Luke L. Junk

Luke L. Junk with Baird inquired about the future operating leverage within the QNX division, specifically how to interpret the mid-teens year-over-year growth against declining OpEx, including the impact of R&D credits and any one-time factors or seasonality affecting Q3 guidance. He also asked about BlackBerry's strategic approach to the China automotive market, particularly regarding a recent mid-eight-figure ADAS design win and the potential for repatriating benefits globally.

Answer

CFO Tim Foote highlighted strong operating leverage in QNX, noting 83% gross margins expected to improve with increased royalties. He acknowledged a $4 million CIF funding benefit this quarter but emphasized continued OpEx control despite R&D and sales & marketing investments, projecting strong adjusted EBITDA margins. CEO John Giamatteo explained that the China market's shift towards safety-critical software, driven by recent incidents, plays into QNX's strengths, particularly with SDP8 and partnerships with Qualcomm and NVIDIA, enabling global progress.

Luke L. Junk asked about the operating leverage within the QNX division, specifically how R&D and sales & marketing operating expenses contribute to profitability, and any one-time or seasonal factors affecting Q3 guidance. He also inquired about BlackBerry's strategic approach to the China automotive market for ADAS applications and the potential for global benefits from these efforts.

Answer

CFO Tim Foote highlighted strong operating leverage in QNX due to high gross margins and stabilizing R&D investment, while noting a $4 million Canadian Government Strategic Innovation Fund benefit in the quarter. CEO John Giamatteo explained that the China market's shift towards safety-critical software, driven by recent incidents, plays into QNX's strengths and is supported by ecosystem partnerships with Qualcomm and NVIDIA.