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Item 2. Management’s Discussion and Analysis

2022-06-24 compared with 2021-12-22 · 261 added, 594 removed, 319 unchanged (73% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read together with the unaudited interim consolidated financial statements and the accompanying notes (the “Consolidated Financial Statements”) of BlackBerry Limited for the three and nine months ended November 30, 2021, included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the Company’s audited consolidated financial statements and accompanying notes and MD&A for the fiscal year ended February 28, 2021 (the “Annual MD&A”).

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read together with the unaudited interim consolidated financial statements and the accompanying notes (the “Consolidated Financial Statements”) of BlackBerry Limited for the three months ended May 31, 2022, included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the Company’s audited consolidated financial statements and accompanying notes and MD&A for the fiscal year ended February 28, 2022 (the “Annual MD&A”).

The Consolidated Financial Statements are presented in U.S.

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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 the potential sale of a portion of its patent portfolio;

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

• the Company’s expectations with respect to its revenue and billings in fiscal 2022 and with respect to installations of the BlackBerry IVY™ platform in fiscal 2023;

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

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

• the Company’s expectations with respect to the impact of the COVID-19 pandemic and global semiconductor shortage on its results of operations and financial condition;

• 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, including the timing of a litigation settlement payment;

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

The words “expect”, “anticipate”, “estimate”, “may”, “will”, “should”, “could”, “intend”, “believe”, “target”, “plan” and similar expressions are intended to identify forward-looking statements in this MD&A, including in the sections entitled “Business Overview - Strategy”, “Business Overview - Products and Services”, “Business Overview - COVID-19”, “Non-GAAP Financial Measures - Key Metrics”, “Results of Operations - Three months ended November 30, 2021 compared to the three months ended November 30, 2020 - Revenue - Revenue by Segment” and “Financial Condition - Debenture Financing and Other Funding Sources”.

The words “expect”, “anticipate”, “estimate”, “may”, “will”, “should”, “could”, “intend”, “believe”, “target”, “plan” and similar expressions are intended to identify forward-looking statements in this MD&A, including in the sections entitled “Business Overview - Strategy”, “Business Overview - Products and Services”, “Business Overview - COVID-19 and Macroeconomic Factors”, “Non-GAAP Financial Measures - Key Metrics”, “Results of Operations - Three months ended May 31, 2022 compared to the three months ended May 31, 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, competition, and the Company’s expectations regarding its financial performance.

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Based in Waterloo, Ontario, the Company leverages artificial intelligence (“AI”) and machine learning to deliver innovative solutions in the areas of cybersecurity, safety and data privacy, and is a leader in the areas of endpoint security, endpoint management, encryption, and embedded systems.

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

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

The Company is widely recognized for its intelligent security software and services and believes that it delivers the broadest set of security capabilities in the market to connect, protect and manage endpoints in the Internet of Things (“IoT”).

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

The Company’s goal is to offer smarter security solutions that are more effective, require fewer resources to support and produce a better return on investment for customers than competing offerings.

To achieve this vision, the Company continues to extend the functionality of its AI-focused BlackBerry Spark® software platform and safety-certified QNX® Neutrino® real time operating system and is commercializing its new BlackBerry IVY™ intelligent vehicle data platform.

The Company’s go-to-market strategy is focused on generating revenue from enterprise software, services and licensing as well as from embedded software designs with leading OEMs and Tier 1 suppliers.

The Company’s go-to-market strategy focuses principally on generating revenue from enterprise software and services as well as from embedded software designs with leading original equipment manufacturers (“OEMs”) and Tier 1 suppliers.

The Company intends to drive revenue growth and to achieve margins that are consistent with those of other enterprise software companies.

Products and Services

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

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

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

Cybersecurity

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

The Cybersecurity business consists of BlackBerry Spark, BlackBerry® AtHoc®, BlackBerry® SecuSUITE® and BlackBerry Messenger (BBM®) Enterprise.

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

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

BlackBerry Spark solutions are available through the BlackBerry Spark® Unified Endpoint Security Suite and the BlackBerry Spark® Unified Endpoint Management Suite, which are also marketed together as the BlackBerry Spark® Suites, offering the Company’s most comprehensive range of tailored cybersecurity and endpoint management options.

The BlackBerry Spark UES Suite offers leading Cylance® AI and machine learning-based cybersecurity solutions, including:

BlackBerry® Protect, an EPP and available MTD solution that uses machine learning to prevent suspicious behavior and the execution of malicious code on an endpoint;

BlackBerry® Optics, an EDR solution that provides both visibility into and prevention of malicious activity on an endpoint;

BlackBerry® Guard, a managed detection and response solution that provides 24/7 threat hunting and monitoring;

BlackBerry® Gateway, a cloud-native ZTNA solution that monitors suspicious network activity;

and BlackBerry® Persona, a UEBA solution that provides continuous authentication by validating user identity in real time.

BlackBerry Spark solutions are available through the BlackBerry Spark® Unified Endpoint Security Suite and the BlackBerry Spark® Unified Endpoint Management Suite, which are also marketed together as the BlackBerry Spark® Suite, offering the Company’s most comprehensive range of tailored cybersecurity and endpoint management options.

The BlackBerry UES Suite offers leading Cylance® AI and machine learning-based cybersecurity solutions, including:

CylancePROTECT®, an EPP and available MTD solution that uses an automated, prevention-first approach to protect against the execution of malicious code on an endpoint;

CylanceOPTICS®, an EDR solution that provides both visibility into and prevention of malicious activity on an endpoint;

CylanceGUARD®, a managed detection and response solution that provides 24/7 threat hunting and monitoring;

CylanceGATEWAY®, an AI-empowered ZTNA solution, and CylancePERSONA®, a UEBA solution that provides continuous authentication by validating user identity in real time.

The combined platform features industry-leading threat prevention modules to help organizations cope with the significant growth of cyberattacks.

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

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

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

The BlackBerry UES Suite natively integrates with BlackBerry® UEM and also works with UEM solutions from other vendors.

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

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

endpoints across all leading operating systems.

BlackBerry UEM is a central software component of the Company’s secure communications platform,

offering a “single pane of glass”, or unified console view, for managing and securing devices, applications, identity, content and endpoints across all leading operating systems.

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

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

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

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BlackBerry AtHoc serves the requirements of the public sector market while BlackBerry Alert targets the commercial sector.

SecuSUITE® for Government is a certified, multi-OS voice and text messaging solution with advanced encryption, anti-eavesdropping and continuous authentication capabilities, providing a maximum level of security on conventional mobile devices for public authorities and businesses.

SecuSUITE is a certified, multi-OS voice and text messaging solution with advanced encryption, anti-eavesdropping and continuous authentication capabilities, providing a maximum level of security on conventional mobile devices for government and businesses.

The Company also offers BBM Enterprise, an enterprise-grade secure instant messaging solution for messaging, voice and video.

The IoT business consists of BlackBerry Technology Solutions (“BTS”) and BlackBerry IVY.

The principal component of BTS is BlackBerry QNX, a global provider of real-time operating systems, hypervisors, middleware, development tools, and professional services for connected embedded systems in the automotive, medical, industrial automation and other markets.

A recognized leader in automotive software, BlackBerry QNX offers a growing portfolio of safety-certified, secure and reliable platform solutions and is focused on achieving design wins with automotive original equipment manufacturers (“OEMs”), Tier 1 vendors and automotive semiconductor suppliers.

A recognized leader in automotive software, BlackBerry QNX offers a growing portfolio of safety-certified, secure and reliable platform solutions and is focused on achieving design wins with automotive OEMs, Tier 1 vendors and automotive semiconductor suppliers.

These solutions include the Neutrino® operating system and the BlackBerry QNX® CAR platform, the most advanced embedded software platform for the autonomous vehicle market, as well as other products designed to alleviate the challenges of compliance with ISO 26262, the automotive industry’s functional safety standard.

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

The Company has partnered with Amazon Web Services, Inc.

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

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

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

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

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

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

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

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

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

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

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

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

The Company has partnered with Amazon Web Services, Inc.

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

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

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

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

In February 2022, the Company released a version of BlackBerry IVY for proof-of-concept testing and the Company expects installations of BlackBerry IVY in vehicles to begin during the 2024 or 2025 model year.

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

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

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

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

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

Licensing and Other

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The Company owns rights to an array of patented and patent pending technologies which include, but are not limited to, operating systems, networking infrastructure, acoustics, messaging, enterprise software, automotive subsystems, cybersecurity, cryptography and wireless communications.

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

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

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

Negotiations are ongoing.

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

While the parties have reached preliminary agreement on many key terms of the potential transaction, there can be no assurance that the Company will reach a definitive agreement or that a transaction will be consummated.

If a transaction is completed, the Company will retain rights to use these patents.

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

In the fourth quarter of fiscal 2022, the Company announced its entry into a patent sale agreement with Catapult IP Innovations (“Catapult”) for the sale of substantially all of the Company’s non-core patent assets for total consideration of $600 million (the “Patent Sale Transaction”).

Patents that are essential to the Company’s current core business operations are excluded from the Patent Sale Transaction.

Pursuant to the terms of the Patent Sale Transaction, at closing, the Company will receive a license back to the patents being sold, which relate primarily to mobile devices, messaging and wireless networking.

The Patent Sale Transaction will not impact customers’ use of any of the Company’s products, solutions or services.

Completion of the Patent Sale Transaction is subject to the satisfaction of financing and other closing conditions.

Catapult continues to work on securing financing;

however, the Company is no longer under exclusivity with Catapult and is able to explore alternative options in parallel.

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

Recent Developments

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Products and Innovation:

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

• Released an early access version of BlackBerry IVY;

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

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

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

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

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

• 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 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.

• Strengthened QNX® Advanced Virtualization Framework for Android Automotive OS to simplify and accelerate building IVI systems on the QNX® Hypervisor;

• Released QNX® Hypervisor 2.2 for Safety, the latest edition of the Company’s safety-certified, real-time embedded hypervisor product, certified to the highest level of functional safety for both automotive and medical device software;

• Achieved the certification of QNX® OS for Safety 2.2 to the highest integrity level of the functional safety standard for the railway industry;

• Received the Frost & Sullivan 2022 Enabling Technology Leadership Award for BlackBerry IVY;

• Launched CylanceGATEWAY, BlackBerry’s Zero Trust Network Access (ZTNA) service offering;

• Named as a ‘Leader’ for a third consecutive year in the IDC MarketScape:

Worldwide UEM Software 2022 Vendor Assessment;

• Together with Google, launched Chrome Enterprise Management with BlackBerry UEM to support devices running Google Chrome OS and Chrome browser;

• Enhanced the BlackBerry Managed Security Service Provider (MSSP) channel program, including an expansion of the range of products available, increased partner support and more comprehensive training.

Customers and Partners:

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

• Announced that BlackBerry QNX software is embedded in over 215 million 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 BlackBerry and Visteon will expand efforts to accelerate the deployment of digital cockpit solutions for automakers and their suppliers;

• Announced that Mahindra & Mahindra Ltd.

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

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

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

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

• Announced the integration of BlackBerry UEM with Microsoft 365;

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

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

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

• Announced that BlackBerry and IBM Canada have established a new partnership to bring BlackBerry’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 next generation of software engineers;

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

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

• Selected by BDStar Intelligent & Connected Vehicle Technology Co., Ltd.

(BICV) to power an intelligent digital cockpit, featuring augmented reality, artificial intelligence, and hologram functions for the new Renault Jiangling all-electric sedan;

• Jointly developed a digital LCD instrument cluster with BiTECH for Changan’s next-generation high-end UNI-V Coupe;

• Entered into a multi-year agreement with Magna International Inc.

to collaborate on next-generation Advanced Driver Assistance System (ADAS) solutions for global automakers;

• Partnered with Midis Group to expand go-to-market activities in Eastern Europe, the Middle East, and Africa;

• Joined forces with NXP to help companies prepare for, and prevent, Y2Q post-quantum cyberattacks.

Environmental, Sustainability and Corporate Governance:

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

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

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

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

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

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

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

Segment Reporting

As disclosed in Note 11 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 has prompted extraordinary actions by governmental authorities throughout the world and has resulted in significant market volatility, uncertainty and economic disruption.

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

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

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

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

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

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

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

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

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

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

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

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.

Third Quarter Fiscal 2022 Summary Results of Operations

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

• Released the Company’s 2022 Environmental, Social, and Governance (ESG) report.

Pearlstein Settlement

On April 7, 2022, the Company announced that it had reached an agreement in principle to settle the consolidated securities class action lawsuit captioned Pearlstein v.

Blackberry Limited, et al., Case No.

7060 (CM) (KHP) pending against the Company and certain of its former officers in the U.S.

District Court for the Southern District of New York.

A formal settlement agreement was signed on June 9, 2022 and contemplates an aggregate cash payment by the Company of $165 million to settle the claims brought on behalf of all persons who purchased or otherwise acquired BlackBerry shares on the NASDAQ between March 28, 2013 and September 20, 2013.

While the Company believes that the allegations in the case were without merit, it also believes that eliminating the distraction, expense and risk of continued litigation is in the best interests of the Company and its shareholders.

In the first quarter of fiscal 2023, the Company accrued $165 million associated with this settlement within the line Litigation settlement on the consolidated statement of operations.

Final settlement including payment is expected to occur before the end of fiscal 2023.

COVID-19 and Macroeconomic Factors

The COVID-19 pandemic has prompted extraordinary actions by governmental authorities throughout the world and continues to have a significant impact on global markets, businesses and economies.

The Company continues to focus on protecting the health and safety of its employees, customers and partners, while also providing technology to help them do their best while operating remotely.

During the first quarter of fiscal 2023, the Company maintained its remote working model, limiting employee travel and hosting certain public events as virtual-only experiences.

The Company has more recently shifted to a hybrid model for most of its global offices with employees returning to work in person on a part-time basis, subject to local rules and regulations.

Although the Company experienced higher Software & Services revenue in the first quarter of fiscal 2023 compared to the first quarter of fiscal 2022, the COVID-19 pandemic and ensuing global semiconductor shortage have had and may continue to have a material adverse impact on production-based royalties for the Company’s QNX automotive software business.

This chip supply disruption and its impact on the Company’s business, results of operations and financial condition may be exacerbated by the invasion of Ukraine by Russia and resulting global sanctions against Russia.

The ultimate impact of the COVID-19 pandemic on the Company’s operational and financial performance will also 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, and 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 long-term impact of the COVID-19 pandemic on the Company’s business cannot be reasonably estimated at this time and may not be fully reflected until future periods.

Refer to Part II, Item 1A “Risk Factors” in the Annual Report for a discussion of these factors and other risks.

First Quarter Fiscal 2023 Summary Results of Operations

The following table sets forth certain unaudited consolidated statements of operations data for the quarter ended May 31, 2022 compared to the quarter ended May 31, 2021 under U.S.

For the Three Months Ended

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

November 30, 2021 November 30, 2020 Change

May 31, 2022 May 31, 2021 Change

Revenue $ 168 $ 174 $ (6)

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Operating expenses 281 172 109

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

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

Investment loss, net (1) (2) 1

Loss before income taxes (178) (60) (118)

Provision for income taxes 3 2 1

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

Earnings (loss) per share - reported

Net loss $ (181) $ (62) $ (119)

Loss per share - reported

Basic $ (0.31) $ (0.11)

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______________________________

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

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

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

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

GAAP basis for the three months ended May 31, 2021 includes 1,421,945 common shares that were subsequently issued on the third anniversary date of the Cylance acquisition completed on February 21, 2019 in consideration for the acquisition.

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

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

GAAP basis for the three months ended May 31, 2021 does not include the dilutive effect of the 1.75% Debentures (defined below), as to do so would be anti-dilutive.

Diluted loss per share on a U.S.

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

GAAP basis for the three months ended May 31, 2022 and May 31, 2021 does not include the dilutive effect of stock-based compensation as to do so would be anti-dilutive.

See Note 7 to the Consolidated Financial Statements for the Company’s calculation of the diluted weighted average number of shares outstanding.

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

The following table shows information by operating segment for the three months ended May 31, 2022 and May 31, 2021.

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

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

See “Business Overview” for a description of the Company’s operating segments, as well as Note 11 to the Consolidated Financial Statements.

See Note 10 to the Consolidated Financial Statements for a description of the Company’s operating segments.

For the Three Months Ended

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Cybersecurity IoT Licensing and Other Segment Totals

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

2021 2020 2021 2020 2021 2020 2021 2020

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

Segment cost of sales 52 53 (1) 8 6 2 6 9 (3) 66 68 (2)

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

For the Nine Months Ended

(in millions)

Cybersecurity IoT Licensing and Other Segment Totals

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

May 31, Change May 31, Change May 31, Change May 31, Change

2022 2021 2022 2021 2022 2021 2022 2021

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Segment gross margin $ 60 $ 61 $ (1) $ 43 $ 36 $ 7 $ 2 $ 18 $ (16) $ 105 $ 115 $ (10)

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

The following table reconciles the Company’s segment results for the three months ended May 31, 2022 to consolidated U.S.

GAAP results:

For the Three Months Ended November 30, 2021

For the Three Months Ended May 31, 2022

(in millions)

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Cost of sales 53 8 2 63 1 64

52 8 6 66 1 67

Gross margin (1)

Operating expenses 66 66

Investment income, net (25) (25)

Income before income taxes $ 76

For the Nine Months Ended November 30, 2021

(in millions)

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

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

Cost of sales (1)

$ 60 $ 43 $ 2 $ 105 $ (1) $ 104

Gross margin $ 208 $ 104 $ 34 $ 346 $ (3) $ 343

Operating expenses 281 281

Investment income, net (22) (22)

Investment loss, net 1 1

Loss before income taxes $ (178)

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

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

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

GAAP-based measures to adjusted measures for the three months ended May 31, 2022.

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

GAAP results:

For the Three Months Ended November 30, 2020

For the Three Months Ended May 31, 2021

(in millions)

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Cost of sales 46 7 6 59 1 60

53 6 9 68 1 69

Gross margin (1)

Operating expenses 276 276

Investment loss, net 1 1

Loss before income taxes $ (128)

For the Nine Months Ended November 30, 2020

(in millions)

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

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

Cost of sales (1)

$ 61 $ 36 $ 18 $ 115 $ (1) $ 114

Gross margin $ 223 $ 74 $ 198 $ 495 $ (4) $ 491

Operating expenses 172 172

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

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

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

Financial Highlights

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

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

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

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

The Company recognized adjusted net income of $9 million, and adjusted earnings of $0.02 per share, in the third quarter of fiscal 2021.

The Company had approximately $721 million in cash, cash equivalents and investments as of May 31, 2022 (February 28, 2022 - $770 million).

In the first quarter of fiscal 2023, the Company recognized revenue of $168 million and a net loss of $181 million, or $0.31 basic loss per share and $0.35 diluted loss per share on a U.S.

GAAP basis (first quarter of fiscal 2022 - revenue of $174 million and net loss of $62 million, or $0.11 basic and diluted loss per share).

The net loss was primarily due to a litigation settlement, as discussed above in “Business Overview - Pearlstein Settlement”.

The Company recognized an adjusted net loss of $31 million, and an adjusted loss of $0.05 per share, on a non-GAAP basis in the first quarter of fiscal 2023 (first quarter of fiscal 2022 - adjusted net loss of $27 million, and adjusted loss of $0.05 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 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”);

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

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

The fair value adjustment does not impact the terms of the 1.75% Debentures such as the face value, the redemption features or the conversion price.

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

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

For the nine months ended November 30, 2021, the Company recorded non-cash income relating to changes in fair value from non-credit components of $47 million (pre-tax and after tax) (the “Fiscal 2022 Debentures Fair Value Adjustment”) in the Company’s consolidated statements of operations and non-cash income relating to changes in fair value from instrument specific credit risk of nil in OCL relating to the 1.75% Debentures.

As at May 31, 2022, the fair value of the 1.75% Debentures was approximately $459 million, a decrease of approximately $48 million during the first quarter of fiscal 2023.

For the three months ended May 31, 2022, the Company recorded non-cash income relating to changes in fair value from non-credit components of $46 million (pre-tax and after tax) (the “Q1 Fiscal 2023 Debentures Fair Value Adjustment”) in the Company’s consolidated statements of operations and a non-cash income relating to

changes in fair value from instrument specific credit risk of $2 million in Other Comprehensive Loss (“OCL”) relating to the 1.75% Debentures.

See Note 5 to the Consolidated Financial Statements for further details on the 1.75% Debentures.

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

On December 21, 2021, the Company announced financial results for the three and nine months ended November 30, 2021, which included certain non-GAAP financial measures, including adjusted gross margin, adjusted gross margin percentage, adjusted operating expense, adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage, adjusted EBITDA margin percentage, adjusted net income (loss), adjusted income (loss) per share, adjusted research and development expense, adjusted selling, marketing and administrative expense and adjusted amortization expense.

On June 23, 2022, the Company announced financial results for the three months ended May 31, 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 loss, adjusted loss per share, adjusted research and development expense, adjusted selling, marketing and administrative expense, adjusted amortization expense, adjusted operating loss, adjusted EBITDA, adjusted operating loss margin percentage, adjusted EBITDA margin percentage and free cash 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 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 acquired adjustments in its non-GAAP financial measures due to the quantitative decline in the adjustments over time.

For purposes of comparability, the Company’s non-GAAP financial measures for the three and nine months ended November 30, 2020 have been updated to conform to the current year’s presentation.

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.

Non-GAAP financial measures and non-GAAP ratios exclude certain amounts as described below:

• 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 1.75% Debentures at fair value in accordance with the fair value option under U.S.

Each period, the fair value of the 1.75% Debentures is recalculated and resulting non-cash income and charges from the change in fair value from non-credit components of the 1.75% Debentures are recognized in income.

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.

This is not indicative of the Company’s core operating performance, and may not be meaningful when comparing the Company’s operating performance against that of prior periods.

• Restructuring charges .

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.

The Company believes that restructuring costs relating to employee termination benefits, facilities and other pursuant to the Cost Optimization Program to reduce its annual expenses amongst R&D, infrastructure and other functions do not reflect expected future operating expenses, are not indicative of the Company’s core operating performance, and may not be meaningful when comparing the Company’s operating performance against that of prior periods.

• Stock compensation expenses .

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Such acquired intangible assets depreciate over time and the related amortization will recur in future periods until the assets have been fully amortized.

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

• Long-lived asset impairment charge .

The Company believes that long-lived asset impairment charges do not reflect expected future operating expenses, are not indicative of the Company’s core operating performance, and may not be meaningful in comparison to the Company’s past operating performance.

• Goodwill impairment charge.

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

This is not indicative of the Company’s core operating performance, and may not be meaningful when comparing the Company’s operating performance against that of prior periods.

• Litigation settlement.

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

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

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

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

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

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

GAAP based measures for the three months ended November 30, 2021 and November 30, 2020

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

GAAP based measures for the three months ended May 31, 2022 and May 31, 2021

Readers are cautioned that adjusted gross margin, adjusted gross margin percentage, adjusted operating expense, adjusted net loss, adjusted loss per share, adjusted research and development expense, adjusted selling, marketing and administrative expense, adjusted amortization expense, adjusted operating loss, adjusted EBITDA, adjusted operating loss margin percentage, adjusted EBITDA margin percentage and free cash 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 November 30, 2021 and November 30, 2020 to adjusted financial measures is reflected in the table below:

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

GAAP financial measures for the three months ended May 31, 2022 and May 31, 2021 to adjusted financial measures is reflected in the table below:

For the Three Months Ended (in millions) May 31, 2022 May 31, 2021

Gross margin $ 104 $ 114

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Adjusted gross margin % 62.5 % 66.1 %

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

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

Operating expense $ 66 $ 253 $ 276

Stock compensation expense 5 11 11

Debentures fair value adjustment (1)

Acquired intangibles amortization 29 32 32

Adjusted operating expense $ 142 $ 143 $ 138

______________________________

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

Reconciliation of U.S.

GAAP net income (loss) and U.S.

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

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

Basic earnings (loss)

per share Basic earnings (loss)

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

Stock compensation expense 6 12

Debentures fair value adjustment (110) 95

Acquired intangibles amortization 29 32

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

Reconciliation of U.S.

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

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

Research and development $ 57 $ 53

Stock compensation expense 2 3

Adjusted research and development $ 55 $ 50

Selling, marketing and administration $ 77 $ 83

Stock compensation expense 3 8

Adjusted selling, marketing and administration $ 74 $ 75

Amortization $ 42 $ 45

Acquired intangibles amortization 29 32

Adjusted amortization $ 13 $ 13

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

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

Operating income (loss) $ 51 $ (127)

Non-GAAP adjustments to operating income (loss)

Stock compensation expense 6 12

Debentures fair value adjustment (110) 95

Acquired intangibles amortization 29 32

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

Adjusted operating income (loss) (24) 12

Amortization 45 49

Acquired intangibles amortization (29) (32)

Adjusted EBITDA $ (8) $ 29

Revenue $ 184 $ 218

Adjusted operating income (loss) margin % (1)

Adjusted EBITDA margin % (2)

______________________________

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

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

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

GAAP based measures for the nine months ended November 30, 2021 and November 30, 2020.

A reconciliation of the most directly comparable U.S.

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

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

Gross margin $ 343 $ 491

Stock compensation expense 3 4

Adjusted gross margin $ 346 $ 495

Gross margin % 64.4 % 71.9 %

Stock compensation expense 0.5 % 0.6 %

Adjusted gross margin % 64.9 % 72.5 %

GAAP operating expense for the three months ended May 31, 2022, February 28, 2022 and May 31, 2021 to adjusted operating expense is reflected in the table below:

For the Three Months Ended (in millions) May 31, 2022 February 28, 2022 May 31, 2021

Operating expense $ 281 $ (22) $ 172

2 unchanged sentences

Debentures fair value adjustment (1)

(46) (165) (4)

Acquired intangibles amortization 23 22 32

Goodwill impairment charge — 594

LLA impairment charge — 21

Litigation settlement 165 — —

Adjusted operating expense $ 132 $ 117 $ 138

______________________________

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

(1) See “First Quarter Fiscal 2023 Summary Results of Operations - Financial Highlights - Debentures Fair Value Adjustment”

Reconciliation of U.S.

GAAP net loss and U.S.

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

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

Basic loss per share Basic earnings (loss) per share

GAAP basic loss per share for the three months ended May 31, 2022 and May 31, 2021 to adjusted net loss and adjusted basic loss per share is reflected in the table below:

For the Three Months Ended (in millions, except per share amounts) May 31, 2022 May 31, 2021

per share Basic loss

Net loss $ (181) $(0.31) $ (62) $(0.11)

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Acquired intangibles amortization 23 32

Goodwill impairment charge — 594

LLA impairment charge — 21

Adjusted net income (loss) $ (61) $(0.11) $ 74 $0.13

Litigation settlement 165 —

Adjusted net loss $ (31) $(0.05) $ (27) $(0.05)

Reconciliation of U.S.

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

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

GAAP research and development, selling, marketing and administration, and amortization expense for the three months ended May 31, 2022 and May 31, 2021 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) May 31, 2022 May 31, 2021

Research and development $ 53 $ 57

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Adjusted amortization $ 4 $ 14

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

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

Adjusted operating loss, adjusted EBITDA, adjusted operating loss margin percentage and adjusted EBITDA margin percentage for the three months ended May 31, 2022 and May 31, 2021 are reflected in the table below.

For the Three Months Ended (in millions) May 31, 2022 May 31, 2021

Operating loss $ (177) $ (58)

4 unchanged sentences

Acquired intangibles amortization 23 32

Goodwill impairment charge — 594

LLA impairment charge — 21

Litigation settlement 165 —

Total non-GAAP adjustments to operating loss 150 35

Adjusted operating income (loss) (77) 69

Adjusted operating loss (27) (23)

Amortization 29 49

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Revenue $ 168 $ 174

Adjusted operating income (loss) margin % (1)

Adjusted operating loss margin % (1)

Adjusted EBITDA margin % (2)

______________________________

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

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

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

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

The Company believes that free cash flow (usage) is helpful in understanding the Company’s capital requirements and provides an additional means to reflect the cash flow trends in the Company’s business.

Reconciliation of U.S.

GAAP net cash used in operating activities for the three months ended May 31, 2022 and May 31, 2021 to free cash usage is reflected in the table below:

For the Three Months Ended (in millions) May 31, 2022 May 31, 2021

Net cash used in operating activities $ (42) $ (33)

Acquisition of property, plant and equipment (1) (2)

Free cash usage $ (43) $ (35)

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

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

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

For purposes of comparability, the Company’s key metrics for the three months ended November 30, 2020 have been updated to conform to the current year’s presentation.

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

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

Readers are cautioned that annual recurring revenue (“ARR”), dollar-based net retention rate (“DBNRR”), QNX royalty revenue backlog, Cybersecurity total contract value (“TCV”) 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.

Comparative breakdowns of certain key metrics for the three months ended May 31, 2022 and May 31, 2021 are set forth below.

For the Three Months Ended (in millions) May 31, 2022 May 31, 2021 Change

Annual Recurring Revenue

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Cybersecurity 88 % 94 % (6 %)

QNX Royalty Revenue Backlog $ 560 $ 490 $ 70

Cybersecurity Total Contract Value Billings $ 89 $ 77 $ 12

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

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

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

IoT ARR was approximately $91 million in the third quarter of fiscal 2022 and increased compared to $89 million in the second quarter of fiscal 2022 and increased compared to $88 million in the third quarter of fiscal 2021.

Cybersecurity ARR was approximately $334 million in the first quarter of fiscal 2023 and decreased compared to $347 million in the fourth quarter of fiscal 2022 and compared to $364 million in the first quarter of fiscal 2022.

IoT ARR was approximately $94 million in the first quarter of fiscal 2023 and increased compared to $93 million in the fourth quarter of fiscal 2022 and compared to $86 million in the first quarter of fiscal 2022.

Dollar-Based Net Retention Rate

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

Cybersecurity DBNRR was 95% in the third quarter of fiscal 2022 and was consistent with 95% in the second quarter of fiscal 2022 and the third quarter of fiscal 2021.

The Company defines billings as amounts invoiced less credits issued.

The Company considers billings to be a useful metric because billings drive deferred revenue, which is an important indicator of the health and visibility of the business, and represents a significant percentage of future revenue.

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

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

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

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

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

Cybersecurity DBNRR was 88% in the first quarter of fiscal 2023 and decreased compared to 91% in the fourth quarter of fiscal 2022 and compared to 94% in the first quarter of fiscal 2022.

QNX Royalty Revenue Backlog

The Company defines the royalty revenue backlog of its QNX business as estimated future revenue from variable forecasted royalties related to the QNX business.

The estimation of forecasted royalties is based on QNX’s royalty rates and on projections of anticipated volumes that are based on historical shipping experience and current customer projections that management believes are reasonable over the lifetime of a design.

The QNX royalty revenue backlog is calculated annually based on current

projections of volumes and may not be indicative of actual future revenue.

The revenue that the Company will recognize is subject to several factors, including actual volumes and potential terminations or modifications to customer contracts.

The Company’s QNX royalty revenue backlog was approximately $560 million at the end of the first quarter of fiscal 2023 and increased compared to approximately $490 million at the end of the first quarter of fiscal 2022.

Total Contract Value Billings

The Company defines TCV billings as amounts invoiced less credits issued.

The Company considers TCV billings to be a useful metric because billings drive deferred revenue, which is an important indicator of the health and visibility of the business, and represents a significant percentage of future revenue.

Cybersecurity TCV billings was $89 million in the first quarter of fiscal 2023, an increase of $12 million compared to $77 in the first quarter of fiscal 2022.

Recurring Software Product Revenue

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

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

Free Cash Flow

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

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

Total Software and Services product revenue, excluding professional services, was approximately 80% recurring in the first quarter of fiscal 2023, consistent with the fourth quarter of fiscal 2022, and decreased compared to approximately 90% recurring in the first quarter of fiscal 2022 due to product mix.

Results of Operations - Three months ended May 31, 2022 compared to the three months ended May 31, 2021

Revenue by Segment

2 unchanged sentences

(in millions)

November 30, 2021 November 30, 2020 Change

May 31, 2022 May 31, 2021 Change

Revenue by Segment

8 unchanged sentences

Cybersecurity

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

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

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

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

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

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

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

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

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

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

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

The increase in IoT revenue of $11 million was primarily due to an increase of $5 million in development seat revenue, an increase of $4 million in BlackBerry QNX royalty revenue due to the partial recovery of the automotive market from the slowdown related to the COVID-19 pandemic in the third quarter of fiscal 2021, and an increase of $2 million relating to professional services.

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

The increase in Cybersecurity revenue of $6 million was primarily due to an increase of $16 million related to the sale of Secusmart solutions, partially offset by a decrease of $6 million relating to product revenue in BlackBerry Spark and a decrease of $2 million relating to professional services.

The increase in IoT revenue of $8 million was primarily due to an increase of $6 million in BlackBerry QNX development seat revenue and an increase of $3 million relating to professional services.

Licensing and Other

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

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

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

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

The decrease in Licensing and Other revenue of $20 million was primarily due to a decrease of $18 million in revenue from the Company’s intellectual property licensing arrangements due to the pending Patent Sale Transaction in the first quarter of 2023 and associated restrictions on monetization activity and a decrease of $2 million in SAF revenue.

Revenue by Geography

2 unchanged sentences

(in millions)

November 30, 2021 November 30, 2020 Change

May 31, 2022 May 31, 2021 Change

Revenue by Geography

9 unchanged sentences

North America Revenue

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

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

The decrease in North America revenue of $22 million was primarily due to a decrease of $18 million in Licensing and Other revenue due to the reasons discussed above in “Revenue by Segment” and a decrease of $3 million in product revenue in BlackBerry Spark, partially offset by an increase of $2 million in BlackBerry QNX royalty revenue.

Europe, Middle East and Africa Revenue

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

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

The increase in Europe, Middle East and Africa revenue of $15 million was primarily due to an increase of $16 million related to the sale of Secusmart solutions and an increase of $4 million in BlackBerry QNX development seat revenue, partially offset by a decrease of $3 million in product revenue in BlackBerry Spark.

Other Regions Revenue

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

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

The increase in Other regions revenue of $1 million was primarily due to an increase of $1 million in BlackBerry QNX development seat revenue.

Consolidated Gross Margin

Consolidated gross margin decreased by $32 million to approximately $117 million in the third quarter of fiscal 2022 from $149 million in the third quarter of fiscal 2021.

Consolidated gross margin decreased by $10 million to approximately $104 million in the first quarter of fiscal 2023 (first quarter of fiscal 2022 - $114 million).

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 4.7% to approximately 63.6% of consolidated revenue in the third quarter of fiscal 2022 from 68.3% of consolidated revenue in the third quarter of fiscal 2021.

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

Consolidated gross margin percentage decreased by 3.6% to approximately 61.9% of consolidated revenue in the first quarter of fiscal 2023 (first quarter of fiscal 2022 - 65.5%).

The decrease was primarily due to a lower gross margin contribution from Licensing and Other and BlackBerry Spark 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 “Third Quarter Fiscal 2022 Summary Results of Operations” for information about the Company’s operating segments and the basis of operating segment results.

See “First Quarter Fiscal 2023 Summary Results of Operations” for information about the Company’s operating segments and the basis of operating segment results.

For the Three Months Ended

1 unchanged sentence

Cybersecurity IoT Licensing and Other Segment Totals

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

May 31, Change May 31, Change May 31, Change May 31, Change

2022 2021 2022 2021 2022 2021 2022 2021

4 unchanged sentences

Cybersecurity

Cybersecurity gross margin decreased by $1 million to approximately $76 million in the third quarter of fiscal 2022 from $77 million in the third quarter of fiscal 2021.

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

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

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

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

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

The decrease in Cybersecurity gross margin of $1 million was primarily due to the reasons discussed above in “Revenue by Segment”, as the cost of sales for most Cybersecurity products does not significantly fluctuate based on business volume.

The decrease in Cybersecurity gross margin percentage of 4% was primarily due to an increase in revenue from the sale of Secusmart solutions, which has a lower relative gross margin percentage.

The increase in IoT gross margin of $7 million was primarily due to the reasons discussed above in “Revenue by Segment”, partially offset by an increase in salaries expense.

IoT gross margin percentage was consistent with the first quarter of fiscal 2022.

Licensing and Other

Licensing and Other gross margin decreased by $40 million to approximately $7 million in the third quarter of fiscal 2022 from $47 million in the third quarter of fiscal 2021.

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

Licensing and Other gross margin percentage decreased by 30% to approximately 54% of Licensing and Other revenue in the third quarter of fiscal 2022 from 84% of Licensing and Other revenue in the third quarter of fiscal 2021.

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

The decrease in Licensing and Other gross margin of $16 million was primarily due to the reasons discussed above in “Revenue by Segment”.

The decrease in Licensing and Other gross margin percentage of 25% was primarily due to the reasons discussed above in “Revenue by Segment”.

Operating Expenses

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

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

The table below presents a comparison of research and development, selling, marketing and administration, and amortization expenses for the quarter ended May 31, 2022, compared to the quarter ended February 28, 2022 and the quarter ended May 31, 2021.

The Company believes it is meaningful to provide a sequential comparison between the first quarter of fiscal 2023 and the fourth quarter of fiscal 2022.

For the Three Months Ended

(in millions)

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

May 31, 2022 February 28, 2022 May 31, 2021

Revenue $ 168 $ 185 $ 174

4 unchanged sentences

Debentures fair value adjustment (46) (165) (4)

Litigation settlement 165 — —

Total $ 281 $ (22) $ 172

4 unchanged sentences

Debentures fair value adjustment (27.4 %) (89.2 %) (2.3 %)

Litigation settlement 98.2 % — % — %

Total 167.3 % (11.9) % 98.9 %

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

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

GAAP-based measures to adjusted measures for the three months ended May 31, 2022, February 28, 2022 and May 31, 2021.

GAAP Operating Expenses

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

The decrease was primarily attributable to the difference between the Q3 Fiscal 2022 Debentures Fair Value Adjustment and the fair value adjustment related to the Debentures incurred in the second quarter of fiscal 2022 of $177 million, a decrease of $8 million in stock compensation expenses, a decrease of $5 million in the Company’s deferred share unit costs, and a decrease of $3 million in amortization expense, partially offset by a decrease in benefits of $8 million in government subsidies resulting from claims filed for the Canada Emergency Wage Subsidy (“CEWS”) program to support the business through the COVID-19 pandemic.

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

Operating expenses increased by $303 million, or 1,377.3% in the first quarter of fiscal 2023, compared to the fourth quarter of fiscal 2022 primarily attributable to a $165 million litigation settlement, the difference between the Q1 Fiscal 2023 Debentures Fair Value Adjustment and the fair value adjustment related to the 1.75% Debentures incurred in the fourth quarter of fiscal 2022 of $119 million, a decrease in benefits of $10 million in government subsidies resulting from claims filed for the Canada Emergency Wage Subsidy and Hardest-Hit Business Recovery Program programs (“COVID-19 subsidies”) to support the business through the COVID-19 pandemic and an increase of $9 million in variable incentive plan costs.

Operating expenses increased by $109 million, or 63.4%, compared to the first quarter of fiscal 2022 primarily attributable to a $165 million litigation settlement and a decrease in benefits of $11 million in COVID-19 subsidies, partially offset by the difference between the Q1 Fiscal 2023 Debentures Fair Value Adjustment and the fair value adjustment related to the 1.75% Debentures incurred in the first quarter of fiscal 2022 of $42 million, a decrease of $19 million in amortization expense and a decrease of $5 million in salaries and benefits expenses.

Adjusted Operating Expenses

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

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

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

The increase was primarily attributable to a decrease in benefits of $7 million in CEWS funding, and a decrease in benefits of $2 million in claims filed with the Ministry of Innovation, Science and Economic Development Canada relating to its Strategic Innovation Fund (“SIF”) program’s investment in BlackBerry QNX, partially offset by a decrease of $6 million in legal expenses.

Adjusted operating expenses increased by $15 million, or 12.8%, to $132 million in the first quarter of fiscal 2023 compared to $117 million in the fourth quarter of fiscal 2022.

The increase was primarily attributable to a decrease in benefits of $10 million in COVID-19 subsidies, an increase of $9 million in variable incentive plan costs and an increase of $3 million in legal expenses, partially offset by a decrease of $6 million in amortization expense and a decrease of $3 million in commission expenses.

Adjusted operating expenses decreased by $6 million, or 4.3%, to $132 million in the first quarter of fiscal 2023 compared to $138 million in the first quarter of fiscal 2022.

The decrease was primarily attributable to a decrease of $10 million in amortization expense, a decrease of $5 million in salaries and benefits expenses and a decrease of $2 million in marketing and advertising expenses, partially offset by a decrease in benefits of $11 million in COVID-19 subsidies.

Research and Development Expenses

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

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

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

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

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

Research and development expenses decreased by $4 million, or 7.0%, in the first quarter of fiscal 2023 compared to the first quarter of fiscal 2022 primarily due to a decrease of $2 million in salaries and benefits expenses and a decrease of $2 million in consulting fees, partially offset by a decrease in benefits of $1 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 $4 million, or 7.3%, to $51 million in the first quarter of fiscal 2023 (first quarter of fiscal 2022 - $55 million).

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

Selling, Marketing and Administration Expenses

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

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

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

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

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

Selling, marketing and administration expenses increased by $9 million, or 12.3%, in the first quarter of fiscal 2023 compared the first quarter of fiscal 2022 primarily due to a decrease in benefits of $11 million in COVID-19 subsidies, partially offset by a decrease of $3 million in salaries and benefits expenses.

Adjusted selling, marketing and administration expenses increased by $8 million, or 11.6%, to $77 million in the first quarter of fiscal 2023 (first quarter of fiscal 2022 - $69 million).

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

Amortization Expense

The table below presents a comparison of amortization expense relating to property, plant and equipment and intangible assets recorded as amortization or cost of sales for the quarter ended November 30, 2021 compared to the quarter ended November 30, 2020.

The table below presents a comparison of amortization expense relating to property, plant and equipment and intangible assets recorded as amortization or cost of sales for the quarter ended May 31, 2022 compared to the quarter ended May 31, 2021.

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

2 unchanged sentences

Included in Operating Expense

November 30, 2021 November 30, 2020 Change

Property, plant and equipment $ 4 $ 4 $ —

Intangible assets 38 41 (3)

Total $ 42 $ 45 $ (3)

Included in Cost of Sales

November 30, 2021 November 30, 2020 Change

Property, plant and equipment $ — $ 1 $ (1)

Intangible assets 3 3 —

Total $ 3 $ 4 $ (1)

Amortization included in Operating Expense

Amortization expense relating to property, plant and equipment and certain intangible assets decreased by $3 million to $42 million in the third quarter of fiscal 2022 compared to $45 million in the third quarter of fiscal 2021.

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

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

Amortization included in Cost of Sales

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

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

Investment Income (Loss), Net

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

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

For the third quarter of fiscal 2022, the Company’s net effective income tax expense rate was approximately 3%, compared to a net effective income tax expense rate of approximately 2% for the same period in the prior fiscal year.

The Company’s net effective income tax rate reflects the change in unrecognized income tax benefits, if any, and the fact that the Company has a significant valuation allowance against its deferred tax assets, and in particular, the change in fair value of the Debentures, amongst other items, was offset by a corresponding adjustment of the valuation allowance.

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

Net Income (Loss)

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

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

The increase in net income of $204 million was primarily due to a decrease in operating expenses that was primarily due to a decrease in the fair value adjustment related to the Debentures, as described above in “Operating Expenses”, and an increase in investment income (loss), net, partially offset by a decrease in revenue, as described above in “Revenue by Segment” and a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage”.

Adjusted net loss was $1 million in the third quarter of fiscal 2022 compared to adjusted net income of $9 million in the third quarter of fiscal 2021, reflecting a decrease in adjusted net income of $10 million primarily due to a decrease in revenue as described above in “Revenue by Segment”, a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage” and an increase in operating expenses as described above in “Operating Expenses”, partially offset by an increase in investment income (loss), net.

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

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

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

The following section sets forth certain consolidated statements of operations data, which is expressed in millions of dollars, except for share and per share amounts and as a percentage of revenue, for the nine months ended November 30, 2021 and November 30, 2020:

For the Nine Months Ended

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

November 30, 2021 November 30, 2020 Change

Revenue $ 533 $ 683 $ (150)

Gross margin 343 491 (148)

Operating expenses 491 1,285 (794)

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

Loss before income taxes (126) (800) 674

Provision for (recovery of) income taxes 6 (11) 17

Net loss $ (132) $ (789) $ 657

Loss per share - reported

Basic $ (0.23) $ (1.41) $ 1.18

Diluted $ (0.28) $ (1.41) $ 1.13

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

568,877 559,732

629,710 559,732

______________________________

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

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

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

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

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

Diluted loss per share on a U.S.

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

Revenue by Segment

Comparative breakdowns of revenue by segment are set forth below.

For the Nine Months Ended

(in millions)

November 30, 2021 November 30, 2020 Change

Revenue by Segment

Cybersecurity $ 355 $ 369 $ (14)

IoT 126 92 34

Licensing and Other 52 222 (170)

$ 533 $ 683 $ (150)

% Revenue by Segment

Cybersecurity 66.6 % 54.0 %

IoT 23.6 % 13.5 %

Licensing and Other 9.8 % 32.5 %

100.0 % 100.0 %

Cybersecurity

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

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

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

The increase in IoT revenue of $34 million was primarily due to an increase of $17 million in BlackBerry QNX royalty revenue due to the partial recovery of the automotive market from the slowdown related to the COVID-19 pandemic in the first nine months of fiscal 2021, an increase of $13 million in development seat revenue, and an increase of $3 million in professional service revenue.

Licensing and Other

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

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

GAAP Revenue by Geography

Comparative breakdowns of the geographic regions on a U.S.

GAAP basis are set forth in the following table:

For the Nine Months Ended

(in millions)

November 30, 2021 November 30, 2020 Change

Revenue by Geography

North America $ 313 $ 492 $ (179)

Europe, Middle East and Africa 168 144 24

Other regions 52 47 5

$ 533 $ 683 $ (150)

% Revenue by Geography

North America 58.7 % 72.0 %

Europe, Middle East and Africa 31.5 % 21.1 %

Other regions 9.8 % 6.9 %

100.0 % 100.0 %

North America Revenue

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

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

Europe, Middle East and Africa Revenue

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

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

Other Regions Revenue

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

The increase in revenue was primarily due to an increase of $4 million in development seat revenue and an increase of $3 million in BlackBerry QNX royalty revenue due to the reasons discussed above in “Revenue by Segment”, partially offset by a decrease of $2 million in SAF revenue.

Consolidated Gross Margin

Consolidated gross margin decreased by $148 million to approximately $343 million in the first nine months of fiscal 2022 from $491 million in the first nine months of fiscal 2021.

Consolidated Gross Margin Percentage

Consolidated gross margin percentage decreased by 7.5%, to approximately 64.4% of consolidated revenue in the first nine months of fiscal 2022 from 71.9% of consolidated revenue in the first nine months of fiscal 2021.

Gross Margin by Segment

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

For the Nine Months Ended

(in millions)

Cybersecurity IoT Licensing and Other Segment Totals

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

2021 2020 2021 2020 2021 2020 2021 2020

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

Segment cost of sales 147 146 1 22 18 4 18 24 (6) 187 188 (1)

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

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

Cybersecurity

Cybersecurity gross margin decreased by $15 million to approximately $208 million in the first nine months of fiscal 2022 from $223 million in the first nine months of fiscal 2021.

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

Cybersecurity gross margin percentage decreased by 1% to approximately 59% of Cybersecurity revenue in the first nine months of fiscal 2022 from 60% of Cybersecurity revenue in the first nine months of fiscal 2021.

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

IoT gross margin increased by $30 million to approximately $104 million in the first nine months of fiscal 2022 from $74 million in the first nine months of fiscal 2021.

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

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

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

Licensing and Other

Licensing and Other gross margin decreased by $164 million to approximately $34 million in the first nine months of fiscal 2022 from $198 million in the first nine months of fiscal 2021.

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

Licensing and Other gross margin percentage decreased by 24% to approximately 65% of Licensing and Other revenue in the first nine months of fiscal 2022 from 89% of Licensing and Other revenue in the first nine months of fiscal 2021.

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

Operating Expenses

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

For the Nine Months Ended

(in millions)

November 30, 2021 November 30, 2020 Change

Revenue $ 533 $ 683 $ (150)

Operating expenses

Research and development 172 167 5

Selling, marketing and administration 233 252 (19)

Amortization 133 137 (4)

Impairment of goodwill — 594 (594)

Impairment of long-lived assets — 21 (21)

Debentures fair value adjustment (47) 114 (161)

Total $ 491 $ 1,285 $ (794)

Operating Expense as % of Revenue

Research and development 32.3 % 24.5 %

Selling, marketing and administration 43.7 % 36.9 %

Amortization 25.0 % 20.1 %

Impairment of goodwill — % 87.0 %

Impairment of long-lived assets — % 3.1 %

Debentures fair value adjustment (8.8) % 16.7 %

Total 92.1 % 188.1 %

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

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

GAAP Operating Expenses

Operating expenses decreased by $794 million, or 61.8%, to $491 million, or 92.1% of revenue in the first nine months of fiscal 2022, compared to $1,285 million, or 188.1% of revenue, in the first nine months of fiscal 2021.

The decrease was primarily attributable to goodwill impairment of $594 million in the first quarter of fiscal 2021 which did not recur, the difference between the Fiscal 2022 Debentures Fair Value Adjustment and the fair value adjustment of $161 million related to the Debentures incurred in the first nine months of fiscal 2021, long-lived assets impairment of $21 million in the second quarter of fiscal 2021 which did not recur, a decrease of $9 million in stock compensation expense, and a decrease of $8 million in salaries and benefits expenses, partially offset by a decrease in benefits of $7 million in CEWS funding.

Adjusted Operating Expenses

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

The decrease was primarily attributable to a decrease of $7 million in salaries and benefits expenses, a decrease of $7 million in legal expenses, and a decrease of $4 million in operating lease cost, partially offset by a decrease in benefits of $7 million in CEWS funding, and an increase of $5 million in variable incentive plan costs.

Research and Development Expenses

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

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

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

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

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

Selling, Marketing and Administration Expenses

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

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

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

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

Amortization Expense

The table below presents a comparison of amortization expense relating to property, plant and equipment and intangible assets recorded as amortization or cost of sales for the nine months ended November 30, 2021 compared to the nine months ended November 30, 2020.

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

For the Nine Months Ended

(in millions)

Included in Operating Expense

November 30, 2021 November 30, 2020 Change

May 31, 2022 May 31, 2021 Change

Property, plant and equipment $ 4 $ 3 $ 1

2 unchanged sentences

Included in Cost of Sales

November 30, 2021 November 30, 2020 Change

May 31, 2022 May 31, 2021 Change

Property, plant and equipment $ — $ 1 $ (1)

2 unchanged sentences

Amortization included in Operating Expense

Amortization expense relating to certain property, plant and equipment and intangible assets decreased by $4 million to $133 million in the first nine months of fiscal 2022, compared to $137 million in the first nine months of fiscal 2021.

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

Adjusted amortization expense was $40 million in the first nine months of fiscal 2022, consistent with $40 million in the first nine months of fiscal 2021.

The decrease in amortization expense included in operating expense of $19 million was due to the lower cost base of assets and a decrease in intellectual property held and used related to the Patent Sale Transaction.

Adjusted amortization expense decreased by $10 million to $4 million in the first quarter of fiscal 2023 (first quarter of fiscal 2022 - $14 million) 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 intangible assets employed in the Company’s service operations decreased by $3 million to $9 million in the first nine months of fiscal 2022, compared to $12 million in the first nine months of fiscal 2021.

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

Investment Income (Loss), Net

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

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

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

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

Investment Loss, Net

Investment loss, net, which includes the interest expense from the 1.75% Debentures, decreased by $1 million to investment loss, net of $1 million in the first quarter of fiscal 2023 (first quarter of fiscal 2022 - investment loss, net of $2 million).

The decrease in investment loss, net is primarily due to a decrease in unrealized losses on public equity securities and a higher yield on cash and investments.

For the first quarter of fiscal 2023, the Company’s net effective income tax expense rate was approximately 2% (first quarter of fiscal 2022 - net effective income tax expense rate of approximately 3%).

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 1.75% Debentures, amongst other items, was offset by a corresponding adjustment of the valuation allowance.

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

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

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

The decrease in net loss of $657 million was primarily due to a decrease in operating expenses due to the goodwill impairment in the first nine months of fiscal 2021 that did not recur and a decrease in the fair value adjustment related to the Debentures, as described above in “Operating Expenses” and an increase in investment income (loss), net, partially offset by a decrease in revenue as described above in “Revenue by Segment” and a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage”.

Adjusted net loss in the first nine months of fiscal 2022 was $61 million compared to adjusted net income of $74 million in the first nine months of fiscal 2021, reflecting a decrease in adjusted net income of $135 million, primarily due to a decrease in revenue as described above in “Revenue by Segment” and a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage”, partially offset by an increase in investment income (loss), net and a decrease in operating expenditures as described above in “Operating Expenses”.

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

The weighted average number of shares outstanding was 560 million for basic and diluted loss per share for the first nine months of November 30, 2020.

Common Shares Outstanding

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

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

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

The Company’s net loss for the first quarter of fiscal 2023 was $181 million, or $0.31 basic loss per share and $0.35 diluted loss per share on a U.S.

GAAP basis (first quarter of fiscal 2022 - net loss of $62 million, or $0.11 basic and diluted loss per share).

The increase in net loss of $119 million was primarily due to an increase in operating expenses, as described above in “Operating Expenses”, a decrease in revenue, as described above in “Revenue by Segment” and a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage”.

Adjusted net loss was $31 million in the first quarter of fiscal 2023 (first quarter of fiscal 2022 - adjusted net loss of $27 million).

The increase in adjusted net loss of $4 million was primarily due to a decrease in revenue as described above in “Revenue by Segment”, a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage”, partially offset by a decrease in operating expenses as described above in “Operating Expenses”.

The weighted average number of shares outstanding was 577 million common shares for basic loss per share and 638 million common shares for diluted loss per share for the first quarter of fiscal 2023 (first quarter of fiscal 2022 - 567 million common shares for basic and diluted loss per share).

Financial Condition

Liquidity and Capital Resources

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

Cash, cash equivalents, and investments decreased by $49 million to $721 million as at May 31, 2022 from $770 million as at February 28, 2022, primarily as a result of changes in working capital.

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

dollars as at November 30, 2021.

dollars as at May 31, 2022.

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

(in millions)

November 30, 2021 February 28, 2021 Change

May 31, 2022 February 28, 2022 Change

Cash and cash equivalents $ 391 $ 378 $ 13

Restricted cash equivalents and restricted short-term investments 29 28 1

Restricted cash and cash equivalents 28 28 —

Short-term investments 272 334 (62)

3 unchanged sentences

(in millions)

November 30, 2021 February 28, 2021 Change

May 31, 2022 February 28, 2022 Change

Current assets $ 964 $ 1,043 $ (79)

2 unchanged sentences

Current Assets

The decrease in current assets of $77 million at the end of the third quarter of fiscal 2022 from the end of the fourth quarter of fiscal 2021 was primarily due to a decrease in short term investments of $83 million, a decrease in accounts receivable, net of allowance of $44 million, a decrease in other receivables of $8 million, and a decrease in income taxes receivable of $1 million, partially offset by an increase in cash and cash equivalents of $57 million and an increase of $2 million in other current assets.

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

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

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

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

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

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

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

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

The decrease in current assets of $79 million at the end of the first quarter of fiscal 2023 from the end of the fourth quarter of fiscal 2022 was primarily due to a decrease in short term investments of $62 million, a decrease in accounts receivable, net of allowance of $36 million and a decrease in other receivables of $4 million, partially offset by an increase in cash and cash equivalents of $13 million and an increase of $10 million in other current assets.

At May 31, 2022, accounts receivable was $102 million, a decrease of $36 million from February 28, 2022.

The decrease was primarily due to lower revenue recognized over the three months ended May 31, 2022 compared to the three months ended February 28, 2022, and a decrease in days sales outstanding to 66 days at the end of the first quarter of fiscal 2023 from 67 days at the end of the fourth quarter of fiscal 2022.

At May 31, 2022, other receivables was $21 million, a decrease of $4 million from February 28, 2022.

The decrease was primarily due to a decrease of $5 million relating to COVID-19 subsidies.

At May 31, 2022, other current assets was $169 million, an increase of $10 million from February 28, 2022.

The increase was primarily due to an increase of $7 million in prepaid software and an increase of $3 million in inventory.

Current Liabilities

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

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

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

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

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

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

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

For the Nine Months Ended

The increase in current liabilities of $124 million at the end of the first quarter of 2023 from the end of the fourth quarter of fiscal 2022 was primarily due an increase in accruals of $147 million and an increase in income taxes payable of $2 million, partially offset by a decrease in deferred revenue, current of $17 million and a decrease in accounts payable of $8 million.

Accrued liabilities were $304 million, reflecting an increase of $147 million compared to February 28, 2022.

The increase was primarily due to a $165 million legal settlement accrual, partially offset by a decrease of $12 million in variable incentive plan costs and a decrease of $4 million in payroll accruals.

Income taxes payable were $13 million, reflecting an increase of $2 million compared to February 28, 2022, which was primarily due to income earned in taxable jurisdictions.

Deferred revenue, current was $190 million, reflecting a decrease of $17 million compared to February 28, 2022 that was attributable to a $13 million decrease in deferred revenue, current related to BlackBerry Spark and $3 million related to BlackBerry AtHoc.

Accounts payable were $14 million, reflecting a decrease of $8 million from February 28, 2022, which was primarily due to timing of payments.

Cash flows for the three months ended May 31, 2022 compared to the three months ended May 31, 2021 were as follows:

For the Three Months Ended

(in millions)

November 30, 2021 November 30, 2020 Change

May 31, 2022 May 31, 2021 Change

Net cash flows provided by (used in):

3 unchanged sentences

Effect of foreign exchange gain (loss) on cash and cash equivalents (1) 3 (4)

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

Net increase in cash and cash equivalents $ 13 $ 150 $ (137)

Operating Activities

1 unchanged sentence

Investing Activities

During the nine months ended November 30, 2021, cash flows provided by investing activities were $111 million and included cash provided by transactions involving the acquisitions of short-term and long-term investments, net of the proceeds on sale or maturity in the amount of $104 million and distribution from a non-marketable equity investment without readily determinable fair value in the amount of $35 million, offset by cash used in the acquisition of intangible assets of $22 million, and the acquisition of property, plant and equipment of $6 million.

For the same period in the prior fiscal year, cash flows provided by investing activities were $52 million and included cash provided by transactions involving the acquisitions of short-term and long-term investments, net of the proceeds on sale or maturity in the amount of $80 million, offset by cash used in the acquisition intangible assets of $23 million, and the acquisitions of property, plant and equipment of $5 million.

During the three months ended May 31, 2022, cash flows provided by investing activities were $53 million and included cash provided by transactions involving the acquisitions of short-term investments, net of the proceeds on sale or maturity in the amount of $62 million, offset by cash used in the acquisition of intangible assets of $8 million, and the acquisition of property, plant and equipment of $1 million.

For the same period in the prior fiscal year, cash flows provided by investing activities were $176 million and included cash provided by transactions involving the acquisitions of short-term investments, net of the proceeds on sale or maturity in the amount of $184 million, offset by cash used in the acquisition intangible assets of $6 million, and the acquisitions of property, plant and equipment of $2 million.

Financing Activities

The increase in cash flows provided by financing activities was $9 million for the first nine months of fiscal 2022 and included common shares issued for stock options exercised and under the employee share purchase plan.

Aggregate Contractual Obligations

The following table sets out aggregate information about the Company’s contractual obligations and the periods in which payments are due as at November 30, 2021:

(in millions)

Total Less than One

Three Years Four to Five

Years Greater than

Operating lease obligations $ 101 $ 33 $ 43 $ 22 $ 3

Purchase obligations and commitments 140 100 40 — —

Debt interest and principal payments 379 6 373 — —

Total $ 620 $ 139 $ 456 $ 22 $ 3

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

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

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

The decrease in cash flows provided by financing activities of $1 million for the first three months of fiscal 2023 was primarily due to a decrease in common shares issued upon the exercise of stock options.

Debenture Financing and Other Funding Sources

2 unchanged sentences

See Note 2 to the Consolidated Financial Statements for further information concerning the Company’s restricted cash.

Cash, cash equivalents, and investments were approximately $772 million as at November 30, 2021.

Cash, cash equivalents, and investments were approximately $721 million as at May 31, 2022.

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

Based on its current financial projections, the Company believes its financial resources, together with expected future operating cash generating and operating expense reduction activities 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 Securities Exchange Act of 1934, as amended (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 May 31, 2022:

(in millions)

Total Short-term

(next 12 months) Long-term

Operating lease obligations $ 94 $ 30 $ 64

Purchase obligations and commitments 129 107 22

Litigation settlement 165 165 —

Debt interest and principal payments 376 6 370

Total $ 764 $ 308 $ 456

Total contractual and other obligations as at May 31, 2022 increased by approximately $161 million as compared to the February 28, 2022 balance of approximately $603 million, which was attributable to a litigation settlement and an increase in purchase obligations and commitments, partially offset by a decrease in operation lease obligations.

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

Accounting Policies and Critical Accounting Estimates

There have been no changes to the Company’s accounting policies or critical accounting estimates from those described under “Accounting Policies and Critical Accounting Estimates” in the Annual MD&A.

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

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

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis