ARC International plc - 1st Quarter Results.Business Editors UK REGULATORY NEWS LONDON--(BUSINESS WIRE)--April 23, 2003
ARC International Plc Results for the First Quarter Ended 31
March 2003
ARC International plc (LSE: ARK), a world leader in semiconductor and
software technology licensing, announces its unaudited financial
results for the first quarter ended 31 March 2003.
Financial and Operational Highlights:
First Quarter ended 31 March 2003:
-- Turnover up 6% in the quarter on prior year quarter and down 10%
sequentially to u2.9 million (Q1 2002: u2.7m, Q4 2002: u3.2m)
-- Pre-exceptional net loss of u4.4m (including an u0.8 million tax
refund), a 19% year on year improvement (Q1 2002: u5.4m)
-- 7 new design licences won for the ARCtangent(TM) processor
-- Strong performance on USB Now(TM) product sales, booked 7 licenses
-- Software and development tools products shipped to more than 50
customers
-- Asia accounted for 8% of revenues
Commenting on the results, Mike Gulett, Chief Executive Officer, said:
"Despite the continued uncertainty in our markets and the deferral of
several licensing deals into the second quarter, we booked 14 licenses
for our ARCtangent and USB products combined. These deals were signed
with companies such as Altek, Conexant, and ST Microelectronics. We
also announced that LSI Logic has licensed ARC's USB High-Speed
On-the-Go (OTG) technology.
An increasing number of ARC's products are being put into production
across a diverse range of markets. In the Digital Still Camera space,
ARC's technology is used in Fujifilm, Axiz, HP, Logitech, Polaroid,
Radio Shack, RCA and Toshiba products. Emerging markets for our
technology include biometrics, storage devices and industrial control.
We expect our customers in those areas to begin shipping products this
year.
Looking ahead, we do not anticipate any significant changes in market
conditions over the next quarter. We are confident that our strategy
of providing a total system solution will help to drive the business
towards profitability and create a sustainable long-term business."
For further information, please contact:
ARC International plc
Mike Gulett Chief Executive Officer, +(408)437-3400
Monica Johnson Chief Financial Officer, +(408)437-3400
www.ARC.com
Tulchan Communications
Julie Foster Consultant, +44 (0) 20 7353 4200
www.tulchangroup.com
An analyst conference call will be held at 9:30am on 23rd April, 2003.
The presentation will be available on the website www.ARC.com. A
recording of this meeting will also be available on the website.
Chief Executive Officer's Review
Overview
In the first quarter of 2003, ARC reported a 6% increase in turnover
to u2.9 million, up from u2.7 over the same quarter last year but down
10% quarter on quarter (Q4 2002: u3.2 million). At constant exchange
rates, this represents an 18% increase year over year and a sequential
decline of 9%. Despite ongoing, challenging market conditions, tight
management of costs resulted in a pre-exceptional net loss of u4.4
million, which is down 19%, (Q1 2002: u5.4 million). Operating
expenses before exceptionals, amortisation and depreciation year on
year were also reduced by 4% to u7.1 million.
Many of our current and prospective customers continue to delay new
product development, which deferred the signing of new licenses for
our products into the second quarter. During the first quarter, we
booked 14 new design licenses including 7 customers for the ARCtangent
processor and 7 licenses for USB. We are pleased with the development
of our Asian business, a market that presents us with significant
opportunities for the future. Sales in Asia during the first quarter
accounted for 8% of total revenue.
Share Buyback
We continue to remain on track for the share buyback programme.
Earlier this month, we received the necessary court approval and the
tender offer is on schedule to be launched in early May.
Product Strategy and Customer Focus
The clearest indication of the success of ARC's "total system
solution" is reflected in our revenue diversity; 35% of revenues came
from processor cores, 31% from toolsets and software and 34% from
peripherals.
Our SoC customers are divided across the consumer, networking and
computing sectors and we are strong in semiconductors for wired and
wireless communications as well as consumer electronics. On the
software side, increasingly ARC's technology is being licensed by
companies in industrial control, broadband networking and digital
imaging.
This quarter we secured licenses with Altek Labs, Inc, Conexant and ST
Microelectronics, among others. Altek is one of the world's leading
manufacturers of digital still cameras. Conexant is a worldwide leader
in semiconductor solutions that facilitate communications worldwide
through wireline voice and data networks. ST Microelectronics is a
leader in developing and delivering semiconductor solutions across the
spectrum of microelectronics applications. We are also on track to
unveil the details of several new products later in the year, which
will continue to strengthen our market position.
USB NOW(TM)
Our USB 2.0 products continue to be among our most popular products.
Of the thirteen licenses previously announced in 2002, seven are in
development, with two of those expecting to reach the manufacturing
stage during the first half of the year. An eighth company has
completed development of the product and is ready to prototype in May.
We announced our relationship with LSI Logic, a leading designer and
manufacturer of communications, consumer and storage semiconductors.
LSI Logic will integrate ARC's USB technology into its CoreWare(R)
library of intellectual property, making it available to a much larger
audience.
Our earlier USB products are equally popular, especially among vendors
of digital still cameras and multi-function printers. Our technology
is currently found in digital still cameras made or marketed by Agfa,
Axia, Casio, Concord, Kodak, Minolta, Ricoh, Samsung, and Toshiba,
among others.
We are currently introducing a full line of class driver software for
our USB family.
ARCtangent(TM) Processor
The ARCtangent processors are being used in a number of innovative new
products including: a DVD Player being shipped by AMLogic, Video on
Demand by Xiran, and a Fingerprint Scanner by ST Microelectronics.
These products have been designed with the ARCtangent as their core
processor.
This week we unveiled our multimedia strategy at the Embedded Systems
Conference in San Francisco. The product family will include
ARCtangent-specific software codecs for the most popular consumer
electronics applications, which will enable ARC to provide a more
complete solution, opening up new vertical market opportunities.
Software and Development Tools
Our software team continues to experience successes across all product
lines. In January, we introduced the ARC OS-Changer, which allows
software engineers to transfer their application software from third
party operating systems to the ARC/MQX Real Time Operating System.
This opens up additional market opportunities for us.
Our relationship with Metrowerks/Motorola continues to strengthen.
This week we announced the availability of our MetaWare/CodeWarrior
bundle for Motorola(R)'s ColdFire(TM) MCF5282 Processor. It is
currently being demonstrated at the Embedded Systems Conference (ESC)
in San Francisco. This processor is targeted at medical
instrumentation, food service equipment, home automation, industrial
control networking, security and lighting control applications. It has
been generating a high level of interest from our customers and is
only just starting to ship in production quantities.
Operational changes
The company continues to assess its cost base with respect to the
business environment. Based on a review of current business levels,
the company expects to take a nominal restructuring charge to cover
severance payments for a 7% reduction of the workforce that was
implemented in the current quarter.
Outlook
Looking ahead, we do not anticipate any significant changes in market
conditions over the next quarter and the SARS epidemic may affect the
speed of our Asian expansion.
We are confident that our strategy of providing a total system
solution will help to drive the business towards profitability and
create a sustainable long-term business. The management team we put in
place last year is having a positive impact on the company's
efficiency and we are in now in a much stronger position to benefit
from any upturn in the economy.
Financial Review
First Quarter ended 31 March 2003
Turnover
Total turnover for the first quarter was u2.9 million, up 6% year over
year and down 10% sequentially (Q4 2002: u3.2 million, Q1 2002: u2.7
million). Prior to currency translation with virtually all sales
denominated in US dollars, turnover was up 18% year over year and down
9% sequentially. License income was down by 11% over the previous
quarter at u2.2 million (Q4 2002: u2.5 million) while maintenance and
service income stayed the same at u0.5 million (Q4 2002: u0.5
million). Royalty income was unchanged at u0.2 million (Q4 2002: u0.2
million).
Within the turnover base, 22% of sales were in Europe, 70% in North
America and the remaining 8% in Asia. From a product perspective, 35%
were processor shipments, Software sales represented 31% and the
remaining 34% was peripheral sales.
Costs
Cost of sales of u0.4 million increased 13% sequentially (Q4 2002:
u0.3 million, Q1 2002: u0.4 million), which resulted in a gross margin
of 87% (Q4 2002: 89%, Q1 2002: 85%). Total operating expenses
(excluding exceptional costs, amortisation of goodwill and
depreciation) of u7.1 million were down 1% over the previous quarter
and 4% year over year (Q4 2002: u7.2 million, Q1 2002: u7.5 million).
Research and development costs of u3.4 million increased 3%
sequentially and increased 13% year over year (Q4 2002: u3.3 million,
Q1 2002: u3.0 million). The increase was related to the development of
recent product launches. Sales and marketing costs of u2.4 million
decreased 5% sequentially and decreased 11% year over year (Q4 2002:
u2.6 million, Q1 2002: u2.7 million). General and administration costs
of u0.9 million decreased 5% sequentially and decreased 29% year over
year (Q4 2002: u1.0 million, Q1 2002: u1.3 million).
The Company had 209 employees at 31 March 2003 compared with 225 at 31
March 2002 and 198 at 31 December 2002.
Interest
Interest income remained the same as the prior quarter at u1.0 million
and decreased by u0.1 million year over year based on the lower cash
balance (Q4 2002: u1.0 million, Q1 2002: u1.1 million).
Net loss
The net loss prior to exceptional items was u4.4 million representing
a sequential improvement of 11% and a 19% improvement year over year
(Q4 2002: u4.9 million, Q1 2002: u5.4 million). The net loss number
includes an R&D related tax refund of u0.8 million. Loss per share
prior to exceptional items decreased to (1.45) p (Q4 2002: (1.63) p,
Q1 2002: (1.90) p). Net loss including exceptional items was u3.8
million (Q4 2002: u4.3 million, Q1 2002: u5.4 million). The u0.5
million exceptional item relates to the release of a provision for the
Ottawa restructuring following the executed lease termination in
Q12003.
Cash flow and balance sheet
The net cash outflow from operations was u5.4 million (Q4 2002: u4.3
million, Q1 2002: u6.0 million). Capital expenditure was u0.9 million.
The movement in net funds during the quarter was an outflow of u4.4
million. Net assets at 31 March 2003 were u111 million, including net
cash of u96.5 million.
ARC International plc
Consolidated profit and loss account
for the quarter ended 31 March 2003
3 months 3 months Year
ended ended ended
31 31 31
March March December
2003 2002 2002
(unaudited)(unaudited)(audited)
u'000 u'000 u'000
Turnover 2,891 2,731 11,702
Less: Operating costs
Goodwill amortisation (968) (1,022) (4,093)
Exceptional credit/(costs) 536 73 (1,501)
Other operating costs (8,059) (8,288) (32,488)
(8,491) (9,237) (38,082)
Loss before interest and tax (5,600) (6,506) (26,380)
Add: Interest receivable and similar
income 964 1,125 4,414
Less: Interest payable and similar
charges (1) - (11)
Loss on ordinary activities before tax (4,637) (5,381) (21,977)
Less: Tax on loss on ordinary
activities 821 (2) (69)
Retained loss for the period (3,816) (5,383) (22,046)
Basic loss per share (1.27)p (1.88)p (7.54)p
Diluted loss per share (1.27)p (1.88)p (7.54)p
Pre-exceptional loss per share (1.45)p (1.90)p (7.02)p
Summary of operating expenses
Operating costs
Cost of sales (387) (397) (1,323)
Research and development (3,400) (3,043) (13,052)
Sales and marketing (2,437) (2,734) (10,053)
General and administration (922) (1,299) (4,913)
Depreciation of fixed assets (913) (742) (3,147)
Amortisation of goodwill (968) (1,022) (4,093)
Exceptional costs - Provision
release 536 - 899
Exceptional costs - Restructuring - (2,400)
Total operating expenses (8,491) (9,237) (38,082)
-------------------------------
ARC International plc
Consolidated balance sheet
as at 31 March 2003
As at As at
31 31
March December
2003 2002
(unaudited) (audited)
u'000 u'000
Fixed Assets
Intangible assets 6,797 7,765
Investment in own shares 1,660 1,660
Tangible assets 6,239 6,419
14,696 15,844
Current Assets
Stock 89 88
Debtors 5,468 4,981
Investments - bank deposits 92,405 98,064
Cash at bank and in hand 4,121 2,921
102,083 106,054
Creditors - amounts fully due within one year (4,486) (4,578)
Net current assets 97,597 101,476
Total assets less current liabilities 112,293 117,320
Creditors - Amounts falling due after more than
one year - -
Provision for liabilities and charges (1,218) (2,566)
Net assets 111,076 114,754
Capital and reserves
Called up share capital 303 300
Share premium account 154,896 152,661
Exchangeable shares 1,807 4,040
Merger reserve 107 107
Other reserves 1,405 23,065
Profit and loss account (47,442) (65,419)
Total shareholders' funds 111,076 114,754
---------------------
ARC International plc
Consolidated cash flow statement
for the quarter ended 31 March 2003
3 months 3 months Year
ended ended ended
31 31 31
March March December
2003 2002 2002
(unaudited)(unaudited)(audited)
u'000 u'000 u'000
Net cash outflow from operating
activities (5,442) (5,963) (19,627)
Returns on investments, servicing of
finance and taxes paid
Taxes paid/received 832 - (81)
Interest received 904 1,317 3,732
Bank interest paid (1) - (11)
Interest element on finance lease
rentals - -
Net cash inflow from returns on
investments and servicing of finance 1,735 1,317 3,640
Capital expenditure and financial
investment
Purchase of tangible fixed assets (902) (1,322) (3,295)
Purchase of intangible fixed assets - - (64)
Disposal of tangible fixed assets 168 - -
Investment in own shares - - (1,660)
Net cash outflow from capital
expenditure and financial investment (734) (1,322) (5,019)
Net cash outflow before management of
liquid resources and financing (4,441) (5,968) (21,006)
Management of liquid resources
Movement on term deposits 5,659 5,861 21,337
Financing
Issue of ordinary share capital - IPO
and options 5 592 1,399
Capital element of finance lease
rentals - (1) (5)
Decrease in borrowings - - -
Net cash inflow from financing 5 591 1,394
(Decrease)/Increase in net cash during
the period 1,223 484 1,725
-------------------------------
About ARC International
ARC International pioneered the integrated development environment for
SoC design in an effort to minimize design risk for customers
developing next generation wireless, networking and consumer
electronics products. ARC introduced the industry's first
user-customizable 32-bit RISC/DSP processor core. In early 2000, ARC
became the first company to integrate the development tools,
peripherals, RTOS and software that enable the designer to better
design optimization and performance. ARC's approach to providing a
single source for the major SoC building blocks reduces the number of
IP suppliers, reduces cost, reduces the risk of system-on-chip design
and reduces time-to-market.
ARC's products include:
-- The ARCtangent(TM) user-customizable 32-bit RISC/DSP processor;
-- An industry-leading family of high-speed and full-speed USB OTG and
other peripherals;
-- MetaWare(R) C/C++ Compiler, the most popular integrated software
development tool suite for SoC design;
-- SeeCode(TM ), the leading tool for simultaneous, multi-processor
debugging;
-- Precise/RTCS(TM), embedded Internet stack and related software
protocols;
-- Precise/MQX(TM), a scalable real-time operating system (RTOS).
-- ARC's software tools, RTOS and embedded software are also available
for ARM, PowerPC and MIP's processors.
ARC International employs approximately 200 people in research and
development, sales and marketing offices across North America, Europe
and Asia. Full details of the company's locations and other
information are available on the company's website, www.ARC.com. ARC
International is listed on the London Stock Exchange as ARC
International plc (LSE:ARK).
Statements made in this report that are not historical facts include
forward-looking statements that involve risks and uncertainties.
Important factors that could cause actual results to differ from those
indicated by such forward-looking statements include, among others,
market acceptance of the ARC technology; fluctuations in and
unpredictability of the Company's quarterly results; general economic
and business conditions; regulatory policies adopted by governmental
authorities; assumptions regarding the Company's future business
strategy; changes in technology; competition; ability to attract and
retain qualified personnel; risks associated with the Company's
international operations; and other uncertainties that are discussed
in the "Investment Considerations" section of the Company's listing
particulars dated 28 September 2000 filed with the United Kingdom
Listing Authority and the Registrar of Companies in England and Wales.
The Company disclaims any intention or obligation to update any
forward-looking statements as a result of developments occurring after
the date such statement was first made
ARC, the ARC logo, ARCtangent, USB Now and WLAN Now are trademarks of
ARC International. All other brands or product names are the property
of their respective holders.
Short Name: Arc Intl PLC Category Code: QRF QRF - Place of Return (radiotelegraphy) QRF - Quality Results Formula (sports teams) QRF - Quick Reaction Force QRF - Quick Release Fitting QRF - Quick Response Force Sequence Number: 00004185 Time of Receipt (offset from UTC): 20030422T184801+0100 |
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