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Revenue and Segment Disclosures
 3 Months Ended
May 31, 2023
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 Chief Operating Decision Maker (“CODM”) for making decisions and assessing performance as a source of the Company’s reportable operating segments. The CODM, who is the Executive Chair and 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, 2023 and May 31, 2022:
 For the Three Months Ended
CybersecurityIoTLicensing and OtherSegment Totals
May 31,May 31,May 31,May 31,
20232022202320222023202220232022
Segment revenue$93 $113 $45 $51 $235 $4 $373 $168 
Segment cost of sales37 53 9 8 147 2 193 63 
Segment gross margin (1)
$56 $60 $36 $43 $88 $2 $180 $105 
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(1) A reconciliation of total segment gross margin to consolidated totals is set forth below.
Cybersecurity consists of BlackBerry® UEM and Cylance® solutions (collectively BlackBerry Spark®), BlackBerry® AtHoc® and BlackBerry® SecuSUITE®. The Company’s Cylance artificial intelligence and machine learning-based platform consists of CylanceENDPOINT™, CylanceGUARD®, CylanceEDGE™, CylanceINTELLIGENCE™ and other cybersecurity applications. The BlackBerry UEM Suite includes the Company’s 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. Other consists of the Company’s legacy service access fees (“SAF”) business, which ceased operations on January 4, 2022.
The following table reconciles total segment gross margin for the three months ended May 31, 2023 and May 31, 2022 to the Company’s consolidated totals:
 Three Months Ended
May 31, 2023May 31, 2022
Total segment gross margin$180 $105 
Adjustments (1):
Less: Stock compensation1 1 
Less:
Research & development54 53 
Selling, marketing and administration 99 82 
Amortization15 27 
Debentures fair value adjustment22 (46)
Litigation settlement— 165 
Investment income (loss), net(3)1 
Consolidated loss before income taxes$(8)$(178)
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(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. The Malikie Transaction will not impact customers’ right to use any of the Company’s products, solutions or services.
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. The Company also recognized $1 million in other receivables, which has been included in accounts receivable on the Company’s balance sheets as at May 31, 2023 and $43 million in long-term receivables, which has been included in other long-term assets on the Company’s balance sheets as at May 31, 2023, relating to the $30 million in future cash to be paid no later than the third anniversary of closing and the future royalties that were not constrained as discussed below. The financing component recorded on the patent sale was $15 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, 2023May 31, 2022
North America (1)
$317 $89 
Europe, Middle East and Africa37 60 
Other regions19 19 
Total $373 $168 
North America (1)
85.0 %53.0 %
Europe, Middle East and Africa9.9 %35.7 %
Other regions5.1 %11.3 %
Total 100.0 %100.0 %
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(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, 2023May 31, 2022
Products and services transferred over time$85 $97 
Products and services transferred at a point in time288 71 
Total$373 $168 
Revenue contract balances
The following table sets forth the activity in the Company’s revenue contract balances for the three months ended May 31, 2023:
Accounts and Other ReceivableDeferred RevenueDeferred Commissions
Opening balance as at February 28, 2023$120 $215 $17 
Increases due to invoicing of new or existing contracts, associated contract acquisition costs, or other396 127 6 
Decrease due to payment, fulfillment of performance obligations, or other(347)(139)(6)
Increase (decrease), net49 (12)— 
Closing balance as at May 31, 2023$169 $203 $17 
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, 2023 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 future royalty revenues from the patent sale to Malikie, which have been constrained based on the Company’s accounting policies and critical accounting estimates as described in Note 1 and under “Patent Sale” in this Note 10.
As at May 31, 2023
Less than 12 Months12 to 24 MonthsThereafterTotal
Remaining performance obligations$177 $11 $15 $203 
Revenue recognized for performance obligations satisfied in prior periods
For the three months ended May 31, 2023, $9 million of revenue was recognized relating to performance obligations satisfied in a prior period as a result of certain variable consideration no longer being subject to constraint (three months ended May 31, 2022 - nil).
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, 2023February 28, 2023
Property, Plant and Equipment, Intangible Assets, Operating Lease ROU Assets and GoodwillTotal AssetsProperty, Plant and Equipment, Intangible Assets, Operating Lease ROU Assets and GoodwillTotal Assets
Canada$94 $323 $98 $375 
United States735 1,262 742 1,208 
Other27 89 27 96 
$856 $1,674 $867 $1,679 
Information About Major Customers
There was one customer that comprised 58% of the Company’s revenue in the three months ended May 31, 2023 due to the completed Malikie Transaction (three months ended May 31, 2022 - one customer that comprised 15% of the Company’s revenue