Earnings Call: Q2 2022

Sep 22, 2021

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 brief question and answer session towards the end of the conference. As a reminder, this conference is being recorded for replay purposes. I would now like to turn today's call over to Tim Foote, BlackBerry Investor Relations. Please go ahead. Thank you, Ashley. Good afternoon, and welcome to BlackBerry's 2nd 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 Ray. 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 and 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. 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 that are discussed in the company's annual filings And MD and A, including the COVID-nineteen 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 their 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 EDGAR, SEDAR and blackfree.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 refer to are GAAP based number. Okay. Starting with our headlines. This quarter the business performed well With revenue for all the free business segments beating expectation. The cybersecurity 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'll 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 Giancio Matteo to lead our cybersecurity business unit beginning or commencing October 4, sorry, Commencing October 4th, which is a couple of weeks from now. John was Peter Thiel McAfee President and Chief Revenue Officer, Running the enterprise and consumer cybersecurity businesses. This new appointment completes the refocus of our software business into 2 business units. I'll cover this in more detail later. I'll start my review with the IoT business unit. Revenue came in at 40,000,000, Which is better than expected, primarily due to ongoing strength in the design activities area. Gross margin remained strong at 83%. IoT AR increased to $89,000,000 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. For instance, A major customers of ours reported 700,000 lost units of production in calendar Q2. Production based royalty are historically the largest single component of our QNX revenue. However, a significant portion of revenue is also generated from design Prior to the vehicle entering production, this part of the business remains very vibrant and we continue to generate strong development seat And professional services revenues. As a result, total IoT revenue in the quarter was better than expected. Furthermore, these design wins will translate into future production based royalties. As we look ahead to the rest of the year, We continue to see the headwind for vehicle production. The problem is feared to 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 accidents going on in Asia, some of the plants have fired 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 are expecting a lessening impact by Q4 excuse me, sorry, but 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, The significant headwinds are expected to continue into Q3 and Q4 and perhaps even beyond that, Albeit with a sequentially decreasing impact. The impact of the chip shortage on QNX royalty revenue is expected to be buffered somewhat by ongoing strength in design activities. We are comfortable with the current IoT revenue consensus, meaning the full year revenue outlook remains unchanged. As mentioned, despite of the supply chain issue, QNX continued 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 JEM. 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 measured by volume. Having been selected most recently by Daimler as part of their design as part of their EV design. This is from the 23 of 25 we had last quarter. These 24 OEMs between them represent 82% Of global EV market production, sorry, 82% of global EV production. This demonstrate the leading position we have in this very fast 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 is with automotive Tier 1 that is building full digital cockpit 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 the Chinese automotive industry, given its reputation for safety and security. QNX was chosen about software solution from both domestic and as well as multinational competitors. Production is expected in 2022, which is next year and run for around 5 years. The The second is the leading Japanese industrial robotics manufacturer that also happened to be a new logo to February. The customers select QNX for an autonomous 3 d 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 5 years. Other notable design wins this quarter in auto included instrument cluster and ADAS systems. In the JEM space, design wins included medical diagnostic, Industrial process control and a thermal control system for our power plant. I'm going to shift it to Javis. During the quarter, we launched Jarvis 2.0. This is a SaaS version of our software composition and analytics tool, which was previously offered as a bespoke service engagement. Jarvis 2.0, which include a market leading binary code scanner, It's an important part of how BlackBerry can assist customer to achieve compliance with the recent As for the executive order, secure bill of materials software bill of materials, sorry, 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 the project and our timelines remains on track. We are on schedule to release an early access version of the production in October in the product, sorry. We are scheduled We released 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 IV to be embraced by automakers, we recognize that it is important to demonstrate IV value to them. Following On from an AI driven battery management app that we announced last quarter, we announced another application that we will be built on Ivy. This new application enabled in vehicle payments and is being delivered through a partnership with CarIQ, a California based startup. The application will use direct access to the sensor data and the edge compute, 2 of the IV's key differentiators To produce a unique digital fingerprint for the vehicle, this will allow authentication of payments for items such as fuel, tolls, parking services, etcetera, without the need of a fleet, credit cards or other traditional payment methods. This opened up the possibility for OEM to participate in a new revenue streams and is another of the many potential applications that IV will enable. In summary, Ivy continues to progress nicely. Now let me turn to cybersecurity. This quarter, the business year delivered strong sequential billings and revenue growth. Revenue was $120,000,000 Gross margin came in at 59%, ARR was $364,000,000 dollar based net retention was 95%. As we mentioned earlier, John Gio Matteo will be joining BlackBerry to lead the cybersecurity business unit, taking over from Tom Ecobazi, who was the acting General Manager. John brings with him many years of cybersecurity industry experience. During his 6 years as President and Chief Revenue Officer At McAfee, he delivered both double digit growth and margin expansion for the enterprise, the SMB as well as the consumer divisions. John will build on the progress that has been made in recent quarters with the cybersecurity business unit go to market engine and we also direct Both product development and business unit strategy. Tom Ecobot Z has decided to pursue other opportunities And we'll 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 focused business units. Both IoT and cyber are targeted with driving growth and with its shareholder value. The 2 business units will report directly to me. As mentioned, this was a good quarter. While there's still work for the team to do, There's a few outstanding areas that I feel that I'd like to share with you about. This quarter we saw further growth in pipeline for our cybersecurity product, Especially for the new local customers. Pipeline grew strongly for BlackBerry Gateway, our Zero Trust Network Access product Launched last quarter. To help realize this increased pipeline, investment in our direct sales force, in particularly, The hiring of quota carrying sales head continues. We are also making further progress to the channel as illustrated by a 32% Sequential growth in channel billings this quarter. New partner program has also helped significantly increase both channel driven pipeline generation and in new local buildings, mainly in the North America's arena. We also have seen robust growth in business through managed service Managed Security Service Providers or MSSPs. You may recall that during the Q2 earnings call a year ago, We target using MSSP to quickly scale our Guardant managed service offering. Today, one of these partners, I'm happy to report, managed more than 100,000 endpoints using BlackBerry's cyber's products. I'd like to take a closer look at some wins from the quarter that demonstrate why customer chose are choosing BlackBerry for their cybersecurity needs. The first customer is one of the top 10 automakers in the world. This customer select our Protec EPP and OPTIX EDR solution following a competitive bake up in which we went head to head with Cloudstrike and Kalmanbach. The customers selected 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 network. The second is a Fortune 100 Financial Services Company. BlackBerry displays Microsoft Defender with ProTech and Optics. The company select us particularly for our performance on Mac OS. The third is where we have continued success within the Australian state government agencies. This quarter, we sold ProTekt, Optix and our ThreatZero Consulting Services Into a number of agency, displacing predominantly legacy incumbents that included Trend Micro and Symantec. The customer chose BlackBerry for our next generation prevention first technology. On the industry recognition front, SE Lab, a leading independent research firm based in London has performed a rigorous set of tests On our ETT and EDR products, ProTek and Optics. This breach test differs on their quarterly endpoint test. Rather than simply loading no malware onto an endpoint, which typically mask the inability of traditional signature based vendors to prevent Zero day threats, the breach test includes instead applies real time real world hacking tactics. They applied comprehensive techniques to evade our defense and concluded that ProTek and Optics provide complete protection prevention, Complete detection as well as 0 falls positive. A link to the full report could be found on our Investor Relations webpage. This 3rd party validation of our product, not just our EPP, but also our EDR demonstrate how we have successfully closed The market is now recognizing some of the unique differentiated abilities Of our cyber products, one of which is the maturity of our AI engine. As in the previous quarters, We're 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 0 day prevention against a host of these threats. In the quarter, our product successfully brought New profile ransomware such as Hive, LockBit, Ragnar Locker and many more before they could do any damages. BlackBerry's Cylance AI engine is firmly focused on preventing our customers from being breached, whereas some of the leading competitors It's a focus on showing customer all the ways that system all the different ways that their system could be accessed. On the UEM front, we are continuing to invest in our roadmap, delivering enhancements that add most value to customers. We recently announced that 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 SS. This is part of the latest version of the UEM U Series, which was released this month, earlier this month, that is. U series also provides 0 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 Corp, the U. S. Army Corp of Engineers, the U. K. Ministry of Defense, the United States Air Force As well as leading enterprise such as General Dynamics and Magna. 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, Couple of investment in direct and channel sales, the outlook of the cybersecurity business units is for sequential billing 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 4.95 to $515,000,000 range. Turning now to licensing. As I mentioned earlier, Negotiation to sell the 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 items of the key terms of the deal. We expect to execute a definitive agreement this quarter. Closing the transaction will be subject to a 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 $10,000,000 per quarter. While we to conclude successfully, the process has taken longer than we expected or anticipated. Should it not conclude this quarter, we'll have other options, including additional interested parties. We will update investors on any of the material developments in a timely manner. 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 Q2 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 2nd quarter total company revenue of $175,000,000 2nd quarter total company gross margin was 65%. Our non GAAP gross margin excludes stock compensation expense of $1,000,000 2nd quarter operating expenses were $143,000,000 Our non GAAP operating expenses exclude $32,000,000 in amortization of acquired intangibles, $11,000,000 in stock compensation expense and $67,000,000 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 2nd quarter non GAAP operating loss was $30,000,000 and the 2nd quarter non GAAP net loss was 33,000,000 Non GAAP earnings per share was a $14,000,000 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 $120,000,000 And IoT revenue was $40,000,000 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 $15,000,000 As John mentioned, our IP monetization Now moving to our balance sheet and cash flow performance. Total cash, cash equivalents and investments were $772,000,000 as at August 31, 2021, an increase of $3,000,000 during the quarter. Our net cash position increased to 407,000,000 2nd quarter free cash flow was $10,000,000 Cash generated from operations was $12,000,000 and capital expenditures were $2,000,000 That concludes my comments. I'll now turn it back to John. Thank you, Steve. Before we move to Q and A, I'd like to summarize this past quarter. I'm pleased with how the business performed, beating revenue expectations for all the businesses and deliver positive cash flow. The structure of the 2 market focused business Sovereign Business Unit is already delivering results and we're adding additional relevant industry experience. We're encouraged by the growth in cybersecurity pipeline and continue to invest in sales headcount. Current exec design activities remains very strong And we are weathering the impact of the chip shortage as well. We are now also making good progress with Ivy. And with that, I'd like actually the operator to open the line for Q and A, please. And we will now begin the question and answer session. 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. Thanks. Hi, John. How are you doing? Very good. Thanks for all the updates and the guidance. I guess my first 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 stronger second half? Yes, thank you. Thank you for the question. So there are some assumptions that Let me break it down a little bit. Licensing, of course, we already explained, so I don't have to go Much detail of that. I think we're going to have $10,000,000 a quarter for the next two quarters for the second half that is each of the quarter. And that has something to do with the fact that we are 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 no longer Actively involved with. Regarding IoT, the only wildcard, so to speak, It's 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 compared to Q2. A good example would be Ford believe They are improving and GM also is although they're going to shut down a couple of factories in Q3, But I think from my magnitude, it's improving versus the first half of the year. So North America, you see it going back We're 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 bring us more developer seats revenue as well as professional services revenue. So I'm pretty comfortable with that. On cyber, it really is a function of one thing. I mean, I got Two considerations in there. One thing, the major part is we have a lot of sales people join us in the last couple of 2, 3 quarters. We have a pretty young pipeline. The activities in the pipeline It's been very strong in the last quarter and 2. So putting that together is actually a good thing, except that it might take time to ramp up. And so the rate of conversion of the pipeline with the newer sales force is the only wildcard, and it's something that we have to manage very carefully. But the good news there is even if it takes longer, these things these business don't tend to go away. So we're so that's the assumption that we make 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 those are the and then we expect them to. So those are the basis of our forecast. Yes, second half seems to be A bigger number, a stronger number than Q1, that's correct. Great. Thank you. And just my follow-up question, congrats on adding John Giammetto to the team. Is he going to run kind of the same playbook that was getting put in place for all the team? Or do you expect further changes 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 has been able to grow Both the consumer business and the enterprise business at McAfee, when he was running the he was the President of 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, We made in pipeline, the investment we make in partners, in engineering and the investment we make in hiring more sales at. And we have a couple of quarters ago, we hired a pretty good I'm sure that he will take full advantage of those. Great. Thanks for taking my questions. All right. Thank you. Your next question comes from Daniel Chan with TD Securities. Your line is open. Hey, Daniel. Hey, John. Hi, Daniel. You mentioned earlier that typically your QNX revenue has a higher mix of royalty versus Development, should we expect a higher mix of development 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 think 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 of the production revenue coming from ADAS assuming The part shortages issue started to improve. It has to improve over time. The huge industry And semiconductor for the whole semiconductor industry, auto is not really that big. It's not 100%. Obviously, it's probably like More like 15% of the market. So it will address that. And so I expect That our royalty rate to go back into some kind of growth, especially with all the design wins that we had in the last couple of 2, 3 years. Okay, that's helpful. Can you remind us how you sell these development seats? Is it more like a perpetual license? Or is there A recurring proportion to that as well. It's more like a perpetual license. It's selling seats. Okay. And do you kind of give like a 20% maintenance? Yes. Yes, we get upgraded and maintenance on it, yes. Okay. One more if I may. Cybersecurity ARR was flat sequentially, while you've been saying that the pipeline has been growing. Just Just wondering when we're going to start seeing that metric start to tick up or whether there's some seasonality built into the current quarter's numbers. Yes. That's good question. I asked that question also and they always give me the product makes the answer. That Some of them we took earlier upfront because of rev rec policy. I expect for the Full sales and I said it in the past by the way, so it's very consistent. Mid year next year is where I'm going to see some Hoping to see some strong growth of all the investment we have made, the pipeline going, the 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, John. First question on the patent sale. I know you Can't say much just given you're in the middle of negotiations. But your statement, you mentioned that the negotiations are going well, But then you also indicated that if it doesn't close, you have other options. Just could you bridge between those two statements because they're actually 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 this, This quarter. But I'm tired of waiting. I know a lot of our investors are too. It just I'm not bringing anything on anybody. And maybe we have too many lawyers assigned to this. Sorry, lawyers. I doubt 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 spent on definitive agreement negotiation. And then by and large with the exception of 1 or 2 items, 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 kind of draw the line at San and say I can't just stop licensing the business These 2 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, weighting percentage, I put eighty-twenty. I put 80%, we get it done this quarter. Does that help? Yes, that's very helpful. I wasn't going to answer a percentage, but I'm glad you threw it Switching back to the business, just in regards to 24 out of 25 EV How do we think about the magnitude or size of these wins? Like if you find like EVs, 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 dollars per royalty. But if you look at ADAS and clusters, They are usually high single digits pushing into double digit per car. So it's not gasoline versus electric And so the electric vehicle had one advantage, which is more component of Highly complex ECUs. When you have highly complex ECU, it does 2 things for us. Number 1, because we have the highest certification In security and safety, when you have a high complex ECU, like a compute engine in a car, They tend to go after that most secure and most safe production products. So We have an actual advantage to win it. That's number 1. Number 2, they used to they tend to use very complex algorithm And that will help us sometimes selling more than even one copy for a UCU. So And when you sell these complex ECUs with ADAS or clusters or hypervisor, typically the ASP is On a higher end. So it's really more function that drive ASP versus EV or gas. Okay, that's helpful. And then one follow-up. It seems like BlackBerry QNX has good traction in the Chinese EV market. Could you speak to like does the pricing for that market, is it materially different than other OEMs or other geographies for QNX? No, not materially different. So also other things you need to be aware of that, a lot of those Chinese players Actually, a design center in the United States. So the market price is the market price because they're all a lot of them are all in the U. S. But of course, we have a Chinese team and deal with the Customers over there and the factories over there and so forth, but they're 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. Thanks, John. I'll follow-up on the EV line of questioning. So that 25th OEM, which you don't have, they're always bringing out new vehicles, many, many New vehicles that are selling well and at lower prices, etcetera. What are the chances of you getting into that OEM? My team Promise me, it's right up and down, they're working it. And so I'm hopeful that I The fact that they typically like to do complete vertical integrations, it will still require work from us. But we're working it. Okay. And then also on the patent sale, There's been press articles that in the trade press that you more or less have settled on a price And it was really the complexity of all the participants in a, 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. That I would agree I would confirm. Everything else I can't really comment on. No, Co. All right. That's great. Appreciate the color. Thanks a lot. Absolutely. Absolutely. Your next question comes from Paul Spieth with Scotia. Your line is open. Hi, Darren. 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 out my quick follow ups. I'm sorry, how do I monetize IV? IV. Okay. Well, there It's a work in progress, but I have a lot of ideas. First of all, I wanted something that are usage based and recurring based. And that's the revenue model. And if you look at what IB really is, it's a collector of sensor data, The ability to analyze it, push it on the edge, put it on the cloud, apply AI to it and feed it back to the OEM or application providers. And one of the reasons why we spent so much time on the application side, a quarter ago, we have an intelligent battery Management Systems for performance and for managing anything regarding related to a battery and the usage of it. And this past quarter, we turned our attention to have an application that turned your vehicle into a wallet basically. And it's a huge market for those of you who follow this because the fleet cars, especially the trucks and The Amazon delivery trucks or FedEx or UPS or cargos or commercial trucks, They if we get equipped with Ivy, there's tons of sensing data Between security and productivity and the ability to not having to use a third party to do Payment and so far are all very positive and cost effective solution from the truck owner and the truck runners. Also, as I mentioned earlier, the OEM has always also tried to find ways to enrich their source of revenue After they sold the car, and this could Ivy may be able to facilitate some of these applications. So that's kind of where I'm really focused on to create usage base, whether it's app based or functional based Use cases and in some cases I could share with the 3rd parties, I could share with Thanks. I could share the revenue with OEMs and these are all possibilities. So that's how we focus on monetizing IT. Great, thanks. The two quick follow ups, I guess, for yourself or Steve. First one would just relate to your commentary about continuing to invest Salesforce, should we think of the numbers that you've sort of added this quarter in aggregate dollars sort of Reflective throughout the remainder of the year. And then the other sort of clarification, not asking you about a pending transaction, But if the patent business didn't exist at the BlackBerry, how should we think about stranded Cost in the SG and 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 of first question, what was the can you repeat your first question? Yes. You talked about adding more sales headcount. I'm just sort of looking at Chasing of what you've done in terms of investment, is that already sort of in the 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 very quick 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 recognize that the business needs investment to step on the gas, you used the word. And so For the time being, and we have 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 long 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 and continue hiring and continue to increase. And the idea is Since we now have the product and we could generate a pipeline, if I could close the pipeline with more Feet on the streets and channel partners and so forth, it will help me grow the business and then that will And create the profit that I needed to offset a very profitable source of revenue which was licensing. So 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 it's a slumpy. And a lot of you have expressed That you actually don't know how to measure and value 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 could 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 into cyber business, which we know there's a high growth. And we know we caught up in the product gap. And then also enhance the growth IoT and invest in IVs, Which is the future revenue source, which could be significant and we have a big partner in Amazon there. So those are all, I believe, positive value creation for BlackBerry. That concludes the Q and A session. I would like to turn the call back over to John Chen, Executive Chair and CEO of BlackBerry for closing remarks. Okay. Well, thank you, Ashley. And I thank everybody for joining us today. And before I end the call, I'd like to remind you We actually have our 8th annual BlackBerry Security Summit hosted virtually on October 13. The event will feature live and on demand section, including keynotes, addresses from BlackBerry executives, customer led case study, Insight from into the cybersecurity and IoT technology landscape. It's free to register for all of you. And if you haven't already, and I encourage you to do so. Otherwise, a replay of the event will also be available Through our Investor Relations website. Thanks again and see you next time. Well, I hope to see you in person Some time. Take care. This concludes today's call. Thank you for your participation.