Charlie Chen - Vice President, Investor Relations John Chen - Executive Chairman and Chief Executive Officer Steve Capelli - Chief Financial Officer

Daniel Chan - TD Securities Paul Steep - Scotia Capital Gus Papageorgiou - Macquarie Mike Walkley - Canaccord Genuity Steven Li - Raymond James Todd Coupland - CIBC Paul Treiber - RBC Daniel Bartus - Bank of America/Merrill Lynch Michael Kim - Imperial Capital Meta Marshall - Morgan Stanley Gabriela Borges - Goldman Sachs

Welcome to BlackBerry’s Fiscal 2018 Second Quarter Conference Call. [Operator Instructions] I will now turn the call over to Charlie Chen, Vice President of Investor Relations for BlackBerry.

Thank you, operator. Welcome to BlackBerry’s fiscal 2018 second quarter results conference call. With me on the call today are Executive Chairman and Chief Executive Officer, John Chen and Chief Financial Officer, Steve Capelli. After I read our cautionary note regarding forward-looking statements, John will provide a business update and Steve will then review the second quarter results. We will then open up the call for a 30-minute Q&A session. In order to let as many people as possible ask questions, please limit yourself to one question. This call is available to the general public via call-in numbers and via webcast in the Investor Relations section at blackberry.com. A replay will also be available on the blackberry.com website. Some of the statements we will be making today constitute forward-looking statements and are made pursuant to the Safe Harbor provisions of applicable U.S. and Canadian Securities laws. We will 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, including the risk factors that are discussed in the company’s Annual Information Form, which is included on our annual report on Form 40-F and in our MD&A. You should not place undue reliance on the company’s forward-looking statements. The company has no intention and undertakes no obligation to update or revise any forward-looking statements, except as acquired by law. I will now turn the call over to John.

Thank you, Charlie. Good morning and welcome to BlackBerry fiscal 2018 second quarter results conference call. As customary, I will reference non-GAAP number in my summary of our quarterly results and there is a reconciliation table of GAAP to non-GAAP results in the press release. I am pleased with our execution in Q2 with established historical highs in sovereign services revenue and gross margin. We make great progress in all our key growth initiatives, which includes unified endpoint management, the connected car, the IoT, licensing as well as cybersecurity. We again delivered strong software billings growth. We secure important design wins in auto. We invested in our sales channel for radar. Our licensing pipeline is growing and we were recognized again as the leader in mobile security. All of these accomplishments position us well for future growth. First, I would start with a summary – a brief summary of our Q2 results. Total revenue came in at $249 million. Total software services revenue was a record of $996 million. This represents a year-over-year growth of 26%. Gross margin for the quarter was also a record high at 76%, up from 67% last quarter and 62% a year ago. Operating income was $29 million. Operating margin was 12%. This compared to 6% last quarter and 5% a year ago. This is also the highest operating margin over 5 years. EPS was $0.05 positive. Total ending cash was $2.5 billion. Now, let me cover some of the key business accomplishments in the quarter and we start with the enterprise, UEM, Unified Endpoint Management business continues to perform well. Billings performance was strong, up 19% year-over-year. This is our third consecutive quarter of solid billings growth starting with double-digit growth in Q4 and high single-digit growth in Q1. This quarter put us back on double-digit billings growth year-to-date which we do expect to continue for the balance of this fiscal year. We saw notable strength in our regulated industry business, particularly in government and banking globally. Some notable names that were allowed to mention include UBS which was a platform consolidation play, the Fifth Third Bank, the Development Bank of Singapore and the National Commercial Bank in Saudi Arabia, just to name a few. This is my favorite part. One of my smaller competitors recently suggested on their conference call that they are making ahead of way against us in our federal business. We find that very puzzling and I asked around by the way, so when I heard that. And I would like to provide some statistics and highlight our strength and call those claims into question. In our U.S. federal business this past quarter, we had 23 transactions over $100,000, of which 7 of them were larger than 500K and 5 deals were over $1 million. These deal win across numerous federal agencies and a number of these represent very highly competitive wins. We also see strong contribution in other areas of our public sector – public sector business outside of the U.S. and as well as national, state and local levels. Our FedRAMP business is seeing solid traction. This is the cloud version of that. We have the only cloud services for crisis management certified by the United States government. In Q2, we added 4 new U.S. federal customers on the platform. We now have over 300,000 licenses, a license that FedRAMP uses, which happened to be an increase of 162% over the prior quarter. During the quarter, we achieved NYAP certification for the SecuSUITE for government, which brings end-to-end solution for encrypted voice call, text messaging and as well as text messagings to the U.S. and the Canadian governments. Proof-of-concept has started with multiple U.S. government agency. SecuSUITE is the only NYAP certified voice solution supporting IoS, Android and BlackBerry 10 smartphone and tablets meaning across platform. Additional wins with enterprise customer in the quarter includes [indiscernible], Hogan logos, and University of Sydney. We also see good traction on the security front. Last month, Gartner published its annual report on critical used cases for high security mobility management and BlackBerry received yet again the highest score in all six categories for the second straight year. Gartner also recently released its content collaboration critical capability report, BlackBerry Workspace, which is part of our enterprise UEM solution, was ranked first in two categories, workforce productivity and centralized content production. We were ranked number two or second in two other categories, expanded collaboration and lightweight workflow. Out of the total of 5 categories, BlackBerry beat all the major players like Box, Google, Microsoft and Dropbox. We were also named a leader in IDC 2017 EMM MarketScape report that was published just last month. This was based on our strong security features and overall well-integrated suite of capabilities for mobile device application as well as content management. And then the bright spot, in our EMM business, on our UEM business is our cybersecurity consulting practice. Awareness is growing with large enterprise customer and we continue to see the pipeline develop very nicely. In particularly we have seen both the number and the size of the deals increasing. For example, we recently closed a 7-figure cybersecurity deal in the Middle East. Total professional services revenue grew over 40% year-over-year, although I have to add that our professional services numbers are of a small base, but nevertheless, the growth was impressive. I would like to move on to the embedded software. We have important design wins in our automotive industry business. After the quarter, as many of you probably know, Delphi announced that it chose BlackBerry QNX for the project called CSLP. It stands for Centralized Sensing Localization and Planning platform. This particular platform is a fully integrated autonomous driving solution. Some of you may have heard of Delphi initiative earlier this year in collaboration with Mobileye and Intel. We are pleased to be providing the software infrastructure for this particular platform and obviously, based on our ability to enhance safety, security as well as performance. Another major win is with Visteon and they are also Tier 1 doing cluster, with adopting our technology for ADAS events I apologize for all the instrument cluster and functional safety. In the quarter, we have additional design wins in advanced driver assist, which I talk about ADAS digital instrument cluster and functional safety platform, hypervisor as well as autonomous driving. These wins should bring – should drive longer term high-margin revenue growth, but it will take some time for the royalty to start kicking in because of design lead time for new cars. In the past quarter, we have also ramped up our investment in BTS channel expansion, most notably in China and Japan, where we signed several new selling partners. These partners will support both our automotive and general embedded business. Moving on to radar and our IoT business, in the past two quarters, we talk about ramping up our go-to-market effort and we have made great strides in Q2. We were successful in hiring a General Manager, a seasonal General Manager for this business and added 4 experienced direct sales people. We have added two new resell partners, Fleet Complete and Pana Pacific. Based in Toronto, Fleet Complete is a leading global provider of IoT solution for fleet, assets and cloud-based mobile workforce solution. They serve over 10,000 customers worldwide. They are recognized as – they are recognized as one of the fastest growing providers of fleet and advanced tracking technology. Radar is also in try with Pana Pacific. Based in Fresno, California, Pana Pacific is one of the largest value-added reseller in the United States. They specialized in mobile applications, safety and other applications for commercial vehicle manufacturers. If the trials were successful, radar could be distributed through their 2,800 dealers nationwide. We launch – in the quarter we launched Radar Lite on the schedule, actually not in the quarter, early this month, so just past the quarter. So, in large, our Radar Lite, are on schedule early this month. As a reminder, this version of radar is a cost optimized version and will significantly expand the total addressable market for radar from 8 million units to a market of 28 million devices platform. I am pleased to announce that we received our first customer order and we shipped yesterday by the way with that for Radar-L, Radar Lite for Titanium, although first order came from Titanium. Titanium uses Radar-M. The first model of the radar or what was that called radar, anyway, full features radar for approximately 1,200 trailers. With this order of the Radar-L for its flatbeds and chassis, Titanium and highest fleet now utilized the BlackBerry radar platform. With the investment in radar both in channel and product development, we are positioned to ramp up this business going forward. Currently, we have a total of 16 POCs in progress and for both Radar-M and L, including 6 that started in Q2. The new sales team is building the pipeline, which now includes over 60 opportunities. Lastly, I want to comment on our licensing business. It also performs quite well. The main source of revenue, are in three buckets. As a reminder, one is for the device software licensing; second one is the IP licensing; and the third one is the technology licensing. I will cover each of them. In device software licensing, two of our three hardware partners, TCL and BB Merah Putih, started shipping BlackBerry branded devices. This quarter, we expect Optiemus in India to start selling devices as well. After the quarter, we entered into a partnership and signed a new licensing agreement for our BlackBerry secure Android operating systems. The partnership is with NTD of Shenzhen China who will manufacture and distribute smartphone devices as well as Equiis based in Switzerland who will provide application functionality. The partnership that is NTD and Equiis and of course ourselves will deliver white label smartphone to carrier customers in Africa, Asia, and Latin America, the first device is planned to ship in the first half of calendar 2018 and four carriers is already lined up. The partnership will expand to include additional carriers and devices. Since our last earnings calls, we have recognized revenue from three IP licenses, Ford, Blue and Timex. We have a good pipeline of opportunities. So, we expect additional monetization opportunity in the second half that would be likely be more back-end loaded to Q4. Our technology licensing is steady with the main source of revenue coming from the BBM consumer platform, which we licensed to AmTech. I would now turn the call over to Steve for a detailed look at our financials.

Thank you, John. Today, we reported Q2 GAAP revenue of $238 million and non-GAAP revenue of $249 million. My comments on our financial performance for the quarter will be in non-GAAP terms unless specified otherwise. For a reconciliation between our GAAP and non-GAAP numbers, please see the earnings press release and supplement published earlier today. I will begin with a consolidated review of our Q2 FY ‘18 income statement results. Our total revenue for the second quarter was $249 million. Our consolidated gross margin was 76% compared to 67% last quarter and 62% a year ago. Our non-GAAP gross margin includes software deferred revenue acquired, but not recognized of $11 million and excludes restructuring program charges of $3 million and stock comp expense of $1 million. The gross margin improvement of 1,400 basis points over a year ago is attributed to the increase and contribution from software and services to our overall revenue mix. We continue to model consolidated gross margin of approximately 70% for the full year. Operating expenses were $161 million, up from $149 million last quarter. We expect Q3 OpEx to modestly increase over Q2 largely based on plans for increased investment in sales and marketing. GAAP net income for the quarter was $19 million. Basic GAAP EPS was positive $0.04. Fully diluted GAAP EPS was $0.07 loss, which assumes conversion of our convertible debentures. Our non-GAAP operating expenses exclude $24 million in amortization of acquired intangibles, $26 million in restructuring charges, $11 million in stock comp expense, $1 million in business acquisition and integration charges, and a benefit of $70 million of fair value adjustment related to the debentures. Our non-GAAP operating income was a positive $29 million and non-GAAP net income was $26 million. Non-GAAP EPS was a positive $0.05. Our adjusted EBITDA was $15 million this quarter, excluding non-GAAP adjustments previously mentioned. This equates to adjusted EBITDA margin of 20%. I will now provide a breakdown of our revenue. Total software and services revenue was $196 million, representing 79% of total revenue. Handset device revenue was $16 million representing 6% of revenue. In Q3, our handset device revenue is expected to be $0 million to $5 million. Total staff revenue for the second quarter was $37 million, representing a 15% of revenue. Staff revenue was down 2% quarter-over-quarter. The sequential design in staff was lower in prior quarters due to an increase in collections of approximately $9 million related to overdue balances for cash basis customers. We continue to model a normalized sequential decline in SaaS revenue of roughly 25% next quarter. Therefore, we are modeling staff of around $20 million for Q3. I will now provide a further breakdown of our software and services revenue. The largest contributor was Enterprise Software & Services at 52%. BlackBerry Technology Solutions accounted for 19% and 29% came from licensing IP and other. Please refer to the supplemental table in the press release for GAAP and non-GAAP details. Roughly, 79% of software and services revenue, excluding IP license services, was recurring in nature. Now, moving on to our balance sheet and working capital performance. Total cash, cash equivalents and investments was approximately $2.5 billion. Our net cash position was approximately $1.9 billion at the end of the quarter. Aggregate contractual obligations, which includes purchase obligations, operating lease obligations, interest payments and other goods and services utilized in operations was approximately $353 million at the end of Q2. This is down from $761 million a year ago. Moving to the cash flow statement, reported free cash flow was breakeven in the second quarter. Reported cash flow from operations was $3 million and CapEx was $3 million. Free cash flow before taking into account the impact of costs related to restructuring and transition from the hardware business was positive $22 million. We expect free cash flow to be positive for the full 2018 fiscal year before the impact of those costs and the benefit of the Qualcomm arbitration award. We also expect positive adjusted EBITDA for the full 2018 fiscal year. That concludes my comments. I will now turn it over to you John.

Okay. Thank you, Steve. Before we started our Q&A, let me comment on our updated outlook. For the full year, we anticipate total revenue in the range of $920 million to $950 million versus the current analyst consensus of $919 million. In our software and services business, we continue to anticipate growth in the range of 10% to 15%. We continue to expect to be profitable for the full year. Last, we expect to be free cash flow positive for the full year before taking into account like Steve has said the benefit of Qualcomm arbitration award and the costs related to restructuring and the hardware transition. Now, I am ready to open for Q&A. Candice?

Thank you. [Operator Instructions] And our first question comes from the line of Daniel Chan of TD Securities. Your line is now open.

Hi, good morning guys.

Good morning, Daniel.

Alright. Can you – what drove the strength in the licensing revenue, was it stronger licensee handset sales or was there anymore recurring IP revenue?

We have licensing handset sales start coming in, which is first literally the first time and it’s the – we have some a quarter ago, right, that’s small. So that grew. The IP was strong for the quarter and then the PBM is the strategic plan, right. So, it’s both the IP and the handset.

And on the IP side, is that recurring or are those one-time license costs or license program?

It’s a little bit mixture of – it’s not recurring I say. It’s usually strong where the model that we like to go to see is a upfront payment with some back end royalty.

Okay.

So it would not be just recurring like you think about every year or something.

Okay. And then on the Enterprise Software & Services, it looks like bookings were strong in the last few quarters and it continued to grow this quarter, yet the enterprise software revenue was flat year-to-year. So, can you just give us an understanding of why we are not seeing that revenue grow with the strong bookings? Does it have to do with the migration to subscriptions from perpetual?

That could have a partial impact, Dan, but a lot of that is with the deferred acquisition revenue accounting. If you recall last quarter, we had – and this number is coming down, so we will start to see it approach, but last quarter that delta was $15 million and this quarter, it was $7 million. So, that’s really the primary piece.

Okay. And then just the final one, it looks like you are starting to get a bit of traction in China with a few deals there. This region typically has been a challenging market for BlackBerry, so can you talk about what’s driving some of the traction there?

More of commercial partnerships over there. It’s still early stage. Couple of quarters ago, enterprise group won a major deal with the state council, but it’s about agricultural distributions and the partner was China Mobile or Shanghai Mobile, we just bought China Mobile. So, we are bidding with partners on various deals. And of course, we also are focusing very much on the UEM software, which isn’t as sensitive as providing solutions to the government.

Great, thank you.

Sure.

Thank you. And our next question comes from Paul Steep of Scotia Capital. Your line is now open.

Great. Good morning. John, could you talk a little bit, just you touched on it in terms of the design wins around QNX, obviously not names, but just more of the systems, are these traditional infotainment wins that we have seen, are we branching largely in terms of the volume of wins in other markets?

Other areas like events driver assist, hypervisors, safety clusters. We already talked, I mean, everybody knows that the infotainment where we actually hold a pretty big market share is a saturating market. So we have seen that a couple of years ago. So, we have developed all these new modules, which I just named and now our concentration of the team is to focus on the design win in this area, so of much higher growth and much higher ARPU.

Okay. And then the other thing we talked about a lot in the past is sort of your view of maybe where the employee base is at? Could you talk from a capacity point of view you talked about hiring some people in the radar, where the focus is and how close you think you sort of are at the moment to today where you need to be?

So, it’s a good question, so different businesses have different – our enterprise software business, are pretty much a global footprint. We are strong – we have pretty good concentration in North America and Europe. And so we are focusing much more expansion in Middle East and Asia. So, some of the wins like the Saudi Arabia, the Middle East deal in cybersecurity, the Saudi Arabia Bank, the Development Bank of Singapore, the China thing we just talked about with Daniel, and then we are signing up other distributors across that part of the world, has not been traditionally our strength, our concentrated area. So, from an enterprise perspective, we are going to maintain our concentration will strengthen in North America and Europe, but we are also going to start seeing seeding and building relationship out there. On auto, because the auto was global, we already have global team across. And what we are doing now is to get ourselves, both in the auto as well as more in the embedded opportunities. So, I spoke about last quarter, we start concentrating on Japan and China. These are early thing, but I just want to give everybody a sense that we are developing market. We are hiring, investing in our distribution capability. So, that part of the business. So, it depends on which part of business we talk about. Now, radar is right now is still very much North American centric. For the time being, I think it’s going to be North American centric. I have not looked at all 60 of the opportunities that I referred to, but I could probably bet that they are mostly all in the United States and Canada, but that’s kind of where we are.

Great. One final clarification, I will pass the line. On the services side, John, do you feel like you have got the capacity you need to deliver potentially larger projects across multiple verticals or do you still think you need to add significantly in the professional services or the BTS area? Thank you.

It’s a very good question. On cybersecurity, it looks like that my pipeline right now is outpacing what we could deliver. And so on cybersecurity practices and some of the professional practices, we need more people. Now, we are trying to repurpose some of our internal technical people for it and we are going to continue to hire more and so it’s a good problem to have, but we don’t have enough.

Okay, thank you very much.

Sure. Absolutely.

Thank you. And our next question comes from Gus Papageorgiou of Macquarie. Your line is now open.

Hey, Gus, we are now going to have a three-part of the question that Charlie referenced.

Okay. Well, it’s pretty easy. You touched on the ASPs for QNX [indiscernible] higher. I am wondering if you can quantify that. So, currently, you suggested that DSPs per cars somewhere in the $1.50 to $5 range with the recent wins at Delphi adopting the entire OS. Can you talk about what do you expect the turn to be on ASP for QNX per car?

Well, Gus I can’t tell you about what our deal with Delphi is, but let’s think about – and I still maintain our focus is to be able to get to anywhere from $5 to $25 a car, so by selling them multiple modules and all these latest modules. So, it’s still a good go. It’s still a good very achievable range.

And can you give us a sense of timing like when do you expect to see the bump in the ASPs?

Yes. So, unfortunately, if you look at a Delphi thing and again, it’s not giving you any particular business plan with Delphi, which of course we have one. But if you look at a new design win and let’s go back to early wins like for this. So, we take them 18 months to get design into the car and get it rode out. So, early as you could see, it’s probably 18 months to 24 months window, but then once you see it, you see it pretty steady.

And the Delphi would be roughly the same kind of around 18 months?

Yes, probably, it’s a 18 to 24 month window.

Okay, great. Thank you.

Alright. Thanks, guys.

And our next question comes from Mike Walkley of Canaccord Genuity. Your line is now open.

Hey, Mike.

Great, thank you. Just on the strong gross margin in the quarter, but then 70% for the year, can you talk about maybe what drove the upside this quarter and why the mix might change for lower gross margin for the second half of the fiscal year?

Well, yes, Steve could answer that.

Yes. So, hey, Mike, obviously the stronger growth was the large amount of software and services and a lot of that came from licensing, which is our highest margin. And so if we look to the second half of the year when we said we are looking at 70% for the entire year, we said about. I do expect that Q3 and Q4 would be above the 70% mark.

Great. That’s very helpful. And then just a follow-up question, just on the radar solution with your growing channel base, what’s kind of the feedback from the channel, why they are choosing you and what features and capabilities are going to market versus your competitors that the feedback is for radar helping you win some deals? Thank you.

So, we have many used cases with customers like Caravan and Titanium. They love it. It’s a cloud-based solution. So, most of the existing install out there in this world is not a cloud-based solution. It’s easy to install. It’s much more higher sampling rate, because the battery lasts much longer. So, if you think about what we have done was to take the company capability in making phones with long battery life, good antennas in security and put it on to a device that you are going to install it and literally talk about probably 10, 15 minutes on each of the truck and flatbed and chassis, which are very expensive and be able to do geo-fencing and control everything on the cloud and look at all the environmental elements of the devices that are being tracked. So, I mean, it’s really functional features and price and the ability to be a cloud-based solution. So, the feedback has been wonderful. I met with Pana Pacific myself. They, of course, is finishing up the trial, so the fact that they allow me to mention their name here is a good indicator and of course, complete oversight with us.

Okay.

And Mike, these will lead to productivity improvements. That’s the other key functionality is that people are getting more productive services out of each and every unit that’s being managed.

Great, thank you.

Thank you. And our next question comes from Steven Li of Raymond James. Your line is now open.

Thank you. Hi, John. On the licensing business, the device software, anyone ability at contract minimums at this point?

No, not at this point, no, but there is one close.

Okay, that’s good. And TCR and BB will be relative to we have had in Q1, right?

Yes. Well, one of them were in Q1, we got revenue from one of them in Q1 I believe.

Okay.

So, Q2 I got two.

Okay, good. And then the Delphi partnership, is there any professional services you expect to generate as you are getting design into the car in the next 18 months?

Yes, that’s a good question. We also have both design – the professional services to help use the technology to help OEMs, which are car manufacturers and so forth use that. We also have the ability to sell them develop proceeds.

Okay. And is it going to be about the same magnitude as the professional services goods you had last year?

No, no, that was a very special case. You talk about the $27 million that has been hunting me, but no, okay, so I want to make sure that no, not in that matter too. I mean, I wish it could be, but you never know there is a particular car manufacturer who wants to – completely uses all our technology and chose Delphi as a Tier 1 partner and so far and so forth you never know, I wouldn’t say never, but that’s not our plan.

Okay, that’s great, John. And with Delphi, you expect EPS revenues to start this year?

Delphi would probably take in excess of – this is the Delphi question really. I think they – normally, they probably would take 6 to 9 months to integrate our technology into that platform. I don’t know their platform release time so that once they released it and they start selling to the car manufacturers, I know a couple of them are already very interested then we come in.

Alright. Thank you, John.

Sure. Absolutely.

Thank you. And our next question comes from Todd Coupland of CIBC. Your line is now open.

Hi, Todd.

Yes, good morning, John. I wanted to get your thoughts on what kind of growth over the next year or so we should expect from QNX with some of the infotainment falling off, will we that business be flat or could that business actually commence before the automotive starts to kick in?

Well, I think as I said earlier, I think if our partners, our Tier 1 partners trying to win deals, we have direct wins with the OEM. You will start seeing revenue coming in. The current revenue of literally majority – majority wise based on royalty as you correctly pointed out, the royalty on IVI, which is infotainment is flat and this is why you are seeing flat, because the majority of them comes from there. You have many design wins in the last few quarters. Now, it’s kind of picking up the speed. We see development seats. We see professional services. And then of course the bulk of the revenue was going to come in when they start shipping cars. So, these are all pipelined. We should see uptick of QNX revenue overall because of that dynamics.

Okay. And I get the Delphi when they got to go out and sell the platform, so, we will see how it goes. But what about specific OEM wins where you actually get visibility to revenue now, what kind of the pipeline is there and what should we expect over the next little while of direct OEMs?

Well, so as you know, our biggest direct to OEM in the last year has been Ford. And as I said also number of earnings call, I said we are working on others and we are working on others, some in particular, one of them are quite close. So, there are some very strong efforts behind it, just takes a very long time.

Okay. And does the Lyft announcement of the other day, does that impact your relationship with Ford at all?

No, I have not heard any negative of our relationship with Ford. We have a lot of engineering to engineering – I don’t know the answer to your question, but I don’t – no, I don’t believe that, but this is probably a Ford question, but I have got no indication and no information about that we are being affected. I have been very – I doubt very much that’s the case, because Ford announced that we are working extremely closely together, I mean, I would have heard.

Okay, thanks for the color. Appreciate it.

Absolutely.

Thank you. And our next question comes from Paul Treiber of RBC. Your line is now open.

Thanks very much and good morning. Just in regards to the outlook for the 10% to 15% software growth this year, should we continue to expect the growth from the licensing line or do you think we should begin to see enterprise software and perhaps BTS pickup towards the second half of the year?

I think you will see – so, our concentration on enterprise has been focused on billings growth. Our concentration and our focus on QNX, BTS is focused on design wins. Now, so we should see some revenue growth on design wins both from QNX as well as the radar portion, especially radar portion of BTS. And so I believe notwithstanding on the so-called acquisition deferral runoff that Steve had mentioned, our people think that they should be able to grow in Q4 in the enterprise side. So, there will be some modest growth there. You should see licensing growth. I am expecting, for example, when Optiemus start shipping, I should see some more software, device software license growth.

Okay, that’s helpful. Just I was hoping to – if you can bridge your comment about the $5 to $25 ASP per car with one of the slides in the Investor Day back in January, where I mentioned it 2 to 3 times ARPU opportunity in automotive?

Right, 2 to 3 times, at that time, we are talking about $1.50 to 2 to 3 times a $1.50 was from a $3 to $5. I think as we released small molecules as the architecture have more redundancy, especially the hypervisor who are able to account the other peoples, a software module in it. We also have one as you know a number of chip manufacturers designing hypervisor into the chipset like the Qualcomm and Nvidia. So, we are hoping that we will see a better ARPU going forward.

Okay, that’s good to know. Just lastly on BTS, when you start shipping the units and this is more of an accounting question, will you recognize the revenue upfront on the hardware or would that be recognized ratably over the life of the agreement?

The hardware gets recognized upon the shipment and then we have ratable revenue from the monthly fees.

Okay, thank you.

There are two models. Another model is if the customer wants to bundle it and we do charge them a monthly fee, then we take it on a monthly basis. That meaning the hardware cost is being bundled into the monthly fee.

And the hardware costs will be included in the BTS line?

Yes, it will be in the BTS line.

Okay, thank you.

Thanks.

Thank you. And our next question comes from Daniel Bartus of Bank of America/Merrill Lynch. Your line is now open.

Hi, good morning. Thanks for taking the questions. So, I wanted to ask again about the enterprise software and I thought you guys gave that non-GAAP number previously for better apples-to-apples comparison on growth. So, if the market is growing probably 10% to 15% year-over-year. Just to ask again, why are you guys growing more flattish there?

Go ahead.

Last quarter, we had double-digit growth on a GAAP basis and this quarter I believe was 8%. And when you say the market is growing…

The market is not growing at that number, but its okay.

Yes, we hear that the number is growing. The billings growth….

Yes, competitors are growing a lot less, go ahead.

And our billings growth is 19%.

Okay, great. And then a clarification, John, it sounded like you said maybe some of the IP revenue maybe back-end loaded in 4Q this year. Did I hear that correctly or did you mean front-end loaded? And I guess what I am getting at to is there anyway to help us think about the real baseline for IP licensing revenue as we go into second half?

I think I made a reference that you look at our first half number and we are going to see pretty much I hope – we are going to see pretty much a mirror image of that in the second half. What I have been trying to gun for is that I am always worried about being giving you folks numbers because you are going to come back and keep asking me the same question, but I am hoping that we are going to get to $100 million or so in IP revenue this year. So, we are obviously on pace to do that. So, that’s why, what I am saying that the transaction that we are working on seems more reasonable to expect in Q4, but you never know, it may come in Q3. So, this is – so I prefer to treat it as a second half target.

Okay, great. Thanks for the color, guys.

Absolutely.

Thank you. And our next question comes from Michael Kim of Imperial Capital. Your line is now open.

Hi, there.

Hi, good morning guys. Just going back to radar and specific to the container intermodal used case, are you starting to see customers viewing Radar-L as efficient versus Radar-M and how are you seeing that shift in your – show up in your POCs?

Yes, great question. Notice that I carefully and purposely put in the application of Radar-L. Radar-M is ideal for the trailer – the container. The Radar-L is ideal for the chassis, the flatbed and the trailer part of it and they have more complementary than replacement of each.

Got it. And are you seeing upside opportunities – up-selling opportunities for Radar-L customers or are you tending to see them separated?

Radar-L at this point is just brand new. So, it’s probably hard for me to answer the question, but logically, yes, but I would answer the question in the others direction. But as you know that Titanium was one of our really good customers, they started with Radar-M and they had it now for order trailers. And I think they are 1,200 and 1,400 containers. And now they started with Radar-L for the chassis and the flatbed. So, they are now – the entire fleet and all the assets are now managed by Radar both L and M. So, you could see that I started in that case with a Radar-M win and then we have done good job there and good work there and then they expanded to cover other assets with the L.

Got it. Great, thanks so much.

Okay.

Thank you. And our next question comes from James Faucette of Morgan Stanley. Your line is now open.

Hi, there.

Hi, this is Meta Marshall for James. Just a quick question on the Delphi deal from last week, I understand the question was kind of asked about Ford already, but would you be precluded from kind of signing future agreements with going direct with other car manufacturers or does the relationship have to go through Delphi just a little bit on are there any contingencies there about restrictions on signing future agreements?

No, not exclusive.

Okay, thanks. And then just a small follow-up question on do we get a sense of number of handsets that your kind of licensing partners that you have signed up of number of handsets that they have been selling or producing?

Yes, I have a sense, because we send them royalty. Not only we have a sense, we better know the exact number, but since I am no longer in the handset hardware business, so I don’t think it’s good for me to review my partners business progress so that’s probably inappropriate.

Got it. Alright, that’s it for me. Thanks.

Sure.

Thank you. And our next question comes from Gabriela Borges of Goldman Sachs. Your line is now open.

Great, good morning. Thank you for taking my question. John, you touched a little bit on the competitive environment and UEM specifically in the federal side in the prepared remarks. I wanted to ask a little more detail when you look at your opportunity on the regulated side for UEM, how do you think about that opportunity in terms of Greenfield versus competitive displacement or up-sell? And then any broader color on the competitive environment in general on the UEM side would be helpful? Thank you.

Yes, there are only a handful of competitors in the so-called UEM space that are established. And given the fact that we have all these wins in terms of business as well as we have won a lot of consolidation play meaning to us, a lot of the customers maybe multiple environment to free environment, they are now all coming to us. And given the fact that we got – the reason I took a while to go over in my script, Gartner is the award that we won, the accolade that we have and IDC and everybody else. It’s to make sure that you all know that while we are going through a consolidation phase in the market that BlackBerry is only winning, but we are extremely strong and it’s been recognized by both customers as well as the analysts world, the industry analyst world. So, I am very keen on that and I am positive about it.

That’s helpful. Thank you. And a follow-up on the radar business if I could. We have talked a little bit about the pricing for Radar-M and Radar-L at the customer level. To the extent you are willing to share any color on what the economics look like for BlackBerry and how much of that is essentially passed back to P&L for BlackBerry and any directional color on how that would defer between when you go direct to customers versus via resellers such as Fleet Complete. That will be really helpful.

Well, I see. Okay. So, the hardware has okay margins and we go through our partners, we pretty much share that margin which we both be making a little bit of money. The monthly fee, if we go direct of course, it’s a very – basically a high percentage of margin and but the partner also sharing some, not to the same magnitude of the hardware side.

Great, thank you very much.

Absolutely.

Alright. I am running out of time. So, I apologize for that. So I would like to provide closing statement and my marketing department asked me to do some advertising here to mention our upcoming security summit events, which many have actually of you attended in the prior years. Based on our strong interest this year, we are going to do two of them now and the first one is planned for London on October 24 and the second one is on November 14 in New York City and they promised to be a very good show. And a lot of the information is provided on cybersecurity stuff. So, we hope to see you there and thank you very much for joining the call. And we’ll chat with you in 90 days.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program. You may all disconnect. Everyone have a great day.