What changed in this filing

/stocks — the workspaceLOADING

Item 2. Management’s Discussion and Analysis

2024-06-27 compared with 2023-12-21 · 222 added, 537 removed, 327 unchanged (70% of the section changed)

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

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read together with the unaudited interim consolidated financial statements and the accompanying notes (the “Consolidated Financial Statements”) of BlackBerry Limited for the three and nine months ended November 30, 2023, included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the Company’s audited consolidated financial statements and accompanying notes and MD&A for the fiscal year ended February 28, 2023 (the “Annual MD&A”).

The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read together with the unaudited interim consolidated financial statements and the accompanying notes (the “Consolidated Financial Statements”) of BlackBerry Limited for the three months ended May 31, 2024, included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the Company’s audited consolidated financial statements and accompanying notes and MD&A for the fiscal year ended February 29, 2024 (the “Annual MD&A”).

The Consolidated Financial Statements are presented in U.S.

7 unchanged sentences

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

• the Company’s expectations with respect to enhancing shareholder value through the full separation of its principal business units;

• the Company’s expectations with respect to the impact of macroeconomic and other external factors on its results of operations and financial condition;

• the Company’s expectations with respect to its billings, revenue, operating expense composition, non-GAAP EPS and cash flow usage in fiscal 2024;

• the Company’s expectations with respect to enhancing operational focus and flexibility, driving improved profitability, and increasing optionality for optimizing shareholder value through the full separation of its principal business units;

• the Company’s expectations with respect to its revenue, non-GAAP EPS and adjusted EBITDA in the second quarter of fiscal 2025 and fiscal 2025 as a whole, annual recurring revenue of the Company’s Cybersecurity division and non-GAAP operating expenses for fiscal 2025 and non-GAAP EPS and cash flow in the fourth quarter fiscal 2025;

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

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

The words “expect”, “anticipate”, “estimate”, “may”, “will”, “should”, “could”, “intend”, “believe”, “target”, “plan” and similar expressions are intended to identify forward-looking statements in this MD&A, including in the sections entitled “Business Overview - Strategy”, “Business Overview - Products and Services”, “Business Overview - Strategic Review of Businesses”, “Business Overview - Macroeconomic Factors”, “Non-GAAP Financial Measures - Key Metrics”, “Results of Operations - Three months ended November 30, 2023 compared to the three months ended November 30, 2022 - Revenue - Revenue by Segment”, “Results of Operations - Three months ended November 30, 2023 compared to the three months ended November 30, 2022 - Gross Margin by Segment“, “Results of Operations - Three months ended November 30, 2023 compared to the three months ended November 30, 2022 - Operating Expenses”, “Results of Operations - Three months ended November 30, 2023 compared to the three months ended November 30, 2022 - Net Income (Loss)” and “Financial Condition - Contractual and Other Obligations”.

Forward-looking statements are based on estimates and assumptions made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that the Company believes are appropriate in the circumstances, including but not limited to, the Company’s expectations regarding its business, strategy, opportunities and prospects, the launch of new products and services, general economic conditions, competition, the Company’s expectations regarding its financial performance, the Company’s expectations regarding its ability to repay at maturity or possibly refinance the Extension Debentures (defined below), and the Company’s expectations regarding the strategic review of its businesses.

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

(i) risk that the proposed business unit separation may disrupt the Company’s operations or adversely impact its relationships with business partners and customers and its ability to attract and retain key employees;

and (ii) risk that the Company may not be able to complete a successful business unit separation in a timely manner, or at all.

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

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

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

product life cycles that characterize the industries in which the Company operates.

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

2 unchanged sentences

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

The Company secures more than 500 million endpoints including more than 235 million vehicles.

The Company secures more than 235 million vehicles.

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

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

The Company leverages its extensive technology portfolio to offer best-in-class cybersecurity, safety and reliability to enterprise customers primarily in government and regulated industries, to small and medium-sized businesses, and to original equipment manufacturers (“OEMs”) in automotive, medical, industrial and other core verticals.

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

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

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

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

The Company has two core divisions, Cybersecurity and IoT, each addressing large and growing market opportunities.

The Company’s Cybersecurity division is a pioneer in the use of artificial intelligence (“AI”) and machine learning to deliver innovative solutions in the areas of cybersecurity and data privacy.

It is a leader in next-generation endpoint security, endpoint management, secure communications and critical event management.

The Company’s IoT division provides embedded software solutions and the Company believes it is the world’s leading automotive foundational software supplier.

Its customers include major automotive OEMs and Tier 1 suppliers that use its products in vehicles, as well as top medical OEMs.

The Company’s solutions are implemented into all of the top ten automotive OEMs, top seven Tier 1 suppliers, 24 of the 25 top EV OEMs, and nine of the ten top medical OEMs.

The Company primarily generates revenue from the licensing of enterprise software and sales of associated services, including its endpoint management and cybersecurity solutions, BlackBerry QNX® software for the embedded market, technology licensing and professional consulting services.

The Company focuses on strategic industries with vertical-specific use cases, including regulated enterprise markets such as financial services, government, healthcare, professional services and transportation, and other markets where embedded software and critical infrastructure are important, such as utilities, mining and manufacturing.

Products and Services

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

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

The Company has a rich pedigree in innovation and has developed a range of products and services that assist customers in addressing their needs as their industries evolve, which are structured in three groups:

Cybersecurity, IoT (collectively with Cybersecurity, “software and services”) and Licensing and Other.

Cybersecurity

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

The Company’s core secure software and services offerings are its Cylance® cybersecurity and BlackBerry unified endpoint management (“UEM”) solutions, collectively known as BlackBerry Spark.

The Cybersecurity business consists of Cylance® cybersecurity and BlackBerry unified endpoint management (“UEM”) solutions, collectively known as BlackBerry Spark, SecuSUITE® and BlackBerry® AtHoc®.

BlackBerry’s Cylance cybersecurity solutions include:

CylanceENDPOINT™, an integrated endpoint security solution that leverages the Cylance AI model and OneAlert EDR console, to prevent, detect and remediate cyber threats at the endpoint, including on mobile;

CylanceGUARD®, a managed detection and response solution that provides 24/7 threat hunting and monitoring, as well as integrated critical event management communications during a cyber incident;

CylanceEDGE™, an AI-powered continuous authentication ZTNA solution that provides secure access to applications and data loss prevention;

CylanceMDR™, a managed detection and response solution that provides 24/7 threat hunting and monitoring, as well as integrated critical event management communications during a cyber incident;

CylanceEDGE™, an AI-powered continuous authentication zero trust network access solution that provides secure access to applications and data loss prevention;

and CylanceINTELLIGENCE™, a contextual cyber threat intelligence service.

3 unchanged sentences

and (iii) reducing complexity and overhead costs associated with security operations.

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

The Company’s UEM offerings include BlackBerry® UEM, BlackBerry® Dynamics™, BlackBerry® Workspaces, and BlackBerry Messenger (BBM®) Enterprise.

BlackBerry UEM employs a containerized approach to manage and secure devices, third party and custom applications, identity, content and endpoints across all leading operating systems, as well as providing regulatory compliance tools.

4 unchanged sentences

BlackBerry AtHoc is a secure, networked critical event management solution that enables people, devices and organizations to exchange critical information in real time during business continuity and life safety operations.

The platform securely connects with a diverse set of endpoints to distribute emergency mass notifications, improve personnel accountability and facilitate the bidirectional collection and sharing of data within and between organizations.

The platform securely connects with a diverse set of endpoints to distribute emergency mass notifications, improves personnel accountability and facilitates the bidirectional collection and sharing of data within and between organizations.

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

1 unchanged sentence

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

These solutions include the BlackBerry QNX real-time operating system, QNX® Hypervisor and QNX® Software Development Platform (SDP), as well as other products designed to alleviate the challenges of compliance with ISO 26262, the automotive industry’s functional safety standard.

The QNX® Acoustics Management Platform provides software-defined audio solutions.

These solutions include the BlackBerry QNX real-time operating system, QNX® Hypervisor for Safety and QNX® Software Development Platform (SDP), as well as other products designed to alleviate the challenges of compliance with ISO 26262, the automotive industry’s functional safety standard.

The QNX pre-certified microkernel operating system is specifically tailored for safety-critical embedded systems and toolchains that are pre-qualified for building these systems.

The QNX Hypervisor for Safety prevents safety systems from potential impact of malfunction in other systems.

These products help drive a faster time to market and also reduce developer friction.

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

BlackBerry QNX collaborates closely with customers to understand their specific requirements and more quickly and effectively develop solutions to meet their evolving needs.

In addition to BlackBerry QNX, BTS includes BlackBerry® Certicom® cryptography and key management products.

8 unchanged sentences

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

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

The Company announced the first design win for BlackBerry IVY in January 2023 and released the platform for general availability in May 2023.

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

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

9 unchanged sentences

Products and Innovation:

• Launched a generative AI-powered cybersecurity assistant to increase efficiency and reduce fatigue for CISO teams;

• Announced enhancements to BlackBerry SecuSUITE® for Government, including encrypted video and group audio calls.

• Launched CylanceMDR, an expert driven and AI-powered Managed Detection and Response (MDR) solution, including an innovative “On-Demand” solution;

• Introduced Cylance Assistant, a generative AI cybersecurity advisor that will help organizations speed up decision-making and stop more threats faster with fewer resources;

• Announced that BlackBerry UEM placed in the upper-right quadrant as a 2024 Gartner® Peer Insights™ Customers’ Choice for Unified Endpoint Management tools;

• Announced that The Tolly Group identified CylanceENDPOINT as detecting up to 25 percent more threats and with up to eight times less system impact than competitors.

Customers and Partners:

• Announced a significant, multi-year deal to provide full suite of cybersecurity solutions to the Government of Malaysia;

• Announced that the United States Department of Homeland Security awarded a new PENS (personal emergency notification system) contract to BlackBerry, utilizing BlackBerry® AtHoc® critical event management (CEM) solution.

• Announced a partnership between ETAS and BlackBerry QNX to jointly sell and market software solutions to provide the safe and secure foundation for the Software-Defined Vehicle (SDV);

• Announced a collaboration with AMD to advance foundational precision and control for the robotics industry by enabling new levels of low latency and jitter, and repeatable determinism.

Environmental, Sustainability and Corporate Governance:

• Appointed John Giamatteo, President of BlackBerry’s Cybersecurity division, as Chief Executive Officer.

Strategic Review of Businesses

On May 1, 2023, the Company announced that the Board would initiate a review of the Company’s portfolio of businesses, with the assistance of its financial advisors, as the Board considered strategic alternatives to drive enhanced shareholder value.

On October 4, 2023, the Company announced its intention to separate the IoT and Cybersecurity business units with a view to pursuing a subsidiary initial public offering (“Sub-IPO”) for the IoT business.

On December 11, 2023, the Company announced that it had reassessed its strategy and will no longer pursue a Sub-IPO but intends to pursue a full separation of the IoT and Cybersecurity businesses, including the separation and streamlining of the Company’s centralized corporate functions into business-unit specific teams, with a view to establishing each business as an independently-operated, profitable and cashflow-positive division.

Chief Executive Officer (“CEO”) Succession

On November 3, 2023, John Chen retired from his roles as Executive Chair and CEO of the Company, aligning with the terms of his employment contract.

Existing Board member Richard (Dick) Lynch succeeded Mr.

Chen as Board Chair and served as interim CEO of the Company from November 4, 2023 until the appointment of John J.

Giamatteo as CEO and as a member of the Board, effective December 11, 2023.

Giamatteo has served as the President of BlackBerry’s Cybersecurity business unit since October 2021 and has over 30 years of experience with global technology companies.

Prior to BlackBerry he was President and Chief Revenue Officer at McAfee.

Before that, Mr.

Giamatteo served as Chief Operating Officer at AVG Technologies.

He also held leadership positions with Solera, RealNetworks and Nortel Networks.

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

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

The revenue recognized reflects the application of the Company’s accounting policies and critical accounting estimates, as described in Note 1 to the Consolidated Financial Statements, which resulted in a substantial majority of the potential future royalties from the Malikie Transaction being constrained until future periods.

In evaluating the Malikie Transaction, the Company considered estimates of value, among other factors, which are not fully reflected when

applying the principles of revenue recognition, such as the variable consideration constraint that is recognized at the inception of the Malikie Transaction.

Accordingly, amounts initially recognized in the first quarter of fiscal 2024 do not reflect the full fair value of the overall transaction as determined by the Company.

Additional variable consideration is expected to be recognized in future quarters, as determined quarterly based on the revenue recognition accounting framework.

See Note 11 to the Consolidated Financial Statements.

Debt Repayment and New Issuance

On November 13, 2023, the Company repaid all amounts due upon the maturity of its outstanding 1.75% unsecured convertible debentures (the “2020 Debentures”) for an aggregate amount of $365 million.

On November 17, 2023, the Company issued an aggregate of $150 million principal amount of new 1.75% extendable unsecured convertible debentures maturing on February 15, 2024 (the “Extension Debentures” and collectively with the 2020 Debentures, the “Debentures”), with an option for the parties to extend the maturity date to May 15, 2024 by mutual agreement, to certain controlled affiliates of Fairfax Financial Holdings Limited (“Fairfax”) on a private placement basis.

The Extension Debentures have terms that are substantially similar to those of the 2020 Debentures.

Interest expense on the Extension Debentures will be approximately $1 million for the period from issuance to February 15, 2024.

See Note 6 to the Consolidated Financial Statements for a description of the terms of the Extension Debentures.

Macroeconomic Factors

Economic uncertainty, customer budgetary constraints, auto industry labor disruptions and inflation, as well as higher interest rates implemented in response to inflation and resulting fears of recession, may negatively impact supply and consumer demand for automobiles and have contributed to longer sales cycles for cybersecurity solutions.

These conditions have adversely affected, and may continue to adversely affect, the Company’s business and results of operations.

The Company does not believe that inflation had a material effect on its operations during first nine months of fiscal 2024.

Third Quarter Fiscal 2024 Summary Results of Operations

The following table sets forth certain consolidated statements of operations data for the quarter ended November 30, 2023 compared to the quarter ended November 30, 2022 under U.S.

• Nominated Lori O’Neill, an experienced corporate director and financial expert for election to its Board of Directors.

Business Separation

On December 11, 2023, the Company announced that it intends to pursue a full separation of the IoT and Cybersecurity businesses, including the separation and streamlining of the Company’s centralized corporate functions into business-unit specific teams, with a view to establishing each business as an independently-operated, profitable and cashflow-positive division.

The Company intends for the separation to enhance the operational focus and flexibility for each business, drive improved profitability, and increase optionality for the Company to optimize shareholder value.

On February 12, 2024, the Company announced its progress in separation and provided targets in respect to annualized net profit improvements to be achieved through a combination of cost reductions and margin expansion, identified previously achieved annualized cost savings in the third quarter of fiscal 2024, and provided guidance regarding expected improvements in operating cash flow in fiscal 2025.

On April 3, 2024, the Company disclosed that it had taken action in fiscal 2024 to reduce annualized expenditures by approximately $105 million and is working towards further run rate reductions.

First Quarter Fiscal 2025 Summary Results of Operations

The following table sets forth certain consolidated statements of operations data for the quarter ended May 31, 2024 compared to the quarter ended May 31, 2023 under U.S.

For the Three Months Ended

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

November 30, 2023 November 30, 2022 Change

May 31, 2024 May 31, 2023 Change

Revenue $ 144 $ 373 $ (229)

13 unchanged sentences

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

GAAP basis for the third quarter of fiscal 2024 and third quarter of 2023 does not include the dilutive effect of stock-based compensation as to do so would be anti-dilutive.

GAAP basis for the first quarter of fiscal 2025 and the first quarter of fiscal 2024 does not include the dilutive effect of the Debentures (as defined in “Financial Condition - Debt Financing and Other Funding Sources”), as to do so would be anti-dilutive.

Diluted loss per share on a U.S.

GAAP basis for the first quarter of fiscal 2025 and the first quarter of fiscal 2024 does not include the dilutive effect of stock-based compensation as to do so would be anti-dilutive.

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

The following tables show information by operating segment for the three and nine months ended November 30, 2023 and November 30, 2022.

The following table shows information by operating segment for the three months ended May 31, 2024 and May 31, 2023.

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

5 unchanged sentences

Cybersecurity IoT Licensing and Other Segment Totals

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

2023 2022 2023 2022 2023 2022 2023 2022

Segment revenue $ 114 $ 106 $ 8 $ 55 $ 51 $ 4 $ 6 $ 12 $ (6) $ 175 $ 169 $ 6

Segment cost of sales 37 46 (9) 9 10 (1) 1 4 (3) 47 60 (13)

Segment gross margin $ 77 $ 60 $ 17 $ 46 $ 41 $ 5 $ 5 $ 8 $ (3) $ 128 $ 109 $ 19

For the Nine Months Ended

(in millions)

Cybersecurity IoT Licensing and Other Segment Totals

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

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

2024 2023 2024 2023 2024 2023 2024 2023

2 unchanged sentences

Segment gross margin $ 50 $ 56 $ (6) $ 43 $ 36 $ 7 $ 4 $ 88 $ (84) $ 97 $ 180 $ (83)

The following tables reconcile the Company’s segment results for the three and nine months ended November 30, 2023 to consolidated U.S.

The following table reconciles the Company’s segment results for the three months ended May 31, 2024 to consolidated U.S.

GAAP results:

For the Three Months Ended November 30, 2023

(in millions)

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

Revenue $ 114 $ 55 $ 6 $ 175 $ — $ 175

Cost of sales 37 9 1 47 1 48

Gross margin (1)

$ 77 $ 46 $ 5 $ 128 $ (1) $ 127

Operating expenses 138 138

Investment income, net (5) (5)

Loss before income taxes $ (6)

For the Nine Months Ended November 30, 2023

For the Three Months Ended May 31, 2024

(in millions)

9 unchanged sentences

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

GAAP-based measures to adjusted measures for the three and nine months ended November 30, 2023.

The following tables reconcile the Company’s segment results for the three and nine months ended November 30, 2022 to consolidated U.S.

GAAP-based measures to adjusted measures for the three months ended May 31, 2024.

The following table reconciles the Company’s segment results for the three months ended May 31, 2023 to consolidated U.S.

GAAP results:

For the Three Months Ended November 30, 2022

For the Three Months Ended May 31, 2023

(in millions)

7 unchanged sentences

Loss before income taxes $ (8)

For the Nine Months Ended November 30, 2022

(in millions)

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

Revenue $ 330 $ 153 $ 22 $ 505 $ — $ 505

Cost of sales 149 27 8 184 2 186

Gross margin (1)

______________________________

Operating expenses 545 545

Investment loss, net 1 1

Loss before income taxes $ (227)

______________________________

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

GAAP-based measures to adjusted measures for the three and nine months ended November 30, 2022.

GAAP-based measures to adjusted measures for the three months ended May 31, 2023.

Financial Highlights

The Company had $271 million in cash, cash equivalents and investments as of November 30, 2023 (February 28, 2023 - $487 million).

In the third quarter of fiscal 2024, the Company recognized revenue of $175 million and incurred a net loss of $21 million, or $0.04 basic loss per share and $0.05 diluted loss per share on a U.S.

GAAP basis (third quarter of fiscal 2023 - revenue of $169 million and net loss of $4 million, or $0.01 basic loss per share and $0.09 diluted loss per share).

The Company recognized adjusted net income of $3 million, and adjusted earnings of $0.01 per share, on a non-GAAP basis in the third quarter of fiscal 2024 (third quarter of fiscal 2023 - adjusted net loss of $30 million, and adjusted loss of $0.05 per share).

The Company had $283 million in cash, cash equivalents and investments as of May 31, 2024 (February 29, 2024 - $298 million).

In the first quarter of fiscal 2025, the Company recognized revenue of $144 million and incurred a net loss of $42 million, or $0.07 basic and diluted loss per share on a U.S.

GAAP basis (first quarter of fiscal 2024 - revenue of $373 million and net loss of $11 million, or $0.02 basic and diluted loss per share).

The Company recognized adjusted net loss of $15 million, and adjusted loss of $0.03 per share, on a non-GAAP basis in the first quarter of fiscal 2025 (first quarter of fiscal 2024 - adjusted net income of $35 million, and adjusted earnings of $0.06 per share).

See “Non-GAAP Financial Measures” below.

Debentures Fair Value Adjustment

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

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

The fair value adjustment does not impact the terms of the Debentures such as the face value or the conversion price.

As at November 30, 2023, the fair value of the Debentures was approximately $150 million, which approximates the principal amount of the Extension Debentures.

For the three months ended November 30, 2023, the Company recorded non-cash income relating to changes in fair value of the 2020 Debentures of $18 million (pre-tax and after tax) and realized a non-cash charge relating to changes in fair value from credit components released from AOCL on maturity of the 2020 Debentures of $6 million (pre-tax and after tax) (the “Q3 Fiscal 2024 Debentures Fair Value Adjustment”) in the Company’s consolidated statements of operations.

For the nine months ended November 30, 2023 the Company recorded non-cash income relating to changes in fair value of the 2020 Debentures of $2 million (pre-tax and after tax) and realized a non-cash charge relating to changes in fair value from credit components released from AOCL on maturity of the 2020 Debentures of $6 million (the “Fiscal 2024 Debentures Fair Value Adjustment”) in the Company’s consolidated statements of operations.

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

Non-GAAP Financial Measures

1 unchanged sentence

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

On December 20, 2023, the Company announced financial results for the three and nine months ended November 30, 2023, which included certain non-GAAP financial measures and non-GAAP ratios, including adjusted gross margin, adjusted gross margin percentage, adjusted operating expense, adjusted net income (loss), adjusted income (loss) per share, adjusted research and development expense, adjusted selling, marketing and administrative expense, adjusted amortization expense, adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage, adjusted EBITDA margin percentage and free cash flow (usage).

On June 26, 2024, the Company announced financial results for the three months ended May 31, 2024, which included certain non-GAAP financial measures and non-GAAP ratios, including adjusted gross margin, adjusted gross margin percentage, adjusted operating expense, adjusted net income (loss), adjusted earnings (loss) per share, adjusted research and development expense, adjusted sales and marketing expense, adjusted general and administrative expense, adjusted amortization expense, adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage, adjusted EBITDA margin percentage and free cash flow (usage).

In the Company’s internal reports, management evaluates the performance of the Company’s business on a non-GAAP basis by excluding the impact of certain items below from the Company’s U.S.

GAAP financial results.

The Company believes that these non-GAAP financial measures and non-GAAP ratios provide management, as well as readers of the Company’s financial statements, with a consistent basis for comparison across accounting periods and is useful in helping management and readers understand the Company’s operating results and underlying operational trends.

The Company believes that

these non-GAAP financial measures and non-GAAP ratios provide management, as well as readers of the Company’s financial statements, with a consistent basis for comparison across accounting periods and are useful in helping management and readers understand the Company’s operating results and underlying operational trends.

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

• Debentures fair value adjustment .

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

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

The amount can vary each period depending on changes to the Company’s share price, share price volatility and credit indices.

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

The Company elected to measure the 2020 Debentures (as defined in “Financial Condition - Debt Financing and Other Funding Sources”) at fair value in accordance with the fair value option under U.S.

Each period, the fair value of the 2020 Debentures was recalculated and the resulting non-cash income and charges from the change in fair value from non-credit components of the 2020 Debentures were recognized in income.

The amount varied each period depending on changes to the Company’s share price, share price volatility and credit indices.

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

• Restructuring charges .

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

The Company believes that restructuring costs relating to employee termination benefits, facilities, streamlining the Company’s centralized corporate functions into Cybersecurity and IoT specific teams and other costs pursuant to the programs to reduce its annual expenses amongst R&D, infrastructure and other functions do not reflect expected future operating expenses, are not indicative of the Company’s core operating performance, and may not be meaningful when comparing the Company’s operating performance against that of prior periods

• Stock compensation expenses .

5 unchanged sentences

• Long-lived asset impairment charge.

The Company believes that long-lived asset impairment charges do not reflect expected future cash operating expenses, are not indicative of the Company’s core operating performance, and may not be meaningful when comparing the Company’s operating performance against that of prior periods.

The Company believes that long-lived asset impairment charges do not reflect expected future operating expenses, are not indicative of the Company’s core operating performance, and may not be meaningful when comparing the Company’s operating performance against that of prior periods.

• Goodwill impairment charge.

The Company believes that goodwill impairment charges do not reflect expected future operating expenses, are non-cash, and may not be meaningful when comparing the Company’s operating performance against that of prior periods.

• Litigation settlement.

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

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

3 unchanged sentences

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

GAAP based measures for the three months ended November 30, 2023 and November 30, 2022

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

GAAP based measures for the three months ended May 31, 2024 and May 31, 2023

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

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

2 unchanged sentences

A reconciliation of the most directly comparable U.S.

GAAP financial measures for the three months ended November 30, 2023 and November 30, 2022 to adjusted financial measures is reflected in the table below:

For the Three Months Ended (in millions) November 30, 2023 November 30, 2022

Gross margin $ 127 $ 109

Stock compensation expense 1 —

Adjusted gross margin $ 128 $ 109

Gross margin % 72.6 % 64.5 %

Stock compensation expense 0.5 % — %

Adjusted gross margin % 73.1 % 64.5 %

Reconciliation of U.S.

GAAP operating expense for the three months ended November 30, 2023, August 31, 2023 and November 30, 2022 to adjusted operating expense is reflected in the table below:

For the Three Months Ended (in millions) November 30, 2023 August 31, 2023 November 30, 2022

Operating expense $ 138 $ 132 $ 111

Restructuring charges 9 3 —

Stock compensation expense 7 10 8

Debentures fair value adjustment (1)

(13) (6) (56)

Acquired intangibles amortization 9 10 22

LLA impairment charge 11 1 —

Adjusted operating expense $ 115 $ 114 $ 137

______________________________

(1) See “Third Quarter Fiscal 2024 Summary Results of Operations - Financial Highlights - Debentures Fair Value Adjustment”

Reconciliation of U.S.

GAAP net loss and U.S.

GAAP basic loss per share for the three months ended November 30, 2023 and November 30, 2022 to adjusted net income (loss) and adjusted basic earnings (loss) per share is reflected in the table below:

For the Three Months Ended (in millions, except per share amounts) November 30, 2023 November 30, 2022

Basic earnings (loss)

per share Basic loss

Net loss $ (21) $(0.04) $ (4) $(0.01)

Restructuring charges 9 —

Stock compensation expense 8 8

Debentures fair value adjustment (13) (56)

Acquired intangibles amortization 9 22

LLA impairment charge 11 —

Adjusted income (loss) $ 3 $0.01 $ (30) $(0.05)

Reconciliation of U.S.

GAAP research and development, selling, marketing and administration, and amortization expense for the three months ended November 30, 2023 and November 30, 2022 to adjusted research and development, selling, marketing and administration, and amortization expense is reflected in the table below:

For the Three Months Ended (in millions) November 30, 2023 November 30, 2022

Research and development $ 42 $ 52

Stock compensation expense 2 2

Adjusted research and development $ 40 $ 50

Selling, marketing and administration $ 85 $ 89

Restructuring charges 9 —

Stock compensation expense 5 6

Adjusted selling, marketing and administration $ 71 $ 83

Amortization $ 13 $ 26

Acquired intangibles amortization 9 22

Adjusted amortization $ 4 $ 4

Adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage and adjusted EBITDA margin percentage for the three months ended November 30, 2023 and November 30, 2022 are reflected in the table below.

For the Three Months Ended (in millions) November 30, 2023 November 30, 2022

Operating loss $ (11) $ (2)

Non-GAAP adjustments to operating loss

Restructuring charges 9 —

Stock compensation expense 8 8

Debentures fair value adjustment (13) (56)

Acquired intangibles amortization 9 22

LLA impairment charge 11 —

Total non-GAAP adjustments to operating loss 24 (26)

Adjusted operating income (loss) 13 (28)

Amortization 14 28

Acquired intangibles amortization (9) (22)

Adjusted EBITDA $ 18 $ (22)

Revenue $ 175 $ 169

Adjusted operating income (loss) margin % (1)

Adjusted EBITDA margin % (2)

______________________________

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

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

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

GAAP based measures for the nine months ended November 30, 2023 and November 30, 2022.

A reconciliation of the most directly comparable U.S.

GAAP financial measures for the nine months ended November 30, 2023 and November 30, 2022 to adjusted financial measures is reflected in the table below:

For the Nine Months Ended (in millions) November 30, 2023 November 30, 2022

GAAP financial measures for the three months ended May 31, 2024 and May 31, 2023 to adjusted financial measures is reflected in the table below:

For the Three Months Ended (in millions) May 31, 2024 May 31, 2023

Gross margin $ 96 $ 179

5 unchanged sentences

Reconciliation of U.S.

GAAP operating expense for the nine months ended November 30, 2023 and November 30, 2022 to adjusted operating expense is reflected in the table below:

For the Nine Months Ended (in millions) November 30, 2023 November 30, 2022

GAAP operating expense for the three months ended May 31, 2024, February 29, 2024 and May 31, 2023 to adjusted operating expense is reflected in the table below:

For the Three Months Ended (in millions) May 31, 2024 February 29, 2024 May 31, 2023

Operating expense $ 135 $ 185 $ 190

3 unchanged sentences

Acquired intangibles amortization 8 8 10

Goodwill impairment charge — 35 —

LLA impairment charge 3 4 —

Litigation settlement — 165

Adjusted operating expense $ 109 $ 113 $ 145

______________________________

(1) See “Third Quarter Fiscal 2024 Summary Results of Operations - Financial Highlights - Debentures Fair Value Adjustment”

Reconciliation of U.S.

GAAP net loss and U.S.

GAAP basic loss per share for the nine months ended November 30, 2023 and November 30, 2022 to adjusted net income (loss) and adjusted basic earnings (loss) per share is reflected in the table below:

For the Nine Months Ended (in millions, except per share amounts) November 30, 2023 November 30, 2022

Basic earnings (loss) per share Basic loss per share

GAAP basic loss per share for the three months ended May 31, 2024 and May 31, 2023 to adjusted net income (loss) and adjusted basic earnings (loss) per share is reflected in the table below:

For the Three Months Ended (in millions, except per share amounts) May 31, 2024 May 31, 2023

per share Basic earnings (loss)

Net loss $ (42) $(0.07) $ (11) $(0.02)

4 unchanged sentences

LLA impairment charge 3 —

Litigation settlement — 165

Adjusted net income (loss) $ (15) $(0.03) $ 35 $0.06

Reconciliation of U.S.

GAAP research and development, selling, marketing and administration, and amortization expense for the nine months ended November 30, 2023 and November 30, 2022 to adjusted research and development, selling, marketing and administration, and amortization expense is reflected in the table below:

For the Nine Months Ended (in millions) November 30, 2023 November 30, 2022

GAAP research and development, selling, marketing and administration, and amortization expense for the three months ended May 31, 2024 and May 31, 2023 to adjusted research and development, selling, marketing and administration, and amortization expense is reflected in the table below:

For the Three Months Ended (in millions) May 31, 2024 May 31, 2023

Research and development $ 42 $ 54

Stock compensation expense 2 2

Adjusted research and development $ 140 $ 153

Selling, marketing and administration $ 258 $ 257

Adjusted research and development expense $ 40 $ 52

Sales and marketing $ 38 $ 45

Stock compensation expense 2 1

Adjusted sales and marketing expense $ 36 $ 44

General and administrative $ 40 $ 54

Restructuring charges 8 5

Stock compensation expense 3 5

Adjusted selling, marketing and administration $ 222 $ 240

Adjusted general and administrative expense $ 29 $ 44

Amortization $ 12 $ 15

Acquired intangibles amortization 8 10

Adjusted amortization $ 13 $ 11

Adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage and adjusted EBITDA margin percentage for the nine months ended November 30, 2023 and November 30, 2022 are reflected in the table below.

For the Nine Months Ended (in millions) November 30, 2023 November 30, 2022

Adjusted amortization expense $ 4 $ 5

Adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage and adjusted EBITDA margin percentage for the three months ended May 31, 2024 and May 31, 2023 are reflected in the table below.

For the Three Months Ended (in millions) May 31, 2024 May 31, 2023

Operating loss $ (39) $ (11)

5 unchanged sentences

LLA impairment charge 3 —

Litigation settlement — 165

Total non-GAAP adjustments to operating loss 27 46

12 unchanged sentences

Reconciliation of U.S.

GAAP net cash used in operating activities for the three months ended November 30, 2023 and November 30, 2022 to free cash flow (usage) is reflected in the table below:

For the Three Months Ended (in millions) November 30, 2023 November 30, 2022

Net cash used in operating activities $ (31) $ (185)

GAAP net cash used in operating activities for the three months ended May 31, 2024 and May 31, 2023 to free cash flow (usage) is reflected in the table below:

For the Three Months Ended (in millions) May 31, 2024 May 31, 2023

Net cash provided by (used in) operating activities $ (15) $ 99

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

1 unchanged sentence

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

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

Comparative breakdowns of certain key metrics for the three months ended or as at November 30, 2023 and November 30, 2022 are set forth below.

For the Three Months Ended (in millions) November 30, 2023 November 30, 2022 Change

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

Comparative breakdowns of certain key metrics for the three months ended or as at May 31, 2024 and May 31, 2023 are set forth below.

For the Three Months Ended (in millions) May 31, 2024 May 31, 2023 Change

Cybersecurity Annual Recurring Revenue $ 285 $ 289 $ (4)

Cybersecurity Dollar-Based Net Retention Rate 87 % 81 % 6 %

Cybersecurity Total Contract Value Billings $ 109 $ 103 $ 6

Recurring Software Product Revenue ~ 70% ~ 80% (10 %)

Annual Recurring Revenue

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

Cybersecurity Annual Recurring Revenue

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

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

Cybersecurity ARR was approximately $273 million as at November 30, 2023 and decreased compared to $279 million as at August 31, 2023 and decreased compared to $313 million as at November 30, 2022.

The Company previously stated that it expected Cybersecurity ARR to return to sequential growth in the second half of fiscal 2024.

The Company no longer expects to meet this due to a reassessment of the likelihood of closing certain large government deals at the values previously expected, if at all.

The Company now expects ARR in the fourth quarter of fiscal 2024 to be broadly consistent with the third quarter of fiscal 2024 and to return to growth in fiscal 2025.

Dollar-Based Net Retention Rate

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

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

Cybersecurity ARR was approximately $285 million as at May 31, 2024 and increased compared to $280 million as at February 29, 2024 and decreased compared to $289 million as at May 31, 2023.

The Company previously stated that it expected Cybersecurity ARR to be flat sequentially in the first quarter of fiscal 2025.

Cybersecurity ARR increased by $5 million sequentially in the first quarter of fiscal 2025.

Cybersecurity Dollar-Based Net Retention Rate

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

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

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

Cybersecurity DBNRR was 82% as at November 30, 2023 and increased compared to 81% as at August 31, 2023 and decreased compared to 84% as at November 30, 2022.

Total Contract Value Billings

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

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

Cybersecurity TCV billings was $109 million for the three months ended November 30, 2023 and increased compared to $74 million for the three months ended August 31, 2023 and $103 million for the three months ended November 30, 2022.

The Company previously stated that it expected Cybersecurity TCV billings for fiscal 2024 to be in the range of $430 million to $480 million.

The Company no longer expects to meet this guidance due to a reassessment of the likelihood of closing certain large government deals at the values previously expected, if at all.

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

Recurring Software Product Revenue

Cybersecurity DBNRR was 87% as at May 31, 2024 and increased compared to 85% as at February 29, 2024 and 81% as at May 31, 2023.

Recurring Software Product Revenue Percentage

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

2 unchanged sentences

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

Total Software and Services product revenue, excluding professional services, was approximately 70% recurring for the three months ended November 30, 2023 and decreased compared to approximately 90% recurring for the three months ended August 31, 2023 due to product mix and decreased compared to approximately 80% for the three months ended November 30, 2022, also due to product mix.

Results of Operations - Three months ended November 30, 2023 compared to the three months ended November 30, 2022

Total software and services product revenue, excluding professional services, was approximately 80% recurring for the three months ended May 31, 2024 and decreased compared to approximately 90% recurring for the three months ended February 29, 2024 due to product mix and decreased compared to approximately 90% for the three months ended May 31, 2023, also due to product mix.

Results of Operations - Three months ended May 31, 2024 compared to the three months ended May 31, 2023

Revenue by Segment

2 unchanged sentences

(in millions)

November 30, 2023 November 30, 2022 Change

May 31, 2024 May 31, 2023 Change

Revenue by Segment

8 unchanged sentences

Cybersecurity

The increase in Cybersecurity revenue of $8 million was primarily due to an increase of $20 million relating to product revenue in Secusmart, partially offset by a decrease of $11 million relating to product revenue in BlackBerry Spark and a decrease of $2 million in professional services.

The Company previously stated that it expected Cybersecurity revenue for fiscal 2024 as a whole to be in the range of $425 million to $450 million.

The expectation was dependent, in part, on the Company closing a certain set of large government deals in the second half of fiscal 2024.

The Company now expects Cybersecurity revenue for fiscal 2024 as a whole to be in the range of $369 million to $374 million due to a reassessment of the likelihood of closing certain large government deals at the values previously expected, if at all.

The Company expects Cybersecurity revenue in the fourth quarter of fiscal 2024 to be in the range of $83 million to $88 million.

The Company previously stated that it was targeting Cybersecurity revenue for fiscal 2026 as a whole to be in the range of $540 million to $590 million.

The Company no longer expects to meet this target due to the actual and expected performance of Cybersecurity for fiscal 2024.

The decrease in Cybersecurity revenue of $8 million was primarily due to a decrease of $17 million relating to product revenue in BlackBerry Spark, partially offset by an increase of $10 million in product revenue in Secusmart.

The Company previously stated that it expected Cybersecurity revenue in the first quarter of fiscal 2025 to be in the range of $78 million to $82 million.

Cybersecurity revenue was $85 million due to better-than-expected product revenue in Secusmart.

The Company expects Cybersecurity revenue in the second quarter of fiscal 2025 to be in the range of $82 million to $86 million.

The increase in IoT revenue of $8 million was primarily due to an increase of $7 million in BlackBerry QNX royalty revenue and an increase of $2 million in professional services, partially offset by a decrease of $1 million in BlackBerry QNX development seat revenue.

The Company previously stated that it expected IoT revenue to grow sequentially in the third quarter of fiscal 2024.

IoT revenue increased in the third quarter of fiscal 2024 compared to the second quarter of fiscal 2024.

The Company previously stated that it expected IoT revenue to be in the range of $225 million to $240 million for fiscal 2024 as a whole primarily due to the rescheduling of software development programs and production timelines at certain large OEM customers and uncertainty in the macroeconomic environment.

The Company now expects IoT revenue to be in the range of $211 million to $215 million for fiscal 2024 as a whole primarily due to a number of industry-level factors including the impact of labor disputes on automotive production volumes and further rescheduling of software development programs at certain large automakers.

The Company expects IoT revenue in the fourth quarter of fiscal 2024 to be in the range of $62 million to $66 million and to be higher than in any previous quarter.

The Company previously stated that it expected total Software & Services revenue, excluding potential revenue from BlackBerry IVY, to be in the range of $650 million and $690 million for fiscal 2024 as a whole due to changes in expectations in IoT revenue for fiscal 2024 as a whole.

The Company now expects total Software & Services revenue, excluding potential revenue from BlackBerry IVY, to be in the range of $580 million and $589 million for fiscal 2024 as a whole due to changes in expectations in Cybersecurity and IoT revenue for fiscal 2024 as a whole.

The Company previously stated that it was targeting IoT revenue, excluding potential revenue from BlackBerry IVY, to be in the range of $340 million and $370 million for fiscal 2026 as a whole.

The Company no longer expects to meet this target due to the actual and expected performance of IoT for fiscal 2024.

The Company previously stated that it was targeting total Software & Services revenue, excluding potential revenue from BlackBerry IVY, to be in the range of $880 million and $960 million for fiscal 2026 as a whole.

The Company no longer expects to meet this target due to the actual and expected performance of Cybersecurity and IoT for fiscal 2024.

The Company previously stated that it expected IoT revenue to be in the range of $48 million to $52 million in the first quarter of fiscal 2025.

IoT revenue was $53 million in the first quarter of fiscal 2025.

The Company expects IoT revenue to be in the range of $50 million to $54 million in the second quarter of fiscal 2025.

Licensing and Other

The decrease in Licensing and Other revenue of $6 million was primarily due to a decrease of $6 million in revenue from the Company’s intellectual property licensing arrangements.

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

Revenue from intellectual property licensing was approximately $6 million excluding the Malikie Transaction.

The Company expects total BlackBerry revenue in the fourth quarter of fiscal 2024 to be in the range of $150 million to $159 million.

The decrease in Licensing and Other revenue of $229 million was primarily due to $218 million associated with the Company’s patent sale in the first quarter of fiscal 2024, which was a one-time event, and a decrease of $11 million in revenue from the Company’s intellectual property licensing arrangements.

The Company previously stated that it expected revenue from intellectual property licensing to be approximately $4 million in each of the four quarters of fiscal 2025.

Intellectual property licensing revenue was $6 million in the first quarter of fiscal 2025.

The Company previously stated that it expected total Company revenue to be approximately $130 million to $138 million in the first quarter of fiscal 2025.

Total Company revenue was $144 million in the first quarter of fiscal 2025 due to better-than-expected product revenue in Secusmart.

The Company expects total BlackBerry revenue to be in the range of $136 million to $144 million in the second quarter of fiscal 2025.

Revenue by Geography

2 unchanged sentences

(in millions)

November 30, 2023 November 30, 2022 Change

May 31, 2024 May 31, 2023 Change

Revenue by Geography

9 unchanged sentences

North America Revenue

The decrease in North America revenue of $15 million was primarily due to a decrease of $9 million relating to product revenue in BlackBerry Spark and a decrease of $6 million in Licensing and Other revenue due to the reasons discussed above in “Revenue by Segment”.

The decrease in North America revenue of $249 million was primarily due to a decrease of $229 million relating to Licensing and Other due to the reasons discussed above in “Revenue by Segment”, a decrease of $17 relating to product revenue in BlackBerry Spark and a decrease of $2 million in BlackBerry QNX development seat revenue, partially offset by an increase of $3 million in BlackBerry QNX royalty revenue.

Europe, Middle East and Africa Revenue

The decrease in Europe, Middle East and Africa revenue of $5 million was primarily due to a decrease of $6 million relating to product revenue in Secusmart, a decrease of $2 million in product revenue in BlackBerry Spark and a decrease of $2 million in professional services, partially offset by an increase of $5 million in BlackBerry QNX royalty revenue.

The increase in Europe, Middle East and Africa revenue of $10 million was primarily due to an increase of $9 million relating to product revenue in Secusmart and an increase of $1 million in BlackBerry QNX royalty revenue.

Other Regions Revenue

The increase in Other regions revenue of $26 million was primarily due to an increase of $26 million relating to product revenue in Secusmart and an increase of $2 million in professional services, partially offset by a decrease of $2 million in QNX development seat revenue.

The increase in Other regions revenue of $10 million was primarily due to an increase of $4 million in professional services, an increase of $3 million relating to BlackBerry QNX royalty revenue and an increase of $1 million in BlackBerry QNX development seat revenue.

Consolidated Gross Margin

Consolidated gross margin increased by $18 million to approximately $127 million in the third quarter of fiscal 2024 (third quarter of fiscal 2023 - $109 million).

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

Consolidated gross margin decreased by $83 million to approximately $96 million in the first quarter of fiscal 2025 (first quarter of fiscal 2024 - $179 million).

The decrease was primarily due to the patent sale in the first quarter of fiscal 2024, which was a one-time event, and a decrease in revenue from BlackBerry Spark due to the reasons discussed above in “Revenue by Segment”, partially offset by an increase in revenue from BlackBerry QNX due to the reasons discussed above in “Revenue by Segment”, as the cost of sales for most software and services products does not significantly fluctuate based on business volume.

Consolidated Gross Margin Percentage

Consolidated gross margin percentage increased by 8.1% to approximately 72.6% of consolidated revenue in the third quarter of fiscal 2024 (third quarter of fiscal 2023 - 64.5%).

The increase was primarily due to a change in mix, specifically a higher gross margin contribution from Secusmart software licenses, which have a higher relative gross margin percentage in the third

quarter of fiscal 2024 as it included a higher portion of software revenue relative to hardware revenue, and a lower gross margin contribution from BlackBerry Spark, which has a lower relative gross margin percentage.

Consolidated gross margin percentage increased by 18.7% to approximately 66.7% of consolidated revenue in the first quarter of fiscal 2025 (first quarter of fiscal 2024 - 48.0%).

The increase was primarily due to a change in mix, specifically a higher gross margin contribution from BlackBerry QNX, and a lower gross margin contribution from Licensing and Other, which had a lower relative gross margin percentage in first quarter of fiscal 2024 due to the patent sale.

Gross Margin by Segment

See “Third Quarter Fiscal 2024 Summary Results of Operations” for information about the Company’s operating segments and the basis of operating segment results.

See “First Quarter Fiscal 2025 Summary Results of Operations” for information about the Company’s operating segments and the basis of operating segment results.

For the Three Months Ended

1 unchanged sentence

Cybersecurity IoT Licensing and Other Segment Totals

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

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

2024 2023 2024 2023 2024 2023 2024 2023

4 unchanged sentences

Cybersecurity

The increase in Cybersecurity gross margin of $17 million was primarily due to the reasons discussed above in “Revenue by Segment”, a decrease of $6 million in infrastructure costs and a change in mix, specifically a higher gross margin contribution from Secusmart software licenses, which had a higher relative gross margin percentage.

The increase in Cybersecurity gross margin percentage of 11% was primarily due to the same reasons discussed above.

The Company previously stated that it expected the gross margin percentage for Cybersecurity to increase by between 4% and 6% by fiscal 2026.

The Company no longer expects to meet this guidance due to the actual and expected performance of Cybersecurity for fiscal 2024.

The increase in IoT gross margin of $5 million was primarily due to the reasons discussed above in “Revenue by Segment” and a change in mix, specifically a higher gross margin contribution from BlackBerry QNX royalty revenue, which had a higher relative gross margin percentage.

The increase in IoT gross margin percentage of 4% was primarily due a change in mix, specifically a higher gross margin contribution from BlackBerry QNX royalty revenue, which had a higher relative gross margin percentage.

The Company previously stated that it expected the gross margin for IoT to increase in the long term due to a change in revenue mix.

The Company no longer expects to meet this guidance due to the actual and expected performance of IoT for fiscal 2024.

The decrease in Cybersecurity gross margin of $6 million was primarily due to the reasons discussed above in “Revenue by Segment”, partially offset by a decrease of $2 million in infrastructure costs.

The decrease in Cybersecurity gross margin percentage of 1% was due to the same reasons discussed above.

The increase in IoT gross margin of $7 million was primarily due to the reasons discussed above in “Revenue by Segment”, as the Company’s cost of sales does not significantly fluctuate based on business volume.

The increase in IoT gross margin percentage of 1% was due to the same reasons discussed above.

Licensing and Other

The decrease in Licensing and Other gross margin of $3 million was primarily due to the reasons discussed above in “Revenue by Segment”, partially offset by a decrease of $3 million in patent costs included in cost of sales in the third quarter of fiscal 2023, which did not recur.

The increase in Licensing and Other gross margin percentage of 16% was primarily due to a decrease of $3 million in patent costs included in cost of sales in the third quarter of fiscal 2023, which did not recur.

The decrease in Licensing and Other gross margin of $84 million was primarily due to patent sale in the first quarter of fiscal 2024, which had a lower relative gross margin percentage due to the cost basis of the sold assets which was de-recognized.

The increase in Licensing and Other gross margin percentage of 30% was due to the same reason discussed above.

Operating Expenses

The table below presents a comparison of research and development, selling, marketing and administration, and amortization expenses for the quarter ended November 30, 2023, compared to the quarter ended August 31, 2023 and the quarter ended November 30, 2022.

The Company believes it is meaningful to provide a sequential comparison between the third quarter of fiscal 2024 and the second quarter of fiscal 2024.

The table below presents a comparison of research and development, sales and marketing, general and administrative, and amortization expenses for the quarter ended May 31, 2024, compared to the quarter ended February 29, 2024 and the quarter ended May 31, 2023.

The Company believes it is meaningful to provide a sequential comparison between the first quarter of fiscal 2025 and the fourth quarter of fiscal 2024.

For the Three Months Ended

(in millions)

November 30, 2023 August 31, 2023 November 30, 2022

May 31, 2024 February 29, 2024 May 31, 2023

Revenue $ 144 $ 173 $ 373

1 unchanged sentence

Research and development 42 40 54

Selling, marketing and administration 85 73 89

Sales and marketing 38 41 45

General and administrative 40 53 54

Amortization 12 12 15

Impairment of long-lived assets 3 4 —

Impairment of goodwill — 35 —

Debentures fair value adjustment — — 22

2 unchanged sentences

Research and development 29.2 % 23.1 % 14.5 %

Selling, marketing and administration 48.6 % 55.3 % 52.7 %

Sales and marketing 26.4 % 23.7 % 12.1 %

General and administrative 27.8 % 30.6 % 14.5 %

Amortization 8.3 % 6.9 % 4.0 %

Impairment of long-lived assets 2.1 % 2.3 % — %

Impairment of goodwill — % 20.2 % — %

Debentures fair value adjustment — % — % 5.9 %

1 unchanged sentence

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

GAAP-based measures to adjusted measures for the three months ended November 30, 2023, August 31, 2023 and November 30, 2022.

GAAP-based measures to adjusted measures for the three months ended May 31, 2024, February 29, 2024 and May 31, 2023.

GAAP Operating Expenses

Operating expenses increased by $6 million, or 4.5%, in the third quarter of fiscal 2024, compared to the second quarter of fiscal 2024 primarily due to a benefit of $17 million related to the release of an accrued liability relating to the Company’s legacy mobile device business in the second quarter of fiscal 2024 which did not recur, an increase of $10 million in impairment of long-lived assets and an increase of $6 million in restructuring costs, partially offset by the difference between the Q3 Fiscal 2024 Debentures Fair Value Adjustment and the fair value adjustment related to the Debentures incurred in the second quarter of fiscal 2024 of $7 million, a decrease of $6 million in variable incentive plan costs, a decrease of $5 million in salaries and benefits expenses and a decrease of $4 million in the Company’s deferred share unit costs.

Operating expenses increased by $27 million, or 24.3%, in the third quarter of fiscal 2024, compared to the third quarter of fiscal 2023 primarily due to the difference between the Q3 Fiscal 2024 Debentures Fair Value Adjustment and the fair value adjustment related to the Debentures incurred in the third quarter of fiscal 2023 of $43 million, an increase of $10 million in impairment of long-lived assets and an increase of $9 million in restructuring costs, partially offset by a decrease of $13 million in amortization costs, a decrease of $11 million in variable incentive plan costs, a decrease of $7 million in salaries and benefits expenses and a benefit of $3 million related to a litigation settlement.

The Company expects sales and marketing expense to be approximately 26% to 28% of revenue, research and development 29% to 31% of revenue, and general and administration, excluding amortization, to be approximately 19% to 21% of revenue in the fourth quarter of fiscal 2024.

Operating expenses decreased by $50 million, or 27.0%, in the first quarter of fiscal 2025, compared to the fourth quarter of fiscal 2024 primarily due to the goodwill impairment charge of $35 million in the fourth quarter of fiscal 2024, which did not recur, a decrease of $12 million in restructuring costs, a decrease of $7 million in salaries and benefits expenses and a decrease of $4 million in consulting expenses, partially offset by an increase of $6 million in variable incentive plan costs and an increase of $1 million in the Company’s deferred share unit costs.

Operating expenses decreased by $55 million, or 28.9%, in the first quarter of fiscal 2025, compared to the first quarter of fiscal 2024 primarily due to the fair value adjustment related to the 2020 Debentures incurred in the first quarter of fiscal 2024 of $22 million, which did not recur, a decrease of $16 million in salaries and benefits expenses, a decrease of $5 million in credit loss provision, a decrease of $4 million in consulting expenses, a decrease of $3 million in amortization expense, a decrease of $3 million in legal expense and a decrease of $2 million in the Company’s deferred share unit costs, partially offset by an increase of $3 million in restructuring costs.

Adjusted Operating Expenses

Adjusted operating expenses increased by $1 million, or 0.9%, to $115 million in the third quarter of fiscal 2024 compared to $114 million in the second quarter of fiscal 2024.

The increase was primarily due to a benefit of $17 million related to the release of an accrued liability relating to the Company’s legacy mobile device business in the second quarter of fiscal 2024 which did not recur, partially offset by a decrease of $6 million in variable incentive plan costs, a decrease of $5 million in salaries and benefits expenses and a decrease of $4 million in the Company’s deferred share unit costs.

Adjusted operating expenses decreased by $22 million, or 16.1%, to $115 million in the third quarter of fiscal 2024, compared to $137 million in the third quarter of fiscal 2023.

The decrease was primarily due to a decrease of $11 million in variable incentive plan costs, a decrease of $7 million in salaries and benefits expenses and a benefit of $3 million related to a litigation settlement.

Adjusted operating expenses decreased by $4 million, or 3.5%, to $109 million in the first quarter of fiscal 2025 compared to $113 million in the fourth quarter of fiscal 2024.

The decrease was primarily due to a decrease of $7 million in salaries and benefits expenses, a decrease of $4 million in consulting expenses and a decrease of $2 million in sales incentive plan costs, partially offset by an increase of $6 million in variable incentive plan costs.

Adjusted operating expenses decreased by $36 million, or 24.8%, to $109 million in the first quarter of fiscal 2025, compared to $145 million in the first quarter of fiscal 2024.

The decrease was primarily due to a decrease of $16 million in salaries and benefits expense, a decrease of $5 million in credit loss provision, a decrease of $4 million in consulting expenses, a decrease of $3 million in legal expenses, a decrease of $2 million in the Company’s deferred share unit costs and a decrease of $2 million in marketing and advertising costs.

The Company previously stated that it expected its average quarterly non-GAAP operating expense run rate to be approximately $110 million in fiscal 2025.

Non-GAAP operating expense was $109 million in the first quarter of fiscal 2025.

Research and Development Expenses

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

Research and development expenses decreased by $10 million, or 19.2%, in the third quarter of fiscal 2024 compared to $52 million in the third quarter of fiscal 2023 primarily due to a decrease of $4 million in salaries and benefits expenses, a decrease of $4 million in variable incentive plan costs and a decrease of $1 million in consulting costs.

Adjusted research and development expenses decreased by $10 million, or 20.0%, to $40 million in the third quarter of fiscal 2024, compared to $50 million in the third quarter of fiscal 2023.

Research and development expenses decreased by $12 million, or 22.2%, in the first quarter of fiscal 2025 compared to $54 million in the first quarter of fiscal 2024 primarily due to a decrease of $7 million in salaries and benefits expense and a decrease of $2 million in consulting expenses.

Adjusted research and development expenses decreased by $12 million, or 23.1%, to $40 million in the first quarter of fiscal 2025, compared to $52 million in the first quarter of fiscal 2024.

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

Selling, Marketing and Administration Expenses

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

Selling, marketing and administration expenses decreased by $4 million, or 4.5%, in the third quarter of fiscal 2024 compared to $89 million in the third quarter of fiscal 2023 primarily due to a decrease of $7 million in variable incentive plan costs, a decrease of $3 million in salaries and benefits expenses, a benefit of $3 million related to a litigation settlement and a decrease of $2 million in the Company’s deferred share unit costs, partially offset by an increase of $8 million in restructuring costs and an increase of $5 million in legal expenses.

Adjusted selling, marketing and administration expenses decreased by $12 million, or 14.5%, to $71 million in the third quarter of fiscal 2024, compared to $83 million in the third quarter of fiscal 2023.

The decrease was primarily due to a decrease of $7 million in variable incentive plan costs, a decrease of $3 million in salaries and benefits expenses, a benefit of $3 million related to a litigation settlement and a decrease of $2 million in the Company’s deferred share unit costs, partially offset by an increase of $5 million in legal expenses.

Sales and Marketing Expenses

Sales and marketing expenses consist primarily of marketing, advertising and promotion, salaries and benefits, information technology costs and travel expenses.

Sales and marketing expenses decreased by $7 million, or 15.6% in fiscal 2025, in the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024, primarily due to a decrease of $6 million in salaries and benefits expense and a decrease of $2 million in marketing and advertising costs.

Adjusted sales and marketing expenses decreased by $8 million, or 18.2%, to $36 million in the first quarter of fiscal 2025 compared to $44 million in the first quarter of fiscal 2024.

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

General and Administrative Expenses

General and administration expenses consist primarily of salaries and benefits, external advisory fees, information technology costs, office and related staffing infrastructure costs.

General and administrative expenses decreased by $14 million, or 25.9%, in the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024.

The decrease was primarily due to a decrease of $5 million in credit loss provision, a decrease of $3 million in salaries and benefits expense, a decrease of $2 million in legal expense, a decrease of $2 million in the Company’s deferred share unit cost and a decrease of $2 million in stock compensation expense, partially offset by an increase of $3 million in restructuring costs.

Adjusted general and administrative expenses decreased by $15 million, or 34.1%, to $29 million in the first quarter of fiscal 2025 compared to $44 million in the fourth quarter of fiscal 2024.

The decrease was primarily due to a decrease of $5 million in credit loss provision, a decrease of $3 million in salaries and benefits, a decrease of $2 million in legal expense, a decrease of $2 million in the Company’s deferred share unit cost and a decrease of $1 million in lease expense.

Amortization Expense

The table below presents a comparison of amortization expense relating to property, plant and equipment and intangible assets recorded as amortization or cost of sales for the quarter ended November 30, 2023 compared to the quarter ended November 30, 2022.

The table below presents a comparison of amortization expense relating to property, plant and equipment and intangible assets recorded as amortization or cost of sales for the quarter ended May 31, 2024 compared to the quarter ended May 31, 2023.

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

2 unchanged sentences

Included in Operating Expense

November 30, 2023 November 30, 2022 Change

May 31, 2024 May 31, 2023 Change

Property, plant and equipment $ 2 $ 3 $ (1)

2 unchanged sentences

Included in Cost of Sales

November 30, 2023 November 30, 2022 Change

Property, plant and equipment $ — $ — $ —

May 31, 2024 May 31, 2023 Change

Intangible assets $ 1 $ 1 $ —

Total $ 1 $ 2 $ (1)

Amortization included in Operating Expense

The decrease in amortization expense included in operating expense of $3 million was primarily due to the lower cost base of acquired technology assets.

Adjusted amortization expense was $4 million in the third quarter of fiscal 2024, consistent with $4 million in the third quarter of fiscal 2023.

Adjusted amortization expense decreased by $1 million to $4 million in the first quarter of fiscal 2025 compared to $5 million in the first quarter of fiscal 2024 was primarily due to the lower cost base of assets.

Amortization included in Cost of Sales

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

Amortization expense relating to certain property, plant and equipment and certain intangible assets employed in the Company’s service operations was $1 million in the first quarter of fiscal 2025, consistent with the first quarter of fiscal 2024.

Investment Income, Net

Investment income, net, which includes the interest expense from the Debentures, was $5 million in the third quarter of fiscal 2024 and increased by $3 million from investment income, net of $2 million in the third quarter of fiscal 2023 due to interest income on significant financing components within certain revenue contracts with customers and a higher yield on cash and investments, partially offset by lower average cash and investment balances.

For the third quarter of fiscal 2024, the Company’s net effective income tax expense rate was approximately 250% (third quarter of fiscal 2023 - net effective income tax expense rate was undefined due to net income before taxes of nil).

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

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

Net Income (Loss)

The Company’s net loss for the third quarter of fiscal 2024 was $21 million, or $0.04 basic loss per share and $0.05 diluted loss per share on a U.S.

GAAP basis (third quarter of fiscal 2023 - net loss of $4 million, or $0.01 basic loss per share and $0.09 diluted loss per share).

The increase in net loss of $17 million was primarily due to an increase in operating expenses, as described above in “Operating Expenses” and an increase in income taxes, partially offset by an increase in revenue, as described above in “Revenue by Segment”, an increase in gross margin percentage, as described above in “Consolidated Gross Margin Percentage” and an increase in investment income, net.

Adjusted net income was $3 million in the third quarter of fiscal 2024 (third quarter of fiscal 2023 - adjusted net loss of $30 million).

The increase in adjusted net income of $33 million was primarily due to a decrease in operating expenses as described above in “Operating Expenses”, an increase in revenue as described above in “Revenue by Segment”, an increase in gross margin percentage, as described above in “Consolidated Gross Margin Percentage” and an increase in investment income, net.

The Company previously stated that it expected to achieve non-GAAP profitability and to generate positive operating cash flow in the fourth quarter of fiscal 2024 and for fiscal 2024 as a whole in each case.

These expectations were dependent, in part, on the Company closing a certain set of large government Cybersecurity deals in the fourth quarter of fiscal 2024.

The Company no longer expects to meet this expectation due to the actual and expected performance of Cybersecurity and IoT for fiscal 2024.

The Company expects to further improve operating cash flow in the fourth quarter of fiscal 2024.

The weighted average number of shares outstanding was 584 million common shares for basic loss per share and 638 million common shares for diluted loss per share for the third quarter of fiscal 2024 (third quarter of fiscal 2023 - 579 million common shares for basic loss per share and 640 million common shares for diluted loss per share).

Results of Operations - Nine months ended November 30, 2023 compared to the nine months ended November 30, 2022

The following section sets forth certain consolidated statements of operations data, which is expressed in millions of dollars, except for share and per share amounts and as a percentage of revenue, for the nine months ended November 30, 2023 and November 30, 2022:

For the Nine Months Ended

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

November 30, 2023 November 30, 2022 Change

Revenue $ 680 $ 505 $ 175

Gross margin 391 319 72

Operating expenses 460 545 (85)

Investment income (loss), net 15 (1) 16

Loss before income taxes (54) (227) 173

Provision for (recovery of) income taxes 20 12 8

Net loss $ (74) $ (239) $ 165

Loss per share - reported

Basic $ (0.13) $ (0.41) $ 0.28

Diluted $ (0.13) $ (0.54) $ 0.41

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

Basic 583,559 577,718

583,559 638,551

______________________________

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

GAAP basis for the first nine months of fiscal 2024 does not include the dilutive effect of the Debentures as to do so would be anti-dilutive.

Diluted loss per share on a U.S.

GAAP basis for the first nine months of fiscal 2024 and fiscal 2023 do not include the dilutive effect of stock-based compensation as to do so would be anti-dilutive.

Revenue by Segment

Comparative breakdowns of revenue by segment are set forth below.

For the Nine Months Ended

(in millions)

November 30, 2023 November 30, 2022 Change

Revenue by Segment

Cybersecurity $ 286 $ 330 $ (44)

IoT 149 153 (4)

Licensing and Other 245 22 223

$ 680 $ 505 $ 175

% Revenue by Segment

Cybersecurity 42.1 % 65.3 %

IoT 21.9 % 30.3 %

Licensing and Other 36.0 % 4.4 %

100.0 % 100.0 %

Cybersecurity

The decrease in Cybersecurity revenue of $44 million was primarily due to a decrease of $26 million relating to product revenue in BlackBerry Spark, a decrease of $9 million relating to product revenue in Secusmart and a decrease of $5 million in professional services.

The decrease in IoT revenue of $4 million was primarily due to a decrease of $8 million in professional services and a decrease of $7 million in BlackBerry QNX development seat revenue, partially offset by an increase of $10 million in BlackBerry QNX royalty revenue.

Licensing and Other

The increase in Licensing and Other revenue of $223 million was primarily due to an increase of $218 million related to the completed Malikie Transaction and an increase of $5 million in revenue from the Company’s intellectual property licensing arrangements.

GAAP Revenue by Geography

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

GAAP basis are set forth in the following table:

For the Nine Months Ended

(in millions)

November 30, 2023 November 30, 2022 Change

Revenue by Geography

North America $ 466 $ 266 $ 200

Europe, Middle East and Africa 126 176 (50)

Other regions 88 63 25

$ 680 $ 505 $ 175

% Revenue by Geography

North America 68.5 % 52.7 %

Europe, Middle East and Africa 18.6 % 34.9 %

Other regions 12.9 % 12.4 %

100.0 % 100.0 %

North America Revenue

The increase in North America revenue of $200 million was primarily due to an increase of $223 million in Licensing and Other revenue due to the reasons discussed above in “Revenue by Segment” and an increase of $3 million relating to product revenue in Secusmart, partially offset by a decrease of $10 million in professional services and a decrease of $14 million in product revenue in BlackBerry Spark.

Europe, Middle East and Africa Revenue

The decrease in Europe, Middle East and Africa revenue of $50 million was primarily due to a decrease of $40 million relating to product revenue in Secusmart, a decrease of $11 million in product revenue in BlackBerry Spark and a decrease of $4 million in BlackBerry QNX development seat revenue, partially offset by an increase of $7 million in BlackBerry QNX royalty revenue.

Other Regions Revenue

The increase in other regions of $25 million was primarily due to an increase of $26 million relating to product revenue in Secusmart and an increase of $3 million in professional services, partially offset by a decrease in $3 million in BlackBerry QNX development seat revenue and a decrease of $1 million relating to product revenue in BlackBerry Spark.

Consolidated Gross Margin

Consolidated gross margin increased by $72 million to approximately $391 million in the first nine months of fiscal 2024 (first nine months of fiscal 2023 - $319 million).

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

Consolidated Gross Margin Percentage

Consolidated gross margin percentage decreased by 5.7%, to approximately 57.5% of consolidated revenue in the first nine months of fiscal 2024 (first nine months of fiscal 2023 - 63.2%).

The decrease was primarily due to a change in mix, specifically higher contribution from Licensing and Other, which had a lower gross margin percentage due to the completed Malikie Transaction, partially offset by a higher gross margin contribution from Secusmart software licenses, which had a higher relative gross margin percentage.

Gross Margin by Segment

See “Business Overview” and “Third Quarter Fiscal 2024 Summary Results of Operations” for information about the Company’s operating segments and the basis of operating segment results.

For the Nine Months Ended

(in millions)

Cybersecurity IoT Licensing and Other Segment Totals

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

2023 2022 2023 2022 2023 2022 2023 2022

Segment revenue $ 286 $ 330 $ (44) $ 149 $ 153 $ (4) $ 245 $ 22 $ 223 $ 680 $ 505 $ 175

Segment cost of sales 110 149 (39) 26 27 (1) 150 8 142 286 184 102

Segment gross margin $ 176 $ 181 $ (5) $ 123 $ 126 $ (3) $ 95 $ 14 $ 81 $ 394 $ 321 $ 73

Segment gross margin % 62 % 55 % 7 % 83 % 82 % 1 % 39 % 64 % (25 %) 58 % 64 % (6 %)

Cybersecurity

The decrease in Cybersecurity gross margin of $5 million was primarily due to the reasons discussed above in “Revenue by Segment”, partially offset by a decrease of $13 million in infrastructure costs and a change in mix, specifically a higher gross margin contribution from Secusmart software licenses, which had a higher relative gross margin percentage.

The increase in Cybersecurity gross margin percentage of 7% was primarily due to a decrease of $13 million in infrastructure costs and a change in mix, specifically a higher gross margin contribution from Secusmart software licenses, which had a higher relative gross margin percentage.

The decrease of IoT gross margin of $3 million was primarily due to the reasons discussed above in “Revenue by Segment”, as the Company’s cost of sales does not significantly fluctuate based on business volume.

The increase in IoT gross margin percentage of 1% was primarily due to the reasons discussed above in “Revenue by Segment”, as the Company’s cost of sales does not significantly fluctuate based on business volume.

Licensing and Other

The increase in Licensing and Other gross margin of $81 million was primarily due to the completed Malikie Transaction.

The decrease in Licensing and Other gross margin percentage of 25% was primarily due to the completed Malikie Transaction, which had a lower relative gross margin percentage due to the cost basis of the sold assets which was de-recognized.

Operating Expenses

The table below presents a comparison of research and development, selling, marketing and administration, and amortization expense for the nine months ended November 30, 2023, compared to the nine months ended November 30, 2022.

For the Nine Months Ended

(in millions)

November 30, 2023 November 30, 2022 Change

Revenue $ 680 $ 505 $ 175

Operating expenses

Research and development 146 159 (13)

Selling, marketing and administration 258 257 1

Amortization 42 78 (36)

Impairment of long-lived assets 11 4 7

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

Debentures fair value adjustment 3 (112) 115

Litigation settlement — 165 (165)

Total $ 460 $ 545 $ (85)

Operating Expense as % of Revenue

Research and development 21.5 % 31.5 %

Selling, marketing and administration 37.9 % 50.9 %

Amortization 6.2 % 15.4 %

Impairment of long-lived assets 1.6 % 0.8 %

Gain on sale of property, plant and equipment, net — % (1.2) %

Debentures fair value adjustment 0.4 % (22.2) %

Litigation settlement — % 32.7 %

Total 67.6 % 107.9 %

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

GAAP-based measures to adjusted measures for the nine months ended November 30, 2023 and November 30, 2022.

GAAP Operating Expenses

Operating expenses decreased by $85 million, or 15.6%, in the first nine months of fiscal 2024, compared to the first nine months of fiscal 2023.

The decrease was primarily due to a $165 million litigation settlement in the first nine months of fiscal 2023 which did not recur, a decrease of $36 million in amortization costs, a benefit of $17 million related to the release of an accrued liability relating to the Company’s legacy mobile device business and a decrease of $14 million in salaries and benefits expenses, partially offset by the difference between the Fiscal 2024 Debentures Fair Value Adjustment and the fair value adjustment related to the Debentures incurred in the first nine months of fiscal 2023 of $115 million, an increase of $13 million in restructuring costs, an increase of $7 million in impairment of long-lived assets, a $6 million gain on sale of property, plant and equipment, net, in the first nine months fiscal 2023 which did not recur and an increase of $6 million in stock based compensation expense.

Adjusted Operating Expenses

Adjusted operating expenses decreased by $23 million, or 5.8%, to $375 million in the first nine months of fiscal 2024, compared to $398 million the first nine months of 2023.

The decrease was primarily due to a benefit of $17 million related to the release of an accrued liability relating to the Company’s legacy mobile device business, a decrease of $14 million in salaries and benefits expenses and a decrease of $9 million in variable incentive plan costs, partially offset by a $6 million gain on sale of property, plant and equipment, net, in the first nine months of fiscal 2023 which did not recur, an increase of $4 million in legal expenses, a decrease in benefits of $4 million in government subsidies resulting from claims filed for the Canada Emergency Wage Subsidy and Hardest-Hit Business Recovery Program programs (“COVID-19 subsidies”) and an increase of $2 million in amortization costs.

Research and Development Expenses

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

Research and development expenses decreased by $13 million, or 8.2%, in the first nine months of fiscal 2024, compared to the first nine months of fiscal 2023.

The decrease was primarily due to a decrease of $7 million in salaries and benefits expenses, a decrease of $3 million in variable incentive plan costs and a decrease of $1 million in consulting costs.

Adjusted research and development expenses decreased by $13 million, or 8.5%, to $140 million in the first nine months of fiscal 2024, compared to $153 million in the first nine months of fiscal 2023.

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

Selling, Marketing and Administration Expenses

Selling, marketing and administration expenses increased by $1 million, or 0.4%, in the first nine months of fiscal 2024 compared to the first nine months of fiscal 2023 primarily due to an increase in $12 million in restructuring costs, an increase of $6 million in stock compensation expense, an increase of $4 million in legal expenses and a decrease in benefits of $4 million in COVID-19 subsidies, partially offset by a benefit of $17 million related to the release of an accrued liability relating to the Company’s legacy mobile device business and a decrease of $6 million in variable incentive plan costs.

Adjusted selling, marketing and administration expenses decreased by $18 million, or 7.5%, to $222 million in the first nine months of fiscal 2024, compared to $240 million the first nine months of fiscal 2023.

The decrease was primarily due to a benefit of $17 million related to the release of an accrued liability relating to the Company’s legacy mobile device business, a decrease of $6 million in variable incentive costs and a decrease of $5 million in salaries and benefits, partially offset by an increase of $4 million in legal expenses, a decrease in benefits of $4 million in COVID-19 subsidies and an increase of $2 million in the Company’s deferred share unit costs.

Amortization Expense

The table below presents a comparison of amortization expense relating to property, plant and equipment and intangible assets recorded as amortization or cost of sales for the nine months ended November 30, 2023 compared to the nine months ended November 30, 2022.

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

For the Nine Months Ended

(in millions)

Included in Operating Expense

November 30, 2023 November 30, 2022 Change

Property, plant and equipment $ 6 $ 7 $ (1)

Intangible assets 36 71 (35)

Total $ 42 $ 78 $ (36)

Included in Cost of Sales

November 30, 2023 November 30, 2022 Change

Property, plant and equipment $ 2 $ 2 $ —

Intangible assets 2 5 (3)

Total $ 4 $ 7 $ (3)

Amortization included in Operating Expense

The decrease in amortization expense included in operating expense of $36 million was primarily due to the lower cost base of acquired technology assets.

Adjusted amortization expense increased by $2 million to $13 million in the first nine months of fiscal 2024 compared to $11 million in the first nine months of fiscal 2023 due to an increase in patent amortization expense included in operating expenses as a result of the decrease in revenue from the Company’s intellectual property licensing arrangements.

Amortization included in Cost of Sales

The decrease in amortization expense relating to certain property, plant and equipment and certain intangible assets employed in the Company’s service operations of $3 million was due to the lower cost base of assets.

Investment Income (Loss), Net

Investment income, net, which includes the interest expense from the Debentures, was $15 million in the first nine months of fiscal 2024 and increased by $16 million from investment loss, net of $1 million in the first nine months of fiscal 2023 due to a higher yield on cash and investments and interest income on significant financing components within certain revenue contracts with customers, partially offset by lower average cash and investment balances.

For the first nine months of fiscal 2024, the Company’s net effective income tax expense rate was approximately 37% (first nine months of fiscal 2023 - net effective income tax expense rate of approximately 5%).

Investment income, net, which includes the interest expense from the Debentures, was $5 million in the first quarter of fiscal 2025 and increased by $2 million from investment income, net of $3 million in the first quarter of fiscal 2024 primarily due to unrealized gains recognized from observable price changes on non-marketable equity investments without readily determinable fair value and interest income on significant financing components within certain revenue contracts with customers, partially offset by a lower average cash and investment balance.

For the first quarter of fiscal 2025, the Company’s net effective income tax expense rate was approximately 24% (first quarter of fiscal 2024 - net effective income tax expense rate of approximately 38%).

in particular, any change in loss carry forwards or research and development credits, amongst other items, was offset by a corresponding adjustment of the valuation allowance.

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

Net Income (Loss)

The Company’s net loss for the first nine months of fiscal 2024 was $74 million, or $0.13 basic and diluted loss per share on a U.S.

GAAP basis (first nine months of fiscal 2023 - net loss of $239 million, or $0.41 basic loss per share and $0.54 diluted loss per share).

The decrease in net loss of $165 million was primarily due to an increase revenue as described above in “Revenue by Segment”, a decrease in operating expenses, as described above in “Operating Expenses” and an increase in investment income (loss), net, partially offset by a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage”.

Adjusted net income was $14 million in the first nine months of fiscal 2024 (first nine months of fiscal 2023 - adjusted net loss of $90 million).

The increase in adjusted net income of $104 million was primarily due to the same reasons described above on a U.S.

The weighted average number of shares outstanding was 584 million for basic and diluted loss per share for the first nine months of November 30, 2023.

The weighted average number of shares outstanding was 578 million for basic loss per share and 639 million for diluted loss per share for the first nine months of November 30, 2022.

Common Shares Outstanding

On December 18, 2023, there were 585 million voting common shares, options to purchase 0.3 million voting common shares, 13 million restricted share units and 2 million deferred share units outstanding.

In addition, 25 million common shares are issuable upon conversion in full of the Extension Debentures as described in Note 6 to the Consolidated Financial Statements.

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

The Company’s net loss for the first quarter of fiscal 2025 was $42 million, or $0.07 basic and diluted loss per share on a U.S.

GAAP basis (first quarter of fiscal 2024 - net loss of $11 million, or $0.02 basic and diluted loss per share).

The increase in net loss of $31 million was primarily due to a decrease in revenue, as described above in “Revenue by Segment”, partially offset by a decrease in operating expenses, as described above in “Operating Expenses” and an increase in gross margin percentage, as described above in “Consolidated Gross Margin Percentage”.

Adjusted net loss was $15 million in the first quarter of fiscal 2025, or $0.03 adjusted basic loss per share (first quarter of fiscal 2024 - adjusted net income of $35 million, or $0.06 adjusted basic earnings per share).

The decrease in adjusted net income of $50 million was primarily due to a decrease in revenue as described above in “Revenue by Segment”, partially offset by a decrease in operating expenses as described above in “Operating Expenses”, and an increase in gross margin percentage, as described above in “Consolidated Gross Margin Percentage”.

The Company expected a sequential increase in operating cash usage in the first quarter of fiscal 2025.

Operating cash flow usage was $15 million in the first quarter of fiscal 2025 and consistent with the fourth quarter of fiscal 2024 due to timing of collections.

The Company expects a sequential increase in operating cash usage in the second quarter of fiscal 2025, before improvement in the third quarter of fiscal 2025.

The Company previously stated that it expected non-GAAP EPS to be in the range of ($0.04) to ($0.06), and adjusted EBITDA to be in the range of negative $15 million to negative $25 million in the first quarter of fiscal 2025.

Non-GAAP EPS was ($0.03) due to better-than-expected revenue.

Adjusted EBITDA was negative $5 million in the first quarter of fiscal 2025 due to better-than-expected revenue.

The Company expects non-GAAP EPS to be in the range of ($0.02) to ($0.04), and adjusted EBITDA to be in the range of negative $5 million to negative $15 million in the second quarter of fiscal 2025.

The Company expects non-GAAP EPS to be in the range of ($0.03) to ($0.07), and adjusted EBITDA to be in the range of breakeven to $10 million for fiscal 2025 as a whole.

The Company does not provide a reconciliation of expected adjusted EBITDA and expected Non-GAAP basic EPS for the second quarter and full fiscal year 2025 to the most directly comparable expected GAAP measures because it is unable to predict with reasonable certainty, among other things, restructuring charges and impairment charges and, accordingly, a reconciliation is not available without unreasonable effort.

These items are uncertain, depend on various factors, and could have a material impact on GAAP reported results for the guidance period.

The weighted average number of shares outstanding was 590 million common shares for basic and diluted loss per share for the first quarter of fiscal 2025 (first quarter of fiscal 2024 - 583 million common shares for basic and diluted loss per share).

Financial Condition

Liquidity and Capital Resources

Cash, cash equivalents, and investments decreased by $216 million to $271 million as at November 30, 2023 from $487 million as at February 28, 2023, primarily due to the repayment of the 2020 Debentures at maturity, partially offset by the issuance of the Extension Debentures, the completed Malikie Transaction and changes in working capital.

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

dollars as at November 30, 2023.

Cash, cash equivalents, and investments decreased by $15 million to $283 million as at May 31, 2024 from $298 million as at February 29, 2024, primarily due to changes in working capital.

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

(in millions)

November 30, 2023 February 28, 2023 Change

May 31, 2024 February 29, 2024 Change

Cash and cash equivalents $ 143 $ 175 $ (32)

5 unchanged sentences

(in millions)

November 30, 2023 February 28, 2023 Change

May 31, 2024 February 29, 2024 Change

Current assets $ 458 $ 508 $ (50)

2 unchanged sentences

Current Assets

The decrease in current assets of $293 million at the end of the third quarter of fiscal 2024 from the end of the fourth quarter of fiscal 2023 was primarily due to a decrease of $138 million in other current assets, a decrease in short term investments of $131 million, a decrease in cash and cash equivalents of $85 million and a decrease in other receivables of $4 million, partially offset by an increase in accounts receivable, net of allowance of $63 million and an increase in taxes receivables of $2 million.

At November 30, 2023, other current assets were $44 million, a decrease of $138 million from February 28, 2023.

The decrease was primarily due to a decrease in intellectual property of $141 million as a result of the completed Malikie Transaction, partially offset by an increase of $1 million in prepaid insurance.

At November 30, 2023, other receivables were $8 million, a decrease of $4 million from February 28, 2023.

The decrease was primarily due to a decrease of $3 million relating to GST/VAT receivables.

At November 30, 2023, accounts receivable, net of allowance was $183 million, an increase of $63 million from February 28, 2023.

The increase was primarily due to an increase in software and services revenue recognized over the three months ended November 30, 2023 compared to the three months ended February 28, 2023 and an increase in days sales outstanding to 81 days at the end of the third quarter of fiscal 2024 from 75 days at the end of the fourth quarter of fiscal 2023.

At November 30, 2023, income taxes receivable was $5 million, an increase of $2 million from February 28, 2023, which was primarily due to tax installments and prepayments required in certain taxing jurisdictions.

The decrease in current assets of $50 million at the end of the first quarter of fiscal 2025 from the end of the fourth quarter of fiscal 2024 was primarily due to a decrease in accounts receivable, net of allowance of $51 million, a decrease in cash and cash

equivalents of $32 million, and a decrease in taxes receivables of $1 million, partially offset by an increase in short term investments of $24 million and an increase of $10 million in other current assets.

At May 31, 2024, accounts receivable, net of allowance was $148 million, a decrease of $51 million from February 29, 2024.

The decrease was primarily due to lower revenue recognized over the three months ended May 31, 2024 compared to the three months ended February 29, 2024, partially offset by an increase in days sales outstanding to 111 days at the end of the first quarter of fiscal 2025 from 100 days at the end of the fourth quarter of fiscal 2024.

At May 31, 2024, income taxes receivable was $3 million, a decrease of $1 million from February 29, 2024.

The decrease was primarily due to the utilization of tax receivable balances against other tax liabilities.

At May 31, 2024, other receivables were $21 million, consistent with February 29, 2024.

At May 31, 2024, other current assets were $57 million, an increase of $10 million from February 29, 2024.

The increase was primarily due to an increase of $6 million in prepaid software maintenance, an increase of $3 million in prepaid subcontractor services and an increase of $2 million in prepaid rent.

Current Liabilities

The decrease in current liabilities of $221 million at the end of the third quarter of 2024 from the end of the fourth quarter of fiscal 2023 was primarily due to a decrease in the Debentures of $217 million due to the repayment of the 2020 Debentures at maturity, which was partially offset by the issuance of the Extension Debentures, a decrease in accrued liabilities of $18 million

and a decrease in accounts payable of $7 million, partially offset by an increase in income taxes payable of $13 million and an increase in deferred revenue, current of $8 million.

Accrued liabilities were $125 million at the end of the third quarter of 2024, reflecting a decrease of $18 million compared to February 28, 2023, which was primarily due to a decrease of $17 million related to the release of an accrued liability relating to the Company’s legacy mobile device business and a decrease of $5 million in variable incentive plan accruals, partially offset by an increase of $2 million in legal accruals.

The decrease in current liabilities of $35 million at the end of the first quarter of 2025 from the end of the fourth quarter of fiscal 2024 was primarily due to a decrease in deferred revenue, current of $20 million, a decrease in accounts payable of $11 million and a decrease in accrued liabilities of $5 million, partially offset by an increase in income taxes payable of $1 million.

Deferred revenue, current was $174 million, which reflects a decrease of $20 million compared to February 29, 2024 that was attributable to a decrease of $13 million in deferred revenue, current related to BlackBerry Spark, a decrease in $5 million in deferred revenue, current related to BlackBerry QNX and a decrease of $2 million in deferred revenue, current related to Secusmart.

Accounts payable were $6 million, reflecting a decrease of $11 million from February 29, 2024, which was primarily due to timing of payments.

Accrued liabilities were $112 million at the end of the first quarter of 2025, reflecting a decrease of $5 million compared to February 29, 2024, which was primarily due to a decrease of $9 million in accrued restructuring costs and a decrease of $5 million in variable incentive plan accrual, partially offset by an increase of $5 million in accrued cost of goods sold.

Income taxes payable were $29 million, reflecting an increase of $1 million compared to February 29, 2024, which was primarily due to changes in the quarterly tax provision.

Deferred revenue, current was $183 million, which reflects an increase of $8 million compared to February 28, 2023 that was attributable to an increase of $15 million in deferred revenue, current related to BlackBerry Spark and an increase in $5 million in deferred revenue, current related to BlackBerry AtHoc, partially offset by a decrease of $11 million in deferred revenue, current related to BlackBerry QNX.

Cash flows for the nine months ended November 30, 2023 compared to the nine months ended November 30, 2022 were as follows:

For the Nine Months Ended

Cash flows for the three months ended May 31, 2024 compared to the three months ended May 31, 2023 were as follows:

For the Three Months Ended

(in millions)

November 30, 2023 November 30, 2022 Change

May 31, 2024 May 31, 2023 Change

Net cash flows provided by (used in):

2 unchanged sentences

Financing activities 1 2 (1)

Effect of foreign exchange loss on cash and cash equivalents — (3) 3

Net decrease in cash and cash equivalents $ (87) $ (124) $ 37

Net increase (decrease) in cash and cash equivalents $ (40) $ 63 $ (103)

Operating Activities

1 unchanged sentence

Investing Activities

During the nine months ended November 30, 2023, cash flows provided by investing activities were $112 million and included cash provided by transactions involving the acquisitions of short-term and long-term investments, net of the proceeds on sale or maturity in the amount of $129 million, offset by cash used in the acquisition of intangible assets of $12 million, and the acquisition of property, plant and equipment of $5 million.

For the same period in the prior fiscal year, cash flows provided by investing activities were $126 million and included cash provided by transactions involving the acquisitions of short-term and long-term investments, net of the proceeds on sale or maturity in the amount of $138 million and proceeds on sale of property, plant and equipment of $17 million, offset by cash used in the acquisition of intangible assets of $24 million and the acquisition of property, plant and equipment of $5 million.

During the three months ended May 31, 2024, cash flows used in investing activities were $26 million and included cash used in transactions involving the acquisitions of short-term and long-term investments, net of the proceeds on sale or maturity in the amount of $24 million, cash used in the acquisition of intangible assets of $1 million, and the acquisition of property, plant and equipment of $1 million.

For the same period in the prior fiscal year, cash flows used in investing activities were $38 million and included cash used in transactions involving the acquisitions of short-term and long-term investments, net of the proceeds on sale or maturity in the amount of $28 million, acquisition of intangible assets of $8 million, and the acquisition of property, plant and equipment of $2 million.

Financing Activities

The decrease in cash flows used in financing activities was $217 million for the first nine months of fiscal 2024 due to the repayment of the 2020 Debentures at maturity on November 13, 2023, partially offset by the issuance of the Extension Debentures as described above in “Business Overview - Debt Repayment and New Issuance” and a decrease in common shares issued upon the exercise of stock options and under the employee share purchase plan.

Debenture Financing and Other Funding Sources

See Note 6 to the Consolidated Financial Statements for a description of the Debentures.

The decrease in cash flows provided by financing activities was $1 million for the first three months of fiscal 2025 due a decrease in common shares issued upon the exercise of stock options and under the employee share purchase plan.

Debt Financing and Other Funding Sources

See Note 5 to the Consolidated Financial Statements for a description of the Company’s $200 million aggregate principal amount of 3.00% senior convertible unsecured notes issued in January 2024 (the “Notes”) and the $365 million aggregate principal amount of convertible debentures issued in September 2020, which matured in November 2023 (the “2020 Debentures” and, collectively with the Notes, the “Debentures”).

The Company has $17 million in collateralized outstanding letters of credit in support of certain leasing arrangements entered into in the ordinary course of business.

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

Cash, cash equivalents, and investments were approximately $271 million as at November 30, 2023.

Cash, cash equivalents, and investments were approximately $283 million as at May 31, 2024.

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

The Company has experienced recent operating losses and the Extension Debentures will mature on February 15, 2024, with an option for the parties to extend the maturity date to May 15, 2024, by mutual agreement, as described in Note 6 to the Consolidated Financial Statements.

The Company believes it 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, 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.

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

Contractual and Other Obligations

The following table sets out aggregate information about the Company’s contractual and other obligations and the periods in which payments are due as at November 30, 2023:

The following table sets out aggregate information about the Company’s contractual and other obligations and the periods in which payments are due as at May 31, 2024:

(in millions)

5 unchanged sentences

Total $ 357 $ 98 $ 259

Total contractual and other obligations as at November 30, 2023 decreased by approximately $269 million as compared to the February 28, 2023 balance of approximately $556 million, which was attributable to a decreases in debt interest and principal payments as a result of the repayment of the 2020 Debentures at maturity on November 13, 2023, partially offset by the issuance of the Extension Debentures as described above in “Business Overview - Debt Repayment and New Issuance” and a decrease in purchase obligations and commitments.

Total contractual and other obligations as at May 31, 2024 increased by approximately $13 million as compared to the February 29, 2024 balance of approximately $344 million, which was attributable to an increase in purchase obligations and commitments, partially offset by a decrease in operating lease obligations.

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

Accounting Policies and Critical Accounting Estimates

There have been no changes to the Company’s accounting policies or critical accounting estimates from those described under “Accounting Policies and Critical Accounting Estimates” in the Annual MD&A, other than those noted in Note 1 to the Consolidated Financial Statements.

There have been no changes to the Company’s accounting policies or critical accounting estimates from those described under “Accounting Policies and Critical Accounting Estimates” in the Annual MD&A, other than the accounting standards adopted during fiscal 2025 as described in Note 1 to the Consolidated Financial Statements.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis