Earnings Call: Q1 2022

Jun 24, 2021

Good afternoon, and welcome to the BlackBerry First Quarter and Fiscal Year 2022 Results Conference Call. My name is Jesse, and I'll be your conference moderator for today's call. During the presentation, all participants will be in a listen only mode. Bill B. 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. Sir, please go ahead. Thank you, Jesse. Good afternoon, and welcome to BlackBerry's Q1 fiscal 2022 earnings conference call. Steve Ray. 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 atblackbury.com. 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 will 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 and supplement published earlier today, which are available on the EDGAR, SEDAR and blackberry.com websites. And with that, I'll turn the call over to John. Thank you, Tim. Good afternoon, everybody, and thank you all for joining us today. The main headline for this Porter. We have organized our software and services business around our 2 biggest market opportunities, namely IoT and cybersecurity. In the past few years, we have done a good job in product development. Last year, we launched 59 new products and the year before over 30. Later, I'll discuss about more about the XTR product that we have launched this quarter, and I will provide you an update on BlackBerry IV. As you all know, at the same time we're delivering our products, many of you know that we've been investing in our go to market as well. We have in a number of last number of years, especially the last few quarters, Turned up the noise with our marketing, expanded our channel and partnerships and invested more feet on the street. Now we are pivoting the organization more heavily towards the market by creating 2 business units, Cybersecurity and IoT. By aligning the cybersecurity and IoT business unit to the main market opportunities, We will drive more focus and accountability. We will also improve our agility, being able to react to the fast changing needs of the market. And even today, both of the BUs have their own business dynamics. In order to accomplish this, we have recruited a number of new talents, Especially with deep IoT experience. This includes Matthias Ericsson, who joined us from HERE Technologies Ed, the President of the IoT Business Unit. Matthias brings over 2 decades of relevant industry experience, and we focus on strategy, Operation and Driving Growth in the IoT Business. BlackBerry President and Chief Operating Officer, Tom Ecobasi, we're focused on leading the cybersecurity business unit. Tom has deep enterprise software experience and is a perfect person to engineer the growth of this business. From a financial reporting perspective, beginning this quarter, we will provide revenue and gross margin by business unit as well as other selected metrics. We believe that this additional color will help us to gain better understanding of the underlying performance of the business units, ultimately driving shareholder value. So let me start by reviewing with you the IoT business unit. This business, which is primarily QNX, It also includes Ivy, CerroCom, Jog and Tradar had a good strong quarter. Revenue came in at 43,000,000, Which represented increasing 48% year over year. Of course, a year ago, there was a pandemic, a hard hit quarter. Gross margin was 84%. IoT ARR was 86,000,000. This growth in both revenue and ARR was achieved despite the fact that we have global chip shortage. The shortage continues to be a significant factor in the auto market in the near term and it's no doubt currently impacting the production driven revenue of QNX. The scale of the impact varies by region and by OEM. The impact looks to be greatest in North America and less so in Europe and Asia. 1 of our largest customers in North America has indicated that production in Q2 will be impacted or maybe impacted by up to 50%, but others are less severe. Generally speaking, Q2 appears to be the low point with Q3 improving and Q4 further still. The impact also looks to be smaller than that of the pandemic last year. So currently, we don't see a need to change our revenue outlook for the year. But we'll continue to assess the impact with our customer and we'll update you again next quarter. Just as a reminder, our IoT revenue outlook remains at $180,000,000 to $200,000,000 for the fiscal year. In contrast to the production based royalties, however, revenue from design activities, I. E, the developer seats and professional services is strong. Unlike Q1 of last fiscal year when COVID was becoming a major issue, Confidence in our OEM appears high and we've seen a lot of design activities in progress. We are particularly pleased with 2 design wins this quarter. First one was with Volvo Group, who selected QNS RTOS Hypervisor, that stands for real time operating systems, sorry guys, and Hypervisor on a whole truck basis, meaning that our technology will power multiple ECUs throughout the truck. 2nd, We further strengthened our position in the EV market with a design win with the Shanghai based WM motor. The QNX OS Gerardo. The QNX OS and Hypervisor will power their all electric W6 SUV vehicle. In total, this quarter we had 28 new design wins with 17 in auto and 11 in jam, the general embedded market. In auto, along those we just mentioned, notable design wins also include Bosch and Visteon. These design wins span hypervisor, digital carpets, multiple socket ADAS, platform and high definition maps. On the GM front, the wide range of application won in the quarter with surgical robotic arm, industrial 3 d printers as well as nuclear cryostation. So design wins such as the Volvo demonstrate 2 key secular trends that QNX Business benefits from. The first one is the consolidation of lower compute power ECUs towards a fewer numbers, higher power chipsets such as the ARM version VA and the X86 60 4 bit chipsets. It is on these higher power chips that QNX operates. And as this consolidation continues, is it gives QNX ever more opportunity in the car. Secondarily, there is a or the second point 2nd trend that is, there's a trend of increasing software content per vehicle, particularly in safety critical system, Such as ADARs, Gateway and Digital Copies. This is, of course, where QNX shine with the highest level of safety certification and has the strongest comparative advantage. Our strategy to focus on safety critical system, which we put in place a number of years ago, has allowed the business to benefit from these trends, ultimately leading to a higher average revenue per car. This strategy is delivering higher value design wins and with the royalty revenue backlog. The backlog metrics is calculated using contracted price and future production volume estimates provided by the customer when the design is awarded. It's important to note that this is a customer's estimate. The backlog increased from $450,000,000 last Q1 to 490,000,000 this Q1. This is a 9% increase year on year despite the pressure on new auto designs over the last 12 months. Strategy Analytics, a leading independent research firm, recently published that QNX Software is now embedded in over 195,000,000 vehicles. That is up from 175,000,000 confirmed the year before. Now for a brief update on progress with IV. Driving the IV opportunity forward remains one of our key priorities and we're working closely with AWS to achieve this. Product development remains on track and in line with the roadmap. We remain on target for the early SS version to be available in October And for the production versions to start shipping next February. Customer discussion and workshops are continuing, And we remain positive about how things are progressing. This quarter, an additional 5 automakers engaged to explore IV. This means that we're now engaged with most almost all of our major QNX customers. We recently announced the launch of the IVS Advisory Council. Industry leaders from a number of key verticals have signed up, including TELUS Telecommunications, 1 of the big three telephone company in Canada, Daikou Insurance, you see a lot on TV, their commercial, Hear Apps and Serence, which is the voice recognition auto business. Development of relevant and exciting new use cases for IB platform remains a key priority. And we believe that the council could greatly assist us with this. Delivering relevant maps and experience provide a higher engagement model with both the consumer as Troy Afti, Enterprise. Last quarter, we launched the IV Innovation Fund, Fabrice to invest in startup adopting the IB platform. Since then, we had a great response on the market and we have reviewed over 200 prospective customers. We recently announced our first investment in an exciting startup called Electra Vehicle. Like most other startups in the battery management space, Elektra aim to not only analyze activity, but to also actively manage the battery operation using artificial intelligence. Vehicle sensor data from Ivy will feed their AI driven platform, dynamically determining factors Such as driving behavior and environmental condition to optimize battery performance. In summary, Ivy is progressing well, and we remain very focused on the various elements to need to make this a strong growth business and success. Now let me move to our cybersecurity business units. This business unit includes our Spark endpoint security and Endpoint Management Products, UEM, as well as ad hoc, the critical event management software and SecuSmart, SecureVoice and Tax Product. GAAP revenue for the quarter was $107,000,000 As mentioned during the last earnings call, we now switch to GAAP revenue GAAP based revenue only. Gross margin was 57%, ARR was 364,000,000 And dollar based net retention was 94%. Over the last couple of years and prevailing the prevailing narrative has been that Detection and remediation is the most important part of cybersecurity. However, the founding principle of Cylance and one of our main reasons that we acquired is prevention is far better than cure, and that's why we're a market leader in EPP. Stopping threats before they execute This quarter, we demonstrated strategy clearly with our next generation AV product, NameProtect, blocking the dark side ransomware, The cause of the Colonial Pipeline Cyber Incidents. In fact, the 2015 version of Protect also block most of the variant of the same ransomware, obviously 6 years ahead of this time. We do have the most mature AI engine in this space and the ability to block ransomware years ahead of time. Without the needs for update, this shows the power of our prevention first strategy. Fotek has also shown to prevent other high profile threats such as Akandi, Ransomware, Novelium, Revo and others. In addition to large enterprise customers, this AI driven automated protection also resonate with small and medium sized customer that don't have the resources to establish the SOX, meaning the security operation centers. We see strong sequential growth in SMB new business pipeline of around 80%. In the quarter, we announced 2 significant new products, both of which are part of the extended detection and response or XDR strategy, kind of the latest evolved market from EDR. The first product is back there in Gateway. With employee base remotely and not in the office as well as mobile becoming more prevalent, the traditional moat and castle model of network assets is no longer efficient or effective. In fact, VPN users, once authenticated, often has access to the entire network, including on prem and all the SaaS application for the length of their session. Vectory Gateway is a 0 Trust network access product that uses the Cylance AI to continuously authenticate network activity. The cloud AI evaluate over 30 risk factors, or we name it factors, such as downloading behavior, DNS, query, time of day, etcetera, to determine unusual activity. The second product released this quarter is OPTIC 3.0. It's our latest version of our endpoint detection and response market or namely EDR. With this new version, the AI driven engine remains at both the edge and in the cloud, allowing me real time responses both offline and online. This continues to be a differentiator for us. However, importantly, this new cloud enabled product will allow event data to be stored centrally in a cloud based data lake. This together with a new search engine and a query language allows threat hunters to gain greater visibility. Switching to the sales front. UEM revenue in Q1 was down year over year in part due to the work from home ramp up that we have saw last year but didn't repeat. Let me reassure you that the UEM remains an important part of our type of business and we remain fully committed to it. In the quarter, we continue to secure business with our highly regulated customers. Let me start with financial services. In financial services included Mitsubishi, UFJ, Bank of China, Bank of France and the Union Bank of India. In the Government and Healthcare segment, we conduct this with the Government of Canada, the UK NHS Health Services, University Health Network Canada, the United States Department of Energy and Department of Commerce, the Netherland Ministry of General Affairs, the Australian Department of Environmental and Energy, also the White House Communication Agency, US Department of State, Department of Treasury and the United States Department of Defense. Also in government, in the United States Federal Government, we have increased the number of ad hoc cloud FedRAMP users by 6% sequentially. From a market perspective, this quarter we gained new business through partnership we recently announced with Verizon, Vodafone as well as TELUS. With Microsoft, we have integrated our critical event management product, Alert, with Microsoft Teams. Further, as we've communicated in the past, CyberSuite, our CyberSuite, our UES platform, is on target to integrate with Intune by the end of August. This quarter, we significantly stepped up on our sales hiring. The market for high quality talent is competitive and it has taken a little longer to increase our headcount. But we currently expect to end Q2 with around 23% more sales rep than at the start of the year. This expanded reach will help BlackBerry to be in more competitive bake offs, where our products stands up well. With the recent increase of sales hiring, many of which start during Q2, billings growth is likely to be more heavily weighted to the back half of the year. Therefore, revenue is likely to be at the lower end of our $495,000,000 to $515,000,000 range that we gave last quarter. Moving on to licenses. Revenue for the quarter was $24,000,000 which is better than expected because some business came in early. Gross margin was 75%. The negotiation for the sale of large portion of the patent portfolio are ongoing and good progress has been made. In fact, we have started negotiating the definitive agreement. Revenue for Q2 is likely to be in the range of $10,000,000 to $15,000,000 for the IP as stated last quarter, so this has not changed. This is due to the monetization activities being limited by the ongoing negotiations. In terms of the full year outlook for the licensing business, should the sales not complete, we expect revenue to be around 100,000,000 Steve. Let me now hand the call over to Steve. Thanks, John. So my comments on our financial performance for the fiscal 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. As John mentioned earlier, starting this quarter, we are no longer adjusting GAAP revenue for deferred revenue acquired. This means that GAAP and non GAAP revenue will be the same going forward and comparatives have been conformed accordingly. We delivered 1st quarter total company revenue of 174,000,000 1st quarter total company gross margin was 66%. Our non GAAP gross margin excludes compensation expense of $1,000,000 1st quarter operating expenses were $138,000,000 Our non GAAP operating expenses exclude $32,000,000 in amortization of acquired intangibles, dollars 6,000,000 in stock compensation Hans and a $4,000,000 fair value adjustment on the convertible debentures, which is a non cash accounting adjustment largely driven by market conditions. 1st quarter non GAAP operating loss was $23,000,000 and the 1st quarter non GAAP net loss was $27,000,000 GAAP earnings per share was a $0.05 loss in the quarter I will now provide a breakdown of our revenue in the quarter. Cybersecurity revenue was 107 million and IoT revenue was $43,000,000 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 90%. Licensing and other revenue, as John mentioned, was $24,000,000 This is a little higher than expected as deals came in early. The monetization activity remains limited while negotiations for the potential IP sale continue. Now moving to our balance sheet and cash flow performance. Total cash, cash equivalents and investments were $769,000,000 At May 31, 2021, a decrease of $35,000,000 during the quarter. Our net cash position decreased Cash generated from operations was negative $33,000,000 and capital expenditures were 2,000,000 Bear in mind, the Q1 of our fiscal year typically has a higher cash requirement due to payment of annual bonuses and other demands at this time. That concludes my comments. And I'll now turn the call back to John. Thank you, Steve. Before the Q and A, I I'd like to update everybody on a few things. Although we have organized along the go to market lines, there are a number of future high growth opportunities that our is that actually harness the power of both entire technology portfolio. Our AI ML engine in IoT. One good example is this is using Cylance in a car. You may or may not remember at CES a couple of years ago, we demonstrated an early version of how our PUSANA technology That identifies inappropriate assets for the use of behaviors can be applied to drivers of vehicles. We also demonstrated how our protected EPP can be used for protected connected cars from cyber threats. There are just 2 of the number of potential use cases that we are currently looking at. The second is our data lake. Drawing data for an ever increasing number of sources is allow for greater visibility and determination of the real level of risk across an organization. This is obviously essential to Zero Trust applications. This applies not only to XDR, but also the increasing sensor rich auto environment, autonomous drive and smart cities. This centralization of data and insights through our data lake can enable a whole new business model in the future. The third area is related to the recent U. S. SBOM, stands for Software Available Materials, the executive orders that aim to secure the software supply chain. This comes in light of the recent incidents, including SolarWind and the Colonial Pipeline intrusions. Combining products from our IoT products, including our Jarvis co scanning tools, our QNX Embedded operating system and our SutterCon cryptology. With our prevention first AI driven cybersecurity product and services, is Min Spec Barry offers a comprehensive approach to this issue. We have begun working closely with various government and standard setting bodies. So before we open the line for Q and A, I'd like to summarize the key messages again. Our software and services business around our key market opportunity, strengthening our management team in the process. QNX made solid progress this year this quarter, sorry. We pleased with the strong design activities and the pipeline of new design wins that saw royalty revenue backlog increase year over year. We continue to demonstrate real progress with Ivy with tangible staff such as the launch of the Advisory Council and as well as the first investment by the Innovation Fund. We launched 2 new important products as part of our XDR strategy and the AI driven prevention first approach continues to be our focus. We're also increasing headcounts, Sales headcount and pipeline is growing, particularly for our new UES products. Our main focus is on growing the top line. And therefore, we continue to increase investment in both our software business units as we see double digit billing growth this year. Finally, we remain optimistic about the successful conclusion to the negotiation of the patent portfolio sale. And with that, I would like to ask Jesse to open the line for Q and A, please. Thank you, speakers. Participants, we will now begin the question and answer session. Is again. Speakers, our first question is from the line of Daniel Chan of TD Securities. Your line is now open. Hi, Katy. Hi, Katy. Hey, Jon. So you stated that your QNX royalty revenue backlog increased to $4.90 from $4.50 last year. Over what period of time That backlog to be recognized over? Typically, the highest usually it's 4 to 7 years. And typically, it's peak at 4, and then it start moving down towards the end of the life cycle of a car. Sometime it extended more beyond that. Okay. That's helpful. Thanks. And then you also talked about the IAB Advisory Council. Can you talk about the level of commitment partners have agreed to as part of this council and whether you plan to include major OEMs on it? Yes, it's a great question. But before I Let me make one more comment on backlog because I have also gotten some feedback regarding that our backlog number is very conservative. I would tell you that it is on a conservative side. Is I would tell you that it is on a conservative side. And we get it from directly from the OEM when we win the design win and they gave us the estimate. We also have not included professional services backlog and developer feedback log. So in the future, when we have a really solid methodology, so that we just don't kind of do much of the guessing And we get a very grounded set of math. You will see that background number to go up and tell you all that we're going to include that. But that may take a couple of quarters. And to go back to answer your question regarding the advisory council, they're there to help us to define use cases, particularly in the vertical that they operate in, That the IV could be of great help. And I don't want to exclude any OEM, but I Don't think OEM would want to do that. They tend to do it 1 on 1 with us directly Because this is obviously value add that they don't want to share. So is I hope that makes sense. It does. Thank you. Next question is from the line of Mike Walkley of Canaccord. Your line is now open. Hi, Mike. Hey, John. Hi. Thanks for taking my question. Yes. I was hoping you could update us on BlackBerry's UEM strategy. I know there's some tough comps because of the pandemic from last year. But could you just update us on the strategy? Is it still a large piece of your cybersecurity business unit? Yes. That's a good question. So let's see, our Spark platform is composed of UEM and UEF. And UEM is very strategic to us because It is our gateway to a lot of our major customers who completely rely on us on security. So our strategy is continue to expand our footprint in the regulated industry. And we're on the more price sensitive and kind of the non regulated industries. We want to make sure that our UES platform, which is our endpoint security platform, also connect to run on it. And obviously, one of the largest installed base outside of my space here, outside the regulated is Microsoft Intune. So this is why We're excited about the fact that we'll have Intune released our Connected Release in end of August, I believe, yes, On the end of August. So basically, the strategy is continue to expand the footprint that we have in the vertical like Financial, Healthcare and Government. That's very important to us with the UEM, with its roadmap. The roadmap is highly geared towards security and certifications and compliance and so forth. And then the bring your own device BYOD environment, and that's the kind of the roadmap of UEM focused on. And then the UES is, of course, expanding on the all the cybersecurity antivirus stuff. So that's our major that's our strategy of how we approach the market. Great. That's very helpful. And Just my follow-up question, just on the gross margin by division, thanks for the updated business metrics. How should we think about growth and trends for the businesses over time, particularly on the Cybersecurity Business. Where could those gross margins get to over time as the business ramps and any reason might have fallen a bit sequentially? Yes. I think the best way to answer the question is that especially in cybersecurity, we're trying to go to the enterprise software timeless model. And so we have not is deviated from that. So the gross margins ought to be maybe patent competitive, but they have the high volume growth, somewhere between 75% to 80%. I think that will be a very good target to shift for, for the cyber business. And when you've happened to maybe get there from where you are today, what would be that timeframe you think? Timeframe, I think probably a year out. If you want me to guess that, I base that on because if you recall, we actually have a lot of increase of headcount Feet on the Street this quarter. In fact, our quarter ends in August. In fact, some of them is committed to sign on and is yet to start. And with that, if I give them the time for 9 to 12 months, 6 to 9 months getting up to speed and at the same time cultivating the pipeline to make the sales cycle work. I think about a year out, I should see some good results from this class of incoming team members here. Great. That's helpful. Thanks for taking my questions. Sure. Next question is from the line of Paul Treiber of RBC Capital Markets. Your line is open. Hi. Thanks and good afternoon. Thanks. A follow-up to the question on sales, but you mentioned in the outlook or the different remarks that you said bookings, double digit bookings growth for the year. How should we think about the ramp or the trajectory over the year? No, I actually didn't get. Paul, I missed some part of your words. Could you remind me? Yes, bookings growth. How should we think about bookings growth over this coming year? How should we think about the ramp over the year relative to where we are now. Yes. As I said earlier also, we just recently has a lot of increase of headcounts in sales. So the booking is going to be back ended this year and then continue on for next year, obviously. So I don't know whether that's the question you're asking. And the rate of growth there, like where do you expect to go to? Yes. We do on bookings, we do expect it towards the end of the year, we do expect it to double digit percentage growth. Okay, that's helpful. On cybersecurity revenue For this quarter, based on the numbers, the historical numbers and GAAP numbers, I did take a step down. I think you mentioned UEM. Can you just elaborate on what you saw customers doing? I mean, I imagine they purchased last year. Did they churn off? Today can you just elaborate on what happened there? No. I think it's quite in general, it's quite Thadie and Stable. We didn't see the growth that we're hoping for, but it will be forthcoming because We just released the EDR products. We talk about cloud, the cloud version, the latest Optix 3.0. We just released all these new products a quarter ago, actually, a quarter ago. So we're seeing that pipeline being built up and is looking for them coming to being billings and business. So we don't I don't see any major movement one way or the other. People are interested in EDR. I believe that they should be interested Mor and ProTekt. That's our job to make sure that that message come across and the benefit of that could be demonstrated and I definitely to demonstrate. One thing you can look at, the BlackBerry Cylance product combo, None of these major viruses I actually hit our user base, touch wood. And so anyway, that tells you the power of our product. Next question is from the line of Chip Chowdhury of Global Equities Research. Your line is now open. Hi, Trevor. Thank you. Very good execution on the product front. Two quick questions. First, regarding the battery management system. I was wondering, this is definitely an incremental market for you. There are three parts of the business model the way I look at. There could be a design win, there could be a production part of it in the software and a subscription part to the software that is running and managing the batteries. So among these three things, is it all the 3 components or is it only the software and subscription regarding the battery management software that QNX is running. Yes. So thank you, Chip. So first off, it's a little early for me to answer the question. I have a preference. The preference is a usage based revenue or a monthly subscription type revenue. That will be my preference. Of course, that will have to be in agreement with the OEM. So demonstrating that an IV as an IV use cases was one of the Most important thing that we need to do in the next 3 to 6 months. There is a demo being put together, And it will not be available until probably the end of this calendar year is SBIO Engineering team just started working on it. So and in the meantime, we'll try to figure out the question the answer to the is Again, I have a strong preference for this to be either usage based or monthly recurring base. Wonderful. The second question I have is regarding your exceptional machine learning models you have. And definitely currently your Cylance machine learning AI models work with only your products. Are you exploring or do you think it makes a business sense To open up your machine learning models to say other OEMs or to other ISVs and then touch For connection or charge of per like an APIs because your product which is gateway security, I think that is very normal. And again, that's another incremental revenue opportunity you can get over a period of time. So I was just thinking, since you have the best Spending models available, just licensing them or any other business model that can give more revenues to you? Your thoughts on that will be really appreciated. And again, very good execution on the product front. Thank you. We haven't thought about Licensing those models to other application, maybe I'll say that. However, We are licensing that licensing is a wrong word, sorry. We are embedding the lightweight agent in IoT devices, including like medical equipment and industrial equipment. So and some of those other technology we have like the mobile threat detection Kiela and prevention also uses the model. So it's being used in a different way. From a business perspective, we didn't think about licensing and where we could explore that, but we're more focused on doing embedding in endpoints. Very good. Thank you very much, John. Sure, Tarek. Thank you. Next question is from the line of Paul Steep of Scotia Capital. Your line is now open. Hi, Paul. Hi, John. Can you maybe either this one may be booked for both you and Steve and I'll just make it one question, you can parsed up as you like here. Can you give us some context around the cost base? Obviously, you disclosed last quarter that you had 3,490 Kevin. And then earlier in this call, you talked about increasing the number of is by 23% at the end of Q2. So I'm just trying to square up how we'd want to think about your cost base maybe going forward, Whether you've just incrementally shifted resources or is this like net new adds that we should all be thinking that are temporarily going to get added and then come to productivity as you pointed out earlier. Yes. We have not done any major or even minor reduction in force. We have moved some resources around more for functional investment reasons, not for reduction of people. So It's probably best for you to think about it as incremental. That's helpful. Maybe just the last one as well. In terms of new cybersecurity products, obviously, you're talking about Given the team time to ramp up, but maybe talk to us a little bit about what you're seeing from inbound client interest, because you've launched a significant number of products, you've been on a bit of a role here in terms of new product launches. That's it. Thanks. Assuming you're talking about the is Sorry, Sai. Yes, sorry, Sai. Okay. Sai. Probably most of the conversation center around the ProTech product. I would say if I think about the larger Opportunities and sites that we have 1, the key winning product, it is the PROTECT. So this is why you heard me said a number of times on this call today, and we're going to try to double down on the protect side because it's a differentiator for us. And in addition to that, the AIML model that we have could be embedded and it could be embedded without having to be updated. It's been valid for a very long time. So that's probably the largest opportunities when you think about large installation. And now what we're trying to do is to position the XTR product. We talked about the new one called Gateway. And that provided 0 Trust Architecture. So enterprise, especially like government, I was extremely interested in that. So those two areas. Thank you. Sure. Thank you. Thank you, participants. I'll now turn the call back over to John Chen, Executive Chair Ant, CEO of BlackBerry for closing remarks. Thank you, Jesse. Thanks everybody for joining us. I know it's late in the East Kous. So I want to just hopefully you are doing well and thank some of you who