BLACKBERRY Ltd 10-Q

ITEM 2. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) should be read together with the unaudited interim consolidated financial statements and the accompanying notes (the “Consolidated Financial Statements”) of BlackBerry Limited for the three months ended May 31, 2025, included in Part I, Item 1 of this Quarterly Report on Form 10-Q, as well as the Company’s audited consolidated financial statements and accompanying notes and MD&A for the fiscal year ended February 28, 2025 (the “Annual MD&A”) included in the Company’s Annual Report on Form 10-K for the fiscal year ended February 28, 2025 (the “Annual Report”). The Consolidated Financial Statements are presented in U.S. dollars and have been prepared in accordance with United States generally accepted accounting principles (“U.S. GAAP”). All financial information in this MD&A is presented in U.S. dollars, unless otherwise indicated. Additional information about the Company, which is included in the Company’s Annual Report, can be found on SEDAR+ at www.sedarplus.ca and on the SEC’s website at www.sec.gov. Cautionary Note Regarding Forward-Looking Statements This MD&A 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, benefit from changes in market demand, and patent new innovations; • the Company’s expectations with respect to its revenue, segment adjusted EBITDA, adjusted Corporate operating costs, total and segment adjusted EBITDA, non-GAAP EPS and operating cash flow in the second quarter of fiscal 2026; • the Company’s expectations with respect to its revenue, adjusted corporate operating costs, Secure Communications adjusted EBITDA and total adjusted EBITDA for fiscal 2026 and operating cash flow in the second half of fiscal 2026; • 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. The words “expect”, “anticipate”, “estimate”, “may”, “will”, “should”, “could”, “intend”, “believe”, “target”, “plan” and similar expressions are intended to identify forward-looking statements in this MD&A, including in the sections entitled “Business Overview”, “Business Overview - Products and Services”, “Results of Operations - Three months ended May 31, 2025 compared to the three months ended May 31, 2024 - Revenue - Revenue by Segment”, “Results of Operations - Three months ended May 31, 2025 compared to the three months ended May 31, 2024 - Revenue - Gross Margin and Adjusted EBITDA by Segment”, “Results of Operations - Three months ended May 31, 2025 compared to the three months ended May 31, 2024 - Revenue - Operating Expenses - Adjusted Operating Expenses” , “Results of Operations - Three months ended May 31, 2025 compared to the three months ended May 31, 2024 - Net Income (Loss)” and “Financial Condition - Contractual and Other Obligations”. Forward-looking statements are based on estimates and assumptions made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that the Company believes are appropriate in the circumstances, including but not limited to, the Company’s expectations regarding its business, strategy, opportunities and prospects, the launch of new products and services, general economic conditions, competition, and the Company’s expectations regarding its financial performance. Many factors could cause the Company’s actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, including, without limitation, the risk factors discussed in Part I, Item 1A “Risk Factors” in the Annual Report. All of these factors should be considered carefully, and readers should not place undue reliance on the Company’s forward-looking statements. Any statements that are forward-looking statements are intended to enable the Company’s shareholders to view the anticipated performance and prospects of the Company from management’s perspective at the time such statements are made, and they are subject to the risks that are inherent in all forward-looking statements, as described above, as well as difficulties in forecasting the Company’s financial results and performance for future periods, particularly over longer periods, given changes in technology and the Company’s business strategy, evolving industry standards, intense competition and short product life cycles that characterize the industries in which the Company operates. See the “Strategy” subsection in Part I, Item 1 “Business” of the Annual Report. 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. 30 Business Overview Founded in 1984, BlackBerry Limited (the “Company”) is a leading provider of intelligent software and services to enterprises, governments and leading OEMs around the world. Its products enable more than 255 million vehicles and secure 17 of the G20 governments. The Company’s common shares trade under the ticker symbol “BB” on the New York Stock Exchange (“NYSE”) and the Toronto Stock Exchange (“TSX”). Based in Waterloo, Ontario, the Company has two core divisions, each addressing large and growing market opportunities. The Company’s QNX division is a leader in embedded software where the Company believes it is the world’s leading automotive foundational software vendor. Its customers include leading automotive OEMs and Tier 1 suppliers that use its products in vehicles, as well as manufacturers in other markets where high-performance, safety-critical foundational embedded software platforms and solutions are important, such as robotics, medical devices, industrial automation solutions, rail systems, hardware security modules, and other mission-critical applications (collectively, the general embedded market or “GEM”). QNX solutions are implemented into all the top 10 automotive OEMs, top 7 Tier 1 suppliers, 24 of the 25 top EV OEMs, and 9 of the 10 top medical OEMs. The Company’s Secure Communications division delivers operational resiliency with a comprehensive, highly secure, and extensively certified product portfolio for mobile fortification, mission-critical communications and critical event management. Secure Communications focuses on the government sector and on strategic industries with vertical-specific use cases, including regulated enterprise markets such as financial services. Products and Services The Company has a rich pedigree in innovation and has developed a range of products and services that assist customers in addressing their needs as their industries evolve, which are structured in three divisions: QNX, Secure Communications and Licensing. QNX The QNX division consists of the QNX® business (“ QNX”) , BlackBerry Radar® and BlackBerry® Certicom®. With 45 years of embedded software expertise and a rich intellectual property portfolio, QNX is an industry leader whose 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. QNX is a trusted supplier of operating systems, hypervisors, frameworks and development tools that help reduce hardware dependency while enabling new possibilities in high-performance compute, standards-based virtualization technologies, and cloud enablement. QNX offers a growing portfolio of safety-certified, secure and reliable platform solutions and is focused on achieving design wins with automotive OEMs, Tier 1 vendors and automotive semiconductor suppliers. These solutions include the QNX® real-time operating system, QNX® Hypervisor for Safety and QNX® Software Development Platform (SDP), as well as other products designed to alleviate the challenges of compliance with ISO 26262, the automotive industry’s functional safety standard. The QNX® pre-certified microkernel operating system is specifically tailored for safety-critical embedded systems and toolchains that are pre-qualified for building these systems. The QNX Hypervisor for Safety prevents safety systems from potential impact of malfunction in other systems. These products help drive a faster time to market and also reduce developer friction. In fiscal 2026, QNX ’s priorities in the automotive space include promoting increased adoption of QNX SDP 8.0 and also working with partners to develop a vehicle platform featuring pre-integrated middleware solutions with a view to capturing a larger share of the automotive software stack and increasing future royalties per vehicle. QNX is also a preferred supplier of embedded systems for companies in the GEM space. QNX collaborates closely with customers to understand their specific requirements and more quickly and effectively develop solutions to meet their evolving needs. The Company is investing in initiatives to increase the revenue that it derives from GEM opportunities. BlackBerry Radar is a family of asset monitoring and telematics solutions for the transportation and logistics industry. The BlackBerry Radar solution includes devices and secure cloud-based dashboards for tracking containers, trailers, chassis, flatbeds and heavy machinery, for reporting locations and sensor data, and for enabling custom alerts and fleet management analytics. BlackBerry Certicom leverages patented elliptic curve cryptography to provide device security, anti-counterfeiting and product authentication solutions to protect vehicles, critical infrastructure and IoT deployments from product counterfeiting, re-manufacturing and unauthorized network access. The QNX division also provides engineering consulting services, including services to assist OEM customers to bring their products to market on time, as well as services to ensure compliance with relevant functional safety standards. 31 Secure Communications The Secure Communications division consists of BlackBerry UEM solutions, BlackBerry® SecuSUITE® and BlackBerry® AtHoc®. The Company’s endpoint management offerings include BlackBerry® UEM, BlackBerry® Dynamics™, BlackBerry® Workspaces, and BlackBerry Messenger (BBM®) Enterprise. BlackBerry UEM employs a containerized approach to manage and secure devices, third party and custom applications, identity, content and endpoints across all leading operating systems, as well as providing regulatory compliance tools. BlackBerry Dynamics offers a best-in-class development platform and secure container for mobile applications, including the Company’s own enterprise applications such as BlackBerry® Work and BlackBerry® Connect for secure collaboration. BlackBerry Workspaces is a secure Enterprise File Sync and Share (EFSS) solution. BBM Enterprise is an enterprise-grade secure instant messaging solution for messaging, voice and video. BlackBerry SecuSUITE is a certified, multi-OS voice and data solution with advanced encryption, anti-eavesdropping and continuous authentication capabilities, providing a maximum level of security on conventional mobile devices for government and businesses. BlackBerry AtHoc is a secure, networked critical event management solution that enables people, devices and organizations to exchange critical information in real time during business continuity and life safety operations. The platform securely connects with a diverse set of endpoints to distribute emergency mass notifications, improve personnel accountability and facilitate the bidirectional collection and sharing of data within and between organizations. In fiscal 2026, the Secure Communications division expects to benefit from an increase in government market demand for on-premise solutions that are designed to protect data sovereignty. The Secure Communications division also provides enterprise consulting services, including platform-agnostic strategies to address mobility-based challenges, providing expert deployment support, end-to-end delivery (from system design to user training), application consulting, and experienced project management. Licensing The Licensing division is responsible for the management and monetization of the Company’s global patent portfolio. The patent portfolio continues to provide a competitive advantage in the Company’s core product areas as well as providing leverage in the development of future technologies and licensing programs in both core and adjacent vertical markets. The Company owns rights to an array of patented and patent pending technologies which include, but are not limited to, operating systems, networking infrastructure, acoustics, messaging, enterprise software, automotive subsystems, cybersecurity, cryptography and wireless communications. Recent Developments The Company has continued to execute on its strategy in fiscal 2026 and announced the following significant achievements during and subsequent to the most recent quarter: Products and Innovation: • QNX launched QNX® Hypervisor 8.0, built on the next-generation SDP 8.0 architecture, facilitating high-performance virtualization of multiple operating systems on a single system-on-a-chip; and • BlackBerry AtHoc became the first critical event management provider to achieve FedRAMP High authorization. Customers and Partners: • WeRide launched its next-generation ADAS platform for L2++ autonomous drive, built upon QNX® OS for Safety; • Leapmotor selected QNX® technology as the foundation of its intelligent digital cockpit and autonomous drive domain controllers in its new B10 electric SUV; • Direct ChassisLink Inc (DCLI) announced the deployment of BlackBerry Radar across 100,000 chassis; and • Malaysia Cybersecurity Center of Excellence celebrated its first anniversary with new partnerships, scholarships and expanded education programs. Environmental, Sustainability and Corporat e Governance: • BlackBerry announced a share buyback program for the repurchase of up to 27,855,153 of its common shares. 32 First Quarter Fiscal 2026 Summary Results of Operations The following table sets forth certain consolidated statements of operations data for the quarter ended May 31, 2025 compared to the quarter ended May 31, 2024 under U.S. GAAP: For the Three Months Ended (in millions, except for share and per share amounts) May 31, 2025 May 31, 2024 Change Revenue $ 121.7 $ 123.4 $ (1.7) Gross margin 90.3 90.0 0.3 Operating expenses 88.3 102.9 (14.6) Investment income, net 2.9 4.0 (1.1) Income (loss) before income taxes 4.9 (8.9) 13.8 Provision for income taxes 3.0 7.6 (4.6) Income (loss) from continuing operations 1.9 (16.5) 18.4 Loss from discontinued operations (1) — (24.9) 24.9 Net income (loss) $ 1.9 $ (41.4) $ 43.3 Earnings (loss) per share - reported Basic $ 0.00 $ (0.07) Diluted $ 0.00 $ (0.07) Weighted-average number of shares outstanding (000’s) Basic 596,300 589,821 Diluted (2) 600,831 589,821 ______________________________ (1) Prior to the third quarter of fiscal 2025, the Company’s Secure Communications segment included the Company’s Cylance® cybersecurity solutions business and was reported as the Cybersecurity segment. As a result of the Cylance sale in the fourth quarter of fiscal 2025, Cylance 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 earnings (loss) per share on a U.S. GAAP basis for the first quarter of fiscal 2026 and fiscal 2025 does not include the dilutive effect of the Notes (as defined in “Financial Condition - Debt Financing and Other Funding Sources”), as to do so would be anti-dilutive. Diluted loss per share on a U.S. GAAP basis for the first quarter of fiscal 2025 does not include the dilutive effect of stock-based compensation as to do so would be anti-dilutive. See Note 8 to the Consolidated Financial Statements for the Company’s calculation of the diluted weighted average number of shares outstanding. 33 The following tables show information by operating segment for the three months ended May 31, 2025 and May 31, 2024. The Company reports segment information in accordance with U.S. GAAP, pursuant to the Financial Standards Accounting Board’s Accounting Standard Codification Topic 280, Segment Reporting, 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, the following table includes the additional measures of segment profit or loss used by the CODM which is segment adjusted EBITDA, a non-GAAP financial measure. See Note 11 to the Consolidated Financial Statements for a description of the Company’s operating segments. For the Three Months Ended (in millions) QNX Secure Communications Licensing Segment Totals May 31, Change May 31, Change May 31, Change May 31, Change 2025 2024 2025 2024 2025 2024 2025 2024 Segment revenue $ 57.5 $ 53.2 $ 4.3 $ 59.5 $ 64.2 $ (4.7) $ 4.7 $ 6.0 $ (1.3) $ 121.7 $ 123.4 $ (1.7) Segment cost of sales 11.2 9.5 1.7 18.1 21.8 (3.7) 1.6 1.4 0.2 30.9 32.7 (1.8) Segment adjusted gross margin $ 46.3 $ 43.7 $ 2.6 $ 41.4 $ 42.4 $ (1.0) $ 3.1 $ 4.6 $ (1.5) $ 90.8 $ 90.7 $ 0.1 Segment research and development 12.4 16.4 (4.0) 11.3 12.3 (1.0) — — — 23.7 28.7 (5.0) Segment sales and marketing 13.3 10.7 2.6 13.6 12.2 1.4 — — — 26.9 22.9 4.0 Segment general and administrative 8.6 8.2 0.4 7.5 9.6 (2.1) 1.6 2.1 (0.5) 17.7 19.9 (2.2) Less amortization included in the above 0.7 0.5 0.2 0.6 1.0 (0.4) 2.3 2.2 0.1 3.6 3.7 (0.1) Segment adjusted EBITDA $ 12.7 $ 8.9 $ 3.8 $ 9.6 $ 9.3 $ 0.3 $ 3.8 $ 4.7 $ (0.9) $ 26.1 $ 22.9 $ 3.2 The following tables reconcile the Company’s segment adjusted gross margin results for the three months ended May 31, 2025 to consolidated U.S. GAAP results: For the Three Months Ended May 31, 2025 (in millions) QNX Secure Communications Licensing Segment Totals Reconciling Items Consolidated U.S. GAAP Revenue $ 57.5 $ 59.5 $ 4.7 $ 121.7 $ — $ 121.7 Cost of sales 11.2 18.1 1.6 30.9 0.5 31.4 Gross margin (1) $ 46.3 $ 41.4 $ 3.1 $ 90.8 $ (0.5) $ 90.3 Operating expenses 88.3 88.3 Investment income, net 2.9 2.9 Income before income taxes $ 4.9 ______________________________ (1) See “Non-GAAP Financial Measures” for a reconciliation of selected U.S. GAAP-based measures to adjusted measures for the three months ended May 31, 2025. 34 The following tables reconcile the Company’s segment adjusted gross margin results for the three months ended May 31, 2024 to consolidated U.S. GAAP results: For the Three Months Ended May 31, 2024 (in millions) QNX Secure Communications Licensing Segment Totals Reconciling Items Consolidated U.S. GAAP Revenue $ 53.2 $ 64.2 $ 6.0 $ 123.4 $ — $ 123.4 Cost of sales 9.5 21.8 1.4 32.7 0.7 33.4 Gross margin (1) $ 43.7 $ 42.4 $ 4.6 $ 90.7 $ (0.7) $ 90.0 Operating expenses 102.9 102.9 Investment income, net 4.0 4.0 Loss before income taxes $ (8.9) ______________________________ (1) See “Non-GAAP Financial Measures” for a reconciliation of selected U.S. GAAP-based measures to adjusted measures for the three months ended May 31, 2024. The following table reconciles total segment adjusted EBITDA for the three months ended May 31, 2025 and May 31, 2024 to the Company’s consolidated totals: Three Months Ended May 31, 2025 May 31, 2024 Total Segment Adjusted EBITDA $ 26.1 $ 22.9 Adjustments (1) : Stock compensation expense 5.7 6.2 Restructuring charges 2.9 7.3 Less: Corporate general and administrative expense 9.7 12.4 Amortization 5.7 6.4 Impairment of long-lived assets 0.1 3.5 Investment income (2.9) (4.0) Consolidated income (loss) from continuing operations before income taxes $ 4.9 $ (8.9) ______________________________ (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 charges - Restructuring charges relate to employee termination benefits, facilities, streamlining many of the Company’s centralized corporate functions into Secure Communications and QNX specific teams, and other costs pursuant to programs to reduce the Company’s annual expenses amongst R&D, infrastructure and other functions and 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 $381.9 million in cash, cash equivalents and investments as of May 31, 2025 (February 28, 2025 - $410.3 million). In the first quarter of fiscal 2026, the Company recognized revenue of $121.7 million and net income of $1.9 million, or $0.00 basic and diluted earnings per share, on a U.S. GAAP basis (first quarter of fiscal 2025 - revenue of $123.4 million and net loss of $41.4 million, or $0.07 basic and diluted loss per share). 35 The Company recognized adjusted net income of $12.3 million, and adjusted earnings of $0.02 per share, on a non-GAAP basis in the first quarter of fiscal 2026 (first quarter of fiscal 2025 - adjusted net loss of $14.3 million, and adjusted loss of 0.02 per share). See “Non-GAAP Financial Measures” below. 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 June 24, 2025, the Company announced financial results for the three months ended May 31, 2025, which included certain non-GAAP financial measures and non-GAAP ratios, including adjusted gross margin, adjusted gross margin percentage, adjusted operating expense, adjusted corporate operating costs, adjusted corporate operating costs excluding amortization, 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 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 below from the Company’s U.S. GAAP financial results. The Company believes that these non-GAAP financial measures and non-GAAP ratios provide management, as well as readers of the Company’s financial statements, with a consistent basis for comparison across accounting periods and are useful in helping management and readers understand the Company’s operating results and underlying operational trends. Non-GAAP financial measures and non-GAAP ratios exclude certain amounts as described below: • Restructuring charges . The Company believes that restructuring charges relating to employee termination benefits, facilities, streamlining many of the Company’s centralized corporate functions into Secure Communications and QNX 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 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. • 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. 36 Reconciliation of non-GAAP based measures with most directly comparable U.S. GAAP based measures for the three months ended May 31, 2025 and May 31, 2024 Readers are cautioned that adjusted gross margin, adjusted gross margin percentage, adjusted operating expense, adjusted corporate operating costs, adjusted corporate operating costs excluding amortization, 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 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. These non-GAAP financial measures should be considered in the context of the U.S. GAAP results, which are described in this MD&A and presented in the Consolidated Financial Statements. A reconciliation of the most directly comparable U.S. GAAP financial measures for the three months ended May 31, 2025 and May 31, 2024 to adjusted financial measures is reflected in the table below: For the Three Months Ended (in millions) May 31, 2025 May 31, 2024 Gross margin $ 90.3 $ 90.0 Stock compensation expense 0.5 0.7 Adjusted gross margin $ 90.8 $ 90.7 Gross margin % 74.2 % 72.9 % Stock compensation expense 0.4 % 0.6 % Adjusted gross margin % 74.6 % 73.5 % Reconciliation of U.S. GAAP operating expense for the three months ended May 31, 2025, February 28, 2025 and May 31, 2024 to adjusted operating expense is reflected in the table below: For the Three Months Ended (in millions) May 31, 2025 February 28, 2025 May 31, 2024 Operating expense $ 88.3 $ 112.1 $ 102.9 Restructuring charges 2.9 11.4 7.3 Stock compensation expense 5.2 3.9 5.5 Acquired intangibles amortization 1.7 1.7 1.8 LLA impairment charge 0.1 4.9 3.5 Litigation settlement — 2.8 — Adjusted operating expense $ 78.4 $ 87.4 $ 84.8 Reconciliation of U.S. GAAP corporate operating costs for the three months ended May 31, 2025 and May 31, 2024 to adjusted corporate operating costs excluding amortization is reflected in the table below: For the Three Months Ended (in millions) May 31, 2025 May 31, 2024 Corporate operating costs $ 14.9 $ 25.4 Restructuring charges 2.9 7.3 Stock compensation expense 1.9 1.3 LLA impairment charge — 3.5 Adjusted corporate operating costs 10.1 13.3 Amortization 0.4 0.9 Adjusted corporate operating costs excluding amortization $ 9.7 $ 12.4 37 Reconciliation of U.S. GAAP net income (loss) and U.S. GAAP basic earnings (loss) per share for the three months ended May 31, 2025 and May 31, 2024 to adjusted net income (loss) and adjusted basic earnings (loss) per share is reflected in the table below: For the Three Months Ended (in millions, except per share amounts) May 31, 2025 May 31, 2024 Basic earnings per share Basic loss per share Net income (loss) $ 1.9 $ 0.00 $ (41.4) $ (0.07) Restructuring charges 2.9 7.3 Stock compensation expense 5.7 7.7 Acquired intangibles amortization 1.7 8.6 LLA impairment charge 0.1 3.5 Adjusted net income (loss) $ 12.3 $ 0.02 $ (14.3) $ (0.02) Reconciliation of U.S. GAAP research and development, sales and marketing, general and administrative, and amortization expense for the three months ended May 31, 2025 and May 31, 2024 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) May 31, 2025 May 31, 2024 Research and development $ 25.0 $ 30.6 Stock compensation expense 1.3 1.8 Adjusted research and development expense $ 23.7 $ 28.8 Sales and marketing $ 28.7 $ 23.8 Stock compensation expense 1.4 0.8 Adjusted sales and marketing expense $ 27.3 $ 23.0 General and administrative $ 30.5 $ 40.3 Restructuring charges 2.9 7.3 Stock compensation expense 2.5 2.9 Adjusted general and administrative expense $ 25.1 $ 30.1 Amortization $ 4.0 $ 4.7 Acquired intangibles amortization 1.7 1.8 Adjusted amortization expense $ 2.3 $ 2.9 38 Adjusted operating income, adjusted EBITDA, adjusted operating income margin percentage and adjusted EBITDA margin percentage for the three months ended May 31, 2025 and May 31, 2024 are reflected in the table below. These are non-GAAP financial measures and non-GAAP ratios that do not have any standardized meaning as prescribed by U.S. GAAP and are therefore unlikely to be comparable to similar measures presented by other companies. For the Three Months Ended (in millions) May 31, 2025 May 31, 2024 Operating income (loss) $ 2.0 $ (12.9) Non-GAAP adjustments to operating income (loss) Restructuring charges 2.9 7.3 Stock compensation expense 5.7 6.2 Acquired intangibles amortization 1.7 1.8 LLA impairment charge 0.1 3.5 Total non-GAAP adjustments to operating income (loss) 10.4 18.8 Adjusted operating income 12.4 5.9 Amortization 5.7 6.4 Acquired intangibles amortization (1.7) (1.8) Adjusted EBITDA $ 16.4 $ 10.5 Revenue $ 121.7 $ 123.4 Adjusted operating income margin % (1) 10.2% 4.8% Adjusted EBITDA margin % (2) 13.5% 8.5% ______________________________ (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. 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 used in operating activities for the three months ended May 31, 2025 and May 31, 2024 to free cash flow (usage) is reflected in the table below: For the Three Months Ended (in millions) May 31, 2025 May 31, 2024 Net cash used in operating activities $ (18.0) $ (15.1) Acquisition of property, plant and equipment (0.9) (1.4) Free cash usage $ (18.9) $ (16.5) 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”) and Secure Communications dollar-based net retention rate (“DBNRR”) do not have any standardized meaning and are unlikely to be comparable to similarly titled measures reported by other companies. Comparative breakdowns of certain key metrics for the three months ended or as at May 31, 2025 and May 31, 2024 are set forth below. For the Three Months Ended (in millions) May 31, 2025 May 31, 2024 Change Secure Communications Annual Recurring Revenue $ 209 $ 211 $ (2) Secure Communications Dollar-Based Net Retention Rate 92 % 93 % (1 %) 39 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 $209 million as at May 31, 2025 and increased compared to $208 million as at February 28, 2025 and decreased compared to $211 million as at May 31, 2024. Secure Communications Dollar-Based Net Retention Rate The Company calculates the Secure Communications DBNRR as of period end by first calculating th e 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. Secure Communications DBNRR was 92% as at May 31, 2025 and decreased compared to 93% as at February 28, 2025 and 93% as at May 31, 2024. Results of Operations - Three months ended May 31, 2025 compared to the three months ended May 31, 2024 Revenue Revenue by Segment Comparative breakdowns of revenue by segment are set forth below. For the Three Months Ended (in millions) May 31, 2025 May 31, 2024 Change Revenue by Segment QNX $ 57.5 $ 53.2 $ 4.3 Secure Communications 59.5 64.2 (4.7) Licensing 4.7 6.0 (1.3) $ 121.7 $ 123.4 $ (1.7) % Revenue by Segment QNX 47.2 % 43.1 % Secure Communications 48.9 % 52.0 % Licensing 3.9 % 4.9 % 100.0 % 100.0 % QNX The increase in QNX revenue of $4.3 million was primarily due to an increase of $3.4 million in development seat revenue, an increase of $1.7 million in royalty revenue and an increase of $1.2 million in BlackBerry Radar revenue, partially offset by a decrease of $2.0 million in professional services. The Company previously stated that it expected QNX revenue to be in the range of $51 million to $55 million in the first quarter of fiscal 2026. QNX revenue in the first quarter of fiscal 2026 was $57.5 million due to better than expected development seat revenue. The Company expects QNX revenue to be in the range of $55 million to $60 million in the second quarter of fiscal 2026. Secure Communications The decrease in Secure Communications revenue of $4.7 million was primarily due to a decrease of $3.0 million in Secusmart product revenue and a decrease of $2.7 million in BlackBerry UEM product revenue, partially offset by an increase of $1.0 million in professional services and an increase of $0.5 million in BlackBerry AtHoc. The Company previously stated that it expected Secure Communications revenue to be in the range of $50 million to $54 million in the first quarter of fiscal 2026. Secure Communications revenue in the first quarter of fiscal 2026 was $59.5 million primarily due to a stronger than expected Secusmart product revenue. 40 The Company previously stated that it expected Secure Communications revenue to be in the range of $230 million to $240 million in fiscal 2026. The Company now expects Secure Communications revenue to be in the range of $234 million to $244 million in fiscal 2026 due to stronger than expected performance in the first quarter of the fiscal year and an increase in the pipeline of opportunities. The Company expects Secure Communications revenue to be in the range of $54 million to $59 million in the second quarter of fiscal 2026. Licensing The decrease in Licensing revenue of $1.3 million was primarily due to a decrease in revenue from the Company’s existing intellectual property licensing arrangements. The Company previously stated that it expected Licensing revenue to be approximately $6 million in each of the four quarters of fiscal 2026. Licensing revenue in the first quarter of fiscal 2026 was $4.7 million due to the reason stated above. The Company continues to expect Licensing revenue of $6 million in the second quarter of fiscal 2026. Total BlackBerry Revenue The Company previously stated that it expected total BlackBerry revenue to be approximately $107 million to $115 million in the first quarter of fiscal 2026. Total BlackBerry revenue was $121.7 million in the first quarter of fiscal 2026, better than expected due to the reasons noted above in “Revenue by Segment”. The Company expects total BlackBerry revenue to be in the range of $115 million to $125 million in the second quarter of fiscal 2026. The Company previously stated that it expected total BlackBerry revenue to be in the range of $504 million to $534 million in fiscal 2026. The Company now expects total BlackBerry revenue to be in the range of $508 million to $538 million in fiscal 2026 due to the change in expectation for Secure Communications revenue stated above. Revenue by Geography Comparative breakdowns of the geographic regions are set forth in the following table: For the Three Months Ended (in millions) May 31, 2025 May 31, 2024 Change Revenue by Geography North America $ 54.8 $ 56.2 $ (1.4) Europe, Middle East and Africa 42.5 43.7 (1.2) Other regions 24.4 23.5 0.9 $ 121.7 $ 123.4 $ (1.7) % Revenue by Geography North America 45.0 % 45.5 % Europe, Middle East and Africa 34.9 % 35.4 % Other regions 20.1 % 19.1 % 100.0 % 100.0 % North America Revenue The decrease in North America revenue of $1.4 million was primarily due to a decrease of $2.2 million in QNX royalty revenue, a decrease of $2.1 million in BlackBerry UEM product revenue and a decrease of $0.7 million in professional services, partially offset by an increase of $2.9 million in QNX development seat revenue and an increase of $1.0 million in BlackBerry Radar. Europe, Middle East and Africa Revenue The decrease in Europe, Middle East and Africa revenue of $1.2 million was primarily due to a decrease of $2.9 million relating to Secusmart product revenue, a decrease of $0.5 million in professional services and a decrease of $0.3 million in BlackBerry UEM product revenue, partially offset by an increase of $2.0 million in QNX royalty revenue and an increase of $0.7 million in QNX development seat revenue. 41 Other Regions Revenue The increase in Other regions revenue of $0.9 million was primarily due to an increase of $1.9 million in QNX royalty revenue, partially offset by a decrease of $0.5 million in BlackBerry UEM product revenue and a decrease of $0.3 million in professional services. Gross Margin Consolidated Gross Margin Consolidated gross margin increased by $0.3 million to $90.3 million in the first quarter of fiscal 2026 (first quarter of fiscal 2025 - $90.0 million). The increase was primarily due to an increase in revenue from QNX due to the reasons discussed above in “Revenue by Segment”, partially offset by a decrease in revenue from Secure Communications and Licensing revenue, 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 1.3% to 74.2% in the first quarter of fiscal 2026 ((first quarter of fiscal 2025 -72.9%). The increase was primarily due to a change in mix specifically a higher gross margin contribution from QNX. Gross Margin and Adjusted EBITDA by Segment See “First Quarter Fiscal 2026 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) QNX Secure Communications Licensing Segment Totals May 31, Change May 31, Change May 31, Change May 31, Change 2025 2024 2025 2024 2025 2024 2025 2024 Segment revenue $ 57.5 $ 53.2 $ 4.3 $ 59.5 $ 64.2 $ (4.7) $ 4.7 $ 6.0 $ (1.3) $ 121.7 $ 123.4 $ (1.7) Segment cost of sales 11.2 9.5 1.7 18.1 21.8 (3.7) 1.6 1.4 0.2 30.9 32.7 (1.8) Segment gross margin $ 46.3 $ 43.7 $ 2.6 $ 41.4 $ 42.4 $ (1.0) $ 3.1 $ 4.6 $ (1.5) $ 90.8 $ 90.7 $ 0.1 Segment gross margin % 81 % 82 % (1 %) 70 % 66 % 4 % 66 % 77 % (11 %) 75 % 74 % 1 % Segment research and development 12.4 16.4 (4.0) 11.3 12.3 (1.0) — — — 23.7 28.7 (5.0) Segment sales and marketing 13.3 10.7 2.6 13.6 12.2 1.4 — — — 26.9 22.9 4.0 Segment general and administrative 8.6 8.2 0.4 7.5 9.6 (2.1) 1.6 2.1 (0.5) 17.7 19.9 (2.2) Less amortization included in the above 0.7 0.5 0.2 0.6 1.0 (0.4) 2.3 2.2 0.1 3.6 3.7 (0.1) Segment adjusted EBITDA $ 12.7 $ 8.9 $ 3.8 $ 9.6 $ 9.3 $ 0.3 $ 3.8 $ 4.7 $ (0.9) $ 26.1 $ 22.9 $ 3.2 QNX The increase in QNX gross margin of $2.6 million was primarily due to the reasons discussed above in “Revenue by Segment”. The decrease in QNX gross margin percentage of 1% was primarily due to an increase in cost of sales related to BlackBerry Radar hardware devices. The increase in QNX adjusted EBITDA of $3.8 million was primarily due to the reasons discussed above in “Revenue by Segment” 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 QNX. 42 The Company previously stated that it expected QNX adjusted EBITDA to be in the range of $2 million to $6 million in the first quarter of fiscal 2026. QNX adjusted EBITDA was $12.7 million in the first quarter of fiscal 2026 due to the reasons discussed above. The Company expects QNX adjusted EBITDA to be in the range of $10 million to $13 million in the second quarter of fiscal 2026. Secure Communications The decrease in Secure Communications gross margin of $1.0 million was primarily due to the reasons discussed above in “Revenue by Segment”. The increase in Secure Communications gross margin percentage of 4% was primarily due to a change in mix, specifically an increased gross margin contribution from Secusmart software licenses. The increase in Secure Communications adjusted EBITDA of $0.3 million was primarily due to a decrease in salaries and benefits expense, partially offset by a decrease in revenue due to 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 $3 million to $6 million in the first quarter of fiscal 2026. Secure Communications adjusted EBITDA was $9.6 million in the first quarter of fiscal 2026 due to revenue exceeding the top end of the Company’s expected range. The Company previously stated that it expected Secure Communications adjusted EBITDA to be in the range of $34 million to $44 million in fiscal 2026. The Company now expects Secure Communications adjusted EBITDA to be in the range of $37 million to $47 million in fiscal 2026 due to stronger than expected performance in the first quarter of the fiscal year and an increase in the pipeline of opportunities. The Company expects Secure Communications adjusted EBITDA to be in the range of $3 million to $6 million in the second quarter of fiscal 2026. Licensing The decrease in Licensing gross margin of $1.5 million was primarily due to the reasons discussed above in “Revenue by Segment”. The decrease in Licensing gross margin percentage of 11% was due to the same reason discussed above. The decrease in Licensing adjusted EBITDA of $0.9 million was primarily due to the reasons discussed above in “Revenue by Segment”, partially offset by a decrease in legal expense. The Company previously stated that it expected 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. Licensing adjusted EBITDA was $3.8 million in the first quarter of fiscal 2026. The Company expects Licensing adjusted EBITDA to be approximately $5 million in the second quarter of fiscal 2026. 43 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 May 31, 2025, compared to the quarter ended February 28, 2025 and the quarter ended May 31, 2024. The Company believes it is meaningful to provide a sequential comparison between the first quarter of fiscal 2026 and the fourth quarter of fiscal 2025. For the Three Months Ended (in millions) May 31, 2025 February 28, 2025 May 31, 2024 Revenue $ 121.7 $ 141.7 $ 123.4 Operating expenses Research and development 25.0 23.2 30.6 Sales and marketing 28.7 27.1 23.8 General and administrative 30.5 50.0 40.3 Amortization 4.0 4.1 4.7 Impairment of long-lived assets 0.1 4.9 3.5 Litigation settlement — 2.8 — Total $ 88.3 $ 112.1 $ 102.9 Operating Expenses as % of Revenue Research and development 20.5 % 16.4 % 24.8 % Sales and marketing 23.6 % 19.1 % 19.3 % General and administrative 25.1 % 35.3 % 32.7 % Amortization 3.3 % 2.9 % 3.8 % Impairment of long-lived assets 0.1 % 3.5 % 2.8 % Litigation settlement — % 2.0 % — % Total 72.6 % 79.1 % 83.4 % See “Non-GAAP Financial Measures” for a reconciliation of selected U.S. GAAP-based measures to adjusted measures for the three months ended May 31, 2025, February 28, 2025 and May 31, 2024. U.S. GAAP Operating Expenses Operating expenses decreased by $23.8 million sequentially, or 21.2%, in the first quarter of fiscal 2026, compared to the fourth quarter of fiscal 2025 primarily due to a decrease of $8.5 million in restructuring costs, a decrease of $5.5 million in credit loss provision, a decrease of $5.0 million in the Company’s deferred share unit costs, a decrease of $4.8 million in impairment of long-lived asset impairment, and a decrease of $2.8 million in litigation settlement, partially offset by an increase of $2.9 million in variable incentive plan costs. Operating expenses decreased by $14.6 million year-over-year, or 14.2%, in the first quarter of fiscal 2026, compared to the first quarter of fiscal 2025 primarily due to a decrease of $4.4 million in restructuring costs, an increase in benefits of $4.5 million from SIF claims filed, a decrease of $3.4 million in impairment of long-lived asset impairment, a decrease of $2.0 million in variable incentive plan costs and a decrease of $1.5 million in the Company’s deferred share unit costs, partially offset by an increase of $1.1 million in sales incentive plan costs. Adjusted Operating Expenses Adjusted operating expenses decreased by $9.0 million sequentially, or 10.3%, to $78.4 million in the first quarter of fiscal 2026 compared to $87.4 million in the fourth quarter of fiscal 2025. The decrease was primarily due to a decrease of $5.5 million in credit loss provision and a decrease of $5.0 million in the Company’s deferred share unit costs, partially offset by an increase of $2.9 million in variable incentive plan costs. Adjusted operating expenses decreased by $6.4 million year-over-year, or 7.5%, to $78.4 million in the first quarter of fiscal 2026, compared to $84.8 million in the first quarter of fiscal 2025. The decrease was primarily due to an increase in benefits of $4.5 million from SIF claims filed, a decrease of $2.0 million in variable incentive plan costs and a decrease of $1.5 million in the Company’s deferred share unit costs, partially offset by an increase of $1.1 million in sales incentive plan costs. 44 Adjusted Corporate operating costs is defined as the portion of the Company’s total adjusted operating costs that is not attributable to any of the three operating segments. The Company previously stated that it expected adjusted Corporate operating costs to be approximately $10 million in the first quarter of fiscal 2026. Adjusted Corporate operating costs including amortization was $10.1 million and adjusted Corporate operating costs excluding amortization was $9.7 million in the first quarter of fiscal 2026. The Company expects adjusted Corporate operating costs excluding amortization to be approximately $10 million in the second quarter of fiscal 2026 and approximately $40 million in fiscal 2026 as a whole. 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 $5.6 million, or 18.3%, in the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025 primarily due to an increase in benefits of $4.5 million from SIF claims filed and a decrease of $1.0 million in salaries and benefits expense. Adjusted research and development expenses decreased by $5.1 million, or 17.7%, to $23.7 million in the first quarter of fiscal 2026 compared to $28.8 million the first quarter of fiscal 2025, 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 $4.9 million, or 20.6%, in the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025, primarily due to an increase of $1.9 million in salaries and benefits expense, an increase of $1.1 million in sales incentive plan costs and an increase of $1.1 million in marketing expense. Adjusted sales and marketing expenses increased by $4.3 million, or 18.7%, to $27.3 million in the first quarter of fiscal 2026 compared to $23.0 million in the first quarter of fiscal 2025. The increase was primarily due to the same reasons described above on a U.S. GAAP basis. General and Administrative Expenses General and administrative 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 $9.8 million, or 24.3%, in the first quarter of fiscal 2026 compared to the first quarter of fiscal 2025. The decrease was primarily due to a decrease of $4.4 million in restructuring costs, a decrease of $1.5 million in the Company’s deferred share unit costs, a decrease of $1.2 million in facilities cost and a benefit of $1.1 million relating to costs recovered under a transition service agreement related to the Company’s sale of Cylance in the fourth quarter of fiscal 2025. Adjusted general and administrative expenses decreased by $5.0 million, or 16.6%, to $25.1 million in the first quarter of fiscal 2026 compared to $30.1 million in the first quarter of fiscal 2025. The decrease was primarily due to a decrease of $1.5 million in the Company’s deferred share unit costs, a decrease of $1.2 million in facilities cost and a benefit of $1.1 million from expenses recovered under the transition service agreement mentioned above. 45 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 May 31, 2025 compared to the quarter ended May 31, 2024. Intangible assets are comprised of patents, licenses and acquired technology. For the Three Months Ended (in millions) Included in Operating Expense May 31, 2025 May 31, 2024 Change Property, plant and equipment $ 1.4 $ 2.0 $ (0.6) Intangible assets 2.6 2.7 (0.1) Total $ 4.0 $ 4.7 $ (0.7) Included in Cost of Sales May 31, 2025 May 31, 2024 Change Property, plant and equipment $ 0.1 $ 0.2 $ (0.1) Intangible assets 1.6 1.5 0.1 Total $ 1.7 $ 1.7 $ — 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 $0.6 million to $2.3 million in the first quarter of fiscal 2026 compared to $2.9 million in the first quarter of fiscal 2025 primarily due to the lower cost base of assets. Amortization included in Cost of Sales Amortization expense relating to certain intangible assets employed in the Company’s licensing operations was $1.7 million in the first quarter of fiscal 2026 and was consistent with the first quarter of fiscal 2025. Investment Income, Net Investment income, net, which includes the interest expense from the Notes, was $2.9 million in the first quarter of fiscal 2026 and decreased by $1.1 million from investment income, net of $4.0 million in the first quarter of fiscal 2025. The decrease was primarily due to a decrease in interest income on significant financing components within certain revenue contracts with customers, partially offset by a higher yield on cash and investments. Income Taxes For the first quarter of fiscal 2026, the Company’s net effective income tax expense rate was approximately 61.2% (first quarter of fiscal 2025 - net effective income tax expense rate of approximately 22.5%). 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; in particular, any change in loss carry forwards or research and development credits, amongst other items, was offset by a corresponding adjustment of the valuation allowance. The Company’s net effective income tax rate also reflects the geographic mix of earnings in jurisdictions with different income tax rates. Net Income (Loss) The Company’s net income for the first quarter of fiscal 2026 was $1.9 million, or $0.00 basic and diluted earnings per share on a U.S. GAAP basis (first quarter of fiscal 2025 - net loss $41.4 million, or $0.07 basic and diluted loss per share). The period over period change of $43.3 million was primarily due to 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 $12.3 million in the first quarter of fiscal 2026, or $0.02 adjusted basic earnings per share (first quarter of fiscal 2025 - adjusted net loss of $14.3 million, or 0.02 adjusted basic loss per share). The increase in adjusted net income of $26.6 million was primarily due to the same reasons described above on a U.S. GAAP basis. 46 The Company previously stated that it expected adjusted EBITDA to be in the range of break-even to $7 million in the first quarter of fiscal 2026. Adjusted EBITDA was $16.4 million in the first quarter of fiscal 2026 due to QNX and Secure Communications exceeding the top end of their expected ranges. The Company previously stated that it expected non-GAAP EPS to be in the range of ($0.01) to breakeven in the first quarter of fiscal 2026. Non-GAAP EPS was $0.02 in the first quarter of fiscal 2026 due to QNX and Secure Communications exceeding the top end of their expected ranges. The Company previously stated that it expected operating cash usage to be in the range of $20 million to $30 million in the first quarter of fiscal 2026. Operating cash usage was $18.0 million in the first quarter of fiscal 2026. The Company expects adjusted EBITDA to be in the range of $8 to $14 million in the second quarter of fiscal 2026. The Company previously stated that it expected adjusted EBITDA to be in the range of $69 million to $84 million in fiscal 2026 as a whole. The Company now expects adjusted EBITDA to be in the range of $72 million to $87 million in fiscal 2026 as a whole due to the change in expectation for Secure Communications adjusted EBITDA, as described above in “Gross Margin and Adjusted EBITDA by Segment”. The Company expects non-GAAP EPS to be in the range of breakeven to $0.01 in the second quarter of fiscal 2026. The Company expects operating cash usage to be in the range of $5 million to $15 million in the second quarter of fiscal 2026. The Company expects to generate positive operating cash flow in the second half of the fiscal year. The Company does not provide a reconciliation of expected adjusted EBITDA and expected non-GAAP basic EPS for the second quarter of 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 596.3 million common shares for basic earnings per share and 600.8 million common shares for diluted earnings per share for the first quarter of fiscal 2026 (first quarter of fiscal 2025 - 589.8 million common shares for basic and diluted loss per share). The weighted average number of shares outstanding includes the cumulative effects of share repurchases pursuant to the NCIB (as defined below) during the quarter ended May 31, 2025. Financial Condition Liquidity and Capital Resources Cash, cash equivalents, and investments decreased by $28.4 million to $381.9 million as at May 31, 2025 from $410.3 million as at February 28, 2025, primarily due to changes in working capital. A comparative summary of cash, cash equivalents, and investments is set out below: As at (in millions) May 31, 2025 February 28, 2025 Change Cash and cash equivalents $ 276.0 $ 266.7 $ 9.3 Restricted cash and cash equivalents 16.5 13.6 2.9 Short-term investments 30.6 71.1 (40.5) Long-term investments (1) 58.8 58.9 (0.1) Cash, cash equivalents, and investments $ 381.9 $ 410.3 $ (28.4) ______________________________ (1) Includes equity investments in private companies, including common shares of Arctic Wolf which are illiquid securities without a public market and, as such, they cannot be readily sold or exchanged for cash. 47 The table below summarizes the current assets, current liabilities, and working capital of the Company: As at (in millions) May 31, 2025 February 28, 2025 Change Current assets $ 533.2 $ 591.5 $ (58.3) Current liabilities 253.4 344.3 (90.9) Working capital $ 279.8 $ 247.2 $ 32.6 Current Assets The decrease in current assets of $58.3 million at the end of the first quarter of fiscal 2026 from the end of the fourth quarter of fiscal 2025 was primarily due to a decrease of $43.8 million in accounts receivable, net of allowance and a decrease of $40.5 million in short term investments, partially offset by an increase of $13.3 million in other current assets, an increase of $9.3 million in cash and cash equivalents, an increase of $3.3 million in other receivables and an increase of $0.1 million in income taxes receivable. At May 31, 2025, accounts receivable, net of allowance was $129.9 million, a decrease of $43.8 million from February 28, 2025. The decrease was primarily due to the collection of a significant receivable from the Government of Malaysia and lower revenue recognized over the three months ended May 31, 2025 compared to the three months ended February 28, 2025, partially offset by a reclassification from long-term receivable to accounts receivable and an increase in days sales outstand ing to 115 days at the end of the first quarter of fiscal 2026 from 102 days at the end of the fourth quarter of fiscal 2025. At May 31, 2025, other current assets were $43.3 million, an increase of $13.3 million from February 28, 2025. The increase was primarily due to an increase of $8.2 million in prepaid professional services, an increase of $1.9 million in prepaid rent, an increase of $1.6 million in prepaid software, an increase of $0.8 million in deferred commissions and an increase of $0.7 million in prepaid insurance. At May 31, 2025, o ther receivables were $51.7 million, an increase of $3.3 million from February 28, 2025. The increase was primarily due to an increase of $3.1 million in SIF claims. At May 31, 2025, income taxes receivable were $1.7 million, an increase of $0.1 million from February 28, 2025. The increase was primarily due to tax installments and prepayments required in certain taxable jurisdictions. Current Liabilities The decrease in current liabilities of $90.9 million at the end of the first quarter of 2026 from the end of the fourth quarter of fiscal 2025 was primarily due to a decrease of $42.9 million in accrued liabilities, a decrease of $25.9 million in accounts payable and a decrease of $25.2 million in deferred revenue, current, partially offset by an increase of $3.1 million in income taxes payable. Accrued liabilities were $83.3 million at the end of the first quarter of 2026, reflecting a decrease of $42.9 million compared to February 28, 2025, which was primarily due to a decrease of $22.9 million in variable incentive plan accrual, a decrease of $4.2 million in restructuring cost accrual, a decrease of $3.8 million in legal costs accrual, a decrease of $2.9 million in output VAT accrual, a decrease of $2.9 million in operating lease liability, current and a decrease of $2.7 million in deferred share unit liability. Accounts payable were $5.2 million, reflecting a decrease of $25.9 million from February 28, 2025, which was primarily due to the timing of payments. Deferred revenue, current was $136.3 million, which reflects a decrease of $25.2 million compared to February 28, 2025 that was attributable to a decrease of $19.4 million in deferred revenue, current related to BlackBerry UEM, a decrease of $4.4 million in deferred revenue, current related to BlackBerry AtHoc, and a decrease of $1.4 million in deferred revenue, current related to QNX. Income taxes payable were $28.6 million, reflecting an increase of $3.1 million from February 28, 2025, which was primarily due to changes in the quarterly tax provision. 48 Cash flows for the three months ended May 31, 2025 compared to the three months ended May 31, 2024 were as follows: For the Three Months Ended (in millions) May 31, 2025 May 31, 2024 Change Net cash flows provided by (used in): Operating activities $ (18.0) $ (15.1) $ (2.9) Investing activities 38.5 (27.2) 65.7 Financing activities (8.8) 1.5 (10.3) Effect of foreign exchange loss on cash and cash equivalents 0.5 — 0.5 Net increase (decrease) in cash and cash equivalents $ 12.2 $ (40.8) $ 53.0 Operating Activities The increase in net cash flows used in operating activities of $2.9 million primarily reflects the changes in working capital. Investing Activities During the three months ended May 31, 2025, cash flows provided by investing activities were $38.5 million and included cash provided by transactions involving the acquisition of short-term and long-term investments, net of the proceeds on sale or maturity in the amount of $40.6 million, offset by cash used in the acquisition of intangible assets of $1.2 million and the acquisition of property, plant and equipment of $0.9 million . For the same period in the prior fiscal year, cash flows used in investing activities were $27.2 million an d included cash used in transactions involving the acquisitions of short-term and long-term investments, net of the proceeds on sale or maturity in the amount of $24.4 million, offset by cash used i n the acquisition of intangible assets of $1.5 million, the acquisition of property, plant and equipment $1.4 million, and the proceeds on sale of property, plant and equipment of $0.1 million. Financing Activities The increase in cash flows used in financing activities was $10.3 million for the first three months of fiscal 2026 primarily due to a repurchase of common shares of $10.0 million pursuant to the NCIB and a decrease of $0.3 million in common shares issued upon the exercise of stock options and under the employee share purchase plan. On May 8, 2025, the Company announced that it received acceptance from the Toronto Stock Exchange with respect to a normal course issuer bid to purchase for cancellation up to 27,855,153 common shares of the Company, or approximately 4.7% of the outstanding public float at May 5, 2025. The NCIB commenced on May 12, 2025, and will terminate on the earliest of May 11, 2026, such date as the Company may determine, or the date on which the maximum number of common shares that may be purchased under the NCIB has been reached. The Company is not obligated to repurchase any common shares under the NCIB. During the three months ended May 31, 2025, the Company repurchased 2.6 million common shares at a cost of $10.0 million. Debt Financing and Other Funding Sources See Note 6 to the Consolidated Financial Statements for a description of the Company’s $200 million aggregate principal amount of 3.00% senior convertible unsecured notes issued in January 2024 (the “Notes”). 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 3 to the Consolidated Financial Statements for further information concerning the Company’s restricted cash. Cash, cash equivalents, and investments were $381.9 million as at May 31, 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 generating and operating expense reduction activities, should be sufficient to meet funding requirements for current financial commitments and future operating expenditures not yet committed, and should provide the necessary financial capacity for the foreseeable future. 49 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 May 31, 2025: (in millions) Total Short-term (next 12 months) Long-term (>12 months) Operating lease obligations $ 43.1 $ 15.3 $ 27.8 Purchase obligations and commitments 59.2 59.2 — Debt interest and principal payments 224.0 6.0 218.0 Total $ 326.3 $ 80.5 $ 245.8 Total contractual and other obligations as at May 31, 2025 increased by $13.5 million as compared to the February 28, 2025 balance of $312.8 million, which was attributable to an increase in purchase obligations and commitments, partially offset by a decrease in operating lease obligations. The Company does not have any material off-balance sheet arrangements. Accounting Policies and Critical Accounting Estimates There have been no changes to the Company’s accounting policies or critical accounting estimates from those described under “Accounting Policies and Critical Accounting Estimates” in the Annual MD&A.