Press Release Source: ARM Holdings plc
ARM Holdings plc - Results for the Second Quarter and Six Months Ended 30 June 2003
Tuesday July 22, 2:13 am ET
Sequential Increases in Revenue and Profit Before Tax in the Second Quarter
CAMBRIDGE, England, July 22 /PRNewswire-FirstCall/ -- ARM Holdings plc (Nasdaq: ARMHY - News; LSE: ARM - News) announces its unaudited financial results for the second quarter and the six months ended 30 June 2003
HIGHLIGHTS
(Figures in US GAAP)
Second quarter ended 30 June 2003
-- Revenues at 31.4 million pounds sterling, up from 31.0 million
pounds in Q1 2003
-- License revenues amounted to 12.7 million pounds, up from
12.1 million pounds in Q1 2003. 11 licenses for microprocessor cores
signed in the quarter, compared to eight in the first quarter. Six
new partners signed bringing the total number of semiconductor
partners to 118
-- Sustained spending on product development resulting in new features
and functionality to be introduced over coming quarters which will
underpin long-term licensing activity. Recent announcements include
TrustZone(TM) security extension, Thumb(R)-2 core technology for
feature-rich applications and the AMBA(TM) AXI protocol
(interconnect technology extension for ultra high performance and
complex system-on-chip designs)
-- Royalty revenues match seasonally high first quarter levels with
record unit shipments of 180 million units (89% up on Q2 2002).
-- Profit before taxation at 6.6 million pounds, 8% higher than Q1 2003
-- Strong net cash generation in the quarter of 5.7 million pounds.
Cash balance of 141.0 million pounds at end Q2 2003, up from
135.3 million pounds at end Q1 2003
-- Earnings per fully diluted share at 0.4 pence (2.1 cents per ADS*)
(Q1 2003: 0.4 pence and 2.0 cents respectively)
Six months ended 30 June 2003
-- Revenues at 62.4 million pounds (H1 2002: 85.3 million pounds;
H2 2002: 65.6 million pounds)
-- Royalty revenues at 20.5 million pounds (H1 2002: 12.9 million
pounds) on unit shipments of 358 million (H1 2002: 205 million)
-- Profit before taxation at 12.6 million pounds (H1 2002: 31.9 million
pounds; H2 2002: 13.5 million pounds)
-- Net cash generated in H1 2003 of 10.7 million pounds at similar
level to H1 2002 (10.9 million pounds) after buying out the minority
interest in ARM Korea for $4.8 million in the second quarter of 2003
-- Earnings per fully diluted share at 0.8 pence (4.2 cents per ADS*)
(H1 2002: 2.2 pence and 9.9 cents respectively)
* Each American Depositary Share (ADS) represents three shares
Commenting on the second quarter and half year results, Warren East, Chief Executive Officer, said:
"We are pleased to see that the stability in our business has been further evidenced by a small sequential increase in revenues in the second quarter. Licensing to both new and existing partners has increased from the first quarter and royalty revenues matched the seasonally high level seen in Q1. With mixed news emerging from across the semiconductor industry, we expect subdued activity levels to continue among our partners for the remainder of the year with ARM's performance being driven by recent technology developments, including the ARM11(TM) family, sales of new RealView® development systems products, and continued strength in royalty revenues. Our long-term position continues to improve, underpinned by discussions of broader, strategic collaboration with a number of large semiconductor companies and continued penetration of small and medium-sized companies."
Tim Score, Chief Financial Officer, added:
"Stable revenues and tight cost control have yielded improved profitability and strong free cash flow, which enables us to maintain R&D expenditure at 39% of sales. This sustained investment in product development and innovation will result in new features and functionality in our product portfolio which underpin future licensing activity."
Operating review
Market conditions, current trading and prospects
The first half of 2003 has continued to witness challenging trading conditions in the semiconductor industry, set against uncertain global economic conditions exacerbated by war and the SARS epidemic. News flow from the semiconductor industry continues to illustrate mixed fortunes amongst the ARM partnership and we continue to manage the company in anticipation of the lower activity levels seen in recent quarters persisting in the second half.
Underlying momentum in the business is supported by the level of licensing negotiations in progress, the recent introduction of new development systems products and the positive trend in royalty revenues. With inventory issues in Asia likely to impact our royalty revenues in the second half and given the company's exposure to weakness in the US dollar, with 90 to 95% of ARM's revenues being in US dollars, we anticipate that despite the underlying momentum, revenues in the second half of 2003 will remain at similar levels to the first half with Q3 possibly being weaker than Q4 due to seasonality.
As anticipated, given that the licenses signed in the first half were for more mature ARM products, the backlog (defined as the aggregate value of contracted business not yet recognised in the profit and loss account) was lower at the end of June 2003 compared to the end of March 2003, although today it is close to end-March levels again. The prospect of further ARM11 family licensing in the second half, combined with other strategic sales opportunities in the pipeline, gives us confidence that the backlog will be higher at the end of the year than it was at the start.
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