BlackBerry Ltd (BB) (Q2 2025) Earnings Call Transcript Highlights: Strong Revenue Growth and ...
Total Revenue: $145 million, exceeding the upper end of the guidance range of $144 million.
IoT Revenue: $55 million, representing 12% year-over-year growth and 4% sequential growth.
Cybersecurity Revenue: $87 million, 10% year-over-year growth.
Gross Margin: Improved by 1 percentage point sequentially to 82% for IoT; total company gross margin consistent year on year at 66%.
Operating Expenses: Decreased to $99 million, 24% lower than the $130 million baseline.
Non-GAAP Operating Loss: $4 million.
Adjusted EBITDA: Breakeven for the quarter, $22 million better year-on-year.
Non-GAAP EPS: Breakeven.
Operating Cash Usage: Improved by $2 million sequentially to $13 million, $43 million better than Q2 last year.
Annual Recurring Revenue (ARR): Flat year over year at $279 million.
Dollar-Based Net Retention Rate (DBNRR): Improved year on year by 7 percentage points to 88%.
Licensing Revenue: $3 million, gross margins at 67%.
Release Date: September 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
Both IoT and cybersecurity divisions delivered solid year-over-year and sequential revenue growth.
Gross margin improved by 1 percentage point sequentially to 82% due to favorable product mix.
Secured significant design wins in automotive and other sectors, including Advanced Driver Assistance Systems (ADAS) and digital cockpit solutions.
Achieved breakeven ahead of plan for non-GAAP EPS and adjusted EBITDA.
Cash used by operations came in better than expected, improving by $2 million sequentially to $13 million.
Negative Points
Development seat revenue remained subdued due to delays in automaker software development programs.
Cylance endpoint security business experienced churn in its customer base, leading to a year-over-year decline in revenue.
Annual recurring revenue (ARR) for the cybersecurity division remained flat year over year at $279 million.
Dollar-based net retention rate (DBNRR) for the cybersecurity division, although improving, is still not at desired levels.
IVY auto software program delays have impacted potential revenue, with no material revenue expected in the near term.
Q & A Highlights
Q: What magnitude of opportunity does QNX containers and the HaleyTek integration and launch open up on that side of the business? How can we think about new product unlocking design wins? A: (Tim Foote, CFO) Containers are part of the ongoing expansion of the TAM. As we move QNX towards the cloud, safety-certified containers are a natural evolution. The traction from the cloud side and the productization of what we did with Stellantis are significant. HaleyTek's integration of QNX Sound into their digital cockpit architecture is another step in expanding QNX content in vehicles.
Q: The Q3 guidance implies a modest sequential increase for cyber before a sharper increase in Q4. Is there anything specific to consider this year? A: (Tim Foote, CFO) At the midpoint, it's a continuation of the trend. Traditionally, Q4 is strongest for us from a billing standpoint. Sequential growth is expected through Q3 and Q4.
Q: Can you reconcile the EBITDA progression with the full-year guidance being maintained at breakeven to $10 million? A: (Tim Foote, CFO) We're being prudent with our guidance. Q1 was negative 7%, and we achieved breakeven ahead of schedule in Q2. Sequential improvements are expected from Q2 into Q3 and Q3 into Q4.
Q: Can you elaborate on the organizational changes in IVY and integrating it more into the QNX organization? A: (John Giamatteo, CEO) We invested heavily in IVY and reached a point where operational efficiencies could be gained by integrating the team with QNX. This leverages synergies in sales and R&D while maintaining progress on the platform.
Q: Could you provide an update on the separation process and what's remaining from an operational perspective? A: (John Giamatteo, CEO) We've made significant progress in aligning resources to the BUs. Some components within networking and cyber protection solutions are more intertwined and take longer to unravel. We're balancing operational agility with cost efficiency.
Q: Are there structural differences in profitability between the two organizations as you untangle them? A: (Tim Foote, CFO) The separation process has allowed us to take a fresh look. More details on divisional profitability will be provided at the Investor Day on October 16.
Q: Was the higher mix of license revenue a major driver of the upside relative to guidance in cyber? A: (John Giamatteo, CEO) It was a combination of license and hardware, particularly from Secusmart and German customers. The durability of the UEM business and ad hoc business also contributed to the broad-based achievement.
Q: Any potential impact from the proposed ban of Chinese auto software and hardware? A: (Tim Foote, CFO) We're watching closely. QNX is well-diversified geographically and industrially. Being a Canadian company puts us in a more neutral position, but China remains an important market.
Q: How should we think about the impact of delayed or canceled design programs on potential royalty revenue? A: (Tim Foote, CFO) The work has not gone away; it's a question of timing. The secular trends are still there, and we have $850 million in backlog. We're confident that the industry trends will continue to drive progress.
Q: What changed over the last three months to reverse the momentum in ARR for cybersecurity? A: (John Giamatteo, CEO) The year-over-year ARR was relatively flat. The variability is likely due to Cylance churn, offset by positive trends in UEM and ad hoc. Long-term stability is improving.
Q: Is the improvement in net revenue retention due to better upsell and cross-sell or reduced churn? A: (John Giamatteo, CEO) It's a combination of both. Good upsell in ad hoc and UEM, offset by some Cylance churn. The overall trend is stabilizing and moving in the right direction.
Q: Can you elaborate on the adoption of managed services in Cylance and its impact on revenue? A: (John Giamatteo, CEO) The product-only segment of Cylance has seen sluggishness, but the managed services (MDR) segment has shown good pipeline and conversions. The shift to MDR is offsetting some of the product-only segment's weakness.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.