REG - Alphawave IP Group - Acquisition of Optical DSP Developer Banias Labs

Alphawave IPAnnouncement

13/10/2022 07:01

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RNS Number : 7069C  Alphawave IP Group PLC  13 October 2022

This announcement contains inside information

Alphawave IP Acquires Optical DSP Chip Developer Banias Labs, Advancing its Optical DSP Products for Data Centers
Alphawave IP Negotiates a Multi-Year Framework with a Leading North American Hyperscaler for a Potential Roadmap Delivering Over US$300 Million of Optical Products

 

LONDON, UK and HOD HASHARON, Israel 13 October 2022 - Alphawave IP Group plc
("Alphawave" or "Company") (LN:AWE), a global leader in high-speed
connectivity for the world's technology infrastructure today announced the
acquisition of Banias Labs, an Israel-based optical Digital Signal Processing
("DSP") chip developer for data centers for approximately US$240 million. The
acquisition strengthens Alphawave's roadmap of optical DSP silicon products
for data centers, a core high growth market for Alphawave.

 

Alongside the acquisition of Banias Labs, Alphawave has negotiated a
non-binding, multi-year purchasing framework with a leading North American
hyperscaler that proposes a multi-year roadmap for Alphawave to develop and
sell a portfolio of optical products and DSPs, including coherent DSP
technology from Banias Labs, with sales potentially ramping to over US$300
million.

 

Tony Pialis, President and Chief Executive Officer of Alphawave said: "Banias
Labs optical DSP technology provides a strong strategic advantage for
Alphawave, strengthening our roadmap of DSP silicon solutions for data
centers. This acquisition enhances our portfolio of electrical and optical
solutions in the most advanced process technologies. The multi-year purchasing
framework includes coherent optical solutions, and with the Banias
acquisition, Alphawave is expanding its total addressable market by delivering
next generation coherent optical solutions for the most advanced data
centers."

 

John Lofton Holt, Executive Chairman of Alphawave said: "We are pleased to
welcome the talented Banias Labs team to Alphawave. This acquisition aligns
with the strategic priorities that we articulated at our IPO, expanding our
technology portfolio in high-speed connectivity to support long-term growth.
Coherent optics will enable the next level of efficiencies in data center
communications, addressing the increasing bandwidth and power efficiency
requirements."

 

About Coherent Optics

 

Coherent optics is the next evolution of optical solutions, the cornerstone of
the industry's efforts to achieve 800G and 1.6T Ethernet speeds while
maintaining the required reaches inside and outside of data centers and also
significantly reducing power consumption. Coherent technology is predominantly
used today in long reaches of over 100km connecting data centers and in
telecommunications. Banias Labs' optical DSP technology strengthens
Alphawave's optical products roadmap by targeting a growing opportunity for
coherent optical technology intra-data center, as shorter reaches adopt this
technology.

 

Furthermore, Alphawave believes the significant engagement from a leading
North American hyperscaler reflects the importance of this technology for the
future of data center connectivity.

Key Acquisition Highlights

 

Key highlights are as follows:

 

·    This acquisition brings silicon-proven optical DSP technology,
expanding Alphawave's product portfolio and strengthening its product roadmap.

 

·    Banias Labs' technology will expand Alphawave's addressable market
and deepen Alphawave's commercial partnership with a leading North American
hyperscaler.

 

·    Alphawave is committed to becoming an industry leader with a broad
portfolio of PAM4 and Coherent DSPs, in the most advanced technologies, and
for all forms of Data Center connectivity.

 

Background on Banias Labs

 

Founded in 2020, Banias Labs 1  (#_ftn1) is a leading provider of coherent
optical DSP semiconductor technology.  Based near Tel Aviv, Israel, the key
core technology leaders have worked together for over two decades and have a
long track record of success in the silicon, IP, and communications segments
of semiconductors. Banias Labs currently has approximately 50 employees the
majority of whom are R&D focused.

 

Banias Acquisition Closing Details

 

Alphawave has acquired 100% of the shares of Banias Labs for a total cash
consideration of US$240 million paid upon closing.

 

The acquisition is funded out of existing cash and additional financing.
Alphawave has obtained US$210 million of Senior Secured Credit Facilities,
comprising a five-year US$110 million Revolving Credit Facility and a
five-year US$100 million Term Loan. The Company's Pro Forma net debt position
after close is expected to be approximately US$35 million. Alphawave expects
to continue to have a strong cash flow generation profile which combined with
the additional facilities provides a solid platform to navigate this period of
accelerated business expansion.

 

Outlook

 

The Company expects the ramp of new Optical products to start in 2024 and
profitability to improve from 2023 levels as products go into high-volume
production and generate additional revenue. Alphawave anticipates additional
revenue synergies given the complementary nature of the technology and its
contribution to the product roadmap.  Alphawave reiterates its stand-alone
outlook. Further details on the pro forma 2023 outlook and the long-term
financial model will be communicated at the upcoming capital markets day on 13
January 2023.

 

Trading for Q3 2022 has been strong and the Company will publish its trading
update for Q3 2022 next week, on 17 October 2022.

 

Non-Binding Purchasing Framework Details

 

The non-binding purchasing framework agreement defines a potential portfolio
of optical DSPs, including coherent solutions based on Banias technology, that
Alphawave intends to develop over the next several years.  The Company
anticipates ramping up sales to the leading hyperscaler over a multi-year
period, with the potential for aggregate sales to exceed US$300 million,
subject to the Company qualifying the products for use in the hyperscaler's
data centers on a timely basis and ensuring sufficient silicon availability to
meet its usage demands. The portfolio of optical DSPs continues to build on
the leading connectivity technology that Alphawave has been delivering to the
industry as silicon IPs.  In addition, the non-binding framework agreement
contemplates the Company issuing future stock warrants of up to 2.5% of the
issued share capital of the Company, with vesting based on purchases of
Alphawave silicon products of up to US$700 million over the same period, and
an exercise price based on the current trading price of the Company's shares,
subject to downward adjustment if the Company's shares trade lower prior to
issuance. The Company intends to solicit all required shareholder approvals,
ahead of finalizing any warrant grants, which are not expected until at least
2024.

 

Presentation and webcast

A presentation for investors and analysts will be held today, 13 October 2022,
at 8.30am BST. The webcast will be accessible via:

https://awaveip.zoom.us/s/89082807240?pwd=ODdkSGxlNzZwb3JhR2w2a0pUQWxIUT09
(https://awaveip.zoom.us/s/89082807240?pwd=ODdkSGxlNzZwb3JhR2w2a0pUQWxIUT09)

Passcode: 747970

 

Or by phone:

US: +1 669 900 9128 / +1 719 359 4580 / +1 253 215 8782

United Kingdom: +44 203 901 7895 / +44 208 080 6591 / +44 330 088 5830

 

Webinar ID: 890 8280 7240

Full list of dial-in numbers available   (https://us02web.zoom.us/u/kD2i0tmO)
https://awaveip.zoom.us/u/kegS2efSIo (https://us02web.zoom.us/u/kD2i0tmO)

 

A recording of the webcast and the presentation will be available later today
on our website at Results, Reports & Presentations (awaveip.com)
(https://www.awaveip.com/en/investors/results-reports-presentations/)

 

###

 

Trademarks

All registered trademarks and other trademarks belong to their respective
owners.

 

Contact Information:

 

 Alphawave IP Group plc         John Lofton Holt, Executive Chairman      ir@awaveip.com

                                Jose Cano, Global Head of IR              +44 (0) 20 7717 5877
 Brunswick Group  Simone Selzer                      alphawave@brunswickgroup.com

                  Sarah West                         +44 (0) 20 7404 5959
 Gravitate PR                   Lisette Paras                             alphawave@gravitatepr.com

                                Wynton Yu                                 +1 415 420 8420

About Alphawave IP Group plc (LSE:AWE)

Faced with the exponential growth of data, Alphawave IP's technology services
a critical need: enabling data to travel faster, more reliably and with higher
performance at lower power. Alphawave IP is a global leader in high-speed
connectivity for the world's technology infrastructure. Our IP and custom
silicon solutions therefore meet the needs of global tier-one customers in
data centers, compute, networking, AI, 5G, autonomous vehicles, and storage.
Founded in Toronto, Canada in 2017, by an expert technical team with a proven
track record in licensing semiconductor IP, our mission is to focus on the
hardest-to-solve connectivity challenges. To find out more about Alphawave IP,
visit: awaveip.com (http://www.awaveip.com/)

 

 

This announcement is issued by Alphawave IP Group plc (the "Company") and
contains information which is deemed by the Company to constitute inside
information as stipulated under the Market Abuse Regulation (EU) No.596/2014
as amended by The Market Abuse (Amendment) (EU Exit) Regulations 2019. By the
publication of this Announcement via a Regulatory Information Service, this
inside information is now considered to be in the public domain. The person
responsible for arranging for the release of this Announcement on behalf of
the Company is Link Company Matters Limited, acting as Company Secretary.

 

 

 

 1  (#_ftnref1) Banias Labs is the commercial name of Solanium Labs, the name
under which the entity is registered in Israel.

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