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Item 7. Management’s Discussion and Analysis

2022-04-01 compared with 2021-03-31 · 461 added, 422 removed, 543 unchanged (62% of the section changed)

12 unchanged sentences

Cautionary Note Regarding Forward-Looking Statements

This MD&A contains forward-looking statements within the meaning of certain securities laws, including under the U.S.

This Annual Report on Form 10-K contains forward-looking statements within the meaning of certain securities laws, including under the U.S.

Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws, including statements relating to:

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

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

• the Company’s plans, strategies and objectives, including its intentions to increase and enhance its product and service offerings, to patent new innovations, to increase staffing in its Cybersecurity and IoT businesses, and to implement changes to its remote and virtual operations;

• the Company’s expectations with respect to the impact of the COVID-19 pandemic or the Company’s response to Russia’s invasion of Ukraine on its 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 2023 and with respect to installations of the BlackBerry IVY™ platform;

• 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 - COVID-19”, “Key Metrics - Billings”, “Results of Operations - Fiscal year ended February 28, 2021 compared to fiscal year ended February 29, 2020 - Revenue - Revenue by Product and Service”, “Financial Condition - Aggregate Contractual Obligations” and “Financial Condition - Debenture Financing and Other Funding Sources ”.

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 particularly in light of COVID-19, competition, and the Company’s expectations regarding its financial performance.

Many factors could cause the Company’s actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the risk factors discussed in Part I, Item 1A “Risk Factors” in the Annual Report on Form 10-K.

The words “expect”, “anticipate”, “estimate”, “may”, “will”, “should”, “could”, “intend”, “believe”, “target”, “plan” and similar expressions are intended to identify forward-looking statements in this Annual Report on Form 10-K, including in the sections in Part I, Item 1 “Business” entitled “Products and Services - IoT”, “Products and Services - Licensing and Other”, “Intellectual Property”, and “Human Capital”, and in the sections of this MD&A entitled “Business Overview - COVID-19”, “Business Overview - Russia Ukraine Conflict”, “Non-GAAP Financial Measures - Key Metrics - Billings”, “Results of

Operations - Fiscal year ended February 28, 2022 compared to fiscal year ended February 28, 2021 - Revenue - Revenue by Segment”, “Results of Operations - Three months ended February 28, 2022 compared to the three months ended February 28, 2021 - Revenue - Revenue by Segment” and “Financial Condition - Contractual and Other Obligations”.

Forward-looking statements are based on estimates and assumptions made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that the Company believes are appropriate in the circumstances, including but not limited to, the Company’s expectations regarding its business, strategy, opportunities and prospects, the launch of new products and services, general economic conditions, the ongoing COVID-19 pandemic, the Russia Ukraine conflict, competition, and the Company’s expectations regarding its financial performance.

All of these factors should be considered carefully, and readers should not place undue reliance on the Company’s forward-looking statements.

Any statements that are forward-looking statements are intended to enable the Company’s shareholders to view the anticipated performance and prospects of the Company from management’s perspective at the time such statements are made, and they are subject to the risks that are inherent in all forward-looking statements, as described above, as well as difficulties in forecasting the Company’s financial results and performance for future periods, particularly over longer periods, given changes in technology and the Company’s business strategy, evolving industry standards, intense competition and short product life cycles that characterize the industries in which the Company operates.

See “Strategy” subsection in Part I, Item 1 “Business” of the Annual Report.

See the “Strategy” subsection in Part I, Item 1 “Business” of this Annual Report on Form 10-K.

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

1 unchanged sentence

The Company provides intelligent security software and services to enterprises and governments around the world.

The Company secures more than 500 million endpoints including more than 175 million cars on the road today.

The Company secures more than 500 million endpoints including more than 195 million vehicles.

Based in Waterloo, Ontario, the Company leverages artificial intelligence 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.

3 unchanged sentences

Products and Innovation:

• Announced an agreement with AWS to develop and market the new BlackBerry IVY intelligent vehicle data platform;

• Launched BlackBerry Spark® Suites, offering enterprises a range of tailored cybersecurity and endpoint management options to help protect data, minimize risk, and reduce cost and complexity;

• Launched BlackBerry Cyber Suite, the industry’s first comprehensive AI-powered UES solution;

• Announced that BlackBerry QNX software is embedded in more than 175 million cars on the road;

• Announced that BlackBerry® UES was validated by MITRE ATT&CK APT29, which examines the ability to detect sophisticated tactics and techniques used by APT29, a group that cybersecurity experts believe operates on behalf of the Russian government;

• Announced that an independent Frost & Sullivan study reported that the Company’s solutions can secure all IoT endpoints against upwards of 96% of all cyberthreats;

• Launched BlackBerry Persona, the industry’s first UEBA solution using AI technology for continuous authentication;

• Launched BlackBerry Protect® Mobile, an MTD solution to protect against mobile malware and phishing attacks;

• Launched Zoom™ for BlackBerry®, a secure, containerized version of the Zoom app enabled by BlackBerry Dynamics;

• Announced that BlackBerry UEM has achieved National Security Agency (NSA) Commercial Solutions for Classified Program (CSfC) approval;

• Announced that BlackBerry UEM achieved National Information Assurance Partnership (NIAP) and U.S.

Department of Defense Information Network (DoDIN) approvals;

• Announced that the BlackBerry® Government Mobility Suite has achieved Federal Risk and Authorization Management Program (FedRAMP) authorization;

• Launched QNX® OS for Safety 2.2 and announced its certification by TÜV Rheinland to IEC 61508 SIL3 (industrial), ISO 26262 ASIL D (automotive), and IEC 62304 Class C (medical devices) functional safety standards;

• Launched BlackBerry QNX® Hypervisor 2.2, the latest edition of the Company’s real-time embedded hypervisor;

• Launched QNX® Black Channel Communications Technology, a new software solution that OEMs and embedded software developers can use to ensure safe data communication exchanges within their safety-critical systems;

• Launched the BlackBerry® Alert next-generation critical event management solution for the commercial sector;

• Introduced AtHoc® Managed Service to enable organizations of any size to maintain crisis communications capability;

• Announced the launch of BlackBerry® AtHoc® Public Safety Edition to support local governments and universities with critical event management programs;

• Announced the integration of BlackBerry AtHoc with Microsoft Teams;

• Announced the integration of the BlackBerry AtHoc service with ServiceNow’s Now platform for rapid crisis communications and IT service management;

• Announced a dedicated European Union market version of BlackBerry AtHoc to comply with data residency mandates;

• Announced enhancements to BlackBerry Radar® devices to help transportation businesses improve asset utilization and visibility;

• Announced that BlackBerry is making available PE Tree, a free open-source tool for cybersecurity professionals that significantly reduces the time and effort required to reverse engineer malware;

• Announced a collaboration with Intel to deliver a new release of BlackBerry Optics to stop cryptojacking malware;

• Released the 2021 BlackBerry Threat Report, detailing a sharp rise in cyberthreats facing organizations since the onset of the COVID-19 pandemic;

• Released proprietary research uncovering attacks by BAHAMUT, a massive hack-for-hire group targeting governments, businesses, human rights groups and influential individuals;

• Released new research that examines how five related Chinese Advanced Persistent Threat groups have compromised Linux servers, Windows systems and mobile Android devices for nearly a decade;

• Announced feature updates to its SecuSUITE for Government and BlackBerry AtHoc solutions.

• Launched BlackBerry® Optics 3.0, the Company’s next-generation cloud-based EDR solution and BlackBerry Gateway, the Company’s first AI-empowered zero trust network access (ZTNA) product;

• Released an early access version of BlackBerry IVY™;

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

• Announced an expansion of products covered by the BlackBerry Guard to include ZTNA, mobile threat defense (MTD) and user behavior risk analytics (UEBA);

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

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

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

• Announced conformance to the OpenChain ISO/IEC 5230:2020 standard for open source license compliance across the Company’s entire product portfolio;

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

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

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

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

• Launched updated BlackBerry® 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;

• Released the 2022 BlackBerry Annual Threat Report;

Customers and Partners:

• Launched the BlackBerry IVY Innovation Fund to drive innovation and new products using BlackBerry IVY;

• Announced that the U.S.

Air Force chose BlackBerry Spark for secure productivity;

• Announced expanded partnership with Baidu to power high-definition map technology for autonomous driving;

• Announced that Scania AB chose BlackBerry QNX to provide the safety-critical operating system and hypervisor in its next generation of heavy goods vehicles;

• Announced the development of an autonomous driving domain controller for the Xpeng P7 intelligent electric sports sedan with Desay SV Automotive;

• Teamed up with Desay SV Automotive to launch a virtual smart cabin domain controller in Chery’s Tiggo 8 Plus and Jetour X90 models;

• Announced that QNX Black Channel Communications Technology will be used in Motional’s driverless vehicle platform;

• Announced that StradVision will utilize the QNX® Software Development Platform within a number of next generation advanced driver assistance systems (ADAS) and autonomous vehicles from South Korean automakers;

• Announced that the Neutrino operating system will power ADAS systems in Canoo’s next generation electric vehicles;

• Announced that BlackBerry QNX technology will power the innovative digital cockpit in ARCFOX αT, a high-end, intelligent, electric SUV;

• Announced that Plus has selected BlackBerry QNX technology for the global commercial deployment of their automated driving system for Class 8 trucks;

• Announced expanded partnerships with Vodafone and TELUS to offer BlackBerry AtHoc as their secure critical event management and crisis communications solution;

• Partnered with Bell to become Bell’s preferred MTD solution provider, delivering BlackBerry Protect to Canadian enterprise customers;

• Launched the BlackBerry Partner Program to unify the BlackBerry Enterprise Partner Program and BlackBerry Cylance Partner Programs into one comprehensive structure;

• Announced that the BlackBerry Enterprise Partner Program and the BlackBerry Cylance Partner Program both received a 5-Star rating from CRN for the fourth consecutive year;

• Expanded the leadership position of the BlackBerry AtHoc crisis communication system within the U.S.

federal government;

• Announced that BlackBerry AtHoc introduced Derived Credentials and FedRAMP authorization on AWS GovCloud to better support U.S.

Federal agencies;

• Announced that the German Development Agency chose BlackBerry AtHoc as its emergency mass notification system;

• Entered into a partnership with Dedrone, a market and technology leader in airspace security, to deliver advanced counter-drone technology to secure the world’s most critical sites;

• Announced that Sliced Tech will host SecuSUITE for Government for Australian government and enterprise customers;

• Announced that BlackBerry Radar added more than 12 new channel partners including two within Mexico, expanding the company’s asset monitoring solutions outside of the U.S.

and Canada for the first time;

• Entered into a partnership with ZTR to offer railcar owners, operators and suppliers a powerful new digital monitoring solution;

• Announced that BlackBerry® Jarvis™ was named “Best In Breed” binary analysis tool for embedded software by an Internal Research & Development (IRAD) program study;

• Announced the success of a joint cybersecurity skills-based education program with Girl Guides of Canada;

• Entered into a partnership with University of Windsor to develop and deliver a cybersecurity curriculum for the University’s Graduate Master’s Program in Applied Computing.

• Announced that BlackBerry entered into a patent sale agreement with Catapult IP Innovations, Inc.

(“Catapult”), pursuant to which BlackBerry has agreed to sell substantially all of its non-core patent assets to Catapult for total consideration of $600 million;

• Announced that the Company has design wins with 24 of the world’s leading 25 Electric Vehicle (EV) automakers, increasing from 23 of the top 25 in the third quarter of fiscal 2022;

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

• Announced first BlackBerry IVY proof-of-concept pilot with PATEO, a leading Chinese tier 1 supplier, and a Chinese electric vehicle automaker to integrate BlackBerry IVY into a digital cockpit;

• Announced that the Company demonstrated BlackBerry IVY running on auto-grade hardware at CES 2022, with partner integrations from Amazon Web Services, HERE Technologies, Car IQ and Electra Vehicles;

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

• Announced an expanded collaboration with Marelli in China to deploy an integrated cockpit domain controller;

• 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;

• Announced that the QNX Neutrino® operating system has been adopted in a new digital LCD cluster jointly developed with BiTech Automotive (Wuhu) Co., Ltd.

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

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

• Announced that BlackBerry QNX technology was selected by Critical Software to help drive safety improvements for Portugal’s national rail network.

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

• Announced that BlackBerry Jarvis was enhanced to include standardized reporting that enables compliance with the U.S.

government’s recent Executive Order relating to software bills of materials;

• Announced that 13 Asia Pacific channel partners will offer BlackBerry Jarvis to customers in the region;

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

• Announced the integration of BlackBerry Radar with the ISAAC Open Platform to help trucking companies improve asset utilization and fleet visibility;

• Announced that the Region of Niagara selected BlackBerry AtHoc as its critical event management platform;

• 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 its secure productivity and secure communications needs;

• Announced that the Company and IBM Canada have established a new partnership to bring the Company’s industry leading BlackBerry Spark platform to organizations across Canada;

• Announced BlackBerry QNX and Carleton University have joined forces in a $21 million partnership to train the next generation of software engineers;

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

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

Environmental, Sustainability and Corporate Governance:

• Announced that the Company received eleven “Employer of Choice” and “Best Place to Work” Awards in 2020;

• Expanded the Company’s commitment to the United Nations Global Compact Sustainable Development Goals;

• Extended the Company’s partnership with the American Red Cross by donating BlackBerry AtHoc software to support community safety and resilience;

• Appointed Thomas Eacobacci as President;

• Appointed Marjorie Dickman as Chief Government Affairs and Public Policy Officer.

Debt Redemption and New Issuance

On September 1, 2020, the Company redeemed its outstanding 3.75% unsecured convertible debentures (the “3.75% Debentures”) for a redemption amount of approximately $615 million (the “Redemption Amount”), which settled all outstanding obligations of the Company in respect of the 3.75% Debentures.

On September 1, 2020, the Company issued an aggregate of $365 million principal amount of new 1.75% unsecured convertible debentures maturing on November 13, 2023 (the “1.75% Debentures” and collectively with the 3.75% Debentures, the “Debentures”) to Hamblin Watsa Investment Counsel Ltd., in its capacity as investment manager of Fairfax Financial Holdings Limited ("Fairfax") and another institutional investor on a private placement basis.

Fairfax agreed to acquire $330 million principal amount of the 1.75% Debentures and receives interest at the same rate as the other holder of the 1.75% Debentures.

The 1.75% Debentures have terms that are substantially identical to those of the 3.75% Debentures except that the 1.75% Debentures are convertible into common shares at a price of $6.00 per common share, bear a lower rate of interest at 1.75% per annum, are subject to a higher approval threshold for extraordinary resolutions and mature in 2023.

Additionally, the 1.75% Debentures cannot be converted to the extent that, after giving effect to the conversion, the holder would beneficially own or exercise control or direction over more than 19.99% of the Company’s then issued and outstanding shares.

Quarterly and annual interest expense on the 1.75% Debentures is and will be approximately $2 million and $6 million, respectively.

In March 2020, the World Health Organization characterized the novel coronavirus (“COVID-19”) as pandemic and extraordinary actions have been taken by international, federal, state, provincial and local governmental authorities to contain and combat the spread of COVID-19 in regions throughout the world.

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

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

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

• 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 effective May 3, 2021;

• 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;

• Announced that the Company partnered with the Water Institute at the University of Waterloo to address global water-related challenges.

Segment Reporting

As disclosed in Note 12 to the Consolidated Financial Statements, the Company reports segment information based on the “management” approach.

The management approach designates the internal reporting used by the chief operating decision maker (“CODM”) for making decisions and assessing performance as a source of the Company’s reportable operating segments.

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

The novel coronavirus (“COVID-19”) pandemic prompted extraordinary actions by governmental authorities throughout the world and 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 fiscal 2022 and throughout most of fiscal 2021, the Company mandated remote working, utilizing virtual meetings and suspending most employee travel.

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

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

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

These actions include the postponement of certain discretionary spending, taking advantage of the broad-based employer relief provided by governments in Canada, the United States and other jurisdictions, temporarily suspending certain company matching contributions to employee retirement savings plans and deferring increases in the base salaries of many employees and executives.

These cost reduction measures and their estimated savings for the year ended February 28, 2021 included measures impacting employee salaries and benefits of approximately $18 million, a reduction in travel spending of approximately $18 million, and a reduction in discretionary selling and administrative expenses relating to marketing and facilities of $14 million.

In addition, the Company has recorded approximately $53 million in offsets to salaries for amounts under the Canada Emergency Wage Subsidy (“CEWS”) and has deferred approximately $6 million of payments related to payroll taxes in the United States under the U.S.

CARES Act, which amounts have been accrued.

The Company estimates that savings from temporary cost reduction measures and governmental

assistance related to COVID-19 will be lower in fiscal 2022 and will primarily depend on the speed and extent of the easing of pandemic-related restrictions and the extent of ongoing government programs.

In fiscal 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, caused volatility in demand for many of the Company’s products and services, adversely affected the ability of the Company’s sales and professional services teams to meet with customers and provide service, negatively impacted expected spending from new customers and increased sales cycle times.

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

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

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

The Company expects to implement changes to this fully remote and virtual model during fiscal 2023.

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

In 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 savings from temporary cost reduction measures and governmental assistance related to the pandemic were lower in fiscal 2022 compared to fiscal 2021.

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 fiscal 2022 compared to fiscal 2021, when the COVID-19 pandemic first materially negatively impacted the Company’s operations, and observed a partial recovery in both automotive design activities and production volumes during fiscal 2022 compared to fiscal 2021, the COVID-19 pandemic and related global chip shortage have had and, in fiscal 2023, 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 COVID-19 pandemic and its related economic impact have not, and the Company does not expect them 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, efficacy and acceptance 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.

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 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.

Russia Ukraine Conflict

In February 2022, Russian military forces invaded Ukraine.

In response, Ukrainian military personnel and civilians are actively resisting the invasion.

The outcome of the conflict is uncertain and is likely to have wide-ranging consequences on the peace and stability of the region.

Strict financial and trade sanctions against Russia that have been imposed by Canada, the United States and other countries may have far-reaching effects on the global economy.

The long-term impacts of the conflict and the sanctions imposed on Russia remain uncertain and will depend on future developments, and the Company continues to monitor the evolving situation.

The conflict and sanctions against Russia could negatively impact automotive production and sales, increase the ongoing disruption of supply chains, worsen the current semiconductor chip shortage since Russia and Ukraine are critical suppliers of neon gas and palladium used in chip production, exacerbate energy shortages and high energy prices, and increase cybersecurity threats.

These impacts could have a material adverse effect on the Company’s operations, sales and profitability;

in particular, the negative impact on automotive production could have an adverse impact on production-based royalties for the Company’s QNX business.

However, the heightened level of cybersecurity threats could have a positive impact on demand for the Company’s cybersecurity products.

In response to Russia’s invasion of Ukraine, shortly after the end of fiscal 2022, the Company announced that it would cease all business activities in Russia with immediate effect.

The Company does not expect this decision to have a material adverse effect on its business, results of operations or financial condition.

Fiscal 2022 Summary Results of Operations

16 unchanged sentences

631,440 561,305 614,361

Total assets $ 2,818 $ 3,888 $ (1,070) $ 3,968 $ (80)

Total long-term financial liabilities $ 720 $ — $ 720 $ 665 $ (665)

______________________________

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

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

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

GAAP basis for fiscal 2021 and 2020 does not include the dilutive effect of stock-based compensation as to do so would be anti-dilutive.

See Note 9 to the Consolidated Financial

Statements for the fiscal year ended February 28, 2021 for calculation of the diluted weighted average number of shares outstanding.

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

Diluted loss per share on a U.S.

GAAP basis for fiscal 2022, fiscal 2021 and fiscal 2020 does not include the dilutive effect of stock-based compensation as to do so would be anti-dilutive.

See Note 8 to the Consolidated Financial Statements for the fiscal year ended February 28, 2022 for calculation of the diluted weighted average number of shares outstanding.

The following tables show information by operating segment for the three months and year ended February 28, 2022 and February 28, 2021.

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

GAAP Accounting Standards Codification Section 280 based on the “management” approach.

The management approach designates the internal reporting used by the CODM for making decisions and assessing performance of the Company’s reportable operating segments.

“Business Overview - Segment Reporting” for a description of the Company’s operating segments, as well as Note 12 to the Consolidated Financial Statements.

For the Three Months Ended

(in millions)

Cybersecurity IoT Licensing and Other Segment Totals

February 28, Change February 28, Change February 28, Change February 28, Change

2022 2021 2022 2021 2022 2021 2022 2021

Segment revenue $ 122 $ 122 $ — $ 52 $ 38 $ 14 $ 11 $ 50 $ (39) $ 185 $ 210 $ (25)

Segment cost of sales 47 46 1 8 5 3 5 6 (1) 60 57 3

Segment gross margin $ 75 $ 76 $ (1) $ 44 $ 33 $ 11 $ 6 $ 44 $ (38) $ 125 $ 153 $ (28)

For the Year Ended

(in millions)

Cybersecurity IoT Licensing and Other Segment Totals

February 28, Change February 28, Change February 28, Change February 28, Change

2022 2021 2022 2021 2022 2021 2022 2021

Segment revenue $ 477 $ 491 $ (14) $ 178 $ 130 $ 48 $ 63 $ 272 $ (209) $ 718 $ 893 $ (175)

Segment cost of sales 194 192 2 30 23 7 23 30 (7) 247 245 2

Segment gross margin $ 283 $ 299 $ (16) $ 148 $ 107 $ 41 $ 40 $ 242 $ (202) $ 471 $ 648 $ (177)

The following tables reconcile the Company’s segment results for the three months and year ended February 28, 2022 to consolidated U.S.

GAAP results:

For the Three Months Ended February 28, 2022

(in millions)

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

Revenue $ 122 $ 52 $ 11 $ 185 $ — $ 185

Cost of sales (1)

47 8 5 60 1 61

Gross margin $ 75 $ 44 $ 6 $ 125 $ (1) $ 124

Operating expenses (22) (22)

Investment loss, net 1 1

Income before income taxes $ 145

For the Year Ended February 28, 2022

(in millions)

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

Revenue $ 477 $ 178 $ 63 $ 718 $ — $ 718

Cost of sales (1)

194 30 23 247 4 251

Gross margin $ 283 $ 148 $ 40 $ 471 $ (4) $ 467

Operating expenses 469 469

Investment income, net (21) (21)

Income before income taxes $ 19

______________________________

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

GAAP-based measures to adjusted measures for the three months and year ended February 28, 2022.

The following tables reconcile the Company’s segment results for the three months and year ended February 28, 2021 to consolidated U.S.

GAAP results:

For the Three Months Ended February 28, 2021

(in millions)

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

Revenue $ 122 $ 38 $ 50 $ 210 $ — $ 210

Cost of sales (1)

46 5 6 57 1 58

Gross margin $ 76 $ 33 $ 44 $ 153 $ (1) $ 152

Operating expenses 465 465

Loss before income taxes $ (313)

For the Year Ended February 28, 2021

(in millions)

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

Revenue $ 491 $ 130 $ 272 $ 893 $ — $ 893

Cost of sales (1)

192 23 30 245 5 250

Gross margin $ 299 $ 107 $ 242 $ 648 $ (5) $ 643

Operating expenses 1,750 1,750

Investment loss, net 6 6

Loss before income taxes $ (1,113)

______________________________

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

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

Financial Highlights

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

In fiscal 2021, the Company recognized revenue of $893 million and incurred a net loss of $1.10 billion, or $1.97 basic and diluted loss per share on a U.S.

In fiscal 2020, the Company recognized revenue of $1.04 billion and incurred a net loss of $152 million, or $0.27 basic and $0.32 diluted loss per share on a U.S.

The Company recognized adjusted revenue of $919 million and adjusted net income of $101 million, or adjusted earnings of $0.18 per share, on a non-GAAP basis in fiscal 2021.

The Company recognized adjusted revenue of $1.10 billion and adjusted net income of $74 million, and adjusted earnings of $0.13 per share, in fiscal 2020.

The Company had approximately $770 million in cash, cash equivalents and investments as of February 28, 2022 (Fiscal 2021 - $804 million).

In fiscal 2022, the Company recognized revenue of $718 million and net income of $12 million, or $0.02 basic earnings per share and $0.31 diluted loss per share on a U.S.

GAAP basis (Fiscal 2021 - revenue of $893 million and net loss of $1,104 million, or $1.97 basic and diluted loss per share).

The Company recognized adjusted net loss of $55 million, or adjusted loss of $0.10 per share, on a non-GAAP basis in fiscal 2022 (Fiscal 2021 - adjusted net income of $88 million and adjusted earnings of $0.16 per share).

See “Non-GAAP Financial Measures” below.

Debentures Fair Value Adjustment

As previously disclosed, the Company elected the fair value option to account for the Debentures;

As previously disclosed, the Company elected the fair value option to account for its outstanding 1.75% unsecured convertible debentures (the “1.75% Debentures”) and its previously outstanding 3.75% outstanding convertible debentures (the “3.75% Debentures” and collectively, the “Debentures”);

therefore, periodic revaluation has been and continues to be required under U.S.

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As of February 28, 2022, the fair value of the 1.75% Debentures was approximately $507 million versus the principal value of $365 million.

For the three months ended February 28, 2021, the Company recorded a non-cash charge relating to changes in fair value from instrument specific credit risk of $4 million in Other Comprehensive Income (Loss) (“OCI”) and a non-cash charge relating to changes in fair value from non-credit components of $258 million (pre-tax and after tax) (the “Q4 Fiscal 2021 Debentures Fair Value Adjustment”) in the Company’s consolidated statements of operations.

In fiscal 2021, the Company recorded non-cash income relating to changes in fair value from instrument-specific credit risk of $13 million in OCI and a non-cash charge relating to changes in fair value from non-credit components of $372 million (pre-tax and after tax) (the “Fiscal 2021 Debentures Fair Value Adjustment”) in the Company’s consolidated statements of operations.

For the three months ended February 28, 2022, the Company recorded non-cash income relating to changes in fair value from instrument specific credit risk of $1 million in other comprehensive income (loss) (“OCI”) and non-cash income relating to changes in fair value from non-credit components of $165 million (pre-tax and after tax) (the “Q4 Fiscal 2022 Debentures Fair Value Adjustment”) in the Company’s consolidated statements of operations.

In fiscal 2022, the Company recorded non-cash income relating to changes in fair value from instrument-specific credit risk of $1 million in OCI and non-cash income relating to changes in fair value from non-credit components of $212 million (pre-tax and after tax) (the “Fiscal 2022 Debentures Fair Value Adjustment”) in the Company’s consolidated statements of operations.

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

The following table shows the impact of the changes in fair value of the Debentures for the three months and year ended February 28, 2021:

Three Months Ended For the Year Ended

February 28, 2021 February 28, 2021

Income associated with the change in fair value from instrument-specific credit components on the 3.75% Debentures recorded in accumulated other comprehensive loss (“AOCL”) $ — $ 15

Realized charges associated with the change in fair value from credit components released from AOCL on redemption of the 3.75% Debentures — 6

Charge associated with the change in fair value from instrument-specific credit components on the 1.75% Debentures recorded in AOCL (4) (8)

Total non-cash income (charges) recorded in AOCL $ (4) $ 13

Three Months Ended For the Year Ended

February 28, 2021 February 28, 2021

Charge associated with the change in fair value from non-credit components on the 3.75% Debentures recorded in the consolidated statements of operations $ — $ (19)

Realized charges associated with the change in fair value from credit components recorded in the consolidated statements of operations on redemption of the 3.75% Debentures — (6)

Charge associated with the change in fair value from non-credit components on the 1.75% Debentures recorded in the consolidated statements of operations (258) (347)

Total non-cash charges recorded in the consolidated statements of operations $ (258) $ (372)

Non-GAAP Financial Measures

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

On March 30, 2021, the Company announced financial results for the three months and fiscal year ended February 28, 2021, which included certain non-GAAP financial measures, including adjusted revenue, adjusted Software and Services revenue, adjusted gross margin, adjusted gross margin percentage, adjusted operating expense, adjusted operating income, adjusted EBITDA, adjusted operating income 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 March 31, 2022, the Company announced financial results for the three months and fiscal year ended February 28, 2022, which included certain non-GAAP financial measures and non-GAAP ratios, including adjusted gross margin, adjusted gross margin percentage, adjusted operating expense, adjusted net income (loss), adjusted income (loss) per share, adjusted research and development expense, adjusted selling, marketing and administrative expense, adjusted amortization expense, adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage, adjusted EBITDA margin percentage and free cash flow (usage).

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 readers of the Company’s financial statements with a consistent basis for comparison across accounting periods and is useful in helping readers understand the Company’s operating results and underlying operational trends.

The Company believes that these non-GAAP financial measures and non-GAAP ratios provide management, as well as readers of the Company’s financial statements with a consistent basis for comparison across accounting periods and is useful in helping management and readers understand the Company’s 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 expense acquired adjustments in its non-GAAP financial measures due to the quantitative decline in the adjustments over time.

For purposes of comparability, the Company’s non-GAAP financial measures for the three months ended and years ended February 28, 2021 and February 29, 2020 have been updated to conform to the current year’s presentation.

• Debentures fair value adjustment .

The Company has elected to measure its Debentures outstanding at fair value in accordance with the fair value option under U.S.

The Company has elected to measure its outstanding Debentures at fair value in accordance with the fair value option under U.S.

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 restructuring costs relating to employee termination benefits and facilities pursuant to the Resource Allocation Program (“RAP”) entered into in order to transition the Company from a legacy hardware manufacturer to a licensing driven software business do not reflect expected future operating expenses, are not indicative of the Company’s core operating performance, and may not be meaningful in comparison to the Company’s past operating performance.

• Software deferred revenue acquired.

The Company has acquired businesses whose net assets include deferred revenue.

In accordance with U.S.

GAAP reporting requirements, the Company recorded write-downs of deferred revenue under arrangements pre-dating each acquisition to fair value, which resulted in lower recognized revenue than the original transaction price until the related service obligations under such arrangements are fulfilled.

Therefore, U.S.

GAAP revenues after the acquisitions will not reflect the full amount of revenue that would have been reported if the acquired deferred revenue was not written down to fair value, prior to the renewal of these arrangements.

The Company believes that reversing the acquisition-related deferred revenue write-downs (so that the full amount of revenue booked by the acquired businesses is included) provides a more appropriate representation of revenue in a given period and, therefore, provides readers of the Company’s financial statements with a more consistent basis for comparison across accounting periods.

The Company also believes that the adjustment is more useful in helping readers to understand the Company’s operating results and underlying operational trends, especially in future periods when the contracts underlying the acquired deferred revenue are renewed at amounts more consistent with their transaction price.

As the impacted contracts renew over time, the associated reversal of the acquisition write-downs will trend to zero.

Given the extent of the quantitative decline in this adjustment over time through the end of fiscal 2021, the Company plans to discontinue its usage of this non-GAAP measure beginning in the first quarter of fiscal 2022.

• Software deferred commission expense acquired.

The Company has acquired businesses whose net assets include deferred commissions.

In accordance with U.S.

GAAP reporting requirements, the Company recorded write-downs of deferred commissions under arrangements pre-dating each acquisition to fair value, which in most cases is nil.

Therefore, U.S.

GAAP commission expense after the acquisitions will not reflect commission expense that would have been reported if the acquired deferred commissions were not written down to fair value.

The Company believes that reversing the acquisition-related deferred commission write-downs (so that the full amount of commission expense is included) provides a more appropriate representation of commission expense in a given period and, therefore, provides readers of the Company’s financial statements with a more consistent basis for comparison across accounting periods.

The Company also believes that the adjustment is more useful in helping readers to understand the Company’s operating results and underlying operational trends, especially in future periods when the Company recognizes commissions on the renewals of the contracts underlying the acquired deferred commissions.

As the impacted contracts renew over time, the associated reversal of the acquisition write-downs will trend to zero.

• Stock compensation expenses .

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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.

• Settlements, net.

The Company believes that settlements, net is an unusual item related to legacy operations which is not reflective of the Company’s ongoing operating expense or core operating performance and may not be meaningful in comparison to the Company’s past and future operating performance.

• Long-lived asset impairment charge .

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The Company believes that goodwill impairment charges do not reflect expected future operating expenses, are 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.

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.

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

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

As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S.

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GAAP based measures for the three months ended February 28, 2022, February 28, 2021 and February 29, 2020

Readers are cautioned that adjusted revenue, adjusted Software and Services revenue, adjusted gross margin, adjusted gross margin percentage, adjusted operating expense, adjusted operating income, adjusted EBITDA, adjusted operating income 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.

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

GAAP and are therefore unlikely to be comparable to similarly titled measures reported by other companies.

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A reconciliation of the most directly comparable U.S.

GAAP financial measures for the three months ended February 28, 2021, February 29, 2020 and February 28, 2019 to adjusted financial measures is reflected in the tables below:

GAAP financial measures for the three months ended February 28, 2022, February 28, 2021 and February 29, 2020 to adjusted financial measures is reflected in the table below:

For the Three Months Ended (in millions) February 28, 2022 February 28, 2021 February 29, 2020

Revenue $ 210 $ 282 $ 255

Software deferred revenue acquired (1)

Adjusted revenue $ 215 $ 291 $ 257

Gross margin $ 124 $ 152 $ 212

Software deferred revenue acquired (1)

Restructuring charges — — 1

Stock compensation expense 1 1 2

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Gross margin % 67.0 % 72.4 % 75.2 %

Software deferred revenue acquired (1)

0.6 % 0.7 % 0.1 %

Restructuring charges — % — % 0.4 %

Stock compensation expense 0.6 % 0.5 % 0.7 %

Adjusted gross margin % 67.6 % 72.9 % 75.9 %

______________________________

(1) See Reconciliation of U.S.

GAAP Software and Services revenue to adjusted Software and Services revenue

Reconciliation of U.S.

GAAP operating expense for the three months ended February 28, 2021, November 30, 2020, February 29, 2020 and February 28, 2019 to adjusted operating expense is reflected in the tables below:

GAAP operating expense (income) for the three months ended February 28, 2022, November 30, 2021, February 28, 2021 and February 29, 2020 to adjusted operating expense is reflected in the table below:

For the Three Months Ended (in millions) February 28, 2022 November 30, 2021 February 28, 2021 February 29, 2020

Operating expense $ 465 $ 276 $ 253 $ 178

Operating expense (income) $ (22) $ 66 $ 465 $ 253

Restructuring charges — — — 1

Stock compensation expense 4 5 16 15

Debenture fair value adjustment (1)

Software deferred commission expense acquired (3) (4) (3) —

Debentures fair value adjustment (1)

(165) (110) 258 5

Acquired intangibles amortization 22 29 32 35

2 unchanged sentences

LLA impairment charge — — 22 5

Settlements, net — — — (9)

Adjusted operating expense $ 117 $ 142 $ 137 $ 169

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GAAP net income (loss) and U.S.

GAAP basic earnings (loss) per share for the three months ended February 28, 2021, February 29, 2020 and February 28, 2019 to adjusted net income and adjusted basic earnings per share is reflected in the tables below:

GAAP basic earnings (loss) per share for the three months ended February 28, 2022, February 28, 2021 and February 29, 2020 to adjusted net income and adjusted basic earnings per share is reflected in the table below:

For the Three Months Ended (in millions, except per share amounts) February 28, 2022 February 28, 2021 February 29, 2020

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

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

Net income (loss) $ 144 $0.25 $ (315) $(0.56) $ (41) $(0.07)

Software deferred revenue acquired 5 9 2

Restructuring charges — — 1

Stock compensation expense 5 17 17

Debenture fair value adjustment 258 5 (6)

Software deferred commission expense acquired (3) (3) —

Debentures fair value adjustment (165) 258 5

Acquired intangibles amortization 22 32 35

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LLA impairment charge — 22 5

Settlements, net — — (9)

Acquisition valuation allowance — — (21)

Adjusted net income $ 6 $0.01 $ 14 $0.02 $ 45 $0.08

Reconciliation of U.S.

GAAP Software and Services revenue for the three months ended February 28, 2021, February 29, 2020 and February 28, 2019 to adjusted Software and Services revenue is reflected in the tables below:

For the Three Months Ended (in millions) February 28, 2021 February 29, 2020 February 28, 2019

Software and Services Revenue $ 160 $ 170 $ 147

Software deferred revenue acquired 5 9 2

Adjusted Software and Services revenue $ 165 $ 179 $ 149

Reconciliation of U.S.

GAAP research and development, selling, marketing and administration, and amortization expense for the three months ended February 28, 2021, February 29, 2020 and February 28, 2019 to adjusted research and development, selling, marketing and administration, and amortization expense is reflected in the tables below:

GAAP research and development, selling, marketing and administration, and amortization expense for the three months ended February 28, 2022, February 28, 2021 and February 29, 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) February 28, 2022 February 28, 2021 February 29, 2020

4 unchanged sentences

Restructuring charges — — 1

Software deferred commission expense acquired (3) (3) —

Stock compensation expense 2 13 12

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A reconciliation of the most directly comparable U.S.

GAAP financial measures for the years ended February 28, 2021, February 29, 2020 and February 28, 2019 to adjusted financial measures is reflected in the tables below:

GAAP financial measures for the years ended February 28, 2022, February 28, 2021 and February 29, 2020 to adjusted financial measures is reflected in the table below:

For the Fiscal Years Ended (in millions) February 28, 2022 February 28, 2021 February 29, 2020

Revenue $ 893 $ 1,040 $ 904

Software deferred revenue acquired (1)

Adjusted revenue $ 919 $ 1,099 $ 916

Gross margin $ 467 $ 643 $ 763

Software deferred revenue acquired (1)

Restructuring charges — — 5

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Gross margin % 65.0 % 72.0 % 73.4 %

Software deferred revenue acquired (1)

0.8 % 1.4 % 0.3 %

Restructuring charges — % — % 0.5 %

4 unchanged sentences

Stock compensation expense 26 47 58

Debenture fair value adjustment (2)

Debentures fair value adjustment (1)

(212) 372 (66)

Software deferred commission expense acquired (13) (16) —

Acquired intangibles amortization 115 129 141

2 unchanged sentences

LLA impairment charge — 43 10

Settlements, net — — (9)

Adjusted operating expense $ 540 $ 563 $ 738

______________________________

(1) See Reconciliation of U.S.

GAAP Software and Services revenue to adjusted Software and Service revenue

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

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GAAP net income (loss) and U.S.

GAAP basic earnings (loss) per share for the years ended February 28, 2021, February 29, 2020 and February 28, 2019 to the adjusted net income and adjusted basic earnings per share is reflected in the tables below:

GAAP basic earnings (loss) per share for the years ended February 28, 2022, February 28, 2021 and February 29, 2020 to the adjusted net income (loss) and adjusted basic earnings (loss) per share is reflected in the table below:

For the Fiscal Years Ended (in millions, except per share amounts) February 28, 2022 February 28, 2021 February 29, 2020

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

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

Net income (loss) $ 12 $ 0.02 $ (1,104) $ (1.97) $ (152) $ (0.27)

Software deferred revenue acquired 26 59 12

Restructuring charges — 2 10

Stock compensation expense 30 52 63

Debenture fair value adjustment 372 (66) (117)

Software deferred commission expense acquired (13) (16) —

Debentures fair value adjustment (212) 372 (66)

Acquired intangibles amortization 115 129 141

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LLA impairment charge — 43 10

Settlements, net — — (9)

Acquisition valuation allowance — — (1)

Adjusted net income $ 101 $0.18 $ 74 $0.13 $ 131 $0.24

Reconciliation of U.S.

GAAP Software and Services revenue for the years ended February 28, 2021, February 29, 2020 and February 28, 2019 to adjusted Software and Services revenue is reflected in the tables below:

For the Fiscal Years Ended (in millions) February 28, 2021 February 29, 2020 February 28, 2019

Software and Services Revenue $ 621 $ 691 $ 559

Software deferred revenue acquired 26 59 12

Adjusted Software and Services revenue $ 647 $ 750 $ 571

Reconciliation of U.S GAAP research and development, selling, marketing and administration, and amortization expense for the years ended February 28, 2021, February 29, 2020 and February 28, 2019 to adjusted research and development, selling, marketing and administration, and amortization expense is reflected in the tables below:

Adjusted net income (loss) $ (55) $(0.10) $ 88 $0.16 $ 31 $0.06

Reconciliation of U.S GAAP research and development, selling, marketing and administration, and amortization expense for the years ended February 28, 2022, February 28, 2021 and February 29, 2020 to adjusted research and development, selling, marketing and administration, and amortization expense is reflected in the table below:

For the Fiscal Years Ended (in millions) February 28, 2022 February 28, 2021 February 29, 2020

Research and development $ 219 $ 215 $ 259

Restructuring charges — — 2

Stock compensation expense 8 11 13

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Restructuring charges — 2 5

Software deferred commission expense acquired (13) (16) —

Stock compensation expense 18 36 45

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Adjusted operating income, adjusted EBITDA, adjusted operating income margin percentage and adjusted EBITDA margin percentage for the three months ended February 28, 2022, February 28, 2021 and February 29, 2020 are reflected in the table below.

These are non-GAAP financial measures that do not have any standardized meaning as prescribed by U.S.

These are non-GAAP financial measures and non-GAAP ratios that do not have any standardized meaning as prescribed by U.S.

GAAP and are therefore unlikely to be comparable to similar measures presented by other companies.

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Non-GAAP adjustments to operating income (loss)

Software deferred revenue acquired 5 9 2

Restructuring charges — — 1

Stock compensation expense 5 17 17

Debenture fair value adjustment 258 5 (6)

Software deferred commission expense acquired (3) (3) —

Debentures fair value adjustment (165) 258 5

Acquired intangibles amortization 22 32 35

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LLA impairment charge — 22 5

Settlements, net — — (9)

Total non-GAAP adjustments to operating income (loss) (138) 329 86

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Adjusted EBITDA $ 20 $ 33 $ 62

Adjusted revenue (per above) $ 215 $ 291 $ 257

Revenue $ 185 $ 210 $ 282

Adjusted operating income margin % (1)

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______________________________

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

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

Adjusted operating income, adjusted EBITDA, adjusted operating income margin percentage and adjusted EBITDA margin percentage for the fiscal years ended February 28, 2021, February 29, 2020 and February 28, 2019 are reflected in the table below.

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

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

Adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage and adjusted EBITDA margin percentage for the fiscal years ended February 28, 2022, February 28, 2021 and February 29, 2020 are reflected in the table below.

For the Fiscal Years Ended (in millions) February 28, 2022 February 28, 2021 February 29, 2020

Operating income (loss) $ (1,107) $ (149) $ 60

Non-GAAP adjustments to operating income (loss)

Software deferred revenue acquired 26 59 12

Operating loss $ (2) $ (1,107) $ (149)

Non-GAAP adjustments to operating loss

Restructuring charges — 2 10

Stock compensation expense 30 52 63

Debenture fair value adjustment 372 (66) (117)

Software deferred commission expense acquired (13) (16) —

Debentures fair value adjustment (212) 372 (66)

Acquired intangibles amortization 115 129 141

2 unchanged sentences

LLA impairment charge — 43 10

Settlements, net — — (9)

Total non-GAAP adjustments to operating income (loss) 1,205 227 59

Adjusted operating income 98 78 119

Total non-GAAP adjustments to operating loss (67) 1,192 184

Adjusted operating income (loss) (69) 85 35

Amortization 176 198 212

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Adjusted EBITDA $ (8) $ 154 $ 106

Adjusted revenue (per above) $ 919 $ 1,099 $ 916

Adjusted operating income margin % (1)

Revenue $ 718 $ 893 $ 1,040

Adjusted operating income (loss) margin % (1)

(10 %) 10 % 3 %

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______________________________

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

(2) Adjusted EBITDA margin % is calculated by dividing adjusted EBITDA by adjusted 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 billings, recurring revenue percentage, annual recurring revenue (“ARR”), dollar-based net retention rate (“DBNRR”), net customer churn rate and free cash flow do not have any standardized meaning prescribed by U.S.

GAAP and are therefore unlikely to be comparable to similarly titled measures reported by other companies.

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.

Both Software and Services and total Company billings increased in the fourth quarter of fiscal 2021 compared to the third quarter of fiscal 2021.

Software and Services billings were consistent with the fourth quarter of fiscal 2020, but total Company billings decreased.

In fiscal 2022, the Company expects Cyber Security and BTS billings to grow by double-digit percentages.

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

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

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

The Company believes that 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.

Reconciliation of U.S.

GAAP net cash provided by operating activities for the three months ended February 28, 2022, February 28, 2021 and February 29, 2020 to free cash flow is reflected in the table below:

For the Three Months Ended (in millions) February 28, 2022 February 28, 2021 February 29, 2020

Net cash provided by operating activities $ 10 $ 51 $ 35

Acquisition of property, plant and equipment (2) (3) $ (3)

Free cash flow $ 8 $ 48 $ 32

Reconciliation of U.S.

GAAP net cash provided by (used in) operating activities for the years ended February 28, 2022, February 28, 2021 and February 29, 2020 to free cash flow (usage) is reflected in the table below:

For the Fiscal Years Ended (in millions) February 28, 2022 February 28, 2021 February 29, 2020

Net cash provided by (used in) operating activities $ (28) $ 82 $ 26

Acquisition of property, plant and equipment (8) (8) (12)

Free cash flow (usage) $ (36) $ 74 $ 14

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

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

For purposes of comparability, the Company’s key metrics for the three months ended February 28, 2021 have been updated to conform to the current year’s presentation.

Comparative breakdowns of certain key metrics for the three months ended February 28, 2022 and February 28, 2021 are set forth below.

For the Three Months Ended (in millions) February 28, 2022 February 28, 2021 Change

Annual Recurring Revenue

Cybersecurity $ 347 $ 369 $ (22)

IoT $ 93 $ 84 $ 9

Dollar-Based Net Retention Rate

Cybersecurity 91 % 95 % (4 %)

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

The Company defines recurring software product revenue percentage as recurring software product revenue divided by total software and services revenue.

Recurring software product revenue is comprised of subscription and term licenses, maintenance arrangements, royalty arrangements and perpetual licenses recognized ratably under ASC 606.

Total software and services revenue is comprised of recurring product revenue, non-recurring product revenue and professional services.

uses recurring software product revenue percentage to provide visibility into the revenue expected to be recognized in the current and future periods.

Total adjusted Software and Services product revenue, excluding professional services, was approximately 90% recurring in the fourth quarter of fiscal 2021 and decreased from greater than 90% recurring in the fourth quarter of fiscal 2020 due to product mix.

Annual Recurring Revenue

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

Software and Services ARR was approximately $468 million in the fourth quarter of fiscal 2021 and decreased compared to the third quarter of fiscal 2021 primarily due to the impact of COVID-19 on BTS, specifically on QNX production-based royalties.

QNX royalties are included in the ARR calculation on a trailing four quarter basis.

Cybersecurity ARR was approximately $347 million in the fourth quarter of fiscal 2022 and decreased compared to $358 million in the third quarter of fiscal 2022 and decreased compared to $369 million in the fourth quarter of fiscal 2021.

IoT ARR was approximately $93 million in the fourth quarter of fiscal 2022 and increased compared to $91 million in the third quarter of fiscal 2022 and increased compared to $84 million in the fourth quarter of fiscal 2021.

Dollar-Based Net Retention Rate

The Company calculates the DBNRR as of any period end by first calculating the ARR from the customer base as at 12 months prior to the current period end (“Prior Period ARR”).

The Company calculates the DBNRR as of period end by first calculating the ARR from the customer base as at 12 months prior to the current period end (“Prior Period ARR”).

The Company then calculates the ARR for the same cohort of customers as at the current period end (“Current Period ARR”).

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

Software and Services DBNRR was 91% in the fourth quarter of fiscal 2021 and increased compared to 90% in the third quarter of fiscal 2021.

Net Customer Churn Rate

The Company defines net customer churn rate as the difference between the gross customer churn rate and the new customer acquisition rate, divided by the number of active customers in the prior quarter, expressed as a percentage.

The Company uses net customer churn rate to evaluate the rate the Company is obtaining new customers to offset customers lost due to account cancellations or non-renewal of subscriptions.

Net Customer Churn Rate was approximately 1% in the fourth quarter of fiscal 2021 consistent with the third quarter of fiscal 2021.

Free Cash Flow

Free cash flow is a measure of liquidity calculated as net operating cash flow minus capital expenditures.

Free cash flow does not have any standardized meaning as prescribed by U.S.

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.

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 February 28, 2021, the Company’s net cash flow provided by operating activities was $51 million and capital expenditures were $3 million, resulting in the Company reporting free cash flow of $48 million.

For the fiscal year ended February 28, 2021, the Company’s net cash provided by operating activities was $82 million and capital expenditures were $8 million, resulting in the Company reporting free cash flow of $74 million.

The Company previously stated that it expected to generate positive free cash flow in fiscal 2021.

The Company has generated positive free cash flow in fiscal 2021.

Cybersecurity DBNRR was 91% in the fourth quarter of fiscal 2022 and decreased compared to 95% in the third quarter of fiscal 2022 and the fourth 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 fourth quarter of fiscal 2022 compared to the third quarter of fiscal 2022 and decreased compared to the fourth 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 fourth quarter of fiscal 2022.

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

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

In fiscal 2022, IoT billings grew by a double-digit percentage compared to fiscal 2021.

The Company expects Cybersecurity billings growth of between 8 to 12% in fiscal 2023 compared to fiscal 2022.

The Company also expects quarterly year-over-year Cybersecurity billings growth throughout fiscal 2023 when compared to the same quarter in the prior year.

Recurring Software Product Revenue

The Company defines recurring software product revenue percentage as recurring software product revenue divided by total software and services revenue.

Recurring software product revenue is comprised of subscription and term licenses, maintenance arrangements, royalty arrangements and perpetual licenses recognized ratably under ASC 606.

Total software and services revenue is comprised of recurring product revenue, non-recurring product revenue and professional services.

uses recurring software product revenue percentage to provide visibility into the revenue expected to be recognized in the current and future periods.

Total Software and Services product revenue, excluding professional services, was approximately 80% recurring in the fourth quarter of fiscal 2022 consistent with approximately 80% recurring in the third quarter of fiscal 2022 and decreased from approximately 90% recurring in the fourth quarter of fiscal 2021 due to product mix.

Results of Operations - Fiscal year ended February 28, 2022 compared to fiscal year ended February 28, 2021

Revenue by Product and Service

Revenue by Segment

Comparative breakdowns of revenue by product and service on a U.S.

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Revenue by Product and Service

Software and Services $ 621 $ 691 $ (70) $ 559 $ 132

Cybersecurity $ 477 $ 491 $ (14) $ 475 $ 16

IoT 178 130 48 216 (86)

Licensing and Other 63 272 (209) 349 (77)

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% Revenue by Product and Service

Software and Services 69.5 % 66.4 % 61.8 %

Cybersecurity 66.4 % 55.0 % 45.7 %

IoT 24.8 % 14.5 % 20.7 %

Licensing and Other 8.8 % 30.5 % 33.6 %

100.0 % 100.0 % 100.0 %

Software and Services

Software and Services revenue was $621 million, or 69.5% of revenue in fiscal 2021, a decrease of $70 million compared to $691 million, or 66.4% of revenue in fiscal 2020.

The decrease in Software and Services revenue of $70 million was primarily due to a decrease of $75 million in recurring royalties in BlackBerry QNX, due to the slowdown in the automotive market related to the COVID-19 pandemic and the conversion in the prior fiscal year of certain existing royalty-bearing licenses to fixed pricing from volume-based pricing, a decrease of $16 million relating to professional services, a decrease of $9 million in BlackBerry AtHoc revenue and a decrease of $7 million relating to non-automotive OEM business, partially offset by an increase of $24 million related to product revenue in BlackBerry Spark and an increase of $18 million related to the sale of Secusmart solutions.

Adjusted Software and Services revenue was $647 million in fiscal 2021 compared to $750 million in fiscal 2020, representing a decrease of $103 million.

The $103 million decrease in adjusted Software and Services revenue was primarily attributable to the same reasons described above on a U.S.

GAAP basis and due to a decrease of $33 million in the non-GAAP adjustment of deferred software revenue acquired to $26 million in fiscal 2021 from $59 million in fiscal 2020.

The Company previously stated that in fiscal 2021, the Company expected BlackBerry QNX revenue to be negatively impacted by a slowdown in automotive market related to the COVID-19 pandemic, the impact of which could be partially offset by increased customer demand for the Company’s endpoint security and productivity solutions that support business continuity and remote working environments, including the BlackBerry Spark platform, SecuSUITE and BlackBerry AtHoc.

This is reflected in the Company’s results as noted above, with the exception of BlackBerry AtHoc which also declined.

The Company previously stated that it expected Software and Services, excluding BTS, to have slight U.S.

GAAP and adjusted revenue growth in the second half of fiscal 2021.

Software and Services, excluding BTS, had slight U.S.

GAAP and adjusted revenue growth in the second half of fiscal 2021.

In fiscal 2022, the Company expects that Cyber Security revenue and BTS revenue will be higher in the second half of the year than in the first half of the year, and that Cyber Security revenue will be between $495 million and $515 million.

Assuming that the global chip shortage has been alleviated by the middle of fiscal 2022, the Company expects that BTS revenue will return to a pre-pandemic run-rate of approximately $50 million per quarter by that time and will be between $180 million and $200 million for fiscal 2022 as a whole, such that full-year Software and Services revenue will be between $675 million and $715 million.

Cybersecurity

Cybersecurity revenue was $477 million, or 66.4% of revenue in fiscal 2022, a decrease of $14 million compared to $491 million, or 55.0% of revenue in fiscal 2021.

The decrease in Cybersecurity revenue of $14 million was primarily due to a decrease of $25 million relating to product revenue in BlackBerry Spark, a decrease of $9 million relating to professional services and a decrease of $4 million relating to non-automotive OEM business, offset by an increase of $29 million related to the sale of Secusmart solutions.

The Company previously stated that it expected Cybersecurity revenue to be higher in the second half of the year than in the first half of the year for fiscal 2022.

In fiscal 2022, Cybersecurity revenue was higher in the second half of the year than in the first half of the year.

The Company expects Cybersecurity revenue in fiscal 2023 to be broadly consistent with fiscal 2022.

IoT revenue was $178 million, or 24.8% of revenue in fiscal 2022, an increase of $48 million compared to $130 million, or 14.6% of revenue in fiscal 2021.

The increase in IoT revenue of $48 million was primarily due to an increase of $20 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 fiscal 2021, an increase of $16 million in development seat revenue, an increase of $8 million in professional service revenue and an increase of $3 million related to sales in BlackBerry Radar.

The Company previously stated that it expected IoT revenue to be between $180 million and $200 million for fiscal 2022 as a whole.

In fiscal 2022, IoT revenue was $178 million primarily due to the impact of disruption in automotive supply chains on production-based royalties.

The Company previously stated that it expected IoT revenue to be higher in the second half of the year than in the first half of the year in fiscal 2022.

In fiscal 2022, IoT revenue was higher in the second half of the year than in the first half of the year.

The Company expects IoT revenue to be between $200 million and $210 million in fiscal 2023.

Licensing and Other

Licensing and Other revenue was $63 million, or 8.8% of revenue in fiscal 2022, a decrease of $209 million compared to $272 million, or 30.5% of revenue in fiscal 2021.

The decrease in Licensing and Other revenue of $77 million was primarily due to a decrease of $93 million in revenue from the BBM Consumer licensing arrangement and a decrease of $8 million from mobility licensing arrangements, partially offset by an increase of $16 million in revenue from the Company’s intellectual property (“IP”) licensing arrangements including its patent licensing agreement with Teletry, and an increase in $16 million in revenue generated from IP sales.

SAF revenue, which is generated from users of BlackBerry 7 and prior BlackBerry operating systems, also decreased by $8 million, primarily due to a lower number of BlackBerry 7 users and lower revenue from those users compared to fiscal 2020.

The Company previously stated that it expects Licensing revenue to be modestly above $250 million in fiscal 2021, which is reflected in the above results.

The Company previously stated that it expected to generate total Company adjusted revenue of approximately $950 to $965 million in fiscal 2021, assuming a gradual re-opening of the global economy as the measures undertaken to contain the COVID-19 pandemic are reduced.

Total adjusted revenue was $919 million in fiscal 2021 primarily due to the impact on the Company’s Licensing and Other business of the Company having entered into negotiations in the fourth quarter of fiscal 2021 for the potential sale of a portion of the Company’s patent portfolio.

The Company has limited its patent monetization activities due to the negotiations and because revenue from additional transactions that could have been completed in the fourth quarter of fiscal 2021 would have been treated as contingent revenue and deferred to future periods.

Had negotiations not been in progress during the quarter, the Company believes that Licensing and Other revenue would have been higher.

Throughout the period in which negotiations or anticipated regulatory reviews related to the potential patent portfolio transaction are ongoing, the Company expects to continue to limit its monetization activities and expects to generate Licensing and Other revenue of $10 million to $15 million per fiscal quarter.

If the sale process concludes in the middle of fiscal 2022 without the completion of a transaction, the Company will resume its prior monetization activities and expects that Licensing and Other revenue will be approximately $100 million in fiscal 2022.

If a sale transaction is completed, the Company expects that Licensing and Other revenue will be significantly higher than $100 million in fiscal 2022 and the Company expects to use the transaction proceeds primarily to support the growth of the Software and Services business.

The decrease in Licensing and Other revenue of $209 million was primarily due to a decrease of $201 million in revenue from the Company’s intellectual property licensing arrangements due to the ongoing patent sale process in fiscal 2022, and associated restrictions on monetization activity.

SAF revenue, which was generated from users of BlackBerry 7 and prior BlackBerry operating systems, also decreased by $5 million, primarily due to a lower number of BlackBerry 7 users and lower revenue from those users compared to fiscal 2021, and to the decommissioning of service for these legacy systems as of January 4, 2022.

The Company previously stated that it expected Licensing and Other revenue to be approximately $60 million in fiscal 2022.

In fiscal 2022, Licensing and Other revenue was $63 million.

GAAP Revenue by Geography

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Revenue in North America was $413 million, or 57.5% of revenue, in fiscal 2022, reflecting a decrease of $220 million compared to $633 million, or 70.9% of revenue in fiscal 2021.

The decrease in North American revenue is primarily due to a decrease of $93 million in revenue from the BBM Consumer licensing arrangement and a decrease of $37 million in BlackBerry QNX revenue, due to the reasons discussed above in “Revenue by Product and Service”, a decrease of $11 million relating to professional services, a decrease of $9 million in BlackBerry AtHoc revenue and a decrease of $7 million relating to non-automotive OEM business, partially offset by an increase of $32 million in IP licensing and sale revenue due to the reasons discussed above in “Revenue by Product and Service” and an increase of $18 million in product revenue in BlackBerry Spark.

The decrease in North American revenue was primarily due to a decrease of $201 million in Licensing and Other revenue due to the reasons discussed above in “Revenue by Segment”, a decrease of $24 million in product revenue in BlackBerry Spark and a decrease of $7 million in professional services, partially offset by an increase of $13 million in BlackBerry QNX royalty revenue due to the reasons discussed above in “Revenue by Segment”.

Europe, Middle East and Africa Revenue

Revenue in Europe, Middle East and Africa was $197 million, or 22.1% of revenue, in fiscal 2021, reflecting a decrease of $24 million compared to $221 million, or 21.3% of revenue, in fiscal 2020.

The decrease in revenue is primarily due to a decrease of $30 million in BlackBerry QNX revenue, a decrease of $7 million in SAF revenue due to the reasons discussed above in “Revenue by Product and Service” and a decrease of $5 million in professional services, partially offset by an increase of $18 million related to the sale of Secusmart solutions.

Revenue in Europe, Middle East and Africa was $234 million, or 32.6% of revenue, in fiscal 2022, reflecting an increase of $37 million compared to $197 million, or 22.1% of revenue, in fiscal 2021.

The increase was primarily due to an increase of $29 million related to the sale of Secusmart solutions, an increase of $6 million in development seat revenue, an increase of $6 million in professional services due to the reasons discussed above in “Revenue by Segment”, partially offset by a decrease of $2 million in product revenue in BlackBerry Spark.

Other Regions Revenue

Revenue in other regions was $63 million, or 7.0% of revenue, in fiscal 2021, reflecting a decrease of $13 million compared to $76 million, or 7.3% of revenue, in fiscal 2020.

The decrease in revenue is primarily due to a decrease of $8 million from mobility licensing arrangements and a decrease of $7 million in BlackBerry QNX revenue due to the reasons discussed above in “Revenue by Product and Service”, a decrease of $4 million in professional services and a decrease of $2 million in development seat revenue, partially offset by an increase of $6 million in product revenue in BlackBerry Spark.

Revenue in other regions was $71 million, or 9.9% of revenue, in fiscal 2022, reflecting an increase of $8 million compared to $63 million, or 7.0% of revenue, in fiscal 2021.

The increase in revenue is primarily due to an increase of $5 million in development seat revenue and an increase of $4 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 SAF revenue.

Consolidated Gross Margin

Consolidated gross margin decreased by $176 million to approximately $467 million in fiscal 2022 from $643 million in fiscal 2021.

The decrease was primarily due to a decrease in revenue in BlackBerry QNX and Licensing and Other, partially offset by increases in revenue in Secusmart and BlackBerry Spark, due to the reasons discussed above in “Revenue by Product and Service”, as the Company’s cost of sales does not significantly fluctuate based on business volume.

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 7.0%, to approximately 65.0% of consolidated revenue in fiscal 2022 from 72.0% of consolidated revenue in fiscal 2021.

The decrease was primarily due a lower proportion of gross margin percentage associated with BlackBerry QNX due to the reasons discussed above in “Revenue by Product and Service”.

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 and Secusmart due to the reasons discussed above in “Revenue by Segment”.

Gross Margin by Segment

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

For the Years Ended

(in millions)

Cybersecurity IoT Licensing and Other Segment Totals

February 28, Change February 28, Change February 28, Change February 28, Change

2022 2021 2022 2021 2022 2021 2022 2021

Segment revenue $ 477 $ 491 $ (14) $ 178 $ 130 $ 48 $ 63 $ 272 $ (209) $ 718 $ 893 $ (175)

Segment cost of sales 194 192 2 30 23 7 23 30 (7) 247 245 2

Segment gross margin $ 283 $ 299 $ (16) $ 148 $ 107 $ 41 $ 40 $ 242 $ (202) $ 471 $ 648 $ (177)

Segment gross margin % 59 % 61 % (2 %) 83 % 82 % 1 % 63 % 89 % (26 %) 66 % 73 % (7 %)

Cybersecurity

Cybersecurity gross margin decreased by $16 million to approximately $283 million in fiscal 2022 from $299 million in 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.

Cybersecurity gross margin percentage decreased by 2% to approximately 59% of Cybersecurity revenue in fiscal 2022 from 61% of Cybersecurity revenue in fiscal 2021.

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

IoT gross margin increased by $41 million to approximately $148 million in fiscal 2022 from $107 million in fiscal 2021.

The increase was primarily due to the reasons discussed above in “Revenue by Segment”, partially offset by an increase in cost of sales related to professional services.

IoT gross margin percentage increased by 1% to approximately 83% of IoT revenue in fiscal 2022 from 82% of IoT revenue in 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”, partially offset by an increase in professional services revenue, which has a lower relative gross margin percentage.

Licensing and Other

Licensing and Other gross margin decreased by $202 million to approximately $40 million in fiscal 2022 from $242 million in 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 26% to approximately 63% of Licensing and Other revenue in fiscal 2022 from 89% of Licensing and Other revenue in fiscal 2021.

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

Operating Expenses

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Debentures fair value adjustment (212) 372 (584) (66) 438

Settlements, net — — — (9) 9

Total $ 469 $ 1,750 $ (1,281) $ 912 $ 838

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Debentures fair value adjustment (29.5 %) 41.7 % (6.3 %)

Settlements, net — % — % (1.0) %

Total 65.3 % 196.0 % 87.7 %

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GAAP Operating Expenses

Operating expenses increased by $838 million, or 91.9%, to $1,750 million, or 196.0% of revenue in fiscal 2021, compared to $912 million, or 87.7% of revenue, in fiscal 2020.

The increase was primarily attributable to an increase of $572 million in goodwill impairment, the difference between the Fiscal 2021 Debentures Fair Value Adjustment and the fair value adjustment related to the Debentures incurred in fiscal 2020 (the “Fiscal 2020 Debentures Fair Value Adjustment”) of $438 million, and an increase of $33 million in impairment of long-lived assets, partially offset by the benefit of $53 million in government subsidies resulting from claims filed for the CEWS program to support the business through the COVID-19 pandemic, a decrease of $42 million in salaries and benefits expense, and a decrease of $19 million in variable incentive plan costs.

Operating expenses decreased by $1,281 million, or 73.2%, to $469 million, or 65.3% of revenue in fiscal 2022, compared to $1,750 million, or 196.0% of revenue, in fiscal 2021.

The decrease was primarily attributable to a goodwill impairment of $594 million in fiscal 2021 which did not recur, the difference between the Fiscal 2022 Debentures Fair Value Adjustment and the fair value adjustment related to the Debentures incurred in fiscal 2021 of $584 million, an impairment of long-lived assets of $43 million in fiscal 2021 which did not recur and a decrease of $20 million in stock compensation expense, partially offset by a decrease in benefits of $10 million in government subsidies such as claims filed for the Canada Emergency Wage Subsidy (“CEWS”) and Hardest-Hit Business Recovery Program (“HHBRP”) programs to support the business through the COVID-19 pandemic and an increase of $7 million in variable incentive plan costs.

Adjusted Operating Expenses

Adjusted operating expenses decreased by $23 million, or 4.1%, to $540 million in fiscal 2022, compared to $563 million in fiscal 2021.

The decrease was primarily attributable to the benefit of $53 million in CEWS funding, a decrease of $41 million in salaries and benefits expense, a decrease of $20 million in variable incentive plan costs, a decrease of $19 million in travel expense, a decrease in cost associated with a direct IP licensing arrangement of $18 million in fiscal 2020 which did not recur, and a decrease of $15 million in marketing and advertising expense.

The decrease was primarily attributable to a decrease of $13 million in legal expenses, a decrease of $11 million in the Company’s deferred share unit liability due to a decrease in the Company’s stock price and a decrease of $10 million in salaries and benefits expense, partially offset by a decrease in benefits of $10 million in government subsidies such as CEWS and HHBRP funding and an increase of $7 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 decreased by $44 million, or 17.0%, to $215 million, or 24.1% of revenue, in fiscal 2021, compared to $259 million, or 24.9% of revenue, in fiscal 2020.

The decrease was primarily attributable to a decrease of $25 million in salaries and benefits expense, a decrease of $8 million in variable incentive plan costs, a decrease of $7 million in consulting fees, and a decrease of $2 million in travel expense, partially offset by a decrease of $4 million in claims filed with the Ministry of Innovation, Science and Economic Development Canada relating to its Strategic Innovation Fund program’s investment in BlackBerry QNX.

Adjusted research and development expenses decreased by $42 million, or 17.1% to $204 million in fiscal 2021 compared to $246 million in fiscal 2020.

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

Research and development expenses increased by $4 million, or 1.9%, to $219 million, or 30.5% of revenue, in fiscal 2022, compared to $215 million, or 24.1% of revenue, in fiscal 2021.

The increase was primarily attributable to an increase of $4 million in variable incentive plan costs and a decrease in benefits of $3 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 $2 million in stock compensation expense.

Adjusted research and development expenses increased by $7 million, or 3.4% to $211 million in fiscal 2022 compared to $204 million in fiscal 2021.

The increase was primarily due an increase of $4 million in variable incentive plan costs and a decrease in benefits of $3 million in SIF claims filed.

Selling, Marketing and Administration Expenses

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

Selling, marketing and administration expenses decreased by $149 million, or 30.2%, to $344 million, or 38.5% of revenue, in fiscal 2021 compared to $493 million in fiscal 2020, or 47.4% of revenue.

The decrease was primarily attributable to the benefit of $53 million in CEWS funding, a decrease in costs associated with direct IP licensing arrangements of $18 million in fiscal 2020 which did not recur, a decrease of $16 million in travel expense, a decrease of $16 million in salaries and benefits expense, a decrease of $15 million in marketing and advertising cost, and a decrease of $11 million in variable incentive plan costs.

Selling, marketing and administration expenses decreased by $47 million, or 13.7%, to $297 million, or 41.4% of revenue, in fiscal 2022 compared to $344 million, or 38.5% of revenue, in fiscal 2021.

The decrease was primarily attributable to a decrease of $19 million in stock compensation expense, a decrease of $13 million in legal expenses and a decrease of $11 million in the Company’s deferred share unit liability due to a decrease in the Company’s stock price, partially offset by a decrease in benefits of $10 million in government subsidies such as CEWS and HHBRP funding.

Adjusted selling, marketing and administration expenses decreased by $27 million, or 8.8%, to $279 million in fiscal 2022 compared to $306 million in fiscal 2021.

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

The decrease was primarily due to a decrease of $13 million in legal expenses, a decrease of $11 million in the Company’s deferred share unit liability due to a decrease in the Company’s stock price and a decrease of $10 million in salaries and benefits expenses, partially offset by a decrease in benefits of $10 million in government subsidies such as CEWS and HHBRP funding.

Amortization Expense

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

Adjusted amortization expense was $53 million in fiscal 2021, consistent with $53 million in fiscal 2020.

Adjusted amortization expense decreased by $3 million to $50 million in fiscal 2022 compared to $53 million in fiscal 2021 due to the reasons described above on a U.S.

Amortization included in Cost of Sales

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Investment Income (Loss), Net

Investment income (loss), net, which includes the interest expense from the Debentures, decreased by $7 million to investment loss, net of $6 million in fiscal 2021, from investment income, net of $1 million in fiscal 2020.

The decrease in investment income, net is primarily due to a lower yield on cash and investments in fiscal 2021 compared to fiscal 2020 and a decrease in average cash and investment balance during fiscal 2021 compared to fiscal 2020 as a result of the redemption of the 3.75% Debentures and issuance of the 1.75% Debentures, partially offset by a decrease in interest expense from the Debentures.

For fiscal 2021, the Company’s net effective income tax recovery rate was approximately 1%, compared to a net effective income tax expense of approximately 3% for the prior fiscal year.

The Company’s net effective income tax rate reflects the change in unrecognized income tax benefits 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.

Investment income (loss), net, which includes the interest expense from the Debentures, increased by $27 million to investment income, net of $21 million in fiscal 2022, from investment loss, net of $6 million in 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 in fiscal 2021, partially offset by a lower yield on cash and investments and lower average cash and investments balances in fiscal 2022 compared to fiscal 2021.

For fiscal 2022, the Company’s net effective income tax expense rate was approximately 37%, compared to a net effective income tax recovery of approximately 1% for 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 adjusted net effective income tax recovery rate was approximately 10%, compared to a net effective income tax expense of approximately 6% for the same period in the prior fiscal year.

The increase is due to current year taxable items that could not be offset with carried forward tax attributes such as tax losses.

The Company’s net loss for fiscal 2021 was $1.10 billion, reflecting an increase in net loss of $952 million compared to net loss of $152 million in fiscal 2020, primarily due to an increase in operating expenses due to the goodwill impairment and increase in debenture fair value adjustment, as described above in “Operating Expenses”, and a decrease in revenue as described above in “Revenue by Product and Service”.

Adjusted net income for fiscal 2021 was $101 million compared to $74 million in fiscal 2020, reflecting an increase in adjusted net income of $27 million, primarily due to a decrease in operating expenditures as described above in “Operating Expenses”, partially offset by a decrease in revenue as described above in “Revenue by Product and Service” and a decrease in gross margin percentage, as describe above in “Consolidated Gross Margin Percentage ”.

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

GAAP basis was $1.97 in fiscal 2021, an increase in basic and diluted loss per share of $1.70 and $1.65, respectively, compared to basic loss per share on a U.S.

GAAP basis of $0.27 and diluted loss per share on a U.S.

GAAP basis of $0.32 in fiscal 2020.

The weighted average number of shares outstanding was 561 million for basic and diluted loss per share, respectively, for the fiscal year ended February 28, 2021.

The weighted average number of shares outstanding was 554 million and 614 million for basic and diluted loss per share, respectively, for the fiscal year ended February 29, 2020.

The Company previously stated that it expected to be profitable on a non-GAAP basis for fiscal 2021.

The Company was non-GAAP profitable for fiscal 2021.

Net Income (Loss)

The Company’s net income for fiscal 2022 was $12 million, or $0.02 basic earnings per share and $0.31 diluted loss per share on a U.S.

GAAP basis, reflecting a decrease in net loss of $1,116 million compared to net loss of $1,104 million, or $1.97 basic and diluted loss per share in fiscal 2021.

The decrease was primarily due to a decrease in operating expenses due to the goodwill impairment in fiscal 2021 that did not recur and a decrease in Debentures fair value adjustment, 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 describe above in “Consolidated Gross Margin Percentage.

Adjusted net loss for fiscal 2022 was $55 million compared to adjusted net income of $88 million in fiscal 2021, reflecting a decrease in adjusted net income of $143 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”.

The weighted average number of shares outstanding was 571 million common shares for basic earnings per share and 631 million common shares for diluted loss per share for the fiscal year ended February 28, 2022.

The weighted average number of shares outstanding was 561 million common shares for basic and diluted loss per share for the fiscal year ended February 28, 2021.

Common Shares Outstanding

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Operating expenses (22) 465 (487) 253 212

Investment income (loss), net — (1) 1 4 (5)

Investment loss, net (1) — (1) (1) 1

Income (loss) before income taxes 145 (313) 458 (42) (271)

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GAAP basis in the fourth quarter of 2022, 2021 and 2020 do not include the dilutive effect of stock-based compensation as to do so would be anti-dilutive.

Revenue by Product and Service

Revenue by Segment

Comparative breakdowns of revenue by product and service on a U.S.

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Revenue by Product and Service

Software and Services $ 160 $ 170 $ (10) $ 147 $ 23

Cybersecurity $ 122 $ 122 $ — $ 124 $ (2)

IoT 52 38 14 46 (8)

Licensing and Other 11 50 (39) 112 (62)

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% Revenue by Product and Service

Software and Services 76.2 % 60.3 % 57.6 %

Cybersecurity 65.9 % 58.1 % 44.0 %

IoT 28.1 % 18.1 % 16.3 %

Licensing and Other 6.0 % 23.8 % 39.7 %

100.0 % 100.0 % 100.0 %

Software and Services

Software and Services revenue was $160 million, or 76.2% of revenue, in the fourth quarter of fiscal 2021, a decrease of $10 million compared to $170 million, or 60.3% of revenue, in the fourth quarter of fiscal 2020.

The decrease in Software and Services revenue of $10 million was primarily due to a decrease of $6 million due to the slowdown in the automotive market related to the COVID-19 pandemic and the conversion in the prior fiscal year of certain existing royalty-bearing licenses to fixed pricing from volume-based pricing, a decrease of $4 million relating to professional services and a decrease of $2 million relating to non-automotive OEM business, partially offset by an increase of $2 million related to the sale of Secusmart solutions and an increase of $1 million related to product revenue in BlackBerry Spark.

Adjusted Software and Services revenue was $165 million in the fourth quarter of fiscal 2021, a decrease of $14 million compared to $179 million in the fourth quarter of fiscal 2020.

Adjusted Software and Services revenue decreased due to the reasons described above on a U.S.

GAAP basis and due to a decrease of $4 million in the non-GAAP adjustment of deferred software revenue acquired to $5 million in the fourth quarter of fiscal 2021 from $9 million in the fourth quarter of fiscal 2020.

The Company previously stated that it expected Software and Services to have sequential non-GAAP revenue growth in the fourth quarter of fiscal 2021.

Software and Services non-GAAP revenue decreased by approximately 2% sequentially in the fourth quarter of fiscal 2021 primarily due to lower than expected revenue from Secusmart and BlackBerry AtHoc.

The Company previously stated that it expected sequential BTS revenue growth in the fourth quarter of fiscal 2021.

BTS revenue grew sequentially in the fourth quarter of fiscal 2021.

Cybersecurity

Cybersecurity revenue was $122 million, or 65.9% of revenue, in the fourth quarter of fiscal 2022, consistent with $122 million, or 58.1% of revenue, in the fourth quarter of fiscal 2021.

An increase of $15 million related to the sale of Secusmart solutions was partially 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 previously stated that it expected Cybersecurity revenue to be between $125 million and $135 million in the fourth quarter of fiscal 2022.

Cybersecurity revenue was $122 million in the fourth quarter of fiscal 2022, below expectations primarily due to higher than expected churn in smaller-sized UEM customers.

The Company previously stated that it expected modest sequential Cybersecurity revenue growth for the remainder of fiscal 2022.

In the fourth quarter of fiscal 2022, Cybersecurity revenue decreased compared to the third quarter of fiscal 2022 due to the reason described above.

IoT revenue was $52 million, or 28.1% of revenue, in the fourth quarter of fiscal 2022, an increase of $14 million compared to $38 million, or 18.1% of revenue, in the fourth quarter of fiscal 2021.

The increase in IoT revenue of $14 million was primarily due to an increase of $5 million relating to professional services, 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 fourth quarter of fiscal 2021 and an increase of $3 million in development seat revenue.

The Company previously stated that it expected sequential IoT revenue growth in the fourth quarter of fiscal 2022.

In the fourth quarter of fiscal 2022, IoT revenue grew sequentially compared to the third quarter of fiscal 2022.

The Company previously stated that it expected IoT revenue to be between $50 million and $55 million in the fourth quarter of fiscal 2022.

In the fourth quarter of fiscal 2022, IoT revenue was $52 million.

Licensing and Other

Licensing and Other revenue was $11 million, or 6.0% of revenue, in the fourth quarter of fiscal 2022, a decrease of $39 million compared to $50 million, or 23.8% of revenue, in the fourth quarter of fiscal 2021.

The decrease in Licensing and Other revenue of $62 million was primarily due to a decrease of $71 million in revenue from the BBM Consumer licensing arrangement, partially offset by an increase of $10 million in revenue from the Company’s IP licensing and sale arrangements including its patent licensing agreement with Teletry.

The decrease in Licensing and Other revenue of $39 million was primarily due to a decrease of $36 million in revenue from the Company’s intellectual property licensing arrangements due to the ongoing patent sale process in the fourth quarter of 2022, and associated restrictions on monetization activity and a decrease of $2 million in SAF revenue.

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

In the fourth quarter of fiscal 2022, the Company entered into a definitive agreement with respect to a sale of a portion of the Company’s patent portfolio.

The Company expects Licensing and Other revenue to be minimal in fiscal 2023, aside from any Licensing and Other revenue that may be recognized in connection with a closing of the patent portfolio sale transaction.

GAAP Revenue by Geography

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Revenue in North America was $100 million, or 54.0% of revenue, in the fourth quarter of fiscal 2022, reflecting a decrease of $41 million compared to $141 million, or 67.1% of revenue, in the fourth quarter of fiscal 2021.

Revenue in North America decreased compared to the fourth quarter of fiscal 2020 primarily due to a decrease of $71 million in revenue from the BBM Consumer licensing arrangement, a decrease of $2 million in BlackBerry QNX revenue due to the reasons discussed above in “Revenue by Product and Service”, a decrease of $2 million in BlackBerry AtHoc revenue and a decrease of $2 million related to product revenue in BlackBerry Spark, partially offset by an increase of $10 million in IP licensing revenue due to the reasons discussed above in “Revenue by Product and Service”.

Revenue in North America decreased compared to the fourth quarter of fiscal 2021 primarily due to a decrease of $36 million in Licensing and Other revenue due to the reasons discussed above in “Revenue by Segment” and a decrease of $8 million in product revenue in BlackBerry Spark, partially offset by an increase of $3 million in BlackBerry QNX royalty revenue due to the reasons discussed above in “Revenue by Segment”.

Europe, Middle East and Africa Revenue

Revenue in Europe, Middle East and Africa was $53 million or 25.2% of revenue in the fourth quarter of fiscal 2021, consistent with $53 million or 18.8% of revenue in the fourth quarter of fiscal 2020.

An increase of $3 million related to the sale of Secusmart solutions and an increase of $1 million related to product revenue in BlackBerry Spark were offset by a decrease of $3 million in BlackBerry QNX revenue due to the reasons discussed above in “Revenue by Product and Service” and a decrease of $1 million relating to professional services.

Revenue in Europe, Middle East and Africa was $66 million or 35.7% of revenue in the fourth quarter of fiscal 2022, reflecting an increase of $13 million compared to $53 million or 25.2% of revenue in the fourth quarter of fiscal 2021.

The increase in revenue is primarily due to an increase of $15 million related to the sale of Secusmart solutions partially offset by a decrease of $2 million in product revenue in BlackBerry Spark.

Other Regions Revenue

Revenue in other regions was $16 million or 7.7% of revenue in the fourth quarter of fiscal 2021, consistent with $16 million or 5.7% of revenue in the fourth quarter of fiscal 2020.

An increase $2 million related to product revenue in BlackBerry Spark was offset by a decrease of $2 million in revenue relating to professional services.

Revenue in other regions was $19 million or 10.3% of revenue in the fourth quarter of fiscal 2022, reflecting an increase of $3 million compared to $16 million or 7.7% of revenue in the fourth quarter of fiscal 2021.

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

Consolidated Gross Margin

Consolidated gross margin decreased by $28 million to approximately $124 million in the fourth quarter of fiscal 2022 from $152 million in the fourth quarter of fiscal 2021.

The decrease was primarily due to a decrease in revenue from Licensing and Other and BlackBerry QNX, partially offset by an increase in revenue from Secusmart due to the reasons discussed above in “Revenue by Product and Service”, 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 5.4%, to approximately 67.0% of consolidated revenue in the fourth quarter of fiscal 2022 from 72.4% of consolidated revenue in the fourth quarter of fiscal 2021.

The decrease was primarily due to a lower gross margin contribution from Licensing and Other (at a higher relative gross margin percentage in each case) due to the reasons discussed above in “Revenue by Product and Service” and a higher gross margin contribution from BlackBerry Spark and Secusmart (at a lower relative gross margin percentage) due to the reasons discussed above in “Revenue by Product and Service”.

Gross Margin by Segment

See “Business Overview - Segment Reporting” and “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)

Cybersecurity IoT Licensing and Other Segment Totals

February 28, Change February 28, Change February 28, Change February 28, Change

2022 2021 2022 2021 2022 2021 2022 2021

Segment revenue $ 122 $ 122 $ — $ 52 $ 38 $ 14 $ 11 $ 50 $ (39) $ 185 $ 210 $ (25)

Segment cost of sales 47 46 1 8 5 3 5 6 (1) 60 57 3

Segment gross margin $ 75 $ 76 $ (1) $ 44 $ 33 $ 11 $ 6 $ 44 $ (38) $ 125 $ 153 $ (28)

Segment gross margin % 61 % 62 % (1 %) 85 % 87 % (2 %) 55 % 88 % (33 %) 68 % 73 % (5 %)

Cybersecurity

Cybersecurity gross margin decreased by $1 million to approximately $75 million in the fourth quarter of fiscal 2022 from $76 million in the fourth 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.

Cybersecurity gross margin percentage decreased by 1% to approximately 61% of Cybersecurity revenue in the fourth quarter of fiscal 2022 from 62% of Cybersecurity revenue in the fourth 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.

IoT gross margin increased by $11 million to approximately $44 million in the fourth quarter of fiscal 2022 from $33 million in the fourth quarter of fiscal 2021.

The increase was primarily due to the reasons discussed above in “Revenue by Segment”, partially offset by an increase in cost of sales related to professional services.

IoT gross margin percentage decreased by 2% to approximately 85% of IoT revenue in the fourth quarter of fiscal 2022 from 87% of IoT revenue in the fourth quarter of fiscal 2021.

The decrease was primarily due an increase in professional services revenue, which has a lower relative gross margin percentage, partially offset by 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 $38 million to approximately $6 million in the fourth quarter of fiscal 2022 from $44 million in the fourth 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 33% to approximately 55% of Licensing and Other revenue in the fourth quarter of fiscal 2022 from 88% of Licensing and Other revenue in the fourth quarter of fiscal 2021.

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

Operating Expenses

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Debentures fair value adjustment (165) (110) 258 5

Settlements, net — — — (9)

Total $ (22) $ 66 $ 465 $ 253

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Debentures fair value adjustment (89.2 %) (59.8 %) 122.9 % 1.8 %

Settlements, net — % — % — % (3.5) %

Total (11.9 %) 35.9 % 221.4 % 89.7 %

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GAAP Operating Expenses

Operating expenses increased by $189 million, or 68.5%, to $465 million, or 221.4%% of revenue, in the fourth quarter of fiscal 2021, compared to $276 million, or 126.6% of revenue, in the third quarter of fiscal 2021.

The increase was primarily attributable to the difference between the Q4 Fiscal 2021 Debentures Fair Value Adjustment and Q3 Fiscal 2021 Debentures Fair Value Adjustment of $163 million and an increase of $22 million in impairment of long-lived assets, partially offset by a decrease of $10 million in variable incentive plan costs and a benefit of $6 million in CEWS funding.

Operating expenses increased by $212 million, or 83.8%, to $465 million, or 221.4%% of revenue, in the fourth quarter of fiscal 2021, compared to $253 million, or 89.7% of revenue, in the fourth quarter of fiscal 2020.

The increase was primarily attributable to the difference between the Q4 Fiscal 2021 Debentures Fair Value Adjustment and Q4 Fiscal 2020 Debentures Fair Value Adjustment of $253 million and an increase of $17 million in impairment of long-lived assets, partially offset by $22 million in impairment of goodwill in the fourth quarter of fiscal 2020 which did not recur, a benefit of $16 million in CEWS funding and a decrease of $9 million in salaries and benefits expenses.

Operating expenses decreased by $88 million, or 133.3%, to $(22) million, or (11.9%) of revenue, in the fourth quarter of fiscal 2022, compared to $66 million, or 35.9% of revenue, in the third quarter of fiscal 2022.

The decrease was primarily attributable to the difference between the Q4 Fiscal 2022 Debentures Fair Value Adjustment and the fair value adjustment related to the Debentures incurred in the third quarter of fiscal 2022 of $55 million, a benefit of $10 million in HHBRP funding, a decrease of $10 million in amortization expense and a decrease of $9 million in variable incentive plan costs.

Operating expenses decreased by $487 million, or 104.7%, to $(22) million, or (11.9%) of revenue, in the fourth quarter of fiscal 2022, compared to $465 million, or 221.4% of revenue, in the fourth quarter of fiscal 2021.

The decrease was primarily attributable to the difference between the Q4 Fiscal 2022 Debentures Fair Value Adjustment and the fair value adjustment related to the Debentures incurred in the fourth quarter of fiscal 2021 of $423 million, an impairment of long-lived assets of $22 million in the fourth quarter of fiscal 2021 which did not recur, a decrease of $13 million in amortization expense, a decrease of $12 million in stock compensation expense and a decrease of $9 million in the Company’s deferred share unit liability due to a decrease in the Company’s stock price.

Adjusted Operating Expenses

Adjusted operating expenses decreased by $25 million, or 17.6%, to $117 million in the fourth quarter of fiscal 2022 compared to $142 million in the third quarter of fiscal 2022.

The decrease was primarily attributable to a decrease of $10 million in variable incentive plan cost and a benefit of $6 million in CEWS funding, partially offset by an increase of $5 million in the Company’s

deferred share unit liability due to increases in the Company’s stock price, an increase of $4 million in consulting fees and an increase of $2 million in legal costs.

The decrease was primarily attributable to a benefit of $10 million in HHBRP funding, a decrease of $9 million in variable incentive plan costs, a decrease of $3 million in amortization expense and a decrease of $2 million in salaries and benefits expenses.

Adjusted operating expenses decreased by $20 million, or 14.6%, to $117 million in the fourth quarter of fiscal 2022, compared to $137 million in the fourth quarter of fiscal 2021.

The decrease was primarily attributable to the benefit of $16 million in CEWS funding, a decrease of $9 million in salaries and benefits expenses and a decrease of $8 million in variable incentive plan costs, partially offset by an increase of $6 million in the Company’s deferred share unit liability due to increases in the Company’s stock price and an increase of $3 million in legal costs.

Research and Development Expense

The decrease was primarily attributable to a decrease of $9 million in the Company’s deferred share unit liability due to a decrease in the Company’s stock price, a decrease of $6 million in legal expenses, a decrease of $4 million in consulting fees and a decrease of $3 million in amortization expense.

Research and Development Expenses

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

Research and development expenses decreased by $1 million, or 2.1%, to $47 million in the fourth quarter of fiscal 2022 compared to $48 million in the fourth quarter of fiscal 2021.

The decrease was primarily attributable to a decrease of $8 million in variable incentive plan costs and a decrease of $5 million in salaries and benefits expense, partially offset by an increase of $2 million in infrastructure costs.

Adjusted research and development expenses decreased by $12 million, or 21.1%, to $45 million in the fourth quarter of fiscal 2021 compared to $57 million in the fourth quarter of fiscal 2020.

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

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

Adjusted research and development expenses were $45 million in the fourth quarter of fiscal 2022, consistent with $45 million in the fourth quarter of fiscal 2021.

Selling, Marketing and Administration Expenses

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Selling, marketing and administration expenses decreased by $28 million, or 30.4%, to $64 million in the fourth quarter of fiscal 2022 compared to $92 million in the fourth quarter of fiscal 2021.

This decrease was primarily attributable to the increase benefit of $16 million in CEWS funding, a decrease of $4 million in salaries and benefits expenses, a decrease of $3 million in sales incentive plan costs and a decrease of $3 million in travel expense, partially offset by an increase of $6 million in the Company’s deferred share unit liability due to increases in the Company’s stock price and an increase of $3 million in legal costs.

This decrease was primarily attributable to a decrease of $11 million in stock compensation expense, a decrease of $9 million in the Company’s deferred share unit liability due to a decrease in the Company’s stock price and a decrease of $6 million in legal expenses.

Adjusted selling, marketing and administration expenses decreased by $17 million, or 21.5%, to $62 million in the fourth quarter of fiscal 2022 compared to $79 million in the fourth quarter of fiscal 2021.

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

This decrease was primarily due a decrease of $9 million in the Company’s deferred share unit liability due to a decrease in the Company’s stock price, a decrease of $6 million in legal expenses and a decrease of $4 million on consulting fees.

Amortization Expense

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

Adjusted amortization was $13 million in the fourth quarter of fiscal 2021, consistent with $13 million in the fourth quarter of fiscal 2020.

Adjusted amortization expense decreased by $3 million to $10 million in the fourth quarter of fiscal 2022 compared to $13 million in the fourth quarter of fiscal 2021 due to the reasons described above on a U.S.

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 were $4 million in the fourth quarter of fiscal 2021, consistent with $4 million in the fourth quarter of fiscal 2020.

Investment Loss, Net

Investment loss, net decreased by $1 million to nil in the fourth quarter of fiscal 2021, compared to investment loss, net of $1 million in the fourth quarter of fiscal 2020.

The decrease is primarily due a decrease in interest expense from the Debentures, partially offset by a lower yield on cash and investments in the fourth quarter of fiscal 2021 compared to the fourth quarter of fiscal 2020 and lower average cash and investment balances due to the redemption of the 3.75% Debentures in fiscal 2021 and issuance of the 1.75% Debentures.

For the fourth quarter of fiscal 2021, the Company’s net effective income tax expense rate was approximately 1%, compared to an effective income tax recovery rate of approximately 2% for the same period in the prior fiscal year.

Amortization expense relating to certain property, plant and equipment and certain intangible assets employed in the Company’s service operations decreased by $2 million to $2 million in the fourth quarter of fiscal 2022 compared to $4 million in the fourth quarter of fiscal 2021 due to the lower cost base of assets.

Investment Income (Loss), Net

Investment income (loss), net decreased by $1 million to investment loss, net of $1 million in the fourth quarter of fiscal 2022, compared to investment income, net of nil in the fourth quarter of fiscal 2021.

The decrease is primarily due to a decrease in unrealized gains on public equity securities in the fourth quarter of fiscal 2022 compared to the fourth quarter of fiscal 2021.

For the fourth quarter of fiscal 2022, the Company’s net effective income tax expense rate was approximately 1%, compared to a net effective income tax expense 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 fourth quarter of fiscal 2021 was $315 million, or $0.56 basic and diluted loss per share on a U.S.

GAAP basis, reflecting an increase in net loss of $274 million compared to a net loss of $41 million, or $0.07 basic and diluted loss per share, in the fourth quarter of fiscal 2020.

The decrease in net income of $274 million was primarily due to an increase in operating expenses due to the increase in debenture fair value adjustment, as described above in “Operating Expenses”, a decrease in revenue as described above in “Revenue by Product and Service” and a decrease in gross margin percentage as described above in “Consolidated Gross Margin Percentage ”.

Adjusted net income was $16 million in the fourth quarter of fiscal 2021 compared to $51 million in the fourth quarter of fiscal 2020, reflecting a decrease in adjusted net income of $35 million primarily due to a decrease in revenue as described above in “Revenue by Product and Service” and a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage ” partially offset by a decrease in operating expenses, as described above in “Operating Expenses”.

The weighted average number of shares outstanding was 566 million common shares for basic and diluted loss per share for the fourth quarter of fiscal 2021.

Net Income (Loss)

The Company’s net income for the fourth quarter of fiscal 2022 was $144 million, or $0.25 basic earnings per share and $0.03 diluted loss per share on a U.S.

GAAP basis, reflecting an increase in net income of $459 million compared to a net loss of $315 million, or $0.56 basic and diluted loss per share, in the fourth quarter of fiscal 2021.

The increase in net income of $459 million was primarily due to a decrease in operating expenses due to the decrease in Debentures fair value adjustment and impairment of long-lived assets in the fourth quarter of fiscal 2021 that did not recur, as described above in “Operating Expenses”, partially offset by a decrease in revenue as described above in “Revenue by Segment” and a decrease in gross margin percentage as described above in “Consolidated Gross Margin Percentage”.

Adjusted net income was $6 million in the fourth quarter of fiscal 2022 compared to $14 million in the fourth quarter of fiscal 2021, reflecting a decrease in adjusted net income of $8 million primarily due to a decrease in revenue as described above in “Revenue by Segment” and a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage”, partially offset by a decrease in operating expenses, as described above in “Operating Expenses”.

The weighted average number of shares outstanding was 576 million common shares for basic earnings per share and 637 million common shares for diluted loss per share for the fourth quarter of fiscal 2022.

The weighted average number of shares outstanding was 566 million common shares for basic and diluted loss per share for the fourth quarter of fiscal 2021.

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Liquidity and Capital Resources

Cash, cash equivalents, and investments decreased by $186 million to $804 million as at February 28, 2021 from $990 million as at February 29, 2020, primarily due to the redemption of the 3.75% Debentures which was partially offset by the issuance of the 1.75% Debentures.

Cash, cash equivalents, and investments decreased by $34 million to $770 million as at February 28, 2022 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 are denominated in U.S.

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Current Assets

The decrease in current assets of $190 million at the end of fiscal 2021 from the end of fiscal 2020 was primarily due to a decrease in cash and cash equivalents of $163 million, accounts receivable, net of $33 million, decreases in short term investments of $7 million and other current assets of $2 million partially offset by an increase in other receivables of $11 million and an increase income taxes receivable of $4 million.

At February 28, 2021, accounts receivable was $182 million, a decrease of $33 million from February 29, 2020.

The decrease was primarily due to lower revenue recognized over the three months ended February 28, 2021 compared to the three months ended February 29, 2020 and an increase in the allowance for credit losses from the adoption of ASC 326, partially offset by an increase in days sales outstanding to 85 days at the end of the fourth quarter of fiscal 2021 from 70 days at the end of the fourth quarter of fiscal 2020 primarily due to a significant long-term receivable becoming current, the associated revenue for which was recognized in the prior period, as well as extended payment terms resulting from the COVID-19 pandemic.

At February 28, 2021, other receivables increased by $11 million to $25 million compared to $14 million as at February 29, 2020.

The increase was primarily due to an increase of $11 million relating to the CEWS program.

At February 28, 2021, other current assets was $50 million, a decrease of $2 million from February 29, 2020.

The decrease is primarily due to a decrease in deferred commission of $3 million partially offset by an increase in derivative assets of $2 million.

At February 28, 2021, income taxes receivable was $10 million, an increase of $4 million from February 29, 2020.

The increase was primarily due to the U.S.

CARES Act resulting in an increase in taxes receivable from tax loss carry backs.

The increase in current assets of $37 million at the end of fiscal 2022 from the end of fiscal 2021 was primarily due to an increase in cash and cash equivalents of $164 million and an increase in other current assets of $109 million, partially offset by decreases in short term investments of $191 million, accounts receivable, net of allowance of $44 million and income taxes receivable of $1 million.

At February 28, 2022, other current assets was $159 million, an increase of $109 million from February 28, 2021.

The increase is primarily due to intellectual property relating to the patent sale agreement of $118 million, partially offset by a decrease in prepaid maintenance of $3 million and decrease in deferred commissions of $3 million.

At February 28, 2022, accounts receivable, net of allowance 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 February 28, 2022 compared to the three months ended February 29, 2020 and a decrease in days sales outstanding to 67 days at the end of the fourth quarter of fiscal 2022 from 85 days at the end of the fourth quarter of fiscal 2021.

At February 28, 2022, other receivables was $25 million, consistent with $25 million as at February 28, 2021.

The increase in SIF claims of $2 million was offset by a decrease in CEWS program of $2 million.

At February 28, 2022, income taxes receivable was $9 million, a decrease of $1 million from February 28, 2021.

The decrease was primarily due to the refund received from tax loss carry backs.

Current Liabilities

The decrease in current liabilities of $692 million at the end of fiscal 2021 from the end of fiscal 2020 was primarily due to a decrease in Debentures of $606 million due to redemption of the 3.75% Debentures, a decrease in deferred revenue of $39 million, a decrease in accrued liabilities of $24 million, a decrease in income taxes payable of $12 million and a decrease in accounts payable of $11 million.

Deferred revenue, current was $225 million, which reflects a decrease of $39 million compared to February 29, 2020 that was attributable to a $39 million decrease in deferred revenue, current related to BlackBerry Spark and $10 million related to IP licensing, partially offset by a $6 million increase in deferred revenue, current related to BlackBerry AtHoc.

As at February 28, 2021, accounts payable were $20 million, reflecting a decrease of $11 million from February 29, 2020, which was primarily attributable to payments of accounts payable.

Accrued liabilities were $178 million, reflecting a decrease of $24 million compared to February 29, 2020, which was primarily attributable to a $17 million decrease in variable incentive plan costs and a decrease of $6 million in payroll accrual, partially offset by an increase of $8 million in the Company’s deferred share unit liability due to increases in the Company’s stock price.

The decrease in current liabilities of $32 million at the end of fiscal 2022 from the end of fiscal 2021 was primarily due to a decrease in accrued liabilities of $21 million, a decrease in deferred revenue, current of $18 million, partially offset by an increase in income taxes payable of $5 million and an increase in accounts payable of $2 million.

Accrued liabilities was $157 million, reflecting a decrease of $21 million compared to February 28, 2021, which was primarily attributable to a decrease of $6 million in the liability associated with the CEO contingent cash award, a decrease of $5 million in current operating lease liabilities, a decrease of $3 million in the Company’s deferred share unit liability due to a decrease in the Company’s stock price, partially offset by an increase of $4 million in variable incentive plan costs.

Deferred revenue, current was $207 million, which reflects a decrease of $18 million compared to February 28, 2021 that was attributable to a $29 million decrease in deferred revenue, current related to BlackBerry Spark partially offset by a $12 million increase in deferred revenue, current related to BlackBerry QNX.

Income taxes payable was $11 million, reflecting an increase of $5 million compared to February 28, 2021, which was primarily due to income earned in taxable jurisdictions.

As at February 28, 2022, accounts payable were $22 million, reflecting an increase of $2 million from February 28, 2021, which was primarily due to timing of payments of accounts payable.

Cash flows for the fiscal year ended February 28, 2022 compared to the fiscal year ended February 28, 2021 were as follows:

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Effect of foreign exchange gain (loss) on cash and cash equivalents (1) 2 (3) (1) 3

Net decrease in cash and cash equivalents $ (208) $ (156) $ (52) $ (273) $ 117

Net increase (decrease) in cash and cash equivalents $ 188 $ (208) $ 396 $ (156) $ (52)

Operating Activities

The increase in net cash flows provided by operating activities of $56 million primarily reflects the net changes in working capital.

The decrease in net cash flows provided by operating activities of $110 million primarily reflects the decrease in revenue and net changes in working capital.

Investing Activities

During the fiscal year ended February 28, 2021, cash flows used in investing activities were $65 million and included cash used in transactions involving the acquisitions of restricted short-term, short-term and long-term investments, net of the proceeds on sale or maturity in the amount of $21 million, intangible asset additions of $36 million, and acquisitions of property, plant and equipment of $8 million.

During fiscal 2020, cash flows used in investing activities were $188 million and included cash flows used in transactions involving the acquisitions of short-term and long-term investments, net of the proceeds on sale or maturity in the amount of $145 million, intangible asset additions of $32 million, and acquisitions of property, plant and equipment of $12 million, partially offset by proceeds received from the decrease in consideration paid for the Cylance acquisition following finalizing the accounting for the acquisition.

During the fiscal year ended February 28, 2022, cash flows provided by investing activities were $207 million and included cash provided by transactions involving the acquisitions of restricted short-term, short-term and long-term investments, net of the proceeds on sale or maturity in the amount of $211 million and a distribution from a non-marketable equity investment without readily determinable fair value in the amount of $35 million, partially offset by intangible asset additions of $31 million, and acquisitions of property, plant and equipment of $8 million.

During fiscal 2021, cash flows used in investing activities were $65 million and included cash flows used in transactions involving the acquisitions of short-term and long-term investments, net of the proceeds on sale or maturity in the amount of $21 million, intangible asset additions of $36 million, and acquisitions of property, plant and equipment of $8 million.

Financing Activities

The decrease in cash flows used in financing activities was $234 million for fiscal 2021 due to the redemption of the 3.75% Debentures on September 1, 2020, partially offset by the issuance of the 1.75% Debentures as described above in “Business Overview - Debt Redemption and New Issuance” and an increase in common shares issued for stock options exercised and 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 February 28, 2021:

(in millions)

Total Less than One

Three Years Four to Five

Years Greater than

Operating lease obligations $ 134 $ 37 $ 52 $ 29 $ 16

Purchase obligations and commitments 159 94 65 — —

Debt interest and principal payments 383 6 377 — —

Total $ 676 $ 137 $ 494 $ 29 $ 16

Purchase obligations and commitments amounted to approximately $676 million as at February 28, 2021, including future principal and interest payments of $383 million on the 1.75% Debentures and operating lease obligations of $134 million.

The remaining balance consists of purchase orders for goods and services utilized in the operations of the Company.

Total aggregate contractual obligations as at February 28, 2021 decreased by approximately $337 million as compared to the February 29, 2020 balance of approximately $1,013 million, which was attributable to the redemption of the 3.75% Debentures on September 1, 2020, partially offset by the issuance of the 1.75% Debentures as described above in “Business Overview - Debt Redemption and New Issuance”, a decrease in purchase obligations and commitments and a decrease in operating lease obligations.

The increase in cash flows provided by financing activities was $237 million for fiscal 2022 due to the redemption of the 3.75% Debentures and issuance of the 1.75% Debentures in fiscal 2021, partially offset by a decrease in common shares issued for stock options exercised.

Debenture Financing and Other Funding Sources

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Based on its current financial projections, the Company believes its financial resources, together with expected future operating cash generating and operating expense reduction activities and access to other potential financing arrangements, should be sufficient to meet funding requirements for current financial commitments and future operating expenditures not yet committed, and should provide the necessary financial capacity for the foreseeable future.

The Company does not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K under the Exchange Act, or under applicable Canadian securities laws.

Contractual and Other Obligations

The following table sets out aggregate information about the Company’s contractual and other obligations and the periods in which payments are due as at February 28, 2022:

(in millions)

Total Short-term

(next 12 months) Long-term

Operating lease obligations $ 101 $ 31 $ 70

Purchase obligations and commitments 125 85 40

Debt interest and principal payments 377 6 371

Total $ 603 $ 122 $ 481

Contractual and other obligations amounted to approximately $603 million as at February 28, 2022, including future principal and interest payments of $377 million on the 1.75% Debentures 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 February 28, 2022 decreased by approximately $73 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.

The Company does not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or under applicable Canadian securities laws.

Accounting Policies and Critical Accounting Estimates

Accounting Policies

See Note 1 to the Consolidated Financial Statements for a description of the Company’s significant accounting policies and the adoption of the new standard in accounting for credit losses on financial instruments and goodwill.

See Note 1 to the Consolidated Financial Statements for a description of the Company’s significant accounting policies and the adoption of the new standard in accounting for income taxes.

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

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Actual results could differ from these estimates, which were based upon circumstances that existed as of the date of the consolidated financial statements, February 28, 2022.

Subsequent to this date, it is reasonably possible that the COVID-19 pandemic and its impact on the health of the global economy could cause changes to estimates as a result of the financial circumstances of the markets in which the Company operates and the price of the Company’s publicly traded equity in comparison to the Company’s carrying value.

The Company’s critical accounting estimates have been reviewed and discussed with the Company’s Audit & Risk Management Committee and are set out below.

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The Company’s determination of its asset groups, its primary asset and its remaining useful life, and estimated cash flows are significant factors in assessing the recoverability of the Company’s assets for the purposes of LLA impairment testing.

The Company’s share price can be affected by, among other things, changes in industry or market conditions, including the effect of competition, changes in the Company’s results of operations, changes in the Company’s forecasts or market expectations relating to future results, and the Company’s strategic initiatives and the market’s assessment of any such factors.

relating to future results, and the Company’s strategic initiatives and the market’s assessment of any such factors.

See Part 1, Item 1A “Risk Factors - The market price of the Company’s common shares is volatile”.

The current macroeconomic environment and competitive dynamics continue to be challenging to the Company’s business and the Company cannot be

certain of the duration of these conditions and their potential impact on the Company’s future financial results and cash flows.

The current macroeconomic environment and competitive dynamics continue to be challenging to the Company’s business and the Company cannot be certain of the duration of these conditions and their potential impact on the Company’s future financial results and cash flows.

A decline in the Company’s performance, the Company’s market capitalization and future changes to the Company’s assumptions and estimates used in the LLA impairment test, particularly the expected future cash flows, remaining useful life of the primary asset and terminal value of the asset group, may result in further impairment charges in future periods of some or all of the assets on the Company’s balance sheet.

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These events and circumstances may include a significant change in legal factors or in the business climate, a significant decline in the Company’s share price, an adverse action or assessment by a regulator, unanticipated competition, a loss of key personnel, significant disposal activity and the testing of recoverability for a significant asset group.

On March 1, 2020 the Company adopted ASU 2017-04 on the topic of Intangibles— Goodwill and Other (ASC 350).

On March 1, 2020, the Company adopted Accounting Standards Update 2017-04 on the topic of Intangibles - Goodwill and Other (ASC 350) (“ASU 2017-40”).

ASU 2017-04 simplifies the subsequent measurement of goodwill, enabling the Company to carry out its goodwill impairment test in one step, instead of two steps.

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The estimated fair value was determined utilizing multiple approaches based on the nature of the reporting units being valued.

In its analysis, the Company utilized multiple valuation techniques, including the income approach using a discounted future cash flow model, the market-based approach, and the asset value approach.

In its analysis, the Company utilized multiple valuation techniques, including the income approach using a discounted future cash flow model, market-based approaches, and the asset value approach.

The analysis requires significant judgment, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rates of revenue growth for the Company’s reporting units, estimation of the useful life over which cash flows will occur, terminal growth rates, profitability measures, and determination of the discount rates for the reporting units.

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The estimated fair value was determined utilizing multiple approaches based on the nature of the reporting units being valued.

In its analysis, the Company utilized multiple valuation techniques, including the income approach, discounted future cash flows, the market-based approach, and the asset value approach.

In its analysis, the Company utilized multiple valuation techniques, including the income approach, discounted future cash flows, market-based approaches, and the asset value approach.

The analysis requires significant judgment, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rate of revenue growth for our reporting units, estimation of the useful life over which cash flows will occur, terminal growth rate, profitability measures, and determination of the discount rates for the reporting units.

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A valuation allowance is required for deferred tax assets if it is more likely than not that all or some portion of the asset will not be realized.

All available evidence, both positive and negative, that may affect the realization of deferred tax assets must be identified and considered in determining the appropriate amount of the valuation allowance.

All available evidence, both positive and negative, that may affect the realization of deferred tax assets must be identified and considered in

determining the appropriate amount of the valuation allowance.

Additionally, for interim periods, the estimated annual effective tax rate should include the valuation allowance for current year changes in temporary differences and losses or income arising during the year.

For interim periods, the Company needs to consider the valuation allowance that it expects to recognize at the end of the fiscal year as part of the estimated annual effective tax rate.

During interim quarters, the Company uses estimates

including pre-tax results and ending position of temporary differences as at the end of the fiscal year to estimate the valuation allowance that it expects to recognize at the end of the fiscal year.

During interim quarters, the Company uses estimates including pre-tax results and ending position of temporary differences as at the end of the fiscal year to estimate the valuation allowance that it expects to recognize at the end of the fiscal year.

This accounting treatment has no effect on the Company’s actual ability to utilize deferred tax assets to reduce future cash tax payments.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis