29th Apr 2008 07:01
ARM Holdings PLC29 April 2008 EMBARGOED until 7.00am BST 29 April 2008 ARM HOLDINGS PLC REPORTS RESULTS FOR THE FIRST QUARTER ENDED 31 MARCH 2008 A conference call discussing these results will be audiocast today at 08:30 BSTat www.arm.com/ir CAMBRIDGE, UK, 29 April 2008-ARM Holdings plc ((LSE: ARM); (Nasdaq: ARMH))announces its unaudited financial results for the first quarter ended 31 March2008 Highlights (US GAAP unless otherwise stated) • Q1 dollar revenues at $134.3m, up 4% year-on-year • Processor Division (PD) total revenue at $91.1m, up 11% year-on-year • PD royalty revenue at $54.8m, up 22% year-on-year • 889 million units shipped • Physical IP Division (PIPD) total revenue at $20.9m, up 7% sequentially • PIPD underlying royalty revenue up 20% year-on-year • Group backlog flat quarter-on-quarter, remaining at record high • Normalised PBT and EPS at £21.3m (US GAAP £12.2m) and 1.17p (US GAAP 0.69p) respectively • Net cash of £55m at end Q1 • £13m spent on share buybacks in Q1 • Normalised cash generation of £14m in Q1 • FY 2008 guidance unchanged Commenting on the results, Warren East, Chief Executive Officer, said: "ARM has made an encouraging start to 2008. Our Q1 results demonstrate robustoperational execution, with sequential revenue growth in PIPD and continuedstrong demand for our Cortex(R) family of microprocessors with a further sevenlicenses being signed in the quarter. Growth in underlying royalty revenues inboth PD and PIPD of more than 20% year-on-year provides further evidence of theincreasing use of ARM's technology in the rapidly broadening range of consumerelectronics products." Q1 2008 - Revenue Analysis Revenue ($M)*** Revenue (£M) Q1 2008 Q1 2007 % Change Q1 2008 Q1 2007 % ChangePDLicensing 36.3 37.4 -3% 18.3 19.4 -6%Royalties 54.8 45.0 22% 27.8 23.0 21%Total PD 91.1 82.4 11% 46.1 42.4 9%PIPD Licensing 11.8 16.9 -30% 5.9 8.7 -32%Royalties 9.11 8.41 9% 4.71 4.31 9%Total PIPD 20.9 25.3 -17% 10.6 13.0 -18%DevelopmentSystems 14.2 13.5 5% 7.1 6.9 3%Services 8.1 8.0 2% 4.1 4.2 -3%Total Revenue 134.3 129.2 4% 67.9 66.5 2% 1 Includes catch-up royalties in Q1 2008 of $0.8m (£0.4m) and in Q1 2007 of$1.5m (£0.8m). Q1 2008 - Financial Summary £M Normalised* US GAAP Q1 2008 Q1 2007 % Change Q1 2008 Q1 2007 Revenue 67.91 66.5 2% 67.9 66.5Income before income tax 21.3 21.6 -1% 12.2 12.7Operating margin 30.6% 30.3% 17.2% 16.9%Earnings per share 1.17 1.14 3% 0.69 0.70(pence) Net cash generation** 13.7 15.6Effective fx rate ($/£) 1.98 1.94 (1) Equivalent to £69.1m at Q1 2007 effective $/£ rate Current trading and prospects ARM has made an encouraging start to 2008 with sequential revenue growth in PIPDand positive momentum in both PD and PIPD royalty revenues. We remain cautious in the short term given the uncertainty in both thesemiconductor industry and the wider macroeconomic environment. Against thisbackdrop and given the potential impact of industry seasonality on royaltyrevenues, total dollar revenues in Q2 are unlikely to be higher than Q1.However, consistent with our guidance in February, assuming no markeddeterioration in the trading environment, we continue to expect to increasedollar revenues in FY 2008 by at least the growth rate achieved in 2007. CONTACTS: Fiona Laffan/Pavla Shaw Tim Score/Ian ThorntonBrunswick ARM Holdings plc+44 (0)207 404 5959 +44 (0)1628 427800 * Normalised figures are based on US GAAP, adjusted for acquisition-related,share-based remuneration and restructuring charges. For reconciliation of GAAPmeasures to normalised non-GAAP measures detailed in this document, see notes6.1 to 6.21. ** Before dividends and share buybacks, net cash flows from share optionexercises and acquisition consideration - see notes 6.12 to 6.15. *** Dollar revenues are based on the group's actual dollar invoicing, whereapplicable, and using the rate of exchange applicable on the date of thetransaction for invoicing in currencies other than dollars. Approximately 95% ofinvoicing is in dollars. **** Each American Depositary Share (ADS) represents three shares. Financial review(US GAAP unless otherwise stated) Total revenuesTotal dollar revenues in Q1 2008 were $134.3 million, up 4% versus Q1 2007.Sterling revenues of £67.9 million were up 2% year-on-year after a 2% weakeningof the dollar against sterling (ARM's effective rate of $1.98 in Q1 2008compared to $1.94 in Q1 2007). At the Q1 2007 effective rate, Q1 2008 sterlingrevenues would have been £69.1 million. License revenuesTotal dollar license revenues in Q1 2008 fell by 12% to $48.1 million,representing 36% of group revenues, compared to $54.3 million in Q1 2007.License revenues comprised $36.3 million from PD and $11.8 million from PIPD. Royalty revenuesTotal dollar royalty revenues in Q1 2008 grew by 20% to $63.9 million,representing 47% of group revenues, compared to $53.4 million in Q1 2007.Royalty revenues comprised $54.8 million from PD and $9.1 million from PIPD. Against the backdrop of growth in more sophisticated mobile phones, underlyingPD royalties grew 12% sequentially and 22% compared to Q1 2007. Total PIPD royalties grew 9% to $9.1 million including $0.8 million of catch-uproyalties. Underlying royalties were up by 20% year-on-year. Development Systems and Service revenuesSales of development systems in Q1 2008 were $14.2 million, representing 11% ofgroup revenues, compared to $13.5 million in Q1 2007. Service revenues in Q12008 were $8.1 million, representing 6% of group revenues, compared to $8.0million in Q1 2007. Gross marginsGross margins in Q1 2008, excluding the FAS123(R) charge of £0.3 million (seebelow), were 88.8% compared to 89.4% in Q4 2007 and 89.5% in Q1 2007. The lowergross margin in Q1 2008 is due primarily to the higher revenue contribution fromtechnology which includes payments to collaborative partners recorded as a costof sale. Operating expenses and operating marginTotal operating expenses in Q1 2008 were £48.4 million (Q1 2007: £48.0 million)including amortisation of intangible assets and other acquisition-relatedcharges of £4.5 million (Q1 2007: £5.1 million), £3.6 million (Q1 2007: £3.6million) in relation to the fair value of share-based remuneration and relatedpayroll taxes and restructuring charges of £0.7 million (Q1 2007: nil). Totalshare-based remuneration and related payroll tax charges of £3.9 million in Q12008 were included within cost of revenues (£0.3 million), research anddevelopment (£2.6 million), sales and marketing (£0.5 million) and general andadministrative (£0.5 million). Normalised income statements for Q1 2008 and Q12007 are included in notes 6.20 and 6.21 below which reconcile US GAAP to thenormalised non-GAAP measures referred to in this earnings release. Operating expenses (excluding acquisition-related, share-based remuneration andrestructuring charges) in Q1 2008 were £39.5 million compared to £39.3 millionin Q1 2007 and £37.2 million in Q4 2007. The sequential increase in operatingexpenses from Q4 2007 to Q1 2008 is due primarily to salary inflation effectivefrom the beginning of the year, the quarterly phasing profile of certainvacation pay and sabbatical accruals and a negative quarter-on-quarter foreignexchange impact on opex. Cost management remains a key focus with opex in theremaining quarters of 2008 expected to be lower than the Q1 level, subject tothe potential negative impact on opex arising from movements in exchange rates. Normalised research and development expenses were £16.3 million in Q1 2008,representing 24% of revenues, compared to £15.1 million in Q4 2007 and £16.6million in Q1 2007. Normalised sales and marketing costs in Q1 2008 were £11.0million, being 16% of revenues, compared to £11.1 million in Q4 2007 and £11.1million in Q1 2007. Normalised general and administrative expenses in Q1 2008were £12.2 million, representing 18% of revenues, compared to £11.1 million inQ4 2007 and £11.6 million in Q1 2007. Normalised operating margin in Q1 2008 was 30.6% (6.1) compared to 31.5% (6.2)in Q4 2007 and 30.3% (6.3) in Q1 2007. Operating margins in Q1 2008 wereslightly ahead of Q1 2007 despite the weakening of the US dollar againststerling. Earnings and taxationIncome before income tax in Q1 2008 was £12.2 million compared to £12.7 millionin Q1 2007. After adjusting for acquisition-related, share-based remunerationand restructuring charges, normalised income before income tax in Q1 2008 was£21.3 million (6.5) compared to £21.6 million (6.7) in Q1 2007. The group'seffective tax rate under US GAAP in Q1 2008 was 27% (Q1 2007: 25%) reflectingthe availability of research and development tax credits and a reduction in thebenefits arising from the structuring of the Artisan(R) acquisition. In Q1 2008, fully diluted earnings per share prepared under US GAAP were 0.7pence (4.1 cents per ADS****) compared to earnings per share of 0.7 pence (4.1cents per ADS****) in Q1 2007. Normalised fully diluted earnings per share in Q12008 were 1.17 pence (6.16) per share (7.0 cents per ADS****) compared to 1.14pence (6.18) (6.7 cents per ADS****) in Q1 2007. Balance sheetIntangible assets at 31 March 2008 were £380.4 million, comprising goodwill of£345.2 million and other intangible assets of £35.2 million, compared to £344.7million and £39.4 million respectively at 31 December 2007. Total accounts receivable were £72.0 million at 31 March 2008, comprising £53.9million of trade receivables and £18.1 million of amounts recoverable oncontracts, compared to £68.2 million at 31 December 2007, comprising £43.7million of trade receivables and £24.5 million of amounts recoverable oncontracts. Days sales outstanding (DSOs) were 52 at 31 March 2008 compared to 49at 31 December 2007 and 41 at 31 March 2007. Having been temporarily higher atthe end of Q1 2008, DSOs are now back to more typical levels following strongcash receipts in April. Cash flow and share buyback programmeNet cash at 31 March 2008 was £55.2 million (6.9) compared to £51.3 million(6.10) at 31 December 2007. Normalised free cash flow in Q1 2008 was £13.7million (6.12). During the quarter, £13.0 million of cash was returned to shareholders throughthe purchase of 15 million shares. It is anticipated that the buyback programmewill resume after the announcement of these results. Operating review BacklogGroup order backlog at the end of Q1 2008 remained at the record high level thatwas achieved in Q4 2007 and was up more than 20% on the level at the end of Q12007. PD licensingFifteen processor licenses were signed in Q1 across the entire range ofprocessor technology. Seven Cortex licenses were signed, including one furtherlicense for our newest microprocessor, the Cortex-A9 core. Interest in ARM's 3DMaliTM graphics technology continued to develop, with Broadcom taking a licensein the quarter, further demonstrating ARM's success in selling specialistprocessor technologies beyond the traditional ARM(R) microprocessors. Q1 2008 PD Licensing Analysis - 542 cumulative processor licenses Multi-use Term Per-use Cumulative U D N U D N U D N Total TotalARM7 1 1 154ARM9 1 1 1 1 4 243ARM11 1 1 65Cortex-M3 1 2 1 4 18Cortex-R4 1 1 11Cortex-A8 1 1 10Cortex-A9 1 1 5Mali 1 1 6Other 1 1 30 Total 15 542 U:Upgrade D:Derivative N:New PD royaltiesPD unit shipments grew strongly in Q4 2007 (our partners report royalties onequarter in arrears) buoyed by growth in smartphones, audio players and otherconsumer electronics. Reported processor unit shipments were 889 million, up 7%sequentially and up 23% compared to Q1 2007. The ARM11(TM) family achieved 80%sequential growth and now represents approximately 3% of all units shipped.Shipments of new Cortex-based devices gathered pace with more than a quarter ofa million units being shipped in a quarter for the first time. The ARM7(TM) andARM9(TM) families now represent 57% and 40% of total shipments respectively. Notonly does this demonstrate the longevity of ARM technology but it alsounderscores the material additional value to be derived from the significantlicense sales of ARM11 and later technology that have already been made. The proportion of total units shipped in mobile devices grew to 70%, up from 67%in the previous quarter. The cause of this shift was a significant increase inthe proportion of smartphones shipped during the Christmas season which containmore ARM technology per phone than less feature-rich devices. For the quarter,an ARM technology-based mobile phone contained an average of 1.7 ARMmicroprocessors. As smartphones typically use more sophisticated semiconductordevices with higher average selling prices per chip and as ARM's royalties aretypically based on a percentage of the selling price of the semiconductor chip,the overall average royalty per ARM microprocessor increased from 5.9c in Q42007 to 6.2c in Q1 2008. In Q1 2008, shipments in ARM-based chips in embedded devices continued to growcompared to the previous quarter. Microcontrollers continued to grow, up 55%compared with Q1 2007, and ARM powered smartcards, used in secure identitycards, credit cards and SIM cards grew 25% sequentially to 30m units. Thecontribution from units shipped in home and enterprise was flat with growth inunits shipped in digital TV being offset by falls in digital still cameras. PIPD licensingPIPD license revenue increased sequentially to $11.8 million in Q1 from $10.8million in Q4 2007. Thirteen physical IP licenses were signed in the quarter forproducts across the technology portfolio, including two further licenses withtop ten semiconductor companies. The attractiveness of ARM's combined processorand physical IP offer was illustrated again in Q1 with additional business beingsigned which included technology from both divisions. In February, we described how the PIPD business is transitioning from thetechnology catch-up phase which has been a key strategic focus since theacquisition of Artisan, to a more business-as-usual state for the development ofleading-edge technology. In order to facilitate this transition, areorganization of the business was undertaken in Q1 which included the creationof dedicated design centres to align better the skill sets of each centre withthe challenges of customer centric development of leading-edge technology. Thisalignment included the elimination of 30 positions from our US operation in thequarter resulting in a restructuring charge of £0.7 million. Also in Q1, we have strengthened PIPD's ability to capitalise on the longer-termgrowth opportunity by investing both in key engineering and commercialmanagement and in the infrastructure to improve internal processes to driveincreased productivity and improved product delivery to customers. We haveincreased the breadth of our product offering through the addition of productsavailable via our web channel and achieved significant milestones in thedelivery of advanced technology to tier-1 customers. Q1 2008 PIPD Licensing Analysis - 363 cumulative physical IP licenses Process Node (nm) TotalPlatform Licenses Metro 180/130 2 Advantage 65 1Standard Cell Libraries Advantage 65/90 3 Metro 180 1Memory Compilers Advantage 90 1 Velocity PHYs 90/65 5Quarter Total 13Cumulative Total 363 PIPD royaltiesPIPD royalties in Q1 2008 were $9.1 million, up 4% from $8.7 million in Q4 2007and up 9% from $8.4 million in Q1 2007. Underlying royalties for PIPD were $8.3million up 20% year-on-year. Sequentially, underlying royalties were broadlyflat, representing market share gains given the 2.3% decline (source - GartnerDataquest, January 2008) in foundry utilization rates during the correspondingperiod. PeopleAt 31 March 2008, ARM had 1,707 full-time employees, a net reduction of 21 sincethe year end, following the restructuring activities in PIPD in the firstquarter. At the end of Q1, the group had 659 employees based in the UK, 494 inthe US, 188 in Continental Europe, 293 in India and 73 in the Asia Pacificregion. Change to ARM's NASDAQ tickerOn 14 April 2008, ARM American Depositary Receipts (ADR) started trading onNASDAQ under the new ticker symbol "ARMH". This change makes ARM ADRs compatiblewith the new NASDAQ platform and better aligns ARM with other leading NASDAQsemiconductor companies such as BRCM, INTC, MRVL and QCOM. The 3:1 ratio betweenARM ordinary shares and an American Depositary Share (ADS) remains unchanged. Legal mattersARM is currently involved in ongoing litigation proceedings with TechnologyProperties Limited, Inc. Details are set out in the 2007 Annual Report on Form20-F filed with the Securities and Exchange Commission on 7 April 2008. Based onindependent legal advice, ARM does not expect any significant liability to arisein respect of these proceedings. ARM had been involved in ongoing litigation proceedings with NazomiCommunications, Inc. The litigation has now been concluded with a ruling grantedin ARM's favour. ARM Holdings plc First Quarter Results - US GAAP Quarter Quarter ended ended 31 March 31 March 2008 2007 Unaudited Unaudited --------- --------- £'000 £'000RevenuesProduct revenues 63,817 62,300Service revenues 4,071 4,192 --------- ---------Total revenues 67,888 66,492 --------- --------- Cost of revenuesProduct costs (5,800) (5,638)Service costs (2,040) (1,590) --------- ---------Total cost of revenues (7,840) (7,228) --------- --------- --------- ---------Gross profit 60,048 59,264 --------- --------- Research and development (18,966) (18,997)Sales and marketing (11,554) (11,906)General and administrative (12,702) (12,462)Restructuring costs (718) - ---------Amortization of intangibles purchased through (4,430) (4,655)business combination --------- ---------Total operating expenses (48,370) (48,020) --------- --------- Income from operations 11,678 11,244Interest, net 571 1,457 --------- ---------Income before income tax 12,249 12,701Provision for income taxes (3,307) (3,124) --------- ---------Net income 8,942 9,577 --------- --------- Earnings per share (assuming dilution)Shares outstanding ('000) 1,301,123 1,377,589Earnings per share - pence 0.7 0.7Earnings per ADS (assuming dilution)ADSs outstanding ('000) 433,708 459,196Earnings per ADS - cents 4.1 4.1 ARM Holdings plc Consolidated balance sheet - US GAAP 31 March 31 December 2008 2007 Unaudited Audited ----------- ----------- £'000 £'000AssetsCurrent assets:Cash and cash equivalents 55,191 49,509Short-term investments 36 232Marketable securities - 1,582Accounts receivable, net of allowance of£1,528,000 in 2008 and £1,504,000 in 2007 72,018 68,232Inventory: finished goods 2,112 2,339Income taxes receivable 7,492 6,552Prepaid expenses and other assets 15,578 13,089Investments - 1,180 ----------- -----------Total current assets 152,427 142,715 Deferred income taxes 11,139 11,309Prepaid expenses and other assets 2,492 2,860Property and equipment, net 11,224 12,042Goodwill 345,192 344,663Other intangible assets 35,188 39,375Investments 3,701 3,701 ----------- -----------Total assets 561,363 556,665 ----------- ----------- Liabilities and shareholders' equityAccounts payable 2,468 2,230Income taxes payable 8,306 3,704Personnel taxes 1,777 1,751Accrued liabilities 20,837 25,670Deferred revenue 28,282 27,543 ----------- -----------Total current liabilities 61,670 60,898 Deferred income taxes 1,346 2,027 ----------- -----------Total liabilities 63,016 62,925 ----------- ----------- Shareholders' equityOrdinary shares 672 672Additional paid-in capital 371,876 367,680Treasury stock, at cost (91,463) (90,000)Retained earnings 234,494 234,455Accumulated other comprehensive income:Unrealized holding loss on available-for-salesecurities, net of tax of £nil (2007: £85,000) (68) (214)Cumulative translation adjustment (17,164) (18,853) ----------- -----------Total shareholders' equity 498,347 493,740 ----------- ----------- Total liabilities and shareholders' equity 561,363 556,665 ----------- ----------- Notes to the Financial Information (1) Basis of preparationUS GAAPThe financial information prepared in accordance with the Company's US GAAPaccounting policies comprises the consolidated balance sheets as of 31 March2008 and 31 December 2007 and related income statements for the periods thenended, together with related notes. In preparing this financial informationmanagement has used the principal accounting policies as set out in theCompany's annual financial statements and Form 20-F for the year ended 31December 2007. (2) Share-based remuneration charges and acquisition-related expensesIncluded within the US GAAP income statement for the quarter ended 31 March 2008are share-based remuneration charges of £3.6 million: £0.2 million in cost ofrevenues, £2.4 million in research and development costs, £0.5 million in salesand marketing costs and £0.5 million in general and administrative costs. (3) Accounts receivableIncluded within accounts receivable at 31 March 2008 are £18.1 million (31December 2007: £24.5 million) of amounts recoverable on contracts. (4) Consolidated statement of changes in shareholders' equity (US GAAP) Additional Unrealized Cumulative Share paid-in Treasury Retained holding translation capital capital stock earnings gain/(loss) adjustment Total £'000 £'000 £'000 £'000 £'000 £'000 £'000 At 1 January 2008 672 367,680 (90,000) 234,455 (214) (18,853) 493,740Net income - - - 8,942 - - 8,942Tax effect of optionexercises - (524) - - - - (524)Amortization of deferred compensation - 3,469 - - - - 3,469Conversion of liabilityaward to equity award - 1,251 - - - - 1,251Issuance of shares from treasury - - 11,556 (8,903) - - 2,653Purchase of own shares - - (13,019) - - - (13,019)Other comprehensive income: Realized gain onavailable-for-sale security (net of tax of £85,000) - - - - 214 - 214Unrealized holding losses onavailable-for-sale securities - - - - (68) - (68)Currency translation adjustment - - - - - 1,689 1,689----------------- ------- --------- ---------- ---------- ------- -------- ---------At 31 March 2008 672 371,876 (91,463) 234,494 (68) (17,164) 498,347----------------- ------- --------- ---------- ---------- ------- -------- --------- (5) Consolidated statement of comprehensive income (US GAAP) Q1 2008 Q4 2007 Q1 2007 FY 2007 £'000 £'000 £'000 £'000 Net income 8,942 9,859 9,577 36,842Realized gain on available-for-sale 214 - - -security, net of taxUnrealized holdings gains /(losses) on available-for-salesecurities, net of tax (68) 237 (230) (608)Currency translation adjustment 1,689 10,543 (927) (6,777)--------------------------- ------- ------- ------- -------Total comprehensive income 10,777 20,639 8,420 29,457--------------------------- ------- ------- ------- ------- (6) Non-GAAP measuresThe following non-GAAP measures, including reconciliations to the US GAAPmeasures, have been used in this earnings release. These measures have beenpresented as they allow a clearer comparison of operating results that excludeacquisition-related charges, share-based remuneration and restructuring chargesand profit on disposal and impairment of available-for-sale investments. Allfigures in £'000 unless otherwise stated. (6.1) (6.2) (6.3) (6.4) Q1 2008 Q4 2007 Q1 2007 FY 2007 Income from operations (US GAAP) 11,678 10,482 11,244 42,838Restructuring costs 718 138 - 1,037Acquisition-related charge -amortization of intangibles 4,430 4,397 4,655 18,226Acquisition-related charge - otherpayments 45 857 397 1,735Share-based remuneration and relatedpayroll taxes 3,899 3,230 3,872 16,341Impairment of available-for-salesecurity - 1,162 - 1,162-------------------------- ------- ------- ------- -------Normalised income from operations 20,770 20,266 20,168 81,339-------------------------- ------- ------- ------- -------As % of revenue 30.6% 31.5% 30.3% 31.4% (6.5) (6.6) (6.7) (6.8) Q1 2008 Q4 2007 Q1 2007 FY 2007 Income before income tax (US GAAP) 12,249 11,529 12,701 48,240Restructuring costs 718 138 - 1,037Acquisition-related charge -amortization of intangibles 4,430 4,397 4,655 18,226Acquisition-related charge - otherpayments 45 857 397 1,735Share-based remuneration and relatedpayroll taxes 3,899 3,230 3,872 16,341Impairment of available-for-saleinvestment - 1,162 - 1,162-------------------------- ------- ------- ------- -------Normalised income before income tax 21,341 21,313 21,625 86,741-------------------------- ------- ------- ------- ------- (6.9) (6.10) (6.11) 31 March 31 December 31 March 2008 2007 2007 Cash and cash equivalents 55,191 49,509 92,595Short-term investments 36 232 19,069Short-term marketable securities - 1,582 15,117-------------------------- -------- -------- --------Normalised cash 55,227 51,323 126,781-------------------------- -------- -------- -------- (6.12) (6.13) (6.14) (6.15) Q1 2008 Q4 2007 Q1 2007 FY 2007 Normalised cash at end of period(as above) 55,227 51,323 126,781 51,323Less: Normalised cash atbeginning of period (51,323) (99,284) (128,494) (128,494)Add back: Cash outflow fromacquisitions (net of cashacquired) 931 100 2,618 6,014Add back: Cash outflow frompayment of dividends - 10,534 - 18,547Add back: Cash outflow frompurchase of own shares 13,019 49,568 20,159 128,561Less: Cash inflow from exerciseof share options (2,653) (1,740) (5,509) (18,892)Less: Cash inflow from sale ofavailable-for-sale investments (1,478) - - --------------------------- ------- ------- ------- -------Normalised cash generation 13,723 10,501 15,555 57,059-------------------------- ------- ------- ------- ------- (6.16) (6.17) (6.18) (6.19) Q1 2008 Q4 2007 Q1 2007 FY 2007 Net income (US GAAP) 8,942 9,859 9,577 36,842Restructuring costs 718 138 - 1,037Acquisition-related charge -amortization of intangibles 4,430 4,397 4,655 18,226Acquisition-related charge -other payments 45 857 397 1,735Share-based remuneration andrelated payroll taxes 3,899 3,230 3,872 16,341Impairment of available-for-sale - 1,162 - 1,162investmentEstimated tax impact ofabove charges (2,816) (2,928) (2,849) (11,523) ------- ------- ------- ---------------------------------Normalised net income 15,218 16,715 15,652 63,820-------------------------- ------- ------- ------- -------Dilutive shares ('000) 1,301,123 1,335,144 1,377,589 1,366,384Normalised diluted EPS 1.17p 1.25p 1.14p 4.67p (6.20) Normalised income statement for Q1 2008 -------- ------- ------- ------- ------- -------- Other Share-based Intangible acquisition Restruct- remuner- amortiza- -related -uring Normalised ation tion charges charges US GAAP -------- ------- ------- ------- ------- -------- £'000 £'000 £'000 £'000 £'000 £'000 -------- ------- ------- ------- ------- -------- RevenuesProduct revenues 63,817 - - - - 63,817Service revenues 4,071 - - - - 4,071 -------- ------- ------- ------- ------- --------Total revenues 67,888 - - - - 67,888 -------- ------- ------- ------- ------- -------- Cost of revenues Product costs (5,800) - - - - (5,800)Service costs (1,772) (268) - - - (2,040) -------- ------- ------- ------- ------- --------Total cost of revenues (7,572) (268) - - - (7,840) -------- ------- ------- ------- ------- -------- -------- ------- ------- ------- ------- --------Gross profit 60,316 (268) - - - 60,048 -------- ------- ------- ------- ------- -------- Research and development (16,312) (2,616) - (38) - (18,966)Sales and marketing (11,048) (508) - 2 - (11,554)General andadministrative (12,186) (507) - (9) - (12,702)Restructuring costs - - - - (718) (718)Amortization of intangibles purchased through businesscombination - - (4,430) - - (4,430) -------- ------- ------- ------- ------- --------Total operating expenses (39,546) (3,631) (4,430) (45) (718) (48,370) -------- ------- ------- ------- ------- -------- Income from operations 20,770 (3,899) (4,430) (45) (718) 11,678Interest 571 - - - - 571 -------- ------- ------- ------- ------- --------Income before income tax 21,341 (3,899) (4,430) (45) (718) 12,249Provision for income taxes (6,123) 841 1,672 16 287 (3,307) -------- ------- ------- ------- ------- --------Net income 15,218 (3,058) (2,758) (29) (431) 8,942 -------- ------- ------- ------- ------- -------- Earnings per share(assuming dilution)Shares outstanding('000) 1,301,123 1,301,123Earnings per share - pence 1.17 0.69Earnings per ADS (assuming dilution)ADSs outstanding('000) 433,708 433,708Earnings per ADS - cents 6.97 4.10 (6.21) Normalised income statement for Q1 2007 Other Share-based Intangible acquisition- Normalised remuneration amortization related charges US GAAP --------- --------- --------- --------- -------- £'000 £'000 £'000 £'000 £'000 --------- --------- --------- --------- --------RevenuesProduct revenues 62,300 - - - 62,300Service revenues 4,192 - - - 4,192 -------- --------- --------- --------- --------Total revenues 66,492 - - - 66,492 -------- --------- --------- --------- -------- Cost of revenuesProduct costs (5,638) - - - (5,638)Service costs (1,358) (232) - - (1,590) -------- --------- --------- --------- --------Total cost of revenues (6,996) (232) - - (7,228) -------- --------- --------- --------- -------- -------- --------- --------- --------- --------Gross profit 59,496 (232) - - 59,264 -------- --------- --------- --------- -------- Research and development (16,589) (2,246) - (162) (18,997)Sales and marketing (11,132) (774) - - (11,906)General andadministrative (11,607) (620) - (235) (12,462)Amortization of intangibles purchasedthrough businesscombination - - (4,655) - (4,655) -------- --------- --------- --------- --------Total operating expenses (39,328) (3,640) (4,655) (397) (48,020) -------- --------- --------- --------- -------- Income from operations 20,168 (3,872) (4,655) (397) 11,244Interest 1,457 - - - 1,457 -------- --------- --------- --------- --------Income before income tax 21,625 (3,872) (4,655) (397) 12,701Provision for income taxes (5,973) 937 1,796 116 (3,124) -------- --------- --------- --------- --------Net income 15,652 (2,935) (2,859) (281) 9,577 -------- --------- --------- --------- -------- Earnings per share(assuming dilution)Shares outstanding ('000) 1,377,589 1,377,589Earnings per share - pence 1.14 0.70Earnings per ADS (assuming dilution)ADSs outstanding ('000) 459,196 459,196Earnings per ADS - cents 6.69 4.09 Note The results shown for Q1 2008, Q4 2007 and Q1 2007 are unaudited. The resultsshown for FY 2007 are audited. The financial information contained in thisannouncement does not constitute statutory accounts within the meaning ofSection 240(3) of the Companies Act 1985. Statutory accounts of the Company inrespect of the financial year ended 31 December 2007, upon which the Company'sauditors have given a report which was unqualified and did not contain astatement under Section 237(2) or Section 237(3) of that Act, will soon bedelivered to the Registrar of Companies. The results for ARM for Q1 2008 and previous quarters as shown reflect theaccounting policies as stated in Note 1 to the US GAAP financial statements inthe Annual Report and Accounts for the fiscal year ended 31 December 2007 and inthe Annual Report on Form 20-F for the fiscal year ended 31 December 2007. This document contains forward-looking statements as defined in section 102 ofthe Private Securities Litigation Reform Act of 1995. These statements aresubject to risk factors associated with the semiconductor and intellectualproperty businesses. When used in this document, the words "anticipates", "may","can", "believes", "expects", "projects", "intends", "likely", similarexpressions and any other statements that are not historical facts, in each caseas they relate to ARM, its management or its businesses and financialperformance and condition are intended to identify those assertions asforward-looking statements. It is believed that the expectations reflected inthese statements are reasonable, but they may be affected by a number ofvariables, many of which are beyond our control. These variables could causeactual results or trends to differ materially and include, but are not limitedto: failure to realize the benefits of our recent acquisitions, unforeseenliabilities arising from our recent acquisitions, price fluctuations, actualdemand, the availability of software and operating systems compatible with ourintellectual property, the continued demand for products including ARM'sintellectual property, delays in the design process or delays in a customer'sproject that uses ARM's technology, the success of our semiconductor partners,loss of market and industry competition, exchange and currency fluctuations, anyfuture strategic investments or acquisitions, rapid technological change,regulatory developments, ARM's ability to negotiate, structure, monitor andenforce agreements for the determination and payment of royalties, actual orpotential litigation, changes in tax laws, interest rates and access to capitalmarkets, political, economic and financial market conditions in variouscountries and regions and capital expenditure requirements. More information about potential factors that could affect ARM's business andfinancial results is included in ARM's Annual Report on Form 20-F for the fiscalyear ended 31 December 2007 including (without limitation) under the captions,"Risk Factors" and "Management's Discussion and Analysis of Financial Conditionand Results of Operations," which is on file with the Securities and ExchangeCommission (the "SEC") and available at the SEC's website at www.sec.gov. About ARMARM designs the technology that lies at the heart of advanced digital products,from mobile, home and enterprise solutions to embedded and emergingapplications. ARM's comprehensive product offering includes 16/32-bit RISCmicroprocessors, data engines, graphics processors, digital libraries, embeddedmemories, peripherals, software and development tools, as well as analogfunctions and high-speed connectivity products. Combined with the company'sbroad Partner community, they provide a total system solution that offers afast, reliable path to market for leading electronics companies. Moreinformation on ARM is available at http://www.arm.com. ARM is a registered trademarks of ARM Limited. ARM7, ARM9, ARM11, Cortex andMali are trademarks of ARM Limited. All other brands or product names are theproperty of their respective holders. "ARM" is used to represent ARM Holdingsplc; 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 N.V.; ARM Germany GmbH; Keil Elektronik GmbH;ARM Embedded Technologies Pvt. Ltd. and ARM Norway, AS. This information is provided by RNS The company news service from the London Stock ExchangeRelated Shares:
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