3rd Quarter & 9 Mths Results

Arc International PLC 15 November 2000 ARC International plc Releases Third Quarter Results Elstree, England - 15 November 2000: ARC International plc ('ARC International' or the 'Company'; LSE: ARK.L), a leading designer and developer of customisable, high-performance microprocessor cores and related intellectual property solutions, today announced results for the third quarter and the nine months ended 30 September 2000 - its first set of results since admission to the Official List of the United Kingdom Listing Authority in September 2000. Highlights of the results include: * Turnover increased to £3.2 million for the three months ended 30 September 2000, over 30% ahead of the previous quarter * Entered into strategic alliance with Xilinx (XLNX.US) * Major new licensee - SanDisk (SNDK.US) * Announcement of Tangent(TM)-A4 processor Bob Terwilliger, Chief Executive Officer, commented: 'I am delighted to announce a particularly strong set of results for our first quarter reporting as a public company. We are pleased to announce an increase in turnover of over 30% from the previous quarter to £3.2 million. We believe that the business of ARC International continues to demonstrate significant growth in the number of licensees of our technology. The new strategic alliance with Xilinx, together with the license of our technology by SanDisk, that we are announcing today complements the quality and breadth of our existing relationships. We believe that we are well positioned for the fourth quarter and the year ended 31 December 2000.' Chief Executive's report I have pleasure in presenting the report of ARC International for the three months and the nine months ended 30 September 2000. This is our first set of results since admission to the Official List of the United Kingdom Listing Authority in September 2000. In our initial public offering, we raised £126.3 million (net of expenses). Developments in the three months ended 30 September 2000 Highlights during the quarter were the announcements of a strategic alliance with Xilinx, SanDisk as a major new licensee of ARC's microprocessor and the appointment of distinguished scientist, Keith Diefendorff, to Vice President of Research. Xilinx pioneered the field programmable gate array (FPGA), a type of electronic device allowing designers to build the systems they develop onto a chip instantly rather than have it manufactured at a semiconductor foundry. We believe that this newly forged alliance is a significant industry development and will make ARC's Tangent processor available in Xilinx devices from a worldwide network of design centres. SanDisk is a designer and manufacturer of flash data storage products for applications like Internet music players, smart phones, digital cameras, and handheld computers. SanDisk chose ARC's processor for its next generation mass storage flash controllers. Keith Diefendorff is a distinguished scientist and over the last 25 years, he has played a central role in developing microprocessor architectures for Motorola (MOT.US), Apple Computer (APPL.US), IBM (IBM.US), Texas Instruments (TXN.US) and NexGen/AMD (AMD.US). He joined ARC International in July to establish a research and development group at ARC's North American headquarters in San Jose, California. Developments subsequent to 30 September 2000 At the Microprocessor Forum in the USA in October, ARC International announced its newest generation microprocessor, the Tangent-A4. Significant benefits of this new processor are the ability to integrate hardware and software intellectual property elements of the technologies available from ARC International's subsidiary companies, MetaWare, Precise Software Technologies and VAutomation, as well as third party companies. Trading for the Nine Months and Three Months Ended 30 September 2000 The strong quarter ended 30 September 2000 has lifted turnover in the nine months ended 30 September 2000 to £7.1 million, generating a gross profit of £6.5 million representing a gross margin of 92% in the same period. Turnover in the three months ended 30 September 2000 was £3.2 million, an increase of 31% over the three months ended 30 June 2000. This increase was primarily attributable to an increase in the number of the Company's customers and an increase in licence fees. The Company's design licenses have increased to 56 licenses from 35 customers at 30 September 2000 from 44 licenses from 28 customers at 30 June 2000. License fees in the nine months ended 30 September 2000 were £5.5 million. Licence fees increased 31% to £2.5 million in the three months ended 30 September 2000 from £1.9 million in three months ended 30 June 2000. This increase was attributable to an increase in the Company's customers. Maintenance and services revenue in the nine months ended 30 September 2000 was £1.2 million. Maintenance and services revenue increased 23% to £534,000 in the three months ended 30 September 2000, from £433,000 in the three months ended 30 June 2000. Royalty revenue in the nine months ended 30 September 2000 was £346,000. Royalty revenue in the three months ended 30 September 2000 was £135,000. To date, the Company has not recognised significant revenue from royalties. The Company expects to recognise significant royalty revenue as its customer base commences production of end-products which incorporate the Tangent processor. Cost of sales in the nine months ended 30 September 2000 was £571,000. Cost of sales increased 23% to £274,000 in the three months ended 30 September 2000, from £223,000 in the three months ended 30 June 2000. Research and development expense in the nine months ended 30 September 2000 was £5.7 million. Research and development expense increased 39% to £2.6 million in the three months ended 30 September 2000, from £1.8 million in the three months ended 30 June 2000. Sales and marketing expense in the nine months ended 30 September 2000 was £6.3 million. Sales and marketing expense increased 12% to £2.7 million in the three months ended 30 September 2000, from £2.4 million in the three months ended 30 June 2000. General and administrative expense in the nine months ended 30 September 2000 was £3.1 million. General and administrative expense was £1.1 million in the three months ended 30 September 2000 compared to £1.4 million in the three months ended 30 June 2000. Significant progress has been made in recruiting new staff to grow our research and development and sales and marketing departments. At 30 September 2000 our headcount was 268, an increase of 30% from 206 at 30 June 2000, and over 200 more than at 30 September 1999. The general level of overheads reflects the increase in staffing levels mentioned above, and our continued investment in research and development together with the necessary increase in sales and marketing expertise. Amortisation of goodwill in the nine months ended 30 September 2000 was £1.0 million the same charge as in the three months ended 30 June 2000. In the nine months ended 30 September 2000, a provision of £1.3 million was made for employer's UK National Insurance contributions on the potential gain on options granted after 5 April 1999 under employee share option plans that have not been approved by the UK Inland Revenue. The net loss in the nine months ended 30 September 2000 was £11.7 million. The net loss in the three months ended 30 September 2000 was £5.3 million compared to a net loss of £4.0 million for the previous quarter, reflecting the continued investment in Research and Development and Sales and Marketing resources. Balance Sheet Following the listing on the London Stock Exchange the balance sheet has been strengthened by the injection of funds. Net assets at 30 September 2000 were £169.4 million and included net cash of £152.2 million. Cash Flow Net cash outflow from operations in the nine months ended 30 September 2000 was £7.7 million, with net interest income of £0.7 million, capital expenditure of £2.0 million and £3.0 million representing the cash element for the acquisitions of Precise and VAutomation in March 2000. Outlook The fourth quarter has started well and we are looking towards a successful conclusion to our first year as a quoted public company. Bob Terwilliger Chief Executive Officer For further information, please contact Bob Terwilliger CEO, ARC International Plc 020 8236 2800 Simon Poulton CFO, ARC International Plc 020 8236 2800 Sue Pemberton Citigate Dewe Rogerson 020 7638 9571 All the above will be available on 020 7638 9571 on 15 November. More information on ARC International is available at www.arccores.com. ARC and Tangent-A4, are trademarks of ARC International (UK) Limited/ARC International plc. All other brands or product names are the property of their respective holders. Statements made in this press release 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. ARC International plc Consolidated profit and loss account for the nine months ended 30 September 2000 and 1999 3 months 9 months 9 months ended ended ended 30 September 30 September 30 September 2000 2000 1999 (unaudited) (unaudited) (unaudited) £'000 £'000 £'000 --------------------------------------- Turnover 3,195 7,058 1,225 Operating costs --------------------------------------------------------------------- Goodwill amortisation (1,019) (2,359) (251) Other operating costs (7,848) (17,021) (4,188) --------------------------------------------------------------------- --------------------------------------- Loss before interest and tax (5,672) (12,322) (3,214) Interest receivable and similar income 418 679 95 Interest payable and similar charges (4) (15) (3) --------------------------------------- Loss on ordinary activities before tax (5,258) (11,658) (3,123) Tax on loss on ordinary activities - - - --------------------------------------- Retained loss for the period (5,258) (11,658) (3,123) ======================================= US GAAP format consolidated profit and loss account Turnover 3,195 7,058 1,225 --------------------------------------- Gross Profit 2,921 6,487 997 Operating costs Research and development (2,552) (5,729) (2,031) Sales and marketing (2,667) (6,328) (1,448) General and administration (1,130) (3,124) (481) NIC on share options (1,225) (1,269) 0 --------------------------------------- Total operating expenses (7,574) (16,450) (3,960) Amortisation of goodwill (1,019) (2,359) (251) --------------------------------------- Loss before interest and tax (5,672) (12,322) (3,214) Interest receivable and 418 679 95 similar income Interest payable and similar (4) (15) (3) charges --------------------------------------- Loss on ordinary activities (5,258) (11,658) (3,123) before tax Tax on loss on ordinary activities - - - --------------------------------------- Retained loss for the period (5,258) (11,658) (3,123) ======================================= ARC International plc Consolidated statement of total recognised gains and losses for the nine months ended 30 September 2000 and 1999 3 months 9 months 9 months ended ended ended 30 September 30 September 30 September 2000 2000 1999 (unaudited) (unaudited) (unaudited) £'000 £'000 £'000 Loss for the period (5,258) (11,658) (3,123) Currency translation difference (115) (264) - --------------------------------------- Total loss for the period (5,373) (11,922) (3,123) ======================================= ARC International plc Consolidated balance sheet as at 30 September 2000 and 1999 As at As at 30 September 30 September 2000 1999 (unaudited) (unaudited) £'000 £'000 Fixed Assets Intangible assets 17,374 1,355 Tangible assets 2,520 591 --------------------------- 19,894 1,946 --------------------------- Current Assets Debtors 5,071 1,002 Cash at bank and in hand 130,829 2,773 Investments 21,417 - --------------------------- 157,317 3,775 Creditors - Amounts within one year (7,840) (1,293) Net current assets 149,477 2,482 --------------------------- Net Assets 169,371 4,427 =========================== Capital And reserves Called up share capital 270 43 Share premium account 149,013 6,649 Profit and loss account (9,658) (2,372) Other reserves 29,746 107 --------------------------- Total shareholders' funds 169,371 4,427 =========================== ARC International plc Consolidated cash flow statement for the nine months ended 30 September 2000 and 1999 9 months 9 months ended ended 30 September 30 September 2000 1999 (unaudited) (unaudited) £'000 £'000 Net cash outflow from operating activities (7,661) (3,080) Returns on investments and servicing of finance Interest received 664 95 --------------------------- Net cash inflow from returns on investments and servicing of finance 664 91 Capital expenditure and financial investment (1,994) (168) Acquisitions (2,933) - --------------------------- Net cash outflow before management of liquid resources and financing (11,924) (3,157) Financing - issue of ordinary share capital - IPO 126,331 0 Financing - issue of ordinary share capital - Private Placing 31,971 3,263 --------------------------- Movement in net cash in the period 146,378 106 Net funds at beginning of period 5,815 2,667 --------------------------- Net cash at end of period 152,193 2,773 =========================== 1. Reconciliation of operating profit to operating cash flow for nine months ended 30 September 2000 and 1999 30 September 30 September 2000 1999 (unaudited) (unaudited) £'000 £'000 Operating profit (12,322) (3,214) Depreciation and amortisation charges 434 157 Amortisation of goodwill 2,359 251 Profit on disposal of fixed asset - - Share option grant credit 137 - (Increase)/decrease in debtors (2,226) (636) Increase/(decrease) in creditors 3,957 362 --------------------------- Net cash flow from operating activities (7,661) (3,080) --------------------------- 2. Distribution Copies of this quarterly statement are being sent to shareholders of record on 20 November 2000. Further copies of this quarterly statement will be posted on the Company's website at www.arccores.com and may be obtained from the Company's registered office located at ARC House, Waterfront Business Park, Elstree Road, Elstree, Herts. WD6 3BS. The financial information contained in this press release does not constitute statutory accounts within the meaning of Section 240 of the Companies Act 1985. Statutory accounts of the Company in respect of the financial year ended 31 December 1999 have been given a report by the Company's auditors which was unqualified and did not contain a statement under Section 237(2) or Section 237(3) of that Act.

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