TIDMARM
RNS Number : 2712F
ARM Holdings PLC
23 April 2014
ARM HOLDINGS PLC REPORTS RESULTS FOR THE FIRST QUARTER 2014
A conference call discussing these results will be audiocast
today at 09.30 BST at www.arm.com/ir
CAMBRIDGE, UK, 23 April 2014 - ARM Holdings plc [(LSE: ARM);
(NASDAQ: ARMH)] announces its unaudited financial results for the
first quarter ended 31 March 2014
Q1 2014 - Financial Summary Normalised* IFRS
----------------------------------- ------------------ ------------------
Q1 2014 Q1 2013 % Change Q1 2014 Q1 2013
----------------------------------- -------- -------- --------- -------- --------
Revenue ($m) 305.2 263.9 16% 305.2 263.9
Revenue (GBPm) 186.7 170.3 10% 186.7 170.3
Operating expenses (GBPm) 84.3 74.6 13% 101.6 95.2
Operating margin 50.4% 50.5% 40.9% 38.1%
Profit before tax (GBPm) 97.1 89.4 9% 78.0 67.1
Earnings per share (pence) 5.60 5.31 5% 4.39 3.69
Net cash generation** 40.1 58.7
----------------------------------- -------- -------- --------- -------- --------
Effective revenue fx rate ($/GBP) 1.63 1.55
* Normalised figures are based on IFRS, adjusted for acquisition-related charges, share-based
payment costs, share of results in joint venture and intangible amortisation. For reconciliation
of IFRS measures to normalised non-IFRS measures detailed in this document, see notes 5.11
to 5.12.
** Net cash generation is defined as movement on cash, cash equivalents, short-term and long-term
deposits, adding back dividend payments, investment and acquisition consideration, other acquisition-related
payments, share-based payroll taxes, investment in joint venture, payments to Linaro, cash
outflow from IP indemnity and similar charges and deducting inflows from share option exercises
- see notes 5.7 to 5.10.
Q1 Financial Highlights
-- Group revenues in US$ up 16% year-on-year (GBP revenues up 10% year-on-year)
-- Processor licensing revenue in US$ up 38% year-on-year
-- Underlying processor royalty revenue in US$ up 8%
year-on-year (up 4% year-on-year after a deduction for prior years'
royalties over-reported to ARM by a customer)
-- Normalised profit before tax and earnings per share up 9% and
5% year-on-year respectively. IFRS profit before tax and earnings
per share up 16% and 19% year-on-year respectively
Progress on key growth drivers in Q1
-- Growth in adoption of ARM(R) technology
o 26 processor licences signed across multiple end markets from
mobile computing to enterprise networking and chips for Internet of
Things devices
-- Advanced technology enables a higher royalty percentage per
chip in consumer electronics and enterprise infrastructure
o 5 ARMv8-A processor licences signed, taking the total to
43
o 4 Mali graphics processor licences signed
o POP(TM) IP helps optimise ARM processor implementations. 5
further POP IP licences signed
-- Growth in shipments of chips based on ARM processor technology
o 2.9 billion ARM-based chips shipped, up 11% year-on-year
o Strong year-on-year shipment growth especially in enterprise
networking and microcontrollers
Outlook
ARM has made an encouraging start to 2014 with continued strong
licensing performance. ARM's pipeline of licensing opportunities
remains healthy for Q2 and the rest of the year.
The semiconductor industry normally declines sequentially in the
first quarter of the year. Market commentators generally regard the
decline this year to have been similar to prior years, which will
provide the context for ARM's Q2 royalty revenues. Recent
indications from the semiconductor industry and ARM's customers
suggest that ARM will benefit from an improving environment in the
second half.
Assuming the outlook for the semiconductor industry in the
second half of the year improves, as generally anticipated, we
expect Group dollar revenues for the full year 2014 to be in line
with market expectations.
Simon Segars, Chief Executive Officer, said:
"Q1 was a good start to the year for ARM, with more customers
choosing to license ARM technology for their future products, which
helped drive ARM's revenues.
Licences are a precursor to future royalty revenues. Our
customers are signing licences with a view to designing ARM
technology into an increasingly wide range of markets from servers
and supercomputers to embedded sensors and enterprise networking
applications and thereby underpinning ARM's future royalty
opportunity."
Q1 2014 - Revenue Analysis Revenue ($m)*** Revenue (GBPm)
------------------------------------- -----------------------------------
Q1 2014 Q1 2013 % Change Q1 2014 Q1 2013 % Change
------------------------------ ----------- ----------- -----------
Technology Licensing
Processors 111.6 80.8 38% 69.6 51.7 34%
Physical IP 18.3 14.1 30% 11.3 8.9 27%
Total Technology Licensing 129.9 94.9 37% 80.9 60.6 33%
Technology Royalty
Processors 128.1 123.4 4% 76.9 80.4 -4%
Physical IP 16.4 16.6 -1% 9.9 10.8 -8%
Total Technology Royalty 144.5 140.0 3% 86.8 91.2 -5%
Software and Tools 16.1 16.6 -3% 9.8 10.6 -9%
Services 14.7 12.4 19% 9.2 7.9 18%
------------------------------ ----------- ----------- ----------- ---------- ---------- -----------
Total Revenue 305.2 263.9 16% 186.7 170.3 10%
------------------------------ ----------- ----------- ----------- ---------- ---------- -----------
*** 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. Over 95% of invoicing is in dollars.
Includes a deduction of $5 million for prior years' royalties over-reported to ARM by a customer.
CONTACTS:
Sarah West/Ben Fry Ian Thornton/Phil Sparks
Brunswick ARM Holdings plc
+44 (0)207 404 5959 +44 (0)1628 427800
Financial review
(IFRS unless otherwise stated)
Total revenues
Total dollar revenues in Q1 2014 were $305.2 million, up 16%
versus Q1 2013. Q1 sterling revenues of GBP186.7 million were up
10% year-on-year.
Licence revenues
Total dollar licence revenues in Q1 2014 increased by 37%
year-on-year to $129.9 million, representing 43% of Group revenues.
Licence revenues comprised $111.6 million from processor licences
and $18.3 million from physical IP licences.
Group order backlog at the end of Q1 2014 was down about 5%
sequentially. Based on the licensing opportunity pipeline it is
expected that order backlog at the end of 2014 will be at a broadly
similar level to that at the end of Q1 2014.
Royalty revenues
Total dollar royalty revenues in Q1 2014 increased year-on-year
by 3% to $144.5 million, representing 47% of Group revenues.
Royalty revenues comprised $128.1 million from processors and $16.4
million from physical IP. Processor dollar royalty revenues in Q1
2014 are net of a deduction of $5 million representing prior years'
royalties over-reported to ARM by a customer. Underlying processor
royalty revenues increased 8% year-on-year. Industry revenues were
up 6% over the relevant shipment period (i.e. Q4 2013 compared to
Q4 2012).
ARM's royalty revenues in Q1 2014 were impacted by an inventory
correction which particularly affected mobile and consumer
electronics. As a result, both the year-on-year growth in ARM's
royalty revenues and the outperformance compared to overall
industry growth are lower this quarter than seen in most recent
periods. Inventory corrections of this type occur in the industry
from time to time, the last one occurring in H1 2012.
Other revenues
Sales of software and tools in Q1 2014 were $16.1 million, a
decrease of 3% year-on-year. Service revenues were $14.7 million in
Q1 2014, up 19% year-on-year. Together revenues from software and
tools and services represented 10% of Group revenues.
Gross margins
Normalised gross margins in Q1 2014 were 95.6% compared to 95.4%
in Q4 2013 and 94.3% in Q1 2013.
Operating expenses and operating margin
Normalised income statements for Q1 2014 and Q1 2013 are
included in notes 5.11 and 5.12 below which reconcile IFRS to the
normalised non-IFRS measures referred to in this earnings
release.
Normalised operating expenses were GBP84.3 million in Q1 2014
compared to GBP88.1 million in Q4 2013 and GBP74.6 million in Q1
2013. Normalised operating expenses in Q2 2014 (assuming effective
exchange rates similar to current levels) are expected to be in the
range GBP86-88 million as we continue to invest in our research and
development teams and in our business infrastructure.
Normalised operating margin was 50.4% in Q1 2014, compared to
48.8% in Q4 2013 and 50.5% in Q1 2013.
Normalised research and development expenses were GBP39.8
million in Q1 2014, representing 21% of revenues, compared to
GBP38.9 million in Q4 2013 and GBP36.6 million in Q1 2013.
Normalised sales and marketing expenses were GBP20.4 million in Q1
2014, being 11% of revenues, compared to GBP21.3 million in Q4 2013
and GBP18.3 million in Q1 2013. Normalised general and
administrative expenses were GBP24.1 million in Q1 2014,
representing 13% of revenues, compared to GBP27.9 million in Q4
2013 and GBP19.7 million in Q1 2013.
Total IFRS operating expenses in Q1 2014 were GBP101.6 million
(Q1 2013: GBP95.2 million) including share-based payment costs and
related payroll taxes of GBP14.6 million (Q1 2013: GBP17.9
million), and amortisation of intangible assets, other
acquisition-related charges and profits on disposal of investments
of GBP2.7 million (Q1 2013: GBP2.7 million).
Total share-based payment costs and related payroll tax charges
of GBP15.1 million in Q1 2014 were included within cost of revenues
(GBP0.5 million), research and development (GBP9.8 million), sales
and marketing (GBP2.6 million) and general and administrative
(GBP2.2 million).
Earnings and taxation
Normalised profit before tax in Q1 2014 was GBP97.1 million
compared to GBP89.4 million in Q1 2013. After including
acquisition-related and share-based payment costs, intangible
amortisation and share of results of joint ventures, profit before
tax was GBP78.0 million in Q1 2014 compared to GBP67.1 million in
Q1 2013.
The Group's effective normalised tax rate was 18.3% in Q1 2014
(IFRS: 20.1%). ARM's full-year normalised effective tax rate in
2014 is expected to be around 18%.
In Q1 2014, normalised fully diluted earnings per share were
5.60 pence (28.0 cents per ADS) compared to 5.31 pence (24.2 cents
per ADS) in Q1 2013. Fully diluted earnings per share in Q1 2014
were 4.39 pence (22.0 cents per ADS) compared to earnings per share
of 3.69 pence (16.8 cents per ADS) in Q1 2013.
Balance sheet
Intangible assets at 31 March 2014 were GBP605.0 million,
comprising goodwill of GBP522.7 million and other intangible assets
of GBP82.3 million, compared to GBP525.9 million and GBP82.9
million respectively at 31 December 2013.
Total accounts receivable were GBP150.3 million at 31 March
2014, compared to GBP136.2 million at 31 December 2013.
Cash flow
Net cash generation in Q1 2014 was GBP40.1 million. Net cash at
31 March 2014 was GBP735.6 million compared to GBP706.3 million at
31 December 2013.
Technology Licensing
Processor licensing
26 processor licences were signed in Q1 2014.
Six of the licences signed were for ARM's Cortex-A series
processors, mainly for use in smartphones, tablets and enterprise
infrastructure applications. Five of the licences were for ARM's
latest processors based on the ARMv8-A architecture, which include
the Cortex-A53 and Cortex-A57 processors. To date, ARM has signed a
total of 43 ARMv8-A processor and architecture licences which
typically command a higher royalty compared to previous generations
of ARM technology.
ARM also signed four licences for its Mali graphics processors,
for use in digital TV, and mobile and embedded computing
applications.
Eleven of the licences signed in Q1 were for Cortex-M class
processors for use in microcontrollers, smart sensors, and the
Internet of Things and wearable technology.
Q1 2014 and Cumulative Processor Licensing Analysis
Existing New Quarter Cumulative
Licensees Licensees Total Total**
----------- ----------- -------- -----------
Classic
ARM* 3 3 530
Cortex-A 5 1 6 168
Cortex-R 1 1 2 43
Cortex-M 7 4 11 220
Mali 4*** 4 90
Architecture 16
Subscription 16
-------------- ----------- ----------- -------- -----------
Total 20 6 26 1,083
-------------- ----------- ----------- -------- -----------
* Includes ARM7, ARM9, ARM10 and ARM11
**Adjusted for licences that are no longer expected to generate
royalties
*** Includes 3 existing ARM customers taking their first Mali
licence
Physical IP licensing
ARM's physical IP is used by fabless semiconductor companies to
implement their chip designs. Platform licences are royalty bearing
licences that enable foundries to manufacture chips using ARM's
physical IP. Each foundry requires a platform licence for each
process node. ARM has signed a full range of platform licences with
leading foundries, from 250nm to 14nm. During the quarter ARM
signed four new platform licences at 180nm, 90nm, 40nm and 28nm
taking the total platform licences signed to 105.
ARM continues to see strong demand for physical IP optimised for
use with processors (POP IP). POP IP enables a licensee to more
readily achieve high-performance, low-power processor
implementations through specially optimised physical IP technology.
For every chip implemented using POP IP, ARM receives a royalty
both for the processor in the chip and for the physical IP. This
quarter ARM signed five further POP licences, including three for a
Cortex-A class processor, one for a Cortex-M class processor and
one for a Mali graphics processor. POP IP is being made available
earlier than ever to support the first adopters of new ARM-based
Cortex and Mali processors.
Number Physical IP Licences
Total for the Cumulative
Quarter Total
------------------- -------------- -----------
Platform Licences 4 105
------------------- -------------- -----------
POP IP 5 48
------------------- -------------- -----------
Technology Design Wins and Ecosystem Development
Many leading technology companies have announced details of
their ARM processor-based product developments in recent months.
These included:
-- Multiple partners announcing chips for smartphones and mobile
computing based on Cortex-A53 and Cortex-A57 processors including
Marvell, Mediatek and Qualcomm
-- Microsoft announcing that Microsoft Office will now be
available for some ARM-based tablets. The combination of the latest
productivity software with ARM-based mobile computers enables
people to create and collaborate wherever they want
-- Broadcom launched its Open Network Function Virtualization
platform which includes support for ARM-based system-on-chips
(SoCs) and enables the migration of functions across SoCs from
different vendors
-- Freescale announced its new family of QorIQ chips including
the QorIQ LS2085A which has eight ARMv8 Cortex-A57 cores and brings
support for open-standard protocols which enable virtualised
networks
-- Oracle introducing Java SE Embedded which targets Java at
ARM-based Internet of Things devices including the Raspberry Pi
community development board
-- ARM announced the ARM 'Server Base System Architecture'
(SBSA) specification for ARMv8 based server SoCs which was
supported by leading server software companies including Canonical,
Citrix, Linaro, Microsoft, Red Hat and SUSE, and OEMs including
Dell and HP.
Many more partner announcements can be found on the ARM website
at www.arm.com/news.
Technology Royalties
Processor royalties
Q1 royalty revenue was generated from the shipment of some 2.9
billion ARM processor-based chips, up 11% year-on-year. ARM saw
particularly strong growth in enterprise networking and
microcontrollers which grew 150% and 40% respectively.
Throughout 2014 ARM is expected to continue to benefit from the
growth of smartphones and tablets. These devices are more likely to
contain ARM's more advanced Cortex-A series processors, and can
include ARM's Mali graphics technology. In Q1 2014, shipments of
Cortex-A series processors were up more than 30% year-on-year
including the first high-volume shipments of ARMv8-A processor
based chips.
ARM's average royalty per chip in Q1 was 4.7 cents down slightly
from a year ago as the growth in higher value, lower volume
application processors was balanced by the strong growth in
shipments of higher volume, lower cost chips, such as
microcontrollers, smartcards, touchscreen controllers and wireless
connectivity chips.
Q1 2014 Processor Unit Shipment Analysis
Processor Unit Shipments Market Unit Shipments
Series
----------- --------------- ----------- ---------------
ARM7 25% Mobile 46%
----------- --------------- ----------- ---------------
ARM9 17% Enterprise 17%
----------- --------------- ----------- ---------------
ARM11 4% Home 5%
----------- --------------- ----------- ---------------
Cortex-A 18% Embedded 32%
----------- --------------- ----------- ---------------
Cortex-R 4%
----------- ---------------
Cortex-M 32%
----------- ---------------
Physical IP royalties
Royalties are recognised one quarter in arrears with royalties
in Q1 2014 generated from semiconductor wafer shipments in Q4 2013.
Physical IP royalties in Q1 2014 were $16.4 million, down 1%
year-on-year.
People
At 31 March 2014, ARM had 2,953 full-time employees, a net
increase of 120 since the start of the year, being mainly engineers
joining ARM's processor R&D teams. At the end of Q1, the Group
had 1,240 employees based in the UK, 698 in the US, 370 in
Continental Europe, 406 in India and 239 in the Asia Pacific
region.
Principal risks and uncertainties
The principal risks and uncertainties faced by the Group are
included within the "Risks and risk management" section of the 2013
Annual Report and Accounts filed with Companies House in the UK.
Details of other risks and uncertainties faced by the Group are
noted within the Annual Report on Form 20-F for the year ended 31
December 2013 which is on file with the Securities and Exchange
Commission (the "SEC") and is available on the SEC's website at
www.sec.gov. These risks 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; we depend largely on a small number of customers
and products; failure by ARM to achieve the performance under a
licence or failure of a customer to make an obligated milestone
payment could materially impact our revenues; we operate in an
intensely competitive industry and our customers may choose to use
their own or competing technology; ARM has grown its operations
significantly over recent years and ARM's business could be
adversely impacted if these changes are not managed successfully;
ARM's technology is used in a wide range of electronic products,
any bug or fault in our technology could lead to significant damage
to our brand and reputation; ARM may have to protect its
intellectual property or defend the technology against claims that
we have infringed others' proprietary rights; and an infringement
claim against ARM's technology may result in a significant damages
award which would adversely impact ARM's operating results.
ARM Holdings plc
Consolidated balance sheet - IFRS
31 March 31 December
2014 2013
Unaudited Audited
---------- ------------
GBPm GBPm
Assets
Current assets:
Cash and cash equivalents 39.0 43.8
Short-term deposits 537.8 544.1
Fair value of currency exchange contracts 3.5 5.1
Accounts receivable 150.3 136.2
Available-for-sale financial assets - 1.2
Prepaid expenses and other assets 44.6 39.8
Current tax assets 9.7 6.9
Inventories: finished goods 2.7 3.0
Total current assets 787.6 780.1
---------- ------------
Non-current assets:
Long-term deposits 164.6 125.6
Loans and receivables 3.0 3.0
Available-for-sale financial assets 15.8 13.9
Investment in joint venture 5.2 6.5
Prepaid expenses and other assets 1.4 1.6
Property, plant and equipment 42.4 33.6
Goodwill 522.7 525.9
Other intangible assets 82.3 82.9
Deferred tax assets 48.7 65.3
---------- ------------
Total non-current assets 886.1 858.3
---------- ------------
Total assets 1,673.7 1,638.4
---------- ------------
Liabilities
Current liabilities:
Accounts payable 8.2 7.0
Embedded derivatives 7.1 7.0
Accrued and other liabilities (see
note 3) 62.1 88.1
Finance lease liabilities 4.8 2.7
Current tax liabilities 17.0 18.8
Deferred revenue 141.3 156.7
---------- ------------
Total current liabilities 240.5 280.3
---------- ------------
Non-current liabilities:
Accrued and other liabilities 1.8 2.6
Finance lease liabilities 3.3 1.5
Deferred tax liabilities - 0.1
Deferred revenue 47.2 42.5
Total non-current liabilities 52.3 46.7
---------- ------------
Total liabilities 292.8 327.0
---------- ------------
Net assets 1,380.9 1,311.4
---------- ------------
Capital and reserves attributable to owners
of the Company
Share capital 0.7 0.7
Share premium account 18.2 18.1
Capital reserve 354.3 354.3
Share option reserve 61.4 61.4
Retained earnings 893.5 820.6
Cumulative translation adjustment 52.8 56.3
---------- ------------
Total equity 1,380.9 1,311.4
---------- ------------
ARM Holdings plc
First Quarter Results
Consolidated income statement - IFRS
Quarter Quarter
ended ended
31 March 31 March
2014 2013
Unaudited Unaudited
---------- ----------
GBPm GBPm
Revenues 186.7 170.3
Cost of revenues (8.8) (10.2)
Gross profit 177.9 160.1
---------- ----------
Research and development (52.1) (49.2)
Sales and marketing (23.1) (21.7)
General and administrative (26.4) (24.3)
Total operating expenses (101.6) (95.2)
---------- ----------
Profit from operations 76.3 64.9
Investment income 3.0 3.4
Share of results in joint venture (1.3) (1.2)
Profit before tax 78.0 67.1
Tax (15.7) (15.2)
Profit for the period 62.3 51.9
---------- ----------
Earnings per share
Basic and diluted earnings 62.3 51.9
Number of shares (millions)
Basic weighted average number
of shares 1,405.2 1,389.7
Effect of dilutive securities:
Share options and awards 11.5 15.1
---------- ----------
Diluted weighted average number
of shares 1,416.7 1,404.8
---------- ----------
Basic EPS (pence) 4.4 3.7
Diluted EPS (pence) 4.4 3.7
Diluted earnings per ADS (cents) 22.0 16.8
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 statement of comprehensive income - IFRS
Quarter Quarter ended
ended
31 March 31 March
2014 2013
Unaudited Unaudited
---------- --------------
GBPm GBPm
Profit for the period 62.3 51.9
------------------------------------------- ---------- --------------
Other comprehensive income:
Currency translation adjustment* (3.5) 41.6
------------------------------------------- ---------- --------------
Other comprehensive (loss)/income for
the period (3.5) 41.6
Total comprehensive income for the period 58.8 93.5
------------------------------------------- ---------- --------------
*This item may be reclassified to income statement if certain
conditions are met.
ARM Holdings plc
Consolidated statement of changes in shareholders' equity -
IFRS
Share Share Cumulative
Share premium Capital option Retained translation
capital account reserve* reserve** earnings adjustment Total
-------- -------- --------- ---------- --------- ------------ --------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
At 1 January 2013 (audited) 0.7 12.2 354.3 61.4 703.3 74.2 1,206.1
---------------------------------------- -------- -------- --------- ---------- --------- ------------ --------
Profit for the period - - - - 51.9 - 51.9
Other comprehensive income:
Currency translation adjustment - - - - - 41.6 41.6
---------------------------------------- -------- -------- --------- ---------- --------- ------------ --------
Total comprehensive income for the
period - - - - 51.9 41.6 93.5
---------------------------------------- -------- -------- --------- ---------- --------- ------------ --------
Shares issued on exercise of share
options and
awards - 2.4 - - - - 2.4
Credit in respect of employee share
schemes - - - - 12.5 - 12.5
Movement on tax arising on share
options and
awards - - - - 4.1 - 4.1
- 2.4 - - 16.6 - 19.0
At 31 March 2013 (unaudited) 0.7 14.6 354.3 61.4 771.8 115.8 1,318.6
---------------------------------------- -------- -------- --------- ---------- --------- ------------ --------
At 1 January 2014 (audited) 0.7 18.1 354.3 61.4 820.6 56.3 1,311.4
---------------------------------------- -------- -------- --------- ---------- --------- ------------ --------
Profit for the period - - - - 62.3 - 62.3
Other comprehensive loss:
Currency translation adjustment - - - - - (3.5) (3.5)
---------------------------------------- -------- -------- --------- ---------- --------- ------------ --------
Total comprehensive income/(loss) for
the period - - - - 62.3 (3.5) 58.8
---------------------------------------- -------- -------- --------- ---------- --------- ------------ --------
Shares issued on exercise of share
options and
awards - 0.1 - - - - 0.1
Credit in respect of employee share
schemes - - - - 13.8 - 13.8
Movement on tax arising on share
options and
awards - - - - (3.2) - (3.2)
- 0.1 - - 10.6 - 10.7
At 31 March 2014 (unaudited) 0.7 18.2 354.3 61.4 893.5 52.8 1,380.9
---------------------------------------- -------- -------- --------- ---------- --------- ------------ --------
* Capital reserve. In 2004, the premium on the shares issued in
part consideration for the acquisition of Artisan Components Inc.
was credited to reserves on consolidation in accordance with
Section 131 of the Companies Act 1985. The reserve has been
classified as a capital reserve to reflect the nature of the
original credit to equity arising on acquisition. This capital
reserve is clearly distinguished from the share premium arising on
share issues.
** Share option reserve. The share option reserve represents the
fair value of options granted on the acquisition of Artisan
Components Inc. in 2004.
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 31 March 2014 and 31 December 2013, consolidated
income statements, consolidated statements of comprehensive income
and consolidated statements of changes in shareholders' equity for
the quarters ended 31 March 2014 and 2013, together with related
notes. This financial information has been prepared in accordance
with the Disclosure and Transparency Rules of the Financial Conduct
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
2013.
(2) Share-based payment costs and acquisition-related
expenses
Included within the consolidated income statement for the
quarter ended 31 March 2014 are total share-based payment costs
(including related payroll taxes) of GBP15.1 million (2013: GBP18.4
million), allocated GBP0.5 million (2013: GBP0.5 million) in cost
of revenues, GBP9.8 million (2013: GBP10.5 million) in research and
development costs, GBP2.6 million (2013: GBP3.3 million) in sales
and marketing costs and GBP2.2 million (2013: GBP4.1 million) in
general and administrative costs.
(3) Accrued and other liabilities
Included within accrued and other liabilities at 31 March 2014
are GBP8.9 million (31 December 2013: GBP15.1 million) relating to
the provision for payroll taxes on share awards and GBP4.9 million
(31 December 2013: GBP26.5 million) relating to employee bonus and
sales commission provisions.
(4) Financial contingencies
It is common industry practice for licensors of technology to
offer to indemnify their licensees for loss suffered by the
licensee in the event that the technology licensed is held to
infringe the intellectual property of a third party. Consistent
with such practice, the Group provides such indemnification to its
licensees. The obligation for the Group to indemnify its licensees
is subject to certain provisos and is usually contingent upon a
third party bringing an action against the licensee alleging that
the technology licensed by the Group to the licensee infringes such
third party's IP rights. The indemnification obligations typically
survive any termination of the licence and will continue in
perpetuity.
The Group does not provide for any such indemnities unless it
has received notification from the other party that they are likely
to invoke the indemnity. A provision is made if both of the
following conditions are met: (i) information available prior to
the issuance of the financial statements indicates that it is
probable that a liability had been incurred at the date of the
financial statements; and (ii) the amount of the liability can be
reasonably estimated. Any such provision is based upon the
directors' estimate of the fair value of expected costs of any such
claim.
At present, the Group is not a party in any legal proceedings in
which the directors believe that it is probable that the resolution
of such proceedings will result in a material liability for the
Group. Currently, there are legal proceedings against some of the
Group's licensees in which it is asserted that certain of the
Group's technology infringes third-party patents, but in each of
those proceedings the Group either presently has no obligation to
indemnify, because certain preconditions to indemnification have
not been satisfied by such licensees, or to the extent that there
is any present obligation to indemnify, the Group does not believe
that it is probable that the resolution of such proceedings will
result in a material liability for the Group. If preconditions to
indemnification are satisfied then an indemnification obligation
may arise which could result in a material liability for the
Group.
(5) 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 intangible amortisation,
acquisition-related charges, share-based payment costs and share of
results in joint venture. Full reconciliations of Q1 2014 and Q1
2013 are shown in notes 5.11 and 5.12. All figures in GBP'million
unless otherwise stated.
(5.1) (5.2) (5.3) (5.4)
Q1 2014 Q1 2013 Q4 2013 FY 2013
Revenues 186.7 170.3 189.1 714.6
Revenues ($m) 305.2 263.9 302.9 1,117.7
ARM's effective exchange rate
($/GBP) 1.63 1.55 1.60 1.56
Summary normalised figures
Gross margin 95.6% 94.3% 95.4% 94.8%
Operating expenses 84.3 74.6 88.1 326.5
Profit from operations 94.1 86.0 92.3 350.9
Operating margin 50.4% 50.5% 48.8% 49.1%
Profit before tax 97.1 89.4 95.5 364.0
Earnings per share (diluted) 5.60p 5.31p 5.31p 20.59p
Cash (net of accrued interest) 735.6 562.4 706.3 706.3
Normalised cash generation 40.1 58.7 77.9 344.5
(5.5) (5.6)
31 March 31 December
2014 2013
Cash and cash equivalents 39.0 43.8
Short-term deposits 537.8 544.1
Long-term deposits 164.6 125.6
Less: Interest accrued (5.8) (7.2)
Total net cash 735.6 706.3
--------------------------- ------------- ------------
(5.7) (5.8) (5.9) (5.10)
Q1 2014 Q1 2013 Q4 2013 FY 2013
Cash at end of period (as above) 735.6 562.4 706.3 706.3
Less: Cash at beginning of period (706.3) (520.2) (670.5) (520.2)
Add back: Cash outflow from investments
and acquisitions (net of cash
acquired) 1.9 3.4 13.3 25.6
Add back: Cash outflow from investment
in joint venture - - - 3.7
Add back: Cash outflow from acquisition-related
charges 0.6 1.3 0.5 4.6
Add back: Cash outflow from payment
of dividends - - 29.4 68.9
Add back: Cash outflow from share-based
payroll taxes 7.5 13.5 0.3 16.3
Add back: Cash outflow from payments
related to Linaro 0.9 0.8 0.9 3.5
Add back: Cash outflow from IP
indemnity and similar charges - - - 41.8
Less: Cash inflow from exercise
of share options (0.1) (2.5) (2.3) (6.0)
Normalised cash generation 40.1 58.7 77.9 344.5
------------------------------------------------- -------- -------- -------- --------
(5.11) Normalised income statement for Q1 2014
Normalised Share
Share-based incl Intangible Acquisition-related of
payments share-based amortisa-tion charges results
Normalised payments in IFRS
joint
venture
------------ ------------- ------------- --------------- --------------------- --------- --------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenues 186.7 - 186.7 - - - 186.7
Cost of revenues (8.3) (0.5) (8.8) - - - (8.8)
Gross profit 178.4 (0.5) 177.9 - - - 177.9
------------ ------------- ------------- --------------- --------------------- --------- --------
Research and
development (39.8) (9.8) (49.6) (1.9) (0.6) - (52.1)
Sales and marketing (20.4) (2.6) (23.0) (0.1) - - (23.1)
General and
administrative (24.1) (2.2) (26.3) - (0.1) - (26.4)
Total operating
expenses (84.3) (14.6) (98.9) (2.0) (0.7) - (101.6)
------------ ------------- ------------- --------------- --------------------- --------- --------
Profit from
operations 94.1 (15.1) 79.0 (2.0) (0.7) - 76.3
Investment income 3.0 - 3.0 - - - 3.0
Share of results
in joint venture - - - - - (1.3) (1.3)
Profit before tax 97.1 (15.1) 82.0 (2.0) (0.7) (1.3) 78.0
Tax (17.7) 1.2 (16.5) 0.6 0.2 - (15.7)
Profit for the
period 79.4 (13.9) 65.5 (1.4) (0.5) (1.3) 62.3
--------
Earnings per share
(assuming dilution)
Shares outstanding
(millions) 1,416.7 1,416.7 1,416.7
Earnings per share
- pence 5.60 4.62 4.39
ADSs outstanding
(millions) 472.2 472.2 472.2
Earnings per ADS
- cents 28.0 23.1 22.0
(5.12) Normalised income statement for Q1 2013
Normalised Share
Share-based incl Intangible Acquisition-related of
payments share-based amortisa-tion charges results
Normalised payments in IFRS
joint
venture
------------ ------------- ------------- --------------- --------------------- --------- --------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenues 170.3 - 170.3 - - - 170.3
Cost of revenues (9.7) (0.5) (10.2) - - - (10.2)
Gross profit 160.6 (0.5) 160.1 - - - 160.1
------------ ------------- ------------- --------------- --------------------- --------- --------
Research and
development (36.6) (10.5) (47.1) (1.4) (0.7) - (49.2)
Sales and marketing (18.3) (3.3) (21.6) (0.1) - - (21.7)
General and
administrative (19.7) (4.1) (23.8) - (0.5) - (24.3)
Total operating
expenses (74.6) (17.9) (92.5) (1.5) (1.2) - (95.2)
------------ ------------- ------------- --------------- --------------------- --------- --------
Profit from
operations 86.0 (18.4) 67.6 (1.5) (1.2) - 64.9
Investment income 3.4 - 3.4 - - - 3.4
Share of results
in joint venture - - - - - (1.2) (1.2)
Profit before tax 89.4 (18.4) 71.0 (1.5) (1.2) (1.2) 67.1
Tax (14.8) (1.2) (16.0) 0.4 0.4 - (15.2)
Profit for the
period 74.6 (19.6) 55.0 (1.1) (0.8) (1.2) 51.9
--------
Earnings per share
(assuming dilution)
Shares outstanding
(millions) 1,404.8 1,404.8 1,404.8
Earnings per share
- pence 5.31 3.92 3.69
ADSs outstanding
(millions) 468.3 468.3 468.3
Earnings per ADS
- cents 24.2 17.8 16.8
Notes
The results shown for Q1 2014, Q1 2013, and Q4 2013 are
unaudited. The results shown for FY 2013 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 2013
were approved by the Board of directors on 5 March 2014 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 498 of the
Companies Act 2006.
The results for ARM for Q1 2014 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 fiscal year ended 31 December
2013 and in the Annual Report on Form 20-F for the fiscal year
ended 31 December 2013.
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 realize 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 share 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 fiscal year ended 31 December 2013 including
(without limitation) under the captions, "Risk Factors" (on pages 4
to 12) 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 wireless, networking and consumer
entertainment solutions to imaging, automotive, security and
storage devices. ARM's comprehensive product offering includes
32-bit RISC microprocessors, graphics processors, video engines,
enabling software, cell libraries, embedded memories, high-speed
connectivity products, peripherals and development tools. Combined
with comprehensive design services, training, support and
maintenance, and 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 trademark 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 Services BVBA; ARM Germany GmbH; ARM Embedded
Technologies Pvt. Ltd.; ARM Norway AS; ARM Sweden AB; ARM Finland
Oy and Geomerics Ltd.
This information is provided by RNS
The company news service from the London Stock Exchange
END
QRFITMLTMBJTBLI
ARM Holdings (LSE:ARM)
Historical Stock Chart
From Jun 2024 to Jul 2024
ARM Holdings (LSE:ARM)
Historical Stock Chart
From Jul 2023 to Jul 2024
