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Item 7. Management’s Discussion and Analysis

2023-03-31 compared with 2022-04-01 · 271 added, 363 removed, 641 unchanged (50% 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 audited consolidated financial statements and the accompanying notes (the “Consolidated Financial Statements”) of BlackBerry Limited, for the fiscal year ended February 28, 2022.

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read together with the consolidated financial statements and the accompanying notes (the “Consolidated Financial Statements”) of BlackBerry Limited, for the fiscal year ended February 28, 2023.

The Consolidated Financial Statements are presented in U.S.

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Any one of these factors, and other factors that we are unaware of, or currently deem immaterial, may cause our actual results to differ materially from recent results or from our anticipated future results.

Please refer to our MD&A included in our Annual Report on 10-K for the fiscal year ended February 28, 2021 for a comparative discussion of our fiscal 2021 financial results as compared to our fiscal 2020, which is incorporated herein by reference.

Additional information about the Company, which is included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2022 (the “Annual Report”), can be found on SEDAR at www.sedar.com and on the SEC’s website at www.sec.gov.

Please refer to our MD&A included in our Annual Report on 10-K for the fiscal year ended February 28, 2022 for a comparative discussion of our fiscal 2022 financial results as compared to our fiscal 2021 financial results, which is incorporated herein by reference.

Additional information about the Company can be found on SEDAR at www.sedar.com and on the SEC’s website at www.sec.gov.

Cautionary Note Regarding Forward-Looking Statements

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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, to patent new innovations, to increase staffing in its Cybersecurity and IoT businesses, and to implement changes to its remote and virtual operations;

• the Company’s expectations with respect to the impact of the COVID-19 pandemic or the Company’s response to Russia’s invasion of Ukraine on its results of operations and financial condition on a consolidated basis, including its liquidity position;

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

• the Company’s plans, strategies and objectives, including its intentions to increase and enhance its product and service offerings and to patent new innovations, and to complete the sale of a portfolio of its non-core patent assets;

• the Company’s expectations with respect to the impact of the COVID-19 pandemic and the global semiconductor shortage, as well as other macroeconomic factors including inflation and interest rates, on its results of operations and financial condition;

• the Company’s expectations with respect to its revenue and billings in fiscal 2024, the annual recurring revenue of its Cybersecurity business in fiscal 2024, installations of the BlackBerry IVY™ platform and the sale of substantially all of its non-core patent assets;

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

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

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

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

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

The words “expect”, “anticipate”, “estimate”, “may”, “will”, “should”, “could”, “intend”, “believe”, “target”, “plan” and similar expressions are intended to identify forward-looking statements in this Annual Report on Form 10-K, including in the sections in Part I, Item 1 “Business” entitled “Products and Services - IoT”, “Products and Services - Licensing and Other”, “Intellectual Property” and “Human Capital”, and in the sections of this MD&A entitled “Business Overview - COVID-19”, “Business Overview - Russia Ukraine Conflict”, “Non-GAAP Financial Measures - Key Metrics - Annual Recurring Revenue”, “Non-GAAP Financial Measures - Key Metrics - TCV Billings”, “Results of Operations - Fiscal year ended February 28, 2023

compared to fiscal year ended February 28, 2022 - Revenue - Revenue by Segment”, “Results of Operations - Three months ended February 28, 2023 compared to the three months ended February 28, 2022 - 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.

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

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The Company’s common shares trade under the ticker symbol “BB” on the New York Stock Exchange and the Toronto Stock Exchange.

The Company was incorporated under the Business Corporations Act (Ontario) (“OBCA”) on March 7, 1984.

The Company continued to execute on its strategy in fiscal 2022 and announced the following achievements:

The Company was incorporated under the Business Corporations Act (Ontario) on March 7, 1984.

The Company continued to execute on its strategy in fiscal 2023 and announced the following significant achievements:

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 zero trust network access (ZTNA) product;

• Released an early access version of BlackBerry IVY™;

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

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

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

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

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

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

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

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

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

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

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

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

• Released the 2022 BlackBerry Annual Threat Report;

• Demonstrated BlackBerry IVY™ running on three commercially-available automotive platforms at CES 2023 and announced general availability for May 2023;

• Launched QNX® Accelerate, making the QNX® Neutrino® real time operating system (RTOS) and QNX® OS for Safety available in the cloud and through AWS Marketplace;

• 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;

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

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

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

• Released CylanceAVERT™, a data loss detection module that provides data access and leakage visibility via CylanceGATEWAY™;

• Released Cyber Threat Intelligence (CTI), a professional threat intelligence service to help customers prevent, detect, and effectively respond to cyberattacks;

• Recognized as a 2023 Gartner® Peer Insights™ Customers’ Choice for Unified Endpoint Management (UEM) tools, including as the only vendor to be placed in the upper right quadrant;

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

Worldwide UEM Software 2022 Vendor Assessment;

• Announced that NATO Communications and Information Agency (NCI Agency) awarded security accreditation to SecuSUITE for Government for global use in official NATO secure communications;

• Awarded updated NIAP/Common Criteria and CSfC certification for BlackBerry SecuSUITE® for Government.

Customers and Partners:

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

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

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

• Announced an agreement to sell substantially all of BlackBerry’s non-core patent assets to Malikie Innovations Limited, a subsidiary of Key Patent Innovations Limited, for a combination of cash at closing and potential future royalties in the aggregate amount of up to $900 million;

• Announced first BlackBerry IVY design win as Dongfeng Motor selected PATEO digital cockpit for the next-generation all-electric VOYAH Model;

• Selected by Volkswagen Group’s software company, Cariad, for its VW.OS, part of a unified software platform to be deployed across all Volkswagen Group brands;

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

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

• Selected by Chongqing Yazaki to power a digital LCD cluster for the Chinese market, including deployment within next-generation vehicles from Geely Auto and Dongfeng Liuzhou Auto;

• 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;

• Selected by Dayin Technology to develop acoustic solutions for Great Wall Motors’ premium, next-generation vehicles;

• Announced that BlackBerry QNX software is embedded in over 215 million vehicles;

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

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

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

• Announced a collaboration with Ridecell Inc.

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

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

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

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

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

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

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

• Announced that Mahindra & Mahindra Ltd.

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

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

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

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

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

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

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

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

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

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

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

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

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

• Announced the integration of BlackBerry UEM with Microsoft 365;

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

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

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

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

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

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

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

• Launched the Software-Defined Vehicle Innovator Awards with MotorTrend;

• Collaborated with LeapXpert to enable the BlackBerry® Dynamics™ platform to provide secure communications through leading messaging applications such as iMessage, WhatsApp and SMS;

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

• Expanded BlackBerry SecuSUITE secure communications partner network in Asia Pacific, with the addition of NSI Global, Praesidum Group and Teletrol-One.

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 effective May 3, 2021;

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

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

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

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

Segment Reporting

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

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

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

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

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

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

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

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

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

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

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

Although the Company experienced higher Software & Services revenue in fiscal 2022 compared to fiscal 2021, when the COVID-19 pandemic first materially negatively impacted the Company’s operations, and observed a partial recovery in both automotive design activities and production volumes during fiscal 2022 compared to fiscal 2021, the COVID-19 pandemic and related global chip shortage have had and, in fiscal 2023, may continue to have a material adverse impact on the Company’s QNX automotive software business in particular and on the Company’s business, results of operations and financial condition on a consolidated basis.

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

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

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

The Company continues to evaluate the current and potential impact of the pandemic on its business, results of operations and consolidated financial statements, including potential asset impairment.

The Company also continues to actively monitor developments and business conditions that may cause it to take further actions that alter business operations as may be required

by applicable authorities or that the Company determines are in the best interests of its employees, customers, suppliers and stockholders.

Russia Ukraine Conflict

In February 2022, Russian military forces invaded Ukraine.

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

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

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

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

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

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

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

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

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

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

• Appointed Phil Kurtz as Chief Legal Officer and Corporate Secretary;

• 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 contemplated 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.

The Stipulation of Settlement was executed effective June 7, 2022.

On June 14, 2022, the Court granted plaintiffs’ motion for preliminary approval of the settlement and scheduled the final approval hearing for September 29, 2022.

On September 29, 2022, the Court granted final approval of the settlement and entered final judgment.

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 was 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.

On June 29, 2022, the Company paid $1 million of the settlement amount.

The remaining $164 million was paid on September 6, 2022.

Goodwill Impairment

During the fourth quarter of fiscal 2023, as part of its process for setting the annual operating plan for fiscal 2024, the Company updated its estimates of long-term future cash flows to reflect lower revenue and EBITDA growth rate expectations and a reduction in revenue multiples used in the valuation of the BlackBerry Spark reporting unit.

These changes in estimates, combined with the global economic weakness and inflation resulting directly or indirectly from the COVID-19 pandemic and the Russian invasion of Ukraine, higher interest rates implemented in response to inflation, and a broad-based stock market decline impacting the Company’s market capitalization, resulted in the recognition of a goodwill impairment charge of $245 million (the “Fiscal 2023 Goodwill Impairment Charge”) in the BlackBerry Spark reporting unit, which is included within the Company’s Cybersecurity segment.

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

The estimated fair values of the Company’s other reporting units substantially exceeded their carrying values as at the annual goodwill impairment test date.

Long-Lived Asset Impairment (“LLA Impairment”)

During the fourth quarter of fiscal 2023, market conditions and changes in the Company’s estimates as described above under “Goodwill Impairment” provided indicators of potential impairment in the Company’s UES asset group, which is primarily composed of intangible assets recognized in the acquisition of Cylance and is included within the Company’s Cybersecurity segment.

The Company performed the two-step impairment testing process as described in Note 1, utilizing the income approach using a discounted future cash flow model and market-based approaches, and concluded that the carrying values of the Company’s UES asset group exceeded their fair values, necessitating an impairment charge of $231 million.

None of the Company’s other asset groups demonstrated indicators of potential impairment.

During fiscal 2023, the Company also recorded a $4 million impairment charge relating to right-of-use assets for a total LLA impairment charge of $235 million (the “Fiscal 2023 LLA Impairment Charge”).

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

COVID-19 and Macroeconomic Factors

The COVID-19 pandemic and ensuing global semiconductor shortage have had and continue to have a material adverse impact on production-based royalties for the Company’s QNX automotive software business.

The invasion of Ukraine by Russia and resulting global sanctions against Russia have exacerbated the disruption of automotive supply chains and its impact on the Company’s business.

Economic weakness or inflation resulting directly or indirectly from the COVID-19 pandemic and the Russian invasion of Ukraine, as well as higher interest rates implemented in response to inflation and resulting fears of recession, may negatively impact consumer demand for automobiles and is contributing to reduced spending and longer sales cycles for cybersecurity solutions, which in turn may continue to adversely affect the Company’s business.

The Company does not believe that inflation had a direct effect on its operations during fiscal 2023;

however, higher interest rates implemented in response to inflation negatively impacted the Company’s estimates of the fair values of its reporting units which, among other factors, resulted in the Fiscal 2023 Goodwill Impairment Charge.

Refer to Part I, Item 1A “Risk Factors” in this Annual Report on form 10-K for a discussion of these factors and other risks.

Fiscal 2023 Summary Results of Operations

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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.

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

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

For the Three Months Ended

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Cost of sales 36 10 4 50 1 51

47 8 5 60 1 61

Gross margin (1)

$ 52 $ 43 $ 6 $ 101 $ (1) $ 100

Operating expenses 599 599

Investment loss, net 1 1

Income before income taxes $ 145

Investment income, net (6) (6)

Loss before income taxes $ (493)

For the Year Ended February 28, 2023

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Cost of sales 185 37 12 234 3 237

194 30 23 247 4 251

Gross margin (1)

$ 233 $ 169 $ 20 $ 422 $ (3) $ 419

Operating expenses 1,144 1,144

Investment income, net (5) (5)

Income before income taxes $ 19

Loss before income taxes $ (720)

______________________________

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Cost of sales 47 8 5 60 1 61

46 5 6 57 1 58

Gross margin (1)

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

Operating expenses (22) (22)

Loss before income taxes $ (313)

Investment loss, net 1 1

Income before income taxes $ 145

For the Year Ended February 28, 2022

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Cost of sales 194 30 23 247 4 251

192 23 30 245 5 250

Gross margin (1)

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

Operating expenses 469 469

Investment loss, net 6 6

Loss before income taxes $ (1,113)

Investment income, net (21) (21)

Income before income taxes $ 19

______________________________

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The Company had approximately $487 million in cash, cash equivalents and investments as of February 28, 2023 (Fiscal 2022 - $770 million).

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

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

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

In fiscal 2023, the Company recognized revenue of $656 million and incurred a net loss of $734 million, or $1.27 basic loss per share and $1.35 diluted loss per share on a U.S.

GAAP basis (fiscal 2022 - revenue of $718 million and net income of $12 million, or $0.02 basic earnings per share and $0.31 diluted loss per share).

The net loss was primarily due to the Fiscal 2023 Goodwill Impairment Charge and Fiscal 2023 LLA Impairment Charge, as discussed above in “Business Overview - Goodwill Impairment” and “Business Overview - Long-Lived Asset Impairment”.

The Company recognized adjusted net loss of $103 million, or adjusted loss of $0.18 per share, on a non-GAAP basis in fiscal 2023 (fiscal 2022 - adjusted net loss of $55 million and adjusted loss of $0.10 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”);

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

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As of February 28, 2023, the fair value of the 1.75% Debentures was approximately $367 million versus the principal value of $365 million.

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

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

For the three months ended February 28, 2023, the Company recorded a non-cash loss relating to changes in fair value from instrument specific credit risk of $1 million in other comprehensive income (loss) (“OCI”) and non-cash income relating to changes in fair value from non-credit components of $26 million (pre-tax and after tax) (the “Q4 Fiscal 2023 Debentures Fair Value Adjustment”) in the Company’s consolidated statements of operations.

In fiscal 2023, the Company recorded non-cash income relating to changes in fair value from instrument-specific credit risk of $2 million in OCI and non-cash income relating to changes in fair value from non-credit components of $138 million (pre-tax and after tax) (the “Fiscal

2023 Debentures Fair Value Adjustment”) in the Company’s consolidated statements of operations.

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

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

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

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

• Debentures fair value adjustment .

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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 costs 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.

• Business acquisition and integration costs.

The Company incurs costs associated with business acquisitions, including legal costs, audit and accounting fees, and other acquisition and integration expenses.

These expenditures do not relate to the ongoing operation of the business and they tend to vary significantly based on the circumstances of each transaction.

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.

• Acquisition valuation allowance.

The Company records an income tax valuation allowance associated with business acquisitions.

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.

• 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.

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 when comparing the Company’s operating performance against that of prior periods.

• Goodwill impairment charge.

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

The Company believes that goodwill impairment charges do not reflect expected future operating expenses, are non-cash, 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 allows investors to evaluate the financial performance of the Company’s business using the same evaluation measures that management uses and is therefore a useful indication of the Company’s performance or expected performance of future operations and facilitates period-to-period comparison of operating

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

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Acquired intangibles amortization 15 22 22 32

Business acquisition and integration costs — — — 1

Goodwill impairment charge 245 — — —

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GAAP net income (loss) and U.S.

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

GAAP basic earnings (loss) per share for the three months ended February 28, 2023, February 28, 2022 and February 28, 2021 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) February 28, 2023 February 28, 2022 February 28, 2021

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

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

Net income (loss) $ (495) $(0.85) $ 144 $0.25 $ (315) $(0.56)

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Acquired intangibles amortization 15 22 32

Business acquisition and integration costs — — 1

Goodwill impairment charge 245 — —

LLA impairment charge 231 — 22

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

Adjusted net income (loss) $ (13) $(0.02) $ 6 $0.01 $ 14 $0.02

Reconciliation of U.S.

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Stock compensation expense 6 2 13

Business acquisition and integration costs — — 1

Adjusted selling, marketing and administration $ 70 $ 62 $ 79

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Gross margin $ 419 $ 467 $ 643

Restructuring charges — — 5

Stock compensation expense 3 4 5

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Gross margin % 63.9 % 65.0 % 72.0 %

Restructuring charges — % — % 0.5 %

Stock compensation expense 0.4 % 0.6 % 0.6 %

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Acquired intangibles amortization 82 115 129

Business acquisition and integration costs — — 4

Goodwill impairment charge 245 — 594

LLA impairment charge 235 — 43

Litigation settlement 165 — —

Adjusted operating expense $ 516 $ 540 $ 563

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For the Fiscal Years Ended (in millions, except per share amounts) February 28, 2023 February 28, 2022 February 28, 2021

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

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

Net income (loss) $ (734) $ (1.27) $ 12 $ 0.02 $ (1,104) $ (1.97)

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Acquired intangibles amortization 82 115 129

Business acquisition and integration costs — — 4

Goodwill impairment charge 245 — 594

LLA impairment charge 235 — 43

Acquisition valuation allowance — — (1)

Litigation settlement 165 — —

Adjusted net income (loss) $ (103) $(0.18) $ (55) $(0.10) $ 88 $0.16

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Stock compensation expense 19 18 36

Business acquisition and integration costs — — 4

Adjusted selling, marketing and administration $ 310 $ 279 $ 306

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Adjusted amortization $ 14 $ 50 $ 53

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

Adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage and adjusted EBITDA margin percentage for the three months ended February 28, 2023, February 28, 2022 and February 28, 2021 are reflected in the table below.

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

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Acquired intangibles amortization 15 22 32

Business acquisition and integration costs — — 1

Goodwill impairment charge 245 — —

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Total non-GAAP adjustments to operating income (loss) 482 (138) 329

Adjusted operating income 8 16 45

Adjusted operating income (loss) (17) 8 16

Amortization 20 34 49

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Revenue $ 151 $ 185 $ 210

Adjusted operating income margin % (1)

Adjusted operating income (loss) margin % (1)

Adjusted EBITDA margin % (2)

______________________________

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

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

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

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Acquired intangibles amortization 82 115 129

Business acquisition and integration costs — — 4

Goodwill impairment charge 245 — 594

LLA impairment charge 235 — 43

Litigation settlement 165 — —

Total non-GAAP adjustments to operating loss 631 (67) 1,192

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

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

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

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

GAAP net cash provided by (used in) operating activities for the three months ended February 28, 2023, February 28, 2022 and February 28, 2021 to free cash flow (usage) is reflected in the table below:

For the Three Months Ended (in millions) February 28, 2023 February 28, 2022 February 28, 2021

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

Net cash provided by (used in) operating activities $ (7) $ 10 $ 51

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

Free cash flow $ 8 $ 48 $ 32

Free cash flow (usage) $ (9) $ 8 $ 48

Reconciliation of U.S.

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Free cash flow (usage) $ (270) $ (36) $ 74

For the year ended February 28, 2023, free cash usage includes $165 million paid in relation to the Pearlstein settlement discussed above in “Business Overview - Pearlstein Settlement”.

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 and recurring revenue percentage do not have any standardized meaning and are unlikely to be comparable to similarly titled measures reported by other companies.

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

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

Readers are cautioned that annual recurring revenue (“ARR”), dollar-based net retention rate (“DBNRR”), Cybersecurity total contract value (“TCV”) billings, recurring revenue percentage and QNX royalty backlog 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 February 28, 2023 and February 28, 2022 are set forth below.

For the Three Months Ended (in millions) February 28, 2023 February 28, 2022 Change

Annual Recurring Revenue

Cybersecurity $ 347 $ 369 $ (22)

IoT $ 93 $ 84 $ 9

Dollar-Based Net Retention Rate

Cybersecurity 91 % 95 % (4 %)

Cybersecurity Annual Recurring Revenue $ 298 $ 347 $ (49)

Cybersecurity Dollar-Based Net Retention Rate 81 % 91 % (10 %)

Cybersecurity Total Contract Value Billings $ 107 $ 125 $ (18)

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

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The Company defines ARR as the annualized value of all subscription, term, maintenance, services, and royalty contracts that generate recurring revenue as of the end of the reporting period.

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

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

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

The Company uses ARR as an indicator of business momentum for the Cybersecurity business.

Cybersecurity ARR was approximately $298 million in the fourth quarter of fiscal 2023 and decreased compared to $313 million in the third quarter of fiscal 2023 and decreased compared to $347 million in the fourth quarter of fiscal 2022 primarily due to customer churn in the BlackBerry Spark business.

The Company expects Cybersecurity ARR to return to sequential growth in the second half of fiscal 2024.

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 91% in the fourth quarter of fiscal 2022 and decreased compared to 95% in the third quarter of fiscal 2022 and the fourth quarter of fiscal 2021.

The Company defines billings as amounts invoiced less credits issued.

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

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

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

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

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

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

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

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

Cybersecurity DBNRR was 81% in the fourth quarter of fiscal 2023 and decreased compared to 84% in the third quarter of fiscal 2023 and compared to 91% in the fourth quarter of fiscal 2022 primarily due to customer churn in the BlackBerry Spark business.

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 $107 million in the fourth quarter of fiscal 2023 and increased compared to $103 million in the third quarter of fiscal 2023 and decreased compared to $125 million in the fourth quarter of fiscal 2022 primarily due to elongated sales cycles in government causing some large deals to slip into later quarters.

The Company previously stated that it expected quarterly year-over-year Cybersecurity TCV billings growth throughout fiscal 2023 when compared to the same quarter in the prior year, with growth of between 8% to 12% in fiscal 2023 as a whole compared to fiscal 2022.

In the fourth quarter of fiscal 2023, Cybersecurity TCV billings decreased compared to the fourth quarter of fiscal 2022 and Cybersecurity TCV billings decreased in fiscal 2023 as a whole compared to fiscal 2022, in each case primarily due to the reasons discussed in the paragraph immediately above.

The Company expects Cybersecurity TCV billings for fiscal 2024 to be in the range of $430 million to $480 million.

The Company also expects Cybersecurity TCV billings to continue to exceed Cybersecurity revenue in fiscal 2024.

Recurring Software Product Revenue

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

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

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

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 Software and Services product revenue, excluding professional services, was approximately 90% recurring in the fourth quarter of fiscal 2023 and increased compared to approximately 80% recurring in the third quarter of fiscal 2023 and fourth quarter of fiscal 2022.

QNX Royalty Backlog

The Company defines the royalty 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 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 backlog was approximately $640 million at the end of the fourth quarter of fiscal 2023 and increased compared to approximately $560 million at the end of the first quarter of fiscal 2023.

Results of Operations - Fiscal year ended February 28, 2023 compared to fiscal year ended February 28, 2022

Revenue by Segment

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

GAAP basis are set forth below.

Comparative breakdowns of revenue by segment are set forth below.

For the Fiscal Years Ended

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February 28, 2023 February 28, 2022 Change February 28, 2021 Change

Revenue by Product and Service

Revenue by Segment

Cybersecurity $ 418 $ 477 $ (59) $ 491 $ (14)

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$ 656 $ 718 $ (62) $ 893 $ (175)

% Revenue by Product and Service

% Revenue by Segment

Cybersecurity 63.7 % 66.4 % 55.0 %

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Cybersecurity

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

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

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

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

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

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

The increase in IoT revenue of $48 million was primarily due to an increase of $20 million in BlackBerry QNX royalty revenue due to the partial recovery of the automotive market from the slowdown related to the COVID-19 pandemic in fiscal 2021, an increase of $16 million in development seat revenue, an increase of $8 million in professional service revenue and an increase of $3 million related to sales in BlackBerry Radar.

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

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

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

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

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

The decrease in Cybersecurity revenue of $59 million was primarily due to a decrease of $47 million relating to product revenue in BlackBerry Spark, a decrease of $12 million relating to professional services and a decrease of $3 million relating to non-automotive OEM business, partially offset by an increase of $6 million relating to product revenue in Secusmart.

The Company previously stated that it expected Cybersecurity revenue in fiscal 2023 to be broadly consistent with fiscal 2022.

Cybersecurity revenue in fiscal 2023 decreased compared to fiscal 2022 due to both elongated sales cycles in government causing some large deals to slip into later quarters and customer churn in the BlackBerry Spark business.

The Company expects Cybersecurity revenue for the first quarter of fiscal 2024 to increase sequentially and be in the range of $100 million to $110 million.

The Company expects Cybersecurity revenue for fiscal 2024 as a whole to be in the range of $425 million to $450 million.

The Company previously disclosed long-term Cybersecurity revenue targets in the first quarter of fiscal 2023.

The Company expects to disclose updated long-term Cybersecurity revenue targets in the first quarter of fiscal 2024.

The increase in IoT revenue of $28 million was primarily due to an increase of $18 million in QNX development seat revenue and an increase of $15 million in BlackBerry QNX royalty revenue, partially offset by a decrease of $5 million relating to professional services.

The Company previously stated that it expected IoT revenue to be between $205 million and $210 million for fiscal 2023.

IoT revenue was $206 million in fiscal 2023.

The Company expects IoT revenue to be in the range of $50 million to $53 million in the first quarter of fiscal 2024 and expects IoT revenue to be in the range of $240 million and $250 million for fiscal 2024 as a whole.

Licensing and Other

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

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

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

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

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

GAAP Revenue by Geography

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

GAAP basis are set forth in the following table:

The decrease in Licensing and Other revenue of $31 million was primarily due to a decrease of $23 million in revenue from the Company’s intellectual property licensing arrangements due to a proposed patent portfolio sale transaction with Catapult IP Innovations, Inc.

(the “Catapult Sale Transaction”) that was pending in the fourth quarter of fiscal 2023 and associated restrictions on monetization activity and a decrease of $7 million in SAF revenue.

The Company expects revenue from intellectual property licensing to be approximately $5 million per quarter in fiscal 2024, excluding the Malikie Transaction.

Revenue by Geography

Comparative breakdowns of the geographic regions are set forth in the following table:

For the Fiscal Years Ended

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North America Revenue

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

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

The decrease in North America revenue of $63 million was primarily due to a decrease of $28 million in product revenue in BlackBerry Spark, a decrease of $23 million in Licensing and Other revenue due to the reasons discussed above in “Revenue by Segment” and a decrease of $17 million relating to professional services, partially offset by an increase of $7 million in BlackBerry QNX royalty revenue.

Europe, Middle East and Africa Revenue

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

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

The decrease in Europe, Middle East and Africa revenue of $12 million was primarily due to a decrease of $19 million in product revenue in BlackBerry Spark and a decrease of $3 million in SAF revenue, partially offset by an increase of $6 million relating to product revenue in Secusmart and an increase of $5 million in BlackBerry QNX development seat revenue.

Other Regions Revenue

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

The increase in revenue is primarily due to an increase of $5 million in development seat revenue and an increase of $4 million in BlackBerry QNX royalty revenue due to the reasons discussed above in “Revenue by Segment”, partially offset by a decrease of $3 million in SAF revenue.

The increase in Other regions revenue of $13 million was primarily due to an increase of $8 million in BlackBerry QNX development seat revenue and an increase of $6 million in BlackBerry QNX royalty revenue, partially offset by a decrease of $2 million in SAF revenue.

Consolidated Gross Margin

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

The decrease was primarily due to a decrease in revenue 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 decreased by $48 million to approximately $419 million in fiscal 2023 (fiscal 2022 - $467 million).

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

Consolidated Gross Margin Percentage

Consolidated gross margin percentage decreased by 7.0%, to approximately 65.0% of consolidated revenue in fiscal 2022 from 72.0% of consolidated revenue in fiscal 2021.

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

Consolidated gross margin percentage decreased by 1.1%, to approximately 63.9% of consolidated revenue in fiscal 2023 (fiscal 2022 - 65.0%).

The decrease was primarily due to lower gross margin percentage in Spark and Licensing and Other due to the reasons discussed above in “Revenue by Segment” as the cost of sales for these units is relatively fixed, partially offset by a change in mix, specifically higher contribution from BlackBerry QNX and Secusmart due to the reasons discussed above in “Revenue by Segment”.

Gross Margin by Segment

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Cybersecurity

Cybersecurity gross margin decreased by $16 million to approximately $283 million in fiscal 2022 from $299 million in fiscal 2021.

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

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

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

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

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

IoT gross margin percentage increased by 1% to approximately 83% of IoT revenue in fiscal 2022 from 82% of IoT revenue in fiscal 2021.

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

The decrease in Cybersecurity gross margin of $50 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, and to an increase in infrastructure costs allocated due to the Company no longer supporting or maintaining legacy device operating systems that previously were included under Licensing and Other for SAF.

The decrease in Cybersecurity gross margin percentage of 3% was primarily due to an increase in infrastructure costs allocated, partially offset by a higher gross margin percentage on professional services revenue in Secusmart.

The increase in IoT gross margin of $21 million was primarily due to the reasons discussed above in “Revenue by Segment”, partially offset by an increase in salaries expense.

The decrease in IoT gross margin percentage of 1% was primarily due to an increase in salaries expense within cost of goods sold.

Licensing and Other

Licensing and Other gross margin decreased by $202 million to approximately $40 million in fiscal 2022 from $242 million in fiscal 2021.

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

Licensing and Other gross margin percentage decreased by 26% to approximately 63% of Licensing and Other revenue in fiscal 2022 from 89% of Licensing and Other revenue in fiscal 2021.

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

The decrease in Licensing and Other gross margin of $20 million was primarily due to the reasons discussed above in “Revenue by Segment”, partially offset by a decrease in infrastructure costs due to the Company no longer supporting or maintaining legacy device operating systems.

Licensing and Other gross margin percentage was consistent with fiscal 2023.

Operating Expenses

The table below presents a comparison of research and development, selling, marketing and administration, and amortization expense for fiscal 2023 compared to fiscal 2022 and fiscal 2022 compared to fiscal 2021.

The Company believes it is meaningful to provide a sequential comparison between fiscal 2023 and fiscal 2022.

For the Fiscal Years Ended

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Impairment of long-lived assets 235 — 235 43 (43)

Gain on sale of property, plant and equipment, net (6) — (6) — —

Debentures fair value adjustment (138) (212) 74 372 (584)

Litigation settlement 165 — 165 — —

Total $ 1,144 $ 469 $ 675 $ 1,750 $ (1,281)

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Impairment of long-lived assets 35.8 % — % 4.8 %

Gain on sale of property, plant and equipment, net (0.9 %) — % — %

Debentures fair value adjustment (21.0 %) (29.5 %) 41.7 %

Litigation settlement 25.2 % — % — %

Total 174.4 % 65.3 % 196.0 %

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GAAP Operating Expenses

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

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

Operating expenses increased by $675 million, or 143.9% in fiscal 2023 compared to fiscal 2022.

The increase was primarily due to the Fiscal 2023 Goodwill Impairment Charge of $245 million, the Fiscal 2023 LLA Impairment Charge of $235 million, a $165 million litigation settlement, the difference between the Fiscal 2023 Debentures Fair Value Adjustment and the fair value adjustment related to the Debentures incurred in fiscal 2022 of $74 million, a decrease in benefits of $43 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 $11 million in restructuring costs, partially offset by a decrease of $69 million in amortization expense, a decrease of $21 million in salaries and benefits expenses and a decrease of $7 million in sales incentive plan costs.

Adjusted Operating Expenses

Adjusted operating expenses decreased by $24 million, or 4.4%, to $516 million in fiscal 2023, compared to $540 million in fiscal 2022.

The decrease was primarily attributable to a decrease of $13 million in legal expenses, a decrease of $11 million in the Company’s deferred share unit liability due to a decrease in the Company’s stock price and a decrease of $10 million in salaries and benefits expense, partially offset by a decrease in benefits of $10 million in government subsidies such as CEWS and HHBRP funding and an increase of $7 million in variable incentive plan costs.

The decrease was primarily attributable to a decrease of $36 million in amortization expense, a decrease of $21 million in salaries and benefits expenses, a decrease of $7 million in sales incentive plan costs and a $6 million gain on sale of property, partially offset by a decrease in benefits of $43 million in COVID-19 subsidies and an increase of $5 million in bad debt expense.

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 $4 million, or 1.9%, to $219 million, or 30.5% of revenue, in fiscal 2022, compared to $215 million, or 24.1% of revenue, in fiscal 2021.

The increase was primarily attributable to an increase of $4 million in variable incentive plan costs and a decrease in benefits of $3 million in claims filed with the Ministry of Innovation, Science and Economic Development Canada relating to its Strategic Innovation Fund (“SIF”) program’s investment in BlackBerry QNX, partially offset by a decrease of $2 million in stock compensation expense.

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

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

Research and development expenses decreased by $12 million, or 5.5% in fiscal 2023 compared to fiscal 2022.

The decrease was primarily attributable to a decrease of $8 million in salaries and benefits expenses and a decrease of $5 million in consulting costs, partially offset by 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 program’s investment in BlackBerry QNX (“SIF”).

Adjusted research and development expenses decreased by $13 million, or 6.2% to $198 million in fiscal 2023 (fiscal 2022 - $211 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 $47 million, or 13.7%, to $297 million, or 41.4% of revenue, in fiscal 2022 compared to $344 million, or 38.5% of revenue, in fiscal 2021.

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

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

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

Selling, marketing and administration expenses increased by $43 million, or 14.5% in fiscal 2023 compared to fiscal 2022.

The increase was primarily due to a decrease in benefits of $43 million in COVID-19 subsidies, an increase of $11 million in restructuring costs, an increase of $5 million in bad debt expense and an increase of $3 million in travel expenses, partially offset by a decrease of $13 million in salaries and benefits expenses and a decrease of $8 million in sales incentive plan costs.

Adjusted selling, marketing and administration expenses increased by $31 million, or 11.1%, to $310 million in fiscal 2023 compared to $279 million in fiscal 2022.

The increase was primarily due to the same reasons above, excluding the increase in restructuring costs.

Amortization Expense

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Amortization included in Operating Expense

Amortization expense relating to certain property, plant and equipment and intangible assets decreased by $17 million to $165 million for fiscal 2022, compared to $182 million for fiscal 2021.

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

The decrease in amortization expense included in operating expense of $69 million was due to a decrease in intellectual property held and used related to the previously pending Catapult Sale Transaction and due to the lower cost base of assets.

Adjusted amortization expense decreased by $36 million to $14 million in fiscal 2023 compared to $50 million in fiscal 2022 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 $5 million to $11 million for fiscal 2022, compared to $16 million for 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 $27 million to investment income, net of $21 million in fiscal 2022, from investment loss, net of $6 million in fiscal 2021.

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

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

The decrease in amortization expense relating to certain property, plant and equipment and certain intangible assets employed in the Company’s service operations of $2 million was due to the lower cost base of assets.

Investment Income, Net

Investment income, net, which includes the interest expense from the Debentures, decreased by $16 million to investment income, net of $5 million in fiscal 2023 compared to investment income, net of $21 million in fiscal 2022.

The decrease in investment income, net was primarily due to gains recognized from a return of capital from a non-marketable equity investment in fiscal 2022 and lower average cash and investment balances, partially offset by a higher yield on cash and investments in fiscal 2023.

For fiscal 2023, the Company’s net effective income tax expense rate was approximately 2% (fiscal 2022 - net effective income tax expense of approximately 37%).

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.

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Net Income (Loss)

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

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

The decrease was primarily due to a decrease in operating expenses due to the goodwill impairment in fiscal 2021 that did not recur and a decrease in Debentures fair value adjustment, as described above in “Operating Expenses”, partially offset by a decrease in revenue as described above in “Revenue by Segment” and a decrease in gross margin percentage, as describe above in “Consolidated Gross Margin Percentage.

Adjusted net loss for fiscal 2022 was $55 million compared to adjusted net income of $88 million in fiscal 2021, reflecting a decrease in adjusted net income of $143 million, primarily due to a decrease in revenue as described above in “Revenue by Segment” and a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage”, partially offset by a decrease in operating expenditures as described above in “Operating Expenses”.

The Company’s net loss for fiscal 2023 was $734 million, or $1.27 basic loss per share and $1.35 diluted loss per share on a U.S.

GAAP basis (fiscal 2022 - net income of $12 million, or $0.02 basic earnings per share and $0.31 diluted loss per share).

The increase in net loss of $746 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 for fiscal 2023 was $103 million (fiscal 2022 - adjusted net loss of $55 million).

The increase in adjusted net loss of $48 million was primarily due to a decrease in revenue as described above in “Revenue by Segment” and a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage”, partially offset by a decrease in operating expenses as described above in “Operating Expenses”.

The weighted average number of shares outstanding was 579 million common shares for basic loss per share and 639 million common shares for diluted loss per share for the fiscal year ended February 28, 2023.

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

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

Common Shares Outstanding

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Operating expenses 599 (22) 621 465 (487)

Investment loss, net (1) — (1) (1) 1

Investment income (loss), net 6 (1) 7 — (1)

Income (loss) before income taxes (493) 145 (638) (313) 458

Provision for (recovery of) income taxes 1 2 (1) (1) 3

Provision for income taxes 2 1 1 2 (1)

Net income (loss) $ (495) $ 144 $ (639) $ (315) $ 459

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February 28, 2023 February 28, 2022 Change February 28, 2021 Change

Revenue by Product and Service

Revenue by Segment

Cybersecurity $ 88 $ 122 $ (34) $ 122 $ —

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$ 151 $ 185 $ (34) $ 210 $ (25)

% Revenue by Product and Service

% Revenue by Segment

Cybersecurity 58.3 % 65.9 % 58.1 %

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Cybersecurity

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

An increase of $15 million related to the sale of Secusmart solutions was partially offset by a decrease of $9 million relating to product revenue in BlackBerry Spark and a decrease of $3 million relating to professional services.

The Company previously stated that it expected Cybersecurity revenue to be between $125 million and $135 million in the fourth quarter of fiscal 2022.

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

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

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

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

The increase in IoT revenue of $14 million was primarily due to an increase of $5 million relating to professional services, an increase of $4 million in BlackBerry QNX royalty revenue due to the partial recovery of the automotive market from the slowdown related to the COVID-19 pandemic in the fourth quarter of fiscal 2021 and an increase of $3 million in development seat revenue.

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

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

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

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

The decrease in Cybersecurity of $34 million was primarily due to a decrease of $19 million relating to product revenue in Secusmart, a decrease of $13 million relating to product revenue in BlackBerry Spark and a decrease of $4 million relating to professional services.

The increase in IoT revenue of $1 million was primarily due to an increase of $6 million in BlackBerry QNX royalty revenue and an increase of $2 million in Blackberry QNX development seat revenue, partially offset by a decrease of $6 million relating to professional services.

Licensing and Other

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

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

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

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

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

The decrease in Licensing and Other revenue of $1 million was primarily due to a decrease of $1 million in SAF revenue.

GAAP Revenue by Geography

Comparative breakdowns of the geographic regions are set forth in the following table:

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

GAAP basis are set forth in the following table:

For the Three Months Ended

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North America Revenue

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

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

The decrease in North America revenue of $16 million was primarily due to a decrease of $8 million relating to professional services and a decrease of $8 million in product revenue in BlackBerry Spark, partially offset by an increase of $2 million in BlackBerry QNX development seats revenue.

Europe, Middle East and Africa Revenue

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

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

The decrease in Europe, Middle East and Africa revenue of $20 million was primarily due to a decrease of $17 million relating to product revenue in Secusmart, a decrease of $4 million in product revenue in BlackBerry Spark and a decrease of $2 million relating to professional services, partially offset by an increase of $1 million in BlackBerry QNX royalty revenue.

Other Regions Revenue

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

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

The increase in Other regions revenue of $2 million was primarily due to an increase of $4 million in BlackBerry QNX development seat revenue, partially offset by a decrease of $1 million in product revenue in BlackBerry Spark.

Consolidated Gross Margin

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

Consolidated gross margin decreased by $24 million to approximately $100 million in the fourth quarter of fiscal 2023 (fourth quarter of fiscal 2022 - $124 million).

The decrease was primarily due to a decrease in revenue from BlackBerry Spark and Secusmart due to the reasons discussed above in “Revenue by Segment” as much of the Company’s cost of sales does not significantly fluctuate based on business volume.

Consolidated Gross Margin Percentage

Consolidated gross margin percentage decreased by 5.4%, to approximately 67.0% of consolidated revenue in the fourth quarter of fiscal 2022 from 72.4% of consolidated revenue in the fourth quarter of fiscal 2021.

Consolidated gross margin percentage decreased by 0.8%, to approximately 66.2% of consolidated revenue in the fourth quarter of fiscal 2023 (fourth quarter of fiscal 2022 - 67.0%).

The decrease was primarily due to a lower gross margin percentage in IoT and BlackBerry Spark due to the reasons discussed below in “Gross Margin by Segment”, partially offset by a change in mix, specifically higher contribution from BlackBerry QNX.

Gross Margin by Segment

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Cybersecurity

Cybersecurity gross margin decreased by $1 million to approximately $75 million in the fourth quarter of fiscal 2022 from $76 million in the fourth quarter of fiscal 2021.

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

Cybersecurity gross margin percentage decreased by 1% to approximately 61% of Cybersecurity revenue in the fourth quarter of fiscal 2022 from 62% of Cybersecurity revenue in the fourth quarter of fiscal 2021.

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

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

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

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

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

The decrease in Cybersecurity gross margin of $23 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, and an increase in infrastructure costs allocated due to the Company no longer supporting or maintaining legacy device operating systems.

The decrease in Cybersecurity gross margin percentage of 2% was primarily due to an increase in infrastructure costs allocated.

The decrease in IoT gross margin of $1 million was primarily due to the reasons discussed above in “Revenue by Segment”, partially offset by an increase in variable incentive plan costs.

The decrease in IoT gross margin percentage of 4% was primarily due to an increase in variable incentive plan costs.

Licensing and Other

Licensing and Other gross margin decreased by $38 million to approximately $6 million in the fourth quarter of fiscal 2022 from $44 million in the fourth quarter of fiscal 2021.

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

Licensing and Other gross margin percentage decreased by 33% to approximately 55% of Licensing and Other revenue in the fourth quarter of fiscal 2022 from 88% of Licensing and Other revenue in the fourth quarter of fiscal 2021.

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

Licensing and Other gross margin of $6 million was consistent with the fourth quarter of fiscal 2022.

The decrease in revenue discussed above in “Revenue by Segment” was offset by a decrease in infrastructure costs due to the Company no longer supporting or maintaining legacy device operating systems.

The increase in Licensing and Other gross margin percentage of 5% was primarily due to a decrease in infrastructure costs due to the Company no longer supporting or maintaining legacy device operating systems.

Operating Expenses

The table below presents a comparison of research and development, selling, marketing and administration, and amortization expenses for the quarter ended February 28, 2023, compared to the quarter ended November 30, 2022 and the quarter ended February 28, 2022.

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

For the Three Months Ended

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GAAP Operating Expenses

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

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

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

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

Operating expenses increased by $488 million, or 439.6% in the fourth quarter of fiscal 2023, compared to $111 million in the third quarter of fiscal 2023 primarily due to the Fiscal 2023 Goodwill Impairment Charge of $245 million, impairment of long-lived assets of $231 million, the difference between the Q4 Fiscal 2023 Debentures Fair Value Adjustment and the fair value adjustment related to the Debentures incurred in the third quarter of fiscal 2023 of $30 million, an increase of $7 million in restructuring costs and an increase of $3 million in marketing and advertising costs, partially offset by a decrease of $17 million in variable incentive plan costs, a decrease of $8 million in amortization expense and a decrease of $2 million in patent abandonment costs.

Operating expenses increased by $621 million, or 2,822.73% in the fourth quarter of fiscal 2023, compared to $(22) million in the fourth quarter of fiscal 2022.

The increase was primarily attributable to the Fiscal 2023 Goodwill Impairment Charge of $245 million, impairment of long-lived assets of $231 million, the difference between the Q4 Fiscal 2023 Debentures Fair Value Adjustment and the fair value adjustment related to the Debentures incurred in the fourth quarter of fiscal 2022 of $139 million, a decrease in benefits of $14 million in COVID-19 subsidies, an increase of $7 million in restructuring costs and an increase of $5 million in stock compensation expense, partially offset by a decrease of $14 million in amortization expense and a decrease of $4 million in variable incentive plan costs.

Adjusted Operating Expenses

Adjusted operating expenses decreased by $19 million, or 13.9%, to $118 million in the fourth quarter of fiscal 2023 compared to $137 million in the third quarter of fiscal 2023.

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

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

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

The decrease was primarily to a decrease of $17 million in variable incentive plan costs and a decrease of $1 million in foreign exchange losses, partially offset by an increase of $3 million in marketing and advertising costs.

Adjusted operating expenses increased by $1 million, or 0.9%, to $118 million in the fourth 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 $14 million in COVID-19 subsidies and an increase of $3 million in marketing and advertising costs, partially offset by a decrease of $7 million in amortization expense, a decrease of $4 million in variable incentive plan costs and a decrease of $3 million in salaries and benefits expenses.

Research and Development Expenses

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

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

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

Research and development expenses increased by $1 million, or 2.1%, to $48 million in the fourth quarter of fiscal 2023 compared to $47 million in the fourth quarter of fiscal 2022, primarily due to an increase of $1 million in variable incentive plan costs.

Adjusted research and development expenses were $45 million in the fourth quarter of fiscal 2023, consistent with $45 million in the fourth quarter of fiscal 2022.

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

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

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

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

Selling, marketing and administration expenses increased by $19 million, or 29.7%, to $83 million in the fourth quarter of fiscal 2023 compared to $64 million in the fourth quarter of fiscal 2022, primarily due to a decrease in benefits of $14 million in COVID-19 subsidies, an increase of $7 million in restructuring costs and an increase of $4 million stock compensation costs, partially offset by a decrease of $5 million in variable incentive plan costs.

Adjusted selling, marketing and administration expenses increased by $8 million, or 12.9%, to $70 million in the fourth quarter of fiscal 2023 compared to $62 million in the fourth quarter of fiscal 2022.

The increase was primarily due to a decrease in benefits of $14 million in COVID-19 subsidies, an increase of $3 million in marketing and advertising costs, partially offset by a decrease of $5 million in variable incentive plan costs and a decrease of $2 million in sales incentive plan costs.

Amortization Expense

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Amortization included in Operating Expense

Amortization expense relating to certain property, plant and equipment and certain intangible assets decreased by $13 million to $32 million for the fourth quarter of fiscal 2022 compared to $45 million for the fourth quarter of fiscal 2021.

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

The decrease in amortization expense included in operating expense of $14 million was due to a decrease in intellectual property held and used related to the previously pending Catapult Sale Transaction and due to the lower cost base of assets.

Adjusted amortization expense decreased by $7 million to $3 million in the fourth quarter of fiscal 2023 compared to $10 million in the fourth quarter of fiscal 2022 due to the reasons described above on a U.S.

Amortization included in Cost of Sales

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

Amortization expense relating to certain property, plant and equipment and intangible assets employed in the Company’s service operations of $2 million was consistent with the fourth quarter of fiscal 2023.

Investment Income (Loss), Net

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

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

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

Investment income, net, which includes the interest expense from the 1.75% Debentures, increased by $7 million to investment income, net of $6 million in the fourth quarter of fiscal 2023 compared to investment loss, net of $1 million in the fourth quarter of fiscal 2022.

The increase in investment income, net is primarily due to observable price changes on non-marketable equity investments without readily determinable fair value and a higher yield on cash and investments, partially offset by lower cash and investment balances.

For the fourth quarter of fiscal 2023, the Company’s net effective income tax expense rate was approximately 0% (fourth quarter of fiscal 2022 - net effective income tax expense rate of approximately 1%).

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.

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Net Income (Loss)

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

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

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

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

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

The Company’s net loss for the fourth quarter of fiscal 2023 was $495 million, or $0.85 basic and diluted loss per share on a U.S.

GAAP basis (fourth quarter of fiscal 2022 - net income of $144 million, or $0.25 basic earnings per share and $0.03 diluted loss per share).

The decrease in net income of $639 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 $13 million in the fourth quarter of fiscal 2023 (fourth quarter of fiscal 2022 - adjusted net income of $6 million).

The decrease in adjusted net income of $19 million was primarily due to a decrease in revenue as described above in “Revenue by Segment”, a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage” and an increase in operating expenses, as described above in “Operating Expenses”.

The weighted average number of shares outstanding was 581 million common shares for basic and diluted loss per share for the fourth quarter of fiscal 2023.

Financial Condition

Liquidity and Capital Resources

Cash, cash equivalents, and investments decreased by $34 million to $770 million as at February 28, 2022 from $804 million as at February 28, 2021, primarily as a result of changes in working capital, partially offset by investment gains from non-marketable securities.

Cash, cash equivalents, and investments decreased by $283 million to $487 million as at February 28, 2023 from $770 million as at February 28, 2022, primarily as a result of the U.S.

securities class actions settlement discussed in “Business Overview - Pearlstein Settlement” and changes in working capital, excluding the amounts payable in respect of the 1.75% Debentures.

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

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Current Assets

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

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

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

The decrease in current assets of $300 million at the end of fiscal 2023 from the end of fiscal 2022 was primarily due to decreases in short term investments of $203 million, a decrease in cash and cash equivalents of $83 million, a decrease in accounts receivable, net of allowance of $18 million, a decrease of $13 million in other receivables and a decrease income taxes receivable of $6 million, partially offset by an increase in other current assets of $23 million.

At February 28, 2023, accounts receivable, net of allowance was $120 million, a decrease of $18 million from February 28, 2022.

The decrease was primarily due to lower revenue recognized over the three months ended February 28, 2022 compared to the three months ended February 29, 2020 and a decrease in days sales outstanding to 67 days at the end of the fourth quarter of fiscal 2022 from 85 days at the end of the fourth quarter of fiscal 2021.

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

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

The decrease was primarily due to lower revenue recognized over the three months ended February 28, 2023 compared to the three months ended February 28, 2022, offset by an increase in days sales outstanding to 75 days at the end of the fourth quarter of fiscal 2023 from 67 days at the end of the fourth quarter of fiscal 2022.

At February 28, 2023, other receivables was $12 million, a decrease of $13 million from February 28, 2022.

The decrease was primarily due to a decrease of $8 million relating to COVID-19 subsidies and a decrease of $6 million in in intellectual property licensing receivable.

At February 28, 2023, income taxes receivable was $3 million, a decrease of $6 million from February 28, 2022.

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

The decrease was primarily due to tax refunds received.

At February 28, 2023, other current assets was $182 million, an increase of $23 million from February 28, 2022.

The increase is primarily due to maintenance payments on intellectual property relating to the previously pending Catapult Sale Transaction of $23 million.

Current Liabilities

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

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

The increase in current liabilities of $332 million at the end of fiscal 2023 from the end of fiscal 2022 was primarily due to an increase in the amounts payable in respect of the 1.75% Debentures of $367 million, an increase in income taxes payable of $9

million and an increase in accounts payable of $2 million, partially offset by a decrease in deferred revenue, current of $32 million and a decrease in accrued liabilities of $14 million.

Accrued liabilities was $143 million, reflecting a decrease of $14 million compared to February 28, 2022, which was primarily attributable to a decrease of $4 million in operating lease liability, current, a decrease of $3 million in audit fee accrual, a decrease of $3 million in the Company’s deferred share unit liability and a decrease of $2 million in the liability associated with the CEO contingent cash award.

Deferred revenue, current was $175 million, which reflects a decrease of $32 million compared to February 28, 2022 that was attributable to a $34 million decrease in deferred revenue, current related to BlackBerry Spark, partially offset by a $5 million increase in deferred revenue, current related to BlackBerry QNX.

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Operating Activities

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

The increase in net cash flows used in operating activities of $235 million primarily reflects the net changes in working capital and includes the payment of the $165 million U.S.

securities class actions settlement.

Investing Activities

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

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

During the fiscal year ended February 28, 2023, cash flows provided by investing activities were $176 million and included cash provided by transactions involving the acquisitions of restricted short-term, short-term and long-term investments, net of the proceeds on sale or maturity in the amount of $200 million and proceeds on sale of property, plant and equipment of $17 million, partially offset by intangible asset additions of $34 million, and acquisitions of property, plant and equipment of $7 million.

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

Financing Activities

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

The decrease in cash flows provided by financing activities was $4 million for fiscal 2023 due to a decrease in common shares issued upon the exercise of stock options.

Debenture Financing and Other Funding Sources

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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 has experienced recent operating losses and the 1.75% Debentures will mature on November 13, 2023 as described in Note 6, but the Company maintains positive working capital, has the ability and intent to access other potential financing arrangements on commercially reasonable terms, and has entered into the patent sale transaction.

Taking these factors into account and based on its current financial projections, the Company believes its financial resources, together with expected future operating cash generating and operating expense reduction activities, 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.

Contractual and Other Obligations

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

Total aggregate contractual obligations as at February 28, 2022 decreased by approximately $73 million as compared to the February 28, 2021 balance of approximately $676 million, which was attributable to decreases in operating lease obligations and purchase obligations and commitments.

Total aggregate contractual obligations as at February 28, 2023 decreased by approximately $47 million as compared to the February 28, 2022 balance of approximately $603 million, which was attributable to decreases in purchase obligations and commitments and in operating lease obligations.

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.

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Accounting Policies

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

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

See Note 1 to the Consolidated Financial Statements for a description of the Company’s significant accounting policies.

See Note 2 to the Consolidated Financial Statements for a description of accounting policies adopted by the Company in fiscal 2023.

Critical Accounting Estimates

The preparation of the consolidated financial statements requires management to make estimates and assumptions with respect to the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities.

Significant areas requiring the use of management estimates relate to revenue-related estimates including variable consideration, standalone selling price (“SSP”), estimated customer life, if control of licenses to intellectual property has transferred, the value of non-cash consideration, right of return and customer incentive commitments, fair value of reporting units in relation to actual or potential goodwill impairment, fair value of the Debentures, fair value of share-based liability award, fair value of long-lived assets in relation to actual or potential impairment, the Company’s long-lived asset groupings, useful lives of property, plant and equipment and intangible assets, provision for income taxes, realization of deferred income tax assets and the related components of the valuation allowance, allowance for credit losses, incremental borrowing rate in determining the present value of lease liabilities and the determination of reserves for various litigation claims.

Significant areas requiring the use of management estimates relate to revenue-related estimates including variable consideration, standalone selling price (“SSP”), estimated customer life, if control of licenses to intellectual property has transferred, right of return and customer incentive commitments, fair value of reporting units in relation to actual or potential goodwill impairment, fair value of the Debentures, fair value of share-based liability awards, fair value of long-lived assets in relation to actual or potential impairment, the Company’s long-lived asset groupings, estimated useful lives of property, plant and equipment and intangible assets, provision (or recovery) of income taxes, realization of deferred income tax assets and the related components of the valuation allowance, allowance for credit losses, incremental borrowing rates in determining the present value of lease liabilities and the determination of reserves for various litigation claims.

Actual results could differ from these estimates, which were based upon circumstances that existed as of the date of the consolidated financial statements, February 28, 2023.

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

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

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

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

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The Company’s share price could also be adversely affected by the Company’s recorded LLA impairment charges.

The Company used various valuation techniques to determine the fair values of its assets to measure and allocate impairment.

Techniques related to capital equipment and intangible assets included the direct capitalization method, market comparable transactions, the replacement cost method, discounted cash flow analysis, as well as the relief from royalty and excess earnings valuation methods.

Determining valuations using these valuation techniques requires significant judgment and assumptions by management.

Different judgments could yield different results.

The Company used the discounted cash flow analysis and market approach to determine the fair values of its assets to measure and allocate impairment.

Valuation of Goodwill Reporting Units

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

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

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

In the test, the carrying value of the reporting unit, including goodwill, was compared with its fair value.

In the annual impairment test, the carrying value of the reporting unit, including goodwill, was compared with its fair value.

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

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Different judgments could yield different results.

Events and circumstances resulted in an additional goodwill impairment test being conducted as at May 31, 2020, in addition to the Company’s annual impairment test.

Prior to the adoption of ASU 2017-04, the Company’s annual impairment test was carried out in two steps.

In the first step, the carrying value of the reporting unit, including goodwill, was compared with its fair value.

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

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

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

The carrying value of the Company’s assets was assigned to reporting units using reasonable methodologies based on the asset type.

When the carrying value of a reporting unit exceeded its fair value, goodwill of the reporting unit was considered to be impaired and the second step was necessary.

Different judgments could have yielded different results.

In fiscal 2020, the Company disaggregated one reporting unit and goodwill was assigned to the disaggregated reporting units based upon the relative fair value allocation approach.

In the second step, the implied fair value of the reporting unit’s goodwill was compared with its carrying value to measure the amount of the impairment loss, if any.

The second step involved significant judgment in the selection of assumptions necessary to arrive at an implied fair value of goodwill.

Different judgments could have yielded different results.

Valuation Allowance Against Deferred Tax Assets

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

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

determining the appropriate amount of the valuation allowance.

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

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

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Any estimates, including any constraints on variable consideration, are evaluated at each reporting period.

Judgment is required to determine the fair value of non-cash consideration at contract inception.

The Company uses an independent third-party valuator for the fair value of non-cash consideration.

Judgment is required to determine the SSP for each distinct performance obligation.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis