Okay, let's kick it off here. Good morning. Thank you for joining us. My name is Luke Young. I'm the Baird Analyst covering electronic solutions and vehicle tech. It's my pleasure to introduce to you today BlackBerry, a company built around two distinct franchises, QNX, which is the safety certified foundational operating system embedded in more than 275 million vehicles and increasingly as well a broad set of industrial medical and robotics platforms and secure communications with mission critical voice, critical events. Management and Unifor and Edpoint Management Solutions. Pleased to have Tim Foote, CFO, seated to my left and John Wall, President of QMX, joining us for the discussion today. Tim and John, thanks for being here. Why don't we jump right into the conversation. So over the past year, BlackBerry's transitioned back to profitable growth and increasingly your positioning as a software and a QMX-like company. Tim, can you just read how you see the business today? what's changed in the business and more importantly where you see the biggest driver of growth looking out over the next few years?

Yeah, a lot in there. So we've been on a bit of a journey, we've been on a turnaround but I'm here to say that turnaround is complete and Blackberry is now a growth company. So we've done a lot of hard work over the last couple of years since we had a change in the management team to really look at what's working. We took a look at the portfolio, made a decision to sell off a business called Silance, we took a lot cost out of the run rate and ultimately what we've done is we've managed to focus the remaining organization on two key objectives and we've got John here who runs our QNX division, it's a division we're very excited about, we see a lot of runway for growth. I think we're really only just getting started. QNX is a long way to go. But like I said, I think now we've pivoted from value creation, from getting back to profitability through cost reduction, to now looking to get operating leverage from a growing top line. And we've got a lot of secular tailwinds that are really propelling the QNX business in particular but also our secure comms division as well and we think those tailwinds are going to run for quite some time.

So Tim, just bringing that to the here and now in terms of ESCAL 27, if we look at the guidance for QNX revenue you know around 300 million the high end of that range implies 15% growth or sell effectively the EBITDA side of the equation flat at the midpoint as you're reinvesting. Can you just walk us through how you're prioritizing reinvestment versus margin expansion this year? And in terms of upside drivers, maybe what would drive upside both top and bottom lines and go through 27?

Great question. Yeah, so you're right. We're guiding to 15% of the top end, which is our target. Obviously, pricing a little bit of downside risk for things like macro. But at 15%, that's an acceleration of growth for QNX year over year. We were at 14% last year, moving to 15%. And you're right, we could have taken the decision from a capital allocation standpoint this year to kind of harvest the incremental EBITDA that's coming off as a result of that increased top line. But we decided to strategically reinvest in a number of great strategies so we're going to talk about QNX moving up the stack and just being the foundational level with the operation operating system moving up the stack with our new alloy core product which John will talk about more but also a huge opportunity that we see in verticals adjacent to automotive so things like robotics physical AI medical instrumentation industrial automation there's a whole plethora of new markets that we're really quite under penetrated or not even penetrated at all where our product resonates very strongly so we've made the decision to reinvest that into the business because we feel that most value growth from here is really going to come from accelerating that top line and trying to harness the opportunities we see for QNX.

Another lens we can look through certainly in this business is the royalty backlog so you disclose it at the end of the year I think it was around 950 million at the end of fiscal 26 if higher number right it grew about 10% year-over-year you've said that you know certainly more is coming into the backlog than is being recognized on the P&L right now royalties only part of that QNX revenue stream. John maybe you can talk about what is driving that acceleration in terms of new design wins, expansion within existing programs, content per vehicle, some of the major growth drivers in the back.

Yeah, I think the major growth drivers at this point have been more content per vehicle. We're seeing more high performance compute in the vehicle. You know, when we used to think of an ADAS platform, we would think of a single platform of high performance compute. Now there's a smart camera that's attached to it that's yet another socket for us. there's zonal controllers coming into the vehicles there's just more sockets for us to go after within the vehicle but I think beyond that we've designed scale tier 1s that we're seeing and then specifically as Tim mentioned we have alloy core and now we're providing more than the operating system level platform it's logging communication as well as the operating set around this is really has the opportunity currently doing so if you look at the expansion of the number of sockets It's our new initiatives to push higher up the SAC.

Well, I want to revisit a few of those points as we go through the conversation here. But in your return, I'm sure one of the questions on people's minds is just, you know, given that royalty backlog, looking beyond fiscal 27 into fiscal 28 and 29, just what sort of midterm visibility that you have in the business you've been sitting here right now, Tim?

Yeah, so one of the great things about the Q&X business is the level of visibility that we have. compared to a traditional SaaS company where you might really only have a year visibility. When we get locked into a design, we're in that design for three, five, seven, even a decade number of years. So it's a long-term model, which means that clearly we've got a lot of benefit coming from that. Right now, we see an acceleration heading forwards in terms of the amount of revenue that will come out of the backlog on an annual basis. And like you said, in terms of the growth of that backlog, this past year, we added nearly double to the backlog compared to what we took out into the P&L. So if you maintain that kind of ratio over time, clearly we're going to see a significant growth in the amount of royalty revenue you recognize in the P&L each year.

Yeah, and just to remind everyone, if you'd like to ask a question, it's session 5 at rwabair.com. This is also a small room, so if you want to just jump into the conversation, feel free to do that as well. I want to talk about some of these foundational things that you've been investing in and are setting up the story on the Q&X auto side. and certainly want to talk about GEM as well. But on auto, John, you mentioned SDP 8.0 and some of the parameters there. Can you maybe bring it to life in terms of where we are in the adoption curve right now in terms of what you saw in design lens in fiscal 26 and for existing programs, just how customers are looking at that upgrade path on a go-forward basis?

Yeah, I think the changes that we made to SDP 8 versus SDP 7 are significant enough that any new program starting today is going to be an SDP-8 program. And those that started maybe a year ago or two years ago on SDP-7 have a plan to migrate to SDP-8. What we've heard from some of our customers is they could actually downgrade their hardware moving to SDP-8 because they get so much better performance. And that's a very strong equation when it comes to... So it's a value proposition for the customer. So what we see in SDPA, the adoption has been very good.

Can we talk about some of the near-term wins? So I think you had a digital cockpit upsell in the most recent quarter, ADAS systems in Europe with certainly a chip connection there in terms of Paul Kahn as a supplier, and then a tier one supplier award for China on a Chinese SOC. Can you talk about which of these, or maybe all of them, are most representative in terms of where these next legs of growth are coming from? It really touches on some of the things that you mentioned, John, in terms of what's been going into the backlog for a large.

Yeah, I mean, you know, we also mentioned the BMW Noi class, that's a big win as well. I mean, those are all indicative ones, the Camera, Cocted, ADAS, these are all areas, you know, we form strong relationships with silicon partners. so we're winning really across the board within the vehicle and I think that's a representation a small representation the design means that we're winning so one is a smart camera I want to talk about China as well so competitive positioning there it's been a growing piece of the story if you look at the last few quarters China is coming up more and more often in terms of the QNX story, I think the Xera system on SOC award this quarter on the back of some wins in

recent quarters is really showing where that momentum is going.

Can we talk about just the positioning from a high level today, domestic OEMs versus multis in China and how you're competing against local alternatives and what's obviously historically been a pretty price sensitive market yeah i mean uh china is a very unique market it's certainly different from the other markets because editors to qnx i think the way that we've been looking at it is that you know we kind of position qnx as a platform for the world from a safety perspective from a security perspective you know we we often like to position qnx as being switzerland when it comes to selling software so i think we you know we have a we have a better product that from my perspective is with what we're doing is we're trying to work with more local chinese platform similar to what we did with vector for the rest of the world we're working companies to end up bringing more of a platform play try to increase the speed of their deployments a lot of people talk about the speed of china they move faster but they also had no baggage so now they're starting to have baggage they're starting to have cars that are in the market that they have to support. So the platform play that we're doing with Vector is something that we're using more of the Chinese flavor.

You mentioned certainly exports I think are a key part of this. Also just safety certification and maybe if we could unpack that advantage. Your comment John, do you think QNX is the best solution? Just some of the alternatives in China and where you're seeing incremental focus from local Certainly, if there's more of a safety handle around the decision, I would assume that puts QNX in the driver's seat.

It actually gives us an advantage and I think without naming them, I think some of the software players in China are not necessarily well accepted outside of China. And I think that the export marketplace plays a big role in helping us to sell our software in China. I mean, that is how we position it if you, you know, trying to maintain two platforms, a domestic platform and an export platform, which is what they were trying to do in the beginning, I think is very difficult. And so I think it's an advantage for us to kind of be able to sell something they can use domestically.

Okay, well, I've waited long enough. Let's talk about LA core and middleware opportunities. So maybe to just level set, this I think is on track for general release this calendar year. I think John, your CEO, has called it one of the most underappreciated parts of the business. What needs to happen from an execution standpoint between now and your end for that to feel more obvious in the BlackBerry story looking out over maybe the next year or so, John?

Yeah, so we need to have some design with that we can talk about. I think that's the number one piece. from an execution from developing the platform we've got it that's not a problem we're we have a number of customers that have made comments so Mercedes-Benz made a public comment about alloy core we're in the process of a design win today in Europe that we hope that we'll be able to announce in the next two weeks to two months depending on the contract negotiation goes and I think that that's really what's going to help propel this. We've been having, we have a number of customers that we can't name that have a platform, have an early access to the platform and that's both in North America and Europe. So as we can start to announce some of these wins I think this is what's going to really start to bring this to life.

So Mercedes is the one customer you've said that is publicly trialing Alley Corps right now. Can you just talk about that engagement specifically and sort of, you know, how closely you can work with them to drive towards, you know, hopefully a design in the near future?

Yeah, I mean, so we've been talking to Mercedes about this concept and other OEMs for several years. And I think that the thing that's very interesting, and I repeat this, is this is not us trying to push this platform into the market. This was a pull. because, you know, the platform is really a non-differentiating piece of the car. People don't see this part of the system, but it is the foundation of the system and it's where a lot of the car companies have struggled. Performance, stability, and a lot of delays are based on that layer of the platform. So, you know, we feel pretty good that we're building the right platform because we're building what we're being asked to build. So it's not, we're not rolling the dice on a road map here. This is what the customers have asked for. You know, if the customer wants vanilla, we give them vanilla. And in this case, they want more.

Tim, you've said that ASPs here could be, I think your exact quote is, many multiples. Correct me if I'm wrong. Or OS royalties. Just help us understand the economics in terms of some of the drivers of that comment. And then, obviously, there's a little complexity here in that you've got a partner in vector and just the value attribution. I think more of the value, ultimately, is going to land with QNX and BlackBerry, but just maybe any way to contextualize that.

Yeah, from a unit economics perspective, we see this as potentially being transformational. So, selling the real-time operating system, it's a relatively small part of the software stack. It's a critical part, one which we feel very, very passionate about. Obviously, we feel it's got a strong competitive mode. But as soon as we start to move up the stack and take all these other components that John mentioned, start to pre-integrate, safety certify, you're effectively taking a lot of work off the plate of the OEM. And you're actually giving them a superior product as well. It's much more integrated. It's much more robust. so really there's a lot of value to the OEM coming from this we're able to free up a lot of their software engineers to go and work on the pieces that John was saying this is undifferentiated go work on the differentiating things things like the applications how good is your deception engine how good is your infotainment system these are the things that make a vehicle look different to another. So by taking all of this off their hands, and actually we believe even with a significant uplift in unit economics from our perspective, this will actually potentially save money for the OEM. It's a very compelling proposition. In terms of the relationship, yes, the IP is predominantly QNX, so very significantly QNX focused. We all take the form top line and then the share for vector will come through costs of good salt. So in terms of gross margins, we got very strong gross margins in QNX. We're in the low to mid 80s for QNX. We're not going to be too far removed from that for alloy core. It's clearly not going to be quite the same but won't be too far removed. So that's why I say this could potentially be transformational because significant uplift, many multiples of the unit economics just for the operating systems. Yeah.

Can you talk about Vector as a partner? I think maybe there's a mixed knowledge base of who your partner is and just reputationally what they represent as, you know, someone that you obviously had some choice in and chose to work with. Yeah, so we we call Vector a like-minded company.

So Vector is a German company and they provide what's called Classic AutoZar and Adaptive AutoZar. So Classic AutoZar, think of that as a software foundation for brake controllers, engine controllers. They are the dominant force in the world. They work with everybody. And then Adaptive AutoZar is a framework, an application framework for high-performance computing. They're the dominant force so we would we would joke that hey we're in programs together all the time why don't we work more closely and then the industry started saying hey we really need the industry to work more together so we got together at the arm 8 p.m. a few years ago and decided we should give this a go that the teams are integrated it's one software team that's building this and it's been it's been a great experience working but they are a dominant what about the competitive set for this offering?

I mean, should we think about folks like Electrobit and Conti, internal OEM stacks like Karyad, something else, or even is there a competitor for what you're bringing to market right now? So yeah, there's lots.

You mentioned a few. The tier ones are trying to build their platform. Then again, the problem there, you see one of the things when you talk about the Allocor platform, it has all the properties that Tim talked about, really tight integration and high performance etc but it's also a platform they can take from chip to chip and to tier one to tier one and be able to reuse their assets as soon as you get locked in with the tier one you're in their ecosystem and you cannot take what that tier one is built and bring it to another tier one so one of the big advantages of alloy core is to provide a consistent foundation that allows the customer to be able to reuse their assets regardless of the chip and regardless of their integrator. Whether it's a tier one, whether it's just a software integrator, it just gives them a lot of, I would say, flexibility on who they work with.

And Tim, can you just remind us on timing? So, ostensibly, if you get that first design win and hopefully follow-up design wins, we're still probably talking a couple years out in terms of the revenue attribution, is that right?

Yeah, absolutely. So it follows the normal QNX model in such that the really interesting part, talking about this multiples per instance, really comes when the vehicles are being produced. So clearly leading up to that, there's going to be a period of time where there's a development phase, which is exactly the same as you can see for QNX. There will still be some early stage revenue, development C, services, as before, and also a subscription. A subscription to have access to the platform. That's something new that we've not had before. So, but the really interesting part would obviously be multiple concerted production. But what you'll see initially, Luke, is it'll go into backlog. And at scale, this could be really significant for the backlog. Obviously, we've got to get a couple of design wins in the bag, as John says, but once we do, once we do, we'll definitely be talking about the UPAP that has in our backlog, because we believe that could be significant.

Yeah, we'll look forward to that. I want to switch to the other big growth engine within QNX, which is GEM, as you refer to it, or the general embedded market. I think about 20% of QNX revenue today, but I think you've said it represents more like half of the SDP 8.0 pipeline. How should we think about mix looking out a few years from now and maybe more importantly the gating factors driving that via sales capacity, deal size, obviously structurally this is a different kind of market, pipeline conversion, just the main things that you're thinking?

Yeah I mean when we look at the market what we're really focused on today is we decided we're going to go after medical, medical robotics, industrial automation and then robotics and they all share a very strong tie. I was actually at the Boston robotics event last week and I was on a keynote panel And what I learned is that those that are building robots at scale for factory warehouse or warehouse automation have the exact same requirements as automotive, highest levels of safety. These robots, and they're not humanoid robots, we're talking about automated forklifts, skateboards that carry cargo. They need to operate in uncaged environments and they must not do harm to any humans. So we're going to start to see more interaction between the robots and the humans. These are actually, the scale is quite large, these are millions of units. So that looks very good from our perspective. Some of the other markets, industrial automation, yeah the deals are smaller but there's more of them. So I think it's from our side, it's getting more feet on the ground, more sales people that can actually take advantage of these opportunities. The opportunities are there, the world is shifting to high performance compute. everything's getting more automated that requires safety it also the big thing that we see in robotics that is a real feather in the cap for QNX is QNX is a real-time operating system which means it's deterministic what does that mean that means we can react to an event in a very consistent manner same way every time no matter how busy the system is that is essential in robotics that's operating in very tight spaces and has to be able to react to an event and we were told this over and over last week we visited a bunch of customers that determinism is critical in content so I think

that's one of the offsets is you know you mentioned QNX from an RTOS standpoint in automotive you know relatively smaller contribution relative to what you're thinking about for allied or should We think of this being a more content rich environment and I think you've also alluded to the fact that maybe with M&A you could add something that looks like ALEC or but really more positioned on the gem side of the equation.

Yeah, I mean, we're learning. This is a new market. You know, again, what I learned about the robotics market, it's a nascent market. It really is. We see humanoid robotics dancing and choreographed, but the reality of it is it's going to be robots that are automated forklifts, skateboards, to help manufacturing warehouses, etc. We've already started understanding there are a lot of things in common with AlloyCore that they require. There may be some tweaks, there may be some changes, but I think we're going to get to a platform like AlloyCore for medical, for industrial automation, for robotics, much sooner than we did for automotive. I think there's more of a willingness in those markets to embrace a platform that doesn't work for them and for them to really focus on the applications.

Tim, would you touch on the applications under that at all?

Yeah, so one of the things I said earlier that we've done a lot of heavy lifting, we've come back to profitability and also positive cash flow generation. Last year we generated 50 million of operating cash flow. This year we're guiding to doubling that up to 100 million. Our balance sheet's strong. So we do have capacity. What I would say is we've come a long way in terms of getting focus and obviously improving significantly the financials. So any M&A, if we were to do it, the bar's going to be pretty high. It's going to be high on both sides, strategic fit and also the financial profile. And why I say strategic fit is really important. John has got a heck of a lot of opportunity in front of him. We're still in the relatively early innings on the automotive side, and we're really only just getting going on the gen side. huge opportunities in front of us organically we definitely don't want to do is distract from that in any way shape or form however if we can find an acquisition which makes sense that can give us some of that scale critical mass in automotive we're a household name we don't really need to do an awful lot the OEMs come to us in terms of marketing and so on but in general it's a totally a different story. So there might be some ways to fast track that growth. But regardless, I'm very excited about the organic opportunities we've got in products right now.

Yeah, we've got a couple minutes left. A final question on GEM would be chip maker relationships. So a couple months ago, I had an announcement with NVIDIA. Maybe if we could double click on that and then blow that out to, I mean, it's not just a NVIDIA story, No, Qualcomm and whatnot as well.

Yeah, in our regular QBRs with silicon partners, whether it's NVIDIA, Qualcomm, TI, NXP, etc. The move into robotics is to basically take the automotive stacks that they've had and tweak them for the robotics. Because again, the properties are so similar. Safety, security, determinism. So we were able to make an announcement with NVIDIA that the IGX platform, which is their platform for robotics, will be running QNX similar to their AGX platform or their Drive OS for automotive. We're seeing the same thing. We've talked to other Silicon partners. Their plan is to take QNX and position that for the other markets as well. So, you know, we believe the Silicon partners play an enormous role in our success. so we're thrilled that this is kind of where this is going and it really helps us when we get to the customer because again in a lot of these situations customers pick silicon before they pick software. It's starting to change with Alloy Core we will see that will change where it'll be the software platform will be picked first and maintained but traditionally the hardware is picked first.

Well fortunately we are just about out of time for questions here so I'm going to stop it there. John, Tim, thank you so much for the time.

Thank you, everybody.

Thank you very much.