BlackBerry Limited

Good afternoon and welcome to the BlackBerry third quarter fiscal year 2023 results conference call. My name is Matt 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 Tim Foote, Vice President of BlackBerry Investor Relations. Please go ahead.

Thank you, Matt. Good afternoon and welcome to BlackBerry's third quarter fiscal 2023 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 and 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 harbour provisions of applicable US 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. These factors include the risk factors that are discussed in the company's annual filings and MD&A. You should not place undue reliance on the company's forward-looking statements. Any forward-looking statements are made only as of today and the company has no intention and undertakes no obligation to update or revise any of them, 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 published earlier today. which is available on the Edgar, Cedar, and BlackBerry.com websites. And with that, I'll turn the call over to John. Thanks, Tim.

Good afternoon, everyone, and thanks for joining the call today. This was a quarter where BlackBerry made good progress based on leading indicators for both the IoT and the cyber businesses. BlackBerry beat expectations for both total company revenue and earnings per share. On the IoT side, we saw the business performing very strongly, setting yet another record for design phase revenues. The strategic decision made over five years ago to position QNX as the trusted foundation for high performance edge compute, especially in auto, is really bearing fruit. On the cyber side, in line of what we said last quarter, we saw an improvement in the level of churn that we experienced recently. The investment being made in product and go-to-market continue to drive sequential buildings growth in our cyber business. Let me start my review with the IoT business unit. As mentioned, there was another strong quarter. Revenue was $51 million, a 19% year-over-year increase. Gross margin was 80%. Pre-production revenue, that is revenue for development seats and professional services, set another record. This strength is being driven by significant new design wins. In fact, in the first six months of this fiscal year, BlackBerry added more new royalty backlog than in any prior 12 months period. And that momentum continued this past quarter with wins in a number of verticals, but particularly in the safety-critical auto ADAS, advanced driver assist, and digital carpet domain, where we are significantly gaining market share. The largest win in the quarter includes a win with Aptiv to use the QNX hypervisor and RTOS to power a digital cockpit for European OEM. Other auto wins include a design with Daimler truck, an instrument cluster design win with T01 supplier Morelli, for a leading Japanese automaker and a design with a leading Chinese tier one supplier for an ADAS driver assist module. In the quarter, we secure a total of 24 new design wins with nine in auto and 15 in the general embedded market or GEM. In GEM, we secure design wins within medical, industrial, as well as defense and aerospace. Among the use cases was an autopilot flight-controlled system, a naval combat system, and a retinal surgery robotics, to name just a few. Looking forward, we continue to see a very strong pipeline of upcoming new designs. We believe that we're in a strong position to convert this opportunity into wins, given our recent success rate, our very strong reputation in the market, and of course, the strength of our technology. The industry-wide macro backdrop for auto remains mixed. We see strength in China and India, both significant markets for QNX. On the flip side, we see some tightening in North America and Europe, primarily due to ongoing supply chain and some demand challenges. However, it is important to give this some context. While production volume is an important factor in QNX total revenue, The auto industry's significant shift to the software-defined vehicle and the development program that drives this has enabled us to deliver double-digit revenue growth. This quarter, we made a major product announcement for QNX in the cloud. At the Amazon reInvent conference, AWS announced that QNX will be made available to system developers via their cloud-native virtual engineering workbench. Being able to assess QNX in a cloud greatly reduced the time to market for developers and provide significant addition market reach for BlackBerry. QNX will be accessible by AWS large and growing community of over a million developers across multiple verticals, not just auto. We have very positive feedback from both this demonstration and early SS product make available to selected OEMs and tier ones. We expect to provide more details on the general availability at CES. Moving now to a new and exciting use cases for our CertiCom technology. In the quarter, we deliver a electric vehicle charging station PKI public key infrastructure solution for a leading North America automotive OEM. The solution enables the vehicle and EV charging stations to identify and establish trusted connectivity, as well as allowing OEM to meet the new international standard for secure vehicle-to-grid interfaces. This capability opens a significant opportunity for BlackBerry to secure critical smart city infrastructure in the future. Given the strength of the IoT business, going into Q4, we expect revenue to come in at the high end of the range we provided previously. We are therefore now expected our full-year revenue outlook to be in a range of $205 million to $210 million, which translates to 15% to 18% year-on-year growth. Let me now move to IVY, proof-of-concept trials with customers continuing to progress well. Product development also remained on track with the latest version released last week as planned. We have some significant product demonstration of Ivy this past quarter. Last month at the Bosch Connected World in Berlin, the Ivy platform was running in a Peugeot car and enabling predictive maintenance in car payments and Amazon Alexa virtual assistant applications. Ivy was also shown operating in a cloud at the AWS reInvent conference in Las Vegas, and a developer workshop held there were well attended by OEM and tier ones. Feedback from both events was very positive. We also added a new application from Roadside Telematics to the Ivy ecosystem this quarter. Roadside Telematics is a California-based startup aiming to use sensor data from BlackBerry Ivy to provide automatic notification to 911 emergency service in the event of a crash. Let me now turn to our cybersecurity business. Revenue for the quarter was $106 million. On the sequential basis, billing increased for the second consecutive quarter to $103 million. Gross margin was 57%. AR was $313 million. The dollar-based net retention rate was 84%. In line with our comment last quarter, we see signs that investment in product and people are starting to pay off. The rate of churn seen recently has improved this quarter with an uptick in renewal rates and with it, an improved quarter-over-quarter change in ARR. Turning now a bit to the macro environment. We've seen the same as many other software companies, including those in cybersecurity, in noticing some elongation of sales cycles during the past quarters. Therefore, it is likely that the macro environment will be a headwind for the business in the near term, although we're likely to fare better than most given our heavy skew towards regulated customers, particularly government. Furthermore, cybersecurity still remains an essential purchase. Touching briefly on the OEM market specifically, this past quarter, industry analysts noted increased adoption of UEM solution in regulated environment. In the quarter, despite the macro challenges, we secure a great number of multi-year transactions empiriously. This includes both renewals and account expansions. The customer includes some of those with the highest security needs anywhere in the world, such as multiple agencies in the US Department of Homeland Security, the U.S. Defense Intelligence Agency, and the National Guard. Also, the U.S. Missile Defense Agency, the Pan-European Missile System Company, MBDA, as well as the NATO headquarter, will also approve our BlackBerry Secure Voice solution for official NATO communications. Also, within government, with Shared Service Canada, the U.S. Department of Justice, the FBI, the U.S. Department of Treasury, as well as the U.S. Department of Energy. Outside of North America, we secured business with the Australian Federal Court, the Government of Iceland, the Government of Wales, the Scottish Police, and the German Ministry of Home Affairs. In financial services, we did business with Bank of China, Credit Agricole, Blackstone Investment Management, Singapore DBS Bank, German KFW Bank, as well as the German Federal State Bank. Finally, I'll mention that we continue to win in other verticals too, with examples including Johnson & Johnson, a leading law firm, Sullivan & Cromwell, as well as Swiss and ABB, a leading electric equipment manufacturer. Some of you will hopefully have joined us for our Security Summit at the New York Stock Exchange in October. During the event, we announced the launch of a cyber threat intelligent subscription services that will provide customer with tailored threat briefings. This service will launch in January and the initial response has been positive, particularly from the government agencies. Turning to Outlook, we expect to see improvement in both customer churn and new logo acquisition continuing next quarter. We are not changing our outlook for fiber revenue and billings, but as previously mentioned, Q4 outlooks include some large potential government deals that the team is working hard to close. As always, with larger deal of this nature, timing can be predictable. However, regardless of whether we're able to close these deal in time for Q4 or if they slip in Q1, we expect to deliver a sequential billings growth in a quarter. This would mean sequential billing grows for the third quarter in a row. What's more, we currently expect to see the value of billings in Q4 exceeding revenue. This is a strong leading indicator, and we expect a return to ARR growth in the second half of next fiscal year. Let me now move to licensing. Revenue in the quarter came in higher than expected at $12 million. Gross margin was 67%. In the quarter, we recognized revenue related to royalties from past licensing deals, and they came in stronger than expected. Let me now turn the call over to Steve, who will provide more details on our financials.