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Research In Motion Reports Second Quarter Results

Waterloo, ON: Research In Motion Limited (RIM) (Nasdaq: RIMM; TSX: RIM), a world leader in the mobile communications market, today reported second quarter results for the three months ended August 29, 2009 (all figures in U.S. dollars and U.S. GAAP, except where indicated).

Revenue for the second quarter of fiscal 2010 was $3.53 billion, up 3% from $3.42 billion in the previous quarter and up 37% from $2.58 billion in the same quarter of last year. The revenue breakdown for the quarter was approximately 81% for devices, 14% for service, 2% for software and 3% for other revenue.   During the quarter, RIM shipped approximately 8.3 million devices.

Approximately 3.8 million net new BlackBerry® subscriber accounts were added in the quarter.  At the end of the quarter, the total BlackBerry subscriber account base was approximately 32 million. 

"We are pleased to report a strong second quarter with excellent financial performance, successful product launches and accelerating growth in international markets and new market segments," said Jim Balsillie, Co-CEO at Research In Motion. "RIM is entering the second half of the fiscal year and approaching the holiday buying season with an impressive product portfolio, continuing business momentum and strong marketing support from our partners around the world."

GAAP net income for the quarter was $475.6 million, or $0.83 per share diluted, compared with GAAP net income of $643.0 million, or $1.12 per share diluted, in the prior quarter and net income of $495.5 million, or $0.86 per share diluted, in the same quarter last year.  Adjusted net income for the second quarter was $588.4 million, or $1.03 per share diluted, reflecting a tax rate of 28.5%.  Adjusted net income and adjusted diluted earnings per share exclude the impact of a charge of $112.8 million for the payment of the settlement of all outstanding worldwide patent litigation with Visto Corporation, the details of which were disclosed in a press release dated July 16, 2009.  This charge and its related impacts on net income and diluted EPS are summarized in the table below.

Reconciliation of GAAP net income to adjusted net income

(United States dollars, in thousands except per share data)

   
For the quarter ended August 29, 2009
 
   
Net Income
Diluted EPS
 
As reported  
$ 475,621
$ 0.83
       
Adjustment:      
       
Litigation, net of income tax1  
112,809
0.20
 
Adjusted  
$ 588,430
$ 1.03
 

Note: Adjusted net income and adjusted diluted earnings per share do not have any standardized meaning prescribed by GAAP and thus are not comparable to similarly titled measures presented by other issuers. The company believes that the presentation of adjusted net income and adjusted diluted earnings per share enables the Company and its shareholders to better assess RIM's operating results relative to its operating results in prior periods and improves the comparability of the information presented. Investors should consider these non-GAAP financial measures in the context of RIM's GAAP results.

1 In the second quarter of fiscal 2010, the Company settled all outstanding worldwide litigation with Visto Corporation for a total payment of $267.5 million of which $163.8 million ($112.8 million net of tax) was expensed as a litigation charge in the second quarter of fiscal 2010.  The remainder of the payment was recorded as intangible assets.  Further details of the settlement were disclosed in a press release dated July 16, 2009.

Revenue for the third quarter of fiscal 2010 ending November 28, 2009 is expected to be in the range of $3.60-$3.85 billion.  Gross margin for Q3 is expected to be approximately 43%.  Net subscriber account additions in the third quarter are expected to be in the range of 4.0-4.3 million.  Earnings per share for the third quarter are expected to be in the range of $1.00-$1.08 per share diluted.

The total of cash, cash equivalents, short-term and long-term investments was $2.50 billion as at August 29, 2009, compared to $2.42 billion at the end of the previous quarter, an increase of $78.5 million over the prior quarter. Cash flow from operations in Q2 was approximately $564 million which was offset primarily by capital expenditures of approximately $307 million and intangible asset purchases of approximately $179 million.

A conference call and live webcast will be held beginning at 5 pm ET, September 24, 2009, which can be accessed by dialing 800-733-7571 (North America), 416-915-5761 (outside North America). The replay of the company’s Q2 conference call can be accessed after 7 pm ET, September 24, 2009 until midnight ET, October 8, 2009.  It can be accessed by dialing 416-640-1917 and entering passcode 21289982#.   The conference call will also appear on the RIM website live at 5 pm ET and will be archived at http://www.rim.com/investors/events/index.shtml.

About Research In Motion (RIM)
Research In Motion is a leading designer, manufacturer and marketer of innovative wireless solutions for the worldwide mobile communications market. Through the development of integrated hardware, software and services that support multiple wireless network standards, RIM provides platforms and solutions for seamless access to time-sensitive information including email, phone, SMS messaging, internet and intranet-based applications. RIM technology also enables a broad array of third party developers and manufacturers to enhance their products and services with wireless connectivity. RIM’s portfolio of award-winning products, services and embedded technologies are used by thousands of organizations around the world and include the BlackBerry® wireless platform, the RIM Wireless Handheld™ product line, software development tools, radio-modems and software/hardware licensing agreements. Founded in 1984 and based in Waterloo, Ontario, RIM operates offices in North America, Europe and Asia Pacific. RIM is listed on the Nasdaq Stock Market (NASDAQ: RIMM) and the Toronto Stock Exchange (TSX: RIM). For more information, visit www.rim.com or www.blackberry.com.

This news release contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995 and Canadian securities laws, including statements relating to RIM's revenue, gross margin, earnings, net subscriber account additions and operating expense expectations for the third quarter of fiscal 2010, customer demand, penetration of new markets, product initiatives and anticipated growth.  The terms and phrases “accelerating”, “approaching”, “continuing business momentum”, “strong marketing support”, “expected”, and similar terms and phrases are intended to identify these forward-looking statements.  Forward-looking statements are based on estimates and assumptions made by RIM in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors that RIM believes are appropriate in the circumstances including but not limited to general economic conditions, product pricing levels and competitive intensity, supply constraints and new product introductions.  Many factors could cause RIM's actual results, performance or achievements to differ materially from those expressed or implied by the forward-looking statements, including, without limitation: reduced spending by customers and other risks relating to the uncertainty of economic and geopolitical conditions; risks relating to RIM's intellectual property rights; RIM's ability to enhance current products and develop new products and services; RIM's reliance on carrier partners, third-party manufacturers, third-party network developers and suppliers; risks relating to the efficient and uninterrupted operation of RIM’s network operations centre; risks related to RIM’s international operations; and intense competition.  These risk factors and others relating to RIM are discussed in greater detail in the "Risk Factors" section of RIM's Annual Information Form, which is included in its Annual Report on Form 40-F and RIM’s MD&A (copies of which filings may be obtained at www.sedar.com or www.sec.gov).  These factors should be considered carefully, and readers should not place undue reliance on RIM's forward-looking statements.  RIM has no intention and undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

The BlackBerry and RIM families of related marks, images and symbols are the exclusive properties and trademarks of Research In Motion Limited.  RIM, Research In Motion and BlackBerry are registered with the U.S. Patent and Trademark Office and may be pending or registered in other countries.  All other brands, product names, company names, trademarks and service marks are the properties of their respective owners.

Research In Motion Limited
Incorporated under the Laws of Ontario
(United States dollars, in thousands except per share data) (unaudited)

Consolidated Statements of Operations

  For the three months ended   For the six months ended
 
August 29, 2009
May 30, 2009
August 30, 2008
 
August 29, 2009
August 30, 2008

 
             
Revenue
$ 3,525,692
$ 3,423,510
$ 2,577,330
 
$ 6,949,202
$ 4,819,895
Cost of sales
1,971,296
1,931,985
1,270,473
 
3,903,281
2,375,681

 
Gross margin
1,554,396
1,491,525
1,306,857
 
3,045,921
2,444,214

 
Gross Margin %
44.1%
43.6%
50.7%
 
43.8%
50.7%
 
 
 
 
 
 
 
Expenses
 
 
 
 
 
 
   Research and development
235,571
219,777
181,347
 
455,348
309,123
   Selling, marketing and administration
429,748
514,291
379,644
 
944,039
706,236
   Amortization
73,292
67,396
43,633
 
140,688
80,185
   Litigation
163,800
-
-
 
163,800
-

 
 
902,411
801,464
604,624
 
1,703,875
1,095,544

 
Income from operations
651,985
690,061
702,233
 
1,342,046
1,348,670
 
 
 
 
 
 
 
   Investment income
7,625
9,136
17,168
 
16,761
36,145

 
Income before income taxes
659,610
699,197
719,401
 
1,358,807
1,384,815

 
Provision for income taxes
183,989
56,167
223,855
 
240,156
406,754

 

 
Net Income
$ 475,621
$ 643,030
$ 495,546
 
$ 1,118,651
$ 978,061

 
 
 
 
 
 
 
 
Earnings per share
 
 
 
 
 
 

 
   Basic
$ 0.84
$ 1.13
$ 0.88
 
$ 1.97
$ 1.73

 
   Diluted
$ 0.83
$ 1.12
$ 0.86
 
$ 1.95
$ 1.70

 
 
 
 
 
 
 
 
Weighted average number of common shares outstanding (000’s)
 
 
 
 
 
 
   Basic
567,789
566,787
564,899
 
567,288
564,222
   Diluted
573,565
573,259
574,831
 
573,441
574,738
 
 
 
 
 
 
 
Total common shares outstanding (000's)
568,219
567,368
565,370
 
568,219
565,370

 

Research In Motion Limited
Incorporated under the Laws of Ontario
(United States dollars, in thousands except per share data) (unaudited)

Consolidated Balance Sheets

As at
August 29, 2009
February 28, 2009

Assets    
Current    
   Cash and cash equivalents
$ 1,083,251
$ 835,546
   Short-term investments
580,921
682,666
   Trade receivables
2,365,106
2,112,117
   Other receivables
248,162
157,728
   Inventory
572,761
682,400
   Other current assets
189,676
187,257
   Deferred income tax asset
175,568
183,872
 
 
5,215,445
4,841,586
 
 
 
 
 
 
Long-term Investments
833,575
720,635
Capital assets
1,737,403
1,334,648
Intangible assets
1,291,454
1,066,527
Goodwill
146,557
137,572
Deferred income tax asset
-
404
 
 
$ 9,224,434
$ 8,101,372
 
 
 
 
Liabilities
 
 
   Current
 
 
   Accounts payable
$ 496,005
$ 448,339
   Accrued liabilities
1,603,842
1,238,602
   Income taxes payable
-
361,460
   Deferred revenue
66,912
53,834
   Deferred income tax liability
-
13,116
 
 
2,166,759
2,115,351
 
 
 
 
Deferred income tax liability
43,265
87,917
Income Taxes Payable
27,790
23,976
 
 
2,237,814
2,227,244
 
 
 
Shareholders’ Equity
 
 
   Capital stock
2,236,190
2,208,235
   Treasury shares
(45,081)
-
   Retained earnings
4,664,361
3,545,710
   Additional paid-in capital
139,113
119,726
   Accumulated other comprehensive income (loss)
(7,963)
457
 
 
6,986,620
5,874,128
 
 
$ 9,224,434
$ 8,101,372
 

 

Research In Motion Limited
Incorporated under the Laws of Ontario
(United States dollars, in thousands) (unaudited)

Consolidated Statements of Cash Flows

 
For the six
months ended
August 29, 2009
For the six
months ended
August 30, 2008

     
Cash flows from operating activities    
Net income
$ 1,118,651
$ 978,061
 
 
 
Items not requiring an outlay of cash:
 
 
   Amortization
269,164
125,995
   Deferred income taxes
(19,621)
(18,678)
   Income taxes payable
3,814
(2,204)
   Share-based compensation
25,747
19,600
   Other
(7,915)
12,080
Net changes in working capital items
(194,001)
(515,775)
 
Net cash provided by operating activities
1,195,839
599,079
 
Cash flows from investing activities
 
 
Acquisition of long-term investments
(369,111)
(173,642)
Proceeds on sale or maturity of long-term investments
183,847
143,674
Acquisition of capital assets
(554,558)
(386,039)
Acquisition of intangible assets
(242,379)
(331,027)
Business Acquisitions
(131,541)
-
Acquisition of short-term investments
(279,226)
(335,768)
Proceeds on sale or maturity of short-term investments
473,655
408,171
 
Net cash used in investing activities
(919,313)
(674,631)
 
 
 
 
Cash flows from financing activities
 
 
Issuance of common shares
18,890
21,927
Excess tax benefits from stock-based compensation
2,705
12,146
Purchase of treasury shares
(45,081)
-
Repayment of long-term debt
(6,099)
(166)
 
Net cash (used in) provided by financing activities
(29,585)
33,907
 
 
 
 
Effect of foreign exchange gain on cash and cash equivalents
764
(11,679)
 
Net increase (decrease) in cash and cash equivalents for the period
247,705
(53,324)
Cash and cash equivalents, beginning of period
835,546
1,184,398
 
Cash and cash equivalents, end of period
$ 1,083,251
$ 1,131,074
 
 
 
 
 
 
 
 
 
 
As at
August 29, 2009
May 30, 2009

Cash and cash equivalents
$ 1,083,251
$ 1,135,325
Short-term investments
580,921
619,914
Long-term investments
833,575
663,990
 
 
$ 2,497,747
$ 2,419,229