ARM Q4 Pre-tax Profit Jumps On Higher Revenues, Ups Dividend; Stock Rises

(RTTNews) - Chipmaker ARM Holdings Plc. (ARM.L, ARMH) Wednesday said fourth-quarter profit before tax increased significantly from the previous year, supported by strong licence revenue growth. The company lifted its final dividend by 25 percent, adding that it expects total group dollar revenues to be in line in 2015. The stock gained close to 5 percent in early trade.

Profit before tax increased to 91.4 million pounds from 12.2 million pounds in the previous year. The results are on the basis of IFRS, and the previous year's results included exceptional items of 59.5 million pounds.

On an adjusted basis, normalized profit before tax was 118.9 million pounds, while it totaled 95.5 million pounds last year.

Earnings for the period was 72.8 million pounds or 5.1 pence per share, compared to a loss of 6.2 million pounds or 0.4 pence per share last year.

Earnings per ADS were 24 pence per share, compared to loss per ADS of 2.2 pence per share in the prior year.

Revenues for the quarter grew to 225.9 million pounds from 189.1 million pounds reported last year. In US dollars, revenue increased to $357.6 million from $302.9 million in the prior year.

Total Technology Licensing revenues climbed 27 percent in US dollars to $162.3 million, with a 30 percent increase in Processor licensing revenue and a 13 percent rise in Physical IP licensing revenue.

ARM said that Processor licence revenues were up strongly in the quarter due to a record number of licences being signed and to a particularly high proportion of the revenue from those licences being recognized in the quarter.

Group order backlog was up about 5 percent sequentially, driven by an ARMv8-A architecture licence, and five partners licensing new processors that are still in development.

Simon Segars, CEO, said, "In Q4 and throughout 2014 ARM has seen strong licence revenue growth, driven by market-leading semiconductor companies increasing their commitment to use ARM technology, and a broadening range of new customers choosing ARM technology for the first time."

Total dollar royalty revenues jumped 13 percent to $165.5 million, and included a 16 percent increase in Processor royalty revenue to $150.7 million which reflected the expected acceleration in growth after a period of inventory management by consumer electronics OEMs.

As the ARM Partnership continues to gain share, and as chips based on ARMv8-A processors and Mali graphics IP start shipping in higher volumes, the outlook for royalty revenues in 2015 and beyond is encouraging, Segars added.

Operating expenses declined 26 percent to 126.3 million pounds, partly because the firm recorded exceptional items of 59.5 million pounds related to impairment in the previous year. Operating margin was 39.7 percent, compared to 5 percent last year.

The directors recommended payment of a final dividend in respect of 2014 of 4.5 pence per share, up 25 percent from last year.

ARM said that as well as growing the dividend, the Board intends to continue to undertake a limited share buyback program to maintain a flat share count over time.

Looking ahead, with full year 2015 licence and royalty revenues anticipated to be consistent with market expectations, the company expects total group dollar revenues to be in line.

"We anticipate that total Group dollar revenues for Q1 will be up about 10% year on year, based on strengthening royalty revenue growth, and our expectation of the profile of licence revenue through the year," ARM said.

The stock climbed 4.6 percent in early trade on the LSE to 1,105.00 pence.