Financial Express (Holdings) Limited (“we”, “our”, “us” and derivatives) are committed to protecting and respecting your privacy. This Privacy Policy, together with our Terms of Use, sets out the basis on which any personal data that we collect from you, or that you provide to us, will be processed by us relating to your use of any of the below websites (“sites”).

  • FEAnalytics.com
  • FEInvest.net
  • FETransmission.com
  • Investegate.co.uk
  • Trustnet.hk
  • Trustnetoffshore.com
  • Trustnetmiddleeast.com

For the purposes of the Data Protection Act 1998, the data controller is Trustnet Limited of 2nd Floor, Golden House, 30 Great Pulteney Street, London, W1F 9NN. Our nominated representative for the purpose of this Act is Kirsty Witter.

WHAT INFORMATION DO WE COLLECT ABOUT YOU?

We collect information about you when you register with us or use any of our websites / services. Part of the registration process may include entering personal details & details of your investments.

We may collect information about your computer, including where available your operating system, browser version, domain name and IP address and details of the website that you came from, in order to improve this site.

You confirm that all information you supply is accurate.

COOKIES

In order to provide personalised services to and analyse site traffic, we may use a cookie file which is stored on your browser or the hard drive of your computer. Some of the cookies we use are essential for the sites to operate and may be used to deliver you different content, depending on the type of investor you are.

You can block cookies by activating the setting on your browser which allows you to refuse the setting of all or some cookies. However, if you use your browser settings to block all cookies (including essential cookies) you may not be able to access all or part of our sites. Unless you have adjusted your browser setting so that it will refuse cookies, our system will issue cookies as soon as you visit our sites.

HOW WE USE INFORMATION

We store and use information you provide as follows:

  • to present content effectively;
  • to provide you with information, products or services that you request from us or which may interest you, tailored to your specific interests, where you have consented to be contacted for such purposes;
  • to carry out our obligations arising from any contracts between you and us;
  • to enable you to participate in interactive features of our service, when you choose to do so;
  • to notify you about changes to our service;
  • to improve our content by tracking group information that describes the habits, usage, patterns and demographics of our customers.

We may also send you emails to provide information and keep you up to date with developments on our sites. It is our policy to have instructions on how to unsubscribe so that you will not receive any future e-mails. You can change your e-mail address at any time.

In order to provide support on the usage of our tools, our support team need access to all information provided in relation to the tool.

We will not disclose your name, email address or postal address or any data that could identify you to any third party without first receiving your permission.

However, you agree that we may disclose to any regulatory authority to which we are subject and to any investment exchange on which we may deal or to its related clearing house (or to investigators, inspectors or agents appointed by them), or to any person empowered to require such information by or under any legal enactment, any information they may request or require relating to you, or if relevant, any of your clients.

You agree that we may pass on information obtained under Money Laundering legislation as we consider necessary to comply with reporting requirements under such legislation.

ACCESS TO YOUR INFORMATION AND CORRECTION

We want to ensure that the personal information we hold about you is accurate and up to date. You may ask us to correct or remove information that is inaccurate.

You have the right under data protection legislation to access information held about you. If you wish to receive a copy of any personal information we hold, please write to us at 3rd Floor, Hollywood House, Church Street East, Woking, GU21 6HJ. Any access request may be subject to a fee of £10 to meet our costs in providing you with details of the information we hold about you.

WHERE WE STORE YOUR PERSONAL DATA

The data that we collect from you may be transferred to, and stored at, a destination outside the European Economic Area (“EEA”). It may be processed by staff operating outside the EEA who work for us or for one of our suppliers. Such staff may be engaged in, amongst other things, the provision of support services. By submitting your personal data, you agree to this transfer, storing and processing. We will take all steps reasonably necessary, including the use of encryption, to ensure that your data is treated securely and in accordance with this privacy policy.

Unfortunately, the transmission of information via the internet is not completely secure. Although we will do our best to protect your personal data, we cannot guarantee the security of your data transmitted to our sites; any transmission is at your own risk. You will not hold us responsible for any breach of security unless we have been negligent or in wilful default.

CHANGES TO OUR PRIVACY POLICY

Any changes we make to our privacy policy in the future will be posted on this page and, where appropriate, notified to you by e-mail.

OTHER WEBSITES

Our sites contain links to other websites. If you follow a link to any of these websites, please note that these websites have their own privacy policies and that we do not accept any responsibility or liability for these policies. Please check these policies before you submit any personal data to these websites.

CONTACT

If you want more information or have any questions or comments relating to our privacy policy please email publishing@financialexpress.net in the first instance.

 Information  X 
Enter a valid email address

ARM Holdings PLC (ARM)

  Print      Mail a friend       Annual reports

Tuesday 27 October, 2009

ARM Holdings PLC

3rd Quarter Results

RNS Number : 4036B
ARM Holdings PLC
27 October 2009
 



EMBARGOED until 7.00am GMT 27 October 2009

ARM HOLDINGS PLC REPORTS RESULTS FOR THE THIRD QUARTER AND NINE MONTHS ENDED 
3
0 SEPTEMBER 2009

 A conference call discussing these results will be webcast today at 8:30 GMT at www.arm.com/ir


CAMBRIDGE, UK, 27 October 2009-ARM Holdings plc [(LSE: ARM); (NASDAQ: ARMH)], the world's leading semiconductor intellectual property supplier, announces its unaudited financial results for the third quarter and nine months ended 30 September 2009.


Key Highlights

ARM has continued to outperform the semiconductor industry and gain market share

Strong processor licensing for applications such as smartphones, mobile computing and microcontrollers

ARM's advanced physical IP at 28nm was licensed to a major foundry and a fabless semiconductor company

Sequentially improving operating margin to 31.7% and strong quarterly net cash generation of £28.2m

Reiterating guidance: ARM's full-year 2009 dollar revenues to be at least in line with current market expectations 


Q3 Financial Summary
Normalised*
 
IFRS
 
Q3 2009
Q3 2008
% Change
 
Q3 2009
Q3 2008
Revenue ($m)
123.0
134.4
-8%
 
123.0
134.4
Revenue (£m)
75.2
71.7
+5%
 
75.2
71.7
Operating margin
31.7%
33.0%
 
 
9.6%
20.3%
Profit before tax (£m)
24.3
24.9
-2%
 
7.7
15.8
Earnings per share (pence)
1.34
1.38
-3%
 
0.53
0.88
Net cash generation (£m)**
28.2
22.5
 
 
 
 
Effective revenue fx rate ($/£)
1.64
1.88
 
 
 
 
 
 
 

YTD Financial Summary
 
Normalised*
 
IFRS
 
YTD 2009
YTD 2008
% Change
 
YTD 2009
YTD 2008
Revenue ($m)
349.4
396.8
-12%
 
349.4
396.8
Revenue (£m)
219.8
204.6
+7%
 
219.8
204.6
Operating margin
28.8%
31.8%
 
 
11.8%
18.3%
Profit before tax (£m)
64.5
67.5
-5%
 
27.1
40.0
Earnings per share (pence)
3.66
3.73
-2%
 
1.79
2.05
Net cash generation (£m)**
53.3
62.7
 
 
 
 
Effective revenue fx rate ($/£)
1.59
1.94
 
 
 
 

 



Progress on key growth drivers

  • Growth in mobile applications

    • 13 new processor licenses signed for high-performance mobile computers and smartphones

    • ARM licenses 2GHz dual Cortex-A9 processor for mobile computing applications

  • Growth beyond mobile

    • 15 new processor licenses signed, including four next-generation processors, for broad range of markets including digital TV, microcontrollers, hard disk drives and networking applications

    • Strong sequential growth in all target markets including 75% sequential increase in shipments of ARM-technology based microcontrollers due to market share gains and inventory restocking 

  • Growth in new technology outsourcing 

    • First leading fabless semiconductor company licenses ARM's 28nm physical IP and, shortly after the quarter end, GLOBALFOUNDRIES also licenses 28nm physical IP 


Warren East, Chief Executive Officer, said:

"Q3 was a good quarter for ARM. Despite pressure on customers' R&D budgets we are pleased that continuing strong demand from industry leaders, combined with our broadest range of products and effective use of licensing models, has delivered a record number of processor licenses. We are particularly encouraged by the licensing of ARM's next generation processor technology, and by the first license to a leading fabless semiconductor company of ARM's advanced 28nm physical IP. Such agreements are the drivers of ARM's long-term royalty growth, and as ARM becomes the technology of choice in smart, connected and low-power consumer electronic devices we continue to gain market share.  


Once again we have demonstrated the resilience in the ARM business model; our improving revenue and disciplined cost control has delivered a sequential improvement in margins and profitability, as well as a high level of cash generation."

 

Outlook

Going into the final quarter of 2009, ARM is encouraged by the improving confidence in our customer-base, and we reiterate guidance that we expect group dollar revenues for the full year to be at least in line with current market expectations. 


Although, in the short term, the trajectory of consumer demand for electronic devices remains unclear, looking ahead through 2010, ARM is well-positioned to take advantage of the generally anticipated improvements in the semiconductor industry.  


Q3 2009 – Revenue Analysis
 
Revenue ($m)***
 
Revenue (£m)
 
Q3 2009
Q3 2008
% Change
 
Q3 2009
Q3 2008
% Change
PD
 
 
 
 
 
 
 
Licensing
30.9
35.5
-13%
 
18.5
19.2
-4%
Royalties
53.1
55.2
-4%
 
32.3
29.2
11%
Total PD
84.0
90.7
-7%
 
50.8
48.4
5%
PIPD
 
 
 
 
 
 
 
Licensing
8.8
10.4
-16%
 
5.6
5.6
1%
Royalties1
9.2
11.0
-16%
 
5.7
5.9
-4%
Total PIPD
18.0
21.4
-16%
 
11.3
11.5
-2%
Development Systems
14.0
14.6
-4%
 
8.7
7.8
11%
Services
7.0
7.7
-9%
 
4.4
4.0
11%
Total Revenue
123.0
134.4
-8%
 
75.2
71.7
5%

 

1 Includes catch-up royalties in Q3 2009 of $nil million and in Q3 2008 of $1.7m (£0.9m).


YTD 2009 – Revenue Analysis
 
Revenue ($m)***
 
Revenue (£m)
 
YTD 2009
YTD 2008
% Change
 
YTD 2009
YTD 2008
% Change
PD
 
 
 
 
 
 
 
Licensing
92.4
102.1
-9%
 
55.0
        52.8
4%
Royalties
144.7
161.0
-10%
 
94.1
        83.1
13%
Total PD
237.1
263.1
-10%
 
149.1
      135.9
10%
PIPD
 
 
 
 
 
 
 
Licensing
26.7
34.8
-23%
 
16.2
        17.9
-9%
Royalties1
25.1
29.7
-15%
 
16.1
        15.4
5%
Total PIPD
51.8
64.5
-20%
 
32.3
        33.3
-3%
Development Systems
38.8
44.9
-14%
 
25.1
        23.1
9%
Services
21.7
24.3
-11%
 
13.3
        12.3
8%
Total Revenue
349.4
396.8
-12%
 
219.8
      204.6
7%

 

1 Includes catch-up royalties in YTD 2009 of $4.2m (£2.6m) and in YTD 2008 of $3.6m (£1.9m).


*

Normalised figures are based on IFRS, adjusted for acquisition-related, share-based compensation and restructuring charges and profit on disposal and impairment of available-for-sale investments. For reconciliations of IFRS measures to normalised non-IFRS measures detailed in this document, see notes 4.1 to 4.27.

**

Before dividends and share buybacks, net cash flows from share option exercises, disposals of available-for-sale investments and acquisition consideration - see notes 4.14 to 4.18.

***

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.

****

Each American Depositary Share (ADS) represents three shares.


CONTACTS:    


Sarah West/Daniel Thöle  

Tim Score/Ian Thornton  

Brunswick   

ARM Holdings plc  

+44 (0)207 404 5959  

+44 (0)1223 400400



 

  

Financial review

(IFRS unless otherwise stated)


Total revenues

Total dollar revenues in Q3 2009 were $123.0 million, down 8% versus Q3 2008. Overall semiconductor industry revenues are forecast to have declined about 18%1 in the same period.


Sterling revenues of £75.2 million were up 5% compared with Q3 2008, due to the strengthening of the dollar against sterling (ARM's effective rate in Q3 2009 was $1.64 compared to $1.88 in Q3 2008).  


Year-to-date dollar revenues amounted to $349.4 million, down 12% on 2008.


License revenues

Total dollar license revenues in Q3 2009 declined by 14% year-on-year to $39.7m, representing 32% of group revenues. License revenues comprised $30.9 million from PD and $8.8 million from PIPD.  


ARM signed a record number of twenty-eight processor licenses during the quarter. Four of these licenses were for processors that are still under development and all of the revenue associated with these agreements goes into backlog and will be recognised in future quarters as engineering milestones are achieved.  Group backlog at the end of the quarter was up 3% sequentially.


Royalty revenues

Total dollar royalty revenues in Q3 2009 declined year-on-year by 6% to $62.3 million, representing 51% of group revenues. Royalty revenues comprised $53.1 million from PD and $9.2 million from PIPD.  


Royalties are recognised one quarter in arrears with royalties in Q3 generated from semiconductor unit shipments in Q2. PD royalty revenues in Q3 2009 decreased 4% year-on-year. This compares with industry revenues2 declining by 20% in the shipment period (i.e. Q2 2009 compared to Q2 2008), demonstrating ARM's continuing market share gains over the last 12 months.   


Total PIPD royalties of $9.2 million did not include any catch-up royalties; therefore underlying royalty revenues were at a similar level to the $9.3 million reported in Q3 2008, compared to the forecasted decline in overall foundry revenues3 of 21% in the corresponding period.


Development Systems and Service revenues

Sales of development systems in Q3 2009 were $14.0 million, a decrease of 4% year-on-year and representing 11% of group revenues.  However, development systems revenue increased sequentially which was partly due to two large software tools licenses being signed in the quarter. Given that deals of this type are infrequent in this division, development systems revenues in Q4 2009 are expected to be closer to the underlying quarterly revenue run-rate of $10-$12 million.


Service revenues in Q3 2009 were $7.0 million, a decrease of 9% year-on-year and representing 6% of group revenues.


Gross margins

Gross margins in Q3 2009, excluding the share-based compensation charge of £0.4 million (see below), were 92.9% compared to 91.2% in Q2 2009 and 89.9% in Q3 2008. The higher gross margin in Q3 2009 compared to Q2 is due primarily to the higher proportion of royalty and licensing revenue compared to development systems and services revenues.

    

  

Operating expenses and operating margin

Normalised operating expenses (excluding acquisition-related, share-based compensation and restructuring charges) in Q3 2009 were £46.0 million compared to £43.1 million in Q2 2009 and £40.8 million in Q3 2008. Underlying costs continue to be carefully managed with group headcount at the end of the third quarter being approximately 2% lower than at the start of the year. The pay freeze that was implemented with effect from 1 January 2009 will remain in place for the rest of the year. Normalised operating expenses in Q4 2009 (assuming effective exchange rates similar to current levels) are expected to be £46-48 million. During the third quarter ARM initiated the closing of its office in Leuven, Belgium resulting in a restructuring charge of £6.6 million.  This will give rise to an annualised saving of approximately £3 million.

 

Normalised research and development expenses were £21.5 million in Q3 2009, representing 29% of revenues, compared to £22.5 million in Q2 2009 and £15.7 million in Q3 2008. Normalised sales and marketing costs in Q3 2009 were £11.9 million, being 16% of revenues, compared to £11.6 million in Q2 2009 and £11.4 million in Q3 2008. Normalised general and administrative expenses in Q3 2009 were £12.6 million, representing 17% of revenues, compared to £9.0 million in Q2 2009 and £13.7 million in Q3 2008. Normalised operating margin in Q3 2009 was 31.7(4.1) compared to 24.7% (4.3) in Q2 2009 and 33.0% (4.2) in Q3 2008. 


Total operating expenses in Q3 2009 were £62.2 million (Q3 2008: £49.7 million) including amortisation of intangible assets and other acquisition-related charges of £3.6 million (Q3 2008: £4.8 million), £5.8 million (Q3 2008: £3.6 million) in relation to share-based compensation and related payroll taxes and restructuring charges of £6.6 million (Q3 2008: £0.4 million). Total share-based compensation and related payroll tax charges of £6.3 million in Q3 2009 were included within cost of revenues (£0.4 million), research and development (£3.8 million), sales and marketing (£1.2 million) and general and administrative (£0.9 million). Normalised income statements for Q3 2009 and Q3 2008 are included in notes 4.24 and 4.25 below which reconcile IFRS to the normalised non-IFRS measures referred to in this earnings release.


Earnings and taxation 

Profit before tax in Q3 2009 was £7.7 million compared to £15.8 million in Q3 2008. After adjusting for acquisition-related, share-based compensation and restructuring charges, normalised profit before tax in Q3 2009 was £24.3 million (4.6) compared to £24.9 million (4.7) in Q3 2008.  The Group's effective normalised tax rate in Q3 2009 was 28.1% (IFRS: 10.1%) giving a year-to-date normalised tax rate of 26.6% (IFRS: 14.9%). The tax rate under IFRS is lower than the normalised tax rate due primarily to the impact of tax credits arising on share-based compensation.


In Q3 2009, fully diluted earnings per share prepared under IFRS were 0.53 pence (2.54 cents per ADS****) compared to earnings per share of 0.88 pence (4.70 cents per ADS****) in Q3 2008. Normalised fully diluted earnings per share in Q3 2009 were 1.34 pence (4.19) per share (6.44 cents per ADS****) compared to 1.38 pence (4.20) (7.41 cents per ADS****) in Q3 2008.  


Balance sheet 

Intangible assets at 30 September 2009 were £550.8 million, comprising goodwill of £521.7 million and other intangible assets of £29.1 million, compared to £506.9 million and £32.9 million respectively at 30 June 2009. 


Total accounts receivable were £56.1 million at 30 September 2009, comprising £45.3 million of trade receivables and £10.8 million of amounts recoverable on contracts, compared to £56.6 million at 30 June 2009, comprising £45.7 million of trade receivables and £10.9 million of amounts recoverable on contracts. Days sales outstanding (DSOs) were 43 at 30 September 2009 compared to 47 at 30 June 2009 and 49 at 31 December 2008. 


Cash flow

Net cash at 30 September 2009 was £121.7 million (4.11) compared to £88.2 million (4.12) at 30 June 2009. Normalised free cash flow in Q3 2009 was £28.2 million (4.14).

 

 

Operating review


Backlog

Group order backlog at the end of Q3 2009 increased 3% sequentially, with processor backlog up about 10% sequentially. Following licensing activity early in Q4, group order backlog is about 10% higher than at the half year.


Processor licensing

A total of twenty-eight processor licenses were signed in Q3. Non-mobile devices continue to be a major driver for processor licenses and fifteen of the new processor licenses were signed for a broad range of digital products such as automotive, digital TV, microcontrollers, networking and storage.  The remaining thirteen licenses were acquired for use in application and baseband processors in mobile computers and smartphones.


Twenty-three of the licenses were for ARM's advanced Cortex and Mali graphics processors of which eight licenses were signed for the Cortex-A family processors for use in consumer electronics and mobile computing applications, including a license for ARM's 2GHz implementation of a dual core Cortex-A9 processor. Thirteen of the licenses were signed for the Cortex-R and Cortex-M family of processors, for use in embedded applications, including four lead licenses for processors that are still under development.  


Although semiconductor companies are generally maintaining their new product development activity, many have constrained R&D budgets in 2009. ARM has met the continuing demand for its products by, in some cases, offering term and single-use licenses. Typically, these licenses have a lower upfront fee but higher on-going royalty rate. During the quarter, ARM signed a record number of licenses; with a higher proportion than usual for single-use and term, rather than perpetual multi-use.


Q3 2009 and Cumulative Processor Licensing Analysis

 

Existing

Licensees

New
Licensees

Quarter 
Total

Cumulative Total

ARM7




172

ARM9


4

4

258

ARM11

1


1

72

Cortex-A

6

2

8

29

Cortex-R

3


3

17

Cortex-M

10


10

44

Mali

2


2

25

Other




24

Total

22

6

28

641


Processor royalties

Royalties are recognised one quarter in arrears with royalties in Q3 generated from semiconductor unit shipments in Q2. PD royalty revenues in Q3 2009 declined 4% year-on-year. This compares with industry revenues declining by about 20% in the shipment period (i.e. Q2 2009 compared to Q2 2008), demonstrating ARM's market share gains over the last 12 months. 


This revenue came from the sales of over 1.0 billion ARM technology-based chips. The ARM11™ family represents 5% of total unit shipments, with the ARM7 and ARM9 families now representing 54% and 40% of total shipments respectively.   The Cortex family represents 1% of total unit shipments, and the first royalties were received for shipments of Cortex-A9 technology-based chips.


ARM continued to gain share in non-mobile end-markets. Shipments of ARM-based microcontrollers grew 75% sequentially, compared to 30% for the overall microcontroller market. Part of this growth was due to an increase in sales of Cortex-M3 based chips. These chips go into a wide range of price sensitive markets such as toys, white-goods and industrial controllers.  This strong sequential growth in low-cost microcontrollers has resulted in the average royalty rate decreasing to 5.3c in the quarter from 5.7c in the prior quarter and 5.5c in the same quarter last year.


The increasing penetration of smartphones continues to benefit ARM. In Q2 smartphone shipments grew about 25% year-on-year, whilst overall mobile phone shipments declined about 5%. For the quarter, ARM achieved an average of 2.1 ARM technology-based chips per mobile handset, up from 2.0 in the previous quarter.  Over the last few months more new smartphones and mobile computers based on Cortex-A technology were announced by OEMs including Acer, Dell, HTC, Nokia and Sharp.  

  



Q3 2009 Processor Royalty Analysis

Processor Family

Unit Shipments


Market Segment

Unit Shipments

ARM7

54%


Mobile

64%

ARM9

40%


Enterprise

16%

ARM11

5%


Home

5%

Cortex

1%


Embedded

15%



PIPD licensing

ARM signed eight physical IP licenses in Q3 for technologies at process nodes from 180nm to 28nm for a wide range of ARM products including platforms of physical IP technology components and also additional standard cell libraries and memories.


The base of platform licenses for physical IP drives ARM's future royalty potential. During the quarter the first leading fabless semiconductor company licensed a platform of ARM's advanced 28nm physical IP. Shortly after the end of the quarter, GLOBALFOUNDRIES also licensed a platform of ARM's 28nm physical IP. ARM's strategy of developing advanced physical IP at the leading edge of semiconductor manufacturing is addressing the growing need by foundries and their customers to reduce development costs and time to market, whilst improving yield and power efficiency.  


Demand for new platforms at more mature nodes also continues and ARM signed an agreement to develop a platform at 40nm. ARM also signed an agreement to update an existing platform at 180nm. At the end of the quarter ARM had signed 65 platform licenses.


Q3 2009 and Cumulative PIPD Licensing Analysis 



Process Node 

Total


Platform analysis

Royalty Bearing Platforms 


 (nm)



(nm)

at Each Node

New Platform Licenses

32/28

45/40

1*

1


32/28

5*

45/40

7

Platform Updates

180

1


65

10

Standard Cell and Memories

45/40

4


90

10


180

1


130

13

Quarter Total


8


180 to 250

20

Cumulative Total


433


Total

65

* GLOBALFOUNDRIES license was signed early in Q4.


PIPD royalties

Physical IP royalties are generated mainly from chips manufactured in foundries such as TSMC, UMC and Chartered. Royalties are recognised one quarter in arrears with royalties in Q3 generated from semiconductor unit shipments in Q2.  


Underlying PIPD royalties in Q3 2009 were $9.2 million, up about 80% sequentially and at a similar level to the $9.3 million reported in Q3 2008. PIPD demonstrates continuing market share gain as industry revenues declined 20% compared to a year ago4. In addition, ARM received its first 45nm royalties from a leading foundry.


People

At 30 September 2009, ARM had 1,709 full-time employees, a net reduction of 31 since the start of the year. At the end of Q3, the group had 649 employees based in the UK, 494 in the US, 224 in Continental Europe, 260 in India and 82 in the Asia Pacific region.  As mentioned in the Financial Review, ARM's office in Leuven will be closing in Q4 leading to a reduction of 24 full-time employees.


Principal risks and uncertainties

The principal risks and uncertainties faced by the Group that could affect the results for the first nine months of 2009 and beyond are noted within the Annual Report on Form 20-F for the fiscal year ended 31 December 2008. There have been no changes to these risks that would materially impact the Group in the foreseeable future.  These include but are not limited to: ARM's quarterly results may fluctuate significantly and be unpredictable which could adversely affect the market price of ARM ordinary shares; general economic conditions may reduce ARM's revenues and harm its business; and ARM competes in the intensely competitive semiconductor market.

  ARM Holdings plc

Third Quarter and Nine Months Results

Consolidated income statement - IFRS



Quarter

Quarter


Nine months

Nine months


ended

ended


ended

ended


30 September 2009

30 September 2008


30 September 2009

30 September 2008


Unaudited

Unaudited


Unaudited

Unaudited


£'000

£'000


£'000

£'000

Revenues






    Product revenues

70,717

67,677


206,536

192,266

    Service revenues

4,443

3,987


13,304

12,301

Total revenues

75,160

71,664


219,840

204,567







Cost of revenues






    Product costs

(3,661)

(5,492)


(13,600)

(16,650)

    Service costs

(2,114)

(1,985)


(6,458)

(5,998)

Total cost of revenues

(5,775)

(7,477)


(20,058)

(22,648)







Gross profit

69,385

64,187


199,782

181,919







    Research and development

(27,094)

(21,002)


(81,833)

(63,050)

    Sales and marketing

(15,030)

(13,827)


(45,466)

(40,635)

    General and administrative

(20,026)

(14,825)


(46,440)

(40,730)

Total operating expenses, net

(62,150)

(49,654)


(173,739)

(144,415)







Profit from operations

7,235

14,533


26,043

37,504

Investment income

467

1,235


1,207

2,486

Interest payable

(37)

(13)


(113)

(40)







Profit before tax 

7,665

15,755


27,137

39,950

Tax 

(774)

(4,485)


(4,039)

(13,583)







Profit for the period

6,891

11,270


23,098

26,367







Earnings per share






Basic and diluted earnings

6,891

11,270


23,098

26,367







Number of shares ('000)






Basic weighted average number of shares

1,268,613

1,260,265


1,262,735

1,268,563

Effect of dilutive securities: Share options and awards

32,489

20,792


29,399

20,123

Diluted weighted average number of shares

1,301,102

1,281,057


1,292,134

1,288,686







Basic EPS (pence)

0.5

0.9


1.8

2.1

Diluted EPS (pence)

0.5

0.9


1.8

2.0







Diluted earnings per ADS (cents)

2.5

4.7


8.6

10.9


All activities relate to continuing operations.  

All of the profit for the period is attributable to the equity shareholders of the parent.

  ARM Holdings plc

Consolidated balance sheet - IFRS




30 September

31 December



2009

2008



Unaudited

Audited



£'000

£'000





Assets




Current assets:




Financial assets: Cash and cash equivalents


44,475

76,502

        Short-term investments


75,404

471

        Short-term marketable securities


1,810

1,816

        Embedded derivatives


3,375

12,298

Accounts receivable (see note 3)


56,111

76,914

Prepaid expenses and other assets


25,050

23,134

Current tax assets


1,803

621

Inventories: finished goods


1,820

1,972

Total current assets


209,848

193,728





Non-current assets:




Financial assets:     Available-for-sale investments


4,846

1,167

Prepaid expenses and other assets


2,088

2,102

Property, plant and equipment


13,862

14,197

Goodwill


521,747

567,844

Other intangible assets


29,070

45,082

Deferred tax assets


39,412

24,063

Total non-current assets


611,025

654,455





Total assets


820,873

848,183





Liabilities and shareholders' equity




Current liabilities:




Financial liabilities: Accounts payable


2,173

6,953

    Fair value of currency exchange contracts


176

18,457

Current tax liabilities


21,655

15,655

Accrued and other liabilities


41,762

35,646

Deferred revenue


33,620

29,906

Total current liabilities


99,386

106,617





Net current assets


110,462

87,111





Non-current liabilities:




Deferred tax liabilities


642

1,223

Total liabilities


100,028

107,840





Net assets


720,845

740,343





Capital and reserves attributable to equity holders of the Company



Share capital


672

672

Share premium account


351,578

351,578

Share option reserve


61,474

61,474

Retained earnings


217,949

182,008

Revaluation reserve


(159)

(285)

Cumulative translation adjustment


89,331

144,896

Total equity


720,845

740,343


 




ARM Holdings plc

Consolidated statement of changes in shareholders' equity - IFRS



Share

Share


Reval-

Cumulative



Share

premium

option

Retained

-uation

translation



capital

account

reserve

earnings

reserve

adjustment

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000









At 1 January 2008 (audited)

672

351,578

61,474

185,125

(214)

(19,473)

579,162

Profit for the period (9M 2008)

26,367

26,367

Other comprehensive income:








  Realised gain on available-for-sale investment

214

214

  Unrealised holding losses on available-for-sale investments

(137)

(137)

  Currency translation adjustment

53,111

53,111

Total comprehensive income for the nine month period 

26,367

77

53,111

79,555

Dividends

(15,267)

(15,267)

Credit in respect of employee share schemes

11,237

11,237

Movement on tax arising on share options

(1,420)

(1,420)

Purchase of own shares

(37,043)

(37,043)

Proceeds from sale of own shares

5,421

5,421


(37,072)

(37,072)

At 30 September 2008 (unaudited)

672

351,578

61,474

174,420

(137)

33,638

621,645









At 1 January 2009 (audited)

672

351,578

61,474

182,008

(285)

144,896

740,343

Profit for the period (9M 2009)

23,098

23,098

Other comprehensive income:








  Unrealised holding gain on available-for-sale investments

126

126

  Currency translation adjustment

(55,565)

(55,565)

Total comprehensive income for the nine month period 

23,098

126

(55,565)

(32,341)

Dividends

(16,634)

(16,634)

Credit in respect of employee share schemes

13,294

13,294

Movement on tax arising on share options

5,577

5,577

Proceeds from sale of own shares

10,606

10,606


12,843

12,843

At 30 September 2009 (unaudited)

672

351,578

61,474

217,949

(159)

89,331

720,845

 


ARM Holdings plc

Consolidated statement of comprehensive income - IFRS




Nine months

Nine months



ended

ended



30 September 2009

30 September 2008



Unaudited

Unaudited



£'000

£'000





Profit for the period


23,098

26,367

Other comprehensive income:




  Realised gain on available-for-sale investment (net of tax of £84,000)


214

  Unrealised holding gain/(losses) on available-for-sale investments 

  (net of tax of £nil)



126


(137)

  Foreign exchange difference on consolidation


(55,565)

53,111

Other comprehensive (loss)/income for the period


(55,439)

53,188

Total comprehensive (loss)/income for the period


(32,341)

79,555


  Notes to the Financial Information



(1) Basis of preparation

International Financial Reporting Standards

The financial information prepared in accordance with the Group's IFRS accounting policies comprises the consolidated balance sheets as of 30 September 2009 and 31 December 2008, consolidated income statements for the quarters and nine months ended 30 September 2009 and 2008, and consolidated statements of changes in shareholders' equity and comprehensive income for the nine months ended 30 September 2009 and 2008, together with related notes.  This financial information has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority. In preparing this financial information management has used the principal accounting policies as set out in the Group's annual financial statements for the year ended 31 December 2008.



(2) Share-based compensation charges and acquisition-related expenses

Included within the consolidated income statement for the quarter ended 30 September 2009 are total share-based payment costs of £6.3 million (2008: £3.9 million), allocated £0.4 million (2008: £0.3 million) in cost of revenues, £3.8 million (2008: £2.6 million) in research and development costs, £1.2 million (2008: £0.5 million) in sales and marketing costs and £0.9 million (2008: £0.5 million) in general and administrative costs.


Included within the consolidated income statement for the nine months ended 30 September 2009 are total share-based payment costs of £16.7 million (2008: £11.6 million), allocated £1.2 million (2008: £0.8 million) in cost of revenues, £10.0 million (2008: £7.8 million) in research and development costs, £3.2 million (2008: £1.5 million) in sales and marketing costs and £2.3 million (2008: £1.5 million) in general and administrative costs.


Also included within operating costs for the quarter ended 30 September 2009 is amortisation of intangibles acquired on business combinations of £3.6 million (2008: £4.8 million), allocated £1.8 million (2008: £2.6 million) in research and development costs, £1.8 million (2008: £2.0 million) in sales and marketing costs and £nil (2008: £0.2 million) in general and administrative costs.



(3) Accounts receivable

Included within accounts receivable at 30 September 2009 are £10.8 million (31 December 2008: £17.9 million) of amounts recoverable on contracts. 



 

  

(4) Non-GAAP measures

The following non-GAAP measures, including reconciliations to the IFRS measures, have been used in this earnings release. These measures have been presented as they allow a clearer comparison of operating results that exclude acquisition-related charges, share-based compensation and restructuring charges and profit on disposal and impairment of available-for-sale investments. All figures in £'000 unless otherwise stated.



(4.1)

(4.2)

(4.3)

(4.4)

(4.5)


Q3 2009

Q3 2008

Q2 2009

9M 2009

9M 2008







Profit from operations (IFRS)

7,235

14,533

6,112

26,043

37,504

Restructuring costs

6,557

395

157

7,991

1,582

Acquisition-related charge - amortisation of intangibles

3,644

4,812

4,021

12,068

14,137

Acquisition-related charge - other payments

114

64

114

342

224

Share-based compensation and related payroll taxes

6,283

3,854

5,757

16,737

11,611

Impairment of available-for-sale security

48

412

Gain on disposal of available-for-sale security

(224)

(224)

Normalised profit from operations

23,833

23,658

15,985

63,369

65,058

As % of revenue

31.7%

33.0%

24.7%

28.8%

31.8%



(4.6)

(4.7)

(4.8)

(4.9)

(4.10)


Q3 2009

Q3 2008

Q2 2009

9M 2009

9M 2008







Profit before tax (IFRS)

7,665

15,755

6,403

27,137

39,950

Restructuring costs

6,557

395

157

7,991

1,582

Acquisition-related charge - amortisation of intangibles

3,644

4,812

4,021

12,068

14,137

Acquisition-related charge - other payments

114

64

114

342

224

Share-based compensation and related payroll taxes

6,283

3,854

5,757

16,737

11,611

Impairment of available-for-sale security

48

412

Gain on disposal of available-for-sale security

(224)

(224)

Normalised profit before tax

24,263

24,880

16,276

64,463

67,504





(4.11)

(4.12)

(4.13)




30 September 

2009

30 June 

2009

31 December

2008







Cash and cash equivalents



44,475

49,268

76,502

Short-term investments



75,404

37,180

471

Short-term marketable securities



1,810

1,769

1,816

Normalised cash



121,689

88,217

78,789



(4.14)

(4.15)

(4.16)

(4.17)

(4.18)


Q3 2009

Q3 2008

Q2 2009

9M 2009

9M 2008







Normalised cash at end of period (as above)

121,689

66,019

88,217

121,689

66,019

Less: Normalised cash at beginning of period

(88,217)

(50,644)

(91,345)

(78,789)

(51,323)

Add back: Cash outflow from acquisitions (net of cash acquired)

1,346

185

1,080

5,063

2,566

Add back: Cash outflow from payment of dividends

16,634

16,634

15,267

Add back: Cash outflow from purchase of own shares

8,595

37,043

Less: Cash inflow from exercise of share options

(6,598)

(1,703)

(2,335)

(10,606)

(5,421)

Less: Cash inflow from sale of available-for-sale investments

(663)

(663)

(1,478)

Normalised cash generation

28,220

22,452

11,588

53,328

62,673



(4.19)

(4.20)

(4.21)

(4.22)

(4.23)


Q3 2009

Q3 2008

Q2 2009

9M 2009

9M 2008







Profit for the period (IFRS)

6,891

11,270

6,422

23,098

26,367

Restructuring costs

6,557

395

157

7,991

1,582

Acquisition-related charge - amortisation of intangibles

3,644

4,812

4,021

12,068

14,137

Acquisition-related charge - other payments

114

64

114

342

224

Share-based compensation and related payroll taxes

6,283

3,854

5,757

16,737

11,611

Impairment of available-for-sale security

48

412

Gain on disposal of available-for-sale security

(224)

(224)

Estimated tax impact of above charges

(6,033)

(2,653)

(4,036)

(13,117)

(5,805)

Normalised profit

17,456

17,742

12,259

47,307

48,116

Dilutive shares ('000)

1,301,102

1,281,057

1,290,352

1,292,134

1,288,686

Normalised diluted EPS

1.34p

1.38p

0.95p

3.66p

3.73p



  (4.24) Normalised income statement for Q3 2009







Normalised



Share-based compen-sation


Normalised incl share-based compen-sation




Intangible amortisa-tion


Other acquisition -related charges



Restruct-

-uring charges






IFRS


£'000


£'000


£'000


£'000

£'000

£'000


£'000













Revenues












  Product revenues

70,717



70,717



70,717

  Service revenues

4,443



4,443



4,443

Total revenues

75,160



75,160



75,160













Cost of revenues












  Product costs

(3,661)



(3,661)



(3,661)

  Service costs

(1,680)


(434)


(2,114)



(2,114)

Total cost of revenues

(5,341)


(434)


(5,775)



(5,775)













Gross profit

69,819


(434)


69,385



69,385













  Research and development

(21,542)


(3,772)


(25,314)


(1,780)


(27,094)

  Sales and marketing

(11,859)


(1,196)


(13,055)


(1,861)

(114)


(15,030)

  General and administrative

(12,585)


(881)


(13,466)


(3)

(6,557)


(20,026)

Total operating expenses

(45,986)


(5,849)


(51,835)


(3,644)

(114)

(6,557)


(62,150)













Profit from operations

23,833


(6,283)


17,550


(3,644)

(114)

(6,557)


7,235

Investment income

467



467



467

Interest payable

(37)



(37)



(37)













Profit before tax 

24,263


(6,283)


17,980


(3,644)

(114)

(6,557)


7,665

Tax 

(6,807)


2,800


(4,007)


1,364

32

1,837


(774)













Profit for the period

17,456


(3,483)


13,973


(2,280)

(82)

(4,720)


6,891













Earnings per share (assuming dilution)












Shares outstanding ('000)

1,301,102




1,301,102






1,301,102

Earnings per share - pence

1.34




1.07






0.53













ADSs outstanding ('000)

433,701




433,701






433,701

Earnings per ADS - cents

6.44




5.15






2.54


     (4.25) Normalised income statement for Q3 2008







Normalised



Share-based compen-sation


Normalised incl share-based compen-sation




Intangible amortisa-tion


Other acquisition -related charges



Restruct-

-uring charges






IFRS


£'000


£'000


£'000


£'000

£'000

£'000


£'000













Revenues












  Product revenues

67,677



67,677



67,677

  Service revenues

3,987



3,987



3,987

Total revenues

71,664



71,664



71,664













Cost of revenues












  Product costs

(5,492)



(5,492)



(5,492)

  Service costs

(1,712)


(273)


(1,985)



(1,985)

Total cost of revenues

(7,204)


(273)


(7,477)



(7,477)













Gross profit

64,460


(273)


64,187



64,187













  Research and development

(15,690)


(2,600)


(18,290)


(2,658)

(54)


(21,002)

  Sales and marketing

(11,365)


(477)


(11,842)


(1,985)


(13,827)

  General and administrative

(13,747)


(504)


(14,251)


(169)

(10)

(395)


(14,825)

Total operating expenses

(40,802)


(3,581)


(44,383)


(4,812)

(64)

(395)


(49,654)













Profit from operations

23,658


(3,854)


19,804


(4,812)

(64)

(395)


14,533

Investment income

1,235



1,235



1,235

Interest payable

(13)



(13)



(13)













Profit before tax 

24,880


(3,854)


21,026


(4,812)

(64)

(395)


15,755

Tax 

(7,138)


644


(6,494)


1,828

23

158


(4,485)













Profit for the period

17,742


(3,210)


14,532


(2,984)

(41)

(237)


11,270













Earnings per share (assuming dilution)












Shares outstanding ('000)

1,281,057




1,281,057






1,281,057

Earnings per share - pence

1.38




1.13






0.88













ADSs outstanding ('000)

427,019




427,019






427,019

Earnings per ADS - cents

7.41




6.07






4.70


  (4.26) Normalised income statement for 9M 2009







Normalised



Share-based compen-sation


Normalised incl share-based compen-sation




Intangible amortisa-tion


Other acquisition -related charges


Disposal / impairment of investments



Restruct-

-uring charges






IFRS


£'000


£'000


£'000


£'000

£'000

£'000

£'000


£'000














Revenues













  Product revenues

206,536



206,536



206,536

  Service revenues

13,304



13,304



13,304

Total revenues

219,840



219,840



219,840














Cost of revenues













  Product costs

(13,600)



(13,600)



(13,600)

  Service costs

(5,282)


(1,176)


(6,458)



(6,458)

Total cost of revenues

(18,882)


(1,176)


(20,058)



(20,058)














Gross profit

200,958


(1,176)


199,782



199,782














  Research and development

(65,875)


(10,036)


(75,911)


(5,922)


(81,833)

  Sales and marketing

(35,810)


(3,183)


(38,993)


(6,131)

(342)


(45,466)

  General and administrative

(35,904)


(2,342)


(38,246)


(15)

(188)

(7,991)


(46,440)

Total operating expenses

(137,589)


(15,561)


(153,150)


(12,068)

(342)

(188)

(7,991)


(173,739)














Profit from operations

63,369


(16,737)


46,632


(12,068)

(342)

(188)

(7,991)


26,043

Investment income

1,207



1,207



1,207

Interest payable

(113)



(113)



(113)














Profit before tax 

64,463


(16,737)


47,726


(12,068)

(342)

(188)

(7,991)


27,137

Tax 

(17,156)


6,205


(10,951)


4,521

96

53

2,242


(4,039)














Profit for the period

47,307


(10,532)


36,775


(7,547)

(246)

(135)

(5,749)


23,098














Earnings per share (assuming dilution)













Shares outstanding ('000)

1,292,134




1,292,134







1,292,134

Earnings per share - pence

3.66




2.85







1.79














ADSs outstanding ('000)

430,711




430,711







430,711

Earnings per ADS - cents

17.57




13.66







8.58


  (4.27) Normalised income statement for 9M 2008







Normalised



Share-based compen-sation


Normalised incl share-based compen-sation




Intangible amortisa-tion


Other acquisition -related charges



Restruct-

-uring charges






IFRS


£'000


£'000


£'000


£'000

£'000

£'000


£'000













Revenues












  Product revenues

192,266



192,266



192,266

  Service revenues

12,301



12,301



12,301

Total revenues

204,567



204,567



204,567













Cost of revenues












  Product costs

(16,650)



(16,650)



(16,650)

  Service costs

(5,190)


(808)


(5,998)



(5,998)

Total cost of revenues

(21,840)


(808)


(22,648)



(22,648)













Gross profit

182,727


(808)


181,919



181,919













  Research and development

(47,261)


(7,810)


(55,071)


(7,782)

(197)


(63,050)

  Sales and marketing

(33,297)


(1,478)


(34,775)


(5,861)

1


(40,635)

  General and administrative

(37,111)


(1,515)


(38,626)


(494)

(28)

(1,582)


(40,730)

Total operating expenses

(117,669)


(10,803)


(128,472)


(14,137)

(224)

(1,582)


(144,415)













Profit from operations

65,058


(11,611)


53,447


(14,137)

(224)

(1,582)


37,504

Investment income

2,486



2,486



2,486

Interest payable

(40)



(40)



(40)













Profit before tax 

67,504


(11,611)


55,893


(14,137)

(224)

(1,582)


39,950

Tax 

(19,388)


(212)


(19,600)


5,363

77

577


(13,583)













Profit for the period

48,116


(11,823)


36,293


(8,774)

(147)

(1,005)


26,367













Earnings per share (assuming dilution)












Shares outstanding ('000)

1,288,686




1,288,686






1,288,686

Earnings per share - pence

3.73




2.82






2.05













ADSs outstanding ('000)

429,562




429,562






429,562

Earnings per ADS - cents

19.97




15.06






10.94


   

Notes


The results shown for Q3 2009, Q2 2009 and Q3 2008 are unaudited. The results shown for FY 2008 are audited. The condensed consolidated financial information contained in this announcement does not constitute statutory accounts within the meaning of Section 434 of the Companies Act 2006. Statutory accounts of the Company in respect of the financial year ended 31 December 2008 were approved by the Board of directors on 2 April 2009 and delivered to the Registrar of Companies. The report of the auditors on those accounts was unqualified and did not contain an emphasis of matter paragraph nor any statement under Section 237 of the Companies Act 1985.


The results for ARM for Q3 2009 and previous quarters as shown reflect the accounting policies as stated in Note 1 to the financial statements in the Annual Report and Accounts filed with Companies House in the UK for the financial year ended 31 December 2008 and in the Annual Report on Form 20-F for the financial year ended 31 December 2008.


This document contains forward-looking statements as defined in section 102 of the Private Securities Litigation Reform Act of 1995. These statements are subject to risk factors associated with the semiconductor and intellectual property businesses. When used in this document, the words "anticipates", "may", "can", "believes", "expects", "projects", "intends", "likely", similar expressions and any other statements that are not historical facts, in each case as they relate to ARM, its management or its businesses and financial performance and condition are intended to identify those assertions as forward-looking statements. It is believed that the expectations reflected in these statements are reasonable, but they may be affected by a number of variables, many of which are beyond our control. These variables could cause actual results or trends to differ materially and include, but are not limited to: failure to realise the benefits of our recent acquisitions, unforeseen liabilities arising from our recent acquisitions, price fluctuations, actual demand, the availability of software and operating systems compatible with our intellectual property, the continued demand for products including ARM's intellectual property, delays in the design process or delays in a customer's project that uses ARM's technology, the success of our semiconductor partners, loss of market and industry competition, exchange and currency fluctuations, any future strategic investments or acquisitions, rapid technological change, regulatory developments, ARM's ability to negotiate, structure, monitor and enforce agreements for the determination and payment of royalties, actual or potential litigation, changes in tax laws, interest rates and access to capital markets, political, economic and financial market conditions in various countries and regions and capital expenditure requirements.


More information about potential factors that could affect ARM's business and financial results is included in ARM's Annual Report on Form 20-F for the financial year ended 31 December 2008 including (without limitation) under the caption "Risk Factors" (on pages 5 to 13) which is on file with the Securities and Exchange Commission (the "SEC") and available at the SEC's website at www.sec.gov.


About ARM


ARM designs the technology that lies at the heart of advanced digital products, from mobile, home and enterprise solutions to embedded and emerging applications. ARM's comprehensive product offering includes 16/32-bit RISC microprocessors, graphics processors, digital libraries, embedded memories, peripherals, software and development tools, as well as analog functions and high-speed connectivity products. Combined with the company's broad Partner community, they provide a total system solution that offers a fast, reliable path to market for leading electronics companies. More information on ARM is available at http://www.arm.com.


ARM is a registered trademarks of ARM Limited. ARM7, ARM9, ARM11, Cortex and Mali are trademarks of ARM Limited. All other brands or product names are the property of their respective holders. "ARM" is used to represent ARM Holdings plc; its operating company ARM Limited; and the regional subsidiaries: ARM Inc.; ARM KK; ARM Korea Ltd.; ARM Taiwan Limited; ARM France SAS; ARM Consulting (Shanghai) Co. Ltd.; ARM Belgium NV; ARM Germany GmbH; ARM Embedded Technologies Pvt. Ltd.; ARM Norway AS; and ARM Sweden AB.




1 Source: Gartner, September 2009

2 Source: Semiconductor Industry Association, August 2009

3 Source: Gartner, September 2009

4 Source: Gartner, September 2009


This information is provided by RNS
The company news service from the London Stock Exchange
 
END
 
 
QRTVQLFLKBBZFBB