Blackberry 1998 Annual Report Download - page 16

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Overview
Research In Motion generated net income of $540,000
for the year ended February 28, 1998 on an almost
threefold increase in revenue to $33.2 million. Results
reflected strong growth over net income of $44,000 on
revenues of $12.1 million last year, as RIM continued
to boost capacity and fill its order backlog to meet
growing demand for its state-of-the-art wireless
products. RIM’s order backlog stood at $100 million at
fiscal year end. This backlog is expected to decline
relative to ongoing shipments as RIM’s production
facilities achieve sufficient capacity to significantly
reduce customer lead times for its products.
Results of Operations
Operating Highlights
(C$000’s), Fiscal 1998 Fiscal 1997
Revenue $ 33,159 $ 12,071
Gross Profit 11,715 6,390
Net Income 540 44
Revenue
Strong demand for wireless messaging products
almost tripled revenue to $33.2 million from $12.1
million in fiscal 1997. Inter@ctive Pager sales of $23.2
million to customers such as BellSouth Wireless Data,
AMSC/ARDIS, IBM, and Bell Mobility were the
primary source of revenue growth, accounting for
70% of total revenue versus 4% last year. However,
OEM embedded radio modems and Wireless PC
Cards also made solid contributions. OEM radio sales
of $5.0 million represented 15% of total revenue (1997:
2%), while sales of Wireless PC Cards represented
6% of revenue (1997: 59%) at $1.9 million.
Approximately 90% of product shipments
were exported to the US in fiscal 1998, with the
remaining 10% shipped to customers in Asia. This
compares to 85% to the US and 15% to Asia in fiscal
1997. While difficult economic conditions in Asia had
a negative impact on shipments to this region during
the year, RIM maintains close relationships with
its Asian customers and long-term growth prospects
remain favourable.
Other revenue of $3.2 million chiefly consisted
of government grants and investment tax credits of
$2.0 million.
Revenue growth for the Company’s products is
affected by the product development cycle. Tradi-
tionally, RIM has introduced new products in the first
half of its fiscal year, and the resultant phasing out of
previous generation products and concentration on
launch efforts typically depresses revenue relative to
the fourth quarter of the preceding fiscal year. The
June 1998 launch of the next generation Inter@ctive
Pager is expected to have this impact on first quarter
revenue in fiscal 1999, with sales growth expected to
resume thereafter.
Gross Margin
Gross profit rose to $11.7 million in fiscal 1998 from
$6.4 million in fiscal 1997, representing 35% of sales
versus 53% a year ago. Gross margin in fiscal 1997
was higher due to a greater proportion of non-
product revenue for which there was no associated
COGS. Government grants, investment tax credits,
and non-recurring engineering revenue represented
34% of total revenue in fiscal 1997; their decline to 8%
of total revenue in fiscal 1998 is consistent with
expectations as the Company moves into full
MANAGEMENT’S DISCUSSION AND ANALYSIS
DENNIS KAVELMAN
CHIEF FINANCIAL OFFICER
0
5
10
15
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
1997 1998
Quarterly Revenues ($ in millions)