BLACKBERRY Ltd Q2 FY2022 Earnings Call

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. 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 revenue numbers we use will be GAAP-based, correct?

Yes.

When you say non-GAAP numbers, the actual revenue number we referred to are all GAAP-based numbers. Okay. Starting with the headlines. This quarter, the business performed well with revenue for all the three business units beating expectations. 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 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 critical refocus of our software business into two 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 impacted 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 is historically the largest single component of our QNX 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 revenue 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 headwinds for vehicle production. The problem has shifted from supply of wafers to more of the back-end assembly and testing issues, largely due to a spike in COVID cases in Asia, as well as some incidents happening in Asia, like some of the plants having fires, 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 expect a lessening impact by Q4. Excuse me, sorry. And Volkswagen, on the other hand, sees challenges persisting into 2023. In terms of outlook, we continue to see the past quarter as the low point, but 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 revenue quality revenue is expected to be buffered 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 the supply chain issue, QNX continues 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 measured by volume. Having been selected most recently by Daimler as part of 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 demonstrates 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 investors more color, as to why QNX was chosen, and why we are the industry leader. The first win was with an automotive Tier-1 that excludes full digital instrumentation and gateway solutions for a Chinese EV OEM, using the QNX real-time operating system and hypervisor. QNX technology is well-known and trusted in the Chinese automotive industry, given its reputation for safety and security. QNX was chosen over a software solution from both domestic and multinational competitors. Production is expected in 2022, which is next year, and will run for around five years. The second is a leading Japanese industrial robotics manufacturer that's also a new customer for BlackBerry. The customer selected QNX for an 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 clusters and ADAS systems. In the GEM space, design wins included medical diagnostic, industrial process control, and a thermal control system for a power plant. I'm going to shift to IVY. During the quarter we launched IVY 2.0. This is a SaaS version of our software composition, and Analytics 2, which was previously offered as a professional services engagement. IVY 2.0, which includes a market-leading binary code scanner, is an important part of how BlackBerry can assist customers to achieve compliance with the recent software bill of materials executive order 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 timeline remains on track. We are on schedule 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 applications on IVY. And speaking of applications, for IVY to be embraced by automakers, we recognize that it is important to demonstrate IVY's value to them. Management apps that we announced last quarter will be built on IVY. This new application will enable in-vehicle payments delivered through a partnership with Car IQ, a California-based startup. The application will use only the sensors and the edge computers. Two of IVY's key differentiators will produce a unique digital fingerprint for the vehicle. This will allow for the processing of payments for items such as fuel, towing, parking services, etc., without the need for credit cards or other traditional payment methods. This opens up the possibility for OEMs to participate in new revenue streams, and it's another one of the many potential applications that IVY will enable. In summary, IVY continues to progress nicely. Now let me turn to cybersecurity. This quarter, the business unit delivered strong sequential billings and revenue growth. Revenue was 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 lead the cybersecurity unit, bringing with him many years of cybersecurity industry experience. During his six years as President and Chief Revenue Officer at McAfee, he delivered both double-digit growth and margin expansion for both enterprise and consumer divisions. John will build on the progress that has been made in recent quarters within the cybersecurity business unit, the go-to-market engine, and will also direct all 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 two market-focused business units. Home IoT and Cybersecurity are targeted with driving growth and showing value. The two business units will report directly to me. As mentioned, this was a good quarter. Although there is still work for the team to do, there are a few outstanding areas that I feel I need to share with you about the growth and pipeline for our cybersecurity customers. The pipeline grew strongly for BlackBerry Gateway as a zero-trust network. To help realize this increased pipeline, investment in our direct sales force, particularly the hiring of quota-carrying sales heads, continues. We're also making further progress on the channel as illustrated by a 32% sequential growth in channel billings this quarter. The new partner program has also significantly increased full channel-driven pipeline generation and new logo billings, mainly in the North America arena. We have also seen robust growth in business through Managed Security Service Providers or MSSPs. You may recall that during the Q2 earnings call a year ago, we targeted using MSSPs to quickly scale our managed service offerings. Today, one of these partners I'm happy to report manages more than 100,000 endpoints using BlackBerry Cyber products. I'd like to take a closer look at some wins from the quarter that demonstrate why customers are choosing BlackBerry for their cybersecurity needs. The first customer is one of the top ten automakers in the world. This customer selected our Protect EPP and Optics EDR solutions, following a competitive bake-off in which we went head-to-head with CrowdStrike and Carbon Black. The customer chose BlackBerry due to our near 100% malware detection rate, our lightweight engine, and flexible deployment options, both in the cloud as well as standalone factory networks. The second is a Fortune 100 financial services company. BlackBerry displaced Microsoft Defender with Protect and Optics. The company selected us particularly for our performance on MacOS. The third success is with the Australian state government agencies. This quarter we sold Protect and Optics and our Threat Zero consulting services into a number of agencies displacing predominantly legacy incumbents, including Trend Micro and Symantec. The customer chose BlackBerry for our next-generation prevention-first technology. On the industry recognition front, SE Labs, a leading independent research firm based in London, performed a rigorous set of tests on our EPP and EDR products, Protect and Optics. This breach test differs from their quarterly endpoint tests. Rather than simply loading no malware onto an endpoint, which typically masks the ability of traditional signature-based vendors to defend against zero-day threats, the breach tests include real-time, real-world hacking tactics. They apply comprehensive techniques to evade our defenses and concluded that Protect and Optics provide complete prevention, complete detection, as well as zero false positives. A link to the full report can be found on our investor relations webpage. This third-party validation of our products, including EPP and EDR, demonstrates how we have successfully closed the product gap to competitors with recent product launches. The market is also recognizing some of the unique differentiated abilities of our cybersecurity products, one of which is the maturity of our AI engine. As seen in previous quarters, we are observing new malware and ransomware hitting the headlines 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 blocked new profile ransomware, such as Hive, Lock Bit, Ragnar Locker, and many more before they could cause any damage. BlackBerry Cylance AI engine is firmly focused on preventing our customers from being breached, whereas some of the leading competitors instead focus on showing customers other ways their systems could be assessed. On the UEM front, we're continuing to invest in our roadmap, delivering enhancements that add the most value to customers. We recently announced an enterprise can now benefit from BlackBerry's 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 access. This is part of the latest version of the UEM U-Series, which was released early this month. This U-Series also provides zero-day support for Android 12 and iOS 15. This past quarter, we secured important UEM renewals with government agencies such as the IRS, the Department of Homeland Security, the U.S. Marine Corps, the U.S. Army Corps of Engineers, the UK Ministry of Defense, the U.S. Air Force, as well as leading enterprises such as General Dynamics and Magna. We also overcame a number of new logo wins 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 for the cybersecurity business units is for sequential billing growth for the remaining 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 a $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 on 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 $10 million per quarter. While we expect sales to conclude essentially, the process has taken longer than we expected or anticipated. Should we not conclude this quarter, we will have other options, including additional interest from 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.

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 excludes stock compensation expense of 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 loss of $0.06 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 expectations for all the businesses and delivering positive cash flow. The structure of the two market-focused software business units is already delivering results. And we're adding additional relevant industry experience. We're encouraged by the growth in the cybersecurity pipeline and continue to invest in sales headcounts. QNX and design activities remain very strong, and we are weathering the impact of the chip shortages well. We're now also making good progress with IVY. And with that, I'd like to actually the operator to open the line for Q&A, please?

And we will now begin the question-and-answer session. 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 question. 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 into much detail of that. I think we're going to have 10 million a quarter for the next two quarters, for the second half that is, each of the quarter, and it has something to 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 a portion of the patents that is in those areas of the business that we're no longer actively involved with. Regarding IoT, the only wildcard, so to speak, is the chip shortage and its impact. From all the indicators, all the ups and downs and give and take, and we've spoken to a lot of the OEMs, that North America seems to be getting better in Q3, Q4, as compared to Q2. A good example will be Ford; they believe they are improving and GM also is, although they are 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 the situation. Europe, however, still had about 10% to 15% impact on production, and so does 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 hold. A big part of that, of course, is we are winning some very strong design wins that bring us more development receipts, revenue and professional services revenue. So I’m pretty comfortable with that. On cybersecurity, it really is a function of one thing, I saw two considerations in there. One thing, the major part is we have a lot of salespeople who joined us in the last couple of quarters. We have a pretty young pipeline. The activities in the pipeline have been very strong in the last quarter. 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 is that even if it takes longer, these businesses don't tend to go away, so that's the assumption that we made in our forecast. The other one is, in Q4 we have a couple of large government deals with some of the government, especially in North America. Some of those need to come to fruition, and 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 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're going to run with the rotation of such a key position, did that impact your guidance thoughts at all?

It's slightly early to tell, but I'm eager to hear his experience of growth. Because he was able to grow both the consumer business and enterprise business as McAfee, when he was running as 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 investments that we made in channel, the investments we made in pipeline, the investments we made in partners and engineering, and the investments we made in hiring more sales reps. We hired a very good head of professional services a couple of quarters ago, and 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 Chan, 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 ramp 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 we will address that. And so I expect that our royalty rate to go back into some kind of right in the last couple of 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 perpetual licenses. We're selling seats.

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

Yeah. We get upgrades 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 if there is some seasonality built in.

Yeah. That's a good question. I asked that question also, and they always give me the product mix answer, that some of them we took earlier upfront because of revenue recognition policy. I expect for the full annual net increase and I said it in the past, so it's very consistent. Mid-year or next year is where I'm going to see hopefully some strong growth from all the investments 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 of negotiations, but your statement mentioned that the negotiations seem to be going well. However, you also indicated that if it doesn't close, you have other options. Could you bridge between those two statements because they are quite far apart from a tone perspective?

That's a good point. I'm pleased you noticed it. Yes, the situation is progressing positively. I fully expect to conclude it this quarter, but I'm frustrated with the wait. I know many investors feel the same. I'm not attributing the delay to anyone specifically, and perhaps we have too many lawyers involved. Apologies to the legal team; I don't mean to doubt your efforts. However, it's important to note that this is a complex and substantial portfolio, and it's understandable that thorough due diligence was necessary, which has now been completed. We've also spent considerable time negotiating the definitive agreement, and except for one or two minor issues, that process is mostly finished. We also have the purchase agreement in place. For me, it's been ongoing since last Christmas, and as we approach another Christmas, I feel it's time to establish a clear course of action, either moving forward or pivoting. We have received interest from other parties, but we're not pursuing those options since we were previously in exclusive discussions with the current party. To summarize, if I were to assign a probability, I would say there's an 80% chance we'll finalize this deal this quarter. Does that answer your question?

Yes, that's very helpful. I wasn't going to ask for a percentage, but I'm glad you threw it out. Switching back to the business. In regards to 24 out of 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 dollars 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 has one advantage, which is more components of highly complex ECUs. When you have highly complex ECUs, that's two things for us. Number one, because we have the highest certification in security and safety, when you have a highly complex ECU, like a computer engine in the car, they tend to look for the most secure and safest product, so we have an edge and advantage to win it. That's number one. Number 2, they tend to use very complex algorithms, and that will help us sometimes sell more than even one copy for a given ECU. When you sell these contracts for ECUs, whether it's for infotainment or clusters or hypervisors, typically the ASP is on the higher end. So it's really more about function than about EV or gasoline.

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

No, it’s not materially different. Also, other things you need to be aware of that a lot of those Chinese players actually have design centers in the U.S. So the market price is the market price because a lot of them are only in the U.S. But, of course, we have a Chinese team to 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, etc. What are the chances of you getting into that OEM?

My team promised 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 with us, but we're working it.

Okay. And then also on the patent sale, there have 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 have yet to get worked out? Thanks a lot.

I can't comment on ongoing negotiations because it doesn't help me whatsoever. I would say to you that we have settled on the price, and I would confirm that. 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 in my quick follow-ups.

I'm sorry. How do I monetize IVY?

IVY.

It's a work in progress, but I have many ideas. First, I wanted a usage-based and recurring revenue model. IVY is essentially a collection of essential data, and the ability to analyze it gives us an advantage. By putting it in the Cloud, applying AI, and providing that back to OEMs or application providers, we can enhance the value. Recently, we focused on the application side, launching an intelligent battery management system that handles performance and battery usage. This past quarter, we rolled out our full offering, which has significant potential, especially with trucks, including Amazon, FedEx, UPS, and other commercial vehicles. Equipping them with IVY generates extensive sensing data for security and productivity, eliminating the need for third-party services for payments and similar tasks. This creates cost-effective solutions for truck owners and operators. Additionally, OEMs have always looked for ways to generate revenue after selling vehicles. IVY could support some of these applications. My focus is on creating usage-based use cases, whether app-based or functional. In some instances, I could collaborate with third parties, banks, or share revenue with OEMs. All of these options are on the table as we work towards monetizing IVY.

Great, thanks. Two quick follow-ups, for yourself, for Steve. First one would relate to your commentary about 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 BlackBerry. How should we think about stranded costs 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 on 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 are you thinking about stepping on the gas a lot harder in your EV, as you continue to win deals?

That's a very good question. I have been here for seven years and have always focused on making money and running a profitable business. However, in the past year, I have come to realize that the business requires investment to accelerate growth. Therefore, for now, I will not concentrate as much on losses versus profits, as long as the situation is manageable and does not lead to excessive cash burn. We will push forward as we now have the product to support our pipeline. Increasing our presence in the field and strengthening partnerships will help grow the business and generate the profits necessary to offset our previously strong revenue from licensing. As many of you are aware, my stock price does not reflect the value of licensing, partly due to market fluctuations, and many of you have mentioned uncertainty in evaluating this aspect and in assessing growth. Given that we have a fresh set of portfolios with a solid average lifespan, we should monetize them once and use the proceeds to invest in high-growth areas like cyber business, where we know we have a product gap. We will also focus on enhancing our goals for IoT and invest in IVY, which has the potential to be a significant future revenue source, especially with a strong partner like Amazon. I believe all these initiatives will lead to positive value creation for BlackBerry.

That helps. Thank you.

Sure.

This 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 studies and insight into the cybersecurity and IoT technology landscape. It's free to register for all of you, and if you haven't already, I encourage you to do so. 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 sometime. Take care.

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