Full Year Results FY2012-13 - Imagination...

© Imagination Technologies Full Year Results June 2013 p1 www.imgtec.com

19th June, 2013

Full Year Results FY2012-13

© Imagination Technologies Full Year Results June 2013 p2

Agenda

Welcome and Introduction Geoff Shingles, Chairman

Financial Results Richard Smith, CFO

Business & Technology Update Hossein Yassaie, CEO

Q&As

Product Demonstrations


Highlights

Group

Good progress strategically and organisationally

Technology

Unit shipments and royalties ahead of plan

Weaker than expected second half licensing due to short term industry and regional transitions

Demand for all our technologies remains high

MIPS acquisition progressing well

Pure

UK and some export markets remained tough

An important driving force for our technologies

Home multimedia and automation a key focus

Geared up for next phase of growth


Financial Overview


Group revenue

34 28 29 26

47 70

98 125

0

20

40

60

80

100

120

140

160

09/10 10/11 11/12 12/13

Gro

up r

evenu

e

£m

Technology PureMomentum continues

28% increase in

technology revenue

49% growth in royalty revenue


Group adjusted profit & loss

12/13

Underlying

£m

12/13

MIPS

£m

12/13

Total

£m

11/12

£m

Change

%

Revenue 143.3 8.2 151.5 127.5 19%

Gross profit 122.7 7.9 130.6 106.5 23%

Gross profit margin 86% 96% 86% 84%

Operating expenses (91.5) (6.8) (98.3) (69.8) 39%

Foreign exchange 1.1 - 1.1 -

Adjusted operating profit 32.3 1.1 33.4 36.7 (9)%

Adjusted operating profit margin 22% 13% 22% 29%

Interest and financing income 0.9 - 0.9 0.1

Adjusted profit before tax 33.2 1.1 34.3 36.8 (7)%

- Positive contribution from MIPS - Operating expenses in line with guidance


Group profit reconciliation 12/13

£m

11/12

£m

Adjusted profit before tax 34.3 36.8

Share based remuneration expenses (11.3) (10.3)

Acquisition related charges:

Amortisation of intangible assets (4.2) (2.7)

Acquisition costs (2.7) -

Adjustment to deferred consideration - 4.0

Gain on investments 1.8 0.8

Impairment of investments (5.7) (0.1)

Reported pre-tax profit 12.2 28.5

Taxation (5.9) (8.0)

Reported profit after tax 6.3 20.5

Earnings per share 2.4p 8.0p

- Amortisation of intangibles increased due to MIPS acquisition - Acquisition costs of £2.7m


Technology

12/13

Underlying

£m

12/13

MIPS

£m

12/13

Total

£m

11/12

£m

Change

%

Revenue

Royalties 89.5 5.6 95.1 63.8 49%

Licensing 26.5 2.6 29.1 34.4 (15)%

Other 1.5 - 1.5 -

Total revenue 117.3 8.2 125.7 98.2 28%

Profit * 38.8 1.1 39.9 39.6 1%

Margin * 33% 13% 32% 40% * Adjusted operating profit

- Royalties - 535m units shipped in the year. Royalty rate maintained in H2

- MIPS contributed £8m of revenue and £1m of profit from 7 February to 30 April


Pure

12/13

£m

11/12

£m Change %

Revenue 25.8 29.3 (12)%

Profit * (6.4) (2.9)

* Adjusted operating profit

- UK and some export markets tough

- Loss increased due to difficult environment and investment in new strategic products

21 26

21 18 16

6

8

7 11

10

0

5

10

15

20

25

30

35

40

08/09 09/10 10/11 11/12 12/13

Reve

nu

e

£m

International

UK


MIPS acquisition – Balance Sheet

£m

Fixed assets 2.0

Trade and other receivables 15.9

Cash

Corporation Tax 56.3

Transaction costs 18.0

Other costs 8.0

82.3

Trade and other payables (18.1)

Tax liability (56.3) Paid 14 June 2013

Other transaction costs (18.0) Paid February 2013

Net assets acquired 7.8

- £82.3m of cash acquired as part of transaction

- £56.3m to settle tax liabilities and £18.0m to settle other transaction expenses

- Other balance sheet items broadly net off


MIPS acquisition – fair value accounting

Consideration represented as:

£m

Net assets 7.8

Intangible assets 50.1 Annual amortisation of £4.8m

Goodwill 23.2

Deferred tax liability (17.2)

63.9 = $100m consideration

- $100m consideration has been allocated based on fair value

- Intangible assets represents the value assigned to technology, trademarks and customer relationships


Group cash flow 12/13

£m

11/12

£m

Operating cash flows 34.0 39.6

Working capital movements (15.8) (10.5)

Net operating cash flows 18.2 29.1

Investments (7.4) (2.8)

Capital expenditure (24.0) (9.6)

Acquisitions – MIPS (2.2) 0.0

Acquisitions – Others (1.9) 0.0

Net financing 25.4 (0.1)

Taxes paid (1.2) (1.2)

Issue of shares, interest etc 1.9 1.4

Exchange fluctuations 1.5 0.1

Net increase 10.3 16.9

Opening cash position 66.3 49.4

Closing cash position 76.6 66.3

Working capital movements in line with

royalty growth

£35m of £65m property redevelopment now

complete

MIPS – small cash impact in period

(£56.3m tax outflow in June 2013)

Net financing – term loan of £30.9m and

repayment of £5.5m of mortgage


Business Update


Company overview

Leading silicon, software & cloud IP supplier

Multimedia, processors, communications, cloud

Licensing & royalties based business model

Targeting high volume, high growth markets

Semiconductor manufacturers and OEMs

Mobile, home consumer, automotive,

storage, networking, infrastructure, IoT

Pure: our strategic product division

Digital radio, connected audio, home automation

Established technology powerhouse

Founded 1985; London FTSE 250 (IMG.L); ~1,500 employees

UK HQ; global operations

Comprehensive IP

portfolio for SoCs

& cloud connectivity

IP business pathfinder

Market maker/driver

Cloud Multimedia

General Processing


Broadening our TAM Each step of our IP technology expansion takes us into new & larger target markets

PowerVR

Graphics

Video & Vision

Ensigma

Communications

MIPS

Processors

All consumer, mobile

& embedded SoCs;

Internet of Things

Multimedia for mobile

consumer

automotive

All classes of SoC

& embedded devices

IP Technologies Target Markets


In more products than ever before

Note: now includes MIPS

More than 5 billion products

3 million per day

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Technology business update - 1

Technology revenues up 28%

Licensing: £29.1m including £2.6m MIPS (2012: £34.4m)

Royalties: up 49% to £95.1m including £5.6m MIPS (2012: £63.8m)

Shipments: 700m units (2012: 325m)

Comprises 535m from Imagination + 165m from MIPS

Substantial volume growth across many partners and market segments

Very strong penetration in emerging markets

Non-MIPS volume driven by mobile/tablets and accelerating in TV & STBs

Partner SoCs: 158 (2012: 136)

In Volume Production: 84 (2012: 60)

Note: MIPS figures only for last 12 weeks of period


Technology business update - 2

Licensing behind plan 2nd half – short term issue

Many new and extended agreements Allwinner, Greenplug,

Intel, LG, MediaTek, Realtek, Renesas, Samsung, ST,

ST-Ericsson, TI, Toumaz

Several new partners including Entropic, Ineda, Metaio, Socle

20 important agreements involving around 35 IP core licenses

PowerVR Series6: first products now shipping

LG shipping in TVs; Renesas announced products

Many more to launch over remaining CY 2013

MIPS

Excellent feedback and co-operation with MIPS partners

Growing enthusiasm for new MIPS roadmap

Note: Summary excludes MIPS except as stated


Strategic progress

Faster than expected growth in unit shipments

Strengthening penetration in all key target markets

Both geographically and by segment

Key strategic acquisition of MIPS

Accelerating our growth in the large and growing

processor IP market

PowerVR leading graphics & video markets

New PowerVR technologies – Vision and Ray Tracing

Notable licensing revenues for Ensigma communications

Flow technology generating strong initial response


Partner chip design & shipment N

o.

of

So

Cs

So

C V

olu

me

(m

Un

its)

40 50

67 78

91

115

136

158

13 18 26 29

37

48 60

84

0

20

40

60

80

100

120

140

160

180

mar-06 mar-07 apr-08 apr-09 apr-10 apr-11 apr-12 apr-13

11.9 25.7 47 86

126

245

325

535

0

100

200

300

400

500

600

mar-06 mar-07 apr-08 apr-09 apr-10 apr-11 apr-12 apr-13

Shipping

Total

Excluding MIPS


Design wins by market

48

8

39

25

20

16 Mobile Phones

Handheld Multimedia

Home Consumer

Mobile Computing

Automotive

Emerging Markets

We continue to strengthen the diversity of SoCs across all our market segments

Total: 158

Excluding MIPS


MIPS CPU IP

0

200

400

600

800

1000

1200

1400

1600

FY2006 FY2007 FY2008 FY2009 FY2010 FY2011 FY2012 FY2013 FY2016 Future

Scaling the business to the next level…

Our goal has been to achieve around 1 billion units/annum shipments…

Vo

lum

e m

Un

its

Note: target set prior to acquisition of MIPS

Imagination IP pre MIPS acquisition


Organisation and infrastructure

Support closer to our growing

customer base

Sales and business development

operations

Segment marketing and ecosystem

activities

R&D across all product families

Strengthening every aspect of the organisation

Gearing up for the next phase of growth


The leading multimedia solution

GPU Graphics

Series5 ‘SGX’ the world’s most widely deployed mobile GPU

Series6 ‘Rogue’ recognised as the benchmark for embedded GPUs

Leading performance and power metrics

Over 20 design wins

First product shipments started; significant volume during this FY from multiple partners

New Series6XT family coming later this year

Demand for high performance graphics within tight power envelope

Latest UI trends, increasing resolution and advanced gaming all driving graphics demand

Low end is moving higher

Industry’s leading GPU technology and roadmap


The leading multimedia solution

GPU Compute Taking offload to the next stage

No compromise in mix between graphics and compute

Superior power and area to get the job done

Latest Samsung Galaxy S4 first mainstream smartphone to support OpenCL

Rogue will take GPU Compute to a new level

Video By far the most successful video decode and encode IP family in the industry

New Series5 video cores lead industry with 4K, 10bit colour, next generation HEVC/H.265

Vision

Important complementary technology with significant potential

Demonstrating leadership in multimedia IP


GPU power efficiency and thermal impact

High power consumption = heat = risk of thermal panic = reduced performance

Thermal shutdown of GPU = Performance Hit

Data courtesy of Anandtech.com

Competitor B

PowerVR

Competitor A


Video power consumption Transcode example

Data courtesy of Anandtech.com

Competitor B

PowerVR

VXD & VXE

(Intel Clovertrail )

Competitor A

PowerVR video requires

lower power & gives

higher performance –

finishes first

Transcode Power consumption


Innovation in GPUs: Ray Tracing The behaviour of light is not inherently supported in conventional graphics

• Current graphics use ‘pre-baked’

lighting to emulate reflections,

shadows etc

• Never looks realistic

• Not dynamic, so limits freedom of

content creation

• Hardware Ray Tracing Unit (RTU)

models light inherently, so every

scene delivers rich image realism

• Content creation is much simpler

PowerVR Ray Tracing is uniquely efficient and will be disruptive


Creating a new force in CPUs Most efficient ‘true RISC’ architecture

Performance, power consumption, architectural elegance

Strong installed base and substantial ecosystem

Provide certainty on the future Build on existing diverse and strong customer relationships

Develop other key market segments & ecosystem

Market leading and comprehensive product roadmap Build on the Aptiv product range

Compelling next generation MIPS Series5 ‘Warrior’ family of CPU IP cores

Coverage across all key segments

Exploit increasingly open OS and app portability

Giving the electronics industry a real choice for CPU IP

Networking

Infrastructure

Enterprise

Wearable

computing

Tablets

Set-Top Box


CPUs: everywhere and growing

Every product has many CPUs and MCUs

CPUs are everywhere – it’s an enormous and growing IP market

Smart Phone:

5-10 CPUs

Smart Car:

30-50 CPUs

Smart House:

100s of CPUs


The ultimate comms processor

Programmable connectivity plus TV/radio

Efficient, always-on, ultra low power

Completely different to CPU or GPU

Programmable + configurable engines

Complex dataflow at various speeds

Multi-standard - integrated or stand alone…

Today: stand alone connectivity chips

Tomorrow: integrated baseband on SoC with serial link to RF

or highly integrated low cost SoCs with RF on chip targeting IoT

Driving the connected revolution

Ensigma RPU is a real enabler for all forms of integrated communications


Making the Internet of Things reality

Simple, well-defined APIs

Basic services “shrink-wrapped”

System architecture to allow devices

to communicate to one another and

share services & content

Subscriptions & transaction-based

revenues

The Flow technology platform enables the connectivity for everything

Flow-enabled

platform

Flow directory

servers &

baseline services

Flow Partner

service providers

User app built

using Flow

Enabling domain experts to focus on what they know best


Imagination market forecast – June 2013

Market Segment TAM* 2017

M Units SAM** 2017

M Units Potential

Share of SAM Description

Mobile Phone 2,113 1,870 35%-60% Phones

Handheld Multimedia 232 179 30%-50% Media players, cameras, games

consoles

Home Consumer 805 750 20%-50% TV/STB, radio/audio, DVD/BluRay;

photo frames, media servers

Mobile Computing 705 527 30%-50% Tablets, mobile PCs

In-car Electronics 96 92 15%-30% Navigation, PND, dashboards,

communications

Networking 1,982 853 30%-50% Access points & CPE; service

providers; enterprise; storage

Total 5,933 4,271

* TAM = Total Available Market in the segment (e.g. total number of handsets per year)

** SAM = Serviceable (by Imagination) Available Market in the segment (i.e. the number of “non-captive” chips that could use Imagination’s IP) Including MIPS


Three phase strategy Helping drive Imagination’s objectives in strategic markets

Phase 1: Drive and penetrate digital radio

Adoption across all categories

Global opportunities

Phase 2: Drive and enable wireless home revolution

Deliver market changing audio devices & apps

Wireless home content delivery everywhere

Subscription-based services

Phase 3: Lead the way in IoT home automation & eLife

Deliver solutions for connected home, security, energy, assisted living

Leveraging connected processors and Flow and ecosystem partners

A key element of our ‘Internet of Things’ strategy


Product & platform development Wireless streaming and internet connected

Jongo range uses patented synchronisation method

Cloud-based services

iPad, iPhone and Android apps; advanced user experience

Connected Set-Top Box

Avalon Freeview+ HD

In-car radio and audio

Strong engagements with leading car manufacturers

Broadcast radio

Strengthening core and premium product ranges

Strategic engagements

Onkyo, VW group, Universal Music Group, Alpine, Pioneer


Jongo multiroom wireless speakers

Jongo allows you to add as many

speakers in as many rooms as you like

With Bluetooth you can stream music

to one speaker at a time

With Wi-Fi go multiroom and

seamlessly play your music through

multiple speakers in multiple rooms

Unique patented low latency audio distribution over Wi-Fi

Licensable IP will be announced and available shortly – strong interest already


Technology Trends


Electronics industry trends Everything is becoming ‘smart’ Everything is programmable, upgradable and connected

Relies on multimedia (entertaining, easy to use) and connectivity (content, social)

Internet of Things – everything connected Will lead to 10bn+ market – bigger than mobile

Wearable electronics will make everyone more connected that ever before

LTE further liberating smartphones Will radically change how voice and data are transmitted

1080P => 4K and beyond displays TV screens growing in resolution; becoming more multi-purpose

4K is happening now - unstoppable

Combination of video & non-video data, e.g. social networking

Apps will not rely on CPU ISA for performance Performance apps not tied into CPU ISA going away thanks to LLVM, binary

translation and HTML5 and Apps stores

Android already available on devices that use MIPS, ARM, Intel CPUs


Heterogeneous SoCs is the future Processors for each key function optimises programmability, area, power

We are well placed to drive and ride all key trends

GPU

VPU

RPU

CPU Unified Memory

Other devices & the

Internet


Conclusions

FY2013 Summary:

Technology:

Chip volume ahead of target

Licensing slower than expected and recovering

MIPS acquisition proceeding well

Pure:

New products set Pure on track for improvement in coming year

Continued tough environment in UK and some export markets

Future Outlook:

Licensing pipeline remains robust, but with usual uncertainty

Unit shipments and royalties set to grow strongly

Pure will improve financial performance medium term

Technology and organisation

foundations are set for next stage of growth


June 2013

Q&A and Demonstrations

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