Blackberry (BB) FY Conference August 13, 2025 09:00 AM ET Company ParticipantsKingsley Crane - MD - Equity ResearchTim Foote - CFOJohn Giamatteo - President & CEOKingsley CraneWelcome everyone to this Wednesday session. I'm King C Crane, a software analyst here at Canaccord Genuity. With me I have the BlackBerry management team, John G. Mateo, CEO and Tim Foote, CFO. Thanks for being here.Tim FooteThank you, Kingsley.John GiamatteoThank you, Kingsley.Kingsley CraneSo let's kick it off. You reported earnings ...

Core Viewpoint - BlackBerry is struggling to find its footing after transitioning from a smartphone manufacturer to a provider of IoT and cybersecurity software, facing challenges in saturated markets [1][2]. Group 1: Company Overview - BlackBerry was once a leader in the smartphone market but lost its position to competitors like Apple and Android [1]. - The company has shifted focus to IoT and cybersecurity software but continues to face difficulties in expanding its market presence [1]. Group 2: Growth Drivers - BlackBerry's growth has been primarily driven by two acquisitions: QNX, an embedded operating system for vehicles, and Cylance, a cybersecurity company [4][6]. - The QNX segment saw a 10% year-over-year revenue increase in fiscal 2025, contributing 44% to BlackBerry's total revenue [5]. - The company launched BlackBerry IVY, a cloud-based connected-vehicle platform, co-developed with Amazon Web Services [4]. Group 3: Financial Performance - In fiscal 2025, revenue from the secured communications segment, which includes cybersecurity services, decreased by 4% year-over-year but still represented 51% of total revenue [7]. - Licensing revenue plummeted by 90% in fiscal 2025, accounting for only 5% of total revenue due to the sale of most of its patent portfolio [8]. Group 4: Future Outlook - BlackBerry anticipates revenue between $508 million and $538 million for fiscal 2026, indicating a potential 2% decline at the midpoint [9]. - The company expects a 10% to 14% decrease in secured communications revenue due to the sale of Cylance's assets, while QNX is projected to grow by 10% [9]. - Analysts predict a revenue increase of 9% and an 18% rise in adjusted EBITDA for fiscal 2027 as QNX and SecuSmart attract new customers [10]. Group 5: Valuation and Investment Considerations - BlackBerry's enterprise value stands at $2.2 billion, trading at four times this year's sales and 27 times forward adjusted EBITDA [11]. - If the company meets analysts' expectations, shares could rise by 16% over the next 12 months, but any setbacks in its main segments could lead to a decline in stock value [12].

Core Viewpoint - BlackBerry shares surged significantly after the company reported better-than-expected first-quarter financial results and raised its fiscal 2026 sales guidance [1][3]. Financial Performance - BlackBerry reported quarterly earnings of $0.02 per share, surpassing the analyst consensus estimate of $0.00 [1]. - Quarterly revenue reached $121.7 million, exceeding the Street estimate of $112.18 million [1]. - QNX revenue increased by 8% to $57.5 million, while Secure Communications revenue exceeded guidance at $59.5 million [2]. Fiscal Guidance - The company affirmed its fiscal 2026 adjusted EPS guidance of $0.08 to $0.10 [3]. - Fiscal 2026 revenue guidance was raised from $504 million-$534 million to $508 million-$538 million, compared to the $513.51 million estimate [3]. Analyst Reactions - RBC Capital analyst Paul Treiber maintained a Sector Perform rating and slightly increased his price forecast from $3.75 to $4, noting strong revenue from Secure Communications and QNX segments [4]. - Canaccord Genuity analyst Kingsley Crane maintained a Hold rating while modestly increasing the price forecast from $4.25 to $4.60, highlighting strong IoT results [5][6]. Market Outlook - Analysts noted that the raised fiscal 2026 guidance remains conservative due to uncertainties in the automotive sector and broader macroeconomic conditions [5][11]. - A backlog of approximately $865 million in QNX presents significant revenue opportunities, though clarity on timing for revenue recognition remains a concern [9][10]. Strategic Initiatives - The company is positioned for substantial expansion in the general embedded opportunity, which represents 43% of the overall pipeline for Software-Defined Vehicle 8.0 [12]. - Management's tone has improved, indicating a more optimistic outlook for the business compared to the previous year [11].

Core Insights - BlackBerry Limited reported first-quarter fiscal 2026 non-GAAP earnings per share (EPS) of 2 cents, surpassing its own estimate of a loss of 1 cent to breakeven and the Zacks Consensus Estimate pegged at breakeven [1][10] - Total revenues for the quarter reached $121.7 million, exceeding guidance of $107-$115 million but reflecting a 1.4% year-over-year decline, primarily due to weaker sales in Secure Communications and Licensing units [2][10] Financial Performance - The QNX business generated revenues of $57.5 million, exceeding the high end of guidance ($51-$55 million) and showing an 8% year-over-year growth, driven by a 9% increase in royalties and a 23% rise in development seat license revenues [7] - Secure Communication revenues declined 7.3% year over year to $59.5 million but exceeded the top limit of guidance ($50-$54 million) due to strong sales in the German government sector [8] - Adjusted gross margin improved to 74.6%, up from 73.5% in the previous year, while QNX's gross margin fell to 81% due to adverse forex impacts [12] Guidance and Outlook - BlackBerry raised its full-year revenue guidance to $508–$538 million and adjusted EBITDA to $72–$87 million, reflecting a stronger outlook for Secure Communications revenues and EBITDA [5] - For fiscal second-quarter 2026, the company expects revenues in the range of $115-$125 million and non-GAAP EPS between breakeven and 1 cent [15] - The company continues to project Licensing & Other revenues to be around $24 million, with non-GAAP loss per share expected to be between 8 cents and 10 cents [4] Market Reaction - Following the better-than-anticipated performance, BlackBerry's shares gained 10% in pre-market trading on June 25, 2025, and have increased by 95.9% over the past year compared to the Zacks Internet-Software industry's growth of 37.6% [6]

Core Insights - BlackBerry reported quarterly earnings of two cents per share, surpassing the analyst consensus estimate of zero cents, with quarterly revenue of $121.7 million exceeding the Street estimate of $112.18 million [1][2] Financial Performance - The company achieved a non-GAAP gross margin of 75% [4] - QNX revenue grew by 8% year-over-year to $57.5 million, with an adjusted gross margin of 81% [4] - Secure Communications revenue reached $59.5 million, exceeding prior guidance, with an adjusted gross margin increase of 6 percentage points sequentially and 4 percentage points year-over-year to 70% [4] - Licensing revenue was reported at $4.7 million, and adjusted EBITDA stood at $3.8 million [4] Management Commentary - CEO John J. Giamatteo stated that BlackBerry made a strong start to the new fiscal year, building on a solid foundation laid over the past year, with both QNX and Secure Communications divisions effectively executing their strategies [2] Future Guidance - BlackBerry affirmed its fiscal 2026 adjusted EPS guidance in the range of eight cents to 10 cents [2] - The company raised its fiscal 2026 revenue guidance from a range of $504 million to $534 million to a new range of $508 million to $538 million, compared to the $513.51 million estimate [2] Stock Performance - Following the earnings report, BlackBerry stock increased by 4.16% to $4.51 in extended trading [3]

Group 1 - BlackBerry's software, known as QNX, is utilized in over 255 million vehicles globally, indicating a significant presence in the automotive market [1] - The recently rebranded QNX segment, previously known as IoT, reported trailing 12-month sales exceeding 230 million [1] - The company is undergoing a substantial transformation, focusing on four specific areas, which includes a strategic split of the company [4]

Core Viewpoint - BlackBerry Limited's shares have increased by 21.3% in the past month, outperforming the Computer Software industry and the S&P 500 composite, which grew by 18.7% and 8% respectively [1] Price Performance - BlackBerry's stock closed at $3.92, which is down 37.2% from its 52-week high of $6.24 [4] QNX Business Development - BlackBerry has shifted focus to its QNX platform, having sold its Cylance unit for $80 million in cash and 5.5 million shares, while retaining its AI/ML patent assets and tax losses [5] - The QNX business is experiencing growth, particularly in the automotive sector, with strong demand in advanced driver assistance systems (ADAS) and digital cockpit solutions [6] - QNX revenues reached $65.8 million, exceeding guidance of $60-$65 million, driven by design wins in digital cockpit and ADAS [7] Revenue Guidance and Market Conditions - BlackBerry maintains a revenue guidance of $260-$270 million, with QNX revenues expected between $250 million and $270 million, amid uncertainties from recent tariff changes [9] Secure Communication Division - The Secure Communication division reported fiscal fourth-quarter revenues of $67.3 million, surpassing the forecast of $62-$66 million, driven by strong performance in the AtHoc platform [10] - The division is seeing healthy momentum from government agencies and top banks, with a notable expansion of a deal with the Malaysian government [11] Financial Performance - BlackBerry's adjusted EBITDA for fiscal 2025 was $39.3 million, reflecting a $54 million improvement from the previous year, aided by cost-cutting measures [13] - Cash and investments increased by $144 million, supported by strong operating cash flow of $42 million and the initial payment from the Cylance deal [14] Analyst Sentiment and Valuation - Analysts have revised EPS estimates for the current fiscal year upward to 10 cents from 7 cents over the past 60 days, indicating bullish sentiment [17] - BB stock is trading at a trailing 12-month price/book multiple of 3.25, compared to the industry average of 5.87, suggesting it is undervalued [18] Investment Opportunity - The pivot towards the QNX business, improving financials, and strong estimate revisions present a compelling buying opportunity for BlackBerry stock [19]