Arm Holdings plc

Good day, and thank you for standing by. Welcome to the armed fourth quarter fiscal year ending 2024 conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker, Ian Thornton, Vice President of Investor Relations. Please go ahead.

Thank you very much. Good morning, good afternoon, everybody. My name is Ian Thornton, and I'm the Head of Investor Relations at Arm. I would like to welcome everyone to our earnings conference call for the fourth quarter of the fiscal year ending March 31st, 2024. I'm joined today by Reni Haas, the Chief Executive Officer of Arm, and Jason Child, Arm's Chief Financial Officer. Hopefully, you will all have downloaded and read the shareholder letter. If not, it is available on the Arm Investor Relations website at investors.arm.com. The shareholder letter provides a rich update on our strategic progress in the quarter. Before we begin, I'd like to remind everyone that during the course of this conference call, Arm will discuss forecasts, targets, and other forward-looking information regarding the company and its financial results. While these statements represent our best current judgments about future results and performance as of today, our actual results are subject to many risks and uncertainties that could cause actual results to differ materially from what we expect. In addition to any risks that we highlight during this call, important risk factors that may affect our future results and performance are described in our registration statement on form F1 filed with the SEC on September the 14th, 2023. ARM assumes no obligation to update any forward-looking statements which speak only as of the date they are made. In addition, we will refer to non-GAAP financial measures during the discussion. Reconciliations of certain of these non-GAAP financial measures to their most directly comparable GAAP financial measures and a discussion of certain projected non-GAAP financial measures that we are not able to reconcile without unreasonable efforts and supplementary financial information can be found in the shareholder letter that we released earlier today. The shareholder letter and other earnings-related materials are available on our website at investors.arm.com. And with that, I'll turn the call over to Rene, who has some prepared remarks.

Thank you, Ian, and hello, everyone. So I'm just going to make a few comments to kick off the call, and then I'll pass it over to Jason. But in summary, this quarter, Q4, obviously being the end of our fiscal year, was just outstanding. We have record revenues for this quarter, And for our first fiscal year as a public company being completed, also record revenue, exceeding the high end of the guidance range. More specifically, for Q4, revenue is up 47% year on year. Royalty is up 37% year on year. And this is really driven by acceleration of V9 adoption, which I'll speak about a little bit more, and also licensing up 60% year on year. which is really a function of increased R&D investment to capture the huge opportunity that is all things AI. Now, in looking back, the expansion strategies that we talked about during our roadshow and at IPO are now all driving growth for the company. As mentioned, we had significant royalty growth in the last quarter, up year on year 37%, really driven by V9 adoption. And what we're seeing is the acceleration of V8 to V9, which drives not only better royalties, but we're also seeing more CPUs inside the chip, which compounds that royalty growth really across all end markets. And the significant driver for that in client has been around smartphones, but broadly, we also see that in our infrastructure business as well. And B9 adoption will only continue to increase. In the last quarter, we've also seen proof points of our diversification strategy. Google, the latest hyperscaler, announced their Axion processor based on ARM, custom chip intended for the data center. They chose us largely because of our compute efficiency, but also the ability to not only have a high-performing chip, but to design an increasingly performant blade, rack, and system for a fantastic TCO. We also announced our very first autonomous solutions based on V9. This is very, very significant as we're now bringing V9 performance to the automotive sector with automotive enhanced features such as functional safety. And we expect huge growth around this area. And we also have introduced the lowest power transformer on the planet, the Ethos U85 for IoT-based designs. One of the strategies we put in place that we are most comfortable with in terms of its growth but very confident in terms of its trajectory is around our what we call compute subsystems. And these are essentially taking blocks of IP, putting them together into a full solution, verified and validated that saves customers huge time to market and also gives them a highly performance solution. So we announced our V3 NeoVerse CSS this quarter, which will give increased performance and benefits to customers. The first automotive CSS is now in discussions with our key partners, to customers in terms of time to market and efficiency. And our first customer in the Neoverse space doing a design, Microsoft, their cobalt chip is now ramping. But probably from a more exciting standpoint, we are oversubscribed on this compute subsystem strategy. We have far more demand for the product than anticipated, and we are anticipating growing that significantly over time. Every end market that we approach has a need for CSSes, and we're very excited about talking about them in the future. All of this is also being driven by AI. What we are seeing is because ARM is the largest installed base of CPUs on the planet and has over 70% of the world's population using those CPUs, it's natural that as these AI workloads are now being moved from anywhere from the edge devices to the training data center that they need support from an ARM CPU standpoint. So whether it's from cloud to edge, from GPT to LAMA, all AI workloads rely and run on ARM. And we only see this increasing. Our licensing activity is probably the best proxy for that. The way to think about licensing revenue as it applies to AI is as software is moving faster than hardware, the hardware designs need to be upgraded quickly to make sure they can capture the needs of these new AI workloads. So because of that, we have seen huge growth in our licensing activity. We talked about that last quarter and it continued this quarter. So based upon this, we are very, very confident of our growth outlook for the upcoming year. This past year was over 20% revenue growth, and we expect that to be even better than that in this year and the upcoming years. Our growth has been accelerating. Lastly, it's taken ARM 20 years to get to $1 billion in revenue. It took us 10 years to get to $2 billion. This year, we passed $3 billion in only two years after our first $2 billion year, and we expect to be near $4 billion this year. The future is very bright, and we'll run on ARM, and I could not be more excited about the future that we have. And with that, I'll turn it over to Jason.