BlackBerry (BB) Q2 2025 Earnings Name Transcript

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and Canadian securities legal guidelines. We’ll point out forward-looking statements through the use of phrases similar to count on, will, ought to, mannequin, intend, imagine, and comparable expressions. Ahead-looking statements are based mostly on estimates and assumptions made by the corporate in mild of its expertise and its notion of historic traits, present situations, and anticipated future developments in addition to different components that the corporate believes are related. Many components might trigger the corporate’s precise outcomes or efficiency to vary materially from these expressed or implied by the forward-looking statements.

These components embody the chance components which might be mentioned within the firm’s annual filings and MD&A. You shouldn’t place undue reliance on the corporate’s forward-looking statements. Any forward-looking statements are made solely as of immediately, and the corporate has no intention or undertakes no obligation to replace or revise any of them besides as required by legislation. As is customary throughout the name, John and Tim will reference non-GAAP numbers of their abstract for our quarterly outcomes.

For a reconciliation between our GAAP and non-GAAP numbers, please see the earnings press launch printed earlier immediately, which is out there on the EDGAR, SEDAR+, and blackberry.com web sites. And with that, I am going to flip the decision over to John.

John Giamatteo — Chief Government Officer

Good. Thanks, Martha, and congratulations in your new position as director of investor relations for the corporate. Q2 was one other good quarter for BlackBerry as we’re making important progress in delivering on our technique. Each the IoT and Cybersecurity divisions delivered strong yr over yr in addition to sequential income development.

The mixture of this and the continuing profit from the actions to enhance our value profile drove year-over-year enhancements in non-GAAP EPS and adjusted EBITDA, with BlackBerry reaching breakeven forward of plan. Likewise, money utilized by operations additionally got here in higher than anticipated. This previous quarter, the IoT division delivered income of $55 million, representing 12% year-over-year development and 4% sequential development, and in addition exceeded the highest finish of the steering vary that we offered. Gross margin improved by one proportion level sequentially to 82% attributable to favorable product combine.

This quarter adopted the same development to final and that sturdy royalty income has pushed a good portion of the better-than-expected outcomes. Manufacturing-based royalties had been stronger each sequentially and yr over yr. This enchancment is partially a consequence of the expansion in royalty backlog that we have constructed from the appreciable quantity of design wins that we have secured in recent times. On the flip facet, as in Q1, improvement seat income for Q2 remained considerably subdued.

Improvement seat consumption is usually pushed by the timing of the ramp-up of automaker software program improvement applications. And as we have talked about in current quarters, these applications have skilled important delays. We have seen some enchancment in current months, however these delays proceed to carry again improvement seat income within the close to time period. Along with income acknowledged within the quarter, in Q2, we secured various new design wins that can generate future income.

Specifically, we secured various massive automotive Superior Driver Help Programs or ADAS wins. Amongst them, in Japan, we secured two design wins with main OEMs and to energy ADAS performance that features encompass digital camera and milli-wave radar for figuring out objects. Among the many design wins in digital cockpit, we secured a follow-on win to that introduced final yr with Hyundai Mobis, a subsidiary of South Korea’s largest automaker, Hyundai, operating on a Qualcomm chipset that QNX Hypervisor and superior digital frameworks will present the protection vital basis for built-in digital cluster, infotainment, and security purposes. We have made massive investments in our QNX product portfolio in recent times, leading to various important product launches being introduced at CES in January.

Typically talking, new product adoption in automotive has a comparatively lengthy lead time, however we’re happy with the traction we have seen for these new merchandise since their launch. Within the quarter, we secured additional design wins in our next-generation SDP 8.0 platform. SDP 8.0 is the flagship next-generation product within the QNX portfolio and gives prospects with a step-change improve in efficiency whereas sustaining the extremely excessive degree of purposeful security that QNX is famend for. One of many world’s largest industrial OEMs upgraded from SDP 7.1 to SDP 8.0 for his or her subsequent era of design for an optical guiding system for use in airport shuttle buses.

As well as, we secured a design win with a German specialised machine producer for SDP 8.0 to energy the management unit for pharmaceutical pill presses. In the course of the quarter, we introduced an thrilling improvement for QNX Sound, our new software-defined acoustics platform. HaleyTek, a Swedish developer of Android-based infotainment methods introduced that they are constructing QNX Sound into their digital cockpit structure. The inspiration for which is the QNX’s Hypervisor.

QNX Sound is a real value-add proposition, enabling each important invoice of fabric financial savings by eliminating costly audio {hardware} in addition to potential web new income streams from customized audio experiences. Lastly, on the product facet, you might recall that we introduced that Stellantis had leveraged QNX within the cloud to develop a digital twin of their cockpit structure. This was a selected deployment, which our engineers have now productized on the market to the business on the whole. We’re in early discussions with various automakers and really feel optimistic that this product will achieve traction in coming quarters.

Along with our core automotive market, we additionally see a big alternative to construct on our presence in adjoining verticals or what we name the final embedded market. This previous quarter, we took one other step ahead by including a senior go-to-market govt with sturdy related expertise to assist drive our efforts on this area. Lastly, a fast replace on IVY. The auto software program program delays that we have spoken about which have prolonged QNX improvement cycles have had a fair higher impression on IVY.

When automakers are totally focusing their efforts on delivering core methods on time, they’ve much less bandwidth for brand new performance like IVY. Regardless of this, we progressed a number of proof of ideas with main OEMs this fiscal yr and are engaged on various potential alternatives for IVY, however it’s unlikely that we’ll see materials income within the close to time period. On the fee facet, now that IVY is thru the numerous funding required for its preliminary improvement, we have built-in the gross sales and R&D efforts into the core QNX workforce. We imagine this not solely drives efficiencies but in addition leverages the attain and experience of our QNX workforce.

Let me now transfer over to our Cybersecurity division. Much like IoT, this was a strong quarter for Cyber. Income was $87 million, that means we exceeded the highest finish of the steering vary we offered final quarter and a key 10% year-over-year development. This efficiency was pushed by the three product teams that mirror BlackBerry’s sturdy heritage and safe communications.

That’s UEM endpoint administration, AtHoc vital occasions administration, and Secusmart encrypted voice and information. All three parts delivered year-over-year development and collectively, income elevated by 24%. Whereas the UEM market is mature and there’s sturdy competitors in cloud-based deployments, our product has a distinct segment with on-premise deployments specifically, notably the place information, sovereignty, and safety are a big concern. We usually see this want most in authorities and monetary companies.

And as different UEM suppliers have ceased to take a position because of the power of the competitors, we proceed to strategically improve the options that resonate most with our goal market and deepen our aggressive moat. This helped UEM to ship each sequential and year-over-year income development for Q2. Whereas there’s nonetheless some churn in our broader buyer base, we’re offsetting this with new logos and buyer expansions. Within the quarter, we secured essential renewal and upsells specifically, with various authorities companies, together with the U.S.

Immigration and Customs Enforcement, the U.S. Division of Power, the U.S. Military Corps of Engineers, and the U.Okay. Ministry of Protection.

Equally, AtHoc had a strong quarter, with income rising each sequentially and yr over yr. We secured a big renewal and growth with the US Division of State in addition to a big growth with the Air Power amongst different offers. Renewal charges for AtHoc remained very excessive at near 100%, which speaks to how built-in our product is in U.S. federal deployments specifically.

Lastly, our Secusmart enterprise had a great yr so far. Income in each Q1 and Q2 has been meaningfully forward of the prior fiscal yr. This power has been pushed by offers from its core buyer base throughout the German authorities, the place our full resolution usually bought together with {hardware} is mostly used. As a result of these licenses are tied to {hardware}, these prospects usually purchase new licenses to coincide with machine refresh cycles.

Along with the truth that the software program is deployed on-premise, and subsequently, income was largely acknowledged upfront. This implies there may be some variability within the prime line for Secusmart from quarter to quarter. Nevertheless, this previous quarter, we noticed additional traction for our software-only resolution with a serious web new emblem authorities in Europe buying our SecuSUITE product for deployment in navy purposes. Let me now transfer from safe communications to our Cylance endpoint safety enterprise.

This stays a really aggressive market. And this quarter, we continued to see some churn in our buyer base that purchases product solely, not managed companies. And this drove year-over-year decline in Cylance income. That stated, we’re happy with the continuing traction from the purchasers adopting Managed Providers, or MDR this quarter.

Our CylanceMDR choices present prospects with a variety of choices to go well with their wants and budgets. From our on-demand product proper as much as our newly launched XDR-focused MDR Professional providing. New emblem and upsell of MDR offsets a number of the churn we noticed within the buyer base this quarter. We have invested closely in our Cylance product in recent times, and we’re happy that our resolution was acknowledged by prospects as a buyer’s selection winner in Gartner’s current analysis.

When it comes to key metrics for our Cyber enterprise, annual recurring income, or ARR, stays largely secure, flat yr over yr at $279 million. The dollar-based web retention charge, or DBNRR improved yr on yr by seven proportion factors and sequentially for the fourth consecutive quarter by one proportion level to 88%. Let me remark briefly on our licensing enterprise, which got here in broadly in step with steering at $3 million. This income relates largely to legacy offers that predate the sale of a noncore portion of the portfolio of Malikie.

Gross margins remained at 67% after permitting for amortization on the patents that generated this income. Now, throughout the quarter, we introduced that Tim Foote was appointed as BlackBerry’s new CFO. Tim had beforehand served because the CFO for the Cybersecurity division and in various different senior finance positions of BlackBerry, together with as the top of investor relations. This deep data of each BlackBerry and extra broadly, the finance operate in addition to a powerful appreciation for our shareholder base and monetary — and what monetary analysts are centered on place him very well on this position.

I look ahead to persevering with my partnership with Tim as we maintain shifting the BlackBerry technique ahead. So, with that, let me flip the decision over to Tim, who can present some extra coloration round our financials.

Tim Foote — Chief Monetary Officer

Thanks, John, and good afternoon, everybody. I am extremely proud to be becoming a member of this name as CFO. My prime precedence on this position is evident to extend shareholder worth. For my part, BlackBerry has a big quantity of worth that’s underappreciated.

And as we proceed to execute on our technique, I am centered on seeing that it is acknowledged. As normal, the numbers I am going to reference aside from income, will probably be non-GAAP. As John talked about earlier, BlackBerry’s second quarter outcomes, not solely met however exceeded the steering vary that we offered final quarter. Complete firm income was $145 million, exceeding the higher finish of the vary of $144 million.

Complete firm gross margin was constant yr on yr at 66%. This yr, we have made great progress on our value construction with working bills this previous quarter reducing to $99 million. That’s $31 million or 24% decrease than the $130 million baseline for opex that we offered as a reference level previous to current value reductions. It’s also 10% decrease than the steering we gave for the FY ’25 common quarterly opex of $110 million.

Price stays a key focus going into the second half. And through September, we introduced various additional back-office head rely reductions and facility closures as we proceed to streamline operations. The brand new administration workforce at BlackBerry has managed to string the needle of considerably lowering prices whereas on the similar time, managing to stabilize the highest line and even drive development. In consequence, we have delivered considerably improved profitability and money utilization.

For Q2, the non-GAAP working loss was $4 million, and adjusted EBITDA beat expectations by ending at breakeven for the quarter. Adjusted EBITDA this quarter is $22 million higher on a year-on-year foundation. Non-GAAP EPS additionally beat steering at breakeven. Additional, money utilization continues to enhance.

Chances are you’ll recall that in our lastearnings name we outlined that due largely to timing of sure money receipts and funds, we anticipated a sequential improve in working money utilization. Nevertheless, working money utilization got here in higher than anticipated, enhancing by $2 million sequentially to $13 million. That is $43 million higher than for Q2 final yr. And in whole, working money utilization is $100 million higher for the primary half than the prior yr earlier than permitting for the proceeds from the patent gross sales.

Let me now present monetary outlook for Q3 and the fiscal yr as an entire. For IoT, we count on income this quarter to extend sequentially and to be within the vary of $56 million to $60 million. For the complete yr, we’re elevating the underside finish of our steering vary for IoT income, such that the vary is now $225 million to $235 million. For Cyber, we count on income for Q3 to be within the vary of $86 million to $90 million, and we’re reiterating the full-year steering vary at $350 million to $365 million.

When it comes to profitability, we count on adjusted EBITDA for Q3 to be within the vary of breakeven to constructive $10 million and non-GAAP EPS, up between minus $0.01 to constructive $0.01. The complete fiscal yr, we count on adjusted EBITDA to be within the vary of breakeven to constructive $10 million. And non-GAAP EPS to be within the now larger vary or between detrimental $0.05 to detrimental $0.02. Lastly, we count on a sequential enchancment in money movement for Q3 and for BlackBerry to return to constructive money movement and EBITDA in This autumn.

And with that, let me now return the decision to John.

John Giamatteo — Chief Government Officer

Thanks for that, Tim. Earlier than we transfer to Q&A, let me shortly summarize the important thing takeaways from this previous quarter. This was a great quarter for BlackBerry. Each our IoT and Cyber divisions be top-line expectations and delivered year-on-year development.

The exhausting work that the workforce has carried out with managing value is actually paying off with working bills now considerably decrease than prior yr and under $100 million 1 / 4. Blackberry reached a big milestone on the trail to profitability by reaching breakeven for each EBITDA and non-GAAP EPS this quarter. And eventually, money burn for the quarter was $43 million higher than final yr and $100 million higher yr on yr for the primary half earlier than permitting for the impression of the patent sale. I am extremely happy with the progress that everybody at BlackBerry has made as we discover ourselves in a considerably stronger place going into the second half of the fiscal yr.

And with that, let’s transfer to Q&A. So, operator, Dave, are you able to please open up the traces?

Questions & Solutions:

Operator

[Operator instructions] Our first query comes from Kingsley Crane with Canaccord Genuity. Please go forward.

Kingsley Crane — Canaccord Genuity — Analyst

Hello. Thanks a lot for taking the query. Congrats on the continued execution. First query, what magnitude of alternative does QNX containers and the HaleyTek integration and launch open up on that facet of the enterprise? How can we take into consideration new product unlocking design wins?

Tim Foote — Chief Monetary Officer

Yeah. Wonderful query. Ought to I reply that, John? Sure. So, containers is one thing that we have heard a good quantity within the form of this business in the previous couple of quarters.

Finally, it is simply a part of the growth. The continuing growth of the TAM, Kingsley, to be trustworthy. Containers is one thing that persons are very acquainted with working in a cloud atmosphere form of Docker sort strategy. So, as we transfer QNX towards the cloud, persons are clearly trying towards safety-certified containers as a manner of working.

So, this can be a pure evolution of that. And John talked about in his remarks that we’re beginning to see some traction from the cloud facet of issues as we productized what we did with Stellantis that we confirmed you at CES. What was the second a part of the query? It was round Sound? Yeah. So, HaleyTek.

So, on the sound facet of issues, that is one other one of many new merchandise that we launched earlier this yr, and we’re happy that though there are lengthy gross sales cycles right here, it simply opens up one other facet. So, up to now, we have talked in regards to the extra sockets, extra layers narrative, which is about saying we would like extra QNX content material in each car and never solely simply the working system however including components of middleware up the stack and Sound is certainly a kind of components. So, seeing traction, seeing somebody truly commit to construct this product into autos, clearly, is a big progress. So, we’re happy with that.

Kingsley Crane — Canaccord Genuity — Analyst

Superior. That is nice to listen to. After which on the financials, simply our Q3 steering implies a modest sequential improve for Cyber earlier than a markedly sharper improve in This autumn. I believe that is been — traditionally been a seasonally lighter quarter.

So, simply something that we must always contemplate there this yr could be useful. Thanks.

Tim Foote — Chief Monetary Officer

Yeah. Good query. So, I might say truly, on the midpoint, it is sort of — it is only a continuation of the development of what we’re seeing. Historically, This autumn is strongest for us, truly from a billing standpoint.

Q3 final yr, we had some important one-time offers, which helped drive the hump in Q3. However if you happen to take the midpoint, Kingsley, truly, you will see sequential development by Q3, This autumn.

Kingsley Crane — Canaccord Genuity — Analyst

Good. Thanks.

Operator

And the following query comes from Luke Junk with Baird. Please go forward.

Luke Junk — Robert W. Baird and Firm — Analyst

Good afternoon. Thanks for taking the questions. First, only a query associated to the EBITDA development, reaching breakeven earlier than I anticipated within the quarter, a terrific achievement. Simply making an attempt to reconcile that with the full-year EBITDA steering being maintained within the vary of breakeven to $10 million.

Is there one thing in timing we must be contemplating or some form of offset within the again half? I suppose if I have a look at the opex trajectory, it appears to be coming down faster than you had anticipated, and that would appear to recommend perhaps some upside to the complete yr. Thanks.

Tim Foote — Chief Monetary Officer

Yeah. So, you understand, we’re clearly making an attempt to be prudent with our steering right here, Luke. So, Q1 was a detrimental 7%. We’re delighted to be breakeven forward of schedule in Q2.

However on the midpoint, we nonetheless acquired somewhat bit to do to make the complete yr constructive by way of EBITDA. So, if you happen to take — you’ll be able to assume that there will be sequential enhancements going from Q2 into Q3 and Q3 into This autumn. So, hopefully, that helps.

Luke Junk — Robert W. Baird and Firm — Analyst

It does. Thanks, Tim. After which second, simply hoping you could possibly simply double-click on the organizational adjustments in IVY and integrating that extra into the QNX group on a go-forward foundation, simply relative to retaining key expertise there whereas additionally lowering value. Possibly if you happen to might simply sort of sq. the balancing of these two issues.

John Giamatteo — Chief Government Officer

Yeah. Look — that is John. It is — we have truly — we invested lots into IVY over the previous couple of years, actually, and we did it by advantage of a really devoted workforce that was actually centered on constructing out the IVY platform as a holistic venture. I believe we got here to the conclusion that now when you get a product to a sure degree, the place there is a baseline, you are that means a variety of the options and capabilities that we’re trying to ship to the market.

We sort of felt like there’s some operational efficiencies that we might achieve by bringing that workforce collectively very synergistically with different QNX members, whether or not it is on the gross sales, front-end gross sales facet, or on the R&D facet. So, I believe we sort of got here to the conclusion within the first half of the yr that leveraging a few of these effectivity since we have made a lot progress on shifting that platform alongside that this was the correct time to do this.

Luke Junk — Robert W. Baird and Firm — Analyst

Understood. I am going to go away it there. Thanks.

Operator

And the following query comes from Paul Treiber with RBC Capital Markets. Please go forward.

Paul Treiber — Analyst

Thanks a lot for taking the query. May you present an replace on the separation course of? I believe final quarter, you talked about you are working by splitting up a number of the IT methods and reorganizing that and simply adjustments to the organizational construction, what’s remaining to go from an operational perspective right here?

John Giamatteo — Chief Government Officer

Yeah, Paul. We made great progress on that. Actually, we’re simply having some deep-dive opinions on that over the course of the final couple of weeks. And a variety of the sort of low-hanging fruit of splitting it out, aligning it to the BUs.

We predict we have achieved that. We have got that largely in place. There are some parts throughout the networking, a few of our cyber safety options throughout the CISO group. I believe we in all probability talked about earlier than, a few of these issues are naturally somewhat bit extra intertwined that takes somewhat bit extra time to unravel.

So, we’re making an attempt to strike the correct steadiness on transfer these assets, transfer the fee, put them into the BUs, allow them to function them in a really agile manner. However on the similar time, do not go too far the place we begin to introduce dissynergies. So, we sort of really feel like we’re placing the correct steadiness, the place the enterprise is working. You’ll be able to see we’re producing the revenues that we would like, the design wins, the progress that we’re making, and the way we function it.

However on the similar time, driving the numerous prices out of the enterprise. So, we really feel like we’re placing in it proper on the proper steadiness at this level. We’ll proceed to have a look at that, however with an eye fixed towards do not — we made a lot progress on lowering our value construction we do not wish to overstep it now begin to introduce further prices only for the sake of claiming issues are separated. So, we’re making an attempt to strike that proper steadiness.

Paul Treiber — Analyst

That is useful to know. Simply on — as you form of untangle the 2 organizations, are you seeing structural variations in profitability between the 2? How ought to we take into consideration that right here?

Tim Foote — Chief Monetary Officer

Yeah. So, I might say this complete course of has given us the chance to take a recent look. And can say is if you happen to tune into the Investor Day on October 16, we’re undoubtedly going to be offering much more coloration on that round divisional profitability. So, we’ll go away it till then, if that is OK, Paul.

Paul Treiber — Analyst

Positive. Only one final one for me. Simply on Cyber, it does appear like that the combination of license income was larger this quarter. Was that the first driver of one of many main drivers of the upside relative to steering? After which how will we take into consideration that from a timing perspective? Was that — is it catch-up from prior quarters? Was it pull ahead from future quarters versus your expectations?

John Giamatteo — Chief Government Officer

Yeah. I believe it was a mixture of each license and {hardware}, as we talked about. Secusmart and a few of our German prospects, they’d a tool refresh cycle that they are working by that generated some upside orders that had been useful to the enterprise. However we had been actually inspired with the sturdiness of the UEM enterprise this quarter.

We’re inspired with the AtHoc enterprise and a number of the massive prospects that we renewed and did some expansions on. So, I believe it has been the achievement for this explicit quarter was actually sort of broad-based throughout license, service, and {hardware}.

Paul Treiber — Analyst

Thanks for taking the questions.

John Giamatteo — Chief Government Officer

Thanks, Paul.

Operator

[Operator instructions] Our subsequent query comes from Daniel Chan with TD Cowen. Please go forward.

Daniel Chan — TD Cowen — Analyst

Hello. Thanks for taking my questions. Any potential impression from the proposed ban of Chinese language auto software program and {hardware}? And perhaps not simply within the U.S., however the potential of it increasing to different international locations.

Tim Foote — Chief Monetary Officer

It is a actually good query. Clearly, one thing we’re watching very intently. The excellent news for QNX is we’re very effectively diversified geographically and in addition from an industrial standpoint. I suppose being a proud Canadian firm sort of places us barely extra within the impartial bucket.

However it’s truthful to say we’re undoubtedly watching intently. China is a crucial marketplace for us. So, we have to see what the — what develops from that.

Daniel Chan — TD Cowen — Analyst

Thanks for that. After which the delayed or canceled applications, design applications that you just’re seeing now, how ought to we take into consideration these impacting the potential royalty income in a number of years?

Tim Foote — Chief Monetary Officer

Yeah, it is a good query. Finally, the best way we give it some thought, Dan, is that this work has not gone away. The secular traits are nonetheless very a lot there. It is only a query of timing, how shortly the OEMs can truly get to the stage of creating this software program after which finally shifting it into manufacturing.

The excellent news for us is this can be a very long-term enterprise. As you understand, we winner design, and we have a income stream sort of locked in for the following 10 years. And we have already acquired $850 million in our backlog, which supplies us a extremely strong base. So, as these kinks in these bumps within the street, if you happen to like, sort of get work by.

We’re very assured that the secular traits which might be powering this business haven’t gone away, and we’ll proceed to make progress.

Daniel Chan — TD Cowen — Analyst

Thanks, Tim. Simply a few questions on Cybersecurity, if I could. The ARR sort of reverse trajectory sort of improved in Q1 and on this quarter, sort of declined sequentially. What modified during the last three months to reverse that momentum?

John Giamatteo — Chief Government Officer

Yeah. That is a great — actually good query. I might say, total, yr over yr was comparatively flat. I believe from quarter to quarter, there’s going to be somewhat little bit of variability, some bumps in that’s in all probability extra of it’s related to a number of the Cylance churn that we have skilled over the course of the final quarter or two.

So, that was in all probability a part of a number of the downward strain. However on the similar time, a number of the traits that we have seen with UEM and AtHoc, we’re offsetting a few of that. So, there’ll all the time be, I believe, somewhat little bit of variability from quarter to quarter simply based mostly on the character of our companies and the markets that they serve. However from a long-term perspective, we’re happy that it is far more secure than it has been within the final couple of years.

Daniel Chan — TD Cowen — Analyst

Thanks. And final one for me. Good to see the web income retention enhancing. Is it enhancing as a result of the churn is getting higher? Or are you doing a greater job with the upsell and cross-sell? Any coloration could be useful.

Thanks.

John Giamatteo — Chief Government Officer

Mixture of all of it, somewhat little bit of a blended bag. I believe there’s some — undoubtedly some actually good upsell within the AtHoc facet, some actually good upsell on the UEM facet. That is offset somewhat bit with a number of the Cylance churn. So, throughout the portfolio, it is good to see no matter, seven factors for consecutive quarters of shifting in the correct course.

It is nonetheless not the place we would like it to be by any means, but it surely’s good to see it stabilizing and shifting in the correct course.

Daniel Chan — TD Cowen — Analyst

Nice. Thanks very a lot.

Operator

The subsequent query comes from Journey Chowdhry with International Equities Analysis. Please go forward.

Journey Chowdhry — Analyst

Thanks. Thanks. A really thrilling quarter. I believe the best way I have a look at your organization is a really underappreciated start-up.

Why I say that’s in each enterprise you might be, there’s a lot alternative to create and form the brand new and the brand new future based mostly on the applied sciences and the platforms you could have I used to be simply pondering in case your workforce is pondering on these three rising alternatives that I believe you probably have a distinct narrative and a distinct perspective, you could possibly be doing lots higher versus if I am taking a look at different analysts’ questions, they’re very backward trying as a result of they’re pondering BlackBerry from a really conventional sense versus if you happen to have a look at the BlackBerry as a start-up, which isn’t effectively understood, let me give a degree two, three factors right here. First, there’s an emergence of generative AI gadgets. There’s just one occasion proper now the place Jony Ive and OpenAI try to create these gadgets. And if we are able to quick ahead, it might be no much less widespread than iPhones down the street.

That is — I am extrapolating, however that is one new factor that has emerged during the last three, 4 months. Second, if you suppose by way of generative AI and varied fashions which might be coming, together with small language fashions and now a variety of intelligence is being carried out on Intel AI PCs, for instance, now as within the ready remarks, you talked about UEM product being superb for on-premises if we extrapolate it as a result of you could have a beautiful CEO who got here from McAfee, that is a chance when you could have AIs and there’s a lot they name it, injection that’s susceptible injections which might be occurring. It’s simply previous paradigm in a brand new scenario. So, one thing that’s useless is getting thrilling now.

The one factor that — there are numerous others we are able to go offline. However the best way I am pondering is we must be taking a look at BlackBerry as a start-up, attacking new issues with the applied sciences and the experiences you could have. So, Tim, since I occur to know you very effectively, and also you’re one of the sharpest, I might say, technologist CFOs. I used to be pondering you probably have thought of it and what are your preliminary views on it.

In fact, this business is being created proper in entrance of our eyes. I really need BlackBerry to go and seize it. So, that is all from me , and congratulations on a pleasant quarter.

Tim Foote — Chief Monetary Officer

No, thanks a lot. John, did you wish to —

John Giamatteo — Chief Government Officer

You understand, only one factor I might — I actually resonate, Journey, with the way you discuss it as a as a start-up, taking a step again and looking at what companies are we in, what can we turbocharge development, whether or not AI-centric. And I believe one of many issues that basically has helped us is that this complete technique round organising two BUs, it is actually given us some attention-grabbing insights into our product portfolios and which of them are extra next-generation issues that may result in extra dynamic development within the markets that you just’re describing and which of them perhaps from a capital allocation, we have to tug again on. So, undoubtedly, tune in additional for some extra particulars on that on the upcoming Investor Day, the place we’ll share sort of extra of a portfolio have a look at the corporate and the way we’re shaping our investments and our capital allocation to spend money on the sorts of issues that you just’re speaking about, Journey.

Journey Chowdhry — Analyst

Phenomenal. Thanks a lot.

John Giamatteo — Chief Government Officer

Thanks, Journey.

Operator

The subsequent query comes from Steven Li with Raymond James. Please go forward.

Steven Li — Raymond James — Analyst

Hey, thanks. John, I am unsure if I misheard you. However on Cyber, I believe I heard you say extra prospects are adopting your managed companies providing. And that drove the year-over-year decline in Cylance’s revenues.

Did I mishear or are you able to elaborate?

John Giamatteo — Chief Government Officer

Yeah. Let me — perhaps I wasn’t clear, Steven. Simply inside Cylance, there’s sort of two parts. Our historic — after we purchased the corporate, it was a really product-centric firm, endpoint safety, and we have constructed out our EDR functionality with optics.

And that is the very — the traditional product the place our prospects license it on a product-only foundation. That a part of the enterprise, we’re seeing that as simply traits available in the market on the whole. That is the place we have had some sluggishness. That is the realm the place we have had some renewal charges, some defections.

However the place we noticed some upside is present prospects which might be shifting from product-only state of affairs to MDR, the place we handle individuals that do not have the assets or the wherewithal to handle their very own environments, and so they search for us to do it from an MDR perspective. So, that a part of the enterprise, we have truly seen good pipeline, some good conversions, some attention-grabbing wins within the quarter, however that was sort of offset by a number of the draw back weak point on the product-only section of our buyer base.

Steven Li — Raymond James — Analyst

Acquired it. That is useful. Thanks, John.

Operator

This concludes our question-and-answer session. I want to flip the convention again over to John Giamatteo for any closing remarks.

John Giamatteo — Chief Government Officer

Terrific. Thanks, Dave. So, earlier than we wrap up, I simply wish to remind everyone about our upcoming Investor Day on the New York Inventory Trade on October 16. At this occasion, for the primary time, we will be offering segmented P&Ls for each our IoT and Cybersecurity divisions in addition to the brand new outlook for fiscal yr ’26 and ’27.

We’ll take a deeper dive into the efficiency of our 4 Cybersecurity product teams and evaluate our capital allocation priorities and also will showcase the depth of experience that we’ve in each IoT and our Cyber groups as they clarify the market alternatives and the place our merchandise are positioned to capitalize on them. The occasion is out there to most people by way of webcast, and you’ll join on the Investor Relations webpage. So, thanks once more for becoming a member of immediately and look ahead to seeing you all subsequent time.

Operator

[Operator signoff]

Period: 0 minutes

Name members:

Martha Gonder — Director, Investor Relations

John Giamatteo — Chief Government Officer

Tim Foote — Chief Monetary Officer

Kingsley Crane — Canaccord Genuity — Analyst

Luke Junk — Robert W. Baird and Firm — Analyst

Paul Treiber — Analyst

Daniel Chan — TD Cowen — Analyst

Journey Chowdhry — Analyst

Steven Li — Raymond James — Analyst

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