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What changed in BLACKBERRY Ltd's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of BLACKBERRY Ltd's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+372 added−426 removedSource: 10-K (2023-03-31) vs 10-K (2022-04-01)

Top changes in BLACKBERRY Ltd's 2023 10-K

372 paragraphs added · 426 removed · 299 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

48 edited+6 added−12 removed78 unchanged
Biggest changeThe Company is honored that its determination to support smart, dedicated, creative employees who are driven to succeed has been recognized through numerous awards, including Newsweek ’s Most Loved Workplaces (2021), Best & Brightest Companies to Work For (2016-2021), Best & Brightest Companies in Wellness (2016-2021), Canada’s Future Workforce Top Employers for Computer Science (2020-2022), and Canada’s Top 100 Greenest Employers (2016-2021), among others.
Biggest changeThe Company is honored to have the efforts of our talented and dedicated employees recognized through numerous awards, including Forbes Canada’s Best Employers (2022), Best & Brightest Companies to Work for in the Nation (2016-2022), Best & Brightest Companies to Work for in Wellness (2016-2022), Canada’s Top Employers for Young People (2021-2023), Canada’s Greenest Employers (2016-2022), Great Place to Work Germany (2022), Great Place to Work – Ireland’s Best Workplaces in Tech (2022), and Singapore Health Award (2022), among others.
The Company’s cybersecurity consulting services and tools, combined with its other security solutions, help customers identify the latest cybersecurity threats, test for vulnerabilities, develop risk-appropriate mitigations, maintain IT security standards and techniques, and defend against the risk of future attacks. Licensing and Other Licensing and Other consists primarily of the Company’s patent licensing business and legacy service access fees (“SAF”).
The Company’s cybersecurity consulting services and tools, combined with its other security solutions, help customers identify the latest cybersecurity threats, test for vulnerabilities, develop risk-appropriate mitigations, maintain IT security standards and techniques, and defend against the risk of future attacks. 6 Licensing and Other Licensing and Other consists primarily of the Company’s patent licensing business and legacy service access fees (“SAF”).
The Company’s BlackBerry QNX automotive business competes principally with providers of embedded software that employ customized Linux open-source operating systems for the transportation and logistics industry, and with Google’s Android Automotive OS. See Part 1, Item 1A “Risk Factors - The Company faces intense competition ”.
The BlackBerry QNX automotive business competes principally with providers of embedded software that employ customized Linux open-source operating systems for the transportation and logistics industry, and with Google’s Android Automotive OS. See Part 1, Item 1A “Risk Factors - The Company faces intense competition ”.
The Company provides a range of financial and benefit programs such as its employee share purchase program, employee recognition programs, retirement savings plans, family-friendly leave policies, health and 11 wellness programs, employee and family assistance program, as well as corporate discounts, all designed to support the overall wellness of the Company’s employees and their families.
The Company provides a range of financial and benefit programs such as its employee share purchase program, employee recognition programs, retirement savings plans, family-friendly leave policies, health and wellness programs, employee and family assistance program, as well as corporate discounts, all designed to support the overall wellness of the Company’s employees and their families.
All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by applicable law. 12
All statements made in any of our securities filings, including all forward-looking statements or information, are made as of the date of the document in which the statement is included, and we do not assume or undertake any obligation to update any of those statements or documents unless we are required to do so by applicable law.
Except for the documents specifically incorporated by reference into this Annual Report, information contained on the SEC or CSA websites is not incorporated by reference in the Annual Report on Form 10-K and should not be considered to be a part of the Annual Report.
Except for the documents specifically incorporated by reference in this Annual Report on Form 10-K, information contained on the SEC or CSA websites is not incorporated by reference in this Annual Report on Form 10-K and should not be considered to be a part of the Annual Report.
Solutions include leading security capabilities at each level of the platform in order to address the needs of enterprise IT departments and end users for securing devices, applications, content and work data at rest and in transit.
Solutions include leading security capabilities at each level of the platform in order to address 8 the needs of enterprise IT departments and end users for securing devices, applications, content and work data at rest and in transit.
At the same time, the threat environment for enterprises has become increasingly hostile as the number of adversaries grows and the scale and sophistication of their attacks, increasingly focused on the endpoint, continue to develop.
At the same time, the threat environment for enterprises and manufacturers has become increasingly hostile as the number of adversaries grows and the scale and sophistication of their attacks, increasingly focused on the endpoint, continue to develop.
This landscape of growing vulnerability and accountability has created opportunities for secure communications platforms, endpoint cybersecurity and management solutions, embedded systems, enterprise applications, analytic tools and related services that help enterprises to secure their connected endpoints, enhance data privacy and demonstrate compliance with applicable regulations. 4 Strategy The Company is widely recognized for its intelligent security software and services and believes that it delivers the broadest set of security capabilities in the market to connect, protect and manage IoT endpoints.
This landscape of growing vulnerability and accountability has created opportunities for secure communications platforms, endpoint cybersecurity and management solutions, embedded systems, enterprise applications, analytic tools and related services that help enterprises to secure their connected endpoints, enhance functional safety, maintain data privacy and demonstrate compliance with applicable regulations. 4 Strategy The Company is widely recognized for its intelligent security software and services and believes that it delivers the broadest set of security capabilities in the market to connect, protect and manage IoT endpoints.
The Company’s common shares trade under the ticker symbol “BB” on the New York Stock Exchange (“NYSE”) and the Toronto Stock Exchange (“TSX”). Intercorporate Relationships The Company has four material subsidiaries, all of which are wholly-owned, directly or indirectly, by the Company in each case as at February 28, 2022.
The Company’s common shares trade under the ticker symbol “BB” on the New York Stock Exchange (“NYSE”) and the Toronto Stock Exchange (“TSX”). Intercorporate Relationships The Company has four material subsidiaries, all of which are wholly-owned, directly or indirectly, by the Company in each case as at February 28, 2023.
ITEM 1. BUSINESS The Company The Company provides intelligent security software and services to enterprises and governments around the world. The Company secures more than 500 million endpoints including more than 195 million vehicles.
ITEM 1. BUSINESS The Company The Company provides intelligent security software and services to enterprises and governments around the world. The Company secures more than 500 million endpoints including more than 215 million vehicles.
The Company licenses the BlackBerry Spark platform, including its individual components and complementary third-party applications, through a geographically-dispersed direct sales force, value-added resellers, managed security service providers and alliance partners. The Company continues to build its global BlackBerry Partner Program for resellers and distributors to bolster its direct sales and marketing efforts.
The Company licenses the BlackBerry Spark platform, including its individual components and complementary third-party applications, through a geographically-dispersed direct sales force, value-added resellers, managed security service providers and alliance partners. The Company continues to build its global partner programs to bolster its direct sales and marketing efforts.
Employees are supported in their growth and development through the Company’s tuition and educational reimbursement programs, subsidies for professional association memberships, global mentorship program, career planning services, and various training programs.
Employees are supported in their growth and development through the Company’s tuition and educational reimbursement programs, subsidies for professional association memberships, a global mentorship program, career planning resources, and various training programs.
Products and Services The Company has multiple products and services from which it derives revenue, which are structured in three groups: Cybersecurity, IoT (collectively with Cybersecurity, “Software and Services”) and Licensing and Other. Cybersecurity The Cybersecurity business consists of BlackBerry Spark, BlackBerry® AtHoc®, BlackBerry® Alert, BlackBerry® SecuSUITE® and BlackBerry Messenger (BBM®) Enterprise.
Products and Services The Company has multiple products and services from which it derives revenue, which are structured in three groups: Cybersecurity, IoT (collectively with Cybersecurity, “Software and Services”) and Licensing and Other. Cybersecurity The Cybersecurity business consists of BlackBerry Spark, BlackBerry® SecuSUITE® and BlackBerry® AtHoc®.
The Company is committed to maintaining a respectful and productive work environment free from discrimination and harassment, supported by diversity and inclusion unconscious bias training, outreach and partnership programs like the Company’s Women in Science, Technology, Engineering, and Mathematics (STEM) and Indigenous students awards programs, and development opportunities such as the Taking the Stage program for female and aspiring leaders.
The Company is committed to maintaining a respectful and productive work environment free from discrimination and harassment, supported by training in unconscious bias and inclusive language, outreach and partnership programs such as the Company’s Women in Science, Technology, Engineering, and Mathematics (STEM) and Indigenous students awards programs, 11 and development opportunities such as the Taking the Stage program for female and aspiring leaders.
The Company’s go-to-market strategy focuses principally on generating revenue from enterprise software and services as well as from embedded software designs with leading original equipment manufacturers (“OEMs”) and Tier 1 suppliers. The Company intends to drive revenue growth and to achieve margins that are consistent with those of other enterprise software companies.
The Company’s go-to-market strategy focuses principally on generating revenue from enterprise software and services as well as from embedded software designs with leading OEMs and Tier 1 suppliers. The Company intends to drive revenue growth and to achieve margins that are consistent with those of other enterprise software companies.
The Company 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. As of February 28, 2022, the Company owned approximately 38,000 worldwide patents and applications.
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. As of February 28, 2023, the Company owned approximately 37,500 worldwide patents and applications.
The BlackBerry Cyber Suite offers leading Cylance® AI and machine learning-based cybersecurity solutions, including: BlackBerry® Protect, an EPP and available MTD solution that uses an automated, prevention-first approach to protect against the execution of malicious code on an endpoint; BlackBerry® Optics, an EDR solution that provides both visibility into and prevention of malicious activity on an endpoint; BlackBerry® Guard, a managed detection and response solution that provides 24/7 threat hunting and monitoring; BlackBerry® Gateway, an AI-empowered ZTNA solution, and BlackBerry® Persona, a UEBA solution that provides continuous authentication by validating user identity in real time.
The BlackBerry UES Suite offers leading Cylance® AI and machine learning-based cybersecurity solutions, including: CylancePROTECT®, an EPP and available MTD solution that uses an automated, prevention-first approach to protect against the execution of malicious code on an endpoint; CylanceOPTICS®, an EDR solution that provides both visibility into and prevention of malicious activity on an endpoint; CylanceGUARD®, a managed detection and response solution that provides 24/7 threat hunting and monitoring; CylanceGATEWAY™, an AI-empowered ZTNA solution, and CylancePERSONA™, a UEBA solution that provides continuous authentication by validating user identity in real time.
The Company leverages its extensive technology portfolio to offer best-in-class cybersecurity, safety and reliability to enterprise customers primarily in government and regulated industries, as well as to original equipment manufacturers in automotive, medical, industrial and other core verticals.
The Company leverages its extensive technology portfolio to offer best-in-class cybersecurity, safety and reliability to enterprise customers primarily in government and regulated industries, to small and medium-sized businesses, and to original equipment manufacturers (“OEMs”) in automotive, medical, industrial and other core verticals.
As a result, 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. As of February 28, 9 2022, the Company owned approximately 38,000 worldwide patents and applications.
As a result, the Company owns rights to an array of patented and patent pending technologies which include, but are not limited to, cybersecurity, cryptography, machine learning, artificial intelligence, operating systems, acoustics, messaging, enterprise software, automotive subsystems, networking infrastructure and wireless communications. As of February 28, 2023, the Company owned approximately 37,500 worldwide patents and applications.
In the fourth quarter of fiscal 2022, the Company announced its entry into a patent sale agreement with Catapult IP Innovations for the sale of substantially all of the Company’s non-core patent assets for total consideration of $600 million (the “Patent Sale Transaction”).
In the fourth quarter of fiscal 2022, the Company announced its entry into a patent sale agreement with Catapult IP Innovations (“Catapult”) for the sale of substantially all of the Company’s non-core patent assets.
The policy of the Company is to apply for patents and to acquire or seek other appropriate proprietary or statutory protection when it develops valuable new or improved technology.
Intellectual Property The protection of intellectual property is an important part of the Company’s operations. The policy of the Company is to apply for patents and to acquire or seek other appropriate proprietary or statutory protection when it develops valuable new or improved technology.
Chen California, USA Chief Executive Officer; Executive Chair/Director Randall Cook California, USA Chief Legal Officer General Counsel, Calypso Technology (2017-2018) Marjorie Dickman Washington D.C., USA Chief Government Affairs and Public Policy Officer Global Director and Associate General Counsel, IoT and Automated Driving Policy, Intel (2017-2020) Mattias Eriksson Illinois, USA President, IoT Senior Vice President and Head of Product, HERE Technologies (2019-2020); Senior Vice President, Head of Core Map Group, HERE Technologies (2016-2019) John Giamatteo Texas, USA President, Cybersecurity President and Chief Revenue Officer, McAfee (2013-2020) Sai Yuen (Billy) Ho California, USA Executive Vice President, Product Engineering, BlackBerry Spark Steve Rai Ontario, Canada Chief Financial Officer Deputy Chief Financial Officer (2019), Vice President and Corporate Controller (2014-2019) Nita White-Ivy California, USA Chief Human Resources Officer Mark Wilson California, USA Chief Marketing Officer Senior Vice President, Marketing, BlackBerry Limited (2014-2017) Human Capital The Company’s 3,325 regular employees, contract workers and student workers as of February 28, 2022 work as a team in 20 countries worldwide, of which approximately 51% are in Canada, 31% are in the U.S., and the remaining 18% are outside of North America.
Chen California, USA Chief Executive Officer; Executive Chair/Director Marjorie Dickman Washington D.C., USA Chief Government Affairs and Public Policy Officer Global Director and Associate General Counsel, IoT and Automated Driving Policy, Intel (2017-2020) Mattias Eriksson Illinois, USA President, IoT Senior Vice President and Head of Product, HERE Technologies (2019-2020); Senior Vice President, Head of Core Map Group, HERE Technologies (2016-2019) John Giamatteo Texas, USA President, Cybersecurity President and Chief Revenue Officer, McAfee (2013-2020) Phil Kurtz Ontario, Canada Chief Legal Officer and Corporate Secretary Vice President, Deputy General Counsel and Corporate Secretary (2021-2022); Vice President, Deputy General Counsel and Assistant Corporate Secretary (2015-2021) Steve Rai Ontario, Canada Chief Financial Officer Deputy Chief Financial Officer (2019), Vice President and Corporate Controller (2014-2019) Nita White-Ivy California, USA Chief Human Resources Officer Mark Wilson California, USA Chief Marketing Officer Human Capital The Company’s 3,181 regular employees, contract workers and student workers as of February 28, 2023 work as a team in 20 countries worldwide, with approximately 53% in Canada, 27% in the U.S., and 20% outside of North America.
Any actual or perceived failure to comply with these requirements may result in, among other things, revocation of required licenses or registrations, loss of approved status, private litigation, regulatory or governmental investigations, administrative enforcement actions, sanctions, civil and criminal liability, and constraints on the Company’s operations.
Furthermore, the Company may be subject to a variety of local laws unknown to the Company in foreign jurisdictions where customers are located. 10 Any actual or perceived failure to comply with these requirements may result in, among other things, revocation of required licenses or registrations, loss of approved status, private litigation, regulatory or governmental investigations, administrative enforcement actions, sanctions, civil and criminal liability, and constraints on the Company’s operations.
BlackBerry Certicom leverages patented elliptic curve cryptography to provide device security, anti-counterfeiting and product authentication solutions. BlackBerry Certicom’s offerings include its managed public key infrastructure (“PKI”) platform, key management and provisioning technology that helps customers to protect the integrity of their silicon chips and devices from the point of manufacturing through the device life cycle.
BlackBerry Certicom’s offerings include its managed public key infrastructure (“PKI”) platform, key management and provisioning technology that helps customers to protect the integrity of their silicon chips and devices from the point of manufacturing through the device life cycle.
BlackBerry Professional Services provides platform-agnostic strategies to address mobility-based challenges, providing expert deployment support, end-to-end delivery (from 6 system design to user training), application consulting, and experienced project management.
The BlackBerry Cybersecurity and IoT groups are complemented by the enterprise and cybersecurity consulting services offered by the Company’s BlackBerry® Professional Services business. BlackBerry Professional Services provides 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.
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. In fiscal 2021, the Company partnered with Amazon Web Services, Inc.
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. The Company has partnered with Amazon Web Services, Inc. (“AWS”) to develop and market BlackBerry IVY, an intelligent vehicle data platform leveraging BlackBerry QNX’s automotive capabilities.
Product Design, Engineering and Research and Development The Company’s research and development (“R&D”) strategy seeks to provide broad market applications for products derived from its technology base. 8 The Company dedicates a major portion of its R&D investments to the development of software products and services for its Cybersecurity and IoT solutions.
Product Design, Engineering and Research and Development The Company’s research and development (“R&D”) strategy seeks to drive innovation to continuously enhance the Company’s product portfolio and introduce exciting solutions to the market. The Company dedicates a major portion of its R&D investments to the development of software products and services for its Cybersecurity and IoT solutions.
The Company pioneered the use of this architecture to route messages reliably and efficiently to and from mobile devices, and over time has expanded capabilities to enable end-to-end secure communications between endpoints and applications and enterprise networks.
The Spark platform is also differentiated by the inclusion of a sophisticated network operations center in the BlackBerry infrastructure. The Company pioneered the use of this architecture to route messages reliably and efficiently to and from mobile devices, and over time has expanded capabilities to enable end-to-end secure communications between endpoints and applications and enterprise networks.
The U.S. Dodd-Frank Wall 10 Street Reform and Consumer Protection Act also requires the Company to comply with certain due diligence and disclosure obligations with respect to the use of conflict minerals. Furthermore, the Company may be subject to a variety of local laws unknown to the Company in foreign jurisdictions where customers are located.
The U.S. Dodd-Frank Wall Street Reform and Consumer Protection Act also requires the Company to comply with certain due diligence and disclosure obligations with respect to the use of conflict minerals.
Patents that are essential to the Company’s current core business operations are excluded from the Patent Sale Transaction. At closing, the Company will receive a license back to the patents being sold, which relate primarily to mobile devices, messaging and wireless networking. The Patent Sale Transaction will not impact customers’ use of any of the Company’s products, solutions or services.
Closing is subject to regulatory approval and other customary conditions. Pursuant to the terms of the Malikie Transaction, the Company will receive a license back to the patents being sold, which relate primarily to mobile devices, messaging and wireless networking. The Malikie Transaction will not impact customers’ use of any of the Company’s products, solutions or services.
BlackBerry QNX is a trusted supplier of operating systems, hypervisors, development tools and support to automotive OEMs and Tier 1 vendors and to the general embedded market. BlackBerry QNX technology is embedded in over 195 million vehicles. The BlackBerry AtHoc and BlackBerry Alert platforms are mobile and scalable, integrate with legacy systems and support on-premise and cloud-based deployments.
BlackBerry QNX is a trusted supplier of operating systems, hypervisors, development tools and support to automotive OEMs and Tier 1 vendors and to the general embedded market. BlackBerry QNX technology is embedded in over 215 million vehicles. Competition The Company is engaged in markets that are highly competitive and rapidly evolving.
It is the Company’s general practice to enter into confidentiality and non-disclosure agreements with its employees, consultants, contract manufacturers, customers, potential customers and others to attempt to limit access to, and distribution of, its proprietary information.
The Company does not expect that the sale of its portfolio of primarily legacy patents under the Malikie Transaction will negatively impact its strategy of protecting its new innovations through patent filings. 9 It is the Company’s general practice to enter into confidentiality and non-disclosure agreements with its employees, consultants, contract manufacturers, customers, potential customers and others to attempt to limit access to, and distribution of, its proprietary information.
The platform is differentiated through its use of a zero-trust architecture that 7 uniquely combines intelligent security with a user experience that requires little to no support from end users or IT administrators, simplifying management and reducing costs.
The platform is differentiated through its use of a zero-trust architecture that uniquely combines intelligent security with a user experience that requires little to no support from end users or IT administrators, simplifying management and reducing costs. 7 The BlackBerry Cyber Suite leverages Cylance AI, machine learning and automation to provide improved cyber threat prevention and remediation, and can help users to understand risks, make contextual decisions and dynamically apply policy controls with no user interruption, mitigating risks before they materialize.
With available incident management and encrypted end-to-end instant messaging capabilities, the platforms offer a suite of secure crisis communication services to meet the growing number of use cases for emergency or mass notifications. BlackBerry AtHoc has received FedRAMP certification and is the leading provider of network-centric, interactive crisis communication to the U.S. Department of Defense and the U.S.
The BlackBerry AtHoc and BlackBerry Alert platforms are mobile and scalable, integrate with legacy systems and support on-premise and cloud-based deployments. With available incident management and encrypted end-to-end instant messaging capabilities, the platforms offer a suite of secure crisis communication services to meet the growing number of use cases for emergency or mass notifications.
To honor this commitment, the Company maintains a variety of programs to identify, execute and maintain sustainable initiatives and to reduce its direct and indirect environmental impact. In fiscal 2022, these programs enabled the Company to announce that it has achieved carbon neutrality across its Scope 1, Scope 2 and material Scope 3 greenhouse gas emissions.
To honor this commitment, the Company maintains a variety of programs to identify, execute and maintain sustainable initiatives and to reduce its direct and indirect environmental impact.
The Company expects to increase the number of employees in its Cybersecurity and IoT business units by 250 employees, in the aggregate, during fiscal 2023. None of the Company’s employees in Canada or the United States are represented by a labour union; however, employees of certain foreign subsidiaries in Europe are represented by works councils.
None of the Company’s employees in Canada or the United States are represented by a labour union; however, employees of certain foreign subsidiaries in Europe are represented by works councils. The Company offers employees a fair, equitable and competitive total rewards program, designed to recognize and reward both individual and company performance.
(“AWS”) to develop and market BlackBerry IVY, an intelligent vehicle data platform leveraging BlackBerry QNX’s automotive capabilities. BlackBerry IVY will allow automakers to safely access a vehicle’s sensor data, normalize it, and apply machine learning at the edge to generate and share predictive insights and inferences.
BlackBerry IVY allows automakers to safely access a vehicle’s sensor data, normalize it, and apply machine learning at the edge to generate and share predictive insights and inferences. Automakers and developers will be able to use this information to create responsive in-vehicle services that enhance driver and passenger experiences.
Completed integrations are shared with the user community and promoted to market partners and AWS Marketplace opportunities. The Company also offers the BlackBerry® Spark SDK, an in-app protection solution powered by the Company’s enterprise security assessment framework.
Completed integrations are shared with the user community and promoted to market partners and AWS Marketplace opportunities.
SecuSUITE® for Government is a certified, multi-OS voice and text messaging solution with advanced encryption, anti-eavesdropping and continuous authentication capabilities, providing a maximum level of security on conventional mobile devices for public authorities and businesses. The Company also offers BBM Enterprise, an enterprise-grade secure instant messaging solution for messaging, voice and video.
BlackBerry SecuSUITE is a certified, multi-OS voice and text messaging solution with advanced encryption, anti-eavesdropping and continuous authentication capabilities, providing a maximum level of security on conventional mobile devices for government and businesses. 5 BlackBerry AtHoc and BlackBerry Alert are secure, networked critical event management solutions that enable people, devices and organizations to exchange critical information in real time during business continuity and life safety operations.
Department of Homeland Security, among other governmental bodies. BlackBerry AtHoc helps to protect more than 75% of U.S. government personnel. BlackBerry SecuSUITE technology has been certified to be compliant with the Common Criteria protection profile for VoIP applications and SIP servers.
BlackBerry AtHoc has received FedRAMP certification and is the leading provider of network-centric, interactive crisis communication to the U.S. Department of Defense and the U.S. Department of Homeland Security, among other governmental bodies. BlackBerry AtHoc helps to protect more than 75% of U.S. government personnel.
It has also earned NIAP certification and has been placed on the National Security Agency’s Commercial Solutions for Classified Program component list of products certified for use on classified systems. Competition The Company is engaged in markets that are highly competitive and rapidly evolving.
BlackBerry SecuSUITE technology has been certified to be compliant with the Common Criteria protection profile for VoIP applications and SIP servers. It has also earned NIAP certification and NATO Communications and Information Agency security accreditation, and has been placed on the National Security Agency’s Commercial Solutions for Classified Program component list of products certified for use on classified systems.
Completion of the Patent Sale Transaction is subject to the satisfaction of financing and other closing conditions and is targeted for the end of the first quarter of fiscal 2023. The Company’s Other business generates revenue from SAF charged to subscribers using the Company’s legacy BlackBerry 7 and prior BlackBerry operating systems.
The Company’s Other business generated revenue from SAF charged to subscribers using the Company’s legacy BlackBerry 7 and prior BlackBerry operating systems, for which support and maintenance ceased as of January 4, 2022.
This comprehensive security strategy for BlackBerry Spark is designed to operate on a single agent across all endpoints, to be administered from a single console, to leverage a single crowd-sourced threat data lake and to be managed in one cloud environment.
The platform features industry-leading threat prevention modules to help organizations cope with the significant growth of cyberattacks and operates on a single agent across all endpoints, administered from a single console, leveraging a single crowd-sourced threat data lake and managed in one cloud environment.
The BlackBerry Cyber Suite natively integrates with BlackBerry® UEM and also works with UEM solutions from other vendors. In fiscal 2023, the Company expects to re-brand the solutions within the BlackBerry Cyber Suite using the Cylance brand name. The BlackBerry Spark UEM Suite includes the Company’s BlackBerry UEM, BlackBerry® Dynamics™ and BlackBerry® Workspaces solutions.
The Company also offers incident response, compromise assessment and containment services to assist clients with forensic analysis, state of existing systems and remediation of attacks. The BlackBerry UES Suite natively integrates with BlackBerry® UEM and also works with UEM solutions from other vendors. The BlackBerry Spark UEM Suite includes the Company’s BlackBerry UEM, BlackBerry® Dynamics™ and BlackBerry® Workspaces solutions.
Information about our Executive Officers The Company made two executive officer appointments during fiscal 2022, naming Mattias Eriksson as President, IoT and John Giamatteo as President, Cybersecurity.
Information about our Executive Officers The Company made one executive officer appointment during fiscal 2023, naming Phil Kurtz as Chief Legal Officer.
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. 5 BlackBerry AtHoc and BlackBerry Alert are secure, networked critical event management solutions that enable people, devices and organizations to exchange critical information in real time during business continuity and life safety operations.
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. The BlackBerry Spark platform also includes BBM Enterprise, an enterprise-grade secure instant messaging solution for messaging, voice and video.
BlackBerry QNX also includes BlackBerry® Jarvis®, a cloud-based binary static application security testing platform that identifies vulnerabilities in deployed binary software used in automobiles and other embedded applications. In addition to BlackBerry QNX, BTS includes BlackBerry Certicom® cryptography and key management products, and the BlackBerry Radar® asset monitoring solution.
In addition to BlackBerry QNX, BTS includes BlackBerry Certicom® cryptography and key management products, and the BlackBerry Radar® asset monitoring solution. BlackBerry Certicom leverages patented elliptic curve cryptography to provide device security, anti-counterfeiting and product authentication solutions.
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The Company is currently executing on a robust schedule of product launches for BlackBerry Spark to deliver on the Company’s extended detection and response (“XDR”) strategy, which aims to use security telemetry data from the platform’s full range of natively-integrated products and partner solutions to provide deep contextual insights for more powerful and integrated threat detection and response.
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These solutions are designed to provide a continuous state of resilience for the Company’s customers and support the outcomes they require by: (i) complementing, extending, or fully managing security capabilities with the Company’s experts and extended technology ecosystem, (ii) enabling the workforce in a way that is fast, easy and satisfying, while providing security visibility, controls and peace of mind; and (iii) reducing complexity and overhead costs associated with security operations.
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The combined platform features industry-leading threat prevention modules to help organizations cope with the significant growth of cyberattacks. The Company also offers incident response, compromised assessment and containment services to assist clients with forensic analysis, state of existing systems and remediation of attacks.
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BlackBerry IVY supports multiple vehicle operating systems and hardware, as well as multi-cloud deployments in order to ensure compatibility across vehicle models and brands. The Company recently announced the first design win for BlackBerry IVY and expects to release the platform for general availability in May 2023, with in-vehicle installations to begin during the 2025 model year.
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Automakers and developers will be able to use this information to create responsive in-vehicle services that enhance driver and passenger experiences. BlackBerry IVY will support multiple vehicle operating systems and hardware, as well as multi-cloud deployments in order to ensure compatibility across vehicle models and brands.
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On March 21, 2023, the Company announced that Catapult had been unable to secure financing that would have enabled it to complete the transaction on acceptable amended terms and that, as a result, the Company had terminated its agreement with Catapult.
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In February 2022, the Company released a version of BlackBerry IVY for proof-of-concept testing and the Company expects installations of BlackBerry IVY in vehicles to begin during the 2024 or 2025 model year.
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The Company also announced its entry into a new patent sale agreement with Malikie Innovations Limited for the sale of a similar portfolio of non-core patent assets for $170 million in cash on closing, an additional $30 million in cash by no later than the third anniversary of closing and potential future royalties in the aggregate amount of up to $900 million (the “Malikie Transaction”).
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In fiscal 2022, the Company established the BlackBerry IVY Innovation Fund to invest to up to $50 million in automotive ecosystem startups focused on developing data-driven solutions that leverage BlackBerry IVY.
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Expanding the Company’s automotive product portfolio, the BlackBerry IVY platform includes an in-vehicle runtime for cost-efficient data processing and a set of SDKs which enables developers to process vehicle signals and generate meaningful insights that are used to unlock new use cases on both BlackBerry QNX and Linux-based vehicle platforms.
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The Company also created the BlackBerry IVY Advisory Council, a body of leading transportation and mobility innovators that will help to advise the BlackBerry IVY development community and shape vertical-specific automotive applications for the BlackBerry IVY platform. The BlackBerry Cybersecurity and IoT groups are complemented by the enterprise and cybersecurity consulting services offered by the Company’s BlackBerry® Professional Services business.
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In fiscal 2022, these programs enabled the Company to achieve carbon neutrality across its Scope 1, Scope 2 and material Scope 3 greenhouse gas emissions and the Company maintained its carbon neutral status as at the end of fiscal 2023.
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The BlackBerry Cyber Suite leverages Cylance AI, machine learning and automation to provide improved cyber threat prevention and remediation, and can help users to understand risks, make contextual decisions and dynamically apply policy controls with no user interruption, mitigating risks before they materialize.
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The Company also provides a full development solution for the creation and retrofitting of apps for use in a container and offers an extensive library of secure enterprise applications. The inclusion of a sophisticated network operations center in the BlackBerry infrastructure is also a key differentiator.
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The Spark SDK enables mobile app developers to enhance their iOS and Android applications with a rich set of security capabilities to prevent device, application or user level attacks.
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The Company also offers BlackBerry® Spark Communications Services to application developers to integrate the secure messaging, voice and video capabilities of BBM Enterprise into their applications and services. Intellectual Property The protection of intellectual property is an important part of the Company’s operations.
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The Company does not expect that the sale of its portfolio of primarily legacy patents under the Patent Sale Agreement will negatively impact its strategy of protecting its new innovations through patent filings.
Removed
The Company offers employees a fair, equitable and competitive total rewards program, designed to recognize and reward both individual and company performance.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

60 edited+17 added−31 removed137 unchanged
Biggest changeThe COVID-19 pandemic and related global chip shortage have had and, in fiscal 2022, may continue to have a material adverse impact on the Company’s QNX automotive software business in particular and on the Company’s business, results of operations and financial condition on a consolidated basis.
Biggest changeAdverse macroeconomic and geopolitical conditions have had and may continue to have a material adverse effect on the Company’s business, results of operations and financial condition. The COVID-19 pandemic and ensuing global semiconductor shortage have had and may continue to have a material adverse impact on production-based royalties for the Company’s QNX automotive software business.
A significant natural disaster, such as an earthquake, fire or flood could have a material adverse impact on the Company’s business and operations and could cause the Company to incur significant costs to repair damages to its facilities, equipment and infrastructure.
A significant natural disaster, such as an earthquake, fire or flood could have a material adverse impact on the Company’s business and operations and could cause the Company to incur costs to repair damages to its facilities, equipment and infrastructure.
If the network and product security measures implemented by the Company or its partners, including third-party data center operators, cloud service providers and product manufacturers are breached, or perceived to be breached, or if the confidentiality, integrity or availability of the Company’s data, including intellectual property and legally protected personal data, is compromised, the Company could be exposed to significant litigation, service disruptions, investigation and remediation costs, regulatory sanctions, fines and contractual penalties.
If the network and product security measures implemented by the Company or its partners, including third-party data 14 center operators, cloud service providers and product manufacturers are breached, or perceived to be breached, or if the confidentiality, integrity or availability of the Company’s data, including intellectual property and legally protected personal data, is compromised, the Company could be exposed to significant litigation, service disruptions, investigation and remediation costs, regulatory sanctions, fines and contractual penalties.
The Company’s future success depends upon its ability to enhance and integrate its current products and services, including the BlackBerry Spark Suite, to provide for their compatibility with evolving industry standards and operating systems, to address competing technologies and products developed by other companies, and to continue to develop and introduce new products and services offering enhanced performance and functionality on a timely basis at competitive prices.
The 12 Company’s future success depends upon its ability to enhance and integrate its current products and services, including the BlackBerry Spark Suite, to provide for their compatibility with evolving industry standards and operating systems, to address competing technologies and products developed by other companies, and to continue to develop and introduce new products and services offering enhanced performance and functionality on a timely basis at competitive prices.
If the Company is not able to effectively identify and establish new relationships with successful resellers and channel partners, or to maintain or enhance existing relationships without giving rise to conflicts between channels, or if the Company’s partners 16 do not act in a manner that will promote the success of the Company’s products and services, the Company’s business, results of operations and financial condition could be materially adversely affected.
If the Company is not able to effectively identify and establish new relationships with successful resellers and channel partners, or to maintain or enhance existing relationships without giving rise to conflicts between channels, or if the Company’s partners do not act in a manner that will promote the success of the Company’s products and services, the Company’s business, results of operations and financial condition could be materially adversely affected.
The complexity of the technology involved and the inherent uncertainty of commercial, class action, securities, employment and other litigation increases these risks. In recognition of these considerations, the Company may enter into settlements resulting in material expenditures, the payment of which could have a material adverse effect on the Company’s business, results of operation and financial condition.
The complexity of the technology involved and the inherent uncertainty of commercial, class action, securities, employment and other litigation 16 increases these risks. In recognition of these considerations, the Company may enter into settlements resulting in material expenditures, the payment of which could have a material adverse effect on the Company’s business, results of operation and financial condition.
Even a perception that the Company’s products or practices do not adequately protect users’ privacy or data collected by the Company, made available to the Company or stored in or through the 22 Company’s products, or that they are being used by third parties to access personal or consumer data, could impair the Company’s sales or its reputation and brand value.
Even a perception that the Company’s products or practices do not adequately protect users’ privacy or data collected by the Company, made available to the Company or stored in or through the Company’s products, or that they are being used by third parties to access personal or consumer data, could impair the Company’s sales or its reputation and brand value.
Regardless of whether patent or other intellectual property infringement claims against the Company have any merit, they could: • adversely affect the Company’s relationships with its customers; • be time-consuming and expensive to evaluate and defend, including in litigation or other proceedings; • result in negative publicity for the Company; • divert management’s attention and resources; • cause product delays or stoppages; • subject the Company to significant liabilities; 20 • require the Company to develop possible workaround solutions that may be costly and disruptive to implement; and • require the Company to cease certain activities or to cease selling its products and services in certain markets.
Regardless of whether patent or other intellectual property infringement claims against the Company have any merit, they could: • adversely affect the Company’s relationships with its customers; • be time-consuming and expensive to evaluate and defend, including in litigation or other proceedings; • result in negative publicity for the Company; 19 • divert management’s attention and resources; • cause product delays or stoppages; • subject the Company to significant liabilities; • require the Company to develop possible workaround solutions that may be costly and disruptive to implement; and • require the Company to cease certain activities or to cease selling its products and services in certain markets.
There can be no assurance that the Company will be successful in implementing its sales and distribution strategy. See also the Risk Factor entitled “The Company’s success depends on its relationships with resellers and distributors”. The Company faces intense competition.
There can be no assurance that the Company will be successful in implementing its sales and distribution strategy. See also the Risk Factor entitled “The Company’s success depends on its relationships with resellers and distributors”. 13 The Company faces intense competition.
Furthermore, some of the 18 features and functionality in the Company’s products and services require interoperability with APIs of other operating systems, and if operating system providers decide to restrict the Company’s access to their APIs, that functionality would be lost and the Company’s business could be impaired.
Furthermore, some of the features and functionality in the Company’s products and services require interoperability with APIs of other operating systems, and if operating system providers decide to restrict the Company’s access to their APIs, that functionality would be lost and the Company’s business could be impaired.
In addition, the Company typically receives limited advance notice of changes in features and functionality of operating systems and platforms, and therefore the Company may be forced to divert resources from its preexisting product roadmap to accommodate these changes.
In addition, the Company typically 17 receives limited advance notice of changes in features and functionality of operating systems and platforms, and therefore the Company may be forced to divert resources from its preexisting product roadmap to accommodate these changes.
The Company’s offices and remote working locations have historically experienced, and are projected to continue to experience, climate-related events including drought, heat waves, ice storms, power shortages, and wildfires and resultant air quality impacts.
The Company’s offices and remote working locations 23 have historically experienced, and are projected to continue to experience, climate-related events including drought, heat waves, ice storms, power shortages, and wildfires and resultant air quality impacts.
Changes in the law may weaken the Company’s ability to collect royalty revenue for licensing its patents. Similarly, licensees of the Company’s patents may fail to satisfy their obligations to pay royalties, or may contest the scope and extent of their obligations.
Changes in the law may weaken the Company’s ability to collect 18 royalty revenue for licensing its patents. Similarly, licensees of the Company’s patents may fail to satisfy their obligations to pay royalties, or may contest the scope and extent of their obligations.
In addition, governmental authorities may require access to limited data stored by the Company through lawful access demands and capabilities, which could subject the Company to legal liability, unforeseen compliance cost and negative publicity.
In addition, governmental authorities may require access to limited data stored 21 by the Company through lawful access demands and capabilities, which could subject the Company to legal liability, unforeseen compliance cost and negative publicity.
The laws of certain countries in which the Company’s products and services are sold or licensed do not protect intellectual property rights to the same extent as the laws of Canada or the United States.
Further, the laws of certain countries in which the Company’s products and services are sold or licensed do not protect intellectual property rights to the same extent as the laws of Canada or the United States.
At the same time, the Company’s products and services are highly complex and may contain design defects, bugs or security vulnerabilities that are difficult to detect and correct.
At the same time, the Company’s products and services are highly complex and may contain design defects, bugs or security vulnerabilities that are 15 difficult to detect and correct.
ITEM 1A. RISK FACTORS Investors in the Company’s securities should carefully consider the following risks, as well as the other information contained in MD&A (as defined below) and elsewhere in this Annual Report on Form 10-K Form for the fiscal year ended February 28, 2022.
ITEM 1A. RISK FACTORS Investors in the Company’s securities should carefully consider the following risks, as well as the other information contained in MD&A (as defined below) and elsewhere in this Annual Report on Form 10-K for the fiscal year ended February 28, 2023.
Also, the Company’s financial results and share price performance (particularly for those employees for whom equity-based compensation is a key element of their total compensation), among other factors, may impact the Company’s ability to attract new, and retain existing, employees.
Also, the Company’s financial results and share price performance (particularly for senior employees for whom equity-based compensation is a key element of their total compensation), among other factors, may impact the Company’s ability to attract new, and retain existing, employees.
GAAP may be negatively affected to the extent that any indebtedness, such as the Debentures, are accounted for by the Company at fair value and include embedded derivatives which fluctuate in value from period to period.
GAAP may be negatively affected to the extent that any indebtedness, such as the 1.75% Debentures, are accounted for by the Company at fair value and include embedded derivatives which fluctuate in value from period to period.
The draft legislative proposals are generally intended to apply in respect of taxation years beginning on or after January 1, 2023. The Company will continue to monitor the BEPS and interest deductibility limitation proposals and any impact on the Company, which may result in an increase in future taxes and an adverse effect on the Company.
The revised draft legislative proposals are generally intended to apply in respect of taxation years beginning on or after October 1, 2023. The Company will continue to monitor the BEPS and interest deductibility limitation proposals and any impact on the Company, which may result in an increase in future taxes and an adverse effect on the Company.
The Company’s exposure to product liability risk may increase as the Company continues to commercialize its software innovations for autonomous and connected vehicles. Litigation resulting from these claims could be costly and time-consuming and could divert the attention of management and key personnel from the Company’s business operations.
The Company’s exposure to product liability risk may increase as the Company continues to commercialize its software innovations for autonomous and connected vehicles. Litigation resulting from these claims and from actions asserted by the Company could be costly and time-consuming and could divert the attention of management and key personnel from the Company’s business operations.
Standards for identifying, measuring and reporting ESG matters continue to evolve, including requirements for ESG-related disclosures that may be required of public companies by the securities regulators.
Standards for identifying, measuring and reporting ESG matters continue to evolve, including requirements for ESG-related disclosures that may be required of public companies by the securities and other applicable regulators.
Canada has not yet released any domestic legislation in respect of the introduction of the global minimum tax. In February 2022, the Department of Finance Canada released for public comment draft legislative proposals which, if enacted, may limit the deductibility of interest and financing expenses for Canadian tax purposes.
Canada has not yet released any domestic legislation in respect of the introduction of the global minimum tax. In November 2022, the Department of Finance Canada released for public comment revised draft legislative proposals which, if enacted, may limit the deductibility of interest and financing expenses for Canadian tax purposes.
For more details, please refer to the discussion of foreign exchange and income taxes in the Company’s MD&A for the fiscal year ended February 28, 2022.
For more details, please refer to the discussion of foreign exchange and income taxes in the Company’s MD&A for the fiscal year ended February 28, 2023.
The Debentures are subject to restrictive and other covenants that may limit the discretion of the Company and its subsidiaries with respect to certain business matters.
The 1.75% Debentures are subject to restrictive and other covenants that may limit the discretion of the Company and its subsidiaries with respect to certain business matters.
Failure to protect the Company’s intellectual property could harm its ability to compete effectively and the Company may not earn the revenues it expects from intellectual property rights. The Company’s commercial success is highly dependent upon its ability to protect its proprietary technology.
Risks Related to Intellectual Property and Technology Licensing Failure to protect the Company’s intellectual property could harm its ability to compete effectively and the Company may not earn the revenues it expects from intellectual property rights. The Company’s commercial success is highly dependent upon its ability to protect its proprietary technology.
A significant portion of the Company’s personnel, including a majority of its senior leadership team, is based in California, in areas known for seismic activity and wildfires. The Company also has operations in numerous locations around the world that expose the Company to additional diverse environmental risks.
Environmental events may negatively affect the Company. A significant portion of the Company’s personnel, including a majority of its senior leadership team, is based in California, in areas known for seismic activity and wildfires. The Company also has operations in numerous locations around the world that expose the Company to additional diverse environmental risks.
These activities involve significant challenges and risks, including: that they may not advance the Company’s strategic objectives or generate satisfactory synergies or return on investment; that the Company may have difficulty integrating and managing new employees, business systems, development teams and product offerings; the potential loss of key employees of an acquired business; additional demands on the Company’s management, resources, systems, procedures and controls; disruption of the Company’s ongoing business; and diversion of management’s attention from other business concerns.
These activities involve significant challenges and risks, including: that they may not advance the Company’s strategic objectives or generate satisfactory synergies or return on investment; that the Company may have difficulty integrating and managing new employees, business systems, development teams and product offerings; the potential loss of key employees of an acquired business; additional demands on the Company’s management, resources, systems, procedures and controls; disruption of the Company’s ongoing business; and diversion of management’s attention from other business concerns. 22 Acquisitions, investments or other strategic collaborations or partnerships may involve significant commitments of financial and other resources of the Company.
In addition, the Company’s ability to hire and retain qualified personnel may be negatively impacted by any changes that the Company makes with respect to remote, on-site or hybrid work arrangements, as these may not meet the needs or expectations of employees or may be perceived as less favourable compared to other companies’ policies.
In addition, the Company’s ability to hire and retain qualified personnel may be negatively impacted by the Company’s policies with respect to remote, on-site or hybrid work arrangements, as these may not meet the needs or expectations of employees or may be perceived as less favourable compared to other companies’ policies.
In addition, the Company expends significant resources to patent and manage the intellectual property it creates with the expectation that it will generate revenues by incorporating that intellectual property in its products or services. The Company is also monetizing its patent portfolio through outbound patent licensing.
In addition, the Company expends significant resources to patent and manage the intellectual property it creates with the expectation that it will generate revenues by incorporating that intellectual property in its products or services. The Company also monetizes its patent assets through outbound licensing.
If the Company’s cash flow from operations declines significantly, the Company may be unable to pay amounts due under its outstanding indebtedness or to fund other liquidity needs and it may be required to refinance all or part of its then existing indebtedness (including the Debentures), sell assets, reduce or delay capital expenditures or seek to raise additional capital, any of which could have a material adverse effect on the Company’s business, results of operations and financial condition.
If the Company cannot maintain an adequate cash balance or positive cash flow from operations, the Company may be unable to pay amounts due under its outstanding indebtedness or to fund other liquidity needs and it may be required to refinance all or part of its then existing indebtedness, sell assets, reduce or delay capital expenditures or seek to raise additional capital, any of which could have a material adverse effect on the Company’s business, results of operations and financial condition.
As a result, there can be no assurance that the Company’s patent applications will result in patents being issued. 19 While the Company enters into confidentiality and non-disclosure agreements with its employees, consultants, contract manufacturers, customers, potential customers and others to attempt to limit access to, and distribution of, proprietary and confidential information, it is possible that: • some or all of its confidentiality agreements will not be honored; • third parties will independently develop equivalent technology or misappropriate the Company’s technology or designs; • disputes will arise with the Company’s strategic partners, customers or others concerning the ownership of intellectual property; • unauthorized disclosure or use of the Company’s intellectual property, including source code, know-how or trade secrets will occur; or • contractual provisions may not be enforceable.
While the Company enters into confidentiality and non-disclosure agreements with its employees, consultants, contract manufacturers, customers, potential customers and others to attempt to limit access to, and distribution of, proprietary and confidential information, it is possible that: • some or all of its confidentiality agreements will not be honored; • third parties will independently develop equivalent technology or misappropriate the Company’s technology or designs; • disputes will arise with the Company’s strategic partners, customers or others concerning the ownership of intellectual property; • unauthorized disclosure or use of the Company’s intellectual property, including source code, know-how or trade secrets will occur; or • contractual provisions may not be enforceable.
The stock market in general, and the securities of technology companies in particular, have often experienced extreme price and volume fluctuations, including, in recent years, as a result of the ongoing COVID-19 pandemic, the invasion of Ukraine by Russia, rising inflation and the recent increase in interest rates by the U.S. Federal Reserve.
The stock market in general, and the securities of technology companies in particular, have often experienced extreme price and volume fluctuations, including, in recent years, as a result of the COVID-19 pandemic, the invasion of Ukraine by Russia, rising inflation and higher interest rates.
The increasing frequency and impact of extreme weather events on the infrastructure of the Company and its suppliers, as well as public infrastructure, have the potential to disrupt the business of the Company, its suppliers and its customers. 24 Although the Company maintains incident management and disaster response plans, they may prove to be inadequate in the event of a major disruption caused by a natural disaster or geopolitical incident and the Company may be unable to continue its operations and may endure system interruptions, reputational harm, delays in its development activities, lengthy interruptions in service, breaches of data security and loss of critical data, and the Company’s insurance may not cover such events or may be insufficient to compensate the Company for the potentially significant losses it may incur.
Although the Company maintains incident management and disaster response plans, they may prove to be inadequate in the event of a major disruption caused by a natural disaster or geopolitical incident and the Company may be unable to continue its operations and may endure system interruptions, reputational harm, delays in its development activities, lengthy interruptions in service, breaches of data security and loss of critical data, and the Company’s insurance may not cover such events or may be insufficient to compensate the Company for the potentially significant losses it may incur.
While the Company maintains cybersecurity insurance, the Company’s coverage may be insufficient to cover all losses or types of claims that may arise from cyber incidents, and any incidents may result in the loss of, or increased costs of, the Company’s insurance.
While the Company maintains cybersecurity insurance, the Company’s coverage may be insufficient to cover all losses or types of claims that may arise from cyber incidents, and any incidents may result in the loss of, or increased costs of, the Company’s insurance. The Company’s business could be negatively affected as a result of actions of activist shareholders.
The Company has incurred indebtedness, which could adversely affect its operating flexibility and financial condition. The Company has, and may from time to time in the future have, third-party debt service obligations pursuant to its outstanding indebtedness, which currently includes $365 million aggregate principal amount of 1.75% unsecured convertible debentures (the “Debentures”).
Risks Related to Assets, Indebtedness and Taxation The Company has incurred indebtedness, which could adversely affect its operating flexibility and financial condition. The Company has, and may from time to time in the future have, third-party debt service obligations pursuant to its outstanding indebtedness, which currently includes $365 million aggregate principal amount of 1.75% Debentures maturing on November 13, 2023.
Such attempts may intensify in the event of retaliatory cyber attacks stemming from Russia’s recent invasion of Ukraine. 14 The Company devotes significant resources to network security, encryption and authentication technologies and other measures, including security policies and procedures, vulnerability testing and awareness training, to mitigate cyber risk to its systems, endpoints and data.
Such attempts may intensify as a by-product of Russia’s invasion of Ukraine. The Company devotes significant resources to network security, encryption and authentication technologies and other measures, including security policies and procedures, vulnerability testing and awareness training, to mitigate cyber risk to its systems, endpoints and data.
For larger deployments, particularly with enterprise customers in highly regulated industries such as financial services, government, healthcare and transportation, the Company is subject to risks related to increased customer bargaining power, longer sales cycles, regulatory changes, compliance with procurement requirements and contractual performance covenants, and enhanced customer support obligations. 13 The Company must invest significant time and resources in providing ongoing value to these customers and in enhancing its reputation as an enterprise software vendor.
For larger deployments, particularly with enterprise customers in highly regulated industries such as financial services, government, healthcare and transportation, the Company is subject to risks related to increased customer bargaining power, longer sales cycles, regulatory changes, compliance with procurement requirements and contractual performance covenants, and enhanced customer support obligations.
Acquisitions, divestitures, investments and other business initiatives may negatively affect the Company’s results of operations. The Company has acquired and continues to seek out opportunities to acquire or invest in, businesses, assets, products, services and technologies that expand, complement or are otherwise related to the Company’s business or provide opportunities for growth.
The Company has acquired and continues to seek out opportunities to acquire or invest in, businesses, assets, products, services and technologies that expand, complement or are otherwise related to the Company’s business or provide opportunities for growth.
Failure to maintain such approvals or certifications for the Company’s current products or to obtain such approvals or certifications for any new products on a timely basis could have a material adverse effect on the Company’s business, results of operations and financial condition.
Failure to maintain such approvals or certifications for the Company’s current products or to obtain such approvals or certifications for any new products on a timely basis could have a material adverse effect on the Company’s competitive position.
The Company’s operations rely to a significant degree on the efficient and uninterrupted operation of complex technology systems and networks, which are in some cases integrated with those of carrier partners, cloud service providers, and third-party data centre operators.
Network disruptions or other business interruptions could have a material adverse effect on the Company’s business and harm its reputation. The Company’s operations rely to a significant degree on the efficient and uninterrupted operation of complex technology systems and networks, which are in some cases integrated with those of carrier partners, cloud service providers, and third-party data centre operators.
If any such events or circumstances arise, the Company may be required to record an impairment charge in the value of its goodwill. In the first quarter of fiscal 2021, the Company recorded total non-cash goodwill impairment charges of $594 million in the BlackBerry Spark reporting unit. For additional information, see Note 3 to the Consolidated Financial Statements.
If any such events or circumstances arise, the Company may be required to record an impairment charge in the value of its goodwill. In the fourth quarter of fiscal 2023, the Company recorded the Fiscal 2023 Impairment Charge. For additional information, see Note 3 to the Consolidated Financial Statements.
The Company is also substantially dependent on the continued service of its existing engineering personnel because of the complexity of its products and services. 15 Also, to the extent that the Company hires employees from mature public companies with significant financial resources, the Company may be subject to allegations that such employees have been improperly solicited, or that they have divulged proprietary or other confidential information or that their former employers own such employees’ inventions or other work product.
Also, to the extent that the Company hires employees from mature public companies with significant financial resources, the Company may be subject to allegations that such employees have been improperly solicited, or that they have divulged proprietary or other confidential information or that their former employers own such employees’ inventions or other work product.
Further, a breach of an artificial intelligence and machine learning-based solution offered by another endpoint security provider could cause the market to lose confidence in next-generation security software generally, including the Company’s solutions. The Company’s success depends on its continuing ability to attract new personnel, retain existing key personnel and manage its staffing effectively.
Further, a breach of an artificial intelligence and machine learning-based solution offered by another endpoint security provider could cause the market to lose confidence in next-generation security software generally, including the Company’s solutions. The Company’s success depends on its relationships with resellers and channel partners.
The Company is 23 subject to a number of risks associated with its foreign operations that may increase liability and costs, lengthen sales cycles and require significant management attention.
The Company maintains offices in a number of foreign jurisdictions and intends to continue to pursue growth in select international markets. The Company is subject to a number of risks associated with its foreign operations that may increase liability and costs, lengthen sales cycles and require significant management attention.
Non-compliance could result in penalties or significant legal liability and the Company’s business, results of operations and financial condition may be adversely affected. See also “Regulatory Environment” in this Annual Report on Form 10-K.
Non-compliance could result in penalties or significant legal liability and the Company’s business, results of operations and financial condition may be adversely affected.
The Company relies on a combination of patents, copyrights, trademarks, trade secrets, confidentiality procedures and contractual provisions to protect its proprietary rights, all of which offer only limited protection.
The Company relies on a combination of patents, copyrights, trademarks, trade secrets, confidentiality procedures and contractual provisions to protect its proprietary rights, all of which offer only limited protection. Despite the Company’s efforts, the steps taken to protect its proprietary rights may not be adequate to preclude misappropriation of its proprietary information or infringement of its intellectual property rights.
Competition for highly skilled personnel is intense, especially in the San Francisco Bay Area and in the Waterloo, Ontario area, where the Company has a substantial presence and need for highly skilled personnel.
Competition for highly skilled personnel is intense, especially in the San Francisco Bay area and in the Waterloo, Ontario area, where the Company has a substantial presence and need for highly skilled personnel. The Company is also substantially dependent on the continued service of its existing engineering personnel because of the complexity and specialization of its products and services.
As at February 28, 2022, the Company’s long-lived assets had a carrying value of approximately $613 million. Under United States generally accepted accounting principles (“U.S. GAAP”), the Company reviews its long-lived assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.
The Company’s long-lived assets include items such as the Company’s network infrastructure, operating lease right-of-use assets and certain intellectual property. Under United States generally accepted accounting principles (“U.S. GAAP”), the Company reviews its long-lived assets for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.
In addition, the disclosure in the Company’s patent applications may not be sufficient to meet the statutory requirements for patentability in all cases.
In addition, the disclosure in the Company’s patent applications may not be sufficient to meet the statutory requirements for patentability in all cases. As a result, there can be no assurance that the Company’s patent applications will result in patents being issued.
GAAP, the Company tests goodwill for impairment annually, during the fourth quarter, or more frequently if events or changes in circumstances indicate that the asset may be impaired.
Goodwill represents the excess of the acquisition price over the fair value of identifiable net assets acquired. Under U.S. GAAP, the Company tests goodwill for impairment annually, during the fourth quarter, or more frequently if events or changes in 20 circumstances indicate that the asset may be impaired.
The Company’s ability to maintain and expand its market reach is increasingly dependent on establishing, developing and maintaining relationships with third party resellers and channel partners. The Company makes training available to its partners and develops sales programs to incentivize them to promote and deliver the Company’s current and future products and services and to grow its user base.
The Company makes training available to its partners and develops sales programs to incentivize them to promote and deliver the Company’s current and future products and services and to grow its user base.
See also the Risk Factor entitled “Litigation against the Company may result in adverse outcomes” and the “Legal Proceedings” section in this Annual Report on Form 10-K. Rising inflation may negatively impact the Company’s results of operations as well as the credit and securities markets generally, including the market price of the Company’s common shares and Debentures.
See also the Risk Factor entitled “Litigation against the Company may result in adverse outcomes” and the “Legal Proceedings” section in this Annual Report on Form 10-K.
Administrative or regulatory actions against the Company or its employees could also have a material adverse effect on the Company’s business, BlackBerry brand, results of operations and financial condition. The Company’s success depends on its relationships with resellers and channel partners.
Administrative or regulatory actions against the Company or its employees could also have a material adverse effect on the Company’s business, BlackBerry brand, results of operations and financial condition. See Note 10 to the Consolidated Financial Statements for information regarding certain legal proceedings in which the Company is involved.
In the ordinary course of the Company’s business, there are many transactions and calculations where the ultimate tax determination is uncertain.
Significant judgment is required in determining its worldwide liability for income, indirect and other taxes, as well as potential penalties and interest. In the ordinary course of the Company’s business, there are many transactions and calculations where the ultimate tax determination is uncertain.
General Risk Factors The Company’s business is subject to risks inherent in foreign operations, including fluctuations in foreign currencies. Sales outside of North America account for a significant portion of the Company’s revenue. The Company maintains offices in a number of foreign jurisdictions and intends to continue to pursue growth in select international markets.
The Company’s inability to address these risks could adversely affect the Company’s business, results of operations and financial condition. The Company’s business is subject to risks inherent in foreign operations, including fluctuations in foreign currencies. Sales outside of North America account for a significant portion of the Company’s revenue.
Risks Related to Intellectual Property and Technology Licensing The Company may not be able to obtain rights to use third-party software and is subject to risks related to the use of open source software. Many of the Company’s products include intellectual property which must be licensed from third parties.
The aggregate proceeds that the Company ultimately receives from the Malikie Transaction are expected to be less than $900 million. The Company may not be able to obtain rights to use third-party software and is subject to risks related to the use of open source software.
In addition, certain of the Company’s competitors may operate on a less leveraged basis, or without such restrictive covenants, and therefore could have greater operating and financing flexibility than the Company. 21 There can be no assurance that the Company will be able to repay, restructure or refinance its indebtedness, including the Debentures, as principal amounts become due, or that it will be able to do so on terms as favourable as those currently in place.
In addition, certain of the Company’s competitors may operate on a less leveraged basis, or without such restrictive covenants, and therefore could have greater operating and financing flexibility than the Company. The Company faces substantial asset risk, including the potential for charges related to its long-lived assets and goodwill.
The Company is subject to income, indirect (such as sales tax, sales and use tax and value-added tax) and other taxes in Canada and numerous foreign jurisdictions. Significant judgment is required in determining its worldwide liability for income, indirect and other taxes, as well as potential penalties and interest.
Tax provision changes, the adoption of new tax legislation or exposure to additional tax liabilities could materially impact the Company’s financial condition. The Company is subject to income, indirect (such as sales tax, sales and use tax and value-added tax) and other taxes in Canada and numerous foreign jurisdictions.
Any of these events could have a negative impact on the Company’s business, results of operations and financial condition. The Company is subject to risks related to regulations regarding health and safety, hazardous materials usage and conflict minerals.
Any of these events could have a negative impact on the Company’s business, results of operations and financial condition. General Risk Factors Acquisitions, divestitures, investments and other business initiatives may negatively affect the Company’s results of operations.
Removed
See Note 10 to the Consolidated Financial Statements for information regarding certain legal proceedings in which the Company is involved, including a consolidated securities class action complaint filed in the U.S. District Court for the Southern District of New York.
Added
The Company must invest significant time and resources in providing ongoing value to these customers and in enhancing its reputation as an enterprise software vendor.
Removed
Acquisitions, investments or other strategic collaborations or partnerships may involve significant commitments of financial and other resources of the Company.
Added
Publicly-traded companies have increasingly become subject to campaigns by investors seeking to advocate certain governance changes or corporate actions such as financial or operational restructuring, asset divestitures or even sales of the entire company.
Removed
The Company’s inability to address these risks could adversely affect the Company’s business, results of operations and financial condition. In the fourth quarter of fiscal 2022, the Company announced that it had entered into an agreement for the sale of substantially all of its non-core patent assets for total consideration of $600 million.
Added
Activist shareholders have publicly advocated for certain governance and strategic changes at the Company in the past, and the Company could be subject to additional shareholder activity or demands in the future.
Removed
The buyer is a special purpose vehicle formed to acquire the Company’s assets and completion of the transaction is subject to the satisfaction of financing and other closing conditions. Closing is targeted for the end of the first quarter of fiscal 2023 but there can be no assurance that the transaction will be successfully completed.
Added
Given the challenges the Company has encountered in its business in recent years, the Company’s current strategic direction or leadership may not satisfy such shareholders who may attempt to promote or effect changes.
Removed
The COVID-19 coronavirus pandemic has had and may continue to have a material adverse effect on the Company’s business, results of operations and financial condition. The COVID-19 coronavirus pandemic and related public health measures, including orders to shelter-in-place, travel restrictions and mandated business closures, has adversely affected workforces, organizations, consumers and economies leading to increased market volatility and economic disruption.
Added
Responding to proxy contests, media campaigns and other tactics by activist shareholders would be costly and time-consuming, disrupt the Company’s operations and divert the attention of the Board and senior management from the pursuit of the Company’s business strategies, which could adversely affect the Company’s results of operations, financial condition and prospects.
Removed
The COVID-19 pandemic has disrupted the normal operations of the Company and the businesses of many of the Company’s customers, suppliers and distribution partners. During fiscal 2022 and throughout most of fiscal 2021, the Company mandated remote working, utilizing virtual meetings and suspending employee travel, to protect the health and safety of its employees, contractors, customers and visitors.
Added
If individuals are elected to the Board with a specific agenda to increase short-term shareholder value, it may adversely affect or undermine the Company’s ability to implement its strategic initiatives.
Removed
The Company also shifted customer, industry and other stakeholder events to virtual-only experiences, and may similarly alter, postpone or cancel other events in the future.
Added
Perceived uncertainties as to the Company’s future direction as a result of shareholder activism could also result in the loss of potential business opportunities and may make it more difficult to attract and retain qualified personnel and business partners. The Company’s success depends on its continuing ability to attract new personnel, retain existing key personnel and manage its staffing effectively.
Removed
The long-term impacts on the Company of substantially remote operations are uncertain. 17 The economic downturn and uncertainty caused by the COVID-19 pandemic and the measures undertaken to contain its spread have negatively affected the Company’s QNX automotive software business and caused volatility in demand for the Company’s products and services, adversely affected the ability of the Company’s sales and professional services teams to work with customers, and increased sales cycle times.
Added
The Company’s ability to maintain and expand its market reach, particularly with small and medium-sized businesses, is increasingly dependent on establishing, developing and maintaining relationships with third party resellers and channel partners.
Removed
The uncertainty also resulted in the Company making significant judgments related to its estimates and assumptions concerning the impairment of goodwill, indefinite-lived intangible assets and certain operating lease right-of-use assets and associated property, plant and equipment.
Added
The invasion of Ukraine by Russia and resulting global sanctions against Russia have exacerbated the disruption of automotive supply chains and its impact on the Company’s business.
Removed
While the Company does not expect the COVID-19 pandemic and its related economic impact to materially adversely affect the Company’s liquidity position, the Company continues to evaluate the current and potential impact of the pandemic on its business, results of operations and consolidated financial statements, including potential asset impairment.
Added
Economic weakness or inflation resulting directly or indirectly from the COVID-19 pandemic and the invasion of Ukraine, as well as higher interest rates implemented in response to inflation and resulting fears of recession, may negatively impact consumer demand for automobiles and is contributing to reduced spending on and longer sales cycles for cybersecurity solutions, which in turn may continue to adversely affect the Company’s business, results of operations and financial condition on a consolidated basis.

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Item 2. Properties

Properties — owned and leased real estate

2 edited+0 added−1 removed1 unchanged
Biggest changeThe Company’s other significant leased properties include the following: • Ottawa facility, located in Ontario, Canada, totaling approximately 147,000 square feet; • Irvine facility, located in California, United States, totaling approximately 133,000 square feet; • Mississauga facility, located in Ontario, Canada, totaling approximately 75,000 square feet; • San Ramon facility, located in California, United States, totaling approximately 50,000 square feet; and • Brampton facility, located in Ontario, Canada, totaling approximately 6,706 square feet.
Biggest changeThe Company’s other significant leased properties include the following: • Ottawa facility, located in Ontario, Canada, totaling approximately 147,000 square feet; • Mississauga facility, located in Ontario, Canada, totaling approximately 75,000 square feet; • San Ramon facility, located in California, United States, totaling approximately 50,000 square feet; • Brampton facility, located in Ontario, Canada, totaling approximately 6,706 square feet; and • Cambridge facility, located in Ontario, Canada, totaling approximately 5,107 square feet. 24 The following table sets forth the location and approximate square footage of the Company’s leased facilities as of February 28, 2023: (Square feet in thousands) Location North America 1,050 Europe, Middle East and Africa 60 Asia Pacific 27 Total 1,137
ITEM 2. PROPERTIES The Company’s headquarters are located in Waterloo, Ontario, Canada. The Company’s main campus in Waterloo consists of three leased buildings with approximately 479,000 square feet. The remaining lease term is approximately three years with the option to renew for an additional five years.
ITEM 2. PROPERTIES The Company’s headquarters are located in Waterloo, Ontario, Canada. The Company’s main campus in Waterloo consists of three leased buildings with approximately 479,000 square feet. The remaining lease term is approximately two years with the option to renew for an additional five years.
Removed
The following table sets forth the location and approximate square footage of the Company’s leased facilities as of February 28, 2022: (Square feet in thousands) Location North America 1,077 Europe, Middle East and Africa 140 Asia Pacific 26 Total 1,243

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

6 edited+0 added−0 removed23 unchanged
Biggest changeBase Period 2/28/2017 2/28/2018 2/28/2019 2/28/2020 2/26/2021 2/28/2022 BlackBerry Limited $ 100 $ 174.43 $ 125.00 $ 74.28 $ 144.40 $ 98.71 S&P TSX Capped Composite 100 100.28 103.89 105.61 117.28 137.19 S&P 500/Information Technology 100 134.44 140.29 175.24 259.42 305.54 This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language in such filing. 27 Ownership and Exchange Controls There is currently no law, governmental decree or regulation in Canada that restricts the export or import of capital, or which would affect the remittance of dividends, interest or other payments by us to non-resident holders of the Company’s common shares, other than withholding tax requirements.
Biggest changeBase Period 2/28/2018 2/28/2019 2/28/2020 2/28/2021 2/26/2022 2/28/2023 BlackBerry Limited $ 100.00 $ 71.66 $ 42.59 $ 82.78 $ 56.59 $ 31.96 S&P TSX Capped Composite 100.00 103.60 105.31 116.95 136.81 130.94 S&P 500/Information Technology 100.00 104.35 130.35 192.96 227.26 200.27 This performance graph shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 (the “Exchange Act”) or otherwise subject to the liabilities of that section nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933 or the Exchange Act, regardless of any general incorporation language in such filing. 26 Ownership and Exchange Controls There is currently no law, governmental decree or regulation in Canada that restricts the export or import of capital, or which would affect the remittance of dividends, interest or other payments by us to non-resident holders of the Company’s common shares, other than withholding tax requirements.
These acts will generally not apply except where a control of an existing Canadian business or company, which has Canadian assets or revenue, or enterprise value (as applicable) over a certain threshold, is acquired and will not apply to trading generally of securities listed on a stock exchange. Certain Canadian Federal Income Tax Considerations for U.S.
These acts will generally not apply except where control of an existing Canadian business or company, which has Canadian assets or revenue, or enterprise value (as applicable) over a certain threshold, is acquired and will not apply to trading generally of securities listed on a stock exchange. Certain Canadian Federal Income Tax Considerations for U.S.
Resident Holder at any time at which such common share is listed on a “designated stock exchange,” within the meaning of the Tax Act (which includes the TSX and NYSE) unless, at any particular time during the 60-month period that ends at that time, both of the 28 following conditions are met concurrently: (a) 25% or more of the issued shares of any class of the capital stock of the Company were owned by or belonged to one or any combination of (i) the U.S.
Resident Holder at any time at which such common share is listed on a “designated stock exchange,” within the meaning of the Tax Act (which includes the TSX and NYSE) unless, at any particular time during the 60-month period that ends at that time, both of the 27 following conditions are met concurrently: (a) 25% or more of the issued shares of any class of the capital stock of the Company were owned by or belonged to one or any combination of (i) the U.S.
Unregistered Sales of Equity Securities The Company had no unregistered sales of equity securities during fiscal 2022 that were not previously reported. Share Repurchases The Company did not repurchase any shares during fiscal 2022.
Unregistered Sales of Equity Securities The Company had no unregistered sales of equity securities during fiscal 2023 that were not previously reported. Share Repurchases The Company did not repurchase any shares during fiscal 2023.
Stock Performance Graph The following graph shows the cumulative total shareholder return of $100 invested in the common shares compared to the S&P/TSX Composite Index, and the peer group index (S&P 500 Information Technology index) for the period of February 28, 2017 to February 28, 2022.
Stock Performance Graph The following graph shows the cumulative total shareholder return of $100 invested in the common shares compared to the S&P/TSX Composite index, and the peer group index (S&P 500 Information Technology index) for the period of February 28, 2018 to February 28, 2023.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s common shares are listed and posted for trading on the NYSE and the TSX under the symbol “BB”. On February 28, 2022, there were 901 registered holders of record of our common shares.
ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES The Company’s common shares are listed and posted for trading on the NYSE and the TSX under the symbol “BB”. On February 28, 2023, there were 1,019 registered holders of record of our common shares.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

174 edited+50 added−82 removed37 unchanged
Biggest changeFor the Three Months Ended (in millions) Cybersecurity IoT Licensing and Other Segment Totals February 28, Change February 28, Change February 28, Change February 28, Change 2022 2021 2022 2021 2022 2021 2022 2021 Segment revenue $ 122 $ 122 $ — $ 52 $ 38 $ 14 $ 11 $ 50 $ (39) $ 185 $ 210 $ (25) Segment cost of sales 47 46 1 8 5 3 5 6 (1) 60 57 3 Segment gross margin $ 75 $ 76 $ (1) $ 44 $ 33 $ 11 $ 6 $ 44 $ (38) $ 125 $ 153 $ (28) Segment gross margin % 61 % 62 % (1 %) 85 % 87 % (2 %) 55 % 88 % (33 %) 68 % 73 % (5 %) 51 Cybersecurity Cybersecurity gross margin decreased by $1 million to approximately $75 million in the fourth quarter of fiscal 2022 from $76 million in the fourth quarter of fiscal 2021.
Biggest changeFor the Three Months Ended (in millions) Cybersecurity IoT Licensing and Other Segment Totals February 28, Change February 28, Change February 28, Change February 28, Change 2023 2022 2023 2022 2023 2022 2023 2022 Segment revenue $ 88 $ 122 $ (34) $ 53 $ 52 $ 1 $ 10 $ 11 $ (1) $ 151 $ 185 $ (34) Segment cost of sales 36 47 (11) 10 8 2 4 5 (1) 50 60 (10) Segment gross margin $ 52 $ 75 $ (23) $ 43 $ 44 $ (1) $ 6 $ 6 $ — $ 101 $ 125 $ (24) Segment gross margin % 59 % 61 % (2 %) 81 % 85 % (4 %) 60 % 55 % 5 % 67 % 68 % (1 %) Cybersecurity The decrease in Cybersecurity gross margin of $23 million was primarily due to the reasons discussed above in “Revenue by Segment”, as the cost of sales for most Cybersecurity products does not significantly fluctuate based on business volume, and an increase in infrastructure costs allocated due to the Company no longer supporting or maintaining legacy device operating systems.
GAAP Revenue $ 122 $ 52 $ 11 $ 185 $ — $ 185 Cost of sales (1) 47 8 5 60 1 61 Gross margin $ 75 $ 44 $ 6 $ 125 $ (1) $ 124 Operating expenses (22) (22) Investment loss, net 1 1 Income before income taxes $ 145 For the Year Ended February 28, 2022 (in millions) Cybersecurity IoT Licensing and Other Segment Totals Reconciling Items Consolidated U.S.
GAAP Revenue $ 122 $ 52 $ 11 $ 185 $ — $ 185 Cost of sales 47 8 5 60 1 61 Gross margin (1) $ 75 $ 44 $ 6 $ 125 $ (1) $ 124 Operating expenses (22) (22) Investment loss, net 1 1 Income before income taxes $ 145 For the Year Ended February 28, 2022 (in millions) Cybersecurity IoT Licensing and Other Segment Totals Reconciling Items Consolidated U.S.
GAAP Revenue $ 477 $ 178 $ 63 $ 718 $ — $ 718 Cost of sales (1) 194 30 23 247 4 251 Gross margin $ 283 $ 148 $ 40 $ 471 $ (4) $ 467 Operating expenses 469 469 Investment income, net (21) (21) Income before income taxes $ 19 ______________________________ (1) See “Non-GAAP Financial Measures” for a reconciliation of selected U.S.
GAAP Revenue $ 477 $ 178 $ 63 $ 718 $ — $ 718 Cost of sales 194 30 23 247 4 251 Gross margin (1) $ 283 $ 148 $ 40 $ 471 $ (4) $ 467 Operating expenses 469 469 Investment income, net (21) (21) Income before income taxes $ 19 ______________________________ (1) See “Non-GAAP Financial Measures” for a reconciliation of selected U.S.
GAAP Accounting Standards Codification Section 280 based on the “management” approach. The management approach designates the internal reporting used by the CODM for making decisions and assessing performance of the Company’s reportable operating segments. See 33 “Business Overview - Segment Reporting” for a description of the Company’s operating segments, as well as Note 12 to the Consolidated Financial Statements.
GAAP Accounting Standards Codification Section 280 based on the “management” approach. The management approach designates the internal reporting used by the CODM for making decisions and assessing performance of the Company’s reportable operating segments. See “Business Overview - Segment Reporting” for a description of the Company’s operating segments, as well as Note 12 to the Consolidated Financial Statements.
Except as noted, there have not been any changes to the critical accounting estimates made by the Company, during the past three fiscal years. Valuation of Long-Lived Assets The LLA impairment test prescribed by U.S. GAAP requires the Company to identify its asset groups and test impairment of each asset group separately.
Except as noted, there have not been any changes to the critical accounting estimates made by the Company, during the past three fiscal years. 55 Valuation of Long-Lived Assets The LLA impairment test prescribed by U.S. GAAP requires the Company to identify its asset groups and test impairment of each asset group separately.
The decrease was primarily due to a decrease in revenue from Licensing and Other and BlackBerry Spark, partially offset by an increase in revenue from BlackBerry QNX and Secusmart due to the reasons discussed above in “Revenue by Segment”, as the Company’s cost of sales does not significantly fluctuate based on business volume.
The decrease was primarily due to a decrease in revenue from BlackBerry Spark and Licensing and Other, partially offset by an increase in revenue from BlackBerry QNX and Secusmart due to the reasons discussed above in “Revenue by Segment”, as much of the Company’s cost of sales does not significantly fluctuate based on business volume.
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 36 performance.
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. Reconciliation of non-GAAP based measures with most directly comparable U.S.
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. 34 Reconciliation of non-GAAP based measures with most directly comparable U.S.
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 58 relating to future results, and the Company’s strategic initiatives and the market’s assessment of any such factors.
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 of any such factors.
See Note 6 to the Consolidated Financial Statements for further details on the Debentures. 35 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.
See Note 6 to the Consolidated Financial Statements for further details on the Debentures. 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.
The Company believes that free cash flow 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.
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.
The Company considers billings to be a useful metric because billings drive deferred revenue, which is an important indicator of the health and visibility of the business and represents a significant percentage of future revenue.
The Company considers TCV billings to be a useful metric because billings drive deferred revenue, which is an important indicator of the health and visibility of the business, and represents a significant percentage of future revenue.
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) (“OBCA”) on March 7, 1984.
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.
(2) Adjusted EBITDA margin % is calculated by dividing adjusted EBITDA by revenue. The Company uses free cash flow when assessing its sources of liquidity, capital resources, and quality of earnings.
(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’s net effective income tax rate reflects the change in unrecognized income tax benefits, if any, and the fact that the Company has a significant valuation allowance against its deferred tax assets, and in particular, the change in fair value of the Debentures, amongst other items, was offset by a corresponding adjustment of the valuation allowance.
The Company’s net effective income tax rate reflects the change in unrecognized income tax benefits, if any, and the fact that the Company has a significant valuation allowance against its deferred tax assets, and in particular, the change in fair value of the 1.75% Debentures, amongst other items, was offset by a corresponding adjustment of the valuation allowance.
Actual results could differ from these estimates, which were based upon circumstances that existed as of the date of the consolidated financial statements, February 28, 2022. The Company’s critical accounting estimates have been reviewed and discussed with the Company’s Audit & Risk Management Committee and are set out below.
Actual results could differ from these estimates, which were based upon circumstances that existed as of the date of the consolidated financial statements, February 28, 2023. The Company’s critical accounting estimates have been reviewed and discussed with the Company’s Audit & Risk Management Committee and are set out below.
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, the ongoing COVID-19 pandemic, the Russia Ukraine conflict, competition, and the Company’s expectations regarding its financial performance.
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, the ongoing COVID-19 pandemic, competition, and the Company’s expectations regarding its financial performance.
GAAP basis for fiscal 2021 does not include the dilutive effect of the Debentures (as defined below) as to do so would be anti-dilutive. Diluted loss per share on a U.S. GAAP basis for fiscal 2022, fiscal 2021 and fiscal 2020 does not include the dilutive effect of stock-based compensation as to do so would be anti-dilutive.
GAAP basis for fiscal 2021 does not include the dilutive effect of the Debentures (as defined below) as to do so would be anti-dilutive. Diluted loss per share on a U.S. GAAP basis for fiscal 2023, fiscal 2022 and fiscal 2021 does not include the dilutive effect of stock-based compensation as to do so would be anti-dilutive.
Please refer to our MD&A included in our Annual Report on 10-K for the fiscal year ended February 28, 2021 for a comparative discussion of our fiscal 2021 financial results as compared to our fiscal 2020, which is incorporated herein by reference.
Please refer to our MD&A included in our Annual Report on 10-K for the fiscal year ended February 28, 2022 for a comparative discussion of our fiscal 2022 financial results as compared to our fiscal 2021 financial results, which is incorporated herein by reference.
GAAP based measures for the three months ended February 28, 2022, February 28, 2021 and February 29, 2020 Readers are cautioned that adjusted gross margin, adjusted gross margin percentage, adjusted operating expense, adjusted net income (loss), adjusted income (loss) per share, adjusted research and development expense, adjusted selling, marketing and administrative expense, adjusted amortization expense, adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage, adjusted EBITDA margin percentage and free cash flow (usage) and similar measures do not have any standardized meaning prescribed by U.S.
GAAP based measures for the three months ended February 28, 2023, February 28, 2022 and February 28, 2021 Readers are cautioned that adjusted gross margin, adjusted gross margin percentage, adjusted operating expense, adjusted net income (loss), adjusted income (loss) per share, adjusted research and development expense, adjusted selling, marketing and administrative expense, adjusted amortization expense, adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage, adjusted EBITDA margin percentage and free cash flow (usage) and similar measures do not have any standardized meaning prescribed by U.S.
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 “Products and Services - IoT”, “Products and Services - Licensing and Other”, “Intellectual Property”, and “Human Capital”, and in the sections of this MD&A entitled “Business Overview - COVID-19”, “Business Overview - Russia Ukraine Conflict”, “Non-GAAP Financial Measures - Key Metrics - Billings”, “Results of 29 Operations - Fiscal year ended February 28, 2022 compared to fiscal year ended February 28, 2021 - Revenue - Revenue by Segment”, “Results of Operations - Three months ended February 28, 2022 compared to the three months ended February 28, 2021 - Revenue - Revenue by Segment” and “Financial Condition - Contractual and Other Obligations”.
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 “Products and Services - IoT”, “Products and Services - Licensing and Other”, “Intellectual Property” and “Human Capital”, and in the sections of this MD&A entitled “Business Overview - COVID-19”, “Business Overview - Russia Ukraine Conflict”, “Non-GAAP Financial Measures - Key Metrics - Annual Recurring Revenue”, “Non-GAAP Financial Measures - Key Metrics - TCV Billings”, “Results of Operations - Fiscal year ended February 28, 2023 28 compared to fiscal year ended February 28, 2022 - Revenue - Revenue by Segment”, “Results of Operations - Three months ended February 28, 2023 compared to the three months ended February 28, 2022 - Revenue - Revenue by Segment” and “Financial Condition - Contractual and Other Obligations”.
See Note 8 to the Consolidated Financial Statements for the fiscal year ended February 28, 2022 for calculation of the diluted weighted average number of shares outstanding. The following tables show information by operating segment for the three months and year ended February 28, 2022 and February 28, 2021. The Company reports segment information in accordance with U.S.
See Note 8 to the Consolidated Financial Statements for the fiscal year ended February 28, 2023 for calculation of the diluted weighted average number of shares outstanding. 31 The following tables show information by operating segment for the three months and year ended February 28, 2023 and February 28, 2022. The Company reports segment information in accordance with U.S.
Operating Expenses The table below presents a comparison of research and development, selling, marketing and administration, and amortization expenses for the quarter ended February 28, 2022, compared to the quarter ended November 30, 2021 and the quarter ended February 28, 2021.
Operating Expenses The table below presents a comparison of research and development, selling, marketing and administration, and amortization expenses for the quarter ended February 28, 2023, compared to the quarter ended November 30, 2022 and the quarter ended February 28, 2022.
In the test, the carrying value of the reporting unit, including goodwill, was compared with its fair value. The estimated fair value was determined utilizing multiple approaches based on the nature of the reporting units being valued.
In the annual impairment test, the carrying value of the reporting unit, including goodwill, was compared with its fair value. The estimated fair value was determined utilizing multiple approaches based on the nature of the reporting units being valued.
Debentures Fair Value Adjustment As previously disclosed, the Company elected the fair value option to account for its outstanding 1.75% unsecured convertible debentures (the “1.75% Debentures”) and its previously outstanding 3.75% outstanding convertible debentures (the “3.75% Debentures” and collectively, the “Debentures”); therefore, periodic revaluation has been and continues to be required under U.S. GAAP.
Debentures Fair Value Adjustment As previously disclosed, the Company elected the fair value option to account for its outstanding 1.75% unsecured convertible debentures (the “1.75% Debentures”) and its previously outstanding 3.75% outstanding convertible debentures (the “3.75% Debentures” and together with the 1.75% Debentures, the “Debentures”); therefore, periodic revaluation has been and continues to be required under U.S. GAAP.
The weighted average number of shares outstanding was 576 million common shares for basic earnings per share and 637 million common shares for diluted loss per share for the fourth quarter of fiscal 2022. The weighted average number of shares outstanding was 566 million common shares for basic and diluted loss per share for the fourth quarter of fiscal 2021.
The weighted average number of shares outstanding was 576 million common shares for basic earnings per share and 637 million common shares for diluted loss per share for the fourth quarter of fiscal 2022.
Significant areas requiring the use of management estimates relate to revenue-related estimates including variable consideration, standalone selling price (“SSP”), estimated customer life, if control of licenses to intellectual property has transferred, the value of non-cash consideration, right of return and customer incentive commitments, fair value of reporting units in relation to actual or potential goodwill impairment, fair value of the Debentures, fair value of share-based liability award, fair value of long-lived assets in relation to actual or potential impairment, the Company’s long-lived asset groupings, useful lives of property, plant and equipment and intangible assets, provision for income taxes, realization of deferred income tax assets and the related components of the valuation allowance, allowance for credit losses, incremental borrowing rate in determining the present value of lease liabilities and the determination of reserves for various litigation claims.
Significant areas requiring the use of management estimates relate to revenue-related estimates including variable consideration, standalone selling price (“SSP”), estimated customer life, if control of licenses to intellectual property has transferred, right of return and customer incentive commitments, fair value of reporting units in relation to actual or potential goodwill impairment, fair value of the Debentures, fair value of share-based liability awards, fair value of long-lived assets in relation to actual or potential impairment, the Company’s long-lived asset groupings, estimated useful lives of property, plant and equipment and intangible assets, provision (or recovery) of income taxes, realization of deferred income tax assets and the related components of the valuation allowance, allowance for credit losses, incremental borrowing rates in determining the present value of lease liabilities and the determination of reserves for various litigation claims.
Business Overview The Company provides intelligent security software and services to enterprises and governments around the world. The Company secures more than 500 million endpoints including more than 195 million vehicles.
Business Overview The Company provides intelligent security software and services to enterprises and governments around the world. The Company secures more than 500 million endpoints including more than 215 million vehicles.
GAAP results: For the Three Months Ended February 28, 2022 (in millions) Cybersecurity IoT Licensing and Other Segment Totals Reconciling Items Consolidated U.S.
GAAP results: For the Three Months Ended February 28, 2023 (in millions) Cybersecurity IoT Licensing and Other Segment Totals Reconciling Items Consolidated U.S.
On March 31, 2022, the Company announced financial results for the three months and fiscal year ended February 28, 2022, which included certain non-GAAP financial measures and non-GAAP ratios, including adjusted gross margin, adjusted gross margin percentage, adjusted operating expense, adjusted net income (loss), adjusted income (loss) per share, adjusted research and development expense, adjusted selling, marketing and administrative expense, adjusted amortization expense, adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage, adjusted EBITDA margin percentage and free cash flow (usage).
On March 30, 2023, the Company announced financial results for the three months and fiscal year ended February 28, 2023, which included certain non-GAAP financial measures and non-GAAP ratios, including adjusted gross margin, adjusted gross margin percentage, adjusted operating expense, adjusted net income (loss), adjusted income (loss) per share, adjusted research and development expense, adjusted selling, marketing and administrative expense, adjusted amortization expense, adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage, adjusted EBITDA margin percentage and free cash flow (usage).
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 audited consolidated financial statements and the accompanying notes (the “Consolidated Financial Statements”) of BlackBerry Limited, for the fiscal year ended February 28, 2022.
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, 2023.
Gross Margin by Segment See “Business Overview - Segment Reporting” and “Fiscal 2022 Summary Results of Operations” for information about the Company’s operating segments and the basis of operating segment results.
Gross Margin by Segment See “Business Overview - Segment Reporting” and “Fiscal 2023 Summary Results of Operations” for information about the Company’s operating segments and the basis of operating segment results.
Gross Margin by Segment See “Business Overview” and “Fiscal 2022 Summary Results of Operations” for information about the Company’s operating segments and the basis of operating segment results.
Gross Margin by Segment See “Business Overview” and “Fiscal 2023 Summary Results of Operations” for information about the Company’s operating segments and the basis of operating segment results.
Comparative breakdowns of certain key metrics for the three months ended February 28, 2022 and February 28, 2021 are set forth below.
Comparative breakdowns of certain key metrics for the three months ended February 28, 2023 and February 28, 2022 are set forth below.
Investing Activities During the fiscal year ended February 28, 2022, cash flows provided by investing activities were $207 million and included cash provided by transactions involving the acquisitions of restricted short-term, short-term and long-term investments, net of the proceeds on sale or maturity in the amount of $211 million and a distribution from a non-marketable equity investment without readily determinable fair value in the amount of $35 million, partially offset by intangible asset additions of $31 million, and acquisitions of property, plant and equipment of $8 million.
During fiscal 2022, cash flows provided by investing activities were $207 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 $211 million and a distribution from a non-marketable equity investment without readily determinable fair value in the amount of $35 million, partially offset by intangible asset additions of $31 million, and acquisitions of property, plant and equipment of $8 million.
The majority of the Company’s cash, cash equivalents, and investments are denominated in U.S. dollars as at February 28, 2022.
The majority of the Company’s cash, cash equivalents, and investments are denominated in U.S. dollars as at February 28, 2023.
For the three months ended February 28, 2022, the Company recorded non-cash income relating to changes in fair value from instrument specific credit risk of $1 million in other comprehensive income (loss) (“OCI”) and non-cash income relating to changes in fair value from non-credit components of $165 million (pre-tax and after tax) (the “Q4 Fiscal 2022 Debentures Fair Value Adjustment”) in the Company’s consolidated statements of operations.
For the three months ended February 28, 2023, the Company recorded a non-cash loss relating to changes in fair value from instrument specific credit risk of $1 million in other comprehensive income (loss) (“OCI”) and non-cash income relating to changes in fair value from non-credit components of $26 million (pre-tax and after tax) (the “Q4 Fiscal 2023 Debentures Fair Value Adjustment”) in the Company’s consolidated statements of operations.
Adjusted research and development expenses were $45 million in the fourth quarter of fiscal 2022, consistent with $45 million in the fourth quarter of fiscal 2021.
Adjusted research and development expenses were $45 million in the fourth quarter of fiscal 2023, consistent with $45 million in the fourth quarter of fiscal 2022.
GAAP-based measures to adjusted measures for the three months and year ended February 28, 2022. 34 The following tables reconcile the Company’s segment results for the three months and year ended February 28, 2021 to consolidated U.S. GAAP results: For the Three Months Ended February 28, 2021 (in millions) Cybersecurity IoT Licensing and Other Segment Totals Reconciling Items Consolidated U.S.
GAAP-based measures to adjusted measures for the three months and year ended February 28, 2023. 32 The following tables reconcile the Company’s segment results for the three months and year ended February 28, 2022 to consolidated U.S. GAAP results: For the Three Months Ended February 28, 2022 (in millions) Cybersecurity IoT Licensing and Other Segment Totals Reconciling Items Consolidated U.S.
GAAP-based measures to adjusted measures for the three months and year ended February 28, 2021. Financial Highlights The Company had approximately $770 million in cash, cash equivalents and investments as of February 28, 2022 (Fiscal 2021 - $804 million).
GAAP-based measures to adjusted measures for the three months and year ended February 28, 2022. Financial Highlights The Company had approximately $487 million in cash, cash equivalents and investments as of February 28, 2023 (Fiscal 2022 - $770 million).
The fair value adjustment does not impact the terms of the Debentures such as the face value, the redemption features or the conversion price. As of February 28, 2022, the fair value of the 1.75% Debentures was approximately $507 million versus the principal value of $365 million.
The fair value adjustment does not impact the terms of the Debentures such as the face value, the redemption features or the conversion price. As of February 28, 2023, the fair value of the 1.75% Debentures was approximately $367 million versus the principal value of $365 million.
GAAP measures for the years ended February 28, 2022, February 28, 2021 and February 29, 2020 A reconciliation of the most directly comparable U.S.
GAAP measures for the years ended February 28, 2023, February 28, 2022 and February 28, 2021 A reconciliation of the most directly comparable U.S.
GAAP-based measures to adjusted measures for the three months ended February 28, 2022, November 30, 2021, February 28, 2021 and February 29, 2020. U.S.
GAAP-based measures to adjusted measures for the three months ended February 28, 2023, November 30, 2022, February 28, 2022 and February 28, 2021. U.S.
The remaining balance consists of purchase orders for goods and services utilized in the operations of the Company. Total aggregate contractual obligations as at February 28, 2022 decreased by approximately $73 million as compared to the February 28, 2021 balance of approximately $676 million, which was attributable to decreases in operating lease obligations and purchase obligations and commitments.
The remaining balance consists of purchase orders for goods and services utilized in the operations of the Company. Total aggregate contractual obligations as at February 28, 2023 decreased by approximately $47 million as compared to the February 28, 2022 balance of approximately $603 million, which was attributable to decreases in purchase obligations and commitments and in operating lease obligations.
(2) Adjusted EBITDA margin % is calculated by dividing adjusted EBITDA by revenue. 40 Adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage and adjusted EBITDA margin percentage for the fiscal years ended February 28, 2022, February 28, 2021 and February 29, 2020 are reflected in the table below.
(2) Adjusted EBITDA margin % is calculated by dividing adjusted EBITDA by revenue. 38 Adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage and adjusted EBITDA margin percentage for the fiscal years ended February 28, 2023, February 28, 2022 and February 28, 2021 are reflected in the table below.
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 fourth quarter of fiscal 2022 was $144 million, or $0.25 basic earnings per share and $0.03 diluted loss per share on a U.S.
The Company’s net effective income tax rate also reflects the geographic mix of earnings in jurisdictions with different income tax rates. Net Income (Loss) The Company’s net loss for the fourth quarter of fiscal 2023 was $495 million, or $0.85 basic and diluted loss per share on a U.S.
GAAP financial measures for the three months ended February 28, 2022, February 28, 2021 and February 29, 2020 to adjusted financial measures is reflected in the table below: For the Three Months Ended (in millions) February 28, 2022 February 28, 2021 February 29, 2020 Gross margin $ 124 $ 152 $ 212 Stock compensation expense 1 1 2 Adjusted gross margin $ 125 $ 153 $ 214 Gross margin % 67.0 % 72.4 % 75.2 % Stock compensation expense 0.6 % 0.5 % 0.7 % Adjusted gross margin % 67.6 % 72.9 % 75.9 % Reconciliation of U.S.
GAAP financial measures for the three months ended February 28, 2023, February 28, 2022 and February 28, 2021 to adjusted financial measures is reflected in the table below: For the Three Months Ended (in millions) February 28, 2023 February 28, 2022 February 28, 2021 Gross margin $ 100 $ 124 $ 152 Stock compensation expense 1 1 1 Adjusted gross margin $ 101 $ 125 $ 153 Gross margin % 66.2 % 67.0 % 72.4 % Stock compensation expense 0.7 % 0.6 % 0.5 % Adjusted gross margin % 66.9 % 67.6 % 72.9 % Reconciliation of U.S.
GAAP basis in the fourth quarter of 2021 and 2020 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 2022, 2021 and 2020 do not include the dilutive effect of stock-based compensation as to do so would be anti-dilutive.
GAAP basis in the fourth quarter of 2023 and 2021 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.
In fiscal 2022, the Company recorded non-cash income relating to changes in fair value from instrument-specific credit risk of $1 million in OCI and non-cash income relating to changes in fair value from non-credit components of $212 million (pre-tax and after tax) (the “Fiscal 2022 Debentures Fair Value Adjustment”) in the Company’s consolidated statements of operations.
In fiscal 2023, the Company recorded non-cash income relating to changes in fair value from instrument-specific credit risk of $2 million in OCI and non-cash income relating to changes in fair value from non-credit components of $138 million (pre-tax and after tax) (the “Fiscal 33 2023 Debentures Fair Value Adjustment”) in the Company’s consolidated statements of operations.
GAAP net cash provided by operating activities for the three months ended February 28, 2022, February 28, 2021 and February 29, 2020 to free cash flow is reflected in the table below: For the Three Months Ended (in millions) February 28, 2022 February 28, 2021 February 29, 2020 Net cash provided by operating activities $ 10 $ 51 $ 35 Acquisition of property, plant and equipment (2) (3) $ (3) Free cash flow $ 8 $ 48 $ 32 Reconciliation of U.S.
GAAP net cash provided by (used in) operating activities for the three months ended February 28, 2023, February 28, 2022 and February 28, 2021 to free cash flow (usage) is reflected in the table below: For the Three Months Ended (in millions) February 28, 2023 February 28, 2022 February 28, 2021 Net cash provided by (used in) operating activities $ (7) $ 10 $ 51 Acquisition of property, plant and equipment (2) (2) $ (3) Free cash flow (usage) $ (9) $ 8 $ 48 Reconciliation of U.S.
Readers are cautioned that annual recurring revenue (“ARR”), dollar-based net retention rate (“DBNRR”), billings and recurring revenue percentage do not have any standardized meaning and are unlikely to be comparable to similarly titled measures reported by other companies.
Readers are cautioned that annual recurring revenue (“ARR”), dollar-based net retention rate (“DBNRR”), Cybersecurity total contract value (“TCV”) billings, recurring revenue percentage and QNX royalty backlog do not have any standardized meaning and are unlikely to be comparable to similarly titled measures reported by other companies.
The decrease was primarily due to a decrease in revenue from Licensing and Other and BlackBerry Spark, partially offset by an increase in revenue from BlackBerry QNX and Secusmart due to the reasons discussed above in “Revenue by Segment”, as the Company’s cost of sales does not significantly fluctuate based on business volume.
The decrease was primarily due to a decrease in revenue from BlackBerry Spark and Secusmart due to the reasons discussed above in “Revenue by Segment” as much of the Company’s cost of sales does not significantly fluctuate based on business volume.
Common Shares Outstanding On March 29, 2022, there were 576 million voting common shares, options to purchase 1 million voting common shares, 15 million restricted share units and 2 million deferred share units outstanding. In addition, 60.8 million common shares are issuable upon conversion in full of the 1.75% Debentures, as described in Note 6 to the Consolidated Financial Statements.
Common Shares Outstanding On March 28, 2023, there were 582 million voting common shares, options to purchase 0.5 million voting common shares, 20 million restricted share units and 2 million deferred share units outstanding. In addition, 60.8 million common shares are issuable upon conversion in full of the 1.75% Debentures, as described in Note 6 to the Consolidated Financial Statements.
The Company recognized adjusted net loss of $55 million, or adjusted loss of $0.10 per share, on a non-GAAP basis in fiscal 2022 (Fiscal 2021 - adjusted net income of $88 million and adjusted earnings of $0.16 per share). See “Non-GAAP Financial Measures” below.
The Company recognized adjusted net loss of $103 million, or adjusted loss of $0.18 per share, on a non-GAAP basis in fiscal 2023 (fiscal 2022 - adjusted net loss of $55 million and adjusted loss of $0.10 per share). See “Non-GAAP Financial Measures” below.
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 fiscal 2022 was $12 million, or $0.02 basic earnings per share and $0.31 diluted loss per share on a U.S.
The Company’s net effective income tax rate also reflects the geographic mix of earnings in jurisdictions with different income tax rates. Net Income (Loss) The Company’s net loss for fiscal 2023 was $734 million, or $1.27 basic loss per share and $1.35 diluted loss per share on a U.S.
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 in comparison to the Company’s past operating performance. • Goodwill 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. • Goodwill impairment charge.
In fiscal 2022, the Company recognized revenue of $718 million and net income of $12 million, or $0.02 basic earnings per share and $0.31 diluted loss per share on a U.S. GAAP basis (Fiscal 2021 - revenue of $893 million and net loss of $1,104 million, or $1.97 basic and diluted loss per share).
In fiscal 2023, the Company recognized revenue of $656 million and incurred a net loss of $734 million, or $1.27 basic loss per share and $1.35 diluted loss per share on a U.S. GAAP basis (fiscal 2022 - revenue of $718 million and net income of $12 million, or $0.02 basic earnings per share and $0.31 diluted loss per share).
GAAP basic earnings (loss) per share for the three months ended February 28, 2022, February 28, 2021 and February 29, 2020 to adjusted net income and adjusted basic earnings per share is reflected in the table below: For the Three Months Ended (in millions, except per share amounts) February 28, 2022 February 28, 2021 February 29, 2020 Basic earnings per share Basic earnings (loss) per share Basic earnings (loss) per share Net income (loss) $ 144 $0.25 $ (315) $(0.56) $ (41) $(0.07) Restructuring charges — — 1 Stock compensation expense 5 17 17 Debentures fair value adjustment (165) 258 5 Acquired intangibles amortization 22 32 35 Business acquisition and integration costs — — 1 Goodwill impairment charge — — 22 LLA impairment charge — 22 5 Adjusted net income $ 6 $0.01 $ 14 $0.02 $ 45 $0.08 Reconciliation of U.S.
GAAP basic earnings (loss) per share for the three months ended February 28, 2023, February 28, 2022 and February 28, 2021 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) February 28, 2023 February 28, 2022 February 28, 2021 Basic loss per share Basic earnings per share Basic earnings (loss) per share Net income (loss) $ (495) $(0.85) $ 144 $0.25 $ (315) $(0.56) Restructuring charges 7 — — Stock compensation expense 10 5 17 Debentures fair value adjustment (26) (165) 258 Acquired intangibles amortization 15 22 32 Goodwill impairment charge 245 — — LLA impairment charge 231 — 22 Adjusted net income (loss) $ (13) $(0.02) $ 6 $0.01 $ 14 $0.02 Reconciliation of U.S.
The decrease in amortization expense was due to the lower cost base of assets. Adjusted amortization expense decreased by $3 million to $10 million in the fourth quarter of fiscal 2022 compared to $13 million in the fourth quarter of fiscal 2021 due to the reasons described above on a U.S. GAAP basis.
Adjusted amortization expense decreased by $7 million to $3 million in the fourth quarter of fiscal 2023 compared to $10 million in the fourth quarter of fiscal 2022 due to the reasons described above on a U.S. GAAP basis.
GAAP operating expense (income) for the three months ended February 28, 2022, November 30, 2021, February 28, 2021 and February 29, 2020 to adjusted operating expense is reflected in the table below: For the Three Months Ended (in millions) February 28, 2022 November 30, 2021 February 28, 2021 February 29, 2020 Operating expense (income) $ (22) $ 66 $ 465 $ 253 Restructuring charges — — — 1 Stock compensation expense 4 5 16 15 Debentures fair value adjustment (1) (165) (110) 258 5 Acquired intangibles amortization 22 29 32 35 Business acquisition and integration costs — — — 1 Goodwill impairment charge — — — 22 LLA impairment charge — — 22 5 Adjusted operating expense $ 117 $ 142 $ 137 $ 169 ______________________________ (1) See “Fiscal 2022 Summary Results of Operations - Financial Highlights - Debentures Fair Value Adjustment”. 37 Reconciliation of U.S.
GAAP operating expense (income) for the three months ended February 28, 2023, November 30, 2022, February 28, 2022 and February 28, 2021 to adjusted operating expense is reflected in the table below: For the Three Months Ended (in millions) February 28, 2023 November 30, 2022 February 28, 2022 February 28, 2021 Operating expense (income) $ 599 $ 111 $ (22) $ 465 Restructuring charges 7 — — — Stock compensation expense 9 8 4 16 Debentures fair value adjustment (1) (26) (56) (165) 258 Acquired intangibles amortization 15 22 22 32 Goodwill impairment charge 245 — — — LLA impairment charge 231 — — 22 Adjusted operating expense $ 118 $ 137 $ 117 $ 137 ______________________________ (1) See “Fiscal 2023 Summary Results of Operations - Financial Highlights - Debentures Fair Value Adjustment”. 35 Reconciliation of U.S.
The Company believes that goodwill impairment charges do not reflect expected future operating expenses, are not indicative of the Company’s core operating performance, and may not be meaningful in comparison to the Company’s past operating performance. On a U.S. GAAP basis, the impacts of these items are reflected in the Company’s income statement.
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.
For the Three Months Ended (in millions) February 28, 2022 February 28, 2021 February 29, 2020 Operating income (loss) $ 146 $ (313) $ (41) Non-GAAP adjustments to operating income (loss) Restructuring charges — — 1 Stock compensation expense 5 17 17 Debentures fair value adjustment (165) 258 5 Acquired intangibles amortization 22 32 35 Business acquisition and integration costs — — 1 Goodwill impairment charge — — 22 LLA impairment charge — 22 5 Total non-GAAP adjustments to operating income (loss) (138) 329 86 Adjusted operating income 8 16 45 Amortization 34 49 52 Acquired intangibles amortization (22) (32) (35) Adjusted EBITDA $ 20 $ 33 $ 62 Revenue $ 185 $ 210 $ 282 Adjusted operating income margin % (1) 4% 8% 16% Adjusted EBITDA margin % (2) 11% 16% 22% ______________________________ (1) Adjusted operating income margin % is calculated by dividing adjusted operating income by revenue.
For the Three Months Ended (in millions) February 28, 2023 February 28, 2022 February 28, 2021 Operating income (loss) $ (499) $ 146 $ (313) Non-GAAP adjustments to operating income (loss) Restructuring charges 7 — — Stock compensation expense 10 5 17 Debentures fair value adjustment (26) (165) 258 Acquired intangibles amortization 15 22 32 Goodwill impairment charge 245 — — LLA impairment charge 231 — 22 Total non-GAAP adjustments to operating income (loss) 482 (138) 329 Adjusted operating income (loss) (17) 8 16 Amortization 20 34 49 Acquired intangibles amortization (15) (22) (32) Adjusted EBITDA $ (12) $ 20 $ 33 Revenue $ 151 $ 185 $ 210 Adjusted operating income (loss) margin % (1) (11%) 4% 8% Adjusted EBITDA margin % (2) (8%) 11% 16% ______________________________ (1) Adjusted operating income (loss) margin % is calculated by dividing adjusted operating income (loss) by revenue.
GAAP research and development, selling, marketing and administration, and amortization expense for the three months ended February 28, 2022, February 28, 2021 and February 29, 2020 to adjusted research and development, selling, marketing and administration, and amortization expense is reflected in the table below: For the Three Months Ended (in millions) February 28, 2022 February 28, 2021 February 29, 2020 Research and development $ 47 $ 48 $ 60 Stock compensation expense 2 3 3 Adjusted research and development $ 45 $ 45 $ 57 Selling, marketing and administration $ 64 $ 92 $ 113 Restructuring charges — — 1 Stock compensation expense 2 13 12 Business acquisition and integration costs — — 1 Adjusted selling, marketing and administration $ 62 $ 79 $ 99 Amortization $ 32 $ 45 $ 48 Acquired intangibles amortization 22 32 35 Adjusted amortization $ 10 $ 13 $ 13 38 Reconciliation of selected non-GAAP based measures with most directly comparable U.S.
GAAP research and development, selling, marketing and administration, and amortization expense for the three months ended February 28, 2023, February 28, 2022 and February 28, 2021 to adjusted research and development, selling, marketing and administration, and amortization expense is reflected in the table below: For the Three Months Ended (in millions) February 28, 2023 February 28, 2022 February 28, 2021 Research and development $ 48 $ 47 $ 48 Stock compensation expense 3 2 3 Adjusted research and development $ 45 $ 45 $ 45 Selling, marketing and administration $ 83 $ 64 $ 92 Restructuring charges 7 — — Stock compensation expense 6 2 13 Adjusted selling, marketing and administration $ 70 $ 62 $ 79 Amortization $ 18 $ 32 $ 45 Acquired intangibles amortization 15 22 32 Adjusted amortization $ 3 $ 10 $ 13 36 Reconciliation of selected non-GAAP based measures with most directly comparable U.S.
Fiscal 2022 Summary Results of Operations The following table sets forth certain consolidated statements of operations data, as well as certain consolidated balance sheet data, as at and for the fiscal years ended February 28, 2022, February 28, 2021, and February 29, 2020: As at and for the Fiscal Years Ended (in millions, except for share and per share amounts) February 28, 2022 February 28, 2021 Change February 29, 2020 Change Revenue $ 718 $ 893 $ (175) $ 1,040 $ (147) Gross margin 467 643 (176) 763 (120) Operating expenses 469 1,750 (1,281) 912 838 Investment income (loss), net 21 (6) 27 1 (7) Income (loss) before income taxes 19 (1,113) 1,132 (148) (965) Provision for (recovery of) income taxes 7 (9) 16 4 (13) Net income (loss) $ 12 $ (1,104) $ 1,116 $ (152) $ (952) Earnings (loss) per share - reported Basic $ 0.02 $ (1.97) $ (0.27) Diluted $ (0.31) $ (1.97) $ (0.32) Weighted-average number of shares outstanding (000’s) Basic 570,607 561,305 553,861 Diluted (1) 631,440 561,305 614,361 ______________________________ (1) Diluted loss per share on a U.S.
Fiscal 2023 Summary Results of Operations The following table sets forth certain consolidated statements of operations data, as well as certain consolidated balance sheet data, as at and for the fiscal years ended February 28, 2023, February 28, 2022, and February 28, 2021: As at and for the Fiscal Years Ended (in millions, except for share and per share amounts) February 28, 2023 February 28, 2022 Change February 28, 2021 Change Revenue $ 656 $ 718 $ (62) $ 893 $ (175) Gross margin 419 467 (48) 643 (176) Operating expenses 1,144 469 675 1,750 (1,281) Investment income (loss), net 5 21 (16) (6) 27 Income (loss) before income taxes (720) 19 (739) (1,113) 1,132 Provision for (recovery of) income taxes 14 7 7 (9) 16 Net income (loss) $ (734) $ 12 $ (746) $ (1,104) $ 1,116 Earnings (loss) per share - reported Basic $ (1.27) $ 0.02 $ (1.97) Diluted $ (1.35) $ (0.31) $ (1.97) Weighted-average number of shares outstanding (000’s) Basic 578,654 570,607 561,305 Diluted (1) 639,487 631,440 561,305 ______________________________ (1) Diluted loss per share on a U.S.
Total software and services revenue is comprised of recurring product revenue, non-recurring product revenue and professional services. The Company 42 uses recurring software product revenue percentage to provide visibility into the revenue expected to be recognized in the current and future periods.
The Company uses recurring software product revenue percentage to provide visibility into the revenue expected to be recognized in the current and future periods.
Deferred revenue, current was $207 million, which reflects a decrease of $18 million compared to February 28, 2021 that was attributable to a $29 million decrease in deferred revenue, current related to BlackBerry Spark partially offset by a $12 million increase in deferred revenue, current related to BlackBerry QNX.
Deferred revenue, current was $175 million, which reflects a decrease of $32 million compared to February 28, 2022 that was attributable to a $34 million decrease in deferred revenue, current related to BlackBerry Spark, partially offset by a $5 million increase in deferred revenue, current related to BlackBerry QNX.
For the Three Months Ended (in millions) February 28, 2022 February 28, 2021 Change Annual Recurring Revenue Cybersecurity $ 347 $ 369 $ (22) IoT $ 93 $ 84 $ 9 Dollar-Based Net Retention Rate Cybersecurity 91 % 95 % (4 %) Recurring Software Product Revenue ~ 80 % ~ 90 % ~ (10%) 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.
For the Three Months Ended (in millions) February 28, 2023 February 28, 2022 Change Cybersecurity Annual Recurring Revenue $ 298 $ 347 $ (49) Cybersecurity Dollar-Based Net Retention Rate 81 % 91 % (10 %) Cybersecurity Total Contract Value Billings $ 107 $ 125 $ (18) Recurring Software Product Revenue ~ 90% ~ 80 % 10 % 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.
Recurring Software Product Revenue The Company defines recurring software product revenue percentage as recurring software product revenue divided by total software and services revenue. Recurring software product revenue is comprised of subscription and term licenses, maintenance arrangements, royalty arrangements and perpetual licenses recognized ratably under ASC 606.
Recurring software product revenue is comprised of subscription and term licenses, maintenance arrangements, royalty arrangements and perpetual licenses recognized ratably under ASC 606. Total software and services revenue is comprised of recurring product revenue, non-recurring product revenue and professional services.
The decrease was primarily due to lower revenue recognized over the three months ended February 28, 2022 compared to the three months ended February 29, 2020 and a decrease in days sales outstanding to 67 days at the end of the fourth quarter of fiscal 2022 from 85 days at the end of the fourth quarter of fiscal 2021.
The decrease was primarily due to lower revenue recognized over the three months ended February 28, 2023 compared to the three months ended February 28, 2022, offset by an increase in days sales outstanding to 75 days at the end of the fourth quarter of fiscal 2023 from 67 days at the end of the fourth quarter of fiscal 2022.
GAAP net cash provided by (used in) operating activities for the years ended February 28, 2022, February 28, 2021 and February 29, 2020 to free cash flow (usage) is reflected in the table below: For the Fiscal Years Ended (in millions) February 28, 2022 February 28, 2021 February 29, 2020 Net cash provided by (used in) operating activities $ (28) $ 82 $ 26 Acquisition of property, plant and equipment (8) (8) (12) Free cash flow (usage) $ (36) $ 74 $ 14 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.
GAAP net cash provided by (used in) operating activities for the years ended February 28, 2023, February 28, 2022 and February 28, 2021 to free cash flow (usage) is reflected in the table below: For the Fiscal Years Ended (in millions) February 28, 2023 February 28, 2022 February 28, 2021 Net cash provided by (used in) operating activities $ (263) $ (28) $ 82 Acquisition of property, plant and equipment (7) (8) (8) Free cash flow (usage) $ (270) $ (36) $ 74 For the year ended February 28, 2023, free cash usage includes $165 million paid in relation to the Pearlstein settlement discussed above in “Business Overview - Pearlstein Settlement”. 39 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.
The increase was primarily attributable to an increase of $4 million in variable incentive plan costs and a decrease in benefits of $3 million in 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, partially offset by a decrease of $2 million in stock compensation expense.
The decrease was primarily attributable to a decrease of $8 million in salaries and benefits expenses and a decrease of $5 million in consulting costs, partially offset by a decrease in benefits of $2 million in claims filed with the Ministry of Innovation, Science and Economic Development Canada relating to its Strategic Innovation Fund program’s investment in BlackBerry QNX (“SIF”).
At February 28, 2022, accounts receivable, net of allowance was $138 million, a decrease of $44 million from February 28, 2021.
At February 28, 2023, accounts receivable, net of allowance was $120 million, a decrease of $18 million from February 28, 2022.
GAAP basic earnings (loss) per share for the years ended February 28, 2022, February 28, 2021 and February 29, 2020 to the 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, 2022 February 28, 2021 February 29, 2020 Basic earnings (loss) per share Basic earnings (loss) per share Basic earnings (loss) per share Net income (loss) $ 12 $ 0.02 $ (1,104) $ (1.97) $ (152) $ (0.27) Restructuring charges — 2 10 Stock compensation expense 30 52 63 Debentures fair value adjustment (212) 372 (66) Acquired intangibles amortization 115 129 141 Business acquisition and integration costs — — 4 Goodwill impairment charge — 594 22 LLA impairment charge — 43 10 Acquisition valuation allowance — — (1) Adjusted net income (loss) $ (55) $(0.10) $ 88 $0.16 $ 31 $0.06 39 Reconciliation of U.S GAAP research and development, selling, marketing and administration, and amortization expense for the years ended February 28, 2022, February 28, 2021 and February 29, 2020 to adjusted research and development, selling, marketing and administration, and amortization expense is reflected in the table below: For the Fiscal Years Ended (in millions) February 28, 2022 February 28, 2021 February 29, 2020 Research and development $ 219 $ 215 $ 259 Stock compensation expense 8 11 13 Adjusted research and development $ 211 $ 204 $ 246 Selling, marketing and administration $ 297 $ 344 $ 493 Restructuring charges — 2 5 Stock compensation expense 18 36 45 Business acquisition and integration costs — — 4 Adjusted selling, marketing and administration $ 279 $ 306 $ 439 Amortization $ 165 $ 182 $ 194 Acquired intangibles amortization 115 129 141 Adjusted amortization $ 50 $ 53 $ 53 Adjusted operating income, adjusted EBITDA, adjusted operating income margin percentage and adjusted EBITDA margin percentage for the three months ended February 28, 2022, February 28, 2021 and February 29, 2020 are reflected in the table below.
GAAP basic earnings (loss) per share for the years ended February 28, 2023, February 28, 2022 and February 28, 2021 to the 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, 2023 February 28, 2022 February 28, 2021 Basic loss per share Basic earnings (loss) per share Basic earnings (loss) per share Net income (loss) $ (734) $ (1.27) $ 12 $ 0.02 $ (1,104) $ (1.97) Restructuring charges 11 — 2 Stock compensation expense 31 30 52 Debentures fair value adjustment (138) (212) 372 Acquired intangibles amortization 82 115 129 Goodwill impairment charge 245 — 594 LLA impairment charge 235 — 43 Litigation settlement 165 — — Adjusted net income (loss) $ (103) $(0.18) $ (55) $(0.10) $ 88 $0.16 37 Reconciliation of U.S GAAP research and development, selling, marketing and administration, and amortization expense for the years ended February 28, 2023, February 28, 2022 and February 28, 2021 to adjusted research and development, selling, marketing and administration, and amortization expense is reflected in the table below: For the Fiscal Years Ended (in millions) February 28, 2023 February 28, 2022 February 28, 2021 Research and development $ 207 $ 219 $ 215 Stock compensation expense 9 8 11 Adjusted research and development $ 198 $ 211 $ 204 Selling, marketing and administration $ 340 $ 297 $ 344 Restructuring charges 11 — 2 Stock compensation expense 19 18 36 Adjusted selling, marketing and administration $ 310 $ 279 $ 306 Amortization $ 96 $ 165 $ 182 Acquired intangibles amortization 82 115 129 Adjusted amortization $ 14 $ 50 $ 53 Adjusted operating income (loss), adjusted EBITDA, adjusted operating income (loss) margin percentage and adjusted EBITDA margin percentage for the three months ended February 28, 2023, February 28, 2022 and February 28, 2021 are reflected in the table below.
Gross Margin Consolidated Gross Margin Consolidated gross margin decreased by $28 million to approximately $124 million in the fourth quarter of fiscal 2022 from $152 million in the fourth quarter of fiscal 2021.
Gross Margin Consolidated Gross Margin Consolidated gross margin decreased by $24 million to approximately $100 million in the fourth quarter of fiscal 2023 (fourth quarter of fiscal 2022 - $124 million).
GAAP financial measures for the years ended February 28, 2022, February 28, 2021 and February 29, 2020 to adjusted financial measures is reflected in the table below: For the Fiscal Years Ended (in millions) February 28, 2022 February 28, 2021 February 29, 2020 Gross margin $ 467 $ 643 $ 763 Restructuring charges — — 5 Stock compensation expense 4 5 5 Adjusted gross margin $ 471 $ 648 $ 773 Gross margin % 65.0 % 72.0 % 73.4 % Restructuring charges — % — % 0.5 % Stock compensation expense 0.6 % 0.6 % 0.4 % Adjusted gross margin % 65.6 % 72.6 % 74.3 % Operating expense $ 469 $ 1,750 $ 912 Restructuring charges — 2 5 Stock compensation expense 26 47 58 Debentures fair value adjustment (1) (212) 372 (66) Acquired intangibles amortization 115 129 141 Business acquisition and integration costs — — 4 Goodwill impairment charge — 594 22 LLA impairment charge — 43 10 Adjusted operating expense $ 540 $ 563 $ 738 ______________________________ (1) See “Fiscal 2022 Summary Results of Operations - Financial Highlights - Debentures Fair Value Adjustment”.
GAAP financial measures for the years ended February 28, 2023, February 28, 2022 and February 28, 2021 to adjusted financial measures is reflected in the table below: For the Fiscal Years Ended (in millions) February 28, 2023 February 28, 2022 February 28, 2021 Gross margin $ 419 $ 467 $ 643 Stock compensation expense 3 4 5 Adjusted gross margin $ 422 $ 471 $ 648 Gross margin % 63.9 % 65.0 % 72.0 % Stock compensation expense 0.4 % 0.6 % 0.6 % Adjusted gross margin % 64.3 % 65.6 % 72.6 % Operating expense $ 1,144 $ 469 $ 1,750 Restructuring charges 11 — 2 Stock compensation expense 28 26 47 Debentures fair value adjustment (1) (138) (212) 372 Acquired intangibles amortization 82 115 129 Goodwill impairment charge 245 — 594 LLA impairment charge 235 — 43 Litigation settlement 165 — — Adjusted operating expense $ 516 $ 540 $ 563 ______________________________ (1) See “Fiscal 2023 Summary Results of Operations - Financial Highlights - Debentures Fair Value Adjustment”.
Total Software and Services product revenue, excluding professional services, was approximately 80% recurring in the fourth quarter of fiscal 2022 consistent with approximately 80% recurring in the third quarter of fiscal 2022 and decreased from approximately 90% recurring in the fourth quarter of fiscal 2021 due to product mix.
Total Software and Services product revenue, excluding professional services, was approximately 90% recurring in the fourth quarter of fiscal 2023 and increased compared to approximately 80% recurring in the third quarter of fiscal 2023 and fourth quarter of fiscal 2022.
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. 46 Research and development expenses increased by $4 million, or 1.9%, to $219 million, or 30.5% of revenue, in fiscal 2022, compared to $215 million, or 24.1% of revenue, in fiscal 2021.
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 $12 million, or 5.5% in fiscal 2023 compared to fiscal 2022.
Current Liabilities The decrease in current liabilities of $32 million at the end of fiscal 2022 from the end of fiscal 2021 was primarily due to a decrease in accrued liabilities of $21 million, a decrease in deferred revenue, current of $18 million, partially offset by an increase in income taxes payable of $5 million and an increase in accounts payable of $2 million.
Current Liabilities The increase in current liabilities of $332 million at the end of fiscal 2023 from the end of fiscal 2022 was primarily due to an increase in the amounts payable in respect of the 1.75% Debentures of $367 million, an increase in income taxes payable of $9 53 million and an increase in accounts payable of $2 million, partially offset by a decrease in deferred revenue, current of $32 million and a decrease in accrued liabilities of $14 million.
The Company does not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or under applicable Canadian securities laws.
The Company does not have any off-balance sheet arrangements as defined in Item 303(a)(4)(ii) of Regulation S-K under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or under applicable Canadian securities laws. 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.
Adjusted Operating Expenses Adjusted operating expenses decreased by $23 million, or 4.1%, to $540 million in fiscal 2022, compared to $563 million in fiscal 2021.
Adjusted Operating Expenses Adjusted operating expenses decreased by $24 million, or 4.4%, to $516 million in fiscal 2023, compared to $540 million in fiscal 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+0 added−1 removed7 unchanged
Biggest changeThere was no customer that comprised more than 10% of accounts receivable as at February 28, 2022 (February 28, 2021 - one customer that comprised more than 10%). During fiscal 2022, the percentage of the Company’s receivable balance that was past due decreased by 4.5% compared to the fourth quarter of fiscal 2021.
Biggest changeThere were two customers that comprised more than 10% of accounts receivable as at February 28, 2023 (February 28, 2022 - no customer that comprised more than 10%). As at February 28, 2023, the percentage of the Company’s receivable balance that was past due decreased by 7.9% compared to February 28, 2022.
The Company has also issued Debentures with a fixed interest rate as described in Note 6 to the Consolidated Financial Statements. The fair value of the 1.75% Debentures will fluctuate with changes in prevailing interest rates. Consequently, the Company is exposed to interest rate risk as a result of the 1.75% Debentures.
The Company has also issued 1.75% Debentures with a fixed interest rate as described in Note 6 to the Consolidated Financial Statements. The fair value of the 1.75% Debentures will fluctuate with changes in prevailing interest rates. Consequently, the Company is exposed to interest rate risk as a result of the 1.75% Debentures.
The Company makes this assessment by considering available evidence including changes in general market conditions, specific industry and individual company data, the length of time and the extent to which the fair value has been less than cost, the financial condition, the near-term prospects of the individual investment and the Company’s ability and intent to hold the debt securities to maturity.
The Company makes this assessment by considering available evidence including changes in general market conditions, specific industry and individual company data, the length of time and the extent to which the fair value has been less than cost, the financial condition, the near-term prospects of the individual investment and the Company’s ability and intent to hold the debt securities to maturity. 58
Further, the recognition of the gains and losses related to these instruments may not coincide with the timing of gains and losses related to the underlying economic exposures and, therefore, may adversely affect the Company’s financial condition and operating results. 60 Interest Rate Cash and cash equivalents and investments are invested in certain instruments of varying maturities.
Further, the recognition of the gains and losses related to these instruments may not coincide with the timing of gains and losses related to the underlying economic exposures and, therefore, may adversely affect the Company’s financial condition and operating results. Interest Rate Cash and cash equivalents and investments are invested in certain instruments of varying maturities.
If overall foreign currency exchanges rates to the U.S. dollar uniformly weakened or strengthened by 10% related to the Company’s net monetary asset or liability balances in foreign currencies at February 28, 2022 or February 28, 2021 (after hedging activities), the impact to the Company would be immaterial.
If overall foreign currency exchanges rates to the U.S. dollar uniformly weakened or strengthened by 10% related to the Company’s net monetary asset or liability balances in foreign currencies at February 28, 2023 or February 28, 2022 (after hedging activities), the impact to the Company would be immaterial.
The majority of the Company’s revenue in fiscal 2022 was transacted in U.S. dollars. Portions of the revenue were denominated in Canadian dollars, euros and British pounds. Expenses, consisting mainly of salaries and certain other operating costs, were incurred primarily in Canadian dollars, but were also incurred in U.S. dollars, euros and British pounds.
The majority of the Company’s revenue in fiscal 2023 was transacted in U.S. dollars. Portions of the revenue were denominated in Canadian dollars, euros and British pounds. Expenses, consisting mainly of salaries and certain other operating costs, were incurred primarily in Canadian dollars, but were also incurred in U.S. dollars, euros and British pounds.
There was one customer that comprised 11% of the Company’s revenue in fiscal 2022 (fiscal 2021 - one customer that comprised 22%). Market values are determined for each individual security in the investment portfolio. The Company assesses declines in the value of individual investments for impairment.
There was one customer that comprised 12% of the Company’s revenue in fiscal 2023 (fiscal 2022 - one customer that comprised 11%). Market values are determined for each individual security in the investment portfolio. The Company assesses declines in the value of individual investments for impairment.
The Company establishes an allowance for credit losses (“ACL”) that corresponds to the specific credit risk of its customers, historical trends and economic circumstances. The ACL as at February 28, 2022 was $4 million (February 28, 2021 - $10 million).
The Company establishes an allowance for credit losses (“ACL”) that corresponds to the specific credit risk of its customers, historical trends and economic circumstances. The ACL as at February 28, 2023 was $1 million (February 57 28, 2022 - $4 million).
At February 28, 2022, approximately 37% of cash and cash equivalents, 23% of accounts receivables and 30% of accounts payable were denominated in foreign currencies (February 28, 2021 – 20%, 25% and 34%, respectively). These foreign currencies primarily include the Canadian dollar, euro and British pound.
At February 28, 2023, approximately 19% of cash and cash equivalents, 24% of accounts receivables and 36% of accounts payable were denominated in foreign currencies (February 28, 2022 – 37%, 23% and 30%, respectively). These foreign currencies primarily include the Canadian dollar, euro and British pound.
Removed
During fiscal 2022, the Company recorded nil in impairment charges related to non-marketable equity investments without readily determinable fair value (fiscal 2021 - nil and fiscal 2020 - $3 million). 61

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