- Earnings up 38 per cent
- Licence revenue beats expectations
- Royalties slightly down
Strong demand for its processor technology and several large licensing deals saw third quarter earnings leap at ARM Holdings, which said the fourth quarter remained in line with expectations.
The FTSE 100-listed company signed a record 48 licences with 24 companies, 11 of whom were new customers.
This was a large part of a 38% rise in earnings per share to 5.11p, with pre-tax profits up 36% to £92.6m on revenue ahead 27% to £184m.
Chief Executive Officer Simon Segars said: "As the products we use every day become more connected, and as new categories of smart devices are introduced, there are increasing opportunities for ARM's high-performance, low-power technology, which drive both license and long-term royalty revenues."
He also pointed to four "large" licensing deals with "thought-leading technology companies", which included rising chipset star MediaTek signing a broad licence for ARM's latest ARMv8-A processor technology and next generation Mali graphics.
Royalties were slightly below expectations at $122m, up 14%, versus an analyst consensus of $128.2m and fourth quarter guidance from the company suggested the shortfall would not be made up.
The Cambridge-based group explained current data suggested a revenue increase of "similar dollar
value to previous years" but implied licence revenues would compensate.
ARM said it entered the final quarter of 2013 with a record order backlog and a robust opportunity pipeline, a combination that indicated "another strong quarter for licensing revenue in the fourth quarter" and that it expected group revenues for the quarter to be in-line with current market expectations of approximately $290m.
Analysts at Investec noted this slightly lower royalty number would fuel negative opinion.
"The bears will focus on the royalty progression and while the company was at pains to temper royalty expectations at the last results update, consensus has drifted upwards.
"The downgrades to royalty expectations could temper some of the positive from the licence beat."
ARM said many of its new customers were planning to use its technology in emerging applications such as fingerprint recognition, internet-of-things, and wearable digital devices.
The most popular licences bought during the quarter were for ARM's Cortex-M range of processors, which is designed to be used by the "internet-of-things" market, for communication between devices, with eight of its 11 new customers signing up as well as 10 existing clients.
The company added that customers also signed five further licenses for its Mali graphics processors, four of whom were licensing it for the first time.
Investec was impressed by licence revenues beating expectations by a "quite staggering" amount, with $106.2m versus consensus of $84.9m and a backlog up 3% sequentially that suggested new wins continue apace.
"The market will now want to determine if this is a new sustainable level, or more of a one off."
Shares in ARM were down 3.3% to 1,003p at 09:17 on Tuesday.