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1
ARM Holdings plcQ1 2011 Results
ROADSHOW SLIDES
v1
2
ARM OverviewARM is the world’s leading semiconductor IP company
Licensing and royalty business model delivers operational leverage and robust cash generation
Gaining share in long-term secular growth markets
Strong competitive position for long-term sustainable growth
3
ARM Introduction Global leader in the development of semiconductor IP R&D outsourcing for semiconductor companies
Innovative business model yields high margins Upfront license fee – flexible licensing models Ongoing royalties – typically based on a percentage of chip price Technology reused across multiple applications
Long-term, secular growth markets
Approximately 770 licensesGrows by 60-90 every year
More than 250 potential royalty payers
>6bn ARM-based chips in ’10>25% CAGR over last 5 years
4
$0m
$50m
$100m
$150m
$200m
$250m
$300m
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
2006-10
2001-05
Pre-2001
Cumulative Licensing Drives Royalties Licensing base typically grows by 60-90 licenses every year Internet-connected consumer electronics from smartphones to DTV Embedded applications such as microcontrollers and hard disk drives
Growing base yields royalty revenues over long period Leading semiconductor companies have made long-term, strategic
commitments to ARM technology Applicability of ARM technology broadens over time
Significant Royalty Potential from Recent Licenses
~300 Licenses
~350 Licenses
~100 Licenses
+62
+61
+87
+91
+39
2006 2007 2008 2009 2010 Q1-2011
~770
Processor Licenses
5
Growth Opportunities
Key Growth Drivers
Increasing the ARM valueper device
Growth in non-mobile applications
Extending IP Outsourcing
Growth in mobile applications Increasing value of ARM technology per device More chips and higher priced chips
Growth beyond mobile Increasing ARM penetration into broader
range of digital products
Growth into new technology outsourcing Physical IP, graphics IP and video IP increase
ARM’s value per device and penetration
6
1.6 1.9 2.0
2.5 2.5
-
0.5
1.0
1.5
2.0
2.5
3.0
2007 2008 2009 2010 Q1 2011 -
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2006 2007 2008 2009 2010
Mobile Embedded
Enterprise Home
Increasing Value and PenetrationPC & Peripherals MicrocontrollersARM technology can be found in many products in the home office Disk drives (85% share) Printers (65%) Networking (25%) such as
broadband router, WiFi, BT and femto cell
As these products become more capable and more efficient, they create more opportunity for ARM
Microcontroller market is very large with mainly low-cost chips
ARM’s market share ~10% but growing rapidly
ARM processors used in: Electric motor controllers Monitors and sensors Medical applications Industrial robotics Toys
Digital TV & STBARM market share ~35% in brands such as Samsung, Sony Bravia and Vizio
Digital TV becoming more internet connected, requiring web-browsers, plug-ins and PC-class OS. Driving need for smarter processor such as ARM
ST is market leader and recently announced they are moving to ARM
Mobile ComputersSmartphones are evolving into mobile computers 230m unit market in 2010 Forecast 750m units in 2015
ARM in applications processor used to run: User interface, operating
system, browser and plug-ins, email, gaming
ARM processors also used in: Hard disk drive controller WiFi, Bluetooth, WiMAX 2G/3G baseband connection
Mobile PhonesARM processors can be found in more than 95% of mobile phones
Average of 2.5 ARM-based chips per mobile phone, with smart-phones containing between 2 and 5 ARM-based chips
Typical smartphone drives six times more royalty than typical “dumb-phone”
ARM processors used in: 2G/3G baseband connection Applications processor GPS, WiFi, Bluetooth Touchscreen, camera
Royalty Unit Split
15%
62%Mobile
38%Non-Mobile
5%
16%
Average number of ARM-based chipsper phone
9%17%
8%66%
7
Extending the Model Physical IP and multimedia IP markets represent further
outsourcing opportunity Technology complexity increasing, drives cost and risk ARM develops technology and amortises costs over many licenses Additional royalty streams per chip
Physical IP Leading-edge physical IP available
from 250nm to 20nm Foundries licensing ARM technology
for next generation processes >30% of PIPD royalties generated from
technology at 65nm or below 12 of top 20 semis are
driving ARM royalties from foundries
13 POP licenses signed
Multimedia IP 46 licenses for graphics and video Samsung, ST and Mediatek licensees First licenses now delivering royalties Volume expected to grow 2H 2011
8
£0m
£20m
£40m
£60m
£80m
£100m
£120m
£140m
£160m
£180m
£200m
2007 2008 2009 2010 2011
Cash Generated in First 3 Months of the Year
Cash Generated in Last 9 Months of the Year
Strong Balance Sheet and Cash Generation Healthy margins drive strong
cash generation in Q1 Generated £63m of cash in Q1 Net cash of £344.3m at end Q1
Total cash returned of £402m over 5 years £140m via dividend £262m via share buybacks
Progressive dividend policy 2010 dividend increased by 20%
Strong Cash Generation
Q1
Dividend Growth
Inte
rim
0.0p
0.5p
1.0p
1.5p
2.0p
2.5p
3.0p
2006 2007 2008 2009 2010
9
Summary ARM business model reduces chip development cost Turns large fixed cost into smaller variable cost Yields high margins for ARM
ARM’s technology is needed as growing complexity is increasing cost and risk for chip designers
ARM is gaining share in structural growth markets Global proliferation of the internet Low power in battery-powered products and in consumer electronics Smart, low-cost devices in everything we use during the day
10
Mob
ileSegments for ARM in 2010
* Including tablets, netbooks and laptops * * Includes other applications not listed such as headsets, DVD, game consoles, etc
Non
-Mob
ile
Devices Shipped(Million of Units)
2010Devices
Chips/Device
TAM 2010Chips
2010 ARM
2010 Share
Smart Phone 280 2-5 1,200 1,100 90%
Feature Phone 760 1-3 1,900 1,700 90%
Low End Voice 570 1 570 540 95%
Portable Media Players 150 1-3 300 220 70%
Mobile Computing* (apps only) 230 1 230 25 10%
Desktop PCs & Servers (apps) 220 1 220 0 0%
Digital Camera 130 1-2 200 160 80%
Digital TV & Set-top-box 350 1-2 450 160 35%
Networking 670 1-2 750 185 25%
Printers 120 1 120 75 65%
Hard Disk & Solid State Drives 670 1 670 560 85%
Automotive 1,800 1 1,800 180 10%
Smart Card 5,400 1 5,400 330 6%
Microcontrollers 5,800 1 5,800 560 10%
Others ** 1,700 1 1,800 270 15%
Total 19,000 22,000 6,100 28%
Source: ABI, Gartner, Semico, Instat, IDC, and ARM estimates
11
Mob
ileSegments for ARM in 2015
* Including tablets, netbooks and laptops * * Includes other applications not listed such as headsets, DVD, game consoles, etc
Non
-Mob
ile
Devices Shipped(Million of Units)
TAM 2010Chips
10 ARMShare
TAM 2015Devices
Chips/Unit
TAM 2015Chips
Smart Phone 1,200 90% 1,100 3-5 4,000
Feature Phone 1,900 90% 650 2-3 2,000
Low End Voice 570 95% 700 1-2 1,300
Portable Media Players 300 70% 120 1-3 250
Mobile Computing* (apps only) 230 10% 750 1 750
Desktop PCs & Servers (apps) 220 0% 250 1 250
Digital Camera 200 80% 150 1-2 250
Digital TV & Set-top-box 450 35% 500 1-4 1,200
Networking 750 25% 800 1-2 1,400
Printers 120 65% 200 1 200
Hard Disk & Solid State Drives 670 85% 1,100 1 1,100
Automotive 1,800 10% 2,200 1 2,200
Smart Card 5,400 6% 7,700 1 7,700
Microcontrollers 5,800 10% 9,000 1 9,000
Others ** 1,800 15% 2,000 1 2,000
Total 22,000 28% 27,000 34,000
Source: ABI, Gartner, Semico, Instat, IDC, and ARM estimates
Key Growth Areas for ARM
12
Average Selling Price of a Semiconductor Chip
ARM’s Opportunity at all Price Points
Opportunity
ARM Usage Today
>$25$10-15$3-6$1-2
Volu
me
13
-30%
-20%
-10%
0%
10%
20%
30%
40%
0
50
100
150
200
250
300
350
2006 2007 2008 2009 2010 Q1 2011
Q1 ARM Royalty RevenueARM Royalty RevenueIndustry Growth Rate**ARM Growth Rate
Mobile61%
Embedded18%
Enterprise16%
Home5%
Processor Royalties
*2010 excludes $9m of royalty catch-up* *Source: SIA February 2011Offset 1 quarter to align with ARM’s royalty revenue
Q1 2011: ARM Outperforms Industry
Grow
th Rate (%
)
ARM
Roy
alty
Rev
enue
($M
)
Industry units (ex-memory) up ~10%
ARM mobile shipments up ~30%End market shipments up ~30%
ARM STB/DTV shipments up ~15%End market shipments broadly flat
ARM hard disk shipments ~flatHDD shipments impacted as PC market slowed
ARM MCU shipments up ~60%Overall MCU market up ~20%
Q1 2011: 1.85bn units (up ~30%)
ARM $ Royalty CAGR (06-10) = 12%Industry $ Revenue CAGR (06-10) = 3%
Sources: SIA, February 2011Gartner, January 2011
Non-mobile 39%
Q1 2011 royalty revenue up 32%* Industry up 13% over the relevant period
14
Growing the Licensing Base
97 (+15)
68 (+8)
21(+1)
Cumulative licenses(Q1 2011 licensing shown in parenthesis*)
Cortex-AFamily
Cortex-RFamily
Cortex-MFamily
Others = 20 (+2) *Note: Licensing numbers adjusted for licenses that are no longer expected to start generating royalties.
Smartphone, feature phone, and digital TV Initial lead licensee signed up
Kingfisher
Dual-core embedded processors for storage, baseband & engine management Initial lead licensees signed up
Cortex-R5 & R7
Accelerating system designfor Cortex-M processors
Cygnet
Processor Roadmap in 2011 Estimated Royalty Opportunity
for 2015
Real-timeEmbedded12bn unitsper year
Micro-controllers18bn unitsper year
ApplicationProcessors4bn unitsper year
ARM7TM
Family
ARM11TM
Family 81
172 (+1)
268 (+5)ARM9TM
Family
46 (+7) MaliGraphics
Mobile computing, phones and consumer electronics
Mali T604 & “NG”
15
Q4 2010
Q1 2011
Licensing Increases Market Opportunity
Application Penetration of Key Companies’ Products
2010 ShareShipments
Smartphone – Apps >95%
Mobile Computer – Apps* 10%
Mobile – Modems 100%
Mobile – BT 70%
Mobile – WiFi 65%
Digital Camera** 80%
Digital TV / Set-Top-Box 35%
Networking 25%
Printers** 65%
Disk Drives (HDD & SSD) 85%
Automotive 10%
Smart Card 6%
Microcontrollers 10%
3D Graphics <1%
Public ARM design wins, but not yet shipping
Shipping mainly ARM-based chips
Shipping some ARM-based chips
No ARM design win or not yet public
* Includes handheld computers, tablets, and laptops**Based on OEM market share rather than semiconductor vendor
To gain share ARM works to win designs at market leading semiconductor companies
Based on current market sharesand ARM’s view of how these markets may develop.ARM will update the chart on the left only as design wins become public
3 company re-equipped
2 companies re-equipped
3 companies re-equipped
1 company re-equipped
2 new design wins
16
Latest Technology Drives Royalty Growth
17
ARM’s 2020 Vision ARM is growing into new markets and product categories From sensors to servers, from 50c to $200, from <50MHz to >2GHz
Today’s processor licenses drive shipments beyond 2015 Expect over 100 billion cumulative ARM based chips by 2020
The Architecture for the Digital World
BasebandMicrocontrollers SSD Mobile Computing Server
BT WiFi PCHDD
HPCSmartcardsSensors
Royalty opportunitygrows with volume and scope
>$200>2GHz
<50c<50MHz
18
Mobile: Growing Royalties Per Device ARM chips per phone 2.5 in Q1-11 Smartphones have increasing
number of ARM based chips Basic phones often have
baseband, camera & Bluetooth
More ARM-based mobile computing devices announced by leading OEMs in a wide range of form factors Semiconductor partners have
announced over 100 design wins Dual and quad core Cortex-A9 and
Mali 400 in next generation processors for 2011
Mobile computing market expected to grow to 750m units by 2015*
Some of the ARM-based Products Recently Announced
More AnnouncementsExpected Through 2011
SamsungGalaxy Tab
* Apps processors only. Gartner and ARM forecasts
Acer Iconia Tab A500
Lenovo LePad Hand-cranked OLPC
LG Optimus
SharpGalapalos
19
Opportunity for ARM
$ = Unit of Royalty
Ultra Low Cost
Baseband Modem - $
1 x $
Low Cost PhonesUltra Low Cost
Apps Processorand baseband - $$$WiFi / BT /GPS - $
Touchscreen/Camera - $5 x $
Feature PhonesUltra Low Cost
Apps Processor - $$$3G/LTE BB - $$$
WiFi / BT /GPS - $Touchscreen/Camera - $
8 x $
SmartphoneUltra Low Cost
Apps Processor - $$$$3G/LTE BB - $$$
WiFi / BT / GPS - $Touchscreen - $
Camera - $Storage - $
11 x $
Mobile Computer
650mdevices in 2015
700mdevices in 2015
1.1bndevices in 2015
750mdevices in 2015
20
$0m$100m$200m$300m$400m$500m$600m$700m$800m
2010 2011 2012 2013 2014 2015
ARM Opportunity in Mobile ComputingARM Opportunity per
Mobile Computer
Touch screen
3G Baseband
BT/Wi-Fi/GPS
Storage
Camera
Applications Processor
Opportunity Relative Royalty ARM Market Share
Apps Processor $$$$ TBD
3G/LTE BB $$$ 100%
Storage $ 50%
BT/Wi-Fi/GPS $ 50%
Touch screen $ <10%
Camera $ <5%
Mobile ComputerMarket Growth Forecast
Source: Gartner, ARM estimates
ARM Royalty Opportunity in 2015
$ = Relative unit of royalty
Assumption: ARM receives a 20c royalty for each ARM-based applications processor and another 20c for the other chips in device
ARM share of applicationsprocessor shipments
1% 33% 66% 100%
ARM based apps processors 5m 250m 500m 750m
Royalty from apps processor $1m $50m $100m $150m
Royalty from other chips $150m $150m $150m $150m
Total royalty contribution $151m $200m $250m $300m
~750M
21
Technology: Multi-GHz, multi-core processors and graphics processors delivering unmatched low-power for multi-day battery life
Business model: Multi-sourcing enables a collaborative industry of many players enabling differentiation for OEMs
Ecosystem: Multiple providers supply complete internet software and broadest range of OSes
ARM’s High Performance Computing
Marketsize*
ARM’s 2010Market share
ARM Cortex-A family are used as applications processors in a wide range of computing products
20102015
Mobile**Computers
10%
230m750m
Servers***
0%
70m110m
DTVs/STBs
35%
350m500m
Desktops
0%
150m140m
* Estimates based on forecastsfrom Gartner, SIA and ARM
** Includes tablet, netbooks and laptops
*** Opportunity for ARM-basedapplication processors in server market
Smartphones
280m1100m
>95%
22
ARM’s Opportunity in MicrocontrollersAnalyst Day 2007
End-MarketTAM(m)
2015Automotive 2,200Smartcards 7,700Microcontrollers 9,000
Total 19 billionABI Research, IDC, Gartner and ARM forecasts
Energy Efficient
Appliances
Intelligent Vending
IR Fire Detector
Tele-parking
Utility Meters
Exercise Machines
Intelligent toys
Plus lots of other companies developing MCUs & sensors
23
Gathering MomentumAnalyst Day 2006Full Year 2010 Cortex-M is ARM’s fastest ever licensing
family of processors 97 licensees as of Q1 2011 30% sequential increase in Cortex-M
shipments in Q1 2011 Cortex-M now 13% of all units shipped
Many companies selling devices ≤ $1 Broad set of devices on market Freescale: Over 200 devices, Atmel (60),
NXP (120), ST (135), TI (170), Toshiba (25)
ARM technology being broadly designed into smart-grid and smart-meters
Companies with announced ARM MCU product lines
24
0
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2006 2010
EmbeddedHomeEnterpriseMobile
200m220m430m
Impact of Microcontroller Growth Embedded products such as
microcontrollers have been ARM’s fastest growing market Low-cost MCUs typically in $1-2 range
As ARM gains share in the lower cost microcontroller market, so ARM’s average royalty per chip declines
Royalty Unit Split(million units)
1600m
Royalty per ARM-based microcontroller
-30% value CAGR
60% volume CAGR
Royalty per ARM-based chip ex-MCUs
-5% value CAGR
20% volume CAGR
Royalty per ARM-based chip6.7c 4.7c
-9% value CAGR
25% volume CAGR
Total ARM Royalties
$164.1m $282.5m15% value CAGR
1050m300m970m
3800m
Excluding catch-up
25
Impact of Functional Integration Integration of multiple functions into a single chip has limited overall
impact on ARM total royalty revenue Chips containing multiple ARM processors yield higher royalties
Function X
$5$2.50
Function Y
$6
CombinationFunction X & Y
Integrated chip reduces cost for OEM and increases profitability for the semiconductor manufacturer
ARM royalty rate at2% per chip
ARM royalty rate at 2% for 1st processor1% for 2nd processor
For this high volume application example:ARM gets full royalty for first processor per chip;
discounted royalty for subsequent processors
15croyalty
18c royalty
($5@2%)+ ($2.50@2%)
Average of 7.5c royalty per chip
$6@(2% + 1%)
Average of 18c royalty per chip
OEM, semi and ARM all benefit from integrationChips with multiple ARM-based processors
expected to increase
26
Impact of New ARM Technologies ARM is introducing new technologies that generate additional
royalties per chip – often alongside an ARM processor
$+$
Mali technology has been licensed 46 times by 40 companies Generates a similar per chip royalty
as an ARM processor Mali typically found in higher priced
chips such as applications processors
Mali Graphics and Video
Both CPU and GPU generate a full royalty per chip - no discounts
$
Physical IP has been licensed to allthe major foundries Royalty is paid by the foundry on a per
wafer basis
Physical IP
4 billion consumer electronics devices in 2015 will have screens – all are an opportunity for Mali
All chips need physical IP. ARM’sopportunity grows as companies increasingly outsource to reduce cost
Wafer royalties and chip royalties are paid by different
entities in the value chainWafer
$ARMCPU
MaliGPU
27
Average Royalty Percentage Per Chip Average royalty percentage per chip is beginning to increase Cortex-A family of processors command higher percentage royalty Increasing number of chips contain multiple ARM-based processors ARM Mali and Physical IP generate additional royalties per chip
Increasing percentage per chip is likely to grow over timeHigher Royalties forCortex-A Processors
Multiple ARM Processors Per Chip
Multiple Royalty Sources Per Chip
Combochip
0m10m20m30m40m50m60m70m80m90m
1Q10 2Q10 3Q10 4Q10 1Q11
Cortex-A Shipments
Cortex per chip royalties typically higher than historic royalty rates
When multiple ARM processors areintegrated into a single chip, higherroyalty rates typically apply
Q410
Q111
25% increase in chips with multiple ARM processors per chip
M0 A9
MaliPhysical IP
Mali and Physical IP generate additional royalties per chipThere are chip designs based on ARM processors and/or Mali and physical IP
28
Physical IP Licensing Base ARM develops and licenses physical IP for
leading ASIC, foundry and fabless semis 32/28nm licenses signed with all
advanced foundries Working on 20nm Over 30 foundries have licensed 78
platforms on process nodes from 250nm to 20nm
Nine new platforms licensed in 2010 Higher than historical average
Over 30 platforms yielding royalties 6 platforms driving royalties at
advanced nodes at 65nm or below 12 of top 20 semis are driving ARM
royalties from foundries
Collaboration with IBM to 14nm
Fabless, ASIC and IDM Customers
Platforms Licensed by Foundry
22/20 32/28 45/40 65nm 90nm 130nm 180nm-250nm
Chartered
Dongbu
GlobalFoundries
Grace
HHNEC
IBM (CMOS &SOI)
Magnachip
Samsung
SMIC
Tower
TSMC
UMC
Vangaurd
X-Fab
29
Advanced Roadmap is Moving to 20nm
Leading foundrieslicense 32/28 nmphysical IP
32nm engineering work starts
Next StepsCommercial activity- Focus on 32/28nmdesign wins to driveroyalties
Engineering execution- Multiple customertape-outs at 32nm
2008 Q110 Q210 Q310 Q410
GLOBALFOUNDRIESlicenses28nmphysical IP
On going activity
TSMC licenses28nm & 20nmphysical IP
Optimised Cortex-A9/A5 on 32nm
3rd 20nm R&Dtape-out
28nm alpha deliverablesreleased to customers
Fresecalechooses ARMphysical IP
2009
ARM processor functional on 32nm
IBM & ARMcollaborateon 20 to 14nm
Q111
30
0
20
40
60
2010 2015
Mar
ket S
ize
(m o
f waf
ers)
Forecast by Node≥ 90 nm65 nm≤ 45 nm
0102030405060
2010 2015
Mar
ket S
ize
(m o
f waf
ers)
Foundry Market Forecast
PIPD’s Market Development PIPD market share has grown steadily All major foundries licensed physical IP
Foundry wafer volume expected to grow significantly as IDMs continue to outsource
ARM well positioned for long-termroyalty growth Advanced foundries signed up for
geometries at 45nm and below Leading fabless semis starting to make
outsourcing decisions
Creates opportunity for growth as advanced nodes are forecast to become fastest growing nodes
x1.5
X1.5x4
* 200mm equivalent wafers
Gartner, ARM estimates
16%19% 20% 21%
0%5%
10%15%20%25%
2007 2008 2009 2010
PIPD Market Share by No of Wafers*
Gartner, ARM estimates
31
Physical IP – Building Better Processors Processor Optimisation Packages (POPs) Optimised physical IP that will deliver a pre-
determined processor implementation Different options for higher performance or
lower power Range of Cortex processors, process nodes and
foundries supported
Combination of processor and physical IP delivers multiple royalties per chip 13 POPs licensed for Cortex-A family processors 5 licensees for Cortex-M family ultra low leakage
libraries
Dual Core Cortex-A9Speed Optimised1
2GHz1.9W
Speed Optimised1Dual Core Cortex-A9Power Optimised2
800MHz0.5W
Dual Core Cortex-A5Speed Optimised3
500MHz80mW
Cortex-M0Ultra Low Leakage4
50MHz
1. Speed Optimised: Dual Core Cortex-A9, TSMC 40nm G, typical silicon, 85C Tj Overdrive2. Power Optimised: Dual Core Cortex-A9, TSMC 40nm G, slow silicon, 125C Tj, Worst case Vdd
3. Speed Optimised: Dual Core Cortex-A5, TSMC 40nm G, typical silicon, 85C Tj Overdrive4. Cortex-M0 implemented with TSMC 180ULL with ARM physical IP library at 1.8V
5mW
32
Extending IP Outsourcing: MediaGrowing the Media Processor
Licensing BaseGrowing Shipments in Mobileand Non-Mobile Applications
46
46 licenses for graphics and video 7 licenses added in Q1 2011
More Mali-based chips shipping into mobile and consumer electronics devices
Licenses Partners RoyaltyPayers
40
6
Pre-2007, 24
8
14
2007
2008
2009
2010 11
Samsung announced that Mali-based Orion delivered 5 times more graphics performance than their previous design
STMicroelectronics announced 10 major STB design wins for Mali-based STi7108
Q1 2011 7
33
Processor Ecosystem Development ARM’s processor ecosystem gets broader and richer with
every OEM design win or software/tools/content developer porting their product to run on ARM-processor based chips
Microsoft Announced Future Windows on ARM
Internet explorer 10 demo on NVIDIA Tegra 2 at Microsoft developer conf.
Microsoft announced that future versions of their Windows operating systems and Office application software is available on ARM
Leading baseband providers using ARM for LTE
Leading baseband modem providers declared that they would be using ARM processors for their LTE and LTE-advanced modems
Digital TV Design Wins
Infinite TV is a global B2B over-the-top content marketplace
NDS, Skyworth and Hisensedemonstrated their STB/DTV products based on ARM Cortex-A9 processor and Mali 400 graphics
Major Content Providers Supporting Mali
Autodesk, Gameloft and Polarbit optimised some of their premium UI and gaming content to run on Mali in high definition 3D graphics Autodesk's Scaleform User
Interface is used in many PC and console games
34
FY2010 Revenues $m £m %revsLicensing 208.2 132.5 33%Royalty 335.3 217.7 53%Other 87.8 56.4 14%Total 631.3 406.6 100%
COGS 23.3Gross Margin 94.3%
Operating Costs 219.0Operating Margin 40.4%
Profit Before Tax 167.4EPS 9.34p
Free Cash Flow £290.1
From Revenue to Profits and Cash95% of revenues earned in US dollars
Cash generative, debt free
Operating margins and earnings will increase as royalties grow
Royalties approximately 50% of revenues
R&D expensed as incurred
Approximately 50% of costs in USD10% move in $/£ impacts EPS by ~15%
35
ARM Holdings plcQ1 2011 Results
36
Licensing positions ARM for further gains in multiple markets ARM technology increasingly chosen by market leaders Computers and servers becoming new markets for ARM-based technology
ARM gaining share in end markets with structural growth drivers Several consumer electronics companies chose ARM technology for
the first time during Q1
Physical IP developing optimisation packages at 20nm Additional royalty per chip for Cortex-A family processors
Group backlog up over 100% year-on-year Expect FY11 group revenues at least in-line with
market expectations
Q1 2011 Highlights
Growth Opportunities
Increasing the ARM valueper device
Growth in non-mobile applications
Extending IP Outsourcing
Q1 Group Revenues $185m
13%
12%
Processor Division
Physical IP Division
Dev. Sys. & Services
75%
37
Outlook Q2 outlook Expect normal seasonality for royalty revenues in the second quarter Normalised operating expenses, assuming constant currency, to be in
the range £58m to £60m
Looking further ahead ARM has made an encouraging start to 2011 Notwithstanding current uncertainty as to the economic impact of
Japanese earthquake, we expect group dollar revenues for the full-year 2011 to be at least in line with current market expectations
38
Q1 2011 – Revenue Summary ($)Q1 2011
$mQ1 2010
$mPD
Licensing 51.3 34.2 50%Royalties 87.9 66.7 32%
PD Total 139.2 100.9 38%PIPD
Licensing 12.6 8.8 43%Royalties* 10.7 10.8 -1%
PIPD Total 23.3 19.6 19%
Development Systems 13.3 14.8 -10%
Services 9.7 8.0 21%
Total Revenue 185.5 143.3 29%* Includes catch-up royalties in Q1 2011 of $0.6m and $0.5m in Q1 2010
39
Q1 2011 – Revenue Summary (£)Q1 2011
£mQ1 2010
£mPD
Licensing 32.3 21.8 48%Royalties 54.6 43.2 26%
PD Total 86.9 65.0 34%PIPD
Licensing 7.9 5.7 39%Royalties* 6.6 6.9 -4%
PIPD Total 14.5 12.6 15%
Development Systems 8.4 9.7 -13%
Services 6.2 5.0 24%
Total Revenue ** 116.0 92.3 26%* Includes catch-up royalties in Q1 2011 of £0.4m and £0.3m Q1 2010** ARM’s $/£ effective rate of $1.60 in Q1 2011 and $1.55 in Q1 2010
40
73%
12%
15%
ProcessorsPhysical IPSupport, Maintenance & Other
Backlog Analysis – End Q1 2011
Backlog by Maturity Profile Backlog Composition
24%
22%54%
Q2/Q311 Q411/Q112 2012+
41
Revenue Split Analysis
0%
25%
50%
75%
100%
2007 2008 2009 2010 Q1-2011
% o
f $ R
even
ues
Services Development SystemsPIPD Licensing PD LicensingPIPD Royalties PD Royalties
40%
43%
11%
6%
53%
35%
7%5%
Royalties
Licensing
42
Processor Licensing Revenues at $51.3m up 50% year on year Group backlog up over 100%
Base of licenses grows to over 770 with 39 licenses signed in Q1 2011 Two subscription licenses signed by Broadcom
and LG Electronics Eight licenses for Cortex-A class processors One license for Cortex-R class processor Fifteen licenses for Cortex-M class processors Seven licenses for Mali graphics processors
Non-mobile licensing strong in all target markets Several companies making chips for DTV or STB
license ARM processor technology for the first time 13 companies licensing Cortex-M for microcontrollers
Mobile opportunity increasing too Applications processors for smartphones
and mobile computing
Number of licenses signed in Q1 2011
27%group $revs
7
27
5
Mobile Non-mobile Both
+62
+61
+87
+91
+39
2006 2007 20078 2009 2010 Q1-2011
~770
Processor Licenses
43
Q1 Financial HighlightsStrong financial performance Q1 dollar revenues up 29% YonY to $185.5m Normalised PBT at £50.8m Normalised EPS at 2.73p
Financial discipline balances investment with margin expansion Operating margin at 42.5% year-to-date Headcount up 33 since end of 2010
Robust balance sheet Strong net cash generation of £62.9m Net cash at end of Q1 at £344.3m
44
Summary Balance Sheet
IFRS31 Mar 11 31 Dec 10
£MM £MMAssets
Cash (net of accrued interest) 344.3 290.1
Accounts receivable (net of AROC)Amounts recoverable on contracts (AROC)
68.56.7
97.08.7
Other debtors, inventory and investments 139.5 130.7
Property and equipment 15.6 13.8
Goodwill 520.5 532.3
Other intangibles 11.2 12.1
Total assets 1,106.3 1,084.7Liabilities & shareholders’ equity
Deferred revenue 99.8 92.7
Other creditors 64.8 97.1
Shareholders’ equity 941.7 894.9
Total liabilities & shareholders’ equity 1,106.3 1,084.7
45
Normalised Cash Flow Summary£MM Q1 11 Q1 10Operating activities 59.7 44.0
Interest received 1.2 0.4
Tax (6.7) (4.2)
Capital expenditure (4.2) (1.8)
Investments and acquisitions (net of disposals) - (1.0)
Share options 3.9 15.7
Other (forex, loans) 0.3 1.1
Cash flow 54.2 54.2
Opening cash (net of accrued interest) 290.1 141.8
Closing cash (net of accrued interest) 344.3 196.0
Profit before tax 50.8 37.6
Interest income, depreciation and amortisation 0.7 1.5
Cash flows from items excluded from normalised profits (12.5) (4.4)
Movements in working capital 20.7 9.3
Operating activities 59.7 44.0
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Contact Information If you have any questions please contact Ian Thornton, VP of Investor Relations [email protected] +44 1223 400796
To get onto our distribution list www.arm.com/ir