BlackBerry Limited (BB) Q2 2022 Earnings Report, Transcript and Summary

Good afternoon and welcome to the BlackBerry Second Quarter Fiscal Year 2022 results conference call. My name is Ashley 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 list of question-and-answer session towards the end of the conference. [Operator Instructions]. As a reminder, this conference is being recorded for replay purposes. I would now like to turn this call over to Tim Foote, BlackBerry Investor Relations, please go ahead.

Thank you Ashley. Good afternoon and welcome to BlackBerry's second quarter, fiscal 2022, earnings conference call. With me on the call today, are Executive Chair and Chief Executive Officer John Chen, and Chief Financial Officer, Steve Rai. After I read our cautionary note regarding forward-looking statements, John will provide a business update. Steve will review the financial results. We will then open the call for a brief. Q&A session. This call is available to the general public by 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 provision 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 expression. Forward-looking statements are based on estimates and assumptions made by the Company in light of its experience and its perception of historical trends, current conditions, and expected future developments, as well as other factors that the Company believes are relevant. Many factors could cause the Company's actual results or performance to differ materially from those expressed or implied by the forward-looking statements. These factors include the risk factors, as discussed in the Company's annual filings and NDNA, including the COVID-19 pandemic. 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 a summary of our quarterly results. For a reconciliation between our GAAP and non-GAAP numbers, please see the earnings press release published earlier today, which is available on the EBCA, FIDA, and blackberry.com websites. And with that, I'll turn the call over to John.

Thank you. Thank you, Tim. Good afternoon, everybody and thanks for joining the call today. One correction. I think all the number -- all the revenue number we use will be GAAP -based, correct?

Yes.

When you say non-GAAP numbers, it's actually -- the revenue number we referred to are all GAAP -based number. Okay. Starting with the headlines. This quarter, the business performed well with revenue for all the 3 business summons, beating expectations. The cyber security business unit delivered strong sequential billings and revenue growth. The IoT business unit performed better than expected with strong design-related activities, partially offsetting the impact of the global chip shortage on production royalties. Licensing revenue reflects the restriction on monetization activity from the ongoing patent sale negotiations, which I will talk about more in detail shortly. Licensing and other revenue came in slightly stronger than expected. This quarter, BlackBerry generated positive operating cash flow. following the strengthening of our IoT leadership team in Q1, we have appointed John-Joe Matteo, to lead our Cybersecurity business unit, commencing October 4th, which is a couple of weeks from now. John was previously the McAfee President and Chief Revenue Officer running the enterprise and consumer cybersecurity businesses. In this new appointment a [Indiscernible] to refocus of our software business into 2 business units, I'll cover this in more detail later. Excuse me. I'll start my review with the IoT business unit. Revenue came in at 40 million, which is better than expected, primarily due to ongoing strength in the design activities area. Gross margin remains strong at 83% IoT AAR increased to 89 million. As you are all aware, the auto industry experienced some significant headwinds in Q2, due to the global semiconductor chip shortage. This impact production volume, particularly in North America, Ford for instance, a major customer of ours, reported 700,000 lost units of production in calendar Q2. Production based royalty are historically the largest single component of our Q&X revenue. However, a significant portion of revenue is also generated from design activities prior to the vehicle entering production. This part of the business remains very vibrant, and we continue to generate strong development [Indiscernible], and professional services revenues. As a result, total IoT revenue in the quarter was better than unexpected. Furthermore, these design wins will translate into future production base royalties. As we look ahead to the rest of the year, we continue to see the headwind for vehicle production. The problem is the future have shifted from surprise of wafers to more of the back-end assembly and testing issues, largely due to spike in COVID cases in Asia, as well as some of the accident is going on in Asia, like some of the plans have fire, for example. Feedback from OEM about the impact on production volumes in the second half is somewhat mixed and constantly evolving. For example, Daimler recently indicated they're expecting a lessening impact by Q4. Excuse me, sorry. And Volkswagen on the other hand, see challenges persisting into 2023. In terms of outlook, we continue to see the past quarter as the low point but significant headwinds I expect it to continue into Q4 and -- Q3 and Q4, and perhaps even beyond that, albeit with a sequentially decreasing impact. The impact of the chip shortage on QNX revenue quality revenue is expected to be buffer somewhat by ongoing strength in design activities. We're comfortable with the current IoT revenue consensus. Meaning, the full-year revenue outlook remains unchanged. As mentioned, despite a supply chain issue, QNX continue to win new design at a very solid pace. In the quarter, we had 23 new design wins, with 7 in auto and 16 in the general embedded market, we call it GEM. Because of our market presence and leading technology, we are the trusted go-to-supplier and market leader in auto. Furthermore, we're delighted to announce that we now have design wins with 24 of the world's top 25 electric vehicle automakers, as is measured by volume. Having been selected most recently by Daimler as part their ED design. This is up from the 23 of 25 we had last quarter. These 24 OEMs between them represent 82% of global EV production. This demonstrate the leading position we have in this very fast-growing part of the auto industry. I'd like to expand on a couple of design wins to give Investor more colors, as to why QNX was chosen, and why we are the industry leader. The first [Indiscernible] which was a automotive Tier-1 that excluding full digital [Indiscernible], and gateway solution for a Chinese EV OEM, using the QNX real-time operating system and hypervisor. QNX technology is well-known and trusted in China, in a Chinese automotive industry, given this reputation for safety and security. QNX was chosen about a software solution from both domestic, our multination, and as well as multinational competitors. Production is expected in 2022, which is next year, and run for around five years. The second is to the a leading Japanese industrial robotics manufacturer that's also happen to be a new logo to BlackBerry. The customers select QNX went autonomous 3D robot warehousing system ahead of the leading competitors. QNX was chosen for its functional safety credentials. Production is expected to start this year and continue for five years. Other notable design wins this quarter in auto included instrument, cluster, and ADAS systems. In a GEM space, design wins, including medical diagnostic, industrial process control, and a thermal control system for a power plant. I'm going to shift it to Java's. During the quarter we launched Java's 2.0. This is a SaaS version of our software composition, and an Analytics 2 to which was previously offered as a [Indiscernible] book service engagement. Java's 2.0, which include a market-leading binary code scanner, is an important part of how BlackBerry can assist customer to achieve compliance with the recent SBOM executive order, software bill of materials executive orders, mandated by the Biden administration. Moving to a brief update on IVY, we are pleased with the ongoing progress being made. Both BlackBerry and AWS have significant resources allocated to project and our timelines remains on track. We are on schedule to release an early assets version of the production in October -- in the product, sorry. We are scheduled to release an early access version of the product in October that will enable further engagement with OEMs, and also allow demonstration at CES in January. This version will be available to certain ecosystem partners to begin actively building application on IVY. And speaking of applications, for IVY to be embraced by automakers, we recognized that it is important to demonstrate IVY value to them. Management apps that we announced last quarter, We announce other application that we will -- will be built on IVY. This new application enabled in-vehicle payments as being delivered through a partnership with car IQ, in California -based startup. The application we used only has access to the sense a daters and the edge computers. Two of the IVY key differentiators to produce a unique digital finger print for the need for [Indiscernible] photo vehicle. This allowed our fabrication of payments for items such as fuel, tows, parking services, et center. Without the need of a free credit cards or other traditional payments methods. This opened up the possibility for OEM to participate in a new revenue streams, and it's another the many potential application that IV will enable. In summary, IV continues to progress nicely. Now let me turn to cybersecurity. This quarter to business unit delivered strong sequential billings and revenue growth. Revenue was a 120 million. Gross margin came in at 59%. AR was $364 million. Dollar-based net retention was 95% As we mentioned earlier, John Giamatteo will be joining BlackBerry, to meet the Cybersecurity [Indiscernible], brings with him many years of Cybersecurity industry experience. During his six years as president and Chief Revenue Officer at McAfee, he deliverable both double-digit growth and margin expansion for the enterprise, the SNV, as well as the consumer divisions. John will be on the progress that has been made in recent quarters with the cybersecurity business unit, go to market engine, and will also direct old product development and business unit strategy. Tom Eacobacci has decided to pursue other opportunities, and will leave BlackBerry at the end of October. The addition of John to the team completes the split of the software and services business, into 2 market focus business unit. Home IOTN Ciber's are targeted, with driving growth and will then show the value. The 2 business units will report directly to me. As mentioned, this was a good quarter. All there is still work for team to do, there's a few outstanding area that I feel that I'd like to share with you about. Growth and pipeline for our cybersecurity [Indiscernible] customers. Pipeline grew strongly for BlackBerry gateway as 0 trans network as quarter To help realize this increased pipeline, investment in our direct sales force, in particularly the hiring a quota-carrying sales heads continues. We're also making further progress to the channel as illustrated by a 32% sequential growth in the channel billings this quarter. New partner program has also helped significantly increase full channel-driven pipeline generation and a new logo billings mainly in North America arena. We also have seen robust growth in business through managed service -- Managed Security Service Providers or MSSP s. You may recall that during the Q2 earnings call a year ago, we targeted using MNSP -- MSSP, sorry, to quickly scale our guarded managed service offerings. Today, one of these partners I'm happy to report, managed more than 100,000 endpoints using BlackBerry Cyber's products. I'd like to take a closer look at some wins from the quarter, that demonstrate why customer are choosing BlackBerry for their Cybersecurity needs. The first customer is one of the top ten automakers in the world. This consumers select our ProTect, EPP, and optics, EDR solutions. following a competitive bake-off in which we went head-to-head with Cloud Strike and Carbon Black. The customers [Indiscernible] blackberry due to our near 100% malware detection rate, our lightweight engine, and flexible deployment options, both in the cloud, as well as the standalone factory networks. The second, as a Fortune 100 financial services Company. BlackBerry displays Microsoft Defender, with protect and optics. The companies select us particularly for our performance on MacOS. The third is where we have continued success within the Australian state government agencies. This quarter we sold protect off-takes and our Threat zero consulting services into a number of agency displacing predominantly legacy incumbents, that included Trend Micro and Symantec. The customer choose BlackBerry for our next-generation prevention first technology. On the industry recognition front, SE Labs, a leading independent research firm based in London has performed a rigorous set of tests on our EPP and EDR products, through tech and optics. This breached test differs on their quarterly endpoint tests. Rather than simply loading no malware onto an endpoint, which typically masking an ability of traditional signature-based vendors to defend zero-day threats, the breached tests include, instead a price real-time, real-world hacking tactics. They apply comprehensive techniques to evade our defense, and concluded that Protect and Optics provide complete prevention, complete detection, as well as zero false-positive. A link to the full report could be found on our investor relations web page. This third-party validation of our product, not just our EPP, but also our EDR, demonstrate how we have successfully closed the product gap to competitors, with recent product launches. The market is now recognizing some of the unique differentiated abilities of our fiber products, one of which is the maturity of our AI engine. As seen in previous quarters, we are seeing new malware and ransomware hitting the headline on an almost daily basis. Our AI engine, the most mature in the industry, continues to provide zero-day prevention against a host of these threats. In the quarter, our product successfully brought new profile ransomware, such as Hive, Lock Bit, Ragnar Locker, and many more before they could do any damages. BlackBerry Cylance AI engine is firmly focused on preventing our customer from being breached, whereas some of the leading competitors instead focus on showing customer other ways their system -- on a different ways that the system could be assessed. On the UEM front, we're continuing to invest in our road map delivering enhancement, that add the most value to customers. We recently announced an enterprise can now benefit from BlackBerry leading security, while enjoying a seamless and native user experience, with Microsoft 365 productivity apps. This is enabled by additional integration between BlackBerry UEM and Microsoft 365, primarily through the Azure Active Directory conditional assets. This is part of the latest version of the UEM U-Series, which was released this month, early this month that is U-Series also provide zero-day support for Android 12, and IOS 15. This past quarter, we secured important UEM renewals, with government agencies, such as IRS, the Department of Homeland Security, the U.S. Marine Corps, the U.S. Army Corp of Engineers, the UK Ministry of Defense, the U.S. -- the U.S. Air Force, as well as leading enterprise such as General Dynamics and Magna (ph). We also won a number of new logos such as the French National Institute for Criminal Research and the Tel Aviv Stock Exchange. With continued growth in pipeline, coupled with the investment in our direct and channel sales, the outlook of the Cybersecurity business units is for sequential building growth for the remaining of the fiscal year. This is expected to lead to modest sequential revenue growth due to the subscription model. The full-year outlook remains as before at the lower end of 495 to $515 million range. Turning now to licensing. As I mentioned earlier, negotiations to sell a portion of the patent portfolio related to mobile devices, messaging, and wireless networking, are ongoing and we have made significant progress since our last earnings call, including preliminary agreement of many of the key terms of the deal. We expect to execute a definitive agreement this quarter. Closing the transaction will be subject to normal regulatory review. Naturally, given this backdrop, we will continue to limit monetization activities for the remaining of this fiscal year. Therefore revenue for both Q3 and Q4 is expected to be similar to Q2, which is at $10 million per quarter. While we expected sales to conclude essentially, the process has taken longer than we expected or anticipated. Share not concluded this quarter, will have other options, including additional interest to parties. We will update investors on any of the material developments in a timely manners. So let me now hand over to Steve to further review the financials. Steve?

Thank you, John. My comments on our financial performance for the second quarter will be in non-GAAP terms, unless otherwise noted. Please refer to the supplemental table in the press release for the GAAP and non-GAAP details. We delivered second-quarter total Company revenue of 175 million. Second-quarter total Company gross margin was 65%. Our non-GAAP gross margin exclude stock compensation expense over 1 million. Second-quarter operating expenses were 143 million. Our non-GAAP operating expenses exclude 32 million in amortization of acquired intangibles, 11 million in stock compensation expense, and 67 million fair value adjustment on the convertible debentures, which is a non-cash accounting adjustment prone to large swings driven by market and trading conditions. The second quarter, non-GAAP, operating loss was 30 million, and the second quarter, non-GAAP net loss was 33 million. non-GAAP earnings per share was a $0.06 loss in the quarter. Our adjusted EBITDA was negative 14 million this quarter, excluding the non-GAAP adjustments previously mentioned, as we continue to invest in both our cyber and IoT businesses to drive top-line growth. I will now provide a breakdown of our revenue in the quarter. Cybersecurity revenue was 120 million and IoT revenue was 40 million. Software product revenue remained in the range of 80% to 85% of the total, with professional services comprising the balance. The recurring portion of software product revenue was approximately 80%. Licensing and other revenue was 15 million, as John mentioned, our IP monetization activities remain limited while negotiations for the potential sale continue. Now, moving to our balance sheet and cash flow performance. Total cash, cash equivalents, and investments, were 772 million as of August 31, 2021. An increase of 3 million during the quarter. Our net cash position increased to 407 million. Second-quarter free cash flow was 10 million. Cash generated from operations was 12 million, and capital expenditures were 2 million. That concludes my comments, I'll now turn it back to John.

Thank you, Steve. Before we move to Q&A, I'd like to summarize this past quarter. I'm pretty sure of how the business performed, beating revenue expectation for all the businesses, and deliver positive cash flow. The structure of the 2 market focuses, this is software business units, is already delivering results. And we're adding additional relevant industry experience. We're encouraged by the growth in cybersecurity pipeline and continue to investment sales headcounts. QNX and design activities remains very strong, and we are weathering the impact of the chip shortages well. We're now also making good progress with IV. And with that, I'd like actually the Operator to open the line for Q&A, please?

And we will now begin the question-and-answer session. [Operator Instructions]. 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 today will be from Mike Walkley with Canaccord. Your line is open.

Great.

Hi Mike.

Thanks. Hi John, how are you doing?

Very good. Thanks.

Thanks for all the updates and the guidance. I guess, my question for you is, your guidance arguably implies an aggressive second-half outlook just to reach the full-year guidance, can you walk us through what needs to go right for you to achieve that guidance or a stronger second half?

Yeah. Thank you. Thank you for the questions. So there are some assumptions and let me break it down a little bit. Licensing of course, we already explained, so I don't have to go in much detail of that. I think we're going to have 10 million a quarter for the next 2 quarters, for the second half that is, each of the quarter, and has something you do with the fact that we're not going to monetize, or push on the monetization effort and licensing effort, while we're going through this negotiation on selling the portion of the patents that is on those areas of business that we're no longer actively involved with. Regarding IoT, the only wildcard so to speak, is the chip shortage and the impact of that. From all the indicators, all the ups and downs and give and take, and we spoke to a lot of them. The OEMs. That North America seems to be getting better in Q3, Q4, as it compared to Q2. A good example will be, Ford believe they could -- they are improving and GM also is, although they going to shut down a couple of factories in Q3 but I think for my magnitude, it's improving versus the first half of the year. So North America, you see it going back improving in the situation. Europe, however, still had about 10% to 15% impact of the production, and so is Asia Pacific. So-net of all that, if we're in that range, without any dramatic departure, then the numbers that we expected in the second half still holds. And a big part of that of course is, we are winning some very strong design wins that brings us more developed receipts, revenue and [Indiscernible], as well as professional services revenue. So I'm pretty comfortable with that. On cyber, it really is a function of one thing, I sot 2 consideration in there. One thing, the major part is, we have a lot of salespeople who joined us in the last couple of 2, 3 quarters. We have a pretty young pipeline. the activities in the pipeline has been very strong in the last quarter, into. So putting it together, it's actually a good thing, except that it might take time to ramp up, and so the rate of conversion of the pipeline with a newer salesforce, is the only wildcard, and it is something that we have to manage very carefully. But the good news there is, even if it takes longer, these business don't tend to go away, so that's the assumption that we made in our forecast. The other one is, in Q4 we got a couple of large government deals with some of the government, especially in North America. Some of those needs to come to fruition, and then, we expected to. So those are the basis of our forecast. Yes. Second half seems to be a bigger number, a stronger number, than the first half, that's correct.

Great. Thank you. And just got a follow-up question, congrats on adding John Giamatteo to the team. If you going to run with the rotation of such a key position, and did that impact your guidance thoughts at all?

It's slightly early to tell, but I'm dying to hear his experience of growth. Because he was being able to grow both the consumer business and enterprise business as McAfee, when he was running the -- when he the President in McAfee and the CRO. So I'm sure he will make some changes. I'm doubtful that everything will remain exactly the same. On the other hand, the investment that we made in channel, the investment we made in pipeline, the investment we make in partners and engineering, and the investment we make in hiring more sales rep. And we have a couple of quarters ago, we hired a pretty good head of professional services. I'm sure that he would take full advantage of those.

Okay. Thanks for taking my questions.

All right. Thank you.

You're next question comes from Daniel Chen, with TD Securities, your line is open.

Hey Daniel.

Hey John.

Hey, Dan.

You mentioned earlier that typically your QNX revenue has a higher mix of royalty versus development. Should we expect a higher mix of developments for the next couple of years as electronics and software development become ramped up at a lot of these OEMS?

I think you should expect. probably for this year. And I don't think in the future years it will continue to be the same. The reason I say this, is because remember, I should be seeing some started to improve. It has to improve over time. The huge industry history, and the whole semiconductor industry auto, is not really that big. It's not 100%, obviously, it's probably more like 15% of the market, so he will address that. And so I expect that our royalty rate to go back into some kind of right in the last couple of 2, 3 years.

Okay. That's helpful. Can you remind us how you sell these developments seats? Is it more like a perpetual license or is there a recurring proportion to that as well?

It's more like a perpetual licenses. It's selling seats.

Okay. And do you kind of get 20% maintenance?

Yeah. We get upgrade and maintenance on it. Yes.

Okay. One more if I may.

Sure.

Cybersecurity ARR was flat sequentially, while you've been seeing that the pipeline has been growing. Just wondering when we were going to start seeing that metric, start to pick up whether there is some seasonality built [Indiscernible].

Yeah. That's good question. I ask that question also, and they always give me the product mix answer, that some of them we took earlier upfront because of rev rec policy. I expect for the full [Indiscernible], and I said it in the past, by the way, so it's very consistent. Mid-year or next year is where I'm going to see some hopefully to see some strong growth of all the investment we have made, the pipeline going into new sales and so forth.

Okay. Thank you.

Sure.

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

Hi there.

Hi John. First question on the patent sale. I know you can't say much, just given you're in the middle negotiations, but your statement you mentioned that the negotiations seems to be going well, but then you also indicated that if it doesn't close, you have other options. Could you bridge between those two statements because there quite far apart from a tone perspective,

That's a good one, I'm glad you caught it. Yes, it is going well. I fully expect to finish it this quarter. But I'm tired of waiting. I know a lot of investors are, too. It does -- I'm not blaming anything on anybody. And maybe we have too many lawyers assigned to this. Sorry, lawyers, I doubted you all. But the key is -- it's a complex and big portfolio. It's rightfully so that they have done a lot of due diligence. And those things are now completed, by the way, all the due diligence are completed. And then we have a lot of time spend on definitive agreement negotiation. And then by a large, with the exception of one or two items where we're done with that. And then we have the purchase agreement and so it just -- for me, it's been since last Christmas. It's coming up the next Christmas, so I basically draw the line of Fan and say I can just stop licensing the business needs to either move on one direction or the other. And then there are other interested parties in calling. And so we are not entertaining them because as you recall, during a period of time, not long in the past, we were in exclusive discussion with these people. So I can't really entertain a third party. So my only point is if you want to put percentage -- weighing percentage, I put 80-20. I put 80% we get it done this quarter. Does that help?

Yes, that's very helpful. I wasn't going to ask for percentage, but I'm glad your threw it out. Switching back to the business. In regards to 24 on a 25 EV OEMs, how do we think about the magnitude or size of these wins? You find like EV, the ASP is higher than a gasoline vehicle, is that what you're seeing generally?

No, usually the ASP ties to functionality. If you look at functionality like IVI, it's usually low single-digit dollar for royalty. But you look at ADAS and clusters, they are usually high single-digit pushing into double-digit per car. So it's not gasoline versus electric vehicle. And so the electric vehicle had one advantage, which is more component of highly complex ECUs. When you have highly complex ECUs, that's 2 thing for us. Number one because we have the highest certification in security and safety, when you have a high complex ECU, like a computer engine in the car, they tend to go after that most secure and most faith product, so we have an edge and an advantage to win it. That's number one. Number 2, they tend to use very complex algorithm and that will help us sometimes selling more than even one copy for a ECU. And when you sell these contracts ECUs, and with [Indiscernible] or clusters, or hypervisor, typically the ASP is on a higher end. So it's really more function than drive ASP, versus EV or gas.

Good, that's helpful. And then one follow-up. It seems like BlackBerry QNX has good traction in Chinese EV market. That market is it materially different than other OEMs or other geographies for QNX?

No. materially different. So also other things you need to be aware that, a lot of those Chinese players actually had design center in the U.S.. So the market price, is the market price, because a lot of them are only in the U.S. But all of course we have a Chinese team and deal with customers over there, and the factories over there, and so forth, but they are not materially different.

Okay. Thank you. I'll pass the line.

Sure.

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

Hello, there?

Hey there, John. Nice to talk to you. I will follow up on the EV line of questioning. So that 25th OEM, which you don't have, you're all bringing out new vehicles. Many, many prices, et cetera. What are the chances, if you're getting into that OEM?

My team promise me, throughout, and now they're working it, and so I'm hopeful that the fact that they typically like to do complete vertical integration from us, but we're working it.

Okay. And then also on the patent sale, there's been press articles in the trade press, that you more or less have settled on a price. It's really the complexity of all the participants in, I guess, a buyer's group, if you will. Any comments on whether that is indeed correct, and it really is these details with the various parties that has yet to get worked out. Thanks a lot.

I can't comment on ongoing negotiation because it doesn't help me whatsoever, I would say to you that we have settled on the price, and I would confirm. Everything else, I can't really comment on.

Okay. All right. That's great. I appreciate the color. Thanks a lot.

Absolutely. Absolutely.

Your next question comes from Paul Steep with Scotia. Your line is open.

Hi, there.

Hi, John. So two quick ones. The first one, maybe talk to us about how you're thinking about monetizing IVY and how those thoughts have evolved. And then I'll toss it my quick follow-ups.

I'm sorry. How do I monetize our IVY?

IVY.

Okay. Well, there is -- it's a work in progress, but I have a lot of ideas. First of all, I wanted something that a usage base and recurring base. and that's the revenue model. And if you look at what IVY really is, it's a collection of essential data, the ability to analyze it puts you on the edge, put it on a Cloud, apply AI to it, and feed that back to the OEM or application providers. And one of the reasons why we spend so much time on the application side, a quarter ago, we have a intelligent battery management systems for performance and for managing anything related to a battery and the usage of it. And this past quarter, we basically [Indiscernible] And it's a huge market for those of you who followed it, as well, especially the trucks, and the Amazon delivery trucks, or FedEx, or UPS, or Cargos, or commercial trucks. If we get to equip with IVY, there's tons of sensing data between security and productivity. And the ability to not having the use of third-party to do payment and so forth, are all very positive and cost-effective solution on the truck owner and the truck runners. Also, as I've mentioned earlier, the OEM has always, also, try to find ways to enrich the source of revenue after they sold at car. and IVY may be able to facilitate some of these applications. So that's where I'm really focused on to create usage base, whether it's app based or functional base. Use cases, and in some cases I could share with third-parties, I could share with banks, I could share the revenue with OEMs, and these are all possibilities. So that's how we focus on monetizing IVY.

Great, thanks. Two quick follow-ups, for yourself, for Steve. First one would relate to your commentary, but continuing to invest in salesforce. Should we think of the numbers that you added this quarter in aggregate dollars reflected throughout the remainder of the year and then the other patent business didn't exist at the BlackBerry. How should we think about stranded cost in the SG&A line, or is it effectively pure profit that we just see, maybe move off if that business was not to be there. Thank you.

That's a very good question. I need to get clarification with the first question, can you repeat your first question?

Yeah, you've talked about adding more sales headcount, I'm just sort of looking at the pacing of what you've done in terms of investment. Is that already in envelope or you're thinking about stepping on the gas a lot harder in your EV, as you continue to win deals?

Right, right. I -- we have made a -- that's a very good question. So as you all know me, that this -- I've been here for 7 years and I always been focused on making money, running a profitable business. And so on the other hand, in the last year, I have recognized that the business needs investment to step on the gas, you used the word. And so for the time being, for -- and we had done that in the last 2 quarters or 3 quarters. But for the time being, I'm not going to be so focused on loss versus profit. As far as it's manageable, meaning that it's not going to be outrageous and it's not going to kill a lot of my cash or burn a lot of my cash, then we are going to step on the gas. Since we now have the product, and we could carry the pipeline, if I could push the pipeline with more feet on the street and channel partners and so forth, It will help me grow the business and then that will then create a profit that I needed to offset a very profitable source of revenue, which was licensing. And licensing, as you all know, I'm not getting an evaluation of the licensing, at least the recognition of my stock price. And partly because there's just slumping, and a lot of you have expressed that you actually don't know how to measure, evaluate that, and you don't know how to think about the growth part of it. So that's all fair, so I believe that while we have very fresh set of portfolios, with good average lifespan left in the portfolio that we should monetize it one-time, take that proceeds to step on the gas, and then invest in the cyberbusiness, which we know there's a high-growth, and we know we caught up in the product gap, and then also enhance the goal of IoT and investment in IVY which is a future revenue source. It could be significant and we have a great partner in Amazon there. Those are all I believe our positive value creation for BlackBerry.

That helps. Thank you.

Sure.

Concludes the Q&A session. I would like to turn the call back over to John Chen, Executive Chair and CEO of BlackBerry for closing remarks.

Thank you, Ashley. And I thank everybody for joining us today. And before I end the call, I'd like to remind you that we actually have our eighth Annual BlackBerry Security Summit hosted virtually, including keynote addresses from BlackBerry Executive customer-led case study, insight into the cybersecurity and IoT technology landscape. It's free to registered for all of you, and if you haven't already, and I encourage you to do so [Indiscernible] of the event will also be available through our investor relations website. Thanks again and see you next time. I hope to see you in person some time. Take care.

This concludes today's call. Thank you for your participation.