BlackBerry(BB) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - BlackBerry's total revenue for Q2 2025 was $145 million, exceeding the upper end of the guidance range of $144 million [20] - Non-GAAP operating loss was $4 million, with adjusted EBITDA reaching break-even, which is $22 million better year-on-year [22] - Cash usage improved by $2 million sequentially to $13 million, which is $43 million better than Q2 last year [22][26] Business Line Data and Key Metrics Changes - The IoT division generated revenue of $55 million, representing 12% year-over-year growth and 4% sequential growth [7] - The Cybersecurity division reported revenue of $87 million, achieving 10% year-over-year growth, driven by UEM, AtHoc, and Secusmart products [13][14] - Cylance revenue experienced a year-over-year decline due to churn in the product-only segment, although managed services saw traction [17][65] Market Data and Key Metrics Changes - The UEM market remains mature with strong competition, but BlackBerry's on-premise deployments are gaining traction, particularly in government and financial services [14] - Annual recurring revenue (ARR) for Cybersecurity remained stable at $279 million, with a dollar-based net retention rate improving by 7 percentage points year-on-year [18] Company Strategy and Development Direction - BlackBerry is focusing on integrating IVY into the QNX team to drive efficiencies and leverage expertise [12][38] - The company is strategically enhancing UEM features to deepen its competitive moat in a mature market [14] - BlackBerry is exploring opportunities in generative AI and cloud environments, positioning itself as a startup tackling new challenges [60][63] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the long-term trends in the automotive software market, despite delays in development programs [53] - The company is monitoring potential impacts from proposed bans on Chinese auto software and hardware, emphasizing its geographic diversification [50] - Management highlighted the importance of maintaining a balance between operational efficiency and cost reduction during organizational changes [42] Other Important Information - The company appointed Tim Foote as the new CFO, who aims to increase shareholder value and recognizes the underappreciated potential of BlackBerry [20][19] - An upcoming Investor Day on October 16th will provide segmented P&Ls for IoT and Cybersecurity divisions and a deeper dive into capital allocation priorities [67] Q&A Session Summary Question: What magnitude of opportunity does QNX Containers and the HaleyTek integration open up? - Management indicated that QNX Containers are part of the ongoing expansion of the total addressable market, with traction seen in cloud environments [30] Question: Can you elaborate on the EBITDA progression reaching break-even sooner than expected? - Management noted that while Q2 reached break-even, they are being prudent with guidance for the full year, expecting sequential improvements [36] Question: Could you provide an update on the separation process? - Management reported significant progress in separating IT systems and aligning them with business units, while maintaining operational efficiency [41][43] Question: Was the higher mix of licensed revenue a primary driver of the upside? - Management confirmed that both license and hardware contributed to the revenue upside, particularly from German customers during device refresh cycles [47] Question: Any potential impact from the proposed ban on Chinese auto software and hardware? - Management is closely monitoring the situation, noting that BlackBerry is well-diversified geographically [50] Question: What caused the sequential decline in ARR for Cybersecurity? - Management attributed the decline to churn in the Cylance product segment, while UEM and AtHoc showed positive trends [54] Question: Is the improvement in net revenue retention due to better upsell and cross-sell? - Management indicated that the improvement is a combination of upsell successes and some churn in the Cylance segment [56]