ARM reports continuing success


26-10-2010

ARM Holdings plc announces its unaudited financial results for the third quarter and nine months ended 30 September 2010. Continuing adoption of ARM technology by leading semiconductor companies in a broad range of end-markets is delivering strong revenues, profits and cash.

In an interview with BBC Radio 4's Today programme yesterday (Tuesday), Warren East, chief executive of ARM Holdings, outlines his thoughts on the private sector's capacity to provide growth and jobs.

Q3 Financial Summary

Normalised*

IFRS

Q3 2010

Q3 2009

% Change

 

Q3 2010

Q3 2009

Revenue ($m)

158.1

123.0

29%

158.1

123.0

Revenue (£m)

100.4

75.2

34%

 

100.4

75.2

Operating margin

37.7%

31.7%

 

 

18.6%

9.6%

Profit before tax (£m)

38.8

24.3

60%

 

19.6

7.7

Earnings per share (pence)

2.08

1.34

55%

 

1.09

0.53

Net cash generation (£m)**

65.0

28.3

 

 

 

 

Effective revenue fx rate ($/£)

1.58

1.64

 

 

 

 

 

YTD Financial Summary

Normalised*

IFRS

YTD 2010

YTD 2009

% Change

 

YTD 2010

YTD 2009

Revenue ($m)

451.7

349.4

29%

451.7

349.4

Revenue (£m)

292.6

219.8

33%

 

292.6

219.8

Operating margin

40.1%

28.8%

 

 

24.8%

11.8%

Profit before tax (£m)

119.9

64.5

86%

 

75.1

27.1

Earnings per share (pence)

6.45

3.66

76%

 

4.17

1.79

Net cash generation (£m)**

139.2

55.4

 

 

 

 

Effective revenue fx rate ($/£)

1.54

1.59

 

 

 

 

 

Progress on key growth drivers

* Growth in mobile applications - ARM opportunity increasing with mobile phones, smart phones and now mobile
computers growing strongly
o 900 million ARM®-processor based chips were shipped in mobile devices
o 4 processor licenses signed for mobile phone and computing applications
*Growth beyond mobile - Increased share in target markets such as consumer electronics and embedded products
o 600 million ARM-processor based chips shipped in everything from toys to televisions, cameras to cars
o 18 processor licenses signed for a broad range of applications including advanced processors for use in new
markets such as network infrastructure and sensors
* Growth in new technology outsourcing
o 3 licenses for royalty-bearing platforms of physical IP at advanced nodes and mature nodes including TSMC
licensing physical IP for 28nm and 20nm, as previously reported
o 2 licenses for Mali™, ARM’s advanced graphics processor


Warren East, Chief Executive Officer, said: “Q3 was a good quarter for ARM. Not only are we benefiting from growth in applications where we are the established market leader, including in smartphones and mobile computers, but we are gaining share in markets like digital TV and microcontrollers. Our partners are also starting to develop chips in new markets for ARM, such as servers and laptops, creating longer-term opportunities. In addition, both physical IP and Mali graphics performed well with important license wins and increasing royalty revenues. Given the broadening growth opportunities that are available to us, we have accelerated investment in R&D in the first nine months of the year whilst also increasing both profits and cash generation."

Outlook

We enter the final quarter of 2010 with positive momentum and we expect sequential group dollar revenue growth in the fourth quarter. Looking further ahead, despite an uncertain macro-economic environment, ARM remains well positioned for growth with leading semiconductor companies increasingly adopting ARM technology for a broadening range of end-markets.

Q3 2010 – Revenue Analysis

Revenue ($m)***

 

Revenue (£m)

 

Q3 2010

Q3 2009

% Change

 

Q3 2010

Q3 2009

% Change

PD

 

 

 

 

 

 

 

Licensing

42.2

30.9

37%

 

26.6

18.5

43%

Royalties

70.4

53.1

33%

 

44.8

32.3

39%

Total PD

112.6

84.0

34%

 

71.4

50.8

40%

PIPD

 

 

 

 

 

 

 

Licensing

10.5

8.8

20%

 

6.7

5.6

20%

Royalties1

11.3

9.2

22%

 

7.2

5.7

27%

Total PIPD

21.8

18.0

21%

 

13.9

11.3

23%

Development Systems

15.6

14.0

11%

 

10.0

8.7

16%

Services

8.1

7.0

15%

 

5.1

4.4

15%

Total Revenue

158.1

123.0

29%

 

100.4

75.2

34%

 

1 Includes catch-up PIPD royalties in Q3 2010 of $0.6m (£0.4m) and in Q3 2009 of $nil.

YTD 2010 – Revenue Analysis

Revenue ($m)***

 

Revenue (£m)

 

YTD 2010

YTD 2009

% Change

 

YTD 2010

YTD 2009

% Change

PD

 

 

 

 

 

 

 

Licensing

113.0

92.4

22%

 

72.0

55.0

31%

Royalties1

209.6

144.7

45%

 

137.3

94.1

46%

Total PD

322.6

237.1

36%

 

209.3

149.1

40%

PIPD

 

 

 

 

 

 

 

Licensing

29.8

26.7

11%

 

19.1

16.2

18%

Royalties2

31.8

25.1

27%

 

20.7

16.1

28%

Total PIPD

61.6

51.8

19%

 

39.8

32.3

23%

Development Systems

43.8

38.8

13%

 

28.6

25.1

14%

Services

23.7

21.7

9%

 

14.9

13.3

12%

Total Revenue

451.7

349.4

29%

 

292.6

219.8

33%

1 Includes catch-up PD royalties in YTD 2010 of $9.0m (£6.2m).
2 Includes catch-up PIPD royalties in YTD 2010 of $1.4m (£0.9m) and in YTD 2009 of $4.2m (£2.6m).

*

Normalised non-GAAP figures are based on IFRS, adjusted for acquisition-related charges, share-based payment costs, restructuring charges, Linaro-related charges and profit on disposal and impairment of available-for-sale investments. For reconciliation of IFRS measures to normalised non-IFRS measures detailed in this document, see notes 5.1 to 5.16.

**

Net cash generation is defined as movement on cash, cash equivalents, short-term investments and marketable securities, adding back dividend payments, investment and acquisition consideration, restructuring payments, other acquisition-related payments, Linaro-related charges, and share-based payroll taxes, and deducting inflows from share option exercises and proceeds from investment disposals – see notes 5.8 to 5.12.

***

Dollar revenues are based on the group’s actual dollar invoicing, where applicable, and using the rate of exchange applicable on the date of the transaction for invoicing in currencies other than dollars. Approximately 95% of invoicing is in dollars.

 

CONTACTS:

Sarah West/Daniel Thöle
Brunswick
+44 (0)207 404 5959

Tim Score/Ian Thornton
ARM Holdings plc
+44 (0)1223 400400

 

Full report here

 

ARM is at the heart of the world’s most advanced digital products. Our technology enables the creation of new markets and transformation of industries and society.

Arm Ltd