BLACKBERRY Ltd 10-Q, filed Sep 24, 2020

BLACKBERRY Ltd (BB)

10-Q 2020-09-24 For: 2020-08-31

Added on April 08, 2026

About this 10-Q

BLACKBERRY Ltd filed this 10-Q on September 24, 2020, covering the quarter ended August 31, 2020.

Headline figures

Quarter ended August 31, 2020, as reported in this filing, compared with the same period a year earlier where the filing states it.

Revenue: $259M; up 6.1% from $244M a year earlier
Net loss: $23M; compared with a net loss of $44M a year earlier
Diluted EPS: -$0.04; compared with -$0.10 a year earlier

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Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Shares	BB	New York Stock Exchange
Common Shares	BB	Toronto Stock Exchange


Large accelerated filer	x	Accelerated filer	☐
Non-accelerated filer	o	Smaller reporting company	☐
		Emerging growth company	☐


	As at
	August 31, 2020		February 29, 2020
Assets
Current
Cash and cash equivalents (note 3)	$	837	$	377
Short-term investments (note 3)	58		532
Accounts receivable, net of allowance of $14 and $9, respectively (note 1 and note 4)	240		215
Other receivables	25		14

Income taxes receivable	9		6
Other current assets (note 4)	50		52
	1,219		1,196
Restricted cash and cash equivalents (note 3)	49		49
Long-term investments (note 3)	33		32
Other long-term assets (note 4)	29		65

Operating lease right-of-use assets, net	96		124
Property, plant and equipment, net (note 4)	56		70
Goodwill (note 4)	848		1,437
Intangible assets, net (note 4)	841		915

	$	3,171	$	3,888
Liabilities
Current
Accounts payable	$	29	$	31
Accrued liabilities (note 4)	179		202
Income taxes payable (note 5)	9		18
Debentures (note 6)	610		606
Deferred revenue, current (note 11)	229		264
	1,056		1,121
Deferred revenue, non-current (note 11)	87		109
Operating lease liabilities	106		120
Other long-term liabilities (note 4)	8		9



	1,257		1,359
Commitments and contingencies (note 10)
Shareholders’ equity
Capital stock and additional paid-in capital
Preferred shares: authorized unlimited number of non-voting, cumulative, redeemable and retractable	—		—
Common shares: authorized unlimited number of non-voting, redeemable, retractable Class A common shares and unlimited number of voting common shares
Issued - 556,467,825 voting common shares (February 29, 2020 - 554,199,016 )	2,788		2,760
Deficit	(861)		(198)
Accumulated other comprehensive loss (note 9)	(13)		(33)
	1,914		2,529
	$	3,171	$	3,888


John S. Chen			Barbara Stymiest
Director			Director


	Three Months Ended August 31, 2020
	Capital Stock and Additional Paid-in Capital		Deficit		Accumulated Other Comprehensive Loss		Total
Balance as at May 31, 2020	$	2,777	$	(838)	$	(26)	$	1,913
Net loss	—		(23)		—		(23)
Other comprehensive income	—		—		13		13

Stock-based compensation	9		—		—		9
Shares issued:
Exercise of stock options	2		—		—		2


Balance as at August 31, 2020	$	2,788	$	(861)	$	(13)	$	1,914


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Three Months Ended August 31, 2019
	Capital Stock and Additional Paid-in Capital		Deficit		Accumulated Other Comprehensive Loss		Total
Balance as at May 31, 2019	$	2,708	$	(81)	$	(30)	$	2,597
Net loss	—		(44)		—		(44)
Other comprehensive loss	—		—		(5)		(5)

Stock-based compensation	14		—		—		14




Balance as at August 31, 2019	$	2,722	$	(125)	$	(35)	$	2,562


	Six Months Ended August 31, 2020
	Capital Stock and Additional Paid-in Capital		Deficit		Accumulated Other Comprehensive Loss		Total























Balance as at February 29, 2020	$	2,760	$	(198)	$	(33)	$	2,529
Net loss	—		(659)		—		(659)
Other comprehensive income	—		—		20		20
Cumulative impact of adoption of ASC 326	—		(4)		—		(4)
Stock-based compensation (note 7)	22		—		—		22
Shares issued:
Exercise of stock options (note 7)	3		—		—		3

Employee share purchase plan (note 7)	3		—		—		3
Balance as at August 31, 2020	$	2,788	$	(861)	$	(13)	$	1,914


	Six Months Ended August 31, 2019
	Capital Stock and Additional Paid-in Capital		Deficit		Accumulated Other Comprehensive Loss		Total























Balance as at February 28, 2019	$	2,688	$	(32)	$	(20)	$	2,636
Net loss	—		(79)		—		(79)
Other comprehensive loss	—		—		(15)		(15)
Cumulative impact of adoption of ASC 842	—		(14)		—		(14)
Stock-based compensation	31		—		—		31
Shares issued:
Exercise of stock options	1		—		—		1

Employee share purchase plan	2		—		—		2
Balance as at August 31, 2019	$	2,722	$	(125)	$	(35)	$	2,562


	Three Months Ended						Six Months Ended
	August 31, 2020		August 31, 2019		August 31, 2020		August 31, 2019
Revenue (note 11)	$	259	$	244	$	465	$	491
Cost of sales	60		68		123		138

Gross margin	199		176		342		353

Operating expenses
Research and development	57		62		114		133
Selling, marketing and administration	79		130		169		251
Amortization	46		48		92		97
Impairment of goodwill (note 3)	—		—		594		—
Impairment of long-lived assets (note 3)	21		2		21		2

Debentures fair value adjustment (note 6)	18		(23)		19		(51)

	221		219		1,009		432
Operating loss	(22)		(43)		(667)		(79)
Investment income (loss), net	(5)		—		(5)		3
Loss before income taxes	(27)		(43)		(672)		(76)
Provision for (recovery of) income taxes (note 5)	(4)		1		(13)		3


Net loss	$	(23)	$	(44)	$	(659)	$	(79)
Loss per share (note 8)
Basic	$	(0.04)	$	(0.08)	$	(1.18)	$	(0.14)
Diluted	$	(0.04)	$	(0.10)	$	(1.18)	$	(0.19)


	Cost Basis		Unrealized Gains		Unrealized Losses		Fair Value		Cash and Cash Equivalents		Short-term Investments		Long-term Investments		Restricted Cash
Bank balances	$	793	$	—	$	—	$	793	$	793	$	—	$	—	$	—
Other investments	33		—		—		33		—		—		33		—
	826		—		—		826		793		—		33		—
Level 1:

Equity securities	10		—		(8)		2		—		2		—		—


Level 2:

Term deposits and certificates of deposits	49		—		—		49		—		—		—		49
Bearer deposit notes	19		—		—		19		19		—		—		—
Commercial paper	62		—		—		62		25		37		—		—
Non-U.S. promissory notes	19		—		—		19		—		19		—		—




	149		—		—		149		44		56		—		49





	$	985	$	—	$	(8)	$	977	$	837	$	58	$	33	$	49


	Six Months Ended
	August 31, 2020
Beginning balance as of February 29, 2020	$	9
Impact of adopting ASC 326	4
Current period provision for expected credit losses	1


Ending balance of the allowance for credit loss as at August 31, 2020	$	14


	As at August 31, 2020
	Cost		Accumulated Amortization		Net Book Value
Acquired technology	$	1,022	$	676	$	346
Intellectual property	497		292		205
Other acquired intangibles	494		204		290
	$	2,013	$	1,172	$	841


	As at February 29, 2020
	Cost		Accumulated Amortization		Net Book Value
Acquired technology	$	1,019	$	636	$	383
Intellectual property	489		275		214
Other acquired intangibles	494		176		318
	$	2,002	$	1,087	$	915


	Six Months Ended
	August 31, 2020		August 31, 2019
Cash flows from operating activities


Net loss	$	(659)	$	(79)
Adjustments to reconcile net loss to net cash used in operating activities:
Amortization	100		107

Stock-based compensation	22		31
Impairment of goodwill	594		—
Impairment of long-lived assets	21		2

Non-cash consideration received from contracts with customers	—		(8)

Debentures fair value adjustment (note 6)	19		(51)


Operating leases	(2)		(12)
Other	(3)		5
Net changes in working capital items
Accounts receivable, net	(29)		11
Other receivables	(11)		1

Income taxes receivable	(3)		(1)
Other assets	43		(10)
Accounts payable	(2)		(11)
Accrued liabilities	(21)		(26)
Income taxes payable	(12)		1
Deferred revenue	(57)		(7)
Net cash used in operating activities	—		(47)
Cash flows from investing activities
Acquisition of long-term investments	(1)		—

Acquisition of property, plant and equipment	(3)		(6)

Acquisition of intangible assets	(16)		(16)
Business acquisitions, net of cash acquired	—		1
Acquisition of short-term investments	(320)		(553)


	Carrying Amount
Carrying amount as at February 29, 2020	1,437

Goodwill impairment charge (see Note 3)	(594)
Effect of foreign exchange on non-U.S. dollar denominated goodwill	5
Carrying amount as at August 31, 2020	$	848


	Three Months Ended									Six Months Ended
	August 31, 2020			August 31, 2019			August 31, 2020			August 31, 2019
North America ⁽¹⁾	$	195		$	179		345			339
Europe, Middle East and Africa	48			47			89			108
Other regions	16			18			31			44

Total	$	259		$	244		$	465		$	491

North America ⁽¹⁾	75.3		%	73.4		%	74.2		%	69.0		%
Europe, Middle East and Africa	18.5		%	19.3		%	19.1		%	22.0		%
Other regions	6.2		%	7.3		%	6.7		%	9.0		%
Total	100.0		%	100.0		%	100.0		%	100.0		%


	Accounts Receivable		Deferred Revenue		Deferred Commissions
Opening balance as at February 29, 2020	$	267	$	373	$	28
Increases due to invoicing of new or existing contracts, associated contract acquisition costs, or other	420		245		14
Decrease due to payment, fulfillment of performance obligations, or other	(429)		(302)		(19)

Decrease, net	(9)		(57)		(5)
Closing balance as at August 31, 2020	$	258	$	316	$	23


	Capital Stock and Additional Paid-in Capital
	Stock Outstanding (000s)	Amount
Common shares outstanding as at February 29, 2020	554,199	$	2,760
Exercise of stock options	911	3
Common shares issued for restricted share unit settlements	559	—
Stock-based compensation	—	22






Common shares issued for employee share purchase plan	799	3
Common shares outstanding as at August 31, 2020	556,468	$	2,788


	Foreign Currency Cumulative Translation Adjustment		Accumulated Net Unrealized Losses on Cash Flow Hedges		Other Post-Employment Benefit Obligations		Change in fair value from instrument-specific credit risk on Debentures		Total
AOCL as at February 29, 2020	$	(9)	$	(1)	$	(1)	$	(22)	$	(33)
Other comprehensive income before reclassification	3		$	1	$	—	14		$	18
Amounts reclassified from AOCL into net loss	—		2		—		—		2
Change in cumulative comprehensive income (loss) for the period	3		3		—		14		20
AOCL as at August 31, 2020	$	(6)	$	2	$	(1)	$	(8)	$	(13)


	As at August 31, 2020
	Less than 12 Months		12 to 24 Months		Thereafter		Total
Remaining performance obligations	$	239	$	85	$	32	$	356


	For the Three Months Ended (in millions, except for share and per share amounts)
	August 31, 2020		August 31, 2019		Change
Revenue	$	259	$	244	$	15
Gross margin	199		176		23
Operating expenses	221		219		2
Investment loss, net	(5)		—		(5)
Loss before income taxes	(27)		(43)		16
Provision for (recovery of) income taxes	(4)		1		(5)
Net loss	$	(23)	$	(44)	$	21
Loss per share - reported
Basic	$	(0.04)	$	(0.08)
Diluted	$	(0.04)	$	(0.10)

Weighted-average number of shares outstanding (000’s)
Basic ⁽¹⁾	558,882		552,343
Diluted ⁽²⁾	558,882		612,843


For the Three Months Ended (in millions)	August 31, 2020			August 31, 2019
Revenue	$	259		$	244
Software deferred revenue acquired ⁽¹⁾	7			17
Adjusted revenue	$	266		$	261

Gross margin	$	199		$	176
Software deferred revenue acquired ⁽¹⁾	7			17

Restructuring charges	—			1
Stock compensation expense	1			1
Adjusted gross margin	$	207		$	195

Gross margin %	76.8		%	72.1		%
Software deferred revenue acquired ⁽¹⁾	0.6		%	1.8		%

Restructuring charges	—		%	0.4		%
Stock compensation expense	0.4		%	0.4		%
Adjusted gross margin %	77.8		%	74.7		%


For the Three Months Ended (in millions)	August 31, 2020		May 31, 2020		August 31, 2019
Operating expense	$	221	$	788	$	219
Restructuring charges	1		1		—
Stock compensation expense	8		12		13
Debenture fair value adjustment ⁽¹⁾	18		1		(23)
Software deferred commission expense acquired	(3)		(3)		(4)
Acquired intangibles amortization	32		33		36
Business acquisition and integration costs	—		—		2
Goodwill impairment charge	—		594		—
LLA impairment charge	21		—		2


Adjusted operating expense	$	144	$	150	$	193


For the Three Months Ended (in millions, except per share amounts)	August 31, 2020					August 31, 2019
			Basic earnings (loss) per share			Basic earnings (loss) per share
Net loss	$	(23)	$(0.04)	$	(44)	$(0.08)
Software deferred revenue acquired	7			17

Restructuring charges	1			1
Stock compensation expense	9			14
Debenture fair value adjustment	18			(23)
Software deferred commission expense acquired	(3)			(4)
Acquired intangibles amortization	32			36
Business acquisition and integration costs	—			2

LLA impairment charge	21			2



Adjusted net income	$	62	$0.11	$	1	$0.00


For the six months ended (in millions)	August 31, 2020			August 31, 2019
Revenue	$	465		$	491
Software deferred revenue acquired ⁽¹⁾	15			37
Adjusted revenue	$	480		$	528

Gross margin	$	342		$	353
Software deferred revenue acquired ⁽¹⁾	15			37

Restructuring charges	—			2
Stock compensation expense	3			2
Adjusted gross margin	$	360		$	394

Gross margin %	73.5		%	71.9		%
Software deferred revenue acquired ⁽¹⁾	0.9		%	1.9		%

Restructuring charges	—		%	0.4		%
Stock compensation expense	0.6		%	0.4		%
Adjusted gross margin %	75.0		%	74.6		%

Operating expense	$	1,009		$	432
Restructuring charges	2			—
Stock compensation expense	20			29
Debenture fair value adjustment ⁽²⁾	19			(51)
Software deferred commission expense acquired	(6)			(9)
Acquired intangibles amortization	65			71
Business acquisition and integration costs	—			3
Goodwill impairment charge	594			—
LLA impairment charge	21			2


Adjusted operating expense	$	294		$	387


For the six months ended (in millions, except per share amounts)	August 31, 2020						August 31, 2019
			Basic earnings (loss) per share				Basic earnings (loss) per share
Net loss	$	(659)	$	(1.18)	$	(79)	$	(0.14)
Software deferred revenue acquired	15				37

Restructuring charges	2				2
Stock compensation expense	23				31
Debenture fair value adjustment	19				(51)
Software deferred commission expense acquired	(6)				(9)
Acquired intangibles amortization	65				71
Business acquisition and integration costs	—				3
Goodwill impairment charge	594				—
LLA impairment charge	21				2


Acquisition valuation allowance	—				(1)
Adjusted net income	$	74	$0.13		$	6	$0.01


	For the Three Months Ended (in millions)
	August 31, 2020			August 31, 2019			Change
Revenue by Product and Service
Software and Services	$	151		$	168		$	(17)

Licensing and Other	108			76			32

	$	259		$	244		$	15

% Revenue by Product and Service
Software and Services	58.3		%	68.9		%

Licensing and Other	41.7		%	31.1		%

	100.0		%	100.0		%


	For the Three Months Ended (in millions)
	Included in Operating Expense
	August 31, 2020		August 31, 2019		Change
Property, plant and equipment	$	5	$	4	$	1
Intangible assets	41		44		(3)
Total	$	46	$	48	$	(2)

	Included in Cost of Sales
	August 31, 2020		August 31, 2019		Change
Property, plant and equipment	$	1	$	2	$	(1)
Intangible assets	3		4		(1)
Total	$	4	$	6	$	(2)


	For the six months ended
	(in millions, except for share and per share amounts)
	August 31, 2020		August 31, 2019		Change
Revenue	$	465	$	491	$	(26)
Gross margin	342		353		(11)
Operating expenses	1,009		432		577
Investment income (loss), net	(5)		3		(8)
Loss before income taxes	(672)		(76)		(596)
Provision for (recovery of) income taxes	(13)		3		(16)


Net loss	$	(659)	$	(79)	$	(580)
Loss per share - reported
Basic	$	(1.18)	$	(0.14)	$	(1.04)
Diluted	$	(1.18)	$	(0.19)	$	(0.99)

Weighted-average number of shares outstanding (000’s)
Basic ⁽¹⁾	558,365		552,096
Diluted ⁽²⁾	558,365		612,596


	For the six months ended
	(in millions)
	August 31, 2020			August 31, 2019			Change
Revenue by Product and Service
Software and Services	$	299		$	336		$	(37)

Licensing and Other	166			155			11

	$	465		$	491		$	(26)

% Revenue by Product and Service
Software and Services	64.3		%	68.4		%

Licensing and Other	35.7		%	31.6		%

	100.0		%	100.0		%


	(in millions, except per share data)
	Fiscal Year 2021						Fiscal Year 2020										Fiscal Year 2019
	Second Quarter		First Quarter		Fourth Quarter		Third Quarter		Second Quarter		First Quarter		Fourth Quarter		Third Quarter
Revenue	$	259	$	206	$	282	$	267	$	244	$	247	$	255	$	226
Gross margin	199		143		212		198		176		177		206		170
Operating expenses	221		788		253		227		219		213		178		112
Income (loss) before income taxes	(27)		(645)		(42)		(30)		(43)		(33)		32		60
Provision for (recovery of) income taxes	(4)		(9)		(1)		2		1		2		(19)		1
Net income (loss)	$	(23)	$	(636)	$	(41)	$	(32)	$	(44)	$	(35)	$	51	$	59

Earnings (loss) per share
Basic earnings (loss) per share	$	(0.04)	$	(1.14)	$	(0.07)	$	(0.06)	$	(0.08)	$	(0.06)	$	0.09	$	0.11
Diluted earnings (loss) per share	$	(0.04)	$	(1.14)	$	(0.07)	$	(0.07)	$	(0.10)	$	(0.09)	$	0.08	$	(0.01)


	As at (in millions)
	August 31, 2020		February 29, 2020		Change
Cash and cash equivalents	$	837	$	377	$	460
Restricted cash	49		49		—
Short-term investments	58		532		(474)
Long-term investments	33		32		1
Cash, cash equivalents, and investments	$	977	$	990	$	(13)


	(in millions)
	Total		Less than One Year		One to Three Years		Four to Five Years		Greater than Five Years
Operating lease obligations	$	148	$	36	$	58	$	35	$	19
Purchase obligations and commitments	192		113		67		12		—
Debt interest and principal payments	615		615		—		—		—
Total	$	955	$	764	$	125	$	47	$	19


Exhibit Number						Description of Exhibit














4.1						Indenture dated September 1, 2020 (incorporated by reference to Exhibit 4.1 to the current report on Form 8-K filed by the Company on September 2, 2020)
4.2						First Supplemental Indenture dated August 28, 2020 (incorporated by reference to Exhibit 4.2 to the current report on Form 8-K filed by the Company on September 2, 2020)
4.3						Second Supplemental Indenture dated August 28, 2020 (incorporated by reference to Exhibit 4.3 to the current report on Form 8-K filed by the Company on September 2, 2020)
10.1						Consent Agreement with Hamblin Watsa Investment Counsel Ltd. dated July 21, 2020 (incorporated by reference to Exhibit 99.2 to the current report on Form 8-K filed by the Company on August 24, 2020)
10.2						Subscription Agreement dated August 31, 2020 (incorporated by reference to Exhibit 10.1 to the current report on Form 8-K filed by the Company on September 2, 2020)
31.1*						Certification of Chief Executive Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a)
31.2*						Certification of Chief Financial Officer pursuant to Securities Exchange Act of 1934 Rule 13a-14(a)
32.1†						Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
32.2†						Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



101*						XBRL Instance Document – the document does not appear in the interactive data file because its XBRL tags are embedded within the inline XBRL document
101*						Inline XBRL Taxonomy Extension Schema Document
101*						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101*						Inline XBRL Taxonomy Extension Definition Linkbase Document
101*						Inline XBRL Taxonomy Extension Label Linkbase Document
101*						Inline XBRL Taxonomy Extension Presentation Linkbase Document
104						Cover Page Interactive Data File – formatted as Inline XBRL and contained in Exhibit 101


Date: September 24, 2020			/s/ John Chen
			Name: John Chen
			Title: Chief Executive Officer


Date: September 24, 2020			/s/ Steve Rai
			Name: Steve Rai
			Title: Chief Financial Officer