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DATE
Tuesday, June 24, 2025 at 5:30 p.m. ET
CALL PARTICIPANTS
Chief Executive Officer — John Giamatteo
Chief Financial Officer — Tim Foote
Vice President, Investor Relations — Martha Gonder
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RISKS
Management noted macroeconomic uncertainty affecting customer buying decisions, with some automotive customers pulling guidance and potential production volume impacts, which "could impact royalty revenue."
QNX gross margin declined to 81%, attributed to unfavorable exchange rates, specifically due to a weakening US dollar against the Canadian dollar and euro.
Licensing revenue and adjusted EBITDA were both "slightly below expectations due to lower revenue from existing licensing arrangements."
TAKEAWAYS
Total Revenue: $121.7 million, surpassing the top end of guidance in Q1 fiscal year 2026.
Adjusted EBITDA: Adjusted EBITDA was $16.4 million, up over 55% year over year and exceeding guidance in Q1 FY2026.
Adjusted Net Income: $12.3 million in Q1 fiscal year 2026.
GAAP Net Income: Positive $1.9 million GAAP net income, the first positive quarterly GAAP net income in over three years, in Q1 FY2026.
Adjusted EPS: $0.02 non-GAAP earnings per share, above guidance in Q1 FY2026.
Cash Used by Operations: $18 million, including $11 million in restructuring costs (comprised of $6 million employee severance and $5 million for lease payments for exited properties) in Q1 FY2026.
Share Repurchase: $10 million (2.6 million shares at an average price of $3.89 each) repurchased, with a new $100 million buyback program approved in Q1 FY2026.
Cash and Investments Balance: $382 million total cash and investments at quarter end, down $28 million sequentially but almost $100 million higher than the prior year in Q1 FY2026.
Total Company Adjusted Gross Margin: 75%, up 1% year over year in Q1 fiscal year 2026.
QNX Revenue: $57.5 million, representing 8% year-over-year growth and surpassing guidance (non-GAAP) in Q1 FY2026.
QNX Adjusted EBITDA: $12.7 million, above guidance in Q1 fiscal year 2026.
QNX Gross Margin: 81%, slightly decreased due to unfavorable FX in Q1 FY2026.
QNX Pipeline Mix: General Embedded Market (GEM) comprises 43% of the SDP8.0 pipeline, with the overall pipeline growing 55% in Q1 FY2026.
Largest SDP8.0 Design Win: Secured with a leading industrial automation OEM for multiple applications.
QNX Hypervisor 8.0: Launched, providing support for mixed-criticality domains like digital cockpit and virtualized guest OS hosting.
Secure Communications Revenue: $59.5 million, above guidance and driven by SecuSmart sales in Q1 FY2026.
Secure Communications Adjusted EBITDA: Adjusted EBITDA for secure communications was $9.6 million in Q1 FY2026.
Secure Communications Gross Margin: 70%, higher sequentially and year over year in Q1 fiscal year 2026.
Secure Communications ARR: Stable at $209 million, with dollar-based net retention rate (DBNRR) held flat at 92% in Q1 FY2026.
SecuSmart: Drove stronger revenue with early large deals in Germany and pipeline momentum in global defense sectors in Q1 FY2026.
AtHoc: Achieved FedRAMP High authorization and secured multiple US federal and international wins.
UEM: Stable performance; new deals with major clients despite cloud migration churn, maintaining on-premise market strength.
Licensing Revenue: $4.7 million in Q1 fiscal year 2026.
Licensing Adjusted EBITDA: $3.8 million in Q1 fiscal year 2026.
Adjusted Corporate OpEx: $9.7 million, aligned with guidance and excluding amortization in Q1 FY2026.
Updated Secure Communications Full-Year Guidance: Revenue for secure communications is now guided to $234-$244 million for FY2026, up $4 million; adjusted EBITDA to $37-$47 million (16%-19%).
Total Company Full-Year Guidance: Revenue is projected at $508-$538 million; adjusted EBITDA at $72-$87 million; non-GAAP EPS expected at $0.08-$0.10 for FY2026.
Q2 Guidance: QNX revenue is expected in the $55-$60 million range, secure communications $54-$59 million, total company revenue $115-$125 million, adjusted EBITDA $8-$14 million, and operating cash usage of $5-$15 million for Q2 FY2026.
Cash Flow Outlook: Operating cash flow is expected to be positive for the full FY2026 at approximately $35 million.
SUMMARY
BlackBerry Limited (BB 0.23%) achieved higher-than-guided top-line and profitability metrics on a non-GAAP basis for Q1 FY2026, driven by outperformance in both QNX and secure communications. The QNX segment expanded into non-automotive verticals, notably industrial automation, as evidenced by a record SDP8.0 design win and a 43% GEM pipeline mix in Q1 FY2026. Management launched Hypervisor 8.0 and executed a $10 million share buyback as part of a $100 million authorization in Q1 FY2026. Guidance for secure communications and total company revenue and profitability was raised for FY2026, while the near-term outlook for QNX incorporates caution over possible production and royalty headwinds.
Chief Financial Officer Foote said, "QNX gross margins were slightly down at 81%, primarily as a result of the effects of unfavorable exchange rates."
Chief Executive Officer Giamatteo emphasized QNX's traction in autonomous drive, citing the WeRide L2+ passenger vehicle launch and Chery deployments in China.
Management described the growing opportunity in government/defense communications, noting heightened demand for on-premise and data-sovereignty-centric solutions.
Chief Financial Officer Foote stated, "we expect another quarter of cash usage, albeit sequentially lower," but reaffirmed the projection of positive full-year operating cash flow for FY2026.
Management expects licensing upside from Maliki patent monetization no earlier than FY2027.
Guidance commentary included, "We are taking a prudent position for QNX in Q2, given that any slowdown in production volumes in the first calendar quarter as a result of recent tariff changes are likely to impact Q2 royalty revenues."
INDUSTRY GLOSSARY
GEM (General Embedded Market): Refers to non-automotive applications for embedded software solutions, such as robotics, industrial automation, and medical devices.
SDP8.0: The latest generation of the QNX operating system, designed for enhanced performance in high-compute and safety-critical embedded use cases.
SecuSmart: BlackBerry's voice and text encryption solution, frequently used for securing government communications.
AtHoc: Critical event management software platform, now FedRAMP High certified.
FedRAMP High: The highest level of US federal risk authorization for cloud products, required when managing the government's most sensitive unclassified data.
Full Conference Call Transcript
Martha Gonder: Thank you, Julian. Good afternoon, everyone, and welcome to BlackBerry's first quarter fiscal year 2026 Earnings Conference Call. Joining me on today's call is BlackBerry's Chief Executive Officer, John Giamatteo, and Chief Financial Officer, Tim Foote. After I read our cautionary note regarding forward-looking statements, John will provide a business update, and Tim 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 we'll be making today constitute forward-looking statements, 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.
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 Tim will reference non-GAAP numbers in their summary of our quarterly results. For a reconciliation between our GAAP and non-GAAP numbers, please see the earnings press release published earlier today, which is available on EDGAR, SEDAR Plus, and blackberry.com websites. And with that, let me now turn the call over to John.
John Giamatteo: Thanks, Martha, and thanks to everyone for joining today's call. We made a very solid start to fiscal year 2026 with our results beating the top end of guidance almost entirely across the board. Total company revenue for the quarter was stronger than expected, beating guidance at $121.7 million. BlackBerry delivered solid profitability with adjusted EBITDA growing over 55% year over year, and beating the top end of the guidance range at $16.4 million. Likewise, non-GAAP earnings per share beat guidance at positive 2¢. And despite seasonality in our cash flow for the first half of the year, this stronger profitability helped to deliver better than expected operating cash usage of $18 million.
In May, we announced a $100 million share buyback program based on our confidence in our plan to both continue generating cash as well as driving increased shareholder value. During the quarter, we started to utilize the capital allocation optionality that this facility brings by repurchasing $10 million worth of shares. Tim will provide more details on this later in the call. I'll now give some color on how we executed at a divisional level starting with QNX. QNX revenue for Q1 beat the upper end of our guidance range at $57.5 million. This represents 8% year over year growth despite the uncertainty facing the auto market, including the impact of various tariff announcements.
Royalties and development seat licenses were the main drivers of year over year revenue growth for the quarter, growing 923% respectively. We have a strong plan for profitable growth in QNX, capitalizing on both our market position and the multiyear secular tailwinds that are driving this business forward. As part of this, for fiscal year 2026, we have two key strategies that we believe will help drive future growth. These are to both increase the business beyond automotive into adjacent verticals and to increase our share of the automotive software stack by offering pre-integrated middleware as part of a vehicle platform. Starting with increasing diversification beyond automotive, we believe this has a number of benefits.
First, we see a very significant addressable market in the general embedded space, which we believe could be larger than the auto opportunity. Second, although we're very diversified across auto OEMs and geographies, diversification into other markets can reduce cyclical exposures. We're targeting substantial expansion of our beachheads in robotics, industrial automation, and medical devices and equipment. Similar to automotive, these verticals are seeing significant growth in compute and safety-critical software at the edge, which is where QNX really excels. With minimal adaptations to the core QNX code base, we are able to meet the needs of customers, and therefore, we see this as primarily a go-to-market task. Accordingly, we're adding industry and growing our GEM-focused Salesforce.
We're also working towards engaging new channel partners that will greatly increase our reach in these markets. SDP8.0, our next-generation version of the QNX operating system, is progressing well in this market, and we have a strong non-automotive mix in the pipeline. In fact, GEM currently represents 43% of our total SDP8.0 pipeline, with the overall pipeline having grown by 55% in the quarter. Further, our largest SDP8.0 design win to date was with a leading industrial automation OEM. They will deploy the latest version of QNX across multiple applications. These are clear data points that show how our increased investment in GEM is already starting to generate real returns.
The second focus is the QNX vehicle platform that was announced earlier this year at CES. We are developing this product in response to requests from some leading OEMs who have identified the importance of focusing their teams on customer-facing applications rather than spending time on undifferentiated parts of the software stack. Yesterday, we announced a memorandum of understanding with a leading middleware provider, Vector, to provide a highly integrated hardware-agnostic solution that customers can leverage across the vehicle. This builds on an earlier announcement with both Vector and TT Tech at CES in January. The goal is to help our customers simplify development and shorten time to market.
We are in conversations with several OEMs for this solution and are targeting delivery of an early access version of the product this calendar year. We continue to refine the business model for this platform, but should it be successful, directionally, we expect it to provide a significant uplift to our royalty ASP once deployed in vehicles. We were excited to announce the launch of QNX Hypervisor 8.0 at the end of the quarter. The hypervisor is an important part of our portfolio, allowing customers to virtually host guest operating systems like Android and Linux alongside safety-critical applications running on QNX, all on the same chip.
Upgrading the hypervisor to the next-generation performance standards of our SDP8.0 operating system can help cement our leadership position within mixed criticality domains like the digital cockpit. QNX thrives in high-performance safety-critical use cases. Autonomous drive is a great example. This past quarter, we announced that WeRide, a global leader in autonomous drive technology, is using QNX as the foundation for L2+ passenger vehicles. In fact, this technology is already being deployed in a couple of Chery's vehicle models that are on the road in China today. As autonomous drive continues to ramp worldwide, we see this as an exciting opportunity for BlackBerry.
We're working to build the QNX ecosystem through the availability of QNX products for non-commercial use and the development of QNX-centric training programs. We believe that having a stronger community of developers and partners with QNX experience will help drive adoption across OEMs, especially in the general embedded market. This quarter, we initiated a program in India with more than 30 educational institutions developing or currently offering QNX-focused courses. We're also working with institutions in North America with the goal of launching additional courses this calendar year. In terms of the macro, there is clearly uncertainty in the market, which we are currently having to navigate with some of our customers pulling guidance until market conditions become clearer.
While we have not seen any direct impacts from the automotive tariffs, there have been some delays to customer buying decisions due to this macro uncertainty. As the OEMs navigate possible changes to supply chains, there could also potentially be impacts on production volumes, which could impact royalty revenue. We're taking these factors into account in our guidance and will continue to monitor closely as we head through this fiscal year. Moving now to our secure communications division. It was a strong quarter for the division, beating the top end of our guidance range with quarterly revenue of $59.5 million. Annual recurring revenue, or ARR, was stable at $209 million.
Our dollar-based net retention rate, or DBNRR, also remained relatively flat at 92%. These stable fundamentals position the secure communications division well as a solid source of EBITDA and cash flow for BlackBerry. The stronger than expected revenue number was in large part driven by the strength of our SecuSmart product. This was another strong quarter for sales to the German government, where we closed some large deals earlier than expected. In addition to the core German market, the pipeline of potential deals with customers around the world continues to grow, especially where we're seeing significantly increased budgets, particularly in defense.
Governments are increasingly evaluating the tools they use in the wake of vulnerabilities seen in using consumer-focused platforms for critical communications. While sales cycles in governments are typically long, we are optimistic about our ability to close additional deals for SecuSmart this fiscal year. During Q1, AtHoc earned FedRAMP High authorization, the highest level of attainment for safeguarding mission-critical sensitive data within the US federal government. As the first critical event management platform to achieve FedRAMP High, this further strengthens our moat and further expands our addressable market.
During the quarter, we secured wins for AtHoc with several US federal organizations, including the US Marine Corps, US Air Force, Senate, FEMA, the White House Communications Agency, as well as other organizations in Germany and Canada. Moving on to our unified endpoint management product, BlackBerry UEM. UEM continues to perform as expected, with some ongoing churn with customers moving to a cloud-based architecture partially offset by a deepening of our on-premise moat for those customers who particularly value data sovereignty. One of the legacy players in this market has signaled the end of life for their on-premise solution. In contrast, we continue to make targeted investments.
This quarter, we secured deals for UEM with a broad spectrum of customers, including the US Special Operations Command, US Air Force, The UK's Sellafield Nuclear Power Establishment, National Grid, the Qatar National Bank, leading US bank Oppenheimer, and the Netherlands Government Shared Services. These data points increase our confidence in both defending and expanding our UEM on-premise customer base. Touching briefly on IP licensing, this was a solid quarter where revenue from preexisting licensing deals drove the quarterly result of $4.7 million. We understand that Maliki, the party that purchased our non-core patents in 2024, is pursuing a number of potential licensing opportunities. Should they be successful, BlackBerry will participate in the profit they generate.
While we do not expect incremental revenue this current year, it could provide upside in fiscal year 2027 and fiscal year 2028. With that, let me now turn the call over to Tim who will provide further details on our financials. Thank you, John, and good afternoon, everyone.
Tim Foote: As John mentioned, revenue for the total company in the quarter exceeded the top end of guidance, at $121.7 million. On the cost side, this was a quarter of puts and takes. We saw OpEx headwinds from FX, due to a weakening US dollar. A significant portion of our costs are denominated in other currencies, especially the Canadian dollar and euro. However, we also had some items go our way, including approximately $4.5 million of grant funding as a result of our newly reinvigorated partnership with the Canadian government's strategic innovation fund. The fund is to support the development of cutting-edge technology in Canada, and it helped offset some of our incremental R&D investment in QNX during the quarter.
Total company adjusted gross margin expanded by 1% year over year to 75%. And total company adjusted EBITDA beat expectations at $16.4 million. Overall, the hard work the team has done over the past year to implement tight cost controls is really showing benefits. Adjusted net income for Q1 was $12.3 million, and BlackBerry achieved positive quarterly GAAP net income for the first time in over three years at $1.9 million. Adjusted EPS also beat expectations at 2¢. QNX revenue beat the top end of the guidance range at $57.5 million. QNX gross margins were slightly down at 81%, primarily as a result of the effects of unfavorable exchange rates.
Adjusted EBITDA for QNX in the quarter exceeded the top end of guidance, at $12.7 million. Revenue for secure communications exceeded the top end of guidance in the quarter at $59.5 million, primarily as a result of strong performance from SecuSmart. This higher than expected revenue helped drive sequential and year over year gross margin expansion in Q1 to 70%. Leveraging the secure communications model helped the division to exceed expectations for adjusted EBITDA at $9.6 million. Finally, our licensing division delivered revenue of $4.7 million and adjusted EBITDA of $3.8 million, both slightly below expectations due to lower revenue from existing licensing arrangements in the quarter.
Adjusted corporate operating costs, excluding amortization, came in at $9.7 million in Q1, in line with guidance. As previously outlined, Q1 is a seasonal low for cash for BlackBerry. The combination of our billings profile and timing of certain annual cash payments means that the first quarter is always a burn quarter. That said, cash used by operations was better than guidance with the usage of $18 million. This includes approximately $11 million of cash relating to restructuring costs, including $6 million of employee severance, and $5 million for lease payments for properties that we have exited. We expect the cash commitments for these leases to reduce as the fiscal year goes on.
In addition to cash used by operations, we returned $10 million to shareholders as part of the share buyback program. Therefore, total cash and investments decreased by $28 million during the quarter, to $382 million, which remains almost $100 million better than this time last year when the number was $283 million. As John mentioned, we received approval for a share buyback program during the quarter. The program allows for the repurchase of up to $100 million of shares or approximately 4.7% of the number outstanding at the time of approval.
I'm pleased to report that we took solid first steps in this program, repurchasing approximately $10 million or 2.6 million shares at an average price per share of $3.89 before the prior period commenced. These shares have been subsequently canceled. These actions illustrate our belief that BlackBerry shares are undervalued and that we have a strong plan to continue to generate cash on an annual basis. While we are not obliged to repurchase shares, the program will continue to provide capital allocation optionality as we continue through the rest of the year, allowing for further repurchases if the conditions are favorable. Turning now to financial outlook for the second fiscal quarter and the full fiscal year.
Overall, we're not getting carried away with what was a better than expected first quarter. While we are, of course, very pleased to have beaten expectations almost across the board, we don't expect the remainder of the year to look very different from how it did ninety days ago. We are taking a prudent position for QNX in Q2, given that any slowdown in production volumes in the first calendar quarter as a result of recent tariff changes are likely to impact Q2 royalty revenues. We're also allowing for elongated buying decisions for new design wins, especially newer products like QNX cabin.
As a result, we expect revenue for QNX in Q2 to be in the range of $55 to $60 million, and for adjusted EBITDA to be in the range of $10 to $13 million. Despite the uncertainty in the market, we continue to hold our full year revenue guidance range at $250 to $270 million, and adjusted EBITDA between $55 and $60 million. For secure communications, we are optimistic around the pipeline of opportunities we see for the division. We expect revenue for Q2 to be in the range of $54 million to $59 million, and for adjusted EBITDA to be between $3 and $6 million.
We performed better than expected in Q1, primarily due to closing some large SecuSmart deals earlier than expected. We see those deals being replaced in later quarters by an increased pipeline of opportunities. Therefore, we are raising our full year revenue guidance by $4 million such that the range is now $234 to $244 million. For adjusted EBITDA to be between $37 and $47 million or 16 to 19%. For licensing, we reiterate our guidance for revenue to be approximately $6 million, and adjusted EBITDA to be approximately $5 million per quarter. For the full fiscal year, we're holding guidance for $24 million revenue, and adjusted EBITDA approximately $20 million.
We continue to expect adjusted corporate OpEx, excluding amortization, to be approximately $10 million a quarter, or $40 million for the full fiscal year. At the total company level, we expect revenue for Q2 to be in the range of $115 to $125 million, and adjusted EBITDA to be between $8 and $14 million. Given the increased guidance for both secure communications revenue and adjusted EBITDA, we are raising guidance for the total company as well. For the full fiscal year 2026, we now expect total company revenue to be between $508 and $538 million, and adjusted EBITDA to be in the range of $72 to $87 million.
For non-GAAP EPS, we expect it to be between breakeven and 1¢ for the second quarter, and to remain between 8 and 10¢ for the full fiscal year. As mentioned during the Q4 earnings announcement, we expected the first half of fiscal 2026 to be lower than the second half of the year for cash flow as a result of the billings and payments profile, including a number of one-time factors that will drop off as we get further into the year. Due primarily to tax payments falling during the quarter which relate to a number of prior years for countries outside of North America, we expect another quarter of cash usage, albeit sequentially lower.
We expect an operating cash usage for Q2 in the range of $5 to $15 million.
Martha Gonder: But
Tim Foote: as before, we still expect BlackBerry to be operating cash flow positive for the full fiscal year, generating approximately $35 million, which is in addition to the second tranche of cash from Arctic Wolf relating to the sale of Cylance. With that, let me now turn the call back to John.
John Giamatteo: Thanks for the summary, Tim. And before we move to Q&A, let me quickly summarize. Q1 was a good quarter for BlackBerry, with total company revenue, adjusted EBITDA, EPS, and cash usage beating guidance. QNX delivered a better than expected quarter despite the challenging landscape in the automotive industry as our solid strategy to both help our customers execute on their software development goals and to diversify into non-automotive verticals continues to show positive signs of traction. Secure communications performed better than expected from both a top and bottom line perspective in the quarter, and we're raising our guidance for the full year.
With both these divisions performing well, we believe BlackBerry is in a strong position to continue to generate profit and cash over the long term. With this solid foundation, we started to execute on repurchasing shares and have significant runway should it be appropriate to continue buying more. So let's now move to Q&A. Operator, could you please open up the lines?
Julian: Thank you. We will now begin the question and answer session. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We request that you limit yourself to one question and one follow-up. And our first question comes from the line of Todd Coupland with CIBC Capital Markets. Please proceed with your question.
Todd Coupland: I'm doing great. So I want to ask a question on QNX and the macro environment. You talked about how you hadn't seen changes to production schedules but you're anticipating that's going to happen in this current quarter. Is that assumption already being realized in the production schedules you're seeing? Or are you just building in that downside protection into the guide?
Tim Foote: Yeah. So great question, Todd. Ultimately, the Q2 or our fiscal Q2 royalty revenue is a function of production that happens in Q1. So we don't get the final production numbers by model, which obviously impacts how much royalty we're gonna get until into Q2. So we priced in a reasonable amount of risk there, in the guidance that we've given at $55 to $60 million, to allow for some potential disruption that we haven't yet fully seen in those numbers.
Todd Coupland: Yeah. Great. And is there enough clarity in the market at this point to give you more confidence for the rest of the year? Or are you still concerned beyond this quarter about possible production disruptions?
John Giamatteo: I mean, it's a very fluid situation. I think John mentioned that some of our customers have actually stood down their guidance. So the fact that we still got our guidance up shows that we do have a certain level of visibility, but you know, things can change. It's very fluid. I think you priced in a reasonable amount of risk. And when we look at the year, who knows what's gonna happen, Todd? Well, just like you and everyone else, we're gonna have to see how things pan out. But we feel pretty confident that we're not entirely reliant on royalties. We do have other streams as well, you know, the professional services and also development seats.
So we feel pretty good where we're at.
Martha Gonder: Thank you.
Julian: And our next question comes from the line of Paul Treiber with RBC Capital Markets. Please proceed with your question.
Paul Treiber: We lost home.
Julian: Miss Treiber, your line is up for questioning.
Paul Treiber: Okay. We may have lost all that.
Julian: No worries. The next question comes from the line of Luke Junk with Baird. Please proceed with your question.
Luke Junk: Good afternoon. Thanks for taking the questions. I guess, John, want to start with the comments you made on STP8.0, the strong auto non-auto mix in the pipeline and the overall pipeline grew by, I think you said 55% in the quarter. Can you just help us size that, big numbers in percentage terms, but trying to understand how material that is and maybe if you'd be able to square that with the backlog disclosures that you've made for QNX. Thank you.
John Giamatteo: We I don't think we've updated the backlog at all, Luke. I know from the last numbers that we were at $865 million. Without getting into the granularity of the size of the dollar size of STP8.0, I could tell you it is one of the hottest products where we're getting the most interest and the most demand. And it's encouraging to see that it's not just in the automotive space with some of the next-generation applications for but also as we turn more of our attention towards GEM, towards robotics, towards industrial automation, we're seeing quite a bit of appetite for it.
So it's hard to share too much granularity with it other than we're just happy to see that not only is the total pie growing in terms of overall pipeline, but each of the respective pieces of the pie across automotive and the GEM space as well.
Luke Junk: Got it. And then on the share buyback, that being new here, am I think I'm hearing you saying that the approach here is gonna be more opportunistic and that there's not necessarily a strict mandate timing-wise for the $100 million, but to the extent that the stock gives you opportunities zooming into that, can you maybe just talk about your approach to that next?
Tim Foote: Yeah. It's a great question. I mean, we're delighted that we're in a position now to be able to do a buyback. It shows the strength of our balance sheet and the plan going forward. So we're feeling good about that. We ultimately, as good stewards of capital, will consider a number of different factors like cash flow in the quarter, share price, other alternative uses of capital that we might have available, that type of thing. So it's not gonna be a linear thing, I would say. It would just be whatever we think makes the best sense for shareholder value.
Luke Junk: Okay.
Julian: Thank you. And our next question comes from the line of Trip Chowdhry with Global Equities Research. Please proceed with your question.
Trip Chowdhry: Thanks. So congratulations on very good execution. Two questions here. First, I will ask about your wins in the US or the federal defense spending. I was wondering what kind of trends are you seeing and what specific products from BlackBerry are having traction in the defense spend. And the second question I have is regarding a very solid execution and pipeline in QNX. Are there any specific categories of automotive where you are seeing more strength versus the rest, for example, are EVs still having more traction, or is it hybrid? So is it ICE? Any color on that will also be appreciated. Thank you so much.
John Giamatteo: Thanks, Trip. Thanks for the thoughts and the questions. On the secure comm side of it, it really has been an interesting four or five months of the first year with a lot of the geopolitical dynamics around the world. Secure communications and having mission-critical capabilities, we're finding more interest and more use cases than we had, say, this time last year. A lot of it, we're seeing governments not only in the US but in other markets around the world looking at data sovereignty becoming more of a concern for them.
Turning while many, I think governments in the past have been embracing the cloud and utilizing the cloud more significantly, we're seeing a little bit of kind of pullback from that on-premise solutions and how they're protecting the data and the privacy of all their communications across their organizations. So certainly seeing the pipeline growing with these types of on-premise data sovereignty-focused mission-critical communications is encouraging to see the level of interest and how our product portfolio really is a hand and glove fit for some of these new demands. I'll turn it over to Tim maybe to talk a little bit about the QNX momentum.
Tim Foote: Sure. Yeah. No. Great question, Trip. Ultimately, we're seeing demand across the board. But ultimately, QNX thrives where we got high-performance compute. In the vehicles, that typically tends to be towards the top end of the range, the higher kind of higher trims. But EV versus ICE, we tend to be fairly agnostic to that. But one of the really interesting things that John was talking about is autonomous drive. Obviously, there's a fair amount of buzz around that right now. QNX is great for QNX because safety-critical use case, very high compute, it's perfect. It's like ready-made for QNX. So as we see further advances in that, we're hoping to see some increased demand as well.
But generally speaking, it's across the board. The trends are secular tailwinds for the business. Multiyear secular tailwinds, we feel pretty confident about despite any near-term noise and volatility that may come in the market.
Trip Chowdhry: Thank you so much. Congratulations again.
Paul Treiber: Thanks, Trip.
Julian: Thank you. Our next question comes from the line of Paul Treiber with RBC Capital Markets. Please proceed with your question.
Paul Treiber: Thanks very much. Hopefully, you can hear me now.
Tim Foote: Yeah. We got you. We got you, Paul. Yes. Great.
Paul Treiber: Just a question on the US federal government. Did you see any churn related to DoD or any of the reduced procurement decisions there?
John Giamatteo: You know, Paul, we were on high alert on that. You can imagine, since such a significant part of our business does come from the US government. But we really didn't see any kind of material impact from a DoD. As we work through a lot of the different opportunities and a lot of the different renewals, I think one kind of common theme seemed to come back and forth every time we engaged with them. Is that mission-critical communications didn't seem to be at the top of their list of things to slash and burn on. So it was encouraging to see that.
I think that's one of the reasons why our DBNRR or ARR, things like that, held up pretty nicely in the quarter. As we really didn't find any kind of meaningful impact from a DoD perspective. That's good to hear. And second question, just on QNX and the growth that you're seeing in SDP8, the pipeline there, is that on the automotive side, is that additive to the existing pipeline for QNX, or are you seeing some transition from the prior generations of QNX to STP8?
Tim Foote: Yeah. I mean, ultimately, we'll want everyone to migrate over to STP8. Because it's a future-proof platform, and also, it's got an uplift as you can imagine. It's high performance. So there's an uplift for us. So I'd say we're still in the early innings. It's a new product. Pleasantly surprised by the amount of traction we've already had. But, you know, in this market, things tend to move relatively slow because of very long life cycle type projects. So we're pleased with what we've seen so far. And it is a better ASP than the previous versions.
Paul Treiber: Thank you.
Julian: And our next question comes from the line of Kingsley Crane with Canaccord. Please proceed with your question.
Kingsley Crane: Hi, I want to echo
John Giamatteo: Hi, John. How's it going? I want to echo my congrats on a really strong Q1. I just want to ask one thematic one to start out. Curious how you're thinking about the balance between more tightly integrated systems versus more open systems in the software-defined vehicle space right now. Maybe you could compare what you're doing with Vector and TT Tech with S4. Thanks.
John Giamatteo: I'll start and, Tim, you trip in. Yeah. I think, Ken's asked it from a QNX perspective, kind of, what we announced at CES is us, because we have such a pivotal role in the overall operating for this software-defined vehicle, us expanding our role into middleware, into integration, to serve to help them handle the plumbing. And, you know, regardless of who that's interacting, what applications inevitably are interacting with, that's something that we just think it's a natural place for us to play in and for us to add value in terms of helping our customers from a time to market perspective. So, you know, that's one aspect of it.
I think QNX everywhere is another initiative that we think really expands our ecosystem and expands our partnerships with other players. Having them embrace our technology, design around our tech both within the automotive space and outside of the automotive space from a GEM perspective, we think is another just kind of part of our vision of really making QNX available more broadly across all the markets that we serve. So kind of feel like it's all coming together, you know, the operating system moving up the stack into middleware, creating an ecosystem of technology partners, I think, is part of a more comprehensive approach to the markets that we serve.
Kingsley Crane: Right. Yep.
John Giamatteo: Makes perfect sense. And I want to circle back as well to the STP8.0 pipeline. You know, GEM is 43%. That's really encouraging. I guess, like, you know, how would you characterize the quality maturity of that GEM pipeline versus automotive? I'd say that just because you know, I know you're moving more, to make more serious moves, get more beachheads in those markets. So it's great that it's already 43%. Yeah. And it's, hey. To see the whole pipeline grow 55%, that makes us feel good.
Naturally, you know, we've got a deeper presence in the auto OEMs and with their designs and the GEM space is a little more I don't want to say fluid, but it's certainly it's a newer pipeline. These are newer qualified opportunities. It's actually been very encouraging to see some of these mission-critical GEM kind of applications wanting to lean into the performance characteristics of 8.0. We actually feel that helps qualify the pipeline even further. So both angles from an auto perspective and the GEM perspective, we're really seeing good traction on all of it. GEM's probably got a little more ways to go in terms of developing that pipeline, closing that pipeline, converting it to revenue.
But the fact that we're seeing that much appetite, that much demand this early as we really double down on our go-to-market initiatives in GEM is certainly an encouraging sign. Thank you. With that, there are no further questions at this time. I'd like to turn the call back over to John Giamatteo, CEO of BlackBerry for closing remarks.
John Giamatteo: Terrific. Thanks, Julian. And just as, before we wrap up, a quick reminder to everyone for we're gonna be holding our annual meeting of shareholders tomorrow at 10 AM Eastern. And details for how to join the virtual event can be found on blackberry.com website. So thank you all for joining the call today. And look forward to seeing you next time. Bye for now.
Julian: Thank you. With that, this does conclude today's call. We thank you for your participation. You may disconnect your lines at this time.