REG - Alphawave IP Group - Q3 2022 Trading and Business Update

Alphawave IPAnnouncement

17/10/2022 07:00

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RNS Number : 0146D  Alphawave IP Group PLC  17 October 2022

Q3 2022 Trading and Business Update

 

·      Extending technology leadership with a second 3nm design win

·      Strong Q3 trading and design wins in the quarter reflect our
hybrid business model, combining IP and custom silicon

·      First time consolidation of OpenFive into the Group, from 1
September 2022

·      Management remains confident in the outlook for the business and
reiterates stand-alone(( 1 )) mid-term and long-term guidance, despite
difficult macro environment

LONDON, United Kingdom and TORONTO, Ontario, Canada 17 October 2022
- Alphawave IP Group plc (LN:AWE, "Alphawave", the "Company"), a global
leader in high-speed connectivity for the world's technology infrastructure,
is pleased to publish its trading and business update for the three months
ended 30 September 2022.

 

 US$m                                                                          Q3 2022  Q3 2021  Change
   Licence and NRE                                                             57.8     21.5     169%
   Royalties and Silicon Orders                                                22.2     1.8      nm
 New Bookings (excluding VeriSilicon and WiseWave multi-year subscription      80.0     23.3     245%
 licences)

 Additional design win activity - FSA drawdowns and China re-sale licences 2   8.5      3.9      118%

 WiseWave multi-year subscription licences                                     -        -        nm

 Number of end-customers (as at end of period) 3                               46       21       nm

 

Due to rounding, numbers presented in the table may not add up to the totals
provided and percentages may not precisely reflect the absolute figures.

 

Tony Pialis, President and Chief Executive Officer of Alphawave IP said:
"During the third quarter, we continued to see strong design win momentum,
particularly in North America. Alongside this, we extended our technology
leadership with a second 3nm design win and are already seeing the benefits of
the greater scale of the hybrid business model in which we can further
monetise our differentiated IP through custom silicon. With an enhanced
product portfolio of high-speed connectivity and increasingly broader customer
base, we are confident in the long-term growth potential of our business".

 

John Lofton Holt, Executive Chairman of Alphawave IP said: "The level of
bookings in the quarter reflects the strength of our technology combined with
the ongoing strong execution of the team. Our continued leadership in the most
advanced technologies and our talented team underpin the long-term growth
potential of our business. We are working hard to deliver on our plans and
create long-term value for our shareholders."

 

Changes to Reporting of Bookings Including OpenFive

 

We have consolidated the acquired OpenFive business from 1 September 2022. As
a combined business we bring a broader IP portfolio and engineering expertise
in high-speed connectivity to customers in digital infrastructure markets.
This, combined with a growing customer base and the greater scale of the
hybrid business model will help us drive sustainable long-term revenue growth
and create value for shareholders.

 

The following table summarises how each type of booking has been mapped into
the new bookings classifications:

 

 Alphawave                                                          OpenFive                                                           New Alphawave
 Type                        Includes                               Type            Includes                                           Type                          Notes                                                        Includes
 Licence and related         -  IP licensing, NRE and support       IP Licence      -  IP licensing, NRE and support                   Licence and NRE               Includes IP licensing, NRE and support of combined business  -     IP licensing NRE and support

                                                                                    -  IP royalties                                                                                                                               -     Custom silicon NRE

                                                                                                                                                                     Not volume dependent                                         -  Other custom silicon (not volume dependent)
                                                                    Custom silicon  -  IP licensing, NRE and support

                                                                                    -  Custom silicon NRE

                                                                                    -  Other custom silicon

 Potential future royalties  - IP royalties                         Custom silicon  -  Custom silicon revenue (finished product)       Royalties and silicon orders  Volume dependent                                             -     IP royalties

                                                                                                                                                                                                                                  -     Custom silicon revenue (finished product)

 

Key Highlights

 

Licence and Non-recurring Engineering ("NRE") bookings in Q3 2022 were up 169%
year-on-year. Including estimates of potential future royalties 4  and silicon
orders, new bookings excluding the WiseWave multi-year subscription licence
were up 245% year-on-year. Bookings in the third quarter were driven by North
American and Chinese customers 5 .

 

Within the first month after closing the acquisition of OpenFive we secured a
leading storage design win that leveraged both Alphawave's IP as well as the
custom silicon capabilities acquired with OpenFive.

 

Cumulative bookings over the life of the Company 6  exceeded US$480 million.

 

Expanding Technology Leadership and Strong Customer Traction

 

Since 2017, the Company has demonstrated connectivity technology leadership in
7nm, 6nm, 5nm, and 4nm technology. In Q3 2022, Alphawave IP extended its
leadership with a second design win in 3nm technology. The Company expects
further design wins in 3nm and is working with its foundry partners in 3nm and
beyond.

 

Alongside the year-on-year growth in new bookings (excluding multi-year
subscription licences) and a growing customer base, two additional data points
underline the strong level of customer activity during the third quarter:
Flexible Spending Accounts(( 7 )) ("FSA") drawdowns of US$3.0 million, and
China (VeriSilicon) reseller deals(( 8 )) of US$5.5 million. Both FSA and
reseller deals represent the conversion of customer commitments to design
wins.

 

Design win activity in the quarter was strong with seven new design wins,
including five from new customers and two from repeat customers. In the
quarter we built on the advantages of the hybrid business model with four new
custom silicon wins in September. Our hybrid model enables the business to
generate larger revenue streams by capturing the full value embedded in our
custom silicon offering.

 

Alphawave has six of the top ten semiconductor device companies as
customers 9 , a reflection of its continued strength in the data
infrastructure markets that require the world's most advanced connectivity
technology.

 

 

Outlook

 

Based on current visibility, the Company expects continued customer traction
during the last quarter of the year.

 

Alphawave IP reiterates its stand-alone mid-term and long-term outlook
communicated on 21 September 2022 in its interim results for H1 2022 10 .
Despite the uncertain macroeconomic environment, our growing pipeline reflects
positive secular growth trends in data infrastructure markets and the
continued investment in next generation connectivity solutions. This combined
with our talented team and strong balance sheet give us confidence in our
future.

 

Further details on the pro forma 2023 outlook and long-term financial model,
including the acquisition of Banias Labs and the multi-year agreement with a
leading North American hyperscaler 11 , will be communicated at our Capital
Markets Day on 13 January 2023.

 

About Alphawave IP Group plc (LN: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 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/)

 

Related Party Disclosures

There are no new related parties disclosed in this press release.

 

###

 

 

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, 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

 

 1  Stand-alone outlook excludes the acquisition of Banias Labs and the
multi-year agreement with a leading North American hyperscaler announced on 13
October 2022.

 2  Both FSA (Flexible Spending Account) drawdowns and China re-sale licences
convert previously announced contractual commitments included within bookings
reported in prior periods to new product design wins which will be recognised
as revenue over time.

 3  Includes customers from OpenFive who were not already customers of
Alphawave and who signed contracts from 1 September 2022.

 4  Our bookings comprise in some instances, our estimate of potential future
royalties. Our royalties are estimated based on contractually committed
royalty prepayments or, in limited instances, on sensitised volume estimates
provided by customers.

 5  These Chinese customers are out of scope from the WiseWave and VeriSilicon
agreements.

 6  Since its inception in 2017.

 7  FSAs or Flexible Spending Accounts represent contracts with customers who
have committed to regular periodic payments. These payments are not in respect
of specific licences but can be used as credit against future deliverables.
FSA drawdowns represent the design win value of transactions signed during the
period, against which FSA payments will be credited and will convert to
revenue over time.

 8  In February 2021, Alphawave IP signed a three-year exclusive subscription
reseller agreement with VeriSilicon with a minimum value of US$54 million.
Reseller deals represent the subsequent licensing of IP by VeriSilicon to
third parties in China and do not constitute additional bookings for the
Company as they are part of the US$54 million minimum commitment.

 9  Semiconductor device companies ranked on market capitalisation.

 10  Including the financial contribution from OpenFive, the Company expects
to reach revenues of between US$325m and US$360m in 2023. Longer-term, we
expect to achieve annual revenue run rates in excess of US$500m in 2024 and in
excess of US$1bn by 2027. Near-term margins will be impacted by OpenFive as we
integrate and scale that business, and we anticipate a 2023 adjusted EBITDA
margin of 32% to 36% with a steady increase thereafter as we focus and
integrate the business and realise the anticipated synergies. Excluding
OpenFive, standalone revenues are expected to be in line with the guidance
provided at IPO, namely $210m to $240m by 2023, with an adjusted EBITDA margin
of 50% to 60%.

 11  Communicated on 13 October 2022

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