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United States securities and exchange commission logo
May 25, 2023
Spencer Collins
Chief Legal Officer
Arm Holdings Limited
110 Fulbourn Road
Cambridge CB1 9NJ
United Kingdom
Re: Arm Holdings
Limited
Draft Registration
Statement on Form F-1
Submitted on April
28, 2023
CIK No. 0001973239
Dear Spencer Collins:
We have reviewed your draft registration statement and have the
following comments. In
some of our comments, we may ask you to provide us with information so
we may better
understand your disclosure.
Please respond to this letter by providing the requested
information and either submitting
an amended draft registration statement or publicly filing your
registration statement on
EDGAR. If you do not believe our comments apply to your facts and
circumstances or do not
believe an amendment is appropriate, please tell us why in your
response.
After reviewing the information you provide in response to these
comments and your
amended draft registration statement or filed registration statement, we
may have additional
comments.
Draft Registration Statement on Form F-1
Risk Factors
Actual or perceived security vulnerabilities in our information
technology systems, including
cyberattacks, security breaches..., page 41
1. We note that you may be
subject to cyberattacks. Please update your risks characterized
as potential if you
have experienced a cyberattack.
SoftBank's interests may conflict with our own interests and those of
holders of our ADSs., page
52
2. We note your disclosure
that SoftBank is not restricted from competing with you or
Spencer Collins
FirstName LastNameSpencer Collins
Arm Holdings Limited
Comapany
May NameArm Holdings Limited
25, 2023
May 25,
Page 2 2023 Page 2
FirstName LastName
otherwise taking for itself or its other affiliates certain corporate
opportunities that may be
attractive to you. Please revise your cross-reference here to clarify
which related party
transaction this applies to.
Risks Relating to this Offering and Ownership of Our Securities, page 59
3. Please revise to add a risk factor regarding the deposit agreement s
limitations on
obligations and liabilities that are discussed on pages 175 and 176.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Key Factors and Trends Affecting Our Operating Results, page 78
4. We note your disclosures about your two non-recourse facilities with
SoftBank and
SoftBank Vision Fund, such as on page 141. Please revise to discuss
any known trends,
uncertainties, and commitments, such as the recurrence of these
facilities, which are
reasonably likely to have a material effect on your results of
operations or financial
condition. Further, please revise to add a risk factor discussing such
known trends,
uncertainties, and commitments about these non-recourse facilities.
Reconciliation of Non-GAAP Financial Measures, page 85
5. The reconciliations here include an adjustment for equity-settled
share-based
compensation expense of $30 million for the fiscal year ended March
31, 2022. Please
revise footnote (1) to the tables to clearly explain why
equity-settled share-based
compensation expense was more than the total share-based compensation
expense of $26
for the fiscal year ended March 31, 2022.
Research and development, page 90
6. We note your disclosure that your government research grant income
decreased in the
fiscal year ended March 31, 2022 as compared to the comparable period
in 2021 due to a
non-recurring government research grant income recognized in the prior
fiscal year.
Please tell us if this research grant refers to the Innovate U.K.
grant in fiscal years ended
March 31, 2022 and 2021, as disclosed on F-25. If so, please revise to
clarify how this
was a non-recurring government research income in 2021, but not in
2022.
Liquidity and Capital Resources, page 92
7. We note your disclosure on page 45 that you have experienced material
weaknesses in
your internal control over financial reporting. Please revise to
discuss any material cash
requirements from remediation efforts.
Business
Our Market Opportunity, page 107
8. Please provide the basis or source for your March 31, 2023 total
addressable market and
compound annual growth rate.
Spencer Collins
FirstName LastNameSpencer Collins
Arm Holdings Limited
Comapany
May NameArm Holdings Limited
25, 2023
May 25,
Page 3 2023 Page 3
FirstName LastName
Management and Executive Remuneration
Remuneration of Executive Officers and Directors, page 130
9. Please file your executive officer employment agreements, director
remuneration policy
and Arm Annual Bonus Plan. Please refer to Item 601(b)(10)(iii) of
Regulation S-K or
tell us why such exhibits are not required.
Financial Statements
Notes to Consolidated Financial Statements
1. Description of Business and Summary of Significant Accounting Policies
Revenue Recognition, page F-18
10. Please refer to the License and Other Revenues discussion on page 86
and revise this note
to address the following:
Disclose the timing of your revenue recognition for licensing
products still under
development, and where you indicate that delivery can be many
months, or even
years, after executing a license agreement; and
Explain when delivery and revenue recognition occur for your AFA
agreements, given your statement that there are two components to
the contracts that
have license fees payable at different points in time.
10. Equity Investments, page F-34
11. We note that you use the equity method to account for your 10%
interest in HOPU-ARM
Holding Company Limited. Please explain to us in detail, and revise
the note to briefly
describe, how you exercise significant influence over this entity in
accordance with ASC
323-10-15-6.
21. Segment and Geographic Information, page F-55
12. We note from page 40 the discussion of your pending litigation with
your "major
customer," Qualcomm. Further, you disclose here that you have three
customers that
collectively represented 42% of your revenue, including one customer
that accounted for
18% of total revenue, for the year ended March 31, 2022. To enhance an
investor's
understanding of your risk concentrations, please consider revising
this note to name these
significant customers and to specifically disclose the percentage of
your revenues that
Qualcomm represented in fiscal year ended March 31, 2022. Refer to ASC
275-10-50.
22. Subsequent Events, page F-55
13. Please tell us the nature of the "longstanding corporate governance
issue" to which you
refer.
14. You describe on page 73 the corporate reorganization you intend to
complete prior to the
completion of this offering. Also, on page F-56 you disclose that you
will have Executive
Awards of $55 million that vest upon the occurrence of an IPO, and on
page 140 that you
Spencer Collins
Arm Holdings Limited
May 25, 2023
Page 4
granted a special cash award to your CEO that will vest upon completion
of the offering.
In addition, disclosure on page 98 states that there will be share-based
compensation
recognized upon completion of the offering. Please tell us what
consideration you gave to
presenting pro forma financial information to reflect these material
transactions, including
their impact on your equity and earnings per share amounts upon
completion of the IPO.
Refer to SAB Topic 1.B.2 and Article 11 of Regulation S-X.
15. Please provide us your analysis of whether Arm Limited is a China-based
issuer. Please
refer to the Division of Corporation Finance's Sample Letter to
China-Based Companies
published on December 20, 2021.
You may contact Heather Clark at 202-551-3624 or Martin James at
202-551-3671 if you
have questions regarding comments on the financial statements and related
matters. Please
contact Jenny O'Shanick at 202-551-8005 or Erin Purnell at 202-551-3454 with
any other
questions.
Sincerely,
FirstName LastNameSpencer Collins
Division of
Corporation Finance
Comapany NameArm Holdings Limited
Office of
Manufacturing
May 25, 2023 Page 4
cc: Justin Salon
FirstName LastName