ARM Holdings plc Reports Results for the First Quarter Ended 31 March 2007

The financial information prepared in accordance with the Company's US GAAP accounting policies comprises the consolidated balance sheets as of 31 March 2007 and 31 December 2006 and related income statements for the periods then ended, together with related notes. In preparing this financial information management has used the principal accounting policies as set out in the Company's annual financial statements and Form 20-F for the year ended 31 December 2006, except in relation to changes in respect of accounting for provisions for sabbatical leave following the adoption of EITF 06-2 on 1 January 2007.

(2) Share-based compensation charges and acquisition-related expenses

Included within the US GAAP income statement for the quarter ended 31 March 2007 are share-based compensation charges of GBP3.9 million: GBP0.2 million in cost of revenues, GBP2.3 million in research and development costs, GBP0.8 million in sales and marketing costs and GBP0.6 million in general and administrative costs.

(3) Accounts receivable

Included within accounts receivable at 31 March 2007 are GBP27.9 million (31 December 2006: GBP23.8 million) of amounts recoverable on contracts.

    (4) Consolidated statement of changes in shareholders' equity (US GAAP)

                    Additional                      Unrealized Cumulative
                      Share  paid-in Treasury Retained holding translation
                      capital capital  stock  earnings  gain adjustment Total
                      GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000 GBP'000

    At 1 January 2007  695   446,005  (58,245) 197,874  394  (12,076) 574,647

    Shares issued on
    exercise of options  5     5,504         -       -    -      -      5,509

    Net income           -         -         -   9,577    -      -      9,577

    Cumulative effect
    as a result of
    adopting EITF
    06-2, net of tax*    -         -         - (2,303)    -      -    (2,303)

    Tax effect of option
    exercises            -       368         -       -    -      -        368

    Amortization of
    deferred
    compensation         -     3,784         -       -    -      -      3,784

    Conversion of
    liability award to
     equity award        -     1,396         -       -    -      -      1,396

    Purchase of own
    shares               -         -  (20,159)       -    -      -   (20,159)

    Other comprehensive income:

    Unrealized holding
    losses on
    available-for-sale
    securities           -         -         -       - (230)     -      (230)

    Currency translation
    adjustment           -         -         -       -     -  (927)     (927)

    At 31 March 2007   700   457,057  (78,404) 205,148  164  (13,003) 571,662

* In accordance with EITF 06-2, the cumulative provision for employee sabbatical leave as at 1 January 2007 is credited directly to retained earnings

    (5) Consolidated statement of comprehensive income (US GAAP) <start-table>

    Q1 2007 FY 2006
    Net income 9,577 45,163
    Realized gain on available-for-sale
    security, net of tax - (2,375)
    Unrealized holding losses on available-for-sale
    security, net of tax (230) (1,090)
    Currency translation adjustment (927) (68,128)
    Total comprehensive income / (loss) 8,420 (26,430)
    (6) Non-GAAP measures

The following non-GAAP measures, including reconciliations to the US GAAP measures, have been used in this earnings release. These measures have been presented as they allow a clearer comparison of operating results that exclude one-off non-recurring charges, acquisition-related charges and profit on disposal of available-for-sale investments. All figures in GBP'000 unless otherwise stated.

                                        (6.1)    (6.2)     (6.3)     (6.4)
                                       Q1 2007  Q4 2006   Q1 2006   FY 2006

    Income from operations (US GAAP)    11,244    7,770    14,424    45,020

    Acquisition-related charge -
    amortization of intangibles          4,655    4,700     4,587    19,018

    Acquisition-related charge -
    other payments                         397    1,057         -     1,057

    Stock-based compensation and
    related payroll taxes                3,872    6,177     3,988    18,292

    Normalised income from operations   20,168   19,704    22,999    83,387

    As % of revenue                      30.3%    29.0%     35.6%     31.7%

                                        (6.5)    (6.6)     (6.7)     (6.8)
                                                                          Q1  2007    Q4  2006      Q1  2006      FY  2006

        Income  before  income  tax  (US  GAAP)    12,701        9,351        16,097        57,048

        Acquisition-related  charge  -
        amortization  of  intangibles                    4,655        4,700          4,587        19,018

        Acquisition-related  charge  -
        other  payments                                                  397        1,057                  -          1,057

        Stock-based  compensation  and
        related  payroll  taxes                                3,872        6,177          3,988        18,292

        Profit  on  sale  of  available-for-sale
        investment                                                              -                -                  -      (5,270)

        Normalised  income  before  income  tax  21,625      21,285        24,672        90,145

                                                                                                  (6.9)        (6.10)        (6.11)
                                                                                        31  March  31  December  30  September
                                                                                                    2007            2006            2006

        Cash  and  cash  equivalents                                        92,595        90,743      103,472

        Short-term  investments                                              19,069        18,600        26,427

        Short-term  marketable  securities                          15,117        19,151        17,520

        Normalised  cash                                                          126,781      128,494      147,419

                                                                              (6.12)      (6.13)        (6.14)        (6.15)
                                                                              Q1  2007  Q4  2006      Q1  2006      FY  2006

        Normalised  cash  at  end  of
        period  (as  above)                                    126,781    128,494      182,282      128,494

        Less:  Normalised  cash  at
        beginning  of  period                            (128,494)(147,419)  (160,902)  (160,902)

        Add  back:  Cash  outflow  from
        acquisitions  (net  of  cash  acquired)    2,618        3,305                -          17,270

        Add  back:  Cash  outflow  from  payment
        of  dividends                                                          -        5,449                -          12,367

        Add  back:  Cash  outflow  from
        purchase  of  own  shares                            20,159      25,840        6,957          76,519

        Less:  Cash  inflow  from
        exercise  of  share  options                    (5,509)    (2,349)    (11,007)    (17,860)

        Less:  Cash  inflow  from  sale  of
        available-for-sale  investments                    -                -                  -        (5,567)

        Normalised  cash  generation                  15,555      13,320        17,330          50,321

                                                                            (6.16)      (6.17)        (6.18)          (6.19)
                                                                            Q1  2007    Q4  2006      Q1  2006        FY  2006

        Net  income  (US  GAAP)                                9,577      12,063        11,960          45,163

        Acquisition-related  charge  -
        amortization  of  intangibles                  4,655        4,700          4,587          19,018

        Acquisition-related  charge  -
        other  payments                                                397        1,057                  -            1,057

        Stock-based  compensation  and
        related  payroll  taxes                              3,872        6,177          3,988          21,788

        Profit  on  sale  of
        available-for-sale  investment                      -                -                  -        (5,270)

        Estimated  tax  impact  of  above
        charges                                                      (2,849)    (3,477)      (2,464)      (10,336)

        Normalised  net  income                            15,652      20,520        18,071          71,420

        Dilutive  shares  ('000)                    1,377,589  1,380,581  1,420,175  1,404,751

        Normalised  diluted  EPS                            1.14p        1.49p          1.27p            5.08p


        (6.20)  Normalised  income  statement  for  Q1  2007


                                                          Stock-based                                          Other
                                                      compens-ation                              acquisition
                                                                                        Intangible          related
                                                                                  amortisa-tion          charges

                              Normalised                                                                                          US  GAAP
                                    GBP'000                GBP'000              GBP'000          GBP'000        GBP'000
        Revenues
        Product                62,300                            -                          -                      -          62,300
        revenues
        Service                  4,192                            -                          -                      -            4,192
        revenues
        Total  revenues  66,492                            -                          -                      -          66,492

        Cost  of
        revenues
        Product  costs  (5,638)                            -                          -                      -        (5,638)
        Service  costs  (1,358)                    (232)                          -                      -        (1,590)
        Total  cost  of  (6,996)                    (232)                          -                      -        (7,228)
        revenues

        Gross  profit      59,496                    (232)                          -                      -          59,264

        Research  and  (16,589)                (2,246)                          -              (162)      (18,997)
        development
        Sales  and        (11,132)                    (774)                          -                      -      (11,906)
        marketing
        General  and    (11,607)                    (620)                          -              (235)      (12,462)
        administrative
        Amortization
        of  intangibles
        purchased
        through
        business
        combination                  -                            -              (4,655)                      -        (4,655)

        Total                (39,328)                (3,640)              (4,655)              (397)      (48,020)
        operating
        expenses

        Income  from        20,168                (3,872)              (4,655)              (397)          11,244
        operations
        Interest                1,457                            -                          -                      -            1,457

        Income  before    21,625                (3,872)              (4,655)              (397)          12,701
        income  tax
        Provision  for  (5,973)                        937                  1,796                  116        (3,124)
        income  taxes

        Net  income          15,652                (2,935)              (2,859)              (281)            9,577

        Earnings  per
        share
        (assuming
        dilution)
        Shares            1,377,589                                                                                      1,377,589
        outstanding
        ('000)
        Earnings  per          1.14                                                                                                0.70
        share  -  pence
        Earnings  per
        ADS  (assuming
        dilution)
        ADSs                    459,196                                                                                          459,196
        outstanding
        ('000)
        Earnings  per          6.69                                                                                                4.09
        ADS  -  cents



        (6.21)  Normalised  income  statement  for  Q1  2006


                                                                                    Stock-based      Intangible
                                                                                  compensation  amortisation
                                                          Normalised                                                              US  GAAP
                                                                GBP'000              GBP'000            GBP'000        GBP'000
        Revenues
        Product  revenues                          61,232                          -                        -          61,232
        Service  revenues                            3,402                          -                        -            3,402
        Total  revenues                              64,634                          -                        -          64,634
                                                                                                                                    -
        Cost  of  revenues
        Product  costs                              (5,815)                          -                        -        (5,815)
        Service  costs                              (1,313)                  (239)                        -        (1,552)
        Total  cost  of  revenues            (7,128)                  (239)                        -        (7,367)

        Gross  profit                                  57,506                  (239)                        -          57,267

        Research  and  development      (15,143)              (2,313)                        -      (17,456)
        Sales  and  marketing                  (9,393)                  (798)                        -      (10,191)
        General  and                                  (9,971)                  (638)                        -      (10,609)
        administrative
        Amortization  of                                      -                          -            (4,587)        (4,587)
        intangibles
        purchased  through
        business
        combination

        Total  operating  expenses      (34,507)              (3,749)            (4,587)      (42,843)

        Income  from  operations              22,999              (3,988)            (4,587)          14,424
        Interest                                            1,673                          -                        -            1,673

        Income  before  income  tax          24,672              (3,988)            (4,587)          16,097
        Provision  for  income                (6,601)                      643                1,821        (4,137)
        taxes

        Net  income                                      18,071              (3,345)            (2,766)          11,960

        Earnings  per  share
        (assuming  dilution)
        Shares  outstanding  ('000)  1,420,175                                                          1,420,175
        Earnings  per  share  -                      1.27                                                                    0.84
        pence
        Earnings  per  ADS
        (assuming  dilution)
        ADSs  outstanding  ('000)          473,392                                                              473,392
        Earnings  per  ADS  -  cents              6.62                                                                    4.38

 


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