Good morning, everyone. I'm Todd Coupland from CIBC, and welcome to the BlackBerry presentation, and welcome to the CIBC Technology Innovation Conference, number 13. We started this 13 years ago and thrilled to be having it again this year. From BlackBerry, we have two representatives. We have John Wall on my left. He's Chief Operating Officer for QNX. John has a long and storied history with QNX. I think 1993, is that?
Correct.
You started?
I came with the building.
Came with the building, and then was there for a period of time, and then rejoined in 1998, if I have the numbers right. Has been there ever since and had a variety of roles. John, welcome. On John's left, we have Martha Gonder, who's Director of Investor Relations. Martha, I think you've been at BlackBerry a little bit as well, 18 years or something like that?
Yeah, 18 years.
Is that right? Okay. So welcome, both of you. We're going to do a full fireside chat here with BlackBerry, and we're going to welcome any questions from the audience. I'll invite you to participate as we're going along. Martha, why don't we start with you before we get into QNX, which is going to be the ultimate focus of this discussion. BlackBerry has two units, Secure Communications and QNX. What is the strategy for each in 2026 and over the next three years?
Okay, thanks, Todd. Yeah, so BlackBerry does have two divisions. We actually have three because we also have a licensing division. So in fiscal 2025, we sold Cylance, and we did some restructuring and took out $150 million of cost from the company. What we are left with now is three profitable divisions: QNX, Secure Communications, and Licensing. Actually, in Q3 was our first quarter of profitability when we controlled for our licensing sale a few years ago in three years. We are doing well that way. We also have $410 million in cash and investments. The strategy going forward, we have Secure Communications, which, like I said, we sold Cylance. Now we have three divisions with our three business units within that division. We have AtHoc, UEM, and Secusmart. Those really are profitable divisions that are fairly stable.
That unit is really there to drive profitability for the business. QNX is really our growth driver. It is our main capital allocation priority. We are headed to a rule of 40 within that division. John is going to get into more detail on the strategy behind QNX. In short, it is really on a path to capitalize on the change to software-defined vehicles with our OS and our middleware products, as well as take our middleware products and, sorry, our products that are safety certified and put those into other industries in the general embedded space.
Great. Thanks, Martha. John, let's turn to QNX here, and we have quite a few questions here. We'll dig into them. For those people that are a little bit less familiar with QNX in the automotive, in the general embedded space, GEM, I think, is the shorthand for that. Could you give an overview of BlackBerry's role there?
Yeah, absolutely. QNX, at its foundation, builds what's called a real-time operating system. When you think of, you can think of QNX as kind of the Windows for automotive or iOS. We provide mission-critical software, very similar to Linux, but we have real-time properties, determinism. We're safety certified. We're security certified. Security is always becoming a very, very big topic, and there are certifications similar to safety. We kind of provide that foundation. On top of that, we have a number of middleware components that go on top of that that help our customers develop their applications in vehicle, whether it's digital cockpit, whether it's safety systems, whether it's autonomous drive, et cetera, or whether it's in healthcare that you're building an MRI machine, a surgical robot, oil and gas, et cetera. We provide that foundation.
We don't create vertical stacks that go all the way to the application level. We provide more of a horizontal stack within the vehicle.
Okay. This is, I guess, stepping back before we get into the detail, what is the significance of QNX now being a separate and distinct unit within BlackBerry? Is that important?
Yeah, you know, we've always been pretty much separate when it comes to engineering and sales, but now we're separate completely. Our own HR, our own finance, et cetera, all reporting into the centralized BlackBerry. I think it does allow us a little bit more freedom in what we're doing. For example, we've rebranded to QNX. It used to be BlackBerry QNX. We're now QNX or QNX, depending on how you want to pronounce it. I think our customers.
How should we pronounce it?
You know what? Our marketing says we should pronounce it QNX. I've always called it QNX. You know, it's open for debate. It has been good to rebrand. It has been good to send a strong signal to our customers that we're somewhat independent. We drive our own future. I think it's been well received.
Yeah. Before we get into some of the shorter-term questions, let's set the performance metrics up. One of the key metrics is backlog, estimated future royalties of your design wins. This has been growing very strongly over the last few years, up 30%, now at $865 million. What's driving this growth? Can that momentum be maintained?
My view is it's just the beginning. I mean, the need for software within the vehicle, the focus of software within the vehicle, the focus in other markets is just growing and growing. There's a new term, software-defined vehicle. It's an overused, I would say, buzzword in the industry, but really what it's driving towards is that the features within the vehicle that will be attractive to the consumer will be driven by software. And services within the vehicle will be driven by software. This is how the car companies plan on monetizing services going forward: a little less reliance on the razor-thin margins of building a car and more reliance on services within the car that have higher margins. The reality of it is we're seeing that in every industry, that everything is being driven more by software.
We believe we're just at the beginning of this inflection, that there's lots of room for growth.
What's the split between auto and GEM in the backlog?
Today, it's about 80/20. Yeah, 20% GEM, 80% automotive. The interesting thing there is we haven't really focused on general embedded, but we're starting to see the same trends that were happening in automotive, which is the need for high-performance compute, safety, security. This is now starting to percolate through other industries where the move to high-performance compute, the need for safety, whether you're talking robotics, industrial automation, that's a perfect fit for QNX.
There's a spread between the growth of the backlog and the growth in QNX. QNX is growing 10+%. The backlog's been growing at 30%. I guess maybe for Martha, should this converge over time?
Yeah, as the backlog comes into the P&L, we will expect this to converge. We do not know the timing on that one, obviously, but at some point in time, we do expect that to converge.
Yeah. So John, a big issue in the markets this year has been tariffs. How is that going to impact QNX this year, including the revenue and the ability to build the backlog?
Yeah, so I'm hopeful it won't change the ability to build the backlog because the backlog is future-looking. It's based on design wins. I highly doubt that the car makers slow down their development based on tariffs. Where tariffs could impact us is on the recognition of royalties in the near term. I wish I had a magic eight-ball to say exactly what's going to happen. I mean, it could have a 10% impact on the royalties.
What do you mean by 10%?
I mean, if there's less car shipping because of the tariffs, then we recognize less royalties. Our royalties are based on the number of cars that ship. We see it may have a small impact, but we're hoping that the tariffs get resolved and that we see no impact. That's the top side of it.
Have you seen anything to date?
No, not to date.
Not in the backlog, nor in the royalty stream?
No.
Okay. Just to be clear on the 10%, I don't know, maybe Martha, if you can answer this. Is there an assumption around vehicle production when you make that statement of a 10% impact? Give investors some context for that 10%.
Yeah, so I think.
Sensitivity.
I think that would be a very, very conservative number because realistically, the overall car production going down by 10%. The other part of that is that because of the way that the industry is shifting to be more software-centric, we are seeing QNX in the cars more often. You'll be seeing that as well. Even if the full market goes down, the number of cars with more instances of QNX, with more middleware of QNX, is going up so that we would expect to offset any decline in, for instance, the total automotive.
Great. Thanks for that clarification. You talked a little bit about software-defined vehicle already, John. What are the current conditions? We've heard some discussion around you being in the high end and waiting for designs to move into the backlog or production. Just talk about where the state of the software-defined vehicle is.
Yeah, so there's been a lot of hype around the software-defined vehicle. We've also seen a lot of significant investments by OEMs in building out software teams. We've also seen a lot of challenges with the OEMs building out software teams. And CARIAD in Europe has had some struggles. GEM, you might have seen, have laid off some people recently. What we're seeing in the market is the car makers, and Todd, you might remember me having talked about this in the past, where the car makers are not sure at what level they should be developing software. They're starting to realize now that they've been spending a lot of time in the weeds where they're working on layers of software that are not visible to their customers, that their customer doesn't really care about that layer. What we're seeing is we're seeing the OEMs want to.
Is that a solved problem now? Or is it always going to be a dynamic of going back and forth that investors have to care about?
No, I think it's becoming a solved problem. I don't know that it's a solved problem, but I think it's becoming a solved problem because we're being asked to do more. We're being asked to provide a more integrated software platform as opposed to components. We announced in January a vehicle software platform where we have joined up with other industry players such as VECTOR Informatik , which is very big in automotive, TTTech, to actually bring our components together and provide one solid foundation. This isn't a push from us. This is a pull where car companies have said to us, "Okay, we've been in the weeds for three, four years now. We're wasting time. We're wasting money." There's a new saying called time to series. Series production is when you're launching a car. They want to get faster time to series.
They're looking now for companies like QNX to provide more software that allows them to focus more on the application layer, more on the things that differentiate their brand.
Yeah. Yeah. Are there specific levers within the software-defined vehicle that are pushing its requirements? Maybe just call out a few of those for cues for investors.
Yeah, I think safety is a big one. Safety is probably one of the bigger ones that car companies have struggled with: L2 systems, L2 +. As you may be aware, in Europe, there is a thing called the Euro NCAP. Cars are measured based on the electronic safety systems within the vehicles. That has been slower than the car companies have liked. Right now, these integrated systems are probably only launching in the very high-end vehicles, and they want that to start to percolate through all the vehicles. That has driven this time to market. That has driven the need for more participation of the industry to help them get there. This is an area where they really tried to focus all their energies themselves to do the stack from bottom to end.
In January at CES, you announced a collaboration with Microsoft for QNX 8. What does that mean? And how can that accelerate development?
Cloud is the future of development, cloud development. Everything we do at QNX, and we just had a sales conference last week in Montreal, and cloud first, cloud first, cloud first is the message to everybody. Everything that we do, if we build a platform for the car, that platform first must run in the cloud and then can be brought over to the specific hardware within the vehicle. The reason that's important is the car makers have to be able to reuse their assets. This is one of the areas they're struggling. As soon as they switch hardware, it's like a new development, and they're not able to reuse their assets. By going cloud first, you're creating an abstraction from the hardware. Now this allows them to be able to reuse their assets.
Also, the cloud development allows large teams to have a centralized place to store their assets, keep their versions all aligned. We had been working very strongly with AWS to put all our products in the cloud. The fact that we're now working with Microsoft just shows the pull that our customers, they're asking Microsoft, "Please have QNX in the Azure cloud so we can use it.
Is it just another tool in the market, one option?
It's another tool, yes, exactly.
Does it cause a transition in the business when people shift into the cloud?
It absolutely does.
How does that impact, I guess, historical royalty streams and that kind of thing?
It will not affect royalty streams because the royalty streams today are still based on the number of cars shipping or the number of units shipping. What it does do is now you are in a metering system where, for instance, if AWS is charging you X to use the cloud for a certain period of time, we are getting a percentage of that. It is a new business model for QNX. It is a new stream of revenue.
That's for QNX 8. So that's going to be a little while down the road?
No, we have QNX 7 already in the cloud.
Seven in the cloud as well?
Yeah, Hypervisor in the cloud. We have a product called QNX Cabin, which is a digital cockpit. It's in the cloud as well.
Is that showing up in design parts of the QNX business now?
We have won two large design wins with two massive OEMs, one in Japan, and one in North America.
Okay. Were there any other important CES announcements to call out, or was that the primary one?
No, there was a very important. The vehicle platform that I mentioned earlier was one. The other one is a program we call QNX Everywhere. For me, it's probably one of the most significant programs that we've implemented. This is a program where we make our product available for free for non-commercial use, very low barrier for entry. We're in the process of, we've engaged with companies now that are getting us into universities. In India, I think we've got 20 universities now. We're part of their curriculum. We're expanding that into Europe, expanding that into North America. One of the complaints about QNX is that compared to Linux, we don't have a, what I would say, a public ecosystem around QNX.
The QNX Everywhere program is to really get our products out there into the hands of hobbyists, students, enthusiasts, and to really start to build an ecosystem around QNX. The secondary benefit of this, especially if we're looking at the general embedded market. In automotive, we don't need to advertise. People know who QNX is. In those other markets, we're less well-known. This is a way of getting our products out there and getting a lot more visibility to what we do.
Let's talk about self-driving for a little bit. It's obviously very topical with Tesla and Waymo. They're pressing the market hard for developments. What's your view on self-driving and the potential for QNX in the short term, one year, and then over three years?
QNX is involved in robotaxi work already, and we are in level four systems. I still see self-driving from a consumer car perspective as something that is really not the focus of the OEMs at the moment. I think the focus is more L2, L2 +, and we're starting to see now L3, as we were talking about earlier. Two announcements. BMW announced an L3-based system. For everybody's edification, L3 is hands off the wheel, eyes off the road driving with the system giving you 10 seconds of notification that you have to take over. Mercedes, you can use that system in Germany, and you can also use it. It's certified in California. Those are both QNX-based systems, by the way. We see a lot more focus on that than we do necessarily on fully automated driving.
L4, L5 is really not the priority of our customers. I think the OEMs did spend a lot of money and a lot of time on that, but I've seen really a pullback and more focused on safety-based systems.
You hear some other suppliers, though, talking about L3 in 2026 in China, in Germany, in Switzerland, beyond robotaxi. Is that something QNX might benefit as early as 2026?
Absolutely. Absolutely. We are in programs. For instance, I mentioned BMW. The BMW system that we are in is in the 7 Series, only the 7 Series. This year, they are launching the next generation system, L3 system, that is going into all the cars. The same is true for Mercedes. The Mercedes was just an S-Class system. Now it is going to be in every Mercedes made.
When will that be on the road?
This year.
That'll be on the road with L3, eyes off, hands off. Great. People can go out and buy new vehicles. What other signals, Martha, maybe this is for you. What other signals should investors watch for to confirm QNX's progress in self-driving?
We are in the really early innings of this. Once it gets to be a bigger part, we would definitely look to communicate that to the market. Of course, when we can press release different partnerships and customers, we do. That is your indication right now, I'd say.
I'll pause here for a moment. Are there any investor questions on some of the topics we've been talking about? Anything on people's minds they want to raise? Let's talk about a competitive position, John. I know this is a topic near and dear to your heart.
Absolutely.
What's your defensive mode?
Our defensive mode is have a great offense. That's really how we look at it. Obviously, we look at who the players are. We look at what's going on. Really, the way we approach the competitive landscape is we really focus on having the most innovation, having the highest performance product, having the most safety-certified and security-certified assets. While some of our competitors, and just to be clear, our competitors today are various Linux distributions that are trying to safety-certify a Linux distribution. If and when they get there, our plan is to be 10 steps ahead of them with a full platform that's certified, able to get our customers to time to market much quicker.
I also think we have a price competitive advantage because we have what I would call lots of investments that have been made over the last 40 years that we can leverage because we've been an operating system company our entire lives. Whereas if you've got these competitors now like Red Hat and others that are trying to bring safe Linux to the market, they need to recoup their investments more quickly for their ROI to make sense.
I know you segment the market for high-end and the rest of the market. What's your market share in that part of the market?
I would say, and this is very difficult to measure, but I would say that in digital cockpit, in ADAS, so when I talk about ADAS, I'm talking about integrated ADAS. There are lots of car systems today that have lane keep assist, adaptive cruise control, etc., that are discrete, that are small systems. When I'm talking about the amalgamation with L2 + going towards L3, I do not want to give a number, but I would say we have a pretty dominant position in the market today.
Who else do you see in the market?
Not a whole lot.
I mean, is it internal systems? Does Wind River have any speakable share? I mean, they were acquired a few years ago by Aptiv.
We rarely see Green Hills or Wind River. Maybe in some lower-end systems, surround view systems. Even there, we've been able to build business models to take a pretty significant share of that as well.
When you make that kind of comment, you make that comment in the context of the backlog, which is multi-years out.
QNX is in a very enviable position compared to a lot of other companies working in automotive. We work in automotive across the world. We're in Europe, North America, APAC. The only area that I would say is a little bit different is China because they're going so fast trying to stay afloat because there's so much competition that they tend to maybe go very quickly. I think we're going to see that slow down as the number of OEMs reduce and as the desire to ship externally from China to the rest of the world. I think we'll start to see more attention to safety and security. If I'm talking Korea, Japan, North America, Europe, we don't see a lot of competition in the area that we work in.
We did not raise this earlier. I will raise it now. You mentioned China. Geopolitically, what is the impact to you with all the tariff and the technology?
So far.
Regulatory environment being discussed. Yeah.
So far, nothing. We haven't seen any impact. We still have a very strong footprint. Where we have seen an impact because of the need to move so quickly is that safety is not always a concern. Doing safety software is very, very time-consuming. It requires a lot of effort. If you're trying to put a system out in six months, that's an area you're probably not going to focus on. We've seen some events in China that I think are going to start to see more focus on safety, and I think that's going to be good for us.
What should the investor takeaway be on that? That you're just focused on the higher, more established OEMs in China, or?
No, we're focused on all of them. It's just you don't know which one is going to survive. Obviously, we're focused on BYD, and we're focused on some of the ones that are really starting to make an impact. We've worked with all of them. It's just some of them may not be around long-term.
Let's talk about GEM for a little bit. This has not been an area that's been talked about that much with respect to QNX, I would say, in the investment community. You guys have started to highlight the last, the investor day and the last couple of calls. Just give investors a sense on the TAM, the size of that market, and what is going to be the impact to QNX over the next few years.
Yeah, so many people probably don't know this, but QNX, as a software company, started in the GEM market. That was our market pre-automotive, industrial automation, factory control, building control, oil and gas. We have long-term customers that we've been working with for many, many years, like GE. If you go to Europe and you see wind turbines, good chance it's QNX controlling the pitch and the blades. I think what we believe is happening in the market and what we're seeing, and our silicon partners who are much larger than we are confirming this, the market is potentially much bigger than automotive for us. In the past, what made the general embedded market difficult is it's a very fragmented market. You don't have high volumes like you do in automotive. You need to have a different go-to-market. You have to have channel plays.
In order to have channel plays that are effective, you have to have a big enough footprint that the channel is interested in being your channel. We're starting to see now that as the processing power is going up in these markets, whether it's industrial automation, whether it's medical, or whether it's robotics now, which is very interesting, we're starting to see that the incumbents are not able to scale to these new processors, whereas QNX, we've specifically developed our product to scale one-to-one as the number of cores increase on the CPUs. We're starting to see that we're able to take market share from the incumbents. For me personally, I'm very excited about the general embedded market. I believe it could be bigger than automotive for us.
We're just about out of time, but I did leave a little bit of space for one last question. It's a little lower profile, but I wanted to call it out just in case there is something material to comment on. That's your IVY program and co-development with AWS. Just give investors an update on that and what they should expect.
As I talked about earlier, we've developed a vehicle platform with a number of industry partners. The IVY product now, instead of being sold standalone, is going to become part of that vehicle platform. It will be managing the signals, which is what it was supposed to do standalone. I think some of the hiccups we've seen in the industry where some of the car companies have struggled kind of delayed the adoption of something like IVY. IVY was maybe a little bit too ahead of its time. Now we're bringing that into the vehicle platform as a more integrated platform. That's kind of how we're going to market.
So tech within QNX, perhaps not a SaaS model.
Exactly. That still remains to be seen.
Okay. So monetization still remains to be seen.
Still remains to be seen. I mean, one of the things our customers are asking us is, hey, if the vehicle platform now becomes a living, breathing entity that gets updated every year or gets updated four or five times a year, maybe instead of a royalty, we should be looking at a subscription. Nothing's been determined yet, but the IVY technology is being reused.
We're going to have to leave it there, John. Martha, thanks for your time.
Thank you.