BlackBerry Limited — FY2024 Form 10-K
Reporting period: Fiscal year ended February 29, 2024; the final quarter ended the same date. Figures are in U.S. dollars unless noted. This annual filing reports both full-year and fourth-quarter results.
Business context
BlackBerry sells cybersecurity and endpoint-management software, embedded IoT software—particularly QNX automotive technology—and intellectual-property licensing. It reports three segments: Cybersecurity, IoT, and Licensing and Other. The company announced plans to separate Cybersecurity and IoT into independently operated businesses; it abandoned an earlier plan for an IoT subsidiary IPO. John Giamatteo became CEO during the year.
Financial performance and liquidity
| Metric | FY2024 | FY2023 |
|---|---|---|
| Revenue | $853 million | $656 million |
| Gross profit; gross margin | $520 million; 61.0% | $419 million; 63.9% |
| Operating loss | $125 million | $725 million |
| Net loss; basic loss per share | $130 million; $0.22 | $734 million; $1.27 |
| Adjusted net income (non-GAAP) | $31 million | Adjusted net loss of $103 million |
| Cash used in operating activities | $3 million | $263 million |
| Free cash flow (usage; non-GAAP) | $(10) million | $(270) million |
| Cash, cash equivalents and investments | $298 million | $487 million |
| Working capital | $152 million | $14 million |
Revenue rose 30%, but the comparison was substantially affected by the Malikie patent sale: BlackBerry recognized $218 million of revenue and $147 million of cost of sales in FY2024. Excluding that transaction, the underlying revenue picture is materially different. Cybersecurity revenue fell to $378 million from $418 million; IoT increased to $215 million from $206 million; Licensing and Other rose to $260 million from $32 million, primarily because of the patent sale. The lower consolidated gross-margin percentage reflected segment mix and the patent transaction.
Operating expenses fell to $645 million from $1.144 billion, chiefly because FY2023 included larger goodwill and long-lived-asset impairments and a $165 million litigation settlement. FY2024 included a $35 million goodwill impairment in the BlackBerry Spark reporting unit and $15 million of long-lived-asset impairment. Adjusted EBITDA was $57 million, compared with negative $71 million in FY2023; adjusted measures are non-GAAP and may not be comparable across companies.
Fourth-quarter revenue was $173 million versus $151 million a year earlier; gross margin was $129 million (74.6%) versus $100 million (66.2%). GAAP net loss was $56 million versus $495 million, while adjusted net income was $16 million versus an adjusted net loss of $13 million. The quarter included the $35 million goodwill impairment.
Cash, cash equivalents and investments declined by $189 million year over year, mainly reflecting debt repayments and working-capital movements. Accounts receivable increased to $199 million from $120 million, and days sales outstanding rose to 100 from 75. Cash used in operating activities improved from $263 million to $3 million; management attributed much of the comparison to working capital and the prior-year settlement payment. The company had $200 million principal amount of 3.00% convertible notes due in 2029, recorded at $194 million net of issuance costs. The notes are convertible initially at $3.88 per share, potentially into approximately 52 million shares. Current assets were $508 million and current liabilities $356 million. Contractual obligations totaled $344 million, including $230 million of note principal and interest.
Material changes, outlook and risks
- Patent transaction: Malikie paid $170 million at closing, with another $30 million due by the third anniversary and potential royalties of up to $700 million. BlackBerry recognized $23 million of the estimated future royalty consideration; $210 million remained constrained under revenue-recognition rules. Future royalties are uncertain.
- Cybersecurity momentum: Fourth-quarter Cybersecurity ARR was $280 million, down from $298 million a year earlier, primarily due to customer churn in BlackBerry Spark. Dollar-based net retention was 85%. Management expected ARR to be flat sequentially in Q1 FY2025.
- IoT indicators: QNX royalty backlog was estimated at $815 million, up from $640 million. The company cautions that this estimate depends on projected customer volumes and is not a guarantee of future revenue.
- FY2025 guidance: Total revenue of $586–$616 million; Cybersecurity revenue of $350–$365 million; IoT revenue of $220–$235 million; and Licensing and Other revenue of about $4 million per quarter. Management forecast non-GAAP EPS of negative $0.02 to negative $0.06 and adjusted EBITDA of break-even to $10 million for the year, with positive non-GAAP EPS and cash flow expected in Q4. Q1 guidance was revenue of $130–$138 million, non-GAAP EPS of negative $0.04 to negative $0.06, and adjusted EBITDA of negative $15–$25 million. Management expected increased cash usage in Q1 and year-over-year cash-flow improvement for FY2025 after adjusting for the patent sale.
- Restructuring and separation: Management reported approximately $105 million of annualized expenditure reductions during FY2024 and was pursuing further run-rate reductions. It cited approximately $110 million average quarterly non-GAAP operating expenses for FY2025. Separation execution may create disruption, duplicated corporate costs, personnel-retention challenges, and customer or partner uncertainty.
- Principal risks: Customer churn and renewals, intense competition and pricing pressure, delayed automotive programs, macroeconomic and auto-industry disruption, cybersecurity incidents, privacy and regulatory requirements, foreign-exchange exposure, and intellectual-property disputes. The company reported no cybersecurity incident identified as materially affecting or reasonably likely to materially affect its business during the periods covered.
- Impairment and contingencies: The Intellectual Property reporting unit’s fair value exceeded carrying value by about 5%; $97 million of related goodwill was identified as at risk. No material litigation claims were assessed as both probable and reasonably estimable, but proceedings remain, including a certified Ontario securities class action and an employment class action set for trial in June 2025. A $17 million Strategic Innovation Fund amount may be repayable if specified conditions are not met; repayment was not considered probable.
Important facts for investors to verify
- How much FY2024 and projected FY2025 revenue, margin and cash flow depend on the one-time Malikie transaction and subsequent royalty receipts.
- Whether Cybersecurity ARR, retention and billings stabilize, and whether customer churn continues.
- Whether QNX backlog converts into shipments and recognized royalties on the timing and volumes assumed.
- Progress against separation, cost-reduction and FY2025 profitability and cash-flow targets, including the basis of non-GAAP measures.
- Cash conversion, receivables collection and liquidity after debt service; potential dilution from the convertible notes.
- Further impairment exposure, particularly the Intellectual Property reporting unit, and developments in litigation and the potentially repayable SIF funding.
PwC issued an unqualified audit opinion on the financial statements and concluded internal control over financial reporting was effective. The goodwill impairment test for BlackBerry Spark was identified as a critical audit matter.