BlackBerry Limited (BB) Earnings Call Transcript & Summary

Good morning, everyone, and thank you for joining today's fireside chat. Joining me today are BlackBerry's Chief Technology Officer, Charles Eagan; and BlackBerry's SVP of Corporate Development and Strategic Partnerships, Vito Giallorenzo. Yesterday, BlackBerry announced that it was joining forces with AWS to develop and market BlackBerry's Intelligent Vehicle Data Platform, BlackBerry IVY. Today, Charles and Vito will discuss the key points of the announcement and answer some of your questions. [Operator Instructions]

Okay. So let's begin. Charles, so what is BlackBerry IVY? What does it do?

Great. Thanks, Tim, and good morning, everyone. BlackBerry IVY is the Intelligent Vehicle Data Platform that we're excited to announce. It really is a vehicle edge software solution that puts OEMs in the driver's seat. This is an automobile-to-cloud stack that is enabling a new capability that's been architected and built by BlackBerry and Amazon engineers. One of the cool things about this opportunity, it can apply to every vehicle, every platform with this capability. In its core, it's providing secure access to more data and insights in a standardized way, in that it provides consistent, flexible and secure access to vehicle sensor data, and this data is currently private to and only available to OEMs and we're kind of unleashing it to a larger market. We're also introducing a new machine learning abstraction layer on top of these low-level sensors so we could create higher-level sensors that could be used for application development. So this sensor could be -- there could be like 50 pressure sensors in the seat or audio sensors in the vehicle. You could use that data to infer that there's a child in the rear seat or there's a child in the rear seat that's not wearing a seat belt. So you get higher-level information that could be used for creating new applications in this environment. Now I will say that this data is completely private. BlackBerry is moving the data in a secure way but the access and usage is completely -- that completely stands with the OEMs. And BlackBerry IVY includes the cloud console and the cloud-based API to remotely deploy, update code and these new machine learning models. The initial focus is automotive OEMs but this is really applicable to the entire smart city ecosystem. We've created a standardized ubiquitous ecosystem that enables an entirely new application environment.

Well, thank you. Thank you, Charles. Appreciate that. Vito, what opportunities does this create for OEMs?

Tim, I think the opportunity for OEMs are really infinite here. IVY is what they're looking for. It's a data platform to monetize the data from their vehicles and build an ecosystem around that. While there are different sectors, sometimes I think it's helpful to draw the parallel with what happened in mobile. When you think about when we could unleash the data from those mobile devices and offer it to developer a huge ecosystem of application solutions just grew on top of it. I don't think in 2005, any of us thought that we could order a car or edit a family video in a phone. And I think that's the same is going to happen here. There's going to be a proliferation of services and solutions that maybe we don't even imagine today. And all of that will be a revenue opportunity for automakers and for their partners. I think as Charles mentioned, I think we should expect proliferation of services around personalization, the experience in the vehicles, services that will allow us to enjoy the vehicle more, to have the vehicle running more safely, efficiently, better maintain it. And look, I think all of this will be done in an OEM-friendly way. OEM will be able to do all of this by retaining also full control of the data that is generated from that vehicle and also of the user experience and the user relationship and hence, they'll be able to guarantee the user privacy. So that's important. And what's also important to remember is that it's not just a revenue opportunity for those OEM. I mean, there is a material cost savings and really operational streamlining opportunity here. It's similar to what AWS did in the non-automotive space, really abstracting, simplifying that, call it, dirty plumbing work that is necessary to make these systems work. Now that's going to be attractive and done by IVY for them, and that will tremendously accelerate the time to market for those applications and also saves a lot of cost for the OEMs.

Great. Thanks, Vito. Charles, Vito mentioned services. Could you please give me some examples of the type of services that could be provided as a result of BlackBerry IVY?

Yes. Yes, certainly. One thing I'll start with is this is a blank canvas that we're -- that we have in front of us and there's -- the potential is infinite, as Vito said. But to give it some more -- some examples that we've been thinking of, BlackBerry IVY could leverage vehicle data to recognize driver identity or driver behavior and combine that with hazardous conditions such as icy roads or heavy traffic and then recommend that the driver enable relevant vehicle safety features such as traction control or lane-keeping assist or adaptive cruise control. IVY could then provide automakers with feedback on how and when these safety features are used, allowing them to make targeted investments to improve vehicle performance. Drivers of electric vehicles could choose to share their car's battery information with third-party charging networks, for example, to proactively reserve a charging connector and tailor charge time according to the driver's current location and travel plans. So it's really the synthesis of all this information that's available. BlackBerry IVY can also provide insights to parents of teenage drivers who may choose to receive customized notifications based on insight from vehicle sensors when the number of passengers in the vehicle changes or when the driver appears to be texting or distracted or not observing speed limits or the occupancy level rises above the threshold that they've set. And similarly, parents of infants could receive a reminder to engage the child safety lock when the vehicle detects a child in the rear seat. There's so many scenarios that could be supported with this. And if you think of the smartphone app ecosystem, could you imagine that the inception that -- as of this time in 2020, Android users have close to 3 million apps that are available? So there's quite a potential on this platform.

Wow, okay. Thank you for that. That's really helpful. Vito, I'd like to switch gears, if I may, to the go-to-market approach. So who would be the target customer for BlackBerry IVY?

So IVY is a platform so it's targeted to the entire ecosystem built around automotive. But the primary target customers for us will be the automakers, the OEMs. They are the first adopters that we need to secure in order to guarantee that there is a ubiquitous base of brand and models of cars that leverage IVY. That will secure the base that will allow the rest of the ecosystem to flourish. But at the same time, we're not just focusing even now at just on OEM. We are already talking to several leading Tier 1s who are very interested in IVY and will be also Tier 2. All these Tier 1 and Tier 2 suppliers for automotive, they have solutions that will greatly benefit from IVY and they will be using it. And then we're also looking at ways to build the entire ecosystem beyond that of application and solution providers on top of that. And we are doing that alongside Amazon. I think when we talk about go-to-market, it's important to note that we're not just developing, we're also taking this to market jointly with the AWS teams. But the customer relationship and call it -- it will be from BlackBerry. So BlackBerry will be the contracting entity, BlackBerry will own the relationship with the customers but everything else is being done in very close collaboration with Amazon.

Excellent. Okay. That's really helpful. So how should investors think then of BlackBerry IVY and how it works in relation to other smart systems designed into the car such as an ADAS system or a digital cockpit?

Yes. So they should think of IVY as the underlying data fuel that powers this platform. IVY is an underlying foundational data platform that will help all these other smart systems in the car flourish. They will all be able to use and leverage data much more easily, much more -- in a way that is much more agile, thanks to IVY. And so the goal that IVY wants to achieve is really to enable all the smart platform to be smarter and to be better. And those platform exactly, as you said, could be anything. It could be a digital cockpit, could be an infotainment application, could be an application aimed to assist the driver and assist the vehicle operations. And I think what's important to note, though, the difference would be that with IVY, we are making the platform more flexible. It will be possible for an OEM to take a car, any car and choose to enable certain sensor data, use that sensor data, new machine models, machine learning models that have been downloaded in the car and expose those insights generated to any app they choose. So it would be a more agile way to deploy these applications in cars. And we are talking possibly days versus years. Sometimes, it takes a day.

Great. Thanks, Vito. Again, very helpful. And thanks to everyone for sending in your questions so far. We've already received quite a few. I'll do my best, as I said, to get to as many of them as I can at the end of this call, but please do keep them coming in. So Charles, moving over to you. BlackBerry QNX has a number of safety certifications, most notably ISO 26262 ASIL-D that allows QNX to operate in safety critical systems. This has been, I guess, a barrier to entry for other players reaching those parts of the car. Does this also apply to the data that BlackBerry IVY would collect?

Yes. So this is a very interesting question. BlackBerry IVY can collect any data, so be it safety data or entertainment data or environment data. The thing is BlackBerry IVY collects it in a safe manner and makes it available. So the vehicle behavior and safety systems like our ISO 26262, it remains highly tuned and critical to each OEM, an important part of our current installed base. So IVY is a new higher-level complementary data environment for enabling new use cases and removing that barrier to entry. Much like the smartphone has many applications, in fact, the vast majority not related to making phone calls, this allows data for application developers to access without having to go -- without having the experts in the OEM. So it basically allows Amazon and BlackBerry QNX to remove the barrier to entry for a new development ecosystem. So the app's developed, we could build them once and deploy the multiple OSs and cloud platforms. We get access to vehicle data and insights never possible before. And there's no specified embedded or automotive software skill needed, so it really unlocks who can do this innovation. And what do the drivers get? They get a personalized in-car experience and they get more frequent feature updates. So looking forward, we will see unified experience across OEMs, which is not possible today. Like, for example, if you use Spotify today, you can use it on your phone or your computer or your Alexa device. BlackBerry IVY enables this framework to be ubiquitous and will allow new experiences to go across vehicles and platforms.

That makes sense. So the secular trends we speak about in the car over recent years, we've seen the car become progressively smarter, for want of a better word with more software throughout the car. 5 years ago, if I think back, software would have been limited to systems such as infotainment and probably only in the top-of-the-range models. Now that cars feature more and more systems such as ADAS, digital cockpits and the like and not just at the top end of the range either but also in the entry-level models, too. Is the move into data the next logical step in this progression?

Yes, I think it really is. And as a software engineer, it's great to think of more software equating with being smarter, so I'm fully aligned with that but cars are becoming much smarter. And basically, BlackBerry QNX is we're expanding beyond the infotainment and safety critical systems, like we're currently the safety-certified OS and hypervisor used in these critical driver assist or instrument cluster or vehicle gateway. And there's trends in the vehicle like there's much higher-end compute units that are appearing in the vehicle that gives us -- the cars will become like a mobile server or a massive IoT cluster. And there's higher bandwidth available to this vehicle so we can enable more services and features. In fact, Ford's new CEO recently said that data was more important than fuel economy of the vehicle. So going forward, the vehicle data, its analysis and services built on that data will be core to OEMs and their business models. And we're very excited that BlackBerry IVY is at the front of enabling this market.

Good. So Vito, a question that a number of those in the audience have asked already is, when should we expect to see BlackBerry IVY in vehicles?

Right. Yes. So we are very excited because several OEMs are already considering IVY for their vehicles that they are currently designing. So given the production cycles for those vehicles being designed today, they would hit production around 2023, sometime 2024. So that would be the time frame where you would see the first vehicle hitting the road with IVY inside.

Okay, that's really helpful. Another question from the audience, Vito, and I quote, "We understand that the ASP for QNX has been increasing with the move from infotainment to safety critical systems. How should we think about BlackBerry IVY in this context?"

Yes. So absolutely correct, so our ASP has been growing. I think it's a combination of 2 key drivers: the increased complexity and electrification of the systems in the car that need QNX and also the expansion of the QNX offering inside the car on top of our operating system. And I think IVY, it's a continuation of that trend. We have a long-term goal to keep increasing the ASP in the car, and we really think that IVY will be a big driver for that. It's a bit early to talk about revenue and revenue model. Today, we definitely have a framework in mind that we've agreed with AWS that we are targeting to go to market with, but we'll have to see. But we definitely have a very strong expectation of how IVY will impact our ASP.

Excellent. Thank you for that. Okay. So I think we've time for 1 more audience question, and I'll ask you, Charles, if I may. Are there any others currently doing this? Or are BlackBerry and AWS the first to announce this type of product?

Yes. So we're the first to make this kind of announcement, and we think BlackBerry IVY is truly unique vis-a-vis what is available today. There are several components of this solution today. For example, there's data platforms out there, like there's cloud-only platforms that ingest data but they don't really make it available to the OEM or to the drivers. There's data brokers who aggregate data from various sources in the vehicle or external. And there's also specific in-house sort of proprietary solution. So a Tier 1 or some start-up might often have the specific hardware or software, but they don't have the reach that AWS and QNX have. IVY is the only platform that offers all the things OEMs need and none of the things they don't need. So it's a full stack from the platform, insights, cloud and management. It's done in a way that guarantees functional safety. It works ubiquitous -- it works across all hardware and software systems, including other OS and other clouds so it's a truly standardized framework. And it's very OEM-friendly. It gives the tools they need but allows them to control the data and the user. So it doesn't restrict what the OEM can do in any way and leaves it in complete control. It just allows them to offer many new features on top of it, on top of their current ecosystem. And finally, we think this is very important. It's the only platform that benefits from the best-in-breed capabilities and footprint on both the embedded vehicle side, BlackBerry QNX already having 175 million cars. And on the cloud side of this and which the largest cloud provider in the world is Amazon AWS. So if I quote Andy Jassy, AWS and BlackBerry are making it possible for any automaker to continuously reinvent the customer experience and transform vehicles from fixed pieces of technology into systems that can grow and adapt with the users' needs and preferences. So it's pretty exciting.

Absolutely. It certainly sounds exciting. So thank you, Charles. Unfortunately, I think we're out of time. As I said earlier, we'll try to get back to those of you whose questions we didn't get to on the call today. But if you have any further questions, please feel free to e-mail them to [email protected] and we'll come back to you. I'd like to say a big thanks to Charles and Vito for their time today, and I hope that everyone watching found this a useful session. Thanks, and goodbye.