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. [Operator Instructions]. 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 Rai. 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 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. 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 fillings and 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, SEDAR and blackberry.com website. I will now turn the call over to John.

Thanks, 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 customers and 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, on to the results. As Chris stated, I will reference non-GAAP numbers 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 another year of profitable growth. We're pleased to report $1.1 billion in total Company revenue, resulting in 20% growth year-over-year. Software and Services revenue grew 26% year-over-year. Earnings per share of $0.13, this amount exceeded 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. So, I’d like to give you some highlights of the one that we’re really excited about. QNX Hypervisor 2.0 for Safety, which achieved the highest ISO safety standard in the industry. The second product, BlackBerry Intelligent Security, which uses AI to provide adaptive security and continuous authentication to overcome to static security vulnerabilities. Third, the CylanceOPTICS 2.4, our enhanced endpoint detection and response product. Then, followed by a single agent platform to deploy both, CylancePROTECT as well as CylanceOPTICS, followed by our Mobile Threat Defense product, MTD product that integrates our AI-based endpoint security capabilities with our portfolio of endpoint management technologies. Our peers do not have a full mobile solution like we do. And…

Thank you, John. My comments on our financial performance for the fiscal quarter will be in non-GAAP terms unless otherwise noted. Please refer to the supplemental table in the press release for the GAAP and non-GAAP details and reconciliation. We delivered fourth quarter non-GAAP total Company revenue of $291 million and GAAP total Company revenue of $282 million. I will break down revenue shortly. Fourth quarter total Company gross margin was 77%. Our non-GAAP gross margin includes software deferred revenue acquired but not recognized of $9 million and excludes stock compensation expense of $2 million. Fourth quarter operating expenses of $172 million were down sequentially by $23 million. And we continue to invest in product development and go-to-market. At the same time, we continue to demonstrate cross discipline across the entire Company and gain operating leverage, in particular at Cylance. Our non-GAAP operating expenses exclude $35 million in amortization of acquired intangibles, which equates to about $0.06 impact to GAAP earnings per share. Additionally, our non-GAAP operating expenses exclude $27 million in goodwill in long-term asset impairment charges, $15 million in stock compensation expense, $3 million for software deferred commissions expense acquired, $1 million in acquisition and integration costs, $1 million in restructuring costs, and a charge of $5 million related to the fair value adjustment on the convertible debenture. Fourth quarter non-GAAP operating income was $51 million, and fourth quarter non-GAAP net income was also $51 million. Non-GAAP earnings per share was $0.09 in the quarter. Our adjusted EBITDA was $68 million this quarter, excluding the non-GAAP adjustments previously mentioned. This equates to an adjusted EBITDA margin of 23%. I'll now provide a breakdown of our revenue in the quarter. Total Software and Services revenue was $287 million, representing 99% of total Company revenue. Other revenue is solely comprised of service access fees, which were $4 million, and were expected to decline given the continued wind down of this legacy business. Recurring Software and Services revenue, excluding IP licensing and professional services revenue was about 90% in the quarter. Now, moving to our balance sheet and cash flow performance. Total cash, cash equivalents and investments were $990 million at February 29, 2020, which increased by $20 million from November 30, 2019. Our net cash position was $385 million at the end of the quarter. Fourth quarter free cash flow before considering the impact of acquisition and integration expenses, restructuring costs and legal proceedings was positive $36 million. Cash generated from operations was $35 million and capital expenditures were $3 million. That concludes my comments. I'll turn the call back to John to provide our financial outlook for fiscal 2021.

Thank you, Steve. Currently, I'm sure you all agree, there's a lot of uncertainty across the global economy due to the COVID-19. Therefore, it’s not proven for BlackBerry to provide any specific fiscal 2021 financial outlook as things are changing on almost on a daily basis. However, I'd like to make some macro comments on our business. Our revenue most likely will be negatively impacted by continued headwinds to global auto production and sales. We anticipate a continued delay in capital spending in the auto, as well as the other industries. At the same time, this negative impact could be partially offset, because our product and services portfolio is well-suited to how enterprise meet the challenges of business continuity driven by the dramatic expansion of remote workers or the number of remote workers. We are known for offering the best security and productivity solution. These products and services including our UEM product, Cylance, Digital Workspace, SecuSMart, which is secure voice and text solution as well AtHoc, crisis communication solution, including the new Situation Response product, which is the entire lifecycle of managing crisis. In fact, we are experiencing increased demand. More transaction and inquires comes in daily from new and existing customer, resulting in more licenses being deployed. Furthermore, our Cylance products including CylanceGUARD, which is our cloud-based managed detection and response offering are helping customer to combat growing cybersecurity and privacy risks as the number of BYOD endpoints increases in a remote working environment. While it is difficult to predict the volume business year-over-year, the Company remains strongly focused on the overall financial health in fiscal 2021. The management team has managed through uncertain times in the past and has a track record in balancing profitability and investment for long-term growth. As it related to the shape of the fiscal 2021, we anticipate a tough first quarter due to the COVID-19 impact on our business. This may linger into the second quarter, but we do anticipate a stronger second half of fiscal year versus the first half of the fiscal year. When looking beyond 2021, we do not believe this current global crisis changes BlackBerry strategy and the thesis of any of our long-term profitability growth and value creation. I would now like to open up for Q&A. Josh?

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from Daniel Chan with TD Securities.

Given the macro uncertainty, how are you thinking about capital requirements? In particular, how much do you need and what are your plans for the convert?

Yes. We have -- after paying off the convert, we have $385 million of cash all equivalent. And so, we have made some assumptions under a stress test environment, a couple of assumptions. Number one, we will pay back our convert. The good news for paying back I'll convert is that we would save probably about $23 million a year in interest payment. Obviously, the cash balance will go down quite a bit. We also assume there is no financing work being done. And part of the reason is, as you know very well, you probably know much better than I do. Last couple of weeks, the market isn't really available. I think it’s starting to loosen up a little bit. But, we assume no financing. We assume no dramatic cutback of headcount or investment for the future. This is why I said earlier, we're going to balance profitability and long-term growth. We know this will pass, we know things will come back to normal, and we believe we have very competitive strategy and products. So, we don't want to compromise the future. At the same time, we don't want to put ourselves in a financial difficult position. So, we're going to be working balancing that. But we're not saying that we're going to overhaul anything to disrupt our investment thesis. Given those as kind of a background, we ran through the scenario of revenue coming down by 20%, by 30%, by 50%, you would expect anybody to do in modeling, and we believe we are quite comfortable, and that’s just in very extreme condition, which we are not anticipating. We are quite comfortable to be able to last the liquidity and the health -- financial health for a couple of years.

I want to shift gears a little bit to the enterprise software side. It sounds like things are improving there. Can you give us a sense of whether the enterprise software segment grew year-over-year? Maybe give us a sense of how well you see your go-to-market and your channel? Is it developing the way that you anticipated?

Yes. I don't have -- and I think it's just the year-over-year numbers. So, what I can tell you from a billings growth perspective, we saw very healthy Q4, better than -- double-digit over Q3, and so that seems good. The businesses are there. We have a hiccup. I think, we overcame the hiccup. We have people very committed going after the business. We got infrastructure build up for both the renew and new businesses that we won't let fall through the crack. A while back, it was really us doing -- our doing for not being more diligent on some of this stuff. So, now, I think those are all overcome, we have number of layers that want to sell the business, as I said, both in the renew and the new logo -- going after the new logo. We have a bigger sales force now. And the combination of the Cylance into this IoT portfolio with the UES makes of even more exciting because now we -- each of our sales rep has more things to sell. The Cylance sales rep could sell the UEM, AtHoc and other products, mainly UEM I believe and vice versa. They now -- the UEM sales force now combined as one, could sell the UES product, which included a lot of Cylance, AI technology. So, we feel good about the focus, we feel good about how we align the territories. So, majority of our sales is still going direct. We are building channel business, but that's probably -- that benefit will probably kick in midyear this year or maybe towards the end of the year.

And your next question comes from Daniel Bartus with Bank of America.

First, I wanted to ask about the competitive environment for endpoint security. So, on the one hand, we have CrowdStrike growing very well. And they have a similar approach it seems like as Cylance. And then, you have others like VMware and Microsoft that can follow your moves to integrate the classic UEM business with the endpoint security potentially. So it would be great to just get an update on the competitive landscape you're seeing for Cylance. And I'm curious if the combined UEM and security is a real conversation yet with customers? And I have a quick follow-up.

Okay. That is a good. So, I took a little while to label -- to lay it out, sorry, not label, to lay it out, why we win some of the Cylance deals. As I said earlier, Cylance has secured over 300 new logos in the quarter. And so, we're waiting against somebody. I don't want to name names who we're winning against. And it looks like, to summarize, it looks like where the Cylance won, the win rate basically comes on A, we’re the mobile leader; B, we don't always need the cloud. So, we do secure protection on the endpoint, both offline and online. And that's the differentiators. We have now a managed service and the full suite of products. So, that also is a factor. So, those are -- among other things, those are three that I feel jumped out at me, when I look at the win. The combination of that whole set of Cylance portfolio with the managed surface, and the management tools the UEM has, it’s exactly where the market is going and is verified and confirmed by Gartner. That's what they name this whole segment, called UES, Unified Endpoint Security, which is a combination of mobile and fixed, cloud and on-premise, and also manages and threat detection and protection. So, we just happen to be early provider of the product. And I’m hoping that therefore give us a much more competitive advantage of against some of our big players, and our big competitors out there. And then we'll win hopefully on fair share of the deals. Finally, most of you have asked me the question about there are some of our traditional competitors that provide site licenses. And if you look at everything that we offer, we are about -- for example, a site license for a year ELA5 [ph] will be a lot cheaper than ELA5 and much better security product. So, ELA5 is not pretty, unlike ELA3. So, I believe that we could be competitive out there.

Great. That's very helpful. And then, just quickly on the licensing strength. When we entered this year, you guys were thinking that segment might be down 5% or so year-over-year. And then it turned out to really surprise, up 15%. So, I was wondering, if you could just kind of walk through what changed throughout the year. And more importantly, did this strength come at the expense of some fiscal '21 licensing strength?

Yes. I like to be more conservative. The problem was that -- I mean, it is a good business because it's very good margin, and unfortunately, you all know very well that it's somewhat lumpy and the timing is a little hard to predict than just the kind of enterprise transactions. So, because of that I'm always conservative. I think, I prefer to still plan it about a 250 mark for the FY21 and hoping would do better. I mean, but it is really hard to predict. But this quarter, I didn’t expect it to come in that strong honestly. It's been strong for the entire year.

Your next question comes from Paul Treiber with RBC Capital Markets. Please go ahead.

Just trying to understand that the BTS segment a little bit more. Could you speak to the magnitude of the decline in the quarter? And then, is that driven predominantly from like royalties and the volume or production or there are other nonrecurring items in there, like professional services, I guess licenses of tools that may have contracted?

Paul, unfortunately, it's a little bit of everything. So, off, royalties are down. We have projects, we believe that we were going to get the developer seats that has been delayed. And once the project -- the new projects have been delayed, I remind you, they didn’t go away at all. It's just been delayed because a lot of these are Tier 1 and OEM. They start looking at the auto sales figures and they started to become a little concerned. They'll be a little more cautious. We still won the projects. There's no question about it. But then, the by developer seats business has gone down. And those are the higher, you call it one-time, the immediate revenue type. And then, once the developer seats got slowed down, normally, they come with some portion of professional services, so that they help them to deploy it and to start the new projects. That of course has also slowed down because of that. So, it is a rather unusual situation. And I don't expect it to last long. Our game plan is to do more the professional services work on a remote basis. Then of course, you have to get the authorization from the customers, which they are working remote also. And so, we should be able to get that. And second thing is to go after more than jam growth because then they will need to buy developer seats. So, those are the two and continue working with our auto customers obviously, because they will come back. I mean, this is not going to just end. So, they will come back. It may take a quarter another quarter. But that's about what I expect it to be.

That's helpful. Just shifting to COVID-19, in regards to the promotions that you've implemented, or announced, could you provide some update? Some metrics on the uptake of that and what you expect in terms of potential conversion longer term?

Okay. This is -- my people are probably going to yell at me but I'll give you the update. In the first week, I think, we saw our pipeline grew at least $30 million, and these are good pipelines, because this is the one that actually came to us with a strong need. Customers are able, in some cases, process appeal in record time. I mean, you guys know all this. So, I'm not anything that you don’t know. So I don't -- I said, we do have that situation and so is a lot of different software companies. So, I'm not saying anything to you that are very standoutish and very unique. But, I just want you all to know that we do have a piece of business that in an environment like this, unfortunately, benefit from this whole crisis. And so, we do okay in that area. And so, that's about the only metrics I could share with you. That's more than what anybody will tell you.

Your next question comes from Mike Walkley with Canaccord Genuity. Please go ahead.

Just following up a little bit on cost structure. How should we think about kind of the investment level? It sounds like you guys feel good with the team in place and want to invest for the long-term, but OpEx is a little lower than expected this quarter and imagine this could be lower again, just given lack of travel, entertainment type projects, things like that. But, is there an OpEx rate here, looking at maybe on a run rate for the calendar year to think about?

I did not calculate that. We know we have a number of levels. So for example, in our plan, there were of course replacement of attrition of headcount. We probably -- given this environment, we'll still be hiring people where we actually make some offers lately, but we don't hire in areas of quota carriers, people that are billable. So that could help us on the revenue side. And then, the other areas, unless it's very specific, like we just recently hired a very strong data scientist. And so, of course, we’ll always be looking for excellent people like that. But other areas, we might slow down, we probably -- not might, we are slowing down. And partly, because it's just everybody's working from home and we have a global work from home now. And it's just difficult to do the interview and the processing, the background check and the references check and so it just takes much longer. So, there will be some natural reduction of cost built in. Obviously, we look at our capital spending very carefully and that total. Like you pointed out, travel goes down literally 95%, probably even conservative, I'd say that. Nobody is traveling at all. And there are other areas that we could take some costs out, infrastructures, facilities, that kind of areas.

Just my follow-up question. Just circling back to the licensing, which was strong, as you laid out this year. Can you share with us just kind of heading into this year what the recurring revenue run rate is? I know, 250 might be a good number for the year but is there a recurring piece, it feels pretty solid for the calendar coming up? Thank you.

Yes. In my model, I mean, as I said last year, I realized that I probably don't have a whole ton of credibility, because I tell everybody it’s about 250. I'm going to tell you, it's going to be about 250 for the coming fiscal year. But I hope this time you will believe me a little bit more. Last year, we had a lot of things, a lot of years in play and so -- and they came in through the various time of the year, so different quarters. I believe this year, planning on 250 is reasonable.

Your next question comes from Gus Papageorgiou with PI Financial.

Just a couple questions. Steve, on the $27 million goodwill impairment, can you just tell us a little bit, what was that for?

The impairment I think was $22 million. And that related to the BBM consumer. It was a while back we licensed. This was a licensing arrangement. And we were no longer operating the consumer BBM piece. And eventually, it was known that there were certain amounts that we were going to receive under the agreement. And naturally we had to allocate some goodwill to it back in time and since that service has been shut down during the year, the impairment results from that.

And then, just, I guess on QNX and the auto. So, obviously, we are seeing volumes under pressure here in the short-term, but I guess part of the plan for QNX is that you should increase your market share but also the ASP for car should go up as car manufactures adopt more software modules. Do you think the kind of the ASP growth is going to get pushed back as well, or do you think that -- it's just a volume issue in the short-term but you should -- we should still see ASPs increase this year and then increase again next year?

It is short-term in a volume base, not the ASP. The ARPU has gone up. Because if you look back in the last three, four, five quarters when we announced the results we talked about the design win in clusters, instrumentation, hypervisors, ADAS, OCA. We talk about those wins. Those wins all carry a higher ARPU, ASP than the traditional IBI business.

Okay. So, they’re not getting deferred at all, this is just largely…

Not that we could see. We are basically based on -- at this point, it’s really more volume versus less volume.

Your next question comes from Paul Steep with Scotiabank. Please go ahead.

John, can you maybe talk to us one -- a little bit about AtHoc and what we've seen there? Obviously that’s one area that I’m assuming you're seeing a lift in? And then, I'll give you one quick follow-up.

Yes, AtHoc and environment like this. So for those of you who are not -- haven't really followed our AtHoc business, it is very strong in the federal government and a more of a kind of -- and I meant federal government, I actually meant the United States federal government. And we have over 2 million seats in the United States federal government space, including armed forces and so forth. And then, of course in Canada AtHoc is in the parliament and the other G15 countries, a lot of them uses AtHoc and coordinate security and privacy. But we don't really -- we haven’t really got out of the government and the federal space, which we are beginning to see us getting into. There's a company called Everbridge, a public company, and they do exactly what we do, but they are more on the state, local and education market, which we're interested in. So, we're hiring people building that up. And so, this is opportunity of growth. And it looks like that we are quite competitive. And we just released our latest product, which we're very proud of, which is the lifecycle management of a crisis. And so, anyway, so I think this is going to be a good growth engine.

Great. And then, the last one for me would be, maybe just talk a little bit about where you see the organization being? You've obviously changed things around, integrated Cylance, and it looks like you got to do head of field operations and marketing, or presumably sales, is what that title means? How should we think about any changes to the sales force? And then, secondly, how would you recapture any of cost saves from letting go a few people in the Cylance area, would you redirect that capital to growth or are you just going to sort of hold on to it in the current environment? Thanks.

Yes. So, first off, I'm very pleased to -- when you combine two organizations like that who have traditionally their own infrastructure and sales management, I got the luxury to pick the A team between the so called legacy BlackBerry and Cylance. And it helps save a lot of the management infrastructure costs that we will then throw back into hiring reps around the world. So, the equation works out fine with us -- for us. And they tend to know is pick to run sales, field marketing and customer services for Spark, which is a combination for the UEM and Cylance products. So, we now have one organization do that. And we -- as we cascade down to a number of levels, right, so regional manager or country managers, and so forth, we obviously have the luxury of picking one versus the other person. So that, in my mind, gives us a cleaner structure and also gives us an opportunity to pick the better person. At the same time, there are a number of opportunities out there and geographies and regions that actually have both very strong person and very promising person. We're able to deploy one of the two to a solution side of the business, which are AtHoc SecuSMart and QNX. So like, for example, we now have a solution team in Asia-Pac leading by some really good people. And so, we are taking advantage of the talent pool and the simplification overall of the organizations.

Your next question comes from Trip Chowdhry with Global Equities Research. Please go ahead.

Very good execution in a terrible environment. I have two quick questions, first, regarding your digital workplace. I think, you're viewing this product free for 6 months. Do you see that business to give you some uplift? As you mentioned in your prepared remarks in the second half. Do you think that product is playing an important role? The second question I have is, Zoom video is getting more popular, but they are terrible in providing the security and privacy. Do you think some sort of OEM engagement or relationship with companies like Zoom could be -- if they use Digital Workplace, those issues could be put to rest? Any thoughts on that?

Thank you. So, the first question is Digital Workspace. It’s a brand new product for us. We just released it probably no more than couple of months. And it's slightly early to tell, but through this process of remote working from home, we've been seeing good some license movement on Digital Workplace, not big enough to make a dent. So, I will reserve my comment on this, probably wait till a quarter or two from now. But it certainly has picked up already, and highly because of their environment we're in, not having to deal with VPN and being able to put it on BYOD, it's a huge deal. And we're now integrating by the way. On every one of those desktops, we're putting CylancePROTECT on it. And so, I'm hopeful we’re certainly doing the right thing. So, that's one area. Zoom is obviously picking up quite a bit because of the reason of it. And yes, there were some concerns, security and privacy, and not just Zoom and other players too. Zoom is part of our containerized size program, meaning that Zoom works in our container. If you are a UEM customer, our BlackBerry UEM customer running Zoom, you will already be secured, both in the data privacy and the security of it.

That's really wonderful, good to know. So, the container, is it we're talking about containers in the context of dockers or is this containerized is in some different context? Basically, if I'm a customer of say your Unified Endpoint Management, and whatever service I provide, I put into that container, by default, they will have the same level of security as the underlying platform provides. Is that the correct way to think about it?

Yes. So, the container I was referring to is our endpoint management software, which is a combination of mobile device management and application management. And we use the container technology there. So, that wraps around every application and protect the thread and infusion of that outside agent. So I'm talking about that container.

That is all the time we have for questions. I would like to turn the call back over to John Chen, Executive Chairman and CEO of BlackBerry for closing remarks.

Okay. Thank you. I was just having fun. But, thank you very much for your time today. We look forward to speaking with you at our Analyst Day, which unfortunately we now need to be on webcast because of the work in -- shut in place. It will be webcast on April 21st, coming April 21st. Lastly, I’d like to take this opportunity to hope you and your family to stay healthy and stay safe as we work together through these challenged times. And I add one statement, this crisis shall pass. So, looking forward to interacting with all of you. Thank you very much for your time.

This concludes today's call. Thank you for your participation. You may now disconnect.