3rd Quarter Results

3rd Quarter Results LONDON--(BUSINESS WIRE)--Oct. 24, 2002-- ARC International PLC Results for the Third Quarter Ended 30 September 2002 ARC International plc (LSE: ARK), a world leader in semiconductor and software technology licensing, announces its unaudited financial results for the third quarter ended 30 September 2002. Financial and Operational Highlights: Third Quarter ended 30 September 2002 - Turnover up 37% to £2.8 million (Q3 2001: £2.0m), 2% down sequentially at constant exchange rates excluding 6% currency impact (Q2 2002: £3.0 million) - Pre-exceptional net loss decreased 22% to £5.3 million (Q3 2001: £6.8m) - Quarterly cash outflow at £3.8 million 30% lower than Q3 2001 (£5.4 million) - 7 new design licences and 4 additional customers won for ARCtangent(TM) processor (6 of these licenses were the new A5 version) - Strong results on new USB Now(TM) product sales, booked 7 licenses with 5 for USB On-The-Go - Software and development tools products shipped to more than 50 customers - Consolidation of Ottawa office to streamline operations and reduce costs Nine months ended 30 September 2002 - Turnover down 7% to £8.5 million (2001: £9.2 million) - Significant cost reductions implemented during year; operating expenses down 21% to £22.1 million (2001: £28 million) - Pre-exceptional net loss reduced by 15% to £15.5 million (2001: £18.2 million) - Strong cash position; £108 million - New management team now complete - 23 design wins and 16 new customers in the year to date Commenting on the results, Mike Gulett, Chief Executive Officer, said: "I am pleased with our results, considering the very difficult trading conditions, where we saw customers holding onto orders and delaying new development projects. I am especially encouraged with the positive reception our new USB Now product has received. We were able to sign up 7 licenses for USB in addition to 7 licenses for the ARCtangent processor and we are encouraged by the sales performance of our software and development tools product line. Despite the continuing turbulence in the worldwide semiconductor industry, we expect to achieve sequential growth in turnover this quarter. The Company expects that its financial performance for 2002 will be within the current range of published analyst forecasts." In light of rapidly changing and uncertain market conditions, and as part of its ongoing responsibilities to shareholders, the Board continually evaluates the Company's strategic options with a view to maximizing shareholder value. For further information, please contact: ARC International plc Mike Gulett Chief Executive Officer, +44 (0) 20 8236 2800 Monica Johnson Chief Financial Officer, +44 (0) 20 8236 2800 Natalie Godfrey Senior Communications Executive, +44 (0) 20 8236 2838 ARC's management will be available on +44 (0) 20 7353 4200 on 24 October 2002. Tulchan Communications Julie Foster Consultant, +44 (0) 20 7353 4200 *T The Company is holding a conference call meeting for securities analysts at GMT 0900 on 24 October 2002. The analyst presentation may be accessed on the Investor Relations section of ARC's website at www.ARC.com from GMT 0830 on 24 October. A recording of this meeting will also be available on the ARC website until 24 November 2002. Chief Executive's Review Overview ARC's turnover has been essentially flat over the last quarter and grew significantly compared to the same quarter a year ago. Our new USB Now product was very well received as we signed 7 licensees with 5 of these taking the On-The-Go option. I am very pleased with these results as we only introduced this product in June of this year. During the third quarter of this year, we saw increased evidence of customers delaying new product development projects. As a direct consequence, on 1st October 2002, we announced that a number of licensing deals would be deferred into the fourth quarter and turnover, prior to currency translation, would be broadly similar to the previous quarter. We have today recorded third quarter turnover of £2.8m, a decrease of 8% quarter on quarter, although prior to the impact of the negative currency translations, turnover was broadly flat. Compared to the same quarter last year, turnover increased 37%. During the quarter, we added 7 new ARCtangent processor licensees, bringing the total in the nine months of this year to 23 design license wins and 16 new customers. We also shipped software and development tools products to more than 50 customers during the quarter - an indication of the strength of our software and development tools product line. These customers use our software and tools for ARM(R) and Motorola(R) processors as well as the ARCtangent processor. We indicated at the interim results in July that we would see a marginal increase in total operating expenses during the third quarter as we increased our R&D spend. Total operating expenses (before amortisation, depreciation and exceptional items) came in according to plan at £7.3 million (Q2 2002: £7.2 million) and we expect it to remain at a similar level going forward. We have reduced our costs by more than £1m per quarter over the past year and we continue to drive costs down and run the business more efficiently. Licensee Update ARCtangent Processor At the core of our business is our ARCtangent RISC/DSP configurable, extensible processor. The new A5 version of the ARCtangent processor has been very successful in its first quarter of availability and we have signed 6 new A5 ARCtangent license agreements and one A4 license agreement. This week we have launched a new version of the ARCtangent-A5 processor that features improved DSP extensions whilst retaining the ability to keep memory code footprint low thereby reducing system costs. USB Now In early June, we announced a new product, USB Now, the world's first integrated and optimised Universal Serial Bus for system-on-chip (SoC) intellectual property (IP) platforms. USB Now includes On-The-Go (OTG) functionality for Hi-Speed USB 2.0 peer-to-peer communications between mobile and consumer electronics devices. This new product became available in August this year and we have already booked 7 licenses, 5 of them with OTG functionality. We are very encouraged by the level of interest that has been generated in this leading edge product. Strategic Alliances Strategic alliances are very important for ARC to achieve the goal of building a long-term sustainable business. We have announced several strategic alliances this year; some of these alliances such as the Metrowerks software alliance directly contributed to results this quarter and are expected to grow in the coming quarters. Product Development Update So far this year, we have launched two new products as discussed above and we have been successful in selling and shipping both these products as soon as they became available. We currently have two new versions of the ARCtangent processor in development and intend to announce further details as these products become available. In addition, we will soon be introducing an 802.11 product which, like USB Now, is another application specific system product that allows our customers to create new SoC solutions in less time, at a lower cost and lower risk than alternatives. The wireless LAN market continues to be a bright spot in the current economic environment. The 802.11 standard is generating tremendous interest and innovation. According to the Dell'Oro Group, the Wireless LAN 802.11 market is forecasted to grow from $1.2 B in 2001 to $3.1 B in 2006. Wireless LAN networks are being deployed in the home, at the enterprise and in public "hot spots" such as airports, hotels and cafes. Novel product concepts such as 802.11 voice-activated phones illustrate the breadth of the innovation associated with this market. ARC is well-positioned to benefit from these trends. This quarter we made significant progress in the development of our Wireless LAN platform solution. Our fully synthesizable, cost effective solution will support multiple configurations and includes an embedded ARCtangent processor. Employing our processor technology in the solution permits us to 'future-proof' the customer's investment. Easily made software changes will keep our solution current with rapidly evolving standards and market requirements. We will begin 802.11 customer engagements in the fourth quarter. Our business strategy is to license products, which make it easy for our customers to create embedded systems, usually a SoC. We do this by simplifying the complexity of designing, testing and producing integrated circuits and the software that runs on these integrated circuits, with a proprietary system that results from the integration of ARC's RISC/DSP processors, MetaWare(R) tools, VAutomation peripherals, Precise software and other IP that we import, integrate, then deliver to our customers as an embedded system solution. Business Integration We recently announced our plan to consolidate ARC's software engineering teams. This will promote synergies in software product development and reduce the overall cost structure of the Group. This will neither interrupt the development of new products nor affect the continued high levels of service we offer to our software customers. The transition, which has already begun, is expected to be complete by the end of January 2003. ARC's engineering facility in Ottawa will close and it is expected that a portion of the Ottawa-based RTOS and Protocol Software group will be relocated to Santa Cruz, California, where ARC's Software Development team is headquartered. The Elstree operations in the UK and the Nashua, New Hampshire engineering locations will not be affected. Following the transition, overall headcount is expected to decrease by approximately 7%. As a result of these initiatives, the Company will take an exceptional charge in the range of £2.4 million, of which approximately £1.4 million will be cash spend. People We continue to invest in people who will drive the business towards profitability and have recently announced the appointment of Andrew Haines as Sr. Vice President of Marketing. This is an excellent addition to the team as Andy has more than 25 years experience in marketing management at leading technology companies. Total company headcount at 30 September 2002 is 200 compared to 230 at Q3 2001. Outlook Despite the continuing turbulence in the worldwide semiconductor industry, we expect to achieve sequential growth in turnover this quarter. Management expects to close the deferred deals from the third quarter during the fourth quarter and is encouraged by the strong forward pipeline. The Company therefore expects that its financial performance for the year ended 31 December 2002 will fall within the current range of published analyst forecasts. We also believe that we can support significantly higher levels of turnover with our current infrastructure. As a result, we believe we will continue to make meaningful progress towards achieving EBITDA breakeven. Financial Review Third Quarter ended 30 September 2002 Turnover Total turnover for the third quarter was £2.8 million, up 37% from the prior year quarter (Q3 2001: £2.0 million) and down 8% from the second quarter revenue of £3.0 million. Prior to currency translation, with virtually all sales in US$, underlying turnover was down 2% over Q2 2002. License income was 10% lower than the previous quarter at £2.1 million (Q2 2002: £2.4 million). Maintenance and service income was the same as that in the previous quarter at £0.5million (Q2 2002: £0.5 million). Royalty income increased slightly to £0.2 million (Q2 2002: £0.1 million). Within the turnover base, 34% of sales were in Europe, 63% in North America and the remaining 3% in Asia. From a product perspective, 44% were processor shipments, software sales represented 39% of sales and the remaining 17% was peripheral products. Costs Cost of sales declined to £0.2 million (Q2 2002: £0.3 million), which resulted in an increase in gross margin to 91% (Q2 2002: 89%). Total operating expenses (excluding exceptional costs, amortisation of goodwill and depreciation) came in at plan at £7.3 million (Q2 2002: £7.2 million, Q3 2001: £8.6 million). The Company had 200 employees at 30 September 2002 compared with 230 at 30 September 2001. Research and development costs increased to £3.6 million (Q2 2002: £3.1 million) to fund development projects related to upcoming product releases. Sales and marketing costs decreased 15% to £2.2 million (Q2 2002: £2.6 million) and general and administration costs were up slightly at £1.3 million (Q2 2002: £1.2 million). Interest Interest income was unchanged at £1.1 million (Q2 2002: £1.1 million). Net loss The net loss prior to restructuring increased 7% sequentially to £5.3 million and decreased 22% from the year ago quarter (Q2 2002: £4.9 million Q3 2001: £6.8 million). Loss per share prior to restructuring increased slightly to (1.8)p (Q2 2002:(1.7)p). Net loss including the net restructuring charge of £2.2 million was £7.5 million. (Q2 2002: £4.9 million, Q3 2001: £11.2 million). Cash flow and balance sheet The net cash outflow from operations was £4.5 million, (Q2 2002 an outflow of £4.8 million). Capital expenditure was £0.2 million. The movement in net funds during the quarter was an outflow of £3.8 million. Net assets at 30 September 2002 were £119.1 million, including net cash of £108 million. Nine months ended 30 September 2002 Total turnover at £8.5 million was down 7% from the previous year (2001: £9.2 million). Licence income was £6.6 million (2001: £7.2 million). Maintenance and service income was £1.6 million (2001: £1.6 million) and royalties were £0.3 million (2001: £0.4 million). Costs Cost of sales was £1.0 million (2001: £1.3 million), resulting in a gross margin of 88% (2001: 86%). Total operating expenses (excluding exceptional costs, amortisation of goodwill and depreciation) decreased 21% to £22.1 million (2001: £28 million). Total headcount in the business at 30 September 2002 was 200 employees compared with 230 at 30 September 2001. Research and development costs were down 2% to £9.8 million (Q3 2001: £9.9 million), sales and marketing costs were down 34% to £7.5 million (Q3 2001: £11.4 million) and general and administration costs were down 28% to £3.8 million (Q3 2001: £5.3 million). Interest Interest income was £3.4 million (2001: £5.3 million). Net loss The net loss before exceptional costs was £15.5 million (2001: £18.2 million). Including net exceptional charges of to £2.2 million, net loss decreased 29% to £17.8 million (2001: £25.0 million). Cash flow and balance sheet The net cash outflow from operations was £15.3 million (2001: £20.2 million). Capital expenditure was £1.7 million (2001: £4.9 million). The movement in net funds was a £13.9 million outflow. Net assets at 30 September 2002 were £119.1 million (2001: £140.7 million), including net cash of £108 million. Dividend No interim dividend payment will be made in respect of the nine months ended 30 September 2002. ARC International plc Consolidated profit and loss account for the nine months ended 30 September 2002 --------------------------------- 3 months ended 3 months ended 9 months ended 9 months ended Year ended 30 Sept 30 Sept 30 Sept 30 Sept 31 December 2002 2001 2002 2001 2001 (unaudited) (unaudited) (unaudited) (unaudited) (audited) £'000 £'000 £'000 £'000 £'000 Turnover 2,764 2,016 8,507 9,178 11,450 Less: Operating costs -------------------------------------------------------------------- ------------------------------------------------ Goodwill amortisation 1,024 1,019 3,069 3,058 4,075 Exceptional costs 2,240 4,619 2,240 7,909 5,526 Other operating costs 8,117 9,162 24,338 28,496 38,277 -------------------------------------------------------------------- ------------------------------------------------ 11,381 14,800 29,647 39,463 47,878 Loss before interest and tax 8,617 12,784 21,140 30,285 36,428 Add: Interest receivable and similar income 1,113 1,581 3,355 5,302 6,586 Less: Interest payable and similar charges - - - - 2 ------------------------- ------------------------------------------------ Loss on ordinary activities before tax 7,504 11,203 17,785 24,983 29,844 Less: Tax on loss on ordinary activities - 1 - 4 81 ------------------------- ------------------------------------------------ Retained loss for the period 7,504 11,204 17,785 24,987 29,925 ========================= ================================================ Basic loss per share 2.53p 4.03p 5.99p 8.99p 10.83p Diluted loss per share 2.53p 4.03p 5.99p 8.99p 10.83p ------------------------- Summary of operating expenses ------------------------ Operating costs Cost of sales 244 415 980 1,306 1,683 Research and development 3,617 3,171 9,766 9,945 13,291 Sales and marketing 2,196 3,360 7,502 11,403 14,294 General and administration 1,291 1,694 3,811 5,326 6,583 Depreciation of fixed assets 769 714 2,279 1,608 2,426 Amortisation of goodwill 1,024 1,019 3,069 3,058 4,075 Exceptional costs - NIC on share options - 192 - (1,092) (1,026) Exceptional costs - Provision release (160) - (160) - - Exceptional costs - restructuring 2,400 4,619 2,400 7,909 6,552 ------------------------ ------------------------------------------------ Total operating expenses 11,381 14,800 29,647 39,463 47,878 ------------------------ ------------------------------------------------ ARC International plc Consolidated statement of total recognised gains and losses for the nine months ended 30 September 2002 ---------------------------------- 3 months ended 3 months ended 9 months ended 9 months ended Year ended 30 Sept 30 Sept 30 Sept 30 Sept 31 December 2002 2001 2002 2001 2001 (unaudited) (unaudited) (unaudited) (unaudited) (audited) £'000 £'000 £'000 £'000 £'000 Loss for the period (7,504) (11,204) (17,785) (24,987) (29,925) Currency translation difference (96) (58) (274) 189 71 ---------------------------------- ------------------------------------------------ Total loss for the period (7,600) (11,262) (18,059) (24,798) (29,854) ---------------------------------- ================================================ ARC International plc Consolidated balance sheet as at 30 September 2002 30 Sept 30 Sept 31 December 2002 2001 2001 (unaudited) (unaudited) (audited) £'000 £'000 £'000 Fixed assets Intangible assets 9,289 13,296 12,280 Tangible assets 5,984 7,403 6,702 ------------------------------------------------ 15,273 20,699 18,982 ------------------------------------------------ Current assets Stock 154 451 156 Debtors 4,556 5,589 3,710 Investments - bank deposits 105,265 124,892 119,401 Cash at bank and in hand 2,690 1,759 1,449 ------------------------------------------------ 112,665 132,691 124,716 Creditors - amounts fully due within one year (4,731) (12,732) (5,198) ------------------------------------------------ Net current assets 107,934 119,959 119,518 Total assets less current liabilities 123,207 140,658 138,500 Creditors - amounts fully due after more than one year (2) - (2) Provisions for liabilities and charges (4137) - (2,433) ------------------------------------------------ Net assets 119,068 140,658 136,065 ================================================ Capital and reserves Called up share capital 296 278 283 Share premium account 152,448 149,850 151,033 Exchangeable shares 4,040 5,025 4,286 Merger reserve 107 107 107 Other reserves 24,582 24,688 24,702 Profit and loss account (62,405) (39,290) (44,346) ------------------------------------------------ Total shareholders' funds 119,068 140,658 136,065 ================================================ ARC International plc Consolidated cash flow statement for the nine months ended 30 September 2002 -------------------------------- Note 3 months ended 3 months ended 9 months ended 9 months ended Year ended 30 Sept 30 Sept 30 Sept 30 Sept 31 December 2002 2001 2002 2001 2001 (unaudited) (unaudited) (unaudited) (unaudited) (audited) £'000 £'000 £'000 £'000 £'000 Net cash outflow from operating activities 1 (4,529) (5,996) (15,321) (20,182) (27,304) Returns on investments and servicing of finance Interest received 933 1,737 3,177 5,037 6,365 Bank interest paid - - - - - Interest element on finance lease rentals - - - - (2) ----------------------------- ----------------------------------------------- 933 1,737 3,177 5,037 6,363 ----------------------------- ----------------------------------------------- Capital expenditure and financial investment Purchase of tangible fixed assets (227) (1,246) (1,732) (4,891) (5,315) Sale of tangible fixed assets - - - - 8 ----------------------------- ----------------------------------------------- (227) (1,246) (1,732) (4,891) (5,307) ----------------------------- ----------------------------------------------- Net cash outflow before management of liquid resources and financing (3,823) (5,505) (13,876) (20,036) (26,248) ----------------------------- ----------------------------------------------- Management of liquid resources Movement on term deposits 3 4,714 5,997 14,136 18,396 23,888 ----------------------------- ----------------------------------------------- Financing Financing - issue of ordinary share capital - IPO and options 163 159 1,184 795 1,243 Capital element of finance lease rentals (1) (5) (5) (19) (20) Decrease in borrowings - 1 - (17) (17) ----------------------------- ----------------------------------------------- Net cash inflow from financing 162 155 1,179 759 1,206 ----------------------------- ----------------------------------------------- (Decrease)/Increase in cash during the period 3 1,053 647 1,439 (881) (1,154) ----------------------------- ----------------------------------------------- 1. Reconciliation of operating profit to net cash flow from operating activities ---------------------------------- 3 months ended 3 months ended 9 months ended 9 months ended Year ended 30 Sept 30 Sept 30 Sept 30 Sept 31 December 2002 2001 2002 2001 2001 (unaudited) (unaudited) (unaudited) (unaudited) (audited) £'000 £'000 £'000 £'000 £'000 Operating loss (8,617) (12,784) (21,140) (30,285) (36,428) Depreciation 769 714 2,279 1,608 2,426 Amortisation of goodwill 1,024 1,019 3,069 3,058 4,075 Loss on disposal of fixed assets - - 44 - 237 Share option grant credit 7 10 24 26 39 (Increase) in stocks (1) (72) (4) (455) (159) (Increase)/ decrease in debtors (750) 2,334 (1,411) 1,102 2,911 Increase/(decrease) in creditors 854 2,783 115 4,764 (2,838) (Decrease)/increase in provisions 2185 - 1,703 - 2,433 ---------------------------------- ------------------------------------------------ Net cash flow from operating activities (4,529) (5,996) (15,321) (20,182) (27,304) ---------------------------------- ------------------------------------------------ 2. Analysis of net funds (unaudited) Cash at bank Investments - Finance Total bank deposits leases £000 £000 £000 £000 At 31 December 2001 1,449 119,401 (7) 120,843 Exchange (198) - - (198) Cash flow 1,439 (14,136) 5 (12,692) -------------- ----------------- ------------ ------------ At 30 September 2002 2,690 105,265 (2) 107,953 -------------- ----------------- ------------ ------------ 3. Reconciliation of net cash flow to movement in net funds ---------------------------------- 3 months ended 3 months ended 9 months ended 9 months ended Year ended 30 Sept 30 Sept 30 Sept 30 Sept 31 December 2002 2001 2002 2001 2001 (unaudited) (unaudited) (unaudited) (unaudited) (audited) £'000 £'000 £'000 £'000 £'000 (Decrease)/increase in cash in the period 1,053 (5,351) 1,439 (6,879) (1,154) Cash (inflow)/outflow from increase in liquid resources (4,714) - (14,136) (12,399) (23,888) ---------------- --------------- --------------- --------------- ------------- (3,661) (5,351) (12,697) (19,278) (25,042) Movement in borrowings 1 4 5 36 37 Exchange movements (107) (82) (198) 69 32 ---------------- --------------- --------------- --------------- ------------- Movement in funds (3,767) (5,429) (12,890) (19,173) (24,973) Net funds at beginning of period 111,720 132,072 120,843 145,816 145,816 ---------------- --------------- --------------- --------------- ------------- Net funds at end of period 107,953 126,643 107,953 126,643 120,843 ---------------- --------------- --------------- --------------- ------------- *T Notes About ARC International ARC International is an industry-leading developer of embedded user-customizable, high-performance 32-bit RISC/DSP processor cores, with integrated development tools, peripherals, RTOS and software. These integrated products and solutions are a result of the acquisitions of MetaWare, VAutomation and Precise Software Technologies. ARC's integrated intellectual property solutions assist customers in rapidly developing next generation wireless, networking and consumer electronics products, reducing the number of IP suppliers, reducing time to market, reducing their cost, and reducing their risk for System-on-Chip product development. Products based on ARC's technology include digital still cameras, set-top boxes, and network processors. ARC International employs 200 people in research and development, sales, and marketing offices across North America, Europe and Israel. Full details of the company's locations and other information are on the company's web site, www.ARC.com. ARC International is listed on the London Stock Exchange as ARC International plc (LSE:ARK). Statements made in this report that are not historical facts include forward-looking statements that involve risks and uncertainties. Important factors that could cause actual results to differ from those indicated by such forward-looking statements include, among others, market acceptance of the ARC technology; fluctuations in and unpredictability of the Company's quarterly results; general economic and business conditions; regulatory policies adopted by governmental authorities; assumptions regarding the Company's future business strategy; changes in technology; competition; ability to attract and retain qualified personnel; risks associated with the Company's international operations; and other uncertainties that are discussed in the "Investment Considerations" section of the Company's listing particulars dated 28 September 2000 filed with the United Kingdom Listing Authority and the Registrar of Companies in England and Wales. The Company disclaims any intention or obligation to update any forward-looking statements as a result of developments occurring after the date such statement was first made ARC, the ARC logo, USB Now and ARCtangent are trademarks of ARC International. All other brands or product names are the property of their respective holders. Short Name: Arc Intl PLC Category Code: QRT Sequence Number: 00001042 Time of Receipt (offset from UTC): 20021023T195820+0100

Companies

Arkle Resources (CDI) (ARK)
UK 100
FTSE quotes by TradingView

Latest directors dealings

All directors dealings today