ARM Q4 2008 revenues up 15% year-on-year

February 8, 2009 | 19:56

Companies: #arm

CAMBRIDGE, UK, 3 February 2009—ARM Holdings plc [(LSE: ARM); (NASDAQ: ARMH)], the world's leading semiconductor intellectual property supplier, announces its unaudited financial results for the fourth quarter and full year ended 31 December 2008

Q4 Financial Highlights (US GAAP unless otherwise stated)
· Q4 2008 revenues at $149.4m, up 15% year-on-year (£94.4m, up 47%)
· Normalised operating margin at 34.6% (US GAAP 24.2%)
· Normalised PBT at £33.4m, up 57% (US GAAP £23.6m, up 105%)
· Normalised EPS at 1.93p, up 54% (US GAAP 1.38p, up 86%)
· £29.6m cash generated in the quarter
· Final dividend increased by 10% to 1.32 per share

Q4 2008 – Financial Summary

£M Normalised* US GAAP
Q4 2008 Q4 2007 % Change Q4 2008 Q4 2007
Revenue 94.4 64.3 47% 94.4 64.3
Income before income tax 33.4 21.3 57% 23.6 11.5
Operating margin 34.6% 31.5% 24.2% 16.3%
Earnings per share (pence) 1.93 1.25 54% 1.38 0.74
Net cash generation** 29.6 10.5
Effective fx rate ($/£) 1.58 2.02

FY 2008 – Financial Summary

£M Normalised* US GAAP
FY 2008 FY 2007 % Change FY 2008 FY 2007
Revenue 298.9 259.2 15% 298.9 259.2
Income before income tax 100.8 86.7 16% 64.8 48.2
Operating margin 32.6% 31.4% 20.6% 16.5%
Earnings per share (pence) 5.63 4.67 21% 3.68 2.70
Net cash generation** 91.2 57.1
Effective fx rate ($/£) 1.83 1.98

Outlook
Semiconductor industry activity slowed down markedly in the fourth quarter and the near-term outlook for the sector remains uncertain. Whilst not immune from the impact of the industry slow down, ARM continues to build an established base of licenses that drives long-term royalty growth. The current licensing opportunity pipeline to enlarge that base further remains robust.


Although there is less visibility than usual at this time of the year, we believe that ARM is positioned to perform resiliently in the context of the challenging trading environment. Unless conditions deteriorate to a greater extent than generally anticipated, we expect group dollar revenues for full-year 2009 to be at least in line with current market expectations of around $460 million.

Warren East, Chief Executive Officer, said:
“We are pleased to see ARM technology being increasingly utilised in innovative consumer electronics products, leading to the highest ever group revenues for both the fourth quarter and for the full year.

We saw strong demand for new ARM technology, with industry leaders continuing to license our latest generation processors and physical IP. ARM has built a base of more than 580 processor licenses that is driving long-term royalty growth.

We are encouraged to see that the inherent operating leverage in the ARM business model, combined with sound financial discipline and the recent strengthening of the dollar against sterling, has given rise to earnings growth in 2008 of more than 20%.”

Q4 Operational Highlights
· Processor Division (PD): Strong licensing base driving royalty momentum

· Base of licenses increased to 587 with 21 additional processor licenses signed in Q4

o Three Cortex™-A9 licenses to tier 1 semiconductor companies for mobile computing and gaming

· Q4 mobile unit shipments grew approximately 35% to more than 750 million units
· Q4 non-mobile unit shipments grew approximately 70% to 450 million units

· Physical IP Division (PIPD): Licensing advanced technology nodes to IDMs and foundries

· 12 companies licensed physical IP in Q4, 7 at advanced nodes, including 32nm
· PIPD backlog grew more than 5% sequentially, whilst PIPD license revenue declined 6% quarter-on-quarter

Q4 2008 – Revenue Analysis
Revenue ($m)*** Revenue (£m)
Q4 2008 Q4 2007 % Change Q4 2008 Q4 2007 % Change
PD
Licensing 43.0 38.4 12% 26.5 19.3 37%
Royalties 65.5 48.8 34% 42.5 23.7 79%
Total PD 108.5 87.2 24% 69.0 43.0 60%
PIPD
Licensing 9.8 10.8 -9% 6.3 5.3 19%
Royalties1 10.5 8.7 20% 6.8 4.3 59%
Total PIPD 20.3 19.5 4% 13.1 9.6 36%
Development Systems 12.9 15.5 -17% 8.1 7.7 5%
Services 7.7 8.1 -5% 4.2 4.0 5%
Total Revenue 149.4 130.3 15% 94.4 64.3 47%
1 Includes catch-up royalties in Q4 2008 of $1.0m (£0.6m) and in Q4 2007 of $0.3m (£0.2m).

FY 2008 – Revenue Analysis
Revenue ($m)*** Revenue (£m)
FY 2008 FY 2007 % Change FY 2008 FY 2007 % Change
PD
Licensing 145.1 163.5 -11% 79.3 83.4 -5%
Royalties 226.5 176.5 28% 125.5 88.0 43%
Total PD 371.6 340.0 9% 204.8 171.4 19%
PIPD
Licensing 44.6 54.4 -18% 24.2 27.3 -11%
Royalties1 40.3 32.3 24% 22.2 16.1 38%
Total PIPD 84.9 86.7 -2% 46.4 43.4 7%
Development Systems 57.8 55.6 4% 31.1 27.9 12%
Services 31.9 32.0 - 16.6 16.5 1%
Total Revenue 546.2 514.3 6% 298.9 259.2 15%
1 Includes catch-up royalties in FY 2008 of $4.6m (£2.5m) and in FY 2007 of $2.7m (£1.4m).

* Normalised figures are based on US GAAP, adjusted for acquisition-related, share-based compensation and restructuring charges and profit on disposal and impairment of available-for-sale investments. For reconciliation of GAAP measures to normalised non-GAAP measures detailed in this document, see notes 7.1 to 7.27.
** Before dividends and share buybacks, net cash flows from share option exercises, disposals of available-for-sale investments and acquisition consideration – see notes 7.14 to 7.18.
*** Dollar revenues are based on the group’s actual dollar invoicing, where applicable, and using the rate of exchange applicable on the date of the transaction for invoicing in currencies other than dollars. Approximately 95% of invoicing is in dollars.
**** Each American Depositary Share (ADS) represents three shares.
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