BlackBerry Ltd. Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Closed the win-win transaction with Arctic Wolf for the sale of Cylance, receiving cash and shares, and retaining patents and tax losses.
• QNX division had strong performance with revenue beating guidance, royalty backlog growth to ~$865 million, and design wins in automotive and other verticals like medical, rail, and aerospace/defense.
• Secure Communications division executed solidly with revenue exceeding guidance, renewals and expansions with government agencies, and stable underlying metrics despite cost review.
• Licensing division had revenue above guidance due to stronger-than-expected pre-existing arrangements.
• Fiscal year 2025 was transformative with cost reduction exceeding $150 million, positioning BlackBerry as a profitable and cash-flow-positive company heading into fiscal year 2026.

Segment Performance

• QNX Division: Q4 revenue was $65.8 million, beating guidance; full-year revenue was $236 million. Q4 gross margin was 83%, full-year gross margin was 84%. Adjusted EBITDA in Q4 was $19.2 million (29% of revenue), and full-year adjusted EBITDA was $59.1 million (25% of revenue).
• Secure Communications Division: Q4 revenue was $67.3 million, exceeding the top-end of guidance; full-year revenue was $272.6 million. Q4 gross margin was 64%, full-year gross margin was 66%. Adjusted EBITDA in Q4 was $12.6 million (19% of revenue), and full-year adjusted EBITDA was $52.3 million (19% of revenue).
• Licensing Division: Q4 revenue was $8.6 million, beating guidance; full-year revenue was $26.3 million. Q4 adjusted EBITDA was $1.4 million, and full-year adjusted EBITDA was $15.8 million.

Guidance

• QNX: Q1 revenue expected to be in the range of $51 million to $55 million; full-year revenue expected to be in the range of $250 million to $270 million (10% growth at midpoint) with adjusted EBITDA in the range of $55 million to $60 million (22% margin at midpoint).
• Secure Communications: Q1 revenue expected to be in the range of $50 million to $54 million; full-year revenue expected to be in the range of $230 million to $240 million with adjusted EBITDA in the range of $34 million to $44 million (17% margin at midpoint).
• Licensing: Q1 revenue expected to be approximately $6 million per quarter with EBITDA of approximately $5 million per quarter.
• Total Company: Q1 revenue expected to be in the range of $107 million to $115 million with adjusted EBITDA in the range of breakeven to positive $7 million; full-year revenue expected to be in the range of $504 million to $534 million, adjusted EBITDA in the range of $69 million to $84 million, and adjusted EPS in the range of $0.08 to $0.10.

Risks

• Uncertainty around automotive tariffs and their indirect impacts on customers, supply chains, and macroeconomic demand.
• Uncertainty in core government markets for Secure Communications, including potential impacts from changes in US and other governments, which could cause short-term disruption but present long-term opportunities for consolidation.

Question and Answer

Q: Comment on tariffs and what BlackBerry has seen or heard from auto OEMs.

A: At this point, no material supply chain problems have been seen from large customers. More than 50% of QNX's revenue comes from outside North America, providing some insulation, but the situation is fluid.

Q: What are OEMs saying in terms of how long it'll take to work through tariff impact and drivers for non-US business?

A: OEMs are still navigating tariffs, and conversations with customers outside the US are robust. BlackBerry is focusing on a vehicle OS initiative and the general embedded market (medical, industrial, etc.) as drivers for non-US business.

Q: Talk about the vehicle OS initiative and content opportunity.

A: OEMs are seeking BlackBerry's help with vehicle OS, and as vehicles become more sophisticated, there's an opportunity to expand content, though it's a journey and not immediate in impact.

Q: Discuss DOGE risks and Secure Communications contracts.

A: Long-term contracts with governments are unlikely to see cancellations due to mission-critical nature. There's potential for consolidation as BlackBerry plays a mission-critical role in secure communications, even with government changes and uncertainty.