What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2023-09-29 compared with 2023-06-30 · 170 added, 123 removed, 579 unchanged (34% of the section changed)

4 unchanged sentences

Consolidated Balance Sheets

May 31, 2023 February 28, 2023

August 31, 2023 February 28, 2023

Cash and cash equivalents (note 2) $ 415 $ 295

38 unchanged sentences

Consolidated Statements of Shareholders’ Equity

Three Months Ended May 31, 2023

Three Months Ended August 31, 2023

Capital Stock

2 unchanged sentences

Comprehensive Loss Total

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

Net loss — ( 42 ) — ( 42 )

Other comprehensive income — — 1 1

Stock-based compensation 11 — — 11

Balance as at August 31, 2023 $ 2,931 $ ( 2,081 ) $ ( 21 ) $ 829

Three Months Ended August 31, 2022

Capital Stock

and Additional

Paid-in Capital Deficit Accumulated

Comprehensive Loss Total

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

Net loss — ( 54 ) — ( 54 )

Other comprehensive loss — — ( 8 ) ( 8 )

Stock-based compensation 7 — — 7

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

See notes to consolidated financial statements.

BlackBerry Limited

(United States dollars, in millions) (unaudited)

Consolidated Statements of Shareholders’ Equity

Six Months Ended August 31, 2023

Capital Stock

and Additional

Paid-in Capital Deficit Accumulated

Comprehensive Loss Total

Balance as at February 28, 2023 $ 2,909 $ ( 2,028 ) $ ( 24 ) $ 857

4 unchanged sentences

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

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

Three Months Ended May 31, 2022

Balance as at August 31, 2023 $ 2,931 $ ( 2,081 ) $ ( 21 ) $ 829

Six Months Ended August 31, 2022

Capital Stock

8 unchanged sentences

Employee share purchase plan 3 — — 3

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

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

See notes to consolidated financial statements.

2 unchanged sentences

Consolidated Statements of Operations

Three Months Ended

May 31, 2023 May 31, 2022

Three Months Ended Six Months Ended

August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022

Revenue (note 10) $ 132 $ 168 $ 505 $ 336

5 unchanged sentences

Amortization 14 25 29 52

Impairment of long-lived assets (note 2) 1 4 1 4

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

Debentures fair value adjustment (note 5) ( 6 ) ( 10 ) 16 ( 56 )

Litigation settlement (note 9) — — — 165

132 153 322 434

Operating loss ( 47 ) ( 47 ) ( 58 ) ( 224 )

10 unchanged sentences

Consolidated Statements of Comprehensive Loss

Three Months Ended

May 31, 2023 May 31, 2022

Three Months Ended Six Months Ended

August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022

Net loss $ ( 42 ) $ ( 54 ) $ ( 53 ) $ ( 235 )

Other comprehensive income (loss)

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

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 six months ended August 31, 2023 and August 31, 2022 (note 8) — ( 2 ) 1 ( 1 )

Foreign currency translation adjustment 1 ( 6 ) 2 ( 10 )

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

Net change in fair value from instrument-specific credit risk on the Debentures, net of income taxes of nil for the three and six months ended August 31, 2023 and August 31, 2022 (note 5) — — — 2

Other comprehensive income (loss) 1 ( 8 ) 3 ( 9 )

4 unchanged sentences

Consolidated Statements of Cash Flows

Three Months Ended

May 31, 2023 May 31, 2022

Six Months Ended

August 31, 2023 August 31, 2022

Cash flows from operating activities

3 unchanged sentences

Stock-based compensation 20 15

Impairment of long-lived assets (note 2) 1 4

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

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

Debentures fair value adjustment (note 5) 16 ( 56 )

3 unchanged sentences

Other receivables 4 10

Income taxes receivable ( 2 ) —

Other assets ( 61 ) ( 1 )

7 unchanged sentences

Acquisition of property, plant and equipment ( 3 ) ( 4 )

Proceeds on sale of property, plant and equipment — 17

Acquisition of intangible assets ( 10 ) ( 16 )

1 unchanged sentence

Proceeds on sale or maturity of short-term investments 182 395

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

Net cash provided by investing activities 76 117

Cash flows from financing activities

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

Operating results for the three and six months ended August 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.

6 unchanged sentences

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)

Critical Accounting Estimates during the Six Months Ended August 31, 2023 (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.

31 unchanged sentences

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.

Impairment of Long-Lived Assets

During the second quarter of fiscal 2024, the Company exited certain leased facilities.

The Company recorded a non-cash, pre-tax and after-tax impairment charge of $ 1 million related to the operating lease right-of-use (“ROU”) assets for those facilities (three and six months ended August 31, 2022 - $ 4 million).

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.

BlackBerry Limited

2 unchanged sentences

Cash, Cash Equivalents and Investments

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

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

Cost Basis (1)

9 unchanged sentences

Term deposits and certificates of deposits 31 — — 31 9 — — 22

Bankers’ acceptances/bearer deposit notes 106 — — 106 106 — — —

Bearer deposit notes 115 — — 115 115 — — —

Commercial paper 129 — — 129 123 6 — —

1 unchanged sentence

treasury bills/notes 40 — — 40 40 — — —

treasury bills/notes 19 — — 19 15 — — 4

Corporate notes/bonds 5 — — 5 5 — — —

28 unchanged sentences

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

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.

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

As of August 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 and six months ended August 31, 2023 and August 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.

3 unchanged sentences

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 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

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

August 31, 2023 February 28, 2023

Cash and cash equivalents $ 415 $ 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 May 31, 2023 and February 28, 2023 were as follows:

May 31, 2023 February 28, 2023

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

August 31, 2023 February 28, 2023

Cost Basis Fair Value Cost Basis Fair Value

2 unchanged sentences

$ 442 $ 432 $ 374 $ 364

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

As at August 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 May 31, 2023 was $ 6 million (February 28, 2023 - $ 1 million).

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

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

12 unchanged sentences

Current period provision for expected credit losses 5

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%).

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

The allowance for credit losses as at August 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 August 31, 2023 (February 28, 2023 - two customers comprised more than 10%).

BlackBerry Limited

2 unchanged sentences

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.

As at August 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:

May 31, 2023 February 28, 2023

August 31, 2023 February 28, 2023

Intellectual property $ — $ 141

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”.

2 unchanged sentences

Property, plant and equipment comprised the following:

May 31, 2023 February 28, 2023

August 31, 2023 February 28, 2023

BlackBerry operations and other information technology $ 86 $ 84

9 unchanged sentences

Intangible assets comprised the following:

As at May 31, 2023

As at August 31, 2023

Cost Accumulated

11 unchanged sentences

$ 1,409 $ 1,206 $ 203

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:

For the six months ended August 31, 2023, amortization expense related to intangible assets amounted to $ 26 million (six months ended August 31, 2022 - $ 50 million).

Total additions to intangible assets for the six months ended August 31, 2023 amounted to $ 10 million (six months ended August 31, 2022 - $ 16 million).

During the six months ended August 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 August 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 - $ 22 million;

6 unchanged sentences

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:

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

Carrying Amount

6 unchanged sentences

dollar denominated goodwill 2

Carrying amount as at May 31, 2023 $ 596

Carrying amount as at August 31, 2023 $ 597

Other Long-term Assets

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 August 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

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.

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

For the six months ended August 31, 2023, the Company’s net effective income tax expense rate was approximately 10 % compared to a net effective income tax expense rate of 4 % for the six months ended August 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 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’s total unrecognized income tax benefits as at August 31, 2023 were $ 21 million (February 28, 2023 - $ 21 million).

As at August 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.

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

The fair value 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)

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.

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 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.

The Company’s credit spread was determined to be 7.90 % as of the issuance date of the Debentures and 7.21 % as of August 31, 2023.

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

1 unchanged sentence

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 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:

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

August 31, 2023

Balance as at February 28, 2023 $ 367

Change in fair value of the Debentures 16

Balance as at May 31, 2023 $ 389

Balance as at August 31, 2023 $ 383

The difference between the fair value of the Debentures and the unpaid principal balance of $ 365 million is $ 18 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

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

Three Months Ended Six Months Ended

August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022

Income (charge) associated with the change in fair value from non-credit components recorded in the consolidated statements of operations $ 6 $ 10 $ ( 16 ) $ 56

1 unchanged sentence

Total decrease (increase) in the fair value of the Debentures $ 6 $ 10 $ ( 16 ) $ 58

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).

For the three and six months ended August 31, 2023, the Company recorded interest expense related to the Debentures of $ 2 million and $ 3 million, respectively, which has been included in investment income (loss), net on the Company’s consolidated statements of operations (three and six months ended August 31, 2022 - $ 2 million and $ 3 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 three months ended May 31, 2023:

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

Capital Stock and

6 unchanged sentences

Common shares issued for employee share purchase plan 567 2

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.

Common shares outstanding as at August 31, 2023 583,684 $ 2,931

The Company had 584 million voting common shares outstanding, 0.4 million options to purchase voting common shares, 17 million RSUs and 2 million DSUs outstanding as at September 26, 2023.

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

1 unchanged sentence

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

Three Months Ended

May 31, 2023 May 31, 2022

Three Months Ended Six Months Ended

August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022

Net loss for basic loss per share available to common shareholders $ ( 42 ) $ ( 54 ) $ ( 53 ) $ ( 235 )

Debentures fair value adjustment (1) (2)

— ( 10 ) — ( 56 )

interest expense on Debentures (1) (2)

4 unchanged sentences

Conversion of Debentures (1) (2)

— 60,833 — 60,833

Weighted average number of shares and assumed conversions (000’s) diluted 583,524 638,147 583,171 637,930

3 unchanged sentences

______________________________

(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.

(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 and six months ended August 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 and six months ended August 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 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.

(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 and six months ended August 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.

(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 six months ended August 31, 2023 and August 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 months ended May 31, 2023 and May 31, 2022 were as follows:

Three Months Ended

May 31, 2023 May 31, 2022

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

Three Months Ended Six Months Ended

August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022

Cash Flow Hedges

Balance, beginning of period $ — $ 1 $ ( 1 ) $ —

Other comprehensive income before reclassification — 1

Other comprehensive loss before reclassification — ( 2 ) — ( 1 )

Amounts reclassified from AOCL into net loss — — 1 —

14 unchanged sentences

(a) Letters of Credit

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.

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 August 31, 2023.

See the discussion of restricted cash in Note 2.

6 unchanged sentences

Regardless of whether claims against the Company have merit, those claims could be time-consuming to evaluate and defend, result in costly litigation, divert management’s attention and resources and subject the Company to significant liabilities.

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 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)

loss cannot be reasonably estimated.

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 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.

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

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;

As of August 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.

40 unchanged sentences

As part of the package, the Company’s Executive Chair and CEO is entitled to receive a contingent performance-based cash award in the amount of $ 90 million that will become earned and payable should the volume weighted 10-day average trading price of the Company’s common shares on the New York Stock Exchange reach $ 30 before November 3, 2023 .

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 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

As the award is triggered by the

BlackBerry Limited

1 unchanged sentence

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

Fund program’s investment in BlackBerry QNX.

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

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

As at August 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 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.

23 unchanged sentences

Cybersecurity, IoT, and Licensing and Other.

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

For the Three Months Ended

Cybersecurity IoT Licensing and Other Segment Totals

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

August 31, August 31, August 31, August 31,

2023 2022 2023 2022 2023 2022 2023 2022

3 unchanged sentences

$ 43 $ 61 $ 41 $ 42 $ 2 $ 4 $ 86 $ 107

For the Six Months Ended

Cybersecurity IoT Licensing and Other Segment Totals

August 31, August 31, August 31, August 31,

2023 2022 2023 2022 2023 2022 2023 2022

Segment revenue $ 172 $ 224 $ 94 $ 102 $ 239 $ 10 $ 505 $ 336

Segment cost of sales 73 103 17 17 149 4 239 124

Segment gross margin (1)

$ 99 $ 121 $ 77 $ 85 $ 90 $ 6 $ 266 $ 212

______________________________

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

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®.

6 unchanged sentences

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

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

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 six months ended August 31, 2023 and August 31, 2022 to the Company’s consolidated totals:

Three Months Ended Six Months Ended

August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022

Total segment gross margin $ 86 $ 107 266 $ 212

4 unchanged sentences

Amortization 14 25 29 52

Impairment of long-lived assets 1 4 1 4

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

Debentures fair value adjustment ( 6 ) ( 10 ) 16 ( 56 )

5 unchanged sentences

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”).

2 unchanged sentences

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.

As at August 31, 2023, the remaining financing component on the patent sale was $ 13 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.

1 unchanged sentence

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.

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 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

May 31, 2023 May 31, 2022

Three Months Ended Six Months Ended

August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022

North America (1)

$ 72 $ 85 $ 389 $ 174

Europe, Middle East and Africa 39 61 76 121

9 unchanged sentences

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

Three Months Ended

May 31, 2023 May 31, 2022

Three Months Ended Six Months Ended

August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022

Products and services transferred over time $ 79 $ 95 $ 165 $ 193

1 unchanged sentence

Total $ 132 $ 168 $ 505 $ 336

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 three months ended May 31, 2023:

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

Accounts and Other Receivable Deferred Revenue Deferred Commissions

3 unchanged sentences

Increase (decrease), net 61 ( 20 ) 1

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

Closing balance as at August 31, 2023 $ 181 $ 195 $ 18

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)

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 May 31, 2023 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 August 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.

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

As at August 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 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 ).

For the three and six months ended August 31, 2023, $ 1 million and $ 31 million of revenue, respectively, 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 and six months ended August 31, 2022 - $ 1 million).

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:

May 31, 2023 February 28, 2023

August 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

4 unchanged sentences

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 ).

There was no customer that comprised more than 10% of the Company’s revenue and one customer that comprised 45 % of the Company’s revenue in the three and six months ended August 31, 2023, respectively, due to the completed Malikie Transaction (three and six months ended August 31, 2022 - one customer that comprised 16 % and 15 % of the Company’s revenue, respectively ).

BlackBerry Limited

3 unchanged sentences

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

Three Months Ended

May 31, 2023 May 31, 2022

Three Months Ended Six Months Ended

August 31, 2023 August 31, 2022 August 31, 2023 August 31, 2022

Interest paid during the period $ 2 $ 2 $ 3 $ 3

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 first quarter of fiscal 2024 was transacted in U.S.

The majority of the Company’s revenue in the second 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 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).

At August 31, 2023, approximately 22 % of cash and cash equivalents, 38 % of accounts receivable and 49 % 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 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.

As at August 31, 2023, no single issuer represented more than 16 % 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 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.

As at August 31, 2023, the Company had no collateral posted or held with counterparties (February 28, 2023 - $ 1 million in collateral held).

BlackBerry Limited

1 unchanged sentence

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

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 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 .

Liquidity risk

Cash, cash equivalents, and investments were approximately $ 519 million as at August 31, 2023.

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

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, are expected to 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.

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