What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-12-22 compared with 2021-09-23 · 325 added, 297 removed, 588 unchanged (51% 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 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 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 nine months ended November 30, 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 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 expectations with respect to its revenue and billings in fiscal 2022 and with respect to installations of the BlackBerry IVY™ platform in fiscal 2023;

• 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 - 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”.

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 November 30, 2021 compared to the three months ended November 30, 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.

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.

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The Company has multiple products and services from which it derives revenue, which are structured in three groups:

Cyber Security, IoT (collectively with Cyber Security, “Software & Services”) and Licensing and Other.

Cyber Security

The Cyber Security business consists of BlackBerry Spark, BlackBerry® AtHoc®, BlackBerry Alert and SecuSUITE.

Cybersecurity, IoT (collectively with Cybersecurity, “Software & Services”) and Licensing and Other.

Cybersecurity

The Cybersecurity business consists of BlackBerry Spark, BlackBerry® AtHoc®, BlackBerry Alert and SecuSUITE.

The Company’s core secure software and services offering is its BlackBerry Spark software platform, which integrates a unified endpoint security (“UES”) layer with BlackBerry unified endpoint management (“UEM”) to enable secure endpoint communications in a zero trust environment.

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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.

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 and integrated threat detection and response.

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 and partner solutions to provide deep contextual insights for more powerful and integrated threat detection and response.

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

BlackBerry UEM is a central software component of the Company’s secure communications platform, offering a “single pane of glass”, or unified console view, for managing and securing devices, applications, identity, content and endpoints across all leading operating systems.

endpoints across all leading operating systems.

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.

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

The Company has partnered with Amazon Web Services, Inc.

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

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

BlackBerry IVY will support multiple vehicle operating systems and multi-cloud deployments in order to ensure compatibility across vehicle models and brands.

The Company expects to release an early access version of BlackBerry IVY in October 2021, followed by a commercial release in February 2022 with installations of BlackBerry IVY to begin in 2023 model year vehicles.

BlackBerry IVY will support multiple vehicle operating systems and hardware, as well as multi-cloud deployments in order to ensure compatibility across vehicle models and brands.

The Company released an early access version of BlackBerry IVY to select ecosystem partners in October 2021, and plans to release a beta version in February 2022 with installation of BlackBerry IVY in vehicles expected to begin during fiscal year 2023.

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.

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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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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.

The Company previously stated its expectation of entering into a definitive agreement in the third quarter of fiscal 2022 but now believes that it will do so in the fourth quarter of fiscal 2022.

While the parties have reached preliminary agreement on many key terms of the potential transaction, 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 will retain rights to use these patents.

The Company’s Other business generates revenue from SAF charged to subscribers using the Company’s legacy BlackBerry 7 and prior BlackBerry operating systems, which will no longer be supported or maintained as of January 4, 2022.

Recent Developments

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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;

• Released an early access version of BlackBerry IVY;

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

• Launched an update to the BlackBerry® Guard managed detection and response service to provide a managed XDR service through a partnership with Exabeam;

• Announced an expansion of products covered by the BlackBerry Guard 2.0 managed detection and response service to include zero trust network access (ZTNA), mobile threat defense (MTD) and user behavior risk analytics (UEBA);

• Announced that BlackBerry was recognized by SE Labs as offering the best new endpoint protection solution of 2021;

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

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

• Announced that BlackBerry SecuSUITE® for Government offering now provides certified end-to-end encryption of all group phone calls and instant messages.

Customers and Partners:

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

• Announced a collaboration with Ridecell Inc.

to bring a next generation fleet operations and ADAS data platform to automotive OEMs via BlackBerry IVY;

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

• Announced that BMW Group has entered into a multi-year agreement to use BlackBerry QNX technology to develop SAE Level 2/2+ driving automation functions in multiple makes and models across the BMW group;

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

• Announced the availability of a QNX cockpit reference design powered by Google and Qualcomm technologies that reduces development time for digital cockpit architectures;

• Announced that BlackBerry and Visteon will expand efforts to accelerate the deployment of digital cockpit solutions for automakers and their suppliers;

• Announced that Mahindra & Mahindra Ltd.

selected BlackBerry QNX technologies to power the cockpit domain controller for their next-generation SUV;

• Announced that WM Motor has chosen BlackBerry QNX technologies to power its W6 all-electric SUV;

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

• Announced that Deloitte will leverage BlackBerry Jarvis to help manufacturers to secure their software supply chains;

• Announced the integration of BlackBerry UEM with Microsoft 365;

• Announced a technology integration between Okta and BlackBerry UEM to deliver seamless identity and access capabilities;

• Announced Okta, Mimecast, Stellar Cyber and XM Cyber as new partners in BlackBerry’s XDR ecosystem;

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

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• Announced that BlackBerry and the University of Waterloo have expanded their partnership to create a new joint innovation program;

• Announced that BlackBerry and L-SPARK launched a third cohort of their accelerator program to advance Canadian connected vehicle technology innovation.

Environmental, Sustainability and Corporate Governance:

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

• Announced that Michael Daniels has been appointed as Chair of the Compensation, Nomination and Governance Committee of the Company’s Board of Directors and that Lisa Disbrow has been appointed as Chair of the Audit and Risk Management Committee of the Board of Directors;

• Appointed John Giamatteo as President of Cybersecurity 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;

• Announced that the Company achieved carbon neutrality across Scope 1, Scope 2 and material Scope 3 emissions;

• Announced that the Company was named one of Canada’s Greenest Employers for sixth year in a row;

• Announced that the Company was named to Newsweek's list of the Most Loved Workplaces for 2021.

Segment Reporting

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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.

To protect the health and safety of the Company’s employees, contractors, customers and visitors, during the first nine months 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.

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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.

In the third quarter of fiscal 2022, these actions included taking advantage of the broad-based employer relief provided by governments in Canada 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.

In fiscal 2022 and fiscal 2021, the economic challenges 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 nine months of fiscal 2022 compared to the first nine 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 nine 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, 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 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, such as Delta and Omicron, 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.

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.

Third Quarter Fiscal 2022 Summary Results of Operations

The following table sets forth certain unaudited consolidated statements of operations data for the quarter ended November 30, 2021 compared to the quarter ended November 30, 2020 under U.S.

For the Three Months Ended

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

August 31, 2021 August 31, 2020 Change

November 30, 2021 November 30, 2020 Change

Revenue $ 184 $ 218 $ (34)

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Operating expenses 66 276 (210)

Investment loss, net (1) (5) 4

Loss before income taxes (142) (27) (115)

Provision for (recovery of) income taxes 2 (4) 6

Net loss $ (144) $ (23) $ (121)

Loss per share - reported

Investment income (loss), net 25 (1) 26

Income (loss) before income taxes 76 (128) 204

Provision for income taxes 2 2 —

Net income (loss) $ 74 $ (130) $ 204

Earnings (loss) per share - reported

Basic $ 0.13 $ (0.23)

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______________________________

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

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.

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

GAAP basis for the third quarter of fiscal 2022 and third 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 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.

GAAP basis for the third quarter of fiscal 2021 does not include the dilutive effect of the Debentures (defined below), as to do so would be anti-dilutive.

Diluted loss per share on a U.S.

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

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

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

The following tables show information by operating segment for the three and nine months ended November 30, 2021 and November 30, 2020.

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

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(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

Cybersecurity IoT Licensing and Other Segment Totals

November 30, Change November 30, Change November 30, Change November 30, Change

2021 2020 2021 2020 2021 2020 2021 2020

Segment revenue $ 128 $ 130 $ (2) $ 43 $ 32 $ 11 $ 13 $ 56 $ (43) $ 184 $ 218 $ (34)

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Segment gross margin $ 76 $ 77 $ (1) $ 35 $ 26 $ 9 $ 7 $ 47 $ (40) $ 118 $ 150 $ (32)

For the Six Months Ended

For the Nine 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

Cybersecurity IoT Licensing and Other Segment Totals

November 30, Change November 30, Change November 30, Change November 30, Change

2021 2020 2021 2020 2021 2020 2021 2020

Segment revenue $ 355 $ 369 $ (14) $ 126 $ 92 $ 34 $ 52 $ 222 $ (170) $ 533 $ 683 $ (150)

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Segment gross margin $ 208 $ 223 $ (15) $ 104 $ 74 $ 30 $ 34 $ 198 $ (164) $ 346 $ 495 $ (149)

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

The following tables reconcile the Company’s segment results for the three and nine months ended November 30, 2021 to consolidated U.S.

GAAP results:

For the Three Months Ended August 31, 2021

For the Three Months Ended November 30, 2021

(in millions)

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

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

Revenue $ 128 $ 43 $ 13 $ 184 $ — $ 184

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Operating expenses 66 66

Investment loss, net 1 1

Loss before income taxes $ (142)

For the Six Months Ended August 31, 2021

Investment income, net (25) (25)

Income before income taxes $ 76

For the Nine Months Ended November 30, 2021

(in millions)

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

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

Revenue $ 355 $ 126 $ 52 $ 533 $ — $ 533

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Operating expenses 491 491

Investment loss, net 3 3

Investment income, net (22) (22)

Loss before income taxes $ (126)

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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 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-based measures to adjusted measures for the three and nine months ended November 30, 2021.

The following tables reconcile the Company’s segment results for the three and nine months ended November 30, 2020 to consolidated U.S.

GAAP results:

For the Three Months Ended August 31, 2020

For the Three Months Ended November 30, 2020

(in millions)

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

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

Revenue $ 130 $ 32 $ 56 $ 218 $ — $ 218

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Loss before income taxes $ (128)

For the Six Months Ended August 31, 2020

For the Nine Months Ended November 30, 2020

(in millions)

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

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

Revenue $ 369 $ 92 $ 222 $ 683 $ — $ 683

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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 and six months ended August 31, 2020.

GAAP-based measures to adjusted measures for the three and nine months ended November 30, 2020.

Financial Highlights

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.

The Company had approximately $772 million in cash, cash equivalents and investments as of November 30, 2021 and $804 million in cash, cash equivalents and investments as of February 28, 2021.

In the third quarter of fiscal 2022, the Company recognized revenue of $184 million and net income of $74 million, or $0.13 basic earnings per share and $0.05 diluted loss per share on a U.S.

In the third quarter of fiscal 2021, the Company recognized revenue of $218 million and incurred a net loss of $130 million, or $0.23 basic and diluted loss per share on a U.S.

The Company recognized an adjusted net loss of $1 million, and an adjusted loss of $0.00 per share, in the third quarter of fiscal 2022.

The Company recognized adjusted net income of $9 million, and adjusted earnings of $0.02 per share, in the third 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 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.

As at November 30, 2021, the fair value of the 1.75% Debentures was approximately $673 million, a decrease of approximately $109 million during the third quarter of fiscal 2022.

For the three months ended November 30, 2021, the Company recorded non-cash income relating to changes in fair value from non-credit components of $110 million (pre-tax and after tax) (the “Q3 Fiscal 2022 Debentures Fair Value Adjustment”) in the Company’s consolidated statements of operations and a non-cash charge relating to changes in fair value from instrument specific credit risk of $1 million in Other Comprehensive Loss (“OCL”) relating to the 1.75% Debentures.

For the nine months ended November 30, 2021, the Company recorded non-cash income relating to changes in fair value from non-credit components of $47 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 nil 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 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.

On December 21, 2021, the Company announced financial results for the three and nine months ended November 30, 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.

GAAP financial results.

The Company believes that these non-GAAP measures provide management, as well as readers of the Company’s financial statements, with a consistent basis for comparison across accounting periods and is useful in helping management and readers understand the Company’s operating results and underlying operational trends.

operating results and underlying operational trends.

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 and six months ended August 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 nine months ended November 30, 2020 have been updated to conform to the current year’s presentation.

• Debentures fair value adjustment .

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Each period, the fair value of the Debentures is recalculated and resulting non-cash income and charges from the change in fair value from non-credit components of the Debentures are recognized in income.

The amount can vary each period depending on changes to the Company’s share price.

The amount can vary each period depending on changes to the Company’s share price, share price volatility and credit indices.

This is not indicative of the Company’s core operating performance, and may not be meaningful in comparison to the Company’s past operating performance.

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The Company believes that goodwill impairment charge does not reflect expected future operating expenses, is not indicative of the Company’s core operating performance, and may not be meaningful in comparison to the Company’s past operating performance.

GAAP basis, the impact of these items is reflected in the Company’s income statement.

GAAP basis, the impacts of these items are reflected in the Company’s income statement.

However, the Company believes that the provision of supplemental non-GAAP measures allow investors to evaluate the financial performance of the Company’s business using the same evaluation measures that management uses, and is therefore a useful indication of the Company’s performance or expected performance of future operations and facilitates period-to-period comparison of operating performance.

2 unchanged sentences

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

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

GAAP based measures for the three months ended November 30, 2021 and November 30, 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.

3 unchanged sentences

A reconciliation of the most directly comparable U.S.

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

GAAP financial measures for the three months ended November 30, 2021 and November 30, 2020 to adjusted financial measures is reflected in the table below:

For the Three Months Ended (in millions) November 30, 2021 November 30, 2020

Gross margin $ 117 $ 149

4 unchanged sentences

Adjusted gross margin % 64.1 % 68.8 %

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

Reconciliation of operating expense for the three months ended November 30, 2021, August 31, 2021 and November 30, 2020 to adjusted operating expense is reflected in the table below:

For the Three Months Ended (in millions) November 30, 2021 August 31, 2021 November 30, 2020

Operating expense $ 66 $ 253 $ 276

Restructuring charges — — 1

Stock compensation expense 5 11 11

1 unchanged sentence

Acquired intangibles amortization 29 32 32

LLA impairment charge — — 21

Adjusted operating expense $ 142 $ 143 $ 138

______________________________

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

(1) See “Third 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

GAAP net income (loss) and U.S.

GAAP basic earnings (loss) per share for the three months ended November 30, 2021 and November 30, 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) November 30, 2021 November 30, 2020

Basic earnings (loss)

per share Basic earnings (loss)

Net income (loss) $ 74 $0.13 $ (130) $(0.23)

Stock compensation expense 6 12

1 unchanged sentence

Acquired intangibles amortization 29 32

LLA impairment charge — 21

Adjusted net income (loss) $ (1) $0.00 $ 9 $0.02

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

GAAP research and development, selling, marketing and administration, and amortization expense for the three months ended November 30, 2021 and November 30, 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) November 30, 2021 November 30, 2020

Research and development $ 57 $ 53

2 unchanged sentences

Selling, marketing and administration $ 77 $ 83

Restructuring charges — 1

Stock compensation expense 3 8

3 unchanged sentences

Adjusted amortization $ 13 $ 13

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

Adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage and adjusted EBITDA margin percentage for the three months ended November 30, 2021 and November 30, 2020 are reflected in the table below.

For the Three Months Ended (in millions) November 30, 2021 November 30, 2020

Operating income (loss) $ 51 $ (127)

Non-GAAP adjustments to operating income (loss)

Stock compensation expense 6 12

1 unchanged sentence

Acquired intangibles amortization 29 32

LLA impairment charge — 21

Total non-GAAP adjustments to operating loss 111 81

Total non-GAAP adjustments to operating income (loss) (75) 139

Adjusted operating income (loss) (24) 12

9 unchanged sentences

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.

GAAP based measures for the nine months ended November 30, 2021 and November 30, 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

GAAP financial measures for the nine months ended November 30, 2021 and November 30, 2020 to adjusted financial measures is reflected in the table below:

For the Nine Months Ended (in millions) November 30, 2021 November 30, 2020

Gross margin $ 343 $ 491

13 unchanged sentences

______________________________

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

(1) See “Third 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 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

GAAP basic loss per share for the nine months ended November 30, 2021 and November 30, 2020 to adjusted net income (loss) and adjusted basic earnings (loss) per share is reflected in the table below:

For the Nine Months Ended (in millions, except per share amounts) November 30, 2021 November 30, 2020

Basic loss per share Basic earnings (loss) per share

8 unchanged sentences

Reconciliation of U.S.

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

GAAP research and development, selling, marketing and administration, and amortization expense for the nine months ended November 30, 2021 and November 30, 2020 to adjusted research and development, selling, marketing and administration, and amortization expense is reflected in the table below:

For the Nine Months Ended (in millions) November 30, 2021 November 30, 2020

Research and development $ 172 $ 167

8 unchanged sentences

Adjusted amortization $ 40 $ 40

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

Adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage and adjusted EBITDA margin percentage for the nine months ended November 30, 2021 and November 30, 2020 are reflected in the table below.

For the Nine Months Ended (in millions) November 30, 2021 November 30, 2020

Operating loss $ (148) $ (794)

17 unchanged sentences

(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”), 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

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 November 30, 2020 have been updated to conform to the current year’s presentation.

Comparative breakdowns of certain key metrics for the three months ended November 30, 2021 and November 30, 2020 are set forth below.

For the Three Months Ended (in millions) November 30, 2021 November 30, 2020 Change

Annual Recurring Revenue

Cyber Security $ 364 $ 367 $ (3)

Cybersecurity $ 358 $ 365 $ (7)

IoT $ 91 $ 88 $ 3

Dollar-Based Net Retention Rate

Cyber Security 95 % 100 % (5 %)

Cybersecurity 95 % 95 % — %

Recurring Software Product Revenue ~ 80% ~ 80% — %

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 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.

Cybersecurity ARR was approximately $358 million in the third quarter of fiscal 2022 and decreased compared to $364 million in the second quarter of fiscal 2022 and decreased compared to $365 million in the third quarter of fiscal 2021.

IoT ARR was approximately $91 million in the third quarter of fiscal 2022 and increased compared to $89 million in the second quarter of fiscal 2022 and increased compared to $88 million in the third 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 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.

Cybersecurity DBNRR was 95% in the third quarter of fiscal 2022 and was consistent with 95% in the second quarter of fiscal 2022 and the third 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 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.

Total Company billings decreased in the third quarter of fiscal 2022 compared to the second quarter of fiscal 2022 and decreased compared to the third quarter of fiscal 2021 due to a decrease in billings from Licensing and Other.

The Company previously stated that it expected sequential billings growth for Cybersecurity in the third quarter of fiscal 2022.

In the third quarter of fiscal 2022, Cybersecurity billings increased sequentially compared to the second quarter of fiscal 2022.

The Company previously stated that it expected Cybersecurity billings to grow by a double-digit percentage for fiscal 2022.

The Company no longer expects to meet this expectation due to delays in closing large government deals.

Recurring Software Product Revenue

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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 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.

Total adjusted Software and Services product revenue, excluding professional services, was approximately 80% recurring in the third quarter of fiscal 2022 and was consistent with approximately 80% recurring in the second quarter of fiscal 2022 and the third quarter of fiscal 2021.

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 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

For the three months ended November 30, 2021, the Company’s net cash used in operating activities was $19 million and capital expenditures were $2 million, resulting in the Company reporting free cash usage of $21 million compared to net cash generated by operating activities of $29 million, capital expenditures of $2 million, and free cash flow of $27 million for the three months ended November 30, 2020.

Results of Operations - Three months ended November 30, 2021 compared to the three months ended November 30, 2020

Revenue by Segment

2 unchanged sentences

(in millions)

August 31, 2021 August 31, 2020 Change

November 30, 2021 November 30, 2020 Change

Revenue by Segment

Cyber Security $ 120 $ 120 $ —

Cybersecurity $ 128 $ 130 $ (2)

Licensing and Other 13 56 (43)

1 unchanged sentence

% Revenue by Segment

Cyber Security 68.6 % 46.3 %

Cybersecurity 69.6 % 59.6 %

IoT 23.4 % 14.7 %

1 unchanged sentence

100.0 % 100.0 %

Cyber Security

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.

Cybersecurity

Cybersecurity revenue was $128 million, or 69.6% of revenue, in the third quarter of fiscal 2022, a decrease of $2 million compared to $130 million, or 59.6% of revenue, in the third quarter of fiscal 2021.

The decrease in Cybersecurity revenue of $2 million was primarily due to a decrease of $2 million relating to professional services, a decrease of $2 million relating to product revenue in BlackBerry Spark, and a decrease of $1 million in BlackBerry AtHoc revenue, partially offset by an increase of $3 million related to the sale of Secusmart solutions.

The Company previously stated that it expected modest sequential Cybersecurity revenue growth in the third and fourth quarters of fiscal 2022.

In the third quarter of fiscal 2022, Cybersecurity revenue grew sequentially compared to the second quarter of fiscal 2022.

The Company expects Cybersecurity revenue to be between $125 million and $135 million in the fourth quarter of fiscal 2022.

The Company may or may not achieve sequential Cybersecurity revenue growth in the fourth quarter of fiscal 2022 depending on actual performance within such revenue range.

The Company previously stated that it expected Cybersecurity revenue to be towards the lower end of $495 million and $515 million in fiscal 2022.

The Company no longer expects to meet this expectation due to delays in closing large government deals.

The Company previously stated that it expected Software and Services revenue to be between $675 million and $715 million in fiscal 2022.

The Company no longer expects to meet this expectation due to the reason noted above for Cybersecurity revenue.

IoT revenue was $43 million, or 23.4% of revenue, in the third quarter of fiscal 2022, an increase of $11 million compared to $32 million, or 14.7% of revenue, in the third quarter of fiscal 2021.

The increase in IoT revenue of $11 million was primarily due to an increase of $5 million in development seat revenue, an increase of $4 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 third quarter of fiscal 2021, and an increase of $2 million relating to professional services.

The Company expects sequential IoT revenue growth in the fourth quarter of fiscal 2022.

Licensing and Other

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.

Licensing and Other revenue was $13 million, or 7.0% of revenue, in the third quarter of fiscal 2022, a decrease of $43 million compared to $56 million, or 25.7% of revenue, in the third quarter of fiscal 2021.

The decrease in Licensing and Other revenue of $43 million was primarily due to a decrease of $41 million in revenue from the Company’s intellectual property licensing arrangements including its patent licensing agreement with Teletry and a decrease of $1 million in SAF revenue.

The Company expects to enter into a definitive agreement with respect to a sale of a portion of the Company’s patent portfolio, as previously disclosed, in the fourth quarter of fiscal 2022, in which event the Company expects that Licensing and Other revenue in the quarter will be nominal.

If the patent portfolio sale process concludes in the fourth quarter of fiscal 2022 without the execution of a definitive agreement, the Company expects that Licensing and Other revenue will be approximately $10 million in the quarter.

Revenue by Geography

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(in millions)

August 31, 2021 August 31, 2020 Change

November 30, 2021 November 30, 2020 Change

Revenue by Geography

9 unchanged sentences

North America Revenue

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”.

Revenue in North America was $101 million, or 54.9% of revenue, in the third quarter of fiscal 2022, reflecting a decrease of $46 million compared to $147 million, or 67.5% of revenue, in the third quarter of fiscal 2021.

Revenue in North America decreased compared to the third quarter of fiscal 2021 primarily due to a decrease of $41 million in Licensing and Other revenue due to the reasons discussed above in “Revenue by Segment”, a decrease of $3 million in product revenue in BlackBerry Spark, and a decrease of $3 million in professional services, partially offset by an increase of $1 million in development seat revenue.

Europe, Middle East and Africa Revenue

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.

Revenue in Europe, Middle East and Africa was $66 million or 35.9% of revenue in the third quarter of fiscal 2022, reflecting an increase of $11 million compared to $55 million or 25.2% of revenue in the third quarter of fiscal 2021.

The increase in revenue is primarily due to an increase of $4 million in development seat revenue, an increase of $3 million related to the sale of Secusmart solutions, an increase of $2 million in product revenue in BlackBerry Spark, and an increase of $2 million in professional services.

Other Regions Revenue

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.

Revenue in other regions was $17 million or 9.2% of revenue in the third quarter of fiscal 2022, reflecting an increase of $1 million compared to $16 million or 7.3% of revenue in the third quarter of fiscal 2021.

The increase in revenue is primarily due an increase of $3 million in BlackBerry QNX royalty revenue due to the reasons discussed above in “Revenue by Segment”, and an increase of $1 million in development seat revenue, partially offset by a decrease of $2 million in SAF revenue.

Consolidated Gross Margin

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.

Consolidated gross margin decreased by $32 million to approximately $117 million in the third quarter of fiscal 2022 from $149 million in the third 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 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.

Consolidated gross margin percentage decreased by 4.7% to approximately 63.6% of consolidated revenue in the third quarter of fiscal 2022 from 68.3% of consolidated revenue in the third 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 “Second 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 “Third 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

(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

Cybersecurity IoT Licensing and Other Segment Totals

November 30, Change November 30, Change November 30, Change November 30, Change

2021 2020 2021 2020 2021 2020 2021 2020

Segment revenue $ 128 $ 130 $ (2) $ 43 $ 32 $ 11 $ 13 $ 56 $ (43) $ 184 $ 218 $ (34)

2 unchanged sentences

Segment gross margin % 59 % 59 % — % 81 % 81 % — % 54 % 84 % (30 %) 64 % 69 % (5 %)

Cyber Security

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.

Cybersecurity

Cybersecurity gross margin decreased by $1 million to approximately $76 million in the third quarter of fiscal 2022 from $77 million in the third 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 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 $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 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”.

Cybersecurity gross margin percentage was 59% of Cybersecurity revenue in the third quarter of fiscal 2022, consistent with 59% of Cybersecurity revenue in the third quarter of fiscal 2021.

IoT gross margin increased by $9 million to approximately $35 million in the third quarter of fiscal 2022 from $26 million in the third quarter of fiscal 2021.

The increase was primarily due to the reasons discussed above in “Revenue by Segment”, partially offset by an increase in salaries expense from increased headcount.

IoT gross margin percentage was 81% of IoT revenue in the third quarter of fiscal 2022, consistent with 81% of IoT revenue in the third quarter of fiscal 2021.

Licensing and Other

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.

Licensing and Other gross margin decreased by $40 million to approximately $7 million in the third quarter of fiscal 2022 from $47 million in the third 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 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.

Licensing and Other gross margin percentage decreased by 30% to approximately 54% of Licensing and Other revenue in the third quarter of fiscal 2022 from 84% of Licensing and Other revenue in the third 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 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.

The table below presents a comparison of research and development, selling, marketing and administration, and amortization expenses for the quarter ended November 30, 2021, compared to the quarter ended August 31, 2021 and the quarter ended November 30, 2020.

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

For the Three Months Ended

(in millions)

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

November 30, 2021 August 31, 2021 November 30, 2020

Revenue $ 184 $ 175 $ 218

3 unchanged sentences

Amortization 42 45 45

Impairment of long-lived assets — — 21

Debentures fair value adjustment (110) 67 95

4 unchanged sentences

Amortization 22.8 % 25.7 % 20.6 %

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

Debentures fair value adjustment (59.8 %) 38.3 % 43.6 %

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 August 31, 2021, May 31, 2021 and August 31, 2020.

GAAP-based measures to adjusted measures for the three months ended November 30, 2021, August 31, 2021 and November 30, 2020.

GAAP Operating 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.

Operating expenses decreased by $187 million, or 73.9%, to $66 million, or 35.9% of revenue, in the third quarter of fiscal 2022, compared to $253 million, or 144.6% of revenue, in the second quarter of fiscal 2022.

The decrease was primarily attributable to the difference between the Q3 Fiscal 2022 Debentures Fair Value Adjustment and the fair value adjustment related to the Debentures incurred in the second quarter of fiscal 2022 of $177 million, a decrease of $8 million in stock compensation expenses, a decrease of $5 million in the Company’s deferred share unit costs, and a decrease of $3 million in amortization expense, partially offset by a decrease in benefits of $8 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.

Operating expenses decreased by $210 million, or 76.1%, to $66 million, or 35.9% of revenue, in the third quarter of fiscal 2022, compared to $276 million, or 126.6% of revenue, in the third quarter of fiscal 2021.

Adjusted Operating 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.

Adjusted operating expenses decreased by $1 million, or 0.7%, to $142 million in the third quarter of fiscal 2022 compared to $143 million in the second quarter of fiscal 2022.

The decrease was primarily attributable to a decrease of $5 million in the Company’s deferred share unit costs and a decrease of $3 million in salaries and benefits expenses, partially offset by a decrease in benefits of $8 million in CEWS funding.

Adjusted operating expenses increased by $4 million, or 2.9%, to $142 million in the third quarter of fiscal 2022, compared to $138 million in the third quarter of fiscal 2021.

The increase was primarily attributable to a decrease in benefits of $7 million in CEWS funding, and a decrease in benefits 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, partially offset by a decrease of $6 million in legal 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 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.

Research and development expenses increased by $4 million, or 7.5%, to $57 million in the third quarter of fiscal 2022 compared to $53 million in the third quarter of fiscal 2021.

This increase was primarily attributable to a decrease in benefits of $2 million in SIF claims filed and an increase of $2 million in salaries and benefits expenses.

Adjusted research and development expenses increased by $5 million, or 10.0%, to $55 million in the third quarter of fiscal 2022 compared to $50 million in the third quarter of fiscal 2021.

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

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 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.

Selling, marketing and administration expenses decreased by $6 million, or 7.2%, to $77 million in the third quarter of fiscal 2022 compared to $83 million in the third quarter of fiscal 2021.

This decrease was primarily attributable to a decrease of $6 million in stock compensation expenses, a decrease of $5 million in legal expenses, and a decrease of $3 million in the Company’s deferred share unit costs, partially offset by a decrease in benefits of $7 million in CEWS funding.

Adjusted selling, marketing and administration expenses decreased by $1 million, or 1.3%, to $74 million in the third quarter of fiscal 2022 compared to $75 million in the third quarter of fiscal 2021.

This decrease was primarily attributable to a decrease of $5 million in legal expenses, and a decrease of $3 million in the Company’s deferred share unit costs, partially offset by a decrease in benefits of $7 million in CEWS funding.

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 August 31, 2021 compared to the quarter ended August 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 November 30, 2021 compared to the quarter ended November 30, 2020.

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

2 unchanged sentences

Included in Operating Expense

August 31, 2021 August 31, 2020 Change

November 30, 2021 November 30, 2020 Change

Property, plant and equipment $ 4 $ 4 $ —

2 unchanged sentences

Included in Cost of Sales

August 31, 2021 August 31, 2020 Change

November 30, 2021 November 30, 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 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.

Amortization expense relating to property, plant and equipment and certain intangible assets decreased by $3 million to $42 million in the third quarter of fiscal 2022 compared to $45 million in the third 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.

Adjusted amortization was $13 million in the third quarter of fiscal 2022, consistent with $13 million in the third quarter of fiscal 2021.

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 second quarter of fiscal 2022 compared to $4 million in the second 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 third quarter of fiscal 2022 compared to $4 million in the third 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, 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.

Investment Income (Loss), Net

Investment income (loss), net, which includes the interest expense from the 1.75% Debentures, increased by $26 million to investment income, net of $25 million in the third quarter of fiscal 2022, compared to investment loss, net of $1 million in the third quarter of fiscal 2021.

The increase in investment income (loss), net is primarily due to gains recognized from a return of capital from a non-marketable equity investment and observable price changes on non-marketable equity investments without readily determinable fair value.

For the third quarter of fiscal 2022, the Company’s net effective income tax expense rate was approximately 3%, compared to a net effective income tax expense rate of approximately 2% 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 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

Net Income (Loss)

The Company’s net income for the third quarter of fiscal 2022 was $74 million, or $0.13 basic earnings per share and $0.05 diluted loss per share on a U.S.

GAAP basis, reflecting an increase in net income of $204 million compared to a net loss of $130 million, or $0.23 basic and diluted loss per share, in the third quarter of fiscal 2021.

The increase in net income of $204 million was primarily due to a decrease in operating expenses that was primarily due to a decrease in the fair value adjustment related to the Debentures, as described above in “Operating Expenses”, and an increase in investment income (loss), net, 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 $1 million in the third quarter of fiscal 2022 compared to adjusted net income of $9 million in the third quarter of fiscal 2021, reflecting a decrease in adjusted net income of $10 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”, partially offset by an increase in investment income (loss), net.

The weighted average number of shares outstanding was 571 million common shares for basic earnings per share and 632 million common shares for diluted loss per share for the third quarter of fiscal 2022.

The weighted average number of shares outstanding was 562 million common shares for basic loss and diluted loss per share for the third quarter of fiscal 2021.

Results of Operations - Nine months ended November 30, 2021 compared to the nine months ended November 30, 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 nine months ended November 30, 2021 and November 30, 2020:

For the Nine Months Ended

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

August 31, 2021 August 31, 2020 Change

November 30, 2021 November 30, 2020 Change

Revenue $ 533 $ 683 $ (150)

1 unchanged sentence

Operating expenses 491 1,285 (794)

Investment loss, net (3) (5) 2

Investment income (loss), net 22 (6) 28

Loss before income taxes (126) (800) 674

9 unchanged sentences

(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.

GAAP basis for the first nine 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.

GAAP basis for the first nine months of 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.

GAAP basis for the first nine 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

For the Nine Months Ended

(in millions)

August 31, 2021 August 31, 2020 Change

November 30, 2021 November 30, 2020 Change

Revenue by Segment

Cyber Security $ 227 $ 239 $ (12)

Cybersecurity $ 355 $ 369 $ (14)

IoT 126 92 34

Licensing and Other 52 222 (170)

1 unchanged sentence

% Revenue by Segment

Cyber Security 65.0 % 51.4 %

Cybersecurity 66.6 % 54.0 %

IoT 23.6 % 13.5 %

1 unchanged sentence

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.

Cybersecurity

Cybersecurity revenue was $355 million, or 66.6% of revenue in the first nine months of fiscal 2022, a decrease of $14 million compared to $369 million, or 54.0% of revenue in the first nine months of fiscal 2021.

The decrease in Cybersecurity revenue of $14 million was primarily due to a decrease of $20 million relating to product revenue in BlackBerry Spark, and a decrease of $6 million relating to professional services, offset by an increase of $16 million related to the sale of Secusmart solutions.

IoT revenue was $126 million, or 23.6% of revenue in the first nine months of fiscal 2022, an increase of $34 million compared to $92 million, or 13.5% of revenue in the first nine months of fiscal 2021.

The increase in IoT revenue of $34 million was primarily due to an increase of $17 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 nine months of fiscal 2021, an increase of $13 million in development seat revenue, and an increase of $3 million in professional service 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.

Licensing and Other revenue was $52 million, or 9.8% of revenue in the first nine months of fiscal 2022, a decrease of $170 million compared to $222 million, or 32.5% of revenue in the first nine months of fiscal 2021.

The decrease in Licensing and Other revenue of $170 million was primarily due to a decrease of $165 million in revenue from the Company’s intellectual property licensing arrangements including its patent licensing agreement with Teletry, and a decrease of $4 million in SAF revenue.

GAAP Revenue by Geography

1 unchanged sentence

GAAP basis are set forth in the following table:

For the Six Months Ended

For the Nine Months Ended

(in millions)

August 31, 2021 August 31, 2020 Change

November 30, 2021 November 30, 2020 Change

Revenue by Geography

9 unchanged sentences

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”.

Revenue in North America was $313 million, or 58.7% of revenue, in the first nine months of fiscal 2022, reflecting a decrease of $179 million compared to $492 million, or 72.0% of revenue in the first nine months of fiscal 2021.

The decrease in North American revenue was primarily due to a decrease of $165 million in Licensing and Other revenue due to the reasons discussed above in “Revenue by Segment”, a decrease of $17 million in product revenue in BlackBerry Spark, and a decrease of $6 million in professional services, partially offset by an increase of $10 million in BlackBerry QNX royalty revenue due to the reasons discussed above in “Revenue by Segment” and an increase of $3 million in development seat revenue.

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.

Revenue in Europe, Middle East and Africa was $168 million, or 31.5% of revenue, in the first nine months of fiscal 2022, reflecting an increase of $24 million compared to $144 million, or 21.1% of revenue, in the first nine months of fiscal 2021.

The increase in revenue was primarily due to an increase of $16 million related to the sale of Secusmart solutions, an increase of $6 million in development seat revenue and an increase of $3 million in BlackBerry QNX royalty revenue due to the reasons discussed above in “Revenue by Segment”, partially offset by a decrease of $3 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.

Revenue in other regions was $52 million, or 9.8% of revenue, in the first nine months of fiscal 2022, reflecting an increase of $5 million compared to $47 million, or 6.9% of revenue, in the first nine months of fiscal 2021.

The increase in revenue was primarily due to an increase of $4 million in development seat revenue and an increase of $3 million in BlackBerry QNX royalty revenue due to the reasons discussed above in “Revenue by Segment”, partially offset by a decrease of $2 million in SAF 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 decreased by $148 million to approximately $343 million in the first nine months of fiscal 2022 from $491 million in the first nine 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.

Consolidated gross margin percentage decreased by 7.5%, to approximately 64.4% of consolidated revenue in the first nine months of fiscal 2022 from 71.9% of consolidated revenue in the first nine 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

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

For the Nine 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

Cybersecurity IoT Licensing and Other Segment Totals

November 30, Change November 30, Change November 30, Change November 30, Change

2021 2020 2021 2020 2021 2020 2021 2020

Segment revenue $ 355 $ 369 $ (14) $ 126 $ 92 $ 34 $ 52 $ 222 $ (170) $ 533 $ 683 $ (150)

2 unchanged sentences

Segment gross margin % 59 % 60 % (1 %) 83 % 80 % 3 % 65 % 89 % (24 %) 65 % 72 % (7 %)

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.

Cybersecurity

Cybersecurity gross margin decreased by $15 million to approximately $208 million in the first nine months of fiscal 2022 from $223 million in the first nine 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.

Cybersecurity gross margin percentage decreased by 1% to approximately 59% of Cybersecurity revenue in the first nine months of fiscal 2022 from 60% of Cybersecurity revenue in the first nine 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.

IoT gross margin increased by $30 million to approximately $104 million in the first nine months of fiscal 2022 from $74 million in the first nine 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.

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

Licensing and Other gross margin decreased by $164 million to approximately $34 million in the first nine months of fiscal 2022 from $198 million in the first nine 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.

Licensing and Other gross margin percentage decreased by 24% to approximately 65% of Licensing and Other revenue in the first nine months of fiscal 2022 from 89% of Licensing and Other revenue in the first nine 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

The table below presents a comparison of research and development, selling, marketing and administration, and amortization expense for the nine months ended November 30, 2021, compared to the nine months ended November 30, 2020.

For the Nine Months Ended

(in millions)

August 31, 2021 August 31, 2020 Change

November 30, 2021 November 30, 2020 Change

Revenue $ 533 $ 683 $ (150)

16 unchanged sentences

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-based measures to adjusted measures for the nine months ended November 30, 2021 and November 30, 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.

Operating expenses decreased by $794 million, or 61.8%, to $491 million, or 92.1% of revenue in the first nine months of fiscal 2022, compared to $1,285 million, or 188.1% of revenue, in the first nine 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, the difference between the Fiscal 2022 Debentures Fair Value Adjustment and the fair value adjustment of $161 million related to the Debentures incurred in the first nine months of fiscal 2021, long-lived assets impairment of $21 million in the second quarter of fiscal 2021 which did not recur, a decrease of $9 million in stock compensation expense, and a decrease of $8 million in salaries and benefits expenses, partially offset by a decrease in benefits of $7 million in CEWS funding.

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.

Adjusted operating expenses decreased by $3 million, or 0.7%, to $423 million in the first nine months of fiscal 2022, compared to $426 million in the first nine months of 2021.

The decrease was primarily attributable to a decrease of $7 million in salaries and benefits expenses, a decrease of $7 million in legal expenses, and a decrease of $4 million in operating lease cost, partially offset by a decrease in benefits of $7 million in CEWS funding, and 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.

Research and development expenses increased by $5 million, or 3.0%, to $172 million, or 32.3% of revenue, in the first nine months of fiscal 2022, compared to $167 million, or 24.5% of revenue, in the first nine months of fiscal 2021.

The increase was primarily attributable to a decrease in benefits of $3 million in SIF claims, an increase of $2 million in variable incentive plan costs, and an increase of $1 million in salaries and benefits expenses, partially offset by a decrease of $3 million in operating lease cost.

Adjusted research and development expenses increased by $7 million, or 4.4% to $166 million in the first nine months of fiscal 2022 compared to $159 million in the first nine months of fiscal 2021.

The increase was primarily attributable to a decrease in benefits of $3 million in SIF claims, an increase of $2 million in salaries and benefits expenses, and an increase of $1 million in variable incentive plan costs, partially offset by a decrease of $3 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.

Selling, marketing and administration expenses decreased by $19 million, or 7.5%, to $233 million, or 43.7% of revenue, in the first nine months of fiscal 2022 compared to $252 million in the first nine months of fiscal 2021, or 36.9% of revenue.

The decrease was primarily attributable to a decrease of $9 million in salaries and benefits expenses, a decrease of $8 million in stock compensation expense, and a decrease of $7 million in legal expenses, partially offset by a decrease in benefits of $7 million in CEWS funding, and an increase of $4 million in variable incentive plan costs.

Adjusted selling, marketing and administration expenses decreased by $10 million, or 4.4%, to $217 million in the first nine months of fiscal 2022 compared to $227 million in the first nine months of fiscal 2021.

The decrease was primarily attributable to a decrease of $9 million in salaries and benefits expenses, and a decrease of $7 million in legal expenses, partially offset by a decrease in benefits of $7 million in CEWS funding.

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.

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 nine months ended November 30, 2021 compared to the nine months ended November 30, 2020.

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

For the Six Months Ended

For the Nine Months Ended

(in millions)

Included in Operating Expense

August 31, 2021 August 31, 2020 Change

November 30, 2021 November 30, 2020 Change

Property, plant and equipment $ 10 $ 13 $ (3)

2 unchanged sentences

Included in Cost of Sales

August 31, 2021 August 31, 2020 Change

November 30, 2021 November 30, 2020 Change

Property, plant and equipment $ 2 $ 3 $ (1)

2 unchanged sentences

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.

Amortization expense relating to certain property, plant and equipment and intangible assets decreased by $4 million to $133 million in the first nine months of fiscal 2022, compared to $137 million in the first nine 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.

Adjusted amortization expense was $40 million in the first nine months of fiscal 2022, consistent with $40 million in the first nine 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.

Amortization expense relating to certain property, plant and equipment and intangible assets employed in the Company’s service operations decreased by $3 million to $9 million in the first nine months of fiscal 2022, compared to $12 million in the first nine 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.

Investment Income (Loss), Net

Investment income (loss), net, which includes the interest expense from the Debentures, increased by $28 million to investment income, net of $22 million in the first nine months of fiscal 2022, from investment loss, net of $6 million in the first nine months of fiscal 2021.

The increase in investment income (loss), net was primarily due to gains recognized from a return of capital from a non-marketable equity investment, observable price changes on non-marketable equity investments without readily determinable fair value and a decrease in interest expense from the Debentures as a result of the redemption of the 3.75% Debentures and issuance of the 1.75% Debentures, partially offset by a lower yield on cash and investments and lower average cash and investments balances in the first nine months of fiscal 2022 compared to the first nine months of fiscal 2021.

For the first nine months of fiscal 2022, the Company’s net effective income tax expense rate was approximately 5%, compared to a net effective income tax recovery rate of approximately 1% 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.

The Company’s net loss for the first nine months of fiscal 2022 was $132 million, or $0.23 basic loss per share and $0.28 diluted loss per share on a U.S.

GAAP basis, reflecting a decrease in net loss of $657 million compared to net loss of $789 million, or $1.41 basic and diluted loss per share in the first nine months of fiscal 2021.

The decrease in net loss of $657 million was primarily due to a decrease in operating expenses due to the goodwill impairment in the first nine months of fiscal 2021 that did not recur and a decrease in the fair value adjustment related to the Debentures, as described above in “Operating Expenses” and an increase in investment income (loss), net, 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 nine months of fiscal 2022 was $61 million compared to adjusted net income of $74 million in the first nine months of fiscal 2021, reflecting a decrease in adjusted net income of $135 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 an increase in investment income (loss), net and a decrease in operating expenditures as described above in “Operating Expenses”.

The weighted average number of shares outstanding was 569 million for basic loss per share and 630 million for diluted loss per share for the first nine months of November 30, 2021.

The weighted average number of shares outstanding was 560 million for basic and diluted loss per share for the first nine months of November 30, 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.

On December 17, 2021, there were 574 million voting common shares, options to purchase 1 million voting common shares, 12 million restricted share units and 2 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.

2 unchanged sentences

Liquidity and Capital Resources

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.

Cash, cash equivalents, and investments decreased by $32 million to $772 million as at November 30, 2021 from $804 million as at February 28, 2021, primarily as a result of changes in working capital, partially offset by investment gains from non-marketable securities.

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

dollars as at August 31, 2021.

dollars as at November 30, 2021.

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

(in millions)

August 31, 2021 February 28, 2021 Change

November 30, 2021 February 28, 2021 Change

Cash and cash equivalents $ 271 $ 214 $ 57

5 unchanged sentences

(in millions)

August 31, 2021 February 28, 2021 Change

November 30, 2021 February 28, 2021 Change

Current assets $ 929 $ 1,006 $ (77)

2 unchanged sentences

Current Assets

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.

The decrease in current assets of $77 million at the end of the third 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 $83 million, a decrease in accounts receivable, net of allowance of $44 million, a decrease in other receivables of $8 million, and a decrease in income taxes receivable of $1 million, partially offset by an increase in cash and cash equivalents of $57 million and an increase of $2 million in other current assets.

At November 30, 2021, accounts receivable was $138 million, a decrease of $44 million from February 28, 2021.

The decrease was primarily due to lower revenue recognized over the three months ended November 30, 2021 compared to the three months ended February 28, 2021, and a decrease in days sales outstanding to 64 days at the end of the third quarter of fiscal 2022 from 85 days at the end of the fourth quarter of fiscal 2021.

At November 30, 2021, other receivables decreased by $8 million to $17 million compared to $25 million as at February 28, 2021.

The decrease was primarily due to a decrease of $9 million relating to the CEWS program.

At November 30, 2021, income taxes receivable was $9 million, a decrease of $1 million from February 28, 2021.

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

At November 30, 2021, other current assets was $52 million, an increase of $2 million from February 28, 2021.

The increase was primarily due to an increase of $3 million in inventory, partially offset by a decrease of $2 million in deferred commissions.

Current Liabilities

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.

The decrease in current liabilities of $20 million at the end of the third quarter of 2022 from the end of the fourth quarter of fiscal 2021 was primarily due to a decrease in deferred revenue, current of $31 million, partially offset by an increase in accounts payable of $6 million and an increase in income taxes payable of $5 million.

Deferred revenue, current was $194 million, which reflects a decrease of $31 million compared to February 28, 2021 that was attributable to a $24 million decrease in deferred revenue, current related to BlackBerry Spark and $8 million related to BlackBerry AtHoc, partially offset by an increase of $3 million in deferred revenue, current related to BlackBerry QNX.

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.

Accrued liabilities were $178 million at the end of the third quarter of 2022, consistent with February 28, 2021.

An increase of $8 million in variable incentive plan costs was partially offset by a decrease of $4 million in operating lease liability, current and a decrease of $3 million in payroll accruals.

Accounts payable were $26 million, reflecting an increase of $6 million from February 28, 2021, which was primarily due to timing of payments of accounts payable.

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

Income taxes payable were $11 million, reflecting an increase of $5 million compared to February 28, 2021, which was primarily due to changes in the quarterly tax provision.

Cash flows for the nine months ended November 30, 2021 compared to the nine months ended November 30, 2020 were as follows:

For the Nine Months Ended

(in millions)

August 31, 2021 August 31, 2020 Change

November 30, 2021 November 30, 2020 Change

Net cash flows provided by (used in):

2 unchanged sentences

Financing activities 9 (236) 245

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

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

Effect of foreign exchange gain (loss) on cash and cash equivalents (1) 1 (2)

Net increase (decrease) in cash and cash equivalents $ 82 $ (153) $ 235

Operating Activities

1 unchanged sentence

Investing Activities

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.

During the nine months ended November 30, 2021, cash flows provided by investing activities were $111 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 $104 million and distribution from a non-marketable equity investment without readily determinable fair value in the amount of $35 million, offset by cash used in the acquisition of intangible assets of $22 million, and the acquisition of property, plant and equipment of $6 million.

For the same period in the prior fiscal year, cash flows provided by investing activities were $52 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 $80 million, offset by cash used in the acquisition intangible assets of $23 million, and the acquisitions of property, plant and equipment of $5 million.

Financing Activities

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.

The increase in cash flows provided by financing activities was $9 million for the first nine months of fiscal 2022 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 August 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 November 30, 2021:

(in millions)

6 unchanged sentences

Total $ 620 $ 139 $ 456 $ 22 $ 3

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.

Aggregate contractual obligations amounted to approximately $620 million as at November 30, 2021, including the principal amount of the 1.75% Debentures of $365 million and operating lease obligations of $101 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 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.

Total aggregate contractual obligations as at November 30, 2021 decreased by approximately $56 million as compared to the February 28, 2021 balance of approximately $676 million, which was attributable to decreases in operating lease obligations and purchase obligations and commitments.

Debenture Financing and Other Funding Sources

2 unchanged sentences

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

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

Cash, cash equivalents, and investments were approximately $772 million as at November 30, 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.

4 unchanged sentences

See Note 2 to the Consolidated Financial Statements for accounting pronouncements not yet adopted.

See Note 3 to the Consolidated Financial Statements regarding goodwill impairment.

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