BlackBerry Limited (BB) Q2 2022 Earnings Call Transcript

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BlackBerry Limited (BB -9.51%)
Q2 2022 Earnings Call
Sep 22, 2021, 5:30 p.m. ET

Contents:

• Prepared Remarks
• Questions and Answers
• Call Participants

Prepared Remarks:

Operator

Good afternoon, and welcome to the BlackBerry Second Quarter Fiscal Year 2022 Results Conference Call. May name is Ashley, and I'll be your conference moderator for today's call. During the presentation, all participants will be in a listen-only mode. We will be facilitating a brief question-and-answer session toward the end of the conference. [Operator Instructions]

I would now like to turn today's call over to Tim Foote, BlackBerry Investor Relations. Please go ahead.

Tim Foote -- Investor Relations

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 via call-in numbers and via webcast in the Investor Information section at blackberry.com. A replay will also be available on the blackberry.com website.

Some of the statements we'll be making today constitute forward-looking statements and are made pursuant to the safe harbor provisions of applicable US and Canadian securities laws. We'll indicate forward-looking statements by using words such as, expect, will, should, model, intend, believe and similar expressions. Forward-looking statements are based on estimates and assumptions made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that the Company believes are relevant. Many factors could cause the Company's actual results or performance to differ materially from those expressed or implied by the forward-looking statements. These factors include the risk factors that are discussed in the Company's annual filings and MD&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 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.

And with that, I'll turn the call over to John.

John Chen -- Executive Chairman & Chief Executive Officer

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

Tim Foote -- Investor Relations

Yes.

John Chen -- Executive Chairman & Chief Executive Officer

You said non-GAAP numbers. It is actually -- the revenue number we'll refer to, all GAAP based number. Okay.

Starting with our headlines. This quarter, the business performed well with revenue for all the three business segments, beating expectations. The Cyber Security business unit delivered strong sequential billings and revenue growth. The IoT business unit performed better than expected with strong design-related activities, partially offset -- 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 Giamatteo to lead our Cyber Security business unit, beginning or commencing November -- October 4, sorry, commencing October 4, which is a couple of weeks from now. John was previously the McAfee President and Chief Revenue Officer, running the enterprise and consumer cyber security businesses. This new appointment completes the 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 remained strong at 83%. IoT ARR 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. For instance, a major customers of ours reported 700,000 large units of production in calendar Q2. Production-based royalty are historically the largest single component of our QNX revenue. However, a significant portion of revenue is also generated from design activities, prior to the vehicle entering production. This part of the business remains very vibrant, and we continue to generate strong development seat and professional services revenues. As a result, total IoT revenue in the quarter was better than expected. Furthermore, these design wins will translate into future production-based royalties.

As we look ahead to the rest of the year, we continue to see the headwind for our vehicle production. The problem is future has shifted from surprise of wafers to more of a back-end assembly and testing issues, largely due to the spike in COVID cases in Asia, as well as some of the accidents going on in Asia, like some of their plants had fire for example. Feedback from OEM about the impact on production volumes in the second half is somewhat mix and constantly evolving. For example, Daimler recently indicated they're expecting a lessening impact by Q4, excuse me, sorry. And Volkswagen, on the other hand, see challenges persisting into 2023.

In terms of outlook, we continue to see the past quarter as the low point, but significant headwinds are expected to continue into Q4 and -- Q3 and Q4 and perhaps even beyond that, albeit with a sequentially decreasing impact. The impact of the chip shortage on QNX royalty revenue is expected to be buffer somewhat by ongoing strength in design activities. We are comfortable with the current IoT revenue consensus, meaning the full year revenue outlook remains unchanged.

As mentioned, despite of the supply chain issue QNX continue 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, GEM. Because of our market presence and leading technology, we are a trusted go-to supplier and market leader in auto. Furthermore, we're delighted to announce that we now have design wins with 24 of the world's Top 25 electric vehicle automakers, as measured by volume. Having been selected, most recently by Daimler as part of their design -- as part of their EV design. This is up from the 23 of 25 we had last quarter. These 24 OEMs, between them represent 82% of global EV market -- production, sorry, 82% of global EV production. This demonstrate a 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 get investors more colors as to why QNX was chosen, and why we are the industry leader. The first design, which was a automotive tier 1, that is building full digital cockpit and gateway solution for a Chinese EV OEM. You see the QNX real-time operating system and hypervisor. QNX technology is well known and trusted in China, in the Chinese automotive industry given its reputation for safety and security. QNX was chosen above software as a 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 happen do be a new logo to a BlackBerry. The customer select 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, cluster and ADAS systems. In a GEM space, design wins including medical diagnostic, industrial process control and thermal control system for a power plant.

I'm going to shift to Jarvis. During the quarter, we launched Jarvis 2.0. This is a SaaS version of our software composition analytics tool, which was previously offer as a bespoke service engagement. Jarvis 2.0, which include a market-leading binary code scanner is an important part of how BlackBerry can assist customers to achieve compliance with the recent SBOM executive order, secure bill of material -- Software Bill of Materials, sorry, Software Bill of Materials executive orders, mandated by the Biden administration.

Moving to a brief update on IVY. We are pleased with the ongoing progress being made. Both BlackBerry and AWS has significant resources allocated to project, and our timelines remains on track. We are on schedule to release an early access version of the production in October, in the product side. We are scheduled to release an early access version of the product in October that will enable further engagement with OEMs, and also allow demonstration at CES in January. This version will be available to certain ecosystem partners to begin actively building application on IVY. And speaking of applications, for IVY to be embraced by automakers we recognized that it is important to demonstrate IVY value to them.

Following on from a AI-driven battery management apps that we announced last quarter, we announced another application that we will be built on IVY. This new application enable in-vehicle payments and is being delivered through a partnership with Car IQ, a California-based start-up. The application will use direct access to the sensor data and the edge compute, two of the IVY's key differentiators to produce a unique digital fingerprint for their vehicle. This will allow authentication of payments for items such as, fuels, tolls, parking services, etc., without a need of a free credit cards or other traditional payment methods. This opens up the possibility for OEM to participate in a new revenue streams, and it's another of the many potential applications that IVY will enable. In summary, IVY continues to progress nicely.

Now let me turn to Cyber Security. This quarter, the business unit delivered strong sequential billings and revenue growth. Revenue was $120 million. Gross margin came in at 59%. ARR was $364 million. Dollar-based net retention was 95%. As we mentioned earlier, John Giamatteo will be joining BlackBerry to lead the Cyber Security business unit, taking over from Tom Eacobacci, 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, he delivered both double-digit growth and margin expansion for the enterprise, the SMB, as well as the consumer divisions. John will build on the progress that has been made in recent quarters with the Cyber Security business unit go-to-market engine, and will also direct old product development, and business unit strategy. Tom Eacobacci has decided to pursue other opportunities, and will leave BlackBerry at the end of October. The addition of John to the team completes the split of the software and services business into two market focus business unit. Both IoT and cybers are targeted with driving growth and with it shareholder value. The two business units will report directly to me.

As mentioned, this was a good quarter. Although, it's still work for team to do, there's a few outstanding area that I feel that I'd like to share with you about. This quarter we saw further growth in pipeline for our cyber security product, especially for the new logo customers. Pipeline grew strongly for BlackBerry Gateway, as zero trust network access product launched last quarter. To help realize this increased pipeline, investment in our direct sales force, in particularly the hiring of quota-carrying sales head continues. We're also making further progress in the channel as illustrated by a 32% sequential growth in the channel billings this quarter. New partner program has also helped significantly increase both channel driven pipeline generation and a new logo billings, mainly in the North Americas arena.

We also have seen robust growth in business through managed service -- managed security service providers or MSSPs. You may recall that during the Q2 earnings call a year ago, we targeted using MNSP -- MSSPs, sorry, to quickly scale our guarded managed service offering. Today one of these partners, I'm happy to report, manage more than 100,000 endpoints using BlackBerry Cyber products.

I'd like to take a closer look at some wins during the quarter that demonstrate why customer chose -- are choosing BlackBerry for their cyber security needs. The first customer is one of the Top 10 automakers in the world. This customer select our Protect EPP and Optics EDR solution, following a competitive bake off in which we went head-to-head with CrowdStrike and Carbon Black. The customer selected BlackBerry due to our near 100% malware detection rate, our lightweight engine and flexible deployment options, both in the cloud as well as the stand-alone factory network. The second is a Fortune 100 financial services company. BlackBerry displace Microsoft Defender with Protect and Optics. The company selected us, particularly, for our performance on macOS. The third is where we have continued success within the Australian state government agencies. This quarter, we saw Protect offtakes in our ThreatZERO consulting services into a number of agency displacing predominantly legacy incumbents that included Trend Micro and Symantec. The customer chose BlackBerry for our next-generation prevention for its technology.

On the industry recognition front, SE Labs, a leading independent research firm based in London, has performed rigorous set of tests on our EPP and EDR products, Protect and Optics. This breach test differ from their quarterly endpoint test, rather than simply loading no malware onto an endpoint, which typically masking an ability of traditional signature-based vendors to prevent zero-day threats that breach test in includes instead of [Indecipherable] real-time, real-world hacking tactics. They have probably comprehensive techniques to evade our defense, and concluded that Protect and Optics provide compete prevention, complete detection, as well as zero false positive. A link to the full report could be found on our Investor Relations webpage. This third-party validation of our product, not just our EDP -- EPP, but also our EDR demonstrate how we have successfully closed the product gap to competitors with recent product launches.

The market is now recognizing some of the unique differentiated abilities of our cyber products, one of which is a maturity of our AI engine. As in the previous quarters, we are seeing new malware and ransomware hitting the headline on an almost daily basis. Our AI engine, the most mature in the industry continues to provide zero-day prevention against the host of these threats. In the quarter, our product successfully brought new profile ransomware, such as Hive, LockBit, Ragnar Locker, and many more before they could do any damages. BlackBerry Cylance AI engine is firmly focused on preventing our customers on being breached, whereas some of the leading competitors instead focus on showing customer all the ways that system -- on a different ways that their system could be accessed.

On the UEM front, we will continue to invest in our roadmap delivering enhancements that add most value to customers. We recently announced that the enterprise can now benefit from BlackBerry leading security, while enjoying a seamless and native user experience with Microsoft 365 productivity apps. This is enabled by additional integration between BlackBerry UEM and Microsoft 365, primarily through the Azure Active Directory Conditional Access. This is part of the latest version of the UEM new series, which was released this month, earlier this month that is. New series also provide zero-day support for Android 12 and iOS 15.

This past quarter, we secured important new year renewals with government agencies, such as IRS, the Department of Homeland Security, the US Marine Corps, the US Army Corps of Engineers, the UK Ministry of Defense, the US -- United States Air Force, as well as leading enterprise such as General Dynamics and Mariner [Phonetic]. We also won a number of new logos such as, French National Institute for Criminal Research and the Tel Aviv Stock Exchange.

With continued growth in pipeline, couple of investment in our direct and channel sales, the outlook of the Cyber Security business unit is for sequential billings growth for the remaining of the fiscal year. This is expected to lead to modest sequential revenue growth due to the subscription model. The full year outlook remains, as before, at the lower end of $495 million to $515 million range.

Turning now to licensing. As I mentioned earlier, negotiation to sell the portion of the patent portfolio related to mobile devices, messaging and wireless networking, are ongoing. And we have made significant progress since our last earnings call, including preliminary agreement of many of the key items -- of the key terms of the deal. We expect to execute definitive agreement this quarter. Closing the transaction will be subject to a normal regulatory review. Normal -- naturally, given this backdrop, we will continue to eliminate monetization activities for the remaining of the fiscal year, therefore, revenue for both Q3 and Q4 is expected to be similar to Q2, which is at $10 million per quarter. While we expect the sales to conclude essentially, the process has taken longer than we expected or anticipated. Should it not conclude this quarter, we have other options, including additional interested parties. We will update investors on the material -- on any of the material developments in a timely manners.

So let me now hand over to Steve to further review the financials. Steve?

Steve Rai -- Chief Financial Officer

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 $67 million fair value adjustment on the convertible debentures, which is a non-cash accounting adjustment from the large swings, driven by market and trading conditions.

The second quarter non-GAAP operating loss was $30 million, and the second quarter non-GAAP net loss was $33 million. Non-GAAP earnings per share was a $0.06 loss in the quarter. Our adjusted EBITDA was negative $14 million this quarter, excluding the non-GAAP adjustments previously mentioned, as we continue to invest in both our cyber and IoT businesses to drive top line growth.

I will now provide a breakdown of our revenue in the quarter. 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 for the potential sale continues.

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 John.

John Chen -- Executive Chairman & Chief Executive Officer

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 expectations for all the businesses and delivered positive cash flow. The structure of the two market focused business, cyber business unit is 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 technology. QNX design activities remains very strong, and we are very -- weathering the impact of the chip shortage as well. We are now also making good progress with IVY.

And with that I'd like, actually, the operator to open the line for Q&A, please.

Questions and Answers:

Operator

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

Mike Walkley -- Canaccord -- Analyst

Great.

John Chen -- Executive Chairman & Chief Executive Officer

Hi, Mike.

Mike Walkley -- Canaccord -- Analyst

Thanks. Hi, John. How are you doing?

John Chen -- Executive Chairman & Chief Executive Officer

Very good.

Mike Walkley -- Canaccord -- Analyst

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 for stronger second half?

John Chen -- Executive Chairman & Chief Executive Officer

Yeah. Thank you. Thank you for the question. So there are some assumptions that let me break it down a little bit. Licensing, of course, we already explained. So I don't have to go much detail of that. I think we're going to have $10 million a quarter for the next two quarters, the second half that is. each of the quarter. And it had something to do with the fact that we are not going to monetize, or push on the monetization effort and licensing effort, while we're going through this negotiation on selling the portion of the patents that is on those areas of business that we no longer actively involved with. Regarding IoT, the only wildcard, so to speak, is the chip shortage and the impact of that. From all the indicators, all the ups and downs and give and take, and we spoke to a lot of them, the OEMs that North America seems to be getting better in Q3, Q4, as compared to Q2. Good -- a good example will be Ford believe they could -- they are improving and GM also is, although they're going to shut down a couple of factories in Q3. But I think from by 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 of the production, and so is Asia Pacific. So, net of all that, if we are in that range, without any dramatic departure then the numbers that we expected in the second half still holds. And a big part of that, of course is, we are winning some very strong design wins that that bring us more developer seats revenue and then as well as professional services revenue. So I'm pretty comfortable with that.

On cyber, it really is a function of one thing. I mean, I got two consideration in there. One thing, the major part is, we have a lot of salespeople join us in the last couple of, two quarters, three quarters. We have a pretty young pipeline. The activities in the pipeline has been very strong in the last quarter and two. So putting that 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 is something that we have to manage very carefully. But the good news there is, even if it takes longer, these things -- these businesses don't tend to go away. So we're -- so that's the assumptions that we made in our forecast. The other one is, in Q4, we've got a couple of large government deals with some of the government, especially in North America. Some of those needs to come to fruition. And then we sort of -- and then we expect them to. So those are the basis of our forecast. Yes. Second half seems to be a bigger number, a stronger number than Q -- the first half. That's correct.

Mike Walkley -- Canaccord -- Analyst

Great. Thank you. And just my follow-up question. Congrats on adding John Giamatteo 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 in such key position, and does that impact your guidance thoughts at all.

John Chen -- Executive Chairman & Chief Executive Officer

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

Mike Walkley -- Canaccord -- Analyst

Great. Thanks for taking my questions.

John Chen -- Executive Chairman & Chief Executive Officer

All right. Thank you.

Operator

Your next question comes from Daniel Chan with TD Securities. Your line is open.

John Chen -- Executive Chairman & Chief Executive Officer

Hey, Daniel.

Daniel Chan -- TD Securities -- Analyst

Hey, John.

Steve Rai -- Chief Financial Officer

Hi, Dan.

Daniel Chan -- TD Securities -- Analyst

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

John Chen -- Executive Chairman & Chief Executive Officer

I think you should expect, probably for this year, and I think -- I don't think in the future years it will continue to be the same. The reason I say this is because remember, I should be seeing some of the production revenue coming from ADAS assuming the supply shortages issue, it started to improve. I mean it had to improve over time. As a huge industry, and semiconductor -- for the whole semiconductor industry, auto is not really that big, it's not 100%. Obviously, it's probably like more or 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 growth, especially with all the design wins that we had in the last couple of, two years, three years.

Daniel Chan -- TD Securities -- Analyst

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?

John Chen -- Executive Chairman & Chief Executive Officer

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

Daniel Chan -- TD Securities -- Analyst

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

John Chen -- Executive Chairman & Chief Executive Officer

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

Daniel Chan -- TD Securities -- Analyst

Okay. One more if I may, Cyber Security ARR was flat sequentially, while you've been saying that the pipeline has been growing. Just wondering when we're going to start seeing that metric start to pick up. Whether there is some seasonality built into [Indecipherable].

John Chen -- Executive Chairman & Chief Executive Officer

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 the Rev Rec policy. I expect for this full sales -- and I've said it in the past by the way, so it's very consistent. This year or next year is where I would see -- we are -- I'm going to see some -- hoping to see some strong growth of all the investment we have made, the pipeline growing into new sales and so forth.

Daniel Chan -- TD Securities -- Analyst

Okay, thank you.

John Chen -- Executive Chairman & Chief Executive Officer

Sure.

Operator

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

John Chen -- Executive Chairman & Chief Executive Officer

Hi, there.

Paul Treiber -- RBC Capital Markets -- Analyst

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 in your statement, you mentioned that the negotiations are going well. But then you also indicated that if it doesn't close, you have other options. Just could you bridge between those two statements, because they're actually quite far apart from a tone perspective.

John Chen -- Executive Chairman & Chief Executive Officer

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

Paul Treiber -- RBC Capital Markets -- Analyst

Yeah, that's very helpful. I wasn't going to ask for 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? Like you find like EV is the -- the ASP is higher than a gasoline vehicle, is that what you're seeing, generally?

John Chen -- Executive Chairman & Chief Executive Officer

No. Usually to ASP ties to functionality. If you look at functionality like IDI, it's usually low single digit dollars for royalty, but if 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 have one advantage, which is where -- which is in a more component of highly complex ECUs. When you have highly complex ECU, it does two things for us. Number one, because we have the highest certification in security and safety, when you have a high complex ECU, like a compute engine in the car, they tend to go after that most secure and most safe production -- product. So we have an actual advantage to win it. That's number one. 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 a ECU. So -- and when you sell these complex ECUs, and with ADAS or clusters, or hypervisor, typically the ASP is on a higher end. So it's really more function that drive ASP versus EV or gas.

Paul Treiber -- RBC Capital Markets -- Analyst

Okay, that's helpful. And then one follow-up. It seems like BlackBerry QNX has good traction in Chinese EV market. Could you speak to, like there is a pricing for that market. Does it materially different than other OEMs, or other geographies for QNX?

John Chen -- Executive Chairman & Chief Executive Officer

No, no material difference. So there's also other things you need to be aware that a lot of those Chinese players actually had design center in the United States. So the market price is the market price, because they all -- a lot of them are all in the US. But of course, we have a Chinese team and then deal with the customers over there, and the factories over there and so forth. But they're not materially different.

Paul Treiber -- RBC Capital Markets -- Analyst

Okay, thank you. I'll pass the line.

Operator

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

John Chen -- Executive Chairman & Chief Executive Officer

Hello there.

Todd Coupland -- CIBC -- Analyst

Hey there, John. Nice to talk to you. I'll follow-up on the EV line of questioning. So that 25th OEM, which you don't have, your role is bringing out new vehicles, many new vehicles that are selling well at lower prices, etc. What are the chances, if you're getting into that OEM?

John Chen -- Executive Chairman & Chief Executive Officer

My team promised me, through up and down they're working it. And so I'm hopeful that I -- the fact that they typically like to do compete vertical integrations, it still require work from us. But we're working it.

Todd Coupland -- CIBC -- Analyst

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

John Chen -- Executive Chairman & Chief Executive Officer

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

Todd Coupland -- CIBC -- Analyst

Okay, all right. That's great. Appreciate the color. Thanks a lot.

John Chen -- Executive Chairman & Chief Executive Officer

Absolutely, absolutely.

Operator

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

John Chen -- Executive Chairman & Chief Executive Officer

Hi, there.

Paul Steep -- Scotia -- Analyst

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

John Chen -- Executive Chairman & Chief Executive Officer

I'm sorry, how they monetize IVY? Oh, IVY. Okay. Well, there is -- it's a work in progress, but I have a lot of ideas. First of all, I wanted something that are usage base and recurring base. And that's the revenue model. And if you look at what IVY really is, it's a collateral sensor data, the ability to analyze that push you on the edge, put it on the cloud. Apply AI to it, and feed it back to the OEM or application providers. And one of the 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 anything regarding to -- related to a battery and the usage of it. And this past quarter, we turned our attention to have an application that turn your vehicle into a wallet basically. And it's a huge market for those of you who follow this because the fleet cars -- especially the trucks and the Amazon delivery trucks or the FedEx, or US UPS, or cargoes, the commercial trucks, they -- if we do equipped [Phonetic] with IVY, there are tons of sensing data between security and productivity, and the ability to not having to use of third-party to do payment and so forth, are all very positive and cost effective solution from the truck owner, and a truck runners. They also, as I mentioned earlier, the OEM has always also find -- try to find ways to enrich their source of revenue after they sold the car. And this will -- this could IVY may be able to facilitate some of these applications. So that's kind of where I'm very focused on to create usage base, whether it is app base or functional base use cases. And in some cases I could share with the third parties that could share with banks. I could share the revenue with OEMs. And these are all possibility. So that's how we focus on monetizing IVY.

Paul Steep -- Scotia -- Analyst

Great. Thanks. Steve, two quick follow-ups, I guess, for yourself, or 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 and aggregate dollars sort of reflective throughout the remainder of the year? And then the other sort of clarification, not asking you about a pending transaction, but if the patent business didn't exist at the BlackBerry, how should we think about stranded cost in the SG&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.

John Chen -- Executive Chairman & Chief Executive Officer

That's great. That's very good question. I need to get clarification. The first question -- what was it? Could you repeat your first question?

Paul Steep -- Scotia -- Analyst

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 investments. Is that already sort of in the envelope, or you're thinking about stepping on the gas a lot harder than your EV, as you continue to win deals?

John Chen -- Executive Chairman & Chief Executive Officer

Right, right. I -- we have made a -- thanks for the quick question. So, as you all know me, this -- I've been here for seven years, and I always been focused on making money, running a profitable business. And so, on the other hand, in the last year, I recognized that the business needs investment to step on the gas, we used to work. And so for the time being, and we had done that in the last two quarters, to three quarters. But for the time being, I'm not going to be so focus on loss versus profit as far as it's manageable, meaning that it's not going to be a wages, and it's not to [Indecipherable] lot of my cash, burning along my cash, then we are going to step on the gas and continue hiring and continue to increase. And the idea is, since we now have the products and we could generate a pipeline, if I could close the pipeline with more feet on the streets [Phonetic] and channel partners, and so forth, we will may [Phonetic] 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. That is the recognition of my stock price, and partly because this is a lumpy, and a lot of you have expressed that you actually don't know how to measure, valued at and you don't know how to think about the growth part of it. So that's all fair. So I believe that while we could -- while we have very fresh set of portfolios with good average life span in the portfolio that we should monetize at one time, take that proceeds to step on the gas and then invest into the cyber business, which we know there is a high growth. And we know we caught up in the product gap. And then also -- and hence grow IoT and invest in IVY, which is the future revenue source, which could be significant. And we have a big partner in Amazon there. So those are all, I believe, our positive value creation for BlackBerry.

Paul Steep -- Scotia -- Analyst

That helps. Thank you.

John Chen -- Executive Chairman & Chief Executive Officer

Sure.

Operator

That 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.

John Chen -- Executive Chairman & Chief Executive Officer

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 13. The event will feature live and on-demand section, including keynote addresses from BlackBerry executive, customer-led case study, insight from into the cyber security and IoT technology landscape. It's free to register for all of you. And if you haven't already, and I encourage you to do so. Otherwise, a replay of the event will also be available through our Investor Relations website. Thanks, again, and see you next time. But I hope to see you in person sometime. Take care.

Operator

[Operator Closing Remarks]

Duration: 48 minutes

Call participants:

Tim Foote -- Investor Relations

John Chen -- Executive Chairman & Chief Executive Officer

Steve Rai -- Chief Financial Officer

Mike Walkley -- Canaccord -- Analyst

Daniel Chan -- TD Securities -- Analyst

Paul Treiber -- RBC Capital Markets -- Analyst

Todd Coupland -- CIBC -- Analyst

Paul Steep -- Scotia -- Analyst

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