ARM share price: Company posts second-quarter update

Group revenues in US$ up 9% year-on-year

ARM share price: Company posts second-quarter update

ARM Holdings (LON:ARM) has updated investors on its second-quarter performance this morning. The update comes after the FTSE 100 group recently agreed a tie-up with Japan's SoftBank.

Highlights from ARM's statement:

Total revenues

Total dollar revenues in Q2 2016 were $387.6 million, up 9% versus Q2 2015. Q2 sterling revenues of £267.6 million were up 17% year-on-year.

Half-year dollar revenues in 2016 amounted to $785.6 million, up 11% on H1 2015. Half-year sterling revenues in 2016 amounted to £544.1 million, up 19% on H1 2015.

Licence revenues

Total dollar licence revenues in Q2 2016 increased by 7% year-on-year to $161.3 million, representing 42% of Group revenues. Licence revenues comprised $147.6 million from processor licences and $13.7 million from physical IP licences. Processor licence revenue was up 14% year-on-year driven by 25 processor licences signed. Physical IP was down 37% year-on-year, due to the timing of engineering milestones and a trend to more single-use POP licences.

Group order backlog at the end of Q2 2016 was down around 10% sequentially.

Total sterling licence revenues in Q2 2016 increased by 16% year-on-year to £111.6 million, comprising £102.2 million from processor licences and £9.4 million from physical IP licences.

Royalty revenues

Total dollar royalty revenues in Q2 2016 were up 12% on Q2 2015 at $196.6 million, representing 51% of Group revenues. Royalty revenues comprised $176.7 million from processors and $19.9 million from physical IP. Processor royalty revenue grew 11% year-on-year, representing 14% outperformance vs relevant semiconductor industry revenues, which were down 3% year-on-year over the corresponding shipment period (calendar Q1 2016 compared to calendar Q1 2015). The outperformance was driven by continued market share gains and the increasing deployment of advanced ARM technologies.

Physical IP royalty revenue grew 18% year-on-year due to the increase in shipments of wafers using ARM's physical IP at advanced nodes.

Total sterling royalty revenues in Q2 2016 increased by 19% year-on-year to £135.6 million, comprising £121.9 million from processor licences and £13.7 million from physical IP licences.

Other revenues

Sales of software and tools in Q2 2016 were $15.3 million, an increase of 11% year-on-year. Part of the year-on-year increase is the inclusion of revenues from the acquisition of Carbon Design Systems in Q3 2015. Service revenues were $14.4 million in Q2 2016, down 12% year-on-year. Together revenues from software and tools and services represented 7% of Group revenues.

Total sterling software and tools revenues in Q2 2016 were £10.7 million, an increase of 22% year-on-year. Service revenues were £9.7 million in Q2 2016, down 7% year-on-year.

Outlook

Given the restrictions placed on forward-looking statements as a result of the recommended offer by SoftBank for ARM, it is not appropriate to provide the usual full-year 2016 revenue guidance.

Simon Segars, Chief Executive Officer, said:

"Our royalty revenue growth continues to outperform the wider semiconductor industry, driven by market share gains and the increasing adoption of ARM's latest technologies. With more end-users selecting ARM technology for products ranging from sensors to satellites to supercomputers, we expect this outperformance will continue.

"ARM is continuing to invest in products that will support our partners' roadmaps as they develop next-generation technologies such as 5G networks, autonomous vehicles and the Internet of Things. Our recent acquisition of Apical enhances our expertise in visual computing, a rapidly-advancing field which is enabling smart buildings, augmented reality, self-driving cars and advanced robotics. As new technologies are created and new markets emerge, ARM will continue to evolve its products and business models to capture the opportunities ahead."

As of 07:30 BST, Wednesday, 27 July, ARM Holdings plc share price is 1,676.00p.

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