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News Release

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ARM Holdings plc Reports Results For The Fourth Quarter And Full Year 2010
Download PDF Please click here for PDF version of this press release
RNS Number : 4196A
ARM Holdings PLC
01 February 2011
 

ARM HOLDINGS PLC REPORTS RESULTS FOR THE FOURTH QUARTER AND FULL YEAR 2010
A presentation of the results will be webcast today at 09:30 GMT at www.arm.com/ir

 

CAMBRIDGE, UK, 1 February 2011-ARM Holdings plc announces its unaudited financial results for the fourth quarter and full year ended 31 December 2010.  ARM continues to gain share as market leaders adopt ARM technology for a broadening range of end-markets, increasing ARM's long-term royalty opportunity

 

 

Q4 Financial Summary
Normalised*
 
IFRS
 
Q4 2010
Q4 2009
% Change
Q4 2010
Q4 2009
Revenue ($m)
179.6
140.0
28%
179.6
140.0
Revenue (£m)
113.9
85.2
34%
 
113.9
85.2
Operating margin
41.1%
37.3%
 
 
30.1%
23.0%
Profit before tax (£m)
47.6
32.3
47%
 
34.9
20.1
Earnings per share (pence)
2.90
1.79
62%
 
2.19
1.32
Net cash generation (£m)**
40.7
30.7
 
 
 
 
Effective revenue fx rate ($/£)
1.58
1.64
 
 
 
 
FY Financial Summary
Normalised*
 
IFRS
 
FY 2010
FY 2009
% Change
 
FY 2010
FY 2009
Revenue ($m)
631.3
489.5
29%
 
631.3
489.5
Revenue (£m)
406.6
305.0
33%
 
406.6
305.0
Operating margin
40.4%
31.2%
 
 
26.3%
15.0%
Profit before tax (£m)
167.4
96.8
73%
 
110.0
47.3
Earnings per share (pence)
9.34
5.45
71%
 
6.36
3.11
Net cash generation (£m)**
179.9
86.1
 
 
 
 
Effective revenue fx rate ($/£)
1.55
1.60
 
 
 
 
 

 

Progress on key growth drivers in Q4

·       Growth in adoption of ARM processor technology

o 35 processor licenses signed for a range of applications including smartphones, mobile computers, servers and smartcards

o Microsoft announced that future generations of Windows operating system will support ARM-based chips

o NVIDIA licensed both Cortex-A15 and the next-generation ARM architecture for computing markets

o Strong licensing drives a 35% sequential increase in order backlog

·       Growth in mobile applications

o 1.1 billion ARM-processor based chips shipped into mobile devices

·       Growth beyond mobile into consumer electronics and embedded products

o 0.7 billion ARM-processor based chips shipped into everything from smart-meters to solid-state drives

·       Growth in outsourcing of new technology

o Physical IP: Freescale became ARM's first subscription licensee for physical IP at an advanced technology node; and a foundry licensed a royalty-bearing platform of physical IP.

o Graphics: 8 licenses for Mali, ARM's advanced graphics processor

 

Warren East, Chief Executive Officer, said:

"ARM continues to sign licenses with influential market leaders in an increasingly digital world, and as the industry chooses ARM technology in a broadening range of electronic products, it further drives our long-term royalty opportunity. The growth in licensing and royalty revenues, throughout 2010, has combined to deliver our highest ever annual revenues, profits and cash generation.

 

2011 will bring exciting opportunities and challenges as ARM enters competitive new markets and we are well positioned to succeed with leading technology, an innovative business model and a thriving ecosystem of partners."

 

Outlook

It is generally expected that, after a strong recovery in 2010, the semiconductor industry will see more typical growth levels in 2011.  With ARM well positioned to continue to gain share, we expect group dollar revenues for the full-year to be at least in line with market expectations.


 

 

Q4 2010 - Revenue Analysis

 

Revenue ($m)***

 

Revenue (£m)

 

Q4 2010

Q4 2009

% Change

 

Q4 2010

Q4 2009

% Change

PD

 

 

 

 

 

 

 

Licensing

53.8

35.7

51%

 

34.0

21.5

58%

Royalties

81.9

63.5

29%

 

52.0

38.4

36%

Total PD

135.7

99.2

37%

 

86.0

59.9

44%

PIPD

 

 

 

 

 

 

 

Licensing

11.6

9.2

26%

 

7.4

5.8

29%

Royalties1

12.0

11.1

8%

 

7.6

6.7

12%

Total PIPD

23.6

20.3

16%

 

15.0

12.5

20%

Development Systems

11.6

12.7

-9%

 

7.4

7.9

-6%

Services

8.7

7.8

12%

 

5.5

4.9

13%

Total Revenue

179.6

140.0

28%

 

113.9

85.2

34%

1 Includes catch-up PIPD royalties in Q4 2010 of $0.4m (£0.2m) and in Q4 2009 of $0.8m (£0.5m).

 

 

FY 2010 - Revenue Analysis

 

Revenue ($m)***

 

Revenue (£m)

 

FY 2010

FY 2009

% Change

 

FY 2010

FY 2009

% Change

PD

 

 

 

 

 

 

 

Licensing

166.9

128.2

30%

 

105.9

76.5

39%

Royalties2

291.5

208.1

40%

 

189.4

132.5

43%

Total PD

458.4

336.3

36%

 

295.3

209.0

41%

PIPD

 

 

 

 

 

 

 

Licensing

41.3

35.9

15%

 

26.6

22.0

21%

Royalties1

43.8

36.2

21%

 

28.3

22.9

23%

Total PIPD

85.1

72.1

18%

 

54.9

44.9

22%

Development Systems

55.4

51.6

7%

 

36.0

32.9

9%

Services

32.4

29.5

10%

 

20.4

18.2

12%

Total Revenue

631.3

489.5

29%

 

406.6

305.0

33%

1 Includes catch-up PIPD royalties in FY 2010 of $1.8m (£1.1m) and in FY 2009 of $5.0m (£2.6m).

2 Includes catch-up PD royalties in FY 2010 of $9.0m (£6.2m).

 

Notes

*

Normalised figures are based on IFRS, adjusted for acquisition-related, share-based payment costs and restructuring charges, profit on disposal and impairment of available-for-sale investments and Linaro-related charges. For reconciliations of IFRS measures to normalised non-IFRS measures detailed in this document, see notes 6.1 to 6.16.

**

Before dividends and share buybacks, net cash flows from share option exercises, disposals of available-for-sale investments, investment and acquisition consideration and other items excluded from normalised profits - see notes 6.8 to 6.12.

***

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.

 

 

CONTACTS:      

Sarah West/Daniel Thöle

Brunswick

+44 (0)207 404 5959

Tim Score/Ian Thornton

ARM Holdings plc

+44 (0) 1223 400400

 

 

Total revenues

Total revenues in Q4 2010 were $179.6 million, up 28% on Q4 2009.  Q4 sterling revenues were £113.9 million, up 34% year-on-year. By comparison dollar revenue for the semiconductor industry was up 14% over the equivalent period[1].

 

Total 2010 full-year revenues were $631.3 million, up 29% on 2009.  Full-year sterling revenues were £406.6 million, up 33% on 2009. By comparison dollar revenue for the semiconductor industry was up 23% over the equivalent period[2].

 

License revenues

Total dollar license revenues in Q4 2010 increased by 46% year-on-year to $65.4m, representing 36% of group revenues.  License revenues comprised $53.8 million from PD and $11.6 million from PIPD. 

 

During Q4, several partners entered into long-term commitments to use ARM technology where the revenue associated with these agreements goes into backlog. The revenue for these agreements will be recognised in future quarters as engineering and delivery milestones are achieved. In addition, two new subscription licenses were signed and a third was renewed during the quarter. As a result, group backlog at the end of the quarter was up about 35% sequentially, and about 75% year-on-year, to a record high.

 

Full-year dollar license revenues were $208.2 million, up 27% on 2009.

 

Royalty revenues

Royalties are recognised one quarter in arrears with royalties in Q4 generated from semiconductor unit shipments in Q3.  Total dollar royalty revenues in Q4 2010 increased 26% to $93.9 million, representing 52% of group revenues.  Royalty revenues comprised $81.9 million for PD and $12.0 million for PIPD. 

 

PIPD royalties of $12.0 million include $0.4 million of "catch-up" royalties. Underlying royalties for PIPD were up 12% year-on-year to a record high.

 

Full-year dollar royalty revenues were $335.3 million, up 37% on 2009.  Royalty revenues now represent 53% of ARM's total revenues, having grown from less than 40% in 2005.  It is expected that royalty revenues will become a greater proportion of Group revenues in the future.

 

Development Systems and Service revenues

Sales of development systems were $11.6 million in Q4 2010, down 9% on 2009 and representing 7% of group revenues.  Service revenues were $8.7 million in Q4 2010, up 12% and representing 5% of group revenues.

 

Full-year development systems revenues were $55.4 million, up 7% year-on-year. Full-year service revenues were $32.4 million, up 10% on 2009.

 

Gross margins

Gross margin in Q4 2010, excluding share-based payment costs of £0.7 million, was 94.9%, compared to 94.3% in Q4 2009. 

 

Full-year gross margin, excluding share-based payment costs of £2.8 million, was 94.3% compared to 92.2% in 2009.

 

The higher gross margin in 2010 compared to 2009 is due primarily to the higher proportion of royalty and licensing revenue compared to development systems and services revenues.

 

 

Operating expenses and operating margin

Normalised Q4 and full-year income statements for 2010 and 2009 are included in notes 6.13 to 6.16 below which reconcile IFRS to the normalised non-IFRS measures referred to in this earnings release.

 

Normalised operating expenses (excluding acquisition-related, share-based payments and restructuring charges) in Q4 2010 were £61.2 million compared to £56.6 million in Q3 2010 and £48.6 million in Q4 2009.  The sequential increase in operating expenses in the fourth quarter is due primarily to higher charges for bonus and commission payments than in Q3, arising from the strong revenue and bookings performance in Q4. 

 

Normalised operating expenses in Q1 2011 (assuming effective exchange rates similar to current levels) are expected to be £57-59 million. 

 

Normalised operating margin in Q4 2010 was 41.1%. Normalised operating margin in Q3 2010 and Q4 2009 was 37.7% and 37.3% respectively. Normalised operating margin in the full-year 2010 was 40.4% compared to 31.2% in 2009.

 

Normalised research and development expenses were £29.6 million in Q4 2010, representing 26% of revenues, compared to £26.4 million in Q3 2010 and £23.9 million in Q4 2009. Normalised sales and marketing costs were £15.9 million in Q4 2010, representing 14% of revenues, compared to £13.3 million in Q3 2010 and £12.7 million in Q4 2009. Normalised general and administrative expenses were £15.7 million in Q4 2010, representing 14% of revenues, compared to £16.9 million in Q3 2010 and £12.0 million in Q4 2009.

 

Total IFRS operating expenses in Q4 2010 were £73.1 million (Q4 2009: £60.2 million) including £9.9 million (Q4 2009: £7.4 million) in relation to share-based payments and related payroll taxes, and £2.0 million (Q4 2009: £4.2 million) in relation to amortisation of intangible assets, other acquisition-related charges, disposal of investments and restructuring charges.  Total share-based payments and related payroll tax charges of £10.6 million in Q4 2010 were included within cost of revenues (£0.7 million), research and development (£6.4 million), sales and marketing (£2.0 million) and general and administrative (£1.5 million).

 

Total IFRS operating expenses for full-year 2010 were £273.6 million (2009: £233.9 million), including share-based payments and related payroll taxes of £39.1 million (2009: £23.0 million), amortisation of intangible assets, other acquisition charges, disposal of assets and restructuring charges of £11.0 million (2009: £24.8 million), and Linaro-related charges of £4.5 million (2009: £nil). Excluding these charges, operating expenses for the full year were £219.0 million, compared to £186.2 million in 2009.  

 

Earnings and taxation

Profit before tax was £34.9 million in Q4 2010 compared to £20.1 million in Q4 2009. After adjusting for acquisition-related, share-based payments and restructuring charges, normalised profit before tax was £47.6 million in Q4 2010 compared to £32.3 million in Q4 2009.  As a result of increased research and development tax credits and the ability by the Group to recognise US deferred tax assets from prior years due to increased profits arising in the Group's US subsidiary, the Group's effective normalised tax rate in Q4 2010 was 17.3% (IFRS: 14.9%) giving a full year normalised tax rate of 24.5% (IFRS: 21.9%).  The tax rate under IFRS is lower than the normalised tax rate due primarily to the impact of tax credits arising on share-based payments.  We expect the normalised tax rate for 2011 to be approximately 27%.

 

In Q4 2010, fully diluted earnings per share prepared under IFRS were 2.19 pence (10.28 cents per ADS[3]) compared to earnings per share of 1.32 pence (6.38 cents per ADS) in Q4 2009. Normalised fully diluted earnings per share in Q4 2010 were 2.90 pence per share (13.61 cents per ADS) compared to 1.79 pence (8.66 cents per ADS) in Q4 2009. 

 

Full-year 2010 fully diluted earnings per share prepared under IFRS were 6.36 pence compared to earnings per share of 3.11 pence in 2009.  Normalised fully diluted earnings per share for 2010 were 9.34 pence per share compared to 5.45 pence per share in 2009.

 

Balance sheet

Intangible assets at 31 December 2010 were £544.4 million, comprising goodwill of £532.3 million and other intangible assets of £12.1 million, compared to £516.8 million and £24.7 million respectively at 31 December 2009. The regular review of the carrying value of assets arising on acquisition was performed during Q4 2010 and it was concluded that no impairment was required.

 

Total accounts receivable were £105.7 million at 31 December 2010, comprising £96.8 million of trade receivables and £8.9 million of amounts recoverable on contracts, compared to £70.7 million at 30 September 2010, comprising £56.8 million of trade receivables and £13.9 million of amounts recoverable on contracts.

 

Days sales outstanding (DSOs) were 41 at 31 December 2010 compared to 41 at 30 September 2010 and 46 at 31 December 2009.

 

 

Cash flow and dividend

Total cash (see note 6.6) at 31 December 2010 was £290.1 million compared to £251.9 million at 30 September 2010.  Normalised cash generation in Q4 2010 was £40.7 million.

 

The directors recommend payment of a final dividend in respect of 2010 of 1.74 pence per share, up 20%, which taken together with the interim dividend of 1.16 pence per share paid in October 2010, gives a total dividend in respect of 2010 of 2.90 pence per share, an increase of 20% on the total dividend of 2.42 pence per share in 2009. Subject to shareholder approval, the final dividend will be paid on 18 May 2011 to shareholders on the register on 27 April 2011.

 

Operating review

 

Backlog

During Q4 several partners entered into long-term commitments to use ARM technology across many of their product lines.  This has led to ARM's highest ever group order backlog at the end of Q4 2010, up about 35% sequentially and about 75% higher than a year ago.

 

Processor Licensing

A total of 35 processor licenses were signed in Q4. 

 

ARM processor technology is increasingly being chosen for use across semiconductor companies' product portfolios.  In Q4 several leading semiconductor companies licensed ARM processor technology for multiple end-markets:

·      NVIDIA licensed Cortex-A15 for use in mobile computing applications, and they also signed an ARM architecture license to develop a range of computer chips for PCs, workstations, servers and supercomputers

·      A major semiconductor company signed a subscription license for a broad range of ARM processors for deployment across their semiconductor product portfolio

·      CSR licensed Cortex-A9 and Cortex-A5 for in-vehicle and portable navigation device markets

·      Three major semiconductor companies signed agreements providing access to multiple ARM processors for use in a range of applications.

 

Consumer electronics and embedded devices continue to be a major driver for processor licensing with 19 of the new processor licenses being signed for a range of digital products such as computing, digital TV, microcontrollers, networking, smartcard and solid-state drives.  The remaining 16 licenses are initially intended for mobile computers and smartphones.

 

8 of the licenses were for ARM's advanced Mali graphics processors for use in smartphones, mobile computers and digital TVs.  19 of the licenses were for ARM's Cortex processors, including 8 new licenses where ARM technology is being used by a new customer or in a new product line within an existing customer.

 

Q4 2010 and Cumulative Processor Licensing Analysis

 

Existing

Customers

New
Customers

Quarter
Total

Cumulative Total*

ARM7

 

1

1

174

ARM9

1

1

2

266

ARM11

2

1

3

79

Cortex-A

10

1

11

58

Cortex-R

1

 

1

20

Cortex-M

4

3

7

83

Mali

8

 

8

39

Other

2

 

2

24

Total

28

7

35

743

* Adjusted for licenses that are no longer expected to start generating royalties

 

In addition, Microsoft announced that future versions of the Microsoft Windows operating system and Microsoft Office software will support low power, system-on-chip platforms from ARM's partners.  This announcement builds on the 13 years of technology development by Microsoft together with ARM and the ARM Partnership, and will give computer manufacturers a broader choice of silicon provider, bringing greater differentiation to consumers.

 

 

Processor Royalties

Royalties are recognised one quarter in arrears with royalties in Q4 generated from semiconductor unit shipments in Q3.  PD royalty revenues in Q4 2010 grew 29% year-on-year.  This compares with industry revenues growing by 14% in the shipment period (i.e. Q3 2010 compared to Q3 2009)[4], demonstrating ARM's market share gains over the last 12 months.

 

Q4 revenue came from the sale of 1.8 billion ARM-processor based chips, the highest ever number of ARM-processor based chip shipments reported in a quarter. 

 

The Cortex family now represents 13% of units shipped, up from 2% in the same quarter one year ago. This increase is due primarily to Cortex-M series shipments in microcontrollers and wireless networking chips, and Cortex-A series shipments driven by high-end smartphones and mobile computing.

 

Q4 2010 Processor Royalty Analysis

Processor Family

Unit Shipments

 

Market Segment

Unit Shipments

ARM7

47%

 

Mobile

62%

ARM9

29%

 

Enterprise

14%

ARM11

11%

 

Home

5%

Cortex

13%

 

Embedded

19%

 

ARM gained share in non-mobile end-markets throughout 2010.  Shipments of ARM-processor based microcontrollers grew over 100% year-on-year, compared to about 45% growth for the overall microcontroller market[5].  This growth was driven by an increase in sales of Cortex-M family based chips which now comprise about 10% of total ARM shipments.

 

This strong sequential growth in low-cost microcontrollers has resulted in the average royalty rate decreasing to 4.6 cents in the quarter from 4.7 cents in the prior quarter and 4.9 cents in the same quarter last year.

 

When calculating the number of ARM-processor based chips per mobile handset, ARM has consistently used handset shipment data provided by Gartner Inc.  Recently Gartner have restated their mobile handset estimates to better reflect grey-market shipments into emerging markets.  ARM will continue to use Gartner's estimates, and below is our chips per handset analysis based on both their original and restated numbers to allow a comparison.

 

Full Years

Original

Restated

 

Quarters

Original

Restated

FY2006

1.5

1.5

 

Q4-2009

2.4

2.2

FY2007

1.6

1.6

 

Q1-2010

2.5

2.4

FY2008

1.9

1.9

 

Q2-2010

2.7

2.4

FY2009

2.1

2.0

 

Q3-2010

2.7

2.5

FY2010

2.6

2.5

 

Q4-2010

2.7

2.5

 

Including an additional 200m low-cost phones into 2010, the average number of ARM-processor based chips per handset[6] is lower, however the trend is unchanged; the rapid growth of smartphones and the introduction of mobile computers, such as tablets, continue to benefit ARM.  In Q4 2010 ARM's customers reported about a 30% year-on-year increase in shipments of chips into the mobile segment, driven by a doubling in smartphone shipments. 

 

In addition, ARM's momentum in mobile computing continued with many leading OEMs announcing mobile computers utilizing ARM technology-based chips

 

PIPD licensing

Freescale became ARM's first subscription licensee for physical IP at an advanced technology node.  This agreement will enable Freescale to deploy ARM's advanced physical IP into chips for a broad range of applications and forms a multi-year commitment from Freescale to leverage ARM's investment in advanced technology.  Five other fabless semiconductor companies licensed advanced physical IP technology, at 28nm and 40nm, for use with royalty-bearing foundry platforms.  In addition, ARM signed another new physical IP license in Q4 for a royalty-bearing 130nm foundry platform.  Each platform contains a wide range of physical IP technology components, typically a mix of standard cell libraries and memories.  Cumulatively, 77 physical IP foundry platform licenses have now been signed.  This combination of an expanding base of foundry platform licenses for physical IP and the adoption of that technology by major semiconductor vendors drives ARM's future royalty potential.

 

ARM is seeing increasing demand for physical IP optimised for use with processors, such as the Cortex-A family.  These processor optimisation packages (POPs) enable the licensee to more readily achieve a high-performance, low-power processor implementation through specially optimized physical IP technology.  For every chip implemented using a POP, ARM receives a royalty both for the processor in the chip and for the physical IP.  During the quarter we signed four licenses for POPs for two different advanced ARM Cortex-A cores at 32nm and 40nm nodes, for use in digital TV, gaming, mobile computing and smartphone applications.  This brings the total number of POP licenses to 10.

 

Q4 2010 and Cumulative PIPD Licensing Analysis

 

 

Process Node

Total

 

Platform analysis

Royalty Bearing Foundry

 

 (nm)

 

 

(nm)

Platforms at Each Node

New Royalty Bearing

130

1

 

22/20

1

Foundry Platform Licenses

 

 

 

32/28

7

 

 

 

 

45/40

8

 

Total for

Cumulative

 

65

12

 

Quarter

Total

 

90

11

Processor Optimisation

4

10

 

130

18

Packages

 

 

 

180 to 250

20

 

 

 

 

Total

77

 

Shortly after the end of the quarter, ARM and IBM announced an R&D collaboration that extends the companies' existing technology partnership around advanced processes and physical IP.  This agreement enables ARM to develop physical IP and optimised processor implementations through access to IBM's process technology through the 20nm and 14nm nodes.  These advanced platforms will form the foundation for future generations of low-power high-performance applications such as mobile computing and consumer electronics.

 

PIPD royalties

Physical IP royalties are generated mainly from chip wafers manufactured in foundries such as GLOBALFOUNDRIES, TSMC and UMC.  Royalties are recognised one quarter in arrears with royalties in Q4 generated from wafer unit shipments in Q3. 

 

Underlying PIPD royalties in Q4 2010 were $11.6 million, up 12% year-on-year, to a record high.  ARM's physical IP royalty revenues from advanced nodes, at 65nm and below, have increased three-fold from Q4 2009 and now contribute 30% of total physical IP royalty revenue.

 

People

At 31 December 2010, ARM had 1,889 full-time employees, a net increase of 179 since the start of the year. At the end of 2010, the group had 784 employees based in the UK, 505 in the US, 219 in Continental Europe, 276 in India and 105 in the Asia Pacific region.

 

Principal risks and uncertainties

The principal risks and uncertainties faced by the Group  are noted within the Annual Report on Form 20-F for the year ended 31 December 2009 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 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; ARM may have to protect its intellectual property or defend itself against claims that we have infringed others' proprietary rights; an infringement claim or a significant damages award would adversely impact ARM's operating results; companies within the semiconductor industry may consolidate reducing the number of customers that ARM may sell its technology to; for ARM to enter new markets or develop new technology may require significant investment and may not result in profitable operations; and ARM competes in the intensely competitive semiconductor market.



ARM Holdings plc

Consolidated balance sheet - IFRS

 

 


31 December

31 December

 


2010

2009

 


Unaudited

Audited

 


£'000

£'000

Assets




Current assets:




Financial assets:  Cash and cash equivalents


29,363

34,489

                                Short-term deposits


245,738

105,524

                                Short-term marketable securities


-

1,795

                                Embedded derivatives


2,303

2,480

                                Fair value of currency exchange contracts


-

457

                                Accounts receivable (see note 4)


105,668

65,247

Prepaid expenses and other assets


20,159

23,635

Current tax assets


3,646

350

Inventories: finished goods


1,784

1,680

Total current assets


408,661

235,657





Non-current assets:




Financial assets: Available-for-sale investments


20,329

9,432

                             Long-term deposits


15,000

-

                             Loans and receivables


1,934

-

Prepaid expenses and other assets


1,920

1,611

Property, plant and equipment


13,847

13,565

Goodwill


532,285

516,798

Other intangible assets


12,099

24,696

Deferred tax assets


78,587

42,724

Total non-current assets


676,001

608,826





Total assets


1,084,662

844,483





Liabilities and shareholders' equity




Current liabilities:




Financial liabilities:  Accounts payable


4,305

2,280

                                      Fair value of currency exchange contracts


201

-

                                      Accrued and other liabilities (see note 4)


72,028

46,688

Current tax liabilities


20,216

16,536

Deferred revenue


72,049

39,562

Total current liabilities


168,799

105,066





Non-current liabilities:




Deferred revenue


20,657

-

Deferred tax liabilities


301

720

Total non-current liabilities


20,958

720





Total liabilities


189,757

105,786





Net assets


894,905

738,697





Capital and reserves attributable to equity holders of the Company



Share capital


672

672

Share premium account


351,578

351,578

Share option reserve


61,474

61,474

Retained earnings


381,379

241,950

Revaluation reserve


-

(155)

Cumulative translation adjustment


99,802

83,178

Total equity


894,905

738,697

 



ARM Holdings plc

Consolidated income statement - IFRS

 






 

Quarter ended

Quarter ended

 

Year ended

 

Year ended

 

31 December 2010

31 December 2009

31 December 2010

31 December 2009

 

Unaudited

Unaudited

Unaudited

Audited

 

£'000

£'000

£'000

£'000

 





 

 





Revenues

113,946

85,182

406,595

305,022






Cost of revenues

(6,566)

(5,413)

(26,071)

(25,471)






Gross profit

107,380

79,769

380,524

279,551






                Research and development

(36,635)

(30,382)

(139,750)

(112,215)

                Sales and marketing

(19,707)

(16,257)

(70,108)

(61,723)

                General and administrative

(16,792)

(13,559)

(63,707)

(59,999)

Total operating expenses, net

(73,134)

(60,198)

(273,565)

(233,937)






Profit from operations

34,246

19,571

106,959

45,614






Investment income

1,240

581

3,634

1,788

Interest payable and similar charges

(566)

(30)

(566)

(143)






Profit before tax

34,920

20,122

110,027

47,259

Tax

(5,211)

(2,781)

(24,053)

(6,820)






Profit for the period

29,709

17,341

85,974

40,439






Earnings per share





Basic and diluted earnings

29,709

17,341

85,974

40,439






Number of shares ('000)





Basic weighted average number of shares

1,321,629

1,278,164

1,313,186

1,266,624

Effect of dilutive securities: Share options and awards

36,426

38,275

39,007

34,026

Diluted weighted average number of shares

1,358,055

1,316,439

1,352,193

1,300,650






Basic EPS (pence)

2.2

1.4

6.5

3.2

Diluted EPS (pence)

2.2

1.3

6.4

3.1






Diluted earnings per ADS (cents)

10.3

6.4

29.9

15.1











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 ended

Quarter ended

 

Year ended

 

Year ended

 


31 December 2010

31 December 2009

31 December 2010

31 December 2009

 


Unaudited

Unaudited

Unaudited

Audited

 


£'000

£'000

£'000

£'000

 






Profit for the period


29,709

17,341

85,974

40,439

Other comprehensive income:






   Unrealised holding gain on available-for-sale          

   investments (net of tax of £nil)


 

-

 

4

 

155

 

130

   Currency translation adjustment


3,786

(6,153)

16,624

(61,718)

Other comprehensive income /(loss) for the period


3,786

(6,149)

16,779

(61,588)

Total comprehensive income/(loss) for the period


33,495

11,192

102,753

(21,149)

 



ARM Holdings plc

Consolidated cash flow statement - IFRS

 

 


Year ended

Year ended

 


31 December

31 December

 


2010

2009

 


Unaudited

Audited

 


£'000

£'000

Operating activities




Profit before tax


110,027

47,259

Investment income (net)


(3,068)

(1,645)

Profit from operations


106,959

45,614

Depreciation and amortisation of tangible and intangible assets


19,949

24,953

Loss on disposal of property, plant and equipment


255

79

Compensation charge in respect of share-based payments


27,129

19,001

Impairment of available-for-sale investments


-

412

Profit on disposal of available-for-sale investments


(37)

(224)

Provision for doubtful debts


(904)

1,018

Provision for obsolescence of inventory


(199)

211

Movement in fair value of currency exchange contracts


658

(18,914)

Movement in fair value of embedded derivatives


177

9,818





Changes in working capital:




Accounts receivable


(39,945)

9,531

Inventories


95

81

Prepaid expenses and other assets


4,695

358

Accounts payable


2,025

(4,673)

Deferred revenue


53,594

10,281

Accrued and other liabilities


25,340

14,564

 




Cash generated by operations before tax


199,791

112,110

Income taxes paid


(22,859)

(15,550)





Net cash from operating activities


176,932

96,560





Investing activities




Interest received


2,101

1,277

Interest paid


(566)

-

Purchases of property, plant and equipment


(6,182)

(6,030)

Purchases of other intangible assets


(1,173)

(3,888)

Purchases of available-for-sale investments


(10,997)

(9,116)

Proceeds on disposal of property, plant and equipment


146

49

Proceeds on disposal of available-for-sale investments


142

663

Purchase of short and long-term deposits


(153,264)

(104,902)

Outflow from provision of long-term loan


(1,934)

-

Purchases of subsidiaries, net of cash acquired


-

(563)

 




Net cash used in investing activities


(171,727)

(122,510)





Financing activities




Proceeds received on issuance of shares from treasury


24,015

19,085

Dividends paid to shareholders


(34,323)

(28,961)





Net cash used in financing activities


(10,308)

(9,876)





Net (decrease) in cash and cash equivalents


(5,103)

(35,826)

Cash and cash equivalents at beginning of year


34,489

76,502

Effect of foreign exchange rate changes


(23)

(6,187)

Cash and cash equivalents at end of year


29,363

34,489










ARM Holdings plc

Consolidated statement of changes in shareholders' equity - IFRS

 

 



Share

Share


Reval-

Cumulative



Share

premium

option

Retained

-uation

translation



capital

account

reserve

earnings

reserve

adjustment

Total


£'000

£'000

£'000

£'000

£'000

£'000

£'000









At 1 January 2009 (audited)

672

351,578

61,474

182,008

(285)

144,896

740,343

Profit for the year

40,439

40,439

Other comprehensive income:








   Unrealised holding gain on available-for-sale investment

130

130

   Currency translation adjustment

(61,718)

(61,718)

Total comprehensive income/(expense) for the year

40,439

130

(61,718)

(21,149)

Dividends (see note 3)

(28,961)

(28,961)

Credit in respect of employee share schemes

19,001

19,001

Movement on tax arising on share options and awards

10,378

10,378

Proceeds from sale of own shares

19,085

19,085


19,503

19,503

At 31 December 2009 (audited)

672

351,578

61,474

241,950

(155)

83,178

738,697

 

 








At 1 January 2010 (audited)

672

351,578

61,474

241,950

(155)

83,178

738,697

Profit for the year

85,974

85,974

Other comprehensive income:








   Unrealised holding gain on available-for-sale investments

155

155

   Currency translation adjustment

16,624

16,624

Total comprehensive income for the year

85,974

155

16,624

102,753

Dividends (see note 3)

(34,323)

(34,323)

Credit in respect of employee share schemes

27,129

27,129

Movement on tax arising on share options and awards

36,634

36,634

Proceeds from sale of own shares

24,015

24,015


53,455

53,455

At 31 December 2010 (unaudited)

672

351,578

61,474

381,379

99,802

894,905

 

 

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 December 2010 and 31 December 2009, consolidated income statements and consolidated statements of comprehensive income for the three months and years ended 31 December 2010 and 2009, and consolidated cash flow statements and consolidated statements of changes in shareholders' equity for the years ended 31 December 2010 and 2009, together with related notes.  This condensed set of consolidated financial information for the year ended 31 December 2010 has been prepared in accordance with the Disclosure and Transparency Rules of the Financial Services Authority and with IAS 34, "Interim financial reporting", as adopted by the European Union.  This financial information should be read in conjunction with the annual financial statements for the year ended 31 December 2009, which have been prepared in accordance with IFRSs as adopted by the European Union.

 

The following new standards and amendments to standards are mandatory for the first time in 2010:

 

·     IFRS 3 (revised), "Business combinations".  The revision to this standard continues to apply the acquisition method to business combinations but there are significant changes to the treatment of contingent payments, transaction costs, and the calculation of goodwill.  This could impact the Group's financial statements in the future if it makes any further acquisitions.

 

·     Amendment to IFRS 2, "Share-based payment- group cash-settled share-based payment transactions".  This amendment provides a clear basis to determine the classification of share-based payment awards in both consolidated and separate financial statements.  This has had no material impact on the Group.

 

·     IFRS5 (amendment) "Non-current assets held for sale and discontinued operations".This amendment clarifies that IFRS5 specifies the disclosures required in respect of non-current assets classified as held for sale or discontinued operations.  This could have an impact on the Group if it holds such assets in the future.

 

·      IAS 1 (amendment), "Presentation of financial statements". The amendment clarifies that the potential settlement of a liability by the issue of equity is not relevant to its classification as current or non-current. This has had no impact on the Group as it has not had any transactions of this type.

 

·      IAS 38 (amendment), "Intangible assets".  The amendment clarifies guidance in measuring the fair value of an intangible asset acquired in a business combination and permits the grouping of intangible assets as a single asset if each asset has similar useful economic lives.  This standard could have an impact on the Group in the event that it makes an acquisition and chooses to adopt this policy.

 

·      Amendment to IAS 39, "Financial Instruments: Recognition and measurement on eligible hedged items". This amendment makes two significant changes. It prohibits designating inflation as a hedgeable component of a fixed rate debt. It also prohibits including time value in the one-sided hedged risk when designating options as hedges. This has not impacted the Group since it does not currently designate any financial instruments as hedges.

 

·      IAS 36 (amendment), "Impairment of assets".  This amendment clarifies that the largest cash-generating unit (or group of units) to which goodwill should be allocated for the purposes of impairment testing is an operating segment.  This has no impact on the Group since it does not aggregate segments for this purpose.

 

·     Improvements to International Financial Reporting Standards 2009 were issued in April 2009. These improvements have had no material impact on the results of the Group.

 

 

The following new standards, amendments to standards, or interpretations are effective in 2010 but not relevant to the Group:

 

·      IAS 27 (revised), "Consolidated and separate financial statements".  This amendment revises the accounting for transactions with non-controlling interests.  This is not relevant to the Group as it currently does not have any non-controlling interests.

 

·      IFRIC 15, "Agreements for construction of real estate". This is not relevant to the Group as it does not have any transactions involving real estate.

 

·      IFRIC 16, "Hedges of a net investment in a foreign operation". This clarifies the usage and requirements of IAS 21 with respect to net investment hedging. This is not relevant to the Group as it does not undertake such activities.

 

·     IFRIC 17, "Distributions of non-cash assets to owners". This is not currently relevant to the Group as it does not make non-cash distributions.

 

·     IFRIC 18, "Transfers of assets from customers".  This is not relevant to the Group as it has not received any assets from customers.

 

·     Amendments to IFRIC 9 and IAS 39, "Embedded derivatives".This amendment allows entities to reclassify particular financial instruments out of the fair value through profit or loss or available for sale categories in specific circumstances. This is not relevant to the Group since it currently does not currently have any transactions that meet the criteria of the amendment.

 

 

 

 

(2) Share-based payment costs and acquisition-related expenses

 

Included within the consolidated income statement for the quarter ended 31 December 2010 are total share-based payment costs (including related payroll taxes) of £10.6 million (2009: £8.0 million), allocated £0.7 million (2009: £0.6 million) in cost of revenues, £6.4 million (2009: £4.8 million) in research and development expenses, £2.0 million (2009: £1.5 million) in sales and marketing expenses and £1.5 million (2009: £1.1 million) in general and administrative expenses.

 

Included within the consolidated income statement for the year ended 31 December 2010 are total share-based payment costs (including related payroll taxes) of £41.9 million (2009: £24.7 million), allocated £2.8 million (2009: £1.7 million) in cost of revenues, £25.2 million (2009: £14.8 million) in research and development expenses, £8.0 million (2009: £4.7 million) in sales and marketing expenses and £5.9 million (2009: £3.5 million) in general and administrative expenses.

 

Also included within operating expenses for the quarter ended 31 December 2010 is amortisation of intangibles acquired on business combinations of £2.3 million (2009: £3.6 million), allocated £0.7 million (2009: £1.7 million) in research and development expenses and £1.6 million (2009: £1.9 million) in sales and marketing expenses.

 

Included within operating expenses for the year ended 31 December 2010 is amortisation of intangibles acquired on business combinations of £10.9 million (2009: £15.7 million), allocated £3.5 million (2009: £7.7 million) in research and development expenses and £7.4 million (2009: £8.0 million) in sales and marketing expenses.

 

 

(3) Dividends



Year ended

31 December 2010

Year ended

31 December 2009



£'000

£'000

Final 2008 paid at 1.32 pence per share


-

16,634

Interim 2009 paid at 0.97 pence per share


-

12,327

Final 2009 paid at 1.45 pence per share


19,022

-

Interim 2010 paid at 1.16 pence per share


15,301

-



34,323

28,961





In respect of the year ended 31 December 2010, the directors are proposing a final dividend of 1.74 pence per share (an estimated cost of £23.0m). It will be paid on 18 May 2011 to shareholders who are on the register of members on 27 April 2011.

 

 

(4) Accounts receivable, and accrued and other liabilities

 

Included within accounts receivable at 31 December 2010 are £8.9 million (31 December 2009: £12.4 million) of amounts recoverable on contracts. Included within accrued and other liabilities at 31 December 2010 are £17.7 million (31 December 2009: £6.2 million) relating to the provision for payroll taxes on share awards, and £22.7 million (31 December 2009: £10.7 million) relating to employee bonus and sales commission provisions.

 



 

(5) Segmental reporting

 

At 31 December 2010, the Group is organised on a worldwide basis into three main business segments:

 

Processor Division (PD), encompassing those resources that are centred on microprocessor cores, including specific functions such as graphics IP, fabric IP and embedded software and configurable digital signal processing IP.

 

Physical IP Division (PIPD), concerned with the building blocks necessary for translation of a circuit design into actual silicon.

 

Systems Design Division (SDD), focused on the tools and models used to create and debug software and system-on-chip (SoC) designs.

 

This is based upon the Group's internal organisation and management structure and is the primary way in which the Chief Operating Decision Maker is provided with financial information.  Whilst revenues are also reported into four main revenue streams (namely licensing, royalties, development systems and services), the costs, operating results and balance sheets are only analysed into these three divisions.

 

The following analysis is of revenues (in both GBP and USD), operating costs, investment income, interest payable and similar charges, profit/(loss) before tax, tax, profit/(loss) for the year, amortisation of intangible assets and other acquisition related charges, share-based payment costs including employers taxes, restructuring, investment-related charges, goodwill and total assets for each segment and the Group in total. 

 

Year ended 31 December 2010

Processor

Division

£'000

Physical IP

Division

£'000

Systems

Design

Division

£'000

Unallocated

£'000

Group

£'000

Segmental income statement






Revenues (GBP)

315,747

54,855

35,993

-

406,595

Operating costs

(179,224)

(82,519)

(39,493)

1,600

(299,636)

Investment income

-

-

-

3,634

3,634

Interest payable and similar charges

-

-

-

(566)

(566)

Profit/(loss) before tax

136,523

(27,664)

(3,500)

4,668

110,027

Tax

-

-

-

(24,053)

(24,053)

Profit/(loss) for the year

136,523

(27,664)

(3,500)

(19,385)

85,974

Reconciliation to normalised profit/(loss) before tax

 






Intangible amortisation and other acquisition related charges

 

2,181

8,413

801

-

11,395

Share-based payment costs including employers taxes

24,969

9,949

6,992

-

41,910

Restructuring

(358)

-

(15)

-

(373)

Investment related charges

4,448

-

-

-

4,448

Normalised profit/(loss) before tax

167,763

(9,302)

4,278

4,668

167,407

Goodwill

139,560

377,767

14,958

-

532,285

Total assets

239,918

414,929

29,820

399,995

1,084,662

Revenues (USD)

$ 490,747

$ 85,143

$ 55,417

-

$ 631,307

 



 

(5) Segmental reporting (continued)

 

 

Processor

Division

£'000

Physical IP

Division

£'000

Systems

Design

Division

£'000

Unallocated

£'000

Group

£'000






227,191

44,890

32,941

305,022

(148,820)

(81,070)

(37,019)

7,501

(259,408)

1,788

1,788

(143)

(143)

Profit/(loss) before tax

78,371

(36,180)

(4,078)

9,146

47,259

Tax

(6,820)

(6,820)

Profit/(loss) for the year

78,371

(36,180)

(4,078)

2,326

40,439

Reconciliation to normalised profit/(loss) before tax






2,598

12,056

1,500

16,154

13,906

6,489

4,304

24,699

7,292

348

831

8,471

Investment related charges

188

188

Normalised profit/(loss) before tax

102,355

(17,287)

2,557

9,146

96,771

Goodwill

135,723

366,258

14,817

516,798

215,271

402,223

28,089

198,900

844,483

Revenues (USD)

$ 365,730

$ 72,148

$51,575

$ 489,453

 

 

There are no inter-segment revenues.  The results of each segment have been prepared using accounting policies consistent with those of the Group as a whole.  Unallocated assets include cash and cash equivalents, short and long-term deposits, available-for-sale investments, loans and receivables, embedded derivatives, current and deferred tax, and VAT.  Unallocated operating costs consist of foreign exchange transactions.

 



 (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 acquisition-related charges, share-based payment costs, restructuring charges, profit on disposal and impairment of available-for-sale investments, and Linaro-related charges.  Full reconciliations of Q4 2010, Q4 2009, FY 2010 and FY 2009, are shown in notes 6.13 to 6.16.  All figures in £'000 unless otherwise stated.

 

Summary normalised figures

Q4 2010

Q4 2009

Q3 2010

FY 2010

FY 2009







Revenues (£'000)

113,946

85,182

100,353

406,595

305,022

Revenues ($'000)

179,562

140,017

158,120

631,307

489,453







Gross margin

94.9%

94.3%

94.2%

94.3%

92.2%

Operating expenses

61,242

48,563

56,642

219,001

186,152

Profit from operations

46,883

31,757

37,872

164,339

95,126

Operating margin

41.1%

37.3%

37.7%

40.4%

31.2%







Profit before tax

47,557

32,308

38,782

167,407

96,771

Earnings per share (diluted)

2.90p

1.79p

2.08p

9.34p

5.45p







Cash

290,101

141,808

251,856

290,101

141,808

Cash generation

40,665

30,683

64,988

179,910

86,103

 

 

 

 


(6.1)

(6.2)

(6.3)

(6.4)

(6.5)


Q4 2010

Q4 2009

Q3 2010

FY 2010

FY 2009







Revenues (£'000)

113,946

85,182

100,353

406,595

305,022

ARM's effective exchange rate ($/£)

1.58

1.64

1.58

1.55

1.60

Revenues ($'000)

179,562

140,017

158,120

631,307

489,453

 

 

 





(6.6)

(6.7)





31 December

2010

31 December

2009







Cash and cash equivalents




29,363

34,489

Short-term deposits




245,738

105,524

Short-term marketable securities




-

1,795

Long-term deposits




15,000

-

Normalised cash




290,101

141,808

 

 

 

 


(6.8)

(6.9)

(6.10)

(6.11)

(6.12)


Q4 2010

Q4 2009

Q3 2010

FY 2010

FY 2009







Normalised cash at end of period (as above)

290,101

141,808

251,856

290,101

141,808

Less: Normalised cash at beginning of period

(251,856)

(121,689)

(202,257)

(141,808)

(78,789)

Add back: Cash outflow from investments and acquisitions (net of cash acquired)

 

2,274

 

4,616

 

3,746

 

10,997

 

9,679

Add back: Cash outflow from payment of dividends

-

12,327

15,301

34,323

28,961

Add back: Cash outflow from restructuring payments

51

2,016

370

4,561

3,450

Add back: Cash outflow from share-based payroll taxes

193

84

91

3,215

742

Add back: Cash outflow from payments related to Linaro

819

-

621

2,678

-

Less: Cash inflow from exercise of share options

(880)

(8,479)

(4,740)

(24,015)

(19,085)

Less: Cash inflow from sale of available-for-sale investments

(37)

-

-

(142)

(663)

Normalised cash generation

40,665

30,683

64,988

179,910

86,103

 

 



(6.13) Normalised income statement for Q4 2010

 


 

 

 

 

Normalised

 

 

Share-based payments

 

Normalised incl share-based payments


 

 

Intangible amortisa-tion

 

Other acquisition -related charges

 

Profit on disposal of invest-ments

 

 

Restruct -

-uring
charges


 

 

 

 

IFRS

 

£'000

£'000

£'000


£'000

£'000

£'000

£'000


£'000

 











Revenues

113,946

113,946



113,946












Cost of revenues

(5,821)

(745)

(6,566)



(6,566)












Gross profit

108,125

(745)

107,380



107,380












   Research and development

(29,609)

(6,355)

(35,964)


(671)


(36,635)

   Sales and marketing

(15,913)

(2,014)

(17,927)


(1,666)

(114)


(19,707)

   General and administrative

(15,720)

(1,482)

(17,202)


37

373


(16,792)

Total operating expenses

(61,242)

(9,851)

(71,093)


(2,337)

(114)

37

373


(73,134)












Profit from operations

46,883

(10,596)

36,287


(2,337)

(114)

37

373


34,246












Investment income

1,240

1,240



1,240

Interest payable and similar charges

 

(566)

 

 

(566)


 

 

 

 


 

(566)












Profit before tax

47,557

(10,596)

36,961


(2,337)

(114)

37

373


34,920

Tax

(8,215)

2,228

(5,987)


858

32

(10)

(104)


(5,211)












Profit for the period

39,342

(8,368)

30,974


(1,479)

(82)

27

269


29,709












Earnings per share (assuming dilution)











Shares outstanding ('000)

1,358,055


1,358,055







1,358,055

Earnings per share - pence

2.90


2.28







2.19












ADSs outstanding ('000)

452,685


452,685







452,685

Earnings per ADS - cents

13.61


10.71







10.28

 



(6.14) Normalised income statement for Q4 2009

 


 

 

 

 

Normalised


 

Share-based compen-sation


Normalised incl share-based compen-sation


 

 

Intangible amortisa-tion

 

Other acquisition -related charges

 

 

Restruct -

-uring charges


 

 

 

 

IFRS

 

£'000


£'000


£'000


£'000

£'000

£'000


£'000

 
























Revenues

85,182



85,182



85,182













Cost of revenues

(4,862)


(551)


(5,413)



(5,413)













Gross profit

80,320


(551)


79,769



79,769













   Research and development

(23,867)


(4,781)


(28,648)


(1,734)


(30,382)

   Sales and marketing

(12,733)


(1,514)


(14,247)


(1,896)

(114)


(16,257)

   General and administrative

(11,963)


(1,116)


(13,079)


(480)


(13,559)

Total operating expenses

(48,563)


(7,411)


(55,974)


(3,630)

(114)

(480)


(60,198)













Profit from operations

31,757


(7,962)


23,795


(3,630)

(114)

(480)


19,571

Investment income

581



581



581

Interest payable and similar charges

 

(30)


 


 

(30)


 

 

 


 

(30)













Profit before tax

32,308


(7,962)


24,346


(3,630)

(114)

(480)


20,122

Tax

(8,773)


4,437


(4,336)


1,348

32

175


(2,781)













Profit for the period

23,535


(3,525)


20,010


(2,282)

(82)

(305)


17,341













Earnings per share (assuming dilution)












Shares outstanding ('000)

1,316,439




1,316,439






1,316,439

Earnings per share - pence

1.79




1.52






1.32













ADSs outstanding ('000)

438,813




438,813






438,813

Earnings per ADS - cents

8.66




7.36






6.38

 



(6.15) Normalised income statement for FY 2010

 


 

 

 

 

Normalised

 

 

Share-

based payments

 

Normalised incl share-based payments


 

 

Intangible amortisa-tion

Other acquisi-tion -related charges

 

Profit on disposal of invest-ments

 

 

Restruc-turing charges

 

 

Linaro-related charges


 

 

 

 

IFRS

 

£'000

£'000

£'000


£'000

£'000

£'000

£'000

£'000


£'000

 












Revenues

406,595

406,595



406,595













Cost of revenues

(23,255)

(2,816)

(26,071)



(26,071)













Gross profit

383,340

(2,816)

380,524



380,524













Research and development

(107,559)

(25,206)

(132,765)


(3,544)

(3,441)


(139,750)

Sales and marketing

(54,101)

(8,005)

(62,106)


(7,395)

(456)

(151)


(70,108)

General and administrative

(57,341)

(5,883)

(63,224)


37

373

(893)


(63,707)

Total operating expenses

(219,001)

(39,094)

(258,095)


(10,939)

(456)

37

373

(4,485)


(273,565)













Profit from operations

164,339

(41,910)

122,429


(10,939)

(456)

37

373

(4,485)


106,959













Investment income

3,634

3,634



3,634

Interest payable and similar charges

 

(566)

 

 

(566)


 

 

 

 

 


 

(566)













Profit before tax

167,407

(41,910)

125,497


(10,939)

(456)

37

373

(4,485)


110,027

Tax

(41,085)

11,729

(29,356)


4,033

128

(10)

(104)

1,256


(24,053)













Profit for the period

126,322

(30,181)

96,141


(6,906)

(328)

27

269

(3,229)


85,974













Earnings per share (assuming dilution)












Shares outstanding ('000)

1,352,193


1,352,193








1,352,193

Earnings per share - pence

9.34


7.11








6.36













ADSs outstanding ('000)

450,731


450,731








450,731

Earnings per ADS - cents

43.88


33.40








29.86

 

 



 

(6.16) Normalised income statement for FY 2009

 


 

 

 

 

Normalised

 

Share-based compen-sation

Normalised incl share-based compen-sation


 

 

Intangible amortisa-tion

 

Other acquisition -related charges

 

Disposal / impairment of investments

 

 

Restruct -

-uring charges


 

 

 

 

IFRS

 

£'000

£'000

£'000


£'000

£'000

£'000

£'000


£'000

 






















Revenues

305,022

305,022



305,022












Cost of revenues

(23,744)

(1,727)

(25,471)



(25,471)












Gross profit

281,278

(1,727)

279,551



279,551












Research and development

(89,742)

(14,817)

(104,559)


(7,656)


(112,215)

Sales and marketing

(48,543)

(4,697)

(53,240)


(8,027)

(456)


(61,723)

General and administrative

(47,867)

(3,458)

(51,325)


(15)

(188)

(8,471)


(59,999)

Total operating expenses

(186,152)

(22,972)

(209,124)


(15,698)

(456)

(188)

(8,471)


(233,937)












Profit from operations

95,126

(24,699)

70,427


(15,698)

(456)

(188)

(8,471)


45,614

Investment income

1,788

1,788



1,788

Interest payable and similar charges

 

(143)

 

 

(143)


 

 

 

 


 

(143)












Profit before tax

96,771

(24,699)

72,072


(15,698)

(456)

(188)

(8,471)


47,259

Tax

(25,929)

10,642

(15,287)


5,869

128

53

2,417


(6,820)












Profit for the period

70,842

(14,057)

56,785


(9,829)

(328)

(135)

(6,054)


40,439












Earnings per share (assuming dilution)











Shares outstanding ('000)

1,300,650


1,300,650







1,300,650

Earnings per share - pence

5.45


4.37







3.11












ADSs outstanding ('000)

433,550


433,550







433,550

Earnings per ADS - cents

26.39


21.15







15.06

 



 

Notes

 

The results shown for Q4 2010, Q3 2010, Q4 2009, and FY 2010 are unaudited. The results shown for FY 2009 are audited. The 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 2009 were approved by the Board of directors on 31 March 2010 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 Q4 2010 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 2009 and in the Annual Report on Form 20-F for the fiscal year ended 31 December 2009.

 

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 acquisitions, unforeseen liabilities arising from these 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 2009 including (without limitation) under the captions, "Risk Factors"(on pages 4 to 11) 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 athttp://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; and ARM Sweden AB.

 

 

 



[1] Source: Semiconductor Industry Association, November 2010.  As royalty revenues are recognised one quarter in arrears the "equivalent period" for Q4 2010 is considered to be Q3 2010.

[2] Source: Semiconductor Industry Association, November 2010

[3] Each American Depositary Share (ADS) represents three shares.

[4]Source: Semiconductor Industry Association, November 2010

[5]Source: Semiconductor Industry Association, November 2010

[6] Excluding shipments of ARM-based chips into mobile computers such as tablets and netbooks


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