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Revenue and Segment Disclosures | 3 Months Ended
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May 31, 2024
Segment Reporting [Abstract] |
Revenue and Segment Disclosures | REVENUE AND SEGMENT DISCLOSURES The Company reports segment information based on the “management” approach. The management approach designates the internal reporting used by the CODM for making decisions and assessing performance as a source of the Company’s reportable operating segments. The CODM, who is the CEO of the Company, makes decisions and assesses the performance of the Company using three operating segments. The CODM does not evaluate operating segments using discrete asset information. The Company does not specifically allocate assets to operating segments for internal reporting purposes. Segment Disclosures The Company is organized and managed as three operating segments: Cybersecurity, IoT, and Licensing and Other. The following table shows information by operating segment for the three months ended May 31, 2024 and May 31, 2023:
| For the Three Months Ended
| Cybersecurity |  | IoT |  | Licensing and Other |  | Segment Totals |  |  |  |
| May 31, |  |  |  | May 31, |  |  |  | May 31, |  |  |  | May 31, |  |  |  |  |  |
| 2024 |  | 2023 |  |  |  | 2024 |  | 2023 |  |  |  | 2024 |  | 2023 |  |  |  | 2024 |  | 2023 |  |  |  |  |
Segment revenue | $ | 85 |  |  | $ | 93 |  |  |  |  | $ | 53 |  |  | $ | 45 |  |  |  |  | $ | 6 |  |  | $ | 235 |  |  |  |  | $ | 144 |  |  | $ | 373 |  |  |  |  |  |  |
Segment cost of sales | 35 |  |  | 37 |  |  |  |  | 10 |  |  | 9 |  |  |  |  | 2 |  |  | 147 |  |  |  |  | 47 |  |  | 193 |  |  |  |  |  |  |
Segment gross margin (1) | $ | 50 |  |  | $ | 56 |  |  |  |  | $ | 43 |  |  | $ | 36 |  |  |  |  | $ | 4 |  |  | $ | 88 |  |  |  |  | $ | 97 |  |  | $ | 180 |  |  |  |  |  |  |
______________________________ (1) A reconciliation of total segment gross margin to consolidated totals is set forth below. Cybersecurity consists of BlackBerry® UEM and Cylance® cybersecurity solutions (collectively, BlackBerry Spark®), BlackBerry® AtHoc® and BlackBerry® SecuSUITE®. The Company’s Cylance AI and machine learning-based platform consists of CylanceENDPOINT™, CylanceMDR™, CylanceEDGE™, CylanceINTELLIGENCE™ and other cybersecurity applications. The Company’s endpoint management platform includes BlackBerry® UEM, BlackBerry® Dynamics™, and BlackBerry® Workspaces solutions. Cybersecurity revenue is generated predominantly through software licenses, commonly bundled with support, maintenance and professional services. IoT consists of BlackBerry® QNX®, BlackBerry® Certicom®, BlackBerry Radar®, BlackBerry IVY® and other IoT applications. IoT revenue is generated predominantly through software licenses, commonly bundled with support, maintenance and professional services. Licensing and Other consists of the Company’s intellectual property arrangements and settlement awards. The following table reconciles total segment gross margin for the three months ended May 31, 2024 and May 31, 2023 to the Company’s consolidated totals:
| Three Months Ended |  |
| May 31, 2024 |  | May 31, 2023 |  |  |  |
Total segment gross margin | $ | 97 |  |  | $ | 180 |  |  |  |  |
Adjustments (1): |  |  |  |  |  |  |
Less: Stock compensation | 1 |  |  | 1 |  |  |  |  |
Less: |  |  |  |  |  |  |
Research & development | 42 |  |  | 54 |  |  |  |  |
Sales and marketing | 38 |  |  | 45 |  |  |  |  |
General and administrative | 40 |  |  | 54 |  |  |  |  |
Amortization | 12 |  |  | 15 |  |  |  |  |
Impairment of long-lived assets | 3 |  |  | — |  |  |  |  |
Debentures fair value adjustment | — |  |  | 22 |  |  |  |  |
Investment income, net | (5) |  |  | (3) |  |  |  |  |
Loss before income taxes | $ | (34) |  |  | $ | (8) |  |  |  |  |
______________________________ (1) The CODM reviews segment information on an adjusted basis, which excludes certain amounts as described below: Stock compensation expenses - Equity compensation is a non-cash expense and does not impact the ongoing operating decisions taken by the Company’s management. Patent Sale On May 11, 2023, the Company completed its previously announced patent sale with Malikie and sold certain non-core patent assets for $170 million in cash on closing, an additional $30 million in fixed consideration due by no later than the third anniversary of closing and variable consideration in the form of future royalties in the aggregate amount of up to $700 million (the “Malikie Transaction”). Pursuant to the terms of the Malikie Transaction, the Company received a license back to the patents sold, which relate primarily to mobile devices, messaging and wireless networking. In the first quarter of fiscal 2024, the Company recognized revenue of $218 million and cost of sales of $147 million related to intellectual property sold. As at May 31, 2024, the remaining financing component on the patent sale was $9 million and will be recognized as interest income over the payment terms. The Company estimated variable consideration from future royalty revenues using an expected value method including inputs from both internal and external sources related to patent monetization activities and cash flows, and constrained the recognition of that variable consideration based on the Company’s accounting policies and critical accounting estimates as described in Note 1. The present value of variable consideration recognized as revenue was $23 million and the amount of variable consideration constrained was $210 million. The Company evaluates its conclusions as to whether the constraints are still applicable on an ongoing basis, and will make updates when it observes a sufficient amount of evidence that amounts of variable consideration are no longer subject to constraint or the estimated amount of variable consideration has changed. Revenue The Company disaggregates revenue from contracts with customers based on geographical regions, timing of revenue recognition, and the major product and service types, as discussed above in “Segment Disclosures”. The Company’s revenue, classified by major geographic region in which the Company’s customers are located, was as follows:
| Three Months Ended |  |
| May 31, 2024 |  | May 31, 2023 |  |  |  |
North America (1) | $ | 68 |  |  | $ | 317 |  |  |  |  |
Europe, Middle East and Africa | 47 |  |  | 37 |  |  |  |  |
Other regions | 29 |  |  | 19 |  |  |  |  |
Total | $ | 144 |  |  | $ | 373 |  |  |  |  |
North America (1) | 47.2 | % |  | 85.0 | % |  |  |  |
Europe, Middle East and Africa | 32.7 | % |  | 9.9 | % |  |  |  |
Other regions | 20.1 | % |  | 5.1 | % |  |  |  |
Total | 100.0 | % |  | 100.0 | % |  |  |  |
______________________________ (1) North America includes all revenue from the Company’s intellectual property arrangements, due to the global applicability of the patent portfolio and licensing arrangements thereof. Revenue, classified by timing of recognition, was as follows:
| Three Months Ended |  |
| May 31, 2024 |  | May 31, 2023 |  |  |  |
Products and services transferred over time | $ | 78 |  |  | $ | 85 |  |  |  |  |
Products and services transferred at a point in time | 66 |  |  | 288 |  |  |  |  |
Total | $ | 144 |  |  | $ | 373 |  |  |  |  |
Revenue contract balances The following table sets forth the activity in the Company’s revenue contract balances for the three months ended May 31, 2024:
| Accounts and Other Receivable |  | Deferred Revenue |  | Deferred Commissions
Opening balance as at February 29, 2024 | $ | 255 |  |  | $ | 222 |  |  | $ | 21 |
Increases due to invoicing of new or existing contracts, associated contract acquisition costs, or other | 134 |  |  | 123 |  |  | 5 |
Decrease due to payment, fulfillment of performance obligations, or other | (182) |  |  | (139) |  |  | (7) |
Decrease, net | (48) |  |  | (16) |  |  | (2) |
Closing balance as at May 31, 2024 | $ | 207 |  |  | $ | 206 |  |  | $ | 19 |
Transaction price allocated to the remaining performance obligations The table below discloses the aggregate amount of the transaction price allocated to performance obligations that are unsatisfied or partially unsatisfied as at May 31, 2024 and the time frame in which the Company expects to recognize this revenue. The disclosure includes estimates of variable consideration, except when the variable consideration is a sales-based or usage-based royalty promised in exchange for a license of intellectual property. The disclosure excludes estimates of variable consideration relating to potential future royalty revenues from the patent sale to Malikie, which have been constrained based on the Company’s accounting policies and critical accounting estimates and as described under “Patent Sale” in this Note 10.
| As at May 31, 2024
| Less than 12 Months |  | 12 to 24 Months |  | Thereafter |  | Total
Remaining performance obligations | $ | 174 |  |  | $ | 16 |  |  | $ | 16 |  |  | $ | 206 |
Revenue recognized for performance obligations satisfied in prior periods For the three months ended May 31, 2024, revenue of nil was recognized relating to performance obligations satisfied in a prior period (three months ended May 31, 2023 - $9 million as a result of certain variable consideration no longer being subject to constraint). Property, plant and equipment, intangible assets, operating lease ROU assets and goodwill, classified by geographic region in which the Company’s assets are located, were as follows:
| As at
| May 31, 2024 |  | February 29, 2024
| Property, Plant and Equipment, Intangible Assets, Operating Lease ROU Assets and Goodwill |  | Total Assets |  | Property, Plant and Equipment, Intangible Assets, Operating Lease ROU Assets and Goodwill |  | Total Assets
Canada | $ | 73 |  |  | $ | 338 |  |  | $ | 78 |  |  | $ | 342 |
United States | 649 |  |  | 883 |  |  | 662 |  |  | 923 |
Other | 30 |  |  | 102 |  |  | 29 |  |  | 130 |
| $ | 752 |  |  | $ | 1,323 |  |  | $ | 769 |  |  | $ | 1,395 |
Information About Major Customers There was one customer that comprised 13% of the Company’s revenue in the three months ended May 31, 2024 (three months ended May 31, 2023 - one customer that comprised 58% of the Company’s revenue, due to the completed Malikie Transaction

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- Definition The entire disclosure for reporting segments including data and tables. Reportable segments include those that meet any of the following quantitative thresholds a) it's reported revenue, including sales to external customers and intersegment sales or transfers is 10 percent or more of the combined revenue, internal and external, of all operating segments b) the absolute amount of its reported profit or loss is 10 percent or more of the greater, in absolute amount of 1) the combined reported profit of all operating segments that did not report a loss or 2) the combined reported loss of all operating segments that did report a loss c) its assets are 10 percent or more of the combined assets of all operating segments. + References Reference 1: http://www.xbrl.org/2003/role/exampleRef -Topic 280 -SubTopic 10 -Name Accounting Standards Codification -Section 55 -Paragraph 48 -Publisher FASB -URI https://asc.fasb.org/1943274/2147482785/280-10-55-48 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 280 -SubTopic 10 -Name Accounting Standards 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