This summary is based on the first quarter fiscal 2008 earnings call conducted by Research in Motion Limited (RIMM) on June 28, 2007.
VP of Investor Relations: Adele Ebbs
Co-Chief Executive Officer, Chairman: Jim Balsillie
Chief Accounting Officer: Brian Bidulka
Key Investors Issues
- The earnings per share were $1.17 compared to 67 cents in the prior year.
- The revenue grew from $930 million in prior year to $1.08 billion.
- The company expects second quarter GAAP EPS to be in the range of $1.37 to $1.49.
First Quarter Fiscal 2008 Financial Highlights
Revenue for the first quarter was $1.08 billion, up 16% from $930 million in the previous quarter.
The revenue performance is due to strong net subscriber account additions driven by stronger than forecast device shipments, new product launches and continued Pearl and 8800 success.
Handheld devices represented $824 million, or 76% of RIM''s revenue during the quarter, up from the 73% of total revenue in the previous quarter. Total devices shipped in the quarter were approximately 2.4 million, and were up from 2 million in the prior quarter. Approximately 2.2 million new devices were activated in the Q1, either for new customers or for replacements and upgrades. This does not include devices that were sold through the BlackBerry service plan. Ratio of devices activated and net subscriber account additions increased slightly from Q1 as replacement and upgrade sales continue to increase. The firm expects this high level of upgrade sales to continue as their subscriber account base grows. Based on sell-through forecast, four weeks of inventory were down slightly quarter over quarter. The firm expects this trend to continue into Q2. As expected, average device ASPs were in line with expectations at approximately $341. The firm expects ASPs in Q2 to be flat with Q1.
Service revenue was $174 million or 16% revenue for the quarter, up $2 million from Q4.
Software revenue was $54 million, or 5% of revenue, consisted of BES and CAL fees as well as TSupport contracts.
Other revenues such as repairs and accessories was $30 million or 3% of revenue.
Gross margin for the first quarter was 52%, which is at the lower end of the range of the guidance given in April.
The primary factor influencing this was a larger percentage of revenue coming from hardware. The company’s expectation is that increase in hardware revenue will have a downward impact on gross margin.
Operating expenses increased by slightly less than forecasted last quarter.
R&D spending was $75 million or 7% of revenue for the quarter and selling, marketing administrative expense increased by 6% to $177 million or 16% revenue. The company’s largest operating expense exposure to the Canadian dollars are payroll, however it does have some offset in Canadian dollar revenue as well as the program in place to hedge a portion of the exposure. This does not insulate the firm to 100% and while it continues to hedge its exposure this may result in the firm entering into forward contract of more or less stable rates overtime. In the short-term however, the expected impact of Canadian dollar fluctuations on operating expenses is minimal.
The tax rate for the quarter was approximately 26%.
This is lower than the firm’s forecast of 30% due to the impact of the depreciation of the US dollar versus the Canadian dollar and certain US dollar denominated net assets and the fact that the majority of the tax were payable in Canada.
GAAP net income for the first quarter was $223 million or $1.17 per share, excluding regular stock-option expense of $5 million.
Adjusted net income was $228 or $1.20 per share. This is higher than the previous forecast, due to the stronger than expected revenue, slightly lower OpEx, and the favorable foreign exchange impact on the tax rate.
The weighted average diluted shares, used in the preliminary in the GAAP EPS calculation for the quarter were 190.4 million. Actual shares outstanding at June 2nd were 186 million. Total options outstanding at June 2nd, were 6.3 million.
