BlackBerry Limited

Good morning and welcome to the BlackBerry fiscal year 2020 first quarter results conference call. My name is Lisa and I'll be your conference moderator for today's call. During the presentation, all participants will be in a listen-only mode. We will be facilitating a brief question and answer session towards the end of the conference. Should you need assistance during the call, please signal a conference specialist by pressing star zero. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to our host for today's call, Christopher Lee, Vice President of Finance. Please go ahead.

Thank you, Lisa. Welcome to the BlackBerry Fiscal Year 2020 First Quarter Results Conference Call. With me on the call today are Executive Chairman and Chief Executive Officer John Chen and Chief Financial Officer Steve Capelli. After I read our cautionary note regarding forward-looking statements, John will provide a business update, and Steve will then review the financial results. 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 the blackberry.com website. Some of the statements we'll 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. Many factors could cause the company's actual results or performance to differ materially from those expressed or implied by the forward-looking statements, including the risk factors that are discussed in the company's annual information form, which is included in our annual report on Form 40F and in our MD&A. You should not place undue reliance on the company's forward-looking statements. The company has no intention and undertakes no obligation to update or revise any forward-looking statements except as required by law. As is customary during the call, John and Steve will reference non-GAAP numbers in their summary of our quarterly and annual results. For a reconciliation between our GAAP and non-GAAP numbers, please see the earnings press release and supplement published earlier today. I will now turn the call over to John.

Thank you, Chris. Good morning, everybody. BlackBerry is off to a good start in Fisco 2020. Our total company revenue grew 23% year-over-year, total company revenue growth was driven by a 35% increase year-over-year in total software and services revenue. To break it down further, on an organic basis, total software and services revenue grew 8% year-over-year, and in addition, BlackBerry Silence software and services revenue grew 31% year-over-year. I'm pleased to report that our integration of BlackBerry Silence is ahead of schedules, These activities result in revenue growth and help us in profitability in the first quarter of fiscal 2020. We are executing upon the strategic and operation goal for the fiscal 2020 that we shared with you last quarter. Our execution gives us confidence to reaffirm our fiscal 2020 financial outlook. Now let me provide some highlights for the first fiscal quarter. Sorry, I'm losing my voice a little bit, so I apologize. So total company revenue was $267 million. Total software and services revenue was $260, which is a new record quarterly high. Total software and services billing grew a strong double-digit percentage year-over-year. Total company gross margin came in at 75%. Total company operating income was $5 million. The resulting operating margin was 2%. The company EPS was $0.01. Total ending cash and investment were $935 million. Next, I will cover some of our significant highlights in each of our software businesses. Let me start with Silence. Revenue came in at $51 million, which grew 31% year over year. This was driven by approximately 30% year-over-year increase in the number of new active subscription customers. This new customer growth in the quarter was broad-based across various industries, led by professional services sector, manufacturing, as well as government. Annual recurring revenue, which is an indicator of the business momentum, was approximately 172 million and up 30% year-over-year in the first quarter of fiscal 2020. Another matrix, dollar-based net retention rate, which is an indicator of customer retention expansion, continues to be greater than 100%. BlackBerry Sidance executed well during the integration process, which I mentioned earlier is tracking ahead of schedule. Here are some of the highlights and fruit points. We have completed the back office function and personnel integration worldwide. The integration for the majority of the system and tools that are being used will be finished by the end of the second fiscal quarter, which is in a couple of months. Both the sales and R&D teams are working well together. We're seeing very promising interactions by our sales team within the BlackBerry Key account base. The R&D team is on track to integrate the Xilinx technology into UEM. This integrated product will be available by next spring with a combination of the QNX and Xilinx technologies that came thereafter. Also, the new products that BlackBerry Xilinx announced earlier this year, namely Cocoon, Guard, and Persona, are on track to be released throughout our fiscal year. Now, let me briefly discuss our licensing business. Revenue grew 14% year-over-year with some IP licensing business occurring earlier in fiscal 2020 than we expected. We remain focused on entering into new IP licensing arrangement that generates recurring revenue. Moving on to the IoT business, total IoT revenue grew 5% year-over-year. As shared with you last quarter, the BlackBerry Technology Solution and the Enterprise Software and Services Group will combine to align our financial reporting with the way we manage the company today, which is namely one of the executive of Brian Palmer. To assist you with the year-over-year comparison, though, BTS revenue grew 16%, and ESS revenue growth was slightly up. During the quarter, we made significant change to the sales leadership team in ESS, which are now completed. Let me walk through some highlights for BTS. BlackBerry QNX continued to drive revenue growth for BTS. BlackBerry QNX licenses, services, and royalty revenue all grew year over year as we continued to be selected for designs by our customers in both the automotive and general embedded markets. In the quarter, we had a total of 17 design wins, of which 13 were in automotive, and four were in general embedded market. Of the amount of the automotive wins, 11 were in applications like digital carpets and digital instrument cluster. Two of the 13 were infotainment wins. One of our wins in a quarter was with LG Electronics, a growing innovative partners to automotive OEM. BlackBerry QNX will be the preferred choice of all next generation automotive design that LG provides to multiple OEMs. These design includes infotainment systems, digital instrument cluster, digital consolidated carpets, as well as telematics systems. With these types of partnership, what these types of partnership will bring to BlackBerry is the opportunity to reach new OEMs and increase our content per vehicle. thereby yielding a higher average revenue per car to BlackBerry. Looking ahead, BTS expects to have a very busy year of exciting new product launches. There are two main ones, the Safety Certified Hypervisor, which will start shipping in November 2019, November this year, and the Integrated Digital Carpet, available in beta starting at the same time, which is November 2019. I would like to highlight a little bit about the Digital Carpet. The BlackBerry QNX platform for Digital Carpets integrates a number of our technology, namely BlackBerry Digital Instrument Cluster, infotainment, as well as hypervisor technology, all managed in real time for the safety and security requirements, and they will come in as one platform, one system. Our platform also enables Android and Linux operating system in a secure manner, Of course, we continue to support Android Auto as well as Apple CarPlay. This creates yet another opportunity for BlackBerry to add more content in a vehicle, leading to the higher average revenue per car. Based on the strong growth we have experienced in both infotainment and non-infotainment application over the last several years, BlackBerry QNX is now embedded in over 150 million cars. Out from the 120 million cars that we reported, last June. This statistic has been validated by Strategy Analytics, an independent third party. Before I move on to the ESS, let me briefly talk about our radar business. In the quarter, we added 20 new customers, including one of the top three U.S. retailers specializing in home improvement. I apologize, we did not have the permission to name the individual customer. The customer placed a 2,500 units order. Our radar business is gaining more traction in the market. We're seeing increased activity both directly and through the channels, with reference coming from many existing customers and partners. Now let me walk through ESF, and I'd like to make three key highlights. Let me have a sip of water first. First, we are executing upon the strategic priorities for ESS we share at the beginning of the fiscal year. We remain strong with customers in regulated industry. This group of customers represent a healthy majority of our revenue generated in ESS. We increase revenue year over year in this customer segment at a new customer such as the SMBC and ECOS securities, as well as government agency in Canada, Germany, and UAE. Our government-based suite, which is based on UEM, has achieved the FedRAMP-ready status. This is a key milestone because our cloud-based solutions have demonstrated it has met the core security and process requirements of the United States government. Also, we are now listed on the FedRAMP marketplace, highlighting the availability of our solution to the federal community. We anticipate our product being fully authorized and help to increase our market share within the U.S. government. We are also seeing returns in our go-to-market investment in Ad Hoc, our crisis communication system, and SecuSmart, our secure voice solution. In the quarter, Ad Hoc won a number of new customers, even outside the United States federal governments. A key win in the quarter that we'd like to celebrate was with United Nations. We're also seeing new demand for SecuSmart, Our secure voice capability, which historically has been a product for government agency, is now seeing demand from multinational companies that do business in political sensitive countries. We have over 15 pilots underway across both government and non-government sectors today. Second, we are investing in new products. We will launch our first security solution for Spark, our secure communication platform for the IoT. It will be one month ahead of our original schedules. This will be unveiled at the Black Hat Conference in August. It addresses two security concepts that are currently top of mind of customers. These two are the continuous authentication and zero trust. As noted earlier, we are on track to integrate BlackBerry Silence into UEM. This integration will add mobile threat detection capabilities using AI onto our endpoint management solution. This will be a very differentiated product in the endpoint market. Current and prospective customer tells us they are very interested in these products and they're waiting for these releases. Our innovation will allow us to be even more competitive in the market and drive future revenue growth. We are investing in the organization, adding sales rep and channel coverages, while making necessary operational changes to promote future growth. After reviewing the ESS pipeline for fiscal 2020 and noting the business is seasonally weighted towards the second half of the fiscal year, we anticipate quarterly sequential revenue growth in this category throughout the fiscal year. With that, I would like to turn the call to Steve to provide some details about our financial performance.