BlackBerry Limited

Good morning, and welcome to the BlackBerry Fiscal Fourth Quarter and Fiscal Year 2020 Results Conference Call. My name is Josh, and I will 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 today's call over to Christopher Lee, Vice President of Finance. Please go ahead.

Thank you, Josh. Welcome to the BlackBerry Fiscal Fourth Quarter and Fiscal Year 2020 Results Conference Call. With me on the call today are Executive Chairman and Chief Executive Officer John Chen and Chief Financial Officer Steve Ray. 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 calling numbers and via webcasts 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 a company's actual results or performance to differ materially from those expressed or implied by the forward-looking statements. These factors include the risk factors that are discussed in the company's annual filings in MD&A and the COVID-19 coronavirus outbreak, which is negatively impacting public health, financial markets, and global economic activity. 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 results. For a reconciliation between our GAAP and non-GAAP numbers, please see the earnings press release and supplement published earlier today, which are available on the EDGAR, CDAR, and BlackBerry.com websites. I will now turn the call over to John.

Thank you, Chris. Good afternoon, everybody. Before I speak about the BlackBerry results, I'd like to acknowledge everyone who's doing all they can to contain and overcome the COVID-19 virus. BlackBerry has taken a number of steps to help the global community, including enabling remote working for our customer employees. And we are taking the lead by offering a limited license of our enterprise software products free to organizations around the world for 60 days. Now onto the results. As Chris stated, I will reference non-GAAP number in my summary of our financial results, unless otherwise stated. Let me start off by some highlights for fiscal 2020, the fiscal year entirely. BlackBerry achieved a year of profitable growth. We are pleased to report 1.1 billion in total company revenue, resulting in 20% growth year-over-year. Proper and surfaces revenue grew 26% year-over-year. Earnings per shares of 13 cents. This amount exceeds the expectation we raised during the year. Positive free cash flow of 14 million. Perhaps the best news is the strong set of products released in the past fiscal year. We released over 30 new products. I'd like to give you some highlights of the one that I'll be really excited about. 2NX Hypervisor 2.0 for safety. which achieves the highest ISO safety standard in the industry. The second product, BlackBerry Intelligence Security, which uses AI to provide adaptive security and continuous authentication to overcome the static security vulnerabilities. Third, the Sylens Optics 2.4, our enhanced endpoint detection and response product. Then, followed by a single-agent platform to deploy both Sylens Protect as well as finance optics. Followed by our mobile threat defense product, MPD product, that integrates our AI-based endpoint security capabilities with our portfolio endpoint management technologies. Our peers do not have a full mobile solution like we do. And last but not final, the BlackBerry Digital Workplace, which delivers lightweight secure desktop virtualization while eliminating the need for VPN and adding AI based protection. Digital workplace can be deployed on corporate and personally owned devices used by the entire Salesforce or the workforce, sorry, excuse me, the workforce. This is a must have for secure remote worker productivity and business continuity. Additionally, we make tremendous progress in the development of the Spark platform. I will speak more about that later. Now let me provide some highlights for the fourth quarter, four fiscal quarters. Total revenue came in as 291 million. We achieved positive year-over-year software and services billing growth. We also have a healthy sequential billing performance from enterprise software and services. Growth margin was 77%. Operating income was 51 million, and operating margin was 18%. Both of these are very strong results, compared sequentially is an increase on 20 million and 7% respectively from Q3. EPS came in at 9 cents, which was 5 cents higher than expectation we had for the quarter. Free cash flow of 32 million, contributing to a total ending cash and investment balance of 990 million. Let's move into the business commentary. Let me start with a sentence on licensing business. Revenue increased 9% year-over-year. We have better than expected performance due to some business that actually came in early. Moving on to the IoT business, the IoT business underperforming a quarter due primarily to BTS. BTS has been unexpectedly impacted by the slowdown in the auto industry supply chain due to the COVID-19. Unfortunately, we expect this trend to continue for the near future, due to the temporary global auto production shutdowns and related slowdowns of auto sales. Customer and prospect have become more cautious in their decision-making related to capital expenditure and development. The leading indicator to us was that we expected two large transactions with reliable customers that were unfortunately delayed. While our full fiscal quarter results were impacted, We believe these two delay transactions will occur as the business environment returns to normal. On a positive note, BlackBerry QNX continued to gain design wins. We were chosen for 31 design wins in the quarter. 16, 1-6, were in the automotive market, and 15 were in the general embedded market. Within the auto market, the vast majority of design wins came in were ADOS, the Advanced Driver Assist Program, and digital instrument cluster applications. These wins secure for our customer like Bosch, Continental, and Visteon, just to name a few of those tier one, continue the trend of increasing output and volume in the future and will continue to be the leading provider of safety-certified software to the industry. Within the general embedded market, we saw increased demand in the industrial and medical verticals, including being chosen by WebTech Corporations, a global leader in transportation solutions, who merged with GE Transportation last year. And as noted in the last two quarters, growth in the general embedded market has been a stated priority, a strategic priority for us. A brief update on our radar business. In the quarter, we saw continued growth in both the number of ship units and service revenue. We added seven new customers, resulting in 50 new customers, 5-0, in the fiscal year. Additionally, we continue to have steady repeat buying from existing customers. Moving on to our enterprise software and services business. The sales team executed well, resulting in sequential billing growth in a high team's percentage. Our fourth quarter ESS billing was at its highest level in fiscal 2020. The billing strength was across all the ESS businesses, led by strong performance on both the UEM, the endpoint management, as well as ad hoc. On the customer front, our regulated industry business, such as government, financial services, and healthcare, remains healthy and stable. We also experienced strength in our non-regulated industry business, most notably the energy and utility vertical, as well as the manufacturing vertical. We've added several large-sized wins, both new logos and upsell, in comparative situation. Let me highlight a few. Gerodynamics, a Fortune 100 aerospace and defense leaders. CGI, a global professional services and consulting company. John Hopkins, Armico Healthcare, a leading healthcare provider in Saudi Arabia. EDN Group. one of the largest producers and transporters of electricity in Europe, and Nippon Steel, one of the world's largest steel producers. Our pipeline is building for our new product as well, notably for the MPD, the Mobile Threat Defense, and the BlackBerry Intelligence Security. Now onto our BlackBerry sign-in business. Revenue was up slightly year-over-year against a recently tough calm. building increased sequential leads as we anticipated. We're highly competitive against other next-generation AD players because of the following reasons. Number one, BlackBerry Sign-In is the best mobile solution in the market. Number two, our lightweight solution protects all endpoints, whether they're connected or not. Other next-gen AD players only protect when the endpoint is connected to their cloud. Number three, Instead of being cloud-only, we support cloud-managed, on-premise, and hybrid deployment models. And last but not least, we're compatible with both the current and legacy device operating system, especially on the desktop. This was a strong quarter of new logo. Sidelines won over 300 new customers. Some of the new logos won in a competitive environment include the Fonterra, sorry, Fonterra Cooperative Group, the world's largest dairy exporters. A notable state healthcare organization in Australia. Unfortunately, we don't have permission to name the name. A Fortune 500 financial services company based in the Midwest of the United States. The Suho Security, which was a opportunity to leverage our UEM relationships. And Hartford Financial Services Group, a leading insurance a leader in insurance vertical that was run through our managed service partner with Verizon. As a result, ARR was $167 million, up 9% year-over-year. Our dollar-based net retention rates continue to be over 90%. We ended the quarter with 18% year-over-year growth in active subscription customers. And as I previously said, with the leader momentum will only continue now that BlackBerry Cylance has a full portfolio, plus other BlackBerry capabilities in the market. Before I turn the call over to Steve, let me update you on the Spark platform and the Cylance integration. We have made tangible progress in the development of Spark, a secure IoT platform. This past February, we announced the release of our Unified Endpoint Security, or UES layer, within the smart platform that leverages AI machine learning and automation to deliver zero trust security across all the fixed and mobile endpoints. The UES layer is supported by six initial products, which are Endpoint Protection Platform, the EPP, Endpoint Detection and Respond, the EDR, the Mobile Threat Defense, the MTD, Continuous Authentication, data loss prevention, known as DLP, and secure web gateway. These products work seamlessly together to analyze and define risk, make contextual decisions based on large amount of shared data, and dynamically apply a set of policy controls to address the risks of our customer environment. Our platform development Now, this platform development is in line with the marketplace convergence noted by Gartner, who has seen the consolidation of MTD offerings with EDR and EPP tools and calling this combined stack unified endpoint security. Gartner sees this stack forming a single solution during the next three to five years and indicated their organization should invest with UES in mind. Gartner also noted that 70% of organizations We'll need a combined endpoint management council by 2024, and 50% of the organization will have to have mobile threat defense by 2022, which is up from 20% this year. Given our product and the marketplace progression, we are now ready to increase go-to-market synergies and go after these fake UES and UEM opportunities. Accordingly, we have successfully integrated the entire side ends organization including sales and R&D teams, into our IoT business segment, effective March 1, 2020, which was just a month ago. We believe a unified team leads to broader customer coverage, a richer product roadmap, a clearer sales message, and most importantly, very differentiated offerings. The value proposition to a customer is that BlackBerry Sparks provide the highest level of security and management, with a simpler yet more productive user experience on any endpoint, fixed or mobile, from any location over any network. Many of you actually have asked me over the past several quarters about BlackBerry Prospect in a competitive landscape, especially against much larger players. I could not provide you a complete answer then, only to tell you that we're working on it, because the solution at the time was under development. We now have a differentiated technology architecture that's ready to ship in the market. Today, our UES products work with BlackBerry UEM. However, we recognize that customers may be using competitors or often more than one UEM product. Therefore, in the near future, as part of our roadmap, our UES solution will be made compatible with Intune, AirWatch, and other competitors' UEM products to give customers the best of both worlds. namely preserving investment while enjoying the benefit of the highest security and management that BlackBerry provides. We believe UES changes the competitive dynamics and our operating objectives now is to gain market share because UES is complementary to but not a direct competitor of the non-BlackBerry UEM products and also BlackBerry UEM will maintain our leadership in the regulated industry due to our continued focus and commitment and security and management. In time, we believe this Spark architecture expand our total addressable market, including in the IoT security area. With that, let me turn over to Steve to provide more details about our financial performance.