What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-09-23 compared with 2021-06-25 · 472 added, 188 removed, 413 unchanged (62% of the section changed)

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 unaudited interim consolidated financial statements and the accompanying notes (the “Consolidated Financial Statements”) of BlackBerry Limited for the three months ended May 31, 2021, included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the Company’s audited consolidated financial statements and accompanying notes and MD&A for the fiscal year ended February 28, 2021 (the “Annual MD&A”).

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read together with the unaudited interim consolidated financial statements and the accompanying notes (the “Consolidated Financial Statements”) of BlackBerry Limited for the three and six months ended August 31, 2021, included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the Company’s audited consolidated financial statements and accompanying notes and MD&A for the fiscal year ended February 28, 2021 (the “Annual MD&A”).

The Consolidated Financial Statements are presented in U.S.

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

• the Company’s expectations with respect to its revenue in fiscal 2022 and with respect to the impact of the COVID-19 pandemic on the Company’s business, results of operations and financial condition on a consolidated basis, including its liquidity position;

• the Company’s expectations with respect to the potential sale of a portion of its patent portfolio;

• the Company’s expectations with respect to the impact of the ongoing COVID-19 pandemic and related cost reduction measures and governmental assistance on the Company’s business, results of operations and financial condition on a consolidated basis, including its liquidity position;

• the Company’s expectations with respect to its revenue and billings in fiscal 2022,

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

• 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 MD&A, including in the sections entitled “Business Overview - Strategy”, “Business Overview - COVID-19”, “Non-GAAP Financial Measures - Key Metrics”, “Results of Operations - Three months ended May 31, 2021 compared to the three months ended May 31, 2020 - Revenue - Revenue by Segment” and “Financial Condition - Debenture Financing and Other Funding Sources”.

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 MD&A, including in the sections entitled “Business Overview - Strategy”, “Business Overview - Products and Services”, “Business Overview - COVID-19”, “Non-GAAP Financial Measures - Key Metrics”, “Results of Operations - Three months ended August 31, 2021 compared to the three months ended August 31, 2020 - Revenue - Revenue by Segment” and “Financial Condition - Debenture Financing and Other Funding Sources”.

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, the ongoing COVID-19 pandemic, competition, and the Company’s expectations regarding its financial performance.

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The Company secures more than 500 million endpoints including more than 195 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 is widely recognized for its intelligent security software and services and believes that it delivers the broadest set of security capabilities in the market to connect, protect and manage IoT endpoints.

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 strategy is to connect, secure and manage every endpoint in the Internet of Things.

The Company leverages its extensive technology portfolio to offer best-in-class cybersecurity, safety and reliability to enterprise customers in government, regulated and other core industries, as well as to original equipment manufacturers in automotive, medical, industrial and other verticals.

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BlackBerry UES is a set of complementary cybersecurity products offering endpoint protection platform (“EPP”), endpoint detection and response (“EDR”), mobile threat defense (“MTD”), zero-trust network access (“ZTNA”) and user and entity behavior analytics (“UEBA”) capabilities.

The BlackBerry Spark platform is informed by the Company’s AI and machine learning capabilities, continuous innovations, professional cybersecurity services, industry partnerships and academic collaborations.

The Company is currently executing on a robust schedule of product launches for BlackBerry Spark to deliver on the Company’s extended detection and response (“XDR”) strategy, which aims to use security telemetry data from the platform’s full range of natively-integrated products to provide deep contextual insights for more powerful threat detection and response.

The BlackBerry Spark platform is informed by the Company’s AI and machine learning capabilities, continuous innovations, professional cybersecurity services and threat research, industry partnerships and academic collaborations.

This comprehensive security strategy for BlackBerry Spark is designed to operate on a single agent across all endpoints, to be administered from a single console, to leverage a single crowd-sourced threat data lake and to be managed in one cloud environment.

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The Company also offers incident response, compromised assessment and containment services to assist clients with forensic analysis, state of existing systems and remediation of attacks.

In addition, the Company offers the BlackBerry Cyber Suite, a UEM-agnostic version of its BlackBerry Spark® UES Suite which organizations will be able to integrate with UEM software from other leading vendors.

In addition, the Company offers the BlackBerry Cyber Suite, a UEM-agnostic version of its BlackBerry Spark® UES Suite which organizations can integrate with UEM software from other leading vendors.

The BlackBerry Spark UEM Suite includes the Company’s BlackBerry® UEM, BlackBerry® Dynamics™ and BlackBerry® Workspaces solutions.

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BlackBerry Dynamics offers a best-in-class development platform and secure container for mobile applications, including the Company’s own enterprise applications such as BlackBerry® Work and BlackBerry® Connect for secure collaboration.

BlackBerry AtHoc and BlackBerry Alert are secure critical event management solutions that enable people, devices and organizations to exchange critical information in real time during business continuity and life safety operations.

The Company also offers the BlackBerry® Spark SDK to promote the evolution of a platform ecosystem by enabling enterprise and independent software vendor (“ISV”) developers to integrate the security features of BlackBerry Spark into their own mobile and web applications, as well as BlackBerry Messenger (BBM®) Enterprise, an enterprise-grade secure instant messaging solution for messaging, voice and video.

BlackBerry AtHoc and BlackBerry Alert are secure, networked critical event management solutions that enable people, devices and organizations to exchange critical information in real time during business continuity and life safety operations.

The platforms securely connect with a diverse set of endpoints to distribute emergency mass notifications, improve personnel accountability and facilitate the bidirectional collection and sharing of data within and between organizations.

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Additionally, the Company’s secure automotive over-the-air software update management service allows OEMs to manage the life cycle of the software and security in their vehicles.

The Company entered into an agreement with Amazon Web Services, Inc.

The Company has entered into an agreement with Amazon Web Services, Inc.

(“AWS”) to develop and market BlackBerry IVY, an intelligent vehicle data platform leveraging BlackBerry QNX’s automotive capabilities.

BlackBerry IVY will allow automakers to safely access a vehicle’s sensor data, normalize it, and apply machine learning to generate and share predictive insights and inferences.

BlackBerry IVY will allow automakers to safely access a vehicle’s sensor data, normalize it, and apply machine learning at the edge to generate and share predictive insights and inferences.

Automakers and developers will be able to use this information to create responsive in-vehicle services that enhance driver and passenger experiences.

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BlackBerry QNX is also a preferred supplier of embedded systems for companies building medical devices, train-control systems, industrial robots, hardware security modules, building automation systems, green energy solutions, and other mission-critical applications.

In addition to BlackBerry QNX, BTS includes BlackBerry Certicom® cryptography and key management products, the BlackBerry Radar® asset monitoring solution, and BlackBerry Jarvis™.

In addition to BlackBerry QNX, BTS includes BlackBerry Certicom® cryptography and key management products, the BlackBerry Radar® asset monitoring solution, and the BlackBerry Jarvis™ binary code scanning solution..

BlackBerry Certicom leverages patented elliptic curve cryptography to provide device security, anti-counterfeiting and product authentication solutions.

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The BlackBerry Radar solution includes devices and secure cloud-based dashboards for tracking containers, trailers, chassis, flatbeds and heavy machinery, for reporting locations and sensor data, and for enabling custom alerts and fleet management analytics.

BlackBerry Jarvis is a cloud-based binary static application security testing platform that identifies vulnerabilities in deployed binary software used in automobiles and other embedded applications, and BlackBerry Messenger (BBM®) Enterprise is an enterprise-grade secure instant messaging solution for messaging, voice and video.

BlackBerry Jarvis is a cloud-based binary static application security testing platform that identifies vulnerabilities in deployed binary software used in automobiles and other embedded applications.

The BlackBerry Spark and IoT groups are both complemented by the enterprise and cybersecurity consulting services offered by the Company’s BlackBerry® Professional Services business.

BlackBerry Professional Services provides platform-agnostic strategies to address mobility-based challenges, providing expert deployment support, end-to-end delivery (from system design to user training), application consulting, and experienced project management.

The Company’s cybersecurity consulting services and tools, combined with its other security solutions, help customers identify the latest cybersecurity threats, test for vulnerabilities, develop risk-appropriate mitigations, maintain IT security standards and techniques, and defend against the risk of future attacks.

The Company’s cybersecurity consulting services and tools, combined with its other security solutions, help customers identify the latest cybersecurity threats, test for

vulnerabilities, develop risk-appropriate mitigations, maintain IT security standards and techniques, and defend against the risk of future attacks.

Licensing and Other

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In addition, in recent years, the Company has licensed its device security software and service suite and related brand assets to outsourcing partners who design, manufacture, market and provide customer support for BlackBerry-branded handsets featuring the Company’s secure Android™ software.

The Company also entered into licensing arrangements with manufacturers of other devices with embedded BlackBerry cybersecurity technology.

The Company has also entered into licensing arrangements with manufacturers of other devices with embedded BlackBerry cybersecurity technology.

In the fourth quarter of fiscal 2021, the Company entered into exclusive negotiations with a North American entity for the potential sale of a portion of the patent portfolio relating primarily to non-core or legacy mobile devices, messaging and wireless networking technologies.

The Company expects to retain rights to use these patents if a transaction is completed and does not intend to sell patents associated with the Company’s current Software and Services business.

Negotiations are ongoing and there can be no assurance that the Company will reach a definitive agreement or that a transaction will be consummated.

Negotiations are ongoing.

Although the parties have reached preliminary agreement on many key terms of the potential transaction and the Company expects to enter into a definitive agreement in the third quarter of fiscal 2022, there can be no assurance that the Company will reach a definitive agreement or that a transaction will be consummated.

If a transaction is completed, the Company expects to retain rights to use these patents and does not intend to sell patents associated with the Company’s current Software and Services business.

The Company’s Other business generates revenue from SAF charged to subscribers using the Company’s legacy BlackBerry 7 and prior BlackBerry operating systems.

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• Launched BlackBerry Optics 3.0, the Company’s next-generation cloud-based EDR solution and BlackBerry Gateway, the Company’s first AI-empowered ZTNA product;

• Announced that the Company was awarded the highest AAA Rating in SE Labs’ Breach Response Test for BlackBerry Protect and BlackBerry Optics;

• Announced that Frost & Sullivan named BlackBerry an innovator in its US Healthcare Cybersecurity Market report;

• Launched BlackBerry Jarvis 2.0, the Company’s updated software composition analysis tool;

• Announced that Frost & Sullivan named BlackBerry IVY an industry-leading cloud software platform for automakers and smart cities;

• Launched an autonomous flood risk and clean water monitoring solution based on BlackBerry AtHoc;

• Announced that BlackBerry AtHoc won the Frost & Sullivan 2021 Technology Innovation Leadership Award for safe city solutions;

• Announced that Frost & Sullivan named BlackBerry an innovator in its US Healthcare Cybersecurity Market report.

• Launched updated SecuSUITE capabilities to further secure group phone calls and messages.

Customers and Partners:

• Announced that the Company has design wins with 24 of the world’s leading 25 Electric Vehicle (EV) automakers, increasing from 23 of the top 25 last quarter;

• Announced that BlackBerry QNX software is embedded in over 195 million vehicles;

• Announced that BlackBerry IVY will provide secure vehicle-based payment capability through a partnership with financial technology solution provider Car IQ;

• Launched the BlackBerry IVY Advisory Council to help shape and advise the BlackBerry IVY application development community and drive use case generation;

• Announced that Volvo Group has selected BlackBerry QNX for its Dynamic Software Platform;

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for Changan Automobile’s new SUV, the UNI-K;

• Launched the BlackBerry IVY Advisory Council to help shape and advise the BlackBerry IVY application development community and drive use case generation;

• Announced that Nobo Technologies selected QNX Neutrino as the foundation for the advanced Digital Cockpit Controller in Great Wall Motors’ Haval H6S, the next generation of China’s leading SUV;

• Announced that sTraffic has chosen the BlackBerry QNX® OS for Safety as the foundation for its Communications-based Train Control System (CBTC);

• Announced the integration of BlackBerry UEM with Microsoft 365;

• Announced that the Government of Canada has selected BlackBerry for their secure productivity and secure communications needs;

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Environmental, Sustainability and Corporate Governance:

• Promoted President Tom Eacobacci to BlackBerry President and Chief Operating Officer;

• Appointed John Giamatteo as President of Cyber Security effective October 4, 2021;

• Announced the resignation of Tom Eacobacci as President and Chief Operating Officer effective October 29, 2021;

• Appointed Mattias Eriksson as President and General Manager of IoT;

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In the first quarter of fiscal 2022, the Company internally reorganized and, as a result, the CODM, who is the Executive Chair and CEO of the Company, began making decisions and assessing the performance of the Company using three operating segments, whereas the Company was previously a single operating segment.

The novel coronavirus (“COVID-19”) pandemic has prompted extraordinary actions by international, federal, state, provincial and local governmental authorities to contain and combat the spread of COVID-19 in regions throughout the world.

The COVID-19 pandemic and related public health measures, including orders to shelter-in-place, travel restrictions and mandated business closures, adversely affected workforces, organizations, consumers and economies, which led to an economic downturn and which may cause market volatility and uncertainty in future periods.

The pandemic has disrupted the normal operations of the Company and the businesses of many of the Company’s customers, suppliers and distribution partners.

To protect the health and safety of the Company’s employees, contractors, customers and visitors, during the first quarter of fiscal 2022 and throughout most of fiscal 2021, the Company mandated remote working, utilizing virtual meetings and suspending employee travel, to protect the health and safety of its employees, contractors, customers and visitors.

The novel coronavirus (“COVID-19”) pandemic has prompted extraordinary actions by governmental authorities throughout the world and has resulted in significant market volatility, uncertainty and economic disruption.

To protect the health and safety of the Company’s employees, contractors, customers and visitors, during the first half of fiscal 2022 and throughout most of fiscal 2021, the Company mandated remote working, utilizing virtual meetings and suspending most employee travel.

The Company also shifted customer, industry and other stakeholder events to virtual-only experiences, and may similarly alter, postpone or cancel other events in the future.

The long-term impacts on the Company of substantially remote operations are uncertain.

In response to certain anticipated and ongoing impacts from the COVID-19 pandemic, the Company also implemented a series of temporary cost reduction measures to further preserve financial flexibility.

In the first quarter of fiscal 2022, these actions included taking advantage of the broad-based employer relief provided by governments in Canada, the United States and other jurisdictions and the postponement of certain discretionary spending.

The Company estimates that savings from temporary cost reduction measures and governmental assistance related to the COVID-19 pandemic will be lower in fiscal 2022 than fiscal 2021 and will primarily depend on the speed and extent of the easing of pandemic-related restrictions and the extent of ongoing government programs.

In fiscal 2022 and fiscal 2021, the economic downturn and uncertainty caused by the COVID-19 pandemic and the measures undertaken to contain its spread negatively affected in particular the Company’s QNX automotive software business, caused volatility in demand for many of the Company’s products and services, adversely affected the ability of the Company’s sales and professional services teams to meet with customers and provide service, negatively impacted expected spending from new customers and increased sales cycle times.

Although the Company experienced higher quarterly Software & Services revenue in the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021, when the COVID-19 pandemic first materially negatively impacted the Company’s operations, and the Company observed a continued recovery in both automotive design activities and production volumes during the first quarter of fiscal 2022, the COVID-19 pandemic and related global chip shortage have had and, in fiscal 2022, may continue to have a material adverse impact on the Company’s QNX automotive software business in particular and on the Company’s business, results of operations and financial condition on a consolidated basis.

The Company also implemented a series of temporary cost reduction measures to further preserve financial flexibility during the COVID-19 pandemic.

In the second quarter of fiscal 2022, these actions included taking advantage of the broad-based employer relief provided by governments in Canada, the United States and other jurisdictions and the postponement of certain discretionary spending.

The Company expects that savings from temporary cost reduction measures and governmental assistance related to the pandemic will continue to be lower in fiscal 2022 than in fiscal 2021.

In fiscal 2022 and fiscal 2021, the economic downturn and uncertainty caused by the COVID-19 pandemic and the measures undertaken to contain its spread have negatively affected the Company’s QNX automotive software business, caused volatility in demand for many of the Company’s other products and services, adversely affected the ability of the Company’s sales and professional services teams to meet with customers and provide service, negatively impacted expected spending from new customers and increased sales cycle times.

Although the Company experienced higher Software & Services revenue in the first six months of fiscal 2022 compared to the first six months of fiscal 2021, when the COVID-19 pandemic first materially negatively impacted the Company’s operations, and observed a recovery in both automotive design activities and production volumes during the first six months of fiscal 2022 on a year over year basis, the COVID-19 pandemic and related global chip shortage have had and, in fiscal 2022, may continue to have a material adverse impact on the Company’s QNX automotive software business in particular and on the Company’s business, results of operations and financial condition on a consolidated basis.

The Company does not expect the COVID-19 pandemic and its related economic impact to materially adversely affect the Company’s liquidity position.

The ultimate impact of the COVID-19 pandemic on the Company’s operational and financial performance will depend on, among other things, the pandemic’s duration and severity, the governmental restrictions that may be sustained or imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the pandemic (including the distribution and efficacy of vaccines, particularly against emergent viral variants), the impact of the global chip shortage and global economic conditions.

The ultimate impact of the COVID-19 pandemic on the Company’s operational and financial performance will depend on, among other things, the pandemic’s duration and severity, including resurgences in some geographic areas as a result of new strains and variants, the governmental restrictions that may be sustained or imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the pandemic (including the distribution and efficacy of vaccines,

particularly against emergent viral variants), the impact of the global chip shortage and other supply chain constraints.

The long-term impact of the COVID-19 pandemic on the Company’s business may not be fully reflected until future periods.

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The Company also continues to actively monitor developments and business conditions that may cause it to take further actions that alter business operations as may be required by applicable authorities or that the Company determines are in the best interests of its employees, customers, suppliers and stockholders.

First Quarter Fiscal 2022 Summary Results of Operations

The following table sets forth certain unaudited consolidated statements of operations data for the quarter ended May 31, 2021 compared to the quarter ended May 31, 2020 under U.S.

Second Quarter Fiscal 2022 Summary Results of Operations

The following table sets forth certain unaudited consolidated statements of operations data for the quarter ended August 31, 2021 compared to the quarter ended August 31, 2020 under U.S.

For the Three Months Ended

(in millions, except for share and per share amounts)

May 31, 2021 May 31, 2020 Change

August 31, 2021 August 31, 2020 Change

Revenue $ 175 $ 259 $ (84)

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(1) Basic loss per share on a U.S.

GAAP basis for the first quarter of fiscal 2022 and first quarter of fiscal 2021 includes 1,421,945 and 2,802,067 common shares, respectively, to be issued on the anniversary dates of the Cylance acquisition completed on February 21, 2019, in consideration for the acquisition.

GAAP basis for the second quarter of fiscal 2022 and second quarter of fiscal 2021 includes 1,421,945 and 2,802,067 common shares, respectively, to be issued on the anniversary dates of the Cylance acquisition completed on February 21, 2019, in consideration for the acquisition.

There are no service or other requirements associated with the issuance of these shares.

(2) Diluted loss per share on a U.S.

GAAP basis for the first quarter of fiscal 2022 and 2021 does not include the dilutive effect of the Debentures (defined below) or stock-based compensation, as to do so would be anti-dilutive.

GAAP basis for the second quarter of fiscal 2022 and 2021 does not include the dilutive effect of the Debentures (defined below) or stock-based compensation, as to do so would be anti-dilutive.

See Note 8 to the Consolidated Financial Statements for the Company’s calculation of the diluted weighted average number of shares outstanding.

The following table shows information by operating segment for the three months ended May 31, 2021 and May 31, 2020.

The following tables show information by operating segment for the three and six months ended August 31, 2021 and August 31, 2020.

The Company reports segment information in accordance with U.S.

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Cyber Security IoT Licensing and Other Segment Totals

May 31, 2021 May 31, 2020 Change May 31, 2021 May 31, 2020 Change May 31, 2021 May 31, 2020 Change May 31, 2021 May 31, 2020 Change

August 31, 2021 August 31, 2020 Change August 31, 2021 August 31, 2020 Change August 31, 2021 August 31, 2020 Change August 31, 2021 August 31, 2020 Change

Segment revenue $ 120 $ 120 $ — $ 40 $ 31 $ 9 $ 15 $ 108 $ (93) $ 175 $ 259 $ (84)

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Segment gross margin $ 71 $ 74 $ (3) $ 33 $ 25 $ 8 $ 9 $ 101 $ (92) $ 113 $ 200 $ (87)

The following table reconciles the Company’s segment results for the three months ended May 31, 2021 to consolidated U.S.

For the Six Months Ended

(in millions)

Cyber Security IoT Licensing and Other Segment Totals

August 31, 2021 August 31, 2020 Change August 31, 2021 August 31, 2020 Change August 31, 2021 August 31, 2020 Change August 31, 2021 August 31, 2020 Change

Segment revenue $ 227 $ 239 $ (12) $ 83 $ 60 $ 23 $ 39 $ 166 $ (127) $ 349 $ 465 $ (116)

Segment cost of sales 95 93 2 14 12 2 12 15 (3) 121 120 1

Segment gross margin $ 132 $ 146 $ (14) $ 69 $ 48 $ 21 $ 27 $ 151 $ (124) $ 228 $ 345 $ (117)

The following tables reconcile the Company’s segment results for the three and six months ended August 31, 2021 to consolidated U.S.

GAAP results:

For the Three Months Ended May 31, 2021

For the Three Months Ended August 31, 2021

(in millions)

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Loss before income taxes $ (142)

For the Six Months Ended August 31, 2021

(in millions)

Cyber Security IoT Licensing and Other Segment Totals Reconciling Items Consolidated U.S.

Revenue $ 227 $ 83 $ 39 $ 349 $ — $ 349

Cost of sales (1)

95 14 12 121 2 123

Gross margin $ 132 $ 69 $ 27 $ 228 $ (2) $ 226

Operating expenses 425 425

Investment loss, net 3 3

Loss before income taxes $ (202)

______________________________

(1) See “Non-GAAP Financial Measures” for a reconciliation of selected U.S.

GAAP-based measures to adjusted measures for the three months ended May 31, 2021.

The following table reconciles the Company’s segment results for the three months ended May 31, 2020 to consolidated U.S.

GAAP-based measures to adjusted measures for the three and six months ended August 31, 2021.

The following tables reconcile the Company’s segment results for the three and six months ended August 31, 2020 to consolidated U.S.

GAAP results:

For the Three Months Ended May 31, 2020

For the Three Months Ended August 31, 2020

(in millions)

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Operating expenses 221 221

Investment loss, net 5 5

Loss before income taxes $ (27)

For the Six Months Ended August 31, 2020

(in millions)

Cyber Security IoT Licensing and Other Segment Totals Reconciling Items Consolidated U.S.

Revenue $ 239 $ 60 $ 166 $ 465 $ — $ 465

Cost of sales (1)

93 12 15 120 3 123

Gross margin $ 146 $ 48 $ 151 $ 345 $ (3) $ 342

Operating expenses 1,009 1,009

Investment loss, net 5 5

Loss before income taxes $ (672)

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(1) See “Non-GAAP Financial Measures” for a reconciliation of selected U.S.

GAAP-based measures to adjusted measures for the three months ended May 31, 2020.

GAAP-based measures to adjusted measures for the three and six months ended August 31, 2020.

Financial Highlights

The Company had approximately $769 million in cash, cash equivalents and investments as of May 31, 2021 and $804 million in cash, cash equivalents and investments as of February 28, 2021.

In the first quarter of fiscal 2022, the Company recognized revenue of $174 million and incurred a net loss of $62 million, or $0.11 basic and diluted loss per share on a U.S.

In the first quarter of fiscal 2021, the Company recognized revenue of $206 million and incurred a net loss of $636 million, or $1.14 basic and diluted loss per share on a U.S.

The Company recognized an adjusted net loss of $27 million, and an adjusted loss of $0.05 per share, in the first quarter of fiscal 2022.

The Company recognized adjusted net income of $7 million, and adjusted earnings of $0.01 per share, in the first quarter of fiscal 2021.

The Company had approximately $772 million in cash, cash equivalents and investments as of August 31, 2021 and $804 million in cash, cash equivalents and investments as of February 28, 2021.

In the second quarter of fiscal 2022, the Company recognized revenue of $175 million and incurred a net loss of $144 million, or $0.25 basic and diluted loss per share on a U.S.

In the second quarter of fiscal 2021, the Company recognized revenue of $259 million and incurred a net loss of $23 million, or $0.04 basic and diluted loss per share on a U.S.

The Company recognized an adjusted net loss of $33 million, and an adjusted loss of $0.06 per share, in the second quarter of fiscal 2022.

The Company recognized adjusted net income of $58 million, and adjusted earnings of $0.10 per share, in the second quarter of fiscal 2021.

See “Non-GAAP Financial Measures” below.

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The fair value adjustment does not impact the terms of the Debentures such as the face value, the redemption features or the conversion price.

As at May 31, 2021, the fair value of the 1.75% Debentures was approximately $715 million, a decrease of approximately $5 million during the first quarter of fiscal 2022.

For the three months ended May 31, 2021, the Company recorded non-cash income relating to changes in fair value from instrument specific credit risk of $1 million in Other Comprehensive Income (“OCI”) and non-cash income relating to changes in fair value from non-credit components of $4 million (pre-tax and after tax)

(the “Q1 Fiscal 2022 Debentures Fair Value Adjustment”) in the Company’s consolidated statements of operations relating to the 1.75% Debentures.

As at August 31, 2021, the fair value of the 1.75% Debentures was approximately $782 million, an increase of approximately $67 million during the second quarter of fiscal 2022.

For the three months ended August 31, 2021, the Company recorded a non-cash charge relating to changes in fair value from non-credit components of $67 million (pre-tax and after tax) (the “Q2 Fiscal 2022 Debentures Fair Value Adjustment”) in the Company’s consolidated statements of operations and non-cash income relating to changes in fair value from instrument specific credit risk of nil in Other Comprehensive Loss (“OCL”) relating to the 1.75% Debentures.

For the six months ended August 31, 2021, the Company recorded a non-cash charge relating to changes in fair value from non-credit components of $63 million (pre-tax and after tax) (the “Fiscal 2022 Debentures Fair Value Adjustment”) in the Company’s consolidated statements of operations and non-cash income relating to changes in fair value from instrument specific credit risk of $1 million in OCL relating to the 1.75% Debentures.

See Note 6 to the Consolidated Financial Statements for further details on the 1.75% Debentures.

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GAAP, and information contained in this MD&A is presented on that basis.

On June 24, 2021, the Company announced financial results for the three months ended May 31, 2021, which included certain non-GAAP financial measures, including adjusted gross margin, adjusted gross margin percentage, adjusted operating expense, adjusted operating loss, adjusted EBITDA, adjusted operating loss margin percentage, adjusted EBITDA margin percentage, adjusted net income (loss), adjusted income (loss) per share, adjusted research and development expense, adjusted selling, marketing and administrative expense and adjusted amortization expense.

On September 22, 2021, the Company announced financial results for the three and six months ended August 31, 2021, which included certain non-GAAP financial measures, including adjusted gross margin, adjusted gross margin percentage, adjusted operating expense, adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage, adjusted EBITDA margin percentage, adjusted net income (loss), adjusted income (loss) per share, adjusted research and development expense, adjusted selling, marketing and administrative expense and adjusted amortization expense.

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 below from the Company’s U.S.

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In the first quarter of fiscal 2022, the Company discontinued its use of software deferred revenue acquired and software deferred commission acquired adjustments in its non-GAAP financial measures due to the quantitative decline in the adjustments over time.

For purposes of comparability, the Company’s non-GAAP financial measures for the three months ended May 31, 2020 have been updated to conform to the current year’s presentation.

For purposes of comparability, the Company’s non-GAAP financial measures for the three and six months ended August 31, 2020 have been updated to conform to the current year’s presentation.

• Debentures fair value adjustment .

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Reconciliation of non-GAAP based measures with most directly comparable U.S.

GAAP based measures for the three months ended May 31, 2021 and May 31, 2020

Readers are cautioned that adjusted gross margin, adjusted gross margin percentage, adjusted operating expense, adjusted operating loss, adjusted EBITDA, adjusted operating loss margin percentage, adjusted EBITDA margin percentage, adjusted net income (loss), adjusted income (loss) per share, adjusted research and development expense, adjusted selling, marketing and administrative expense and adjusted amortization expense and similar measures do not have any standardized meaning prescribed by U.S.

GAAP based measures for the three months ended August 31, 2021 and August 31, 2020

Readers are cautioned that adjusted gross margin, adjusted gross margin percentage, adjusted operating expense, adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage, adjusted EBITDA margin percentage, adjusted net income (loss), adjusted income (loss) per share, adjusted research and development expense, adjusted selling, marketing and administrative expense and adjusted amortization expense 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.

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A reconciliation of the most directly comparable U.S.

GAAP financial measures for the three months ended May 31, 2021 and May 31, 2020 to adjusted financial measures is reflected in the tables below:

For the Three Months Ended (in millions) May 31, 2021 May 31, 2020

GAAP financial measures for the three months ended August 31, 2021 and August 31, 2020 to adjusted financial measures is reflected in the table below:

For the Three Months Ended (in millions) August 31, 2021 August 31, 2020

Gross margin $ 112 $ 199

4 unchanged sentences

Adjusted gross margin % 64.6 % 77.2 %

Reconciliation of operating expense for the three months ended May 31, 2021, February 28, 2021 and May 31, 2020 to adjusted operating expense is reflected in the tables below:

For the Three Months Ended (in millions) May 31, 2021 February 28, 2021 May 31, 2020

Reconciliation of operating expense for the three months ended August 31, 2021, May 31, 2021 and August 31, 2020 to adjusted operating expense is reflected in the table below:

For the Three Months Ended (in millions) August 31, 2021 May 31, 2021 August 31, 2020

Operating expense $ 253 $ 172 $ 221

1 unchanged sentence

Stock compensation expense 11 6 8

Debenture fair value adjustment (1)

Debentures fair value adjustment (1)

Acquired intangibles amortization 32 32 32

LLA impairment charge — — 21

Adjusted operating expense $ 143 $ 138 $ 141

______________________________

(1) See “Second Quarter Fiscal 2022 Summary Results of Operations - Financial Highlights - Debentures Fair Value Adjustment”

Reconciliation of U.S.

GAAP net loss and U.S.

GAAP basic loss per share for the three months ended August 31, 2021 and August 31, 2020 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) August 31, 2021 August 31, 2020

Basic loss per share Basic earnings (loss)

Net loss $ (144) $(0.25) $ (23) $(0.04)

Restructuring charges — 1

Stock compensation expense 12 9

Debentures fair value adjustment 67 18

Acquired intangibles amortization 32 32

LLA impairment charge — 21

Adjusted net income (loss) $ (33) $(0.06) $ 58 $0.10

Reconciliation of U.S.

GAAP research and development, selling, marketing and administration, and amortization expense for the three months ended August 31, 2021 and August 31, 2020 to adjusted research and development, selling, marketing and administration, and amortization expense is reflected in the table below:

For the Three Months Ended (in millions) August 31, 2021 August 31, 2020

Research and development $ 58 $ 57

Stock compensation expense 2 2

Adjusted research and development $ 56 $ 55

Selling, marketing and administration $ 83 $ 79

Restructuring charges — 1

Stock compensation expense 9 6

Adjusted selling, marketing and administration $ 74 $ 72

Amortization $ 45 $ 46

Acquired intangibles amortization 32 32

Adjusted amortization $ 13 $ 14

Adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage and adjusted EBITDA margin percentage for the three months ended August 31, 2021 and August 31, 2020 are reflected in the table below.

For the Three Months Ended (in millions) August 31, 2021 August 31, 2020

Operating loss $ (141) $ (22)

Non-GAAP adjustments to operating loss

Restructuring charges — 1

Stock compensation expense 12 9

Debentures fair value adjustment 67 18

Acquired intangibles amortization 32 32

LLA impairment charge — 21

Total non-GAAP adjustments to operating loss 111 81

Adjusted operating income (loss) (30) 59

Amortization 48 50

Acquired intangibles amortization (32) (32)

Adjusted EBITDA $ (14) $ 77

Revenue $ 175 $ 259

Adjusted operating income (loss) margin % (1)

Adjusted EBITDA margin % (2)

______________________________

(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

Reconciliation of non-GAAP based measures with most directly comparable U.S.

GAAP based measures for the six months ended August 31, 2021 and August 31, 2020.

A reconciliation of the most directly comparable U.S.

GAAP financial measures for the six months ended August 31, 2021 and August 31, 2020 to adjusted financial measures is reflected in the table below:

For the Six Months Ended (in millions) August 31, 2021 August 31, 2020

Gross margin $ 226 $ 342

Stock compensation expense 2 3

Adjusted gross margin $ 228 $ 345

Gross margin % 64.8 % 73.5 %

Stock compensation expense 0.5 % 0.7 %

Adjusted gross margin % 65.3 % 74.2 %

Operating expense $ 425 $ 1,009

Restructuring charges — 2

Stock compensation expense 17 20

Debentures fair value adjustment (1)

Acquired intangibles amortization 64 65

Goodwill impairment charge — 594

2 unchanged sentences

______________________________

(1) See “First Quarter Fiscal 2022 Summary Results of Operations - Financial Highlights - Debentures Fair Value Adjustment”

(1) See “Second Quarter Fiscal 2022 Summary Results of Operations - Financial Highlights - Debentures Fair Value Adjustment”

Reconciliation of U.S.

GAAP net loss and U.S.

GAAP basic loss per share for the three months ended May 31, 2021 and May 31, 2020 to adjusted net income (loss) and adjusted basic earnings (loss) per share is reflected in the tables below:

For the Three Months Ended (in millions, except per share amounts) May 31, 2021 May 31, 2020

Basic earnings (loss) per share Basic earnings (loss) per share

GAAP basic loss per share for the six months ended August 31, 2021 and August 31, 2020 to adjusted net income (loss) and adjusted basic earnings (loss) per share is reflected in the table below:

For the Six Months Ended (in millions, except per share amounts) August 31, 2021 August 31, 2020

Basic loss per share Basic earnings (loss) per share

Net loss $ (206) $(0.36) $ (659) $(1.18)

1 unchanged sentence

Stock compensation expense 19 23

Debenture fair value adjustment (4) 1

Debentures fair value adjustment 63 19

Acquired intangibles amortization 64 65

Goodwill impairment charge — 594

LLA impairment charge — 21

Adjusted net income (loss) $ (60) $(0.11) $ 65 $0.12

Reconciliation of U.S.

GAAP research and development, selling, marketing and administration, and amortization expense for the three months ended May 31, 2021 and May 31, 2020 to adjusted research and development, selling, marketing and administration, and amortization expense is reflected in the tables below:

For the Three Months Ended (in millions) May 31, 2021 May 31, 2020

GAAP research and development, selling, marketing and administration, and amortization expense for the six months ended August 31, 2021 and August 31, 2020 to adjusted research and development, selling, marketing and administration, and amortization expense is reflected in the table below:

For the Six Months Ended (in millions) August 31, 2021 August 31, 2020

Research and development $ 115 $ 114

8 unchanged sentences

Adjusted amortization $ 27 $ 27

Adjusted operating loss, adjusted EBITDA, adjusted operating loss margin percentage and adjusted EBITDA margin percentage for the three months ended May 31, 2021 and May 31, 2020 are reflected in the table below.

For the Three Months Ended (in millions) May 31, 2021 May 31, 2020

Adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage and adjusted EBITDA margin percentage for the six months ended August 31, 2021 and August 31, 2020 are reflected in the table below.

For the Six Months Ended (in millions) August 31, 2021 August 31, 2020

Operating loss $ (199) $ (667)

2 unchanged sentences

Stock compensation expense 19 23

Debenture fair value adjustment (4) 1

Debentures fair value adjustment 63 19

Acquired intangibles amortization 64 65

Goodwill impairment charge — 594

LLA impairment charge — 21

Total non-GAAP adjustments to operating loss 146 724

Adjusted operating loss (23) (2)

Adjusted operating income (loss) (53) 57

Amortization 97 100

2 unchanged sentences

Revenue $ 349 $ 465

Adjusted operating loss margin % (1)

Adjusted operating income (loss) margin % (1)

Adjusted EBITDA margin % (2)

______________________________

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

(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 regularly monitors a number of financial and operating metrics, including the following key metrics, in order to measure the Company’s current performance and estimate future performance.

Readers are cautioned that annual recurring revenue (“ARR”), dollar-based net retention rate (“DBNRR”), QNX Royalty Revenue Backlog, billings, recurring revenue percentage, and free cash flow do not have any standardized meaning and are unlikely to be comparable to similarly titled measures reported by other companies.

In the first quarter of fiscal 2022, the Company discontinued its use of software deferred revenue acquired in its key metrics as the Company no longer reports non-GAAP revenue.

For purposes of comparability, the

Company’s key metrics for the three months ended February 28, 2021 and May 31, 2020 have been updated to conform to the current year’s presentation.

Comparative breakdowns of the key metrics for the three months ended May 31, 2021 and May 31, 2020 are set forth below.

For the Three Months Ended (in millions) May 31, 2021 May 31, 2020 Change

Readers are cautioned that annual recurring revenue (“ARR”), dollar-based net retention rate (“DBNRR”), billings, recurring revenue percentage, and free cash flow do not have any standardized meaning and are unlikely to be comparable to similarly titled measures reported by other companies.

In the first quarter of fiscal 2022, the Company discontinued its use of software deferred revenue acquired in its key metrics as the

Company no longer reports non-GAAP revenue.

For purposes of comparability, the Company’s key metrics for the three months ended August 31, 2020 have been updated to conform to the current year’s presentation.

Comparative breakdowns of certain key metrics for the three months ended August 31, 2021 and August 31, 2020 are set forth below.

For the Three Months Ended (in millions) August 31, 2021 August 31, 2020 Change

Annual Recurring Revenue

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Cyber Security 95 % 100 % (5 %)

QNX Royalty Revenue Backlog $ 490 $ 450 $ 40

Recurring Software Product Revenue ~ 80% ~ 90% ~ 10%

2 unchanged sentences

The Company uses ARR as an indicator of business momentum for software and services.

Cyber Security ARR was approximately $364 million in the first quarter of fiscal 2022 and decreased compared to $370 million in the first quarter of fiscal 2021 and decreased compared to $369 million in the fourth quarter of fiscal 2021.

IoT ARR was approximately $86 million in the first quarter of fiscal 2022 and decreased compared to $103 million the first quarter of fiscal 2021 and increased compared to $84 million in the fourth quarter of fiscal 2021.

The Company previously stated that it expected to see the negative impact of COVID-19 on IoT ARR until early in fiscal 2022, as the Company returns to its normal revenue run rate.

The Company now expects that IoT revenue will return to a normal run-rate by the end of fiscal 2022 due to the reasons discussed below in “Revenue by Segment” and expects to see a negative impact from the global chip shortage on IoT ARR until the end of fiscal 2022.

Cyber Security ARR was approximately $364 million in the second quarter of fiscal 2022, consistent with the first quarter of fiscal 2022 and decreased compared to $367 million in the second quarter of fiscal 2021.

IoT ARR was approximately $89 million in the second quarter of fiscal 2022 and increased compared to $86 million in the first quarter of fiscal 2022 and decreased compared to $92 million the second quarter of fiscal 2021.

Dollar-Based Net Retention Rate

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The Company then divides the Current Period ARR by the Prior Period ARR to calculate the DBNRR.

Cyber Security DBNRR was 94% in the first quarter of fiscal 2022 and decreased compared to 101% in first quarter of fiscal 2021 and decreased compared to 95% in the fourth quarter of fiscal 2021.

QNX Royalty Revenue Backlog

The Company defines the royalty revenue 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 customer projections of anticipated volumes over the lifetime of a design, in each case as of when the design win was awarded.

The QNX royalty revenue backlog is calculated annually, is not 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 revenue backlog was approximately $490 million at the end of the first quarter of fiscal 2022 and increased compared $450 million at the end of the first quarter of fiscal 2021.

Cyber Security DBNRR was 95% in the second quarter of fiscal 2022 and increased compared to 94% in the first quarter of fiscal 2022 and decreased compared to 100% in second quarter of fiscal 2021.

The Company defines billings as amounts invoiced less credits issued.

The Company considers 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.

Total Company billings decreased in the first quarter of fiscal 2022 compared to the first quarter of fiscal 2021 and compared to the fourth quarter of fiscal 2021.

Total Company billings increased in the second quarter of fiscal 2022 compared to the first quarter of fiscal 2022 and decreased compared to the second quarter of fiscal 2021.

The Company expects sequential billings growth for Cyber Security for the remainder of fiscal 2022.

Recurring Software Product Revenue

3 unchanged sentences

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 adjusted Software and Services product revenue, excluding professional services, was approximately 90% recurring in the first quarter of fiscal 2022 and decreased from greater than 90% recurring in the first quarter of fiscal 2021 due to product mix.

Total adjusted Software and Services product revenue, excluding professional services, was approximately 80% recurring in the second quarter of fiscal 2022 and decreased compared to approximately 90% recurring in the first quarter of fiscal 2022 and the second quarter of fiscal 2021 due to product mix.

Free Cash Flow

2 unchanged sentences

GAAP and therefore may not be comparable to similar measures presented by other companies.

The Company uses free cash flow when assessing its sources of liquidity, capital resources, and quality of earnings.

The Company uses free cash flow when assessing its sources of liquidity, capital resources, and

quality of earnings.

Free cash flow 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.

For the three months ended May 31, 2021, the Company’s net cash used in operating activities was $33 million and capital expenditures were $2 million, resulting in the Company reporting free cash usage of $35 million compared to net cash used in operating activities of $31 million, capital expenditures of $1 million, and free cash usage of $32 million for the three months ended May 31, 2020.

Results of Operations - Three months ended May 31, 2021 compared to the three months ended May 31, 2020

For the three months ended August 31, 2021, the Company’s net cash generated by operating activities was $12 million and capital expenditures were $2 million, resulting in the Company reporting free cash flow of $10 million compared to net cash generated by operating activities of $31 million, capital expenditures of $2 million, and free cash flow of $29 million for the three months ended August 31, 2020.

Results of Operations - Three months ended August 31, 2021 compared to the three months ended August 31, 2020

Revenue by Segment

2 unchanged sentences

(in millions)

May 31, 2021 May 31, 2020 Change

August 31, 2021 August 31, 2020 Change

Revenue by Segment

8 unchanged sentences

Cyber Security

Cyber Security revenue was $107 million, or 61.5% of revenue, in the first quarter of fiscal 2022, a decrease of $12 million compared to $119 million, or 57.8% of revenue, in the first quarter of fiscal 2021.

The decrease in Cyber Security revenue of $12 million was primarily due to a decrease of $9 million relating to product revenue in BlackBerry Spark and a decrease of $3 million relating to professional services, partially offset by an increase of $3 million related to the sale of Secusmart solutions.

The Company previously stated that it expected Cyber Security revenue to be between $495 million and $515 million in fiscal 2022.

The Company now expects Cyber Security revenue to be towards the lower end of $495 million and $515 million in fiscal 2022 due to billings growth being more heavily weighted to the second half of the year.

IoT revenue was $43 million, or 24.7% of revenue, in the first quarter of fiscal 2022, an increase of $14 million compared to $29 million, or 14.0% of revenue, in the first quarter of fiscal 2021.

The increase in IoT revenue of $14 million was primarily due to an increase of $7 million in BlackBerry QNX royalty revenue due to the partial recovery of the automotive market from the slowdown related to the COVID-19 pandemic in first quarter of fiscal 2021, an increase of $5 million in development seat revenue and an increase of $1 million in BlackBerry Radar revenue.

The Company previously stated that, assuming that the global chip shortage has been alleviated by the middle of fiscal 2022, it expects that BTS revenue will return to a pre-pandemic run-rate of approximately $50 million per quarter by that time and will be between $180 million and $200 million for fiscal 2022 as a whole.

The Company now expects that IoT revenue will return to a run-rate of approximately $50 million per quarter by the end of fiscal 2022, primarily due to the negative impact of the global chip shortage on BlackBerry QNX royalty revenue in the first half of fiscal 2022.

Cyber Security revenue was $120 million, or 68.6% of revenue, in the second quarter of fiscal 2022, compared to $120 million, or 46.3% of revenue, in the second quarter of fiscal 2021.

An increase of $11 million related to the sale of Secusmart solutions was offset by a decrease of $9 million relating to product revenue in BlackBerry Spark, and a decrease of $3 million relating to professional services.

The Company expects modest sequential Cyber Security revenue growth for the remainder of fiscal 2022.

IoT revenue was $40 million, or 22.9% of revenue, in the second quarter of fiscal 2022, an increase of $9 million compared to $31 million, or 12.0% of revenue, in the second quarter of fiscal 2021.

The increase in IoT revenue of $9 million was primarily due to an increase of $6 million in BlackBerry QNX royalty revenue due to the partial recovery of the automotive market from the slowdown related to the COVID-19 pandemic in the second quarter of fiscal 2021, an increase of $3 million in development seat revenue and an increase of $1 million relating to professional services revenue.

Licensing and Other

Licensing and Other revenue was $24 million, or 13.8% of revenue, in the first quarter of fiscal 2022, a decrease of $34 million compared to $58 million, or 28.2% of revenue, in the first quarter of fiscal 2021.

Licensing and Other revenue was $15 million, or 8.5% of revenue, in the second quarter of fiscal 2022, a decrease of $93 million compared to $108 million, or 41.7% of revenue, in the second quarter of fiscal 2021.

The decrease in Licensing and Other revenue of $93 million was primarily due to a decrease in revenue from the Company’s intellectual property licensing arrangements including its patent licensing agreement with Teletry.

The Company previously stated that, assuming the potential sale of a portion of the Company’s patent portfolio process concludes in the middle of fiscal 2022 without the completion of a transaction, the Company would resume its prior monetization activities and expected that Licensing and Other revenue would be approximately $100 million in fiscal 2022.

The Company now expects that the ongoing patent sale process, and associated restrictions on monetization activity, will continue for the remainder of the fiscal year and that, therefore, Licensing and Other revenue will be approximately $10 million in each of the third and fourth quarters of fiscal 2022 and approximately $60 million in fiscal 2022.

Revenue by Geography

2 unchanged sentences

(in millions)

May 31, 2021 May 31, 2020 Change

August 31, 2021 August 31, 2020 Change

Revenue by Geography

9 unchanged sentences

North America Revenue

Revenue in North America was $111 million, or 63.8% of revenue, in the first quarter of fiscal 2022, reflecting a decrease of $39 million compared to $150 million, or 72.8% of revenue, in the first quarter of fiscal 2021.

Revenue in North America decreased compared to the first quarter of fiscal 2021 primarily due to a decrease of $34 million in Licensing and Other revenue due to the reasons discussed above in “Revenue by Segment”, a decrease of $9 million in product revenue in BlackBerry Spark and a decrease of $2 million relating to professional services, partially offset by an increase of $5 million in BlackBerry QNX royalty revenue due to the reasons discussed above in “Revenue by Segment”.

Revenue in North America was $101 million, or 57.7% of revenue, in the second quarter of fiscal 2022, reflecting a decrease of $94 million compared to $195 million, or 75.3% of revenue, in the second quarter of fiscal 2021.

Revenue in North America decreased compared to the second quarter of fiscal 2021 primarily due to a decrease of $92 million in Licensing and Other revenue due to the reasons discussed above in “Revenue by Segment”, a decrease of $6 million in product revenue in BlackBerry Spark, partially offset by an increase of $5 million in BlackBerry QNX royalty revenue due to the reasons discussed above in “Revenue by Segment”.

Europe, Middle East and Africa Revenue

Revenue in Europe, Middle East and Africa was $45 million or 25.9% of revenue in the first quarter of fiscal 2022, reflecting an increase of $4 million compared to $41 million or 19.9% of revenue in the first quarter of fiscal 2021.

The increase in revenue is primarily due to an increase of $2 million related to the sale of Secusmart solutions, an increase of $2 million in development seat revenue and an increase of $1 million in BlackBerry QNX royalty revenue due to the reasons discussed above in “Revenue by Segment”.

Revenue in Europe, Middle East and Africa was $57 million or 32.6% of revenue in the second quarter of fiscal 2022, reflecting an increase of $9 million compared to $48 million or 18.5% of revenue in the second quarter of fiscal 2021.

The increase in revenue is primarily due to an increase of $11 million related to the sale of Secusmart solutions, an increase of $2 million in development seat revenue and an increase of $1 million in BlackBerry QNX royalty revenue due to the reasons discussed above in “Revenue by Segment”, partially offset by a decrease of $4 million in product revenue in BlackBerry Spark.

Other Regions Revenue

Revenue in other regions was $18 million or 10.3% of revenue in the first quarter of fiscal 2022, reflecting an increase of $3 million compared to $15 million or 7.3% of revenue in the first quarter of fiscal 2021.

The increase in revenue is primarily due to an increase of $2 million in development seat revenue and an increase of $1 million in product revenue in BlackBerry Spark.

Revenue in other regions was $17 million or 9.7% of revenue in the second quarter of fiscal 2022, reflecting an increase of $1 million compared to $16 million or 6.2% of revenue in the second quarter of fiscal 2021.

The increase in revenue is primarily due to an increase of $1 million in development seat revenue.

Consolidated Gross Margin

Consolidated gross margin decreased by $29 million to approximately $114 million in the first quarter of fiscal 2022 from $143 million in the first quarter of fiscal 2021.

Consolidated gross margin decreased by $87 million to approximately $112 million in the second quarter of fiscal 2022 from $199 million in the second quarter of fiscal 2021.

The decrease was primarily due to a decrease in revenue from Licensing and Other and BlackBerry Spark, partially offset by an increase in revenue from BlackBerry QNX and Secusmart 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.

Consolidated Gross Margin Percentage

Consolidated gross margin percentage decreased by 3.9% to approximately 65.5% of consolidated revenue in the first quarter of fiscal 2022 from 69.4% of consolidated revenue in the first quarter of fiscal 2021.

Consolidated gross margin percentage decreased by 12.8% to approximately 64.0% of consolidated revenue in the second quarter of fiscal 2022 from 76.8% of consolidated revenue in the second quarter of fiscal 2021.

The decrease was primarily due to a lower gross margin contribution from Licensing and Other due to the reasons discussed above in “Revenue by Segment”, partially offset by a higher gross margin contribution from BlackBerry QNX due to the reasons discussed above in “Revenue by Segment”.

Gross Margin by Segment

See “Business Overview” and “First Quarter Fiscal 2022 Summary Results of Operations” for information about the Company’s operating segments and the basis of operating segment results.

See “Business Overview” and “Second Quarter Fiscal 2022 Summary Results of Operations” for information about the Company’s operating segments and the basis of operating segment results.

For the Three Months Ended

1 unchanged sentence

Cyber Security IoT Licensing and Other Segment Totals

May 31, 2021 May 31, 2020 Change May 31, 2021 May 31, 2020 Change May 31, 2021 May 31, 2020 Change May 31, 2021 May 31, 2020 Change

August 31, 2021 August 31, 2020 Change August 31, 2021 August 31, 2020 Change August 31, 2021 August 31, 2020 Change August 31, 2021 August 31, 2020 Change

Segment revenue $ 120 $ 120 $ — $ 40 $ 31 $ 9 $ 15 $ 108 $ (93) $ 175 $ 259 $ (84)

3 unchanged sentences

Cyber Security

Cyber Security gross margin decreased by $11 million to approximately $61 million in the first quarter of fiscal 2022 from $72 million in the first quarter of fiscal 2021.

Cyber Security gross margin decreased by $3 million to approximately $71 million in the second quarter of fiscal 2022 from $74 million in the second quarter of fiscal 2021.

The decrease 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.

Cyber Security gross margin percentage decreased by 4% to approximately 57% of Cyber Security revenue in the first quarter of fiscal 2022 from 61% of Cyber Security revenue in the first quarter of fiscal 2021.

Cyber Security gross margin percentage decreased by 3% to approximately 59% of Cyber Security revenue in the second quarter of fiscal 2022 from 62% of Cyber Security revenue in the second quarter of fiscal 2021.

The decrease was primarily due to the reasons discussed above in “Revenue by Segment”.

IoT gross margin increased by $13 million to approximately $36 million in the first quarter of fiscal 2022 from $23 million in the first quarter of fiscal 2021.

IoT gross margin increased by $8 million to approximately $33 million in the second quarter of fiscal 2022 from $25 million in the second quarter of fiscal 2021.

The increase 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.

IoT gross margin percentage increased by 5% to approximately 84% of IoT revenue in the first quarter of fiscal 2022 from 79% of IoT revenue in the first quarter of fiscal 2021.

The increase was primarily due an increase in BlackBerry QNX royalty revenue, which has a higher relative gross margin percentage, due to the reasons discussed above in “Revenue by Segment”.

IoT gross margin percentage increased by 2% to approximately 83% of IoT revenue in the second quarter of fiscal 2022 from 81% of IoT revenue in the second quarter of fiscal 2021.

The increase was primarily due to an increase in BlackBerry QNX royalty revenue, which has a higher relative gross margin percentage, due to the reasons discussed above in “Revenue by Segment”.

Licensing and Other

Licensing and Other gross margin decreased by $32 million to approximately $18 million in the first quarter of fiscal 2022 from $50 million in the first quarter of fiscal 2021.

Licensing and Other gross margin decreased by $92 million to approximately $9 million in the second quarter of fiscal 2022 from $101 million in the second quarter of fiscal 2021.

The decrease 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 gross margin percentage decreased by 11% to approximately 75% of Licensing and Other revenue in the first quarter of fiscal 2022 from 86% of Licensing and Other revenue in the first quarter of fiscal 2021.

Licensing and Other gross margin percentage decreased by 34% to approximately 60% of Licensing and Other revenue in the second quarter of fiscal 2022 from 94% of Licensing and Other revenue in the second quarter of fiscal 2021.

The decrease was primarily due to the reasons discussed above in “Revenue by Segment”.

Operating Expenses

The table below presents a comparison of research and development, selling, marketing and administration, and amortization expenses for the quarter ended May 31, 2021, compared to the quarter ended February 28, 2021 and the quarter ended May 31, 2020.

The Company believes it is meaningful to provide a sequential comparison between the first quarter of fiscal 2022 and the fourth quarter of fiscal 2021.

The table below presents a comparison of research and development, selling, marketing and administration, and amortization expenses for the quarter ended August 31, 2021, compared to the quarter ended May 31, 2021 and the quarter ended August 31, 2020.

The Company believes it is meaningful to provide a sequential comparison between the second quarter of fiscal 2022 and the first quarter of fiscal 2022.

For the Three Months Ended

(in millions)

May 31, 2021 February 28, 2021 May 31, 2020

August 31, 2021 May 31, 2021 August 31, 2020

Revenue $ 175 $ 174 $ 259

4 unchanged sentences

Impairment of long-lived assets — — 21

Impairment of goodwill — — 594

Debentures fair value adjustment 67 (4) 18

5 unchanged sentences

Impairment of long-lived assets — % — % 8.1 %

Impairment of goodwill — % — % 288.3 %

Debentures fair value adjustment 38.3 % (2.3 %) 6.9 %

1 unchanged sentence

See “Non-GAAP Financial Measures” for a reconciliation of selected U.S.

GAAP-based measures to adjusted measures for the three months ended May 31, 2021, February 28, 2021 and May 31, 2020.

GAAP-based measures to adjusted measures for the three months ended August 31, 2021, May 31, 2021 and August 31, 2020.

GAAP Operating Expenses

Operating expenses decreased by $293 million, or 63.0%, to $172 million, or 98.9% of revenue, in the first quarter of fiscal 2022, compared to $465 million, or 221.4% of revenue, in the fourth quarter of fiscal 2021.

The decrease was primarily attributable to the difference between the Q1 Fiscal 2022 Debentures Fair Value Adjustment and the fair value adjustment related to the Debentures incurred in the fourth quarter of fiscal 2021 of $262 million, a decrease of $22 million in impairment of long-lived assets in the fourth quarter of fiscal 2021 which did not recur, a decrease of $10 million in stock compensation expenses and a decrease of $6 million in the Company’s deferred share unit costs, partially offset by an increase of $11 million in variable incentive plan costs.

Operating expenses decreased by $616 million, or 78.2%, to $172 million, or 98.9% of revenue, in the first quarter of fiscal 2022, compared to $788 million, or 382.5% of revenue, in the first quarter of fiscal 2021.

The decrease was primarily attributable to goodwill impairment of $594 million in the first quarter of fiscal 2021 which did not recur, a decrease of $7 million in stock compensation expenses, an increase in benefits of $6 million in government subsidies resulting from claims filed for the Canada Emergency Wage Subsidy (“CEWS”) program to support the business through the COVID-19 pandemic, and the difference between the Q1 Fiscal 2022 Debentures Fair Value Adjustment and the fair value adjustment related to the Debentures incurred in the first quarter of fiscal 2021 of $5 million, partially offset by an increase of $5 million in legal expenses.

Operating expenses increased by $81 million, or 47.1%, to $253 million, or 144.6% of revenue, in the second quarter of fiscal 2022, compared to $172 million, or 98.9% of revenue, in the first quarter of fiscal 2022.

The increase was primarily attributable to the difference between the Q2 Fiscal 2022 Debentures Fair Value Adjustment and the fair value adjustment related to the Debentures incurred in the first quarter of fiscal 2022 of $71 million, an increase of $6 million in stock compensation expenses, a decrease in benefits of $4 million in government subsidies resulting from claims filed for the Canada Emergency Wage Subsidy (“CEWS”) program to support the business through the COVID-19 pandemic and an increase of $3 million in the Company’s deferred share unit costs, partially offset by a decrease of $7 million in legal expenses.

Operating expenses increased by $32 million, or 14.5%, to $253 million, or 144.6% of revenue, in the second quarter of fiscal 2022, compared to $221 million, or 85.3% of revenue, in the second quarter of fiscal 2021.

The increase was primarily attributable the difference between the Q2 Fiscal 2022 Debentures Fair Value Adjustment and the fair value adjustment related to the Debentures incurred in the second quarter of fiscal 2021 of $49 million, a decrease in benefits of $7 million in CEWS funding and an increase of $4 million in stock compensation expenses, partially offset by long-lived asset impairment of $21 million in the second quarter of fiscal 2021 which did not recur and a decrease of $7 million in legal expenses.

Adjusted Operating Expenses

Adjusted operating expenses increased by $1 million, or 0.7%, to $138 million in the first quarter of fiscal 2022 compared to $137 million in the fourth quarter of fiscal 2021.

The increase was primarily attributable to an increase of $11 million in variable incentive plan costs and an increase of $4 million in salaries and benefits expenses, partially offset by a decrease of $6

million in the Company’s deferred share unit costs, a decrease of $5 million in professional service expenses, and a decrease of $2 million in legal expenses.

Adjusted operating expenses decreased by $9 million, or 6.1%, to $138 million in the first quarter of fiscal 2022, compared to $147 million in the first quarter of fiscal 2021.

The decrease was primarily attributable to the increase in benefits of $6 million in CEWS funding, a decrease of $3 million in salaries and benefits expenses, favorable foreign currency translation of $2 million and a decrease of $2 million in operating lease costs, partially offset by an increase of $5 million in legal expenses.

Adjusted operating expenses increased by $5 million, or 3.6%, to $143 million in the second quarter of fiscal 2022 compared to $138 million in the first quarter of fiscal 2022.

The increase was primarily attributable to a decrease in benefits of $4 million in CEWS funding, an increase of $3 million in the Company’s deferred share unit costs and a reversal of previously accrued liabilities of $3 million in the first quarter of fiscal 2021 which did not recur, partially offset by a decrease of $7 million in legal expenses.

Adjusted operating expenses increased by $2 million, or 1.4%, to $143 million in the second quarter of fiscal 2022, compared to $141 million in the second quarter of fiscal 2021.

The increase was primarily attributable to a decrease in benefits of $7 million in CEWS funding, an increase of $2 million in the Company’s deferred share unit costs and an increase of $2 million in

variable incentive plan costs, partially offset by a decrease of $7 million in legal expenses and a decrease of $4 million in salaries and benefits expenses.

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 were $57 million in the first quarter of fiscal 2022, consistent with $57 million in the first quarter of fiscal 2021.

A decrease of $1 million in stock compensation expense was offset by a decrease of $1 million in claims filed with the Ministry of Innovation, Science and Economic Development Canada relating to its Strategic Innovation Fund (“SIF”) program’s investment in BlackBerry QNX.

Adjusted research and development expenses increased by $1 million, or 1.9%, to $55 million in the first quarter of fiscal 2022 compared to $54 million in the first quarter of fiscal 2021.

The increase was primarily due to a decrease of $1 million in SIF claims.

Research and development expenses increased by $1 million, or 1.8%, to $58 million in the second quarter of fiscal 2022 compared to $57 million in the second quarter of fiscal 2021.

This increase was primarily attributable to the increase of $1 million in variable incentive plan costs and an increase of $1 million in infrastructure costs, partially offset by a decrease of $1 million in operating lease costs.

Adjusted research and development expenses increased by $1 million, or 1.8%, to $56 million in the second quarter of fiscal 2022 compared to $55 million in the second quarter of fiscal 2021.

The increase was primarily attributable to the increase of $1 million in infrastructure costs, partially offset by a decrease of $1 million in operating lease costs.

Selling, Marketing and Administration Expenses

Selling, marketing and administration expenses consist primarily of marketing, advertising and promotion, salaries and benefits, external advisory fees, information technology costs, office and related staffing infrastructure costs and travel expenses.

Selling, marketing and administration expenses decreased by $17 million, or 18.9%, to $73 million in the first quarter of fiscal 2022 compared to $90 million in the first quarter of fiscal 2021.

This decrease was primarily attributable to the increase in benefits of $6 million in CEWS funding, a decrease of $6 million in stock compensation expenses, a decrease of $3 million in salaries and benefits expenses, favorable foreign currency translation of $2 million and a decrease of $2 million in operating lease costs, partially offset by an increase of $5 million in legal expenses.

Adjusted selling, marketing and administration expenses decreased by $11 million, or 13.8%, to $69 million in the first quarter of fiscal 2022 compared to $80 million in the first quarter of fiscal 2021.

This decrease was primarily attributable to the benefit of $6 million in CEWS funding, a decrease of $3 million in salaries and benefits expenses, a favorable foreign currency translation of $2 million and a decrease of $2 million in operating lease costs, partially offset by an increase of $5 million in legal expenses.

Selling, marketing and administration expenses increased by $4 million, or 5.1%, to $83 million in the second quarter of fiscal 2022 compared to $79 million in the second quarter of fiscal 2021.

This increase was primarily attributable to a decrease in benefits of $7 million in CEWS funding, an increase of $4 million in stock compensation expenses, an increase of $2 million in variable incentive costs and an increase of $2 million in the Company’s deferred share unit costs, partially offset by a decrease of $7 million in legal expenses and a decrease of $5 million in salaries and benefits expenses.

Adjusted selling, marketing and administration expenses increased by $2 million, or 2.8%, to $74 million in the second quarter of fiscal 2022 compared to $72 million in the second quarter of fiscal 2021.

This increase was primarily attributable to a decrease in benefits of $7 million in CEWS funding, an increase of $2 million in the Company’s deferred share unit costs, an increase of $2 million in variable incentive costs and unfavorable foreign currency translation of $2 million, partially offset by a decrease of $7 million in legal expenses and a decrease of $5 million in salaries and benefits expenses.

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 May 31, 2021 compared to the quarter ended May 31, 2020.

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 August 31, 2021 compared to the quarter ended August 31, 2020.

Intangible assets are comprised of patents, licenses and acquired technology.

2 unchanged sentences

Included in Operating Expense

May 31, 2021 May 31, 2020 Change

August 31, 2021 August 31, 2020 Change

Property, plant and equipment $ 3 $ 5 $ (2)

2 unchanged sentences

Included in Cost of Sales

May 31, 2021 May 31, 2020 Change

August 31, 2021 August 31, 2020 Change

Property, plant and equipment $ 1 $ 1 $ —

2 unchanged sentences

Amortization included in Operating Expense

Amortization expense relating to property, plant and equipment and certain intangible assets was $46 million in the first quarter of fiscal 2022, consistent with $46 million in the first quarter of fiscal 2021.

Adjusted amortization increased by $1 million to $14 million in the first quarter of fiscal 2022 compared to $13 million in the first quarter of fiscal 2021 due to a decrease in the non-GAAP adjustment of acquired intangibles amortization to $32 million in the first quarter of fiscal 2022 from $33 million in the first quarter of fiscal 2021.

Amortization expense relating to property, plant and equipment and certain intangible assets decreased by $1 million to $45 million in the second quarter of fiscal 2022 compared to $46 million in the second quarter of fiscal 2021.

The decrease in amortization expense was due to the lower cost base of assets.

Adjusted amortization decreased by $1 million to $13 million in the second quarter of fiscal 2022 compared to $14 million in the second quarter of fiscal 2021 due to the lower cost base of assets.

Amortization included in Cost of Sales

Amortization expense relating to certain property, plant and equipment and certain intangible assets employed in the Company’s service operations decreased by $1 million to $3 million in the first quarter of fiscal 2022 compared to $4 million in the first quarter of fiscal 2021.

Amortization expense relating to certain property, plant and equipment and certain intangible assets employed in the Company’s service operations decreased by $1 million to $3 million in the second quarter of fiscal 2022 compared to $4 million in the second quarter of fiscal 2021.

The decrease in amortization expense was due to the lower cost base of assets.

Investment Loss, Net

Investment loss, net, which includes the interest expense from the 1.75% Debentures, increased by $2 million to an investment loss, net of $2 million in the first quarter of fiscal 2022, compared to investment loss, net of nil in the first quarter of fiscal 2021.

The increase in investment loss, net is primarily due to a lower yield on cash and investments and a lower cash and investments balance compared to the first quarter of fiscal 2021 as a result of the redemption of the 3.75% Debentures and issuance of the 1.75% Debentures, partially offset by a decrease in interest expense from the Debentures.

For the first quarter of fiscal 2022, the Company’s net effective income tax expense rate was approximately 3%, compared to an effective income tax recovery rate of approximately 1% for the same period in the prior fiscal year.

Investment loss, net, which includes the interest expense from the 1.75% Debentures, decreased by $4 million to an investment loss, net of $1 million in the second quarter of fiscal 2022, compared to investment loss, net of $5 million in the second quarter of fiscal 2021.

The decrease in investment loss, net is primarily due to a decrease in interest expense from the Debentures partially offset by a lower average cash and investments balance compared to the second quarter of fiscal 2021 as a result of the redemption of the 3.75% Debentures and issuance of the 1.75% Debentures.

For the second quarter of fiscal 2022, the Company’s net effective income tax expense rate was approximately 1%, compared to an effective income tax recovery rate of approximately 15% for the same period in the prior fiscal year.

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 fair value of the Debentures, 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.

The Company’s net loss for the first quarter of fiscal 2022 was $62 million, or $0.11 basic and diluted loss per share on a U.S.

GAAP basis, reflecting a decrease in net loss of $574 million compared to a net loss of $636 million, or $1.14 basic and diluted loss per share, in the first quarter of fiscal 2021.

The decrease in net loss of $574 million was primarily due to a decrease in operating expenses due to the goodwill impairment in the first quarter of fiscal 2021 that did not recur, as described above in “Operating Expenses”, partially offset by a decrease in revenue, as described above in “Revenue by Segment” and a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage”.

Adjusted net loss was $27 million in the first quarter of fiscal 2022 compared to adjusted net income of $7 million in the first quarter of fiscal 2021, reflecting a decrease in adjusted net income of $34 million primarily due to a decrease in revenue as described above in “Revenue by Segment” and a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage”, partially offset by a decrease in operating expenses as described above in “Operating Expenses”.

The weighted average number of shares outstanding was 567 million common shares for basic and diluted loss per share for the first quarter of fiscal 2022.

The weighted average number of shares outstanding was 558 million common shares for basic loss and diluted loss per share for the first quarter of fiscal 2021.

The Company’s net loss for the second quarter of fiscal 2022 was $144 million, or $0.25 basic and diluted loss per share on a U.S.

GAAP basis, reflecting an increase in net loss of $121 million compared to a net loss of $23 million, or $0.04 basic and diluted loss per share, in the second quarter of fiscal 2021.

The increase in net loss of $121 million was primarily due to a decrease in revenue, as described above in “Revenue by Segment”, a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage” and an increase in operating expenses primarily due to an increase in the fair value adjustment related to the Debentures, as described above in “Operating Expenses”.

Adjusted net loss was $33 million in the second quarter of fiscal 2022 compared to adjusted net income of $58 million in the second quarter of fiscal 2021, reflecting a decrease in adjusted net income of $91 million primarily due to a decrease in revenue as described above in “Revenue by Segment”, a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage” and an increase in operating expenses as described above in “Operating Expenses”.

The weighted average number of shares outstanding was 568 million common shares for basic and diluted loss per share for the second quarter of fiscal 2022.

The weighted average number of shares outstanding was 559 million common shares for basic loss and diluted loss per share for the second quarter of fiscal 2021.

Results of Operations - Six months ended August 31, 2021 compared to the six months ended August 31, 2020

The following section sets forth certain consolidated statements of operations data, which is expressed in millions of dollars, except for share and per share amounts and as a percentage of revenue, for the six months ended August 31, 2021 and August 31, 2020:

For the Six Months Ended

(in millions, except for share and per share amounts)

August 31, 2021 August 31, 2020 Change

Revenue $ 349 $ 465 $ (116)

Gross margin 226 342 (116)

Operating expenses 425 1,009 (584)

Investment loss, net (3) (5) 2

Loss before income taxes (202) (672) 470

Provision for (recovery of) income taxes 4 (13) 17

Net loss $ (206) $ (659) $ 453

Loss per share - reported

Basic $ (0.36) $ (1.18) $ 0.82

Diluted $ (0.36) $ (1.18) $ 0.82

Weighted-average number of shares outstanding (000’s)

567,724 558,365

______________________________

(1) Basic loss per share on a U.S.

GAAP basis for the first six months of fiscal 2022 and fiscal 2021 includes 1,421,945 and 2,802,067 common shares, respectively, remaining to be issued on the anniversary dates of the Cylance acquisition completed on February 21, 2019, in consideration for the acquisition.

There are no service or other requirements associated with the issuance of these shares.

(2) Diluted loss per share on a U.S.

GAAP basis for the first six months of fiscal 2022 and fiscal 2021 does not include the dilutive effect of the Debentures as to do so would be anti-dilutive.

Diluted loss per share on a U.S.

GAAP basis for the first six months of fiscal 2022 and fiscal 2021 do not include the dilutive effect of stock-based compensation as to do so would be anti-dilutive.

Revenue by Segment

Comparative breakdowns of revenue by segment are set forth below.

For the Six Months Ended

(in millions)

August 31, 2021 August 31, 2020 Change

Revenue by Segment

Cyber Security $ 227 $ 239 $ (12)

Licensing and Other 39 166 (127)

$ 349 $ 465 $ (116)

% Revenue by Segment

Cyber Security 65.0 % 51.4 %

IoT 23.8 % 12.9 %

Licensing and Other 11.2 % 35.7 %

100.0 % 100.0 %

Cyber Security

Cyber Security revenue was $227 million, or 65.0% of revenue in the first six months of fiscal 2022, a decrease of $12 million compared to $239 million, or 51.4% of revenue in the first six months of fiscal 2021.

The decrease in Cyber Security revenue of $12 million was primarily due to a decrease of $19 million relating to product revenue in BlackBerry Spark and a decrease of $6 million relating to professional services, offset by an increase of $14 million related to the sale of Secusmart solutions.

IoT revenue was $83 million, or 23.8% of revenue in the first six months of fiscal 2022, an increase of $23 million compared to $60 million, or 12.9% of revenue in the first six months of fiscal 2021.

The increase in IoT revenue of $23 million was primarily due to an increase of $12 million in BlackBerry QNX royalty revenue due to the partial recovery of the automotive market from the slowdown related to the COVID-19 pandemic in the first six months of fiscal 2021, an increase of $8 million in development seat revenue and an increase of $2 million in BlackBerry Radar revenue.

Licensing and Other

Licensing and Other revenue was $39 million, or 11.2% of revenue in the first six months of fiscal 2022, a decrease of $127 million compared to $166 million, or 35.7% of revenue in the first six months of fiscal 2021.

The decrease in Licensing and Other revenue of $127 million was primarily due to a decrease in revenue from the Company’s intellectual property licensing arrangements including its patent licensing agreement with Teletry.

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 Six Months Ended

(in millions)

August 31, 2021 August 31, 2020 Change

Revenue by Geography

North America $ 212 $ 345 $ (133)

Europe, Middle East and Africa 102 89 13

Other regions 35 31 4

$ 349 $ 465 $ (116)

% Revenue by Geography

North America 60.8 % 74.2 %

Europe, Middle East and Africa 29.2 % 19.1 %

Other regions 10.0 % 6.7 %

100.0 % 100.0 %

North America Revenue

Revenue in North America was $212 million, or 60.8% of revenue, in the first six months of fiscal 2022, reflecting a decrease of $133 million compared to $345 million, or 74.2% of revenue in the first six months of fiscal 2021.

The decrease in North American revenue is primarily due to a decrease of $124 million in Licensing and Other revenue due to the reasons discussed above in “Revenue by Segment”, a decrease of $16 million in product revenue in BlackBerry Spark and a decrease of $2 million relating to non-automotive OEM business, partially offset by an increase of $10 million in BlackBerry QNX royalty revenue due to the reasons discussed above in “Revenue by Segment”.

Europe, Middle East and Africa Revenue

Revenue in Europe, Middle East and Africa was $102 million, or 29.2% of revenue, in the first six months of fiscal 2022, reflecting an increase of $13 million compared to $89 million, or 19.1% of revenue, in the first six months of fiscal 2021.

The increase in revenue is primarily due to an increase of $14 million related to the sale of Secusmart solutions, an increase of $3 million in development seat revenue and an increase of $2 million in BlackBerry QNX royalty revenue due to the reasons discussed above in “Revenue by Segment”, partially offset by a decrease of $4 million in product revenue in BlackBerry Spark.

Other Regions Revenue

Revenue in other regions was $35 million, or 10.0% of revenue, in the first six months of fiscal 2022, reflecting an increase of $4 million compared to $31 million, or 6.7% of revenue, in the first six months of fiscal 2021.

The increase in revenue is primarily due to an increase of $3 million in development seat revenue.

Consolidated Gross Margin

Consolidated gross margin decreased by $116 million to approximately $226 million in the first six months of fiscal 2022 from $342 million in the first six months of fiscal 2021.

Consolidated Gross Margin Percentage

Consolidated gross margin percentage decreased by 8.7%, to approximately 64.8% of consolidated revenue in the first six months of fiscal 2022 from 73.5% of consolidated revenue in the first six months of fiscal 2021.

Gross Margin by Segment

See “Business Overview” and “Second Quarter Fiscal 2022 Summary Results of Operations” for information about the Company’s operating segments and the basis of operating segment results.

For the Six Months Ended

(in millions)

Cyber Security IoT Licensing and Other Segment Totals

August 31, 2021 August 31, 2020 Change August 31, 2021 August 31, 2020 Change August 31, 2021 August 31, 2020 Change August 31, 2021 August 31, 2020 Change

Segment revenue $ 227 $ 239 $ (12) $ 83 $ 60 $ 23 $ 39 $ 166 $ (127) $ 349 $ 465 $ (116)

Segment cost of sales 95 93 2 14 12 2 12 15 (3) 121 120 1

Segment gross margin $ 132 $ 146 $ (14) $ 69 $ 48 $ 21 $ 27 $ 151 $ (124) $ 228 $ 345 $ (117)

Segment gross margin % 58 % 61 % (3 %) 83 % 80 % 3 % 69 % 91 % (22 %) 65 % 74 % (9 %)

Cyber Security

Cyber Security gross margin decreased by $14 million to approximately $132 million in the first six months of fiscal 2022 from $146 million in the first six months of fiscal 2021.

The decrease 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.

Cyber Security gross margin percentage decreased by 3% to approximately 58% of Cyber Security revenue in the first six months of fiscal 2022 from 61% of Cyber Security revenue in the first six months of fiscal 2021.

The decrease was primarily due to the reasons discussed above in “Revenue by Segment”.

IoT gross margin increased by $21 million to approximately $69 million in the first six months of fiscal 2022 from $48 million in the first six months of fiscal 2021.

The increase 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.

IoT gross margin percentage increased by 3% to approximately 83% of IoT revenue in the first six months of fiscal 2022 from 80% of IoT revenue in the first six months of fiscal 2021.

The increase was primarily due an increase in BlackBerry QNX royalty revenue, which has a higher relative gross margin percentage, due to the reasons discussed above in “Revenue by Segment”.

Licensing and Other

Licensing and Other gross margin decreased by $124 million to approximately $27 million in the first six months of fiscal 2022 from $151 million in the first six months of fiscal 2021.

The decrease 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 gross margin percentage decreased by 22% to approximately 69% of Licensing and Other revenue in the first six months of fiscal 2022 from 91% of Licensing and Other revenue in the first six months of fiscal 2021.

The decrease was primarily due to the reasons discussed above in “Revenue by Segment”.

Operating Expenses

The table below presents a comparison of research and development, selling, marketing and administration, and amortization expense for the six months ended August 31, 2021, compared to the six months ended August 31, 2020.

For the Six Months Ended

(in millions)

August 31, 2021 August 31, 2020 Change

Revenue $ 349 $ 465 $ (116)

Operating expenses

Research and development 115 114 1

Selling, marketing and administration 156 169 (13)

Amortization 91 92 (1)

Impairment of goodwill — 594 (594)

Impairment of long-lived assets — 21 (21)

Debentures fair value adjustment 63 19 44

Total $ 425 $ 1,009 $ (584)

Operating Expense as % of Revenue

Research and development 33.0 % 24.5 %

Selling, marketing and administration 44.7 % 36.3 %

Amortization 26.1 % 19.8 %

Impairment of goodwill — % 127.7 %

Impairment of long-lived assets — % 4.5 %

Debentures fair value adjustment 18.1 % 4.1 %

Total 121.8 % 217.0 %

See “Non-GAAP Financial Measures” for a reconciliation of selected U.S.

GAAP-based measures to adjusted measures for the six months ended August 31, 2021 and August 31, 2020.

GAAP Operating Expenses

Operating expenses decreased by $584 million, or 57.9%, to $425 million, or 121.8% of revenue in the first six months of fiscal 2022, compared to $1,009 million, or 217.0% of revenue, in the first six months of fiscal 2021.

The decrease was primarily attributable to goodwill impairment of $594 million in the first quarter of fiscal 2021 which did not recur, long-lived assets impairment of $21 million in the second quarter of fiscal 2021 which did not recur, a decrease of $9 million in salaries and benefits expense, and a decrease of $3 million in operating lease cost, partially offset by the difference between the Fiscal 2022 Debentures Fair Value Adjustment and the fair value adjustment of $44 million related to the Debentures incurred in the first six months of fiscal 2021, and an increase of $6 million in variable incentive plan costs.

Adjusted Operating Expenses

Adjusted operating expenses decreased by $7 million, or 2.4%, to $281 million in the first six months of fiscal 2022, compared to $288 million in the first six months of 2021.

The decrease was primarily attributable to a decrease of $8 million in salaries and benefits expense, a decrease of $3 million in operating lease cost, partially offset by an increase of $5 million in variable incentive plan costs.

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 increased by $1 million, or 0.9%, to $115 million, or 33.0% of revenue, in the first six months of fiscal 2022, compared to $114 million, or 24.5% of revenue, in the first six months of fiscal 2021.

The increase was primarily attributable to a decrease of $2 million in claims filed with the Ministry of Innovation, Science and Economic Development Canada relating to its Strategic Innovation Fund (“SIF”) program’s investment in BlackBerry QNX, and an increase of $1 million in variable incentive plan costs, partially offset by a decrease of $2 million in operating lease cost.

Adjusted research and development expenses increased by $2 million, or 1.8% to $111 million in the first six months of fiscal 2022 compared to $109 million in the first six months of fiscal 2021.

The increase was primarily attributable to a decrease of $2 million in SIF claims, partially offset by a decrease of $2 million in operating lease cost.

Selling, Marketing and Administration Expenses

Selling, marketing and administration expenses decreased by $13 million, or 7.7%, to $156 million, or 44.7% of revenue, in the first six months of fiscal 2022 compared to $169 million in the first six months of fiscal 2021, or 36.3% of revenue.

The decrease was primarily attributable to a decrease of $8 million in salaries and benefits expenses, a recovery of $2 million in expected credit losses, and a decrease of $2 million in consulting expenses, partially offset by an increase of $5 million in variable incentive plan costs, and an increase of $2 million in the Company’s deferred share unit liability due to increases in the Company’s stock price.

Adjusted selling, marketing and administration expenses decreased by $9 million, or 5.9%, to $143 million in the first six months of fiscal 2022 compared to $152 million in the first six months of fiscal 2021.

The decrease was primarily due to the same reasons described above on a U.S.

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 six months ended August 31, 2021 compared to the six months ended August 31, 2020.

Intangible assets are comprised of patents, licenses and acquired technology.

For the Six Months Ended

(in millions)

Included in Operating Expense

August 31, 2021 August 31, 2020 Change

Property, plant and equipment $ 6 $ 9 $ (3)

Intangible assets 85 83 2

Total $ 91 $ 92 $ (1)

Included in Cost of Sales

August 31, 2021 August 31, 2020 Change

Property, plant and equipment $ 2 $ 2 $ —

Intangible assets 4 6 (2)

Total $ 6 $ 8 $ (2)

Amortization included in Operating Expense

Amortization expense relating to certain property, plant and equipment and intangible assets decreased by $1 million to $91 million in the first six months of fiscal 2022, compared to $92 million in the first six months of fiscal 2021.

The decrease in amortization expense was due to the lower cost base of assets.

Adjusted amortization expense was $27 million in the first six months of fiscal 2022, consistent with $27 million in the first six months of fiscal 2021.

Amortization included in Cost of Sales

Amortization expense relating to certain property, plant and equipment and intangible assets employed in the Company’s service operations decreased by $2 million to $6 million in the first six months of fiscal 2022, compared to $8 million in the first six months of fiscal 2021.

The decrease in amortization expense was due to the lower cost base of assets.

Investment Loss, Net

Investment loss, net, which includes the interest expense from the Debentures, decreased by $2 million to investment loss of $3 million in the first six months of fiscal 2022, from investment loss of $5 million in the first six months of fiscal 2021.

The decrease in investment loss, net was due to a decrease in interest expense from the Debentures, partially offset by a lower yield on cash and investments and lower average cash and investments balances in the first six months of fiscal 2022 compared to the first six months of fiscal 2021 as a result of the redemption of the 3.75% Debentures and issuance of the 1.75% Debentures.

For the first six months of fiscal 2022, the Company’s net effective income tax expense rate was approximately 2%, compared to a net effective income tax recovery rate of approximately 2% for the same period in the prior fiscal year.

The Company’s net effective income tax rate also reflects the geographic mix of earnings in jurisdictions with different income tax rates.

The Company’s net loss for the first six months of fiscal 2022 was $206 million, reflecting a decrease in net loss of $453 million compared to net loss of $659 million in the first six months of fiscal 2021, primarily due to a decrease in operating expenses due to the goodwill impairment in the first six months of fiscal 2021 that did not recur, as described above in “Operating Expenses”, partially offset by a decrease in revenue as described above in “Revenue by Segment” and a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage”.

Adjusted net loss in the first six months of fiscal 2022 was $60 million compared to adjusted net income of $65 million in the first six months of fiscal 2021, reflecting a decrease in adjusted net income of $125 million, primarily due to a decrease in revenue as described above in “Revenue by Segment” and a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage”, partially offset by a decrease in operating expenditures as described above in “Operating Expenses”.

Basic and diluted loss per share on a U.S.

GAAP basis was $0.36 in the first six months of fiscal 2022, a decrease in basic and diluted loss per share of $0.82, compared to basic and diluted loss per share on a U.S.

GAAP basis of $1.18 in the first six months of fiscal 2021.

The weighted average number of shares outstanding was 568 million for basic and diluted loss per share for the first six months of August 31, 2021.

The weighted average number of shares outstanding was 558 million for basic and diluted loss per share for the first six months of August 31, 2020.

Common Shares Outstanding

On September 20, 2021, there were 567 million voting common shares, options to purchase 1 million voting common shares, 20 million restricted share units and 1 million deferred share units outstanding.

In addition, 60.8 million common shares are issuable upon conversion in full of the 1.75% Debentures as described in Note 6 to the Consolidated Financial Statements.

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

Financial Condition

Liquidity and Capital Resources

Cash, cash equivalents, and investments decreased by $35 million to $769 million as at May 31, 2021 from $804 million as at February 28, 2021, primarily as a result of changes in working capital.

Cash, cash equivalents, and investments decreased by $32 million to $772 million as at August 31, 2021 from $804 million as at February 28, 2021, primarily as a result of changes in working capital.

The majority of the Company’s cash, cash equivalents, and investments were denominated in U.S.

dollars as at May 31, 2021.

dollars as at August 31, 2021.

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

(in millions)

May 31, 2021 February 28, 2021 Change

August 31, 2021 February 28, 2021 Change

Cash and cash equivalents $ 291 $ 214 $ 77

5 unchanged sentences

(in millions)

May 31, 2021 February 28, 2021 Change

August 31, 2021 February 28, 2021 Change

Current assets $ 910 $ 1,006 $ (96)

2 unchanged sentences

Current Assets

The decrease in current assets of $53 million at the end of the first quarter of fiscal 2022 from the end of fourth quarter of fiscal 2021 was primarily due to a decrease in short term investments of $161 million, and accounts receivable, net of allowance of $29 million, partially offset by an increase in cash and cash equivalents of $125 million, an increase in other current assets of $11 million, and an increase in other receivables of $1 million.

At May 31, 2021, accounts receivable was $153 million, a decrease of $29 million from February 28, 2021.

The decrease was primarily due to lower revenue recognized over the three months ended May 31, 2021 compared to the three months ended February 28, 2021, partially offset by an increase in days sales outstanding to 89 days at the end of the first quarter of fiscal 2022 from 85 days at the end of the fourth quarter of fiscal 2021.

At May 31, 2021, other current assets was $61 million, an increase of $11 million from February 28, 2021.

The increase was primarily due to an increase in inventory of $3 million, an increase of $3 million in prepaid insurance, an increase of $2 million in prepaid maintenance, and an increase of $2 million in derivative assets.

At May 31, 2021, other receivables increased by $1 million to $26 million compared to $25 million as at February 28, 2021.

The increase was primarily due to an increase of $1 million relating to the SIF claims, and an increase of $1 million in GST and VAT receivables, partially offset by a decrease of $1 million relating to the CEWS program.

The decrease in current assets of $96 million at the end of the second quarter of fiscal 2022 from the end of the fourth quarter of fiscal 2021 was primarily due to a decrease in short term investments of $109 million, a decrease in accounts receivable, net of allowance of $61 million, a decrease in other receivables of $2 million, and a decrease in income taxes receivable of $1 million, partially offset by an increase in cash and cash equivalents of $77 million.

At August 31, 2021, accounts receivable was $121 million, a decrease of $61 million from February 28, 2021.

The decrease was primarily due to lower revenue recognized over the three months ended August 31, 2021 compared to the three months ended February 28, 2021, and a decrease in days sales outstanding to 72 days at the end of the second quarter of fiscal 2022 from 85 days at the end of the fourth quarter of fiscal 2021.

At August 31, 2021, other receivables decreased by $2 million to $23 million compared to $25 million as at February 28, 2021.

The decrease was primarily due to a decrease of $3 million relating to the CEWS program, partially offset by an increase of $2 million relating to the SIF claims.

At August 31, 2021, income taxes receivable was $9 million, a decrease of $1 million from February 28, 2021.

This decrease was primarily due to changes in the quarterly tax provision.

Current Liabilities

The decrease in current liabilities of $27 million at the end of the first quarter of 2022 from the end of the fourth quarter of fiscal 2021 was primarily due to a decrease in deferred revenue of $17 million, and a decrease in accrued liabilities of $14 million, partially offset by an increase in income taxes payable of $2 million and an increase in accounts payable of $2 million.

The decrease in current liabilities of $26 million at the end of the second quarter of 2022 from the end of the fourth quarter of fiscal 2021 was primarily due to a decrease in deferred revenue, current of $27 million, and a decrease in accrued liabilities of $4 million, partially offset by an increase in income taxes payable of $3 million and an increase in accounts payable of $2 million.

Deferred revenue, current was $198 million, which reflects a decrease of $27 million compared to February 28, 2021 that was attributable to a $20 million decrease in deferred revenue, current related to BlackBerry Spark and $7 million related to BlackBerry AtHoc, partially offset by an increase of $2 million in deferred revenue, current related to BlackBerry QNX.

Accrued liabilities were $164 million, reflecting a decrease of $14 million compared to February 28, 2021, which was primarily attributable to a $8 million decrease in variable incentive plan costs and a decrease of $5 million in payroll accrual.

Income taxes payable were $8 million, reflecting a decrease of $2 million compared to February 28, 2021, which was primarily attributable to the reversal of uncertain tax positions.

Accrued liabilities were $174 million, reflecting a decrease of $4 million compared to February 28, 2021, which was primarily attributable to a $3 million decrease in the operating lease liability, current, partially offset by an increase of $3 million in the Company’s deferred share unit liability due to increases in the Company’s stock price.

Income taxes payable were $9 million, reflecting an increase of $3 million compared to February 28, 2021, which was primarily due to changes in the quarterly tax provision.

Accounts payable were $22 million, reflecting an increase of $2 million from February 28, 2021, which was primarily due to timing of payments of accounts payable.

Cash flows for the three months ended May 31, 2021 compared to the three months ended May 31, 2020 were as follows:

For the Three Months Ended

Cash flows for the six months ended August 31, 2021 compared to the six months ended August 31, 2020 were as follows:

For the Six Months Ended

(in millions)

May 31, 2021 May 31, 2020 Change

August 31, 2021 August 31, 2020 Change

Net cash flows provided by (used in):

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Effect of foreign exchange gain on cash and cash equivalents — 1 (1)

Net increase (decrease) in cash and cash equivalents $ 150 $ (66) $ 216

Net increase in cash and cash equivalents $ 100 $ 460 $ (360)

Operating Activities

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Investing Activities

During the three months ended May 31, 2021, cash flows provided by investing activities were $176 million and included cash provided by transactions involving the acquisitions of short-term and long-term investments, net of the proceeds on sale or maturity in the amount of $184 million, offset by cash used in the acquisition of intangible assets of $6 million, and the acquisition of property, plant and equipment of $2 million.

For the same period in the prior fiscal year, cash flows used in investing activities were $39 million and included cash 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 $30 million, intangible asset additions of $8 million, and acquisitions of property, plant and equipment of $1 million.

During the six months ended August 31, 2021, cash flows provided by investing activities were $113 million and included cash provided by transactions involving the acquisitions of short-term and long-term investments, net of the proceeds on sale or maturity in the amount of $131 million, offset by cash used in the acquisition of intangible assets of $14 million, and the acquisition of property, plant and equipment of $4 million.

For the same period in the prior fiscal year, cash flows provided by investing activities were $454 million and included cash provided by transactions involving the acquisitions of short-term and long-term investments, net of the proceeds on sale or maturity in the amount of $473 million, offset by cash used in the acquisition intangible assets of $16 million, and the acquisitions of property, plant and equipment of $3 million.

Financing Activities

The increase in cash flows provided by financing activities of $4 million was consistent with the first three months of fiscal 2021 and included common shares issued for stock options exercised and under the employee share purchase plan.

The cash flows provided by financing activities of $5 million was consistent with the first six months of fiscal 2021 and included common shares issued for stock options exercised and under the employee share purchase plan.

Aggregate Contractual Obligations

The following table sets out aggregate information about the Company’s contractual obligations and the periods in which payments are due as at May 31, 2021:

The following table sets out aggregate information about the Company’s contractual obligations and the periods in which payments are due as at August 31, 2021:

(in millions)

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Total $ 661 $ 154 $ 468 $ 26 $ 13

Purchase obligations and commitments amounted to approximately $695 million as at May 31, 2021, including the principal amount of the 1.75% Debentures of $365 million and operating lease obligations of $127 million.

Purchase obligations and commitments amounted to approximately $661 million as at August 31, 2021, including the principal amount of the 1.75% Debentures of $365 million and operating lease obligations of $118 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 May 31, 2021 increased by approximately $19 million as compared to the February 28, 2021 balance of approximately $676 million, which was attributable to an increase in purchase obligations and commitments, partially offset by a decrease in operating lease obligations.

Total aggregate contractual obligations as at August 31, 2021 decreased by approximately $15 million as compared to the February 28, 2021 balance of approximately $676 million, which was attributable to a decrease in operating lease obligations.

Debenture Financing and Other Funding Sources

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See Note 3 to the Consolidated Financial Statements for further information concerning the Company’s restricted cash.

Cash, cash equivalents, and investments were approximately $769 million as at May 31, 2021.

Cash, cash equivalents, and investments were approximately $772 million as at August 31, 2021.

The Company’s management remains focused on maintaining appropriate cash balances, efficiently managing working capital balances and managing the liquidity needs of the business.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis