BLACKBERRY Ltd 10-K

ITEM 7. 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 consolidated financial statements and the accompanying notes (the “Consolidated Financial Statements”) of BlackBerry Limited, for the fiscal year ended February 28, 2025. The Consolidated Financial Statements are presented in U.S. dollars and have been prepared in accordance with U.S. GAAP. All financial information in this MD&A is presented in U.S. dollars, unless otherwise indicated. Readers should carefully review Part I, Item 1A “Risk Factors” and other documents filed by the Company from time to time with the Securities and Exchange Commission (“SEC”) and other securities regulators. A number of factors may materially affect our business, financial condition, operating results and prospects. These factors include but are not limited to those set forth in Part I, Item 1A “Risk Factors” and elsewhere in this Annual Report on Form 10-K. Any one of these factors, and other factors that we are unaware of, or currently deem immaterial, may cause our actual results to differ materially from recent results or from our anticipated future results. Please refer to our MD&A included in our Annual Report on 10-K for the fiscal year ended February 29, 2024 for a comparative discussion of our fiscal 2024 financial results as compared to our fiscal 2023 financial results, which is incorporated herein by reference. Additional information about the Company can be found on SEDAR+ at www.sedarplus.ca and on the SEC’s website at www.sec.gov. Cylance Sale On February 3, 2025, the Company completed the sale of its Cylance endpoint security assets and related liabilities to Arctic Wolf Network, Inc. (“Arctic Wolf”) for $160.0 million of cash, subject to certain adjustments of approximately $39.1 million, and 5.5 million common shares of Arctic Wolf. As a result of the Cylance sale, it is no longer reported alongside UEM, SecuSuite and AtHoc as the Cybersecurity segment, and those three businesses are now reported separately from Cylance as the Secure Communications segment. The financial results of Cylance are presented as discontinued operations and are included in “loss from discontinued operations, net of tax” in the Consolidated Statements of Operations and have been removed from the presentation of results from continuing operations. Prior period comparatives in the financial statements, and throughout this Annual Report on Form 10-K where applicable, have been recast to reflect this change Cautionary Note Regarding Forward-Looking Statements This Annual Report on Form 10-K contains forward-looking statements within the meaning of certain securities laws, including under the U.S. Private Securities Litigation Reform Act of 1995 and applicable Canadian securities laws, including statements relating to: • the Company’s plans, strategies and objectives, including its intentions to increase and enhance its product and service offerings and to patent new innovations; • the Company’s expectations with respect to its revenue, segment adjusted EBITDA, adjusted Corporate general and administrative costs, adjusted EBITDA, non-GAAP EPS and operating cash flow in the first quarter of fiscal 2026, and these items for fiscal 2026 as a whole; • the Company’s estimates of purchase obligations and other contractual commitments; and • the Company’s expectations with respect to the sufficiency of its financial resources. 28 The words “expect”, “anticipate”, “estimate”, “may”, “will”, “should”, “could”, “intend”, “believe”, “target”, “plan” and similar expressions are intended to identify forward-looking statements in this Annual Report on Form 10-K, including in the sections in Part I, Item 1 “Business” entitled “The Company: A heritage of innovation”, “Industry Background - QNX”, “Competition and Competitive Strengths - QNX”, “Intellectual Property” and “Human Capital”, and in the sections of this MD&A entitled, “Results of Operations - Fiscal year ended February 28, 2025 compared to fiscal year ended February 29, 2024 - Revenue - Revenue by Segment”, “Results of Operations - Fiscal year ended February 28, 2025 compared to fiscal year ended February 29, 2024 - Gross Margin and Adjusted EBITDA by Segment”, “Results of Operations - Fiscal year ended February 28, 2025 compared to fiscal year ended February 29, 2024 - Operating Expenses - General and Administrative Expenses”, “Results of Operations - Fiscal year ended February 28, 2025 compared to fiscal year ended February 29, 2024 - Net 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, and the Company’s expectations regarding the planned separation 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 this Annual Report on Form 10-K. 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 this Annual Report on Form 10-K. The Company has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by applicable law. Business Overview The Company provides enterprises and governments the intelligent software and services that power the world around us. Based in Waterloo, Ontario, the Company’s high-performance foundational software enables major automakers and industrial giants alike to unlock transformative applications, drive new revenue streams and launch innovative business models, all without sacrificing safety, security, and reliability. With a deep heritage in Secure Communications, BlackBerry delivers operational resiliency with a comprehensive, highly secure, and extensively certified portfolio for mobile fortification, mission-critical communications, and critical events management. The Company’s common shares trade under the ticker symbol “BB” on the New York Stock Exchange and the Toronto Stock Exchange. The Company was incorporated under the Business Corporations Act (Ontario) on March 7, 1984. The Company continued to execute on its strategy in fiscal 2025 and announced the following significant achievements: Products and Innovation: • QNX announced that its embedded technology powers more than 255 million vehicles; • QNX launched its General Embedded Development Platform to accelerate developer innovation for embedded systems; • QNX introduced a software-defined functional safety platform for industrial automation in collaboration with Intel; • QNX added QNX® Containers to support operating system virtualization and containerization on QNX-based devices; • BlackBerry UEM placed in the upper-right quadrant as a 2024 Gartner® Peer Insights™ Customers’ Choice for Unified Endpoint Management tools; and • The Company announced that BlackBerry AtHoc is “in process” to become the first critical events management solution to obtain FedRAMP high authorization. Customers and Partners: • The Company completed the sale of its Cylance endpoint security assets to Arctic Wolf; • QNX collaborated with Microsoft to make QNX SDP 8.0 available in the Microsoft Azure cloud environment; • QNX announced a multi-year collaboration with Vector and TTTech Auto to develop and market a vehicle software platform that pre-integrates the QNX OS with other leading middleware components; • QNX partnered with Pi Square Technologies to train software engineers across India as part of QNX Everywhere ecosystem expansion strategy; 29 • QNX extended its relationship with AMD to support a wider range of adaptive computing devices used in robotic systems and other embedded devices; • QNX was selected by Hyundai Mobis to power its next-generation digital cockpit platform; • QNX partnered with ETAS to jointly sell and market software solutions for SDVs; and • QNX was selected by FERNRIDE for its safety-certified autonomous terminal tractor solution; and • BlackBerry announced the Government of Canada’s investment in the Malaysia Cybersecurity Center of Excellence. Environmental, Sustainability and Corporate Governance: • Appointed Lori O’Neill, an experienced corporate director and financial expert, to the Board of Directors; • Appointed Lisa Bahash, an automotive OEM and Tier 1 supplier veteran, to the Board of Directors; and • Appointed Tim Foote as Chief Financial Officer. Fiscal 2025 Summary Results of Operations The following table sets forth certain consolidated statements of operations data for the fiscal years ended February 28, 2025, February 29, 2024, and February 28, 2023: As at and for the Fiscal Years Ended (in millions, except for share and per share amounts) February 28, 2025 February 29, 2024 Change February 28, 2023 Change Revenue $ 534.9 $ 759.1 $ (224.2) $ 526.3 $ 232.8 Gross margin 394.9 490.7 (95.8) 366.6 124.1 Operating expenses 394.1 479.7 (85.6) 573.4 (93.7) Investment income, net 7.7 18.8 (11.1) 5.0 13.8 Income (loss) before income taxes 8.5 29.8 (21.3) (201.8) 231.6 Provision for income taxes 17.0 24.2 (7.2) 13.7 10.5 Income (loss) from continuing operations (8.5) 5.6 (14.1) (215.5) 221.1 Loss from discontinued operations (1) (70.5) (135.8) 65.3 (518.9) 383.1 Net loss $ (79.0) $ (130.2) $ 51.2 $ (734.4) $ 604.2 Earnings (loss) per share - reported Basic $ (0.13) $ (0.22) $ (1.27) Diluted $ (0.13) $ (0.22) $ (1.35) Weighted-average number of shares outstanding (000’s) Basic 591,470 584,543 578,654 Diluted (1) 591,470 592,497 639,487 ______________________________ (1) As a result of the Cylance sale, it is no longer reported alongside UEM, SecuSuite and AtHoc as the Cybersecurity segment, and those three businesses are now reported separately from Cylance as the Secure Communications segment. The financial results of Cylance are presented as “loss from discontinued operations, net of tax” in the Consolidated Statements of Operations and have been removed from the presentation of results from continuing operations. Prior period comparatives have been recast to reflect this change. (2) Diluted loss per share on a U.S. GAAP basis for fiscal 2025 and 2024 do not include the dilutive effect of the Debentures (as defined below in “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 fiscal 2025 and fiscal 2023 do not include the dilutive effect of stock-based compensation as to do so would be anti-dilutive. See Note 9 to the Consolidated Financial Statements for the fiscal year ended February 28, 2025 for calculation of the dilutive weighted average number of shares outstanding. 30 The following section sets forth certain consolidated statements of operations data for the three months ended February 28, 2025, February 29, 2024 and February 28, 2023: For the Three Months Ended (in millions, except for share and per share amounts) February 28, 2025 February 29, 2024 Change February 28, 2023 Change Revenue $ 141.7 $ 152.9 $ (11.2) $ 123.6 $ 29.3 Gross margin 104.1 122.2 (18.1) 89.8 32.4 Operating expenses 112.1 134.7 (22.6) 191.0 (56.3) Investment income, net 1.6 4.0 (2.4) 6.2 (2.2) Loss before income taxes (6.4) (8.5) 2.1 (95.0) 86.5 Provision for income taxes 1.4 3.9 (2.5) 1.9 2.0 Loss from continuing operations (7.8) (12.4) 4.6 (96.9) 84.5 Income (loss) from discontinued operations (1) 0.4 (43.8) 44.2 (398.0) 354.2 Net loss $ (7.4) $ (56.2) $ 48.8 $ (494.9) $ 438.7 Earnings (loss) per share - reported Basic $ (0.01) $ (0.10) $ 0.09 $ (0.85) $ 0.75 Diluted (2) $ (0.01) $ (0.10) $ 0.09 $ (0.81) $ 0.71 Weighted-average number of shares outstanding (000’s) Basic 594,267 587,523 581,493 Diluted (2) 594,267 587,523 642,327 ______________________________ (1) As a result of the Cylance sale, it is no longer reported alongside UEM, SecuSuite and AtHoc as the Cybersecurity segment, and those three businesses are now reported separately from Cylance as the Secure Communications segment. The financial results of Cylance are presented as “loss from discontinued operations, net of tax” in the Consolidated Statements of Operations and have been removed from the presentation of results from continuing operations. Prior period comparatives have been recast to reflect this change. (2) Diluted loss per share on a U.S. GAAP basis in the fourth quarter of 2025 and 2024 do 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 in the fourth quarter of 2025, 2024 and 2023 do not include the dilutive effect of stock-based compensation as to do so would be anti-dilutive. The following tables show information by operating segment for the three months and years ended February 28, 2025 and February 29, 2024. The Company reports segment information in accordance with U.S. GAAP ASC Section 280 based on the “management” approach. The management approach designates the internal reporting used by the Chief Operating Decision Maker (“CODM”) for making decisions and assessing performance of the Company’s reportable operating segments. The measure of segment profit or loss disclosed by the Company in the Consolidated Financial Statements under the “management” approach in reviewing the results of the Company’s operating segments is segment adjusted gross margin. Additionally below, management uses the additional measures of segment profit or loss used by the CODM which is segment adjusted EBITDA a non-GAAP financial measure. Also note the change in presentation relating to expense reclassification as disclosed in Note 1 to the Consolidated Financial Statements. See Note 13 to the Consolidated Financial Statements for a description of the Company’s operating segments. 31 For the Three Months Ended (in millions) Secure Communications QNX Licensing Segment Totals Feb 28 Feb 29 Change Feb 28 Feb 29 Change Feb 28 Feb 29 Change Feb 28 Feb 29 Change 2025 2024 2025 2024 2025 2024 2025 2024 Segment revenue $ 67.3 $ 71.6 $ (4.3) $ 65.8 $ 65.9 $ (0.1) $ 8.6 $ 15.4 $ (6.8) $ 141.7 $ 152.9 $ (11.2) Segment cost of sales 24.5 18.9 5.6 11.1 9.7 1.4 1.6 1.4 0.2 37.2 30.0 7.2 Segment adjusted gross margin $ 42.8 $ 52.7 $ (9.9) $ 54.7 $ 56.2 $ (1.5) $ 7.0 $ 14.0 $ (7.0) $ 104.5 $ 122.9 $ (18.4) Segment research and development 9.1 11.6 (2.5) 13.1 16.0 (2.9) — — — 22.2 27.6 (5.4) Segment sales and marketing 12.0 13.4 (1.4) 14.5 12.3 2.2 — — — 26.5 25.7 0.8 Segment general and administrative 9.7 11.6 (1.9) 8.5 10.8 (2.3) 7.8 3.6 4.2 26.0 26.0 — Less amortization included in the above 0.6 1.0 (0.4) 0.6 0.6 — 2.2 2.3 (0.1) 3.4 3.9 (0.5) Segment adjusted EBITDA $ 12.6 $ 17.1 $ (4.5) $ 19.2 $ 17.7 $ 1.5 $ 1.4 $ 12.7 $ (11.3) $ 33.2 $ 47.5 $ (14.3) For the Years Ended (in millions) Secure Communications QNX Licensing Segment Totals Feb 28 Feb 29 Change Feb 28 Feb 29 Change Feb 28 Feb 29 Change Feb 28 Feb 29 Change 2025 2024 2025 2024 2025 2024 2025 2024 Segment revenue $ 272.6 $ 283.8 $ (11.2) $ 236.0 $ 215.4 $ 20.6 $ 26.3 $ 259.9 $ (233.6) $ 534.9 $ 759.1 $ (224.2) Segment cost of sales 92.7 80.7 12.0 38.8 33.8 5.0 6.1 150.9 (144.8) 137.6 265.4 (127.8) Segment adjusted gross margin $ 179.9 $ 203.1 $ (23.2) $ 197.2 $ 181.6 $ 15.6 $ 20.2 $ 109.0 $ (88.8) $ 397.3 $ 493.7 $ (96.4) Segment research and development 44.2 56.1 (11.9) 59.9 64.5 (4.6) — — — 104.1 120.6 (16.5) Segment sales and marketing 46.4 58.2 (11.8) 46.6 43.4 3.2 — — — 93.0 101.6 (8.6) Segment general and administrative 40.2 47.2 (7.0) 33.9 43.1 (9.2) 13.4 23.2 (9.8) 87.5 113.5 (26.0) Less amortization included in the above 3.2 4.4 (1.2) 2.3 2.9 (0.6) 9.0 9.7 (0.7) 14.5 17.0 (2.5) Segment adjusted EBITDA $ 52.3 $ 46.0 $ 6.3 $ 59.1 $ 33.5 $ 25.6 $ 15.8 $ 95.5 $ (79.7) $ 127.2 $ 175.0 $ (47.8) 32 The following tables reconcile the Company’s segment gross margin for the three months and year ended February 28, 2025 to consolidated U.S. GAAP results: For the Three Months Ended February 28, 2025 (in millions) Secure Communications QNX Licensing Segment Totals Reconciling Items Consolidated U.S. GAAP Revenue $ 67.3 $ 65.8 $ 8.6 $ 141.7 $ — $ 141.7 Cost of sales 24.5 11.1 1.6 37.2 0.4 37.6 Gross margin (1) $ 42.8 $ 54.7 $ 7.0 $ 104.5 $ (0.4) $ 104.1 Operating expenses 112.1 112.1 Investment income, net 1.6 1.6 Loss before income taxes $ (6.4) For the Year Ended February 28, 2025 (in millions) Secure Communications QNX Licensing Segment Totals Reconciling Items Consolidated U.S. GAAP Revenue $ 272.6 $ 236.0 $ 26.3 $ 534.9 $ — $ 534.9 Cost of sales 92.7 38.8 6.1 137.6 2.4 140.0 Gross margin (1) $ 179.9 $ 197.2 $ 20.2 $ 397.3 $ (2.4) $ 394.9 Operating expenses 394.1 394.1 Investment income, net 7.7 7.7 Income before income taxes $ 8.5 ______________________________ (1) See “Non-GAAP Financial Measures” for a reconciliation of selected U.S. GAAP-based measures to adjusted measures for the three months and year ended February 28, 2025. The following tables reconcile the Company’s segment gross margin results for the three months and year ended February 29, 2024 to consolidated U.S. GAAP results: For the Three Months Ended February 29, 2024 (in millions) Secure Communications QNX Licensing Segment Totals Reconciling Items Consolidated U.S. GAAP Revenue $ 71.6 $ 65.9 $ 15.4 $ 152.9 $ — $ 152.9 Cost of sales 18.9 9.7 1.4 30.0 0.7 30.7 Gross margin (1) $ 52.7 $ 56.2 $ 14.0 $ 122.9 $ (0.7) $ 122.2 Operating expenses 134.7 134.7 Investment income, net 4.0 4.0 Loss before income taxes $ (8.5) For the Year Ended February 29, 2024 (in millions) Secure Communications QNX Licensing Segment Totals Reconciling Items Consolidated U.S. GAAP Revenue $ 283.8 $ 215.4 $ 259.9 $ 759.1 $ — $ 759.1 Cost of sales 80.7 33.8 150.9 265.4 3.0 268.4 Gross margin (1) $ 203.1 $ 181.6 $ 109.0 $ 493.7 $ (3.0) $ 490.7 Operating expenses 479.7 479.7 Investment income, net 18.8 18.8 Income before income taxes $ 29.8 ______________________________ 33 (1) See “Non-GAAP Financial Measures” for a reconciliation of selected U.S. GAAP-based measures to adjusted measures for the three months and year ended February 29, 2024. The following table reconciles total segment adjusted EBITDA for the three months and year ended February 28, 2025 and February 29, 2024 to the Company’s consolidated totals: Three Months Ended For the Years Ended February 28, 2025 February 29, 2024 February 28, 2025 February 29, 2024 Total Segment Adjusted EBITDA $ 33.2 $ 47.5 $ 127.2 $ 175.0 Adjustments (1) : Stock compensation expense 4.3 4.8 20.6 28.8 Restructuring expenses 11.4 18.4 26.1 35.9 Less: Corporate general and administrative expense 12.1 9.3 43.0 33.3 Amortization 5.7 6.4 24.3 31.3 Impairment of long-lived assets 4.9 4.7 9.6 15.3 Impairment of goodwill — 15.9 — 15.9 Prior Debentures fair value adjustment — 0.5 — 3.5 Litigation settlement 2.8 — 2.8 — Investment income (1.6) (4.0) (7.7) (18.8) Consolidated income (loss) from continuing operations before income taxes $ (6.4) $ (8.5) $ 8.5 $ 29.8 ______________________________ (1) The CODM reviews segment information on an adjusted EBITDA basis, which excludes certain amounts as described below: Stock compensation expenses - Equity compensation is a non-cash expense and does not impact the ongoing operating decisions taken by the Company’s management. Restructuring expenses - Restructuring costs relate to employee termination benefits, facilities, streamlining many of the Company’s centralized corporate functions into Secure Communications (formerly “Cybersecurity”) and QNX (formerly “IoT”) specific teams, and other costs pursuant to programs to reduce the Company’s 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. Financial Highlights The Company had approximately $410.3 million in cash, cash equivalents and investments as of February 28, 2025 (Fiscal 2024 - $298.2 million). In fiscal 2025, the Company recognized revenue of $534.9 million and incurred a net loss of $79.0 million, or 0.13 basic and diluted loss per share on a U.S. GAAP basis (fiscal 2024 - revenue of $759.1 million and net loss of $130.2, or 0.22 basic loss and diluted loss per share). The Company recognized net loss from continuing operations of $8.5 million, or $0.01 basic and diluted loss per share on a U.S. GAAP basis for fiscal 2025 (fiscal 2024 - net income from continuing operations of $5.6 million, or $0.01 basic and diluted earnings per share). The Company recognized adjusted net income of $12.5 million, or adjusted income of $0.02 per share, on a non-GAAP basis in fiscal 2025 (fiscal 2024 - adjusted net income of $30.6 million and adjusted income of $0.05 per share). See “Non-GAAP Financial Measures” below. Adjusted net income from continuing operations was $57.6 million in fiscal 2025 or $0.10 adjusted basic earnings per share from continuing operations (fiscal 2024 - adjusted net income from continuing operations of $116.0 million, or $0.20 adjusted basic earnings per share from continuing operations). 34 Non-GAAP Financial Measures The Consolidated Financial Statements have been prepared in accordance with U.S. GAAP, and information contained in this MD&A is presented on that basis. On April 2, 2025, the Company announced financial results for the three months and fiscal year ended February 28, 2025, which included certain non-GAAP financial measures and non-GAAP ratios, including adjusted gross margin, adjusted gross margin percentage, adjusted operating expense, adjusted income (loss) from continuing operations, 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 EBITDA from continuing and discontinued operations, adjusted segment 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 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 are useful in helping management and readers understand the Company’s operating results and underlying operational trends. For purposes of comparability, the Company’s non-GAAP financial measures for the three months ended and years ended February 29, 2024 and February 28, 2023 have been updated to conform to the current year’s presentation and discontinued operations. • Prior Debentures fair value adjustment . The Company elected to measure the Prior Debentures (as defined below) at fair value in accordance with the fair value option under U.S. GAAP. Each period, the fair value of the Prior Debentures was recalculated and the resulting non-cash income and charges from the change in fair value from non-credit components of the Prior 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, streamlining many of the Company’s centralized corporate functions into Secure Communications (formerly “Cybersecurity”) and QNX (formerly “IoT”) specific teams, and other costs pursuant to programs to reduce the Company’s 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 . Equity compensation is a non-cash expense and does not impact the ongoing operating decisions taken by the Company’s management. • Amortization of acquired intangible assets. When the Company acquires intangible assets through business combinations, the assets are recorded as part of purchase accounting and contribute to revenue generation. Such acquired intangible assets depreciate over time and the related amortization will recur in future periods until the assets have been fully amortized. This is not indicative of the Company’s core operating performance, and may not be meaningful when comparing the Company’s operating performance against that of prior periods. • Long-lived asset impairment charge. The Company believes that long-lived asset impairment charges (“LLA impairment charge”) 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 settlements. 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. On a U.S. GAAP basis, the impacts of these items are reflected in the Company’s income statement. However, the Company believes that the provision of supplemental non-GAAP measures allows investors to evaluate the financial performance of the Company’s business using the same evaluation measures that management uses, and is therefore a useful indication of the Company’s performance or expected performance of future operations and facilitates period-to-period comparison of operating performance. As a result, the Company considers it appropriate and reasonable to provide, in addition to U.S. GAAP measures, supplementary non-GAAP financial measures that exclude certain items from the presentation of its financial results. 35 Reconciliation of non-GAAP based measures with most directly comparable U.S. GAAP based measures for the three months ended February 28, 2025, February 29, 2024 and February 28, 2023 Readers are cautioned that adjusted gross margin, adjusted gross margin percentage, adjusted operating expense, adjusted income (loss) from continuing operations, 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 EBITDA from continuing and discontinued operations, adjusted segment 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. A reconciliation of the most directly comparable U.S. GAAP financial measures for the three months ended February 28, 2025, February 29, 2024 and February 28, 2023 to adjusted financial measures is reflected in the table below: For the Three Months Ended (in millions) February 28, 2025 February 29, 2024 February 28, 2023 Gross margin $ 104.1 $ 122.2 $ 89.8 Stock compensation expense 0.4 0.7 0.7 Adjusted gross margin $ 104.5 $ 122.9 $ 90.5 Gross margin % 73.5 % 79.9 % 72.7 % Stock compensation expense 0.2 % 0.5 % 0.5 % Adjusted gross margin % 73.7 % 80.4 % 73.2 % Reconciliation of U.S. GAAP operating expense for the three months ended February 28, 2025, November 30, 2024, February 29, 2024 and February 28, 2023 to adjusted operating expense is reflected in the table below: For the Three Months Ended (in millions) February 28, 2025 November 30, 2024 February 29, 2024 February 28, 2023 Operating expense $ 112.1 $ 92.7 $ 134.7 $ 191.0 Restructuring charges 11.4 6.1 18.4 5.9 Stock compensation expense 3.9 4.1 4.1 7.1 Prior Debentures fair value adjustment — — 0.5 (25.4) Acquired intangibles amortization 1.7 1.8 1.8 3.5 Litigation settlements 2.8 — — — Goodwill impairment charge — — 15.9 112.1 LLA impairment charge 4.9 1.0 4.7 — Adjusted operating expense $ 87.4 $ 79.7 $ 89.3 $ 87.8 36 Reconciliation of U.S. GAAP loss from continuing operations, U.S. GAAP net income (loss) and U.S. GAAP basic earnings (loss) per share for the three months ended February 28, 2025, February 29, 2024 and February 28, 2023 to adjusted income (loss) from continuing operations, adjusted net income (loss) and adjusted basic earnings (loss) per share is reflected in the table below: For the Three Months Ended (in millions, except per share amounts) February 28, 2025 February 29, 2024 February 28, 2023 Basic earnings (loss) per share Basic earnings (loss) per share Basic earnings (loss) per share Loss from continuing operations $ (7.8) $(0.01) $ (12.4) $(0.02) $ (96.9) $(0.17) Restructuring charges 11.4 18.4 5.9 Stock compensation expense 4.3 4.8 7.8 Prior Debentures fair value adjustment — 0.5 (25.4) Acquired intangibles amortization 1.7 1.8 3.5 Litigation settlements 2.8 — — Goodwill impairment charge — 15.9 112.1 LLA impairment charge 4.9 4.7 — Adjusted income from continuing operations $ 17.3 $0.03 $ 33.7 $0.06 $ 7.0 $0.01 Net income (loss) $ (7.4) $(0.01) $ (56.2) $(0.10) $ (494.9) $(0.85) Restructuring charges 11.4 18.4 5.9 Stock compensation expense 4.3 5.6 10.5 Prior Debentures fair value adjustment — 0.5 (25.4) Acquired intangibles amortization 1.7 8.6 14.4 Litigation settlements 2.8 — — Goodwill impairment charge — 34.8 245.4 LLA impairment charge 4.9 4.7 231.0 Adjusted net income (loss) $ 17.7 $0.03 $ 16.4 $0.03 $ (13.1) $(0.02) 37 Reconciliation of U.S. GAAP research and development, sales and marketing, general and administrative, and amortization expense for the three months ended February 28, 2025, February 29, 2024 and February 28, 2023 to adjusted research and development, sales and marketing, general and administrative, and amortization expense is reflected in the table below: For the Three Months Ended (in millions) February 28, 2025 February 29, 2024 February 28, 2023 Research and development $ 23.2 $ 28.9 $ 33.1 Stock compensation expense 1.2 1.6 1.8 Adjusted research and development expense $ 22.0 $ 27.3 $ 31.3 Sales and marketing $ 27.1 $ 26.0 $ 28.7 Stock compensation expense 0.7 0.3 0.9 Adjusted sales and marketing expense $ 26.4 $ 25.7 $ 27.8 General and administrative $ 50.0 $ 54.0 $ 35.8 Restructuring charges 11.4 18.4 5.9 Stock compensation expense 2.0 2.2 4.4 Adjusted general and administrative expense $ 36.6 $ 33.4 $ 25.5 Amortization $ 4.1 $ 4.7 $ 6.7 Acquired intangibles amortization 1.7 1.8 3.5 Adjusted amortization expense $ 2.4 $ 2.9 $ 3.2 Reconciliation of non-GAAP based measures with most directly comparable U.S. GAAP based measures for the years ended February 28, 2025, February 29, 2024 and February 28, 2023 A reconciliation of the most directly comparable U.S. GAAP financial measures for the years ended February 28, 2025, February 29, 2024 and February 28, 2023 to adjusted financial measures is reflected in the table below: For the Fiscal Years Ended (in millions) February 28, 2025 February 29, 2024 February 28, 2023 Gross margin $ 394.9 $ 490.7 $ 366.6 Stock compensation expense 2.4 3.0 3.0 Adjusted gross margin $ 397.3 $ 493.7 $ 369.6 Gross margin % 73.8 % 64.6 % 69.7 % Stock compensation expense 0.5 % 0.4 % 0.5 % Adjusted gross margin % 74.3 % 65.0 % 70.2 % Operating expense $ 394.1 $ 479.7 $ 573.4 Restructuring charges 26.1 35.9 10.2 Stock compensation expense 18.2 25.8 24.4 Prior Debentures fair value adjustment — 3.5 (137.4) Acquired intangibles amortization 7.0 11.0 13.8 Litigation settlements 2.8 — 165.0 Goodwill impairment charge — 15.9 112.1 LLA impairment charge 9.6 15.3 3.5 Adjusted operating expense $ 330.4 $ 372.3 $ 381.8 38 Reconciliation of U.S. GAAP income (loss) from continuing operations, U.S. GAAP net income (loss) and U.S. GAAP basic earnings (loss) per share for the years ended February 28, 2025, February 29, 2024 and February 28, 2023 to adjusted income (loss) from continuing operations, adjusted net income (loss) and adjusted basic earnings (loss) per share is reflected in the table below: For the Fiscal Years Ended (in millions, except per share amounts) February 28, 2025 February 29, 2024 February 28, 2023 Basic earnings (loss) per share Basic earnings (loss) per share Basic loss per share Income (loss) from continuing operations $ (8.5) $ (0.01) $ 5.6 $ 0.01 $ (215.5) $ (0.37) Restructuring charges 26.1 35.9 10.2 Stock compensation expense 20.6 28.8 27.4 Prior Debentures fair value adjustment — 3.5 (137.4) Acquired intangibles amortization 7.0 11.0 13.8 Litigation settlements 2.8 — 165.0 Goodwill impairment charge — 15.9 112.1 LLA impairment charge 9.6 15.3 3.5 Adjusted income (loss) from continuing operations $ 57.6 $0.10 $ 116.0 $0.20 $ (20.9) $(0.04) Net loss $ (79.0) $(0.13) $ (130.2) $(0.22) $ (734.4) $(1.27) Restructuring charges 26.1 35.9 10.2 Stock compensation expense 25.6 33.1 31.4 Prior Debentures fair value adjustment — 3.5 (137.4) Acquired intangibles amortization 27.4 38.2 82.0 Litigation settlements 2.8 — 165.0 Goodwill impairment charge — 34.8 245.4 LLA impairment charge 9.6 15.3 234.5 Adjusted net income (loss) $ 12.5 $0.02 $ 30.6 $0.05 $ (103.3) $(0.17) 39 Reconciliation of U.S GAAP research and development, sales and marketing, general and administrative, and amortization expense for the years ended February 28, 2025, February 29, 2024 and February 28, 2023 to adjusted research and development, sales and marketing, general and administrative, and amortization expense is reflected in the table below: For the Fiscal Years Ended (in millions) February 28, 2025 February 29, 2024 February 28, 2023 Research and development $ 108.8 $ 127.1 $ 134.2 Stock compensation expense 5.3 7.3 7.4 Adjusted research and development expense $ 103.5 $ 119.8 $ 126.8 Sales and marketing $ 95.5 $ 104.0 $ 102.6 Stock compensation expense 2.8 2.5 2.7 Adjusted sales and marketing expense $ 92.7 $ 101.5 $ 99.9 General and administrative $ 159.7 $ 187.2 $ 172.0 Restructuring charges 26.1 35.9 10.2 Stock compensation expense 10.1 16.0 14.3 Adjusted general and administrative expense $ 123.5 $ 135.3 $ 147.5 Amortization $ 17.7 $ 26.7 $ 27.4 Acquired intangibles amortization 7.0 11.0 13.8 Adjusted amortization expense $ 10.7 $ 15.7 $ 13.6 40 Adjusted operating income, adjusted EBITDA, adjusted operating income margin percentage and adjusted EBITDA margin percentage for the three months ended February 28, 2025, February 29, 2024 and February 28, 2023 are reflected in the table below. For the Three Months Ended (in millions) February 28, 2025 February 29, 2024 February 28, 2023 Operating loss $ (8.0) $ (12.5) $ (101.2) Non-GAAP adjustments to operating loss Restructuring charges 11.4 18.4 5.9 Stock compensation expense 4.3 4.8 7.8 Prior Debentures fair value adjustment — 0.5 (25.4) Acquired intangibles amortization 1.7 1.8 3.5 Litigation settlements 2.8 — — Goodwill impairment charge — 15.9 112.1 LLA impairment charge 4.9 4.7 — Total non-GAAP adjustments to operating loss 25.1 46.1 103.9 Adjusted operating income 17.1 33.6 2.7 Amortization 5.7 6.4 9.0 Acquired intangibles amortization (1.7) (1.8) (3.5) Adjusted EBITDA $ 21.1 $ 38.2 $ 8.2 Revenue $ 141.7 $ 152.9 $ 123.6 Adjusted operating income margin % (1) 12% 22% 2% Adjusted EBITDA margin % (2) 15% 25% 7% ______________________________ (1) Adjusted operating income margin % is calculated by dividing adjusted operating income by revenue. (2) Adjusted EBITDA margin % is calculated by dividing adjusted EBITDA by revenue. 41 Adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage and adjusted EBITDA margin percentage for the fiscal years ended February 28, 2025, February 29, 2024 and February 28, 2023 are reflected in the table below. For the Fiscal Years Ended (in millions) February 28, 2025 February 29, 2024 February 28, 2023 Operating income (loss) $ 0.8 $ 11.0 $ (206.8) Non-GAAP adjustments to operating income (loss) Restructuring charges 26.1 35.9 10.2 Stock compensation expense 20.6 28.8 27.4 Prior Debentures fair value adjustment — 3.5 (137.4) Acquired intangibles amortization 7.0 11.0 13.8 Litigation settlements 2.8 — 165.0 Goodwill impairment charge — 15.9 112.1 LLA impairment charge 9.6 15.3 3.5 Total non-GAAP adjustments to operating income (loss) 66.1 110.4 194.6 Adjusted operating income (loss) 66.9 121.4 (12.2) Amortization 24.3 31.3 36.5 Acquired intangibles amortization (7.0) (11.0) (13.8) Adjusted EBITDA $ 84.2 $ 141.7 $ 10.5 Revenue $ 534.9 $ 759.1 $ 526.3 Adjusted operating income (loss) margin % (1) 13 % 16 % (2 %) Adjusted EBITDA margin % (2) 16 % 19 % 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. 42 Adjusted EBITDA from continuing and discontinued operations for the fiscal years ended February 28, 2025, February 29, 2024 and February 28, 2023 are reflected in the table below. For the Fiscal Years Ended (in millions) February 28, 2025 February 29, 2024 February 28, 2023 Net loss $ (79.0) $ (130.2) $ (734.4) Non-GAAP adjustments to operating loss Restructuring charges 26.1 35.9 10.2 Stock compensation expense 25.6 33.1 31.4 Prior Debentures fair value adjustment — 3.5 (137.4) Acquired intangibles amortization 27.4 38.2 82.0 Litigation settlements 2.8 — 165.0 Goodwill impairment charge — 34.8 245.4 LLA impairment charge 9.6 15.3 234.5 Total non-GAAP adjustments to net loss 91.5 160.8 631.1 Adjusted operating income (loss) 12.5 30.6 (103.3) Amortization 44.7 58.5 104.7 Acquired intangibles amortization (27.4) (38.2) (82.0) Investment income, net (7.7) (18.8) (5.0) Provision for income taxes from continuing and discontinued operations 17.2 24.2 13.7 Adjusted EBITDA from continuing and discontinued operations $ 39.3 $ 56.3 $ (71.9) The Company uses free cash flow (usage) when assessing its sources of liquidity, capital resources, and quality of earnings. The Company believes that free cash flow (usage) is helpful in understanding the Company’s capital requirements and provides an additional means to reflect the cash flow trends in the Company’s business. Reconciliation of U.S. GAAP net cash provided by (used in) operating activities for the three months ended February 28, 2025, February 29, 2024 and February 28, 2023 to free cash flow (usage) is reflected in the table below: For the Three Months Ended (in millions) February 28, 2025 February 29, 2024 February 28, 2023 Net cash provided by (used in) operating activities $ 42.0 $ (14.7) $ (6.9) Acquisition of property, plant and equipment (0.5) (1.6) $ (2.0) Free cash flow (usage) $ 41.5 $ (16.3) $ (8.9) 43 Reconciliation of U.S. GAAP net cash provided by (used in) operating activities for the years ended February 28, 2025, February 29, 2024 and February 28, 2023 to free cash flow (usage) is reflected in the table below: For the Fiscal Years Ended (in millions) February 28, 2025 February 29, 2024 February 28, 2023 Net cash provided by (used in) operating activities $ 16.5 $ (3.5) $ (262.2) Acquisition of property, plant and equipment (3.1) (7.1) (7.3) Free cash flow (usage) $ 13.4 $ (10.6) $ (269.5) For the year ended February 28, 2023, free cash usage includes $165.0 million paid in relation to a legal settlement. Key Metrics 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 Secure Communications annual recurring revenue (“ARR”), Secure Communications dollar-based net retention rate (“DBNRR”) and QNX royalty backlog do not have any standardized meaning and are unlikely to be comparable to similarly titled measures reported by other companies. Comparative breakdowns of certain key metrics for the three months ended February 28, 2025 and February 29, 2024 are set forth below. For the Three Months Ended (in millions) February 28, 2025 February 29, 2024 Change Secure Communications Annual Recurring Revenue $ 208 $ 202 $ 6 Secure Communications Dollar-Based Net Retention Rate 93 % 91 % 2 % QNX Royalty Backlog $ 865 $ 815 $ 50 Secure Communications 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 Secure Communications business. Secure Communications ARR was approximately $208 million in the fourth quarter of fiscal 2025 and decreased compared to $215 million in the third quarter of fiscal 2025 and increased compared to $202 million in the fourth quarter of fiscal 2024 primarily due to customer churn in the UEM business. Secure Communications Dollar-Based Net Retention Rate The Company calculates the Secure Communications DBNRR as of period end by first calculating the Secure Communications ARR from the customer base as at 12 months prior to the current period end (“Prior Period ARR”). The Company then calculates the Secure Communications 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. The Company uses DBNRR as an indicator of business momentum for the Secure Communications business. Secure Communications DBNRR was 93% in the fourth quarter of fiscal 2025 and decreased compared to 95% in the third quarter of fiscal 2025 and increased compared to 91% in the fourth quarter of fiscal 2024. QNX Royalty Backlog The Company defines the royalty backlog of its QNX business as estimated future revenue from variable forecasted royalties related to the QNX business. The estimation of forecasted royalties is based on QNX’s royalty rates and on projections of anticipated volumes that are based on historical shipping experience and current customer projections that management believes are reasonable over the lifetime of a design. The QNX royalty backlog is calculated annually based on current projections of volumes and may not be indicative of actual future revenue. The revenue that the Company will recognize is subject to several factors, including actual volumes and potential terminations or modifications to customer contracts. QNX royalty backlog was approximately $865 million at the end of the fourth quarter of fiscal 2025 and increased compared to approximately $815 million at the end of the fourth quarter of fiscal 2024. 44 Results of Operations - Fiscal year ended February 28, 2025 compared to fiscal year ended February 29, 2024 Revenue Revenue by Segment Comparative breakdowns of revenue by segment are set forth below. For the Fiscal Years Ended (in millions) February 28, 2025 February 29, 2024 Change February 28, 2023 Change Revenue by Segment Secure Communications $ 272.6 $ 283.8 $ (11.2) $ 288.2 $ (4.4) QNX 236.0 215.4 20.6 205.7 9.7 Licensing 26.3 259.9 (233.6) 32.4 227.5 $ 534.9 $ 759.1 $ (224.2) $ 526.3 $ 232.8 % Revenue by Segment Secure Communications 51.0 % 37.4 % 54.8 % QNX 44.1 % 28.4 % 39.1 % Licensing 4.9 % 34.2 % 6.1 % 100.0 % 100.0 % 100.0 % Secure Communications The decrease in Secure Communications revenue of $11.2 million was primarily due to a decrease of $34.9 million relating to up-front components of revenue recognized in fiscal 2024 on the Company’s long term agreement with the Government of Malaysia and a decrease of $19.1 million in BlackBerry UEM product revenue, partially offset by an increase of $32.1 million relating to product revenue in Secusmart, an increase of $7.9 million increase in professional services revenue and an increase of $2.7 million in BlackBerry AtHoc. The Company previously stated that it expected Secure Communications revenue to be in the range of $267 million to $271 million for fiscal 2025 as a whole. Secure Communications revenue was $272.6 million for fiscal 2025. The Company expects Secure Communications revenue to be in the range of $50 million to $54 million in the first quarter of fiscal 2026, and for the full year to be in the range of $230 million to $240 million in fiscal 2026. QNX The increase in QNX revenue of $20.6 million was primarily due to an increase of $22.1 million in BlackBerry QNX royalty revenue and an increase of $6.3 million in BlackBerry Radar revenue, partially offset by a decrease of $4.9 million in BlackBerry QNX development seat revenue and a decrease of $1.7 million in professional services. The Company previously stated that it expected QNX revenue to be in the range of $230 million to $235 million for fiscal 2025 as a whole. QNX revenue for fiscal 2025 was $236.0 million. The Company expects QNX revenue to be in the range of $51 million to $55 million in the first quarter of fiscal 2026. The Company previously stated that it expects QNX revenue to be in the range of $260 million to $270 million for fiscal 2026 as a whole. The Company now expects QNX revenue to be in the range of $250 million to $270 million for fiscal 2026 as a whole due to the uncertain impact of new U.S. tariffs and global retaliatory tariffs on QNX’s automotive customers. Licensing The decrease in Licensing revenue of $233.6 million was primarily due to $217.7 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 $15.9 million in revenue from the Company’s other intellectual property licensing arrangements. The Company previously stated that it expected Licensing revenue to be approximately $20 million for fiscal 2025 as a whole. Licensing revenue was $26.3 million for fiscal 2025 due to the timing of new licensing deals. The Company expects Licensing revenue to be approximately $6 million in each of the four quarters of fiscal 2026. 45 Total BlackBerry Revenue The Company previously stated that it expected total BlackBerry revenue to be in the range of $517 million to $526 million in fiscal 2025 as a whole. Total BlackBerry revenue was $534.9 million and was higher due to the total impact of each of the Company’s operating segments exceeding the top end of the Company’s expectation ranges. The Company expects total BlackBerry revenue to be approximately $107 million to $115 million in the first quarter of fiscal 2026, and for the full year to be in the range of $504 million to $534 million in fiscal 2026. Revenue by Geography Comparative breakdowns of the geographic regions are set forth in the following table: For the Fiscal Years Ended (in millions) February 28, 2025 February 29, 2024 Change February 28, 2023 Change Revenue by Geography North America $ 248.7 $ 496.9 $ (248.2) $ 261.7 $ 235.2 Europe, Middle East and Africa 188.6 159.0 29.6 203.1 (44.1) Other regions 97.6 103.2 (5.6) 61.5 41.7 $ 534.9 $ 759.1 $ (224.2) $ 526.3 $ 232.8 % Revenue by Geography North America 46.5 % 65.5 % 49.7 % Europe, Middle East and Africa 35.3 % 20.9 % 38.6 % Other regions 18.2 % 13.6 % 11.7 % 100.0 % 100.0 % 100.0 % North America Revenue The decrease in North America revenue of $248.2 million was primarily due to $217.7 million associated with the Company’s patent sale in the first quarter of fiscal 2024, which was a one time-event, a decrease of $17.6 BlackBerry UEM licensing revenue, a decrease of $15.9 million in revenue from the Company’s other intellectual property licensing arrangements and a decrease of $8.4 million in BlackBerry QNX development seat revenue, partially offset by an increase of $8.8 million in BlackBerry QNX royalty revenue and an increase of $5.8 million in BlackBerry Radar. Europe, Middle East and Africa Revenue The increase in Europe, Middle East and Africa revenue of $29.6 million was primarily due to an increase of $32.0 million relating to product revenue in Secusmart and an increase of $3.2 million in BlackBerry QNX royalty revenue, partially offset by a decrease of $4.3 million in professional services revenue. Other Regions Revenue The decrease in Other regions revenue of $5.6 million was primarily due to a decrease of $34.9 million relating to up-front components of revenue recognized in fiscal 2024 on the Company’s long term agreement with the Government of Malaysia, partially offset by an increase of $11.7 million professional services revenue, an increase of $10.2 million in BlackBerry QNX royalty revenue and an increase of $3.3 million in BlackBerry QNX development seat revenue. 46 Gross Margin Consolidated Gross Margin Consolidated gross margin decreased by $95.8 million to approximately $394.9 million in fiscal 2025 (fiscal 2024 - $490.7 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 lower gross margin from Secusmart due to change in product mix, 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 9.2%, to approximately 73.8% of consolidated revenue in fiscal 2025 (fiscal 2024 - 64.6%). The increase was primarily due to a change in mix specifically a lower gross margin contribution from Licensing, which had a lower relative gross margin percentage in fiscal 2024 due to the patent sale, and a higher gross margin contribution from BlackBerry QNX. Gross Margin and Adjusted EBITDA by Segment See “Business Overview” and “Fiscal 2025 Summary Results of Operations” for information about the Company’s operating segments and the basis of operating segment results. For the Year Ended (in millions) Secure Communications QNX Licensing Segment Totals Feb 28 Feb 29 Change Feb 28 Feb 29 Change Feb 28 Feb 29 Change Feb 28 Feb 29 Change 2025 2024 2025 2024 2025 2024 2025 2024 Segment revenue $ 272.6 $ 283.8 $ (11.2) $ 236.0 $ 215.4 $ 20.6 $ 26.3 $ 259.9 $ (233.6) $ 534.9 $ 759.1 $ (224.2) Segment cost of sales 92.7 80.7 12.0 38.8 33.8 5.0 6.1 150.9 (144.8) 137.6 265.4 (127.8) Segment gross margin $ 179.9 $ 203.1 $ (23.2) $ 197.2 $ 181.6 $ 15.6 $ 20.2 $ 109.0 $ (88.8) $ 397.3 $ 493.7 $ (96.4) Segment research and development 44.2 56.1 (11.9) 59.9 64.5 (4.6) — — — 104.1 120.6 (16.5) Segment sales and marketing 46.4 58.2 (11.8) 46.6 43.4 3.2 — — — 93.0 101.6 (8.6) Segment general and administrative 40.2 47.2 (7.0) 33.9 43.1 (9.2) 13.4 23.2 (9.8) 87.5 113.5 (26.0) Less amortization included in the above 3.2 4.4 (1.2) 2.3 2.9 (0.6) 9.0 9.7 (0.7) 14.5 17.0 (2.5) Segment adjusted EBITDA $ 52.3 $ 46.0 $ 6.3 $ 59.1 $ 33.5 $ 25.6 $ 15.8 $ 95.5 $ (79.7) $ 127.2 $ 175.0 $ (47.8) 47 Secure Communications The decrease in Secure Communications gross margin of $23.2 million was primarily due to a change in mix, specifically a decrease in gross margin contribution from Secusmart software licenses, which had a higher relative gross margin percentage in fiscal 2024 due to up-front components of revenue recognized on the Company’s long-term agreement with the Government of Malaysia. The decrease in Secure Communications gross margin percentage of 6% was primarily due to the same reasons discussed above. The increase in Secure Communications adjusted EBITDA of $6.3 million was primarily due to decreases in salaries and benefits expense, partially offset by the reasons discussed above in “Revenue by Segment”. The Company previously stated that it expected Secure Communications adjusted EBITDA to be in the range of $43 million to $45 million for fiscal 2025 as a whole. Secure Communications adjusted EBITDA was $52.3 million for fiscal 2025 as a whole due to lower than expected salaries and benefits expense and revenue exceeding the top end of the Company’s expectation ranges. The Company expects Secure Communications adjusted EBITDA to be in the range of $34 million to $44 million in fiscal 2026 and to be in the range of $3 million to $6 million in the first quarter of fiscal 2026. QNX The increase in QNX gross margin of $15.6 million was primarily due to the reasons discussed above in “Revenue by Segment”, partially offset by an increase in cost of sales related to Radar hardware devices. QNX gross margin percentage of 84% was consistent with fiscal 2024. The increase in QNX adjusted EBITDA of $25.6 million was primarily due to the reasons discussed above in “Revenue by Segment”, a decrease in facilities costs, a decrease in consulting costs and a benefit from claims filed with the Ministry of Innovation, Science and Economic Development Canada relating to its Strategic Innovation Fund (“SIF”) program’s investment in BlackBerry QNX. The Company previously stated that it expected QNX adjusted EBITDA to be in the range of $48 million to $50 million in fiscal 2025. QNX adjusted EBITDA was $59.1 million in fiscal 2025 due to SIF claims, lower than expected salaries and benefits expense, lower cost of sales due to product mix and revenue exceeding the top end of the Company’s expectation ranges. The Company previously stated that it expected QNX adjusted EBITDA margin percentage to be approximately 18% in fiscal 2025. QNX adjusted EBITDA margin percentage was 25% due to the reasons noted above. The Company expects QNX adjusted EBITDA to be in the range of $55 million to $60 million in fiscal 2026 and to be in the range of $2 million to $6 million in the first quarter of fiscal 2026. Licensing The decrease in Licensing gross margin of $88.8 million was primarily due to the 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 gross margin percentage of 35% was primarily due to the same reason discussed above. The decrease in Licensing adjusted EBITDA of $79.7 million was primarily due to the same reason discussed above and an increase in credit loss provision that was subsequently written off, partially offset by a decrease in legal expense. The Company previously stated that it expected Licensing adjusted EBITDA to be approximately $16 million in fiscal 2025. Licensing adjusted EBITDA was $15.8 million in fiscal 2025. The Company previously stated that it expected Licensing adjusted EBITDA margin percentage to be approximately 65% in fiscal 2025. Licensing adjusted EBITDA was 60% in fiscal 2025 due to the reasons noted above. The Company expects Licensing adjusted EBITDA to be approximately $20 million in fiscal 2026 and to be approximately $5 million in each of the four quarters of fiscal 2026. The Company previously stated that it expected the negative impact to adjusted EBITDA from its Corporate functions to be approximately $48 million in fiscal 2025. The negative impact to adjusted EBITDA from the Corporate functions was $43.0 million in fiscal 2025 and $12.1 million in the fourth quarter of fiscal 2025. 48 Operating Expenses The table below presents a comparison of research and development, sales and marketing, general and administrative, and amortization expense for fiscal 2025 compared to fiscal 2024 and fiscal 2024 compared to fiscal 2023. For the Fiscal Years Ended (in millions) February 28, 2025 February 29, 2024 Change February 28, 2023 Change Revenue $ 534.9 $ 759.1 $ (224.2) $ 526.3 $ 232.8 Operating expenses Research and development 108.8 127.1 (18.3) 134.2 (7.1) Sales and marketing 95.5 104.0 (8.5) 102.6 1.4 General and administrative 159.7 187.2 (27.5) 172.0 15.2 Amortization 17.7 26.7 (9.0) 27.4 (0.7) Impairment of goodwill — 15.9 (15.9) 112.1 (96.2) Impairment of long-lived assets 9.6 15.3 (5.7) 3.5 11.8 Gain on sale of property, plant and equipment, net — — — (6.0) 6.0 Debentures fair value adjustment — 3.5 (3.5) (137.4) 140.9 Litigation settlements 2.8 — 2.8 165.0 (165.0) Total $ 394.1 $ 479.7 $ (85.6) $ 573.4 $ (93.7) Operating Expense as % of Revenue Research and development 20.3 % 16.7 % 25.5 % Sales and marketing 17.9 % 13.7 % 19.5 % General and administrative 29.9 % 24.7 % 32.7 % Amortization 3.3 % 3.5 % 5.2 % Impairment of goodwill — % 2.1 % 21.3 % Impairment of long-lived assets 1.8 % 2.0 % 0.7 % Gain on sale of property, plant and equipment, net — % — % (1.1 %) Debentures fair value adjustment — % 0.5 % (26.1 %) Litigation settlements 0.5 % — % 31.4 % Total 73.7 % 63.2 % 108.9 % See “Non-GAAP Financial Measures” for a reconciliation of selected U.S. GAAP-based measures to adjusted measures for the years ended February 28, 2025, February 29, 2024 and February 28, 2023. 49 U.S. GAAP Operating Expenses Operating expenses decreased by $85.6 million, or 17.8% in fiscal 2025 compared to fiscal 2024. The decrease was primarily due to a decrease of $34.9 million in salaries and benefits, a decrease of $15.9 million in goodwill impairment, a decrease of $9.9 million in facilities costs, a decrease of $9.8 million in restructuring costs, a decrease of $9.0 million in amortization expense, a decrease of $8.9 million in legal expenses, a decrease of $8.7 million in consulting cost, a decrease of $7.6 million in stock compensation expense and a decrease of $5.7 million in impairment of long-lived assets, partially offset by an increase of $19.1 million related to the release of an accrued liability relating to the Company’s legacy mobile device business in fiscal 2024 which did not recur and an increase of $10.8 million in variable incentive plan cost, and an increase of $5.3 million in the Company’s deferred share unit costs. Adjusted Operating Expenses Adjusted operating expenses decreased by $41.9 million, or 11.3%, to $330.4 million in fiscal 2025, compared to $372.3 million in fiscal 2024. The decrease was primarily attributable to a decrease of $34.9 million in salaries and benefits, a decrease of $11.7 million in legal expenses, a decrease of $9.9 million in facilities costs, a decrease of $8.9 million in amortization expense and a decrease of $8.7 million in consulting cost, partially offset by an increase of $19.1 million related to the release of an accrued liability relating to the Company’s legacy mobile device business in fiscal 2024 which did not recur, an increase of $10.8 million in variable incentive plan cost, an increase of $5.3 million in the Company’s deferred share unit 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 $18.3 million, or 14.4% in fiscal 2025 compared to fiscal 2024. The decrease was primarily attributable to a decrease of $9.4 million in salaries and benefits expenses, a decrease of $7.1 million in consulting cost, and an increase in benefits of $3.0 million from SIF claims filed. Adjusted research and development expenses decreased by $16.3 million, or 13.6%, to $103.5 million in fiscal 2025 compared to $119.8 million in fiscal 2024. The decrease was primarily due to the same reasons described above on a U.S. GAAP basis. 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 $8.5 million, or 8.2% in fiscal 2025 compared to fiscal 2024. The decrease was primarily due to a decrease of $8.1 million in salaries and benefits and a decrease of $2.5 million in sales incentive plan costs. Adjusted sales and marketing expenses decreased by $8.8 million, or 8.7%, to $92.7 million in fiscal 2025 compared to $101.5 million in fiscal 2024. The decrease was primarily due to same reasons described above on a U.S. GAAP basis. 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 $27.5 million, or 14.7%, in fiscal 2025 compared to fiscal 2024. The decrease was primarily due to a decrease of $17.4 million in salaries and benefits expenses, a decrease of $9.9 million in facilities cost, a decrease of $9.8 million in restructuring costs, a decrease of $8.6 million in legal expenses and a decrease of $5.9 million in stock based compensation expense, partially offset by an increase of $19.1 million related to the release of an accrued liability relating to the Company’s legacy mobile device business in fiscal 2024 which did not recur and an increase of $5.3 million in the Company’s deferred share unit cost. Adjusted general and administrative expenses decreased by $11.8 million, or 8.7%, to $123.5 million in fiscal 2025 compared to $135.3 million in fiscal 2024. The decrease was primarily due to a decrease of $17.4 million in salaries and benefits expenses, a decrease of $11.3 million in legal expenses, and a decrease $9.9 million in facilities costs, partially offset an increase of $19.1 million related to the release of an accrued liability relating to the Company’s legacy mobile device business in fiscal 2024 which did not recur and an increase of $5.3 million in the Company’s deferred unit share cost. The Company expects adjusted Corporate general and administrative costs to be approximately $10 million in the first quarter of fiscal 2026 and approximately $40 million in fiscal 2026 as a whole. 50 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 fiscal 2025 compared to fiscal 2024 and fiscal 2024 compared to fiscal 2023. Intangible assets are comprised of patents, licenses and acquired technology. For the Fiscal Years Ended (in millions) Included in Operating Expense February 28, 2025 February 29, 2024 Change February 28, 2023 Change Property, plant and equipment $ 7.1 $ 9.1 $ (2.0) $ 9.4 $ (0.3) Intangible assets 10.7 17.7 (7.0) 18.0 (0.3) Total $ 17.8 $ 26.8 $ (9.0) $ 27.4 $ (0.6) Included in Cost of Sales February 28, 2025 February 29, 2024 Change February 28, 2023 Change Property, plant and equipment $ 0.5 $ 0.8 $ (0.3) $ 2.8 $ (2.0) Intangible assets 6.0 3.7 2.3 6.3 (2.6) Total $ 6.5 $ 4.5 $ 2.0 $ 9.1 $ (4.6) Amortization included in Operating Expense The decrease in amortization expense included in operating expense of $9.0 million was primarily due to the lower cost base of acquired technology assets. Adjusted amortization expense decreased by $5.0 million to $10.7 million in fiscal 2025 compared to $15.7 million in fiscal 2024 due to the same reasons described above. Amortization included in Cost of Sales The increase in amortization expense relating to certain property, plant and equipment and certain intangible assets employed in the Company’s service operations of $2.0 million was due to an increase in patent amortization expense included in cost of sales. Investment Income, Net Investment income, net, which includes the interest expense from the Debentures, decreased by $11.1 million to investment income, net of $7.7 million in fiscal 2025 compared to investment income, net of $18.8 million in fiscal 2024. The decrease in investment income, net was primarily due to a lower yield on cash and investments and the impact of observable price changes on non-marketable equity investments without readily determinable fair value. Income Taxes For fiscal 2025, the Company’s net effective income tax expense rate was approximately 27% (fiscal 2024 - net effective income tax expense rate of approximately 23%). 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 loss carry forwards, 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. 51 Net Loss From Continuing Operations The Company’s loss from continuing operations for fiscal 2025 was $8.5 million, or $0.01 basic and diluted loss per share from continuing operations on a U.S. GAAP basis (fiscal 2024 - income from continuing operations of $5.6 million, or $0.01 basic and diluted earnings per share from continuing operations). The decrease in income of $14.1 million from continuing operations 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 income from continuing operations was $57.6 million in fiscal 2025 or $0.10 adjusted basic earnings per share from continuing operations (fiscal 2024 - adjusted income from continuing operations of $116.0 million, or $0.20 adjusted basic earnings per share from continuing operations). The decrease in adjusted income from continuing operations of $58.4 million was primarily due to the same reasons described above on a U.S. GAAP basis. Net Loss The Company’s net loss for fiscal 2025 was $79.0 million, or $0.13 basic and diluted loss per share on a U.S. GAAP basis (fiscal 2024 - net loss of $130.2 million, or $0.22 basic and diluted loss per share). The decrease in net loss of $51.2 million was primarily due to a decrease in loss from discontinued operations, 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”, partially offset by a decrease in revenue as described above in “Revenue by Segment”. Adjusted net income was $12.5 million in fiscal 2025 or $0.02 adjusted basic earnings per share (fiscal 2024 - adjusted net income of $30.6 million, or $0.05 adjusted basic earnings per share). The decrease in adjusted net income of $18.1 million was primarily due to the same reasons described above on a U.S. GAAP basis. The Company previously stated that it expected total Company adjusted EBITDA from continuing operations to be in the range of $60 million to $70 million in fiscal 2025 and total Company adjusted EBITDA from continuing operations to be in the range of $10 million to $20 million in the fourth quarter of fiscal 2025. Total Company adjusted EBITDA from continuing operations was $84.2 million fiscal 2025 due to each of the Company’s operating segments exceeding the top end of the Company’s expectation ranges and lower than expected salaries and benefits expense. Total Company adjusted EBITDA from continuing operations was $21.1 million in the fourth quarter of fiscal 2025. The Company previously stated that it expected non-GAAP EPS to be in the range of ($0.01) and $0.01 in the fourth quarter of fiscal 2025 and non-GAAP EPS to be in the range of ($0.02) to breakeven for fiscal 2025. Non-GAAP EPS was $0.03 in the fourth quarter of fiscal 2025 and $0.02 for fiscal 2025. The Company expects adjusted EBITDA to be in the range of break-even to $7 million in the first quarter of fiscal 2026 and to be in the range of $69 million to $84 million in fiscal 2026 as a whole. The Company expects non-GAAP EPS to be in the range of ($0.01) to breakeven in the first quarter of fiscal 2026 and to be in the range of $0.08 to $0.10 in fiscal 2026 as a whole. The Company expects operating cash usage to be in the range of $20 million to $30 million in the first quarter of fiscal 2026 and to deliver positive operating cash flow of approximately $35 million for fiscal 2026. The Company does not provide a reconciliation of expected adjusted EBITDA and expected non-GAAP basic EPS for the first quarter and full fiscal year 2026 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 591 million common shares for basic and diluted loss per share for the fiscal year ended February 28, 2025. The weighted average number of shares outstanding was 585 million common shares for basic loss per share and 592 million common shares for diluted loss per share for the fiscal year ended February 29, 2024. Common Shares Outstanding On March 28, 2025, there were 596 million voting common shares, options to purchase 0.1 million voting common shares, 11 million restricted share units and 1.6 million deferred share units outstanding. In addition, 51.5 million common shares are issuable upon conversion in full of the Notes (as defined below), as described in Note 7 to the Consolidated Financial Statements. The Company has not paid any cash dividends during the last three fiscal years. 52 Results of Operations - Three months ended February 28, 2025 compared to the three months ended February 29, 2024 Revenue Revenue by Segment Comparative breakdowns of revenue by product and service on a U.S. GAAP basis are set forth below. For the Three Months Ended (in millions) February 28, 2025 February 29, 2024 Change February 28, 2023 Change Revenue by Segment Secure Communications $ 67.3 $ 71.6 $ (4.3) $ 60.8 $ 10.8 QNX 65.8 65.9 (0.1) 52.2 13.7 Licensing 8.6 15.4 (6.8) 10.7 4.7 $ 141.7 $ 152.9 $ (11.2) $ 123.7 $ 29.2 % Revenue by Segment Secure Communications 47.5 % 46.8 % 49.2 % QNX 46.4 % 43.1 % 42.2 % Licensing 6.1 % 10.1 % 8.6 % 100.0 % 100.0 % 100.0 % Secure Communications The decrease in Secure Communications revenue of $4.3 million was primarily due to a decrease of $11.9 million relating to BlackBerry UEM product revenue, partially offset by an increase of $2.9 million in professional services revenue, an increase of $2.1 million relating to product revenue in Secusmart and an increase of $0.9 million in BlackBerry AtHoc. The Company previously stated that it expected Secure Communications revenue in the fourth quarter of fiscal 2025 to be in the range of $62 million to $66 million. Secure Communications revenue in the fourth quarter of fiscal 2025 was $67.3 million. QNX QNX revenue in the fourth quarter of fiscal 2025 was consistent with the revenue in the fourth quarter of fiscal 2024. The increase of $1.9 million in BlackBerry QNX royalty revenue and the increase of $2.1 million in BlackBerry Radar was offset by a decrease of $2.7 million in BlackBerry QNX development seat revenue and $1.3 million in professional services revenue. The Company previously stated that it expected QNX revenue in the fourth quarter of fiscal 2025 to be in the range of $60 million to $65 million. QNX revenue in the fourth quarter of fiscal 2025 was $65.8 million. Licensing The decrease in Licensing revenue of $6.8 million was primarily due to a decrease 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. Revenue from intellectual property licensing was approximately $8.6 million in fourth quarter of fiscal 2025 due to the timing of new licensing deals. Total BlackBerry Revenue The Company previously stated that it expected the total BlackBerry revenue to be in the range of $126 million to $135 million in the fourth quarter of fiscal 2025. Total BlackBerry revenue was $141.7 million in the fourth quarter of fiscal 2025 primarily due to better than expected Licensing revenue. 53 U.S. 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 Three Months Ended (in millions) February 28, 2025 February 29, 2024 Change February 28, 2023 Change Revenue by Geography North America $ 70.2 $ 78.4 $ (8.2) $ 66.2 $ 12.2 Europe, Middle East and Africa 47.8 42.8 5.0 41.3 1.5 Other regions 23.7 31.7 (8.0) 16.1 15.6 $ 141.7 $ 152.9 $ (11.2) $ 123.6 $ 29.3 % Revenue by Geography North America 49.5 % 51.3 % 53.5 % Europe, Middle East and Africa 33.7 % 28.0 % 33.4 % Other regions 16.8 % 20.7 % 13.1 % 100.0 % 100.0 % 100.0 % North America Revenue The decrease in North America revenue of $8.2 million was primarily due to a decrease of $6.8 million in the Company’s intellectual property licensing arrangements, a decrease of $2.9 million in BlackBerry UEM product revenue and a decrease of $2.2 million in BlackBerry QNX development seats revenue, partially offset by an increase of $2.0 million in BlackBerry Radar and an increase of $1.4 million in BlackBerry AtHoc. Europe, Middle East and Africa Revenue The increase in Europe, Middle East and Africa revenue of $5.0 million was primarily due to an increase of $2.5 million relating to product revenue in Secusmart and an increase of $2.2 million in BlackBerry QNX royalty revenue. Other Regions Revenue The decrease in Other regions revenue of $8.0 million was primarily due to a decrease of $9.3 million in BlackBerry UEM product revenue and a decrease of $0.9 million in BlackBerry QNX development seats revenue, partially offset by an increase of $2.0 million in professional services. Gross Margin Consolidated Gross Margin Consolidated gross margin decreased by $18.1 million to approximately $104.1 million in the fourth quarter of fiscal 2025 (fourth quarter of fiscal 2024 - $122.2 million). The decrease was primarily due to a decreases in revenue from Licensing due to the reasons discussed above in “Revenue by Segment” and lower gross margin from Secusmart due to change in product mix, 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 decreased by 6.4%, to approximately 73.5% of consolidated revenue in the fourth quarter of fiscal 2025 (fourth quarter of fiscal 2024 - 79.9%). The decrease was primarily due to a lower gross margin contribution 54 from Secusmart due to change in product mix and a decrease in contribution in gross margin from Licensing due to the reasons discussed above in “Revenue by Segment”. Gross Margin and Adjusted EBITDA by Segment See “Business Overview - Segment Reporting” and “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 (in millions) Secure Communications QNX Licensing Segment Totals Feb 28 Feb 29 Change Feb 28 Feb 29 Change Feb 28 Feb 29 Change Feb 28 Feb 29 Change 2025 2024 2025 2024 2025 2024 2025 2024 Segment revenue $ 67.3 $ 71.6 $ (4.3) $ 65.8 $ 65.9 $ (0.1) $ 8.6 $ 15.4 $ (6.8) $ 141.7 $ 152.9 $ (11.2) Segment cost of sales 24.5 18.9 5.6 11.1 9.7 1.4 1.6 1.4 0.2 37.2 30.0 7.2 Segment gross margin $ 42.8 $ 52.7 $ (9.9) $ 54.7 $ 56.2 $ (1.5) $ 7.0 $ 14.0 $ (7.0) $ 104.5 $ 122.9 $ (18.4) Segment research and development 9.1 11.6 (2.5) 13.1 16.0 (2.9) — — — 22.2 27.6 (5.4) Segment sales and marketing 12.0 13.4 (1.4) 14.5 12.3 2.2 — — — 26.5 25.7 0.8 Segment general and administrative 9.7 11.6 (1.9) 8.5 10.8 (2.3) 7.8 3.6 4.2 26.0 26.0 — Less amortization included in the above 0.6 1.0 (0.4) 0.6 0.6 — 2.2 2.3 (0.1) 3.4 3.9 (0.5) Segment adjusted EBITDA $ 12.6 $ 17.1 $ (4.5) $ 19.2 $ 17.7 $ 1.5 $ 1.4 $ 12.7 $ (11.3) $ 33.2 $ 47.5 $ (14.3) Secure Communications The decrease in Secure Communications gross margin of $9.9 million was primarily due to the reasons discussed above in “Revenue by Segment” and a lower gross margin contribution from Secusmart due to change in product mix. The decrease in Secure Communications gross margin percentage of 10% was due to the same reasons discussed above. The decrease in Secure Communications adjusted EBITDA of $4.5 million was primarily due to the reasons discussed above in “Revenue by Segment”, partially offset by the decreases in salaries and benefits expense. The Company previously stated that it expected Secure Communications adjusted EBITDA to be in the range of $4 million to $6 million in the fourth quarter of fiscal 2025. Secure Communications adjusted EBITDA was $12.6 million in the fourth quarter of fiscal 2025 due to decreases in salaries and benefits expense, lower cost of sales due to product mix and revenue exceeding the top end of the Company’s expectation ranges. QNX The decrease in QNX gross margin of $1.5 million was primarily due to an increase in cost of sales related to BlackBerry Radar hardware devices. The decrease in QNX gross margin percentage of 2% was due to the same reason discussed above. The increase in QNX adjusted EBITDA of $1.5 million was primarily due to the reasons discussed above in “Revenue by Segment” and a benefit from SIF claims. The Company previously stated that it expected QNX adjusted EBITDA to be in the range of $8 million to $10 million in the fourth quarter of fiscal 2025. QNX adjusted EBITDA was $19.2 million in the fourth quarter of fiscal 2025 due to SIF claims, lower than expected salaries and benefits expense and revenue exceeding the top end of the Company’s expectation ranges. 55 Licensing The decrease in Licensing gross margin of $7.0 million was primarily due to the reasons discussed above in “Revenue by Segment”. The decrease in Licensing gross margin percentage of 10% was due to the same reasons discussed above. The decrease in Licensing adjusted EBITDA of $11.3 million was primarily due to the reasons discussed above in “Revenue by Segment” and an increase in credit loss provision that was subsequently written off. The Company previously stated that it expected Licensing adjusted EBITDA to be approximately $3 million in the fourth quarter of fiscal 2025. Licensing adjusted EBITDA was $1.4 million in the fourth quarter of fiscal 2025 due to the reasons noted above. Operating Expenses The table below presents a comparison of research and development, sales and marketing, general and administrative, and amortization expenses for the quarter ended February 28, 2025, compared to the quarter ended November 30, 2024 and the quarter ended February 29, 2024. The Company believes it is meaningful to provide a sequential comparison between the fourth quarter of fiscal 2025 and the third quarter of fiscal 2025. For the Three Months Ended (in millions) February 28, 2025 November 30, 2024 February 29, 2024 February 28, 2023 Revenue $ 141.7 $ 143.6 $ 152.9 $ 123.6 Operating expenses Research and development 23.2 27.9 28.9 33.1 Sales and marketing 27.1 23.4 26.0 28.7 General and administrative 50.0 36.4 54.0 35.8 Amortization 4.1 4.4 4.7 6.7 Impairment of long-lived assets 4.9 0.6 4.7 — Impairment of goodwill — — 15.9 112.1 Debentures fair value adjustment — — 0.5 (25.4) Litigation settlements 2.8 — — — Total $ 112.1 $ 92.7 $ 134.7 $ 191.0 Operating Expense as % of Revenue Research and development 16.4 % 19.4 % 18.9 % 26.8 % General and administrative 19.1 % 16.3 % 17.0 % 23.2 % Sales and marketing 35.3 % 25.3 % 35.3 % 29.0 % Amortization 2.9 % 3.1 % 3.1 % 5.4 % Impairment of long-lived assets 3.5 % 0.4 % 3.1 % — % Impairment of goodwill — % — % 10.4 % 90.7 % Debentures fair value adjustment — % — % 0.3 % (20.6 %) Litigation settlements 2.0 % — % — % — % Total 79.1 % 64.6 % 88.1 % 154.5 % See “Non-GAAP Financial Measures” for a reconciliation of selected U.S. GAAP-based measures to adjusted measures for the three months ended February 28, 2025, November 30, 2024, February 29, 2024 and February 28, 2023. U.S. GAAP Operating Expenses Operating expenses increased by $19.4 million, or 20.9% in the fourth quarter of fiscal 2025, compared to $92.7 million in the third quarter of fiscal 2025 primarily due to an increase of $5.3 million in restructuring cost, an increase of $4.9 million credit loss provision that was subsequently written off, an increase of $4.3 million in impairment of long-lived assets, an increase of $2.9 million in the Company’s deferred share unit cost and an increase of $2.8 million in legal expense, partially offset by a decrease of $4.7 million in variable incentive plan costs. 56 Operating expenses decreased by $22.6 million, or 16.8% in the fourth quarter of fiscal 2025, compared to $134.7 million in the fourth quarter of fiscal 2024. The decrease was primarily attributable to a decrease of $15.9 million in goodwill impairment, a decrease of $7.0 million in restructuring costs, decrease of $5.3 million salaries and benefits, the increase in benefits of $3.0 million in SIF claims filed, a decrease of $1.6 million in consulting cost, and a decrease of $1.6 million in facilities costs, partially offset by an increase of $4.7 million in credit loss provision that was subsequently written off and an increase of $4.7 million in the Company’s deferred share unit cost. Adjusted Operating Expenses Adjusted operating expenses increased by $7.7 million, or 9.7%, to $87.4 million in the fourth quarter of fiscal 2025 compared to $79.7 million in the third quarter of fiscal 2025. The increase was primarily due to an increase of $4.9 million in credit loss provision that was subsequently written off, an increase of $2.9 million in the Company’s deferred share unit cost and an increase of $0.9 million in marketing and advertising cost, partly offset by a decrease of $1 million in salaries and benefits. Adjusted operating expenses decreased by $1.9 million, or 2.1%, to $87.4 million in the fourth quarter of fiscal 2025, compared to $89.3 million in the fourth quarter of fiscal 2024. The decrease was primarily attributable to a decrease of $5.3 million in salaries and benefits costs, the increase in benefits of $3.0 million in SIF claims filed, a decrease of $1.6 million in consulting cost and a decrease of $1.6 million in facilities costs, partially offset by an increase of $4.7 million in credit loss provision that was subsequently written off and an increase of $4.7 million in the Company’s deferred share unit cost. 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 $5.7 million, or 19.7%, in the fourth quarter of fiscal 2025 compared to the fourth quarter of fiscal 2024, primarily due to the increase in benefits of $3.0 million in SIF claims filed, a decrease of $1.4 million in consulting cost and a decrease of $1.2 million in salaries and benefit cost. Adjusted research and development expenses decreased by $5.3 million, or 19.4%, to $22.0 million in the fourth quarter of fiscal 2025 compared to $27.3 million in the fourth quarter of fiscal 2024, primarily due to the same reasons described above on a U.S. GAAP basis. 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 increased by $1.1 million, or 4.2% in fiscal 2025, in the fourth quarter of fiscal 2025 compared to the fourth quarter of fiscal 2024, primarily due to an increase of $0.7 million in variable incentive plan costs and an increase of $0.4 million in stock compensation expense. Adjusted sales and marketing expenses increased by $0.7 million, or 2.7%, to $26.4 million in the fourth quarter of fiscal 2025 compared to $25.7 million in the fourth quarter of fiscal 2024, primarily due to an increase of $0.7 million in variable incentive plan costs. 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 $4.0 million, or 7.4%, in the fourth quarter of fiscal 2025 compared to the fourth quarter of fiscal 2024. The decrease was primarily due to a decrease of $7.0 million in restructuring costs, a decrease of $4.1 million in salaries and benefits costs and a decrease of $1.6 million in facilities costs, partially offset by an increase of $4.7 million in credit loss provision that was subsequently written off and an increase of $4.7 million in the Company’s deferred share unit cost. Adjusted general and administrative expenses increased by $3.2 million, or 9.6%, to $36.6 million in the fourth quarter of fiscal 2025 compared to $33.4 million in the fourth quarter of fiscal 2024. The increase was primarily due to an increase of $4.7 million in credit loss provision that was subsequently written off and an increase of $4.7 million in the Company’s deferred share unit cost, partially offset by a decrease of $4.1 million in salaries and benefits costs and a decrease of $1.6 million in facilities costs. 57 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 February 28, 2025 compared to the quarter ended February 29, 2024 and for the quarter ended February 29, 2024 compared to the quarter ended February 28, 2023. Intangible assets are comprised of patents, licenses and acquired technology. For the Three Months Ended (in millions) Included in Operating Expense February 28, 2025 February 29, 2024 Change February 28, 2023 Change Property, plant and equipment $ 1.4 $ 2.0 $ (0.6) $ 2.2 $ (0.2) Intangible assets 2.7 2.8 (0.1) 4.5 (1.7) Total $ 4.1 $ 4.8 $ (0.7) $ 6.7 $ (1.9) Included in Cost of Sales February 28, 2025 February 29, 2024 Change February 28, 2023 Change Property, plant and equipment $ 0.1 $ 0.2 $ (0.1) $ 0.7 $ (0.5) Intangible assets 1.5 1.4 0.1 1.6 (0.2) Total $ 1.6 $ 1.6 $ — $ 2.3 $ (0.7) Amortization included in Operating Expense The decrease in amortization expense included in operating expense of $0.7 million was primarily due to the lower cost base of acquired technology assets. Adjusted amortization expense decreased by $0.5 million to $2.4 million in the fourth quarter of fiscal 2025 compared to $2.9 million in the fourth quarter of fiscal 2024 due to the same reasons discussed above on a U.S. GAAP basis. Amortization included in Cost of Sales Amortization expense relating to certain property, plant and equipment and intangible assets employed in the Company’s service operations was $1.6 million in the fourth quarter of fiscal 2025 and was consistent with the fourth quarter of fiscal 2024. Investment Income, Net Investment income, net, which includes the interest expense from the Debentures, decreased by $2.4 million to investment income, net of $1.6 million in the fourth quarter of fiscal 2025 compared to investment income, net of $4.0 million in the fourth quarter of fiscal 2024. The decrease in investment income, net is primarily due to a lower yield on cash and investments. Income Taxes For the fourth quarter of fiscal 2025, the Company’s net effective income tax expense rate was approximately 23% (fourth quarter of fiscal 2024 - net effective income tax expense rate of approximately 7%). 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 loss carry forwards, 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 Loss From Continuing Operations The Company’s loss from continuing operations for the fourth quarter of fiscal 2025 was $7.8 million, or $0.01 basic and diluted loss from continuing operations per share on a U.S. GAAP basis (fourth quarter of fiscal 2024 - loss from continuing operations of $12.4 million, or $0.02 basic and diluted loss from continuing operations per share). The increase in loss from continuing operations of $4.6 million was primarily due to a decrease in revenue, as described above in “Revenue by Segment” and a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage”, partially offset by a decrease in operating expenses, as described above in “Operating Expenses”. Adjusted income from continuing operations was $17.3 million in the fourth quarter of fiscal 2025 or $0.03 adjusted basic earnings from continuing operations per share (fourth quarter of fiscal 2024 - adjusted income from continuing operations of $33.7 million or $0.06 adjusted basic earnings from continuing operations per share). The decrease in adjusted income from continuing operations of $16.4 million was primarily due to the same reasons describe above on a U.S. GAAP basis. 58 Net Loss The Company’s net loss for the fourth quarter of fiscal 2025 was $7.4 million, or $0.01 basic and diluted net loss per share on a U.S. GAAP basis (fourth quarter of fiscal 2024 - net loss of $56.2 million, or $0.10 basic and diluted net loss per share). The decrease in net loss of $48.8 million was primarily due to a decrease in loss from discontinued operations and a decrease in operating expenses, as described above in “Operating Expenses”, partially offset by a decrease in revenue, as described above in “Revenue by Segment” and a decrease in gross margin percentage, as described above in “Consolidated Gross Margin Percentage”. Adjusted net income was $17.7 million in the fourth quarter of fiscal 2025 or $0.03 adjusted basic earnings per share (fourth quarter of fiscal 2024 - adjusted net income of $16.4 million or $0.03 adjusted basic earnings per share). The decrease in adjusted net income of $1.3 million was primarily due to the same reasons describe above on a U.S. GAAP basis. The weighted average number of shares outstanding was 594 million common shares for basic and diluted loss per share for the fourth quarter of fiscal 2025. The weighted average number of shares outstanding was 588 million common shares for basic and diluted loss per share for the fourth quarter of fiscal 2024. Financial Condition Liquidity and Capital Resources Cash, cash equivalents, and investments increased by $112.1 million to $410.3 million as at February 28, 2025 from $298.2 million as at February 29, 2024, primarily due to the cash proceeds received from the sale of the Company’s Cylance business to Arctic Wolf and cash generated from operations. A comparative summary of cash, cash equivalents, and investments is set out below: As at (in millions) February 28, 2025 February 29, 2024 Change February 28, 2023 Change Cash and cash equivalents $ 266.7 $ 175.1 $ 91.6 $ 295.7 $ (120.6) Restricted cash and cash equivalents 13.6 25.4 (11.8) 26.6 (1.2) Short-term investments 71.1 62.0 9.1 131.2 (69.2) Long-term investments 58.9 35.7 23.2 34.0 1.7 Cash, cash equivalents, and investments $ 410.3 $ 298.2 $ 112.1 $ 487.5 $ (189.3) The table below summarizes the current assets, current liabilities, and working capital of the Company: As at (in millions) February 28, 2025 February 29, 2024 Change February 28, 2023 Change Current assets $ 591.5 $ 507.5 $ 84.0 $ 743.5 $ (236.0) Current liabilities 344.3 356.9 (12.6) 729.0 (372.1) Working capital $ 247.2 $ 150.6 $ 96.6 $ 14.5 $ 136.1 Current Assets The increase in current assets of $84.0 million at the end of fiscal 2025 from the end of fiscal 2024 was primarily due to an increase in cash and cash equivalents of $91.6 million, an increase in other receivable of $27.0 million and an increase of $9.1 million in short-term investments, partially offset by a decrease of $25.0 million in account receivable, net of credit loss, a decrease of $11.6 million in assets held for sale, current, a decrease of $5.1 million in other current assets and a decrease of $2.0 million in income taxes receivable. At February 28, 2025, other receivables was $48.4 million, an increase of $27.0 million from February 29, 2024. The increase was primarily due to an increase of $38.6 million related to the present value of the Arctic Wolf delayed cash payment consideration, partially offset by a decrease of $13.2 million related to a certain receivable reclassified from short-term to long-term receivables. At February 28, 2025, accounts receivable, net of allowance was $173.7 million, a decrease of $25.0 million from February 29, 2024. The decrease was primarily due to lower revenue recognized over the three months ended February 28, 2025 compared to the three months ended February 29, 2024, partially offset by an increase in days sales outstanding to 102.1 days at the end of the fourth quarter of fiscal 2025 from 100.4 days at the end of the fourth quarter of fiscal 2024. 59 At February 28, 2025, other current assets was $30.0 million, a decrease of $5.1 million from February 29, 2024. The decrease was primarily due to a decrease of $2.2 million in prepaid software maintenance. At February 28, 2025, income taxes receivable was $1.6 million, a decrease of $2.0 million from February 29, 2024. The decrease was primarily due to tax refunds received. Current Liabilities The decrease in current liabilities of $12.6 million at the end of fiscal 2025 from the end of fiscal 2024 was primarily due to a decrease in the deferred revenue associated with the sale of Cylance of $49.3 million and a decrease of $2.9 million in income taxes payable, partially offset by an increase of $14.3 million in accounts payable, an increase of $12.8 million in deferred revenue, current, and an increase in accrued liabilities of $12.5 million. At February 28, 2025, income taxes payable was $25.5 million, reflecting a decrease of $2.9 million compared to February 29, 2024, which was primarily due to a change in the quarterly tax provision and installments made during the period. At February 28, 2025, accounts payable was $31.1 million, reflecting an increase of $14.3 million from February 29, 2024, which was primarily due to timing of payments of accounts payable. At February 28, 2025, deferred revenue, current was $161.5 million, which reflects an increase of $12.8 million compared to February 29, 2024 that was attributable to a $7.6 million increase in deferred revenue, current related to BlackBerry UEM, and an increase of $6.9 million in deferred revenue, current related to BlackBerry QNX. At February 28, 2025, accrued liabilities was $126.2 million, reflecting an increase of $12.5 million compared to February 29, 2024, which was primarily attributable to an increase of $16.3 million in variable incentive plan accrual, partially offset by a decrease of $4.6 million in operating lease liability, current. Cash flows for the fiscal year ended February 28, 2025 compared to the fiscal year ended February 29, 2024 were as follows: For the Fiscal Years Ended (in millions) February 28, 2025 February 29, 2024 Change February 28, 2023 Change Net cash flows provided by (used in): Operating activities $ 16.5 $ (3.5) $ 20.0 $ (262.2) $ 258.7 Investing activities 60.7 46.6 14.1 175.2 (128.6) Financing activities 3.1 (165.1) 168.2 6.0 (171.1) Effect of foreign exchange loss on cash and cash equivalents (0.5) 0.2 (0.7) (2.9) 3.1 Net increase (decrease) in cash and cash equivalents $ 79.8 $ (121.8) $ 201.6 $ (83.9) $ (37.9) Operating Activities The increase in net cash flows provided by operating activities of $20 million primarily reflects the net changes in working capital. Investing Activities During the fiscal year ended February 28, 2025, cash flows provided by investing activities were $60.7 million and included cash proceeds of $79.8 million from disposal of discontinued operations, partially offset by cash flows used in transactions involving the acquisitions of short-term and long-term investments, net of the proceeds on sale or maturity in the amount of $9.0 million, intangible asset additions of $7.0 million, and acquisitions of property, plant and equipment of $3.1 million. During fiscal 2024, cash flows provided by investing activities were $46.6 million and included cash flows used in transactions involving the acquisitions of short-term and long-term investments, net of the proceeds on sale or maturity in the amount of $67.5 million, partially offset by intangible asset additions of $13.8 million and acquisitions of property, plant and equipment of $7.1 million. Financing Activities The increase in cash flows provided by financing activities was $168.2 million for fiscal 2025 due to the net effect of redemption of the 2020 Debentures and issuance of Extension Debentures partially offset by the issuance of the Notes, each as defined below, which did not recur. 60 Debt Financing and Other Funding Sources See Note 7 to the Consolidated Financial Statements for a description of the Company’s $200.0 million aggregate principal amount of 3.00% senior convertible unsecured notes issued in January 2024 (the “Notes”), the $365.0 million aggregate principal amount of convertible debentures issued in September 2020, which matured in November 2023 (the “2020 Debentures”), and the $150.0 million aggregate principal amount of convertible debentures issued in November 2023, which matured in February 2024 (the “Extension Debentures” and, collectively with the Notes and the 2020 Debentures, the “Debentures” and the “2020 Debentures” and, collectively with the Extension Debentures, the “Prior Debentures”). The Company has $13.5 million in collateralized outstanding letters of credit in support of certain leasing arrangements entered into in the ordinary course of business. See Note 4 to the Consolidated Financial Statements for further information concerning the Company’s restricted cash. Cash, cash equivalents, and investments were approximately $410.3 million as at February 28, 2025. The Company’s management remains focused on maintaining appropriate cash balances, efficiently managing working capital balances and managing the liquidity needs of the business. Based on its current financial projections, the Company believes its financial resources, together with expected future operating cash generation 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 February 28, 2025: (in millions) Total Short-term (next 12 months) Long-term (>12 months) Operating lease obligations $ 48.6 $ 18.2 $ 30.4 Purchase obligations and commitments 40.2 40.2 — Debt interest and principal payments 224.0 6.0 218.0 Total $ 312.8 $ 64.4 $ 248.4 Total contractual and other obligations as at February 28, 2025 decreased by approximately $31.4 million as compared to the February 29, 2024 balance of approximately $344.2 million, which was attributable to a decrease in operating lease obligations and a decrease in purchase obligations and commitments. The Company does not have any material off-balance sheet arrangements. Accounting Policies and Critical Accounting Estimates Accounting Policies See Note 1 to the Consolidated Financial Statements for a description of the Company’s significant accounting policies. Critical Accounting Estimates The preparation of the consolidated financial statements requires management to make estimates and assumptions with respect to the reported amounts of assets, liabilities, revenue and expenses and the disclosure of contingent assets and liabilities. The Company’s critical accounting estimates are those estimates that involve a significant level of uncertainty at the time the estimate was made, and changes in them have had or are reasonably likely to have a material effect on the Company’s financial condition or results of operations. Accordingly, actual results could differ materially from the Company’s estimates. The Company’s estimates are based on past experience and other assumptions that it believes is reasonable under the circumstances, and the Company evaluates these estimates on an ongoing basis. The Company’s critical accounting estimates have been reviewed and discussed with the Company’s Audit & Risk Management Committee and are set out below. Valuation of Long-Lived Assets The Company’s determination of its asset groups, its primary asset and its remaining useful life, and estimated cash flows are significant factors in assessing the recoverability of the Company’s assets for the purposes of LLA impairment testing. The current macroeconomic environment and competitive dynamics continue to be challenging to the Company’s business and the Company cannot be certain of the duration of these conditions and their potential impact on the Company’s future financial results and cash flows. The Company’s share price can be affected by, among other things, changes in industry or market conditions, including the effect of competition, changes in the Company’s results of operations, changes in the Company’s forecasts or market expectations relating to future results, and the Company’s strategic initiatives and the market’s assessment 61 of any such factors. See Part 1, Item 1A “Risk Factors - The market price of the Company’s common shares is volatile”. A decline in the Company’s performance, future changes to the Company’s assumptions and estimates used in the LLA impairment test, particularly the expected future cash flows, remaining useful life of the primary asset and terminal value of the asset group, may result in further impairment charges in future periods of some or all of the assets on the Company’s balance sheet. Although it does not affect the Company’s cash flow, an impairment charge to earnings has the effect of decreasing the Company’s earnings or increasing the Company’s losses, as the case may be. Valuation of Goodwill Reporting Units In the annual impairment test, the analysis requires significant judgment, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rates of revenue growth for the Company’s reporting units, estimation of the useful life over which cash flows will occur, terminal growth rates, profitability measures, and determination of the discount rates for the reporting units. The carrying value of the Company’s assets was assigned to reporting units using reasonable methodologies based on the asset type. When the carrying value of a reporting unit exceeds its fair value, goodwill of the reporting unit is considered to be impaired and written down to its fair value. Different judgments could yield different results. During the third quarter of fiscal 2025 and in connection with the plans to sell the Cylance business, the Company reorganized its reporting structure resulting in its BlackBerry Spark reporting unit being disaggregated into two separate reporting units: UEM and Cylance. In accordance with ASC 350 Intangibles - Goodwill and Other, the Company conducted a valuation of the individual reporting units and allocated the goodwill associated with the previous BlackBerry Spark reporting unit to the UEM and Cylance reporting units using a relative fair value approach. The valuations of the reporting units were based on a combination of the income approach using a discounted future cash flow model, a market-based approach, and estimated exit value approaches for Cylance using the same critical accounting estimates as disclosed in Note 1 to the Consolidated Financial Statements. The analysis requires significant judgment, including estimation of future cash flows, which is dependent on internal forecasts, estimation of the long-term rates of revenue growth for the Company’s reporting units, estimation of the useful life over which cash flows will occur, terminal growth rates, profitability measures, and determination of the discount rates for the reporting units. Following the assignment of assets, liabilities, and goodwill to the UEM and Cylance reporting units, the Company compared the carrying values of the reporting units against their fair values and determined no impairment was present in either reporting unit. Different judgments could yield different results. Valuation Allowance Against Deferred Tax Assets The Company regularly assesses the need for a valuation allowance against its deferred tax assets. A valuation allowance is required for deferred tax assets if it is more likely than not that all or some portion of the asset will not be realized. All available evidence, both positive and negative, that may affect the realization of deferred tax assets must be identified and considered in determining the appropriate amount of the valuation allowance. There have been no changes in the Company’s judgement in determining the valuation allowance for the fiscal year ended February 28, 2025. Additionally, for interim periods, the estimated annual effective tax rate should include the valuation allowance for current year changes in temporary differences and losses or income arising during the year. For interim periods, the Company needs to consider the valuation allowance that it expects to recognize at the end of the fiscal year as part of the estimated annual effective tax rate. During interim quarters, the Company uses estimates including pre-tax results and ending position of temporary differences as at the end of the fiscal year to estimate the valuation allowance that it expects to recognize at the end of the fiscal year. This accounting treatment has no effect on the Company’s actual ability to utilize deferred tax assets to reduce future cash tax payments. Different judgments could yield different results. There have been no changes to the method with which the Company estimates the valuation allowance for the interim quarters during the fiscal year ended February 28, 2025. Revenue Recognition Variable consideration is included in the transaction price if, in the Company’s judgment, it is probable that a significant future reversal of cumulative revenue recognized under the contract will not occur. Any estimates, including any constraints on variable consideration, are evaluated at each reporting period. To the extent the transaction price in a contract with a customer includes variable consideration, the Company estimates the amount of variable consideration that should be included in the price utilizing either the expected value method or the most likely amount method, depending on the nature of the variable consideration. The Company also estimates whether and how much variable consideration is subject to constraint if it cannot conclude it is probable that a significant reversal in revenue will not occur, due to factors such as: the consideration being highly susceptible to factors outside the Company’s influence, the period of time before the variable consideration is resolved, the Company’s previous experience with similar contracts, the Company’s history of price concessions or changing of payment terms, and whether there is a large number and broad range of possible variable consideration amounts. Apart from future revenues from the Malikie Transaction which are constrained, there have been no material changes to the Company’s assumptions or estimates on any material variable consideration for the fiscal year ended February 28, 2025. 62 Judgment is required to determine the SSP for each distinct performance obligation. The Company’s products and services often have observable SSP when the Company sells a promised product or service separately to similar customers. A contractually stated price or list price for a good or service may be the SSP of that good or service. However, in instances where SSP is not directly observable, the Company determines the SSP by maximizing observable inputs and using an adjusted market assessment approach using information that may include market conditions and other observable inputs from the Company’s pricing team, including historical SSP.