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ARM Holdings plc Reports Results For The Third Quarter and Nine Months Ended 30 September 2008

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Press release

CAMBRIDGE, UK, 28 October 2008-ARM Holdings plc [(LSE: ARM); (NASDAQ: ARMH)], the world's leading semiconductor intellectual property supplier, announces its unaudited financial results for the third quarter and nine months ended 30 September 2008

Highlights (US GAAP unless otherwise stated)

  • Highest ever quarterly revenues at $134.4m, up 7% year-on-year
    • Normalised operating margin at 33% (US GAAP 21%)
    • Normalised PBT at £24.9m (US GAAP £16.3m), up 17% (US GAAP 36%)
    • Normalised EPS at 1.38p (US GAAP 0.92p), up 23% (US GAAP 46%)
  • Processor Division (PD): Strong licensing platform driving royalty momentum
    • Total revenue at $90.7m, up 7% year-on-year
      • Licensing revenues up 18% sequentially to $35.5m
      • Royalty revenue up 30% year-on-year
        • One billion units reported in a quarter for the first time
  • Physical IP Division (PIPD): Licensing leading technology nodes to IDMs and foundries
    • Total revenue at $21.4m, up 4% year-on-year
      • Licensing revenues decreased 17% sequentially to $10.4m
      • Royalty revenue at a record $11m, up 38% year-on-year
        • Underlying royalty revenue up 21% to $9.3m
    • Leading-edge technology development yields long-term strategic deals
      • STMicroelectronics buys 40nm platform license
      • 32nm and 28nm collaboration with the Common Platform technology partnership
  • Continuing cost discipline
    • Headcount at end Q3 marginally lower than at start of year
    • Normalised Q3 operating expenses higher at £40.8m (US GAAP £49.1m) due primarily to stronger dollar
    • Operating margins and earnings likely to benefit further from stronger dollar
  • Strong cash generation continues
    • £22.5m cash generated in the quarter
    • £8.6m share buyback in Q3
    • £66m net cash at the end of Q3

Outlook

Following the sequential improvement in PD licensing revenues and the signing of key strategic deals in PIPD in Q3, the license opportunity pipeline remains robust as we enter the fourth quarter.

Although the global macroeconomic conditions make the near-term trading environment uncertain, based on the order backlog, robust licensing pipeline and underlying momentum in royalties, we expect that group dollar revenues in Q4 2008 will be at least in line with expectations. In addition, we anticipate that profits and earnings will benefit further from the strengthening of the dollar against sterling.

Commenting on the results, Warren East, Chief Executive Officer, said:

"In Q3, ARM delivered the best quarterly revenue performance in its history and we continue to see strong demand for ARM's technology including long-term commitments for our physical IP technology by industry leaders.

Growth of at least 30% year-on-year in royalty revenues for both PD and PIPD provides further evidence of the increasing use of ARM's technology in a broadening range of consumer electronics products.

We are encouraged to see that the inherent operating leverage in the ARM business model, combined with sound cost discipline and the recent strengthening of the dollar against sterling, has given rise to earnings growth in Q3 of more than 20% on dollar revenue growth of 7%."

 



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