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Press Release
June 29, 2000
Research In Motion Reports First Quarter Results
Waterloo, Ontario - Research In Motion Limited (Nasdaq: RIMM, TSE: RIM), a leader in innovative wireless solutions for the mobile communications market, today reported first quarter results for the three months ended May 31, 2000. (all figures in US $ and Canadian GAAP)
Revenue for the first quarter of fiscal 2001 was $27.1 million, compared to $25.8 million in the prior quarter and $16.2 million in the first quarter last year. BlackBerry™ subscriber growth continues to be a main growth driver. BlackBerry accounted for approximately 50% of the Company's quarterly revenue, RIM Wireless Handhelds™ accounted for 25%, and OEM radio modems and software sales accounted for the balance.
"We are experiencing acceleration in market demand for RIM's products," said Jim Balsillie, Chairman and Co-CEO. "Momentum in our customer and channel relationships, as well as expansion opportunities into international markets, are expected to be significant growth drivers. We are entering a new stage in our corporate growth which will require significant investment to fully capitalize on."
Net income for the quarter was $388,000 ($0.01 per share basic and $0.00 per share fully diluted) compared with a net income of $3.2 million in the prior quarter and $1.8 million in the same quarter last year. The decrease was primarily due to higher expenditures for sales and marketing and research and development initiatives.
Gross research and development expenditures for the quarter were $4.5 million, or 17% of revenue, compared to $3.7 million in the prior quarter, or 14% of revenue, and $2.4 million, or 15% of revenue, in the first quarter last year. The increase was mainly due to the hiring of additional technical personnel.
Selling, marketing and administration expenses were $10.4 million, or 38% of revenue, for the quarter compared to $5.1 million, or 20% of revenue, in the previous quarter and $2.3 million, or 14% of revenue, in the first quarter of last year. This increase was due to planned investments in marketing campaigns to increase brand awareness for BlackBerry, staffing increases in sales, marketing, and customer support as well as cooperative marketing programs in collaboration with several of RIM's distribution partners.
Cash, cash equivalents and marketable securities were $198.8 million at May 31, 2000 as compared to $218.2 in the previous quarter. Changes in working capital, capital investments and investments in key strategic partners account for the decrease.
"The infrastructure to grow RIM's business for the next stage involves significant hiring of sales and support personnel, investment in research and development, new support and information systems, and sizeable investment in direct and co-operative marketing programs," said Dennis Kavelman, Chief Financial Officer. "The market opportunity before us is significant and we believe it is prudent to forego short term profitability to position RIM for long term success."
The company is also pleased to announce that Valdis Martinsons joins RIM's executive management team as Chief Information Officer and will oversee all Information Technology infrastructure and initiatives for RIM worldwide including computer systems, voice and data communications and computer based applications. Martinsons recently led ATI Technologies' Information Technology group during a period of extended and rapid growth. Martinsons' technical and management experience will be an asset to RIM's management team.
Highlights of the first quarter:
- RIM announced the new palm-sized RIM 957 Wireless Handheld™, which incorporates a large high-quality screen, 32-bit Intel 386™ processor, 5MB flash memory, easy-to-use keyboard, embedded wireless modem, integrated organizer and full support for the BlackBerry wireless email solution. The RIM 957™ began shipping in May 2000.
- RIM announced BlackBerry Notes Edition™ BlackBerry Notes Edition will offer a complete, integrated, wireless email solution for corporate customers operating Lotus Notes® environments.
- Aether Systems, Inc. and RIM announced a strategic marketing agreement with Aether for software licensing fees and for RIM Wireless Handhelds. This will allow Aether to host the BlackBerry wireless email solution, enabling Aether to offer BlackBerry and specific enterprise solutions including wireless access to enterprise information, applications and Internet data.
- Motient Corporation (formerly known as American Mobile Satellite Corporation) announced it will offer BlackBerry Exchange Edition™ over its DataTAC network. This opens up both a new sales channel and a new network offering for the BlackBerry wireless email solution.
- SkyTel announced its new wireless email service, BlackBerry by SkyTel, which incorporates BlackBerry Exchange Edition.
- Earthlink, Inc. began a market test of EarthLink Airmanager™, a wireless service featuring BlackBerry Internet Edition™.
- Microcell Connexions Inc. and RIM announced their intent to proceed with trials to jointly test high-speed mobile data services based on General Packet Radio Services (GPRS) wireless technology. Live technical trials will be conducted later this year.
- GoAmerica, Inc. and RIM announced an agreement to offer Go.Web, the flagship wireless Internet technology from GoAmerica, as a pre-loaded application with the BlackBerry wireless email solution.
- RIM announced a strategic relationship with Neomar Inc. to provide a fully Wireless Applications Protocol (WAP) - compliant microbrowser, powered by Neomar's WAP gateway, for RIM Wireless Handhelds and the BlackBerry wireless email solution.
Highlights subsequent to quarter end:
- RIM introduced its Development Environment for Java technology at the JavaOne conference. During the conference, RIM distributed its Development Kit (Early Access Version) for the Java 2 Micro Edition (J2ME) platform and distributed RIM Wireless Handhelds running an early release of the J2ME Connected Limited Device Configuration (CLDC)
- BT Cellnet and RIM announced that they will be working together to offer the BlackBerry wireless email solution to BT Cellnet corporate customers in the UK. BlackBerry will support both Microsoft® Exchange and Lotus Notes environments and will operate over BT Cellnet's new GPRS (General Packet Radio Service) high speed network.
- RIM finalized its agreement with America Online for the supply of wireless handhelds. AOL members and users of AOL Instant Messenger (AIM) will receive access to AOL email and AIM via a customized, AOL-branded, RIM handheld device.
RIM's annual shareholder's meeting will take place at 6:30 pm on August 8, 2000 at the Canadian Clay and Glass Museum in Waterloo, Ontario.
About Research In Motion
Research In Motion Limited is a leading designer, manufacturer and marketer of innovative wireless solutions for the mobile communications market. Through development and integration of hardware, software and services, RIM provides solutions for seamless access to time-sensitive information including email, messaging, Internet and intranet-based applications. RIM technology also enables a broad array of third party developers and manufacturers around the world to enhance their products and services with wireless connectivity. RIM's portfolio of award-winning products includes the RIM Wireless Handheld™ product line, the BlackBerry™ wireless email solution, wireless personal computer card adapters, embedded radio-modems and software development tools. Founded in 1984 and based in Waterloo, Ontario, RIM operates offices in Canada, the United States and England. RIM is listed on the Nasdaq Stock Market (Nasdaq: RIMM) and the Toronto Stock Exchange (TSE: RIM). For more information, visit: www.rim.net. Investors may contact investor_relations@rim.net. Customers may contact info@rim.net.
Research In Motion, RIM, the RIM logo, the RIM Wireless Handheld family of marks, RIM 802D, RIM 902M, BlackBerry, the BlackBerry logo, BlackBerry Exchange Edition, BlackBerry Notes Edition and BlackBerry Internet Edition are trademarks of Research In Motion Limited. Research In Motion and RIM are registered with the U.S. Patent and Trademark Office. All other brands, products and company names mentioned herein may be trademarks or registered trademarks of their respective holders. Forward-looking statements in this news release are made pursuant to the "safe harbor" provisions of the United States Private Securities Litigation Reform Act of 1995. Investors are cautioned that such forward-looking statements involve risks and uncertainties, including, without limitation, risks relating to possible product defects and product liability, risks related to international sales and potential foreign currency exchange fluctuations, risks related to the year 2000 issue, continued acceptance of RIM's products, increased levels of competition, technological changes, dependence on intellectual property rights and other risks detailed from time to time in RIM's periodic reports filed with the United States Securities and Exchange Commission and other regulatory authorities.
QUARTERLY CONSOLIDATED STATEMENT OF OPERATIONS
| For the three months ended May 31 | Fiscal 2001 | Fiscal 2000 |
| (in US$ thousands, except for earnings per share) (unaudited) | ||
| Revenue | $27,098 | $16,199 |
| Cost of Sales | 14,957 | 9,412 |
| 12,141 | 6,787 | |
| Research and development, net of government assistance of $1,900 (2000 - $813) | 2,625 | 1,584 |
| Selling, marketing and administrative | 10,404 | 2,300 |
| Amortization | 1,363 | 924 |
| 14,392 | 4,808 | |
| Income (loss from operations) | (2,251) | 1,979 |
| Investment income | 2,890 | 717 |
| Income before provision for taxes | 639 | 2,696 |
| Provision for income taxes | 250 | 910 |
| Net Income | $388 | $1,786 |
| Earnings per share, basic | $0.01 | $0.03 |
| Earnings per share, fully diluted | $0.00 | $0.03 |
See accompanying notes.
CONSOLIDATED BALANCE SHEET
| As at May 31 | Fiscal 2001 | Fiscal 2000 |
| (in US$ thousands) (unaudited) | ||
| CURRENT ASSETS | ||
| Cash and cash equivalents | $65,558 | $26,374 |
| Marketable Securities | 133,248 | 34,740 |
| Trade Receivables | 28,314 | 8,589 |
| Other receivables | 11,591 | 2,351 |
| Inventory | 37,961 | 21,556 |
| Prepaid expenses | 5,216 | 4,291 |
| 281,888 | 97,901 | |
| DEFERRED INCOME TAXES | 4,490 | - |
| INVESTMENTS | 7,000 | - |
| CAPITAL ASSETS | 49,316 | 16,108 |
| TOTAL ASSETS | $342,694 | $114,009 |
| CURRENT LIABILITIES | ||
| Accounts payable and accrued liabilities | $13,216 | $2,404 |
| Taxes payable | 1,107 | 1,128 |
| Deferred revenue | 7,724 | 752 |
| Current portion of long-term debt | 214 | - |
| 22,261 | 4,284 | |
| LONG TERM DEBT | 6,889 | - |
| 29,150 | 4,284 | |
| SHAREHOLDERS' EQUITY | ||
| Common Shares | 295,026 | 100,307 |
| Retained Earnings | 18,518 | 9,418 |
| 313,544 | 109,725 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $342,694 | $114,009 |
QUARTERLY CONSOLIDATED STATEMENT OF CASH FLOWS
| For the three months ended May 31 (in US$ thousands) | Fiscal 2001 | Fiscal 2000 |
| (unaudited) | ||
| CASH FLOWS FROM OPERATING ACTIVITIES | ||
| Net income for the period | $388 | $1,786 |
| Items not requiring an outlay of cash: | ||
| Amortization | 1,508 | 924 |
| Deferred income taxes | 191 | - |
| Foreign exchange loss | 68 | - |
| 2,155 | 2,710 | |
| Net changes in non-cash working capital items | (4,019) | (6,624) |
| Total cash used in operations | (1,864) | (3,914) |
| CASH FLOWS FROM FINANCING ACTIVITIES | ||
| Income tax reduction resulting from financing costs | - | 134 |
| Issuance of share capital, net of financing costs | 631 | 300 |
| Government funding received for capital expenditures | 436 | 100 |
| Repayment of debt | (47) | - |
| Total cash provided by financing activities | 1,020 | 534 |
| CASH FLOWS FROM INVESTING ACTIVITIES | ||
| Acquisition of capital assets | (11,524) | (2,120) |
| Acquisition of investments | (7,000) | - |
| Acquisition of marketable securities | (123,428) | - |
| Proceeds on sale and maturity of marketable securities | 208,296 | 22,256 |
| Total cash provided by investing activities | 66,344 | 20,136 |
| Foreign exchange effect on cash and cash equivalent | (68) | - |
| Increase in cash and cash equivalents for the period | 65,432 | 16,756 |
| Cash and cash equivalents, beginning of the period | 126 | 9,618 |
| Cash and cash equivalents, end of the period | $65,558 | $26,374 |
| Cash and cash equivalents, are represented by: | ||
| Balances with banks | $43,362 | $3,898 |
| Short-term investments | 22,196 | 22,476 |
| Cash and cash equivalents, end of the period | $65,558 | $26,374 |
See accompanying notes.
Notes to Consolidated Financial Statements
NOTE 1: BASIS OF PRESENTATION
The Company has incorporated subsidiaries to hold investments in real property. All of the subsidiaries are wholly owned. The consolidated financial statements include the accounts of the subsidiaries with inter-company transactions and balances eliminated.
NOTE 2: CHANGE IN FUNCTIONAL AND REPORTING CURRENCY
Prior to September 1, 1999, the Company had measured and presented its consolidated financial statements in Canadian dollars. Effective September 1, 1999, as a result of the Company’s increased economic activity in the U.S, the U. S. dollar has become the functional currency of the Company’s operations. Effective the same date, the U. S. dollar has also been adopted as the reporting currency. For periods up to and including August 31, 1999, the Canadian dollar financial statements of the Company have been restated into U.S. dollars, in accordance with accounting principles generally accepted in Canada, using the August 31, 1999 closing exchange rate being a rate of CDN $1.4888 per US $1.00.
NOTE 3: CAPITAL STOCK
The following are the number of outstanding common shares, common share purchase warrants and stock options at May 31:
| Fiscal 2001 | Fiscal 2000 | |
| Common Shares | 71,306,662 | 64,412,386 |
| Common Share purchase warrants | 214,000 | 139,000 |
| Stock Options | 7,520,570 | 7,180,350 |
NOTE 4: RECLASSIFICATION OF COMPARATIVE FIGURES Comparative figures have been restated to U.S. dollars as disclosed in Note 2 and have been reclassified to conform to the current year’s presentation.
