ARM Holdings PLC · NASDAQ:ARM

ARM — Q3 FYE24 Earnings Presentation

43 slides from ARM's earnings presentation, Feb 7, 2024

  1. Slide 1: Arm Holdings plc Q3 FYE24 Results Presentation

    Arm Holdings plc Q3 FYE24 Results Presentation Ian Thornton, Head of Investor Relations investor.relations@arm.com https://investors.arm.com AI-generated image February 7, 2024 © 2024 Arm

  2. Slide 2: Forward-Looking Statements

    Forward-Looking Statements This presentation may contain certain “forward-looking statements,” including statements regarding Arm’s and its management team's expectations, hopes, beliefs, intentions or strategies regarding the future. Forward-looking statements are generally identifiable by statemen

  3. Slide 3: Q3 FYE24 Results Summary

    Q3 FYE24 Results Summary © 2024 Arm

  4. Slide 4: Q3 FYE24 – Highlights

    Q3 FYE24 – Highlights $824m $338m(1) Total revenue up 14% yoy Non-GAAP Operating Income up 17% yoy 41.0% Non-GAAP operating margin $354m $724m License and other revenue up 18% yoy Trailing 12 Months FCF up 63% yoy $470m 7.7bn Royalty revenue up 11% yoy Chips reported as shipped 280.3bn Cumulative ch

  5. Slide 5: Q3 FYE24 – From Revenues to Profits to Cash

    Q3 FYE24 – From Revenues to Profits to Cash 97% 41% 30% NG GP Margin Non-GAAP Revenue Operating to Cash $824m $27m $797m $459m2 Margin Conversion Royalty Revenue $1,180m $338m2 License $595m Data from Revenue Q3 FYE24 $251m Revenue Non-GAAP Non-GAAP Non-GAAP Non-GAAP Non-GAAP1 Cost of Sales Gross Pr

  6. Slide 6: Q3 FYE24 – Revenue

    Q3 FYE24 – Revenue Total revenue: $824m up 14% yoy – Highest ever! License and other revenue: $354m up 18% yoy driven by five new ATA agreements and companies licensing high- performance CPUs etc. to embedded AI into every end device Royalty revenue: $470m up 11% yoy with strong smartphone sales and

  7. Slide 7: Q3 FYE24 – Royalty Revenue

    Q3 FYE24 – Royalty Revenue Record royalty revenue up 11% yoy Semiconductor industry (WSTS) has been growing month on month since low point in February 2023; Arm has ~50% market share of chips with processors and so is impacted by the same overall industry trends Arm is benefitting from Armv9 penetra

  8. Slide 8: Q3 FYE24 – Annualized Contract Value

    Q3 FYE24 – Annualized Contract Value Annualized contract value increased during Q3 by multiple high-value, long-term ATA deals being signed $1,400m $600m $1,200m $1,160m $1,108m $500m $1,030m $1,052m $1,080m $1,048m $1,009m $1,030m $1,000m Annualized Contract Value ($) $388m $400m $354m $800m $299m

  9. Slide 9: Q3 FYE24 – Remaining Performance Obligations

    Q3 FYE24 – Remaining Performance Obligations (RPO) Remaining performance obligations represent revenue that will be recognized in future periods RPO increased slightly in Q3 due to multiple high-value, long-term deals being signed Remaining performance obligations ($) $3,000m $600m $2,500m $2,414m $

  10. Slide 10: Q3 FYE24 – Non-GAAP Cost of Sales and Operating Expenses

    Q3 FYE24 – Non-GAAP Cost of Sales and Operating Expenses Cost profile includes prospective change to Non-GAAP reporting (see footnote) Q3 FYE24 non-GAAP COGS was roughly flat yoy, whilst non-GAAP Opex grew 7% yoy After adjusting Q3 FYE23 for cash settled share-based compensation and various one-off

  11. Slide 11: Q3 FYE24 – Non-GAAP gross and operating profit

    Q3 FYE24 – Non-GAAP gross and operating profit Cost and margin profile includes prospective change to Non-GAAP reporting (see footnote) Q3 gross profit and operating profit margins remaining over 95% and 40%, respectively $900m 100% 96.3% 96.1% 96.4% 96.8% $798m 96.8% 96.7% 96.2% $780m $800m 94.4% $

  12. Slide 12: Q3 FYE24 – Chips reported as shipped

    Q3 FYE24 – Chips reported as shipped Chip shipments relate to July to September quarter Chips Reported as Shipped 7.8bn 7.9bn 7.8bn 7.7bn Down 3% yoy mainly due to mobile 7.5bn 7.5bn shipments gradually recovering from 7.3bn 7.1bn historical inventory builds in Sept-qtr, 6.9bn 7.0bn 6.8bn offset by

  13. Slide 13: Q3 FYE24 – Non-Financial Metrics

    Q3 FYE24 – Non-Financial Metrics Arm Total Access up 5 to 27 • Target markets for these licensees include Arm Flexible Access Arm Total Access automotive, consumer electronics, IoT/embedded 27 and smartphones • ATA licensees typically long-term Arm partners, 218 211 212 203 191 20 22 20 of the 27 ar

  14. Slide 14: Guidance

    Guidance Q4 FYE 24 FYE 24 Revenue ($m) $850m - $900m $3,155m - $3,205m Non-GAAP Operating Expense ($m)1 ~$490m ~$1,700m Non-GAAP fully diluted earnings per share ($)1 $0.28 - $0.32 $1.20 - $1.24 1. Non-GAAP presentation excludes employer taxes related to equity-classified awards vesting within the q

  15. Slide 15: Q3 FYE24 Background on Arm

    Q3 FYE24 Background on Arm © 2024 Arm

  16. Slide 16: Arm is Building the Future of Computing

    Arm is Building the Future of Computing Arm is the world’s most pervasive CPU architecture 280+ Billion Arm-based chips shipped since inception Everything today is a computer 30.6 Billion – CPUs needed everywhere Arm-based chips reported as shipped in FYE23 Strong growth, highly profitable and cash

  17. Slide 17: The Foundation of the Semiconductor Industry

    The Foundation of the Semiconductor Industry Software Products Foundries EDA Chip Designers Arm CPU – The Brain of Everything 17 © 2024 Arm

  18. Slide 18: What Have We Done Since 2016?

    What Have We Done Since 2016? Then1 Now1 Auto MARKET Cloud & SPECIFIC Networking STRATEGY Mobile IoT General Purpose CPU Consumer Other Electronics Mobile AI Enabled Total Compute Neoverse Automotive IoT (Mobile) (Cloud) Enhanced Solutions Arm Platform Approach 18 © 2024 Arm 1 Reflects revenue as of

  19. Slide 19: CPU and subsystems for every target end-market

    CPU and subsystems for every target end-market Mobile – Total Compute Subsystem Infrastructure - Neoverse Compute Subsystem Up to 40% TOOLS TOOLS SOFTWARE SOFTWARE Price/Performance SUPPORT DSU-120 Neoverse-V2 CMN-700 32-192 CPUs SUPPORT Immortalis-G720 Cortex Cortex- -X4 Cortex- Mali-G720 A720 Mali

  20. Slide 20: Infrastructure – Progressing our Strategy

    Infrastructure – Progressing our Strategy Arm continues to gain market share within the cloud compute market as our customers increasingly adopt and deploy Arm CPUs into cloud server chips driven by the need for power efficient computing. Recent announcements Neoverse Compute Subsystem (CSS) Cloud C

  21. Slide 21: Automotive – Progressing our Strategy

    Automotive – Progressing our Strategy The automotive semiconductor market is one of Arm's fastest growing opportunities and where we have been rapidly gaining market share. Recent announcements Growth from Autonomous Driving Growth from ADAS/IVI Growth from automotive MCUs AMD introduces Versal AI E

  22. Slide 22: IoT/Embedded – Progressing our Strategy

    IoT/Embedded – Progressing our Strategy Arm is already the leading CPU architecture for IoT devices and embedded computers. Billions of IoT and embedded devices are in use today gathering and analyzing vast new sources of data. Billions more will be deployed to help us solve complex issues, such as

  23. Slide 23: Client – Progressing our Strategy

    Client – Progressing our Strategy Our strategy is to develop and license more advanced technology such as CPUs based on its Armv9 architecture, and platforms that deliver additional functionality, higher performance, and higher energy efficiency in mobile and consumer computing devices. Arm’s custom

  24. Slide 24: AI on Arm is Everywhere

    AI on Arm is Everywhere IoT & Mobile Cloud Compute Automotive Embedded AI for all Generative AI Optimized Autonomous Smart applications for AI Driving Home 24 © 2024 Arm

  25. Slide 25: AI – Progressing our Strategy

    AI – Progressing our Strategy Arm is central to the acceleration of AI /ML workloads everywhere. Whether its large language models being trained in the cloud or inference models being deployed at the edge, the need for efficient computing resources has never been more important Recent announcements

  26. Slide 26: Mobile - Strong Tie Between CPU & Software

    Mobile - Strong Tie Between CPU & Software 2009 2019 2023 26 © 2024 Arm

  27. Slide 27: Cloud and Automotive Follows the Same Trend

    Cloud and Automotive Follows the Same Trend Arm is supported in all major Linux Cloud Distributions Automotive ^Covers 99% of production deployed distributions 27 © 2024 Arm

  28. Slide 28: Unparalleled Software Ecosystem

    Unparalleled Software Ecosystem 15M Developers on Arm, 10M+ Developer hours for Arm 1st decade of Armv8 1.5Bn Ecosystem hours 30M+ Developer hours 1st decade of Armv9 28 © 2024 Arm

  29. Slide 29: Arm is the Ubiquitous Choice

    Arm is the Ubiquitous Choice X86 RISC-V Ability to license Energy efficiency Compute performance Software ecosystem Standardization End-market solutions All PC / Server Low-end embedded 29 © 2024 Arm

  30. Slide 30: Why Arm Continues to Grow

    Why Arm Continues to Grow More Complexity More Chips More Arm Per Chip 8 1.7x Auto Cloud & FYE 2016 More Networking IoT Mobile Consumer 192 Increase in number of Arm-based chips shipped Electronics FYE 2023 Number of cores per “high end” Arm-based chip 30 © 2024 Arm

  31. Slide 31: Royalty: Gaining Share in a Massive and Growing Market

    Royalty: Gaining Share in a Massive and Growing Market Market Value1 (2020 to 2022) Market Share1 (2020 to 2022) MOBILE $30bn >99% >99% APPLICATIONS $22bn Client OTHER MOBILE 69% $14bn $18bn 69% 64% CONSUMER ELECTRONICS $46bn $47bn 32% 25% CLOUD Auto Infrastructure COMPUTE $18bn 10% $14bn 7% NETWORK

  32. Slide 32: Royalty Revenue: Arm is Gaining Share

    Royalty Revenue: Arm is Gaining Share Market Share by Chip Value $250m Arm x86 Other $200m $150m $100m 2023: 51% 2020: 42% $50m 2014: 39% $0m 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 Calendar Years Other includes legacy and niche architectures such as: * Proprietary architectures (68000, 80

  33. Slide 33: Royalty Revenue Provides a Platform for Long-Term Growth

    CONFIDENTIAL Royalty Revenue Provides a Platform for Long-Term Growth Royalty revenue can continue for many years or decades $1,800m Royalty revenue from Arm products launched during Fiscal Year Ending Still collecting $1,600m 1990-2008 2009-2013 2014-2018 2019-2023 royalties on $1,400m products dev

  34. Slide 34: Royalty-led Subscription Business Model

    Royalty-led Subscription Business Model Arm Total Access Long term subscription-based access to an extensive portfolio of more than 300 CPUs, GPUs and other IP including Arm’s latest products Cumulative number of extant Arm Total Access licenses signed 27 SUBSCRIPTION FEE 18 Access Select, Evaluate,

  35. Slide 35: License Revenue Growing Over Time

    License Revenue Growing Over Time Arm signs a small number of high-value deals and many lower-value deals A significant portion (approx. 40-60%) of the deal value may be recognized on signature License revenue can be lumpy quarter to quarter ACV is the value of a contract divided by the duration of

  36. Slide 36: Arm’s Financial Opportunity

    Arm’s Financial Opportunity $824m $724m Revenues: 14% growth Strong revenue growth opportunity Q3-FYE Q3-FYE 2023 2024 $338 (1) $289m Non-GAAP operating profit Balancing investing for long term growth 40% 41% and margin with best-in-class margins Q3-FYE Q3-FYE 2023 2024 Non-GAAP FCF and Robust cash

  37. Slide 37: Appendix

    Appendix © 2024 Arm

  38. Slide 38: Environmental, Social and Governance

    Environmental, Social and Governance Using the power of technology to build a better world for everyone Decarbonising compute Arm’s high performance, energy-efficient technology has the potential to help reduce emissions from billions of devices from sensors to servers Arm is committed to achieving

  39. Slide 39: Reconciliations: GAAP to Non-GAAP and Adjustments

    Reconciliations: GAAP to Non-GAAP and Adjustments Includes prospective change to Non-GAAP reporting Arm Holdings plc As of February 7, 2024 Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY FY FY 31-Mar 30-Jun 30-Sep 31-Dec 31-Mar 30-Jun 30-Sep 3

  40. Slide 40: Reconciliations: GAAP to Non-GAAP and Adjustments… cont’d

    Reconciliations: GAAP to Non-GAAP and Adjustments… cont’d Arm Holdings plc As of February 7, 2024 Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY FY FY 31-Mar 30-Jun 30-Sep 31-Dec 31-Mar 30-Jun 30-Sep 31-Dec 31-Mar 31-Mar 31-Mar (in millions, e

  41. Slide 41: Reconciliations: GAAP to Non-GAAP and Adjustments… cont’d

    Reconciliations: GAAP to Non-GAAP and Adjustments… cont’d Arm Holdings plc As of February 7, 2024 Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY FY FY 31-Mar 30-Jun 30-Sep 31-Dec 31-Mar 30-Jun 30-Sep 31-Dec 31-Mar 31-Mar 31-Mar (in millions, e

  42. Slide 42: Reconciliations: GAAP to Non-GAAP and Adjustments… cont’d

    Reconciliations: GAAP to Non-GAAP and Adjustments… cont’d Arm Holdings plc As of February 7, 2024 Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY FY FY 31-Mar 30-Jun 30-Sep 31-Dec 31-Mar 30-Jun 30-Sep 31-Dec 31-Mar 31-Mar 31-Mar (in millions, e

  43. Slide 43: Reconciliations: GAAP to Non-GAAP and Adjustments… cont’d

    Reconciliations: GAAP to Non-GAAP and Adjustments… cont’d Arm Holdings plc As of February 7, 2024 Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Actual Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 FY FY FY 31-Mar 30-Jun 30-Sep 31-Dec 31-Mar 30-Jun 30-Sep 31-Dec 31-Mar 31-Mar 31-Mar (in millions, e

Arm Holdings — Q3 FYE24 Earnings Presentation on 6ix