Blackberry (BB) 2024 RBC Capital Markets Global Technology, Internet, Media and Telecommunications Conference summary

Leadership transformation and business restructuring

• Leadership overhaul led to a mandate for unbiased review and restructuring, resulting in two autonomous business units: IoT and Cybersecurity, with a leaner corporate layer and reduced costs.

• Over $150 million in costs have been cut, with a focus on driving both units toward profitability and positive cash flow, targeting Q3 and Q4 for these milestones.

• The company is nearing profitability and expects to be cash flow positive, with further cost reductions planned for the next fiscal year.

• Corporate overhead is being reduced from $48 million to $40 million, with ongoing efforts to streamline further.

• Heavy cost-cutting has improved business fundamentals, with additional, though smaller, savings expected next year.

Cybersecurity segment and Cylance strategy

• The cybersecurity business was broken out into secure communications (UEM, AtHoc, Secusmart) and Cylance, with Cylance identified as a financial drag due to market shifts toward EDR.

• Cylance has struggled to scale and required significant investment; leadership is streamlining costs and open to divestiture or offers, aiming to resolve the issue within a year.

• Excluding Cylance, the cyber division generates around 20% EBITDA margins and is profitable.

• Non-Cylance cyber assets are stable, with modest low- to mid-single-digit growth, strong government sector presence, and high margins.

• Cash generated from stable cyber assets is being reinvested to fuel IoT growth.

IoT segment and QNX business outlook

• IoT (QNX) is described as a portfolio gem, with strong competitive positioning and secular tailwinds, driven by record design wins and a growing $815 million backlog.

• Growth has been tempered by delays in auto production and OEM software development, but long-term opportunities are increasing as OEMs seek pre-integrated solutions.

• QNX is expanding its content per vehicle and domain coverage, with ARPU expected to rise as more layers and sockets are added.

• IVY, a new data platform, is experiencing slower adoption due to OEM priorities but may be integrated into broader vehicle OS offerings.

• Investments continue in R&D (about 30% of revenue), with new products like QNX SDP 8.0 and QNX Sound, and expansion into adjacent markets such as industrial automation and medical robotics.