BlackBerry Limited Q2 FY2026 earnings call

Management Statement and Operational Highlights

• Q2 revenue was $129.6 million, up 3% YOY. Adjusted EBITDA was 20% of revenue, and GAAP net income was positive for the second consecutive quarter at $13.3 million.
• QNX delivered 15% YOY revenue growth and 32% adjusted EBITDA margin, achieving a rule of 40 quarter. Had design wins in ADAS, automotive partnerships, and progress in verticals like robotics and medical instrumentation.
• Secure Communications saw reduced customer churn, deals with German government and Canadian entity, and traction with iOS deployments.
• Licensing had a net new one-time deal, contributing to better-than-expected revenue.

Segment Performance

• QNX: Revenue was $63.1 million, representing 15% year-over-year growth. Adjusted EBITDA margin was 32%. Driven by strong royalties and design wins, including a mid-eight-figure deal in China for ADAS applications and partnerships with BMW/Qualcomm. Gross margins were 83%.
• Secure Communications: Revenue was $59.9 million, exceeding guidance. Annual recurring revenue (ARR) grew to $213 million, and dollar-based net retention rate (DVNRR) improved to 93%. Saw reduced customer churn, deals with government entities, and traction with iOS deployments.
• Licensing: Revenue was $6.6 million, better than expected with a net new one-time deal.

Guidance

• Raised full-year QNX revenue guidance to $256-270 million (midpoint increased by $3 million) and adjusted EBITDA to $64-73 million (midpoint increased by $11 million).
• Raised full-year Secure Communications revenue guidance to $239-247 million and adjusted EBITDA to $38-48 million.
• Licensing guidance unchanged at approximately $24 million revenue and $20 million adjusted EBITDA for full year.
• Total company revenue guidance raised to $519-541 million and adjusted EBITDA to $82-101 million for full year 2026.
• Expect positive cash flow for remainder of fiscal 2026, with Q3 operating cash flow expected $10-20 million and full-year $35-40 million.

Risks

• Uncertain macro environment impacting the automotive market.
• Long sales cycles for Secure Communications government deals.
• Tariff uncertainty and challenges in software development remaining complex.

Question and Answer

• Q: Question about operating leverage in QNX and China market approach.

A: Tim discussed leverage from gross margins and OpEx, noting potential improvement as royalties increase. John talked about China market shifting towards safety-critical software due to recent incidents.

• Q: Outlook for QNX back half and auto market prioritization.

A: Tim mentioned back-end loading due to design work timing, with Q2 coming back well and pipeline solid. John noted stabilization and momentum in the auto market as OEMs maintain guidance.

• Q: QNX backlog and growth sustainability.

A: Tim discussed backlog volatility but positive Q2 progress. John talked about pipeline strength, diversification into GEM, and progress in various verticals supporting sustainable growth.