This summary is based on the second quarter fiscal 2009 earnings call conducted by Research In Motion Limited (RIMM) on September 25, 2008.
Management:
Co-CEO and Director: James L. Balsillie
Chief Accounting Officer: Brian Bidulka
VP, IR: Edel Ebbs
Key Investor Issues:
- Quarter-over-quarter revenues increased to $2.58 billion from $2.24 billion.
- Quarterly EPS were 86 cents versus 50 cents in the year ago period.
- Q3 revenues are forecast to be in the range of $2.95 billion to $3.10 billion.
Second Quarter Fiscal 2009 Highlights:
The quarterly revenues were $2.58 billion compared with $2.24 billion in the previous quarter.
- The handheld devices represented $2.12 billion, or 82% of the total revenue during the quarter.
- The total devices shipped in the quarter of approximately 6.1 million were up from 5.4 million in the prior quarter.
- An estimated 4.8 million new devices were activated in Q2, either for new customers or for replacements and upgrades.
- The quarterly channel inventory at the end of Q2 was up slightly from Q1.
The device ASPs during the quarter were approximately $344.
- The management expects Q3 ASPs to be almost the same as for Q2.
- Service revenue was $334 million or 13% of revenue for the quarter, an increase of $42 million from Q1.
- The monthly ARPU declined just slightly from the prior quarter.
- The company reported software revenue of $64 million, or 3% of revenue.
- The other revenue, including non-warranty repairs and accessories, was $63 million, or 2% of revenue.
The Q2 operating expenses increased by 23%, slightly less than the forecast in the last quarter.
- R&D spending was $181 million, or 7% of revenue for the quarter.
- The selling, marketing, and administrative expenses increased to $380 million, and were 15% of revenue.
- The Q2 operating expenses are inclusive of stock option expense of approximately $10 million.
- The tax rate for the quarter was approximately 31.1%, slightly higher than the forecast and this was primarily due to the unfavorable impact of the appreciation of the U.S. dollar relative to the Canadian dollar.
- The impact of the unfavorable tax rate was just more than 1 cent per share and was primarily the result of U.S. dollar denominated assets and liabilities held by the Canadian operating companies that are subject to tax in Canadian dollars and the related timing of transactions.
During the quarter, the company generated approximately $163 million in cash from operations before working capital adjustments.
- The total cash, cash equivalents, short-term and long-term investments were $2.24 billion at the end of Q2, as compared to $2.08 billion at the end of the previous quarter.
- The capital asset additions in Q2, including intangible assets, were approximately $425 million, which was offset in part by cash provided by financing activities of $8 million, primarily related to the issuance of share capital resulting from the exercise of stock options.
- From a working capital perspective, the trade receivables were up from the prior quarter, in line with top line growth, and DSOs were higher from the prior quarter at 56.5 days.
- The increase was due to sales that were weighted towards the latter part of the quarter, as well as longer payment terms for non-North American customers.
- The quarter-end inventory on-hand was approximately $513 million versus $462 million in the prior quarter.
- Inventories continue to be primarily raw materials and semi-finished goods to support demand for BlackBerry products.
The management reported several new product launches and relationships with companies like AOL, Microsoft, MySpace, Slacker, TicketMaster and Tiyo.
- The company added about 2.5 million net new subscriber accounts in Q2.
- The total BlackBerry subscriber account base was approximately 19 million at the end of the quarter.
- An estimated 60% of the net additions in Q2 were by non-enterprise customers and about 42% of the current subscriber base is non-enterprise users.
- The management reported that the company has approximately 400 carrier distribution partners offering BlackBerry in more than 150 countries worldwide.
- The percentage of the subscriber base outside North America remained steady in Q2 in the low 30% range.
- The BlackBerry Bold was launched by 60 carriers in 29 countries in Q2 and a strong take-up of the product by both enterprise and consumer customers were noted.
- The management reported disproportionate amount of Bolds being activated as upgrades or replacement during the initial days of the Bold launch.
The company announced the BlackBerry Pearl flip smartphone at the CTIA.
- The Pearl flip is the first smartphone designed to address about 70% of the U.S. market with a preference to use a flip form factor.
- The BlackBerry Pearl flip, with its special drop-hinged design, sure-type keyboard system and dual color LCD displays for easy message previewing, has reportedly cracked the code for a smart flip phone and is suited to address the large market segment.
- In addition to the Pearl flip, the company also recently announced the BlackBerry Curve 8350I for Sprint’s push-to-talk network.
- Despite the new product launchs, the existing product portfolio continues to be strong.
- The company has partnered with Spring on a substantial joint marketing program.
- The management reported that Alltel continues to show strong support for the BlackBerry platform.
- In addition, AT&T continues to be a significant partner for the company.
- The management advised that Latin America continues to be a strong market for BlackBerry products and services.
- Carriers throughout the region heavily promoted the BlackBerry solution throughout the summer.
- In Europe, the company continues to introduce new price plans for BlackBerry service.
- T-Mobile Germany registered significant adoption through special pricing of less than EUR10 on Pearl and Curve, including six months for e-mail and GPS navigation.
- The promotion drove retail store sales significantly in the quarter.
- The company reported that Vodafone Germany also had strong results with promotion of color Pearls.
- In Spain, Orange launched BlackBerry smartphones for the first time into the more than 900 retail stores, with a EUR9 unlimited e-mail plan and a special 50% discount on service plans for the first three months.
- In Turkey, Turkcell launched the Bold in August and supported it with TV, print, and online campaigns.
- The BlackBerry Bold is also reportedly making in-roads into Asian markets.
- In Hong Kong, the Bold launch was supported by significant carrier promotions and is receiving positive reviews and market acceptance.
- In Australia, the management launched Bold with Optus and also with Vodafone Australia and Telstra.
- In China, the company continues to see greater interest among both multi-nationals and domestic enterprise accounts and is encouraged by our progress so far.
- In India, the management recently introduced the Bold with Bharti AirTel, Reliance Mobile, and Vodafone and announced BlackBerry product availability for the first time with Tata India.
- The company also entered into a relationship with Redington India Limited to distribute BlackBerry products to the carrier partners in India.
