Q2 2022 BlackBerry Ltd 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 country and smarter here 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.
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As a reminder, this conference is being recorded for replay purposes.
I would now like to turn this call over to Tim, but Blackberry Investor Relations. Please go ahead.
Thank you Ashley good afternoon, and welcome to the Blackberry 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 right.
After I read our cautionary note regarding forward looking statements John will provide a business update and 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.
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 discussed in the company's annual filings and MD&A, 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 their summary of our quarterly results for.
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 Blackberry com websites.
With that I'll turn the call over to Joe.
Thank you. Thank you Tim and good afternoon, everybody and thanks for joining the call today, one correction I think all the number or the revenue number we use will be GAAP base correct, yes.
Non-GAAP numbers.
It's actually.
The revenue number we referred to all GAAP base number okay.
I highlight this quarter the business performed well with revenue for all of the free business salmons, beating expectation.
The cyber security business unit delivered strong sequential billings and revenue growth.
The Iot business unit performed better than expected with strong design related activities, partially offset offsetting the impact of the global chip shortage on production royalties.
Licensing revenue reflects a 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 the Iot leadership team in Q1, we have appointed John Joe Matteo to lead our cyber security business unit, beginning all commencing November October fault, sorry, commencing October farthing switches a couple of weeks from now.
John was previously the Mcafee, President and Chief revenue officer, running their enterprise and consumer cyber security businesses.
This new appointment of competes the refocus of our software business into two business units I'll cover this in more detail later.
Excuse me.
Tom I 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 remained strong at 83% Iot a our increased to $89 million.
As you are all aware the auto industry experienced some significant headwinds in Q2 due to the global car you'll go with both semiconductor chip shortage.
This impact production volume, particularly in North America. Fortunately instance, a major customers of ours reported 700000 locks units of production in calendar Q2 protect.
Production base royalty I historically, the largest single component of our <unk> revenue. However, a significant portion of revenue was also generated from design activities prior to the vehicle entering production.
This is 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 base royalties.
As we look ahead to the rest of the year, we continue to see the headwind for vehicle production.
The problem is for you to have shifted on surprise of wafers to more of a backend assembly and testing issues largely due to a spike in Covid cases in Asia as well as some of the.
The accidents going on in Asia, some of the plants that fire for example.
Feedback from Oems about the impact on production volumes in the second half is somewhat mixed and constantly evolving for example, Dynamo recently indicated they are expecting a lessening impact by Q4.
Sorry, there's both swagger and on the other hand.
The challenge is persisting into 2023.
In terms of outlook, we continue to see the part the past quarter is the low point, but significant headwinds I expect it to continue into Q4, and Q3, and Q4 and perhaps even beyond that albeit with a sequentially decreasing impact.
The impact of the chip shortage on Q N X royalty revenue is expected to be above or somewhat by ongoing strength in design activities.
We are comfortable with the current Iot revenue consensus meeting the full year revenue outlook remains unchanged.
As mentioned despite the supply chain issue.
<unk> continued to win new design at a very solid pace in the quarter. We had 23, new design wins with seven in auto and 16 in the general embedded market we call it Jim.
Because of our market presence and leader leading technology. We are the trusted go to a supplier and market leader in auto.
Furthermore, we're delighted to announce that we now have design wins with 24 of the worlds top 25 electric vehicle auto makers as measured by volume.
Haven't been selected most recently by Daimler as part of their design.
As part of that design.
This is up from the 23 of 25, we had last quarter. These.
These 24 Oems between dam represent 82% of global EV market production sorry.
82% of global EV production. This guidance this demonstrated leading position we have in this very fast growing parts of the auto industry.
I'd like to expand on a couple of design wins to get investor more colors as to why <unk> chosen and why we are an industry leader.
The first is with.
With automotive tier ones that it's building food digital cockpit and gateway solution for a Chinese EV OEM youll see that <unk> real time operating system and Hypervisor <unk>.
<unk> technology is well known and trusted in China, and the Chinese automotive industry, given its reputation for safety and security.
<unk> was chosen about software solution from both domestic and multinational and as well as multinational competitors production is expected in 2022, which is next year and run for around five years.
The second is a leading Japanese industrial robotics manufacturer. That's also happened to be a new logo to <unk>.
The customers select <unk> autonomous three D robot robot warehousing system. It ahead of the leading competitors couldn't actually was chosen for its functional safety for that shows production expected to start this year and continue for five years.
I don't notable design wins this quarter in auto included instrument cluster and Adas systems in it.
Jim space design wins, including medical diagnostic industrial process control and a thermal control system for a power plant.
I'm on a shifted to Java is during the quarter. We launched Java is to point out. This is a SaaS version of our software compensation analytics too, which was previously offer as a bespoke service engagement.
Java is 2.0, which include a marketing binary code scanner you said, it's an important part of how Blackberry can assist customer to achieve compliance with the reason.
Asphalt executive order.
Secure a bill of materials software available material, sorry software viewing matures executive borders mandated by the <unk> administration.
Moving to a brief update on Ivy.
We are pleased with the ongoing progress being made.
Both Blackberry and AWS has significant resources allocated a project and our timeline remains on track.
We are on schedule to release, an early access version that a reduction in October.
And the product sorry, we were scheduled to release in early access version of the product in October that will enable further engagement with Oems and also allowed 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 ivy value to them.
Following on from a AI driven battery management apps that we announced last quarter.
We announced another application that we will we will be built on Ivy. This new application enabled in vehicle payments is being delivered through a partnership with car IQ a California based startup.
The application will use direct access to the sensor data and the edge compute to of the Ivy as key differentiators to produce a unique digital fingerprint for the Mi photo vehicle.
Allow a fabrication of payments or items, such as few toes parking surfaces et cetera.
Without the need of a free credit cards or auto traditional payment methods.
This opens up the possibility for OEM to participate in a new revenue streams and is another of the many potential application that Ivy will enable.
In summary, Ivy continues to progress nicely.
Now, let me turn to cyber security.
This quarter the business delivered strong sequential billings and revenue growth revenue was $120 million gross margin came in at 59%. A R was 364 million dollar based net retention was 95%.
As we mentioned earlier, John Joe and Matteo will be joining Blackberry to lead the cyber security business unit, taking over from time ago, Bacci, who was the acting general manager John brings with him many years of cyber security industry experience.
During his six years as president and Chief revenue officer at Mcafee, It deliver both double digit growth and margin expansion for the enterprise.
<unk> as well as the consumer divisions.
John will build on the progress has been made in recent quarters with our cyber security business unit go to market engine and we will also direct both product development and business unit strategy.
<unk> has decided to pursue other opportunities and we'll leave Blackberry at the end of October.
The addition of John to the team completed the split up the software and services business into two market focused business unit, both Iot and cyber.
Our targeted we're driving growth and with its shoulder value.
The two business units will report directly to me.
As mentioned this was a good quarter or there is still work with team to do this a few outstanding area that I feel that I would like to share with you about.
This quarter, we saw further growth in pipeline for cyber security products, especially for the new logo customers.
Pipeline grew strongly for Blackberry gateways.
Aero Trust network access product launch last quarter.
Two how realized this increase pipeline investment of our direct sales force and particularly the hiring of quota carrying sales heads continues.
We're also making further progress through the channel.
Illustrated by a 32% sequential growth in the channel billings this quarter.
New pilot program is also have significantly increased both channel driven pipeline generation and a new local billings, mainly in North America.
Arena.
We also have seen robust growth in business through managed service managed security service providers or <unk> piece.
You may recall that during the Q2 earnings call a year ago.
We target using MSP MSP, sorry to quickly scale, our guard managed service offering to day one of these partners I'm happy to report managed more than 100000 endpoints using Blackberry Cypress products.
I'd like to take a closer look at some wins from the quarter that demonstrate why customer chose our choosing blackberry for the cyber security needs.
The first customer is one of the top 10 automakers in the world.
Customers, who lack our protect ETP and optics Edr solution following a competitive bake off and which we went head to head with cloud straight and carbon black.
The customers like it back vary due to a near 100% malware detection rate, our lightweight engine and flexible deployment options both in the cloud as well as a standalone factory networks.
The second is a fortune 100 financial services company, Blackberry displace Microsoft defender would protect and optics the company selected particularly for our performance on Mac OS.
The third is where we have continued success within the Australian state government agencies. This quarter, we saw protect optics and our threat zero consulting services into a number of agency displacing predominantly legacy incumbents that included trend Michael and Symantec.
The customer chose Blackberry for a next generation prevention for its technology.
On the industry recognition funds F E lab.
Leading independent research firm based in London as perform a rigorous set of tests on our ETP and ETF products protect and optics.
This breach tests differs from their quarterly endpoint tests, rather than simply loading known malware onto an endpoint, which typically mask the inability of traditional signature based vendors for defense zero day threats. The breach test includes instead of price real time real world hacking.
Tactics.
They are probably comprehensive techniques to evade or defense.
And concluded that protect and optics for a very complete protection prevention complete detection. That's right. That's what I was zero false positive.
Linked to the full report can be found on our Investor Relations webpage.
This third party validation of our product not just our EVP.
But also our edr demonstrate how we have successfully closed a product gap to competitors with recent product launches.
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 period quarters, we're seeing 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 stress.
In the quarter, our product successfully Brock new profile ransomware, such as high.
Locked bid Ragnar locker and many more before they could do any damages Blackberry silence AI engine is firmly focused on preventing a customer from being breached.
Some of the leading competitors instead focus on showing customer all the ways that system all the different ways that this system could be assessed.
On the OEM front, we are continuing to invest in our roadmap delivering enhancement that admiral add that add most value to customers.
We recently announced the enterprise cannot benefit from Blackberry, leading security, while enjoying a seamless native user experience with Microsoft 365 productivity apps.
This is enabled by additional integration between Blackberry <unk> and Microsoft Microsoft 365, primarily through the Azure active directory conditional access.
This is part of the latest version of the <unk> series, which was released this month earlier. This month that is U series also provide zero day support for Android 12, Nio S 15.
This past quarter, we secured important new year renewed with government agencies, such as the IRS. The department of Homeland Security. The U S. Marine Corps U S. Army Corp of engineers, the U K Ministry of Defense The U S.
I'd stay Air force as far as leading enterprise such as general dynamics and Magna. We also won a number of new logos such as a French national industry Institute for Criminal Research and Hotel Aviv stock exchange.
With continued growth in pipeline, coupled with the investment in our direct and channel sales the outlook of the cyber security business units is for sequential building growth for the remaining of the fiscal year.
This is expected to lead to modest sequential revenue growth due to the subscription model.
The full year outlook remains as before at the lower end of what argue $5 million to $515 million range.
Turning now to licensing.
Mentioned earlier negotiation to sell a portion of that 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.
Key terms of the deal.
We expect to execute definitive agreement this quarter.
Closing the transaction will be subject to normal regulatory review.
Normal 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 that $10 million per quarter.
While we expect our sales to conclude so essentially the process has taken longer than we expected or anticipated should not conclude this quarter, we will have other options, including additional interested parties.
We will update investors on our material on any of the material developments in a timely matters.
So let me now hand over to <unk> to further review of 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 $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.
And $67 million fair value adjustment on the convertible debentures, which is a noncash accounting adjustment from to large swings driven by market and trading conditions.
Our second quarter non-GAAP operating loss was $30 million in the second quarter non-GAAP net loss was $33 million.
Non-GAAP earnings per share was <unk> <unk> loss in the quarter.
Our adjusted EBITDA was negative $14 million this quarter.
Excluding the non-GAAP adjustments previously mentioned as we continue to invest in both our cyber and Iot businesses to drive topline growth.
I will now provide a breakdown of our revenue in the quarter.
Cyber security 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 remained limited while negotiations from the potential sale continue.
Now moving to our balance sheet and cash flow performance.
Total cash cash equivalents and investments were $772 million as at 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 Jeff.
Thank you Steve.
Before we move to Q&A.
I'd like to summarize this past quarter.
I'm pleased with how the business performed beating revenue expectation for all of the businesses and deliver positive cash flow.
The structure of the two market focus this as separate business units.
Already delivering results and we're adding additional relevant industry experience.
We are encouraged by the growth in cyber security pipeline and continue to invest in sales headcount.
Current exec design activity remains very strong and we are weathering the impact of the chip shortage as well. We're now also making good progress with Ivy and with that I like actually the operator to open the line for Q&A. Please.
We will now begin the question and answer questions.
To ask a question you May press star one on your telephone keypad.
If you are using a speaker phone. Please make sure your line is open.
Hey, Tom Crush Star one to ask a question, we'll pause for just a moment.
And for JD signal for questions.
Request that you limit yourself to one question and one follow up.
Our first question today will be.
From Mike Walkley.
Your line is open.
Great.
Hi, John how are you doing.
Hey, guys. Thanks.
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 are stronger second half.
Yes. Thank you. Thanks. Thank you for the question. So there are some assumptions, 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 it all.
I think we're going to have 10 million a quarter for the next two quarters. The second half that is each of the quarter.
And I had something to do with the fact that we are we're not going to monetize.
Push on the monetization effort and licensing athlete Huawei going through this negotiation on selling the portion of the other patents that is on those.
Areas of business that we no longer actively involved with.
Regarding Iot.
The only wildcard so to speak is the chip shortage and the impact of that from all the indicators all the ups and downs and give and take and we spoke to a lot of them.
Oh, yes.
That.
North America seems to be getting better in Q3 Q4.
As compared to Q2, a good a good example.
Simple will be fourth we believed they could they are improving.
GM also is although they go shut down.
Couple of factories in Q3, but I think for my Manitou is improving versus the first half of the year, So North America, you'd see it going back to improving the situation.
However, still had about 10% to 15% impact.
Auto production and so is Asia Pacific.
So net of all of that.
If we're in that range without any dramatic departure.
And the numbers that we expected in the second half still holds.
Big part of that of course is we are winning some very strong design wins at.
That bring us more developer seats revenue in <unk>.
As well as professional services revenue.
So I'm pretty comfortable with that on cyber it really is a function of one thing I've got two two consideration in there.
One thing the major part is we have a.
Lot of salespeople join us in the last couple of two or three quarters, we have a pretty young.
Pipeline.
They are the activities in our pipeline has been very strong in the last quarter and two.
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 sales force. It's 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 so so we're so that's a that's the assumption that we made in our forecast. The other one is in Q4, we got a couple of large government deals.
With some of the government, especially in North America.
Some of those needs to come to fruition and that was sort of and then we expect them to so those are those are the basis of our forecast, yes second half seems to be a bigger number.
A stronger number than Q, the first half that's correct.
Great. Thank you and just my follow up question, congrats on adding <unk> 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 keep key position and did that impact your guidance thoughts at all.
It's slightly early to tell but I'm dying to hear his experience of growth because he was being able to grow.
Both the consumer business in the enterprise business as Mcafee when he was running the Oh I agree we have a.
The president of Mcafee, and the CRO, So I'm sure he will make some changes.
I am doubtful that everything will remain exactly the same on the other hand.
The.
The investment that we made in channel the investment we made in pipeline investment we make in partners.
And engineering and the investment we make in hiring what sells hat.
And we have a.
A couple of quarters ago, we hired a pretty good.
Head of professional services I'm sure that he will take full advantage of those.
Great. Thanks for taking my questions.
Thank you.
Your next question comes from Daniel Chan of TD Securities. Your line is open.
Daniel.
John Hi, Dan.
You mentioned earlier that typically your Q <unk> 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 a lot of these Oems.
I think you should expect.
Probably for this year.
Uh huh.
And I think I don't think in the future years. It will continue to be the same the reason I say it is is because remember I should be seeing some of the production.
Revenue coming from Adas, assuming the pie shortages issue.
Got it to improve and it has to improve over time and it's a huge industry.
And semi conductor for the whole semiconductor industry auto is not really that big.
It's not 100%, obviously is probably like more like 15% of the of the of the market. So it will it will address that and.
So I 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 two or three years.
Okay. That's helpful can you remind us how you sell these developments seats or is it more like a perpetual license or is there a recurring proportion a portion of that as well.
It's more like a perpetual licenses selling seats.
Okay, and do you kind of get like 20% maintenance.
Yeah, Yeah, we get upgraded and maintenance on it yes.
One more if I may cyber secure IRR was.
Flat sequentially.
<unk> 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 was some seasonality built into cornerstone yes.
That's good that's a good question I asked that question also and they always take give me the product makes sensor.
That.
Some of them, we took earlier upfront because of the Rev Rec policy.
I I expect for the full sales force and I said it in the past by the way. So it's very consistent mid year next year is what I'm gonna see.
We are going to see some hoping to see some strong growth of all the investment we have made the pipeline going into new sales and so forth.
Okay. Thank you.
Sure.
Your next question comes from Paul Treiber with RBC capital markets. Your line is open.
Hi, there.
Hi, John.
First question on <unk>.
So 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.
Could you bridge between those two statements because they are actually out quite far apart from a tone perspective.
[laughter] that's a good that's a good one I'm glad you caught it yes. It is going well I fully expect to finished as this quarter, but I'm tired of waiting.
I know I know a lot of our investors are too.
It just is.
Bringing anything on anybody and maybe we have too many lawyers assigned to this sorry lawyers.
But this.
The key is.
It's a complex any big portfolio.
Is rightfully so that they have done a lot of due diligence.
And those things are now complete it by the way all the due diligence are completed and then we have a lot of time spanned our definitive agreement negotiation and then by and large with the exception of one or two items, where we're done on that.
And then you know then we had the purchase agreement.
So it just.
For me, it's been since last Christmas.
You know, it's coming up the next Christmas So I.
I basically kind of draw the line of sand and say.
I can just stop.
Licensing.
The business.
<unk> needs to either move on one direction or the other.
And then there are other interested party have been calling.
And so we are not entertaining down because as you recall during our during a period of time not long in the past.
We're an 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 80, 20, I put 80% we'd get it done this quarter.
Yes.
Does that help.
Yes.
Very helpful.
I wasn't going to answer what percentage of them budgets rollout.
Switching back to the business.
Just in regards to the 24 on a 25.
The Oems.
Think about the magnitude or size.
These wins you find like EV is the ASP is higher than <unk>.
Gasoline vehicles is that what youre seeing generally.
No usually the ASB ties to functionality.
If you look at.
Functionality like Ivy I.
It's usually low single digit dollars for for Iot.
But if you look at eight Oz and clusters. They are usually high single digit pushing into double digits per car. So it's not gasoline versus <unk>.
Electric vehicle.
And so the electric vehicle had one advantage, which is where it is at a more component.
Hi, Lee complex Ecu's when you have highly complex GCU. It does two things for US number one because we have the highest certification in security and safety.
You have a high complex C E Cu like a compute engine in a car they tend to go after the most secure and most are most safe.
Production.
Product, so we have a agile and advantage to win it that's number one.
Number two number two they used to they tend to use very complex algorithm and that will help us.
Sometimes selling more than even one copy.
For you see you so.
And when you sell these complex CCU.
And with eight hours a cluster so a hypervisor typically the ASB is on a higher on the higher end. So so it's really more function that drive ESP with EV.
EV or gas.
Okay. That's helpful and then one follow up.
It seems like Blackberry <unk> has good traction in the Chinese EV market could you speak to does the pricing for that market is it materially different than that then other Oems or other geographies for Q&A.
No not in the non material difference. So it's also other things.
Need to be aware that a lot of those Chinese players actually have design center in the United States.
So.
The market price is the market price.
There are a lot of them are all in the U S. But of course, we have the Chinese team in and then deal with the customers over there and the factories over there and and so far but.
They are not materially different.
Okay. Thank you I'll pipeline.
John.
Your next question comes from Todd Coupland.
Your line is open.
Hey, John Nice to talk to you.
Follow up on the <unk> line of questioning so that 25th OEM, which you don't have.
We're always bringing out new vehicles.
Many many.
New vehicles that are selling well and at lower prices et cetera.
What are the chances of you getting into that OEM.
My team promised me its way up and down there working at and so.
Hum.
Hopeful but I.
The fact that they typically like to do.
Compete vertical integrations.
Yeah. It was.
Still require work from us.
But but.
But we're working it.
Okay.
And then and then also on the on the patent sale.
There has been press articles that in the trade press that you're more or less have settled on a price and it was really the complexity of our.
All the participants in a I guess, a buyer's group if you will.
Hi.
Any.
Any comments on on on whether that is indeed, correct and it really is these these details with the various parties that has yet to get worked out thanks a lot.
I can't I can't comment on ongoing negotiations because it doesn't help meals whoever.
I would say to you that that.
That we have we have settled on the price.
I would agree I would confirm everything else I can't really comment on.
Okay.
Alright, Thats great I appreciate the color. Thanks, a lot absolutely absolutely.
Your next question comes from Paul steep Scotia Your line is open.
Hi, there.
Hi, John.
Two quick ones. The first one maybe talk to us about how you're thinking about monetizing Ivy and how those thoughts have evolved and then I'll toss. It my quick follow ups.
I'm, sorry, how they monetize all ABB Ivy all Ivy.
Okay, well there is.
It's a 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 base.
And Thats, the revenue model and and and if you look at what Ivy really is.
You know, it's a collector of central data are the ability to analyze it push it on the ash put it on the cloud.
AI to it and feed it back to the OEM or application providers.
And one of the reason why we spend so much time on the application side.
A quarter ago, we have a intelligent battery management systems for performance and for.
Managing everything.
Related to our battery and the usage of it.
And this past quarter, we turn our attention to have an application that turned the toyo vehicle into a wallet basically.
And and it's a huge market for those of you who follow this.
The fleet cars.
Especially the trucks and.
The Amazon delivery drugs or the fed acts or <unk>.
P S ore cargoes or.
Commercial trucks they.
They they they if we go the equipped with Ivy.
There are tons of sensing data.
Between security and productivity.
And the ability to.
Not having to use a third party to do payments and so forth are all very positive and cost effective solution on the truck owner and their truck runners.
They also as I mentioned earlier the OEM has always also fine tried to find ways to enrich their social revenue after they sold a car.
And this will this could ivy may be able to do a facility. Some of these applications. So so that's kind of where I'm really focus on to create usage base.
It is apt base or functional base.
Use cases.
And in some cases I could share with third parties I could share with banks I could share the revenue with Oems and these are all possibilities. So that's.
That's how we focus on monetizing Ivy.
Great. Thanks.
Two quick follow ups I guess for yourself for Steve.
First one would just relate to your commentary, but continuing to invest in sales force should we think of the numbers that you've sort of added this quarter in aggregate dollars sort of.
It reflected throughout the remainder of the year and then.
The other sort of clarification, not asking you about a pending transaction, but it's a patent business didn't exist at Blackberry, how should we think about stranded costs in the SG&A line or is it effectively sure profit.
Maybe move off that business was not to be there.
That's great.
That's very good question.
Okay.
I need to get co location. The first question was Ah.
Can you repeat your first question, yes, you've talked about adding more sales head count and just sort of wondering if the pacing of what you've done in terms of investment is that already sort of in the envelope or youre thinking about.
Stepping on the gas a lot harder than your EV as you continue to win deals why why I.
We have made it.
Quick question.
So as you all know me.
I've been here for seven years, and I have always been focused on.
Making money are running a profitable business and.
And so.
On the other hand in the last year.
I recognize that the business meets the investment to step on the gas you use the word and so for the time being and we had done that in the last two quarters three quarters, but for the time being I'm not going to be so focused on on loss versus profit.
As long as it's manageable, meaning that it's not gonna be outrageous and it's not going to kill a lot of my cash burn alone in my cash.
We are going to step on the gas and continued 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 Street and channel partners and so forth.
It will help me grow the business and then that will then create a profit that I needed to offset a very profitable.
Source of revenue, which was licensing.
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 there's a slump Pete and a lot of you have expressed that you actually don't know how to measure it.
<unk> would add and you don't know how to think about the growth part of it. So that's all fair.
So so I believe that while while we could while we have very fresh set of portfolios.
Good average lifespan lap in the portfolio that we should monetize at one time take that proceeds to step on the gas and then invest in the cyber business, which we know there is a high growth and we know we caught up in the product GAAP and then also enhance the core with Iot in and invest in.
Which is a which is the future revenue source, which could be significant and we have a great partner in Amazon there. So.
So those are all I believe are positive.
Value creation for Blackberry.
That helps thank you.
Sure.
That concludes the Q&A session I would like to turn the call back over to John John My take is Chang CEO 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 that we actually have our eighth annual Blackberry security summit hosted virtually on October 13th.
The event will feature a live and on demand section, including keynote addresses from Blackberry executive customer that case study insight from you know into the cyber security and Iot technology landscape is three to register for all of you and if you havent 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 I hope to see you in person some time.
Take care.
This concludes today's call. Thank you for your participation.
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