Good afternoon, and welcome to the BlackBerry Fourth Quarter and Full Fiscal Year 2024 Results Conference Call. My name is MJ, and I'll 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. [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, CFO, Cybersecurity Division and Head of Investor Relations. Tim, please go ahead, sir.

Thank you, MJ. Good afternoon, everyone and welcome to BlackBerry's fourth quarter and full fiscal year 2024 earnings conference call. Joining me on today's call is BlackBerry's Chief Executive Officer, John Giamatteo; 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 business updates. 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 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 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'll turn the call over to John.

Terrific. Thanks, Tim. And thank you all for joining us today. BlackBerry delivered a solid quarter where we either met or exceeded expectations and in the process set a number of new records. We beat expectations for earnings per share and given our laser focus on profitable growth, further improved operating cash flow as we said we would. In fact, this quarter, we more than halved operating cash usage. And despite being prudent and measured with our top line outlook, we expect to be both cash flow and EBITDA positive this coming fiscal year. In the quarter, our IoT business recorded its best ever quarter for revenue. Despite the delays automakers have experienced with their software development programs, we also achieved our strongest year for adding royalty backlog from new design wins. This design win momentum has driven an all-time high QNX royalty backlog of approximately $815 million or 27% year-over-year growth. On the cyber side, we saw a very important data point with ARR stabilizing and even growing a little sequentially. We believe this demonstrates the impact of the many improvements the team has been enacting recently. Cyber also recorded solid year-over-year growth from a revenue standpoint as well. So let me start my review with the IoT business unit. As you know, the QNX business benefits from its strong multiyear customer relationships. Given this long time horizon, the key metric for the health of the business is royalty backlog. This gives a view on estimated lifetime royalty revenue from the design wins that we have secured. And this metric has never been better reaching approximately $815 million this past quarter. As I mentioned, it was a strong year for adding new backlog from design wins surpassing last year. And this past quarter, we secured a number of design…

Thank you, John. As always, my comments on our financial performance will be in non-GAAP terms unless otherwise noted. Total company revenue for the quarter was $173 million. IoT revenue was $66 million, cybersecurity revenue was $92 million and licensing revenue was $15 million. The percentage of software product revenue that was recurring increased to approximately 90%. Total company gross margin improved to 75%, while operating expenses decreased to $113 million. Non-GAAP operating expenses exclude a $35 million goodwill impairment charge, $20 million of restructuring expenses, $8 million in amortization of acquired intangibles, $5 million in stock compensation expense and $4 million in impairment of long lived assets. Both non-GAAP operating profit and net profit for the fourth quarter were $16 million. BlackBerry delivered $0.03 of non-GAAP basic earnings per share for the quarter, beating expectations. Adjusted EBITDA, excluding the non-GAAP adjustments previously mentioned was $21 million. Total cash, cash equivalents and investments increased to $298 million as at February 29. Cash used by operating activities more than halved sequentially to $15 million. As a reminder, two quarters ago this was $56 million and Q3 was $31 million. Traditionally, Q1 is a seasonal low for cash flow, driven by the annual billings and payments profile. Therefore, we would expect a sequential increase in operating cash usage. However, a year-on-year improvement after factoring in the impact of the sale of our non-core patent portfolio in Q1 of last year. We expect EPS for Q1 to be in the range of negative $0.04 to negative $0.06 and adjusted EBITDA to be in the range of negative $15 million to negative $25 million. For the full fiscal year 2025, we expect EPS to be in the range of negative $0.02 to negative $0.06 and adjusted EBITDA to be in the range of breakeven to positive $10 million. We also expect to exit the year with both positive EPS and positive operating cash flow in Q4. This quarter, we recorded a $35 million non-cash accounting impairment of goodwill for the Spark reporting unit. This represents a non-cash charge of $0.06 to GAAP earnings per share. In accordance with accounting rules, we were required to perform a goodwill impairment review by determining a fair value for all reporting units, the total of which is required to reconcile to our market cap. Further details will be disclosed in our Form 10-K. As we announced during the past quarter, we successfully completed a $200 million five year convertible debt raise. The level of interest in the offering was high and we were able to achieve competitive rates. As a result, we were able to fully repay the $150 million of short-term extension debentures that had been in place since the previous debentures matured last November. With this long term financing in place, Blackberry has a solid balance sheet and we are well positioned to execute on our strategy. That concludes my comments, and I'll turn it back to John.

Thank you, Steve. Okay. So as Steve mentioned, we are currently executing on our strategy to establish two profitable standalone divisions. During the quarter, we provided an update on actions we expected to take and I can confirm that we delivered as planned. We have appointed divisional leaders such as finance, HR and legal and those leaders are currently building out their teams to address the specific needs of the businesses they support. In regards to cost, you may recall that during Q3, we executed on approximately $50 million of run rate savings, predominantly within the cybersecurity business and including approximately 200 headcount reductions. During this past quarter, we went further and took actions that will enable an additional $55 million worth of savings. Approximately $35 million of this came from cybersecurity, the cybersecurity business and $20 million came from our central G&A functions. We understand how important it is for shareholders to see the benefits of these cost reductions starting to realize in the P&L. So in order to make it easier to track the cost improvements, starting this quarter, we are reporting sales and marketing separately from general and administrative. This new split aligns to how we're tracking towards our long-term targets as a percentage of revenue. Also, we think it is helpful to provide a cost run rate from before we started the reductions described as a baseline for comparison. Without getting into too many various one time and takes in the reporting OpEx for Q1 and Q2 of this past year, we consider the average of the two to be a fair baseline to use. Non GAAP OpEx for Q1 was $145 million and Q2 $114 million giving an average of $130 million a quarter. This past quarter, non-GAAP OpEx was $113 million that is $17…

[Operator Instructions] Our first question today will be from Mike Walkley with Canaccord Genuity. Please go ahead.

Just wanted to delve in a little bit to the improving ARR on the cybersecurity business. With the endpoint market still over 40% legacy solutions and it sounds like Cylance was part of the improvement this quarter. Can you just talk about how BlackBerry's position relative to some of the legacy players and how you see maybe growth in this segment over the course of the year?

Yes, absolutely, Mike. Hey, we're really pleased. It's been a long journey to get our ARR to where we -- it's starting to stabilize and pivoting for growth. So a lot of heavy lifting in the product and in our customer engagement activities. So we're pleased that we're kind of starting to see that stabilize. As we think about future growth, you still think there's a tremendous amount out there. When you think about the legacy endpoint providers like the Trellix of the world, like the Trent Micros of the world, like the Broadcom Symantec install base. There's a lot of opportunity that's we think up for grabs for a next generation endpoint capability along the lines of what we offer in Cylance. So, it was actually telling a lot of new logos, albeit smaller logos but a lot of new logos over the course of the last quarter. And between that and our GUARD platform, we're cautiously optimistic for opportunities to move that in the right direction in the next fiscal year.

And just for my follow-up question on the IoT business, strong close to the year and a lot of records in that strong royalty backlog. But you've laid out some delays and the guidance kind of suggests maybe mid-single-digit growth this year. Based on your conversation with customers and some of these delays, are these multiyear delays, as you talk about the opportunity to grow that backlog or do you see things kind of ramping through this year and picking up in calendar '25?

Yes. We have not -- my -- the delays that we talked about last quarter, like kind of a four quarter shift, six quarter shift, we have not seen that improve yet. So just the complexity of the software defined vehicles, the skill sets of the OEMs and it's not their core competency. Getting these things out is a little more of a complex and a little more challenge. I will tell you we're doing everything we can to help them. As I mentioned, we're going to increase more in our engineering at the edge with our customers to help them do some of that integration with their development projects. But we're trying to be a little cautious because we're not seeing the floodgates wide open at this point. We're still seeing some sluggishness in getting those new software defined vehicle programs launched. That's why we're being a little, that's why we're being somewhat cautious and prudent about it based on what we're seeing.

The next question is from William Kerwin with Morningstar.

Maybe just to keep it on the IoT business, obviously, a lot of positive announcements at CES. Just curious, how those have been received so far over the course of the past three months and are they already gaining some traction in the pipeline as you look going forward? And just maybe as a follow-up to that the path to get towards kind of a double-digit growth profile in this business. Understand it's still growing but slower than you would probably like.

So a couple of things. The product -- the pipeline is just exciting. SDP 8.0 it was a buzz at CES as we were walking through that. It's a step change in capability that really I think puts us in a strong position. And it's actually to have one of the leading chip suppliers buy some development tools, a strong kind of statement to the impact of that. The acoustics capability, the cloud capability, the fact that we got a couple of design wins there. We're supporting Stellantis in their efforts to leverage the cloud to be much more productive in their process. Pipeline is growing nicely. We're excited about the base level platform and with RTOS and ADAS, but now these other capabilities just puts us in that much more of a stronger position. So we're excited about the pipeline for the future. To your point, we wish some of this stuff would -- some of that $815 million backlog would roll off a little bit faster than it's been. But we think when that stuff opens up, it's going to be a really good opportunity to drive some business model leverage into the business.

And if I could just tack one more on, obviously, some good progress on the cost savings already. Just curious if you could cut talk through, why you think the targets that you've laid out are the right size for the business and how you see the progress going forward, I guess, longer term past, fiscal '25?

To me, it's kind of a two-fold impact from the cost side of things. One, I think that really helped us clarify where we're investing and how is just has we embarked on our strategy to split into two divisions? That really kind of makes us forces us to look and say where are we investing, where can we back off of that. In fact, we had some really renowned industry consultants provide us some advice with some benchmarking on where we are and where the industry is. So, we kind of target the right levels and the right benchmarks for that. So I think that's one aspect of it. I think the other is, you can see a lot of it came out of cyber. So I think rightsizing cyber getting the efficiencies out of cyber that we think were there. I think I mentioned in the past. Cyber grew throughout five or six different acquisitions over the years. So there was a lot of R&D rationalization that we thought was not going to impact the innovation cycle, but at the same time improve the overall business. So I think between working with consultants on the split of -- into two divisions as well as some really focused efficiencies on the cyber side, we kind of feel like we're landing at the right place right now from a cost standpoint.

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

It's helpful that I think next quarter you're breaking out sales and marketing from G&A. You touched on the split of the company into IoT and cyber. What should we expect in terms of the disclosures around segmented profitability by between IoT and cyber and the time frame for that?

So obviously, there's a lot of activity internally at play both from a separation -- business separation standpoint and from a cost streamlining and restructuring standpoint. So the markers that we've kind of given on a total company basis, I appreciate the desire to kind of have basically a full P&L for each of the business units. We're not in a position to provide that at this time. But on that, we would ask you to just stay tuned as we work towards that.

Kind of feel, like, you said think of it as the breakout of sales and marketing and G&A. That's a down payment on giving you more transparency to our overall cost structure. And as Steve articulated in the quarters ahead, we'll -- I think we'll be in a better position to kind of take that to the next level. So hang in there with us and we'll provide you updates as we go throughout the year.

And my second question just relates to the future opportunities for cost savings. I mean, also with that what's the timeframe that you're targeting to make those announcements? And does that also relate to the split of those segments so we may get everything at once? And then can you also elaborate on the nature of those reductions that you're considering?

Maybe I'll start there. I mean there's a number of structural items ranging from corporate legal entity structures, which we've talked about before just in terms of simplifying IT systems, the supporting back office infrastructure, particularly from an IT standpoint. Those types of things are bigger rocks and that doesn't happen overnight. So we'll obviously actively looking at how to go about that and formulating the plans to execute on those. We'll be able to squeeze some of those types of items out this year. But by and large, that's probably going to go -- that will go beyond this fiscal.

Just November of last year to now, we did some heavy lifting on $105 million worth of real cost that's coming out. We're starting to see it in the run rate. And that's heavy lifting on things that structural. We talked about facilities I think last time that we closed down, we're rationalizing our labs. We're fine tuning our go-to-market in cyber. We're doing a lot of those things underpinned $105 million heavy lift. The next week we're not -- we're going to continue to focus on these to be more efficient. But those are, like I said, those are a little -- those as Steve said, that’s a little trickier. They're a little more intertwined. There's more dependencies. We've got to be a little more careful and a little more thoughtful how we proceed on that not to disrupt some of the momentum that we have in the business. So a lot of work that's done in the last six months. We still have a lot more to do, but we'll be cautious about it and we'll provide you updates as we go throughout the year.

[Operator Instructions] Seeing no further questions in the queue, I would like to turn the call back over to John Giamatteo, CEO of BlackBerry for closing remarks.

Terrific. Thank you, MJ. Just thanks everybody for being part of the call today. We are -- as we talked about solid quarter for the company in many ways set new records within the IoT. It's really encouraging to see the cyber business stabilizing and the opportunities that we have in front. We're executing really well on our strategy to split this company into two divisions and marching towards profitability on both of them. And we're pleased with the progress that we've made thus far and we're going to look forward and committed to providing you all more transparent updates as we go throughout the fiscal year. So thanks for being on the call with us today, and we'll talk to you next quarter.

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