INSIDE BLACKBERRY BLOG

Video: BlackBerry’s Annual General Meeting 2019

At the recent BlackBerry® Annual General Meeting, John Chen, executive chairman and CEO, provided an update on BlackBerry’s strategy and covered key milestones from the last twelve months, including that BlackBerry software is now in over half a billion IoT endpoints.

Watch the full recording of BlackBerry's 2019 Annual General Meeting from Waterloo, Ontario, recorded June 24, 2019:

 

Slides:

View the slides presented at the AGM.

Transcript:

The following is a full transcript of the event:

[RECORDING STARTED MID-SPEECH]

JOHN CHEN: …in attendance. With me on the stage is Phil Kurtz. He’s the Deputy General Counsel and Assistant Corporate Secretary of the company. And his job is to make sure that I say all the right things; and he does this job extremely well.

The formal part of the meeting will be chaired by me, and will include my annual update on BlackBerry’s strategy and performance. Following the completion of the formal business meeting, there will be opportunity for the Shareholders to ask—for here, to ask questions. Just to remind everybody, we are webcasting this with a slide and—and the audio, so we are live.

I would like—I would now like to call this meeting to order, and as Chair I’ll ask Phil Kurtz, as Secretary of the meeting, Phil will now go over the procedures and items of the business for the meeting. Thank you.

PHIL KURTZ: Thank you, John. For this meeting, Pina Pacifico of Computershare Investor Services will ask as Scrutineer. I confirm that we have received the Declaration from Computershare Investor Services confirming that notice of this meeting was properly given to all the Shareholders entitled to give notice, and to the Directors and Auditors, together with the Management Information Circular and Form of Proxy. In order to facilitate these meetings, we have prearranged with certain Shareholders to make and second certain voting matters today. As all Shareholders should have previously received a copy of the Notice of Meeting, I would ask for a motion to dispense with the reading of the notice.

SPEAKERS: [Indiscernible – too far from microphone]

PHIL KURTZ: Thanks very much. All in favour?

[PAUSE]

PHIL KURTZ: Any opposed?

[PAUSE]

PHIL KURTZ: Motion is carried. The Scrutineer’s Report, stating that a quorum of Shareholders is present, has now been tabled. The report shows that there are Shareholders or Proxy Holders present here today holding 370,112,647 Common Shares of the company, representing approximately 68.28% of the Common 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.

Voting today will be administered using a paper ballot process. At Registration today, our Scrutineer endeavoured to distribute a single ballot to each registered Shareholder or Proxy Holder who is entitled to vote at this meeting and wishes to vote. If you are entitled to vote and wish to vote, but have not received a ballot, please raise your hand and our Scrutineer will provide you with one.

If you have already voted prior to the meeting, you should not fill out a ballot unless you wish to change your vote. Your ballots will be collected and your votes will be counted by the Scrutineer once all four voting matters today have been completed. Please print your name clearly on the ballot and sign it before it is collected. The Scrutineer cannot count your vote if she cannot read your name on the ballot. Prelim—preliminary results of voting will be announced towards the end of the meeting and final results will be posted later today on SEDAR and EDGAR and on our website.

The first item of voting business today is the presentation of the financial statements of the company for the fiscal year ended February 28, 2019…or, rather, first item of business rather than voting item. These include the Consolidated Balance Sheets of the company as at February 28, 2019 and February 28, 2018, and the related Consolidated Statements of Shareholders Equity, Operations, and Cash Flows, together with the Auditor’s Report. As copies of these materials were mailed to all Shareholders who requested a copy, I would ask someone to move that the reading of these materials be dispensed with.

SPEAKERS: [Indiscernible – too far from microphone]

PHIL KURTZ: All in favour?

MULTIPLE SPEAKERS: Aye.

PHIL KURTZ: Any opposed?

[PAUSE]

PHIL KURTZ: That motion is carried, thank you. We will now proceed with the Election of Directors for the ensuing year. As determined by the Board, the number of Electors to be—Directors to be elected today is eight. As set forth in the Management Information Circular, each of the following persons has been nominated for the position of Director of the company, to hold office for the ensuing year, and each has agreed to serve as Director if elected: John Chen, Michael Daniels, Timothy Dattels, Richard Lynch, Laurie Smaldone Alsup, Barbara Stymiest, Prem Watsa, and Wayne Wouters.

Bylaw #84 for the company sets out a procedure requiring Shareholders to provide advance notice if they wish to nominate any person for election as Director of the company. The company has not received notice from any Shareholder intending to nominate any person for election as Director at this meeting. We will now proceed to take a vote by ballot for the election of the Directors.

Mark an ‘X’ in the appropriate boxes in the ballot indicating whether you wish to vote for a person named on the ballot, or whether you wish to withhold your vote for that individual. Once you have marked your ballot, please keep it with you as there are three more voting matters on the agenda today.

The next item of business is the reappointment of the independent auditors of the company. Will someone please move that Ernst & Young 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.

SPEAKERS: [Indiscernible – too far from microphone]

PHIL KURTZ: All in favour?

MULTIPLE SPEAKERS: Aye.

PHIL KURTZ: Any opposed?

[PAUSE]

PHIL KURTZ: We will now proceed to take a vote by ballot for the appointment of the auditors. Please mark an ‘X’ in the appropriate box on the ballot indicating whether you wish to vote for the appointment of Ernst & Young LLP as the independent auditors of the company or whether you wish to withhold your vote. After you have marked your ballot, please keep it with you until all items of business have been completed.

[PAUSE]

PHIL KURTZ: 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 Plan can be replenished in certain circumstances, such as when outstanding equity awards are forfeited or cancelled before they have vested. Replenishment features of the company’s Plan are described in detail in our Management Information Circular. Because of these features, the company’s Plan does not have a fixed maximum number of shares under it and is considered to be an ‘Evergreen’ Plan. Under Toronto’s 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 our Equity Incentive Plan in 2013 and last approved unallocated entitlements in 2016.

Would someone please move that the resolution to approve the unallocated awards under our Equity Plan, as set out in the Management Information Circular, be adopted?

SPEAKERS: [Indiscernible – too far from microphone]

PHIL KURTZ: We will now proceed to take a vote by ballot on the resolution to approve the unallocated awards. Please mark an ‘X’ in the appropriate ballot—box on the ballot indicating whether you wish to vote for the resolution or whether you wish to vote against it. After you have marked your ballot, please keep it with you until all voting items have been completed.

The next and final item of business is the approval of the non-binding Advisory resolution on Executive Compensation. The 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 our Management Information Circular. A copy of the company’s Say on Pay policy is set out in Schedule 8 of the Circular. Can someone please move that the resolution be adopted?

SPEAKERS: [Indiscernible – too far from microphone]

PHIL KURTZ: Thank you. We will now proceed to take a vote by ballot on the resolution to approve the non-binding Advisory resolution on Executive Compensation. Please mark an ‘X’ in the appropriate box in the ballot if you wish to vote for the resolution and mark appropriately if you wish to vote against it.

This concludes all items to be voted on. Again, please ensure that you have printed your name clearly on your ballot and signed the ballot in the space indicated. I would now ask the Scrutineer to pick up the ballots in the room.

[PAUSE]

PHIL KURTZ: If there are no ballots to be collected, I hereby declare the polls be closed with respect to all items of business mentioned on the notice of this meeting.

[PAUSE]

PHIL KURTZ: Normally at this time, the Scrutineers would prepare a preliminary report on the votes cast in the room, but it looks like that may not be necessary. [LAUGHTER]

[PAUSE]

PHIL KURTZ: Thank you, Pina.

[PAUSE]

PHIL KURTZ: In a moment, John will provide his comments on the company’s performance and strategic direction. Please note that John’s presentation and the Question and Answer session later in the meeting will contain forward-looking statements. Shareholders should be aware that any forward-looking statements are made 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 these disclosed here today. We are adopting for this presentation and Q&A the Cautionary Language regarding Forward-looking Statements that is set out in the company’s Annual Report on Form 40F, to which we refer you for further details regarding the risks, uncertainties, and assumptions relating to our forward-looking statements.

[PAUSE]

PHIL KURTZ: I’ll review the results of the ballots. On the election of Directors, the following eight individuals have been elected as Directors of the company, to hold office until the next Annual meeting of the company in 2020 or until their respective successors are elected or appointed: John Chen, Michael Daniels, Timothy Dattels, Richard Lynch, Laurie Smaldone Alsup, Barbara Stymiest, Prem Watsa, and Wayne Wouters.

I can confirm that all Director nominees received substantially more votes for than votes withheld and therefore all are elected. Final voting results for this item and all items voted on today will be posted on SEDAR and EDGAR and on our website.

The motion reappointing the auditors is carried, and I declare Ernst & Young LLP to have been reappointed the independent auditors of the company in accordance with the motion. I confirm that E&Y’s reappointed by a substantial majority of votes cast.

The motion approving unallocated entitlements under the Equity Incentive Plan is also carried by a substantial majority of votes. And finally, the motion approving the non-binding Advisory resolution on Executive Compensation is carried by substantial majority as well. Again, detailed voting results will be posted later today. And now, John will conclude the formal part of the meeting.

JOHN CHEN: Thank you, Phil. Having completed all the formal business for this Annual and Special Meeting for Shareholders call, I would like to ask for a motion to adjourn this Annual and Special Meeting of the Shareholders of the company.

[PAUSE]

JOHN CHEN: All in favour?

MULTIPLE SPEAKERS: Aye.

JOHN CHEN: Thank you. And, I would declare the meeting adjourned. I would now like to make some remarks about the state of the company. I think we have a video?

[VIDEO PLAYING]

JOHN CHEN: Great.

[PAUSE]

JOHN CHEN: I am very pleased to have another opportunity to present to you all what this company is doing, and all the exciting things we are doing. If you have been here in the previous Shareholder meetings, you would see that there’s a lot of similarities, but we have made a lot of progress in a lot of small months. And, this is the same vision, mission statement, and value proposition statement that you have seen for a number of years. And, the only difference I believe this year is really the element of trust. We have been realized in working with the market, working with customers, that our vision of connecting IoT security securely is—is the—it happens to be a very well-accepted proposition in the market. And, of course, we have all the DNA and all the know-how to—to qualify, to play in the really big market.

What we have now added another component to this, that defines the strategy so that we can all work on something very substantive, is the element of trust. And you can see in the video that trust is defined by us as “security, privacy, and control.” Security – obvious. We spoke many times and we continue to discuss that throughout this morning. The privacy happened to be a big hot topic. As the video has identified, all the governmental around the world – especially the more technologically advanced governments – are putting a lot of rules or discussions of generating rules, whether it’s the UK GDPR, whether it is the Canadian Privacy Rules, so Data Privacy rules; all the countries around the world wanted to have a set of well thought out privacy rules so that it could manage the advance of technology in society. And I don’t think there’s too many companies other than BlackBerry that actually have a say, or at least something to say about it. We are actively working on that and I think that, you will see us stepping up that emphasis in the next two-three years as we expand our portfolio.

And then, of course, the final word is ‘control’. You know, we build a lot of technology as a company. You would see some of those coming out in a very short period of time. The video talks about Spark, which is our IoT Connect platform, and the first component of Spark is going to come out a demo at the Black Hat event in Las Vegas, I think it’s early August, correct? It’s early August. And then, we will do more—we will roll out in London at our Security Summit at the first week of October. So, we have a pretty good plan, marketing plan, behind it.

So, those are—and—and, don’t let me forget, the word ‘control’ and obviously the first word ‘security’ is to enable customers to have a good set of tools to manage their environment. I don’t, obviously, security is not one size fits all and so, that is a very, very important part. And that also explains a little bit of the—of the reason behind that we spent a lot of money to acquire a company called Cylance in this last 12 months, to provide to allow customers to have control in their environment.

So, this is the—the—why does that make sense? So, it’s really about our serve available market, or total available market, and—and it’s a $22 billion market that we only pick out the area that we played in, you know, where we have technology and we have business already in it. We had about 27% CAGR – these are collections of data from various analyst firms. And, if you followed the company, a number of years ago when we first embarked on this software secure IoT journey, the first—the left-hand, those three columns were what we were aiming at doing at the time. And that’s roughly, I’d say, about an $8 billion market, growing roughly the high-teens.

Now, you can see that we have expanded our serve available market dramatically by getting into the endpoint management and in various areas. One is organically: we have the UEM platform and extended to UM platform, communications, technology, that are secure. And then, inorganically, we just acquired an Artificial Intelligence, or a machine-learning company, called Cylance. So, you can see we are now playing in a much bigger space right now. The total market place is about $22 billion.

We talk about Spark. This is the platform that we are going to go tackle the IoT platform. Eventually, everything that BlackBerry does is going to be able to fit into this whole strategy. You heard about intelligent transportation. It is really an attempt to enhance what we do in QMX and embedded cars and embedded platform. It’s not just cars; it’s more than cars. Although, we’ve done well in cars, so. And then, how that’s tied to the endpoint management, because a car is really a collection of endpoints. Thousands and thousands of endpoints. And so, we believe our strategy will be able to crystalize everything that BlackBerry knows how to do from some 30 years back to today and—and tomorrow, obviously.

You can see all the logos pulling down. All these, in the original products that we sell, either as a bundle or as one functionality that eventually these will be a collection that will come in to various different components of the platform. So, we are very excited about this technology. We told you a year ago to give us a year to give you the first product, and I’m pleased to say that we will be doing that, as I said earlier, first in Black Hat and then in London.

A little bit of a reminder, for those new to our story, that obviously, we started a company by building, I think, data loading platforms…I don’t know how many people remember that, way back when before even the pager. Then, RIM is very, very famous for its pager, and then of course the Smart Phone. And, when we entered the company, I joined in Fiscal ’14, we were trying to make sense about Smart Phone business at the time and we decided that the future lies in software and services. So, in FY’19, which is the calendar year ’14 basically, because our fiscal year starts March 1, we formulated a strategy, we stabilized the company financially, built a good foundation there, and then in FY’18—and then, from that time on, organically and inorganically, we are [indiscernible] our businesses. Meaning, that we are going to slow down or deemphasize our hardware shipments and products but emphasize the software component of it. I’ll show you a little bit the reason why we did that. And then, once we got into the software pivot, we completed that in—in FY’18 and we established our portfolio in the FY’19. And then, finally, in this fiscal year we expect to see growth.

In fact, as a reminder, about 90 days ago we had publicly stated that this company would grow revenue this year somewhere between 23% to 27%. I know these are very odd numbers: 3 and 7. I was told they are lucky numbers, so.

So, this is—this has been the journey and we have completed the platforms and we are ready to grow. In the last 12 months, we have expanded from EoT to IoT. EoT was, obviously, the Enterprise of Things; very focussed on the industrial verticals and we now believe that we could – especially with the inclusion of Cylance – we believe now we can go on every PC and every laptop and every device, and every human being for that matter. So, the consumer, we are now expanding more—at least allowing that to get into the consumer, professional consumer that is. So, that’s why we expanded from EoT to IoT.

We talked about Cylance. I’m going to talk a little bit more about AI/ML capabilities. The collection will be over $1 billion in revenue this year, and you know, it’s a very focussed company in security, in cybersecurity software and surfaces.

This morning we announced that the independent analysts that measure how much, you know, market share, has announced that we now have 150 million cars using our software. You may recall that 12 months ago it was 120 million cars. So, the growth is—is pretty nice, and—and we will continue to grow it; maybe, I don’t know whether the market will grow at that pace, but we will continue to grow at/or better than the market.

We counted we have over half a billion of things that already have our software in there, whether we are connecting or we are protecting, or both. And—and, you can say, “Well, half a billion. That’s a huge sum.” It’s true, but remember, we have cell phones, we have auto, we have Petrotech, which is antenna-tuning technology inside chips that are being shipped worldwide. We have Certacom [phonetic], which is a cryptology licence and certificate that’s also being shipped – actually used in most of the routers that people have, including all the Cisco routers that you—you know, people deploy. So, if you add up all these endpoints, Cylance manages around 20 million endpoints. So, if you add up all that it’s at least a half a billion. So, it’s an interest metric, meaning that we have a sizeable market already.

And, finally, last but not least, we established a—a BlackBerry Government Solution subsidiary—independent subsidiary in Washington, DC; allow us to do business with various agencies in the United States governments. Given that we are Canadian government, very pleased to tell you that the BlackBerry is treated in United States government as almost like one of the same as a United States company. And, you can see that we did the CFIUS filing, you know, the foreign investment into the United States CFIUS filing, and was able to get through that process, you know, relatively with ease. And, this is in the middle of a government shutdown, the United States government. So, we thought it was very fortunate for that, but only because that they are trust—we are trusted partners with the US, at least the military. So, we are establishing this organization. We will now be able to do even more business in various different agencies in—in the United States.

We laid out a set of financial metrics, as you know, a year ago. I’m very pleased to report that we have met every single one of them, if not exceeded. The non-GAAP software revenue growth last year came in at 10%, with our guidance a year prior to that was 8 to 10%. We are profitable every year on a non-GAAP basis. Software billings grew double-digits. We have—we made $0.24 per share on a non-GAAP basis, and then we delivered $84 million of positive cash flow. So, we thought, you know, every metrics we laid out we have met or exceeded.

Earlier I spoke about this pivot, why does that pivot make sense? Well, we were going to move into a higher-value food chain, part of the food chain, and by going the software and—and services. And, we think security, because that is the heritage of the company and this is DNA we have, and the reputation we have, and nobody doubted us that—that we could do that. We had a lot of patents and know-how in the company to deliver that. So, but, this is the chart that tells you why. A) the market is growing faster. In four year we were able to grow our software services to 13% on a CAGR basis, compounded annual growth rate, and our—and our gross margin went—went from 40-some percent four years ago to 78% last year. In fact, if you go track one more year, when I joined the company it was at 32%, the gross margin. So, you know, if you do five years it’d be even more impressive of growth rate. This is the really basic reason why we chose the pivot strategy to software and services and to—to narrow ourselves into more security, privacy world, and—and I’m glad that we did that because now we have a really, really healthy company…or, you have a very healthy company, that we will be ready to continue the growth and progress.

These slides are available on our website, already available on our website, and this is something just to show the kind of metrics that our Management team track. So, I’m not going to be—I’m not going to go through every single one of this because it’s not really productive, but I would encourage you to read it and—and, you know, you see what motivates us and how we keep our own report card, so to speak. On the left-hand side, obviously, 150 million cars. That number is very important to us and I hope—you know, there are about 1.1 billion automobiles out there in the world today, but obviously not everyone is, you know, the connected cars and the Level 3, 4, and 5 cars. We only play in the higher end, the more value-added vehicle. Over time, every car will be in that—in that space. So, there’s about 150 million cars—vehicles being produced every year, so there is a good chance that this number will continue to go up.

We talk about, you know, our government business. We are, obviously, in all the [indiscernible] countries, all the G7 countries, 16 of the G20, and we’re building the FedRAMP business, which, by the way, is the market that we are serving with the BlackBerry Government Solutions that I spoke of earlier. So, the—the FedRAMP growth rate is very high. And, these are all reoccurring, subscription base; good business for us. And then, banks a good historic base for us. So are the regulated industries. So, we’ll continue to—to metrics ourselves around this, focussing on channels, developers, and marketing engagement.

You heard the—every—almost every time I have a chance to speak to the financial analysts, I—I start—I bring in this element of what are we really working on every day? I think our product portfolios are very strong. Obviously, we have a couple thousand engineers working on product portfolios continuously to make it even stronger. But, important for BlackBerry is to get the message out there, and also educate the market that we are the—the right partners to—to do business with. So, channels and developers has not been something that we have been traditionally strong in, and, you know, it will take a number of years. I’m glad to see progress; we will continue to focus on that progress.

Certification is obviously important, especially the majority of all our businesses comes from regulated industry. Certification is important in financial, in health care, and obviously in the government. And, the top part, you know, these are all the new ones, but the top ones are pretty prestigious, I would say.

Finally, analysts; we spent a lot of time with the analysts, making sure that our story and our strategy and our offering and the customer testimonials are something they—they can understand and relate to, and while they are writing the report. Again, pleased to tell you that Gartner and IDC continue to put us, you know, at the leadership quadrants, especially when it comes to mission critical security. You know, Gartner has us at four of the six categories as leaders, so these are helpful when the—when the businesses need to decide what choices they want—you know, who they want to partner with and who they want to do business with. And, you know, the list continues. These, again, these are things that you can read on your own.

The Canadian governments and us work very close together, and in a more trusted type environment. So, recently – if you follow our story – you know, the Canadian government, actually Mr. Bains, came out and said that BlackBerry is the most trusted—is the standard of trust, basically. And so, we’re very pleased with that. We always are very supportive of all the Canadian regulatory efforts in data privacy and cybersecurity.

I’ll spend a few minutes on—I’d like to spend a few minutes on Cylance. So, Cylance have a lot of things that they offer, and I am going to give you a slide on that, but one important thing is that you know that BlackBerry is a mobile first company. We only does everything on Mobile and laptops and iPad and so forth. But, we don’t actually touch the PC, or I call it the ‘fixed assets’, like routers and so forth. We—we—embed security cryptology into—into routers, but we don’t actually touch and protect the usage of the routers. And so, with Cylance, it—it changes the story.

The reason why they are an attractive target for us is because they actually do very well on desktops and associated connectivity of that. And so, as I said earlier, 20 million plus endpoints. And, the idea is now we can go to a customer and then give—offer them end-to-end protection, not only about AI and ML and the evolution of that, but end-to-end protection that will feel and look and have the same way to manage it across the board. And that—that’s a dream of what we are doing, and I have a number of projects that will take us there. So, that’s the component—that’s the, kind of, high order vis of why it is attractive, other than technology and so forth.

I’d like to talk about the—the timeline, because that’s very important, to echo, or to support what I said earlier. We made—completed the acquisition I think at the end of February, is that correct? End of February of this year. We already, in a short four/five months, we already have operational synergy that we realized at the back offices. We have integrated back offices and personnel in the last four months. A little ahead of our schedule. Probably the colleagues from Cylance here in the room thought that might be too fast, but we—we know we need to get on with it.

So, the second part is we already kicked off two project. One, actually, has a very substantive road map and development behind it, which is adding—adding the ML technology, machine learning technology, that Cylance has into our endpoint management platform, called the UEM. I have—when we made the acquisition announcement, I said we should see the products in about one year. I’m here to tell you that we still stand by that commitment, that you should see the product before February, end of February of next year. I actually just bought them a couple of months by just saying that, right?

At the same time, we kicked off our strategy of putting the machine learning and artificial intelligence protection of cybersecurity into the auto. I think if we do it properly, that is huge. That is going to be—I think everybody that steps into a car, that talks through your phone and creates analytics that you got, you know Google sending you stuff, you know, the Yelp sending you stuff. Everything, either professional or personal, I think you will like our technology to keep you safe. And that’s—that’s the idea behind it. We haven’t—I think we’re just scratching the surface at this point.

Behind that, other than technology and protection and usage, you actually could go beyond and get in more of the analytics and services that we would be able to provide. Or, we will at least provide to the OEM, which [indiscernible], or the telecom company, to provide that to the consumer, is that. So, I think that we have a lot of ideas and, you know, we’re going to obviously take our time to make sure that we don’t branch out too broadly.

And, finally, we expect the Cylance integration will turn accretive in one year. And, we’re still—we’re still holding on to that commitment.

What does Cylance bring to us? Well, I’m going to start with the upper right quadrant. They bring 1,000 channel partners. These are mostly SMEs, small-medium enterprise, but BlackBerry doesn’t have SMEs. We have, you know, more enterprise, bigger—bigger, higher-end channels. So, SME, a lot of time, is where the growth is in the market. So—so, we are very excited to have that and we’re hoping that over time, when our products could synergistically work together to a customer, then we have another channel—1,000+ channel partners that we can bring the BlackBerry technology into those markets, like the UEM.

It brings over 4,000 new customers. It brings 300+ engineers, data scientists. These are, as you know, extremely well sought after talents. Obviously, the eng—the tech—the pioneering in the security technology. I spoke about 20 million fixed points, and we talk about consumer and enterprise install base. So, that’s what both the technology, the channels, the people are all three of those components are the reasons why we did this transaction, and will be more than happy to answer those questions if you have any, at the end of this presentation.

And so, let’s move forward now. What is the priority this year? Here are the four priorities. And, our Management team and all the people here are very focussed on this. Deliver BlackBerry Spark; I already talked about that. On Wednesday, when we do our earnings release, one of my script is going to go down a little deeper, one letter deeper, in what in Spark are we actually going to deliver and demonstrate in Black Hat and at the Security Summit.

Integrated BlackBerry and Cylance portfolio. I gave you the project, I gave you the timeline. I hope it makes sense to you.

Broadening reach in the regulated verticals. This is an interesting part. We have a new gentleman that now runs all that channels, so—and all the fuel coverages for us. It’s Brian Palmer. He’s actually in the audience. If you haven’t had a chance to hassle him, please do. You know that in the three verticals that we do very well: transportation, particularly cars/auto; banks, the top 10 banks of the world, they all use—not only uses our technology but this is their day-to—day in and day out mission critical platform. This is how their CEO gets email, so this is very important; and securely, that is. And governments. Government is a huge vertical for us. In fact, I think our largest set of customer, the top 10, a lot of them are government and United States Armed Forces and branches.

But, what we haven’t done is to penetrate to the next tier. So, the banks, there are probably 3,000 banks around the world that we haven’t touched. So, there are the focus, when we said ‘broaden reach in regulated vertical’ that’s what we meant, that’s what we said. And there are other verticals, like oil, gas, energy, and medical and health care. So, we are putting plans together. Again, once at a time. I doubt very much in 12 months I’ll be standing here and say, “Oh, we’re doing really great in one of those new verticals.” But, I think you should expect us to do very well in the—in the deepening of the vertical we are already in. So, that—that’s what we meant by ‘broadening the reach’. Expanding into new verticals – that’s, obviously, part of the conversation earlier. So, we have plenty of space to grow.

Finally, I’d like to give you our guidance for this year. I said earlier, we stated this, by the way, it’s the same set of guidance 90 days ago. Deliver total company revenue growth of 23% - 27%, we deliver double-digit billings growth in software and services, and we will be profitable for the year. And that’s—that’s our guidance and—and it looks good, as we sit here today…as you sit here today.

So, that concludes my prepared remarks, and I am…oh. You’re supposed to say something?

PHIL KURTZ: To introduce Q&A.

JOHN CHEN: Oh, ok.

______________________________________________________________________

QUESTION AND ANSWER PERIOD

(Names of Shareholders spelled phonetically)

PHIL KURTZ: Ladies and gentlemen, the question period today in the room will last for approximately 20 minutes. We have two microphones available in the room, one in either aisle, if you have a question, and we’ll alternate taking turns offering the microphone. Before asking your question, please state your name. And, as there are a number of Shareholders that may wish to participate, please limit your question to a single question and kindly keep it brief. With this in mind, can we please have the first question?

[PAUSE]

ALLAN HADLEY: Hi, my name is Allan Hadley. I came from Ajax today. Thank you very much for hosting the meeting. A couple of comments. One, I was glad to see the slide about, you know, partnerships with the Canadian government, that type of thing. I just wondered if the provincial or even federal government Ontario is open for business? Whether they have reached out to you at all, worrying about their Kitchener/Waterloo constituency and what they’d like to do for the region? Also, we’re on the eve of federal election – whether any parties, the Prime Minister himself – have reached out in terms of boosting Canadian technology?

Secondly, a pie in the sky: will the company ever investigate the 5G network? There’s certain competitors in certain places that there were some security concerns with; you know, whether they are founded or not. If we are that trusted, perhaps we should be looking at something at that genre?

And finally, not to take too much time, again thank you for hosting the meeting. And, whether you would ever consider inviting a high school or college or university group to, basically, sit at the back and say nothing, but at least be able to see/hear and sit to go through this process, because that group is going to be this group sitting up front? I think it would be worthwhile.

JOHN CHEN: Thank you. Ok, let me answer the last question first. We had, in the past, run this meeting at the University of Waterloo and Laurier University, alternatively. So, those were—we didn’t see a lot of students, but I think we didn’t do a very active invitation for the students. But, I have to tell you, that at any given time BlackBerry has about 400 interns and co-ops working in the company today, right now. And, a lot of them, actually, is on this site and they’re usually from University of Waterloo. And, you all know, University of Waterloo has a very, very substantial, active intern program; they actually are very big part of our everyday work force. And so, we try to expose ourselves to as many of the students as possible. In fact, I am going to host a Townhall tomorrow afternoon just with the students themselves, so they will hear pretty much the same message that I just delivered, and then there will be a lot of questions and answers. So, it is a very, very key part of our company and that is being replicated around many sites; in Ottawa, that’s the same thing. So, we have a very strong University program, so that—that’s that part. But, we can take that under advisement and we think about it.

As far as the government, we—we obviously are very trusted partners of the Canadian governments, and we do a lot of work with various municipalities. Maybe not as good as we should, because we focus a lot more on the state/federal level.

I’ll give you an example. When the G7 event was held in Montreal, we actually provided our crisis management technology to track all the VIPs for the Secret Services people and police, and the first responders, and all their staff. And—and they were extremely well used. And given that success, we are actually in a number of projects bidding for the Government of Canada communication systems, software side of communications. So we do—that’s just one example, where that was an example that most stands out because all of the Ministers were in there, especially the Minister of Finance and Minister of Public Safety, they were all involved with that. So, we are quite involved with the government, but again it is on more of the higher-level of government. We should get more involved in the – and this is one of the strategy about broadening our reach and government is certainly one of those verticals.

And, one of the question I actually thought this is more I can comment on; there’s a lot of companies, technology companies like you pointed out, networking and other companies, that really need our security and we just need to do a better job in getting to them and do more business development. Now, having said that, at any one given time we are in a lot of conversations. Sometimes it goes somewhere, sometimes it doesn’t go anywhere, but we are in tons of conversations. No—no lack of interest in what BlackBerry has to offer, and certainly no lack of interest in what BlackBerry wants to reach out and work with. Thank you, though.

DARHL VERCAIGNE: Good morning, Mr. Chen. My name is Darhl Vercaigne. I come from White City, Saskatchewan, the constituency of the leader of the Conservative Party of Canada. We’re very proud of that, that we have a representative for the first time since John Diefenbaker, about 1955 when I was born, so I’m dating myself. But, anyway, I’m here. Came out for the meeting today, and I’m also the President of…you can call it a start-up, although it feels like I started up 20 years ago, an international digital exchange for physical goods and services. It’s the IKTS/VCMx, the International Knowledge and Trade Station Value Chain Management Exchange. That’s why I’m here today, holding quite a bit of stock in your company.

My question to you is relating to -and I was very happy to hear this – your consideration of rolling out something with the SME sector of the international economy. I was fortunate enough to be invited for Canada to the D20 in Germany a couple of years ago, and that was the first ever digitization policy making body that came together to discuss critical issues in getting people to engage in the Internet. I am going to focus on B2B, but there was a lot of great research that came out of there that really validated my efforts. It’s just a matter now of moving them forward with a very, very strong team. Not just a company like yours, but logistics companies, railroads, steam ship lines, education, etc., etc.

So, I am going to leave it at that. I’d appreciate if you maybe had a few more comments about where you think you might be going with this, or could be going, and I’d be very, very happy to meet with you on this initiative. Thank you.

JOHN CHEN: Thank you for coming over from Saskatchewan. You probably are trying to escape the cold.

[LAUGHTER]

JOHN CHEN: I was told by one of our Directors that they have snow in Colorado as recent as yesterday. So, probably Saskatchewan is not too far from that. So, as I pointed out earlier, small-medium enterprise is something that we don’t really have a lot of experience and progress and so forth, although we’d love to, and—and with Cylance channels in that—in that space, we hope that we can do more and as time progresses. So, don’t have a lot of concrete plans to report to you on this, but more on the, kind of, we will organize our efforts to make sure that, obviously, the 1,000+ SME channels at Cylance continues to grow in numbers and in vertical – meaning that we’re going to try to get more of the BlackBerry product integrated into that, too. So, those are—I give you that is the desire and the effort. I am not sure I have very concrete plans at this point.

However, I am very interested in what you talked about in the German—when you were representing Canada to go to Germany for the data privacy and digitalization effort. We get invited to a lot of those, too, especially in Europe, and so we will—we will step up efforts in that. I think this is where, as I said earlier, all the government around the world – especially, I think Europe are leaders in, at least in thought leadership in—in putting the effort in driving the understanding of digitization, what it means to society, and what it means to each and every one of us in, kind of, compromising, or striking a good compromise between data privacy, security, as well as convenience. So, those are things that BlackBerry is extremely interested in doing.

[PAUSE]

ROGER CHRYSLER: My name is—my name is Roger Chrysler. I came from Mancaster this morning. This is an annual meeting for me, too, and so I really enjoy these meetings. Your video this morning made mention that BlackBerry has never sold subscriber information to third parties.  Am I correct in extrapolating from that, that I could use a BlackBerry device, use a search engine there that is not like a Google that does sell information, and—and have delivered to my phone a website the same?

JOHN CHEN: Ok. Thank you. Good question. If you use a Google search engine, Google will unfortunately gather your information, like Google does. But, you—anything that—that you deposit or inquire on BlackBerry – like BlackBerry Messenger – that will not—never be seen. It will not be exploited by another party period. In fact, we have a very elaborate scheme to make sure we can’t see it ourselves, either. And—and we would not—we do not keep copies. Once it is delivered, it would be overwritten.

[PAUSE]

ROGER CHRYSLER: The point was made about 5G coming. Is BlackBerry going to be involved in 5G?

JOHN CHEN: Oh, absolutely. So, #1, 5G is a technology that will promote the usage of the QMX technology and every application on top. All of—all the auto platform, whether it is connected or autonomous, they would need continuous communication outside that vehicle. And so, and one of the—you know, the industry has two ways of communicating, or two formats of communication – 5G is certainly one of them, which is more cellular based. The vehicle-to-vehicle communication, vehicle-to-infrastructure communications, loosely called V2X, is something that will be useless without a continuous guaranteed signal, and 5G is one of those technology that is a lot more promising than 4G. I am not a—I don’t believe that there will be no dead spots in 5G period. You might have 1% of 1,000th of a percent of the 4G dead spots, or whatever. So, yes. 5G is very useful to us.

Now, securing the data of 5G, which is the hottest topic in the industry today, I would tell you that we are involved technologically, but there are areas of political sensitivity that—that we—we tend not to get in.

[PAUSE]

SHAREHOLDER: Hi. I have, actually, have one and a half questions. Just continuing on the 5G, is it possible to secure the information then with—with the endpoints the way that 5G travels? That’s one question. And, the—the second thing about…I use a BlackBerry device. You mentioned a pivot to go into the software. Will the BlackBerry mess—will you keep the hardware, the handhelds, to—to keep the capability for security for the Messenger?

JOHN CHEN: So, let me answer the second question first. We don’t have plans to build another device, hardware device. We continue to licence to other people to build the devices. And so, that will have to rely on what is a good business case for those other people, the partners; however, we are very comfortable – if you are using our technology, like BBM Enterprise or other of the BlackBerry technology that you can get on both iPhone and Android – those will be—those will be private data.

Security is really a form of how secure the phone was—is, rather than, you know, whether the security is in the software. As related to the software side, if it is coming from BlackBerry, not only do you expect security, you should expect total privacy. I hope I answered that particular question.

Is there any opportunity for securing 5G? So, all the debates right now—the answer is has to be yes, from a technological point of view. But, the debate is going to be on how much of the 5G transports the data is being copied or interpreted. So, this really is going to have to be more the scrambling and the encryption technology that goes along with 5G. Now, again, I’m not suggesting—there are multiple companies in the world is working on securing the 5G protocol, especially given to all the political sensitivities in the last six months. So, one or more of those companies will have a breakthrough in it. And, you know, it is something that we’re very interested in. We are working on something, but it’s too early to tell how successful we are. I’m trying to say a lot of words by not answering your question.

[LAUGHTER]

JOHN CHEN: So, it appears intelligent but I didn’t say anything. But, I did that not to be evasive. A) there’s certain unknowns still from a technological point of view, and B) it’s not something that I think, you know, politically sensible to make too much comment on.

BART FENANDEL: My name is Bart Fenandel, I am an individual Shareholder, and I’ve enjoyed your presentation. As far as competitors go, who would you…with your current product mix, who would you see are your primary competitors and how do you see things evolving in the next, say, two years? And, second question: earnings per share – you gave top line projections, but the earnings per share were only that they would be positive. How do you see that evolving over the next two to three years, as far as little more concrete on earnings per share?

JOHN CHEN: Ok. So, I’ll get to the competition a little later. Let’s talk about the earnings per share for a second. Cylance is one of those companies that is a high growth and we expect to grow the Cylance top line somewhere between 25% - 30% this year. In order to fuel that growth, we will have to spend quite a bit of money in carrying the loss, although a year from now we expect it to be accretive.

So, this mix—well, we’ve passed three months, and the next nine months we will have to invest in that, in addition to investing in other BlackBerry activities, whether it is the product development of the Spark, whether it’s the launching of that, and the sales and marketing efforts beyond going—broadening our base. However, I don’t remember whether I said it publicly or not, but still we will now know it’s public. However, we actually do expect to be profitable for the year. We just can’t tell you exactly whether it is, you know, $0.05 profitable, $0.15 profitable, but I almost can tell you that unless we can see even higher growth than what we expected, it will not be $0.24 positive.

But, the investment we are making right now is the right investment for our future growth, and a year from now we will not only be growing, we’ll be profitably growing. So—so, that’s the—that’s the game plan.

Regarding competition, that’s a very good question. You know, a lot of our traditional business, or established business call it, like the Endpoint Management business, the traditional competitors would be people like the Microsoft of the world. But, as we go into more of an IoT communication platform, I think you’re going to start seeing us to provide a software equivalent of a lot of the networking companies. And so, eventually, I hope that I—we can find a way to collaborate with them rather than fighting, but in our business there is no concrete competitor. Like, in the case of Microsoft. Microsoft sells you Office, then they sell you something called In Tune, which overlaps with our Unified Endpoint Management platform. They, of course, have the size and the—and the ability to do a enterprise-wide contract; however, they are not as secure as ours. We also, by the way, work together to build something called a ‘Bridge’, which will make all Microsoft applications, including Skype, being looked at natively on our mobile phone, using our UEM.

So, we collaborate in some cases, and we compete in some cases. In addition to that, Microsoft and us have a lot of common customers in Cloud around the world. So, there is no—you know, unlike the old days, there’s not a die-hard case, you know, and so we compete in some cases, we collaborate in some cases. So, I expect that to continue. I’m—I’m sure that we will overlap with Cisco, Palo Alto network and other people by providing this software platform.

PHIL KURTZ: We’ve reached our 20 minutes.

JOHN CHEN: Ok. Unless somebody has a pressing question, I—I thank you all for coming. I hope to see you all again next year, and have a great day.

[APPLAUSE]

[PAUSE]

OPERATOR: Ladies and gentlemen, this concludes the BlackBerry AGM conference call. Thank you for your participation and have a nice day. 

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