BlackBerry Limited

We'll 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 face call over to Tim Foote, BlackBerry Investor Relations. Please go ahead.

Thank you, Ashley. Good afternoon and welcome to BlackBerry's second quarter fiscal 2022 earnings 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 forward looking statements, John will provide a business update. Steve will 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. will 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. These factors include the risk factors that are discussed in the company's annual filings and MD&A, including the COVID-19 pandemic. We should not place the 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 reconciliation between our GAAP and non-GAAP numbers, please see the earnings press release published earlier today, which is available on the EDGA, FIDA, and BlackBerry.com websites. And with that, I'll turn the call over to John.

Thank you. Thank you, Jim. Good afternoon, everybody, and thanks for joining the call today. One correction, I think all the number, all the revenue number we use will be GAAP-based, correct? Yes. When you say non-GAAP numbers, it's actually the revenue number we refer to are all GAAP-based numbers. Okay, starting with our headlines. This quarter, the business performed well. with revenue for all the free business summons beating expectation. The cybersecurity business unit delivers strong sequential billings and revenue growth. The IoT business unit performed better than expected with strong design-related activities, partially offsetting the impact of the global chip shortage on production royalties. Licensing revenue reflects the restriction on monetization activity from the ongoing patent sale negotiations, which I'll talk about more in detail shortly. Licensing and other revenue came in slightly stronger than expected. This quarter, BlackBerry generated positive operating cash flow. Following the strengthening of our IoT leadership team in Q1, we have appointed John Gio Matteo to lead our cybersecurity business unit beginning or commencing October 4th, sorry, commencing October 4th, which is a couple of weeks from now. John was previously the McAfee president and chief revenue officer running the enterprise and consumer cybersecurity businesses. This new appointment completes the refocus of our software business into two business units. I'll cover this in more detail later. Excuse me. I'll start my review with the IoT business unit. Revenue came in at $40 million, which is better than expected, primarily due to ongoing strength in the design activities area. Gross margin remained strong at 83%. IoT AR increased to $89 million. As you are all aware, the auto industry experienced some significant headwinds in Q2 due to the global semiconductor chip shortage. This impacts production volume, particularly in North America. Ford, for instance, a major customer of ours, reported 700,000 lost units of production in calendar Q2. Production-based royalties are historically the largest single component of our QNX revenue. However, A significant portion of revenue is also generated from design activities prior to the vehicle entering production. This part of the business remains very vibrant, and we continue to generate strong development seat and professional services revenues. As a result, total IoT revenue in a quarter was better than expected. Furthermore, these design wins will translate into future production-based royalties. As we look ahead to the rest of the year, we continue to see the headwind for vehicle production. The problem appears to have shifted from surprise of wafers to more of a back-end assembly and testing issues, largely due to spike in COVID cases in Asia, as well as some of the accidents going on in Asia, like some of the plants have fired, for example. Feedback from OEM about the impact on production volumes in the second half is somewhat mixed and constantly evolving. For example, Daimler recently indicated they are expecting a lessening impact by Q4. Excuse me. Sorry. But Volkswagen, on the other hand, see challenges persisting into 2023. In terms of outlook, we continue to see the past quarter as the low point. But significant headwinds are expected to continue into Q3 and Q4, and perhaps even beyond that, albeit with a sequentially decreasing impact. The impact of the chip shortage on QNX royalty revenue is expected to be buffered somewhat by ongoing strength in design activities. We are comfortable with the current IoT revenue consensus, meaning the full-year revenue outlook remains unchanged. As mentioned, despite the supply chain issue, QNX continued to win new design at a very solid pace. In the quarter, we had 23 new design wins, with seven in auto and 16 in the general embedded market. We call it JAM. Because of our market presence and leading technology, we are the trusted go-to supplier and market leader in auto. Furthermore, we're delighted to announce that we now have design wins with 24 of the world's top 25 electric vehicle automakers as measured by volume. Haven't been selected most recently by Daimler as part of their design, as part of their EV design. This is from the 23 or 25 we had last quarter. These 24 OEMs between them represent 82% of global EV market, or production, sorry. 82% of global EV production. This demonstrates the leading position we have in this very fast-growing part of the auto industry. I'd like to expand on a couple of design wins to get investors more colors as to why QNX was chosen and why we are the industry leader. The first is with an automotive tier one that is building full digital cockpit and gateway solution for a Chinese EV OEM. using the QNX real-time operating system and hypervisor. QNX technology is well-known and trusted in China, in the Chinese automotive industry, given its reputation for safety and security. QNX was chosen about software solution from both domestic and as well as multinational competitors. Production is expected in 2022, which is next year, and run for around five years. The second is the leading Japanese industrial robotics manufacturer. That also happened to be a new logo to the library. The customers select QNX for an autonomous 3D robot warehousing system ahead of the leading competitors. QNX was chosen for its functional safety credentials. Production is expected to start this year and continue for five years. Other notable design wins this quarter in auto include instrument, cluster, and ADOT systems. In a gem space, design wins include a medical diagnostic, industrial process control, and a thermal control system for a power plant. I'm going to shift it to Jarvis. During the quarter, we launched Jarvis 2.0. This is a fast version of our software composition and analytics tool, which was previously offered as a beast book service engagement. Java 2.0, which includes a market-leading binary code scanner, is an important part of how BlackBerry can assist customers to achieve compliance with the recent SBOM executive order, secure bill of materials, software bill of materials, sorry, software bill of materials, executive orders mandated by the Biden administration. Moving to a brief update on Ivy. We are pleased with the ongoing progress being made. Both BlackBerry and AWA have significant resources allocated to the project, and our timeline remains on track. We are on schedule to release an early access version of the production in October. In the product, sorry. We are scheduled to release an early access version of the product in October that will enable further engagement with OEMs and also allow demonstration at CES in January. This version will be available to certain ecosystem partners to begin actively building applications on IV. And speaking of applications, for IV to be embraced by automakers, we recognize that it is important to demonstrate IV value to them. Following on from an AI-driven battery management app that we announced last quarter, we announced another application that will be built on IV. This new application enables in-vehicle payments and is being delivered through a partnership with CarIQ, a California-based startup. The application will use direct access to the sensor data and the edge compute, two of the IV's key differentiators, to produce a unique digital fingerprint for the vehicle. This will allow authentication of payments for items such as fuel, tolls, parking surfaces, et cetera. without the need of a fleet, credit cards, or other traditional payment methods. This opened up the possibility for OEM to participate in the new revenue streams and is another of the many potential applications that Ivey will enable. In summary, Ivey continues to progress nicely. Now let me turn to cybersecurity. This quarter, the business unit delivered strong sequential billing and revenue growth. Revenue was $120 million. Growth margin came in at 59%. ARR was $364 million. Dollar-based net retention was 95%. As we mentioned earlier, John Gio Matteo will be joining BlackBerry to lead the cybersecurity business unit, taking over from Tom Agobazzi, who was the acting general manager. John brings with him many years of cybersecurity industry experience. During his six years as president and chief revenue officer at McAfee, he delivered both double-digit growth and margin expansion for the enterprise, the SMB, as well as the consumer divisions. John will build on the progress that has been made in recent quarters with the cybersecurity business unit, go-to-market engine, and will also direct both product development and business unit strategy. Tom Ekobatsi has decided to pursue other opportunities and will leave BlackBerry at the end of October. The addition of John to the team completes a split of the software and services business into two market-focused business units. Both IoT and cybers are targeted with driving growth and with its shareholder value. The two business units will report directly to me. As mentioned, this was a good quarter. All there's still work for the team to do. There's a few outstanding areas that I feel that I'd like to share with you about. This quarter, we saw further growth in pipeline for our cybersecurity product, especially for the new local customers. Pipeline grew strongly for BlackBerry Gateway, a zero-trust network access product launched last quarter. To help realize this increased pipeline, investment in our direct sales force, in particular the hiring of quota-carrying sales head, continues. We're also making further progress to the channel, as illustrated by a 32% sequential growth in channel buildings this quarter. New partner program has also helped significantly increase both channel-driven pipeline generation and in new local buildings, mainly in the North America arena. We also have seen robust growth in business through managed security service providers, or MSSP. You may recall that during the Q2 earnings call a year ago, we targeted using MSSP to quickly scale our guarded managed service offering. Today, one of these partners, I'm happy to report, managed more than 100,000 endpoints using BlackBerry Cyber's products. I'd like to take a closer look at some wins from the quarter that demonstrate why customers are choosing BlackBerry for their cybersecurity needs. The first customer is one of the top 10 automakers in the world. This customer select our Protect EPP and Optics EDR solution following a competitive takeoff in which we went head to head with CloudStrike and Carbonback. The customers selected BlackBerry due to our near 100% malware detection rate, our lightweight engine, and flexible deployment options, both in the cloud as well as the standalone factory network. The second is the Fortune 100 financial services company. BlackBerry displays Microsoft Defender with ProTech and Optics. The companies select us particularly for our performance on Mac OS. The third is where we have continued success within the Australian state government agencies. This quarter, we sold Protect, Optics, and our Threat Zero consulting services into a number of agencies, displacing predominantly electricity incumbents that included Trend Micro and Symantec. The customer chose BlackBerry for our next-generation prevention-first technology. On the Industry Recognition Fund, SELAB, a leading independent research firm based in London, has performed a rigorous set of tests on our EPP and EDR products, protect and optics. This breach test differs from their quarterly endpoint tests. Rather than simply loading known malware onto an endpoint, which typically masks the inability of traditional signature-based vendors to defend zero-day threats, the breach test instead applies real-time, real-world hacking tactics. They apply comprehensive techniques to evade our defense and concluded that protect and optics provide complete prevention, complete detection, as well as zero false positives. A link to the full report could be found on our investor relations web page. This third-party validation of our product, not just our EPP, but also our EDR, demonstrate how we have successfully closed the product gap to competitors with recent product launches. The market is now recognizing some of the unique differentiated abilities of our cyber products, one of which is the maturity of our AI engine. As in the previous quarters, we're seeing new malware and ransomware hitting the headline on an almost daily basis. Our AI engine, the most mature in the industry, continues to provide zero-day prevention against a host of these threats. In the quarter, our product successfully brought new profile ransomware such as Hive, LockBit, RagnarLocker, and many more before they could do any damages. BlackBerry's sign-in AI engine is firmly focused on preventing our customer from being breached, whereas some of the leading competitors instead focus on showing customers all the different ways that their system could be accessed. On the UEM front, we'll continue to invest in our roadmap, delivering enhancements that add most value to customers. We recently announced that enterprise can now benefit from BlackBerry leading security while enjoying a seamless and native user experience with Microsoft 365 productivity apps. This is enabled by additional integration between BlackBerry UEM and Microsoft 365, primarily through the Azure Active Directory Conditional SS. This is part of the latest version of the UEM U-Series, which was released this month, earlier this month, that is. U-Series also provides zero-day support for Android 12 and iOS 15. This past quarter, we secured important UEM renewals with government agencies such as IRS, the Department of Homeland Security, the U.S. Marine Corps, the U.S. Army Corps of Engineers, the U.K. Ministry of Defense, the United States Air Force, as well as leading enterprises such as General Dynamics and Magna. We also won a number of new logos such as the French National Institute for Criminal Research and the Tel Aviv Stock Exchange. With continued growth in pipeline, coupled with investment in direct and channel sales, the outlook of the cybersecurity business units is for sequential building growth for the remaining other fiscal year. This is expected to lead to modest sequential revenue growth due to the subscription model. The full year outlook remains as before, at a lower end of $495 to $515 million range. Turning now to licensing. As I mentioned earlier, negotiations to sell the portion of the patent portfolio related to mobile devices, messaging, and wireless networking are ongoing, and we have made significant progress since our last earnings call, including preliminary agreement of many of the key items of the key terms of the deal. We expect to execute a definitive agreement this quarter. Closing the transaction will be subject to a normal regulatory review. Naturally, given this backdrop, we will continue to limit monetization activities for the remaining of this fiscal year. Therefore, revenue for both Q3 and Q4 is expected to be similar to Q2, which is at $10 million per quarter. While we expected sales to conclude successfully, the process had taken longer than we expected or anticipated. Should it not conclude this quarter, we'll have other options, including additional interest to parties. We will update investment on any of the material developments in a timely manner. So let me now hand over to Steve to further review the financials. Steve?