Good afternoon and welcome to the BlackBerry First Quarter Fiscal Year 2023 Results Conference Call. My name is Brent and I will be your conference moderator for today’s call. [Operator Instructions] 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, Brent. Good afternoon and welcome to Blackberry’s first 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 Rai. 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 will 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 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. 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, SEDAR and blackberry.com websites. And with that, I will turn the call over to John.

Thanks, Tim. Good afternoon, everybody and thanks for joining the call. I must first apologize. After speaking for 2 days, because we had our AGM and Board meeting, my throat is a little sketchy. So I apologize for that. Anyway, this quarter, we built on the momentum from fiscal ‘22 and continue to execute it well, delivering solid year-over-year revenue growth. Total Software and Services revenue was $164 million, representing a 9% year-over-year. Let me first start my review today with the IoT business unit. Despite a tough macro environment for auto, we delivered revenue of $51 million, which represents 19% year-over-year growth. Gross margin came in at 84%. IoT ARR was $94 million, increasing 9% year-over-year. We recorded strong revenue from preproduction development seats and professional services, setting yet another quarterly record for the third quarter in a row. As you know, this is not only a positive for the current year, but also a strong indicator of future revenue once the design enter into production. Our strength in securing new design wins have driven a year-over-year increase in our royalty revenue backlog, which is now at approximately $560 million, 5-6-0, a 14% increase from a year ago. Further, the number of vehicles with QNX Software embedded has increased year-over-year from over $195 million to over $215, 2-1-5, million. I am pleased with the strength of our design wins once again allow us to overcome the impact of the headwind that the auto industry is currently facing. These headwinds include COVID-related lockdowns in China, supply chain issues, the Ukraine war, inflation and rising interest rates. On the supply chain front, the situation appears to be showing some signs of stabilization. While the economic issues will impact the overall auto market, demand for higher end models and electric vehicle appears…

Thank you, John. As usual, my comments on our financial performance this past quarter will be in non-GAAP terms, unless otherwise noted. Also, please refer to the supplemental table in the press release for the GAAP and non-GAAP details. Total company revenue for the quarter was $168 million. First quarter total company gross margin was 63%. Our non-GAAP gross margin excludes stock compensation expense of $1 million. First quarter operating expenses were $132 million. Our non-GAAP operating expenses exclude $23 million in amortization of acquired intangibles, $1 million of restructuring expenses, $165 million relating to a one-time litigation settlement of a matter dating back to 2013, $6 million in stock compensation expense and $46 million fair value gain on the convertible debentures. This quarter, non-GAAP operating loss was $27 million and non-GAAP net loss was $31 million. The GAAP basic loss per share of $0.31 was primarily driven by the one-time impact of the litigation settlement. Non-GAAP loss per share was $0.05 in the quarter. Our adjusted EBITDA was negative $21 million, excluding the non-GAAP adjustments previously mentioned. I will now provide a breakdown of our revenue in the quarter. Cybersecurity revenue was $113 million and IoT revenue was $51 million. Software product revenue remained in the range of 80% to 85% of the total, with professional services making up the balance. The recurring portion of software product revenue remains at approximately 80%. Licensing and other revenue was $4 million. I’ll now move to our balance sheet and cash flow performance. Total cash, cash equivalents and investments were $721 million as of May 31, 2022. Our net cash position was $356 million. Q1 is traditionally a seasonal high for use of cash given the payment of annual bonuses and other annual items, and together with the ongoing investment in the business, free cash usage was $43 million. Cash used by operations was $42 million and capital expenditures were $1 million. That concludes my comments, and I’ll now turn it back to John.

Thank you, Steve. Before we commence our Q&A session, let me first provide a current year outlook. There is no change from our previous guidance. We continue to expect through fiscal year ‘23 revenue for the IoT business unit to be in the range of $200 million to $210 million, and revenue for the cybersecurity business unit to be broadly in line with the fiscal year ‘22, with about 8% to 12% year-over-year billings growth. I’d like to thank everybody who attended our recent Analyst Day. I think it was May 12. For those who were able to join, we provided a 3 and 5-year revenue target for BlackBerry. We expect the total company revenue, excluding the IVY, to grow with a 5-year CAGR of approximately 13% with revenue of $886 million in FY ‘25 and $1.2 billion in FY ‘27. Breaking this down by business unit, while the IoT TAM is expected to grow in the range of 8% to 12% over the next 3 years, we expect to grow IoT revenue at a 5-year CAGR of approximately 20%. This doubled the industry growth rate. This faster than market growth rate, is primarily driven by the market share gain in our core safety critical auto domains. In addition to auto, we also expect growth from adjacent verticals, particularly medical and industrial, broadening our addressable market. We estimate revenue in the FY ‘25 to be approximately $307 million and approximately $443 million in FY ‘27. This model is still – is partially built on the multiyear revenue backlog from already confirmed designs and a line of sight to upcoming potential new design wins. It is important to note that these IoT targets do not include any revenue from IVY, which then becomes upside to the story. For cyber, given the…

[Operator Instructions] Your first question comes from the line of Paul Treiber with RBC Capital Markets. Your line is open.

Hi, Paul.

Thanks so much and good afternoon. John, first question, can you connect the dots between – in the cyber business between the decline in ARR versus the very healthy billings growth in the quarter. And more specifically, was there any contribution from perpetual license like SecuSUITE in the quarter?

Yes. Actually, your second question answers somewhat partially the first question. We had a good SecuSUITE quarter selling to the government and it’s perpetual because of the way the government purchase the technology. And so that did not fully reflect on obviously on – and it cannot be reflected on the ARR. There was some minor churn for the UEM mid-market, which we have identified last quarter. So the combination of those two explain the delta.

That’s helpful. Thank you. And second question, just on the patent sale, and not so much in the details you mentioned you can’t disclose – obviously, negotiations are ongoing. But if the sale doesn’t go through and you don’t find a third-party, I mean would you revert back to IP licensing, or are you – you are definitely going to go through with the sale. You just have to find the right buyer and the right price.

I believe for simplicity of our company’s story and the focus, we should find a buyer, and I believe we will find a buyer. But we will not shy away from monetizing ourselves. We do have our team standby and ready. So – but my first priority is a secure buyer. And there has been other people that have approached, but I still believe that Catapult will get it done.

Okay. Great. That’s helpful. I will pass it on.

Thank you.

Your next question is from the line of Trip Chowdhry with Global Equity. Your line is open.

Hey Trip. Trip, how are you?

Wonderful. Always exciting to hear about IVY. Two things – two questions I have. First is regarding the chip supply position. Do you think because of the depression in cryptos, some chip capacity may have been released and that may be easing out the chip shortage that automotive industry is facing. Are you seeing something to that effect?

Seeing the chip shortages. So, I think it’s the fact that crypto currency is currently depressed, does that freeing up chips, I am not I am not good enough to answer your question there, Trip. I am not a big crypto fan. I got it. So, I don’t follow that very closely. I know it’s very depressed at this point. And I don’t know the relationship with that. I am sure there are some with the chip shortages issue. So, sorry, I can’t answer that question.

Second question I had is regarding the IVY platform, and it’s – and you are getting insurance – auto insurers on top of it. I was wondering what kind of use cases can you think about that can evolve over a period of time? And that’s all from me.

That’s a very good question. I – so we have, in our partnership, at least one if not two organization as specialized in this area – in the insurance area, for example. The big thing about the insurance area with auto is pay-as-you-go kind of a usage-based insurance model. And then the other one is a redefinition of how the insurance – kind of related to the first one, how they were calculated and it’s particularly more meaningful in the fleet management side of the equation. So, other use cases, there is a lot of use cases in IVY or IVY could host a lot of use cases. Of course, we told you guys about battery management. The whole area of predictive maintenance are huge. And every OEM will want to get their hands around the trader, around the actions that could generate, whether it’s physically or over-the-air update. So, we are seeing a lot of interest of a lot of different use cases and auto as a wallet, there is also a lot of financial technology around it. And so this is exciting time for IVY.

Thank you very much. All the best.

Thank you, Trip.

[Operator Instructions] Your next question comes from the line of Todd Coupland with CIBC. Your line is open.

Hey Todd. Todd, how are you?

How are you there John? Good evening. Thank you. I had a couple of questions. First on IoT. You talked about how you are seeing the supply chain ease. Could you just talk about what you are seeing that’s changed since you gave the last update?

Yes. On the supply chain side, the OEMs around the world, they finally have a good strategy. And then as each of them has their own strategy, but I see it more suited to high-end cars being built, that they are able to manage their supply chain issue and build and release cars that hold more value to them. So, high-end car being built, of course, there is a constant demand of electric vehicle, particularly given today’s environment with the gas price and the environment. So – and the good thing about us is QNX is typically embedded in the high-end cars more so than the lower-end models. And in addition to that, we have a strong footprint, 24 of the top 25 production volume producer, they are users to QNX of the EV that is of the electric vehicle world. So, as sales volume goes up, although still a small percentage of total vehicles sold, I think it’s like 12% right now, that we are seeing the volume uptick. So, it’s – it’s a good trend for us.

But it’s – I guess it’s not material enough to move the IoT guide for the year.

No, because there is a headwind. We had a little delay on some of the stuff when China has a lockdown because of COVID. And then of course, now, as you all read, and you guys probably know this very well, that the interest rate uptick is causing a little bit of the demand slowdown for new vehicle purchases. And so those are all factors that we still need to confront with. And so our strategy is we see a strong design win rate. We are winning a lot of new design win and they typically come with license, developer license and some professional services revenue. We are strong enough in those areas that covers the shortfall on production or slowdown of production if there is any. So, we believe that our guidance is still good. And I hope I am wrong on the conservative side. But I think our guidance is still good. And there is a mix shifted a little bit.

Okay. That’s helpful. And then my second question had to do on the cyber business. You talked about modest churn in SMBs. And you talked about that for a couple of quarters. What I was wondering is are we starting to see an enterprise staff being given auctions of BlackBerry UEM versus, let’s say, a competitor. And I am just wondering if you are seeing that in other enterprise. And does that give you some concern that the churn might bleed into larger businesses? Just talk about that trend. Thanks a lot.

Yes. Currently, we haven’t seen that. So, this is important that we continue to work on our products and partnerships, which I talked about. So far, the UEM churn is usually in the non-regulated space and is a small – more small, medium enterprise. So, for the very large one, we have continuous renewal and particularly the government world. So, no, I haven’t seen that as a major trend at all. Even banks so far have been okay, knock on wood.

Okay, great. Thanks a lot.

Thank you.

Your next question comes from the line of Daniel Chan with TD Securities. Your line is open.

Hi. How are you Daniel?

Hi John. Good. Thanks. Just wondering if you can provide some color on the drivers behind the 14% increase in the QNX backlog, is that due to a recovery of production volumes, extension of some programs or higher ASP? Just any color on that would be helpful.

Yes. It’s the result of the design wins we have been telling you folks every quarter. And so we have a very strict guideline and formula of what get counted, what didn’t get counted. And we are very conservative on that. But this is as a result of what the OEM told us that this is the volume you should expect in future years on the total program. And we sometimes do a discount on it, sometimes we took it as is. And so – and it was accumulation of those offsetting obviously the runoff which is the – which is the royalty we got in the last 12 months, and that results a 14% increase.

Okay. That’s helpful. Thank you for that. And then I wanted to ask a question on the patent sale. You said you would explore options as they come in. I just want to know like whether you guys are actively looking for other options? Like are you actually going back to other bits you had in your initial process or are you starting from the beginning again?

No, not at all. In fact, we are being approached by others. I am not actively looking for or starting from square one. As I said I want to make sure that the shareholder knows that we are not just stuck with one option, but we do expect to see, and we would like to see the previously announced deal with Catapult to happen. But what we are basically saying is we have been getting calls. And we are now responding to the calls because now the exclusivity has expired.

Great. Thanks a lot.

Sure.

There are no further questions at this time. I would like to turn the call back over to Mr. John Chen, Executive Chair and CEO of BlackBerry for closing remarks.

Thank you, Brent. Thank you, everybody, for joining us. I realize it’s late back east. And looking forward to speaking with you all again soon. And have a good day – have a good evening.

Ladies and gentlemen this concludes today’s call. Thank you for your participation. You may now disconnect.