Business Context and Reporting Period
Company: BlackBerry Limited
Filing Type: Form 10-Q (Quarterly Report)
Reporting Period: Three months ended May 31, 2025 (First Quarter of Fiscal 2026)
Business Overview: BlackBerry operates three reportable segments: QNX (embedded software for automotive and industrial markets), Secure Communications (enterprise security and critical event management), and Licensing (intellectual property monetization). The company recently completed the sale of its Cylance cybersecurity business, which is now reported as discontinued operations.
Key Financial Metrics
| Metric (in millions, except per share) | Q1 2026 (May 31, 2025) | Q1 2025 (May 31, 2024) |
|---|---|---|
| Revenue | $121.7 | $123.4 |
| Gross Margin | $90.3 (74.2%) | $90.0 (72.9%) |
| Operating Income | $2.0 | $(12.9) |
| Net Income (Loss) | $1.9 | $(41.4) |
| Diluted EPS | $0.00 | $(0.07) |
| Adjusted EBITDA (Non-GAAP) | $16.4 | $10.5 |
| Cash, Cash Equivalents & Investments | $381.9 | $159.7 (End of Period) |
| Long-Term Debt (Carrying Value) | $195.6 | N/A |
| Net Cash Used in Operating Activities | $(18.0) | $(15.1) |
Material Changes vs. Prior Period
- Profitability Turnaround: The company reported a net income of $1.9 million, a significant improvement from a net loss of $41.4 million in the prior year. This shift was driven by a $14.6 million reduction in operating expenses and improved gross margins, partially offset by a slight revenue decline.
- Segment Performance:
- QNX: Revenue increased $4.3 million to $57.5 million, driven by higher development seat and royalty revenue. Adjusted EBITDA rose to $12.7 million.
- Secure Communications: Revenue decreased $4.7 million to $59.5 million due to lower Secusmart and UEM product revenue, though Adjusted EBITDA improved slightly to $9.6 million.
- Licensing: Revenue declined $1.3 million to $4.7 million.
- Discontinued Operations: The prior year's loss included a $24.9 million loss from discontinued operations (Cylance), which is no longer part of continuing operations following its sale in the fourth quarter of fiscal 2025.
- Expense Reduction: Operating expenses decreased 14.2% year-over-year, primarily due to lower restructuring charges ($2.9 million vs. $7.3 million), reduced impairment charges, and benefits from government claims (Strategic Innovation Fund).
Guidance, Outlook, and Risks
Management Commentary and Guidance
- Q2 2026 Outlook:
- Revenue: Expected to be in the range of $115 million to $125 million.
- Adjusted EBITDA: Expected to be in the range of $8 million to $14 million.
- Operating Cash Flow: Expected usage of $5 million to $15 million.
- Fiscal 2026 Full Year Outlook:
- Revenue: Raised to $508 million to $538 million (previously $504M-$534M) due to stronger Secure Communications performance.
- Adjusted EBITDA: Raised to $72 million to $87 million (previously $69M-$84M).
- Operating Cash Flow: Management expects to generate positive operating cash flow in the second half of the fiscal year.
Risks and Contingencies
- Liquidity of Investments: Approximately $58.8 million of investments are in non-marketable equity securities, including shares of Arctic Wolf received for the Cylance sale, which are illiquid and cannot be readily sold.
- Legal Proceedings: The company is involved in ongoing litigation, including a Canadian employment class action settled in principle for approximately $4.0 million CAD (subject to court approval) and various patent infringement claims.
- Customer Concentration: One customer accounted for 13% of revenue in the quarter. Two customers comprised more than 10% of accounts receivable.
- Foreign Exchange: Significant portions of expenses are in Canadian dollars while revenue is largely in U.S. dollars, creating currency exposure.
Investor Verification Checklist
- Revenue Quality: Verify the sustainability of the QNX revenue growth, specifically the "development seat" and royalty components that drove the beat.
- Working Capital Trends: Monitor the increase in Days Sales Outstanding (DSO) to 115 days from 102 days, indicating slower collections despite a large receivable collection from the Government of Malaysia.
- Non-GAAP Reconciliations: Review the reconciliation of Adjusted EBITDA to GAAP Net Income, noting the significant impact of stock-based compensation ($5.7M) and restructuring charges ($2.9M) excluded from the non-GAAP metric.
- Share Repurchases: Confirm the execution of the Normal Course Issuer Bid (NCIB), under which the company repurchased 2.6 million shares for $10.0 million in the quarter.
- Arctic Wolf Exposure: Assess the risk associated with the $38.6 million delayed cash payment and illiquid equity stake from the Cylance sale.