BlackBerry (BB) Q1 2024 Earnings Call Transcript

BlackBerry (BB 1.80%)
Q1 2024 Earnings Call
Jun 28, 2023, 5:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon and welcome to the BlackBerry first-quarter fiscal year 2024 results conference call. My name is Andrea, and I will be your conference moderator for today's call. During the presentation, all participants will be in a listen-only mode. We will be facilitating a brief question-and-answer session toward the end of the conference.

[Operator instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn today's call over to Tim Foote, vice president of BlackBerry investor relations. Please go ahead.

Tim Foote -- Vice President, Investor Relations

Thank you, Andrea. Good afternoon and welcome to BlackBerry's first-quarter 2024 earnings conference call. With me on the call today are Executive Chair and Chief Executive Officer John Chen and Chief Financial Officer Steve Rai. After I read our cautionary note regarding forward-looking statements, John will provide a business update and Steve will review the financial results.

We will then open the call for a brief Q&A session. This call is available to the general public via call-in numbers and via webcast in the investor information section at blackberry.com. A replay will also be available on the blackberry.com website. Some of the statements will be making today constitute forward-looking statements and are made pursuant to the Safe Harbor provisions of applicable U.S.

and Canadian securities laws. We'll indicate forward-looking statements by using words such as expect, will, should, model, intend, believe, and similar expressions. Forward-looking statements are based on estimates and assumptions made by the company in light of its experience and its perception of historical trends, current conditions, and expected future developments, as well as other factors that the company believes are relevant. Many factors could cause the company's actual results or performance to differ materially from those expressed or implied by the forward-looking statements.

These factors include the risk factors that are discussed in the company's annual filings and MD&A. You should not place undue reliance on the company's forward-looking statements. Any forward-looking statements are made only as of today, and the company has no intention and undertakes no obligation to update or revise any of them except as required by law. As is customary, during the call, John and Steve will reference non-GAAP numbers in a summary of our quarterly and full-year results.

For a reconciliation between our GAAP and non-GAAP numbers, please see the earnings press release published earlier today, which is available on the EDGAR, SEDAR, and blackberry.com websites. And with that, I'll turn the call over to John.

John Chen -- Executive Chairman and Chief Executive Officer

Thanks, Jim. Good afternoon, everybody, and thanks for joining the call today. Let me start with the IoT business unit. Revenue for the quarter was 45 million, and gross margin remains strong at 80%.

Revenue came in lower than expected for two main reasons. The first related to a number of leading industry players that are revising their development plans as they step up their software-defined vehicle efforts. This has caused some program to be delayed. While seeing our customer placing a higher priority on the SDV transition is a good thing for both QNX and IVY, the delay rolled out of QNX Development Seat license has therefore pushed our revenue this quarter.

So, this was purely a timing issue. As we have outlined in the past, from quarter to quarter, design phase revenues will fluctuate depending on the timing of large design awards and when the award begins. However, while we haven't seen any weakening of the strong secular trends driving the business, we remain confident in our ability to win new designs. The second factor is the macro environment, which has impacted some regional production volumes and, with it, royalty revenues.

As has been the case in recent quarters, the impact appears to be mixed across OEMs and geographies. While production in China in the early part of this year was much softer than expected, elsewhere in North America, Europe, Japan, and Korea, output continues to look relatively steady, helped, of course, by an easing of supply side constraints. We will closely monitor the situation and assess for any potential impact for the year. And at this time, we continue to expect to achieve the full-year revenue consensus for IoT.

Further, we are reiterating the 18% to 22% three-year revenue kicker that we provided in our Analyst Day last month. These targets are based on a number of factors, including our strong QNX backlog, which we reported as being 640 million at last fiscal year-end; our pipeline of upcoming potential design wins; and our assessment of ongoing secular trends. A data point that illustrated those trends and our leadership position in the market is our annual vehicle count. TechInsights, a leading technology analyst -- analysis -- sorry, a leading technology analysis and market research firm, has published that QNX is now embedded in over 235 million vehicles, a year-on-year net increase of 20 million, or 9%.

When compared to annual global vehicle production, this supports a growing market share for QNX. Excuse me. QNX remains the foundational software of choice for leading automakers and Tier 1 suppliers around the globe as we continue to add new design wins. In the quarter, QNX had seven design wins in auto and seven in general embedded market verticals.

In auto, we continue to secure design wins in the digital cockpit domain. This fast-growing domain has largely led the way in consolidating various software stacks onto a single high-powered ship in a car. This quarter, we recorded wins with two of the top five global automakers. The first win includes our real-time operating system, as well as a hypervisor and acoustic middleware.

The second win will deploy two instances of QNX, supporting the digital cockpit and main body domain, both running on high-performance compute engines. We also secure win with a leading U.S.-based EV automaker with multiple instances of QNX being deployed. QNX, in that case, will support a Sono and central compute architecture, including the digital cockpit and the vehicle telematics. These wins demonstrate how we expanded both the number of domains deploying QNX and the number of layers of QNX deployed in each of the domain.

Outside auto, we recorded winds supporting a range of different applications. In industrial, we secure an ADAS platform for heavy industry machinery and requires both our hypervisor and OS for safety. We also secure wins for industrial testing and control, including a next-generation controller for use in marine and aerospace applications, and a win with a leading global household appliance -- sorry, household appliance manufacturer for production line testing equipment. In medical, wins include medical eye laser equipment with a leading surgical technology manufacturer.

These designs in operational technologies, like medical and industry -- industrial, sorry -- in medical and industrial demonstrate our ability to win in this very large and growing market. These protocols are showing similar trends to auto, including significantly higher compute at the edge and a need for complex, safety-critical software stacks, which is where QNX is the market leader. On the product front, last month, we announced the early access release of our next-generation kernel. This is a significant step change for QNX.

The new release helped deliver significantly higher performance and particularly scaling almost linearly as the number of cores on the underlying chip increase up to 64 cores. While safety and reliability are essential parts of the QNX value proposition, it is also a leading performance in complex compute stack that helps differentiate us from our competitors. This release will position QNX to support the future of rapidly increased compute power at the edge for many years to come. Moving on to IVY.

As branded, we have now released a general availability version of IVY. This is a much more stand-alone version of the product than before, requiring far less support from the IVY technical team. We see this as a significant step forward for scaling our go to market efforts, allowing us to support a much wider range of proof-of-concept trials than before. We are making good progress with building the IVY ecosystem, an important part of the overall value proposition.

This past quarter, we announced an investment in the Michigan-based CerebrumX. Ford, Stellantis, and Toyota are all currently working with CerebrumX, and they offer AI-driven solutions that analyze vehicle data on driver behavior and vehicle health. They harness this data to deliver application such as fleet management and personalized insurance plan. IVY end-to-end edge-to-cloud platform will provide CerebrumX with higher-quality, easier-to-use data in a centralized development environment.

We also announced a go-to-market partnership with a leading automotive cybersecurity firm, Upstream Security. Upstream Security partners with BMW, Volvo, and Renault as they are already protecting over 20 million vehicles against cyberattacks with their VDR, stands for vehicle detection and response platform. This new partnership with BlackBerry will allow them to leverage IVY's edge capabilities to preprocess data in near real time, maintaining cybersecurity while significantly reduce cloud overhead. The strategic decision by BlackBerry and AWS to develop a primarily edge-based architecture is proven to be the right call, especially as some cloud-only players, such as WEJO and Autonomo, have struggled to achieve profitability.

Turning now to the cybersecurity units. Revenue for the quarter was 93 million, representing 6% sequential growth. Like many others in this market, we have seen -- we've also seen delays from elongated sale cycles, with additional layer of approval compared to previous quarter slowing our ability to convert our growing pipelines into revenue. That said, a leading indicator for revenue for this business is billings.

And this quarter, we booked total contract value, or TCV, billings of 122 million, significantly higher than revenue for the second consecutive quarter. TCV billing grew for the four consecutive quarters with 14% sequentially and 37%, three seven, 37% year-on-year growth. This growth was anchored on multiyear deals in our core government vertical where we continue to have a lot of success. In the quarter, we closed one of the deals that slipped from Q4 with the other two still progressing well and likely to close later in the year.

We also see two new large potential deals in government that will enter the pipeline. Given this pipeline and billings momentum, we expect to achieve full-year revenue consensus and expect TCV billings for the year to be in the range of 430 million to 480 million. Finally, we are reiterating the three-year revenue growth CAGR of 9% to 12% that we call -- that we gave at our Analyst Day. Gross margin for the quarter improved to 60%, which is 700 basis points higher than the prior year, largely due to product mix.

In addition, the decline in ARR slowed and came in at 289 million. This trend is encouraging as we remain on track for ARR to return to sequential growth in the second half of this fiscal year. The dollar-based net retention rate, or DBNRR, also stabilized at 81%. As a reminder, DBNRR doesn't include new logos.

As mentioned in the quarter, we secured new renewed -- new, renewed, and expanded business with a number of leading government institutions. These include Shared Services Canada, Transport Canada, the Canadian House of Commons, the U.S. Special Ops Command, the U.S. Navy, the U.S.

Army Corps of Engineers, the White House Communications Agency, and the U.S. Transportation Security Administration, or known as TSA. Outside North America, we secured business with the French Ministry of Defense, the German State Police, the Netherlands Ministry of General Affairs, the New Zealand Ministry of Foreign Affairs, and the British Transport Police, just to name a few. We also closed business in healthcare and financial services, including John Muir Health, Kaiser Permanente, and Hartford HealthCare, and a number of leading international banks.

On the channel front, a critical element of scaling our SMB go-to-market presence, this quarter, we saw promising sign of progress from our renewed channel programs. In North America, deal registration and new logos brought by the channel increased significantly both sequentially and year over year. Turning briefly to product. Leading independent test lab, The Tolly Group, recently performed an assessment of a number of endpoint protection platforms, EPPs, including CylanceENDPOINT, Microsoft Defender, and others, and tested performance for detection rates, CPU utilization, and total scanning time.

CylanceENDPOINT came out on top with a market leading 98.9% detection rate, both online and offline, while also using the lowest amount of CPU capacity. In comparison, competitors allow between 9 to 52 times more malware through than Cylance. Moving now to licensing. The past quarter, we were pleased to have closed the deal with key patent innovations for the sale of the noncore portion of the patent portfolio.

The deal includes an initial 170 million cash payment, which we have received, and the deal value could total as much as 900 million over time. KPIs have already started to ramp up their monetization activities, including adding to their experience team by hiring executives and patent lawyers, as well as starting to engage with potential licensees. That said, it would take some time to be fully ramped up, and we do not expect any meaningful additional revenue from the sale to be recognized this fiscal year. Under the terms of the deal, we retain ongoing revenue for any licensing arrangement in place prior to the sale, and in this quarter, this was 17 million.

We expect revenue to be approximately 5 million per quarter for the remainder of this fiscal year. Let me now hand the call over to Steve who will provide more color on our financials. Steve?

Steve Rai -- Chief Financial Officer

Thank you, John. As usual, my comments on our financial performance for the first quarter will be in non-GAAP terms unless otherwise noted. Total company revenue for the quarter was 373 million. IoT revenue was 45 million.

Cybersecurity revenue was 93 million. And licensing revenue was 235 million. Software product revenue as a percentage of total revenue remained in the range of 85% to 90%, with professional services forming the balance. The percentage of software product revenue that was recurring remained at approximately 90%.

The 235 million of licensing and other revenue represents the 17 million of revenue from preexisting arrangements that John mentioned earlier and 218 million relating to the patent sale. More details will be available in our 10-Q. Related to this, 147 -- there was 147 million of intellectual property assets previously classified as held for sale on our balance sheet, which were sold as part of the transaction. Accordingly, with the sale completed in Q1, these were reclassified to cost of sales.

Total company gross margin was 48% and 22 percentage points higher when excluding the patent sale. Operating expenses for the first quarter were 145 million. These non-GAAP operating expenses exclude a 22 million fair value expense on the convertible debentures, 10 million in amortization of acquired intangibles, 8 million in stock compensation expense, and 5 million in restructuring expenses. Both the non-GAAP operating profit and non-GAAP net profit for the first quarter were 35 million.

The $0.06 non-GAAP basic earnings per share for the quarter beat expectations. Adjusted EBITDA, excluding the non-GAAP adjustments previously mentioned, was 41 million. Total cash, cash equivalents, and investments increased by 91 million to 578 million as at May 31st, 2023. Net cash generated from operations was 99 million.

The cash generated from the patent sale strengthens their balance sheet and helps finance the plans for profitable growth. Given the macroeconomic backdrop, we remain selective on potential investments and remain committed to significantly reducing the level of EPS loss and operating cash flow usage this fiscal year. That concludes my comments, and I'll turn it back to John.

John Chen -- Executive Chairman and Chief Executive Officer

Thank you, Steve. Before we open the line up for Q&A, I'd like to touch on an announcement we made in May regarding the strategic review of our portfolio. Our strategy is clear. We have a robust operating plans for both our business units to address their large and growing market opportunities.

In addition, we see potential upside to the thesis from the convergence of cybersecurity with the IoT. Indeed, McKinsey recently issued a report on this trend of convergence and named Blackberries as being well positioned to capitalize on what they estimate to be a $750 billion TAM. We believe that's executing -- we believe that executing against the strategy hitting our three-year targets, and achieving profitable growth will generate significant shareholder value. Notwithstanding, the board and management are constantly focused on optimizing shareholder values and have therefore asked a questions to whether there are alternative approaches for delivering greater shareholder returns, for example -- for example, by means of the two businesses operating as stand-alone companies.

As per our press release on May 1st, we have engaged leading investment bankers, Morgan Stanley and Perella Weinberg, and establish an -- as well as established an internal program management office to support this review, and I could tell investors that there was a lot of activity ongoing. Although the review is in the early stage, a lot of progress has already been made, and the team is focusing on performing a thorough process as quickly as we practically can. It wouldn't be appropriate to provide further commentary until the board has approved a specific outcome or has terminated its review. That ends my prepared remarks.

Andrea, could you please open the line for Q&A?

Questions & Answers:

Operator

We will now begin the question-and-answer session. [Operator instructions] And our first question will come from Luke Junk of Baird. Please go ahead.

John Chen -- Executive Chairman and Chief Executive Officer

Hi there. 

Luke Junk -- Robert W. Baird and Company -- Analyst

Good afternoon. Thanks for taking the questions. First question I want to ask about IoT, so you cited some temporary delays to the start of new programs as a few of your customers review their software-defined vehicle plans. Guess what I'm trying to understand is how close you are to these customers as they made that change and your level of confidence that this is solely a timing issue versus something that could be more disruptive.

And related to that, should we be thinking about the low end of full-year guidance, or where would you expect to be within the guidance range given this result?

John Chen -- Executive Chairman and Chief Executive Officer

OK, a good question. So -- so, from the design delay, is usually -- we base our forecasts on the project being awarded to us, mostly. So, it is embedded into our $640 million backlog that we announced. So -- so, we already won the design.

That's why we're expecting the developers -- Development Seat. So, we have very high confidence and very close contact with these customers. And these are, you know, the huge, big customer name around the world. So, I feel comfortable with that.

There are, of course, design wins that may get affected in Q2, 3, and 4, but we wanted to make sure that we see that first before we make the adjustment. I personally believe that there might be some minor shifting of time frame, but -- but nothing that we expected to not winning it, or I don't actually expect it -- that it will be delayed for too long. So, that's that -- that question -- what is the...

Tim Foote -- Vice President, Investor Relations

The outlook, John, would it be toward the bottom end of the guidance?

John Chen -- Executive Chairman and Chief Executive Officer

Well, Tim has looked at the -- the consensus number. And when we look at our range and our forecast, we feel comfortable with the consensus number. And I don't know what is high or low end.

Tim Foote -- Vice President, Investor Relations

Towards the lower end.

John Chen -- Executive Chairman and Chief Executive Officer

OK. But I think you -- you estimate it based on the consensus number. That -- that should be reasonable for now.

Luke Junk -- Robert W. Baird and Company -- Analyst

OK. Thank you for that. And then, for my follow-up, I want to stay within IoT. John, could you just comment on the level of engagement that you've seen since IVY's GA release earlier this month? I'm curious both with respect to OEMs and Tier 1 partners.

If you could comment in, is there anything that has surprised you in the first month post-release? Thank you.

John Chen -- Executive Chairman and Chief Executive Officer

From the IVY?

Tim Foote -- Vice President, Investor Relations

Yeah.

John Chen -- Executive Chairman and Chief Executive Officer

I would rather not tell you the number of PoC that's requested or ongoing, but is -- it's reasonably significant. I'll just leave it as that. So, very high-level interests. Usually, IVY runs into the competition.

And IVY is quite unique right now in the market. The competition that we run into is a -- is the -- is the customer themselves. They believe that they could -- they could build or they are building a data and analytics platform that may not be as much as the edge to cloud, maybe it's mostly cloud implementation. But once they see the simplicity of our solution and a number of application that we have lined up and we'll continue to line up, this is almost like building an app store for the car.

They wanted a lot of them, wanted to cast IVY under the PoC and then -- and then make a determination whether that they should continue doing their own or they come to us. Some of them already decided that they are coming with us. So, that's -- that's to the extent that I could comment on.

Luke Junk -- Robert W. Baird and Company -- Analyst

I will leave it there. Thank you very much.

John Chen -- Executive Chairman and Chief Executive Officer

Sure.

Operator

The next question comes from Mike Walkley of Canaccord Genuity. Please go ahead.

John Chen -- Executive Chairman and Chief Executive Officer

Hello there.

Mike Walkley -- Canaccord Genuity -- Analyst

Hi. Hey, Tim. Hey, John. Switching gears maybe to the cybersecurity business.

With the fourth consecutive quarter of -- of billings growth, can you share a little bit more color just what's driving the improving billings, or maybe more specifically, what solutions in the portfolio are some of these multiyear government contracts choosing?

John Chen -- Executive Chairman and Chief Executive Officer

I think there's a number. First of all, you know we had a challenge -- we had two challenges in the past. You've got one challenge, is the SME for the UEM challenge where they were -- they were leaving us, and there was a lot of churn in that. And that churn over the quarters -- over the time is now stabilized.

So, that's number one. Number two, on UES, the Cylance product line, as you know, we were having trouble integrating it, and we did integrated it, and then we caught up on the EDR technology. We're now winning bakeoff. So -- so, we're comfortable with that, and the customer is now seeing that.

So, our renewal rate are now trending up nicely, and that is -- and winning new -- new logo by replacing, you know, kind of the legacy folks in the SMB market. And that's why I also commented on the channel. The channel does bring us a lot more businesses than used to do. So -- so, those are the second part of it, the reason.

And then, on -- on -- we have a growth, although now based on a little smaller number, for both ad hoc for the critical event management software, as well as the secure -- secure communications software. And they are typically tied to government, and government problem is that it takes a long time. So -- but -- but -- but they're -- that they are all -- they're all very high renewal rate, very high. In fact, we seldom ever lose one, would be a rare for us to lose the renewal, and we're winning new ones, but that takes time as I said.

So, I feel that all the four components mix up our cyber offering are all, you know, building some level of momentum. And you're raising -- or addressing some of the issue, the pain point that we had.

Mike Walkley -- Canaccord Genuity -- Analyst

Great. That's very -- very helpful. And maybe just a follow-up question, just going back to IoT and your -- your big pipeline there. I know tough on the Development Seat timing, but as these new design wins turn to production, what are you thinking about in terms of revenue uptick in terms of what you -- what you're getting today from current royalties?

John Chen -- Executive Chairman and Chief Executive Officer

Oh, so, the first set of revenue that we're going to get or the design win that we had is to develop -- Development Seat. You know, as they get into a very strong development cycle, typically, every -- every OEM will buy more seats. And so, that's number one. And then, they sometimes will require professional services' help which we also offer to -- to make sure they get to use the QNX in the most efficient way.

So, those are the second one. Typically, an SOP, which is the start of production, on a design win, three to four years from the day we win it. But you see that I think that was going to accelerate probably because of competition from China and some of the other Asian countries like Vietnam. And so, they would -- they will -- I think they will compress the cycle.

And so, that's kind of -- I don't know what I answer your question, that's kind of where we expect the revenue will come in. So, the 640 million are literally beyond the -- this is only royalty. This is -- this is not -- doesn't include professional services, doesn't include Development Seat. So, we will eventually get all that -- hopefully get, if not all, the majority of the 640.

And we, of course, will continue to grow the 640.

Mike Walkley -- Canaccord Genuity -- Analyst

Right. Well, thanks for taking my questions, and congrats on finalizing the licensing sale.

John Chen -- Executive Chairman and Chief Executive Officer

Thank you.

Operator

The next question comes from Paul Treiber of RBC Capital Markets. Please go ahead.

John Chen -- Executive Chairman and Chief Executive Officer

Hi there.

Paul Treiber -- RBC Capital Markets -- Analyst

Oh, hi, John. Good afternoon. The -- I'm going to apologize upfront for asking an accounting question, but just on the -- can you explain the high-level reason for the revenue recognition on the patent sale? You received 170 million cash, and you're recognizing 218 million. What's the reason for the difference there?

John Chen -- Executive Chairman and Chief Executive Officer

I could ask Steve to tell you because I think we should recognize a lot more, but -- but my accounting gurus all said that this is -- this is the right proper, constrained revenue. I think they use the word constrained. I -- I have never used that term before, but I'll let Steve answer the question of how this come about.

Steve Rai -- Chief Financial Officer

Sure. So, as we -- we disclosed the -- the details of the -- of the terms of -- of the deal, there's a -- you know, beyond the initial payment of the 170 million, which -- which we did receive, there's -- there's a -- there's a fixed amount that's due no later than -- than, you know, a few years out, and then there's some also a royalty component as well. So, it's those other elements, in a -- in -- in short, that under the accounting framework where, you know, the fixed piece, obviously, there's some discounting there that you apply to kind of net present value it back. And then, you know, only a very small component of the -- just the very near term, on the -- on the royalty component.

So, the rest, obviously, will -- will be recorded in -- in future periods when -- as the amounts become known over the next several years.

Paul Treiber -- RBC Capital Markets -- Analyst

In the -- the -- the earnout process or the future royalty, like, is it a risk-adjusted measure, or like, how do you -- how do the accountants arrive at that number?

Steve Rai -- Chief Financial Officer

There's a -- basically there is, you know, a lot of factors that go into it, and there is -- there is some risk weighting in it, but -- but by no means does the accounting framework, you know, allow you to kind of look at the full stream and -- and value the full stream over the remaining period. So, it's -- it's -- don't -- don't think of it as a -- as a fair value because the accounting does not represent the -- the -- the full fair value of the sale.

Paul Treiber -- RBC Capital Markets -- Analyst

OK. That's helpful to understand. Just in terms of cash flow, though, the -- if you take out the patent sale this quarter, cash flow from operations was negative. You know, what -- what were the headwinds to cash flow this quarter?

Steve Rai -- Chief Financial Officer

Our first -- I mean, at the beginning of the year, you know, usually, that our typical profile is -- is to have net cash usage in the early part of the year. So, in that regard, you know, if you -- if you remove the amount related to the IP sale, it's -- it's a similar profile to -- to what we've -- we typically have over the course of the year and then -- and then generate in later periods.

John Chen -- Executive Chairman and Chief Executive Officer

And, Paul, it's driven by -- mainly by bonuses for last year, so-called VIP payment and compensation.

Paul Treiber -- RBC Capital Markets -- Analyst

OK. Good to know. The last question, I'm not sure you can answer it, but I'll throw it out there. This -- this arbitration in regards to the patent sale, you know, any -- any comments there, or any -- any sort of outlook on -- on that?

John Chen -- Executive Chairman and Chief Executive Officer

Well, we -- it's -- it's -- it's something that I shouldn't comment on. I think the lawyer won't like me to comment on it, but there was no merits to it. And we will -- we will fight vigorously, and I don't think you need to worry about it.

Paul Treiber -- RBC Capital Markets -- Analyst

Thanks for taking the questions.

John Chen -- Executive Chairman and Chief Executive Officer

Yeah.

Operator

The next question comes from Daniel Chan of TD Cowen. Please go ahead.

John Chen -- Executive Chairman and Chief Executive Officer

Hey. Hi there.

Daniel Chan -- TD Securities -- Analyst

Hi, John. On the -- the new software-defined vehicle plans, you mentioned that there is timing differences, but just wondering if there's any changes to the scope of those programs that could either generate potential upside to what you originally had agreed to them.

John Chen -- Executive Chairman and Chief Executive Officer

Yeah, will you or any one of the people in your firm gone to the MotorTrend event in CES in Vegas this beginning of the year? And the reason I asked that question is because nearly every OEM, you know -- we should try to get tickets for you guys in the future -- nearly every OEM is having a SDV plan, software-defined vehicle. So, yes, the scope are expanding. We just don't want to get overly, you know, carried away with our estimates, but the scope is definitely expanding. It is truly a timing thing.

We, in particular one case, we're relying on some really good developer seats that didn't come in, and that was purely a timing issue because they wanted to step up the program. And there is some very visible public thing -- public announcement I -- that they are -- OEM -- major OEMs are reorganizing -- reorganizing some of their efforts and step up some of the car release days because the software. There are at least a handful of them, but I -- you know, because they're all my customers, I prefer not to mention here.

Daniel Chan -- TD Securities -- Analyst

OK. That's helpful. Thanks for that. And then, on the cybersecurity side, the billings that you want, any color on whether -- or how much of those were renewals versus new business? Thank you.

John Chen -- Executive Chairman and Chief Executive Officer

Oh, that's interesting. I don't have it. We could have Tim follow up with you. I don't -- I don't have the breakdown of the 122.

Daniel Chan -- TD Securities -- Analyst

OK, thanks. Just looking for some color on how much of that is just backfilling, you know, contracts that have expired versus how much of the --

John Chen -- Executive Chairman and Chief Executive Officer

I would tell you, the biggest -- the biggest one that was the most significant one was an extension of multiple number of years and also expanded the footprint of a number of licenses. So, in that case, it's the both -- it's both.

Daniel Chan -- TD Securities -- Analyst

Great. Thank you.

John Chen -- Executive Chairman and Chief Executive Officer

Sure, of course.

Operator

The next question comes from Trip Chowdhry of Global Equities Research. Please go ahead.

John Chen -- Executive Chairman and Chief Executive Officer

Hey, Trip.

Trip Chowdhry -- Global Equities Research -- Analyst

Hi, John. Congratulations, very good backlog and billing numbers. I have a question in terms of IVY. You have a very strong machine learning models for Cylance.

And I was wondering, is there a way using maybe some transfer learning or some other secret sauce that this intellectual horsepower you have in the -- in the Cylance machine learning products we could transpose it into IVY? And if so, that would be great. Any thoughts you may have on that end?

John Chen -- Executive Chairman and Chief Executive Officer

Yeah, we -- we, like every company, we obviously are looking at this plan, you know. So, first off, our threat hunting, our group, has always used AI, and -- and we -- we recently just offer the threat hunting services to customers. So, in a -- in a way, that -- it's all AI-driven model. It's like forum -- four generation of that and we got billions -- so, we got literally billions of malware profile and the experience that we build a -- we build a model based on the machine learning.

So that's -- that's -- so, you probably see that being a push. Now, as -- if other AI capability going into products, we haven't finalized that. We're in a more in a -- in a business of going through it, in the process of going through it, except I wanted to kind of -- we want to make sure that we don't generate too much of a -- review too much of our internal model, you know, when we go into the open AI world. So -- so, we're -- we're in, literally, in that kind of internal analysis of it, and we also are waiting for the government.

I think the government will have something to say about how -- how the -- how the AI allow to use and not allow to use in the product because we're very sensitive to governments. We -- we're a big provider of -- of system or software to -- to governments around the world, so we've got to be very careful that we don't run a file with their -- with their rules. So, those are the -- I have people working on both, developing the product as well as understanding the policy.

Trip Chowdhry -- Global Equities Research -- Analyst

Very good. A follow-up on the same IVY and battery management system, which is very critical component of the modern electric vehicle. And again, you have technologies, like in Cylance, and I was wondering if you may have thought about using the machine learning models that you already have. Maybe it needs to be trained on a different set of datas to automate maybe battery management system for some performance enhancements which could literally differentiate yourself.

And maybe you will be the only player who can offer, in software-defined vehicles, complete intelligence in the battery management solutions. Any thoughts on that? And that's all for me.

John Chen -- Executive Chairman and Chief Executive Officer

Yeah, yeah, Trip, our -- our lab people will know a lot more about that. And we, of course, will -- will try to take advantage of it too, you know, from a business side, but it's -- it's not something that we have deep into yet, but that's a good suggestion.

Trip Chowdhry -- Global Equities Research -- Analyst

Thank you so much. Very good.

John Chen -- Executive Chairman and Chief Executive Officer

All right. Thanks, Trip.

Operator

The next question comes from Todd Coupland of CIBC. Please go ahead.

John Chen -- Executive Chairman and Chief Executive Officer

Hey, Todd.

Todd Coupland -- CIBC World Markets -- Analyst

Hey, John. I was wondering if you could talk about the expected quarterly cadence of IoT and cyber. What does it look like for Q2 and then the back half of the year?

John Chen -- Executive Chairman and Chief Executive Officer

I don't wholly provide a quarterly outlook, Todd. That's a good one. You know, given the environment out there, I think we should be a little bit more cautious short term. And -- but the year, as I said, we feel good about our pipeline and all the deals that we're working on, particularly the government deals from the cyber side.

We're waiting, you know, for the -- the OEMs on the vehicle side to kind of release their -- their development schedules, so to speak. So -- so, those are the two major things that we have to look forward to, look at, you know, examine very carefully, and watch very carefully. So, I would say I expect Q2 to be probably a little better than Q1. And then, I expect second half, as I said, particularly in the cyber side, I expect the ARR to return to positive sequentially.

Todd Coupland -- CIBC World Markets -- Analyst

OK. Appreciate that. And then, what are your thoughts on your contract extension which is -- which is coming up this year? I know you've talked about it in the past. If you have anything incremental to say there, would be interested.

Thanks a lot.

John Chen -- Executive Chairman and Chief Executive Officer

It's -- it's -- Todd, it's a little complicated with the Imperium project. I'm waiting for kind of where the Imperium comes up with, then -- then I will kind of make my own decision of what I wanted to do. But it's all in good hands, so don't -- don't worry about it. And it's -- I told the board let's wait for where the Imperium project is at, and then we'll just make that decision.

Todd Coupland -- CIBC World Markets -- Analyst

Right. And you'd indicated there was a lot of -- lot of activity around -- around that project. Would you expect it still to take at least the summer before you get your initial findings, or can it happen sooner than that?

John Chen -- Executive Chairman and Chief Executive Officer

I -- my guess, will take -- you know, because we have a lot of effort going on in, you know, when you -- when you look at separating the business, you have to look at the -- separating the income statement. That's the easy one. Then you have to separate the -- the balance sheet, and then you have to look at the tax side of the equation. And then, you have to look at what the market offer and not offer.

And, you know, there's a -- there's just a ton of thing that when -- when you cannot just skip it. And so, I still expect this to be the end of summer-type thing.

Todd Coupland -- CIBC World Markets -- Analyst

Yeah, OK. Appreciate that color. Thanks a lot.

John Chen -- Executive Chairman and Chief Executive Officer

Absolutely.

Operator

I would now like to turn the call back over to John Chen, executive chair and CEO of BlackBerry, for any closing remarks.

John Chen -- Executive Chairman and Chief Executive Officer

I don't have any closing remark. Thank you, everybody, for participating. I'm always confident in the fact that you are in the East Coast, and -- and then -- you know, it's late for you folks and I appreciate it. So, I'll talk to you guys more and, hopefully, sooner in the next quarter.

If not, at least, next quarter. Thank you all very much. Have a good evening.

Operator

[Operator signoff]

Duration: 0 minutes

Call participants:

Tim Foote -- Vice President, Investor Relations

John Chen -- Executive Chairman and Chief Executive Officer

Steve Rai -- Chief Financial Officer

Luke Junk -- Robert W. Baird and Company -- Analyst

Mike Walkley -- Canaccord Genuity -- Analyst

Paul Treiber -- RBC Capital Markets -- Analyst

Daniel Chan -- TD Securities -- Analyst

Trip Chowdhry -- Global Equities Research -- Analyst

Todd Coupland -- CIBC World Markets -- Analyst

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