The conference call discusses BlackBerry's first quarter fiscal year 2026 results, featuring updates from the CEO and CFO on business developments and financial performance. Forward-looking statements are highlighted, cautioning against undue reliance on them due to potential significant differences in actual results. The call also mentions the availability of a non-GAAP numbers reconciliation on the company's website and in the earnings press release.

BlackBerry exceeded Q1 fiscal year 2026 guidance with strong revenue, profitability, and cash flow. QNX division showed 8% year-over-year growth, driven by royalties and development seat licenses. Strategies include diversifying beyond automotive into robotics, industrial automation, and medical devices, and increasing share of the automotive software stack through pre-integrated middleware. Key initiatives involve partnerships, product development, and educational programs to enhance market penetration and community support.

The secure communications division reported a strong quarter with a quarterly revenue of 59.5 million and stable annual recurring revenue at 209 million. The success was largely attributed to the Sekure Smart product, particularly due to sales to the German government and growing interest from global customers. Additionally, the unified endpoint management product (UEM) performed as expected, securing deals with various high-profile organizations, while the IT licensing division saw solid revenue from pre-existing deals with potential for future upside.

Revenue surpassed guidance at 121.7 million with operational expenses impacted by FX due to the weakening US dollar. Significant grant funding from the Canadian Government's Innovation Fund offset RD investments. The total company adjusted gross margin expanded by 1% YoY to 75%, and adjusted EBITDA beat expectations at 16.4 million, showcasing effective cost controls.

BlackBerry reports its first positive quarterly GAAP net income in over three years, achieving $1.9 million, with adjusted net income at $12.3 million. Secure communications revenue surpassed guidance at $59.5 million, driving gross margin expansion. Adjusted EPS and EBITDA also exceeded expectations, while licensing division revenue and EBITDA were slightly below forecasts due to lower revenue from existing arrangements.

The first quarter is noted as a seasonal low for BlackBerry's cash flow due to billing profiles and specific annual cash payments. The quarter saw a cash burn of $18 million, including restructuring costs and lease payments for exited properties. Despite this, total cash and investments decreased by $28 million to $382 million, still $100 million higher than the previous year. A share buyback program was initiated, repurchasing $10 million worth of shares at an average price of $3.89 per share. The company remains optimistic about its financial outlook, expecting revenue and adjusted EBITDA within specified ranges for different quarters, and has raised its full-year revenue guidance for secure communications by $4 million.

For the full fiscal year, revenue and adjusted EBITDA guidance are approximately 6 million and 5 million per quarter respectively, with expectations for Q2 revenue between 115 to 125 million and adjusted EBITDA between 8 and 14 million. Total company revenue for fiscal year 2026 is now projected to be between 508 and 538 million, with adjusted EBITDA in the range of 72 to 87 million. Non-GAAP EPS is expected to be between breakeven and 1 cent in the second quarter and between 8 and 10 cents for the full fiscal year. The first half of fiscal year 26 is anticipated to be lower than the second half due to the billings and payments profile.

Despite expecting another quarter of cash usage due to tax payments, BlackBerry anticipates being operating cash flow positive for the full fiscal year, with a projected generation of approximately $35 million. Q1 proved successful with total company revenue, adjusted EBITDA, EPS, and cash usage all beating guidance. QNX showed positive traction in its strategy to support customer software development goals and diversify into non-automotive sectors, while secure communications exceeded expectations in both revenue and profitability. The company has raised its guidance for the full year and is executing share repurchases, indicating a strong position for long-term profit and cash generation.

Participants are guided on how to ask questions during a session, emphasizing the use of star one to signal and the importance of unmuting lines. A request is made to limit inquiries to one question and one follow-up.

The speaker discusses the anticipation of changes in production schedules affecting fiscal Qi royalty revenue, noting that the final production numbers impacting royalties are received in Q2. Guidance has been adjusted to account for potential disruptions not yet fully realized.

Despite concerns over possible production disruptions and fluid market conditions, confidence for the rest of the year is bolstered by visibility in guidance and diversification in revenue streams including royalties, professional services, and subscription seats.

A question is posed by an individual from RBC Capital Markets, highlighting a significant point for discussion.

A discussion highlights the substantial growth, noted at 55%, in the non-auto mix pipeline, questioning the materiality of this increase and seeking clarification on how it aligns with existing backlog disclosures.

The company observes growing interest and demand for its products, particularly in automotive, robotics, and industrial automation sectors, contributing to an expanding overall pipeline. The approach to share buyback is flexible, prioritizing tuition over strict timing mandates, with opportunities seized as the stock market allows.

The dialogue centers around the excitement and strategic planning involved in executing a buyback, emphasizing the robust balance sheet and the careful consideration of factors like cash flow, share price, and alternative capital uses to maximize shareholder value.

The increasing global geopolitical dynamics have heightened interest in secure communications and mission-critical capabilities, with governments focusing on data sovereignty and on-premise solutions. In the automotive sector, there's growing demand for high-performance computing software, particularly in safety-critical use cases, agnostic to electric, hybrid, or ICE vehicles, and with potential boosts from advances in autonomous driving technology.

Despite concerns over potential impacts from Doge, the company experienced no significant effect on its federal government business, particularly in mission-critical communications. On the automotive side, the introduction of SP8 for QNX shows promising traction, aiming to migrate users to this future-proof, high-performance platform, although the market's long lifecycle projects mean progress is gradual.

A discussion unfolds around the strategic positioning within the software-defined vehicle space, focusing on the expansion into middleware, integration, and services to streamline time to market. The speaker emphasizes the importance of a comprehensive approach, including the expansion of their ecosystem through partnerships and the broad availability of their technology across various markets.

The SCP 8.0 pipeline has seen a significant increase, particularly in the automotive and GE sectors, with the latter showing promising demand and a strong appetite for the product's performance characteristics. While the automotive sector has a more established presence, the GE space, though newer, exhibits encouraging signs of growth and potential revenue.

The CEO thanks participants for attending the call, reminds them of the upcoming annual shareholders' meeting scheduled for the next day at 10 AM Eastern, and provides details on how to join the virtual event on the company's website.