Highlights From RIM's (RIMM) Q2 Conference Call: Terrible Results; But Really High Hopes

Research In Motion Ltd (NASDAQ: RIMM) reported Q2 EPS of $0.80, $0.07 worse than the analyst estimate of $0.87. Revenue for the quarter came in at $4.2 billion versus the consensus estimate of $4.47 billion.

Highlights from the conference:

• RIM shipped approximately 10.6 million smartphones in the second quarter and the BlackBerry subscriber base is now over 70 million.
• Revenue was approximately $4.2 billion and service revenue surpassed $1 billion for the first time in RIM's history, reflecting the over 40% growth in our subscriber base over the past year.
• Hardware revenue was 73% of sales with services, software and other representing 27%.
• Some of the larger other markets in the quarter were South Africa, Indonesia, Western Europe, Middle East and Latin America. U.S. sales were 27% of total consolidated revenue. Sales in the U.K. represented approximately 10% and Canada represented the remainder.
  
• Sell-through of BlackBerry smartphones in Q2 was the second highest ever at 13.7 million.
• Moving to cash flow, the company made significant investment in intellectual property this quarter with the $780 million purchase of the Nortel assets as part of the consortium of companies as well as having higher working capital requirements due to higher levels of inventory and DSOs.
  
• Early results from the BlackBerry 7 launch are strong and we are rolling these devices out to all of our network, our full network of global partners including broadening our launches in our strongest global regions.
• Anticipate acceleration of the uptake of BlackBerry devices for the remainder of the fiscal year and into 2012 as reflected in our guidance for the sequential unit shipment increase of 27% to 37% in Q3.
• PlayBook shipments were 200,000 in the quarter, which was lower than we had anticipated. We're planning to launch a major software upgrade for PlayBook.
• RIM's balance sheet remains strong with a cash position of approximately $1.4 billion.
• The board-approved share purchase program remains in place and shall be commenced at our discretion.
• GAAP diluted earnings per share in the second quarter were $0.63. Excluding the after-tax impact of our cost optimization charge, adjusted net earnings per share were $0.80 diluted.
• We expect full-year adjusted diluted earnings per share excluding changes related to the cost optimization program to come in towards the low end of our guidance range of $5.25 to $6.00.
• In the first several weeks of the launch, 147 launches have occurred with approximately 90 carriers in 30 countries and we've achieved over 600 certifications currently at 250 carriers.
• RIM also recently entered into an agreement for a $500 million credit facility, which will eventually replace the existing $100 million credit facility.
• Total revenue for Q3 to be in the range of $5.3 billion to $5.6 billion, which includes BlackBerry smartphone shipments of between 13.5 million and 14.5 million units, which is a sequential increase of between 27% and 37%.
• We expect gross margin to be approximately 37%. Q3 adjusted diluted EPS excluding charges related to the cost optimization program to be in the range of $1.20 to $1.40 per share diluted.
• Development efforts on the first QNX-based smartphone product are going extremely well and we plan to ensure that when we launch the product will have the features,
• We understand that the past few quarters have been challenging and we are confident that we are on track to return to growth in Q3 and beyond.

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