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Press Release
September 24, 1998
Research In Motion Reports 55% Increase In Second Quarter Revenue
Waterloo, Ontario - Initial sales of our next generation Inter@ctive™ Pager 950, coupled with additional market penetration of OEM radio modem and Wireless PC Card products, drove revenue and earnings higher in the second quarter, Research in Motion (TSE:RIM) reported today.
Revenue for the quarter ended August 31, 1998 increased 55% to $9.8 million compared to $6.3 million in the same period of Fiscal 1998 (last year). The Inter@ctive™ Pager 950, which was launched in the United States in the last month of the quarter, accounted for 65% of total product sales. OEM radio modems represented 25% and Wireless PC Cards accounted for approximately 10% of product sales. Included in revenue was $1.2 million derived from government funding which was applied in RIM's ongoing product research and development activities. As anticipated, second quarter fiscal 1999 revenue was virtually the same as first quarter fiscal 1999 revenue. RIM expects revenue to ramp up significantly in the third and fourth quarters, driven primarily by sales of the new pagers.
Gross profit in the second quarter of Fiscal 1999 was $4.3 million, or 43.5% of revenue. This compares favorably with $2.4 million, or 38% of revenue, in the second quarter of fiscal 1998 and is the result of more favourable product mix and revenue growth.
Selling, marketing and administrative expenses increased 58% to $1.2 million from $0.75 million in the comparable quarter of fiscal 1998. These expenses are expected to decline on a percentage of revenue basis as revenue ramps up in the second half of fiscal 1999.
Research and development investments of $3.2 million increased 131% from the second quarter of fiscal 1998 due largely to final, pre-launch testing of the new Inter@ctive™ Pager 950. At the current level of 33% of revenue, R&D spending temporarily exceeds RIM's long-term target of 10% to 15% of revenue. However, as revenue ramps up, R&D as a percentage of revenue is expected to revert to more normal levels.
Net income of $0.3 million (1 cent per share) for the second quarter showed a marked improvement over the corresponding period of fiscal 1998 when RIM recorded a loss of $0.07 million (loss of 1 cent per share).
Revenue for the six months ended August 31, 1998 increased 132% to $19.6 million from $8.4 million in the first half of fiscal 1998. Fifty-eight percent of first half 1999 product sales was derived from sales of Inter@ctive™ Pagers, 28% came from OEM radio modems and 14% from Wireless PC Cards.
Gross profit in the first half of fiscal 1999 was $8.9 million (45.7% of revenue) versus $3.3 million (39.0% of revenue) in the first half of fiscal 1998. Higher revenue and better product mix accounted for the margin improvement.
Net income for the first half of fiscal 1999 was $1.0 million (2 cents per share) compared to a loss of $2.2 million (5 cents per share) for the same period last year.
Among recent operating highlights:
- RIM announced a contract on September 23, 1998 for approximately $50 million with American Mobile to supply the Inter@ctive™ Pager for American Mobile's ARDIS wireless data network.
- On August 26, 1998 RIM announced the availability of the new Inter@ctive™ Pager 950 for the BellSouth Interactive PagingSM Service across the United States.
- A $3 million contract was signed with Rogers Cantel on September 10, 199, 1988 to supply the Inter@ctive™ Pager 950. Rogers Cantel will market the RIM Inter@ctive™ Pager 950 in Canada with service over the Cantel® AT&T™ Mobitex wireless data network.
- Two new OEM radio modem contracts were signed, representing $2 million in revenue for delivery over the next 12 months.
- A strategic alliance was formed with Sybase and BellSouth Wireless Data to deploy Sybase's UltraLite mobile database software on the RIM Inter@ctive™ Pager 950.
- RIM licensed Puma Technology's Intellisync Synchronization Platform to allow seamless synchronization of personal information management applications on the RIM Inter@ctive™ Pager 950.
- RIM expanded its employment base, which now stands at 260 - up 30% from the beginning of the year - by aggressively recruiting knowledge workers
- RIM was awarded $2 million in arbitration proceedings against U.S. Robotics Mobile Communications Corp. ("USR"), now 3COM Corporation.
- The company announced that it is working with industry leaders, including Intel (NASDAQ: INTC) and Visteon Automotive Systems, to enable two-way wireless connectivity for in-vehicle computing applications.
"The second quarter was pivotal for RIM in that it marked the consumer launch of our new Inter@ctive™ Pager 950 in both the U.S. and Canada," said Jim Balsillie RIM Chairman and Co-CEO. "These launches are a stepping stone for our company that will raise the visibility of two-way interactive pager technology. We expect strong sales to follow, starting in the second half of this year, as consumers realize the significant advantages inherent in these products."
"Initial consumer reaction to our Inter@ctive™ Pager 950 has been excellent," said Mike Lazaridis, President and Co-CEO. "Now that we have successfully launched the product, we have three major areas on which to focus: utilize production resources efficiently to meet demand, develop additional opportunities for our current products, and through R&D, continue to enhance our technologies to drive our long-term future."
In unrelated business, RIM noted that Valentine O'Donovan, Chairman and CEO of COMDEV, has resigned as a director of RIM.
Research in Motion 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 pagers, wireless personal computer card adapters and embedded OEM wireless radios. Based in Waterloo, Ontario and listed on The Toronto Stock Exchange, Research in Motion is a knowledge-based company with proven, leading technologies. Its customers include a diverse range of major multinational companies including wireless network suppliers, original equipment manufacturers and value-added resellers. Email investor_relations @rim.net. Web site address www.rim.net
YEAR TO DATE STATEMENT OF OPERATIONS
| For the six months ended August 31 | Fiscal 1999 | Fiscal 1998 |
| (unaudited) |
| (note 1) |
| Revenue | $19,571,364 | $8,424,511 |
| Cost of sales | 10,618,335 | 5,137,041 |
| 8,953,029 | 3,287,470 | |
| Research and development | 5,778,644 | 2,992,663 |
| Selling, marketing and administration | 3,047,470 | 1,799,071 |
| Amortization | 1,610,917 | 932,214 |
| Interest on loans payable | 1,080 | 20,168 |
| 10,438,111 | 5,744,116 | |
| Loss from operations | (1,485,082) | (2,456,646) |
| Investment income | 2,925,600 | 306,461 |
| Income (loss) before provision for taxes | 1,440,518 | (2,150,185) |
| Provision for income taxes | 415,000 | 46,000 |
| Net income (loss) | $1,025,518 | $(2,196,185) |
| Earnings (loss) per share, basic | $.02 | ($.05) |
| Earnings (loss) per share, fully diluted | $.02 | ($.05) |
Note 1: Comparative figures have been reclassified to conform to the current year’s presentation.
QUARTERLY STATEMENT OF OPERATIONS
| For the three months ended August 31 | Fiscal 1999 | Fiscal 1998 |
| (unaudited) | (note 1) | |
| Revenue | $9,795,248 | $6,334,983 |
| Cost of sales | 5,536,156 | 3,928,387 |
| 4,259,092 | 2,406,596 | |
| Research and development | 3,213,264 | 1,389,830 |
| Selling, marketing and administration | 1,208,789 | 764,108 |
| Amortization | 857,492 | 535,545 |
| Interest on loans payable | - | 1,980 |
| 5,279,545 | 2,691,463 | |
| Loss from operations | (1,020,453) | (284,867) |
| Investment income | 1,433,889 | 255,012 |
| Income (loss) before provision for taxes | 413,436 | (29,855) |
| Provision for income taxes | 145,000 | 46,000 |
| Net income (loss) | $268,436 | $(75,855) |
| Earnings (loss) per share, basic | $.01 | ($.01) |
| Earnings (loss) per share, fully diluted | $.01 | ($.01) |
Note 1: Comparative figures have been reclassified to conform to the current year’s presentation.
BALANCE SHEET
| As at August 31 | Fiscal 1999 | Fiscal 1998 |
| (unaudited) | ||
| CURRENT ASSETS | ||
| Cash and short-term investments | $107,389,465 | $3,917,935 |
| Accounts receivable | 9,365,087 | 8,886,934 |
| Inventory | 16,357,247 | 20,442,430 |
| Prepaid expenses | 3,159,011 | 159,771 |
| 136,270,810 | 33,407,070 | |
| CAPITAL ASSETS | 19,476,600 | 10,606,121 |
| TOTAL ASSETS | $155,747,410 | $44,013,191 |
| CURRENT LIABILITIES | ||
| Accounts payable and accrued liabilities | $3,651,532 | $1,707,467 |
| Deferred revenue | 1,017,724 | - |
| 4,669,256 | 1,707,467 | |
| SHAREHOLDERS' EQUITY | ||
| Common shares | 148,231,135 | 42,830,641 |
| Retained earnings (deficit) | 2,847,019 | (524,917) |
| 151,078,154 | 42,305,724 | |
| TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY | $155,747,410 | $44,013,191 |
STATEMENT OF CHANGES IN FINANCIAL POSITION
| For the six months ended August 31 | Fiscal 1999 | Fiscal 1998 |
| (unaudited) | ||
| CASH PROVIDED BY (USED IN) OPERATIONS | ||
| Net income (loss) for the period | $1,025,518 | $(2,196,185) |
| Items not requiring an outlay of cash: | ||
| Amortization | 1,610,917 | 932,214 |
| 2,636,435 | (1,263,971) | |
| Net changes in non-cash working capital items | 3,089,876 | (2,902,580) |
| Total cash provided (used by) operations | 5,726,311 | (4,166,551) |
| CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES | ||
| Repayment of loans payable | - | (1,480,364) |
| Issuance (redemption) of share capital, net of share issue costs | (1,513) | 3,735,424 |
| Government funding received for capital expenditures | 250,000 | - |
| Total cash provided by financing activities | 248,487 | 2,225,060 |
| CASH USED IN INVESTING ACTIVITIES | ||
| Acquisition of capital assets | (7,604,587) | (3,646,251) |
| Total cash used in investing activities | (7,604,587) | (3,646,251) |
| Decrease in cash and short term investments for the period | (1,629,789) | (5,557,742) |
| Cash and short-term investments, beginning of the period | 109,019,254 | 9,475,677 |
| Cash and short-term investments, end of the period | $107,389,465 | $3,917,935 |
