Good morning, and welcome to the BlackBerry Annual and Special Meeting of Shareholders 2025. During the meeting, all participants will be in a listen-only mode. We will be facilitating a brief question-and-answer session towards the end of the meeting. I would now like to turn today's call over to Mr. Dick Lynch, Chair of BlackBerry's Board of Directors.
Thank you very much. Hello, everyone. I am Dick Lynch, Chairman of the BlackBerry Limited Board of Directors. On behalf of the board and management, it is my pleasure to welcome you to the company's annual and special meeting of shareholders. I will serve as chair of today's meeting. As we have done in recent years, we are hosting our meeting in a virtual-only format through a live audio webcast. We have found that the virtual format is more inclusive, and many more shareholders have been able to join us virtually than previously at our past in-person meetings. Even though the meeting is in a virtual format, procedures have been implemented to ensure that shareholders and proxy holders, regardless of their location, will be able to participate in this meeting and engage with us.
Registered shareholders and valid proxy holders who are participating online will be able to listen to the meeting, submit questions, and vote in real time. Non-registered beneficial shareholders will also be able to submit questions through the online meeting platform. The Secretary of the meeting will cover the procedures for all of this in just a moment. Phil Kurtz, the Chief Legal Officer of the company, will act as Secretary of the meeting. Phil is joining me today, as is our Chief Executive Officer, John Giamatteo, and our Chief Financial Officer, Tim Foote. Following the formal business of the meeting, John will provide an update on BlackBerry's strategy and performance, and then he and Tim will address questions submitted by shareholders.
Before we turn to the formal section of the meeting, I'd like to reflect on what has been a year in which our management team and the whole of our employee base reached for significant improvement and managed to deliver improvement in every facet of our business. In reflecting back on what you were told last year and the evidence from the year we have just completed, I'm sure that you can see that the trajectory has been positive, and we are still very much on track to see continuous progress going forward. As our CEO, John Giamatteo, will detail for you in a few minutes, we truly have two virtually autonomous business units under a thin corporate layer. We told you that each of the business units would end with healthy financials, and they have.
We told you that we would position the business to take advantage of strategic opportunities. With the sale of Cylance, we have taken one significant strategic action, which has resulted in our ability to form a profitable, secure communications business unit. Our IoT business unit has been renamed to highlight its very positive and healthy asset, QNX. With our improved structure, we are now well positioned to take advantage of other strategic opportunities which may present themselves. Part of the evolution of our business has been a renewed and strengthened executive team with a corporate component which is smaller and more nimble than in the past. The board continues to do its part to evolve. I am pleased to announce that we have recruited Lisa Barash to join the board.
Lisa has experience, including in the automotive industry, which has allowed her to quickly contribute, especially into the QNX business. Lisa has replaced Mike Daniels, who chose to resign from the board during the last year. Mike had been a significant contributor to the business over a number of years, and we want to thank him for his contributions and wish him well. In summary, the board, management, and the whole BlackBerry team are excited about the direction of the business, and we believe the company will continue to show strong improvement, which will position BlackBerry to be best in class. I would now like to call this meeting to order and ask Phil to go over the procedures and items of the business from the meeting.
Thank you, Dick. I'd like to start by highlighting a couple of important procedural matters that apply to our virtual meeting relating to questions and voting. Questions or comments can be submitted at any time by any shareholder or proxy holder who logged in with a control number or username using the messaging feature of the virtual interface. If you logged into the meeting as a guest without a control number, you'll not be able to submit questions or comments. Questions will not be displayed but will be read or summarized as appropriate. Generally, questions will be addressed only at the Q&A session after the formal part of the meeting. However, questions or comments regarding procedural matters or that are directly related to an item of business will be addressed earlier as appropriate. Voting on all matters will be conducted by electronic ballot.
Registered shareholders and duly appointed proxy holders will be asked to vote on each item of business only after the presentation of all of the business items. In order to expedite the formal business of today's meeting, I will make all motions on the voting matters. When you are asked to vote, you'll receive a message on the virtual interface requesting you to register your votes. You'll only have a certain amount of time to do so when the polls are open. Final detailed voting results will be published on the Canadian Securities Administrators' SEDAR website and the SEC's EDGAR website and on our website after the conclusion of the meeting. Pina Pacifico of Computershare Investor Services will act as scrutineer for the meeting today.
I've received a declaration from Computershare confirming that the notice of this meeting was properly given to all the shareholders entitled to receive notice and to the directors and auditors together with the management proxy circular in form of proxy. Copies of the management proxy circular and other meeting materials are available on the company's profile on SEDAR + and EDGAR and on the Envision website established for this meeting. I've received the scrutineer's preliminary report stating that a quorum of shareholders is in attendance. The report shows that there are shareholders or proxy holders represented on this live webcast today holding 363,366,813 common shares of the company, representing approximately 60.9% of the shares issued and outstanding. I therefore declare this annual and special meeting of shareholders to be regularly called and properly constituted for the transaction of business.
The first item of business is the presentation of the financial statements of the company for the fiscal year ended February 28, 2025. These include the consolidated balance sheets as of February 28, 2025, and February 29, 2024, and the related consolidated statements of shareholders' equity, operations, and cash flows together with the auditor's report. Copies of these documents have been mailed to the shareholders who requested them, and they're also available on SEDAR + and EDGAR. The second item of business is the election of directors for the ensuing year. As determined by the board, the number of directors to be elected today is seven. Information with respect to each of the individuals nominated for the position of director of the company was set forth in the management proxy circular, and each of the nominees has agreed to serve as a director if elected.
As we've done at previous meetings, we'll be nominating and approving individual directors and not a slate of directors. By-law Number A4 of the company sets out a procedure requiring shareholders to provide advance notice if they wish to nominate any person for election as a director of the company. The company has not received notice in accordance with the by-law from any shareholder intending to propose a nominee for election at this meeting. Since there are no other nominations, I move to elect the directors named in our proxy circular. Again, I remind you that voting on all matters to be acted upon at the meeting will take place electronically after the presentation of all business items. The next item of business is the reappointment of our independent auditors.
I move that PricewaterhouseCoopers LLP be reappointed as the independent auditors of the company until the next annual meeting of shareholders and that the Board of Directors of the company be authorized to fix their remuneration. The next item of business is the approval of unallocated entitlements under the company's equity incentive plan. The number of common shares reserved for issuance under the equity plan can be replenished in certain circumstances, such as when outstanding equity awards are forfeited or canceled before they have vested. The replenishment features of the company's plan are described in detail in the management proxy circular. Because of these features, the company's plan does not have a fixed maximum number of shares issuable under it and is considered to be an evergreen plan.
Under Toronto Stock Exchange rules, unallocated equity awards, being awards that remain available for grant under evergreen plans, are subject to shareholder approval every three years. Shareholders initially approved the company's equity incentive plan in 2013 and last approved unallocated entitlements in 2022. I move that the resolution on unallocated entitlements be adopted. The penultimate item of business is the approval of our annual non-binding advisory resolution on executive compensation, our say-on-pay vote. This resolution provides that on an advisory basis and without diminishing the role and responsibilities of the board of directors, shareholders accept the approach to executive compensation disclosed in the management proxy circular. I move that the resolution be adopted. The final item of business is a proposal submitted by a shareholder to amend By-law Number A3 of the company, as set out in the management proxy circular.
Do any shareholders or proxy holders have any questions or is there any discussion with respect to this proposal? Seeing none, I move that the proposal to amend the company's by-law be defeated. That concludes all items to be voted on at this meeting. We will now move to electronic voting on the items of business presented. As mentioned earlier, voting today will be conducted by electronic ballot. I'll now take a moment to ask that the balloting be open to registered holders and appointed proxy holders. The polls are now open, and at this point, all registered holders and proxy holders who have properly logged in with their control number or username and wish to vote will be able to see on the screen all motions brought forward at this meeting.
Please register your votes by accessing the voting page and by selecting the for or withhold button next to the name of each proposed director and with respect to the reappointment of PricewaterhouseCoopers as the company's auditors, and then by selecting the for, against, or abstain button with respect to the approval of the unallocated entitlements under the equity incentive plan, the advisory vote on executive compensation, and the shareholder proposal. We'll provide registered shareholders and proxy holders with another brief moment to complete the electronic ballots. Once the balloting closes, the voting page will disappear and your votes will be submitted automatically. The scrutineers have provided me with a preliminary voting report. On the election of the directors, all seven nominees have been elected as directors of the company to hold office until the next annual meeting in 2026 or until their respective successors are elected or appointed.
The motion to reappoint the auditors is also carried. PricewaterhouseCoopers LLP has been reappointed as the independent auditors of the company. The motion to approve the unallocated entitlements under the equity incentive plan is carried as well. Say-on-pay resolution also passed with the support of a substantial majority of votes. We're very pleased that our improved compensation disclosures and the changes that we've made to our long-term incentive program have been well received by shareholders. Lastly, the shareholder proposal has been defeated. As noted earlier, detailed voting results will be published on SEDAR + and EDGAR and on our website after the conclusion of the meeting. In a few moments, John will provide an update on the company's business. Ahead of that, please note that John's presentation and the Q&A session that will follow it may contain forward-looking statements.
Shareholders should be aware that any forward-looking statements are made as of today based on certain assumptions and are subject to risks and uncertainties that could cause actual results, performance, or achievements of the company to differ materially from those disclosed here today. We’re adopting for this presentation the cautionary language regarding forward-looking statements that is set out in the company’s annual report on Form 10-K, to which we refer you for additional details concerning the risks, uncertainties, and assumptions relating to our forward-looking statements. Please note that the slides for John’s presentation are available in the investor section of the blackberry.com website. Dick, we’ll conclude the formal part of the meeting.
Okay, thank you, Phil. As there is no further business to come before the meeting, I declare the formal part of the meeting to be concluded. John will now make some remarks about the state of the company. John.
Good morning. I'd like to thank you all for joining us here today. I'd like to take a few minutes to walk you through the notable progress we've seen over the course of the past year and why we think that BlackBerry is better positioned to make an impact in the market than it has been in a long time. This has been a transformational year for BlackBerry. They say that transformation is a journey, not a destination. Like any journey, successful transformations are marked by milestones along the way, each milestone positioning you to push ahead to reach the next one. Early this past year, we made the fundamental decision to focus the company on two virtually autonomous divisions. Why was this fundamental? It created clarity and focus.
At our annual investor day last October, the leadership team and I shared for the first time in several years real transparency into the financial health of our two virtually autonomous business units. The strategic decision to divest ourselves of the Cylance business to Arctic Wolf has allowed us the opportunity to now remain laser-focused on our two new and profitable divisions: QNX, formerly known as IoT, and Secure Communications, formerly known as BlackBerry Cybersecurity. It has also provided us the chance to look forward and to outline our key strategic priorities for the future. I'd like to review five key components of our transformation that illustrate the incredible progress we're making on this transformational journey. First off, we have strengthened our portfolio with the relaunch of the QNX brand and an increased focus on our heritage in Secure Communications.
Starting with our QNX division, this software is the clear leader in the automotive software industry, powering over 255 million vehicles worldwide. QNX is essentially the foundational operating system that powers your car, providing the next generation of mission-critical safety systems, merging unprecedented performance with unparalleled security and reliability. I'm incredibly proud of the fact that we work with all of the 10 top 10 global automakers and 24 of the 25 top electric vehicle OEMs. Thanks to these relationships, the business continues to benefit from strong multi-year secular tailwinds, positioning us well for sustained growth and success. It's a business we are remarkably excited about, particularly as we are seeing good demand beyond just the automotive sector in general embedded industries like robotics and industrial technology.
The sale of the Cylance business, in addition to improving our financial profile, has allowed us to put our focus on what BlackBerry has always been known for: Secure Communications. From protecting mobile devices with BlackBerry UEM to advanced critical events management functionality with BlackBerry AtHoc to offering the highest level of encryption across voice, video, and data with SecuSUITE, our strong heritage of security, trust, and innovation shines through. I'm proud to say our Secure Communications division works with all G7 governments and the majority of the G20, eight out of the 10 largest global banks, and is the number one provider of critical events management software to the U.S. federal government. Second, let's take a look at the improving and stabilizing fundamentals across our business.
For QNX, this manifests itself in the form of our royalty backlog, a key indicator of estimated future revenue that we expect to come in as part of a continuum of a long lifecycle of business. When we achieve a design win with one of our automotive partners, we can expect revenue generation for around seven to ten years. Over the past two years, this royalty backlog has grown substantially from $460 million in the fourth quarter of our fiscal year 2022 to $865 million at the end of our fiscal year 2025. Needless to say, this is something we are extremely excited about. On the Secure Communications side, our two key metrics that really show the health of the business, annual recurring revenue and dollar-based net retention rate, are both healthy and continue to show steady improvement over time.
Thanks to the QNX division's track record of year-over-year double-digit growth, and as we continue to benefit from a highly defensible competitive moat built on decades of experience, we are on the path to becoming a Rule of 40 division. Our Secure Communications division is much more than just a stable business generating positive adjusted EBITDA. It is a cash generator that we can leverage to fuel our higher growth parts of the business and other priorities focused on delivering shareholder value. Third, we are focused on proactively creating a more resilient earnings profile. As I mentioned, we see significant growth opportunities for our QNX business. As the clear market leader with multi-year secular tailwinds and a deep competitive moat, this business generates meaningful positive adjusted EBITDA. Our Secure Communications division represents a stable and healthy, primarily government-focused business, also generating positive adjusted EBITDA. On top of this we continue to tightly manage cost and drive profitability.
Over the course of the past year, we have reduced our global office footprint by 14 locations. We have consolidated our global R&D presence by 50%. We have taken a hard look at our cloud infrastructure, reducing this spend by 38% year-over-year. As a result, we have seen adjusted EBITDA improve $54 million year-over-year to $39 million in fiscal year 2025. Number four, we are seeing significant transformation in our cash profile through improvements in our fundamentals, profitability, and Cylance sale. The great progress we have made has resulted in the company achieving positive operating cash flow for the first time in three years in Q3 of our fiscal year 2025, one quarter ahead of our expectations. Additionally, we have reduced our gross debt by $165 million, with no debt maturities looming until 2029.
Finally, number five, in the near term, we will continue to leverage the strength of BlackBerry's great people, great brand, and strong financial foundation to continue to position ourselves for future success by prioritizing organic investments in growth segments of the business, primarily QNX. As we look to the medium term, we'll look to be opportunistic in our approach to tuck in M&A activity to accelerate the growth of QNX, its diversification, and expansion into adjacent markets. As I mentioned before, transformation is a journey, not a destination, one marked by milestones of progress along the way, each milestone pointing to the next part of our journey.
For QNX, the journey continues with urgency and precision, strengthening our go-to-market strategy to take advantage of expanded opportunities in the general embedded market, leveraging our new product investments in our next-generation SDP 8.0 platform, Cabin, the sound technologies, and accelerating our path towards a Rule of 40. These milestones are not just metrics. They're the building blocks of a sustainable growth and market leadership. In Secure Communications, our mission is clear: fortify our portfolio as a reliable source of EBITDA by delivering purpose-built, mission-critical solutions that governments and critical infrastructure providers rely on. Security here isn't just a goal. It's a promise to those who depend on us when it matters most. At a corporate level, in addition to the share buyback program, we will continue to diligently manage cash flow and profitability while continuing to look for opportunities to ensure we are operating as efficiently as possible.
This past year has been a transformational one for this great company. As we continue our journey, let's carry forward the momentum we've built. Every challenge and hard decision is an opportunity. Every milestone, a testament to our resilience. Together, we'll keep pushing boundaries, embracing change, and driving value to write the next chapter of this extraordinary journey. The road ahead is bright, and we intend to walk it with purpose. Thank you.
Okay. Before we address questions from shareholders, Tim will provide details of protocols for the question period. Tim?
Thank you, John. We will now address questions submitted by shareholders and their proxies who are in attendance on this webcast for approximately 15 minutes. Shareholders and proxy holders have had the opportunity to submit questions in advance and also have the opportunity to do so now using the instant messaging function on the portal.
As a reminder, we are unable to receive questions from guests who have not logged in with a control number or username. We will now give attendees a moment to submit their questions. We will answer as many questions as time permits. Before answering, we will read out or summarize the question. Questions that are redundant, offensive, not primarily related to our business, or otherwise out of order will not be addressed. Please limit your questions to topics relating to today's meeting, and please keep your questions brief so that we can address a variety of questions in the time available. Okay. We have a question here. The question is, when is there going to be a return on investment to shareholders? I have been a shareholder for more than 12 years, and I've not seen any significant return in that time.
Meanwhile, executives and directors of the company continue to be compensated very well.
I'll start with the entire management team. The entire board is 100% focused on driving shareholder value. A lot of the actions and decisions and the transformation that we've been on over the course of the last 18 months, I think, is certainly moving in that direction. You look at all of our indicators of how the stock has performed over the course of the last 12 months, over the course of the last six months, over the course of the last month. We're certainly guiding all of our decisions around maximizing shareholder value. Please know that's top of mind for myself, for the leadership team, and for the entire board.
Okay. We have no further questions at this time. That concludes the Q&A session. I'll now turn the call back to Dick.
Okay. Thanks very much, Tim. Actually, that ends today's meeting. I want to thank everyone for attending. We look forward to welcoming you again at next year's meeting.
This concludes the BlackBerry Annual and Special Meeting of Shareholders 2025. You may now disconnect.