ARM Holdings PLC · NASDAQ:ARM
ARM — Non-Deal Roadshow (January 2018)
31 slides from ARM's roadshow presentation, January 2018
Slide 1: Arm Limited Q3 2018 Roadshow Slides
Arm Limited Q3 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 138bn 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* 8% by volume, 3% by value over past five years Chips with processors** ARM shipments 80bn 70bn 60bn Proportion of chips with processors is increasing over the medium term: 65% in 2017 50bn 40b
Slide 12: From revenue to profits
From revenue to profits License revenues have been maintained at the same flattish level since 2014 FY 2017 Revenues $m %revs Licensing 33% Royalties are a growing proportion 618 of revenues Royalty 1,087 60% Software and Services 126 7% Cost increase as Arm accelerates investment Total 1,831 100% i
Slide 13: Qtr. ending Dec. 2018 – Financial summary
Qtr. ending Dec. 2018 – Financial summary Revenues ($m) Q3 2017 Q3 2018 Growth Licensing can fluctuate quarter to quarter. Licensing 190 125 -34% In Q3, customers were worried about potential global industry slowdown in 2019 Royalty 297 305 3% Software and Services 33 56 70% Royalty revenue growth d
Slide 14: Q3 Licensing: 42 is in the normal range
The number of licenses for Q3 Licensing: 42 is in the normal range Cortex-M processors has been reduced since the introduction of the DesignStart Pro (DS Pro) Historic licensing 21 program in June 2017. 60 DS Pro Cortex-M processors are available for no upfront fee. Q1 Q3 In Q3, 38 DS pro licenses w
Slide 15: Cumulative Licences
Licensing enables future royalties Arm signed 93 licences Q1 to Q3 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 +93 1500 ~550 licences signed +141 $50
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 75% $20bn $15bn Other automotive chips 10
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 partners 2006-2017 Arm China will be ab
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 to Arm China in Q1 Arm Limited to Arm China 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: Generating profits and cash to be reinvested
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 Ultra-constrained Device Management Ser
Slide 24: How Arm makes money from IoT Devices
How Arm makes money from IoT Devices Semiconductor technology 2x Arm Cortex-M3 Arm Integrated SIM technology 24 © Arm 2018 (Arm iSIM)
Slide 25: How Arm makes money from IoT Services
How Arm makes money from IoT Services Connectivity, Device and Data Management Other data sources Control of Recurring Device and IoT devices Data Management Fees OEM Data collected Control of devices from IoT devices Data from devices 25 © Arm 2018
Slide 26: 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 Headcount For the current phase of 4,000 £800m inve
Slide 27: Investment philosophy
Investment philosophy “Now is the time to be sowing, not harvesting” Arm has over $1.4bn of net cash and no debt Rate of investment is discretionary and under Arm's control $1,600m $1,400m SoftBank has asked Arm to accelerate investments and to increase risk appetite $1,200m $1,000m All costs
Slide 28: 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 29: 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 30: Investing in people, infrastructure to create new products
Investment strategy Investing in people, infrastructure to create new products Costs are expected to be higher in FY2018 as Arm expands R&D capability Cost increases are expected to be consistent with increases in headcount $20m ($59m) $397m $17m ($8m) $367m Q3 2017 in5%headcount increase Increased
Slide 31: Arm Investor Relations Contact
Arm Investor Relations Contact Contact Title Contact +44 776 885 6503 Ian Thornton Head of Investor Relations ian.thornton@arm.com More content available on • Arm’s website: arm.com/ir • SoftBank Group’s website: softbank.jp/en/corp/irinfo/ 31 © Arm 2018