TIDMARM
RNS Number : 7722K
ARM Holdings PLC
21 April 2015
ARM HOLDINGS PLC REPORTS RESULTS FOR THE FIRST QUARTER 2015
A conference call discussing these results will be audiocast
today at 09.30 BST at www.arm.com/ir
CAMBRIDGE, UK, 21 APRIL 2015 - ARM Holdings plc [(LSE: ARM);
(NASDAQ: ARMH)] announces its unaudited financial results for the
first quarter ended 31 March 2015.
Q1 2015 - Normalised* IFRS
Financial
Summary
---------------- ------------------------------------------------- -------------------------------------------
Q1 2015 Q1 2014 % Change Q1 2015 Q1 2014 % Change
--------------- --------------- --------------- --------------- --------------- --------------- ---------
Revenue ($m) 348.2 305.2 14% 348.2 305.2 14%
Revenue (GBPm) 227.5 186.7 22% 227.5 186.7 22%
Operating
expenses
(GBPm) 100.0 84.3 19% 115.4 101.6 14%
Operating
margin 51.7% 50.4% 44.6% 40.9%
Profit before
tax (GBPm) 120.5 97.1 24% 103.4 78.0 33%
Earnings per
share (pence) 7.1 5.6 27% 6.0 4.4 36%
Net cash
generation
(GBPm) ** 68.5 40.1
---------------- --------------- --------------- --------------- --------------- --------------- ---------
Effective
revenue fx
rate ($/GBP) 1.53 1.63
* Normalised figures are based on IFRS, adjusted for acquisition-related charges,
share-based
payment costs, restructuring charges, Linaro-related charges, share of results of
joint venture,
intangible amortisation, and impairment of investments net of profit on disposal.
For reconciliation
of IFRS measures to normalised non-IFRS measures detailed in this document, see
notes 6.7
and 6.8.
** Net cash generation is defined as movement on cash, cash equivalents, short-term
and long-term
deposits and similar instruments, adding back dividend payments and share
buy-backs, investment
and acquisition consideration, other acquisition-related payments, restructuring
payments,
share-based payroll taxes, investment in joint venture, payments to Linaro, and
deducting
inflows from share option exercises - see notes 6.3 to 6.6.
Q1 2015 Financial Summary
-- Group revenues in US$ up 14% year-on-year (GBP revenues up 22%)
-- Processor royalty revenue in US$ up 31% year-on-year
(Underlying(1) revenue up 26% year-on-year)
-- Processor licensing revenue in US$ down 2% year-on-year
-- Normalised PBT and EPS up 24% and 27% year-on-year respectively
Progress on key growth drivers in Q1 2015
-- Growth in adoption of ARM(R) processor technology
o 30 processor licences signed for a broad range of applications
from sensors to smartphones to servers
-- Maintained momentum in licensing of advanced technology,
underpinning future royalty revenue growth:
o 4 ARMv8-A processor licences signed, and an additional
architecture licence for smart mobile devices
o 4 Mali(TM) multimedia processor licences signed, including
another licence for Mali video technology
o 2 POP IP licences signed, including one for a Cortex-A53
processor implementation on a 28nm process
-- Growth in shipments of chips based on ARM technology
o 3.8 billion ARM-based chips shipped up 31% year-on-year
o Strong year-on-year growth in shipments of microcontrollers
and chips for mobile devices
o First physical IP royalty revenues from a leading edge FinFET
manufacturing process
Outlook
ARM has made an encouraging start to 2015 with more leading
companies choosing to deploy ARM technology in their products.
Assuming that the macroeconomic backdrop remains supportive of
consumer spending, we expect group dollar revenues for the
full-year 2015 to be at least in line with current market
expectations.
Relevant industry data for Q1 2015, being the shipment period
for ARM's Q2 royalties, points to a sequential decrease in
industry-wide revenues, broadly consistent with normal seasonality.
In this context we expect group dollar revenues for the second
quarter to be in line with current market expectations.
Simon Segars, Chief Executive Officer, said:
"As the world becomes more digital and more connected, we
continue to see an increase in the demand for ARM's smart and
energy-efficient technology, which is driving both our licensing
and royalty revenues.
In recent months many handset OEMs have announced smartphones
and tablets based on ARMv8-A and Mali graphics processors. As
production of these mobile computers start to ramp up in the second
half of the year, ARM will benefit from the higher royalty
percentage per chip that these technologies deliver compared to the
processors in previous generations of mobile devices.
Building on our leadership in mobile computing, ARM technology
continues to be adopted in enterprise infrastructure and embedded
devices. In Q1 we licensed ARMv8--A processors for networking and
server applications, and Cortex-M processors for microcontrollers
and smart sensors for the Internet of Things.
These design wins underpin future royalty revenue growth and
enable continued investment in future innovative technology to
create long-term superior returns for our shareholders."
Q1 2015 - Revenue Analysis Revenue ($m)*** Revenue (GBPm)
----------------------------- -----------------------------
Q1 2015 Q1 2014 % Change Q1 2015 Q1 2014 % Change
---------------------------- -------- -------- ---------
Technology Licensing
Processors 109.3 111.6 -2% 71.0 69.6 2%
Physical IP 23.9 18.3 31% 15.6 11.3 37%
Total Technology Licensing 133.2 129.9 3% 86.6 80.9 7%
Technology Royalty
Processors 167.5 128.1 31% 110.1 76.9 43%
Physical IP 17.2 16.4 5% 11.4 9.9 16%
Total Technology Royalty 184.7 144.5 28% 121.5 86.8 40%
Software and Tools 14.7 16.1 -9% 9.6 9.8 -1%
Services 15.6 14.7 6% 9.8 9.2 6%
---------------------------- -------- -------- --------- -------- -------- ---------
Total Revenue 348.2 305.2 14% 227.5 186.7 22%
---------------------------- -------- -------- --------- -------- -------- ---------
*** Dollar revenues are based on the Group's actual dollar invoicing, where applicable, 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, recognised in Q1 2014, of $5 million for prior years' royalties over-reported
to ARM by a customer.
Contacts:
Sarah West/Ben Fry Ian Thornton/Phil Sparks
Brunswick +44 (0)207 404 5959 ARM Holdings plc +44 (0)1628
427800
Financial review
(IFRS unless otherwise stated)
Total revenues
Total dollar revenues in Q1 2015 were $348.2 million, up 14%
versus Q1 2014. Q1 sterling revenues of GBP227.5 million were up
22% year-on-year.
Licence revenues
Total dollar licence revenues in Q1 2015 increased by 3%
year-on-year to $133.2 million, representing 38% of Group revenues.
Licence revenues comprised $109.3 million from processor licences
and $23.9 million from physical IP licences. Following multiple
periods of accelerated license revenue growth (29% compound annual
growth in the five years 2010-2014), in line with previous
guidance, we continue to expect licence revenue growth of 5-10% per
annum in the medium term. Group order backlog at the end of Q1 2015
was down about 7% sequentially. Based on the medium-term outlook
for license revenue growth, we expect quarterly sequential
movements of backlog to be lumpy.
Royalty revenues
Total dollar royalty revenues in Q1 2015 were up 28% on Q1 2014
at $184.7 million, representing 53% of Group revenues. Relevant
industry revenues were up 4% over the corresponding shipment period
(i.e. calendar Q4 2014 compared to calendar Q4 2013).
Royalty revenues comprised $167.5 million from processors and
$17.2 million from physical IP. Processor dollar royalty revenues
in Q1 2014 were net of a deduction of $5 million representing prior
years' royalties over-reported to ARM by a customer. Underlying
processor royalty revenues increased 26% year-on-year, reflecting
the expected acceleration in growth following a period of inventory
management by consumer electronics OEMs in 2014. Physical IP
royalty revenue increased 5% year-on-year.
Other revenues
Sales of software and tools in Q1 2015 were $14.7 million, a
decrease of 9% year-on-year. Service revenues were $15.6 million in
Q1 2015, up 6% year-on-year. Together revenues from software and
tools and services represented 9% of Group revenues.
Gross margins
Normalised gross margins in Q1 2015 were 95.6% compared to 95.9%
in Q4 2014 and 95.6% in Q1 2014.
Operating expenses and operating margin
Normalised income statements for Q1 2015 and Q1 2014 are
included in notes 6.7 and 6.8 below which reconcile IFRS to the
normalised non-GAAP measures referred to in this earnings release.
Non-GAAP measures have been presented as we believe that they allow
a clearer comparison of operating results.
Normalised operating expenses were GBP100.0 million in Q1 2015
compared to GBP100.4 million in Q4 2014 and GBP84.3 million in Q1
2014.
Normalised operating expenses in Q2 2015 (assuming effective
exchange rates similar to current levels) are expected to be in the
range GBP102-104 million as we continue to invest in our research
and development teams and in our business infrastructure.
Normalised operating margin was 51.7% in Q1 2015, compared to
51.4% in Q4 2014 and 50.4% in Q1 2014.
Normalised research and development expenses were GBP47.8
million in Q1 2015, representing 21% of revenues, compared to
GBP44.4 million in Q4 2014 and GBP39.8 million in Q1 2014.
Normalised sales and marketing expenses were GBP21.6 million in Q1
2015, representing 10% of revenues, compared to GBP23.6 million in
Q4 2014 and GBP20.4 million in Q1 2014. Normalised general and
administrative expenses were GBP30.6 million in Q1 2015,
representing 13% of revenues, compared to GBP32.4 million in Q4
2014 and GBP24.1 million in Q1 2014.
Total IFRS operating expenses in Q1 2015 were GBP115.4 million
(Q1 2014: GBP101.6 million) including share-based payment costs and
related payroll taxes of GBP18.7 million (Q1 2014: GBP14.6
million), amortisation of intangible assets and other
acquisition-related charges of GBP2.4 million (Q1 2014: GBP2.7
million) and profit on disposal of investments of GBP5.7 million
(Q1 2014: GBPnil).
Total share-based payment costs and related payroll tax charges
of GBP19.3 million in Q1 2015 were included within cost of revenues
(GBP0.6 million), research and development (GBP12.5 million), sales
and marketing (GBP3.3 million) and general and administrative
(GBP2.9 million).
Earnings and taxation
Normalised profit before tax in Q1 2015 was GBP120.5 million
compared to GBP97.1 million in Q1 2014. After including
acquisition-related and share-based payment costs, intangible
amortisation, profit on disposal of investments and share of
results of joint ventures, IFRS profit before tax was GBP103.4
million in Q1 2015 compared to GBP78.0 million in Q1 2014.
The Group's effective normalised tax rate was 16.0% in Q1 2015
(IFRS: 17.8%). ARM's full-year normalised effective tax rate in
2015 is expected to be about 16%.
In Q1 2015, normalised fully diluted earnings per share were 7.1
pence (31.7 cents per ADS(2) ) compared to earnings per share of
5.6 pence (28.0 cents per ADS) in Q1 2014. IFRS fully diluted
earnings per share in Q1 2015 were 6.0 pence (26.7 cents per ADS)
compared to earnings per share of 4.4 pence (22.0 cents per ADS) in
Q1 2014.
Balance sheet
Intangible assets at 31 March 2015 were GBP673.4 million,
comprising goodwill of GBP594.5 million and other intangible assets
of GBP78.9 million, compared to GBP567.0 million and GBP77.2
million respectively at 31 December 2014.
Total accounts receivable were GBP145.4 million at 31 March
2015, compared to GBP138.6 million at 31 December 2014.
Cash flow
Normalised cash generation in Q1 2015 was GBP68.5 million. Net
cash at 31 March 2015 was GBP921.8 million, compared to GBP861.7
million at 31 December 2014.
Technology Licensing
Processor licensing
Thirty processor licences were signed in Q1 2015 reflecting the
ongoing demand for ARM's latest technology. Eight of the licences
signed were for ARM's Cortex-A series processors, for use in mobile
computers, servers, enterprise networking, automotive infotainment
and consumer electronics devices. Four of the licences were for
processors based on the ARMv8-A architecture, including two further
licences for Cortex-A72, ARM's recently announced next-generation
processor. ARM also signed an ARMv8-A architecture licence with a
Partner targeting mobile and computing applications. To date, ARM
has signed 68 ARMv8-A processor and architecture licences which
typically command a higher royalty compared to previous generations
of ARM technology.
Sixteen of the licences signed in Q1 were for Cortex-M class
processors for use in the key components of smart connected
devices: microcontrollers, smart hubs, wireless communications, and
the secure chip in a bank card.
ARM signed four licences for its Mali multimedia processors.
These processors are used in devices with graphics displays, such
as smartphones, mobile computing devices and set-top boxes. One of
the licences signed in Q1 was for our new Mali-V500 series video
processor.
Q1 2015 and Cumulative Processor Licensing Analysis
Existing New Licensees Quarter Cumulative
Licensees Total Total
----------- -------------- -------- -----------
Classic ARM* 526
Cortex-A 6 2 8 208
Cortex-R 1 1 51
Cortex-M 13 3 16 300
Mali 4 4 109
Architecture 1 1 18
Subscription** 16
---------------- ----------- -------------- -------- -----------
Total 25 5 30 1,228
---------------- ----------- -------------- -------- -----------
* Includes ARM7, ARM9, ARM10 and ARM11
** Includes CPU and Mali subscription licences
Includes all extant licenses that are expected to generate
royalties
Physical IP licensing
During the quarter ARM saw continuing 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 two further POP licences, including a
licence for a 28nm POP IP optimised for the Cortex-A53
processor.
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:
-- ARM introduced the Cortex-A72 processor, the highest
performing CPU technology for premium mobile devices, which has now
been licensed 12 times by leading semiconductor companies.
-- New Chromebooks from Haier and Hisense were launched using
Rockchip's ARM quad-core Cortex-A17 based SOC.
-- Many OEMs announcing ARMv8-A based smartphones and tablets at
Mobile World Congress, including mobile devices from Acer, Alcatel,
HTC, Huawei, Lenovo, LG, Motorola, Samsung, Sony and ZTE.
-- Atmel demonstrating the Smart SAM L21 family of
ultra-low-power microcontrollers, based on ARM Cortex-M processors,
and which are intended for Internet of Things devices that need to
run for years on a battery.
-- Gigabyte Technologies introducing two new ARM-based boards
for servers and enterprise infrastructure; one developed using
Applied Micro's X-Gene chip and the other using Annapurna's Alpine
chip.
-- Cavium demonstrating a comprehensive Cloud RAN (Radio Access
Network) application on a 48 Core 64-bit ARMv8-A ThunderX
System-on-chip.
-- EZChip introducing the Tile-MX100, a high-performance
networking chip with 100 ARM cores delivering scalability and
power-efficiency for data-centers and carrier networks.
-- Freescale announcing the Kinetis V series of ARM-based
microcontrollers for more efficient electric motor control.
More partner announcements can be found on the ARM website at
www.arm.com/news.
Technology Royalties
Q1 royalty revenue was generated from the shipment of 3.8
billion ARM processor-based chips, up 31% year-on-year.
Compared with Q1 a year ago, we saw a significant increase in
the number of chips going into mobile devices, with much of this
increase due to the inventory correction in the first half of 2014.
Growth in the number of ARM-based chips shipped into embedded
applications continued, about 40% up year-on-year, with
particularly strong growth in ARM-based microcontrollers and
smartcards, and in automotive infotainment systems.
Q1 2015 Processor Unit Shipment Analysis
Processor Unit Shipments Market Unit Shipments
Series
----------- --------------- ------------------------ ---------------
Classic* 35% Mobile and connectivity 46%
----------- --------------- ------------------------ ---------------
Cortex-A 18% Home 6%
----------- --------------- ------------------------ ---------------
Cortex-R 4% Enterprise 14%
----------- --------------- ------------------------ ---------------
Cortex-M 43% Embedded 34%
----------- --------------- ------------------------ ---------------
* Includes ARM7, ARM9, ARM10 and ARM11
Increasing the royalty revenue opportunity per chip
During the quarter, nine companies reported that they had
shipped ARMv8-A based chips, which in aggregate represented around
3.5% of ARM's total unit shipments.
Q1 shipments of chips containing an ARM Mali graphics processor
were consistent with our full-year expectations of 600m to 700m
units. Most Mali graphics processors are found in chips containing
an ARM Cortex-A class processor.
ARM's physical IP dollar royalty revenue in Q1 2015 was up 5%
year-on-year. This included the first physical IP royalties
generated from wafers manufactured at a leading edge FinFET
node.
People
At 31 March 2015, ARM had 3,397 full-time employees, a net
increase of 103 since the start of the year, being mainly engineers
joining ARM's processor R&D teams. At the end of Q1 the Group
had 1,449 employees based in the UK, 728 in the US, 479 in
Continental Europe, 477 in India and 264 in the Asia Pacific
region.
Principal risks and uncertainties
The principal risks and uncertainties faced by the Group in 2015
are included within the "Risks and risk management" section of the
2014 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 2014 which is on file with the Securities and Exchange
Commission (the "SEC") and is available on the SEC's website at
www.sec.gov. There have been no changes to these risks that would
materially impact the Group in the foreseeable future. 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
2015 2014
Unaudited Audited
-------------------- ------------
GBPm GBPm
Assets
Current assets:
Cash and cash equivalents 51.8 54.1
Short-term deposits and similar instruments 643.8 620.8
Embedded derivatives 8.7 2.6
Accounts receivable 145.4 138.6
Prepaid expenses and other assets 44.4 43.2
Current tax assets 17.7 8.9
Inventories: finished goods 1.9 2.7
Total current assets 913.7 870.9
-------------------- ------------
Non-current assets:
Long-term deposits and similar instruments 231.9 191.4
Loans and receivables 3.9 3.0
Available-for-sale financial assets 20.5 23.7
Investment in joint venture 1.9 3.0
Prepaid expenses and other assets 1.9 1.7
Property, plant and equipment 43.1 43.4
Goodwill 594.5 567.0
Other intangible assets 78.9 77.2
Deferred tax assets 47.9 55.9
-------------------- ------------
Total non-current assets 1,024.5 966.3
-------------------- ------------
Total assets 1,938.2 1,837.2
-------------------- ------------
Liabilities
Current liabilities:
Accounts payable 7.8 11.7
Fair value of currency exchange contracts 10.5 4.8
Accrued and other liabilities (see note 3) 69.6 80.6
Finance lease liabilities 3.3 3.9
Current tax liabilities 21.9 31.9
Deferred revenue 117.1 127.4
-------------------- ------------
Total current liabilities 230.2 260.3
-------------------- ------------
Non-current liabilities:
Finance lease liabilities 1.1 2.6
Deferred tax liabilities 0.4 0.4
Deferred revenue 47.0 45.6
Total non-current liabilities 48.5 48.6
-------------------- ------------
Total liabilities 278.7 308.9
-------------------- ------------
Net assets 1,659.5 1,528.3
-------------------- ------------
Capital and reserves attributable to owners of the Company
Share capital 0.7 0.7
Share premium account 24.9 24.9
Capital reserve 354.3 354.3
Share option reserve 61.4 61.4
Retained earnings 1,097.7 991.8
Revaluation reserve - 4.3
Cumulative translation adjustment 120.5 90.9
-------------------- ------------
Total equity 1,659.5 1,528.3
-------------------- ------------
ARM Holdings plc
First Quarter Results
Consolidated income statement - IFRS
Quarter Quarter
ended ended
31 March 31 March
2015 2014
Unaudited Unaudited
---------- ----------
GBPm GBPm
Revenues 227.5 186.7
Cost of revenues (10.6) (8.8)
Gross profit 216.9 177.9
---------- ----------
Research and development (62.4) (52.1)
Sales and marketing (25.0) (23.1)
General and administrative (28.0) (26.4)
Total operating expenses (115.4) (101.6)
---------- ----------
Profit from operations 101.5 76.3
Investment income, net 3.0 3.0
Share of results in joint venture (1.1) (1.3)
Profit before tax 103.4 78.0
Tax (18.4) (15.7)
Profit for the period 85.0 62.3
---------- ----------
Earnings per share
Basic and diluted earnings 85.0 62.3
Number of shares (millions)
Basic weighted average number
of shares 1,408.1 1,405.2
Effect of dilutive securities:
Share options and awards 12.1 11.5
---------- ----------
Diluted weighted average number
of shares 1,420.2 1,416.7
---------- ----------
Basic EPS (pence) 6.0 4.4
Diluted EPS (pence) 6.0 4.4
Diluted earnings per ADS (cents) 26.7 22.0
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
2015 2014
Unaudited Unaudited
---------- --------------
GBPm GBPm
Profit for the period 85.0 62.3
-------------------------------------------------- ---------- --------------
Other comprehensive income/(loss):
Currency translation adjustment* 29.6 (3.5)
Unrealised holding gain on available-for-sale
financial assets reclassified to income
statement (net of tax of GBP1.1 (4.3) -
million)
------------------------------------------------- ---------- --------------
Other comprehensive income/(loss) for
the period 25.3 (3.5)
Total comprehensive income for the period 110.3 58.8
-------------------------------------------------- ---------- --------------
*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 Revaluation translation
capital account reserve* reserve** earnings reserve*** adjustment Total
-------- -------- --------- ---------- --------- ------------ ------------ --------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm GBPm
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
-------------------------- -------- -------- --------- ---------- --------- ------------ ------------ --------
At 1 January 2015
(audited) 0.7 24.9 354.3 61.4 991.8 4.3 90.9 1,528.3
-------------------------- -------- -------- --------- ---------- --------- ------------ ------------ --------
Profit for the period - - - - 85.0 - - 85.0
Other comprehensive
income/(loss):
Currency translation
adjustment - - - - - - 29.6 29.6
Unrealised holding gain
on available-for-sale
financial asset
reclassified to
income statement (net
of tax of GBP1.1
million) - - - - - (4.3) - (4.3)
-------------------------- -------- -------- --------- ---------- --------- ------------ ------------ --------
Total comprehensive
income/(loss) for the
period - - - - 85.0 (4.3) 29.6 110.3
-------------------------- -------- -------- --------- ---------- --------- ------------ ------------ --------
Credit in respect of
employee share schemes - - - - 16.9 - - 16.9
Movement on tax arising
on share options
and awards - - - - 4.0 - - 4.0
- - - - 20.9 - - 20.9
At 31 March 2015
(unaudited) 0.7 24.9 354.3 61.4 1,097.7 - 120.5 1,659.5
-------------------------- -------- -------- --------- ---------- --------- ------------ ------------ --------
* 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.
*** Revaluation reserve. The Group includes on its balance sheet
equity investments that are not publicly traded, which are
classified as available-for-sale financial assets. These are
carried at fair value. Unrealised holding gains or losses on such
investments are included, net of related taxes, within the
revaluation reserve (except where there is evidence of permanent
impairment, in which case losses would be recognised within the
income statement). Any unrealised gains within this reserve are
undistributable.
Notes to the Financial Information
(1) Basis of preparation
The financial information prepared in accordance with the
Group's IFRS accounting policies comprises the consolidated balance
sheets as of 31 March 2015 and 31 December 2014, consolidated
income statements, consolidated statements of comprehensive income
and consolidated statements of changes in shareholders' equity for
the quarters ended 31 March 2015 and 2014, 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
2014.
(2) Share-based payment costs and acquisition-related
expenses
Included within the consolidated income statement for the
quarter ended 31 March 2015 are total share-based payment costs
(including related payroll taxes) of GBP19.3 million (2014: GBP15.1
million), allocated GBP0.6 million (2014: GBP0.5 million) in cost
of revenues, GBP12.4 million (2014: GBP9.8 million) in research and
development costs, GBP3.4 million (2014: GBP2.6 million) in sales
and marketing costs and GBP2.9 million (2014: GBP2.2 million) in
general and administrative costs.
(3) Accrued and other liabilities
Included within accrued and other liabilities at 31 March 2015
are GBP8.0 million (31 December 2014: GBP12.8 million) relating to
the provision for payroll taxes on share awards and GBP5.2 million
(31 December 2014: GBP19.3 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 typically 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 intellectual property
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.
(5) Acquisitions
In February 2015 the Group acquired Wicentric, a Bluetooth(R)
Smart stack and profile provider. In April 2015 the Group acquired
Sunrise Micro Devices, a provider of sub-one volt radio
intellectual property (IP). The IP of both companies will be
integrated to form a portfolio that will complement ARM's existing
processor and physical IP, targeting end markets requiring
low-power wireless communications such as the Internet of Things
(IoT).
(6) 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 and
acquisition-related charges, share-based payment costs, share of
results of joint venture, restructuring charges, profit on disposal
of investments, and Linaro-related charges. Full reconciliations of
Q1 2015 and Q1 2014 are shown in notes 6.7 and 6.8. All figures in
GBPm unless otherwise stated.
Summary normalised figures Q1 2015 Q1 2014 Q4 2014 FY 2014
--------------------------------------- -------- -------- -------- --------
Revenues 227.5 186.7 225.9 795.2
Revenues ($m) 348.2 305.2 357.6 1,292.6
ARM's effective exchange rate ($/GBP) 1.53 1.63 1.58 1.63
Gross margin 95.6% 95.6% 95.9% 95.5%
Operating expenses 100.0 84.3 100.4 359.3
Profit from operations 117.5 94.1 116.2 400.3
Operating margin 51.7% 50.4% 51.4% 50.3%
Profit before tax 120.5 97.1 118.9 411.3
Earnings per share (diluted) 7.13p 5.60p 7.22p 24.12p
Cash 921.8 735.6 861.7 861.7
Normalised cash generation 68.5 40.1 122.0 339.9
--------------------------------------- -------- -------- -------- --------
(6.1) (6.2)
31 March 31 December
2015 2014
Cash and cash equivalents 51.8 54.1
Short-term deposits and similar
instruments 643.8 620.8
Long-term deposits and similar
instruments 231.9 191.4
Less: Interest accrued (5.7) (4.6)
Total net cash 921.8 861.7
------------------------------------ --------- ------------
(6.3) (6.4) (6.5) (6.6)
Q1 2015 Q1 2014 Q4 2014 FY 2014
Cash at end of period (as above) 921.8 735.6 861.7 861.7
Less: cash at beginning of period (861.7) (706.3) (797.0) (706.3)
Add back: Cash (inflow)/outflow
from investments and acquisitions
(net of cash acquired and advance
for loans) (1.2) 1.9 3.2 16.9
Add back: Cash outflow from loan 0.8 - - -
in joint venture
Add back: Cash outflow from acquisition-related
charges 0.8 0.6 0.1 4.3
Add back: Cash outflow from restructuring
charges - - 0.1 5.1
Add back: Cash outflow from payment
of dividends - - 35.4 86.1
Add back: Cash outflow from purchase
of own shares - - 20.6 66.9
Add back: Cash outflow from share-based
payroll taxes 7.2 7.5 0.3 8.5
Add back: Cash outflow from payments
related to Linaro 0.8 0.9 0.8 3.5
Less: Cash inflow from exercise
of share options - (0.1) (3.2) (6.8)
Normalised net cash generation 68.5 40.1 122.0 339.9
-------------------------------------------------- -------- -------- -------- --------
(6.7) Normalised income statement for Q1 2015
Intangible
amortisa-tion
Normalised and Share
Share-based incl acquisition Profit of
payments share-based related on disposal results
Normalised payments charges of in IFRS
investments joint
venture
------------ ------------- ------------- -------------- ------------- --------- --------
GBPm GBPm GBPm GBPm GBPm GBPm GBPm
Revenues 227.5 - 227.5 - - - 227.5
Cost of revenues (10.0) (0.6) (10.6) - - - (10.6)
Gross profit 217.5 (0.6) 216.9 - - - 216.9
------------ ------------- ------------- -------------- ------------- --------- --------
Research and
development (47.8) (12.4) (60.2) (2.2) - - (62.4)
Sales and marketing (21.6) (3.4) (25.0) - - - (25.0)
General and
administrative (30.6) (2.9) (33.5) (0.2) 5.7 - (28.0)
Total operating
expenses (100.0) (18.7) (118.7) (2.4) 5.7 - (115.4)
------------ ------------- ------------- -------------- ------------- --------- --------
Profit from
operations 117.5 (19.3) 98.2 (2.4) 5.7 - 101.5
Investment income 3.0 - 3.0 - - - 3.0
Share of results
in joint venture - - - - - (1.1) (1.1)
Profit before tax 120.5 (19.3) 101.2 (2.4) 5.7 (1.1) 103.4
Tax (19.3) 1.6 (17.7) 0.5 (1.2) - (18.4)
Profit for the
period 101.2 (17.7) 83.5 (1.9) 4.5 (1.1) 85.0
--------
Earnings per share
(assuming dilution)
Shares outstanding
(millions) 1,420.2 1,420.2 1,420.2
Earnings per share
- pence 7.13 5.88 5.99
ADSs outstanding
(millions) 473.4 473.4 473.4
Earnings per ADS
- cents 31.7 26.2 26.7
(6.8) 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
Notes
The results shown for Q1 2015, Q1 2014, and Q4 2014 are
unaudited. The results shown for FY 2014 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 2014
were approved by the Board of directors on 17 February 2015 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 2015 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
2014 and in the Annual Report on Form 20-F for the fiscal year
ended 31 December 2014.
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 2014 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
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. Cortex is a
trademark 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 Electronic Technology (Shanghai) Co.
Ltd; ARM Belgium Services BVBA; ARM Germany GmbH; ARM Embedded
Technologies Pvt. Ltd.; ARM Norway AS; ARM Sweden AB; ARM Finland
Oy; Geomerics Ltd; ARM Ireland Ltd; ARM Hungary Kft; and Offspark
BV.
(1) The underlying growth rate excludes the impact of a
deduction, recognised in Q1 2014, of $5 million for prior years'
royalties over-reported to ARM by a customer.
(2) Each American Depositary Share (ADS) represents three
shares.
This information is provided by RNS
The company news service from the London Stock Exchange
END
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