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BLACKBERRY LTD filed this 10-K on April 04, 2024

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BLACKBERRY LTD - 10-K - 20240404 - MANAGEMENTS_DISCUSSION

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read together with the consolidated financial statements and the accompanying notes (the “Consolidated Financial Statements”) of BlackBerry Limited, for the fiscal year ended February 29, 2024. The Consolidated Financial Statements are presented in U.S. dollars and have been prepared in accordance with U.S. GAAP. All financial information in this MD&A is presented in U.S. dollars, unless otherwise indicated.

Readers should carefully review Part I, Item 1A “Risk Factors” and other documents filed by the Company from time to time with the Securities and Exchange Commission (“SEC”) and other securities regulators. A number of factors may materially affect our business, financial condition, operating results and prospects. These factors include but are not limited to those set forth in Part I, Item 1A “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Any one of these factors, and other factors that we are unaware of, or currently deem immaterial, may cause our actual results to differ materially from recent results or from our anticipated future results. Please refer to our MD&A included in our Annual Report on 10-K for the fiscal year ended February 28, 2023 for a comparative discussion of our fiscal 2023 financial results as compared to our fiscal 2022 financial results, which is incorporated herein by reference. Additional information about the Company can be found on SEDAR+ at www.sedarplus.ca and on the SEC’s website at www.sec.gov.

Cautionary Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains forward-looking statements within the meaning of certain securities laws, including under the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws, including statements relating to:

•the Company’s plans, strategies and objectives, including its intentions to increase and enhance its product and service offerings and to patent new innovations;

•the Company’s expectations with respect to enhancing operational focus and flexibility, driving improved profitability, and increasing optionality for optimizing shareholder value through the full separation of its principal business units;

•the Company’s expectations with respect to its revenue, non-GAAP EPS and adjusted EBITDA in the first quarter of fiscal 2025 and fiscal 2025 as a whole, annual recurring revenue of the Company’s Cybersecurity division and cash usage in the first quarter of fiscal 2025, non-GAAP operating expenses for fiscal 2025 and non-GAAP EPS and cash flow in the fourth quarter fiscal 2025;

•the Company’s estimates of purchase obligations and other contractual commitments; and

•the Company’s expectations with respect to the sufficiency of its financial resources.

The words “expect”, “anticipate”, “estimate”, “may”, “will”, “should”, “could”, “intend”, “believe”, “target”, “plan” and similar expressions are intended to identify forward-looking statements in this Annual Report on Form 10-K, including in the sections in Part I, Item 1 “Business” entitled “Products and Services - IoT”, “Products and Services - Licensing and Other”, “Intellectual Property” and “Human Capital”, and in the sections of this MD&A entitled, “Non-GAAP Financial Measures - Key Metrics - Cybersecurity Annual Recurring Revenue”, “Results of Operations - Fiscal year ended February 29, 2024 compared to fiscal year ended February 28, 2023 - Revenue - Revenue by Segment”, “Results of Operations - Fiscal year ended February 29, 2024 compared to fiscal year ended February 28, 2023 - Operating Expenses”, “Results of Operations - Fiscal year ended February 29, 2024 compared to fiscal year ended February 28, 2023 - Net Income (Loss)” and “Financial Condition - Contractual and Other Obligations”. 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 appropriate in the circumstances, including but not limited to, the Company’s expectations regarding its business, strategy, opportunities and prospects, the launch of new products and services, general economic conditions, competition, the Company’s expectations regarding its financial performance, and the Company’s expectations regarding the planned separation of its businesses. Many factors could cause the Company’s actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the risk factors discussed in Part I, Item 1A “Risk Factors” in this Annual Report on Form 10-K.

All of these factors should be considered carefully, and readers should not place undue reliance on the Company’s forward-looking statements. Any statements that are forward-looking statements are intended to enable the Company’s shareholders to view the anticipated performance and prospects of the Company from management’s perspective at the time such statements are made, and they are subject to the risks that are inherent in all forward-looking statements, as described above, as well as difficulties in forecasting the Company’s financial results and performance for future periods, particularly over longer periods, given changes in technology and the Company’s business strategy, evolving industry standards, intense competition and short product life cycles that characterize the industries in which the Company operates. See the “Strategy” subsection in Part I, Item 1 “Business” of this Annual Report on Form 10-K.

The Company has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law.

Business Overview

The Company provides intelligent security software and services to enterprises and governments around the world. The Company secures more than 235 million vehicles. Based in Waterloo, Ontario, the Company leverages artificial intelligence (“AI”) and machine learning to deliver innovative solutions in the areas of cybersecurity, safety and data privacy, and is a leader in the areas of endpoint security, endpoint management, encryption, and embedded systems. The Company’s common shares trade under the ticker symbol “BB” on the New York Stock Exchange and the Toronto Stock Exchange. The Company was incorporated under the Business Corporations Act (Ontario) on March 7, 1984.

The Company continued to execute on its strategy in fiscal 2024 and announced the following significant achievements:

Products and Innovation:

•Announced general availability of QNX® Software Development Platform (SDP) 8.0, the Company’s scalable, high-performance foundation for next generation automotive and IoT systems;

•Launched an enhanced AI-based Cylance® cybersecurity solutions portfolio, including a major update to its patented Cylance AI engine;

•Launched QNX® Sound, an audio and acoustics innovation platform for software-defined vehicles;

•Announced enhancements to SecuSUITE® for Government, including encrypted video and group audio calls;

•Announced an integration of CylanceGUARD® and BlackBerry® AtHoc® technologies for secure bi-directional response communications during cyber incidents;

•Announced that CylanceENDPOINT™ received Gartner® Peer Insights™ 2023, Customers’ Choice designation for Endpoint Protection Platforms, based on customer feedback, placing in the upper-right quadrant;

•Released a Global Threat Intelligence Report, highlighting that the Company’s AI-driven cybersecurity solutions stopped 55,000 individual cyber-attacks between March and May 2023;

•Launched a generative AI-powered cybersecurity assistant to increase efficiency and reduce fatigue for CISO teams; and

•Announced that BlackBerry is the first Mobile Device Management vendor to receive BSI clearance for BlackBerry® UEM Brightsite usage with Apple iNDIGO.

Customers and Partners:

•Announced a significant, multi-year deal to provide full suite of cybersecurity solutions to the Government of Malaysia;

•Stellantis, BlackBerry QNX and AWS launched the world’s first virtual cockpit, leveraging the QNX® Hypervisor in the cloud to transform in-vehicle software engineering;

•Mobility in Harmony (MIH) consortium, a Foxconn initiative, selected BlackBerry IVY® to power its next-generation electric production vehicles;

•Announced the Company’s new Cybersecurity Center of Excellence (CCoE) in Kuala Lumpur will offer SANS training courses to help grow and upskill cyber workforces in Malaysia;

•Announced that the United States Department of Homeland Security awarded a new PENS (personal emergency notification system) contract to BlackBerry, utilizing BlackBerry® AtHoc® critical event management (CEM) solution;

•Announced that Mitsubishi’s enhanced automotive in-cabin system, FlexConnect.X, will be powered by BlackBerry IVY to deliver AI data-driven experiences;

•Announced that BlackBerry QNX software is embedded in over 235 million vehicles;

•Announced an extended partnership with leading managed security services provider (MSSP) Solutions Granted, enabling better scale to address small and medium-sized businesses (SMBs); and

•Announced a strategic partnership with McLeod Software, a leading Transportation Management System (TMS) provider, delivering enterprise software solutions to the transportation and logistics industry.

Environmental, Sustainability and Corporate Governance:

•Appointed Philip Brace, an IoT technology industry veteran, to the Board of Directors (the “Board”); and

•Appointed John Giamatteo, President of BlackBerry’s Cybersecurity division, as Chief Executive Officer.

Goodwill Impairment

During the fourth quarter of fiscal 2024, as part of its process for setting the annual operating plan for fiscal 2025, the Company updated its estimates of long-term future cash flows to reflect lower revenue and EBITDA growth rate expectations and a reduction in revenue multiples used in the valuation of the BlackBerry Spark reporting unit. These changes in estimates, combined with the continued global economic uncertainty, customer budgetary constraints, and inflation, as well as higher interest rates implemented in response to inflation, and a broad-based stock market decline impacting the Company’s market capitalization, resulted in the recognition of a goodwill impairment charge of $35 million (the “Fiscal 2024 Goodwill Impairment Charge”) in the BlackBerry Spark reporting unit, which is included within the Company’s Cybersecurity segment. For additional information, see Note 3 to the Consolidated Financial Statements. The estimated fair values of the Company’s other reporting units substantially exceeded their carrying values as at the annual goodwill impairment test date, with the exception of the Intellectual Property reporting unit.

Business Separation

On May 1, 2023, the Company announced that the Board would initiate a review of the Company’s portfolio of businesses, with the assistance of its financial advisors, as the Board considered strategic alternatives to drive enhanced shareholder value. On October 4, 2023, the Company announced its intention to separate the IoT and Cybersecurity business units with a view to pursuing a subsidiary initial public offering (“Sub-IPO”) for the IoT business. On December 11, 2023, the Company announced that it had reassessed its strategy and would no longer pursue a Sub-IPO but intends to pursue a full separation of the IoT and Cybersecurity businesses, including the separation and streamlining of the Company’s centralized corporate functions into business-unit specific teams, with a view to establishing each business as an independently-operated, profitable and cashflow-positive division. The Company intends for the separation to enhance the operational focus and flexibility for each business, drive improved profitability, and increase optionality for the Company to optimize shareholder value. On February 12, 2024, the Company announced its progress in separation and provided targets in respect to annualized net profit improvements to be achieved through a combination of cost reductions and margin expansion, identified previously achieved annualized cost savings in the third quarter of fiscal 2024, and provided guidance regarding expected improvements in operating cash flow in fiscal 2025. On April 3, 2024, the Company stated that it had taken action in fiscal 2024 to reduce annualized expenditures by approximately $105 million and is working towards further run rate reductions.

Patent Sale

On May 11, 2023, the Company completed its previously announced patent sale with Malikie Innovations Limited and sold certain non-core patent assets for $170 million in cash on closing, an additional $30 million in cash by no later than the third anniversary of closing and potential future royalties in the aggregate amount of up to $700 million (the “Malikie Transaction”).

In the first quarter of fiscal 2024, the Company recognized revenue of $218 million and cost of sales of $147 million related to non-core intellectual property sold. The revenue recognized reflects the application of the Company’s accounting policies and

critical accounting estimates, as described in Note 1 to the Consolidated Financial Statements, which resulted in a substantial majority of the potential future royalties from the Malikie Transaction being constrained until future periods. In evaluating the Malikie Transaction, the Company considered estimates of value, among other factors, which are not fully reflected when applying the principles of revenue recognition, such as the variable consideration constraint that is recognized at the inception of the Malikie Transaction. Accordingly, amounts initially recognized in the first quarter of fiscal 2024 do not reflect the full fair value of the overall transaction as determined by the Company. Additional variable consideration is expected to be recognized in future quarters, as determined quarterly based on the revenue recognition accounting framework. See Note 12 to the Consolidated Financial Statements.

Debt Repayment and New Issuance

On November 13, 2023, the Company repaid all amounts due upon the maturity of its outstanding 1.75% unsecured convertible debentures (the “2020 Debentures”) for an aggregate amount of $365 million. On November 17, 2023, the Company issued an aggregate of $150 million principal amount of new 1.75% extendable unsecured convertible debentures maturing on February 15, 2024 (the “Extension Debentures” and collectively with the 2020 Debentures, the “Debentures”), with an option for the parties to extend the maturity date to May 15, 2024 by mutual agreement, to certain controlled affiliates of Fairfax Financial Holdings Limited (“Fairfax”) on a private placement basis. The Extension Debentures had terms that were substantially similar to those of the 2020 Debentures. Interest expense on the Extension Debentures was approximately $1 million for the period from issuance to maturity on February 15, 2024.

On January 29, 2024, the Company issued $200 million aggregate principal amount of 3.00% senior convertible unsecured notes (the “Notes”) in an offering to qualified institutional buyers in accordance with Rule 144A under the Securities Act of 1933, as amended. The Company used the net proceeds of the issuance of the Notes principally to repay the Extension Debentures at maturity on February 15, 2024. The Notes are due on February 15, 2029 unless earlier converted, redeemed, or repurchased. Interest expense on the Notes will be approximately $6 million per year.

See Note 6 to the Consolidated Financial Statements for a description of the terms of the Notes.

Refer to Part I, Item 1A “Risk Factors” in this Annual Report on form 10-K for a discussion of these factors and other risks.

Fiscal 2024 Summary Results of Operations

The following table sets forth certain consolidated statements of operations data for the fiscal years ended February 29, 2024, February 28, 2023, and February 28, 2022:


	As at and for the Fiscal Years Ended (in millions, except for share and per share amounts)
	February 29, 2024		February 28, 2023		Change		February 28, 2022		Change
Revenue	$	853	$	656	$	197	$	718	$	(62)
Gross margin	520		419		101		467		(48)
Operating expenses	645		1,144		(499)		469		675
Investment income, net	19		5		14		21		(16)

Income (loss) before income taxes	(106)		(720)		614		19		(739)
Provision for income taxes	24		14		10		7		7
Net income (loss)	$	(130)	$	(734)	$	604	$	12	$	(746)
Earnings (loss) per share - reported
Basic	$	(0.22)	$	(1.27)			$	0.02
Diluted	$	(0.22)	$	(1.35)			$	(0.31)

Weighted-average number of shares outstanding (000’s)
Basic	584,543		578,654				570,607
Diluted (1)	584,543		639,487				631,440

______________________________

(1)Diluted loss per share on a U.S. GAAP basis for fiscal 2024 does not include the dilutive effect of the Debentures and the Notes as to do so would be anti-dilutive. Diluted loss per share on a U.S. GAAP basis for fiscal 2024, fiscal 2023, and fiscal 2022 does not include the dilutive effect of stock-based compensation as to do so would be anti-dilutive. See Note 8 to the

Consolidated Financial Statements for the fiscal year ended February 29, 2024 for calculation of the diluted weighted average number of shares outstanding.

The following section sets forth certain unaudited consolidated statements of operations data for the three months ended February 29, 2024, February 28, 2023 and February 28, 2022:


	For the Three Months Ended (in millions, except for share and per share amounts)
	February 29, 2024		February 28, 2023	Change		February 28, 2022	Change
Revenue	$	173		$	151		$	22	$	185	$	(34)
Gross margin	129			100			29		124		(24)
Operating expenses	185			599			(414)		(22)		621
Investment income (loss), net	4			6			(2)		(1)		7

Income (loss) before income taxes	(52)			(493)			441		145		(638)
Provision for income taxes	4			2			2		1		1


Net income (loss)	$	(56)		$	(495)		$	439	$	144	$	(639)
Earnings (loss) per share - reported
Basic	$	(0.10)		$	(0.85)		$	0.75	$	0.25	$	(1.10)
Diluted (1)	$	(0.10)		$	(0.85)		$	0.75	$	(0.03)	$	(0.82)

Weighted-average number of shares outstanding (000’s)
Basic	587,523			581,493					575,883
Diluted (1)	587,523			581,493					636,716

______________________________

(1)Diluted loss per share on a U.S. GAAP basis in the fourth quarter of 2024 and 2023 do not include the dilutive effect of the Debentures or Notes as to do so would be anti-dilutive. Diluted loss per share on a U.S. GAAP basis in the fourth quarter of 2024, 2023 and 2022 do not include the dilutive effect of stock-based compensation as to do so would be anti-dilutive.

The following tables show information by operating segment for the three months and year ended February 29, 2024 and February 28, 2023. The Company reports segment information in accordance with U.S. GAAP Accounting Standards Codification Section 280 based on the “management” approach. The management approach designates the internal reporting used by the CODM for making decisions and assessing performance of the Company’s reportable operating segments. See Note 12 to the Consolidated Financial Statements for a description of the Company’s operating segments.


	For the Three Months Ended (in millions)
	Cybersecurity						IoT						Licensing and Other						Segment Totals
	Feb 29		Feb 28		Change		Feb 29		Feb 28		Change		Feb 29		Feb 28		Change		Feb 29		Feb 28		Change
	2024		2023				2024		2023				2024		2023				2024		2023
Segment revenue	$	92	$	88	$	4	$	66	$	53	$	13	$	15	$	10	$	5	$	173	$	151	$	22
Segment cost of sales	32		36		(4)		10		10		—		2		4		(2)		44		50		(6)
Segment gross margin	$	60	$	52	$	8	$	56	$	43	$	13	$	13	$	6	$	7	$	129	$	101	$	28


	For the Year Ended
	(in millions)
	Cybersecurity						IoT						Licensing and Other						Segment Totals
	Feb 29		Feb 28		Change		Feb 29		Feb 28		Change		Feb 29		Feb 28		Change		Feb 29		Feb 28		Change
	2024		2023				2024		2023				2024		2023				2024		2023
Segment revenue	$	378	$	418	$	(40)	$	215	$	206	$	9	$	260	$	32	$	228	$	853	$	656	$	197
Segment cost of sales	142		185		(43)		36		37		(1)		152		12		140		330		234		96
Segment gross margin	$	236	$	233	$	3	$	179	$	169	$	10	$	108	$	20	$	88	$	523	$	422	$	101

The following tables reconcile the Company’s segment results for the three months and year ended February 29, 2024 to consolidated U.S. GAAP results:


	For the Three Months Ended February 29, 2024
	(in millions)
	Cybersecurity		IoT		Licensing and Other		Segment Totals		Reconciling Items		Consolidated U.S. GAAP
Revenue	$	92	$	66	$	15	$	173	$	—	$	173
Cost of sales	32		10		2		44		—		44
Gross margin (1)	$	60	$	56	$	13	$	129	$	—	$	129
Operating expenses									185		185
Investment income, net									4		4
Loss before income taxes											$	(52)












	For the Year Ended February 29, 2024
	(in millions)
	Cybersecurity		IoT		Licensing and Other		Segment Totals		Reconciling Items		Consolidated U.S. GAAP
Revenue	$	378	$	215	$	260	$	853	$	—	$	853
Cost of sales	142		36		152		330		3		333
Gross margin (1)	$	236	$	179	$	108	$	523	$	(3)	$	520
Operating expenses									645		645
Investment income, net									19		19
Loss before income taxes											$	(106)

______________________________

(1) See “Non-GAAP Financial Measures” for a reconciliation of selected U.S. GAAP-based measures to adjusted measures for the three months and year ended February 29, 2024.

The following tables reconcile the Company’s segment results for the three months and year ended February 28, 2023 to consolidated U.S. GAAP results:


	For the Three Months Ended February 28, 2023
	(in millions)
	Cybersecurity		IoT		Licensing and Other		Segment Totals		Reconciling Items		Consolidated U.S. GAAP
Revenue	$	88	$	53	$	10	$	151	$	—	$	151
Cost of sales	36		10		4		50		1		51
Gross margin (1)	$	52	$	43	$	6	$	101	$	(1)	$	100
Operating expenses									599		599
Investment income, net									6		6
Loss before income taxes											$	(493)












	For the Year Ended February 28, 2023
	(in millions)
	Cybersecurity		IoT		Licensing and Other		Segment Totals		Reconciling Items		Consolidated U.S. GAAP
Revenue	$	418	$	206	$	32	$	656	$	—	$	656
Cost of sales	185		37		12		234		3		237
Gross margin (1)	$	233	$	169	$	20	$	422	$	(3)	$	419
Operating expenses									1,144		1,144
Investment income, net									5		5
Loss before income taxes											$	(720)

______________________________

(1) See “Non-GAAP Financial Measures” for a reconciliation of selected U.S. GAAP-based measures to adjusted measures for the three months and year ended February 28, 2023.

Financial Highlights

The Company had approximately $298 million in cash, cash equivalents and investments as of February 29, 2024 (Fiscal 2023 - $487 million).

In fiscal 2024, the Company recognized revenue of $853 million and incurred a net loss of $130 million, or $0.22 basic and diluted loss per share on a U.S. GAAP basis (fiscal 2023 - revenue of $656 million and net loss of $734 million, or $1.27 basic loss per share and $1.35 diluted loss per share).

The Company recognized adjusted net income of $31 million, or adjusted income of $0.05 per share, on a non-GAAP basis in fiscal 2024 (fiscal 2023 - adjusted net loss of $103 million and adjusted loss of $0.18 per share). See “Non-GAAP Financial Measures” below.

Debentures Fair Value Adjustment

As previously disclosed, the Company elected the fair value option to account for the Debentures; therefore, periodic revaluation was required under U.S. GAAP. The fair value adjustment did not impact the terms of the Debentures such as the face value, the redemption features or the conversion price.

In fiscal 2024, the Company recorded non-cash income relating to changes in fair value of the 2020 Debentures of $2 million (pre-tax and after tax) and realized a non-cash charge relating to changes in fair value from non-credit components released from AOCL on maturity of the Extension Debentures and 2020 Debentures of $6 million (the “Fiscal 2024 Debentures Fair Value Adjustment”) in the Company’s consolidated statements of operations. See Note 6 to the Consolidated Financial Statements for further details on the Debentures.

Non-GAAP Financial Measures

The Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, and information contained in this MD&A is presented on that basis. On April 3, 2024, the Company announced financial results for the three months and fiscal year ended February 29, 2024, which included certain non-GAAP financial measures and non-GAAP ratios, including adjusted gross margin, adjusted gross margin percentage, adjusted operating expense, adjusted net income (loss), adjusted earnings (loss) per share, adjusted research and development expense, adjusted sales and marketing expense, adjusted general and administrative expense, adjusted amortization expense, adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage, adjusted EBITDA margin percentage and free cash flow (usage). Commencing with this MD&A and consistent with the presentation of the corresponding U.S. GAAP measures, the Company is presenting adjusted sales and marketing expense and adjusted general and administrative expense separately, whereas they were previously aggregated.

In the Company’s internal reports, management evaluates the performance of the Company’s business on a non-GAAP basis by excluding the impact of certain items from the Company’s U.S. GAAP financial results. The Company believes that these non-GAAP financial measures and non-GAAP ratios provide management, as well as readers of the Company’s financial statements, with a consistent basis for comparison across accounting periods and are useful in helping management and readers understand the Company’s operating results and underlying operational trends. For purposes of comparability, the Company’s non-GAAP financial measures for the three months ended and years ended February 28, 2023 and February 28, 2022 have been updated to conform to the current year’s presentation.

•Debentures fair value adjustment. The Company elected to measure the Debentures at fair value in accordance with the fair value option under U.S. GAAP. Each period, the fair value of the Debentures was recalculated and the resulting non-cash income and charges from the change in fair value from non-credit components of the Debentures were recognized in income. The amount varied each period depending on changes to the Company’s share price, share price volatility and credit indices. This was not indicative of the Company’s core operating performance, and may not be meaningful when comparing the Company’s operating performance against that of prior periods.

•Restructuring charges. The Company believes that restructuring costs relating to employee termination benefits, facilities, streamlining the Company’s centralized corporate functions into Cybersecurity and IoT specific teams and other costs pursuant to the programs to reduce its annual expenses amongst R&D, infrastructure and other functions do not reflect expected future operating expenses, are not indicative of the Company’s core operating performance, and may not be meaningful when comparing the Company’s operating performance against that of prior periods

•Stock compensation expenses. Equity compensation is a non-cash expense and does not impact the ongoing operating decisions taken by the Company’s management.

•Amortization of acquired intangible assets. When the Company acquires intangible assets through business combinations, the assets are recorded as part of purchase accounting and contribute to revenue generation. Such acquired intangible assets depreciate over time and the related amortization will recur in future periods until the assets have been fully amortized. This is not indicative of the Company’s core operating performance, and may not be meaningful when comparing the Company’s operating performance against that of prior periods.

•Long-lived asset impairment charge. The Company believes that long-lived asset impairment charges do not reflect expected future operating expenses, are not indicative of the Company’s core operating performance, and may not be meaningful when comparing the Company’s operating performance against that of prior periods.

•Goodwill impairment charge. The Company believes that goodwill impairment charges do not reflect expected future operating expenses, are non-cash, and may not be meaningful when comparing the Company’s operating performance against that of prior periods.

•Litigation settlement. The Company believes that litigation settlements do not reflect expected future operating expenses, are not indicative of the Company’s core operating performance, and may not be meaningful when comparing the Company’s operating performance against that of prior periods.

On a U.S. GAAP basis, the impacts of these items are reflected in the Company’s income statement. However, the Company believes that the provision of supplemental non-GAAP measures allows investors to evaluate the financial performance of the Company’s business using the same evaluation measures that management uses and is therefore a useful indication of the Company’s performance or expected performance of future operations and facilitates period-to-period comparison of operating performance. As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S. GAAP measures, supplementary non-GAAP financial measures that exclude certain items from the presentation of its financial results.

Reconciliation of non-GAAP based measures with most directly comparable U.S. GAAP based measures for the three months ended February 29, 2024, February 28, 2023 and February 28, 2022

Readers are cautioned that adjusted gross margin, adjusted gross margin percentage, adjusted operating expense, adjusted net income (loss), adjusted earnings (loss) per share, adjusted research and development expense, adjusted sales and marketing expense, adjusted general and administrative expense, adjusted amortization expense, adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage, adjusted EBITDA margin percentage and free cash flow (usage) and similar measures do not have any standardized meaning prescribed by U.S. GAAP and are therefore unlikely to be comparable to similarly titled measures reported by other companies. Commencing with this MD&A and consistent with the presentation of the corresponding U.S. GAAP measures, the Company is presenting adjusted sales and marketing expense and adjusted general and administrative expense separately. These non-GAAP financial measures should be considered in the context of the U.S. GAAP results, which are described in this MD&A and presented in the Consolidated Financial Statements.

A reconciliation of the most directly comparable U.S. GAAP financial measures for the three months ended February 29, 2024, February 28, 2023 and February 28, 2022 to adjusted financial measures is reflected in the table below:


For the Three Months Ended (in millions)	February 29, 2024			February 28, 2023			February 28, 2022




Gross margin	$	129		$	100		$	124



Stock compensation expense	—			1			1
Adjusted gross margin	$	129		$	101		$	125

Gross margin %	74.6		%	66.2		%	67.0		%



Stock compensation expense	—		%	0.7		%	0.6		%
Adjusted gross margin %	74.6		%	66.9		%	67.6		%

Reconciliation of U.S. GAAP operating expense (income) for the three months ended February 29, 2024, November 30, 2023, February 28, 2023 and February 28, 2022 to adjusted operating expense is reflected in the table below:


For the Three Months Ended (in millions)	February 29, 2024		November 30, 2023		February 28, 2023		February 28, 2022
Operating expense (income)	$	185	$	138	$	599	$	(22)
Restructuring charges	20		9		7		—
Stock compensation expense	5		7		9		4
Debentures fair value adjustment (1)	—		(13)		(26)		(165)

Acquired intangibles amortization	8		9		15		22

Goodwill impairment charge	35		—		245		—
LLA impairment charge	4		11		231		—


Adjusted operating expense	$	113	$	115	$	118	$	117

______________________________

(1) See “Fiscal 2024 Summary Results of Operations - Financial Highlights - Debentures Fair Value Adjustment”.

Reconciliation of U.S. GAAP net income (loss) and U.S. GAAP basic earnings (loss) per share for the three months ended February 29, 2024, February 28, 2023 and February 28, 2022 to adjusted net income (loss) and adjusted basic earnings (loss) per share is reflected in the table below:


For the Three Months Ended (in millions, except per share amounts)	February 29, 2024			February 28, 2023			February 28, 2022
			Basic earnings (loss) per share			Basic loss per share			Basic earnings per share
Net income (loss)	$	(56)	$(0.10)	$	(495)	$(0.85)	$	144	$0.25


Restructuring charges	20			7			—
Stock compensation expense	5			10			5
Debentures fair value adjustment	—			(26)			(165)

Acquired intangibles amortization	8			15			22

Goodwill impairment charge	35			245			—
LLA impairment charge	4			231			—



Adjusted net income (loss)	$	16	$0.03	$	(13)	$(0.02)	$	6	$0.01

Reconciliation of U.S. GAAP research and development, sales and marketing, general and administrative, and amortization expense for the three months ended February 29, 2024, February 28, 2023 and February 28, 2022 to adjusted research and development, sales and marketing, general and administrative, and amortization expense is reflected in the table below:


For the Three Months Ended (in millions)	February 29, 2024		February 28, 2023		February 28, 2022
Research and development	$	40	$	48	$	47

Stock compensation expense	2		3		2
Adjusted research and development	$	38	$	45	$	45

Sales and marketing	$	41	$	48	$	45
Stock compensation expense	1		2		1
Adjusted sales and marketing	$	40	$	46	$	44

General and administrative	$	53	$	35	$	19
Restructuring charges	20		7		—

Stock compensation expense	2		4		1

Adjusted general and administrative	$	31	$	24	$	18

Amortization	$	12	$	18	$	32
Acquired intangibles amortization	8		15		22
Adjusted amortization	$	4	$	3	$	10

Reconciliation of non-GAAP based measures with most directly comparable U.S. GAAP based measures for the years ended February 29, 2024, February 28, 2023 and February 28, 2022

A reconciliation of the most directly comparable U.S. GAAP financial measures for the years ended February 29, 2024, February 28, 2023 and February 28, 2022 to adjusted financial measures is reflected in the table below:


For the Fiscal Years Ended (in millions)	February 29, 2024			February 28, 2023			February 28, 2022




Gross margin	$	520		$	419		$	467



Stock compensation expense	3			3			4
Adjusted gross margin	$	523		$	422		$	471

Gross margin %	61.0		%	63.9		%	65.0		%



Stock compensation expense	0.3		%	0.4		%	0.6		%
Adjusted gross margin %	61.3		%	64.3		%	65.6		%

Operating expense	$	645		$	1,144		$	469
Restructuring charges	37			11			—
Stock compensation expense	30			28			26
Debentures fair value adjustment (1)	3			(138)			(212)

Acquired intangibles amortization	38			82			115

Goodwill impairment charge	35			245			—
LLA impairment charge	15			235			—

Litigation settlement	—			165			—
Adjusted operating expense	$	487		$	516		$	540

______________________________

(1) See “Fiscal 2024 Summary Results of Operations - Financial Highlights - Debentures Fair Value Adjustment”.

Reconciliation of U.S. GAAP net income (loss) and U.S. GAAP basic earnings (loss) per share for the years ended February 29, 2024, February 28, 2023 and February 28, 2022 to the adjusted net income (loss) and adjusted basic earnings (loss) per share is reflected in the table below:


For the Fiscal Years Ended (in millions, except per share amounts)	February 29, 2024				February 28, 2023				February 28, 2022
			Basic earnings (loss) per share				Basic loss per share				Basic earnings (loss) per share
Net income (loss)	$	(130)	$	(0.22)	$	(734)	$	(1.27)	$	12	$	0.02


Restructuring charges	37				11				—
Stock compensation expense	33				31				30
Debentures fair value adjustment	3				(138)				(212)

Acquired intangibles amortization	38				82				115

Goodwill impairment charge	35				245				—
LLA impairment charge	15				235				—

Litigation settlement	—				165				—

Adjusted net income (loss)	$	31	$0.05		$	(103)	$(0.18)		$	(55)	$(0.10)

Reconciliation of U.S GAAP research and development, sales and marketing, general and administrative, and amortization expense for the years ended February 29, 2024, February 28, 2023 and February 28, 2022 to adjusted research and development, sales and marketing, general and administrative, and amortization expense is reflected in the table below:


For the Fiscal Years Ended (in millions)	February 29, 2024		February 28, 2023		February 28, 2022
Research and development	$	186	$	207	$	219

Stock compensation expense	8		9		8
Adjusted research and development	$	178	$	198	$	211

Sales and marketing	$	171	$	176	$	183
Stock compensation expense	6		5		5
Adjusted sales and marketing	$	165	$	171	$	178

General and administrative	$	181	$	164	$	114
Restructuring charges	37		11		—

Stock compensation expense	16		14		13

Adjusted general and administrative	$	128	$	139	$	101

Amortization	$	54	$	96	$	165
Acquired intangibles amortization	38		82		115
Adjusted amortization	$	16	$	14	$	50

Adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage and adjusted EBITDA margin percentage for the three months ended February 29, 2024, February 28, 2023 and February 28, 2022 are reflected in the table below. These are non-GAAP financial measures and non-GAAP ratios that do not have any standardized meaning as prescribed by U.S. GAAP and are therefore unlikely to be comparable to similar measures presented by other companies.


For the Three Months Ended (in millions)	February 29, 2024		February 28, 2023		February 28, 2022
Operating income (loss)	$	(56)	$	(499)	$	146
Non-GAAP adjustments to operating income (loss)


Restructuring charges	20		7		—
Stock compensation expense	5		10		5
Debentures fair value adjustment	—		(26)		(165)

Acquired intangibles amortization	8		15		22

Goodwill impairment charge	35		245		—
LLA impairment charge	4		231		—


Total non-GAAP adjustments to operating income (loss)	72		482		(138)
Adjusted operating income (loss)	16		(17)		8
Amortization	13		20		34
Acquired intangibles amortization	(8)		(15)		(22)
Adjusted EBITDA	$	21	$	(12)	$	20

Revenue	$	173	$	151	$	185
Adjusted operating income (loss) margin % (1)	9%		(11%)		4%
Adjusted EBITDA margin % (2)	12%		(8%)		11%

______________________________

(1) Adjusted operating income (loss) margin % is calculated by dividing adjusted operating income (loss) by revenue.

(2) Adjusted EBITDA margin % is calculated by dividing adjusted EBITDA by revenue.

Adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage and adjusted EBITDA margin percentage for the fiscal years ended February 29, 2024, February 28, 2023 and February 28, 2022 are reflected in the table below.


For the Fiscal Years Ended (in millions)	February 29, 2024			February 28, 2023			February 28, 2022
Operating loss	$	(125)		$	(725)		$	(2)
Non-GAAP adjustments to operating loss


Restructuring charges	37			11			—
Stock compensation expense	33			31			30
Debentures fair value adjustment	3			(138)			(212)

Acquired intangibles amortization	38			82			115

Goodwill impairment charge	35			245			—
LLA impairment charge	15			235			—

Litigation settlement	—			165			—
Total non-GAAP adjustments to operating loss	161			631			(67)
Adjusted operating income (loss)	36			(94)			(69)
Amortization	59			105			176
Acquired intangibles amortization	(38)			(82)			(115)
Adjusted EBITDA	$	57		$	(71)		$	(8)

Revenue	$	853		$	656		$	718
Adjusted operating income (loss) margin % (1)	4		%	(14		%)	(10		%)
Adjusted EBITDA margin % (2)	7		%	(11		%)	(1		%)

______________________________

(1) Adjusted operating income (loss) margin % is calculated by dividing adjusted operating income (loss) by revenue.

(2) Adjusted EBITDA margin % is calculated by dividing adjusted EBITDA by revenue.

The Company uses free cash flow (usage) when assessing its sources of liquidity, capital resources, and quality of earnings. The Company believes that free cash flow (usage) is helpful in understanding the Company’s capital requirements and provides an additional means to reflect the cash flow trends in the Company’s business.

Reconciliation of U.S. GAAP net cash provided by (used in) operating activities for the three months ended February 29, 2024, February 28, 2023 and February 28, 2022 to free cash flow (usage) is reflected in the table below:


For the Three Months Ended (in millions)	February 29, 2024		February 28, 2023		February 28, 2022
Net cash provided by (used in) operating activities	$	(15)	$	(7)	$	10
Acquisition of property, plant and equipment	(2)		(2)		$	(2)
Free cash flow (usage)	$	(17)	$	(9)	$	8

Reconciliation of U.S. GAAP net cash provided by (used in) operating activities for the years ended February 29, 2024, February 28, 2023 and February 28, 2022 to free cash flow (usage) is reflected in the table below:


For the Fiscal Years Ended (in millions)	February 29, 2024		February 28, 2023		February 28, 2022
Net cash used in operating activities	$	(3)	$	(263)	$	(28)
Acquisition of property, plant and equipment	(7)		(7)		(8)
Free cash usage	$	(10)	$	(270)	$	(36)

For the year ended February 28, 2023, free cash usage includes $165 million paid in relation to a legal settlement.

Key Metrics

The Company regularly monitors a number of financial and operating metrics, including the following key metrics, in order to measure the Company’s current performance and estimated future performance. Readers are cautioned that Cybersecurity annual recurring revenue (“ARR”), Cybersecurity dollar-based net retention rate (“DBNRR”), Cybersecurity total contract value (“TCV”) billings, recurring software product revenue percentage and QNX royalty backlog do not have any standardized meaning and are unlikely to be comparable to similarly titled measures reported by other companies.

Comparative breakdowns of certain key metrics for the three months ended February 29, 2024 and February 28, 2023 are set forth below.


For the Three Months Ended (in millions)	February 29, 2024			February 28, 2023			Change



Cybersecurity Annual Recurring Revenue	$	280		$	298		$	(18)


Cybersecurity Dollar-Based Net Retention Rate	85		%	81		%	4		%
Cybersecurity Total Contract Value Billings	$	91		$	107		$	(16)
Recurring Software Product Revenue Percentage	~ 90%			~ 90 %			—		%
QNX Royalty Backlog	$	815		$	640		$	175

Cybersecurity Annual Recurring Revenue

The Company defines ARR as the annualized value of all subscription, term, maintenance, services, and royalty contracts that generate recurring revenue as of the end of the reporting period. The Company uses ARR as an indicator of business momentum for the Cybersecurity business.

Cybersecurity ARR was approximately $280 million in the fourth quarter of fiscal 2024 and increased compared to $273 million in the third quarter of fiscal 2024 and decreased compared to $298 million in the fourth quarter of fiscal 2023 primarily due to customer churn in the BlackBerry Spark business.

The Company previously stated that it expected ARR in the fourth quarter of fiscal 2024 to be broadly consistent with the third quarter of fiscal 2024. Cybersecurity ARR increased by 3% compared to the third quarter of fiscal 2024.

The Company expects Cybersecurity ARR to be flat sequentially in the first quarter of fiscal 2025.

Cybersecurity Dollar-Based Net Retention Rate

The Company calculates the Cybersecurity DBNRR as of period end by first calculating the Cybersecurity ARR from the customer base as at 12 months prior to the current period end (“Prior Period ARR”). The Company then calculates the Cybersecurity ARR for the same cohort of customers as at the current period end (“Current Period ARR”). The Company then divides the Current Period ARR by the Prior Period ARR to calculate the DBNRR.

Cybersecurity DBNRR was 85% in the fourth quarter of fiscal 2024 and increased compared to 82% in the third quarter of fiscal 2024 and 81% in the fourth quarter of fiscal 2023.

Cybersecurity Total Contract Value Billings

The Company defines Cybersecurity TCV billings as amounts invoiced less credits issued. The Company considers Cybersecurity TCV billings to be a useful metric because billings drive deferred revenue, which is an important indicator of the health and visibility of the business, and represents a significant percentage of future revenue.

Cybersecurity TCV billings was $91 million in the fourth quarter of fiscal 2024 and decreased compared to $109 million in the third quarter of fiscal 2024 and $107 million in the fourth quarter of fiscal 2023 primarily due to the timing of closing large customer contracts and churn in the BlackBerry Spark business.

The Company previously stated that it expected Cybersecurity TCV billings to continue to exceed Cybersecurity revenue in fiscal 2024. Cybersecurity TCV billings exceeded Cybersecurity revenue in fiscal 2024.

Recurring Software Product Revenue Percentage

The Company defines recurring software product revenue percentage as recurring software product revenue divided by total Software & Services revenue. Recurring software product revenue is comprised of subscription and term licenses, maintenance arrangements, royalty arrangements and perpetual licenses recognized ratably under ASC 606. Total Software & Services revenue is comprised of recurring product revenue, non-recurring product revenue and professional services. The Company uses recurring software product revenue percentage to provide visibility into the revenue expected to be recognized in the current and future periods.

Total Software & Services product revenue, excluding professional services, was approximately 90% recurring in the fourth quarter of fiscal 2024 and increased compared to approximately 70% recurring in the third quarter of fiscal 2024 due to product mix and was consistent with the fourth quarter of fiscal 2023.

QNX Royalty Backlog

The Company defines the royalty backlog of its QNX business as estimated future revenue from variable forecasted royalties related to the QNX business. The estimation of forecasted royalties is based on QNX’s royalty rates and on projections of anticipated volumes that are based on historical shipping experience and current customer projections that management believes are reasonable over the lifetime of a design. The QNX royalty backlog is calculated annually based on current projections of volumes and may not be indicative of actual future revenue. The revenue that the Company will recognize is subject to several factors, including actual volumes and potential terminations or modifications to customer contracts.

The Company’s QNX royalty backlog was approximately $815 million at the end of the fourth quarter of fiscal 2024 and increased compared to approximately $640 million at the end of the fourth quarter of fiscal 2023.

Results of Operations - Fiscal year ended February 29, 2024 compared to fiscal year ended February 28, 2023

Revenue

Revenue by Segment

Comparative breakdowns of revenue by segment are set forth below.


	For the Fiscal Years Ended (in millions)
	February 29, 2024			February 28, 2023			Change		February 28, 2022				Change
Revenue by Segment
Cybersecurity	$	378		$	418		$	(40)		$	477			$	(59)
IoT	215			206			9			178				28
Licensing and Other	260			32			228			63				(31)

	$	853		$	656		$	197		$	718			$	(62)

% Revenue by Segment
Cybersecurity	44.3		%	63.7		%				66.4		%
IoT	25.2		%	31.4		%				24.8		%
Licensing and Other	30.5		%	4.9		%				8.8		%

	100.0		%	100.0		%				100.0		%

Cybersecurity

The decrease in Cybersecurity revenue of $40 million was primarily due to a decrease of $28 million relating to product revenue in BlackBerry Spark, a decrease of $8 million relating to product revenue in Secusmart and a decrease of $3 million in professional services.

The Company previously stated that it expected Cybersecurity revenue for fiscal 2024 as a whole to be in the range of $369 million to $374 million. Cybersecurity revenue for fiscal 2024 as a whole was $378 million.

The Company expects Cybersecurity revenue to be in the range of $78 million to $82 million in the first quarter of fiscal 2025, and for the full year to be in the range of $350 million to $365 million in fiscal 2025.

IoT

The increase in IoT revenue of $9 million was primarily due to an increase of $12 million in BlackBerry QNX royalty revenue and an increase of $3 million in product revenue from BlackBerry Radar, partially offset by a decrease of $6 million in professional services.

The Company previously stated that it expected IoT revenue to be in the range of $211 million to $215 million for fiscal 2024 as a whole. IoT revenue for fiscal 2024 was $215 million.

The Company expects IoT revenue to be in the range of $48 million to $52 million in the first quarter of fiscal 2025, and for the full year to be in the range of $220 million to $235 million in fiscal 2025.

The Company previously stated that it expected total Software & Services revenue, excluding potential revenue from BlackBerry IVY, to be in the range of $580 million and $589 million for fiscal 2024 as a whole. Total Software & Services revenue, excluding potential revenue from BlackBerry IVY for fiscal 2024 was $593 million due to higher revenue in Cybersecurity as described above.

Licensing and Other

The increase in Licensing and Other revenue of $228 million was primarily due to an increase of $218 million related to the completed Malikie Transaction and an increase of $10 million in revenue from the Company’s intellectual property licensing arrangements.

The Company expects Licensing and Other revenue to be approximately $4 million in each of the four quarters of fiscal 2025.

The Company expects total Company revenue to be approximately $130 million to $138 million in the first quarter of fiscal 2025 and total Company revenue to be approximately $586 million to $616 million in fiscal 2025.

Revenue by Geography

Comparative breakdowns of the geographic regions are set forth in the following table:


	For the Fiscal Years Ended (in millions)
	February 29, 2024			February 28, 2023			Change		February 28, 2022	Change
Revenue by Geography
North America	$	556		$	350		$	206		$	413		$	(63)
Europe, Middle East and Africa	172			222			(50)			234			(12)
Other regions	125			84			41			71			13
	$	853		$	656		$	197		$	718		$	(62)

% Revenue by Geography
North America	65.2		%	53.4		%				57.5		%
Europe, Middle East and Africa	20.2		%	33.8		%				32.6		%
Other regions	14.6		%	12.8		%				9.9		%
	100.0		%	100.0		%				100.0		%

North America Revenue

The increase in North America revenue of $206 million was primarily due to an increase of $228 million in Licensing and Other revenue due to the reasons discussed above in “Revenue by Segment”, an increase of $4 million in BlackBerry QNX development seat revenue and an increase of $4 million relating to product revenue in AtHoc, partially offset by a decrease of $20 million in product revenue in BlackBerry Spark and a decrease of $13 million in professional services.

Europe, Middle East and Africa Revenue

The decrease in Europe, Middle East and Africa revenue of $50 million was primarily due to a decrease of $38 million relating to product revenue in Secusmart, a decrease of $15 million in product revenue in BlackBerry Spark and a decrease of $3 million in BlackBerry QNX development seat revenue, partially offset by an increase of $6 million in BlackBerry QNX royalty revenue.

Other Regions Revenue

The increase in Other regions revenue of $41 million was primarily due to an increase of $27 million relating to product revenue in Secusmart, an increase of $7 million in product revenue in BlackBerry Spark, an increase of $6 million in professional services and an increase of $2 million in BlackBerry QNX royalty revenue.

Gross Margin

Consolidated Gross Margin

Consolidated gross margin increased by $101 million to approximately $520 million in fiscal 2024 (fiscal 2023 - $419 million). The increase was primarily due to the completed Malikie Transaction and an increase in revenue from Secusmart, partially offset by a decrease in revenue from BlackBerry Spark due to the reasons discussed above in “Revenue by Segment”, as much of the Company’s cost of sales does not significantly fluctuate based on business volume.

Consolidated Gross Margin Percentage

Consolidated gross margin percentage decreased by 2.9%, to approximately 61.0% of consolidated revenue in fiscal 2024 (fiscal 2023 - 63.9%). The decrease was primarily due to a change in mix, specifically higher contribution from Licensing and Other, which had a lower gross margin percentage due to the completed Malikie Transaction, partially offset by a higher gross margin contribution from Secusmart software licenses, which had a higher relative gross margin percentage.

Gross Margin by Segment

See “Business Overview” and “Fiscal 2024 Summary Results of Operations” for information about the Company’s operating segments and the basis of operating segment results.


	For the Years Ended
	(in millions)
	Cybersecurity									IoT									Licensing and Other									Segment Totals
	Feb 29			Feb 28			Change			Feb 29			Feb 28			Change			Feb 29			Feb 28			Change			Feb 29			Feb 28			Change
	2024			2023						2024			2023						2024			2023						2024			2023
Segment revenue	$	378		$	418		$	(40)		$	215		$	206		$	9		$	260		$	32		$	228		$	853		$	656		$	197
Segment cost of sales	142			185			(43)			36			37			(1)			152			12			140			330			234			96
Segment gross margin	$	236		$	233		$	3		$	179		$	169		$	10		$	108		$	20		$	88		$	523		$	422		$	101
Segment gross margin %	62		%	56		%	6		%	83		%	82		%	1		%	42		%	63		%	(21		%)	61		%	64		%	(3		%)

Cybersecurity

The increase in Cybersecurity gross margin of $3 million was primarily due to the reasons discussed above in “Revenue by Segment”, a decrease of $13 million in network infrastructure costs and a change in mix, specifically a higher gross margin contribution from Secusmart software licenses, which had a higher relative gross margin percentage.

The increase in Cybersecurity gross margin percentage of 6% was primarily due to the same reasons discussed above.

IoT

The increase in IoT gross margin of $10 million was primarily due to the reasons discussed above in “Revenue by Segment”, as the Company’s cost of sales does not significantly fluctuate based on business volume.

The increase in IoT gross margin percentage of 1% was primarily due to the reasons discussed above in “Revenue by Segment”, as the Company’s cost of sales does not significantly fluctuate based on business volume.

Licensing and Other

The increase in Licensing and Other gross margin of $88 million was primarily due to the completed Malikie Transaction.

The increase in Licensing and Other gross margin percentage of 27% was primarily due to the completed Malikie Transaction, which had a lower relative gross margin percentage due to the cost basis of the sold assets which were de-recognized.

Operating Expenses

The table below presents a comparison of research and development, sales and marketing, general and administrative, and amortization expense for fiscal 2024 compared to fiscal 2023 and fiscal 2023 compared to fiscal 2022.


	For the Fiscal Years Ended (in millions)
	February 29, 2024			February 28, 2023			Change		February 28, 2022			Change
Revenue	$	853		$	656		$	197	$	718		$	(62)
Operating expenses
Research and development	186			207			(21)		219			(12)
Sales and marketing	171			176			(5)		183			(7)
General and administrative	181			164			17		114			50
Amortization	54			96			(42)		165			(69)
Impairment of goodwill	35			245			(210)		—			245
Impairment of long-lived assets	15			235			(220)		—			235
Gain on sale of property, plant and equipment, net	—			(6)			6		—			(6)
Debentures fair value adjustment	3			(138)			141		(212)			74
Litigation settlement	—			165			(165)		—			165
Total	$	645		$	1,144		$	(499)	$	469		$	675

Operating Expense as % of Revenue
Research and development	21.8		%	31.6		%			30.5		%
Sales and marketing	20.0		%	26.8		%			25.5		%
General and administrative	21.2		%	25.0		%			15.9		%
Amortization	6.3		%	14.6		%			23.0		%
Impairment of goodwill	4.1		%	37.3		%			—		%
Impairment of long-lived assets	1.8		%	35.8		%			—		%
Gain on sale of property, plant and equipment, net	—		%	(0.9		%)			—		%
Debentures fair value adjustment	0.4		%	(21.0		%)			(29.5		%)
Litigation settlement	—		%	25.2		%			—		%
Total	75.6		%	174.4		%			65.3		%

See “Non-GAAP Financial Measures” for a reconciliation of selected U.S. GAAP-based measures to adjusted measures for the years ended February 29, 2024, February 28, 2023 and February 28, 2022.

U.S. GAAP Operating Expenses

Operating expenses decreased by $499 million, or 43.6% in fiscal 2024 compared to fiscal 2023. The decrease was primarily due to a decrease of $220 million in impairment of long-lived assets, a decrease of $210 million in goodwill impairment, a $165 million litigation settlement in fiscal 2023 that did not recur, a decrease of $42 million in amortization expense and a decrease in $20 million in salaries and benefits expenses, partially offset by the difference between the Fiscal 2024 Debentures Fair Value Adjustment and the fair value adjustment related to the Debentures incurred in fiscal 2023 of $141 million, an increase of $27 million in restructuring costs, a decrease in benefits of $4 million in government subsidies resulting from claims filed for the Canada Emergency Wage Subsidy and Hardest-Hit Business Recovery Program programs (“COVID-19 subsidies”) to support the business through the COVID-19 pandemic and an increase of $2 million in the Company’s deferred share unit costs.

Adjusted Operating Expenses

Adjusted operating expenses decreased by $29 million, or 5.6%, to $487 million in fiscal 2024, compared to $516 million in fiscal 2023. The decrease was primarily attributable to a decrease of $20 million in salaries and benefits expenses and a benefit of $17 million related to the release of an accrued liability relating to the Company’s legacy mobile device business, partially offset by a decrease in benefits of $4 million in COVID-19 subsidies, an increase of $2 million in amortization expense and an increase of $2 million in the Company’s deferred share unit costs.

The Company expects its average quarterly non-GAAP operating expense run rate to be approximately $110 million in fiscal 2025.

Research and Development Expenses

Research and development expenses consist primarily of salaries and benefits for technical personnel, new product development costs, travel, office and building costs, infrastructure costs and other employee costs.

Research and development expenses decreased by $21 million, or 10.1% in fiscal 2024 compared to fiscal 2023. The decrease was primarily attributable to a decrease of $11 million in salaries and benefits expenses and a decrease of $3 million in consulting costs, a decrease of $3 million in variable incentive plan costs and a decrease of $2 million in stock based compensation expense.

Adjusted research and development expenses decreased by $20 million, or 10.1%, to $178 million in fiscal 2024 compared to $198 million in fiscal 2023. The decrease was primarily due to the same reasons described above on a U.S. GAAP basis, excluding the decrease in stock based compensation expense.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of marketing, advertising and promotion, salaries and benefits, information technology costs and travel expenses.

Sales and marketing expenses decreased by $5 million, or 2.8% in fiscal 2024 compared to fiscal 2023. The decrease was primarily due to a decrease of $6 million in salaries and benefits and a decrease of $4 million in marketing and advertising costs, partially offset by an increase of $3 million in consulting costs and an increase of $1 million in stock based compensation expense.

Adjusted sales and marketing expenses decreased by $6 million, or 3.5%, to $165 million in fiscal 2024 compared to $171 million in fiscal 2023. The decrease was primarily due to same reasons described above on a U.S. GAAP basis, excluding the increase in stock based compensation expense.

General and Administrative Expenses

General and administration expenses consist primarily of salaries and benefits, external advisory fees, information technology costs, office and related staffing infrastructure costs.

General and administrative expenses increased by $17 million, or 10.4%, in fiscal 2024 compared to fiscal 2023. The increase was primarily due to an increase of $27 million in restructuring costs, a decrease in benefits of $4 million in COVID-19 subsidies, an increase of $2 million in variable incentive plan costs and an increase of $2 million in stock based compensation expense, partially offset by a benefit of $17 million related to the release of an accrued liability relating to the Company’s legacy mobile device business.

Adjusted general and administrative expenses decreased by $11 million, or 7.9%, to $128 million in fiscal 2024 compared to $139 million in fiscal 2023. The decrease was primarily due a benefit of $17 million related to the release of an accrued liability relating to the Company’s legacy mobile device business, a decrease of $3 million in consulting costs, partially offset by a decrease in benefits of $4 million in COVID-19 subsidies, an increase of $2 million in variable incentive plan costs and a decrease of $2 million in the Company’s deferred share unit cost.

Amortization Expense

The table below presents a comparison of amortization expense relating to property, plant and equipment and intangible assets recorded as amortization or cost of sales for fiscal 2024 compared to fiscal 2023 and fiscal 2023 compared to fiscal 2022. Intangible assets are comprised of patents, licenses and acquired technology.


	For the Fiscal Years Ended (in millions)
	Included in Operating Expense
	February 29, 2024		February 28, 2023		Change		February 28, 2022		Change
Property, plant and equipment	$	8	$	9	$	(1)	$	12	$	(3)
Intangible assets	46		87		(41)		153		(66)
Total	$	54	$	96	$	(42)	$	165	$	(69)

	Included in Cost of Sales
	February 29, 2024		February 28, 2023		Change		February 28, 2022		Change
Property, plant and equipment	$	2	$	3	$	(1)	$	3	$	—
Intangible assets	3		6		(3)		8		(2)
Total	$	5	$	9	$	(4)	$	11	$	(2)

Amortization included in Operating Expense

The decrease in amortization expense included in operating expense of $42 million was primarily due to the lower cost base of acquired technology assets due to the impairment of long-lived assets in fiscal 2023.

Adjusted amortization expense increased by $2 million to $16 million in fiscal 2024 compared to $14 million in fiscal 2023 due to an increase in patent amortization expense included in operating expenses as a result of the decrease in revenue from the Company’s intellectual property licensing arrangements.

Amortization included in Cost of Sales

The decrease in amortization expense relating to certain property, plant and equipment and certain intangible assets employed in the Company’s service operations of $4 million was due to the lower cost base of assets.

Investment Income, Net

Investment income, net, which includes the interest expense from the Debentures and the Notes, increased by $14 million to investment income, net of $19 million in fiscal 2024 compared to investment income, net of $5 million in fiscal 2023. The increase in investment income, net was primarily due to a higher yield on cash and investments and interest income on significant financing components within certain revenue contracts with customers, partially offset by lower average cash and investment balances.

Income Taxes

For fiscal 2024, the Company’s net effective income tax expense rate was approximately 23% (fiscal 2023 - net effective income tax expense rate of approximately 2%). The Company’s net effective income tax rate reflects the change in unrecognized income tax benefits, if any, and the fact that the Company has a significant valuation allowance against its deferred tax assets, and in particular, the change in loss carry forwards, research and development credits, amongst other items, was offset by a corresponding adjustment of the valuation allowance. The Company’s net effective income tax rate also reflects the geographic mix of earnings in jurisdictions with different income tax rates.

Net Income (Loss)

The Company’s net loss for fiscal 2024 was $130 million, or $0.22 basic and diluted loss per share on a U.S. GAAP basis (fiscal 2023 - net loss of $734 million, or $1.27 basic loss per share and $1.35 diluted loss per share). The decrease in net loss of $604 million was primarily due to a decrease in operating expenses, as described above in “Operating Expenses” and an increase in revenue as described above in “Revenue by Segment”, partially offset by a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage”.

Adjusted net income for fiscal 2024 was $31 million (fiscal 2023 - adjusted net loss of $103 million). The increase in adjusted net income of $134 million was primarily due to an increase in revenue as described above in “Revenue by Segment” and a

decrease in operating expenses as described above in “Operating Expenses”, partially offset by a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage”.

The Company expects a sequential increase in operating cash usage in the first quarter of fiscal 2025, but a year-on-year improvement in fiscal 2025 after adjusting for the impact of the sale of our legacy patent portfolio in the first quarter of fiscal 2025.

The Company expects non-GAAP EPS to be in the range of ($0.04) to ($0.06), and adjusted EBITDA to be in the range of negative $15 million to negative $25 million in the first quarter of fiscal 2025.

The Company expects non-GAAP EPS to be in the range of ($0.02) to ($0.06), and adjusted EBITDA to be in the range of breakeven to $10 million in fiscal 2025.

The Company expects to return to positive non-GAAP EPS and positive cash flow in the fourth quarter of fiscal 2025.

The Company does not provide a reconciliation of expected adjusted EBITDA and expected Non-GAAP basic EPS for the first quarter and full fiscal year 2025 to the most directly comparable expected GAAP measures because it is unable to predict with reasonable certainty, among other things, restructuring charges and impairment charges and, accordingly, a reconciliation is not available without unreasonable effort. These items are uncertain, depend on various factors, and could have a material impact on GAAP reported results for the guidance period.

The weighted average number of shares outstanding was 585 million common shares for basic loss and diluted loss per share for the fiscal year ended February 29, 2024. The weighted average number of shares outstanding was 579 million common shares for basic loss per share and 639 million common shares for diluted loss per share for the fiscal year ended February 28, 2023.

Common Shares Outstanding

On April 1, 2024, there were 589 million voting common shares, options to purchase 0.2 million voting common shares, 19 million restricted share units and 1 million deferred share units outstanding. In addition, 51.5 million common shares are issuable upon conversion in full of the Notes, as described in Note 6 to the Consolidated Financial Statements.

The Company has not paid any cash dividends during the last three fiscal years.

Results of Operations - Three months ended February 29, 2024 compared to the three months ended February 28, 2023

Revenue

Revenue by Segment

Comparative breakdowns of revenue by product and service on a U.S. GAAP basis are set forth below.


	For the Three Months Ended (in millions)
	February 29, 2024			February 28, 2023			Change		February 28, 2022	Change
Revenue by Segment
Cybersecurity	$	92		$	88		$	4		$	122		$	(34)
IoT	66			53			13			52			1
Licensing and Other	15			10			5			11			(1)

	$	173		$	151		$	22		$	185		$	(34)

% Revenue by Segment
Cybersecurity	53.2		%	58.3		%				65.9		%
IoT	38.2		%	35.1		%				28.1		%
Licensing and Other	8.6		%	6.6		%				6.0		%

	100.0		%	100.0		%				100.0		%

Cybersecurity

The increase in Cybersecurity revenue of $4 million was primarily due to an increase of $5 million relating to product revenue in Secusmart and an increase of $1 million in professional services, partially offset by a decrease of $2 million relating to product revenue in BlackBerry Spark.

The Company previously stated that it expected Cybersecurity revenue in the fourth quarter of fiscal 2024 to be in the range of $83 million to $88 million. Cybersecurity revenue in the fourth quarter of fiscal 2024 was $92 million.

IoT

The increase in IoT revenue of $13 million was primarily due to an increase of $8 million in BlackBerry QNX development seat revenue, an increase of $2 million in BlackBerry QNX royalty revenue and an increase of $2 million in professional services.

The Company previously stated that it expected IoT revenue in the fourth quarter of fiscal 2024 to be in the range of $62 million to $66 million and to be higher than in any previous quarter. IoT revenue in the fourth quarter of fiscal 2024 was $66 million and was higher than any previous quarter.

Licensing and Other

The increase in Licensing and Other revenue of $5 million was primarily due to an increase of $5 million in revenue from the Company’s intellectual property licensing arrangements.

The Company previously stated that it expected revenue from intellectual property licensing to be approximately $5 million per quarter in fiscal 2024, excluding the Malikie Transaction. Revenue from intellectual property licensing was approximately $15 million excluding the Malikie Transaction due to higher licensing program royalty revenue.

The Company previously stated that it expected total BlackBerry revenue in the fourth quarter of fiscal 2024 to be in the range of $150 million to $159 million. Total BlackBerry revenue in the fourth quarter of fiscal 2024 was $173 million due to higher revenue in Cybersecurity and Licensing and Other as described above.

U.S. GAAP Revenue by Geography

Comparative breakdowns of the geographic regions on a U.S. GAAP basis are set forth in the following table:


	For the Three Months Ended (in millions)
	February 29, 2024			February 28, 2023			Change		February 28, 2022	Change
Revenue by Geography
North America	$	91		$	84		$	7		$	100		$	(16)
Europe, Middle East and Africa	45			46			(1)			66			(20)
Other regions	37			21			16			19			2
	$	173		$	151		$	22		$	185		$	(34)

% Revenue by Geography
North America	52.6		%	55.6		%				54.0		%
Europe, Middle East and Africa	26.0		%	30.5		%				35.7		%
Other regions	21.4		%	13.9		%				10.3		%
	100.0		%	100.0		%				100.0		%

North America Revenue

The increase in North America revenue of $7 million was primarily due to an increase of $5 million in Licensing and Other revenue due to the reasons discussed above in “Revenue by Segment”, an increase of $3 million in BlackBerry QNX development seats revenue, an increase of $2 million in BlackBerry QNX royalty revenue and an increase of $2 million in product revenue in Radar, partially offset by a decrease of $7 million in product revenue in BlackBerry Spark.

Europe, Middle East and Africa Revenue

Europe, Middle East and Africa revenue in the fourth quarter of fiscal 2024 was consistent with revenue in the fourth quarter of fiscal 2023. The increase of $3 million in product revenue in Secusmart and the increase of $2 million in BlackBerry QNX development seat revenue was offset by the decrease of $5 million relating to product revenue in BlackBerry Spark.

Other Regions Revenue

The increase in Other regions revenue of $16 million was primarily due to an increase of $10 million in product revenue in BlackBerry Spark, an increase of $3 million in BlackBerry QNX development seat revenue and an increase of $2 million in professional services.

Gross Margin

Consolidated Gross Margin

Consolidated gross margin increased by $29 million to approximately $129 million in the fourth quarter of fiscal 2024 (fourth quarter of fiscal 2023 - $100 million). The increase was primarily due to an increase in revenue from BlackBerry QNX and Licensing and Other due to the reasons discussed above in “Revenue by Segment” as much of the Company’s cost of sales does not significantly fluctuate based on business volume.

Consolidated Gross Margin Percentage

Consolidated gross margin percentage increased by 8.4%, to approximately 74.6% of consolidated revenue in the fourth quarter of fiscal 2024 (fourth quarter of fiscal 2023 - 66.2%). The increase was primarily due to a higher gross margin percentage in Licensing and Other due to the reasons discussed below in “Gross Margin by Segment” and higher gross margin contribution from Secusmart software licenses, which had a higher relative gross margin percentage.

Gross Margin by Segment

See “Business Overview - Segment Reporting” and “Fiscal 2024 Summary Results of Operations” for information about the Company’s operating segments and the basis of operating segment results.


	For the Three Months Ended (in millions)
	Cybersecurity									IoT									Licensing and Other									Segment Totals
	Feb 29			Feb 28			Change			Feb 29			Feb 28			Change			Feb 29			Feb 28			Change			Feb 29			Feb 28			Change
	2024			2023						2024			2023						2024			2023						2024			2023
Segment revenue	$	92		$	88		$	4		$	66		$	53		$	13		$	15		$	10		$	5		$	173		$	151		$	22
Segment cost of sales	32			36			(4)			10			10			—			2			4			(2)			44			50			(6)
Segment gross margin	$	60		$	52		$	8		$	56		$	43		$	13		$	13		$	6		$	7		$	129		$	101		$	28
Segment gross margin %	65		%	59		%	6		%	85		%	81		%	4		%	87		%	60		%	27		%	75		%	67		%	8		%

Cybersecurity

The increase in Cybersecurity gross margin of $8 million was primarily due to the reasons discussed above in “Revenue by Segment”, a decrease of $2 million in network infrastructure costs and a change in mix, specifically a higher gross margin contribution from Secusmart product revenue, which had a higher relative gross margin percentage.

The increase in Cybersecurity gross margin percentage of 6% was primarily due to the same reasons discussed above.

IoT

The increase in IoT gross margin of $13 million was primarily due to the reasons discussed above in “Revenue by Segment”, as the Company’s cost of sales does not significantly fluctuate based on business volume.

The increase in IoT gross margin percentage of 4% was primarily due to the same reasons discussed above.

Licensing and Other

The increase in Licensing and Other gross margin of $7 million was primarily due to the reasons discussed above in “Revenue by Segment” and a decrease of $1 million in patent costs included in cost of sales in the fourth quarter of fiscal 2023, which did not recur.

The increase in Licensing and Other gross margin percentage of 27% was primarily due to the same reasons discussed above.

Operating Expenses

The table below presents a comparison of research and development, sales and marketing, general and administrative, and amortization expenses for the quarter ended February 29, 2024, compared to the quarter ended November 30, 2023 and the quarter ended February 28, 2023. The Company believes it is meaningful to provide a sequential comparison between the fourth quarter of fiscal 2024 and the third quarter of fiscal 2024.


	For the Three Months Ended (in millions)
	February 29, 2024			November 30, 2023			February 28, 2023			February 28, 2022
Revenue	$	173		$	175		$	151		$	185
Operating expenses
Research and development	40			42			48			47
Sales and marketing	41			42			48			45
General and administrative	53			43			35			19
Amortization	12			13			18			32
Impairment of long-lived assets	4			11			231			—
Impairment of goodwill	35			—			245			—

Debentures fair value adjustment	—			(13)			(26)			(165)

Total	$	185		$	138		$	599		$	(22)

Operating Expense as % of Revenue
Research and development	23.1		%	24.0		%	31.8		%	25.4		%
General and administrative	23.7		%	24.0		%	31.8		%	24.3		%
Sales and marketing	30.6		%	24.6		%	23.2		%	10.3		%
Amortization	6.9		%	7.4		%	11.9		%	17.3		%
Impairment of long-lived assets	2.3		%	6.3		%	153.0		%	—		%
Impairment of goodwill	20.2		%	—		%	162.3		%	—		%

Debentures fair value adjustment	—		%	(7.4		%)	(17.2		%)	(89.2		%)

Total	106.9		%	78.9		%	396.7		%	(11.9		%)

See “Non-GAAP Financial Measures” for a reconciliation of selected U.S. GAAP-based measures to adjusted measures for the three months ended February 29, 2024, November 30, 2023, February 28, 2023 and February 28, 2022.

U.S. GAAP Operating Expenses

Operating expenses increased by $47 million, or 34.1% in the fourth quarter of fiscal 2024, compared to $138 million in the third quarter of fiscal 2024 primarily due to the goodwill impairment charge of $35 million in the fourth quarter of fiscal 2024, the benefit of the fair value adjustment related to the 2020 Debentures incurred in the third quarter of fiscal 2024 of $13 million that did not recur and an increase of $11 million in restructuring costs, partially offset by a decrease of $7 million in impairment of long-lived assets and a decrease of $5 million in legal expenses.

Operating expenses decreased by $414 million, or 69.12% in the fourth quarter of fiscal 2024, compared to $599 million in the fourth quarter of fiscal 2023. The decrease was primarily attributable to a decrease of $227 million in impairment of long-lived assets, a decrease of $210 million in goodwill impairment and a decrease of $6 million in amortization costs, partially offset by the benefit of the fair value adjustment related to the 2020 Debentures incurred in the fourth quarter of fiscal 2024 of $26 million that did not recur and an increase of $14 million in restructuring costs.

Adjusted Operating Expenses

Adjusted operating expenses decreased by $2 million, or 1.7%, to $113 million in the fourth quarter of fiscal 2024 compared to $115 million in the third quarter of fiscal 2024. The decrease was primarily due to a decrease of $5 million in legal expenses, and a decrease of $1 million in marketing and advertising costs, partially offset by an increase of $3 million in variable incentive plan costs and a benefit of $3 million related to a legal settlement in the third quarter of fiscal 2024 that did not recur.

Adjusted operating expenses decreased by $5 million, or 4.2%, to $113 million in the fourth quarter of fiscal 2024, compared to $118 million in the fourth quarter of fiscal 2023. The decrease was primarily attributable to a decrease of $8 million in salaries

and benefits costs and a decrease of $5 million in marketing and advertising costs, partially offset by an increase of $8 million in variable incentive plan costs.

The Company previously stated that it expected non-GAAP sales and marketing expense to be approximately 27% of revenue, research and development to be approximately 30% of revenue, and general and administration, excluding amortization, to be approximately 20% of revenue in the fourth quarter of fiscal 2024. Adjusted sales and marketing expense was 23% of revenue, adjusted research and development expense was 22% of revenue and adjusted general and administrative expense was 18% of revenue due to the expectation being based on achievement of the mid-point of the Company’s expected range for total revenue.

Research and Development Expenses

Research and development expenses consist primarily of salaries and benefits costs for technical personnel, new product development costs, travel expenses, office and building costs, infrastructure costs and other employee costs.

Research and development expenses decreased by $8 million, or 16.7%, in the fourth quarter of fiscal 2024 compared to the fourth quarter of fiscal 2023, primarily due to a decrease of $5 million in salaries and benefit costs, a decrease of $2 million in consulting costs and a decrease of $1 million in stock compensation expense.

Adjusted research and development expenses decreased by $7 million, or 15.6%, to $38 million in the fourth quarter of fiscal 2024 compared to $45 million in the fourth quarter of fiscal 2023, was primarily due to the same reasons described above on a U.S. GAAP basis, excluding the decrease in stock based compensation expense.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of marketing, advertising and promotion, salaries and benefits, information technology costs and travel expenses.

Sales and marketing expenses decreased by $7 million, or 14.6% in fiscal 2024, in the fourth quarter of fiscal 2024 compared to the fourth quarter of fiscal 2023, primarily due to a decrease of $4 million in advertising and marketing costs, a decrease of $3 million in salaries and benefit costs, partially offset by an increase $1 million in sales incentive plan costs.

Adjusted sales and marketing expenses decreased by $6 million, or 13.0%, to $40 million in the fourth quarter of fiscal 2024 compared to $46 million in the fourth quarter of fiscal 2023. The decrease was primarily due to the same reasons described above on a U.S. GAAP basis.

General and Administrative Expenses

General and administration expenses consist primarily of salaries and benefits, external advisory fees, information technology costs, office and related staffing infrastructure costs.

General and administrative expenses increased by $18 million, or 51.4%, in the fourth quarter of fiscal 2024 compared to the fourth quarter of fiscal 2023. The increase was primarily due to an increase of $14 million in restructuring costs and an increase of $8 million in variable incentive plan costs, partially offset by a decrease of $2 million in stock compensation expense.

Adjusted general and administrative expenses increased by $7 million, or 29.2%, to $31 million in the fourth quarter of fiscal 2024 compared to $24 million in the fourth quarter of fiscal 2023. The increase was primarily due to an increase of $8 million in variable incentive plan costs.

Amortization Expense

The table below presents a comparison of amortization expense relating to property, plant and equipment and intangible assets recorded as amortization or cost of sales for the quarter ended February 29, 2024 compared to the quarter ended February 28, 2023 and for the quarter ended February 28, 2023 compared to the quarter ended February 28, 2022. Intangible assets are comprised of patents, licenses and acquired technology.


	For the Three Months Ended (in millions)
	Included in Operating Expense
	February 29, 2024		February 28, 2023		Change		February 28, 2022		Change
Property, plant and equipment	$	2	$	2	$	—	$	2	$	—
Intangible assets	10		16		(6)		30		(14)
Total	$	12	$	18	$	(6)	$	32	$	(14)

	Included in Cost of Sales
	February 29, 2024		February 28, 2023		Change		February 28, 2022		Change
Property, plant and equipment	$	—	$	1	$	(1)	$	1	$	—
Intangible assets	1		1		—		1		—
Total	$	1	$	2	$	(1)	$	2	$	—

Amortization included in Operating Expense

The decrease in amortization expense included in operating expense of $6 million was primarily due to the lower cost base of acquired technology assets.

Adjusted amortization expense increased by $1 million to $4 million in the fourth quarter of fiscal 2024 compared to $3 million in the fourth quarter of fiscal 2023 due to an increase in patent amortization expense included in operating expenses as a result of the decrease in revenue from the Company’s intellectual property licensing arrangements.

Amortization included in Cost of Sales

The decrease in amortization expense relating to certain property, plant and equipment and intangible assets employed in the Company’s service operations of $1 million was primarily due to the lower cost base assets.

Investment Income (Loss), Net

Investment income, net, which includes the interest expense from the Debentures and Notes, decreased by $2 million to investment income, net of $4 million in the fourth quarter of fiscal 2024 compared to investment income, net of $6 million in the fourth quarter of fiscal 2023. The decrease in investment income, net is primarily due to observable price changes on non-marketable equity investments without readily determinable fair value in the fourth quarter of fiscal 2023 that did not recur and lower cash and investment balances, partially offset by interest income on significant financing components within certain revenue contracts with customers and a higher yield on cash and investments.

Income Taxes

For the fourth quarter of fiscal 2024, the Company’s net effective income tax expense rate was approximately 8% (fourth quarter of fiscal 2023 - net effective income tax expense rate of approximately 0%). The Company’s net effective income tax rate reflects the change in unrecognized income tax benefits, if any, and the fact that the Company has a significant valuation allowance against its deferred tax assets, and in particular, the change in loss carry forwards, research and development credits, amongst other items, was offset by a corresponding adjustment of the valuation allowance. The Company’s net effective income tax rate also reflects the geographic mix of earnings in jurisdictions with different income tax rates.

Net Income (Loss)

The Company’s net loss for the fourth quarter of fiscal 2024 was $56 million, or $0.10 basic and diluted loss per share on a U.S. GAAP basis (fourth quarter of fiscal 2023 - net loss of $495 million, or $0.85 basic and diluted loss per share). The decrease in net loss of $439 million was primarily due to a decrease in operating expenses, as described above in “Operating Expenses”, partially offset by an increase in revenue, as described above in “Revenue by Segment” and an increase in gross margin percentage, as described above in “Consolidated Gross Margin Percentage”.

Adjusted net income was $16 million in the fourth quarter of fiscal 2024 (fourth quarter of fiscal 2023 - adjusted net loss of $13 million). The increase in adjusted net income of $29 million was primarily due to an increase in revenue as described above in

“Revenue by Segment”, an increase in gross margin percentage, as described above in “Consolidated Gross Margin Percentage” and a decrease in operating expenses, as described above in “Operating Expenses”.

The weighted average number of shares outstanding was 588 million common shares for basic and diluted loss per share for the fourth quarter of fiscal 2024. The weighted average number of shares outstanding was 581 million common shares for basic and diluted loss per share for the fourth quarter of fiscal 2023.

Financial Condition

Liquidity and Capital Resources

Cash, cash equivalents, and investments decreased by $189 million to $298 million as at February 29, 2024 from $487 million as at February 28, 2023, primarily due to the repayment of the 2020 Debentures and Extension Debentures at maturity, partially offset by the issuance of the Notes, the completed Malikie Transaction and changes in working capital.

A comparative summary of cash, cash equivalents, and investments is set out below:


	As at (in millions)
	February 29, 2024		February 28, 2023		Change		February 28, 2022		Change
Cash and cash equivalents	$	175	$	295	$	(120)	$	378	$	(83)
Restricted cash and cash equivalents	25		27		(2)		28		(1)
Short-term investments	62		131		(69)		334		(203)
Long-term investments	36		34		2		30		4
Cash, cash equivalents, and investments	$	298	$	487	$	(189)	$	770	$	(283)

The table below summarizes the current assets, current liabilities, and working capital of the Company:


	As at (in millions)
	February 29, 2024		February 28, 2023		Change		February 28, 2022		Change
Current assets	$	508	$	743	$	(235)	$	1,043	$	(300)
Current liabilities	356		729		(373)		397		332
Working capital	$	152	$	14	$	138	$	646	$	(632)

Current Assets

The decrease in current assets of $235 million at the end of fiscal 2024 from the end of fiscal 2023 was primarily due to a decrease in other current assets of $135 million, a decrease in cash and cash equivalents of $120 million and a decreases in short term investments of $69 million, partially offset an increase in accounts receivable, net of allowance of $79 million, an increase of $9 million in other receivables and an increase of income taxes receivable of $1 million.

At February 29, 2024, other current assets was $47 million, a decrease of $135 million from February 28, 2023. The decrease was primarily due to a decrease in intellectual property of $141 million as a result of the completed Malikie Transaction, partially offset by an increase of $6 million in prepaid cloud services.

At February 29, 2024, income taxes receivable was $4 million, an increase of $1 million from February 28, 2023. The increase was primarily due to tax installments and prepayments required in certain taxable jurisdictions.

At February 29, 2024, accounts receivable, net of allowance was $199 million, an increase of $79 million from February 28, 2023. The increase was primarily due to higher revenue recognized over the three months ended February 29, 2024 compared to the three months ended February 28, 2023, and an increase in days sales outstanding to 100 days at the end of the fourth quarter of fiscal 2024 from 75 days at the end of the fourth quarter of fiscal 2023.

At February 29, 2024, other receivables was $21 million, an increase of $9 million from February 28, 2023. The increase was primarily due to an increase of $12 million related to accretion of interest on the significant financing components within certain revenue contracts with customers, partially offset by a decrease of $3 million relating to GST/VAT receivables.

Current Liabilities

The decrease in current liabilities of $373 million at the end of fiscal 2024 from the end of fiscal 2023 was primarily due to a decrease in the amounts payable in respect of the 2020 Debentures of $367 million, a decrease in accrued liabilities of $26 million, and a decrease in accounts payable of $7 million, partially offset by an increase in deferred revenue, current of $19 million, and an increase in income taxes payable of $8 million.

Accrued liabilities was $117 million, reflecting a decrease of $26 million compared to February 28, 2023, which was primarily attributable to a decrease of $17 million in liabilities from the release of a legacy mobile device business accrual and a decrease in $12 million in payroll accruals.

As at February 29, 2024, accounts payable were $17 million, reflecting a decrease of $7 million from February 28, 2023, which was primarily due to timing of payments of accounts payable.

Deferred revenue, current was $194 million, which reflects an increase of $19 million compared to February 28, 2023 that was attributable to a $12 million increase in deferred revenue, current related to AtHoc, a $4 million increase in deferred revenue, current related to BlackBerry Spark and a $3 million increase in deferred revenue, current related to Secusmart.

Income taxes payable was $28 million, reflecting an increase of $8 million compared to February 28, 2023, which was primarily due to income earned in taxable jurisdictions.

Cash flows for the fiscal year ended February 29, 2024 compared to the fiscal year ended February 28, 2023 were as follows:


	For the Fiscal Years Ended (in millions)
	February 29, 2024		February 28, 2023		Change		February 28, 2022		Change
Net cash flows provided by (used in):
Operating activities	$	(3)	$	(263)	$	260	$	(28)	$	(235)
Investing activities	46		176		(130)		207		(31)
Financing activities	(165)		6		(171)		10		(4)
Effect of foreign exchange loss on cash and cash equivalents	—		(3)		3		(1)		(2)
Net increase (decrease) in cash and cash equivalents	$	(122)	$	(84)	$	(38)	$	188	$	(272)

Operating Activities

The decrease in net cash flows used in operating activities of $260 million primarily reflects the net changes in working capital and includes the payment of the $165 million U.S. securities class actions settlement in fiscal 2023.

Investing Activities

During the fiscal year ended February 29, 2024, cash flows provided by investing activities were $46 million and included cash provided by transactions involving the acquisitions of restricted short-term, short-term and long-term investments, net of the proceeds on sale or maturity in the amount of $67 million, partially offset by intangible asset additions of $14 million, and acquisitions of property, plant and equipment of $7 million. During fiscal 2023, cash flows provided by investing activities were $176 million and included cash flows used in transactions involving the acquisitions of short-term and long-term investments, net of the proceeds on sale or maturity in the amount of $200 million and proceeds on sale of property, plant and equipment of $17 million, partially offset by intangible asset additions of $34 million and acquisitions of property, plant and equipment of $7 million.

Financing Activities

The decrease in cash flows used in financing activities was $171 million for fiscal 2024 due to the maturity of the 2020 Debentures and Extension Debentures, partially offset by the issuance of the Notes as described above in “Business Overview - Debt Repayment and New Issuance”.

Debt Financing and Other Funding Sources

See Note 6 to the Consolidated Financial Statements for a description of the Debentures and the Notes.

The Company has $25 million in collateralized outstanding letters of credit in support of certain leasing arrangements entered into in the ordinary course of business. See Note 3 to the Consolidated Financial Statements for further information concerning the Company’s restricted cash and restricted short-term investments.

Cash, cash equivalents, and investments were approximately $298 million as at February 29, 2024. The Company’s management remains focused on maintaining appropriate cash balances, efficiently managing working capital balances and managing the liquidity needs of the business. Based on its current financial projections, the Company believes its financial resources, together with expected future operating cash generating and operating expense reduction activities, should be sufficient to meet funding requirements for current financial commitments and future operating expenditures not yet committed, and should provide the necessary financial capacity for the foreseeable future.

Contractual and Other Obligations

The following table sets out aggregate information about the Company’s contractual and other obligations and the periods in which payments are due as at February 29, 2024:


	(in millions)

	Total		Short-term (next 12 months)		Long-term (>12 months)
Operating lease obligations	$	65	$	23	$	42
Purchase obligations and commitments	49		49		—
Debt interest and principal payments	230		6		224
Total	$	344	$	78	$	266

Contractual and other obligations amounted to approximately $344 million as at February 29, 2024, including future principal and interest payments of $230 million on the Notes and operating lease obligations of $65 million. The remaining balance consists of purchase orders for goods and services utilized in the operations of the Company. Total aggregate contractual obligations as at February 29, 2024 decreased by approximately $212 million as compared to the February 28, 2023 balance of approximately $556 million, which was attributable to a decreases in debt interest and principal payments as a result of the repayment of the 2020 Debentures at maturity on November 13, 2023, partially offset by the issuance of the Notes as described above in “Business Overview - Debt Repayment and New Issuance”, a decrease in purchase obligations and commitments and a decrease in operating lease obligations.

The Company does not have any material off-balance sheet arrangements.

Accounting Policies and Critical Accounting Estimates

Accounting Policies

See Note 1 to the Consolidated Financial Statements for a description of the Company’s significant accounting policies.

Critical Accounting Estimates

The preparation of the consolidated financial statements requires management to make estimates and assumptions with respect to the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities.

The Company’s critical accounting estimates are those estimates that involve a significant level of uncertainty at the time the estimate was made, and changes in them have had or are reasonably likely to have a material effect on the Company’s financial condition or results of operations. Accordingly, actual results could differ materially from the Company’s estimates. The Company’s estimates are based on past experience and other assumptions that it believes is reasonable under the circumstances, and the Company evaluates these estimates on an ongoing basis. The Company’s critical accounting estimates have been reviewed and discussed with the Company’s Audit & Risk Management Committee and are set out below.

Valuation of Long-Lived Assets

The Company’s determination of its asset groups, its primary asset and its remaining useful life, and estimated cash flows are significant factors in assessing the recoverability of the Company’s assets for the purposes of LLA impairment testing. The current macroeconomic environment and competitive dynamics continue to be challenging to the Company’s business and the Company cannot be certain of the duration of these conditions and their potential impact on the Company’s future financial results and cash flows. During the fiscal year ended February 29, 2024, the Company continued to experience varying levels of decline in performance amongst the businesses associated with its asset groups, as well as a decline in market capitalization; however, it did not identify any indicators which would indicate an impairment in its LLA and there were no critical estimates pertaining to the valuation of its LLA during fiscal 2024. Continued declines in the Company’s performance, the Company’s market capitalization and future changes to the Company’s assumptions and estimates used in the LLA impairment test, particularly the expected future cash flows, remaining useful life of the primary asset and terminal value of the asset group, may result in further impairment charges in future periods of some or all of the assets on the Company’s balance sheet. Although it does not affect the Company’s cash flow, an impairment charge to earnings has the effect of decreasing the Company’s earnings or increasing the Company’s losses, as the case may be.

Valuation of Goodwill Reporting Units

In the annual impairment test, the analysis requires significant judgment, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rates of revenue growth for the Company’s reporting units, estimation of the useful life over which cash flows will occur, terminal growth rates, profitability measures, and determination of the discount rates for the reporting units. The carrying value of the Company’s assets was assigned to reporting units using reasonable methodologies based on the asset type. When the carrying value of a reporting unit exceeds its fair value, goodwill of the reporting unit is considered to be impaired and written down to its fair value. Different judgments could yield different results.

For the year-ended February 29, 2024, the Company recognized an impairment charge of $35 million in the BlackBerry Spark reporting unit. The fair value of all remaining reporting units, with the exception of the Intellectual Property reporting unit, substantially exceeded their carrying values. The fair value of Intellectual Property exceeded its carrying value by approximately 5%. The Company has $97 million of goodwill related to Intellectual Property at risk of potential future impairment.

The estimated fair values were determined utilizing multiple approaches based on the nature of the reporting units being valued. In its analysis, the Company utilized multiple valuation techniques, including the income approach using a discounted future cash flow model and the market-based approach.

The market approach estimates fair value by applying multiples to the reporting unit’s projected operating performance. The multiples are derived from comparable publicly traded companies with similar characteristics to the reporting unit.

Assumptions and estimates about future cash flows and discount rates are complex and often subjective. The analysis requires significant judgment, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rates of revenue growth for the Company’s reporting units, estimation of the useful life over which cash flows will occur, estimation of the total amount of variable consideration to be received under royalty arrangements, terminal growth rates, profitability measures, and determination of the discount rates for the reporting units.

These forecasted cash flows took into consideration management’s outlook for the future and were compared to historical performance to assess reasonableness. A discount rate was applied to the forecasted cash flows. The discount rate considered market and industry data, as well as the specific risk profile of the reporting unit. A terminal value was calculated, which estimates the value of annual cash flow to be received after the discrete forecast periods.

It is reasonably possible that future judgements, assumptions and estimates of cash flows may change, resulting in the need to write down those assets to fair value. Reductions in the Company’s estimates of long-term revenue growth rates, operating margins, and variable consideration could potentially result in impacts that would be material to the consolidated financial statements, including the fair value of the Company’s goodwill.

As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual goodwill impairment test will prove to be accurate predictions of the future. Although management believes the assumptions and estimates made are reasonable and appropriate, different assumptions and estimates could materially impact the reported financial results.

If the Company’s expectations of future results and cash flows decrease significantly or other economic conditions deteriorate, goodwill may be further impaired. As a measure of sensitivity, a 10% decrease in the fair value of the Intellectual Property reporting unit as of December 31, 2023, would result in the carrying amount exceeding its fair value by approximately $9 million or 5%.

Examples of events or circumstances that could negatively affect the underlying key assumptions and ultimately impact the estimated fair value of the aforementioned reporting unit may include such items as the following:

•volatility in the equity and debt markets or other macroeconomic factors

•an increase in the weighted-average cost of capital due to further increases in interest rates

•decreases in future cash flows due to lower than forecast licensing revenue and/or lower than estimated variable consideration received under existing royalty arrangements

•a failure to align the costs associated with maintaining the Company’s patent portfolio to its realized revenues

•failure to protect the Company’s intellectual property could harm its ability to compete effectively and the Company may not earn the revenues it expects from intellectual property rights

The Company intends to continue to monitor the performance of its reporting units for potential indicators of impairment. If impairment indicators exist, the Company will perform an interim goodwill impairment analysis.

Valuation Allowance Against Deferred Tax Assets

The Company regularly assesses the need for a valuation allowance against its deferred tax assets. A valuation allowance is required for deferred tax assets if it is more likely than not that all or some portion of the asset will not be realized. All available evidence, both positive and negative, that may affect the realization of deferred tax assets must be identified and considered in determining the appropriate amount of the valuation allowance. There have been no changes in the Company’s judgement in determining the valuation allowance for the fiscal year ended February 29, 2024. Additionally, for interim periods, the estimated annual effective tax rate should include the valuation allowance for current year changes in temporary differences and losses or income arising during the year. For interim periods, the Company needs to consider the valuation allowance that it expects to recognize at the end of the fiscal year as part of the estimated annual effective tax rate. During interim quarters, the Company uses estimates including pre-tax results and ending position of temporary differences as at the end of the fiscal year to estimate the valuation allowance that it expects to recognize at the end of the fiscal year. This accounting treatment has no effect on the Company’s actual ability to utilize deferred tax assets to reduce future cash tax payments. Different judgments could yield different results. There have been no changes to the method with which the Company estimates the valuation allowance for the interim quarters during the fiscal year ended February 29, 2024.

Revenue Recognition

Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue recognized under the contract will not occur. Any estimates, including any constraints on variable consideration, are evaluated at each reporting period. To the extent the transaction price in a contract with a customer includes variable consideration, the Company estimates the amount of variable consideration that should be included in the price utilizing either the expected value method or the most likely amount method, depending on the nature of the variable consideration. The Company also estimates whether and how much variable consideration is subject to constraint if it cannot conclude it is probable that a significant reversal in revenue will not occur, due to factors such as: the consideration being highly susceptible to factors outside the Company’s influence, the period of time before the variable consideration is resolved, the Company’s previous experience with similar contracts, the Company’s history of price concessions or changing of payment terms, and whether there is a large number and broad range of possible variable consideration amounts. Apart from future revenues from the Malikie Transaction which are constrained, there have been no changes to the Company’s assumptions or estimates on any material variable consideration for the fiscal year ended February 29, 2024.

Judgment is required to determine the SSP for each distinct performance obligation. The Company’s products and services often have observable SSP when the Company sells a promised product or service separately to similar customers. A contractually stated price or list price for a good or service may be the SSP of that good or service. However, in instances where SSP is not directly observable, the Company determines the SSP by maximizing observable inputs and using an adjusted market assessment approach using information that may include market conditions and other observable inputs from the Company’s pricing team, including historical SSP.