This summary is based on the fourth quarter fiscal 2008 earnings call conducted by Research In Motion Ltd (RIMM) on April 2, 2008.
Co-Chief Executive Officer: Jim Balsillie
Chief Accounting Officer: Brian Bidulka
Vice President Investor Relations: Edel Ebbs
Key Investors Issues
- Earnings per share rose to 72 cents from 33 cents in the prior year quarter.
- Quarterly revenue rose from $1.67 billion in last year to $1.88 billion.
- The firm expects Q1 EPS to be in the range of 82 cents to 86 cents per share.
Fourth Quarter Fiscal 2008 Financial Highlights
Revenue for the fourth quarter ending March 1 was $1.88 billion up 13% from $1.67 billion the previous quarter.
Handheld devices represented $1.52 billion or 81% of RIM’s revenue during the quarter, up from 80% of total revenue during the previous quarter. Total devices shipped in the quarter were approximately $4.4 million or up from $3.9 million in the prior quarter. Approximately 3.9 million new devices were activated in Q4 either from new customers or from replacements and upgrades, not including phone only sales. Phone only sales in the quarter increased somewhat as AT&T began offering a voice SMS only package for BlackBerry smartphones in the fourth quarter.
- Device ASPs in the quarter were approximately $348. The firm expects ASPs in Q1 to be slightly lower than Q4 at approximately $345.
- Service revenue was $254 million or 14% of revenue for the quarter, up $22 million from Q3.
- Software revenue was $63 million at 3% of revenue.
- Other revenue including non-warranty repairs and excess rates was $43 million or 2% of revenue.
In Q4, channel inventory was drawn down as sell through run rates outpaced forecasts at most North American carriers.
The effect of this was the normalization of forward week’s inventory at the end of the quarter. Number of units in the channel increased slightly at the end of Q4 and the firm expects an increase of forward week’s inventory in Q1 as carriers replenish stocks following the holiday season and as its CDMA partners gear up for the launch to occur later this quarter.
- Gross margin for the fourth quarter was approximately 51%, in line with the firm’s expectations.
Operating expenses increased by 13%, slightly more than the firm’s forecast last quarter.
R&D spending was $105 million or 6% of revenue for the quarter and selling, marketing and administrative expenses increased to $268 million and were 14% of revenue. Included in operating expenses is stock option expense of approximately $10 million.
- The tax rate for the quarter was approximately 29%, slightly lower than the forecast primarily due to the enactment of Canadian federal tax rate reductions in the fourth quarter of fiscal 2008 and some impact of foreign exchange.
- Net income for Q4 was $413 million or 72 cents per share diluted.
- Weighted average diluted shares used in the EPS calculation for the quarter were $574 million.
- Actual shares outstanding as of March 1 were 563 million. Total options outstanding at March 1 were 16.5 million.
RIM’s balance sheet continues to ebb strong with substantial cash reserves and appropriate working capital balances.
- At the end of the fourth quarter RIM had approximately $2.3 billion in cash, cash flow and investments. This was up $211 million from the prior quarter.
- During the quarter, RIM generated approximately $616 million in cash from operations. The primary use of cash in the quarter was capital expenditures of approximately $110 million and the acquisition of intangible assets of approximately $310 million. The fund will be required to fund its estimated 2008 corporate tax liability in the first quarter, which will result in a cash out flow of approximately $450 million.
- From a working capital perspective, trade receivables were up from the prior quarter, in line with top line growth and DSOs were up slightly from the prior quarter at 54 days.
- Inventory on hand was approximately $396 million versus $340 million in the prior quarter. Inventories continue to be primarily raw material and semi-finished goods to support demand for BlackBerry products.
The company continues to diversify its customer base.
At the end of the year, approximately 38% of the BlackBerry subscriber base were non-enterprise while over half of the net new subscriber account additions in the quarter came from non-enterprise customers. CDMA in North American was particularly strong in Q4 with the launch of BlackBerry Pearl 8130 branching across all of its North American CDMA partners. While the firm also saw strength in a number of European markets, the out performance in the quarter was largely North American based. The percentage of subscriber account base outside North America was approximately 33% at the end of the quarter.
Demand for BlackBerry products and services in Q4 was strong with approximately 2.18 million BlackBerry net subscriber account additions, which was in line with earlier update but much higher than the December forecast and 32% higher than the approximately 1.65 million subscriber accounts added in Q4. This takes the total BlackBerry subscriber account base at year end to over 14 million. This growth was driven by a strong showing by the firm’s carrier partners throughout December particularly in North America, the ramping of new direct distribution channels and the success of numerous promotions in January and February that mitigated the typical seasonal slow down in the consumer market.
