Press Release

December 16, 1997

Research In Motion Reports Sixfold Gain In Revenue, Solid Bottom Line Growth

Waterloo, Ontario - Strong demand in the personal communications services market led Research In Motion (TSE: RIM) to deliver record financial performance for the third quarter of fiscal 1998, the company reported today.

Revenue for the third quarter of fiscal 1998 ended November 30, 1997, was $11.7 million, over six times higher than the $1.8 million generated in the corresponding period of fiscal 1997 and 78% higher than second quarter 1998 revenue. Revenue growth was primarily attributable to the partial fulfillment of backlogged orders for two-way pagers, OEM radio modems and Type II PC Cards. The successful commissioning and operation of its new manufacturing facility has enabled RIM to begin to supply its order backlog. This facility will allow RIM to shorten customer lead times and to reduce the amount of backlogged orders relative to product shipments. RIM enjoyed new sales growth, especially in North America, for mobile radios and the company also earned $0.5 million in interest income on the proceeds of its initial public offering.

Gross profit and margin in the most recent quarter were $4.0 million and 34% of revenue respectively, versus $1.6 million and 86% of revenue in the same period last year. Gross margins are moving in-line with the company's longer-term expectations now that the majority of RIM’s sales mix has shifted to hardware products.

Research In Motion continued to expand its product development teams in preparation for important new launches next spring, and as a result, research and development investments of $1.2 million were 5% higher than in the third quarter of fiscal 1997, but declined to 10.4% of revenue from 63% a year ago. R& D investments fluctuate quarterly depending on expenditures for software and engineering materials, but are targeted at between 10% and 15% of sales.

Selling, general and administrative expenses in the most recent period were $1.9 million, 80% higher than $1.0 million a year earlier, but also declined on a percentage of revenue basis to 16.5% from 56% in fiscal 1997. The increase was primarily attributable to marketing and sales activities associated with the expansion of the business and depreciation expense attributable to the new manufacturing facility.

SG&A expenses as a percentage of sales are expected to continue to decline as revenue ramps up over the next 12 months.

Net income for the third quarter of fiscal 1998 was $0.8 million (earnings per share were $.01 on both a basic and fully diluted basis), versus a net loss of $0.6 million (loss per share was $.02 basic and $.01 fully diluted) in the third quarter of fiscal 1997.

For the first nine months of fiscal 1998, revenue more than tripled to $20.4 million from $5.7 million in the same period of fiscal 1997. Gross profit and margin for the first nine months of fiscal 1998 were $7.5 million and 36.5% of revenue, respectively, versus $3.9 million and 69% in fiscal 1997. Research and development investments increased 32% to $4.2 million from $3.2 million in the corresponding period of fiscal 1998, but declined on a percentage of revenue basis to 21% from 56%. Selling, general and administrative expenses increased 98% year-over-year, but declined to 22% of revenue from 41% a year earlier. Net loss for the first nine months was $1.4 million ($.02) basic, ($.02) fully diluted, compared to a net loss of $1.3 million ($.04) basic, ($.03) fully diluted, in the same period last year.

Among recent developments at Research in Motion:

  • The company completed its initial public offering, raising net proceeds of $100 million to be used for the procurement of components inventory, the expansion of its manufacturing capacity, the purchase of capital equipment for research and development, the increased human resources needs of the company in R&D and manufacturing, and to implement marketing and sales strategies.
  • The company won the Canada Award for Excellence Trophy for Innovation given by the National Quality Institute for its state-of-the-art wireless Type II PC Card.
  • Its Inter@ctive Pager was named Top Product for 1997 in the category of "Innovative Devices: Voice and/or Data" by Wireless for the Corporate User magazine. "Research In Motion has made important strides toward meeting our existing customer commitments and preparing for more dramatic growth in the years ahead," said Jim Balsillie, Chairman and Co-CEO. "We are exactly where we want to be in terms of order fulfillment and we're on schedule for next generation products."

Mike Lazaridis, RIM President and Co-CEO said: "The mobile personal communications market continues to advance rapidly and recent customer developments in the US suggest two-way paging networks will expand significantly. We're confident Research In Motion will be a prime beneficiary of this expansion."

Research In Motion Limited is a world leader in designing, manufacturing and marketing wireless consumer and business-to-business electronic access technology for the rapidly emerging mobile personal communications market. The company's current product portfolio includes revolutionary two-way Inter@ctive pagers, wireless personal computer card adapters, software connectivity tools and embedded wireless radios. Based in Waterloo, Ontario and listed on The Toronto Stock Exchange, Research in Motion is a knowledge-based company with proprietary technologies. It has a proven track record in electronics design, software development, printed circuit board layout and prototyping. Its customers include a diversified range of major multinational companies, including wireless network suppliers and value-added resellers.

STATEMENT OF OPERATIONS

For the nine months ended November 30 Fiscal 1997 Fiscal 1996
(unaudited)    
     
Revenue $20,439,719 $5,680,204
Cost of sales    12,985,400     1,740,196
       7,454,319     3,940,008
     
Research and development expenses 4,206,016 3,183,268
Selling and administrative expenses 4,596,587 2,323,621
     
Loss before income taxes (1,348,284) (1,566,881)
Provision for (recovery of) income taxes 75,000 (229,847)
     
Net loss   $(1,423,284)   $(1,337,034)
     
Net loss per share, basic $(.02) $(.04)
Net loss per share, fully diluted ($.02) ($.03)
     
     
For the three months ended November 30 Fiscal 1997 Fiscal 1996
(unaudited)    
     
Revenue $11,708,747 $1,844,945
Cost of sales     7,708,359       262,436
      4,000,388    1,582,509
     
Research and development expenses 1,213,352 1,156,951
Selling and administrative expenses 1,939,135 1,028,495
     
Earnings(loss) before income taxes 847,901 (602,937)
Provision for income taxes 75,000 --     
     
Net income (loss)   $772,901   $(602,967)
     
Net income (loss) per share, basic $.01 $(.02)
Net income (loss) per share, fully diluted $.01 $(.01)


BALANCE SHEET

As at November 30 Fiscal 1997 Fiscal 1996
(unaudited)    
     
CURRENT ASSETS    
Cash and short-term investments $107,385,914 $15,613,023
Accounts receivable 11,533,715 3,883,824
Inventory 18,821,761 18,094,959
Prepaid expenses       371,847    2,639,342
  138,113,237 40,231,148
     
CAPITAL ASSETS   11,542,660    3,497,534
     
TOTAL ASSETS $149,655,697 $43,728,682
     
CURRENT LIABILITIES    
Accounts payable and accrued liabilities $1,700,387 $3,739,312
Current portion of loans payable       --           645,738
  1,700,387 4,385,050
     
LONG-TERM LIABILITIES    
Loans payable       --           22,808
     
TOTAL LIABILITIES 1,700,387 4,407,858
     
SHAREHOLDERS' EQUITY    
Common Shares 147,707,528 38,952,017
Retained earnings (deficit)       247,982     368,807
     
TOTAL SHAREHOLDERS' EQUITY 147,955,510 39,320,824
     
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY   $149,655,897   $43,728,682


STATEMENT OF CHANGES IN FINANCIAL POSITION

For the six months ended November 30 Fiscal 1997
(unaudited)  
   
CASH PROVIDED BY (USED IN) OPERATIONS  
Net Income (loss) for the period (1,423,284)
Items not requiring an outlay of cash  
  Amortization   1,500,674
  77,390
   
Net changes in non-cash working capital items related to operations (4,147,848)
   
Total cash used by operations (4,070,458)
   
CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES  
Repayment of loans payable (1,480,364)
Issuance of share capital, net of financing costs 108,612,309
   
Total cash provided by financing activities 107,131,945
   
CASH USED IN INVESTING ACTIVITIES  
Acquisition of capital assets (5,151,250)
   
Total cash used in investing activities (5,151,250)
   
Increase in cash and short term Investments 97,910,237
   
Cash and short-term investments, beginning of period 9,475,677
   
Cash and short-term investments, end of period $107,385,914