavy now it's a matter of filing going through the government process getting them.
Speaker Change: You know too.
Speaker Change: Give us their kind of their check mark.
John Giamatteo: I'd love for it to be by the end of Q4. But if I had to guess, it's probably something that'll linger on, especially right now with all the, you know, things that are going on with the government. Things are teeming to be a little moving a little bit more slowly. But I do think it's going to, it'll open up some opportunities, but I think even more so, it's going to really strengthen our existing position, because it, it will lock out. A lot of competitors to do it, to get to this level. You've got to have a lot of staying power, a lot of investment, a lot of process, and I think that's really going to secure our existing footprint and I think opportunistically open up some new ones.
Speaker Change: I'd love for it to be by the end of Q4, but if I had to guess, it's probably something that will linger on especially <unk>.
Speaker Change: Right now with all the things that are going on with the government.
Speaker Change: Things are seems to be a little move in a little bit more slowly, but I do think it's going to it'll open up some opportunities, but I think even more so it's going to really strengthen our existing position because it it it will lock out.
Speaker Change: A lot of competitors could do it to get to this level.
Speaker Change: You got to have a lot of staying power lost a lot of investment a lot of process.
Speaker Change: And I think that's really going to secure our existing footprint and I think opportunistically open up some new ones.
Unknown Executive: That's helpful.
Speaker Change: That's helpful. Thank you.
Speaker Change: Thank you. Our next question comes from the line of Paul Tiber with RBC capital markets. Please proceed.
Paul Treiber: Our next question comes from the line of Paul Treiber with RBC Capital Markets. Yeah, thanks very much and good afternoon. A question on the SecureComms ARR growth in the quarter. You know, I think I heard up 8%. It sounds like a good number. How's that been tracking over the last several quarters? And has there been variability in that in that number from quarter to quarter?
Paul Tiber: Yeah, Thanks, very much and good afternoon.
Paul Tiber: Question on the secure comms AOR growth in the quarter.
Paul Tiber: I think I heard 8%.
Paul Tiber: It sounds like a good number how has that been tracking over the last several quarters and has there been variability in that in that number from quarter to quarter.
Tim Foote: Yeah, I'll take that one. So it's been tracking up in actual fact, so Obviously, we've been pleased that cyber has been largely stable, but if you take X silence, actually the trend line is up. Occasionally it goes down one or two, but it's been trending up. That's, that's helpful. And the follow up is, just in regards to Q4 guidance for secure comms, you know, how do we think about the, you know, what it implies for the year over year growth in Q4? I mean, we see sequentially, but you do have that tough comping in Q3, just trying to understand the year over year growth in that uh Yeah, so.
Paul Tiber: Yeah, all type of them so.
Paul Tiber: It's been tracking up and actual facts so.
Paul Tiber: Obviously, we've been pleased cyber has been largely stable, but if you take ex silence actually the trend line is is off.
Paul Tiber: Occasionally it goes down one or two but it's been it's been trending up.
Paul Tiber: That's that's helpful. And then a follow up is I just in regards to Q4 guidance for secure commerce, Yeah. How do we think about the you know what it implies for the year over year growth in Q4, I mean, we've seen sequentially.
Paul Tiber: But you do have that tough comp in Q3, I'm just trying to.
Paul Tiber: Understand that the year over year growth in that business.
Paul Tiber: Yeah.
Paul Tiber: Yeah. So.
Paul Tiber:
Tim Foote: I think it's going to be a little bit down because of the Q3 compare, because we obviously had a significant amount of revenue relating to the Malaysia deal in Q3, particularly on the SecuSmart side of the house. But if you control for that, I think this is a fairly stable business year on the air. Certainly, it's a lot more stable than it was the cybersecurity division. Ultimately, as we've kind of pointed out invest today, we see this as a stable business that's generating a decent profit margin. This quarter, obviously, there was a couple of things in there that helped, but it was 30% EBITDA margin this quarter.
Paul Tiber: I think it's going to be a little bit down because of the Q3 compare because we obviously had a significant amount of revenue relating to the Malaysia deal in Q3, particularly almost like you saw small side of the house, but if you control for that I think this is a fairly fairly stable business.
Paul Tiber: Year on year.
Paul Tiber: Certainly, it's there's a lot more stable than it was a it was the cyber security Division.
Ultimately as we've kind of pointed out at Investor Day. This we see this as a.
Paul Tiber: Stable businesses generating a decent profit margin. This quarter. Obviously, there was a couple of things in there that helped but it was 30% EBITDA margin this quarter. So.
Tim Foote: So we see the QNX side of the house as being really the growth engine for BlackBerry. There are opportunities in Secure Comms, particularly the app token SecuSmart business, but we don't see this as a huge grower. It's more stable.
Paul Tiber: We see the Cuban ex fiber house as being really the growth engine for Blackberry there are opportunities in secured comms, particularly.
Speaker Change: They are talking second small business, but we don't see this as a huge grower. It's a small stable John anything you want to add to that.
John Giamatteo: John, anything you want to add to that? I think that's I think that's right. I think it's more of a stability type of one thing I would say is relates to ARR on SecureComms We are increasingly, when we introduced the software-only product of SecuSmart, that now, the business model with that is more of a subscription-based, so, and which will drive a, I think it'll, you know, historically it was more perpetual, we sold it with a device, it was a very complex, you know, so we'd have these big lumpy swings because we were a device. I think over time as we adopt more of a, and, you know, migrate more of our customers over to the software version, as we grow our business outside of Germany, which historically has been a more hardware-centric type of customer, that's, we think that's a good kind of trajectory for us to stabilize and even, you know, grow that on a going forward basis.
Paul Tiber: I think that's I think that's right I think it's Uh huh.
Paul Tiber: More of a stability type, but one thing I would say is when it relates to <unk> on.
Paul Tiber: Secure comps.
Paul Tiber: We are increasingly when we introduce the software only product of.
Paul Tiber: Second smart.
Paul Tiber: That now the business model with that is more of a subscription base.
Paul Tiber: And which will drive a I think it will.
Paul Tiber: Historically it was more perpetual we sold with the device who is a very complex you know so we'd have these the big lumpy swings because we were device I think over time as we adopt more of and migrate more of our customers over to these these the software version as we are.
Paul Tiber: Grow our business outside of Germany, which historically has been a more hardware centric type of customer.
Paul Tiber: That's a we think that's a good kind of trajectory for us to.
Paul Tiber: Stabilize and even grow that on a going forward basis. So well, we'll update you on that as we go forward, but that's a fairly new phenomenon as we introduce the software version of <unk> smart not providing some more AOR stability.
John Giamatteo: So, we'll update you on that as we go forward, but that's a fairly new phenomenon as we introduce the software version of SecuSmart and that providing some more ARR stability.
Unknown Executive: Thanks for the color there. Thank you.
Thanks for the color there I'll pass the line.
Speaker Change: Thank you. Our next question comes from the line is Daniel Chan with TD Cowen. Please proceed.
Daniel Chan: Our next question comes from the line of Daniel Chan with TD Cowan. Please proceed. Thanks. Hi, good afternoon. You mentioned that IOT strength this quarter was partly driven by higher royalties. How do we reconcile the royalty strength relative to the weak macro back?
Daniel Chan: Hi, good afternoon.
Daniel Chan: You mentioned that Iot strength this quarter was partly driven by higher royalties, how do we reconcile the royalty strengths relative to the weak macro backdrop.
Tim Foote: Yeah, maybe I'll start on this one, John, feel free to chime in. But I mean, ultimately, the the narratives that we have for the growth in QNX is Not really dependent on the SAR, the number of vehicles produced, as much as it is content per vehicle. So directionally, we don't necessarily need to see a growing SAR in order for QNX to grow. So directionally, there's a content piece that comes into that. That's helpful. Thanks.
Daniel Chan: Yes.
Jordan: Maybe I'll start on this from Jordan feel free to chime in but.
Jordan: Ultimately the narrative that we have for the the grossing Q&A.
Jordan: It's not really dependent on the saw the number of vehicles produced as much as it is content per vehicle. So.
Jordan: Direction me, we don't necessarily need to see.
Jordan: <unk> saw in order for <unk> to grow so.
Jordan: <unk> direct to me those are called.
Jordan: Content piece that comes into that down.
Jordan: That's helpful. Thanks, and then on silence you mentioned that you guys are keeping the tax losses there.
Tim Foote: And then on silence, you mentioned that you guys are keeping the tax losses there. How much tax losses does it do you get to keep? And what's the opportunity to use those now that you're profiting? Oh, it's, it's significant. It's, it's well into the hundreds of millions. So ultimately, that provides a significant shelter for profits that we hope to make in our US businesses so for us we see significant value to that so we're really pleased that we we continue to maintain this.
How much tax losses does it do you get to keep and what's the opportunity to use those now that you are profitable.
Jordan: Oh, it's.
Jordan: It's it's well into the hundreds of millions so ulta.
Jordan: Ultimately that provides a significant shelter for profits that we hope to make in our U S.
Jordan: Businesses so.
For us we see significant value to that so we're really pleased that we continue to maintain those losses.
Speaker Change: Alright, thank you.
Unknown Executive: Thank you.
Jordan: Thank you.
John Giamatteo: I would now like to turn the call back over to John Giamatteo, CEO of BlackBerry, for closing remarks.
Jordan: I'd now like to turn the call back over to John Keogh, Mikael CEO of Blackberry for closing remarks.
John Giamatteo: Very good. Thanks, Alicia.
Jordan: Very good thanks Alicia.
John Giamatteo: So before we end today's call, I'd just like to let everybody know that our BlackBerry QNX team will be participating at CES in Las Vegas from Tuesday, January 7 to Friday, January 10. at Booth 4224 in the West Hall. This is always a great opportunity to catch up with the latest developments for the QNX business and see how strong we wear positions, not only within the auto industry, but also other opportunities as well. So really encourage any of you that can make it to stop by the booth and visit us down in Vegas in January.
Before we end today's call I'd, just like to let everybody know that our Blackberry <unk> will be part participating at CES in Las Vegas from Tuesday January 7th to Friday January 10th.
Speaker Change: At Booth for two to four in the West Hall.
Speaker Change: This is always a great opportunity to catch up with the latest developments for the Q1 <unk> business and see how strong we were positioned not only within the auto industry, but also other opportunities as well so really encourage any of you that can make it to stop by the booth.
Speaker Change: And then visit us down in Vegas in January.
John Giamatteo: And with that, why don't I conclude by just thanking everybody for joining today. We hope we hope you all have a great holiday season and look forward to talking to you next time. Bye for now.
Speaker Change: And with that why don't I conclude by just thanking everybody for joining today.
We hope we hope you all have a great holiday season, and we look forward to talking to you next time.
Speaker Change: Bye for now.
Unknown Executive: This concludes today's call. Thank you for your participation.
Speaker Change: This concludes today's call. Thank you for your participation you may now disconnect.
Speaker Change: Yeah.
Speaker Change: Okay.
Speaker Change: Paul.