Blackberry - Earnings Call - Q4 2025

Executive Summary

• Q4 FY25 beat across revenue ($141.7M), adjusted EBITDA ($21.1M), and adjusted EPS ($0.03), exceeding the top end of guidance; GAAP loss per share improved to $(0.01) with operating cash flow of $42.0M, aided by the first $~80M tranche from the Cylance sale closing in February.
• Segment execution was solid: QNX revenue $65.8M (flat YoY, +6% QoQ) with 83% gross margin and $19.2M adj. EBITDA; Secure Communications revenue $67.3M with 64% gross margin and $12.6M adj. EBITDA; Licensing $8.6M with $1.4M adj. EBITDA.
• FY26 outlook introduced: total revenue $504–$534M, adj. EBITDA $69–$84M, non‑GAAP EPS $0.08–$0.10; Q1 FY26 revenue $107–$115M, adj. EBITDA breakeven to $7M, non‑GAAP EPS $(0.01) to breakeven. Licensing quarterly revenue was raised to ~$6M (from ~$4M) going forward, with ~$5M quarterly EBITDA.
• Stock reaction catalysts: multi‑quarter beat/raise cadence, visible cost takeout (> $150M), strengthened net cash (> $200M) for optionality, plus narrative on vehicle OS/content expansion and GEM (adjacent verticals) pipeline offset by uncertainties around auto tariffs and public sector budget dynamics.

What Went Well and What Went Wrong

• What Went Well
  • Broad beat: “another strong quarter that beat expectations across the board” with total revenue $141.7M, adj. EBITDA $21.1M, adj. EPS $0.03; cash and investments increased $144M QoQ to $410M.
  • QNX resilience and future growth: QNX revenue $65.8M, backlog grew to ~$865M; progress on SDP 8.0, QNX Cabin, and partnerships (Microsoft Azure, TTTech, Vector) to increase content per vehicle and address GEM verticals.
  • Secure Communications profitability: revenue $67.3M with adj. EBITDA $12.6M; ARR $208M (up 3% YoY); continued wins/renewals with U.S. government and Malaysian government expansion.
• What Went Wrong
  • Mixed demand/mix pressure: total GAAP gross margin 73.5% (down QoQ/YoY) on revenue mix; Secure Comms ARR declined 3% QoQ to $208M; Secure Comms DBNRR slipped 2ppt QoQ to 93%.
  • Licensing variability: revenue $8.6M but Q4 adj. EBITDA only $1.4M due to onetime bad debt expense on a legacy contract dispute.
  • Macro/tariff uncertainty: Management broadened FY26 ranges (QNX revenue $250–$270M) citing uncertain impacts from automotive tariffs and public sector spending dynamics; bottom ends prudently set wider.

Transcript

Speaker 1

Good morning and welcome to the BlackBerry fourth quarter and fiscal year 2025 results conference call. My name is Rob, 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. Should you need assistance during the call, please signal a conference specialist by pressing star zero. As a reminder, this conference is being recorded for replay purposes. I would now like to turn today's call over to Martha Gonder, Director of Investor Relations, BlackBerry. Please go ahead.

Speaker 0

Thank you, Rob. Good morning, everyone, and welcome to BlackBerry's fourth quarter and full fiscal year 2025 earnings conference call. Joining me on today's call is BlackBerry's Chief Executive Officer, John Giamatteo, and Chief Financial Officer, Tim Foote. After I read our cautionary note regarding forward-looking statements, John will provide a business update, and Tim 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'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 customary, during the call, John and Tim will reference non-GAAP numbers in their summary of 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, CedarPlus, and blackberry.com websites. Additionally, unless otherwise noted, the numbers John and Tim reference will be for continuing operations only. That is excluding the results of Silence Business, which are included within discontinued operations. With that, let me now turn the call over to John.

Speaker 2

Thanks, Martha, and thanks to everyone for joining today's call. This past quarter marked another significant step forward in what was a transformative year for BlackBerry. We closed the win-win transaction with Arctic Wolf for the sale of Silence, and through solid execution by the team, we finished the year with another strong quarter that beat expectations across the board. Total company revenue beat the top end of our guidance range at $141.7 million. Revenue for the QNX division beat guidance at $65.8 million. Likewise, the Secure Communications division finished the year strongly, also beating the top end of guidance at $67.3 million. Finally, licensing had a better-than-expected quarter as well, beating guidance at $8.6 million. In terms of profitability, BlackBerry beat guidance for adjusted EBITDA coming in at $21.1 million.

EPS, which includes discontinued operations for both the fourth quarter and the full fiscal year 2025, beat guidance and expectations at positive $0.03 and positive $0.02 respectively. Finally, BlackBerry's cash performance also beat expectations. Total cash and investments increased by $144 million, driven by a significant increase in operating cash flow to $42 million, and the collection of the initial tranche of cash from the Silence deal of approximately $80 million. As I mentioned at the start of February, we closed the Silence transaction with Arctic Wolf. Last summer, the new management team performed a deep dive into BlackBerry's various businesses. Once we identified the financial challenges that Silence was presenting to the cybersecurity division, and with it, BlackBerry as a whole, we moved quickly to find a solution. I'm very proud of the team's hard work that made this deal happen and close so quickly.

At close, BlackBerry received approximately $80 million of cash and $5.5 million common shares. Additionally, BlackBerry retained its pioneering AI/ML endpoint security patents, as well as tax losses that we expect will provide a significant shield for future profits generated by our U.S. entities. We were delighted that so many of our colleagues in the Silence business were able to find a new home at Arctic Wolf as part of the transaction. With the deal successfully closed, we've switched our focus to fiscal year 2026 and beyond. We performed a thorough review of all aspects of the cost structure in our new Secure Communications division that includes UEM, AdHoc, and SecuSmart. This review aimed at refocusing the business more clearly on addressing its narrower, more common customer base, optimizing our cost structure in the process.

The cost reduction actions of the past quarter build on others that we've executed over the past year. When we began this process, we said our target was to remove approximately $150 million of costs from our run rate, and I'm delighted to report that we've now exceeded that goal. As a result of this hard work, BlackBerry's profitability has transformed. Total company adjusted EBITDA was $39.3 million for the year when including Silence, a $54 million improvement year over year when controlling for the patent sale in early fiscal year 2024. Let me now go into further detail at the divisional level. Earlier this week, QNX celebrated its 45th anniversary. QNX's leadership position in safety-critical foundational software cannot be replicated overnight. Instead, it has taken decades of working with the biggest names in the auto industry and beyond to establish the competitive moat that this business enjoys today.

Notwithstanding the various challenges for the auto industry, the largest market segment for QNX, the team continued to drive results throughout 2025 and finished the year with Q4 revenue beating expectations at $65.8 million. Royalty revenue continued to be strong in Q4, albeit slightly lower sequentially, offset by the strongest quarter of the year for development seat revenue, while services remained relatively constant. Despite the delay in software development across automotive that have deferred both the start of existing and the award of new designs, QNX's royalty backlog grew yet again year over year to approximately $865 million. The growth in backlog demonstrates that QNX continues to add future expected royalty revenue from new designs at a faster rate than is currently recognizing in the P&L. We believe this is a solid indicator of ongoing future health of this business.

During the quarter, we continue to demonstrate our leadership in automotive by securing design wins with a number of leading OEMs and tier-one suppliers, primarily for ADAS and cockpit domain controllers. QNX is powered by strong multi-year secular tailwinds. We continue to invest in the business to capture these opportunities. This includes both driving go-to-market penetration, particularly in verticals adjacent to automotive, and bringing exciting new products to market that our broad customer base is asking for. Our next-generation version of the QNX platform, SDP 8.0, and our cloud-based digital cockpit development solution, QNX Cabin, are two of these products, and both are gaining traction in the market. Another top-ten global auto OEM made a multi-year commitment to the QNX Cabin solution, building on wins with similar industry leaders in the prior two quarters.

SDP 8.0 is also building momentum with significant progress across Q4 across automotive, medical, industrial, rail, and robotic verticals. As mentioned, we see significant opportunities outside of automotive. The QNX code base used in medical, industrial, and other general embedded applications is almost identical to that in automotive, meaning that we can truly leverage our technology investments across a broader addressable market. To help drive this growth, we recently launched the QNX General Embedded Development Platform, designed to accelerate the time to market for high-performance, scalable, and secure embedded systems. We are also building out our team, adding sales professionals to drive this go-to-market push. This past quarter, we secured several new logo design wins with customers in medical equipment, rail, and aerospace and defense.

QNX is a leading brand in automotive, and BlackBerry is very much leaning into this brand as part of our efforts to drive top-line growth in fiscal year 2026 and beyond. Going forward, the IoT division will now be referred to as QNX, more clearly reflecting the key driver within it. There was no better place to lead with the brand than at the CES Trade Show in Las Vegas, and the team did a magnificent job in making QNX shine with the booth sporting the bold new color scheme. We also showcased new product developments centered around helping customers shorten and simplify cycle and time to market. In particular, we highlighted the expansion of QNX's vehicle platform.

This vehicle OS aims to take the heavy lifting of integrating non-differentiated parts of the software stack off the OEM's plates, leaving them to focus on the application layer that their customers see and interact with. Leading middleware providers, TT Tech and Vector, confirmed a multi-year collaboration with BlackBerry on this exciting new platform. We also announced a partnership with Microsoft Azure for SDP 8.0 in the cloud. This expands options for customers that already include running QNX on AWS. Overall, 2025 was a solid year of progress for QNX in a difficult environment, consistently achieving or beating the top end of guidance throughout the fiscal year and continuing to grow the royalty backlog.

Moving over to Secure Communications, this was another very solid quarter of execution for the division, despite a significant amount of time by the team that was dedicated to both Arctic Wolf transaction and the review of our cost structure. Revenue exceeded the top end of guidance at $67.3 million for Q4. In the quarter, UEM secured new business with a number of government agencies, including the U.S. Air Force, and a number of multi-year commitments with leading banks and law firms. Quarterly revenue for UEM increased sequentially. Year-over-year revenue for Q4 was down, however, partially as a result of a tough compare in the same quarter the year before as a result of the upfront revenue portion of the large deal with the Malaysian government. Likewise, for the same reason, revenue for UEM for the full fiscal year was slightly lower as well.

Speaking of the Malaysian government contract, this past quarter, we were delighted to expand our relationship, signing an extension to our existing deal that increased both the contract length and number of licenses. The Malaysian government remains a strong case study for deployment of the full Secure Communications portfolio and is one we are working to replicate. AdHoc, our critical events management solution, also had a solid quarter and full year, with revenue increasing both year-over-year in Q4 and for the full fiscal year. This past quarter, we secured expansions and renewals with key U.S. government agencies, including the Department of Homeland Security, U.S. Department of the Treasury, and the U.S. Missile Defense Agency. SecuSmart, our military-grade encrypted voice and data solution, had a solid fiscal 2025 with revenue increasing year-over-year.

Given the significant portion of upfront revenue recognition, revenue can vary from quarter to quarter depending on the timing of new deals, as evidenced by Q4 being sequentially lower. Annual recurring revenue, or ARR for Secure Comms, decreased by $7 million, or 3% sequentially to $208 million, although it was up $6 million, or 3% year-over-year. The dollar-based net retention rate, or DBNRR, decreased marginally two percentage points sequentially to 93%, but was two percentage points higher than in Q4 of the prior year. Particularly pleasing is the continued strength in AdHoc's dollar-based net retention rate, which remains north of 100%. This past fiscal year saw a significant transformation for the Secure Communications division, with both the sale of the Silence business and significant restructuring to right-size the cost structure.

That said, the team has remained laser-focused and delivered a very solid year with both reliable revenue, significantly improved profitability, and stable underlying metrics. Touching briefly on licensing, licensing revenue came in above guidance at $8.6 million, driven by a stronger-than-expected revenue from pre-existing arrangements. For a year of significant change, I'm pleased that BlackBerry as a whole was able to maintain focus and deliver a solid top line of $534.9 million. As we move into fiscal year 2026, I am confident that the team will continue to deliver results. With that, let me now turn the call over to our CFO, Tim, who will provide further details on our financials. Thank you, John, and good morning, everyone. As John mentioned, revenue for QNX in the quarter exceeded the top end of guidance at $65.8 million and came in at $236 million for the full fiscal year.

QNX gross margins in the quarter remained strong at 83%, and for the full fiscal year, were 84%. Adjusted EBITDA in the quarter was $19.2 million, or 29% of revenue, and $59.1 million, or 25% of revenue, for the full fiscal year. Revenue for Secure Communications in the quarter was $67.3 million, or $272.6 million for the full fiscal year. Gross margins in Q4 were 64%, and for the full fiscal year 2025, 66%, both lower primarily as a result of revenue mix. Adjusted EBITDA for Secure Communications in the quarter was $12.6 million, or 19% of revenue, significantly beating the top end of the guidance range, with the division's operating expenses being $2 million lower than the prior quarter.

Adjusted EBITDA for Secure Comms for the full year was 19% of revenue at $52.3 million, a stark comparison year-over-year from the cybersecurity division, which included Silence, that had a significantly negative adjusted EBITDA in fiscal 2024. Secure Communications is a solid source of both EBITDA and cash flow generation for BlackBerry as a whole. Finally, our licensing division delivered stronger-than-expected revenue at $8.6 million. Q4 adjusted EBITDA for licensing was $1.4 million as a result of the resolution of a legacy contract dispute that caused a one-time bad debt expense, driving higher-than-expected OPEX. The full year, licensing delivered strong results, with total revenue of $26.3 million and generating adjusted EBITDA of $15.8 million. The adjusted operating costs for the significantly streamlined corporate functions came in at $12.1 million in Q4 and $43 million for the full fiscal year.

The costs were higher than expected due primarily to a $3 million charge for revaluing deferred stock units, given the strong BlackBerry share price performance in the quarter. Pulling this all together, and primarily due to product mix, as I described, total company gross margin in the quarter decreased both sequentially and year-over-year. However, total company gross margin for the full fiscal year improved 9 percentage points to 74%. In Q4, total company adjusted EBITDA beat the top end of our guidance range at $21.1 million, representing 15% of revenue. For the full fiscal year, adjusted EBITDA for the total company, including Silence, was $39.3 million. Adjusted net income, including discontinued operations for Q4, was $17.7 million, and adjusted EPS beat expectations at $0.03. For the full fiscal year, adjusted net income, including discontinued operations, was $12.5 million, and adjusted EPS also beat expectations at $0.02.

BlackBerry exits FY25 in a solidly profitable position, a significantly different company to this time last year. A few points on the accounting relating to the Silence sale. As John mentioned, at closing, we received approximately $80 million in cash, the first of two tranches, as well as 5.5 million common shares in Arctic Wolf. The shares are recorded at estimated fair value under accounting rules, the method determining which can be highly judgmental for private companies. Our estimate is conservative, and we have recorded them at a value of $24.6 million. The second tranche of cash, of approximately $41 million, receivable next January, will initially be recorded at $38.6 million in the books due to the discounting for the time value of money. This past quarter, the company meaningfully strengthened its balance sheet.

Cash from operations was $42 million, significantly exceeding expectations and $57 million better than in the same quarter of the prior year. In fact, excluding the patent sale proceeds in Q1 of FY24, this was the strongest operating cash flow performance since Q4 of fiscal 2021. Total cash and investments increased by $144 million during the quarter as a result of the Silence sale proceeds and the strong operating cash flow to $410 million. This means that BlackBerry now has a solid net cash position in excess of $200 million. This healthy cash balance and a strong plan to generate cash in FY26 and beyond provides BlackBerry with significant optionality.

Turning now to financial outlook for the first fiscal quarter and the full fiscal year, we expect revenue for QNX in Q1 to be in the range of $51-$55 million, and for EBITDA to be in the range of $2-$6 million. Due to the timing of auto programs, we typically see sequential growth throughout the fiscal year, with Q1 being the low point. For the full fiscal year, we see an uncertain backdrop within automotive. Given the recent tariff changes, and particularly automotive tariffs, like others in the industry, we are currently uncertain of the impact this could have on our business. While we currently do not see that tariffs will directly impact our products and service, we do expect some indirect effects on BlackBerry due to impacts to our customers, including supply chains and macroeconomic demand, although these effects are currently difficult to model.

That said, because we work with almost all major OEMs across the globe, we are mitigated to some extent from U.S.-specific impacts, given that approximately 50% of QNX's revenue comes from outside North America. Due to this uncertainty, we are reiterating the top end of our guidance range provided at our investor day in October, but expanding the bottom end, such that we expect revenue in the range of $250-$270 million for the full year, or 10% growth at the midpoint. Despite this broader range, we continue to expect full-year adjusted EBITDA to be in the range of $55-$60 million, or a 22% margin at the midpoint. We are taking a prudent view on the Secure Comms division, given the uncertainty in its core government markets at this time.

This includes the potential impact of DOGE and other parts of the administration in the U.S., and changes in governments in Canada, Germany, and elsewhere. We're obviously tracking the ever-changing landscape, and while we haven't yet seen any material impacts, we're keeping a close eye on things. These changes could potentially cause disruption in the short term, but could also present opportunities in the long run through further consolidation of products and vendors. Given this backdrop, we expect revenue to be in the range of $50-$54 million in the first quarter, and for EBITDA to be between $3-$6 million. For the full year, we expect revenue to be in the range of $230-$240 million. Currently, ARR represents a significant portion of this expected range at $208 million. Adjusted EBITDA is expected to be between $34-$44 million, a 17% margin at the midpoint.

Profitability for the Secure Communications division remains the top priority. We are increasing our expectations for revenue for our licensing division to be approximately $6 million each quarter, up from the prior $4 million expectation, with EBITDA of approximately $5 million per quarter. We expect adjusted corporate costs to be approximately $10 million a quarter, or $40 million for the full fiscal year. At a total company level, we expect revenue in Q1 of between $107-$115 million, and adjusted EBITDA in the range of break-even to positive $7 million. For non-GAAP EPS, we expect it to be between minus $0.01 to break-even in the first quarter. For the full fiscal year, we expect revenue for BlackBerry in total to be in the range of $504-$534 million, adjusted EBITDA between $69-$84 million, with adjusted EPS between $0.08 and $0.10.

Finally, in terms of cash, as in the past, Q1 is expected to be a seasonal low for cash flow, driven by the billings and payments profile. Therefore, we expect an operating cash usage for Q1 in the range of $20-$30 million. However, for the full fiscal year, we expect to deliver positive operating cash flow at around $35 million. This figure includes a number of one-time factors that decreased what would otherwise have been a stronger conversion of EBITDA into operating cash flow. The one-time factors, totaling approximately $20 million, include payment for multiple years of already accrued corporate income tax in Europe, the ongoing cash cost of restructured facilities that we have exited but the lease has not yet expired, as well as the tail end of severance costs from actions taken this past year, particularly in international locations where the process takes longer.

These impacts will gradually drop off as the year goes on, and the second half of this fiscal year is expected to deliver solid operating cash flow. In addition to operating cash flow, we will also add approximately $40 million from the second tranche of cash from the Silence sale, meaning a further $75 million of cash will be added to the balance sheet this coming fiscal year. With that, let me now turn the call back to John. Thanks for the summary, Tim. Now, before we move to Q&A, let me quickly summarize the key takeaways from this past year. Fiscal year 2025 was truly transformative for BlackBerry. We identified and swiftly addressed the challenges that the Silence business presented for the company through a win-win transaction with Arctic Wolf.

We increased focus and external visibility by increasing the level of autonomy in each of our divisions and providing their EBITDA as part of our financial statements. Finally, we evaluated our capital allocation priorities, shifting focus to our core growth driver of QNX and reducing our cost run rate by more than $150 million. This transformation positions BlackBerry as a profitable, cash flow positive company heading into the new fiscal year. Let's now move to Q&A. Rob, could you please open up the lines? Yes, thank you. We will now begin the question and answer session. To ask a question, please press Star 1 on your telephone keypad. Please make sure your line is unmuted. Again, press Star 1 to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions.

We request that you limit yourself to one question and one follow-up. Thank you. Now, our first question will be from Paul Treiber with RBC Capital Markets. Please proceed with your questions. Thanks very much and good morning. Just a question on tariffs and what you've seen or heard from auto OEMs. Can you just elaborate on some of the comments you made in the prepared remarks and if you've had any comments from OEMs in terms of changing production or other changes to new vehicle introductions as a result of the uncertainty around tariffs? At this point, Paul, we have not seen any conversations that we've had with any of our large customers that said, "Hey, I'm seeing a real supply chain problem." We talk with them every day. We keep our finger on the pulse of everything that's going on.

As we said, I think a large part of more than 50% of our revenue comes from things outside of the U.S. I think we're insulated to a certain degree to this particular dynamic. As you can imagine, it's a very fluid situation, but we haven't had any kind of calls of a significant call down in supply chain at this point. Just a follow-up just in regards to the overall uncertainty in the market, but looking at U.S. Federal, can you just remind us again how large U.S. Federal is as a percent of secure communications? Then just speak to if you've heard from any agencies either cutting seats or looking to cut seats at this point. U.S. Federal is a substantial portion. I would say probably 20%-25% of our overall secure comms business comes with the U.S.

Federal business, and we have not seen any material impact. In fact, I think sometimes we've certainly seen some uncertainties where some of our renewals and our contracts, they were coming down the line and they decided to move forward with them because I think the nature of the products that we provide are secure, mission-critical communications. I think they're very careful and cautious before they cut things like that. There's a lot of other waste and things for them to focus on. Another area that we watch very, very closely, but we haven't seen any material impact to that part of our business, primarily because the nature of what we provide to them is mission-critical, and those are things I think they're a little bit more cautious about. Thanks for that clarification. I'll pass the line.

The next question is from the line of Todd Coupland with CIBC. Please proceed with your questions. Yeah, good morning. I had two QNX questions. Firstly, what are the OEMs saying in terms of how long it'll take to work through adjusting to the tariff impact? I think, Todd, they're still navigating their way, quite honestly. They are kind of taking direction from what's happening in the marketplace. Like I said, there's nobody that's flagged, "Hey, we're going to have a material downtick in our overall supply chain and volumes throughout the year." Certainly, the uncertainty of everything is something that has them on alert, let's put it that way. Nobody, like I said, has raised the flag of a material downturn on it.

It's just everybody trying to read the tea leaves on where this thing is going in the future and what the impact will be. In terms of your own guide, what have you assumed in terms of how long it'll take to work through the tariff overlay? What I'd say, Todd, is it's pretty difficult to model right now. I mean, obviously, we've broadened our range to reflect the uncertainty right now. We've kept the top end in line with what we presented at Investor Day back in October. We still see a path to that, but clearly, there's some uncertainty. We broadened the range a little bit. Right now, it's a little bit difficult to model. My second question relates to the 50% of your business that's outside the U.S.

Could you just talk about those regions and what are the levers or drivers to that business in the coming year? Thanks a lot. Yeah. I would say, Todd, we're bullish about the prospects and the momentum, the conversations that we're having with our customers outside the U.S. and, quite frankly, inside the U.S. This whole vehicle OS initiative that we're working with a lot of our OEMs, particularly in Europe, where they're looking for us to do more for them, how we can support them more, how we can bring more value, provide more technology and services. I would say the conversations that we're having with the industry in general, very robust, very strategic. We're at the center of what they are planning for strategically, and I think it sets us up for some interesting opportunities in the future.

I'd just add to that that one of the key focuses for this current fiscal year that we're going into is expanding beyond automotive. We're investing heavily in what we call the GEM, General Embedded Market Opportunity, which is adjacent verticals such as medical, industrial, this type of thing, which we see massive opportunity as well. That's another way of continuing to diversify this business and expand the TAM, which obviously, in a period of volatility, is a good thing. Thank you. The next question is from the line of Trip Chowdhry with Global Equities Research. Please proceed with your question. Thank you. I think you guys are really executing very well like a startup. You're a lot of progress. I have two questions. Maybe it's more like a comment.

If we look at everybody's talking about tariffs, I think if we look and position BlackBerry as more like the new steel company, because if you look at the future, every vehicle is now software-defined, and QNX is right at the center of it when we come to software-defined vehicles. They are pretty much a North American company. I think they are headquartered in Texas. I think the effect of tariffs, if positioned well for QNX, could be a little less severe. That's one comment. Second, as Tim rightly mentioned, expanding the market of QNX to adjacent spaces is, I think, a very smart move. This is more of a comment because it seems like robotics or physical AI is starting to gain some traction, and probably QNX can find its way because it's a real-time operating system into this new domain.

Just two comments and was wondering if you have any thoughts on it. And congratulations on really putting your heart and soul into making BlackBerry shine again. Thank you so much. Thanks, Trip. Thank you for those observations and the question. As Tim mentioned, we are leaning heavily into one of our big investment areas for the QNX business this year is in the GEM space. We are seeing some real interesting pipeline and some real interesting opportunities coming our way as we take that SDP 8.0 platform, which requires very, very little modification to adjust and adapt to other segments of the market. We have been investing in go-to-market. We have been investing in the brand. We have been investing in sales professionals on the ground driving these relationships forward.

That's a big part of our plan for this next fiscal year, as well as managing and going up the food chain on our main segment of the market from an automotive perspective where we're going deeper with our customers. That's absolutely part of the plan for us in this coming year. Very good. Thank you. Our next question is from the line of Luke L. Junk with Baird. Please proceed with your questions. Good morning. Thanks for taking the questions. Maybe to start, bigger picture, John, hoping you could just double-click on the vehicle OS initiative in terms of what you're seeing initially with OEMs in terms of scope. In other words, could it maybe expand the number of addressable models with a given customer or something similar to that?

From a content standpoint, just your ability and maybe early learnings around what the content opportunity might look like relative to your current royalty opportunity per vehicle. Thank you. Yeah, thank you, Luke. Thanks for the question. Both of those specific areas are places where we see opportunity. We consistently see a lot of OEMs trying their own thing on the software front, working with other platforms, looking maybe at Linux as a solution, and then very quickly pulling back and coming to us and talking to us about how we can expand and help them on different models and help them as they plan for their future going forward. I think whether that's in the U.S. or in Europe, we definitely see a lot of OEMs kind of coming back to us, asking us how we can help them do more.

That is certainly one trend that has been pretty consistent. The other is expanding our content as these vehicles. I know it is a journey as they put more content and more DCUs and more sophistication in the vehicles. That obviously plays very well to more instances of QNX in each of these vehicles coming out off the line. That is a trend that we only see increasing going forward. It is definitely a journey. I do not think it is a switch that they flip and suddenly you see the impact of that in the current fiscal year. It is definitely a trend that plays to the strength of our QNX brand, our QNX capability, and the position that we have in the market. Okay. If I can just add just a couple of comments on there. I mean, I totally agree with all of that.

I would just add that this is an ask that's coming from the OEMs for us to do more. To be able to take some of that heavy lifting of pre-integrating a bunch of undifferentiated parts of the stack, deep down in the stack on their behalf, this is something that they really want us to help with. Us working with people like TT Tech and Vector to make sure that we get a really solid native experience and a platform is something that really is going to help OEMs focus on the areas of the stack that they really need to be focusing on. That's the application layer. To your point about the content per vehicle opportunity, this could be a significant transformation. We obviously need to secure some of this business.

I want to just caution, we're still in the early innings on this. Clearly, if we're providing our components, our middleware components, as well as reselling some of our partners' components, that could be a significant step up in terms of content per vehicle. That is all good color. Yeah, stay tuned and appreciate the additional clarity there, Tim. For my second question, just relative to DOGE risks and new administrations that you mentioned in a couple of countries, just how should we think about either, I don't know if this is a major factor, capability of secure communications contracts across your various business lines, or maybe more importantly, just typical contract terms and materiality of renewals in any given year? Any just guardrails or rules of thumb we can think of? Thank you. Yeah. It's something, Luke.

We watch very closely with all the dynamics that are going on. I would say a couple of things. A lot of our contracts with some of these governments around the world, they're long-term agreements. Our Canadian agreement, how we're positioned well with the German government, the U.S. A number of, most, I would say, of all of the U.S. is we're very much infiltrated and integrated and a sticky part of their mission-critical communications. We do think it's unlikely that suddenly they're going to flip a switch and all of a sudden rip out some mission group for the sake of saving a few dollars. In fact, if anything, I think there might be opportunities for us to consolidate because we play such a mission-critical role. There could be opportunities to replace other vendors and expand our position with some of our solutions.

Definitely a long journey, but I think the long entrenched, sticky relationships that we have with these governments around the world are going to serve us well at a time where there's a little bit of unknown volatility. I'll leave it there. Thank you. Thank you. I would now like to turn the call back over to John Giamatteo, CEO of BlackBerry, for closing remarks. Thank you, Rob. And thanks for everybody for joining the call. Very excited about the progress that BlackBerry is making and the transformation that we've executed on in the past fiscal year. We feel we're very, very well set up for future growth and future acceleration as we go into the next fiscal year. Thanks for your interest. Thanks for joining. We'll see you next time. This concludes today's call. Thank you for your participation.

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