BlackBerry (BB) Q4 2019 Earnings Conference Call Transcript

BlackBerry (NYSE: BB) Q4 2019 Earnings Conference CallMarch 29, 2019, 8:00 a.m. ET

Prepared Remarks:

Operator

Good morning and welcome to the BlackBerry fiscal year 2019 fourth quarter results conference call. My name is Michelle, and I will be your conference moderator for today's call. During the presentation, all participants will be in a listen-only mode. We will be facilitating a brief question and answer session toward the end of the conference. Should you need assistance during the call, please signal a conference specialist by pressing *1. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to our host for today's call, Christopher Lee, Vice President of Finance. Please go ahead.

Christopher Lee -- Vice President, Finance and Head, Investor Relations

Thank you, Michelle. Welcome to the BlackBerry fiscal fourth quarter and fiscal year 2019 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 financial results. We will then open the call for a brief Q&A session. This call is available to the general public via call-in numbers and via webcast in the Investor Information section at blackberry.com. A replay will also be available on the blackberry.com website.

Some of the statements we'll 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'll 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.

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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 in 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 required by law. As is customary during the call, John and Steve will reference non-GAAP numbers in their summary of our quarterly and annual results. For a reconciliation between our GAAP and non-GAAP numbers, please see the earnings press release and supplement published earlier today. I will now turn the call over to John.

John Chen -- Executive Chairman and Chief Executive Officer

Thank you, Chris. Good morning, everybody. As Chris has stated earlier, I will only reference non-GAAP numbers in my summaries. So, BlackBerry had a very, very positive quarter, as well as fiscal 2019. Let me start with the fiscal 2019 results. For fiscal 2019, we delivered upon all our financial outlooks, including 10% total software and services revenue growth, double-digit percentage total software and services billing growth, we reported $0.24 in earnings per share versus $0.14 last fiscal year, and we generated $83 million in reported free cash flow.

In the quarter, we achieved 8% -- now it's for Q4. In the quarter Q4, we achieved 8% year-over-year total company revenue growth. This was the first time in many years, driven by four consecutive years of software and services growth that overcame the quarter-to-quarter decline in handset revenue and service access fees. This is where the violins come in. We believe total company revenue growth is a significant milestone to both the company and our shareholders. This profitable growth is a clear indication that we have successfully pivoted to become an enterprise software company.

This quarter's results are due to the achievement of record highs in total software and services revenue, enabling BlackBerry to exceed the consensus expectation in both revenue and earnings per share for the quarter. Finally, we completed our acquisition of Cylance. Cylance is a next-generation endpoint security technology which participates in the fast-growing market, and they provide technologies that are shaping the future direction of cybersecurity. The AI and machine learning capabilities we added are synergistic with our long-term vision for BlackBerry Spark, our integrated secure communication platform for the IoT.

Now, let me provide some highlights for the fourth fiscal quarter. Total company revenue came in at $257 million, total software and services revenue was $248 million. As I mentioned before, this is a new record quarterly high. Total software and services billing grew a solid double-digit percentage year over year for both the fiscal quarter as well as for the fiscal year. Gross margin came in at 82%, operating income was $58 million, positive for the 12th consecutive quarter. Operating margin was 23%, an increase of nine percentage points from last quarter. This is the highest operating margin reported by the company since fiscal 2011. EPS came in at $0.11. Total ending cash and investments after the closing of the acquisition of Cylance came in as $1 billion.

Next, I will cover some significant highlights by business. Fourth-quarter Enterprise Software and Services revenue declined 20% year over year, primarily due to the impact of the ASC 606 accounting. You may recall that in the fourth quarter of fiscal 2018, we reported approximately $30 million of perpetual license that was recognized up front prior to the 606. It is worth noting that this is the last quarter of year-over-year comparative impact related to the implementation of ASC 606.

As we look at billings and other operational metrics in the quarter, we expect to see growth in Enterprise Software and Services in fiscal 2020. Billings grew strongly on a sequential basis. The strength in the quarter came mainly from the Financial Services and Government verticals. In the Financial Services vertical, we received over 400 orders from banking customers from all around the world. We include Barclays PLC and Bank of Oman. In the Government vertical, some notable orders received, including the Austria Federal Computing Center, the Defense Logistics Agency, the Police Service of Scotland, Public Service and Procurement Canada, U.S. Air Force, U.S. Army, U.S. Navy, just to name a few.

After the quarter, we made two major announcements that underscore our continued progress in the Government sector. First, we were selected by NATO for our secure voice solution SecuSUITE for Government. Second, we announced the creation of BlackBerry Government Solutions, which is a Washington, D.C.-based subsidiary that will deepen our reach within the United States government and ensure that all our company's solutions and products are FedRAMP authorized. This is a model that we can see deployed with other countries -- in the future, of course. As we have demonstrated consistently throughout the fiscal year, we were well positioned to not only compete, but to win in the regulated industry.

Our strongest revenue performer within the Enterprise Software and Services in the quarter was our UEM, the Unified Endpoint Management business, which grew at a high single-digit percentage on a sequential basis. Enterprise Software and Services deferred revenue also grew in the fourth quarter since we have largely transitioned to a ratable revenue model. We're still on track to release the first module for the BlackBerry Spark platform this September. As a reminder, BlackBerry Spark is our integrated secure communication platform designed to address the hyperconnected needs in the IoT markets.

So, let me move to BlackBerry Technology Solutions business. Fourth-quarter BTS revenue came in increased 20% year over year. Growth in BTS was mainly driven by BlackBerry QNX, the software development license, services, and royalty revenue. They all grew year over year as we continue to be selected for designs by our customers in both the automotive as well as the general embedded market. In the quarter, we had a total of 22 design wins, of which 14 were in automotive. Three of the wins were for infotainment, and the remaining 11 wins were across ADAS, which is advanced driver assistance, digital cockpits, instrument clusters, and other non-infotainment applications.

Based on one of our recent wins with a prominent Tier 1 supplier, we are seeing an emerging trend in the automotive software architecture where domain controllers are consolidating functions that have historically been distributed across many ECUs, or electronic control units. This trend is constructive for BlackBerry QNX. Our safety-certified operating system and hypervisor are very relevant for this current market demand.

During the quarter, we announced an investment of $310 million Canadian over 10 years to develop the next generation of safe and secure embedded software for the future automobile and other enterprise markets and other autonomous platforms. Our investment continues to increase the breadth of our products that are necessary to serve the active safety and autonomous platform now as well as in the future. I believe this investment is going to help BlackBerry to stay ahead of the competition.

I'm going to move on to Radar. In the quarter, we added eight new customers, including Fleets Mexico, continuing our international expansion. We also received repeated orders from nine existing customers, including Bimbo Bakeries USA and Fraxovan. We are actively engaged with a number of very large companies in our pipeline, and we look to continue to ramp up volume.

In our business reporting regarding licensing, IP, and other revenue -- which, in the future, by the way, we're going to refer to as "Licensing" from now until perpetuity -- we continued to execute well against the strategy to monetize our IP and technology portfolio. Our licensing business performance in the fourth quarter resulted in an increase in revenue of 71% year over year. The performance was driven by the opportunities we have highlighted as we were discussing with you earlier in the fiscal year that we were all working on. We expect a steady annual revenue contribution from this business. Based on our pipeline, we're working toward a goal of around $270 million in Licensing revenue in fiscal year 2020.

A brief word on BlackBerry Cylance: Those of you who attended RSA -- by the way, we completed the acquisition the last week of February. Those of you who attended RSA this month, which is March, are aware of our release of Cylance Persona, which generated a lot of interest as the first proactive protection solution based on individual behavioral characteristics. At RSA, we also announced that Verizon selected BlackBerry Cylance to be part of its managed security service portfolio. This partnership strengthened our channel as well as broadened our reach to Verizon enterprise and the small and medium business customer base.

BlackBerry Cylance was also recently recognized by multiple cybersecurity industry experts for their innovation and leadership. I guess IE got a lot of awards at RSA. BlackBerry Cylance is off to a bright start, and we're very pleased with this acquisition, and it's a positive validation on our investment thesis.

Before I turn the call over to Steve, let me provide you with a couple of key personnel updates. First, I'm pleased to welcome and announce that Bryan Palma recently joined BlackBerry as our President and Chief Operating Officer. Bryan is an excellent addition to our team. Bryan started his career as a forensic specialist for the United States Secret Service. He was also the first CISO for Pepsi, VP of Cyber and Security Solutions for Boeing, and a Senior Vice President of an $8 billion professional services business from Sysco. The combination of Bryan's strong go-to-market focus and his cybersecurity background has enabled him to deliver growth at all his prior organizations and engagements.

As you have seen, we added some strong talent over the last several months, with Bryan as well as Stuart and the Cylance team. We plan to add others to our team. All of them will be key for BlackBerry to execute against our strategy for profitable growth. For fiscal 2020, the company is now organized in three business units, whose leaderships will report to me. Bryan will lead the new BlackBerry IoT business, which will include our Enterprise Software and Services as well as the BlackBerry Technology Solutions team. Stuart, the co-founder and CEO of Cylance, will lead the BlackBerry Cylance business. Steve Capelli will lead Licensing in conjunction with his CFO role. I will now turn the call over to Steve to provide more details about our financial performance.

Steven Capelli -- Chief Financial Officer

Thank you, John. Before I comment on the fiscal quarter, I'd like to comment on fiscal 2019. As John previously mentioned, I am pleased that we did what we said we would do regarding our fiscal 2019 financial outlook. More importantly, we ended the year on a high note, with total company revenue growth, gross margins over 80%, positive free cash flow generation, and $1 billion in cash after closing the Cylance acquisition.

Now, on to the fiscal quarter. Note my comments on our financial performance for the fiscal quarter will be in non-GAAP terms unless specified otherwise. We delivered fourth-quarter non-GAAP total company revenue of $257 million and GAAP total company revenue of $255 million. I will now break down revenue shortly.

Fourth-quarter total company gross margin was 82%, primarily due to the higher mix of Licensing revenue. Our non-GAAP gross margin includes software-deferred revenue acquired but not recognized of $2 million, and excludes stock compensation expense of $1 million and restructuring costs of $1 million. Operating expenses of $152 million were up 8% sequentially, due primarily to the inclusion of Cylance in our numbers for about a week of our fiscal quarter.

Our non-GAAP operating expenses exclude $18 million in amortization of acquired intangibles, $13 million in stock common expense, $8 million in acquisition and integration costs, $2 million in restructuring charges, and a onetime benefit of $9 million from a settlement with Panasonic, and a benefit of $6 million related to the fair-value adjustment on the debentures. Non-GAAP operating income was $58 million and non-GAAP net income was $60 million. Non-GAAP EPS was $0.11 in the quarter. Our adjusted EBITDA was $73 million this quarter, excluding the non-GAAP adjustments previously mentioned. This equates to an adjusted EBITDA margin of 28%.

I will now provide a breakdown of our revenue in the quarter. Total Software and Services revenue was $248 million, representing 96% of total revenue and up from 91% a year ago. Total SAF revenue was $9 million and total handset device revenue was zero. I will now provide a further breakdown of our Software and Services revenue in the quarter. Please refer to the supplemental table in the press release for the GAAP and non-GAAP details. Enterprise Software accounted for 37%, BlackBerry Technology Solutions accounted for 22%, Licensing accounted for 40%, and Cylance accounted for 1%. Recurrent Software and Services revenue was 93% in the quarter, consistent with the definition we used last quarter, which was to include perpetual licenses recognized ratably.

Now, moving on to our balance sheet and cash flow performance, total cash, cash equivalents, and investments were $1 billion, which decreased by $1.4 billion from November 30th, 2018 due to the closing of the Cylance acquisition. Our net cash position was $400 million at the end of the quarter. Free cash flow before considering the impact of acquisition and integration expenses, restructuring costs, and legal proceedings was a positive $20 million. Cash generated in operations was $21 million and capital expenditures were $3 million. That concludes my comments. I'll now turn the call back to John to provide further outlook.

John Chen -- Executive Chairman and Chief Executive Officer

Thank you, Steve. Before I provide the fiscal year 2020 outlook, let me summarize our strategic priorities for the fiscal year, and I will break it down by business unit. For BlackBerry IoT, our goal is to drive profitable revenue growth, increase our market share in the industry vertical that we have been strong in, and start to expand the vertical that we have been underweighted. For BlackBerry Cylance, our goal is to increase market share, of course, while improving its profitability and reducing the cash burn.

For Licensing, we look to close opportunities that result in a higher amount of recurring revenue. We are investing for growth, including spending our channel reach and our innovation. We have begun to integrate AI and machine learning capabilities onto both our UEM product as well as the QNX product line, and we anticipate at least the beginning of the releases in 12 months, probably starting with UEM first. We are also investing to accelerate the development of the Spark for our internal growth.

With that as context, our outlook for fiscal year 2020 is as follows: We believe the total revenue growth will come in between 23-27%, driven by a double-digit percentage increase in billings. Revenue growth is broken down as follows: IoT business unit growth of between 12-16%. We expect BTS to grow faster than the enterprise UEM business. We are sharing this detail with you only on this call -- I guess it should be "only once on this call" -- to help you align your historical model with our going-forward financial reporting. Licensing we expect to decrease 5% year over year as we focus on closing opportunities that build upon our recurring licensing revenue base.

In summary, the combination of IoT and Licensing business unit should deliver organic growth somewhere between 8-10%. Also, we expect BlackBerry Cylance to grow somewhere between 25-30% from a base of around $170 million for the 12 months ending February 28, 2019. Service Access Fees, or SAF, will be somewhere between $10-20 million. As stated earlier, we are investing for current and future growth. Though we are investing, we still anticipate being profitable on a full-year basis, even with the diluted impact of the Cylance acquisition.

As previously noted on the November announcement call, we anticipate the acquisition to be accretive in the second fiscal year and thereafter. BlackBerry's stand-alone annual growth and operating margin profile is largely unchanged. However, we are adding about $300 million in costs related to Cylance. This will break down to about $75 million in cost of goods sold and $220 million operating expense. The total company intends to improve operating leverage throughout fiscal 2020.

We anticipate our fiscal 2020 financial results will be consistent with the seasonality we have exhibited the last fiscal year. We anticipate minimum change to the tax expense and capital expenditure that we have reported last year. So, with all that, you should be able to come up with the final answers -- the definite number. Operator Michelle, I would like to open the call for question and answer, please. Michelle?

Questions and Answers:

Operator

At this time, we will now begin the question and answer session. To ask a question, you may press *1 on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press *1 to ask a question. We'll pause for just a moment to allow everyone an opportunity to signal for questions. We request that you limit yourself to one question and one follow-up. Our first question will come from Steven Fox from Cross Research. Your line is open.

Steven Fox -- Cross Research -- Managing Director

Hi, good morning.

John Chen -- Executive Chairman and Chief Executive Officer

Good morning, Steve.

Steven Fox -- Cross Research -- Managing Director

Two questions for me, please. First of all, John, given all the organizational changes, I was curious if you could outline what it does to free up your time and maybe how your emphasis in terms of your own management is going to change going forward. And then, secondly, when we think about Cylance -- and obviously, everything you've said is fairly consistent with when you announced the acquisition, but can you give us a little color on maybe how their business plays out seasonally quarter to quarter, roughly, and also how the direction we should think about the cash burn declining as the year goes on? Thanks.

John Chen -- Executive Chairman and Chief Executive Officer

Okay, good. I will leave the cash burn answer to Steve. So, the first question is -- I'm buying all the maps about beaches and golf courses... No, no. Steve, I think will be immensely busy, and part of the reason is to make sure that we have the synergy both in the financial side, and more importantly, the technology, and build out our internal communication platform for the IoT. There are some really big projects that I need to focus on. And also, making sure that the Cylance, being a very high-growth company, continues that growth, but being integrated into BlackBerry as one company. So, I have to balance both cultures, and I think it will work very well. Initially, it has worked exceedingly well right now. So, people at Cylance were excited to join us, and we're very excited to have them.

So, anyway, there's going to be a lot of work, and hoping that I could spend more time in getting the company more focused on the strategy going forward. So, that's that. Because of their growth, there wasn't really much of a seasonality because they're growing every quarter, basically. But, if you look at the four-quarters-over-four-quarters-type thing, you basically see Q1 being lower and Q4 being higher, the same kind of mathematics. A little bit more profound on our enterprise business, less profound on theirs.

Steven Fox -- Cross Research -- Managing Director

That's helpful.

Steven Capelli -- Chief Financial Officer

So, Steven, first of all, we will submit a business acquisition report where you have to submit by 75 days. May 7th would be that deadline. We hope to have that done before our Analyst Day, which is late April. So, in about 30 days, I think you'll have a better view. John mentioned because of the high amount of recurring revenue that the -- how the revenue flow would come through, and on a cash flow basis, we did say they would be accretive next year for us, but as we look to this year, we're really looking at decreasing losses on cash. We do expect to have that throughout the full year. Obviously, more heavily weighted in Q1 and gradually moving out to more profitability or cash flow generation in Q4.

Steven Fox -- Cross Research -- Managing Director

Great, that's helpful. Feel free to send some of those beach brochures over to me when you get a chance.

John Chen -- Executive Chairman and Chief Executive Officer

Okay, will do.

Operator

Your next question will come from Gus Papageorgiou from Macquarie. Your line is open.

Gus Papageorgiou -- Macquarie Capital Partners -- Associate Director

How are you guys? Congrats on a great quarter. Just a couple questions. On the Licensing, Steve, you said $270 million annually. Is that --

John Chen -- Executive Chairman and Chief Executive Officer

No, for next year.

Gus Papageorgiou -- Macquarie Capital Partners -- Associate Director

For next year, yeah. Is there any seasonality in that, or is that pretty consistent across quarters? Also, on the gross margin -- very strong gross margin this quarter. I know Cylance is only there for a week. If you think about the gross margin profile for the year, should we be keeping it flat at where it is or trying to cut it down?

Steven Capelli -- Chief Financial Officer

Great questions. So, on the Licensing component, I would expect an uptick through the year, Q1 to Q4. Q2 and Q3 will be flat, and probably a stronger Q4, as we did this year, on the Licensing model. Secondarily, on the gross margins, when we combine the two companies, Cylance has a greater proportion of professional services, and as we look at our company, when I combine the two, I would say mid-70s -- if you say 75% going forward, it would be a good number to work from.

Gus Papageorgiou -- Macquarie Capital Partners -- Associate Director

Great. Thanks a lot.

Operator

Your next question comes from Daniel Chan from TD Securities. Your line is open.

Daniel Chan -- TD Securities -- Analyst

Hi, thanks for taking my questions. So, can you put the expected growth of Cylance of 25-30% in context of last year's growth, where they stated they were doing about 90%? What are the factors that are changing your assumptions here?

John Chen -- Executive Chairman and Chief Executive Officer

Ninety percent is an abnormally -- because of a virus... I don't remember if it was Petabyte...

Steven Capelli -- Chief Financial Officer

WannaCry.

John Chen -- Executive Chairman and Chief Executive Officer

-- or WannaCry. It's because of that. And also, the math of small numbers versus bigger numbers. And, one other point -- I'm glad you mentioned it -- our apples-to-apples comparison -- although I'm allergic to apples -- but apples-to-apples comparison is actually 5% off the growth because we mapped their fiscal year into ours. Mathematically, Chris and Steve could show you that if you're interested. So, you really need to look at the 25-30% growth from the historical way. It's actually 5% higher than that.

Steven Capelli -- Chief Financial Officer

They lose the impact of a strong quarter end because of the way we do the modeling on that. And, Dan, your reference point of 100% -- I think when the bar is released, you'll see -- I think the 100% is actually even dated to our prior year.

John Chen -- Executive Chairman and Chief Executive Officer

Two years ago, yeah.

Steven Capelli -- Chief Financial Officer

And so, you'll see it. And, not to mention that the competition in this marketplace is growing significantly less than that.

John Chen -- Executive Chairman and Chief Executive Officer

If you map our number, we will be literally doubling the growth of the competition that is public.

Daniel Chan -- TD Securities -- Analyst

Okay, great. Thanks. That's very helpful. I wonder if we could switch gears to the Enterprise segment. So, that segment dropped sequentially. Can we get some more color there, especially considering that most of it is now being recorded as recurring if you include the perpetual licenses? If it's mostly recurring and you're gaining customers, wouldn't you expect that segment to increase? I know you said the UEM grew sequentially, so where did the sequential decline come from?

Steven Capelli -- Chief Financial Officer

Sure. So, the quarter-over-quarter -- it's really the product mix. As you pointed out, there are certain product lines that are recurring in nature and others that are not. So, the fact remains that billings grew quarter over quarter, and that was substantial, and as well as the fact that due to the mix, you can look back and see that -- John spoke about 93% recurring this quarter. Last quarter was 88%. So, we have more recurring, less immediate revenue, and that's really the mix.

John Chen -- Executive Chairman and Chief Executive Officer

The height of essential business was actually UEM that came in, and they're all on ratable, so that pushes up our number by 5% -- the recurring number or the ratable number -- by 5%, and so, it drops the revenue number.

Daniel Chan -- TD Securities -- Analyst

If I could just squeeze one more in, what was that recurring revenue number if you exclude the perpetual licenses?

Steven Capelli -- Chief Financial Officer

What was the recurring revenue...? Well, we said 93% is total company, and that's how we report.

Daniel Chan -- TD Securities -- Analyst

That's if you include the perpetual licenses recorded as ratably. What if you were to exclude those perpetual licenses?

John Chen -- Executive Chairman and Chief Executive Officer

This quarter, we had very few perpetual.

Steven Capelli -- Chief Financial Officer

Very few perpetual. So, it would still be mid-80s.

John Chen -- Executive Chairman and Chief Executive Officer

Yeah, probably mid and high 80s.

Daniel Chan -- TD Securities -- Analyst

Okay, great. Thank you very much.

Operator

Your next question comes from Paul Treiber from RBC Capital Markets. Your line is open.

Steven Capelli -- Chief Financial Officer

Hey, Paul.

Paul Treiber -- RBC Capital Markets -- Analyst

Thanks so much, and good morning, guys. On the theme of recurring revenue, in regards to IP licensing, I think in the past, you mentioned a base-level run rate, but what's the mix of recurring versus onetime in either the quarter or the year, and then, relative to the $270 million outlook for next year?

Steven Capelli -- Chief Financial Officer

So, first of all, we don't include IP revenue as part of our recurring percentages, so I wanted to set that tone first. The second piece of it is we still say that $40-45 million is that baseline of recurring revenue, and the rest is more onetime in nature. However, as you've seen, we've been able to deliver a consistent number above that number, and that's due to our pipeline.

Paul Treiber -- RBC Capital Markets -- Analyst

Okay. And then --

John Chen -- Executive Chairman and Chief Executive Officer

So, your model, Paul, should be still above $40-45 million per quarter on a baseline basis. You used the word "baseline." You should use that, and then, the rest will come in more as a onetime.

Paul Treiber -- RBC Capital Markets -- Analyst

Okay. And, in the bigger picture, in regards to the IP licensing business -- I think in the past, you said there's 10-11 years remaining on the patents -- is the opportunity to monetize the business, and what happens in 10-11 years to the extent -- are you replacing those patents or can you extend those patents to sustain the durability of that revenue stream?

John Chen -- Executive Chairman and Chief Executive Officer

Well, we currently have over 100 patents in application that are new, and then, added to it, a set of patents also from Cylance. So, we are filling up the pipeline very rapidly. We have a lot of innovation going on in the company, so I wouldn't be overly concerned about running out of food.

Steven Capelli -- Chief Financial Officer

And, that also includes patents from QNX and other areas.

John Chen -- Executive Chairman and Chief Executive Officer

It's all in there, yeah.

Paul Treiber -- RBC Capital Markets -- Analyst

Okay, thanks very much.

John Chen -- Executive Chairman and Chief Executive Officer

Sure. Thanks.

Operator

Your next question comes from Todd Coupland from CIBC. Your line is open.

Todd Coupland -- CIBC -- Managing Director

Good morning, everyone.

John Chen -- Executive Chairman and Chief Executive Officer

Good morning.

Steven Capelli -- Chief Financial Officer

Hi, Todd.

Todd Coupland -- CIBC -- Managing Director

I wanted to see if you could unpack the outlook for QNX and Enterprise Solutions. I know you bundled it up together here 12-16%, but how should we think about those two segments as we look out the next year?

John Chen -- Executive Chairman and Chief Executive Officer

QNX on the high end of that range and UEM on the lower end of that range.

Todd Coupland -- CIBC -- Managing Director

Okay. So, you still think that UEM can grow in the high single digits from regulated and governmental demand? That's how you're thinking about that?

John Chen -- Executive Chairman and Chief Executive Officer

Absolutely. Well, I hope it's a little better than high single digits, but yes, that's correct. We have a lot of projects going on. We have new products in the pipeline. I'm not overly concerned. We saw a good sequential growth from Q3 to Q4.

Todd Coupland -- CIBC -- Managing Director

Okay. And then, on QNX, it's hard for us to see what's going on under the surface because you have professional services before you get the recurring revenue, and then you have various design wins ramping, and you have the mix of design wins -- ADAS versus entertainment, et cetera. What actually is happening overall from a growth perspective in the areas that you like? So, if I were to look at that 12-16%, 16% QNX, that's just OK relative to where you had been growing that business the last couple years, so help us bridge what's going on in the business. Thanks.

John Chen -- Executive Chairman and Chief Executive Officer

I hope... There was also something -- you have to remember that the ratio of UEM revenue and QNX revenue is such that I hope QNX is growing faster than 16%. You know we have a design win type of revenue model. Royalties are quite steady throughout all these years, and gradually upticking. Design wins bring in development seed revenue as well as some professional services, but by and large, this is a royalty-based business. So, I don't know how you want me to unpack it. Now, this last fiscal year we just finished, we're reporting we grew 25% year over year. That's a pretty good year, and we shouldn't be dropping off any more than that, or we might even be going into 25% or a little bit higher. So, it's a little difficult to just pinpoint exact numbers. So, we model ourselves as growing on a high-teens-type environment.

Todd Coupland -- CIBC -- Managing Director

And, just last question if I could, on Cylance -- so, lots of noise with the peers in the market. Some of them are probably bulking up to have a story to go public, et cetera. Help investors understand competitive differentiation of Cylance to see through some of that commentary.

John Chen -- Executive Chairman and Chief Executive Officer

There are a lot of people who call themselves cybersecurity companies. There are basically three categories. One category is one we would call "signature-based." In the industry, they refer to the first-generation antivirus software. These would be companies like Symantec and McAfee. And then, the second generation is attuned more to AI and machine learning, and are much more lightweight. The players there are the three C's -- Carbon Black, Cylance, and CrowdStrike. And then, you have the third category, which are tied more to the IoT endpoints, more in the discovery side of the equation.

So, we are definitely in the newer generation -- second generation of antivirals and cybersecurity threat detection and prediction technology. So, in the second generation, there are two major fields. One is called EPP and one is called EDR. EPP is more on the predictive protection. EDR is more on the detection and remediation. Cylance is -- at least, for the industry analyst community -- ranked No. 1 on EPP, and the RSA announcement -- the reason I referred to it -- this is obviously part of our due diligence -- is they have the newest set of EDR products also. They just announced that in March. So, we're pretty pleased with the technology and how competitive it is, but it's definitely in the top handful of names in the market.

Todd Coupland -- CIBC -- Managing Director

Great. I appreciate the color.

Operator

And, our final question for today will come from Mike Walkley from Canaccord Genuity. Your line is open.

John Chen -- Executive Chairman and Chief Executive Officer

Hi, Mike.

Michael Walkley -- Canaccord Genuity -- Managing Director

Hi, thanks. Just following up on Cylance in the 25-30% guidance, can you talk about any cross-selling synergies built into there? Is that longer-term? Can you share any initial feedback from your customers now that you've had it closed for a little over a month here? Thanks.

John Chen -- Executive Chairman and Chief Executive Officer

Initial feedback is very strong, very interested. There are overlap customers, and the good news is BlackBerry is on mobile, Cylance is mostly on PC and laptops, so we can now provide end-to-end. In our math, there is no revenue synergy assumed. Now, the reason why we don't have revenue synergy assumed is because we are integrating the two products from PC to mobile, and as I said, the first set of products will come on in 12 months. And so, the next fiscal year will be a growth catalyst from that, so I'm quite excited about that fact that we could have two waves, or hopefully more than two waves. Then, after that, we will integrate Cylance into the QNX offering.

Michael Walkley -- Canaccord Genuity -- Managing Director

Great, thanks. And, my follow-up question -- just on Radar, any updates there, maybe on a quarterly run rate or quarterly subs you have for Radar after a little over a year of the platform? Thanks.

John Chen -- Executive Chairman and Chief Executive Officer

Right now, it's not significant enough for us to break it out. When it gets to that, rest assured we will give you some numbers to follow. But, the POCs are going on very well. We have very large customers kicking our tires, so to speak, and it doesn't mean that we're going to win it all, but we're going to win our share. And, the repeat buying tells us that customers are happy, and they're rolling out, and a couple of new ones are always nice, but it's still a small total business.

Michael Walkley -- Canaccord Genuity -- Managing Director

Great, OK. Thank you.

John Chen -- Executive Chairman and Chief Executive Officer

All right, thanks. Okay. Well, thank you. We'll be around to answer any further questions, so please do call us. And, let me provide you with some closing statements. Before I start the closing statement, we do have an Analyst Day. Please contact Chris if you would like to come. I know it's filling up very quickly. Analyst Day is at the end of April in San Ramon, California. The significance of that is the Cylance founder will be there, the Chief Product Officer will be there to talk about everything about Cylance. We also have the CTO to talk about the integration of Cylance products into UEM and QNX, so it's pretty exciting from a technology -- for a lot of questions that are being asked, they will be able to provide the next-level details.

Anyway, the closing statements are we obviously -- BlackBerry -- the thing that pleases us is BlackBerry has evolved from a portfolio of strong assets to an enterprise security software company. We will talk about the Spark platform that we're developing ourselves with the integration of Cylance onto it, which will make it extremely competitive in the market. We expect our security solutions to generate more than $1 billion in revenue for fiscal 2020, and there are not too many security companies of our size and reach.

So, we have a technology portfolio and significant know-how in data security and privacy that is extremely relevant to the emerging IoT market, so this is very encouraging from that. And, all in all, I hope you can see the optimism of the company, and we are executing. There's still a lot of work to do, but we feel pretty good about where we are today, and we'll hopefully see you in late April. Thank you very much.

Operator

This concludes today's call. Thank you for your participation. You may now disconnect.

Duration: 44 minutes

Call participants:

Christopher Lee -- Vice President, Finance and Head, Investor Relations

John Chen -- Executive Chairman and Chief Executive Officer

Steven Capelli -- Chief Financial Officer

Steven Fox -- Cross Research -- Managing Director

Gus Papageorgiou -- Macquarie Capital Partners -- Associate Director

Daniel Chan -- TD Securities -- Analyst

Paul Treiber -- RBC Capital Markets -- Analyst

Todd Coupland -- CIBC -- Managing Director

Michael Walkley -- Canaccord Genuity -- Managing Director

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