BlackBerry Limited

Good afternoon, and welcome to the BlackBerry first quarter fiscal year 2021 results conference call. My name is Josh, and I will be your conference moderator for today's call. During the presentation, we will be facilitating a brief question and answer session towards the end of 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 2021 first quarter results conference call. With me on the call today are Executive Chair and Chief Executive Officer John Chen, and Chief Financial Officer Steve Ray. After I read our cautionary note regarding forelooking 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. Forelooking 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 forelooking statements. These factors include the risk factors that are discussed in the company's annual filings in MD&A, and the COVID-19 pandemic, which is negatively impacting public health, financial markets, and global economic activity. You should not place undue reliance on a company's forward-looking statement. 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 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. Sorry, I was looking at Steve. Thank you, Chris. Good afternoon, everybody. I hope that all of you and your families and your loved ones are staying safe and healthy and during this very unprecedented times. This fiscal quarter of ours, which happened to be March, April, and May, overlapped directly with COVID-19 business constraints, resulting in both headwinds and tailwinds. The entire company moved to working from home in early March, and operation has been recently smoothed. I will start with the financial highlight in a quarter, and then move into a business commentary I will reference non-GAAP number in my summary. In our first fiscal quarter, we reported total company revenue of 214 million. All the businesses performed in line, or better than our expectation, except for QNX, which was negatively affected by global auto production shutdowns. However, our enterprise product and services that feature security and productivity benefit from the increased in remote working, business continuity, and crisis management use cases with our customers. Total company billings were also down over the year due to the pandemic, but the billings decline rate was less than the revenue decline rate. This is, of course, the positive for future revenue. Gross margin was 71%. We achieved a profit of $0.02 per share. BlackBerry continues to balance profitability and investment for the long term. Cash use in operation was $31 million versus $64 million in cash use in operation last year. As you are aware, our first fiscal quarter typically has a high use of cash due to the commission and the annual bonuses payment. This year, we spread the annual bonus payment over to the first two quarters. Total ending cash and investment balance at May 31st was $955 million. Before I move on to business commentary, please be reminded that we have fully integrated Silance into BlackBerry on March 1, the start of our current fiscal year. As a result, we are now operating in two reporting groups, the software and services group and the licensing and others group. Let me start with the licensing and other groups. Revenue was 58 million in a quarter, in line with our expectation. The vast majority of the revenue is from IT licensing. We're off to a solid start for the fiscal year. Moving on to the software and services group, revenue came in at 156 million, 156. ARR was approximately 500 million, and the dollar-based net retention rate was 93%. Going forward, we intend to provide these metrics on a quarterly basis. Net customer churn was close to 0%, and there has been no change to this net churn rate for the last several quarters. Let me click down on a key product component of the group. Let's start with QNX. Development seat, professional services, and royalty revenue were all negatively impacted, primarily due to the auto shutdown, production shutdown, and the project delays. That said, we're starting to see signs of recovery in the auto sector, evidenced by the reopening of the production facilities. Engagement with our auto and general embedded customer has increased on projects that we were working on prior to the shutdown, as well as new opportunity that came up. We anticipated a slow and gradual recovery for QNX throughout the year. It would take time for the production to run back to full capacity. In the quarter, QNX was chosen for 10 design wins, six of which were in the general embedded market for industrial and medical applications. The remaining four were in auto, including an ADOS, advanced driver assist software, design wins with Hyundai Altron, sorry, Hyundai Altron, and an acoustic win, design win we have with Volvo, The other two auto design awards were for the secure gateway and in infotainment systems. This continued design win momentum supports our leadership positions. Our latest automotive install base number is over 175 million, an increase from 150 million last year. This metrics, which we generally update once a year, have been validated by strategy analytics and independent third parties. In an attempt to provide more information on QNX business, we have decided to share our royalty revenue backlog on an annual basis. The backlog is based on the customer estimate of lifetime volume of the design when it is awarded. As of today, the estimated royalty revenue backlog is at $450 million. QNX is a recognized name associated with safety and trust. and we continue to expect that QNX will be selected for many design wins in the future. These design wins will add on incremental revenue from development seats, professional services, as well as royalties. Our four-year historical compound annual growth rate, or CAGR, is 13%, which is well ahead of the 5% market CAGR over the same period. Over the next five years, We plan to achieve a CAGR above the market growth rate of 11% which is cited by McKinsey for automotive operating system and middleware over the next decade. Our plan to accelerate the QNX growth rate includes increased investment to gain market share in both the auto and general embedded markets and to grow our professional services business. We recently launched our first service package that offers cybersecurity assessment and testing. Moving on to Ad Hoc, a crisis communication lifecycle solution. Ad Hoc was a performance leader this quarter. Ad Hoc is very well suited for business continuity, preparedness, and execution in the current environment. We had a number of new customer wins in comparative situations, including wins with first responder agency, and energy companies. We also had a strong quarter expansion and renewals. After the quarter, we announced several notable new logos, including United States Department of Transportation and the U.S. Federal Trade Commission. We also expanded our business with the U.S. Department of Health and Human Services. Moving on to Silence and UEM, which going forward will be referred to as the SPARC platform. Blackberry Silence was slightly ahead of consensus expectation for the quarter. We added 279 new customers, and new active subscription customer growth was about 15%, 1.5. This is measured on a year-over-year basis. Notable new customers include General Motors, Bacton Dickinson, Philips Healthcare, SKF, which is one of the Sweden's largest manufacturers, the New Zealand Defense Force, and the United States Census Bureau, just to name a few. We have seen revenue steadily increase for the bundle that includes Optics, which is our EDR product, and Protect, which happens to be our EPP product. Interest in our managed service offering, Guard, continues to be strong since its launch last July, resulting in sequential revenue growth of over 85%, which is, but I have to caution, this is of a small base. BlackBerry East Island performed extraordinarily well in the recent MITRE evaluation, which is regarded by the industry as the most objective and transparent standards currently in the market. We clearly demonstrate that our AI-led solution and managed service protect customers from global threat actors, We were especially pleased by the performance of Optics, which surpassed many EDR players who happened to be ranked above us in industry analyst report. Our UEM business also executed well, benefited from the increased need to provide more endpoint, especially mobile. Demand was strong from our regulated industry customers. Let me name you some notable wins, notable customers. They include American Express, CIBC, the European Bank for Reconstruction and Development, Qatar National Bank, the National Commercial Bank, AFSA Bank, the Development Bank of Singapore, Mitsubishi UFJ Financial Group, and the Republic of India. With the Republic of India win, we now have 18 of the G20 government as customers. These wins, I hope you agree, will solidify our strength in the financial services and government vertical. Let me wrap up with the spot streets. Enterprise today face an increasingly chaotic environment where cyber threats are ever more sophisticated and pervasive. Attack the primary target endpoints in 70% of successful breaches, especially in the form of mobile. The 5G road out will lead us to a significant increase in attack on mobile endpoints. At the same time, enterprise endpoint and the amount of data shared at the edge are also growing exponentially. Together, cybersecurity threats and endpoint chaos are putting organizations at risk while cutting into the employee productivity and increasing the IT costs. A recent assessment by Frost and Sullivan defines the cyber threats to the entire IoT landscape. This report recognized how BlackBerry's solution addressed over 96% of the collective threats. A copy of this assessment is available on our website. A big part of BlackBerry value proposition is our ability to address these threats with our Spark Suite, a platform that combines endpoint security as well as endpoint management. Though the Spark Suites were only launched on May 19, which was about four or five weeks ago, they have been extremely well received by both customers and partners. Since the launch, over 15, one five, 15 customers have purchased one of our Spark Suites, including Deutsche Boss AG, one of the largest provider of financial market transaction infrastructure worldwide. After the quarter, we announced a partnership with Bell Canada. BlackBerry becomes Bell Canada's preferred partners for mobile threat detection and defense. Sorry, MTDs, sometimes used as mobile threat defense. Bell will offer our MTD product to their enterprise customers. Our AI-driven MTD product is one of the core pillars in our Spark streams. We're adding more features. We are on schedule to ship data loss protection, and secure gateway later this year. We anticipated these additional fillers will increase revenue. We also believe this will increase our addressable market because of the way we architect our UES security layer to interoperate with competitors' UEM solutions. Let me wrap up this session on the personnel front. We recently announced that Tom Ecobasi, has been appointed as BlackBerry's newest president. Tom's role will be to lead all business activities for the software and services group. Tom is an accomplished software sales executive from Citrix with over 20 years of enterprise customer-facing experience. Tom has led all facets of the global sales organization. In addition to Tom, we also have recently recruited two other senior-level industry leaders focus on go-to-market. The first is our new head of software services business, business development. The second is our head of corporate marketing. Both started on June 15 already. The hiring, I hope, is a good indicator of industry talent interested in joining BlackBerry and demonstrate our conviction to build a stronger go-to-market engine. With that said, let me turn the call over to Steve to provide more details about our financial performance.