What changed in this filing

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Item 1A. Risk Factors

2022-04-01 compared with 2021-03-31 · 99 added, 74 removed, 270 unchanged (39% of the section changed)

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The industries in which the Company competes are characterized by rapid technological change, frequent new product introductions, frequent market price reductions, constant improvements in features and short product life cycles.

The Company’s future success depends upon its ability to enhance and integrate its current products and services, including the BlackBerry Spark platform, to provide for their compatibility with evolving industry standards and operating systems, to address competing technologies and products developed by other companies, and to continue to develop and introduce new products and services offering enhanced performance and functionality on a timely basis at competitive prices.

The Company’s future success depends upon its ability to enhance and integrate its current products and services, including the BlackBerry Spark Suite, to provide for their compatibility with evolving industry standards and operating systems, to address competing technologies and products developed by other companies, and to continue to develop and introduce new products and services offering enhanced performance and functionality on a timely basis at competitive prices.

The process of developing new technology is complex and uncertain, and involves time, substantial costs and risks, which are further magnified when the development process involves multiple operating platforms.

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The Company may not be able to maintain or expand its customer base for its software and services offerings to grow revenue or achieve sustained profitability.

The Company has focused its strategy on software and services to grow revenue and generate sustainable profitability, including by commercializing the BlackBerry Spark platform.

The Company has focused its strategy on software and services to grow revenue and generate sustainable profitability, including by commercializing the BlackBerry Spark Suite and its component solutions.

For the Company to increase its software and services revenues, it must continually grow its customer base by attracting new customers or, in the case of existing customers, deploying software and services across more endpoints or attracting additional users in such existing customers’ businesses.

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The Company’s customers’ expansion and renewal rates may decline or fluctuate as a result of a number of factors, including the perceived need for such additional software and services, the level of satisfaction with the Company’s software and services, features or functionality, the reliability of the Company’s software and services, the Company’s customer support, customer budgets and other competitive factors, such as pricing and competitors’ offerings.

For smaller or simpler deployments, the switching costs and time are relatively minor compared to traditional enterprise software deployments and such a customer may more easily decide

not to renew with the Company and switch to a competitor’s offerings.

For smaller or simpler deployments, the switching costs and time are relatively minor compared to traditional enterprise software deployments and such a customer may more easily decide not to renew with the Company and switch to a competitor’s offerings.

For larger deployments, particularly with enterprise customers in highly regulated industries such as financial services, government, healthcare and transportation, the Company is subject to risks related to increased customer bargaining power, longer sales cycles, regulatory changes, compliance with procurement requirements and contractual performance covenants, and enhanced customer support obligations.

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The Company is also exposed to risk as a result of process, coding or human errors and through attempts by third parties to fraudulently induce employees to provide access to confidential or personal information.

Although malicious attempts to gain unauthorized access to such information affect many companies across various industries, the

Company is at a relatively greater risk of being specifically targeted because of its reputation for security and the nature of its network operations, and because the Company has been involved in the identification of organized cyber adversaries.

Although malicious attempts to gain unauthorized access to such information affect many companies across various industries, the Company is at a relatively greater risk of being specifically targeted because of its reputation for security and the nature of its network operations, and because the Company has been involved in the identification of organized cyber adversaries.

Such attempts may intensify in the event of retaliatory cyber attacks stemming from Russia’s recent invasion of Ukraine.

The Company devotes significant resources to network security, encryption and authentication technologies and other measures, including security policies and procedures, vulnerability testing and awareness training, to mitigate cyber risk to its systems, endpoints and data.

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The Company may not be able to anticipate these techniques, to implement adequate preventative measures or to identify and respond to them in a timely manner, and the Company’s efforts to do so may have a material adverse impact on the Company’s operating margins, the user experience or compatibility with third party products and services.

Although to date the Company has not experienced any material financial or other losses relating to technology failure, cyberattacks or security breaches, there is no assurance that the Company will not experience loss or damage in the future.

If the network and product security measures implemented by the Company or its partners, including third-party data center operators, cloud service providers and product manufacturers are breached, or perceived to be breached, or if the confidentiality, integrity or availability of the Company’s data, including intellectual property and legally protected personal data, is compromised, the Company could be exposed to significant litigation, service disruptions, investigation and remediation costs, regulatory sanctions, fines and contractual penalties.

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Further, a breach of an artificial intelligence and machine learning-based solution offered by another endpoint security provider could cause the market to lose confidence in next-generation security software generally, including the Company’s solutions.

The COVID-19 coronavirus pandemic has had and may continue to have a material adverse effect on the Company’s business, results of operations and financial condition.

Throughout fiscal 2021, the COVID-19 coronavirus pandemic and related public health measures, including orders to shelter-in-place, travel restrictions and mandated business closures, have adversely affected workforces, organizations, consumers and economies leading to an economic downturn and increased market volatility.

The COVID-19 pandemic has disrupted the normal operations of the Company and the businesses of many of the Company’s customers, suppliers and distribution partners.

Throughout most of fiscal 2021, the Company mandated remote working, utilizing virtual meetings and suspending employee travel, to protect the health and safety of its employees, contractors, customers and visitors.

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

The Company has a limited history with substantially remote operations and the long-term impacts of it are uncertain.

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

The uncertainty also resulted in the Company making significant judgments related to its estimates and assumptions concerning the impairment of goodwill, indefinite-lived intangible assets and certain operating lease right-of-use assets and associated property, plant and equipment.

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.

While the Company does not expect the COVID-19 pandemic and its related economic impact to materially adversely affect the Company’s liquidity position, the Company continues to evaluate the current and potential impact of the pandemic on its business, results of operations and consolidated financial statements, including potential asset impairment.

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.

The ultimate impact of COVID-19 will depend on, among other things, the pandemic’s duration and severity, governmental restrictions which may be sustained or additional measures which may be imposed in response to the pandemic, the effectiveness of actions taken to contain or mitigate the pandemic (including the availability and distribution of vaccines), the impact of the global chip shortage and global economic conditions.

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

The Company’s success depends on its continuing ability to attract new personnel, retain existing key personnel and manage its staffing effectively.

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Also, the Company’s financial results and share price performance (particularly for those employees for whom equity-based compensation is a key element of their total compensation), among other factors, may impact the Company’s ability to attract new, and retain existing, employees.

In addition, the Company’s ability to hire and retain qualified personnel may be negatively impacted by any changes that the Company makes with respect to remote, on-site or hybrid work arrangements, as these may not meet the needs or expectations of employees or may be perceived as less favourable compared to other companies’ policies.

Any failure by the Company to attract and retain key employees could have a material adverse effect on the Company’s business, results of operations and financial condition.

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If the Company does not maintain appropriate staffing, develop effective business continuity and succession programs, mitigate turnover and effectively utilize employees with the right mix of skills and experience across the functions necessary to meet the current and future needs of its business, the financial and operational performance of the Company could suffer.

The Company’s success depends on its relationships with resellers and channel partners.

The Company’s ability to maintain and expand its market reach is increasingly dependent on establishing, developing and maintaining relationships with third party resellers and channel partners.

The Company makes training available to its partners and develops sales programs to incentivize them to promote and deliver the Company’s current and future products and services and to grow its user base.

If the Company is not able to effectively identify and establish new relationships with successful resellers and channel partners, or to maintain or enhance existing relationships without giving rise to conflicts between channels, or if the Company’s partners do not act in a manner that will promote the success of the Company’s products and services, the Company’s business, results of operations and financial condition could be materially adversely affected.

Many resellers and channel partners sell products and services of the Company’s competitors and may terminate their relationships with the Company with limited or no notice and limited or no penalty.

If the Company’s competitors offer their products and services to the resellers and channel partners on more favorable contractual or business terms, have more products and services available, or those products and services are, or are perceived to be, in higher demand by end users, or are more lucrative for the resellers and channel partners, there may be continued pressure on the Company to reduce the price of its products and services, or those resellers and channel partners may stop offering the Company’s products or de-emphasize the sale of its products and services in favor of the Company’s competitors, which could have a material adverse effect on the Company’s business, results of operations and financial condition.

Litigation against the Company may result in adverse outcomes.

In the course of its business, the Company receives general commercial claims related to the conduct of its business and the performance of its products and services, including product liability and warranty claims, employment claims, claims for breaches of contractual covenants and other litigation claims, which may potentially include claims relating to improper use of, or access to, personal data.

Liability claims related to product defects, bugs or vulnerabilities could give rise to class action litigation or to the withdrawal of certifications, and the Company may be subject to such claims either directly or indirectly through indemnities that it provides to certain of its customers.

The Company’s exposure to product liability risk may increase as the Company continues to commercialize its software innovations for autonomous and connected vehicles.

In addition, the Company is subject to potential litigation claims and enforcement actions arising from its public disclosure.

In the course of its business, the Company is subject to potential litigation claims and enforcement actions arising from its public disclosure.

The Company is committed to providing a high level of disclosure and transparency and provides commentary that highlights the trends and uncertainties that the Company anticipates.

Given the highly competitive and rapidly evolving industry in which the Company operates and the recent transition in the Company’s business strategy, the Company’s financial results may not follow any past trends, making it difficult to predict the Company’s financial results.

Given the highly competitive and dynamic industry in which the Company operates and the evolution of the Company’s business strategy over time, the Company’s financial results may not follow any past trends, making it difficult to predict the Company’s financial results.

Consequently, actual results may differ materially from those expressed or implied by the Company’s forward-looking statements and may not meet the expectations of analysts or investors, which can contribute to the volatility of the market price of the Company’s common shares.

See Note 10 to the Consolidated Financial Statements for information regarding certain legal proceedings in which the Company is involved, including a consolidated securities class action complaint filed in the U.S.

District Court for the Southern District of New York.

In addition, the Company receives general commercial claims related to the conduct of its business and the performance of its products and services, including product liability and warranty claims, employment claims, claims for breaches of contractual covenants and other litigation claims, which may potentially include claims relating to improper use of, or access to, personal data.

The Company’s exposure to product liability risk may increase as the Company continues to commercialize its software innovations for autonomous and connected vehicles.

Litigation resulting from these claims could be costly and time-consuming and could divert the attention of management and key personnel from the Company’s business operations.

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In recognition of these considerations, the Company may enter into settlements resulting in material expenditures, the payment of which could have a material adverse effect on the Company’s business, results of operation and financial condition.

If the Company is unsuccessful in its defense of material litigation claims or is unable to settle the claims, the Company may be faced with significant monetary damages or injunctive relief against it that could have a material adverse effect on the Company’s business, BlackBerry brand, results of operations and financial condition.

Similarly, if the Company is unsuccessful in its defense of material litigation claims, the Company may be faced with significant monetary damages or injunctive relief against it that could have a material adverse effect on the Company’s business, BlackBerry brand, results of operations and financial condition.

Administrative or regulatory actions against the Company or its employees could also have a material adverse effect on the Company’s business, BlackBerry brand, results of operations and financial condition.

See also “Legal Proceedings” in this Annual Report on Form 10-K.

The Company’s success depends on its relationships with resellers and channel partners.

The Company’s ability to maintain and expand its market reach is increasingly dependent on establishing, developing and maintaining relationships with third party resellers and channel partners.

do not act in a manner that will promote the success of the Company’s products and services, the Company’s business, results of operations and financial condition could be materially adversely affected.

Acquisitions, divestitures, investments and other business initiatives may negatively affect the Company’s results of operations.

The Company has acquired and continues to seek out opportunities to acquire or invest in, businesses, assets, products, services and technologies that expand, complement or are otherwise related to the Company’s business or provide opportunities for growth.

In addition, the Company is increasingly collaborating and partnering with third parties to develop technologies, products and services, as well as seek new revenue through partnering arrangements.

These activities involve significant challenges and risks, including:

that they may not advance the Company’s strategic objectives or generate satisfactory synergies or return on investment;

that the Company may have difficulty integrating and managing new employees, business systems, development teams and product offerings;

the potential loss of key employees of an acquired business;

additional demands on the Company’s management, resources, systems, procedures and controls;

disruption of the Company’s ongoing business;

and diversion of management’s attention from other business concerns.

Acquisitions, investments or other strategic collaborations or partnerships may involve significant commitments of financial and other resources of the Company.

If these fail to perform as expected, or if the Company fails to enter into and execute the transactions or arrangements needed to succeed, the Company may not be able to bring its products, services or technologies to market successfully or in a timely manner, which would have a material adverse impact on results of operations.

Furthermore, an acquisition may have an adverse effect on the Company’s cash position if all or a portion of the purchase price is paid in cash, and common shares issuable in an acquisition would dilute the percentage ownership of the Company’s existing shareholders.

Any such activity may not be successful in generating revenue, income or other returns to the Company, and the financial or other resources committed to such activities would not be available to the Company for other purposes.

In addition, the acquisitions may involve unanticipated costs and liabilities, including possible litigation and new or increased regulatory exposure, which are not covered by the indemnity or escrow provisions, if any, of the relevant acquisition agreements.

As business circumstances dictate, the Company may also decide to divest itself of assets or businesses.

The Company may not be successful in identifying or managing the risks involved in any divestiture, including its ability to obtain a reasonable purchase price for the assets, potential liabilities that may continue to apply to the Company following the divestiture, potential tax implications, employee issues or other matters.

The Company’s inability to address these risks could adversely affect the Company’s business, results of operations and financial condition.

In the fourth quarter of fiscal 2022, the Company announced that it had entered into an agreement for the sale of substantially all of its non-core patent assets for total consideration of $600 million.

The buyer is a special purpose vehicle formed to acquire the Company’s assets and completion of the transaction is subject to the satisfaction of financing and other closing conditions.

Closing is targeted for the end of the first quarter of fiscal 2023 but there can be no assurance that the transaction will be successfully completed.

The COVID-19 coronavirus pandemic has had and may continue to have a material adverse effect on the Company’s business, results of operations and financial condition.

The COVID-19 coronavirus pandemic and related public health measures, including orders to shelter-in-place, travel restrictions and mandated business closures, has adversely affected workforces, organizations, consumers and economies leading to increased market volatility and economic disruption.

The COVID-19 pandemic has disrupted the normal operations of the Company and the businesses of many of the Company’s customers, suppliers and distribution partners.

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

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

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

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 and caused volatility in demand for the Company’s products and services, adversely affected the ability of the Company’s sales and professional services teams to work with customers, and increased sales cycle times.

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

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

Network disruptions or other business interruptions could have a material adverse effect on the Company’s business and harm its reputation.

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The Company may not be successful in fostering an ecosystem of third-party application developers.

The Company believes decisions by customers to purchase its products, including the forthcoming BlackBerry IVY platform, depend and will depend in part on the availability and compatibility of software applications and services that are developed and maintained by third-party developers.

The Company believes decisions by customers to purchase its products, including the BlackBerry IVY platform, depend and will depend in part on the availability and compatibility of software applications and services that are developed and maintained by third-party developers.

The Company may not be able to convince third parties to develop and maintain applications for its cybersecurity software and embedded solutions platforms.

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This could further disrupt the Company’s product roadmap and cause it to delay introduction of planned products and services, features and functionality, which could harm the Company’s business.

Furthermore, some of the features and functionality in the Company’s products and services require interoperability with APIs of other operating systems, and if operating system providers decide to restrict the Company’s access to their APIs, that functionality would be lost and the Company’s business could be impaired.

Furthermore, some of the

features and functionality in the Company’s products and services require interoperability with APIs of other operating systems, and if operating system providers decide to restrict the Company’s access to their APIs, that functionality would be lost and the Company’s business could be impaired.

Operating system providers have included, and may continue to include, features and functionality in their operating systems that are comparable to elements of the Company’s products and services, thereby making the Company’s platform less valuable.

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The termination of any of these licenses, or the failure of such third parties to adequately maintain, protect or update their software or intellectual property rights, could delay the Company’s ability to offer its products while the Company seeks to implement alternative technology offered by other sources (which may not be available on commercially reasonable terms) or develop such technology internally (which would require significant unplanned investment on the Company’s part).

The use of third-party software in the Company’s products could also expose the Company and its customers to security vulnerabilities.

In addition, certain software that the Company uses may be subject to open source licenses.

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In addition, the Company expends significant resources to patent and manage the intellectual property it creates with the expectation that it will generate revenues by incorporating that intellectual property in its products or services.

The Company is also monetizing its patent portfolio through outbound patent licensing, and derives a significant portion of its Licensing and Other revenue from its agreement with Teletry.

Although the Company operates its own direct licensing program, it may not be possible for the Company to offset any reduction in revenue from Teletry in the short term, or at all.

In addition, changes in the law may weaken the Company’s ability to collect royalty revenue for licensing its patents.

The Company is also monetizing its patent portfolio through outbound patent licensing.

Changes in the law may weaken the Company’s ability to collect royalty revenue for licensing its patents.

Similarly, licensees of the Company’s patents may fail to satisfy their obligations to pay royalties, or may contest the scope and extent of their obligations.

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If any such events or circumstances arise, the Company may be required to record an impairment charge in the value of its goodwill.

In the first quarter of fiscal 2021, the Company recorded total non-cash goodwill impairment charges of

$594 million in the BlackBerry Spark reporting unit.

In the first quarter of fiscal 2021, the Company recorded total non-cash goodwill impairment charges of $594 million in the BlackBerry Spark reporting unit.

For additional information, see Note 3 to the Consolidated Financial Statements.

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The Company’s future effective tax rate will depend on the relative profitability of the Company’s domestic and foreign operations, the statutory tax rates and taxation laws of the related tax jurisdictions, the tax treaties between the countries in which the Company operates, the timing of the release, if any, of the valuation allowance, and the relative proportion of research and development incentives to the Company’s profitability.

Canada, together with approximately 140 other countries comprising the Organization for Economic Co-Operation and Development (“OECD”) and the G20 Inclusive Framework on Base Erosion and Profit Shifting (“BEPS”), approved in principle in 2021 certain base erosion tax initiatives, including the introduction of a 15% global minimum tax which is intended to be effective in 2023.

Canada has not yet released any domestic legislation in respect of the introduction of the global minimum tax.

In February 2022, the Department of Finance Canada released for public comment draft legislative proposals which, if enacted, may limit the deductibility of interest and financing expenses for Canadian tax purposes.

The draft legislative proposals are generally intended to apply in respect of taxation years beginning on or after January 1, 2023.

The Company will continue to monitor the BEPS and interest deductibility limitation proposals and any impact on the Company, which may result in an increase in future taxes and an adverse effect on the Company.

federal income tax laws, if a company is, or for any past period was, a passive foreign investment company (“PFIC”), there could be adverse U.S.

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In addition, governmental authorities may require access to limited data stored by the Company through lawful access demands and capabilities, which could subject the Company to legal liability, unforeseen compliance cost and negative publicity.

Even a perception that the Company’s products or practices do not adequately protect users’ privacy or data collected by the Company, made available to the Company or stored in or through the Company’s products, or that they are being used by third parties to access personal or consumer data, could impair the Company’s sales or its reputation and brand value.

Even a perception that the Company’s products or practices do not adequately protect users’ privacy or data collected by the Company, made available to the Company or stored in or through the

Company’s products, or that they are being used by third parties to access personal or consumer data, could impair the Company’s sales or its reputation and brand value.

Government regulations applicable to the Company’s products and services, including products containing encryption capabilities, could negatively impact the Company’s business.

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In addition, failure to comply with such regulations could result in penalties, costs and restrictions on import or export privileges or adversely affect sales to government agencies or government funded projects.

Environmental, social and governance (“ESG”) expectations and standards expose the Company to risks that could adversely affect the Company’s reputation and performance.

Standards for identifying, measuring and reporting ESG matters continue to evolve, including requirements for ESG-related disclosures that may be required of public companies by the securities regulators.

If the Company’s ESG practices or disclosures do not meet evolving investor or other stakeholder expectations and standards, then the reputation of the Company, its ability to attract or retain employees, and its attractiveness as an investment, business partner, acquiror or service provider could be negatively impacted.

Further, the Company’s failure or perceived failure to pursue or fulfill ESG objectives or to satisfy applicable reporting standards on a timely basis, or at all, could have similar negative impacts or expose the Company to government enforcement actions and private litigation.

Failure of the Company’s suppliers, subcontractors, channel partners and representatives to use acceptable ethical business practices or to comply with applicable laws could negatively impact the Company’s business.

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General Risk Factors

Acquisitions, divestitures, investments and other business initiatives may negatively affect the Company’s results of operations.

In addition, the Company is increasingly collaborating and partnering with third parties to develop technologies, products and services, as well as seek new revenue through partnering arrangements.

These activities involve significant challenges and risks, including:

that they may not advance the Company’s strategic objectives or generate satisfactory synergies or return on investment;

that the Company may have difficulty integrating and managing new employees, business systems, development teams and product offerings;

the potential loss of key employees of an acquired business;

additional demands on the Company’s management, resources, systems, procedures and controls;

disruption of the Company’s ongoing business;

and diversion of management’s attention from other business concerns.

Acquisitions, investments or other strategic collaborations or partnerships may involve significant commitments of financial and other resources of the Company.

As business circumstances dictate, the Company may also decide to divest itself of assets or businesses.

The Company’s inability to address these risks could adversely affect the Company’s business, results of operations and financial condition.

The Company’s business is subject to risks inherent in foreign operations, including fluctuations in foreign currencies.

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The Company maintains offices in a number of foreign jurisdictions and intends to continue to pursue growth in select international markets.

The Company is subject to a number of risks associated with its foreign operations that may increase liability and costs, lengthen sales cycles and require significant management attention.

The Company is

subject to a number of risks associated with its foreign operations that may increase liability and costs, lengthen sales cycles and require significant management attention.

These risks include:

• compliance with the laws of the United States, Canada and other countries that apply to the Company’s international operations, including import and export legislation, lawful access, and privacy, anti-corruption and consumer protection laws;

• compliance with the laws of the United States, Canada and other countries that apply to the Company’s international operations, including import and export legislation, trade sanctions, lawful access, and privacy, anti-corruption and consumer protection laws;

• unexpected changes in foreign regulatory requirements;

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All of the above factors may have a material adverse effect on the Company’s business, results of operations and financial condition and there can be no assurance that the policies and procedures implemented by the Company to address or mitigate these risks will be successful, that Company personnel will comply with them, or that the Company will not experience these factors in the future.

Adverse economic, geopolitical and environmental conditions may negatively affect the Company.

A slowdown in capital spending by end users of the Company’s products and services, coupled with existing economic and geopolitical uncertainties globally and in the Company’s target vertical markets, could substantially reduce the demand for the Company’s products and services and adversely affect the Company’s business, results of operations and financial condition.

Current and future conditions in the domestic and global economies remain uncertain, and it is difficult to estimate the level of economic activity for the economy as a whole.

It is even more difficult to estimate growth in various parts of the economy, including the markets in which the Company participates.

Because all components of the Company’s budgeting and forecasting are dependent upon estimates of economic activity in the markets that the Company serves and demand for its products and services, economic uncertainties make it difficult to estimate future income and expenditures.

In addition, acts of terrorism, political unrest, the outbreak of hostilities and armed conflicts within or between countries have created and may continue to create uncertainties that may affect the global economy.

If economic or geopolitical uncertainties, including those related to the COVID-19 pandemic or Russia’s recent invasion of Ukraine, further disrupt the automotive supply chain or cause customers to reduce their IT budgets or to reduce or cancel orders for the Company’s products and services, the Company’s business, results of operations and financial condition may be adversely affected.

A significant portion of the Company’s personnel, including a majority of its senior leadership team, is based in California, in areas known for seismic activity and wildfires.

The Company also has operations in numerous locations around the world that expose the Company to additional diverse environmental risks.

A significant natural disaster, such as an earthquake, fire or flood could have a material adverse impact on the Company’s business and operations and could cause the Company to incur significant costs to repair damages to its facilities, equipment and infrastructure.

The Company’s offices and remote working locations have historically experienced, and are projected to continue to experience, climate-related events including drought, heat waves, ice storms, power shortages, and wildfires and resultant air quality impacts.

The increasing frequency and impact of extreme weather events on the infrastructure of the Company and its suppliers, as well as public infrastructure, have the potential to disrupt the business of the Company, its suppliers and its customers.

Although the Company maintains incident management and disaster response plans, they may prove to be inadequate in the event of a major disruption caused by a natural disaster or geopolitical incident and the Company may be unable to continue its operations and may endure system interruptions, reputational harm, delays in its development activities, lengthy interruptions in service, breaches of data security and loss of critical data, and the Company’s insurance may not cover such events or may be insufficient to compensate the Company for the potentially significant losses it may incur.

The Company expects its quarterly revenue and operating results to fluctuate.

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In addition, broad market and industry factors may decrease the market price of the Company’s common shares, regardless of the Company’s operating performance.

The stock market in general, and the securities of technology companies in particular, have often experienced extreme price and volume fluctuations.

The stock market in general, and the securities of technology companies in particular, have often experienced extreme price and volume fluctuations, including, in recent years, as a result of the ongoing COVID-19 pandemic, the invasion of Ukraine by Russia, rising inflation and the recent increase in interest rates by the U.S.

Federal Reserve.

Periods of volatility in the overall market and in the market price of the Company’s securities may prompt securities class action litigation against the Company which, if not resolved swiftly, can result in substantial costs and a diversion of management’s attention and resources.

See also the Risk Factor entitled “Litigation against the Company may result in adverse outcomes” and the “Legal Proceedings” section in this Annual Report on Form 10-K.

Adverse economic, geopolitical and environmental conditions may negatively affect the Company.

Current and future conditions in the domestic and global economies remain uncertain, and it is difficult to estimate the level of economic activity for the economy as a whole.

It is even more difficult to estimate growth in various parts of the economy, including the markets in which the Company participates.

Because all components of the Company’s budgeting and forecasting

are dependent upon estimates of economic activity in the markets that the Company serves and demand for its products and services, economic uncertainties make it difficult to estimate future income and expenditures.

If economic or geopolitical uncertainties, including those related to the COVID-19 pandemic, cause customers to reduce their IT budgets or to reduce or cancel orders for the Company’s products and services, the Company’s business, results of operations and financial condition may be adversely affected.

A significant portion of the Company’s personnel, including a majority of its senior leadership team, is based in California, in areas known for seismic activity and wildfires.

The Company also has operations in numerous locations around the world that expose the Company to additional diverse environmental risks.

Rising inflation may negatively impact the Company’s results of operations as well as the credit and securities markets generally, including the market price of the Company’s common shares and Debentures.

Due to global supply chain issues, a rise in energy prices and strong consumer demand as economies continue to reopen from restrictions related to the COVID-19 pandemic, inflation is showing signs of acceleration in the U.S., Canada and globally.

An inflationary environment can increase the Company’s cost of labour as well as energy and other costs.

In addition, economic conditions and market factors may make it difficult for the Company to raise its prices enough to offset rising costs, which could reduce the Company’s profitability, while raising prices could reduce the number of customers who purchase the Company’s products.

Although the U.S.

Federal Reserve and the Bank of Canada recently increased interest rates and announced their intention to further raise interest rates in the near term, inflation is likely to continue.

Conversely, the recently increased interest rates could have a negative effect on trade and securities markets generally, which may in turn have a material adverse effect on the market price of our common shares and our Debentures.

UNRESOLVED STAFF COMMENTS

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What changed 10-K

Item 1A. Risk Factors