Slide 1: Arm Limited Q2 2018 Roadshow Slides
Arm Limited Q2 2018 Roadshow Slides Arm Limited is a subsidiary of 1 v1 © Arm 2018
Slide 2: Technology trends that will redefine all industries
Technology trends that will redefine all industries Artificial Intelligence in Autonomous Augmented Hyperscale cloud every device machines reality and connectivity Security and Privacy 2 © Arm 2018
Slide 3: Arm defines the technology that will redefine all industries
Arm defines the technology that will redefine all industries Mobile and Networking Automotive Internet of Things Consumer and Servers and Robotics Artificial Intelligence in every device Autonomous machines Augmented reality Hyperscale cloud and connectivity 3 Security and Privac
Slide 4: Arm introduction
Arm introduction Global leader in technology licensing • R&D outsourcing for semiconductor companies Innovative business model • Upfront licence fee – flexible licensing models • Ongoing royalties on partner sales • Technology reused across multiple applications Long‐term, secular growth markets >1,
Slide 5: Arm's business model
Arm’s business model Arm develops technology that is licensed to semiconductor companies Arm receives an upfront license fee and a royalty on every chip that contains its technology Business Development 1) Arm licenses 2) Partners develop technology to chips and ship chip Partners them to OEMs Techn
Slide 6: Arm's strategy
Arm’s strategy Maintain or gain share in long‐term growth markets • From mobile phones to networking infrastructure and servers to embedded smart devices and automotive Increase value of Arm technology per smart device • Invest in developing more advanced processors with higher royalty rates • Physi
Slide 7: Arm's main growth markets
Arm’s main growth markets Mobile and Consumer Devices Networking & Servers Embedded Markets $77bn $41bn $85bn TAM 2026 TAM 2026 TAM 2026 Smartphones, tablets and laptops Base stations, routers, switches, and Automotive, white‐goods, wearables, servers for cloud and data centres smart devices i
Slide 8: History of Arm
History of Arm Joint venture between Designed into first mobile Now all electronic devices can Acorn Computers and Apple phones and then smartphones use smart Arm technology 1990 1993 onwards Today 8 © Arm 2018
Slide 9: Smart devices contain many Arm processors
Smart devices contain many Arm processors Arm CPU Applications Processor chips can contain Touchscreen and Apps Processor Chip multiple Arm technologies Sensor Hub Arm v8‐A processor for OS and apps Cortex‐R controller for modem Cortex‐M controllers for peripherals WiFi Arm Mali multimedia p
Slide 10: Arm-based chip shipments
Arm‐based chip shipments 21.3bn 130bn 39% 20 17.7bn Arm‐powered SoCs shipped (billions) 15 Arm‐based chips shipped to date Market share in 2017 10 5 0 1991 Calendar Years 2017 10 © Arm 2018
Slide 11: Arm's opportunity continues to broaden
Arm's opportunity continues to broaden 100bn Semiconductor industry continues to grow: 90bn Total industry* Chips with processors** 8% by volume, 3% by value over past five years ARM shipments 80bn 70bn 60bn Proportion of chips with processors is increasing 50bn over the medium term: 65% in 2017 40b
Slide 12: From revenue to profits
From revenue to profits Over 95% of revenues earned in US dollars FY 2017 Revenues $m £m %revs Licensing 33% Royalties are a growing proportion 618 455 of revenues Royalty 1,087 819 60% Software and Services 126 94 7% Cost increase as Arm accelerates investment Total 1,831 1,368 100% in R&D for futu
Slide 13: Qtr. ending Sept. 2018 – Financial summary
Qtr. ending Sept. 2018 – Financial summary Revenues ($m) Q2 2017 Q2 2018 Growth Licensing can fluctuate quarter to quarter. Licensing In Q2, lower revenues are primarily due to 123 124 1% contract delays as Arm China was established. Royalty 271 285 5% Software and Services 28 47 68% Royalty revenue
Slide 14: Q2 Licensing is in the normal range
Q2 Licensing: 35 is in the normal range The number of licenses for Cortex‐M processors has been Historic licensing Average = 20 reduced since the introduction of the DesignStart Pro (DS Pro) 60 program in June 2017. Q1 Q3 50 Under DS Pro Cortex‐M processors Q2 Q3 Q3 are available for no upfront fee.
Slide 15: Licensing enables future royalties
Licensing enables future royalties Arm signed 51 licences H1 2018 Arm’s current royalty revenues are derived from licences signed many years ago Growing base yields royalty revenues over long period Significant Royalty Potential $600m from Recent Licences +51 1500 ~500 licences signed +141 $500m 199
Slide 16: Arm's expanding opportunity
Arm’s expanding opportunity 2017 2026 Market Share Market Value Market Value Mobile Applications $21bn processor 90% $32bn Other mobile chips $14bn 45% $30bn $18bn Infrastructure Networking $14bn 20% $19bn Servers $17bn ~1% $22bn Automotive $4bn IVI and ADAS 50% $20bn $15bn Other automotive $8bn chi
Slide 17: Arm's expanding opportunity
Arm’s expanding opportunity 2017 2026 Market Share Market Value Market Value Embedded Controller in 90% $7bn IoT Devices $30bn $24bn Microcontrollers/ 20% $17bn SIM Cards $21bn Other Consumer 40% $21bn Electronics Markets $27bn Other chips 40% $7bn $10bn Total Market All chips with 39% $130bn proces
Slide 18: Establishing Arm China JV in Fiscal Q1 2018
Establishing Arm China JV in Fiscal Q1 2018 Building a bigger business; built on strong foundations >150 Licensees 10bn Chips shipped by Chinese partners using Arm processor technology 95% Chinese designed SoC based on x140 Growth in volume shipment by Chinese Arm China will be able to better access
Slide 19: Establishing Arm China JV in Fiscal Q1 2018
Establishing Arm China JV in Fiscal Q1 2018 Building a bigger business; built on strong foundations >150 Customers to novate from 341 Employees transferred Arm China JV establishment was initiated in early Q1 2018 and completed at the end Q1 Arm Limited to Arm China to Arm China in Q1 Novation (tran
Slide 20: Arm's current business
Investment strategy Arm's current business Arm develops intellectual property (IP) blocks which are used in silicon chips Our partners combine Arm IP with their own IP to create complete chip designs We earn license fees when we deliver Arm IP to our partners and royalties when our partners ship chi
Slide 21: Accelerating investment to increase share gains; investing to create new revenue streams
Accelerating investment Investing to create to increase share gains new revenue streams Arm Pelion IoT Platform SaaS business Early-stage investment but many years in research Securely connect and manage any device, using any communications technology, supporting any cloud platform Device Ma
Slide 22: Arm IoT Services
Arm IoT Services Secure and scalable innovation from 800+ Device to Data customers > 30 PB of customer data managed > 2 million records per second ingested 140+ > 300K queries per day Ecosystem partners 55 TB network data flow per month Smart grid technology partnership with KEPKO, the largest elect
Slide 23: Pelion IoT Platform Overview
Pelion IoT Platform Overview Partner and Customer Pelion IoT Platform Business Applications Systems SaaS Data Management Services Marketing One Social View of Unified Visualization Database Data operational view Asset Visibility Marketing Business Intelligence Device Management Services Energy Ultra
Slide 24: Pelion Connectivity Management
Pelion Connectivity Management Single pane of glass for easy connectivity management One simple bill for global connectivity usage Zero‐touch onboarding of devices Support for any network ‐ LoRa, cellular, satellite Built‐in security, network resilience GSMA eUICC Choice of Network Unified API Granu
Slide 25: Pelion Device Management
Pelion Device Management Secure identity on‐boarding, connection and lifecycle management services for all IoT devices One simple portal interface for all IoT device management services Support for any device, any vendor, and any cloud Built‐in security from device to cloud Secure asset and Energy e
Slide 26: Pelion Data Management
Pelion Data Management Collect and unify diverse data from heterogeneous devices, enterprise data and 3rd party sources Security in trusted data ‐ encryption in transition and at rest, control permissions Rich ecosystem of data integrations Fully managed solution that processes over 30 trillion reco
Slide 27: Pelion Data Management
Pelion Data Management Partner Customer Data Device Data & Customer & Insight Solutions Solutions Applications Data Business Sources & Solutions Systems Application Tools • Multiple Sources • Multiple Destinations • Efficient Storage • BI Direct Connect • High Performance Querying • Dashboard Report
Slide 28: Revenues, investments and profits
Investment strategy Revenues, investments and profits £1,600m 7,000 Until 2016 revenues grew faster £1,400m Revenue 6,000 than costs as Arm constrained Total Costs investment in R&D to enable £1,200m 5,000 increasing profits Adjusted EBITDA £1,000m For the current phase of Headcount 4,000 £800m inve
Slide 29: Investment philosophy
Investment philosophy Arm has over £1.1bn of net cash and no debt Increase in H1 2018 is due to sale of Arm’s stake in the “Now is the time to be sowing, not harvesting” Arm China Joint Venture, net of the acquisition of Rate of investment is discretionary and under Treasure Data Inc. and Stream T
Slide 30: Return on Investments – Arm v8-A case study
Investment strategy Return on Investments – Arm v8‐A case study Arm incurs R&D costs many years before revenue starts Multiple processors in development Research into 64‐bit computing First generation started in 2000 of processors Architecture development and Arm v8‐A processor design Development st
Slide 31: Return on Investments – General case
Return on Investments – General case Arm incurs R&D costs many years before revenue starts New technology Research into announced Technology Recurring 64‐bit computing delivery revenue started in 2000 starts First technology agreements New technology New technology development starts Initial develop
Slide 32: Investing in people, infrastructure to create new products
Investment strategy Investing in people, infrastructure to create new products Costs are higher in 2018 as Arm expands R&D capability Cost increases are expected to be consistent with increases in headcount £327m £30m £2m £22m £27m £246m Q2 2017 in8%headcount increase Increased IT, facilities Bad de
Slide 33: Arm Investor Relations Contact
Arm Investor Relations Contact Contact Title Contact +44 1223 400796 Ian Thornton Head of Investor Relations ian.thornton@arm.com More content available on • Arm’s website: https://www.arm.com/company/investors • SoftBank Group’s website: https://group.softbank/en/corp/irinfo/ 33 © Arm 2018