BlackBerry Limited (BB) Earnings

Management highlights

### Overall Business Trajectory - The company has transitioned from cost restructuring to profitable value creation, delivering a strong start to fiscal 2027 with both QNX and Secure Communications meeting Rule of 40 performance targets. - Positive operating and free cash flow was achieved even during the seasonally low first quarter, with a strengthened balance sheet providing capital allocation flexibility. - Management emphasizes focus on long-term shareholder value rather than quarter-to-quarter performance, noting growth will not be perfectly linear. ### QNX Segment Updates - Q1 development license revenue hit an 8-quarter high, predominantly for the new SDP8 platform, building a foundation for future royalty revenue as customer programs move to production. - Multiple new design wins were secured across automotive (ADAS platforms for a European OEM, driver monitoring systems for a Japanese OEM, multi-domain architecture for a commercial vehicle OEM) and GEM (general embedded markets, including a semiconductor equipment manufacturer and a medical diagnostics customer). - Key long-term growth drivers: GEM (the fastest growing QNX sub-segment, expanding into robotics, industrial automation, medical devices, and physical AI, leveraging QNX's certified deterministic safety and security that unproven open-source alternatives cannot match); AlloyCore, which will move BlackBerry from an OS provider to a full platform provider, expected to increase average selling price (ASP) per vehicle by multiples. - Strategic partnerships with NVIDIA, Qualcomm, Arm, and other silicon leaders continue to strengthen market position and expand sales channels. ### Secure Communications Segment Updates - The segment has stabilized and transformed from a historical headwind to a stable, growing business, with strong Q1 performance driven by a large scaled deployment with Shared Services Canada aligned to the global digital sovereignty trend. - Multiple new wins and renewals were secured across North American (U.S. Air Force, U.S. Cyber Command, White House Communications Agency) and EMEA (UK National Crime Agency, BAE Systems, Bank de France) government, defense, and regulated entities. - Large government deals have long sales cycles and do not occur every quarter, so outsized Q1 growth is expected to be followed by more normalized quarterly performance. ### Capital Allocation - The company continues to execute a disciplined share repurchase program, having bought back 18 million shares for $17 million (average price $3.85 per share) since launch last May. - The program was recently renewed and expanded to allow repurchase of an additional 27 million shares, viewed as an effective use of capital to create shareholder value.

Guidance

- QNX: Full-year fiscal 2027 guidance raised to revenue of $295-$312 million and adjusted EBITDA of $74-$86 million. Q2 fiscal 2027 guidance set to revenue of $70-$75 million and adjusted EBITDA of $16-$21 million. - Secure Communications: Full-year fiscal 2027 growth guidance maintained at 4-8% year-over-year. Q2 fiscal 2027 guidance set to revenue of $57-$63 million and adjusted EBITDA of $5-$10 million. - Licensing: Full-year fiscal 2027 guidance raised to revenue of approximately $29 million and adjusted EBITDA of approximately $25 million. Q2 fiscal 2027 guidance raised to revenue of approximately $10 million and adjusted EBITDA of approximately $9 million. - Total company: Full-year fiscal 2027 guidance raised to revenue of $594-$621 million and adjusted EBITDA of $119-$139 million, with 90% flow-through of incremental revenue to adjusted EBITDA demonstrating strong operating leverage. Q2 fiscal 2027 guidance set to total revenue of $137-$148 million, adjusted EBITDA of $20-$30 million, adjusted EPS of 3-4 cents, and positive operating cash flow between breakeven and $10 million.

Segment performance

1. QNX: Revenue of $72 million, 26% year-over-year growth, contributing 47% of total company revenue. Adjusted gross margin reached 86% (up 5 percentage points YoY), with adjusted EBITDA of $19 million (52% YoY growth, 27% margin). 2. Secure Communications: Revenue of $74 million, 24% year-over-year growth, contributing 48% of total company revenue. Adjusted gross margin expanded 2 percentage points YoY, with adjusted EBITDA of $20 million (27% margin). Annual recurring revenue (ARR) grew 5% YoY to $220 million, and dollar-based net retention rate (DBNRR) was 92%. 3. Licensing: Revenue of $7 million, ahead of guidance, contributing 5% of total company revenue. Adjusted EBITDA was approximately $6 million, providing consistent profitability and cash flow. Total company revenue for the quarter was $153 million, 26% year-over-year growth. Adjusted gross margin was 79% (up 4 percentage points YoY), adjusted EBITDA was $36 million (more than doubled YoY), and GAAP net income was positive for the 5th consecutive quarter.

Risks & headwinds

Forward-looking statements are inherently uncertain, and actual results may differ materially due to a range of factors, which are detailed in the company's annual filings and management discussion & analysis. Geopolitical tensions, particularly related to market exposure in China, are noted as an evolving risk that management actively monitors, though the company believes its technical capabilities create mutually beneficial opportunities for Chinese OEMs exporting technology globally. DBNRR for Secure Communications remains below 100% due to residual headwinds on parts of the portfolio, creating pressure on core recurring revenue growth.

Analyst Q&A

• Q: With Secure Communications delivering consistent sequential growth and large non-recurring government deals boosting revenue beyond the core ARR base, is ARR still a useful metric, and how should we expect recurring and non-recurring revenue trends to develop over the next year? /

  A: Management confirms ARR remains a valuable indicator of the business's underlying stable base, used to manage cost structure and investments. The gap between ARR and annualized revenue comes from large digital sovereignty-focused government deals like the Shared Services Canada contract, which require upfront revenue recognition for infrastructure deployment. These opportunities have long sales cycles, but once a government customer is secured, they become sticky long-term revenue and profit sources, so ARR still reflects core stability while upside comes from converting periodic large opportunities.

• Q: AlloyCore will expand BlackBerry's role from OS provider to full platform provider, significantly boosting ASP per vehicle. Will AlloyCore only target net new vehicle programs, or could it also be retrofitted to existing in-flight programs? /

  A: AlloyCore is primarily geared toward new programs built on the latest SDP8 platform with advanced chipsets and architectures. However, it can be retrofitted to earlier platforms like SDP7 if OEMs choose to upgrade. Some in-flight programs may even be moved early to AlloyCore, which would create an uplift to existing backlog, a meaningful positive outcome for the business.

• Q: How is BlackBerry's competitive win rate in GEM (non-automotive embedded) compared to automotive, and does open source software create meaningful competitive pressure in GEM? /

  A: BlackBerry's decades of experience meeting strict automotive safety, security, and real-time performance requirements gives it a unique competitive edge in GEM, particularly for fast-growing categories like robotics, industrial automation, and medical devices that require the same rigorous standards. Management is disciplined about focusing on these high-value categories, where open source cannot match QNX's certified reliability, and the GEM pipeline is now the strongest it has ever been, with particularly strong opportunities in robotics and industrial automation.

• Q: Can you characterize the digital sovereign Secure Communications pipeline outside of Canada, and what is the long-term target for DBNRR? /

  A: The successful Shared Services Canada deployment has created a blueprint for expansion, with a strong pipeline of similar digital sovereignty opportunities across EMEA and APAC, driven by growing government demand for fully secure, non-public communications solutions. DBNRR currently sits at 92%, and management is working to increase it over time with a long-term target of closer to 100%. The 5% year-over-year ARR growth despite ongoing transformation is seen as a positive early sign of stabilization.