What changed in this filing

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Item 1. Financial Statements

2023-06-30 compared with 2022-12-21 · 194 added, 312 removed, 508 unchanged (50% of the section changed)

4 unchanged sentences

Consolidated Balance Sheets

November 30, 2022 February 28, 2022

May 31, 2023 February 28, 2023

Cash and cash equivalents (note 2) $ 358 $ 295

20 unchanged sentences

Other long-term liabilities 1 1

Long-term debentures (note 5) — 507

Commitments and contingencies (note 9)

5 unchanged sentences

authorized unlimited number of non-voting, redeemable, retractable Class A common shares and unlimited number of voting common shares

Issued - 580,346,426 voting common shares (February 28, 2022 - 576,227,898 )

Issued and outstanding - 583,237,331 voting common shares (February 28, 2023 - 582,157,203 )

Deficit ( 2,039 ) ( 2,028 )

8 unchanged sentences

Consolidated Statements of Shareholders’ Equity

Three Months Ended November 30, 2022

Capital Stock

and Additional

Paid-in Capital Deficit Accumulated

Comprehensive Loss Total

Balance as at August 31, 2022 $ 2,887 $ ( 1,529 ) $ ( 28 ) $ 1,330

Net loss — ( 4 ) — ( 4 )

Other comprehensive income — — 2 2

Stock-based compensation 9 — — 9

Shares issued:

Employee share purchase plan 2 — — 2

Balance as at November 30, 2022 $ 2,898 $ ( 1,533 ) $ ( 26 ) $ 1,339

Three Months Ended November 30, 2021

Capital Stock

and Additional

Paid-in Capital Deficit Accumulated

Comprehensive Loss Total

Balance as at August 31, 2021 $ 2,845 $ ( 1,512 ) $ ( 15 ) $ 1,318

Net income — 74 — 74

Other comprehensive loss — — ( 5 ) ( 5 )

Stock-based compensation 8 — — 8

Shares issued:

Employee share purchase plan 4 — — 4

Balance as at November 30, 2021 $ 2,857 $ ( 1,438 ) $ ( 20 ) $ 1,399

See notes to consolidated financial statements.

BlackBerry Limited

(United States dollars, in millions) (unaudited)

Consolidated Statements of Shareholders’ Equity

Nine Months Ended November 30, 2022

Three Months Ended May 31, 2023

Capital Stock

4 unchanged sentences

Net loss — ( 11 ) — ( 11 )

Other comprehensive loss — — ( 7 ) ( 7 )

Other comprehensive income — — 2 2

Stock-based compensation (note 6) 9 — — 9

1 unchanged sentence

Employee share purchase plan (note 6) 2 — — 2

Balance as at November 30, 2022 $ 2,898 $ ( 1,533 ) $ ( 26 ) $ 1,339

Nine Months Ended November 30, 2021

Balance as at May 31, 2023 $ 2,920 $ ( 2,039 ) $ ( 22 ) $ 859

Three Months Ended May 31, 2022

Capital Stock

7 unchanged sentences

Shares issued:

Exercise of stock options 2 — — 2

Employee share purchase plan 3 — — 3

Balance as at November 30, 2021 $ 2,857 $ ( 1,438 ) $ ( 20 ) $ 1,399

Balance as at May 31, 2022 $ 2,880 $ ( 1,475 ) $ ( 20 ) $ 1,385

See notes to consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Operations

Three Months Ended Nine Months Ended

November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021

Three Months Ended

May 31, 2023 May 31, 2022

Revenue (note 10) $ 373 $ 168

5 unchanged sentences

Amortization 15 27

Impairment of long-lived assets (note 2) — — 4 —

Gain on sale of property, plant and equipment, net (note 3) — — ( 6 ) —

Debentures fair value adjustment (note 5) 22 ( 46 )

Litigation settlement (note 9) — 165

111 66 545 491

Operating income (loss) ( 2 ) 51 ( 226 ) ( 148 )

Investment income (loss), net 2 25 ( 1 ) 22

Income (loss) before income taxes — 76 ( 227 ) ( 126 )

Operating loss ( 11 ) ( 177 )

Investment income (loss), net (note 2 and note 5) 3 ( 1 )

Loss before income taxes ( 8 ) ( 178 )

Provision for income taxes (note 4) 3 3

Net income (loss) $ ( 4 ) $ 74 $ ( 239 ) $ ( 132 )

Earnings (loss) per share (note 7)

Net loss $ ( 11 ) $ ( 181 )

Loss per share (note 7)

Basic $ ( 0.02 ) $ ( 0.31 )

3 unchanged sentences

(United States dollars, in millions) (unaudited)

Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended Nine Months Ended

November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021

Net income (loss) $ ( 4 ) $ 74 $ ( 239 ) $ ( 132 )

Consolidated Statements of Comprehensive Loss

Three Months Ended

May 31, 2023 May 31, 2022

Net loss $ ( 11 ) $ ( 181 )

Other comprehensive income (loss)

Net change in fair value and amounts reclassified to net loss from derivatives designated as cash flow hedges during the period, net of income taxes of nil for the three and nine months ended November 30, 2022 and November 30, 2021 (note 8) — — ( 1 ) ( 1 )

Net change in fair value and amounts reclassified to net loss from derivatives designated as cash flow hedges during the three months ended, net of income taxes of nil (May 31, 2022 - income taxes of nil) (note 8) 1 1

Foreign currency translation adjustment 1 ( 4 )

Net change in fair value from instrument-specific credit risk on the 1.75% Debentures, net of income taxes of nil for the three and nine months ended November 30, 2022 and November 30, 2021 (note 5) 1 ( 1 ) 3 —

Net change in fair value from instrument-specific credit risk on the Debentures, net of income taxes of nil (May 31, 2022 - income taxes of nil) (note 5) — 2

Other comprehensive income (loss) 2 ( 1 )

Comprehensive income (loss) $ ( 2 ) $ 69 $ ( 246 ) $ ( 139 )

Comprehensive loss $ ( 9 ) $ ( 182 )

See notes to consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Cash Flows

Nine Months Ended

November 30, 2022 November 30, 2021

Three Months Ended

May 31, 2023 May 31, 2022

Cash flows from operating activities

Net loss $ ( 11 ) $ ( 181 )

Adjustments to reconcile net loss to net cash used in operating activities:

Adjustments to reconcile net loss to net cash provided by (used in) operating activities:

Amortization 16 29

Stock-based compensation 9 8

Gain on sale of investment — ( 22 )

Impairment of long-lived assets (note 2) 4 —

Gain on sale of property, plant and equipment, net (note 3) ( 6 ) —

Intellectual property disposed of by sale (note 3) 147 —

Debentures fair value adjustment (note 5) 22 ( 46 )

Operating leases ( 1 ) ( 3 )

Other 7 ( 3 )

Net changes in working capital items

1 unchanged sentence

Other receivables 4 4

Income taxes receivable 4 1

Other assets ( 62 ) ( 9 )

3 unchanged sentences

Deferred revenue ( 12 ) ( 22 )

Net cash used in operating activities ( 253 ) ( 37 )

Net cash provided by (used in) operating activities 99 ( 42 )

Cash flows from investing activities

Acquisition of long-term investments ( 1 ) —

Distribution from long-term investments — 35

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

Proceeds on sale of property, plant and equipment (note 3) 17 —

Acquisition of intangible assets ( 8 ) ( 8 )

Acquisition of short-term investments ( 66 ) ( 164 )

Proceeds on sale or maturity of restricted short-term investments — 24

Proceeds on sale or maturity of short-term investments 39 226

Net cash provided by investing activities 126 111

Net cash provided by (used in) investing activities ( 38 ) 53

Cash flows from financing activities

2 unchanged sentences

Effect of foreign exchange loss on cash, cash equivalents, restricted cash, and restricted cash equivalents — ( 1 )

Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents during the period ( 124 ) 82

Net increase in cash, cash equivalents, restricted cash, and restricted cash equivalents during the period 63 13

Cash, cash equivalents, restricted cash, and restricted cash equivalents, beginning of period 322 406

10 unchanged sentences

In the opinion of management, all normal recurring adjustments considered necessary for fair presentation have been included in these interim consolidated financial statements.

Operating results for the three and nine months ended November 30, 2022 are not necessarily indicative of the results that may be expected for the full year ending February 28, 2023.

Operating results for the three months ended May 31, 2023 are not necessarily indicative of the results that may be expected for the full year ending February 29, 2024.

The consolidated balance sheet at February 28, 2023 was derived from the audited Annual Financial Statements but does not contain all of the footnote disclosures from the Annual Financial Statements.

5 unchanged sentences

Significant Accounting Policies and Critical Accounting Estimates

There have been no material changes to the Company’s accounting policies or critical accounting estimates from those described in the Annual Financial Statements.

There have been no material changes to the Company’s accounting policies or critical accounting estimates from those described in the Annual Financial Statements other than those noted below.

Critical Accounting Estimates during the Quarter (Note 10)

To the extent the transaction price in a contract with a customer includes variable consideration, the Company estimates the amount of variable consideration that should be included in the price utilizing either the expected value method or the most likely amount method, depending on the nature of the variable consideration.

The Company also estimates whether and how much variable consideration is subject to constraint if it cannot conclude it is probable that a significant reversal in revenue will not occur, due to factors such as:

the consideration being highly susceptible to factors outside the Company’s influence, the period of time before the variable consideration is resolved, the Company’s previous experience with similar contracts, the Company’s history of price concessions or changing of payment terms, and whether there is a large number and broad range of possible variable consideration amounts.

To the extent the Company determines that there is a significant financing component in a contract with a customer, it determines the impact of the time value of money in adjusting the transaction price to account for the income associated with the financing component by estimating the discount rate that would be reflected in a separate financing transaction between the customer and the Company at contract inception, based upon the credit characteristics of the customer receiving financing in the contract.

Accounting Standards Adopted During Fiscal 2024

ASU 2020-06, Debt with Conversion and Other Options

In August 2020, the Financial Standards Accounting Board (“FASB”) issued a new accounting standard on the topic of debt with conversion and other options, accounting standards update (“ASU”) 2020-06.

The amendment in this update simplifies the accounting for convertible instruments by reducing the number of accounting models available for convertible debt instruments and convertible preferred stock.

This update also amends the guidance for the derivatives scope exception for contracts in an entity’s own equity to reduce form-over-substance-based accounting conclusions and requires the application of the if-converted method for calculating diluted earnings per share.

The update also requires entities to provide expanded disclosures about the terms and features of convertible instruments, how the instruments have been reported in the entity’s financial statements, and information about events, conditions, and circumstances that can affect how to assess the amount or timing of an entity’s future cash flows related to those instruments.

The guidance is effective for interim and annual periods beginning after December 15, 2021.

The Company adopted this guidance in the first quarter of fiscal 2023 and it did not have a material impact on its results of operations, financial position and disclosures as the fair value option accounting model used by the Company is not impacted by this ASU and the Company already utilizes the if-converted method in its calculation of diluted earnings per share relating to the 1.75% Debentures (as defined in Note 5).

ASU 2021-08, Business Combinations

In October 2021, the FASB issued a new accounting standard on the topic of business combinations, accounting for contract assets and contract liabilities from contracts with customers, ASU 2021-08.

The amendment in this update improves the accounting for acquired revenue contracts with customers in a business combination by addressing diversity in practice and inconsistency.

This update requires entities to recognize and measure contract assets and contract liabilities acquired in a business combination in accordance with ASC 606, Revenue from Contracts with Customers.

The guidance is effective for interim and annual periods beginning after December 15, 2022 and requires entities to prospectively apply business combinations occurring on or after the effective date of the amendments.

The Company early adopted this guidance in the first quarter of fiscal 2023, and will apply it prospectively to any business acquisitions subsequent to the date of adoption.

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

ASU 2021-10, Government Assistance

In November 2021, the FASB issued a new accounting standard on the topic of government assistance, ASU 2021-10.

The standard requires additional disclosures for transactions with a government accounted for by applying a grant or contribution accounting model by analogy, including:

(i) information about the nature of the transactions and related accounting policy used to account for the transactions;

(ii) the line items on the balance sheet and income statement affected by these transactions including amounts applicable to each line;

and (iii) significant terms and conditions of the transactions, including commitments and contingencies.

The update also requires entities that omit any of the information because it is legally prohibited from being disclosed to include a statement to that effect.

The guidance is effective for annual periods beginning after December 15, 2021.

The Company adopted this guidance in the first quarter of fiscal 2023 and does not expect the adoption to have a material impact on its annual disclosures.

The Company has not adopted any new standards to date during fiscal 2024.

FAIR VALUE MEASUREMENTS, CASH, CASH EQUIVALENTS AND INVESTMENTS

3 unchanged sentences

• Level 1 - Unadjusted quoted prices at the measurement date for identical assets or liabilities in active markets.

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

• Level 2 - Observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets;

9 unchanged sentences

The independent third-party valuator considers the information provided by the Company before determining whether a change in their original pricing is warranted.

The Company’s investments largely consist of debt securities issued by major corporate and banking organizations, the provincial and federal governments of Canada, international government banking organizations and the United States Department of the Treasury and are all investment grade.

The Company also holds certain public equity securities obtained through an initial public offering by the issuer of a previously held non-marketable equity investment.

For a description of how the fair value of the 1.75% Debentures was determined, see the “Convertible debentures” accounting policies in Note 1 to the Annual Financial Statements.

When the Company concludes that there is a significant financing component included within a contract with a customer due to timing differences between the fulfillment of certain performance obligations and the receipt of payment for those performance obligations, the Company determines the present value of the future consideration utilizing the discount rate that would be reflected in a separate financing transaction between the customer and the Company at contract inception based upon the credit characteristics of the customer receiving financing in the contract.

For a description of how the fair value of the Debentures (as defined in Note 5) was determined, see the “Convertible debentures” accounting policies in Note 1 to the Annual Financial Statements.

The Debentures are classified as Level 3.

1 unchanged sentence

Upon the occurrence of certain events, the Company re-measures the fair value of non-marketable equity investments for which it utilizes the measurement alternative, and long-lived assets, including property, plant and equipment, operating lease ROU assets, intangible assets and goodwill if an impairment or observable price adjustment is recognized in the current period.

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

Impairment of Long-Lived Assets

During the second quarter of fiscal 2023, the Company exited certain leased facilities and is in the process of seeking subleases for those properties.

The Company recorded a non-cash, pre-tax and after-tax impairment charge of $ 4 million related to the operating lease right-of-use (“ROU”) assets for those facilities.

The impairment was determined by comparing the fair value of the impacted ROU asset to the carrying value of the asset as of the impairment measurement date, as required under ASC Topic 360, Property, Plant, and Equipment, using Level 2 inputs.

The fair value of the ROU asset was based on the estimated sublease income for certain facilities taking into consideration the time period it will take to obtain a sublessor, the applicable discount rate and the sublease rate.

The Company conducts an evaluation of the related liabilities and expenses and revises its assumptions and estimates as appropriate as new or updated information becomes available.

Non-Marketable Equity Investments Measured Using the Measurement Alternative

1 unchanged sentence

The estimation of fair value used in the fair value measurements required the use of significant unobservable inputs, and as a result, the fair value measurements were classified as Level 3.

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

Cash, Cash Equivalents and Investments

The components of cash, cash equivalents and investments by fair value level as at November 30, 2022 were as follows:

The components of cash, cash equivalents and investments by fair value level as at May 31, 2023 were as follows:

Cost Basis (1)

13 unchanged sentences

treasury bills/notes 22 — — 22 22 — — —

government sponsored enterprise notes 50 — — 50 — 50 — —

treasury bills/notes 5 — — 5 5 — — —

Corporate notes/bonds 22 — — 22 — 22 — —

458 — — 458 275 158 — 25

16 unchanged sentences

Equity securities 10 — ( 10 ) — — — — —

Term deposits, certificates of deposits, and GICs 157 — — 157 65 65 — 27

Bankers’ acceptances/bearer deposit notes 58 — — 58 58 — — —

Term deposits, and certificates of deposits 33 — — 33 8 — — 25

Bearer deposit notes 82 — — 82 82 — — —

Commercial paper 159 — — 159 108 51 — —

1 unchanged sentence

government sponsored enterprise notes 30 — — 30 10 20 — —

treasury bills/notes 43 — — 43 43 — — —

Corporate notes/bonds 15 — — 15 — 15 — —

364 — — 364 208 131 — 25

3 unchanged sentences

(1) Cost basis for other investments includes the effect of returns of capital and impairment.

As at November 30, 2022, the Company had private non-marketable equity investments without readily determinable fair value of $ 29 million (February 28, 2022 - $ 30 million).

As of November 30, 2022, the Company has recorded a cumulative impairment of $ 3 million to the carrying value of certain other non-marketable equity investments without readily determinable fair value (February 28, 2022 - $ 3 million).

There were no realized gains or losses on available-for-sale securities for the three and nine months ended November 30, 2022 and November 30, 2021.

As at May 31, 2023, the Company had non-marketable equity investments without readily determinable fair value of $ 35 million (February 28, 2023 - $ 34 million).

As of May 31, 2023, the Company has recorded a cumulative impairment of $ 3 million to the carrying value of certain other non-marketable equity investments without readily determinable fair value (February 28, 2023 - $ 3 million).

There were no realized gains or losses on available-for-sale securities for the three months ended May 31, 2023 and May 31, 2022.

The Company has restricted cash and cash equivalents, consisting of cash and securities pledged as collateral to major banking partners in support of the Company’s requirements for letters of credit.

These letters of credit support certain leasing arrangements entered into in the ordinary course of business.

The letters of credit are for terms ranging from one month to three years.

The letters of credit are for terms ranging from one month to two years.

The Company is legally restricted from accessing these funds during the term of the leases for which the letters of credit have been issued;

however, the Company can continue to invest the funds and receive investment income thereon.

The following table provides a reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents as at November 30, 2022 and February 28, 2022 from the consolidated balance sheets to the consolidated statements of cash flows:

November 30, 2022 February 28, 2022

The following table provides a reconciliation of cash, cash equivalents, restricted cash, and restricted cash equivalents as at May 31, 2023 and February 28, 2023 from the consolidated balance sheets to the consolidated statements of cash flows:

May 31, 2023 February 28, 2023

Cash and cash equivalents $ 358 $ 295

4 unchanged sentences

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

The contractual maturities of available-for-sale investments as at November 30, 2022 and February 28, 2022 were as follows:

November 30, 2022 February 28, 2022

The contractual maturities of available-for-sale investments as at May 31, 2023 and February 28, 2023 were as follows:

May 31, 2023 February 28, 2023

Cost Basis Fair Value Cost Basis Fair Value

2 unchanged sentences

$ 468 $ 458 $ 374 $ 364

As at November 30, 2022 and February 28, 2022, the Company had no available-for-sale debt securities with continuous unrealized losses .

As at May 31, 2023 and February 28, 2023, the Company had no available-for-sale debt securities with continuous unrealized losses .

CONSOLIDATED BALANCE SHEET DETAILS

Accounts Receivable, Net of Allowance

The allowance for credit losses as at November 30, 2022 was $ 5 million (February 28, 2022 - $ 4 million).

The allowance for credit losses as at May 31, 2023 was $ 6 million (February 28, 2023 - $ 1 million).

The Company recognizes current estimated credit losses (“CECL”) for accounts receivable.

3 unchanged sentences

The Company also has long-term accounts receivable included in Other Long-term Assets.

The CECL for long-term accounts receivable is estimated using the probability of default method and the default exposure due to limited historical information.

The CECL for the long-term accounts receivable is estimated using the probability of default method and the default exposure due to limited historical information.

The exposure of default is represented by the assets’ amortized carrying amount at the reporting date.

2 unchanged sentences

Beginning balance as of February 28, 2022 $ 4

Prior period recovery for expected credit losses ( 2 )

Prior period provision for expected credit losses 1

Write-offs charged against the allowance

1 unchanged sentence

Current period provision for expected credit losses 5

Ending balance of the allowance for credit loss as at November 30, 2022 $ 5

The allowance for credit losses as at November 30, 2022 consists of $ 2 million (February 28, 2022 - $ 2 million) relating to CECL estimated based on days past due and region and $ 3 million (February 28, 2022 - $ 2 million) relating to specific customers that were evaluated separately.

There was one customer that comprised more than 10% of accounts receivable as at November 30, 2022 (February 28, 2022 - no customer comprised more than 10%).

Other Receivables

As at November 30, 2022, other receivables included items such as claims filed with the Ministry of Innovation, Science and Economic Development Canada relating to its Strategic Innovation Fund program’s investment in BlackBerry QNX, among other items, none of which were greater than 5% of the current assets balance.

As at February 28, 2022, other receivables included items such as receivables from the Government of Canada’s Hardest-Hit Business Recovery Program (“HHBRP”) and an intellectual property licensing receivable, among other items, none of which were greater than 5% of the current assets balance.

Ending balance of the allowance for credit loss as at May 31, 2023 $ 6

The allowance for credit losses as at May 31, 2023 consists of $ 2 million (February 28, 2023 - $ 1 million) relating to CECL estimated based on days past due and region and $ 4 million (February 28, 2023 - nil ) relating to specific customers that were evaluated separately.

There was one customer that comprised more than 10% of accounts receivable as at May 31, 2023 (February 28, 2023 - two customers comprised more than 10%).

BlackBerry Limited

1 unchanged sentence

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

Other Receivables

As at May 31, 2023 and February 28, 2023, other receivables included items such as claims filed with the Ministry of Innovation, Science and Economic Development Canada relating to its Strategic Innovation Fund program’s investment in BlackBerry QNX, among other items, none of which were greater than 5% of the current assets balance.

Other Current Assets

Other current assets comprised the following:

November 30, 2022 February 28, 2022

May 31, 2023 February 28, 2023

Intellectual property $ — $ 141

On January 29, 2022, the Company entered into a patent sale agreement with Catapult IP Innovations, Inc.

(“Catapult”), pursuant to which the Company agreed to sell substantially all of its non-core patent assets to Catapult for a total transaction price of $ 600 million.

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

Pursuant to the patent sale agreement, the Company would receive a license back to the patents being sold, which relate primarily to mobile devices, messaging and wireless networking.

Catapult is working with a financing partner and the parties are negotiating definitive closing documents.

In parallel, the Company is in advanced term sheet discussions with a second interested party which has completed its due diligence on the portfolio.

This alternate party is a prominent private equity firm that would not require external financing.

For the year ended February 28, 2022, the Company had classified $ 118 million of intellectual property that would be sold under the patent sale agreement with Catapult as other current assets on the Company’s consolidated balance sheets relating to the patent sale agreement.

As at November 30, 2022, the Company continues to classify $ 134 million of intellectual property, which includes the initial $ 118 million of intellectual property that would be sold under the patent sale agreement with Catapult with additions related to patent maintenance, as other current assets on the Company’s consolidated balance sheets.

Other current assets also included items such as the current portion of deferred commissions and prepaid expenses, among other items, none of which were greater than 5% of the current assets balance in any of the periods presented.

As described in Note 10, on May 11, 2023, the Company completed its previously announced patent sale with Malikie Innovations Limited (“Malikie”) and recognized revenue of $ 218 million and cost of sales of $ 147 million, which is comprised of the carrying value of the intellectual property of $ 141 million referred to above, and $ 6 million of capitalized costs during the quarter related to patent maintenance.

See Note 10 under the heading “Patent Sale”.

Other current assets also included the current portion of deferred commissions and prepaid expenses, among other items, none of which were greater than 5% of the current assets balance as at the balance sheet dates.

Property, Plant and Equipment, Net

Property, plant and equipment comprised the following:

November 30, 2022 February 28, 2022

May 31, 2023 February 28, 2023

BlackBerry operations and other information technology $ 85 $ 84

4 unchanged sentences

Net book value $ 24 $ 25

Sale of Property, Plant and Equipment, Net

During the second quarter of fiscal 2023, the Company completed the sale of its corporate aircraft.

As a result, the Company recorded proceeds of approximately $ 17 million and incurred a gain on disposal of approximately $ 6 million (cost of $ 29 million, accumulated amortization of $ 18 million, and a net book value of approximately $ 11 million).

BlackBerry Limited

3 unchanged sentences

Intangible assets comprised the following:

As at November 30, 2022

As at May 31, 2023

Cost Accumulated

11 unchanged sentences

$ 1,409 $ 1,206 $ 203

For the nine months ended November 30, 2022, amortization expense related to intangible assets amounted to $ 76 million (nine months ended November 30, 2021 - $ 130 million).

Total additions to intangible assets for the nine months ended November 30, 2022 amounted to $ 24 million (nine months ended November 30, 2021 - $ 22 million) and included additions related to patent maintenance classified as other current assets on the Company’s consolidated balance sheets.

During the nine months ended November 30, 2022, additions to intangible assets primarily consisted of payments for intellectual property relating to patent maintenance, registration and license fees.

Based on the carrying value of the identified intangible assets as at November 30, 2022, and assuming no subsequent impairment of the underlying assets, the annual amortization expense for the remainder of fiscal 2023 and each of the five succeeding years is expected to be as follows:

For the three months ended May 31, 2023, amortization expense related to intangible assets amounted to $ 13 million (three months ended May 31, 2022 - $ 25 million).

Total additions to intangible assets for the three months ended May 31, 2023 amounted to $ 2 million (three months ended May 31, 2022 - $ 8 million).

During the three months ended May 31, 2023, additions to intangible assets primarily consisted of payments for intellectual property relating to patent maintenance, registration and license fees.

Based on the carrying value of the identified intangible assets as at May 31, 2023, and assuming no subsequent impairment of the underlying assets, the annual amortization expense for the remainder of fiscal 2024 and each of the five succeeding years is expected to be as follows:

fiscal 2024 - $ 35 million;

3 unchanged sentences

fiscal 2028 - $ 19 million and fiscal 2029 - $ 6 million.

Changes to the carrying amount of goodwill during the nine months ended November 30, 2022 were as follows:

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

Changes to the carrying amount of goodwill during the three months ended May 31, 2023 were as follows:

Carrying Amount

Carrying amount as at February 28, 2022 $ 844

Goodwill impairment charge ( 245 )

Effect of foreign exchange on non-U.S.

3 unchanged sentences

dollar denominated goodwill 1

Carrying amount as at November 30, 2022 $ 839

In the fourth quarter of fiscal 2022, the Company announced that it had agreed to the sale of a significant amount of patent assets to Catapult subject to the satisfaction of closing conditions.

The completion of the sale would accelerate the timing of estimated cash flows for the Intellectual Property reporting unit and, based upon changes in the estimates to future cash flows following the contemplated sale, could potentially result in impacts that would be material to the consolidated financial statements in relation to the recoverability of the carrying value of that reporting unit.

Carrying amount as at May 31, 2023 $ 596

Other Long-term Assets

As at November 30, 2022 and February 28, 2022, other long-term assets included long-term portion of deferred commission and long-term receivables, among other items, none of which were greater than 5% of total assets in any of the periods presented.

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

As at May 31, 2023, other long-term assets included long-term receivables related to intellectual property sold, see Note 10 under the heading “Patent Sale”, long-term receivables, and the long-term portion of deferred commission, among other items, none of which were greater than 5% of the total assets balance.

As at February 28, 2023, other long-term assets included the long-term portion of deferred commission, among other items, none of which were greater than 5% of the total assets balance.

Accrued Liabilities

Accrued liabilities comprised the following:

November 30, 2022 February 28, 2022

Accrued royalties $ 20 $ 20

Operating lease liabilities, current 25 28

Other 109 109

Other accrued liabilities include accrued director fees, accrued vendor liabilities, accrued carrier liabilities, variable incentive accrual and payroll withholding taxes, among other items, none of which were greater than 5% of the current liabilities balance in any of the periods presented.

For the nine months ended November 30, 2022, the Company’s net effective income tax expense rate was approximately 5 % compared to a net effective income tax expense rate of 5 % for the nine months ended November 30, 2021.

As at May 31, 2023 and February 28, 2023, other accrued liabilities included operating lease liabilities, current, accrued royalties, accrued director fees, accrued vendor liabilities, variable incentive accrual and payroll withholding taxes, among other items, none of which were greater than 5% of the current liabilities balance in any of the periods presented.

For the three months ended May 31, 2023, the Company’s net effective income tax expense rate was approximately 38 % compared to a net effective income tax expense rate of 2 % for the three months ended May 31, 2022.

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

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

The Company’s total unrecognized income tax benefits as at November 30, 2022 were $ 20 million (February 28, 2022 - $ 20 million).

As at November 30, 2022, $ 20 million of the unrecognized income tax benefits have been netted against deferred income tax assets and nil has been recorded within income taxes payable on the Company’s consolidated balance sheets.

The Company’s total unrecognized income tax benefits as at May 31, 2023 were $ 21 million (February 28, 2023 - $ 21 million).

As at May 31, 2023, $ 21 million of the unrecognized income tax benefits have been netted against deferred income tax assets and nil has been recorded within income taxes payable on the Company’s consolidated balance sheets.

The Company is subject to ongoing examination by tax authorities in certain jurisdictions in which it operates.

1 unchanged sentence

While the final resolution of audits is uncertain, the Company believes the ultimate resolution of these audits will not have a material adverse effect on its consolidated financial position, liquidity or results of operations.

On September 1, 2020, Hamblin Watsa Investment Counsel Ltd., in its capacity as investment manager of Fairfax Financial Holdings Limited (“Fairfax”), and another institutional investor invested in the Company through a $ 365 million private placement of new debentures (the “1.75% Debentures”), which replaced $ 605 million of debentures issued in a private placement on September 7, 2016 (the “3.75% Debentures”).

The Debentures mature on November 13, 2023 .

2 unchanged sentences

Each period, the fair value of the Debentures is recalculated and resulting gains and losses from the change in fair value of the Debentures associated with non-credit components are recognized in income, while the change in fair value associated with credit components is recognized in accumulated other comprehensive loss (“AOCL”).

The fair value of the 1.75% Debentures has been determined using the significant Level 2 inputs interest rate curves, the market price and volatility of the Company’s listed common shares, and the significant Level 3 inputs related to credit spread and the implied discount of the 1.75% Debentures at issuance.

The Company originally determined its credit spread by calibrating to observable trades of the 3.75% Debentures and trending the calibrated spread to valuation dates utilizing an appropriate credit index.

The Company’s credit spread was determined to be 7.90 % as of the issuance date of the 1.75% Debentures and 7.52 % as of November 30, 2022.

An increase in credit spread will result in a decrease in the fair value of 1.75% Debentures and vice versa.

The fair value of the 1.75% Debentures on September 1, 2020 was determined to be approximately $ 456 million and the implied discount

The fair value of the Debentures has been determined using the significant Level 2 inputs interest rate curves, the market price and volatility of

BlackBerry Limited

1 unchanged sentence

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

approximately $ 91 million.

the Company’s listed common shares, and the significant Level 3 inputs related to credit spread and the implied discount of the Debentures at issuance.

The Company originally determined its credit spread by calibrating to observable trades of the previously-outstanding convertible debentures issued by the Company and trending the calibrated spread to valuation dates utilizing an appropriate credit index.

The Company’s credit spread was determined to be 7.90 % as of the issuance date of the Debentures and 7.44 % as of May 31, 2023.

An increase in credit spread will result in a decrease in the fair value of Debentures and vice versa.

The fair value of the Debentures on September 1, 2020 was determined to be approximately $ 456 million and the implied discount approximately $ 91 million.

The Company determined the implied discount on the Debentures by calculating the fair value of the Debentures on September 1, 2020 utilizing the above credit spread and other inputs described above.

The following table summarizes the change in fair value of the 1.75% Debentures for the nine months ended November 30, 2022, which also represents the total changes through earnings of items classified as Level 3 in the fair value hierarchy:

November 30, 2022

The following table summarizes the change in fair value of the Debentures for the three months ended May 31, 2023, which also represents the total changes through earnings of items classified as Level 3 in the fair value hierarchy:

Balance as at February 28, 2023 $ 367

Change in fair value of the Debentures 22

Balance as at November 30, 2022 $ 392

Balance as at May 31, 2023 $ 389

The difference between the fair value of the Debentures and the unpaid principal balance of $ 365 million is $ 24 million.

The following table shows the impact of the changes in fair value of the 1.75% Debentures for the three and nine months ended November 30, 2022 and November 30, 2021:

Three Months Ended Nine Months Ended

November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021

Income associated with the change in fair value from non-credit components recorded in the consolidated statements of operations $ 56 $ 110 $ 112 $ 47

Income (charge) associated with the change in fair value from instrument-specific credit components recorded in AOCL 1 ( 1 ) 3 —

Total decrease in the fair value of the 1.75% Debentures $ 57 $ 109 $ 115 $ 47

For the three and nine months ended November 30, 2022, the Company recorded interest expense related to the 1.75% Debentures of $ 2 million, and $ 5 million which has been included in investment income (loss), net on the Company’s consolidated statements of operations (three and nine months ended November 30, 2021 - $ 2 million and $ 5 million).

The following table shows the impact of the changes in fair value of the Debentures for the three months ended May 31, 2023 and May 31, 2022:

Three Months Ended

May 31, 2023 May 31, 2022

Income (charge) associated with the change in fair value from non-credit components recorded in the consolidated statements of operations $ ( 22 ) $ 46

Income associated with the change in fair value from instrument-specific credit components recorded in AOCL — 2

Total decrease (increase) in the fair value of the Debentures $ ( 22 ) $ 48

For the three months ended May 31, 2023, the Company recorded interest expense related to the Debentures of $ 2 million, which has been included in investment income (loss), net on the Company’s consolidated statements of operations (three months ended May 31, 2022 - $ 2 million).

Fairfax, a related party under U.S.

6 unchanged sentences

CAPITAL STOCK

The following details the changes in issued and outstanding common shares for the nine months ended November 30, 2022:

The following details the changes in issued and outstanding common shares for the three months ended May 31, 2023:

Capital Stock and

6 unchanged sentences

Common shares issued for employee share purchase plan 567 2

Common shares outstanding as at November 30, 2022 580,346 $ 2,898

The Company had 580 million voting common shares outstanding, 0.5 million options to purchase voting common shares, 13 million RSUs and 2 million DSUs outstanding as at December 16, 2022.

Common shares outstanding as at May 31, 2023 583,237 $ 2,920

The Company had 583 million voting common shares outstanding, 0.4 million options to purchase voting common shares, 18 million RSUs and 2 million DSUs outstanding as at June 26, 2023.

In addition, 60.8 million common shares are issuable upon conversion in full of the Debentures as described in Note 5.

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

EARNINGS ( LOSS) PER SHARE

The following table sets forth the computation of basic and diluted earnings (loss) per share:

Three Months Ended Nine Months Ended

November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021

Net income (loss) for basic earnings (loss) per share available to common shareholders $ ( 4 ) $ 74 $ ( 239 ) $ ( 132 )

LOSS PER SHARE

The following table sets forth the computation of basic and diluted loss per share:

Three Months Ended

May 31, 2023 May 31, 2022

Net loss for basic loss per share available to common shareholders $ ( 11 ) $ ( 181 )

Debentures fair value adjustment (1) (2)

( 56 ) ( 110 ) ( 112 ) ( 47 )

interest expense on Debentures (1) (2)

4 unchanged sentences

Conversion of Debentures (1) (2)

60,833 60,833 60,833 60,833

Weighted average number of shares and assumed conversions (000’s) diluted 582,812 637,710

Earnings (loss) per share - reported

Loss per share - reported

$ ( 0.02 ) $ ( 0.31 )

1 unchanged sentence

______________________________

(1) The Company has presented the dilutive effect of the 1.75% Debentures using the if-converted method, assuming conversion at the beginning of the quarter for the three and nine months ended November 30, 2022 and November 30, 2021.

Accordingly, to calculate diluted loss per share, the Company adjusted net income (loss) by eliminating the fair value adjustment made to the 1.75% Debentures and interest expense incurred on the 1.75% Debentures for the three and nine months ended November 30, 2022 and November 30, 2021, and added the number of shares that would have been issued upon conversion to the diluted weighted average number of shares outstanding.

(1) The Company has presented the dilutive effect of the Debentures using the if-converted method, assuming conversion at the beginning of the quarter for the three months ended May 31, 2022.

Accordingly, to calculate diluted loss per share, the Company adjusted net loss by eliminating the fair value adjustment made to the Debentures and interest expense incurred on the Debentures for the three months ended May 31, 2022, and added the number of shares that would have been issued upon conversion to the diluted weighted average number of shares outstanding.

See Note 5 for details on the Debentures.

(2) The three and nine months ended November 30, 2021, includes approximately 1,421,945 common shares (Exchange Shares) remaining that were subsequently issued on the third anniversary date of the Cylance acquisition completed on February 21, 2019 in consideration for the acquisition.

(3) The Company has not presented the dilutive effect of in-the-money options and RSUs that will be settled upon vesting by the issuance of new common shares in the calculation of diluted loss per share for the three and nine months ended November 30, 2022 and November 30, 2021, as to do so would be antidilutive.

(2) The Company has not presented the dilutive effect of the Debentures using the if-converted method in the calculation of diluted loss per share for the three months ended May 31, 2023, as to do so would be antidilutive.

See Note 5 for details on the Debentures.

(3) The Company has not presented the dilutive effect of in-the-money options and RSUs that will be settled upon vesting by the issuance of new common shares in the calculation of diluted loss per share for the three months ended May 31, 2023 and May 31, 2022, as to do so would be antidilutive.

BlackBerry Limited

2 unchanged sentences

ACCUMULATED OTHER COMPREHENSIVE LOSS

The changes in AOCL by component net of tax, for the three and nine months ended November 30, 2022 and November 30, 2021 were as follows:

Three Months Ended Nine Months Ended

November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021

The changes in AOCL by component net of tax, for the three months ended May 31, 2023 and May 31, 2022 were as follows:

Three Months Ended

May 31, 2023 May 31, 2022

Cash Flow Hedges

Balance, beginning of period $ ( 1 ) $ —

Other comprehensive loss before reclassification ( 2 ) — ( 3 ) —

Amounts reclassified from AOCL into net income (loss) 2 — 2 ( 1 )

Other comprehensive income before reclassification — 1

Amounts reclassified from AOCL into net loss 1 —

Accumulated net unrealized gains on derivative instruments designated as cash flow hedges $ — $ 1

5 unchanged sentences

Balance, beginning of period $ ( 6 ) $ ( 8 )

Other comprehensive income (loss) before reclassification 1 ( 1 ) 3 —

Other comprehensive income before reclassification — 2

Change in fair value from instruments-specific credit risk on Debentures

$ ( 6 ) $ ( 6 )

Other Post-Employment Benefit Obligations

3 unchanged sentences

(a) Letters of Credit

The Company had $ 25 million in collateralized outstanding letters of credit in support of certain leasing arrangements entered into in the ordinary course of business as of November 30, 2022.

The Company had $ 26 million in collateralized outstanding letters of credit in support of certain leasing arrangements entered into in the ordinary course of business as of May 31, 2023.

See the discussion of restricted cash in Note 2.

7 unchanged sentences

Management reviews all of the relevant facts for each claim and applies judgment in evaluating the likelihood and, if applicable, the amount of any potential loss.

Where a potential loss is considered probable and the amount is reasonably

Where a potential loss is considered probable and the amount is reasonably estimable, provisions for loss are made based on management’s assessment of the likely outcome.

Where a range of loss can be reasonably estimated with no best estimate in the range, the Company records the minimum amount in the range.

The Company does not provide for claims for which the outcome is not probable or claims for which the amount of the

BlackBerry Limited

1 unchanged sentence

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

estimable, provisions for loss are made based on management’s assessment of the likely outcome.

Where a range of loss can be reasonably estimated with no best estimate in the range, the Company records the minimum amount in the range.

The Company does not provide for claims for which the outcome is not probable or claims for which the amount of the loss cannot be reasonably estimated.

loss cannot be reasonably estimated.

Any settlements or awards under such claims are provided for when reasonably determinable.

As of November 30, 2022, there are no other material claims outstanding for which the Company has assessed the potential loss as both probable to result and reasonably estimable;

As of May 31, 2023, there are no material claims outstanding for which the Company has assessed the potential loss as both probable to result and reasonably estimable;

therefore, no accrual has been made.

14 unchanged sentences

The individual lawsuit was voluntarily dismissed and the consolidated U.S.

class actions reached an agreement in principle to settle;

class actions was settled;

see “Litigation Settlement” below in this Note 9.

24 unchanged sentences

As the award is triggered by the Company’s share price, it is considered stock-based compensation and accounted for as a share-based liability award.

As at November 30, 2022, the liability recorded in association with this award is nominal (February 28, 2022 - $ 2 million).

As at May 31, 2023, the liability recorded in association with this award is nil (February 28, 2023 - nominal ).

As at May 31, 2023, the Company has recognized $ 17 million (February 28, 2023 - $ 17 million) in funds from claims filed with the Ministry of Innovation, Science and Economic Development Canada relating to its Strategic Innovation

BlackBerry Limited

1 unchanged sentence

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

As at November 30, 2022, the Company has recognized $ 17 million (February 28, 2022 - $ 17 million) in funds from claims filed with the Ministry of Innovation, Science and Economic Development Canada relating to its Strategic Innovation Fund program’s investment in BlackBerry QNX.

Fund program’s investment in BlackBerry QNX.

A portion of this amount may be repayable in the future under certain circumstances if certain terms and conditions are not met by the Company, which is not probable at this time.

On March 14, 2014, the four putative U.S.

class actions were consolidated in the U.S.

District Court for the Southern District of New York, and on May 27, 2014, a consolidated amended class action complaint was filed.

On March 13, 2015, the Court issued an order granting the Company’s motion to dismiss.

The Court denied the plaintiffs’ motion for reconsideration and for leave to file an amended complaint on November 13, 2015.

On August 24, 2016, the U.S.

Court of Appeals for the Second Circuit affirmed the District Court order dismissing the complaint, but vacated the order denying leave to amend and remanded to the District Court for further proceedings in connection with the plaintiffs’ request for leave to amend.

The Court granted the plaintiffs’ motion for leave to amend on September 13, 2017.

On September 29, 2017, the plaintiffs filed a second consolidated amended class action complaint (the “Second Amended Complaint”), which added the Company’s former Chief Legal Officer as a defendant.

The Court denied the motion to dismiss the Second Amended Complaint on March 19, 2018.

On August 2, 2019, the Magistrate Judge issued a Report and Recommendation that the Court grant the defendants’ motion for judgment on the pleadings dismissing the claims of additional plaintiffs Cho and Ulug.

On September 24, 2019, the District Court Judge accepted the Magistrate Judge’s recommendation and dismissed the claims of Cho and Ulug against all defendants.

On January 26, 2021, the District Court granted the plaintiffs’ motion for class certification.

The class includes “all persons who purchased or otherwise acquired the common stock of BlackBerry Limited on the NASDAQ during the period from March 28, 2013, through and including September 20, 2013”.

The class excludes (a) all persons and entities who purchased or otherwise acquired the Company’s common stock between March 28, 2013, and April 10, 2013, and who sold all their Company common stock before April 11, 2013, and (b) the defendants, officers and directors of the Company, members of their immediate families and their legal representatives, heirs, successors, or assigns, and any entity in which any of the Defendants have or had a controlling interest.

The Second Circuit Court of Appeals denied the defendants’ petition for review of the class certification order on June 23, 2021.

The Second Circuit Court of Appeals affirmed the District Court judgment dismissing Cho and Ulug’s claims on March 11, 2021, and denied Cho and Ulug’s petition for panel rehearing and rehearing en banc on April 28, 2021.

On May 5, 2021, the parties participated in a mediation with the Hon.

Layn Phillips (ret.), which did not result in an agreement.

On September 10, 2021.

the Court granted the plaintiffs’ unopposed motion for approval of the class notice plan.

Postcard notice was mailed on October 8, 2021;

publication notice was issued starting on October 18, 2021.

On January 3, 2022, the Court denied defendants’ motion for summary judgment except with respect to seven statements the Court found were barred by the statute of repose.

On April 6, 2022, the parties accepted a mediator’s settlement proposal, and reached an agreement in principle to settle the U.S.

consolidated actions for $ 165 million.

On April 6, 2022, through a mediator, the Company agreed in principle to pay $ 165 million to settle the U.S.

consolidated actions (see “Litigation” above in this Note 9).

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.

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.

9 unchanged sentences

The Company has not encountered material costs as a result of such indemnifications in the current period.

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

REVENUE AND SEGMENT DISCLOSURES

7 unchanged sentences

Cybersecurity, IoT, and Licensing and Other.

The following table shows information by operating segment for the three and nine months ended November 30, 2022 and November 30, 2021:

The following table shows information by operating segment for the three months ended May 31, 2023 and May 31, 2022:

For the Three Months Ended

Cybersecurity IoT Licensing and Other Segment Totals

November 30, November 30, November 30, November 30,

2022 2021 2022 2021 2022 2021 2022 2021

Segment revenue $ 106 $ 128 $ 51 $ 43 $ 12 $ 13 $ 169 $ 184

Segment cost of sales 46 52 10 8 4 6 60 66

Segment gross margin (1)

$ 60 $ 76 $ 41 $ 35 $ 8 $ 7 $ 109 $ 118

For the Nine Months Ended

Cybersecurity IoT Licensing and Other Segment Totals

November 30, November 30, November 30, November 30,

May 31, May 31, May 31, May 31,

2023 2022 2023 2022 2023 2022 2023 2022

5 unchanged sentences

(1) A reconciliation of total segment gross margin to consolidated totals is set forth below.

Cybersecurity consists of the Company’s BlackBerry Spark® software platform, BlackBerry® AtHoc®, BlackBerry® Alert and BlackBerry® SecuSUITE®.

The BlackBerry Spark platform is a comprehensive offering of security software products and services, including the BlackBerry® Cyber Suite and the BlackBerry Spark® Unified Endpoint Management Suite, which are also marketed together as the BlackBerry Spark® Suite, offering the Company’s broadest range of tailored cybersecurity and endpoint management options.

The BlackBerry Spark UES Suite includes revenue from the Company’s Cylance® artificial intelligence and machine learning-based platform consisting of CylancePROTECT®, CylanceOPTICS®, CylancePERSONA™, CylanceGATEWAY™, CylanceGUARD® managed services, CylancePROTECT Mobile™ and other cybersecurity applications.

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

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

Cybersecurity consists of BlackBerry® UEM and Cylance® solutions (collectively BlackBerry Spark®), BlackBerry® AtHoc® and BlackBerry® SecuSUITE®.

The Company’s Cylance artificial intelligence and machine learning-based platform consists of CylanceENDPOINT™, CylanceGUARD®, CylanceEDGE™, CylanceINTELLIGENCE™ and other cybersecurity applications.

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

Cybersecurity revenue is generated predominantly through software licenses, commonly bundled with support, maintenance and professional services.

3 unchanged sentences

Other consists of the Company’s legacy service access fees (“SAF”) business, which ceased operations on January 4, 2022.

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

The following table reconciles total segment gross margin for the three and nine months ended November 30, 2022 and November 30, 2021 to the Company’s consolidated totals:

Three Months Ended Nine Months Ended

November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021

The following table reconciles total segment gross margin for the three months ended May 31, 2023 and May 31, 2022 to the Company’s consolidated totals:

Three Months Ended

May 31, 2023 May 31, 2022

Total segment gross margin $ 180 $ 105

4 unchanged sentences

Amortization 15 27

Impairment of long-lived assets — — 4 —

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

Debentures fair value adjustment 22 ( 46 )

1 unchanged sentence

Investment income (loss), net ( 3 ) 1

Consolidated income (loss) before income taxes $ — $ 76 $ ( 227 ) $ ( 126 )

Consolidated loss before income taxes $ ( 8 ) $ ( 178 )

______________________________

1 unchanged sentence

Stock compensation expenses - Equity compensation is a non-cash expense and does not impact the ongoing operating decisions taken by the Company’s management.

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

On May 11, 2023, the Company completed its previously announced patent sale with Malikie and sold certain non-core patent assets for $ 170 million in cash on closing, an additional $ 30 million in fixed consideration due by no later than the third anniversary of closing and variable consideration in the form of future royalties in the aggregate amount of up to $ 700 million (the “Malikie Transaction”).

Pursuant to the terms of the Malikie Transaction, the Company received a license back to the patents sold, which relate primarily to mobile devices, messaging and wireless networking.

The Malikie Transaction will not impact customers’ right to use any of the Company’s products, solutions or services.

In the first quarter of fiscal 2024, the Company recognized revenue of $ 218 million and cost of sales of $ 147 million related to intellectual property sold.

The Company also recognized $ 1 million in other receivables, which has been included in accounts receivable on the Company’s balance sheets as at May 31, 2023 and $ 43 million in long-term receivables, which has been included in other long-term assets on the Company’s balance sheets as at May 31, 2023, relating to the $ 30 million in future cash to be paid no later than the third anniversary of closing and the future royalties that were not constrained as discussed below.

The financing component recorded on the patent sale was $ 15 million and will be recognized as interest income over the payment terms.

The Company estimated variable consideration from future royalty revenues using an expected value method including inputs from both internal and external sources related to patent monetization activities and cash flows, and constrained the recognition of that variable consideration based on the Company’s accounting policies and critical accounting estimates as described in Note 1.

The present value of variable consideration recognized as revenue was $ 23 million and the amount of variable consideration constrained was $ 210 million.

The Company evaluates its conclusions as to whether the constraints are still applicable on an ongoing basis, and will make updates when it observes a sufficient amount of evidence that amounts of variable consideration are no longer subject to constraint or the estimated amount of variable consideration has changed.

The Company disaggregates revenue from contracts with customers based on geographical regions, timing of revenue recognition, and the major product and service types, as discussed above in “Segment Disclosures”.

The Company’s revenue, classified by major geographic region in which the Company’s customers are located, was as follows:

Three Months Ended Nine Months Ended

November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021

Three Months Ended

May 31, 2023 May 31, 2022

North America (1)

$ 92 $ 101 $ 266 $ 313

Europe, Middle East and Africa 37 60

8 unchanged sentences

(1) North America includes all revenue from the Company’s intellectual property arrangements, due to the global applicability of the patent portfolio and licensing arrangements thereof .

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

Revenue, classified by timing of recognition, was as follows:

Three Months Ended Nine Months Ended

November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021

Three Months Ended

May 31, 2023 May 31, 2022

Products and services transferred over time $ 85 $ 97

1 unchanged sentence

Total $ 373 $ 168

BlackBerry Limited

Notes to the Consolidated Financial Statements

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

Revenue contract balances

The following table sets forth the activity in the Company’s revenue contract balances for the nine months ended November 30, 2022:

Accounts Receivable Deferred Revenue Deferred Commissions

The following table sets forth the activity in the Company’s revenue contract balances for the three months ended May 31, 2023:

Accounts and Other Receivable Deferred Revenue Deferred Commissions

Opening balance as at February 28, 2023 $ 120 $ 215 $ 17

2 unchanged sentences

Increase (decrease), net 49 ( 12 ) —

Closing balance as at November 30, 2022 $ 131 $ 209 $ 17

Closing balance as at May 31, 2023 $ 169 $ 203 $ 17

Transaction price allocated to the remaining performance obligations

The table below discloses the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as at November 30, 2022 and the time frame in which the Company expects to recognize this revenue.

The table below discloses the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as at May 31, 2023 and the time frame in which the Company expects to recognize this revenue.

The disclosure includes estimates of variable consideration, except when the variable consideration is a sales-based or usage-based royalty promised in exchange for a license of intellectual property.

As at November 30, 2022

The disclosure excludes estimates of variable consideration relating to future royalty revenues from the patent sale to Malikie, which have been constrained based on the Company’s accounting policies and critical accounting estimates as described in Note 1 and under “Patent Sale” in this Note 10.

As at May 31, 2023

Less than 12 Months 12 to 24 Months Thereafter Total

1 unchanged sentence

Revenue recognized for performance obligations satisfied in prior periods

For the three and nine months ended November 30, 2022, nil and $ 1 million of revenue was recognized for performance obligations satisfied in a prior period (three and nine months ended November 30, 2021 - $ 1 million of revenue was recognized relating to performance obligations satisfied in a prior period).

For the three months ended May 31, 2023, $ 9 million of revenue was recognized relating to performance obligations satisfied in a prior period as a result of certain variable consideration no longer being subject to constraint (three months ended May 31, 2022 - nil ).

Property, plant and equipment, intangible assets, operating lease ROU assets and goodwill, classified by geographic region in which the Company’s assets are located, were as follows:

November 30, 2022 February 28, 2022

May 31, 2023 February 28, 2023

Property, Plant and Equipment, Intangible Assets, Operating Lease ROU Assets and Goodwill Total Assets Property, Plant and Equipment, Intangible Assets, Operating Lease ROU Assets and Goodwill Total Assets

3 unchanged sentences

$ 856 $ 1,674 $ 867 $ 1,679

Information About Major Customers

There was one customer that comprised 58 % of the Company’s revenue in the three months ended May 31, 2023 due to the completed Malikie Transaction (three months ended May 31, 2022 - one customer that comprised 15 % of the Company’s revenue ).

BlackBerry Limited

1 unchanged sentence

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

Information About Major Customers

There was one customer that comprised 11 % and 14 % of the Company’s revenue in the three and nine months ended November 30, 2022, respectively (three and nine months ended November 30, 2021 - one customer that comprised 14 % and 11 % of the Company’s revenue, respectively).

CASH FLOW AND ADDITIONAL INFORMATION

(a) Certain consolidated statements of cash flow information related to interest and income taxes paid is summarized as follows:

Three Months Ended Nine Months Ended

November 30, 2022 November 30, 2021 November 30, 2022 November 30, 2021

Three Months Ended

May 31, 2023 May 31, 2022

Interest paid during the period $ 2 $ 2

4 unchanged sentences

The Company is exposed to foreign exchange risk as a result of transactions in currencies other than its functional currency, the U.S.

The majority of the Company’s revenue in the third quarter of fiscal 2023 was transacted in U.S.

The majority of the Company’s revenue in the first quarter of fiscal 2024 was transacted in U.S.

Portions of the revenue were denominated in Canadian dollars, euros and British pounds.

1 unchanged sentence

dollars, euros and British pounds.

At November 30, 2022, approximately 25 % of cash and cash equivalents, 41 % of accounts receivable and 44 % of accounts payable were denominated in foreign currencies (February 28, 2022 – 37 %, 23 % and 30 %, respectively).

At May 31, 2023, approximately 21 % of cash and cash equivalents, 35 % of accounts receivable and 38 % of accounts payable were denominated in foreign currencies (February 28, 2023 – 19 %, 24 % and 36 %, respectively).

These foreign currencies primarily include the Canadian dollar, euro and British pound.

11 unchanged sentences

The Company reduces this risk by investing in liquid, investment-grade securities and by limiting exposure to any one entity or group of related entities.

As at November 30, 2022, no single issuer represented more than 19 % of the total cash, cash equivalents and investments (February 28, 2022 - no single issuer represented more than 10 % of the total cash, cash equivalents and investments), with the largest such issuer representing cash balances, bearer deposits, term deposits and bankers’ acceptances with one of the Company’s banking counterparties.

As at May 31, 2023, no single issuer represented more than 18 % of the total cash, cash equivalents and investments (February 28, 2023 - no single issuer represented more than 12 % of the total cash, cash equivalents and investments), with the largest such issuer representing bearer deposits, term deposits and cash balances with one of the Company’s banking counterparties.

The Company maintains Credit Support Annexes (“CSAs”) with several of its counterparties.

These CSAs require the outstanding net position of all contracts be made whole by the paying or receiving of collateral to or from the counterparties on a daily basis, subject to exposure and transfer thresholds.

As at November 30, 2022, the Company had $ 1 million in collateral posted with counterparties (February 28, 2022 - nil in collateral posted).

As at May 31, 2023, the Company had $ 1 million in collateral posted with counterparties (February 28, 2023 - $ 1 million in collateral held).

Liquidity risk

Cash, cash equivalents, and investments were approximately $ 578 million as at May 31, 2023.

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

The Company has experienced recent operating losses and the Debentures will mature on November 13, 2023 as described above in Note 5, but the Company has the ability to access other potential financing arrangements on commercially reasonable terms.

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 and access to other potential financing arrangements, should be sufficient to meet funding

BlackBerry Limited

1 unchanged sentence

In millions of United States dollars, except share and per share data, and except as otherwise indicated (unaudited)

Liquidity risk

Cash, cash equivalents, and investments were approximately $ 505 million as at November 30, 2022.

The Company’s management remains focused on 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.

requirements for current financial commitments and future operating expenditures not yet committed, and should provide the necessary financial capacity for the foreseeable future.

Government subsidies

During fiscal 2021, the Government of Canada announced the Canada Emergency Wage Subsidy (“CEWS”) and the Canada Emergency Rent Subsidy (“CERS”) for Canadian employers whose businesses were affected by the COVID-19 pandemic.

The CEWS program initially ran for a thirty-six week period between March and November 2020 and the CERS program for a period between September 2020 and July 2021.

The programs were subsequently extended to October 2021.

The CEWS program provided a subsidy of up to 75 % of eligible employees’ employment insurable remuneration, subject to certain criteria.

The extension also included a gradual decrease to the subsidy rate.

CEWS received after June 5, 2021 may be repayable in the future under certain circumstances if certain terms and conditions are not met by the Company, which is not probable at this time.

The CERS program provided a subsidy of up to 65 % of eligible fixed property expenses.

The base subsidy was determined based on the percentage revenue decline experienced by businesses affected by the COVID-19 pandemic.

The CERS program gradually reduced the amount and availability of subsidies in the months leading up to the program’s final claim period.

During the third quarter of fiscal 2022, the Government of Canada announced the HHBRP to continue supporting businesses affected by the COVID-19 pandemic.

The HHBRP provides a subsidy of up to 50 % of eligible employees’ employment insurable remuneration, subject to certain criteria, and rent and ran until May 7, 2022 .

The Company applied for the CEWS, CERS and HHBRP to the extent it met the requirements to receive the subsidy and during the three and nine months ended November 30, 2022, recorded nil and $ 4 million, respectively, in government subsidies as a reduction to operating expenses in the consolidated statement of operations (November 30, 2021 - $ 3 million and $ 30 million, respectively).

As at November 30, 2022, the Company has recorded nil in accrued government subsidies within other receivables on the consolidated balance sheet (February 28, 2022 - $ 8 million).

During the third quarter of fiscal 2022, the Government of Canada announced the Hardest-Hit Business Recovery Program (“HHBRP”) to continue supporting businesses affected by the COVID-19 pandemic.

The HHBRP provided a subsidy of up to 50% of eligible employees’ employment insurable remuneration, subject to certain criteria, and rent and ran until May 7, 2022.

The Company applied for the HHBRP to the extent it met the requirements to receive the subsidy and during the three months ended May 31, 2022, recorded $ 4 million in government subsidies as a reduction to operating expenses in the consolidated statement of operations.

As at May 31, 2022, the Company has recorded $ 4 million in accrued government subsidies within other receivables on the consolidated balance sheet .

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

What changed 10-Q

Item 1. Financial Statements