BlackBerry(US:BB)2025-09-25 20:20markdown [PART I - FINANCIAL INFORMATION](index=4&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section presents BlackBerry Limited's unaudited consolidated financial statements, including balance sheets, statements of shareholders' equity, operations, comprehensive income (loss), and cash flows, supported by detailed explanatory notes [Consolidated Balance Sheets](index=5&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheets show a decrease in total assets from **$1,295.6 million** as of February 28, 2025, to **$1,184.1 million** as of August 31, 2025, primarily driven by a reduction in current assets Consolidated Balance Sheet Data (in millions) | Category | August 31, 2025 (in millions) | February 28, 2025 (in millions) | Change (in millions) | | :------- | :---------------------------- | :------------------------------ | :------------------- | | Total Assets | $1,184.1 | $1,295.6 | $(111.5) | | Total Liabilities | $459.0 | $575.7 | $(116.7) | | Shareholders' Equity | $725.1 | $719.9 | $5.2 | [Consolidated Statements of Shareholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Shareholders'%20Equity) Shareholders' equity increased from **$719.9 million** at February 28, 2025, to **$725.1 million** at August 31, 2025, primarily due to net income and stock-based compensation, partially offset by share repurchases Shareholders' Equity Changes (in millions) | Item | Six Months Ended August 31, 2025 (in millions) | Six Months Ended August 31, 2024 (in millions) | | :-------------------------- | :----------------------------------- | :----------------------------------- | | Balance as at Feb 28/29 | $2,976.4 | $2,947.7 | | Net income (loss) | $15.2 | $(61.1) | | Other comprehensive income | $7.2 | $1.8 | | Stock-based compensation | $11.6 | $14.8 | | Share repurchase | $(37.9) | — | | Employee share purchase plan | $1.2 | $1.5 | | Balance as at Aug 31 | $2,951.3 | $2,964.0 | [Consolidated Statements of Operations](index=8&type=section&id=Consolidated%20Statements%20of%20Operations) For the three months ended August 31, 2025, BlackBerry reported net income of **$13.3 million**, a significant improvement from a net loss of **$19.7 million** in the prior-year period, with revenue increasing slightly to **$129.6 million** and gross margin improving to **$96.6 million** Statements of Operations Summary (in millions, except EPS) | Metric | Three Months Ended Aug 31, 2025 (in millions) | Three Months Ended Aug 31, 2024 (in millions) | Six Months Ended Aug 31, 2025 (in millions) | Six Months Ended Aug 31, 2024 (in millions) | | :---------------------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Revenue | $129.6 | $126.2 | $251.3 | $249.6 | | Gross margin | $96.6 | $88.6 | $186.9 | $178.6 | | Operating income (loss) | $11.5 | $2.2 | $13.5 | $(10.7) | | Net income (loss) | $13.3 | $(19.7) | $15.2 | $(61.1) | | Basic EPS | $0.02 | $(0.03) | $0.03 | $(0.10) | | Diluted EPS | $0.02 | $(0.03) | $0.03 | $(0.10) | [Consolidated Statements of Comprehensive Income (Loss)](index=9&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) Comprehensive income for the three months ended August 31, 2025, was **$14.1 million**, a significant improvement from a comprehensive loss of **$17.6 million** in the prior-year period, driven by net income and positive foreign currency translation adjustments Comprehensive Income (Loss) Summary (in millions) | Metric | Three Months Ended Aug 31, 2025 (in millions) | Three Months Ended Aug 31, 2024 (in millions) | Six Months Ended Aug 31, 2025 (in millions) | Six Months Ended Aug 31, 2024 (in millions) | | :---------------------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Net income (loss) | $13.3 | $(19.7) | $15.2 | $(61.1) | | Other comprehensive income | $0.8 | $2.1 | $7.2 | $1.8 | | Comprehensive income (loss) | $14.1 | $(17.6) | $22.4 | $(59.3) | [Consolidated Statements of Cash Flows](index=10&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the six months ended August 31, 2025, net cash used in operating activities decreased to **$14.1 million** from **$31.1 million** in the prior-year period, with net cash provided by investing activities significantly increasing to **$52.8 million** Cash Flow Summary (in millions) | Cash Flow Activity | Six Months Ended Aug 31, 2025 (in millions) | Six Months Ended Aug 31, 2024 (in millions) | | :---------------------------------- | :------------------------------------ | :------------------------------------ | | Net cash used in operating activities | $(14.1) | $(31.1) | | Net cash provided by investing activities | $52.8 | $16.6 | | Net cash provided by (used in) financing activities | $(28.8) | $1.5 | | Net increase (decrease) in cash, cash equivalents, restricted cash, and restricted cash equivalents | $10.3 | $(12.8) | | End of period cash, cash equivalents, restricted cash, and restricted cash equivalents | $290.6 | $187.7 | [Notes to the Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) These notes provide detailed explanations and breakdowns of the figures presented in the consolidated financial statements, covering accounting policies, discontinued operations, fair value measurements, specific balance sheet accounts, income taxes, long-term debt, capital stock, earnings per share, comprehensive loss, commitments, contingencies, segment reporting, and cash flow information [1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND CRITICAL ACCOUNTING ESTIMATES](index=11&type=section&id=1.%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES%20AND%20CRITICAL%20ACCOUNTING%20ESTIMATES) The financial statements are prepared in accordance with U.S. GAAP, with no material changes to accounting policies or critical accounting estimates from the annual statements, and new accounting pronouncements are being evaluated for future adoption - The Company reclassified all expenses associated with its facilities to General and administrative expenses in the third quarter of fiscal **2025**, impacting prior period comparatives[33](index=33&type=chunk) - No material changes to the Company's accounting policies or critical accounting estimates have occurred during fiscal **2026**[35](index=35&type=chunk) - The Company is evaluating new FASB ASUs on income tax disclosures (ASU **2023-09**, effective FY**26**) and expense disaggregation (ASU **2024-03**, effective FY**28**), and does not expect ASU **2025-05** on credit losses (effective FY**28**) to have a material impact[38](index=38&type=chunk)[39](index=39&type=chunk)[40](index=40&type=chunk) [2. DISCONTINUED OPERATIONS](index=12&type=section&id=2.%20DISCONTINUED%20OPERATIONS) The Cylance business, acquired in **2019**, was classified as held for sale in Q3 fiscal **2025** and subsequently sold to Arctic Wolf Networks, Inc. on February 3, **2025**, with its financial results now presented as 'loss from discontinued operations, net of tax' - The Cylance business was sold to Arctic Wolf Networks, Inc. on February 3, **2025**, resulting in a gain on disposal of **$10.4 million** in Q4 fiscal **2025**[42](index=42&type=chunk) Discontinued Operations Financials (in millions) | Metric | Three Months Ended Aug 31, 2024 (in millions) | Six Months Ended Aug 31, 2024 (in millions) | | :---------------------------------- | :------------------------------------ | :------------------------------------ | | Revenue | $20.3 | $41.2 | | Gross margin | $8.2 | $16.2 | | Operating loss | $(23.2) | $(48.1) | | Loss from discontinued operations, net of tax | $(23.2) | $(48.1) | | Basic loss per share from discontinued operations | $(0.04) | $(0.08) | [3. FAIR VALUE MEASUREMENTS, CASH, CASH EQUIVALENTS AND INVESTMENTS](index=13&type=section&id=3.%20FAIR%20VALUE%20MEASUREMENTS,%20CASH,%20CASH%20EQUIVALENTS%20AND%20INVESTMENTS) The Company uses a three-level fair value hierarchy for its investments, with cash, cash equivalents, and short-term investments totaling **$276.4 million** and **$14.1 million** respectively as of August 31, 2025, and recorded impairment charges for long-lived assets - During the three and six months ended August 31, 2025, the Company recorded a pre-tax impairment charge of **$0.5 million** and **$0.6 million**, respectively, for operating lease ROU assets and property, plant and equipment[53](index=53&type=chunk) Cash, Investments, and Fair Value Summary (in millions) | Category | August 31, 2025 (in millions) | February 28, 2025 (in millions) | | :---------------------------------------------------------------- | :---------------------------- | :------------------------------ | | Cash and cash equivalents | $276.4 | $266.7 | | Short-term investments | $14.1 | $71.1 | | Long-term investments (including equity investments in private companies) | $58.8 | $58.9 | | Restricted cash and cash equivalents | $14.2 | $13.6 | | **Total Cash, Cash Equivalents and Investments** | **$363.5** | **$410.3** | - As of August 31, 2025, the Company had non-marketable equity investments without readily determinable fair value of **$58.8 million**, including common shares of Arctic Wolf[59](index=59&type=chunk) [4. CONSOLIDATED BALANCE SHEET DETAILS](index=17&type=section&id=4.%20CONSOLIDATED%20BALANCE%20SHEET%20DETAILS) Accounts receivable, net of allowance, decreased to **$125.0 million** as of August 31, 2025, with a CECL of **$5.4 million**, while intangible assets, net, decreased to **$42.0 million** due to amortization, and goodwill increased to **$478.5 million** due to foreign exchange effects Balance Sheet Details (in millions) | Item | August 31, 2025 (in millions) | February 28, 2025 (in millions) | | :-------------------------------- | :---------------------------- | :------------------------------ | | Accounts receivable, net | $125.0 | $173.7 | | Allowance for credit losses (CECL) | $5.4 | $6.6 | | Other receivables | $48.7 | $48.4 | | Intangible assets, net | $42.0 | $47.3 | | Goodwill | $478.5 | $472.4 | | Accrued liabilities | $83.9 | $126.2 | | Restructuring program liabilities | $5.2 | $10.4 | - Other receivables include a **$38.1 million** delayed cash payment from Arctic Wolf related to the Cylance sale[69](index=69&type=chunk) - Amortization expense for intangible assets was **$7.6 million** for the six months ended August 31, 2025, down from **$22.0 million** in the prior year[74](index=74&type=chunk) [5. INCOME TAXES](index=21&type=section&id=5.%20INCOME%20TAXES) The Company's net effective income tax expense rate remained approximately **17%** for both the six months ended August 31, 2025, and 2024, reflecting changes in unrecognized income tax benefits and a significant valuation allowance against deferred income tax assets - The net effective income tax expense rate was approximately **17%** for the six months ended August 31, 2025 and 2024[84](index=84&type=chunk) - Total unrecognized income tax benefits were **$19.6 million** as of August 31, 2025, with **$19.2 million** netted against deferred income tax assets[85](index=85&type=chunk) [6. LONG-TERM NOTES](index=21&type=section&id=6.%20LONG-TERM%20NOTES) The Company has **$200.0 million** aggregate principal amount of **3.00%** senior convertible unsecured notes due February 15, 2029, with a carrying amount of **$195.9 million** and an estimated fair value of **$249.0 million** as of August 31, 2025 - The Company issued **$200.0 million** aggregate principal amount of **3.00%** senior convertible unsecured notes due February 15, 2029[87](index=87&type=chunk)[88](index=88&type=chunk) Long-Term Notes Summary (in millions) | Metric | August 31, 2025 (in millions) | February 28, 2025 (in millions) | | :-------------------------------- | :---------------------------- | :------------------------------ | | Carrying amount of Notes | $195.9 | $195.3 | | Fair value of Notes | $249.0 | $289.5 | | Interest expense (3 months) | $1.5 | $1.5 | | Interest expense (6 months) | $3.0 | $3.0 | [7. CAPITAL STOCK](index=22&type=section&id=7.%20CAPITAL%20STOCK) As of August 31, 2025, the Company had **590,361,084** common shares issued and outstanding, having repurchased **7.6 million** common shares at a cost of **$30.0 million** under its Normal Course Issuer Bid (NCIB) share buyback program Capital Stock Activity (000s, in millions) | Item | August 31, 2025 (000s) | February 28, 2025 (000s) | | :-------------------------------- | :--------------------- | :--------------------- | | Common shares outstanding | 590,361 | 596,231 | | Common shares repurchased (6 months) | (7,595) | — | | Cost of share repurchase (6 months) | $(30.0) | — | - The NCIB share buyback program, commenced on May 12, 2025, authorizes the repurchase of up to **27.9 million** common shares[93](index=93&type=chunk) [8. EARNINGS (LOSS) PER SHARE](index=23&type=section&id=8.%20EARNINGS%20(LOSS)%20PER%20SHARE) Basic and diluted earnings per share from continuing operations for the three months ended August 31, 2025, were **$0.02**, an increase from **$0.01** in the prior-year period, with the dilutive effect of convertible notes excluded as it was anti-dilutive Earnings Per Share Data (in millions, except EPS) | Metric | Three Months Ended Aug 31, 2025 | Three Months Ended Aug 31, 2024 | Six Months Ended Aug 31, 2025 | Six Months Ended Aug 31, 2024 | | :------------------------------------------------ | :---------------------------- | :---------------------------- | :---------------------------- | :---------------------------- | | Net income (loss) from continuing operations | $13.3 | $3.5 | $15.2 | $(13.0) | | Basic EPS from continuing operations | $0.02 | $0.01 | $0.03 | $(0.02) | | Diluted EPS from continuing operations | $0.02 | $0.01 | $0.03 | $(0.02) | | Total basic EPS | $0.02 | $(0.03) | $0.03 | $(0.10) | | Total diluted EPS | $0.02 | $(0.03) | $0.03 | $(0.10) | | Weighted average shares outstanding (basic, 000s) | 592,938 | 590,549 | 594,624 | 590,188 | | Weighted average shares outstanding (diluted, 000s) | 597,369 | 591,610 | 598,697 | 590,188 | [9. ACCUMULATED OTHER COMPREHENSIVE LOSS](index=24&type=section&id=9.%20ACCUMULATED%20OTHER%20COMPREHENSIVE%20LOSS) Accumulated Other Comprehensive Loss (AOCL) decreased from **$(19.2) million** at February 28, 2025, to **$(12.0) million** at August 31, 2025, primarily driven by positive foreign currency translation adjustments and net changes in fair value of cash flow hedges Accumulated Other Comprehensive Loss Breakdown (in millions) | Component | Three Months Ended Aug 31, 2025 (in millions) | Three Months Ended Aug 31, 2024 (in millions) | Six Months Ended Aug 31, 2025 (in millions) | Six Months Ended Aug 31, 2024 (in millions) | | :---------------------------------------------------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | Cash Flow Hedges (net unrealized gains) | $0.3 | $0.9 | $0.3 | $0.9 | | Foreign Currency Cumulative Translation Adjustment | $(11.7) | $(12.8) | $(11.7) | $(12.8) | | Other Post-Employment Benefit Obligations (actuarial losses) | $(0.6) | $(0.6) | $(0.6) | $(0.6) | | **Accumulated Other Comprehensive Loss, End of Period** | **$(12.0)** | **$(12.5)** | **$(12.0)** | **$(12.5)** | [10. COMMITMENTS AND CONTINGENCIES](index=24&type=section&id=10.%20COMMITMENTS%20AND%20CONTINGENCIES) The Company has **$14.1 million** in collateralized outstanding letters of credit and is involved in various litigations, including a Canadian employment class action that settled for **$2.8 million** (CAD **$4.0 million**) in February 2025, with other claims ongoing - The Company had **$14.1 million** in collateralized outstanding letters of credit as of August 31, 2025[100](index=100&type=chunk) - A Canadian employment class action settled for **$2.8 million** (CAD **$4.0 million**) in February 2025, with Court approval in July 2025[110](index=110&type=chunk) - The Company recognized **$29.0 million** in funds from QNX's Strategic Innovation Fund (SIF) claims, which may be repayable if certain terms are not met[108](index=108&type=chunk) [11. REVENUE AND SEGMENT DISCLOSURES](index=26&type=section&id=11.%20REVENUE%20AND%20SEGMENT%20DISCLOSURES) BlackBerry operates through three reportable segments: QNX, Secure Communications, and Licensing, with total revenue of **$129.6 million** for the three months ended August 31, 2025, and North America remaining the largest geographic region - The Company is organized into three operating segments: QNX, Secure Communications, and Licensing, following the sale of the Cylance business[116](index=116&type=chunk) Segment Revenue Breakdown (in millions) | Segment | Three Months Ended Aug 31, 2025 (in millions) | Three Months Ended Aug 31, 2024 (in millions) | Six Months Ended Aug 31, 2025 (in millions) | Six Months Ended Aug 31, 2024 (in millions) | | :-------------------- | :------------------------------------ | :------------------------------------ | :---------------------------------- | :---------------------------------- | | QNX Revenue | $63.1 | $54.7 | $120.6 | $107.9 | | Secure Communications Revenue | $59.9 | $66.5 | $119.4 | $130.7 | | Licensing Revenue | $6.6 | $5.0 | $11.3 | $11.0 | | **Total Segment Revenue** | **$129.6** | **$126.2** | **$251.3** | **$249.6** | Revenue by Geographic Region (%) | Region | Three Months Ended Aug 31, 2025 (%) | Three Months Ended Aug 31, 2024 (%) | Six Months Ended Aug 31, 2025 (%) | Six Months Ended Aug 31, 2024 (%) | | :---------------------------- | :---------------------------------- | :---------------------------------- | :-------------------------------- | :-------------------------------- | | North America | 48.1% | 46.1% | 46.6% | 45.8% | | Europe, Middle East and Africa | 30.8% | 34.5% | 32.8% | 35.0% | | Other regions | 21.1% | 19.4% | 20.6% | 19.2% | | **Total** | **100.0%** | **100.0%** | **100.0%** | **100.0%** | Remaining Performance Obligations (in millions) | Time Frame | Remaining Performance Obligations (as at Aug 31, 2025, in millions) | | :-------------------- | :------------------------------------------------ | | Less than 12 Months | $128.5 | | 12 to 24 Months | $3.1 | | Thereafter | $3.6 | | **Total** | **$135.2** | [12. CASH FLOW AND ADDITIONAL INFORMATION](index=30&type=section&id=12.%20CASH%20FLOW%20AND%20ADDITIONAL%20INFORMATION) Interest paid for the six months ended August 31, 2025, was **$3.0 million**, while income taxes paid were **$18.1 million**, and the Company is exposed to foreign exchange, interest rate, and credit risks, including a **$38.1 million** deferred cash payment from Arctic Wolf Cash Flow Details (in millions) | Item | Six Months Ended Aug 31, 2025 (in millions) | Six Months Ended Aug 31, 2024 (in millions) | | :-------------------------------- | :------------------------------------ | :------------------------------------ | | Interest paid | $3.0 | $3.0 | | Income taxes paid | $18.1 | $9.8 | | Income tax refunds received | $0.2 | — | - The Company is exposed to foreign exchange risk, with approximately **10%** of cash and cash equivalents, **25%** of accounts receivable, and **71%** of accounts payable denominated in foreign currencies as of August 31, 2025[134](index=134&type=chunk) - The Company is owed a **$38.1 million** delayed cash payment from Arctic Wolf, exposing it to credit risk related to potential non-payment[137](index=137&type=chunk) - Equity investments in private companies, including Arctic Wolf shares (**$24.6 million**), are illiquid securities, posing liquidity risk[140](index=140&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=31&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on BlackBerry's financial condition and results of operations for the three and six months ended August 31, 2025, covering business overview, summary results, and an assessment of liquidity and capital resources [Business Overview](index=33&type=section&id=Business%20Overview) BlackBerry Limited is a leading provider of intelligent software and services, with two core divisions: QNX for embedded software and Secure Communications for highly secure solutions, complemented by a Licensing division - BlackBerry's QNX division is a leader in embedded software, serving top automotive OEMs, Tier 1 suppliers, EV OEMs, and medical OEMs, with a focus on safety-critical foundational software[150](index=150&type=chunk) - The Secure Communications division provides operational resiliency with secure solutions for mobile fortification, mission-critical communications, and critical event management, targeting government and strategic industries[151](index=151&type=chunk) - Recent product innovations include the launch of QNX OS for Safety **8** and BlackBerry UEM achieving BSI certification[168](index=168&type=chunk) [Second Quarter Fiscal 2026 Summary Results of Operations](index=35&type=section&id=Second%20Quarter%20Fiscal%202026%20Summary%20Results%20of%20Operations) For the second quarter of fiscal 2026, BlackBerry reported revenue of **$129.6 million** and net income of **$13.3 million** (**$0.02** basic and diluted EPS), a significant improvement from a net loss of **$19.7 million** in the prior-year period Q2 FY26 Summary Results (in millions, except EPS) | Metric | Q2 FY26 (in millions, except EPS) | Q2 FY25 (in millions, except EPS) | Change (in millions) | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :------------------- | | Revenue | $129.6 | $126.2 | $3.4 | | Gross margin | $96.6 | $88.6 | $8.0 | | Operating expenses | $85.1 | $86.4 | $(1.3) | | Net income (loss) | $13.3 | $(19.7) | $33.0 | | Basic EPS | $0.02 | $(0.03) | | | Diluted EPS | $0.02 | $(0.03) | | | Adjusted Net Income (Loss) | $24.2 | $(2.6) | | | Adjusted EPS | $0.04 | $0.00 | | - The significant improvement in net income is primarily due to the absence of loss from discontinued operations (Cylance) in Q2 FY**26**, which was **$(23.2) million** in Q2 FY**25**[169](index=169&type=chunk)[259](index=259&type=chunk) [Non-GAAP Financial Measures](index=39&type=section&id=Non-GAAP%20Financial%20Measures) BlackBerry uses non-GAAP financial measures such as adjusted gross margin, adjusted operating expense, adjusted net income (loss), adjusted EPS, and adjusted EBITDA to provide a consistent basis for comparison and to help understand underlying operational trends - Non-GAAP measures exclude restructuring charges, stock compensation expenses, amortization of acquired intangible assets, and long-lived asset impairment charges[187](index=187&type=chunk) Non-GAAP Financial Metrics (in millions) | Metric | Q2 FY26 (in millions) | Q2 FY25 (in millions) | H1 FY26 (in millions) | H1 FY25 (in millions) | | :-------------------------------- | :-------------------- | :-------------------- | :-------------------- | :-------------------- | | Adjusted Gross Margin | $97.2 | $89.2 | $188.0 | $179.9 | | Adjusted Operating Expense | $74.8 | $78.5 | $153.2 | $163.3 | | Adjusted EBITDA | $25.9 | $15.1 | $42.3 | $25.6 | | Adjusted Net Income (Loss) | $24.2 | $(2.6) | $36.5 | $(16.9) | | Adjusted Basic EPS | $0.04 | $0.00 | $0.06 | $(0.03) | [Key Metrics](index=44&type=section&id=Key%20Metrics) Secure Communications Annual Recurring Revenue (ARR) increased to **$213 million** as of August 31, 2025, up from **$209 million** in the prior year, with the Dollar-Based Net Retention Rate (DBNRR) remaining consistent at **93%** Key Operational Metrics (in millions) | Metric | August 31, 2025 (in millions) | August 31, 2024 (in millions) | Change | | :------------------------------------ | :---------------------------- | :---------------------------- | :----- | | Secure Communications ARR | $213 | $209 | $4 | | Secure Communications DBNRR | 93% | 93% | —% | [Results of Operations - Three months ended August 31, 2025 compared to the three months ended August 31, 2024](index=45&type=section&id=Results%20of%20Operations%20-%20Three%20months%20ended%20August%2031,%202025%20compared%20to%20the%20three%20months%20ended%20August%2031,%202024) This section details the financial performance for the second quarter of fiscal 2026, highlighting revenue growth in QNX and Licensing, improved consolidated gross margin and operating income, and updated guidance reflecting stronger-than-expected performance [Revenue](index=45&type=section&id=Revenue) Total revenue for Q2 FY26 was **$129.6 million**, exceeding expectations, with QNX revenue increasing by **$8.4 million** to **$63.1 million**, while Secure Communications revenue decreased by **$6.6 million** to **$59.9 million** Q2 Revenue by Segment (in millions) | Segment | Q2 FY26 Revenue (in millions) | Q2 FY25 Revenue (in millions) | Change (in millions) | | :-------------------- | :---------------------------- | :---------------------------- | :------------------- | | QNX | $63.1 | $54.7 | $8.4 | | Secure Communications | $59.9 | $66.5 | $(6.6) | | Licensing | $6.6 | $5.0 | $1.6 | | **Total Revenue** | **$129.6** | **$126.2** | **$3.4** | - QNX revenue of **$63.1 million** exceeded expectations due to better-than-expected royalty revenue[209](index=209&type=chunk) - The Company now expects QNX revenue to be in the range of **$256 million** to **$270 million** for fiscal 2026, up from **$250 million** to **$270 million**[210](index=210&type=chunk) - Total BlackBerry revenue is now expected to be in the range of **$519 million** to **$541 million** for fiscal 2026, up from **$508 million** to **$538 million**[217](index=217&type=chunk) [Gross Margin](index=47&type=section&id=Gross%20Margin) Consolidated gross margin increased by **$8.0 million** to **$96.6 million** in Q2 FY26, with the gross margin percentage rising to **74.5%** from **70.2%**, primarily due to a higher contribution from Secusmart and QNX - Consolidated gross margin increased by **$8.0 million** to **$96.6 million** in Q2 FY**26**, with gross margin percentage increasing by **4.3%** to **74.5%**[222](index=222&type=chunk)[223](index=223&type=chunk) Q2 Adjusted Gross Margin and EBITDA by Segment (in millions) | Segment | Q2 FY26 Adjusted Gross Margin (in millions) | Q2 FY25 Adjusted Gross Margin (in millions) | Change (in millions) | | :-------------------- | :------------------------------------ | :------------------------------------ | :------------------- | | QNX | $52.4 | $45.4 | $7.0 | | Secure Communications | $39.7 | $40.4 | $(0.7) | | Licensing | $5.1 | $3.4 | $1.7 | | **Total Adjusted Gross Margin** | **$97.2** | **$89.2** | **$8.0** | | Segment | Q2 FY26 Adjusted EBITDA (in millions) | Q2 FY25 Adjusted EBITDA (in millions) | Change (in millions) | | :-------------------- | :------------------------------------ | :------------------------------------ | :------------------- | | QNX | $20.5 | $13.1 | $7.4 | | Secure Communications | $9.7 | $7.9 | $1.8 | | Licensing | $5.6 | $4.0 | $1.6 | | **Total Adjusted EBITDA** | **$35.8** | **$25.0** | **$10.8** | - QNX adjusted EBITDA of **$20.5 million** exceeded the expected range of **$10 million** to **$13 million** due to strong revenue and SIF claims[228](index=228&type=chunk) - Secure Communications adjusted EBITDA of **$9.7 million** exceeded the expected range of **$3 million** to **$6 million** due to revenue performance and increased gross margin percentage[232](index=232&type=chunk) [Operating Expenses](index=49&type=section&id=Operating%20Expenses) Total U.S. GAAP operating expenses decreased by **$1.3 million** year-over-year to **$85.1 million** in Q2 FY26, primarily due to SIF claims benefits, lower infrastructure costs, and reduced amortization, partially offset by increased restructuring costs and salaries Q2 Operating Expenses Breakdown (in millions) | Operating Expense Category | Q2 FY26 (in millions) | Q2 FY25 (in millions) | Change (in millions) | | :-------------------------------- | :-------------------- | :-------------------- | :------------------- | | Research and development | $25.6 | $27.1 | $(1.5) | | Sales and marketing | $24.4 | $21.3 | $3.1 | | General and administrative | $31.5 | $32.8 | $(1.3) | | Amortization | $3.1 | $4.6 | $(1.5) | | Impairment of long-lived assets | $0.5 | $0.6 | $(0.1) | | **Total Operating Expenses** | **$85.1** | **$86.4** | **$(1.3)** | - Operating expenses decreased year-over-year by **$1.3 million**, primarily due to **$3.8 million** in SIF claims benefits, **$1.6 million** in lower infrastructure costs, and **$1.5 million** in reduced amortization[239](index=239&type=chunk) - Investment income, net, decreased by **$0.8 million** to **$1.9 million** in Q2 FY26, mainly due to a non-recurring interest income in the prior year, partially offset by higher returns on cash and investments[257](index=257&type=chunk) - The Company now expects adjusted EBITDA for fiscal 2026 to be in the range of **$82 million** to **$101 million** (previously **$72 million** to **$87 million**) and non-GAAP EPS to be **$0.11** to **$0.15** (previously **$0.08** to **$0.10**)[264](index=264&type=chunk)[265](index=265&type=chunk) [Results of Operations - Six months ended August 31, 2025 compared to the six months ended August 31, 2024](index=53&type=section&id=Results%20of%20Operations%20-%20Six%20months%20ended%20August%2031,%202025%20compared%20to%20the%20six%20months%20ended%20August%2031,%202024) This section reviews the financial performance for the first six months of fiscal 2026, showing a slight increase in total revenue and a significant improvement in net income from a loss to a positive figure, driven by QNX segment growth and reduced operating expenses [Consolidated Financial Performance](index=53&type=section&id=Consolidated%20Financial%20Performance) For the six months ended August 31, 2025, BlackBerry reported revenue of **$251.3 million** and net income of **$15.2 million** (**$0.03** basic and diluted EPS), a substantial improvement from a net loss of **$61.1 million** in the prior-year period H1 FY26 Consolidated Financial Performance (in millions, except EPS) | Metric | H1 FY26 (in millions, except EPS) | H1 FY25 (in millions, except EPS) | Change (in millions) | | :---------------------------------- | :-------------------------------- | :-------------------------------- | :------------------- | | Revenue | $251.3 | $249.6 | $1.7 | | Gross margin | $186.9 | $178.6 | $8.3 | | Operating income (loss) | $13.5 | $(10.7) | $24.2 | | Net income (loss) | $15.2 | $(61.1) | $76.3 | | Basic EPS | $0.03 | $(0.10) | $0.13 | | Diluted EPS | $0.03 | $(0.10) | $0.13 | - The **$76.3 million** increase in net income is primarily due to the absence of a **$48.1 million** loss from discontinued operations in H1 FY**25**[270](index=270&type=chunk)[309](index=309&type=chunk) [Revenue](index=53&type=section&id=Revenue) Total revenue for the six months ended August 31, 2025, increased slightly to **$251.3 million**, with QNX revenue growing by **$12.7 million** to **$120.6 million**, while Secure Communications revenue decreased by **$11.3 million** to **$119.4 million** H1 Revenue by Segment (in millions) | Segment | H1 FY26 Revenue (in millions) | H1 FY25 Revenue (in millions) | Change (in millions) | | :-------------------- | :---------------------------- | :---------------------------- | :------------------- | | QNX | $120.6 | $107.9 | $12.7 | | Secure Communications | $119.4 | $130.7 | $(11.3) | | Licensing | $11.3 | $11.0 | $0.3 | | **Total Revenue** | **$251.3** | **$249.6** | **$1.7** | H1 Revenue by Segment and Region (in millions) | Region | H1 FY26 Revenue (in millions) | H1 FY25 Revenue (in millions) | Change (in millions) | | :---------------------------- | :---------------------------- | :---------------------------- | :------------------- | | North America | $117.1 | $114.4 | $2.7 | | Europe, Middle East and Africa | $82.4 | $87.3 | $(4.9) | | Other regions | $51.8 | $47.9 | $3.9 | | **Total** | **$251.3** | **$249.6** | **$1.7** | [Gross Margin](index=55&type=section&id=Gross%20Margin) Consolidated gross margin increased by **$8.3 million** to **$186.9 million** for the first six months of fiscal 2026, with the gross margin percentage rising to **74.4%** from **71.6%**, primarily due to increased revenue from QNX and a favorable mix - Consolidated gross margin increased by **$8.3 million** to **$186.9 million** in H1 FY**26**, with gross margin percentage increasing by **2.8%** to **74.4%**[281](index=281&type=chunk)[282](index=282&type=chunk) H1 Adjusted Gross Margin and EBITDA by Segment (in millions) | Segment | H1 FY26 Adjusted Gross Margin (in millions) | H1 FY25 Adjusted Gross Margin (in millions) | Change (in millions) | | :-------------------- | :------------------------------------ | :------------------------------------ | :------------------- | | QNX | $98.7 | $89.1 | $9.6 | | Secure Communications | $81.1 | $82.8 | $(1.7) | | Licensing | $8.2 | $8.0 | $0.2 | | **Total Adjusted Gross Margin** | **$188.0** | **$179.9** | **$8.1** | | Segment | H1 FY26 Adjusted EBITDA (in millions) | H1 FY25 Adjusted EBITDA (in millions) | Change (in millions) | | :-------------------- | :------------------------------------ | :------------------------------------ | :------------------- | | QNX | $33.2 | $22.0 | $11.2 | | Secure Communications | $19.3 | $17.2 | $2.1 | | Licensing | $9.4 | $8.7 | $0.7 | | **Total Adjusted EBITDA** | **$61.9** | **$47.9** | **$14.0** | - QNX adjusted EBITDA increased by **$11.2 million**, primarily due to revenue growth and benefits from SIF claims[286](index=286&type=chunk) [Operating Expenses](index=56&type=section&id=Operating%20Expenses) Total U.S. GAAP operating expenses decreased by **$15.9 million** to **$173.4 million** for the first six months of fiscal 2026, driven by SIF claims benefits, lower impairment charges, reduced amortization, and decreased infrastructure and restructuring costs H1 Operating Expenses Breakdown (in millions) | Operating Expense Category | H1 FY26 (in millions) | H1 FY25 (in millions) | Change (in millions) | | :-------------------------------- | :-------------------- | :-------------------- | :------------------- | | Research and development | $50.6 | $57.7 | $(7.1) | | Sales and marketing | $53.1 | $45.1 | $8.0 | | General and administrative | $62.0 | $73.1 | $(11.1) | | Amortization | $7.1 | $9.3 | $(2.2) | | Impairment of long-lived assets | $0.6 | $4.1 | $(3.5) | | **Total Operating Expenses** | **$173.4** | **$189.3** | **$(15.9)** | - Operating expenses decreased by **$15.9 million**, primarily due to **$8.3 million** in SIF claims benefits, **$3.5 million** lower impairment charges, and **$2.2 million** reduced amortization[292](index=292&type=chunk) - Investment income, net, decreased by **$1.9 million** to **$4.8 million**, mainly due to non-recurring unrealized gains and interest income in the prior year, partially offset by higher returns on cash and investments[307](index=307&type=chunk) [Financial Condition](index=59&type=section&id=Financial%20Condition) This section details BlackBerry's liquidity and capital resources, showing a decrease in cash, cash equivalents, and investments to **$363.5 million** as of August 31, 2025, with working capital increasing to **$277.0 million** [Liquidity and Capital Resources](index=59&type=section&id=Liquidity%20and%20Capital%20Resources) Cash, cash equivalents, and investments decreased by **$46.8 million** to **$363.5 million** as of August 31, 2025, primarily due to changes in working capital, while net cash used in operating activities decreased by **$17.0 million** Liquidity and Capital Resources Summary (in millions) | Item | August 31, 2025 (in millions) | February 28, 2025 (in millions) | Change (in millions) | | :------------------------------------ | :---------------------------- | :------------------------------ | :------------------- | | Cash, cash equivalents, and investments | $363.5 | $410.3 | $(46.8) | | Current assets | $507.2 | $591.5 | $(84.3) | | Current liabilities | $230.2 | $344.3 | $(114.1) | | Working capital | $277.0 | $247.2 | $29.8 | Cash Flow Activities (in millions) | Cash Flow Activity | H1 FY26 (in millions) | H1 FY25 (in millions) | Change (in millions) | | :------------------------------------ | :-------------------- | :-------------------- | :------------------- | | Net cash used in operating activities | $(14.1) | $(31.1) | $17.0 | | Net cash provided by investing activities | $52.8 | $16.6 | $36.2 | | Net cash used in financing activities | $(28.8) | $1.5 | $(30.3) | - The increase in cash flows used in financing activities was primarily due to **$30.0 million** in common share repurchases under the NCIB share buyback program[326](index=326&type=chunk) Contractual Obligations (in millions) | Obligation Type | Total (in millions) | Short-term (next 12 months, in millions) | Long-term (>12 months, in millions) | | :-------------------------- | :------------------ | :--------------------------------------- | :---------------------------------- | | Operating lease obligations | $39.3 | $12.6 | $26.7 | | Purchase obligations and commitments | $53.0 | $53.0 | — | | Debt interest and principal payments | $221.0 | $6.0 | $215.0 | | **Total** | **$313.3** | **$71.6** | **$241.7** | [Accounting Policies and Critical Accounting Estimates](index=61&type=section&id=Accounting%20Policies%20and%20Critical%20Accounting%20Estimates) There have been no changes to the Company's accounting policies or critical accounting estimates from those described in the Annual MD&A - No changes to the Company's accounting policies or critical accounting estimates have occurred[333](index=333&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=61&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) BlackBerry is exposed to foreign exchange risk, interest rate risk, and credit and customer concentration risk, which are managed through hedging activities and monitored for potential impacts - The Company is exposed to foreign exchange risk, with significant portions of cash, accounts receivable, and accounts payable denominated in foreign currencies (Canadian dollar, euro, British pound)[334](index=334&type=chunk) - Interest rate risk stems from investments with varying maturities and fixed-rate convertible notes[337](index=337&type=chunk) - Credit risk includes an allowance for credit losses of **$5.4 million** and exposure to a **$38.1 million** deferred cash payment from Arctic Wolf[338](index=338&type=chunk) [Item 4. Controls and Procedures](index=62&type=section&id=Item%204.%20Controls%20and%20Procedures) As of August 31, 2025, the Company's Chief Executive Officer and Chief Financial Officer concluded that its disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - The Company's disclosure controls and procedures were effective as of August 31, 2025[340](index=340&type=chunk) - No material changes were made to the Company's internal control over financial reporting during the three months ended August 31, 2025[341](index=341&type=chunk) [PART II - OTHER INFORMATION](index=63&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=63&type=section&id=Item%201.%20Legal%20Proceedings) Information regarding legal proceedings in which the Company is involved can be found in Note **10** to the Consolidated Financial Statements - Refer to Note **10** for details on legal proceedings[343](index=343&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=63&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The Company initiated a Normal Course Issuer Bid (NCIB) share buyback program on May 12, 2025, to repurchase up to **27,855,153** common shares, with **5,024,926** shares repurchased during July and August 2025 - The NCIB share buyback program commenced on May 12, 2025, authorizing the repurchase of up to **27,855,153** common shares[344](index=344&type=chunk)[345](index=345&type=chunk) Share Repurchase Program Activity | Period | Total Number of Shares Purchased | Average Price Paid per Share | | :----------------------- | :----------------------------- | :--------------------------- | | July 1, 2025 - July 31, 2025 | 2,387,128 | $4.19 | | Aug 1, 2025 - Aug 31, 2025 | 2,637,798 | $3.77 | | **Total (July-Aug 2025)** | **5,024,926** | **$3.97 (approx)** | | Maximum Shares Remaining | 20,260,268 | | [Item 5. Other Information](index=63&type=section&id=Item%205.%20Other%20Information) During the three months ended August 31, 2025, no officers or directors of the Company adopted or terminated Rule **10b5-1** or non-Rule **10b5-1** trading arrangements for the purchase or sale of the Company's common shares - No officers or directors adopted or terminated Rule **10b5-1** trading arrangements during the three months ended August 31, 2025[348](index=348&type=chunk) [Item 6. Exhibits](index=63&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form **10-Q**, including certifications from the Chief Executive Officer and Chief Financial Officer, as well as XBRL-related documents - Exhibits include CEO and CFO certifications (**31.1**, **31.2**, **32.1**, **32.2**) and various XBRL documents (**101**, **104**)[349](index=349&type=chunk)[350](index=350&type=chunk) [Signatures](index=65&type=section&id=Signatures) The report is duly signed on behalf of BlackBerry Limited by John Giamatteo, Chief Executive Officer, and Tim Foote, Chief Financial Officer, on September 25, 2025 - The report was signed by John Giamatteo (CEO) and Tim Foote (CFO) on September 25, 2025[354](index=354&type=chunk)