TIDMAWE
RNS Number : 8002J
Alphawave IP Group PLC
29 April 2022
ALPHAWAVE IP GROUP PLC
Company Number 13073661
Full Year 2021 Results and Q1 2022 Trading Update
Strong maiden FY results with >170% y-o-y revenue growth and
continued momentum in Q1
LONDON, United Kingdom and TORONTO, Ontario, Canada 29 April
2022 - Alphawave IP Group plc (LN:AWE, "Alphawave IP", the
"Company"), a global leader in high-speed connectivity for the
world's technology infrastructure, is pleased to publish its full
year 2021 results.
2021 Highlights
Year ended 31 December 2021 2020 Change
--------------------------------------------- ----- ----- ---- ------
Financial
Revenue US$m 89.9 32.9 173%
Adjusted EBITDA(1) US$m 51.8 19.3 168%
Pre-tax operating cash flow US$m 26.5 11.8 124%
Net cash balance (as at year end) US$m 501.0 14.0 n/m
--------------------------------------------- ----- ----- ---- ------
Non-financial
Bookings(2) US$m 244.7 75.0 226%
Backlog excluding royalties (as at year end) US$m 168.6 37.3 352%
End-customers (as at year end) # 20 11 82%
--------------------------------------------- ----- ----- ---- ------
1. Adjusted EBITDA excludes IPO-related non-recurring costs,
foreign exchange adjustments, share-based payments, M&A
transaction expenses and one--time legal fees associated with
WiseWave. See note 4 (Alternative Performance Measures).
2. Bookings are a non-IFRS measure representing legally binding
and largely non-cancellable commitments by customers to license our
technology. Bookings comprise licence fees, non-recurring
engineering, support and, in some instances, our estimate of
potential future royalties. Our FY 2021 bookings include estimates
of potential future royalties of US$24.0m.
-- Record 2021 bookings, with over 225% year-on-year growth
-- Expanded direct and indirect sales channel globally, to
enable accelerated pipeline conversion
-- Record 2021 revenue (US$89.9m) and adjusted EBITDA
(US$51.8m), exceeding guidance and median analyst consensus
-- Gross margins of 94% and adjusted EBITDA margins of 58%
-- Cash on balance sheet of US$0.5bn as at 31 December 2021. IPO
proceeds continue to be deployed to drive growth both through
organic, as well as inorganic, investments
-- Strong Q1 2022 trading with over US$30m in bookings, a 20%
quarter-on-quarter sequential increase
2021 strategic highlights
-- 20 customers, up from 11 as at end FY 2020, including five of
the top eight global semiconductor companies
-- Four global hyperscalers as customers --- all major global
hyperscalers are now in the pipeline
-- Accelerated hiring globally with 82 new hires over the year,
taking global headcount to 154, in line with our strategy to scale
the business
-- Over 80 IPs available today -- first customer products now in
production. Early royalties expected to start from 2022, ahead of
schedule
-- First to demonstrate silicon success in 7nm, 6nm, 5nm and 4nm
-- First IP provider to have entire high-volume production-ready
IP portfolio from 7nm to 4nm at 112Gbps in 2021. Expanding to
200G/400G/800G/1.6T at 3nm and beyond in 2022
-- First chiplet design wins with early production expected in 2022
-- Acquisition of Precise-ITC and pending acquisition of
OpenFive to accelerate technology leadership and scale the business
globally
-- Board remains confident in the outlook for the Group in 2022
Q1 2022 Trading Update
As expected, Alphawave IP has continued to accelerate sales
performance in Q1 2022. Total bookings for the period were
US$30.7m, a quarter-on-quarter increase of 20%. This performance
was driven by continued expansion in North America with numerous
design wins with new and existing customers, as well as an
additional chiplet design win. There were also repeat wins with a
major Korean customer and WiseWave, with one design win with a
customer in China through the VeriSilicon reseller relationship. Of
the US$30.7m in bookings, US$5.7m was through VeriSilicon,
previously booked as part of the US$54m multi-year reseller
transaction signed in Q1 2021, US$19.4m represented new IP licence
and related sales, and US$5.6m were management's estimates of
future royalties. The Group expects to continue to accelerate the
sales performance in the second quarter and expand both within
existing customers and new customers, primarily in North America
and Korea.
Outlook for 2023 and beyond
Through the OpenFive acquisition, Alphawave IP will accelerate
its strategy and deliver its technology in a way that enables it to
achieve revenue scale much faster than contemplated at the IPO.
The OpenFive acquisition is expected to close in H2 2022 pending
US regulatory approvals. 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 $500m in 2024 and in excess of $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%.
Tony Pialis, President and Chief Executive Officer of Alphawave
IP stated:
"The technical founders of the business have been leaders in
connectivity since the late 1990s, but we have never had a year as
successful as 2021. Our business performance was driven by our
continued and expanding technology leadership, and delivery of
communications solutions to some of the most sophisticated
end-customers in the world. We first established technology
leadership in 2017 with our 112Gbps solutions in 7nm. In 2021 we
expanded that leadership beyond 6nm and 5nm and into 4nm
technology. We are now delivering technology to five of the top
eight largest semiconductor companies globally and four global
hyperscalers. Many of these customers are repeat customers who have
licensed multiple products from us."
John Lofton Holt, Executive Chairman of Alphawave IP stated:
"2021 was a historic year for Alphawave IP in many ways. Looking
back on the year, we are proud to have delivered record results.
But most of all we are pleased to have delivered leading
connectivity solutions to some of the largest chipmakers in the
world. Our technology leadership is a core part of our value and
differentiation and is one of the key pillars of our continued
growth and expansion in 2022 and beyond. As we look forward to
2022, we will continue to expand our technology leadership in our
IP licensing business while broadening our portfolio of solutions
through organic development and through continued acquisition of
adjacent technologies. The recently announced acquisitions of
OpenFive and Precise-ITC are examples of how we will continue to
expand our product offerings in the future. With this growth and
expansion, we will continue to be not only the leading provider of
connectivity IP, but the global leader in connectivity for the
entire high-end semiconductor market."
CEO review
Over 2021, the business grew its end-customer base from 11 to
20, winning some of the largest technology and semiconductor
companies in the world. Customers spend hundreds of millions of
dollars on their chip developments - Alphawave's IP is a critical
element of those designs and is selected at the beginning of their
product development journey. Whilst Alphawave IP's leading
technology provides a distinct competitive advantage, it is also
the Company's proven track record that provides customers the
confidence to choose, and choose again, Alphawave IP as a
mission-critical technology provider.
Alphawave IP works with some of the largest semiconductor
companies and hyperscalers in the world. As a result, we are
restricted in what we can disclose given the strategic importance
and sensitivity of our customers' chip development roadmaps.
In 2021 and early 2022, Alphawave IP was proud to announce
further design wins with Samsung, including a 4nm win with a global
hyperscaler, a win with Microchip for their next--generation
1.6Tb/s Ethernet retimer family and additional success with
Tektronix in driving their industry-leading PCI Gen 6.0 solutions.
Based on the strong pipeline, Alphawave IP expects to continue to
win new customers and repeat business from existing customers in
2022.
CFO review
Revenues
Revenues for 2021 reached US$89.9m, 173% growth compared to
US$32.9m in 2020 and reflect significant diversification.
-- Customers - In 2021, the Company recognised revenues from 20
end-customers (21 excluding the impact of two of our customers
merging). This compares to eleven customers in 2020. The top three
customers represented 53% of 2021 sales (28% excluding WiseWave)
versus 52% in 2020 and one of the top three customers in 2021 was
also a top three customer in 2020.
-- End-markets - in 2021, the Company generated revenues from
customers across key end-markets of data networking (including
optical), cloud compute and solid state storage as well as AI and
5G wireless. Revenues from data networking, cloud compute and solid
state storage represented over 75% of our 2021 sales.
-- Regions - in 2021, revenues were well-balanced between North
America and Asia, with 42% of revenues to North America, 48% to
China and 10% to APAC excluding China. In 2020, 59% of sales were
to North American customers, 25% to China and 16% to APAC excluding
China. The increased weighting to China in 2021 reflects first
revenue recognition in H2 2021 of the agreements with WiseWave and
VeriSilicon. Excluding WiseWave, 63% of FY2021 sales were to North
American customers, 22% to China and 15% to APAC excluding China.
Revenues from China in the medium and long-term are expected to be
less than 30% of total Group revenues
-- Subscription licence - in respect of the WiseWave five-year
subscription licence agreement, in H2 2021 Alphawave IP invoiced
US$24.0m (gross of 10% withholding tax) and recognised US$27.7m,
with revenue recognition based on our deliveries of IP to WiseWave.
In respect of the three-year exclusive reseller arrangement with
VeriSilicon, the Company has been invoicing and collecting on a
quarterly basis since February 2021. In FY2021, the Company
invoiced US$8.8m and recognised US$8.9m of revenue related to the
VeriSilicon reseller agreement.
Substantially all of the revenue in both 2020 and 2021 was
generated from one-time licence and licence-related (non--recurring
engineering and support) and subscription licence activities. The
Company did not recognise any royalty revenue in 2020 or 2021 and
given the long design cycles from our customers, do not expect to
recognise material royalties until FY2024 at the earliest.
Operating expenses and profitability
In 2021, the Company maintained gross margins at 94%, with cost
of sales primarily reflecting sales commissions as well as costs
related to the development of test chips. Adjusted EBITDA was
US$51.8m (58% margin) compared to adjusted EBITDA of US$19.3m (59%
margin) in 2020.
Reflecting the rapid scaling of the business, in 2021, operating
expenses totalled US$48.7m, or US$36.1m excluding non-recurring IPO
costs, one-time M&A/professional expenses, share-based payment
costs and foreign exchange gains. This compares to $14.6m in 2020
($13.0m excluding share-based payment costs and foreign exchange
losses).
Of US$48.7m in operating expenses in 2021, US$29.4m (33% of
sales) related to R&D/engineering, US$5.4m (6% of sales)
related to general and administrative expenses and US$1.3m (1% of
sales) related to sales and marketing expenditure. US$12.6m related
to other items comprising non-recurring IPO costs, one-time
M&A/professional expenses, share-based payment costs and
exchange gains. In 2020, operating expenses totalled US$14.6m,
US$1.5m of which reflect foreign exchange gains and share--based
payments, and US$8.8m (27% of sales) related to
R&D/engineering, US$3.4m (10% of sales) related to general and
administrative and US$0.8m (2% of sales) related to sales and
marketing.
This increase in operating expenses was primarily due to the
increase in our headcount to 154 heads at end 2021 from 72 at end
2020, together with associated software tool costs which scale with
R&D/engineering headcount, as well as additional professional
costs required as a publicly listed company following our IPO. To
capitalise on future growth opportunities, the Company was able to
expand headcount significantly ahead of budget and estimates that
the incremental expenses from accelerated hiring during 2021
exceeded US$4.0m.
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 solutions meet the needs
of global tier-one customers in data centres, 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
Investor conference call
The Company will host an investor conference call including a
Q&A at 16:00 BST on 29 April 2022 and will provide additional
details on the 2021 results and forward-looking guidance on the
business.
Related Party Disclosures
WiseWave is a related party of Alphawave IP.
Trademarks
All registered trademarks and other trademarks belong to their
respective owners.
Contact Information:
Alphawave IP Group John Lofton Holt, Executive ir@awaveip.com
plc Chairman +44 (0) 20 7717 5877
Daniel Aharoni, CFO
Brunswick Group Simone Selzer alphawave@brunswickgroup.com
Sarah West +44 (0) 20 7404 5959
Gravitate PR Lisette Paras alphawave@gravitatepr.com
Wynton Yu +1 415 528 0468
------------------ --------------------------- ----------------------------
The information contained within this announcement is deemed to
constitute inside information as stipulated under the UK Market
Abuse Regulations. Upon the publication of this announcement, this
inside information is now considered to be in the public
domain.
Copies of this announcement are available and the Annual
Financial Report will be available in due course on Alphawave IP's
website www.awaveip.com and from the Company's registered office at
65 Gresham Street, London, EC2V 7NQ.
Executive Chair's statement
"Looking back on the year, we are proud to have delivered record
results."
John Lofton Holt
Executive Chair
2021 was a historic year for Alphawave IP in many ways. Looking
back on the year, we are proud to have delivered record results
while beating our IPO guidance, our raised guidance since the IPO
and median analyst consensus for revenue and adjusted EBITDA. But
most of all we are pleased to have delivered leading connectivity
solutions to some of the largest chipmakers in the world, in the
most advanced technologies. This technology leadership is a core
part of our value and differentiation to date and is one of the key
pillars of our continued growth and expansion in 2022 and beyond.
As we look forward to 2022, we will continue to expand our
technology leadership in our IP licensing business while broadening
our portfolio of solutions through organic development and through
continued acquisition of adjacent technologies. The recently
announced acquisitions of OpenFive and Precise-ITC are examples of
how we will continue to expand our product offerings in the future.
With this growth and expansion, we will continue to be not only a
leading provider of connectivity IP, but a global leader in
connectivity-focused IP, chiplet and custom silicon solutions for
the entire high-end semiconductor market.
Our vision for Alphawave IP
When we founded Alphawave IP in 2017, the founders had a vision
to not just build a connectivity IP licensing company, but to build
the world's leading semiconductor company focused on connectivity
solutions. In 2021 we executed on this vision by expanding our core
and product IP offerings with our key manufacturing partners - TSMC
and Samsung. In the second half of the year, based on inbound
demand from our most advanced customers, we accelerated our chiplet
developments and announced early design wins with chiplets in 5nm
technology. Looking to 2022, we will continue to accelerate our
product offerings through organic development and acquisitions to
provide a broader and deeper set of connectivity solutions to our
customers. These will include a wide range of electrical and
optical solutions, delivered through core, product and chiplet
licensing business models, but also through chiplet and custom
silicon delivery business models.
Included within the strategic report is a fair review of the
Group's performance during the year and of its position at the end
of the financial year.
Alphawave IP's IPO on the London Stock Exchange
In May 2021, we were admitted to listing on the London Stock
Exchange, raising net proceeds of GBP347.1m (US$492.1m). Our IPO
represented one of the largest semiconductor IPOs in history, the
largest IPO of a North American company on the London Stock
Exchange and the first UK Main Market semiconductor IPO since 2004.
Our IPO strengthened our ability to recruit the best talent and
elevated our profile as we continue to win business from some of
the largest technology companies globally.
We have begun to deploy our IPO proceeds, as we committed to
investors during our IPO process. In the fourth quarter of 2021, we
made the first tranche of our investment into WiseWave, a newly
formed company established in China to develop and sell silicon
products incorporating silicon IP licensed from the Group. We
invested US$22.4m in return for a 42.5% equity interest. As
outlined in our IPO Prospectus, we moved the VeriSilicon reseller
arrangement under WiseWave in order to consolidate the Group's
activities in China under a single entity.
In early 2022, we completed the acquisition of Precise--ITC,
bringing a team of talented engineers and additional strategic IP
for our product portfolio. As recently announced, we have completed
a definitive agreement to acquire OpenFive, including a portfolio
of over 70 SoC IPs and a custom silicon design team specialised in
networking and data centre ICs, as well as over 250 new customers.
This transaction is expected to close in the fourth quarter pending
regulatory approvals and will significantly increase our capacity
and capability across our existing and new product offerings.
Financial performance
I am pleased to deliver our first full set of results as a
listed company. Our bookings for the full year were US$244.7m, over
220% growth on FY 2020 (US$75.0m). We delivered revenues of
US$89.9m, which represents year-on-year growth of 173%. We also
accelerated our hiring plans, growing our headcount from 72 at the
end of 2020 to 154 at the end of 2021, significantly ahead of our
budgeted headcount for FY 2021. Despite this, and increased
investment in our sales, finance, HR, legal teams and increased
administrative costs from becoming a listed company, we grew
adjusted EBITDA to US$51.8m for the year compared to US$19.3m in FY
2020. Our balance sheet is strong with a closing cash balance of
US$501.0m and no borrowings. We will continue to invest to maintain
our technology leadership, expand our product portfolio and grow
our business globally with a main goal to maximise revenue growth
while maintaining very good gross margins and profitability.
People, culture and values
I am exceptionally proud of our global team who have continued
to execute for our customers and investors in a completely virtual
environment over the last two years. Our team works with the
largest companies in the world, who trust us to deliver
exceptionally complex technology on time and to specification. In
2021, we more than doubled our headcount from 72 people to 154 and
hired a new Head of Human Resources. Given the restrictions placed
upon us by the pandemic, many of our employees have never set foot
in an Alphawave IP facility. Thanks to the dedication of our
employees, this has not hindered our ability to grow the
business.
Every Alphawave IP employee participates in our long-term
incentive programme to engender a shared sense of ownership. Every
hire that we made in FY 2021 was given equity incentivisation
through our long-term employee share programme. Further, Michelle
Senecal de Fonseca has been appointed as Workforce Engagement
Non-Executive Director on our Board, ensuring that the interests
and concerns of our employees are represented at our Board.
COVID-19
The COVID-19 environment posed unique challenges to our team and
to our customers. Fortunately, we were able to adapt quickly and
complete multiple tapeouts in the world's most advanced
technologies - 7nm, 6nm, 5nm and 4nm - all in a 100% virtual
environment. We also completed our entire IPO process - from start
to finish - in a 100% virtual environment. In addition to the
impact on our own employees and adapting to new ways of working,
the impact on our end-markets and our customers has been dramatic.
As remote working became, and remains, the norm for many
individuals, the demand for data accelerated, including video
conferencing and online collaboration tools, consumption of video
content by consumers, social media interaction, remote education
and deployment of cloud-based enterprise solutions. For many
people, technology was a personal and professional lifeline. In May
2020, the OECD reported that some broadband communication providers
experienced up to 60% increase in internet traffic. Our
end-customers are the companies that own, operate or provide
components into global data infrastructure. With focus on network
capacity, resilience and power efficiency, our customers invested
heavily in 2021 and are accelerating their investments in 2022 and
beyond. For the first time in history, global semiconductor sales
topped US$500bn in 2021 and we expect to see this trend continue to
accelerate, to the benefit of our business and our
shareholders.
Governance and leadership
Ahead of the IPO, we added six independent Non--Executive
Directors to our Board, with Jan Frykhammar, former CEO and Chief
Financial Officer of Ericsson, serving as our Senior Independent
Director. Our Non--Executive Board members are all leaders in their
respective industries and have diverse backgrounds across
telecommunications, internet and semiconductors. Four of our six
independent Directors are female. As a founding member of the
Alphawave IP team, started in 2017 with a handful of individuals, I
am humbled that such impressive and accomplished individuals have
chosen to work with us on our journey as a listed company.
We have also significantly bolstered the senior leadership team,
welcoming John Hou as our Corporate General Counsel, Maia Jones as
our Head of Human Resources and Tony Chan Carusone as our Chief
Technology Officer. In 2022 we will be further expanding our senior
leadership team as we continue to scale our global
capabilities.
Our first Annual General Meeting (AGM) as a listed company will
be held on 6 June 2022. COVID restrictions permitting, we look
forward to meeting our shareholders in person and sharing our
excitement about what we have achieved at Alphawave IP and what we
will achieve in the future.
Outlook for 2023 and beyond
We are excited about the prospects for the business,
particularly in an environment where the importance and relevance
of semiconductors to the global economy has seen increasing
prominence. Through the pending OpenFive acquisition, we have
seized an opportunity to accelerate our strategy and deliver our
technology in a way that enables us to achieve revenue scale much
faster than contemplated at the IPO.
The OpenFive acquisition is expected to close in H2 2022 pending
US regulatory approvals. Including the financial contribution from
OpenFive, we expect 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. Our 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, our standalone revenues
are expected to be in line with the guidance provided at IPO,
namely US$210m to US$240m, with an adjusted EBITDA margin of 50% to
60%.
Our guidance for the mid term and longer is reflective of our
confidence in the core business and the OpenFive business and
pipeline.
John Lofton Holt
Executive Chair
29 April 2022
President & Chief Executive Officer's statement
"The technical founders of the business have been leaders in
connectivity since the late 1990s, but we have never had a year as
successful as 2021."
Tony Pialis
President & Chief Executive Officer
The technical founders of the business have been leaders in
connectivity since the late 1990s, but we have never had a year as
successful as 2021. Our business performance was driven by our
continued and expanding technology leadership, and delivery of
communications solutions to some of the most sophisticated
end--customers in the world. We first established technology
leadership in 2017 with our 112Gb/s solutions in 7nm. In 2021 we
expanded that leadership beyond 6nm and 5nm and into 4nm
technology. We are now delivering technology to five of the top
eight largest semiconductor companies globally and four global
hyperscalers. Many of these customers are repeat customers who have
licensed multiple products from us.
Our number one focus - our customers
Over 2021, we grew our end-customer base from 11 to 20, winning
some of the largest technology and semiconductor companies in the
world. Our customers spend hundreds of millions of dollars on their
chip developments - our IP is a critical element of those designs
and selected at the beginning of their product development journey.
Whilst our leading technology provides us with a distinct
competitive advantage, it is also our proven track record that
provides our customers the confidence to choose, and choose again,
Alphawave IP as a mission-critical technology provider.
We work with some of the largest semiconductor companies and
hyperscalers in the world. As a result, we are restricted in what
we can disclose given the strategic importance and sensitivity of
their chip development roadmaps.
In 2021 and early 2022, we were proud to announce further design
wins with Samsung, including a 4nm win with a global hyperscaler,
our win with Microchip for their next--generation 1.6Tb/s Ethernet
retimer family and our success with Tektronix in driving their
industry-leading PCI Gen 6.0 solutions. Based on our strong
pipeline, we expect to continue to win new customers and repeat
business from existing customers in 2022.
Technology
Although only founded in 2017, Alphawave IP has built on the
20-year legacy and achievements of the founding team. Together,
they have founded and scaled multiple businesses delivering
high-speed connectivity solutions. Our scalable and configurable IP
platform, built entirely in-house, has enabled us to rapidly expand
our portfolio to over 70 products. In 2021, we were the first IP
vendor in the world to deliver 5nm and 4nm solutions and several
customers also taped out early silicon integrating our IP. In June
2021, the foremost market research provider for silicon IP, IPNest,
confirmed Alphawave IP's leadership position in Very High-Speed
SerDes.
We have invested heavily in research and development during the
year, scaling significantly ahead of plan and increasing our
R&D headcount from 66 to 134. Tony Chan Carusone joined in
January 2022 as our Chief Technology Officer. Tony is a pre-eminent
figure in the semiconductor industry and for the past 20 years has
been Professor of Electrical and Computer Engineering at the
University of Toronto, focusing on lowering power consumption of
microelectronics for communications traffic. Tony was recently
named a Fellow of the IEEE, the world's largest technical
professional organisation for the advancement of technology.
Our manufacturing partners
Alphawave IP delivers connectivity technology in the most
advanced process technologies in the world from TSMC, Samsung and
Intel. Our end-customers then leverage these manufacturing partners
to build their semiconductor devices. While the development with
Intel is recent and was just announced in 2022, the long heritage
of the Alphawave IP founding team working with TSMC and Samsung
goes back more than a decade. In 2021, we were awarded TSMC
'Partner of the Year' for the second year in a row. This was a
proud moment for our team and reflects the deep relationships that
we have with TSMC as a key partner.
Building a global connectivity leader
When we founded Alphawave IP, we set out to build a global
connectivity leader - not just an IP company. We achieved
profitability within a year by building our core connectivity IP
portfolio. More recently, we significantly expanded that portfolio
to include product IPs and chiplet IPs. We have now announced
further expansion of our capabilities through the acquisitions of
OpenFive and Precise-ITC. This enables us to bundle additional
technology and capabilities for our customers beyond just core,
product and chiplet connectivity IPs by offering customised chiplet
silicon devices. In 2022, we expect to further expand our
technology leadership into the electrical connectivity space and
the optical connectivity space. Through these expansions we strive
to be a global connectivity leader for the most advanced
semiconductor companies in the world.
Q1 trading update
As expected, Alphawave IP has continued to accelerate sales
performance in Q1 2022. Total bookings for the period were
US$30.7m, a quarter-on-quarter increase of 20%. This performance
was driven by continued expansion in North America with numerous
design wins with new and existing customers, as well as an
additional chiplet design win. There were also repeat wins with a
major Korean customer and WiseWave, several new customer wins in
North America and one design win with a new customer in China
through the VeriSilicon reseller relationship. Of the US$30.7m in
bookings, US$5.7m was through VeriSilicon previously booked as part
of the US$54m multi-year reseller transaction signed in Q1 2021,
demonstrating further success from the reseller relationship,
US$19.4m represented new IP licence and related sales, and US$5.6m
were management's estimates of future royalties. The Group expects
to continue to accelerate the sales performance in the second
quarter and expand both within existing customers and new
customers, primarily in North America and Korea.
Tony Pialis
President & Chief Executive Officer
29 April 2022
ESG
We are proud of our diverse workforce. We are one of the only
semiconductor companies with a majority-women independent Board of
Directors.
Our aims for 2022
-- Report our gender pay gap
-- Publish our modern slavery statement
-- Introduce best-in-class employee benefits prioritising employee health and wellbeing
-- Track and publish our charitable contributions
-- Report to TCFD and SASB
-- Formalise path to carbon neutrality
We do not want to exist as a top-down organisation. We have
appropriate governance between management, the Board and employees
which sets the tone for how we engage with our stakeholders. Our
compensation structure reflects our shared purpose.
Bold ideas flow from top-down diversity
At Alphawave IP, ensuring diverse representation and the bold
ideas it creates is something we take seriously from the top-down.
More than half of our independent Board is made up of women, who
are leading figures in global technology companies. It is
reflective of our diverse workforce, which is over 15% female and
where 75% of our global workforce identifies with a minority
group.
Gender diversity(1)
Gender Number Percentage
------- ------ ----------
Female 23 15%
Male 131 85%
------- ------ ----------
1. Data as at 31 December 2021.
Responsible governance
-- Management structure: Our management is inclusive, fair,
accessible, and has a well-established controls environment with a
clear balance of power between the President & Chief Executive
Officer, Executive Chair and the Board of Directors. Our Board of
Directors is majority-independent and is led by our Senior
Independent Director, who is a globally recognised governance
leader in public technology companies.
-- Equity structure: We have one class of shares in our Company
- ordinary shares. There are no special rights, no ratchets, no
liquidation preferences, and no special voting agreements. All
shares carry the same rights.
-- Executive compensation: Our management team is paid on
average at the bottom quartile of public companies in the FTSE 250.
For 2021, our President & Chief Executive Officer and Executive
Chair have waived participation in any annual bonus or stock--based
compensation and have committed to doing so again in FY 2022.
-- Employee compensation: All our employees have received either
shares, options or restricted stock units in the Company. This is
part of our commitment not just to shareholder value but enabling
our colleagues to share in the value they create. Employees also
receive annual performance-based salary increases and bonuses.
-- Gender diversity: We actively seek to encourage gender
diversity and four of our six Non-Executive Directors are female.
As at the end of FY 2021, of our total workforce, 23 employees are
female and 131 male. The semiconductor industry has historically
seen under--representation of females, with the Global
Semiconductor Alliance and Accenture reporting in 2020 that the
majority of semiconductor companies have less than 1% of women in
director roles and above. Of our senior managers, classified as
those in director roles and above, four are female and 17 are male
as at 31 December 2021.
Our low carbon footprint
The fact that we license IP means that we have a low carbon
footprint. However, we strongly believe that all companies have an
obligation to actively help society decarbonise, and we are proud
of the fact that our technology has been built to perform better at
lower power.
This has the potential to contribute towards the increased power
efficiency of the world's IT infrastructure. Though the
transmission of data is a small percentage of the total power
consumption in many systems, there are many thousands of devices
that can benefit from our power savings
Committed to carbon neutrality
We are committed to achieving carbon neutrality and use Bullfrog
Power to purchase power from renewable energy sources that meet or
exceed the strictest environmental criteria offset programme.
-- We provide silicon IP solutions, delivering software and
designs in a virtual environment. We therefore operate in a low
environmental impact sector, relative to our customers and partners
who may operate data centres or manufacture semiconductors.
-- Though our environment impact is low, we are actively
reducing our carbon footprint and committing to operate on a carbon
neutral basis across our Scope 1 and 2 emissions.
-- To deal with electronic equipment at the end of their life
cycle, we will use robust product lifecycle management programmes
for our computer and IT resources and recycle electronic equipment.
This helps to recover precious and rare earth metals.
-- Our products enable data to travel at lower power, which has
the potential to lower the carbon footprint of the world's IT
infrastructure.
Reducing climate risk through transparent disclosure
We care about embedding transparency in our financial
disclosures, so that we can be a part of greener financial markets,
where climate risk can be more accurately assessed, and investors
can make informed decisions. We intend to report using the
Sustainability Accounting Standards Board (SASB) framework.
Task Force on Climate-Related Financial Disclosures (TCFD)
The Group recognises the impact of climate change and the role
we must play to mitigate the impact on our business and the wider
world. Alphawave IP is committed to transparency in its disclosure
of climate-related risks and the management of those risks. Given
the nature of our business and operations, the climate-related
risks that directly impact us are of limited materiality. However,
we have considered these and identified opportunities to reduce our
impact on and from climate change.
We strongly support the recommendations of the Task Force on
Climate-Related Financial Disclosures (TCFD), which are structured
around governance, strategy, risk management and metrics and
targets. As we have a standard listing on the LSE, we are not
required to apply the TCFD recommended disclosures in FY 2021. We
will be required to do so in future years and have elected to do
so, but may not be fully compliant, in FY 2021. We have considered
the recommendation of the TCFD and provide the following
information on our approach to assessing and disclosing
climate-related risks and opportunities in accordance with Listing
Rule 14.3.27R, except for the following matters:
-- disclosure ('strategy c') - we have not performed a
quantitative risk assessment or climate-related scenario
analysis.
We have structured the report in line with the four themes of
Governance, Strategy, Risk management and Metrics and targets.
Governance
The Board has overall accountability for the management of risks
and opportunities, and the Board's consideration of significant
risks impacting the Group includes assessment of risks associated
with climate change. Our Chief Financial Officer is responsible for
our risk management framework, including the assessment and
management of climate-related risks. During 2022, we intend to hire
an individual within the senior executive team with
responsibilities to include leading our climate change agenda and
managing our policies and practices across sustainability and wider
ESG matters. Our Senior Vice President of Operations is responsible
for our facilities, our IT resilience and IT end-of-life
policies.
We do not manufacture or supply physical products, our premises
are limited to leasehold office spaces and during substantially all
of 2021, our workforce was working from home due to the Covid-19
pandemic. Therefore, the Group's exposure to climate-related risks
is considered to be low and not currently classified as a
significant risk. In view of our low exposure and our business
model, and as we are still developing our approach to managing
climate-related risks, the Board's assessment of climate-related
risks is provided on a qualitative basis rather than quantitative
scenario testing.
Strategy
We have not identified any short-term climate-related risks that
are likely to have a material and direct impact on our operations.
We are potentially exposed to medium and longer-term
climate-related risks of a global/macro nature that impact society
in general, together with risks which may impact our end-customers
and the broader semiconductor supply chain. These physical risks
are either event--driven, such as extreme weather events, or
chronic, being longer--term shifts in climate patterns, such as
sustained higher temperatures or rising sea levels. We are also
potentially exposed to transitional changes, including changes to
government policies, taxes or measures aimed at reducing
emissions.
Our exposure is mitigated by the fact that we are a low carbon
intensity business, delivery of our technology to customers is
through virtual and not physical means, is not dependent on a
single region or a physical supply chain and we have proven our
ability, throughout the COVID-19 pandemic, to execute remotely and
from alternative locations. Therefore, we regard our exposure to
direct physical climate-related risks as low. Further, the impact
of any transitional changes upon the Group and its operations is
considered to be low compared to those businesses that have more
direct dependencies on manufacturing, distribution or fossil
fuels.
Our end-customers may rely on physical infrastructure and supply
chains for the manufacture and delivery of semiconductors either
for production use or during the development process, or may have
operations, including data centres and networks utilising those
semiconductors, that are required for their own businesses or that
they make available to customers. In the medium and longer term,
physical and transitional climate-related risks may impact the
ability of our customers to source and purchase semiconductors or
to build or operate their data centres or networks. We regard these
risks as being of a global nature which our customers and partners,
some of the largest technology companies in the world, are better
placed
to mitigate.
Power consumption is a material consideration for our customers
and one where we believe we have a competitive advantage in our
technology. Increasing focus on power consumption within data
centres and networks, and the need for our customers to select
vendors across their supply chains that offer power efficiencies,
represents a growing opportunity for the Group.
Risk management
Our process for identifying and assessing risks and
opportunities follows our Group-wide risk assessment and management
process. These risks, together with mitigations, are discussed by
the executive management team and the Board. Given the nature of
our business model, the Group's exposure to climate-related risks
is considered to be low and not currently classified as a
significant risk.
Metrics and targets
The Group is already proactive in putting in place mitigating
actions to reduce its environmental impact, such as avoiding
unnecessary business travel and purchasing energy from certified
renewable sources. We currently purchase renewable energy
certificates (RECs), similar to Renewable Energy Guarantees of
Origin in the UK, significantly in excess of our power consumption
from our offices in Toronto, Canada. These are purchased from
Bullfrog Power Inc in Toronto, Canada, who source them from
EcoLogo(R)-certified wind, solar and low-impact hydro-facilities.
By purchasing RECs, we reduce our carbon footprint and directly
support sustainable energy generators.
We offer our shareholders the ability to receive documentation,
including our annual report, in electronic form. Our annual report
is printed on recycled paper.
For 2022, we plan to fully offset our Scope 1 and 2 greenhouse
gas emissions through the purchase of RECs or carbon offsetting. We
plan to make further disclosures structured around the TCFD
framework in our 2022 annual report and we will develop the depth
of our TCFD disclosure over time.
Alphawave IP has appointed Carbon Footprint Ltd, a carbon and
energy management company, to independently assess its greenhouse
gas (GHG) emissions in accordance with the UK Government's
'Environmental Reporting Guidelines: Including Streamlined Energy
and Carbon Reporting Guidance'.
The GHG emissions have been assessed following the ISO
14064-1:2018 standard using the 2021 emission conversion factors
published by Department for Environment, Food and Rural Affairs and
the Department for Business, Energy and Industrial Strategy. The
assessment follows the location--based approach for assessing Scope
2 emissions from electricity usage. The financial control approach
has been used.
The table below summarises the GHG emissions for the 2021
reporting year. This is the first year that Alphawave IP has
assessed its emissions and this will set the baseline for future
assessments. For FY 2021, the scope includes UK and non-UK
operations, including Canada and the US.
Scope 1 includes emissions associated with gas consumption.
Scope 2 includes emissions associated with electricity consumption.
Scope 3 includes emissions associated with business travel and also
includes electricity consumption attributable to our utilisation of
servers within our third-party data centre provider. Reported
energy consumption and associated carbon emissions includes energy
consumption from our leased offices in Toronto.
Baseline
Activity year 2021
------------------- ---------
In metric
tonnes
CO(2) e
Total Scope
1 emissions
(natural
gas) 14.18
Total Scope
2 emissions
(electricity
consumption) 6.33
Total Scope
3 emissions
(transmissions
and distribution,
non-controlled
electricity,
homeworkers,
well to
tank, flights,
hire car,
taxi and
grey fleet
travel) 45.33
------------------- ---------
Total gross
(Scope
1, 2 &
3) location-based
emissions 65.84
------------------- ---------
Intensity
ratios
tCO(2)
e (gross
Scope 1,
2 & 3)
per employee 0.49
tCO(2)
e (gross
Scope 1,
2 & 3)
per US$m
revenue 0.73
------------------- ---------
Underlying
energy
consumption
(kWh)
------------------- ---------
Total global
energy
consumed 285,414
------------------- ---------
Total UK
energy
consumed 273
------------------- ---------
UK-based
emissions 0.1%
------------------- ---------
UK-based
energy
consumption 0.1%
------------------- ---------
As from 1 July 2021, we contracted with Bullfrog Power Inc., in
Toronto, Canada, to purchase Renewable Energy Certificates (RECs),
sourced from projects that meet or exceed environmental criteria as
defined by EcoLogo(R). Our purchases of RECs equated to 194.4 MWh,
which represents a substantial portion of our total energy
consumption and considerably exceeds our energy consumption
attributable to our Scope 1 and Scope 2 emissions.
In light of the impact of COVID-19 and the limited ability of
our employees to work from our offices or undertake business travel
during FY 2021, we were constrained in our ability to implement any
significant energy efficiency measures. As travel constraints are
now lifting and employees are increasingly returning to our
offices, we are keeping under review any opportunities to implement
such measures going forward.
Financial review
"Our growth is anchored in the exponential growth of data. We
enable data to travel faster, more reliably and at lower
power."
Daniel Aharoni
Chief Financial Officer
Contracted order book and backlog
The Group generated bookings of US$244.7m in 2021, an increase
of 226% from 2020 (US$75.0m), including US$147.8m of bookings from
recurring revenue subscription licences from our joint venture,
WiseWave, and our reseller in China, VeriSilicon. Excluding
estimates of potential future royalties, our 2021 bookings were
US$220.8m, an increase of 325% from 2020 (US$52.0m). Our 2021
bookings do not include the US$105m extension option from WiseWave,
which, if triggered, provides WiseWave with access to future
generations of our technology, nor any potential royalty
contributions from WiseWave or VeriSilicon.
Excluding China, our total bookings for 2021 were US$87.9m, an
increase of 47% from 2020 (US$59.8m). Excluding estimates of
royalties, we generated 92% year-on-year growth in bookings from
North American customers.
Our backlog (contracted bookings over the life of the Group not
yet recognised as revenue) as at end-2021 was US$219.5m including
royalties (US$168.6m excluding royalties), of which around 50%
represents recurring revenue subscription deals with WiseWave and
through VeriSilicon.
In 2021, we secured orders from ten new end-customers and repeat
business from eight existing customers. We won 16 new licence
sales, including our first two chiplet IP deals in Q4 2021.
Excluding subscription licence deals which give access to a broad
portfolio of our IP at multiple process nodes, nearly 80% of our
bookings in 2021 were for process nodes below 7nm.
Revenues
Revenues for 2021 reached US$89.9m, 173% growth compared to
US$32.9m in 2020, and reflect significant diversification.
-- Customers - in 2021, we recognised revenues from 20
end-customers (21 excluding the impact of two of our customers
merging). This compares to eleven customers in 2020. Our top three
customers represented 53% of 2021 sales (28% excluding WiseWave)
versus 52% in 2020 and one of the top three customers in 2021 was
also a top three customer in 2020.
-- End-markets - in 2021, we generated revenues from customers
across our key end-markets of data networking (including optical),
cloud compute and solid state storage as well as AI and 5G
wireless. Revenues from data networking, cloud compute and solid
state storage represented over 75% of our 2021 sales.
-- Regions - in 2021, our revenues were well balanced between
North America and Asia, with 42% of revenues to North America, 48%
to China and 10% to APAC excluding China. In 2020, 59% of our sales
were to North American customers, 25% to China and 16% to APAC
excluding China. The increased weighting to China in 2021 reflects
first revenue recognition in H2 2021 of the agreements with
WiseWave and VeriSilicon. Excluding WiseWave, 63% of FY 2021 sales
were to North American customers, 22% to China and 15% to APAC
excluding China. As we have previously stated, revenues from China
in the medium and long-term are expected to be less than 30% of
total Group revenues.
-- Subscription licence - in respect of the WiseWave five--year
subscription licence agreement, in H2 2021 we invoiced US$24.0m
(gross of 10% withholding tax) and recognised US$27.7m, with
revenue recognition based on our deliveries of IP to WiseWave. In
respect of the three--year exclusive reseller arrangement with
VeriSilicon, we have been invoicing and collecting on a quarterly
basis since February 2021. In FY 2021, we invoiced US$8.8m and
recognised US$8.9m of revenue related to the VeriSilicon reseller
agreement.
Substantially all of our revenue in both 2020 and 2021 was
generated from one-time licence and licence-related (non--recurring
engineering and support) and subscription licence activities. We
did not recognise any royalty sales in 2020 or 2021 and given the
long design cycles from our customers, do not expect to recognise
material royalties until FY 2024 at the earliest.
Operating expenses and profitability
In 2021, we maintained our gross margins at 94%, with cost of
sales primarily reflecting sales commissions as well as costs
related to the development of test chips. Our adjusted EBITDA(1)
was US$51.8m (58% margin) compared to adjusted EBITDA of US$19.3m
(59% margin) in 2020.
Reflecting the rapid scaling of the business, in 2021, our
operating expenses totalled US$48.7m, or US$36.1m excluding
non-recurring IPO costs, one-time M&A/professional expenses,
share-based payment costs and foreign exchange gains. This compares
to $14.6m in 2020 ($13.0m excluding share-based payment costs and
foreign exchange losses).
Of US$48.7m in operating expenses in 2021, US$29.4m (33% of
sales) related to R&D/engineering, US$5.4m (6% of sales)
related to general and administrative expenses and US$1.3m (1% of
sales) related to sales and marketing expenditure. US$12.6m related
to other items comprising non-recurring IPO costs, one-time
M&A/professional expenses, share-based payment costs and
exchange gains. In 2020, operating expenses totalled US$14.6m,
US$1.5m of which reflect foreign exchange gains and share--based
payments, and US$8.8m (27% of sales) related to
R&D/engineering, US$3.4m (10% of sales) related to general and
administrative and US$0.8m (2% of sales) related to sales and
marketing.
This increase in our operating expenses was primarily due to the
increase in our headcount to 154 heads at end 2021 from 72 at end
2020, together with associated software tool costs which scale with
our R&D/engineering headcount, as well as additional
professional costs required as a publicly listed company following
our IPO. To capitalise on our future growth opportunities, we were
able to expand headcount significantly ahead of our budget and
estimate that the incremental expenses from our accelerated hiring
during 2021 exceeded US$4.0m.
Whilst this negatively impacted our full-year margins, our
ability to continue to attract and incentivise high calibre
engineering talent, reinforced by our IPO, will enable us to expand
and accelerate our product development roadmap. We have continued
the pace of hiring in 2022 and our total headcount as at
end-February 2022 was 184.
The increase in share-based payments, from US$0.6m in 2020 to
US$6.1m in 2021, was due to our headcount expansion and
significantly higher exercise prices for share--based awards given
to employees during the year.
In 2020, as a private Canadian company with limited visibility
on the duration, extent and impact of the COVID-19 pandemic on our
business, we received US$1.1m in grants from the Canadian
Government Canadian Emergency Wage Subsidy (CEWS) to support wages
to employees. In early H1 2021, prior to our IPO, we received a
further US$55,000. Post-IPO, although entitled to further grants in
Canada, we have elected not to receive them. No government
assistance has been requested nor taken in the UK.
In 2021, US$2.5m represented depreciation on right--of--use
assets, namely our premises and test equipment which we lease
(2020: US$0.7m). We saw a significant increase in test equipment
leased due to the increase in the number of customer engagements
and engineering staff. In addition, we commenced a lease on larger
premises in Toronto, Canada, in November 2020, resulting in a full
year of depreciation in 2021. In September 2021, we signed a
five-year lease for offices in San Jose, California. Based in
Silicon Valley and near many of our customers, these offices will
serve as our flagship US demonstration labs. Fit-out is ongoing and
we expect to occupy the offices in Q2 2022.
The total one-time costs associated with our IPO on the London
Stock Exchange were US$30.3m, of which US$20.3m was set off against
equity on our balance sheet and US$10.0m was expensed through our
income statement.
As at year end, the Group owned 42.5% of WiseWave, a newly
formed company established in China in Q4 2021 to develop and sell
silicon products incorporating silicon IP licensed from the Group.
We equity account for the investment as a joint venture, resulting
in a US$12.9m loss. The five-year subscription licence agreement is
being capitalised and amortised over the life of the agreement by
WiseWave.
Our tax expense for the year was US$13.7m, being 38% of our
operating profit of US$36.0m. Substantially all of our revenue was
generated from Alphawave IP Inc, based in Canada, which has a
corporation tax rate of 26.5%. Our higher tax charge is a result of
expenses relating to IPO costs, M&A professional fees,
share-based payments and FX gains of US$12.6m which are
disallowable for corporation tax purposes.
Our profit after tax for FY 2021, which is stated after
share--based payments, exchange gains/losses and one--time costs
relating to our IPO, one-time M&A and professional fees and our
share of the post-tax loss of WiseWave of US$12.9m, was US$9.4m,
compared to US$12.2m in 2020. On an adjusted basis(1) , which is
stated after our US$12.9m share of the post-tax loss of WiseWave,
our equity-accounted joint venture, our profit after tax for FY
2021 was US$22.0m, an increase of 60% compared to US$13.8m in FY
2020.
The exchange loss of US$23.1m is a result of our GBP proceeds at
IPO being translated into US$, our presentational currency, at the
foreign exchange rate on the date of the IPO, and being
re-translated, again for presentational purposes, into US$ at the
year end. Over this period the US$ strengthened from 1.4134 to
1.3513, a 4.6% increase.
Balance sheet, liquidity and cash flow
As at end-December 2021, we held US$501.0m in cash and had no
borrowings. Our cash increased by US$486.9m between end-December
2020 and end-December 2021, primarily as a result of the net IPO
proceeds received, after issuance costs, of US$485.9m. In addition,
the Company benefited from a stock stabilisation programme which
resulted in a US$22.2m cash receipt.
Between end-December 2020 and end-December 2021, our trade and
other receivables increased from US$6.2m to US$13.1m. This increase
is mostly due to Group trade receivables increasing from US$5.2m to
US$12.1m as a result of increased sales in 2021.
Between end-December 2020 and end-December 2021, our intangible
assets increased from US$0.1m to US$1.2m. Our intangible assets
comprise IP being developed by a third-party vendor and represents
instalments paid towards the development which is carried at cost.
No amortisation is recorded as the intangible asset is not yet
available for use. The increase in 2021 is due to twelve months'
worth of further development in contrast to two months at the end
of H2 2020 when the development commenced.
Our accrued revenue, where revenue recognition conditions are
met under IFRS 15 but we have not billed or collected any amount,
increased to US$31.7m at end-December 2021 from US$10.3m at
end-December 2020. This increase is a function of our revenue
growth and due to the timing of invoicing milestones on specific
contracts. Since our 2021 year end, and as at 31 March 2022, we
have billed a further US$15.6m of this accrued revenue balance, as
invoicing milestones have now been met.
Our investments in equity-accounted associates of US$9.4m
represents the value of our investment in WiseWave, based upon a
42.5% share of WiseWave's net assets as at 31 December 2021.
Between end-December 2020 and end-December 2021, our trade and
other payables increased from US$2.2m to US$5.8m. This increase is
predominantly due to accruals increasing from US$1.0m to US$4.0m,
from accrued advisory fees of US$0.4m, design automation tools of
US$1.5m and accrued sales commissions of US$1.6m incurred in FY
2021 but not paid until FY 2022.
Our deferred revenue liability, where we have invoiced or
received money for products or services where revenue recognition
conditions are not met, increased to US$12.7m at end-December 2021
from US$7.4m at end-December 2020. This increase is a function of
our revenue growth and due to invoicing being ahead of revenue
recognition on specific contracts.
Flexible spending accounts, which represent non--current
deferred income, and which increased to US$6.8m as at end-December
2021 from US$2.3m as at end--December 2020, are contracts with
customers who have committed to regular periodic payments to us
over the term of the contract. These payments are not in respect of
specific licences or other deliverables, but can be used as credit
against future deliverables. We have flexible spending accounts
with customers with whom we work on multiple projects and who
prefer regular periodic billing and payments rather than
milestone-based billing. Although we have been invoicing and
collecting under these contracts, the revenue recognition
conditions may not have been met which enable us to recognise these
billings as revenue.
Our pre-tax operating cash flow for 2021 was US$26.5m (which
includes one-time payments of approximately US$10.0m relating to
our IPO expenses), an increase of 124% compared to US$11.8m of
pre-tax operating cash flow in 2020. Our working capital in 2021
increased by US$15.6m, compared to an increase of US$4.7m in FY
2020, primarily due to an increase in accrued revenue and trade and
other receivables, offset by an increase in deferred revenue and
flexible spending accounts, as detailed above.
After tax, we generated cash from operations of US$18.9m in
2021, compared to US$10.3m in 2020. Our capital expenditure during
2021 totalled US$1.1m (US$0.4m in 2020) as a result of computing
equipment purchased for new hires and fit-out costs for our new
office space in Toronto. In Q4 2021, we also made the first tranche
of our investment into WiseWave totalling US$22.4m for a 42.5%
equity interest, with Wise Road Capital contributing US$30.3m. As
disclosed in our IPO Prospectus, Alphawave IP has committed to
invest up to US$170m into WiseWave. Finally, we recorded an FX loss
of US$22.5m predominantly resulting from the translation of our net
IPO GBP proceeds into our presentational currency of US$ at
different points in time.
Capital allocation and dividends
The Company's capital allocation policy is focused on investing
in our future growth and deploying our financial resources to
rapidly expand our business, as demonstrated by our recent
acquisitions. Given our growth strategy, we do not intend to pay
dividends in the short or medium term.
Finally, as further detailed below, the Directors have adopted
the going concern basis of accounting.
Daniel Aharoni
Chief Financial Officer
29 April 2022
2. See note 4 (Alternative Performance Measures) of the
financial statements for reconciliation of EBITDA to adjusted
EBITDA.
3. See note 4 (Alternative Performance Measures) of the
financial statements for reconciliation of profit after tax to
adjusted profit after tax.
Financial statements
Consolidated statement of comprehensive income
for the year ended 31 December 2021
Year ended Year ended
31 December 31 December
2021 2020
----------------------------------------------------- ---- ----------- -------------
Continuing operations Note US$'000 US$'000
Revenue 5 89,931 32,946
Cost of sales (5,199) (1,547)
_______ _______
Gross profit 84,732 31,399
Research and development/engineering 6 (29,444) (8,816)
Sales and marketing (1,275) (766)
General and administration (5,364) (3,428)
Other expenses (12,614) (1,547)
_______ _______
Operating profit 36,035 16,842
Other expenses charged in arriving at operating
profit:
Non-recurring Initial Public Offering costs 11 (9,961) -
M&A costs/professional costs (533) -
Share-based payment 25 (6,143) (565)
Exchange gain/(loss) 4,023 (982)
_______ _______
Other expenses (12,614) (1,547)
Finance income 10 312 198
Finance expense 10 (320) (195)
Share of post-tax loss of equity-accounted
joint ventures 17 (12,939) -
_______ _______
Profit before tax 23,088 16,845
Tax expense 12 (13,657) (4,640)
_______ _______
Profit for the year 9,431 12,205
_______ _______
Other comprehensive (expense)/income
Exchange (losses)/gains arising on translation
of foreign operations (23,096) 1,378
Tax relating to other comprehensive (expense)/income - -
_______ _______
Other comprehensive (expense)/income for
the period, net of tax (23,096) 1,378
_______ _______
Total comprehensive (expense)/income for
the year (13,665) 13,583
Profit per ordinary share attributable
to the shareholders (expressed in cents
per ordinary share)
Basic earnings per share (US$ cents) 13 1.51 2.27
Diluted earnings per share (US$ cents) 13 1.34 1.94
----------------------------------------------------- ---- ----------- -------------
The accompanying notes below form part of these financial
statements.
Consolidated statement of financial position
as at 31 December 2021
31 December 31 December
2021 2020
Note US$'000 US$'000
------------------------------------------- ---- ----------- -----------
Assets
Current assets
Trade and other receivables 18 13,103 6,224
Accrued revenue 5 31,719 10,328
Taxes receivable 2,605 2,553
Cash and cash equivalents 32 500,964 14,039
_______ _______
Total current assets 548,391 33,144
_______ _______
Non-current assets
Property and equipment 14 1,626 412
Intangible assets 15 1,167 140
Right-of-use assets 16 7,672 6,915
Investments in equity-accounted associates 17 9,421 -
_______ _______
Total non-current assets 19,886 7,467
_______ _______
Total assets 568,277 40,611
_______ _______
Liabilities
Current liabilities
Trade and other payables 19 5,805 2,207
Lease liabilities 16 2,160 1,672
Deferred revenue 5 12,661 7,381
Income tax payable 6,970 3,550
Flexible spending account 5 6,819 2,335
Loans and borrowings 20 - 27
_______ _______
Total current liabilities 34,415 17,172
_______ _______
Non-current liabilities
Loans and borrowings 20 - 27
Lease liabilities 16 5,668 5,129
Deferred income taxes 22 422 492
_______ _______
Total non-current liabilities 6,090 5,648
_______ _______
Total liabilities 40,505 22,820
_______ _______
Net assets 527,772 17,791
_______ _______
Issued capital and reserves attributable
to owners of the parent
Share capital 23 9,399 1,881
Preference shares 23 - -
Share premium account 24 - -
Share-based payment reserve 25 4,777 331
Merger reserve 24 (793,216) -
Foreign exchange reserve 24 (21,718) 1,378
Retained earnings 24 1,328,530 14,201
_______ _______
Total equity 527,772 17,791
------------------------------------------- ---- ----------- -----------
The financial statements were approved and authorised for issue
by the Board of Directors on 29 April 2022 and were signed on its
behalf by:
D Aharoni
Director
The accompanying notes below form part of these financial
statements.
Company statement of financial position
as at 31 December 2021
31 December
2021
Note US$'000
--------------------------------------------------- ---- -----------
Assets
Current assets
Trade and other receivables 18 146
Amounts owed by Group undertakings 367
Taxes receivable 205
Cash and cash equivalents 32 463,360
_______
Total current assets 464,078
_______
Non-current assets
Investments in subsidiaries 17 22,391
Amounts owed by Group undertakings 22,997
_______
Total non-current assets 45,388
_______
Total assets 509,466
_______
Liabilities
Current liabilities
Trade and other payables 19 1,013
Amounts owed to Group undertakings 150
Income tax payable 253
_______
Total current liabilities 1,416
_______
Total liabilities 1,416
_______
Net assets 508,050
_______
Issued capital and reserves attributable to owners
of the parent
Share capital 23 9,399
Preference shares 24 -
Share premium account 24 -
Share-based payment reserve 25 4,497
Merger reserve 24 (777,751)
Foreign exchange reserve 24 (23,486)
Retained earnings 24 1,295,391
_______
Total equity 508,050
_______
The Company has taken advantage of the exemption allowed under
section 408 of the Companies Act 2006 and has not presented its own
statement of comprehensive income in these financial statements.
The loss of the Company for the period was US$8.5m.
The financial statements on were approved and authorised for
issue by the Board of Directors on 29 April 2022 and were signed on
its behalf by:
D Aharoni
Director
The accompanying notes below form part of these financial
statements.
Consolidated statement of cash flows
for the year ended 31 December 2021
Year ended Year ended
31 December 31 December
2021 2020
Note US$'000 US$'000
--------------------------------------------- ---- ----------- -----------
Cash flows from operating activities
Profit for the year 9,431 12,205
Adjusted for:
Income tax expense 12 13,731 4,379
R&D tax credit (3,039) (1,802)
Depreciation of property and equipment 14 642 172
Depreciation of right-of-use asset 16 2,485 740
Share of loss in joint venture 17 12,939 -
Share-based payment 25 6,143 565
Subcontracting expense obtained for common
shares - 30
Deferred income taxes 12 (74) 261
Finance income 10 (312) (198)
Finance cost 10 26 113
Lease interest 10 294 82
Foreign exchange (gain) (112) -
_______ _______
42,154 16,547
_______ _______
Changes in working capital
(Increase) in trade and other receivables (6,879) (3,160)
(Increase) in accrued revenue (21,391) (9,052)
Increase in trade and other payables 2,859 1,841
Increase in deferred revenue and flexible
spending account 9,764 5,654
_______ _______
(15,647) (4,717)
_______ _______
Cash generated from operating activities
before tax 26,507 11,830
Income tax paid (3,383) (582)
Withholding taxes paid (4,232) (935)
_______ _______
Net cash generated from operating activities 18, 892 10,313
_______ _______
--------------------------------------------- ---- ----------- -----------
The accompanying notes below form part of these financial
statements.
Year ended Year ended
31 December 31 December
2021 2020
Note US$'000 US$'000
---------------------------------------------------- ---- ----------- -----------
Cash flows from investing activities
32,
Purchase of property and equipment 14 (1,129) (368)
Collection of notes receivables - 36
Purchase of intangible assets 15 (1,038) (133)
Interest received 10 312 198
Investment in joint venture 17 (22,360) -
_______ _______
Net cash used in investing activities (24,215) (267)
_______ _______
Cash flows from financing activities
Issuance of common shares - Initial Public
Offering 23 509,003 -
Issuance of common shares 23 1,282 864
Initial Public Offering share issuance
costs 23 (20, 308) -
Exercise of options 25 5,089 -
Proceeds from Initial Public Offering stabilisation 23 22,238 -
Interest paid 10 (26) (113)
Decrease in bank indebtedness (54) (2,169)
Increase in long-term debt 20 - 52
Repayment of principal under lease liabilities 16 (2,494) (1,001)
_______ _______
Net cash generated from/(used in) financing
activities 514, 730 (2,367)
_______ _______
Net increase in cash and cash equivalents 509,407 7,679
Cash and cash equivalents at start of year 14,039 5,626
Effects of foreign exchange on cash and
cash equivalents ( 22,482) 734
_______ _______
Cash and cash equivalents at end of year 32 500,964 14,039
_______ _______
---------------------------------------------------- ---- ----------- -----------
The accompanying notes below form part of these financial
statements.
Consolidated statement of changes in equity
for the year ended 31 December 2021
Ordinary Preference Share Share-based Merger Currency Retained Total
share share premium payment reserve translation earnings equity
capital capital account reserve reserve
Note US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------------- ---- --------- ---------- --------- ----------- --------- ------------ --------- --------
Balance at 1
January 2021 1,881 - - 331 - 1,378 14,201 17,791
Reorganisation
accounting (1,881) - - - - - - (1,881)
_______ _______ _______ _______ _______ _______ _______ _______
- - - 331 - 1,378 14,201 15,910
_______ _______ _______ _______ _______ _______ _______ _______
Comprehensive
income for the
year
Profit for the
year - - - - - - 9,431 9,431
Other comprehensive
expense - - - - - (23,096) - (23,096)
_______ _______ _______ _______ _______ _______ _______ _______
Total comprehensive
income/(expense)
for the year - - - - - (23,096) 9,431 (13,665)
Contributions
by and
distributions
to owners
Issue of shares,
primary 23 124,147 71 384,856 - - - - 509,074
Issue of shares,
reorganisation 23 796,958 - - - (793,216) - - 3,742
Issue of shares,
other 23 313 - 969 - - - - 1,282
Exercise of share
options 25 4,064 - - (1,060) - - 1,060 4,064
Exercise of share
options, pre
reorganisation - - - (637) - - (637)
Effect of exercise
price below
nominal
value 23 14,381 - (14,381) - - - - -
Net costs on
issuance of shares
relating to
Initial
Public Offering 23 - - 1,930 - - - - 1,930
Capital reduction (930,464) (373,374) 1,303,838 -
Share-based
payments 25 - - - 6,143 - - - 6,143
Shares redeemed - (71) - - - - - (71)
_______ _______ _______ _______ _______ _______ _______ _______
Total contributions
by and
distributions
to owners 9,399 - - 4,446 (793,216) - 1,304,898 525,527
_______ _______ _______ _______ _______ _______ _______ _______
Balance at 31
December 2021 9,399 - - 4,777 (793,216) (21,718) 1,328,530 527,772
_______ _______ _______ _______ _______ _______ _______ _______
Balance at 1
January 2020 462 - - 35 - - 1,996 2,493
Comprehensive
income for the
year
Profit for the
year - - - - - - 12,205 12,205
Other comprehensive
income - - - - - 1,378 - 1,378
_______ _______ _______ _______ _______
Total comprehensive
income for the
year - - 1,378 12,205 13,583
_______ _______ _______ _______ _______
Contributions
by and
distributions
to owners
Issue of shares 1,419 (269) - - 1,150
Share-based
payments - 565 - - 565
_______ _______ _______ _______ _______
Total contributions
by and
distributions
to owners 1,419 296 - - 1,715
_______ _______ _______ _______ _______
Balance at 31
December 2020 1,881 331 1,378 14,201 17,791
_______ _______ _______ _______ _______
------------------- ---- --------- ---------- --------- ----------- --------- ------------ --------- --------
The tax impact of other comprehensive income/expense is
US$nil.
The accompanying notes below form part of these financial
statements.
Company statement of changes in equity
for the period ended 31 December 2021
Ordinary Preference Share Share-based Currency
share share premium payment Merger translation Retained Total
Note capital capital account reserve reserve reserve earnings equity
US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000 US$'000
------------------ ---- --------- ---------- --------- ----------- --------- ------------ --------- ---------
Balance at 9 - - - - - - - -
December 2020
Comprehensive
expense for the
period
Loss for the
period - - - - - - (8,447) (8,447)
Other
comprehensive
expense - - - - - (23,486) - (23,486)
_______ _______ _______ _______ _______ _______ _______ _______
Total
comprehensive
expense for the
period - - - - - (23,486) (8,447) (31,933)
Contributions
by and
distributions
to owners
Issue of shares,
Primary 23 124,147 71 384,856 - - - - 509,074
Issue of shares,
Secondary 23 796,958 - - - - - - 796,958
Issue of shares,
other 23 313 - 969 - - - - 1,282
Exercise of share
options 25 4,064 - - - - - - 4,064
Reorganisation
accounting 23 - - - - (777,751) - - (777,751)
Effect of exercise
price below
nominal
value 23 14,381 - (14,381) - - - - -
Net costs on
issuance of
shares
relating to
Initial
Public Offering - - 1,930 - - - - 1,930
Capital reduction (930,464) (373,374) 1,303,838 -
Share-based
payments 25 - - - 4,497 - - - 4,497
Shares redeemed 23 - (71) - - - - - (71)
_______ _______ _______ _______ _______ _______ _______ _______
Total
contributions
by and
distributions
to owners 9,399 - - 4,497 (777,751) - 1,303,838 539,983
_______ _______ _______ _______ _______ _______ _______ _______
Balance at 31
December 2021 9,399 - - 4,497 (777,751) (23,486) 1,295,391 508,050
_______ _______ _______ _______ _______ _______ _______ _______
------------------ ---- --------- ---------- --------- ----------- --------- ------------ --------- ---------
The tax impact of other comprehensive income/expense is
US$nil.
The accompanying notes below form part of these financial
statements.
Notes to the consolidated financial statements
for the year ended 31 December 2021
1 General information
Alphawave IP Group plc (the 'Company') is a public limited
company whose shares are listed on the main market of the London
Stock Exchange and is incorporated and domiciled in England and
Wales. The address of its registered office is 6th Floor, 65
Gresham Street, London, United Kingdom, EC2V 7NQ.
The principal activities of the Company and its subsidiaries
(the 'Group') are detailed in the Directors' report.
2 Accounting policies
The preliminary announcement does not constitute the Company's
statutory accounts for the years ended 31 December 2021 or 2020.
Statutory accounts for 2021 will be delivered to the registrar of
companies in due course. The auditor has reported on those
accounts: their reports were (i) unqualified, (ii) did not include
a reference to any matters to which the auditor drew attention by
way of emphasis without qualifying their report and (iii) did not
contain a statement under section 498 (2) or (3) of the Companies
Act 2006.
Basis of preparation
The principal accounting policies adopted in the preparation of
the consolidated financial statements are set out below. The
policies have been consistently applied to all the years presented,
unless otherwise stated.
The Company was incorporated on 9 December 2020. Therefore, the
Company results represent the period from incorporation to 31
December 2021.
The consolidated financial statements are presented in US$,
which is the Group's presentational currency. Each of the five
trading entities in the Group have different functional currencies,
with Alphawave IP Inc. being accounted for in CAD$, Alphawave IP
Corp., Alphawave IP Limited and Alphawave IP (BVI) Ltd in US$ and
the Company in GBP. The currencies used by each entity reflect the
functional currency of that entity. However, it was decided to use
US$ as the Group's presentational currency as substantially all of
the Group's revenues and a significant part of the costs are
denominated in US$ and it is typically the presentational currency
used across the semiconductor industry.
Amounts are rounded to the nearest thousand, unless otherwise
stated.
The consolidated financial statements of the Group (the
'consolidated financial statements') have been prepared in
accordance with international accounting standards in accordance
with UK-adopted international accounting standards ('UK-adopted
IFRS'). The Company has elected to prepare its parent company
financial statements in accordance with FRS 101.
In preparing separate financial statements, the Company has
taken advantage of certain disclosure exemptions conferred by FRS
101:
-- certain disclosures required under IFRS 15 Revenue from Contracts from Customers, including disaggregation of revenue, details of changes in contract assets and liabilities, and details of incomplete performance obligations;
-- paragraphs 91 to 99 of IFRS 13 Fair value measurement
(disclosure of valuation techniques and inputs used for fair value
measurement of assets and liabilities);
-- the requirement in paragraph 38 of IAS 1 Presentation of
Financial Statements to present comparative information in respect
of:
-- paragraph 79(a)(iv) of IAS 1;
-- paragraph 73(e) of IAS 16 Property, Plant and Equipment;
-- the requirements of paragraphs 10(d), 10(f), 16, 38A, 38B,
38C, 38D, 40A, 40B, 40C, 40D, 111 and 134--136 of IAS 1
Presentation of Financial Statements;
-- the requirements of IAS 7 Statement of Cash Flows;
-- the requirements of paragraphs 30 and 31 of IAS 8 Accounting
Policies, Changes in Accounting Estimates and Errors;
-- the requirements of paragraphs 17 of IAS 24 Related Party
Disclosures to disclose key management personnel compensation and
18A of IAS 24 Related Party Disclosures to disclose amounts
incurred by the entity for provision of key management personnel
services that are provided by a separate management entity; and
-- the requirements in IAS 24 Related Party Disclosures to
disclose related party transactions entered into between two or
more members of a group, provided that any subsidiary which is a
party to the transaction is wholly owned by such a member.
The Company has taken advantage of the exemption allowed under
section 408 of the Companies Act 2006 and has not presented its own
statement of comprehensive income in these financial
statements.
In addition, and in accordance with FRS 101, further disclosure
exemptions have been applied because equivalent disclosures are
included in the consolidated financial statements:
-- the requirements of IFRS 7 Financial Instruments: Disclosures.
Where required, equivalent disclosures are given in the Group
financial statements.
The preparation of financial statements in compliance with
adopted IFRS requires the use of certain critical accounting
estimates. It also requires Group management to exercise judgement
in applying the Group's accounting policies. The areas where
significant judgements and estimates have been made in preparing
the financial statements and their effect are disclosed in note
3.
Basis of measurement
The financial statements have been prepared on the historical
cost basis except where the IFRS requires an alternative treatment,
including certain financial instruments.
Changes in accounting policies
New standards, interpretations and amendments
There were a number of amendments to existing standards which
were effective in the year ended 31 December 2021, none of which
were relevant to the Group.
New standards, interpretations and amendments not yet
effective
There are a number of standards, amendments to standards, and
interpretations which have been issued by the IASB that are
effective in future accounting periods that the Group has decided
not to adopt early.
The following amendments are effective for the period beginning
1 January 2022:
-- Onerous Contracts - Cost of Fulfilling a Contract (Amendments to IAS 37);
-- Property, Plant and Equipment: Proceeds before Intended Use (Amendments to IAS 16);
-- Annual Improvements to IFRS Standards 2018-2020 (Amendments
to IFRS 1, IFRS 9, IFRS 16 and IAS 41); and
-- References to Conceptual Framework (Amendments to IFRS 3).
The following amendments are effective for the period beginning
1 January 2023:
-- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);
-- Definition of Accounting Estimates (Amendments to IAS 8); and
-- Deferred Tax Related to Assets and Liabilities arising from a
Single Transaction (Amendments to IAS 12).
In January 2020, the IASB issued amendments to IAS 1, which
clarify the criteria used to determine whether liabilities are
classified as current or non-current. These amendments clarify that
current or non-current classification is based on whether an entity
has a right at the end of the reporting period to defer settlement
of the liability for at least twelve months after the reporting
period. The amendments also clarify that 'settlement' includes the
transfer of cash, goods, services or equity instruments unless the
obligation to transfer equity instruments arises from a conversion
feature classified as an equity instrument separately from the
liability component of a compound financial instrument. The
amendments were originally effective for annual reporting periods
beginning on or after 1 January 2022. However, in May 2020, the
effective date was deferred to annual reporting periods beginning
on or after 1 January 2023.
In response to feedback and enquiries from stakeholders, in
December 2020, the IFRS Interpretations Committee (IFRIC) issued a
Tentative Agenda Decision, analysing the applicability of the
amendments to three scenarios. However, given the comments received
and concerns raised on some aspects of the amendments, in April
2021, IFRIC decided not to finalise the agenda decision and
referred the matter to the IASB. In its June 2021 meeting, the IASB
tentatively decided to amend the requirements of IAS 1 with respect
to the classification of liabilities subject to conditions and
disclosure of information about such conditions and to defer the
effective date of the 2020 amendment by at least one year.
The Directors are currently assessing the impact of these new
accounting standards and amendments. The Directors do not expect
any standards issued by the IASB, but not yet effective, to have a
material impact on the Group.
Basis of consolidation
Where the Company has control over an investee, it is classified
as a subsidiary. The Company controls an investee if all three of
the following elements are present: power over the investee,
exposure to variable returns from the investee, and the ability of
the investor to use its power to affect those variable returns.
Control is reassessed whenever facts and circumstances indicate
that there may be a change in any of these
elements of control.
The consolidated financial statements present the results of the
Company and its subsidiaries (the 'Group') as if they formed a
single entity. Intercompany transactions and balances between Group
companies are therefore eliminated in full.
Joint ventures are accounted for using the equity method, where
the Group's share of post-acquisition profits and losses and other
comprehensive income is recognised in the consolidated statement of
comprehensive and other comprehensive income (except for losses in
excess of the Group's investment in the joint venture unless there
is an obligation to make good those losses).
Business combinations
The Company was incorporated on 9 December 2020. On 14 May 2021,
a reorganisation of Alphawave IP's corporate structure was
completed, which resulted in the Company being the sole owner of
Alphawave IP Inc. Pursuant to an agreement between the Company,
Alphawave IP Inc. and each of the members of Alphawave IP Inc., the
issued and outstanding Alphawave IP Inc. common shares were
exchanged for 20 ordinary shares of the Company with a nominal
value of GBP1. As such the Company issued 563,859,059 ordinary
shares increasing its share capital by this amount. At the time of
the exchange, the net assets of Alphawave IP Inc. had a book value
of GBP13,589,766 which was posted as an investment in the books of
the Company and the difference posted to the merger reserve, in
line with merger accounting as described below.
The merger reserve in the consolidated financial statements
reflects the difference between the share capital of the shares
issued in the Company US$796,958 in exchange for the shares in
Alphawave IP Inc. and the share capital of Alphawave IP Inc.
US$3,742 (as at the date of the reorganisation).
The Group reconstruction has been accounted for in accordance
with the principles of merger accounting, as a common control
transaction under IFRS 3.B1. Alphawave IP Inc. was controlled by
the same individuals as Alphawave IP Group plc previously, and
their rights relative to each other were unchanged. Therefore, the
shareholders have a continuing interest in the business, both
before and after its transfer. Consequently, these financial
statements have been prepared as if Alphawave IP Group plc had
always been the holding company.
The Company was admitted to listing on the London Stock Exchange
on 18 May 2021
There has been no recognition of acquisitions in the year that
have been agreed but not closed out by the year end.
Going concern
As of 31 December 2021, the Group had cash and cash equivalents
of US$501m. Considering the Group's financial position as of 31
December 2021 and its principal risks and opportunities, a going
concern analysis has been prepared for the twelve-month period from
the date of signing the consolidated financial statements (the
'going concern period') utilising realistic scenarios and applying
a severe but plausible downside scenario.
The Directors' assessment of the Group's ability to continue to
adopt the going concern basis of accounting included:
-- obtaining and reviewing management's base case scenario,
including the twelve-month period from the date of signing the
consolidated financial statements, together with the basis for key
trading and financial assumptions;
-- obtaining and reviewing management's downside scenarios over
the forecast period, including the extreme scenario that the Group
fails to win any new orders and executes only against its existing
contracted orders with no significant reduction in its operating
cost base;
-- considering whether the assumptions are consistent with our
understanding of the business obtained during the course of the
audit and external circumstances arising from the impact of
COVID-19, noting that the impact on the business thus far from
COVID-19 has not been material. Beginning in March 2020, the
governments of Canada and Ontario, as well as foreign governments,
instituted emergency measures as a result of the COVID-19 virus.
The Group has continued to operate with limited impact on its
financial position and cash flows; and
-- ensuring that post-year end events have been factored into
management's forecasts, including completion of the acquisition of
Precise-ITC in January 2022 and assuming completion of the
acquisition of OpenFive.
Even under the severe downside scenario, the analysis
demonstrates the Group can continue to maintain sufficient
liquidity headroom and continue to comply with all financial
obligations. Therefore, the Directors believe the Group is
adequately resourced to continue in operational existence for at
least the twelve-month period from the date of signing the
consolidated financial statements. Accordingly, the Directors
considered it appropriate to adopt the going concern basis of
accounting in preparing the consolidated financial statements.
Basis of organisation
The Group's management has performed its evaluation for
reporting its reportable segments, if any, and concluded that the
Group's business constitutes only one operating segment as all its
products and services are of similar nature and focus on customers
from the same industry. Its entire revenues, expenses, assets and
liabilities pertain to the one business as a whole. This has been
ratified by the chief operating decision-makers (CODMs), Tony
Pialis (CEO) and Daniel Aharoni (CFO), who are deemed best placed
to evaluate the entity's operating results to assess performance
and to allocate resources. Therefore, there was no information to
be disclosed for operating segments.
Revenue recognition
Revenue is recognised in accordance with IFRS 15 Revenue From
Contracts with Customers, upon transfer of control of promised
products or services to customers in an amount that reflects the
consideration the Group expects to be entitled to in exchange for
those products or services.
The Group enters into contracts with customers to license its
intellectual property (IP) products, which consist primarily of
software files that customers use to create, integrate and operate
functional building blocks within a semiconductor device. Such
contracts can include various combinations of IP products and
support, some of which are distinct and are accounted for as
separate performance obligations.
IP products
The Group's IP products are typically licensed under standard
pay-per-use licence agreements and are delivered over the period
its customers are developing their semiconductor products, which
can span several years. The Group categorises its standard
pay-per-use licences into three types: derivative, migration and
R&D:
-- derivative licences are utilised when the licensed IP is
derived from an existing IP already developed for a specific
foundry manufacturing node;
-- migration licences are utilised when there is a requirement
to migrate existing IP products to new foundry manufacturing nodes;
and
-- R&D licences are utilised for new IP products, depending
on the level of complexity, that are being developed.
Due to the complexity of the IP products being delivered and the
need for customers to integrate the IP products with other IP
building blocks in their chip designs, the Group's IP products are
typically delivered in multiple stages, referred to as IP views,
all of which require some level of customisation and/or
configuration. The delivery of these IP views occurs over the
development phase of the customers' chip design.
Although delivery of the licensed IP products is split over
multiple deliveries of IP views, each of these deliveries is not
considered distinct as each IP view is highly dependent on or
interrelated with one or more of the other IP views, as each
successive IP view is based on the prior views of that IP product.
Therefore, each IP view is not separately identifiable from other
IP views of the same IP product and hence they are considered part
of the same performance obligation, being the transfer of the IP
product and associated deliverables to final specification.
Further, where a contract contains multiple IP products and
non-recurring engineering (NRE) work, these products and any NRE
required to deliver them are considered to be a single performance
obligation and not distinct from each other as customers are unable
to benefit from the IP products on their own or together with other
readily available resources, due to the bespoke nature of the
configuration that the Group performs on the IP products as part of
the licence arrangements. Support is considered a separate
performance obligation from the transfer of the IP product, as
customers can benefit from the service with other resources that
are readily available to them and the Group's promise to transfer
the service is separately identifiable from other performance
obligations in the contract.
Each contract to license the Group's IP products includes
pricing to be paid by the customer, based on the specific IP
products licensed and the amount of any NRE required. Contracts do
not typically permit refunds and payment terms often align with
delivery of the IP views and final silicon acceptance and are
within the contract milestones, and as such, there is no financing
element associated with the contractual payment terms. Payment
terms are based on completion of milestones throughout the project
life for fixed price contracts and payment is generally due within
30 days of receipt of invoice. In one instance we offered credit
terms to a customer on which a commercial rate of interest was
charged.
Any major modifications to the contract or IP product
specification will typically result in a new contract being signed
with the customer for the additional work. In assessing whether a
contract modification should be accounted for as part of the
original contract or as a separate contract, the Group considers
the following:
-- whether the contract modification is 'accepted', i.e. it
creates legally enforceable rights and obligations on the parties
to the contract;
-- if the contract modification is accepted, whether it adds
distinct goods or services that are priced commensurate with
stand-alone selling prices; and
-- if the contract modification does not add distinct goods or
services that are priced commensurate with stand-alone selling
prices, whether the remaining goods or services are distinct from
those already transferred.
If the contract modification is not accepted, it is accounted
for as part of the original contract until such point that it is
accepted. If the contract modification is accepted and it adds
distinct goods or services that are priced commensurate with
stand-alone selling prices, it is accounted for as a separate
contract. If the contract modification is accepted and it does not
add distinct goods or services that are priced commensurate with
stand-alone selling prices, and the remaining goods or services are
distinct from those already transferred, it is accounted for as
termination of the existing contract and creation of a new
contract. If the contract modification is accepted and it does not
add distinct goods or services that are priced commensurate with
stand-alone selling prices, and the remaining goods or services are
not distinct from those already transferred, it is accounted for as
part of the original contract.
The contract price is allocated to the support performance
obligation based on its relative standalone selling price and the
Group uses the residual method to allocate the remaining contract
price to the IP product performance obligation. The contract price
allocated to the IP products is recognised as the IP products are
delivered to the customer.
On partially completed contracts, the Group recognises IP
product revenue based on the stage of completion of the IP
delivery, which is estimated by comparing the number of hours spent
with the total number of hours expected to be spent to complete the
IP delivery (i.e. an input-based method). Revenue on such contracts
is recognised over time in this way, as, due to the highly bespoke
nature of the work carried out by the Group in configuring IP views
for a customer, the Group is limited practically from readily
directing the asset (the IP product) in its completed state for
another use and the Group has an enforceable right to payment for
performance completed to date, as per the terms of the
contract.
Material hours are typically incurred towards fulfilment of the
performance obligation prior to contract signature. These hours are
included in our percentage of completion calculations.
Following delivery of final IP product deliverables, a
proportion of revenue is held back (the amount dependent on the
type of licence and the maturity of the licensed IP products),
until silicon acceptance is achieved by the customer. Silicon
acceptance is a contractual milestone where the customer confirms
or is contractually deemed to confirm that our IP, once integrated
into silicon, complies with the contractual specification. The
amount of revenue deferred, which is based on judgement, is
intended to cover the potential for any additional work required to
ensure our delivered IP meets the specifications in the licence
agreement.
The cumulative effects of revisions to contract revenues and
estimated completion costs are recorded in the accounting period in
which the amounts become evident and can be reasonably estimated.
These revisions can include such items as the effects of change
orders as described above.
Support
Contracts for IP products contain a separate performance
obligation to provide support services. Such support services
typically cover two areas of support, namely 'Integration Support'
and 'Bring-up Support'.
Integration Support consists of assistance with the integration
of the licensed IP product into the licensee's target product (i.e.
their semiconductor design). Such assistance includes support to
address questions and debug integration issues encountered by the
licensee.
Bring-up Support consists of assistance with troubleshooting
'bring-up' issues with ensuring the licensed IP product is
functional in the licensee's target product. 'Bring-up' is a
semiconductor industry term for ensuring a test chip is
functional.
Support is considered a separate performance obligation from
delivery of the IP products, as customers can benefit from the
service with other resources that are readily available to the
customer and the Group's promise to transfer the service is
separately identifiable from other performance obligations in the
contract.
The support performance obligation is separately priced in
customer contracts and revenue is allocated to it based on its
relative standalone selling price. Payment milestones are on the
anniversaries of the contract effective date and payment is
generally due within 30 days of receipt of invoice.
Support revenue is recognised over time, as it is a stand-ready
obligation, and the customer simultaneously receives and consumes
the benefits provided as they are performed by the Group. As the
number of hours required to provide support services is uncertain
and there is typically no maximum number of hours stated in the
contract, revenue is recognised rateably over the contractual
period of support provision.
Reseller
Under the three-year exclusive subscription reseller agreement
with VeriSilicon, exclusivity fees are invoiced and collected
quarterly. Revenue is recognised on a percentage of completion
basis once the IP is licensed by VeriSilicon to a third party, with
any invoices credited against exclusivity fees paid. The
exclusivity payments represent minimum annual payments from the
reseller to Alphawave IP and can be offset against any purchases
made for licences to third parties in the calendar year.
Exclusivity payments under this agreement are a form of
'breakage', as defined in the accounting standard. Our expectation
is that the exclusivity payments will be utilised against purchases
of IP products by the reseller, which can occur at any time during
the calendar year. We consider that the likelihood of the customer
exercising its remaining rights only becomes remote at the end of
the period to which the exclusivity payment relates as any unused
exclusivity payments cannot be carried forward to future periods.
This judgement minimises the risk of a significant reversal of
revenue in the period.
Income from joint venture
The subscription licence agreement entered into with WiseWave
provides them with right of use to a library of our IP products for
a period of five years. The Group does not expect to undertake any
activities that impact the IP product after delivery to the
customer. Based on engineering schedules, we have estimated the
total number of IP products that we expect to provide into the
library for the duration of the agreement. This estimate gives rise
to a variable price per IP product as the total contract value is
assigned to the estimated total number of performance obligations.
As we do not usually provide individual licences without NRE to
customers it is difficult to determine the standalone selling price
of each performance obligation. Given that there is a variable
number of products to be provided in the future, on an if-and-when
available basis, the revenue attributable to each performance
obligation constitutes variable consideration. Therefore, we
exercise judgement in applying constraints for revenue recognition
in order to minimise the risk of significant reversals of revenue
in future periods. Revenue on this agreement is recognised at a
point in time when an IP product is added to the library, as this
is when we consider control of the IP product is transferred to the
customer.
Accrued revenue and deferred revenue
The timing of delivery of products and services to customers may
differ from the timing of invoices and the customers' payments.
Billed and/or collected amounts for which the products or services
are not yet delivered, and recognition conditions are not met as at
the reporting date, are recorded as deferred revenue. Where
products or services are delivered, and recognition conditions are
met, however no amounts have been billed and/or collected, revenue
is recognised with a corresponding amount recorded as accrued
revenue.
Costs of obtaining long-term contracts and costs of fulfilling
contracts
Incremental commissions paid to staff for work in obtaining
contracts of periods longer than one year are recorded in
capitalised contract costs and amortised based on the stage of
completion of the contract, i.e. in the same pattern as revenue is
recognised (see above). No judgement is needed to measure the
amount of costs of obtaining contracts as the commission paid is
based on a percentage of the booking. Under IFRS 15, in order for
costs of obtaining contracts (including commissions) to be
capitalised, they must be incremental. The Group is satisfied that
it is appropriate to capitalise these costs in accordance with IFRS
15 as they would not have been incurred had it not been for the
acquisition of new customer contracts.
Strategic, integration and other non-recurring items
The Group incurred costs from certain strategic, integration and
other non-recurring items, e.g. Initial Public Offering costs.
Management has disclosed these separately to enable a greater
understanding of the underlying results of the trading business so
that the underlying run rate of the business can be established and
compared on a like-for-like basis each year.
Defined contribution schemes
Contributions to defined contribution pension schemes are
charged to the consolidated statement of comprehensive income in
the year to which they relate.
Government grants
Government grants received for qualifying expenditure are netted
against the cost incurred by the Group. Where retention of a
government grant is dependent on the Group satisfying certain
criteria, it is initially recognised as deferred income. When the
criteria for retention have been satisfied, the deferred income
balance is released to the consolidated statement of comprehensive
income or netted against the asset purchased.
Share-based payments
The Group operates an equity-settled, share-based payment
compensation plan, under which the entity receives services from
employees as consideration for equity instruments, options and
restricted share units (RSUs), of the Group. The fair value of the
employee service received in exchange for the grant of the options
is recognised as an expense over the vesting period.
Share options and RSUs granted to employees are accounted for
under the fair value-based method of accounting using fair value
for the underlying equity instrument. Fair values are determined in
accordance with the Black-Scholes-Merton option-pricing model
(BSM). Management exercises judgement in determining the underlying
share price volatility, expected forfeitures and other parameters
of the calculations. Share options and RSUs granted to service
providers are valued using fair value of services obtained, and if
that is not determinable, at the fair value of the underlying
equity instrument as per BSM.
Where options and RSUs are exercised, the Company issues new
shares and the proceeds received, net of any directly attributable
transaction costs, are credited to share capital.
If an option or RSU is cancelled this is accounted for as an
acceleration of the vesting period and any amount unrecognised is
recognised immediately.
Upon expiry of the options or RSUs, the value that had been
ascribed to the expired options or RSUs remains in the share-based
payment reserve.
When terms of the options or RSUs are modified at a future date,
the fair value of the options or RSUs are adjusted for the new
terms using the BSM. Any difference in fair value is adjusted as a
change to share-based payment reserve and share-based payment
expense.
Research and development
Research costs are expensed as incurred. Development
expenditures on an individual project are recognised as an
intangible asset when the Group can demonstrate:
-- the technical feasibility of completing the intangible asset
so that it will be available for use or sale;
-- its intention to complete the asset and to use or sell it;
-- the ability to use or sell the intangible asset;
-- how the asset will generate future economic benefits;
-- the availability of resources to complete the asset; and
-- the ability to measure reliably the expenditure during development.
As of 31 December 2021 the Group has not capitalised any
development costs as technical feasibility has not been
reached.
Foreign currency
Transactions entered into by Group entities in a currency other
than the currency of the primary economic environment in which they
operate (their 'functional currency') are recorded at the rates
ruling when the transactions occur. Foreign currency monetary
assets and liabilities are translated at the rates ruling at the
reporting date. Exchange differences arising on the retranslation
of unsettled monetary assets and liabilities are recognised
immediately in the consolidated statement of comprehensive
income.
On consolidation, the results of overseas operations are
translated into US$ at rates approximating to those ruling when the
transactions took place. All assets and liabilities of overseas
operations are translated at the rate ruling at the reporting date.
Exchange differences arising on translating the opening net assets
at opening rate and the results of overseas operations at actual
rate are recognised in other comprehensive income and accumulated
in the foreign exchange reserve.
Exchange differences recognised in profit or loss in Group
entities' separate financial statements on the translation of
long-term monetary items forming part of the Group's net investment
in the overseas operation concerned are reclassified to other
comprehensive income and accumulated in the foreign exchange
reserve on consolidation.
Interest income
Interest income is recorded on accrual basis and is included in
finance income in the consolidated statement of comprehensive
income.
Interest income from customers is recognised monthly at an
agreed annual interest rate over the period of the contract.
Borrowing costs
Interest expense is recognised on the basis of the effective
interest method and is included in finance expense in the
consolidated statement of comprehensive income.
Taxation
The tax expense for the year comprises current and deferred tax.
Tax is recognised in the consolidated statement of comprehensive
income, except that a charge attributable to an item of income or
expense recognised as other comprehensive income is also recognised
directly in other comprehensive income.
The current tax charge is calculated on the basis of tax rates
and laws that have been enacted or substantively enacted by the
reporting date in the countries where the Group operates and
generates taxable income.
Deferred tax assets and liabilities are recognised where the
carrying amount of an asset or liability in the consolidated
statement of financial position differs from its tax base, except
for differences arising on:
-- the initial recognition of goodwill;
-- the initial recognition of an asset or liability in a
transaction which is not a business combination and at the time of
the transaction affects neither accounting or taxable profit,
and
-- investments in subsidiaries and joint arrangements where the
Group is able to control the timing of the reversal of the
difference and it is probable that the difference will not reverse
in the foreseeable future.
Recognition of deferred tax assets is restricted to those
instances where it is probable that taxable profit will be
available against which the difference can be utilised.
The amount of the asset or liability is determined using tax
rates that have been enacted or substantively enacted by the
reporting date and are expected to apply when the deferred tax
liabilities are settled.
When there is uncertainty concerning the Group's filing position
regarding the tax bases of assets or liabilities, the taxability of
certain transactions or other tax-related assumptions, then the
Group:
-- considers whether uncertain tax treatments should be
considered separately, or together as a group, based on which
approach provides better predictions of the resolution;
-- determines if it is probable that the tax authorities will
accept the uncertain tax treatment; and
-- if it is not probable that the uncertain tax treatment will
be accepted, measures the tax uncertainty based on the most likely
amount or expected value, depending on whichever method better
predicts the resolution of the uncertainty. This measurement is
required to be based on the assumption that each of the tax
authorities will examine amounts they have a right to examine and
have full knowledge of all related information when making those
examinations.
Deferred tax assets and liabilities are offset when the Group
has a legally enforceable right to offset current tax assets and
liabilities and the deferred tax assets and liabilities relate to
taxes levied by the same tax
authority on either:
-- the same taxable Group company; or
-- different Group entities which intend either to settle
current tax assets and liabilities on a net basis, or to realise
the assets and settle the liabilities simultaneously, in each
future period in which significant amounts of deferred tax assets
or liabilities are expected to be settled or recovered.
Sales made to customers incorporated in China and Korea are
subject to withholding tax. Since invoices are raised by Group
entities which operate under the tax authorities in Canada, a
country which has a tax treaty with China and Korea, withholding
tax amounts are treated as prepaid tax and offset against
corporation taxes payable.
Intangible assets
The intangible asset is a purchased licence to use IP. This IP
is being developed by a third-party vendor and amounts paid to date
represent instalments to initiate the development which is carried
at cost.
Expenditure on the developed IP is capitalised if it can be
demonstrated that:
-- it is technically feasible to develop the IP for it to be sold;
-- adequate resources are available to complete the development;
-- there is an intention to complete and sell the IP;
-- sale of the IP will generate future economic benefits, and
-- expenditure on the project can be measured reliably.
The intangible asset is carried at cost less accumulated
amortisation and impairment. The intangible asset has a finite
useful economic life and will be amortised on a straight-line basis
over the term of the licence, which is five years from the date of
completion.
Intangible assets are not amortised until the date the asset is
available for use. An intangible asset that is under development
and not yet available for use is tested for impairment annually by
comparing its carrying amount with its recoverable amount. The
residual values and useful lives are reviewed by management at each
reporting date and those estimates are adjusted if required.
Property and equipment
Property and equipment are carried at cost less accumulated
depreciation and impairment losses, if any. Cost includes initial
cost and subsequent expenditures that are directly attributable to
the related asset when it is probable that future economic benefits
associated with the item will flow to the Group and the cost of the
item can be measured reliably. All other repair and maintenance
costs are charged to consolidated statement of comprehensive income
during the year they are incurred.
Depreciation is provided on items of property and equipment so
as to write off their carrying value over
their expected useful economic lives. It is provided at the
following rates:
Computer equipment - 50% straight line
Furniture and fixtures - 20% straight line
Leasehold improvements - 40% straight line
Property and equipment acquired during the year are depreciated
from the date the asset is available for use as intended until the
date of de-recognition. The residual values and useful lives are
reviewed by the management at each reporting date and adjusted if
the impact on depreciation is significant. Property and equipment
are regularly reviewed to eliminate obsolete items.
An item of property and equipment is de-recognised upon disposal
or when no future economic benefits are expected from its use. Any
gain or loss arising on de-recognition of the asset is included in
the consolidated statement of comprehensive income in the year the
asset is de-recognised.
Leases
Identifying leases
The Group accounts for a contract, or a portion of a contract,
as a lease when it conveys the right to use an asset for a period
of time in exchange for consideration. Leases are those contracts
that satisfy the following
criteria:
-- there is an identified asset;
-- the Group obtains substantially all the economic benefits from use of the asset; and
-- the Group has the right to direct use of the asset.
The Group considers whether the supplier has substantive
substitution rights. If the supplier does have those
rights, the contract is not identified as giving rise to a
lease.
In determining whether the Group obtains substantially all the
economic benefits from use of the asset, the Group considers only
the economic benefits that arise from the use of the asset, not
those incidental to legal
ownership or other potential benefits.
In determining whether the Group has the right to direct use of
the asset, the Group considers whether it directs how and for what
purpose the asset is used throughout the period of use. If there
are no significant decisions to be made because they are
pre-determined due to the nature of the asset, the Group considers
whether it was involved in the design of the asset in a way that
predetermines how and for what purpose the asset will be used
throughout the period of use. If the contract or portion of a
contract does not satisfy these criteria, the Group applies other
applicable IFRSs rather than IFRS 16.
All leases are accounted for by recognising a right-of-use asset
and a lease liability except for:
-- leases of low-value assets; and
-- leases with a term of twelve months or less.
The Group has elected to use the recognition exemptions listed
above and thus does not apply the right-of-use asset and lease
liability measurement requirements to these items. Leases of
low-value assets and short-term leases are expensed on a
straight-line basis over the life of the lease.
Lease liabilities are measured at the present value of the
contractual payments due to the lessor over the lease term, with
the discount rate determined by reference to the rate inherent in
the lease unless (as is typically the case) this is not readily
determinable, in which case the Group's incremental borrowing rate
on commencement of the lease is used. Variable lease payments are
only included in the measurement of the lease liability if they
depend on an index or rate. In such cases, the initial measurement
of the lease liability assumes the variable element will remain
unchanged throughout the lease term. Other variable lease payments
are expensed in the period to which they relate.
On initial recognition, the carrying value of the lease
liability also includes:
-- amounts expected to be payable under any residual value guarantee;
-- the exercise price of any purchase option granted in favour
of the Group if it is reasonably certain to exercise that
option;
-- any penalties payable for terminating the lease, if the term
of the lease has been estimated on the basis of the termination
option being exercised.
Right-of-use assets are initially measured at the amount of the
lease liability, reduced for any lease incentives
received, and increased for:
-- lease payments made at or before commencement of the lease;
-- initial direct costs incurred; and
-- the amount of any provision recognised where the Group is
contractually required to dismantle, remove or restore the leased
asset (typically leasehold dilapidations).
Subsequent to initial measurement, lease liabilities increase as
a result of interest charged at a constant rate on the balance
outstanding and are reduced for lease payments made. Right-of-use
assets are amortised on a straight-line basis over the remaining
term of the lease or over the remaining economic life of the asset
if, rarely, this is judged to be shorter than the lease term.
When the Group revises its estimate of the term of any lease
(because, for example, it reassesses the probability of a lessee
extension or termination option being exercised), it adjusts the
carrying amount of the lease liability to reflect the payments to
make over the revised term, which are discounted at the same
discount rate that applied on lease commencement. The carrying
value of lease liabilities is similarly revised when the variable
element of future lease payments dependent on a rate or index is
revised. In both cases an equivalent adjustment is made to the
carrying value of the right-of-use asset, with the revised carrying
amount being amortised over the remaining (revised) lease term.
Where a variable lease payment that is dependent on an index or
rate is present in the lease, the lease liability and right-of-use
asset is remeasured once the rate is known. Any variable lease
payments that are not dependent on an index or rate are expensed in
the period they are incurred.
When the Group renegotiates the contractual terms of a lease
with the lessor, the accounting depends on the
nature of the modification:
-- if the renegotiation results in one or more additional assets
being leased for an amount commensurate with the standalone price
for the additional rights-of-use obtained, the modification is
accounted for as a separate lease in accordance with the above
policy;
-- in all other cases where the renegotiation increases the
scope of the lease (whether that is an extension to the lease term,
or one or more additional assets being leased for an amount that is
not commensurate with the standalone price for the additional
rights-of-use obtained), the lease liability is remeasured using
the discount rate applicable on the modification date, with the
right-of-use asset being adjusted by the same amount; and
-- if the renegotiation results in a decrease in the scope of
the lease, both the carrying amount of the lease liability and
right-of-use assets are reduced by the same proportion to reflect
the partial or full termination of the lease with any difference
recognised in profit or loss. The lease liability is then further
adjusted to ensure its carrying amount reflects the amount of the
renegotiated payments over the renegotiated term, with the modified
lease payments discounted at the rate applicable on the
modification date. The right-of-use asset is adjusted by the same
amount.
For contracts that both convey a right to the Group to use an
identified asset and require services to be provided to the Group
by the lessor, the Group has elected to account for the entire
contract as a lease, i.e. it does not allocate any amount of the
contractual payments to, and account separately for, any services
provided by the supplier as part of the contract.
Investments in subsidiaries
Investments in subsidiaries in the Company financial statements
are carried at cost less any provision for losses arising on
impairment.
Investments in joint ventures
The Group is a party to a joint arrangement when there is a
contractual arrangement that confers joint control over the
relevant activities of the arrangement to the Group and at least
one other party. Joint control is assessed under the same
principles as control over subsidiaries.
Joint ventures are initially recognised in the consolidated
statement of financial position at cost. Subsequently joint
ventures are accounted for using the equity method, where the
Group's share of post-acquisition profits and losses and other
comprehensive income is recognised in the consolidated statement of
comprehensive income (except for losses in excess of the Group's
investment in the joint venture unless there is an obligation to
make good those losses).
Profits and losses arising on transactions between the Group and
its joint ventures are recognised only to the extent of unrelated
investors' interests in the joint venture. The Group's share in the
joint venture's profits and losses resulting from these
transactions is eliminated against the carrying value of the joint
venture.
Any premium paid for a joint venture above the fair value of the
Group's share of the identifiable assets, liabilities and
contingent liabilities acquired is capitalised and included in the
carrying amount of the joint venture. Where there is objective
evidence that the investment in the joint venture has been impaired
the carrying amount of the investment is tested for impairment in
the same way as other non-financial assets.
Impairment of non-financial assets
The carrying amounts of the Group's non-financial assets are
reviewed at each reporting date to determine whether there is any
indication of impairment. If such indication exists, the
recoverable amount of such asset is estimated. An impairment loss
is recognised wherever the carrying amount of the asset exceeds its
recoverable amount. Impairment losses are recognised in the
consolidated statement of comprehensive income. A previously
recognised impairment loss is reversed only if there has been a
change in the estimates used to determine the asset's recoverable
amount since the last impairment loss was recognised. If that is
the case, the carrying amount of the asset is increased to its
recoverable amount. That increased amount cannot exceed the
carrying amount that would have been determined, net of
depreciation, had no impairment loss been recognised for the asset
in prior years. Such reversal is recognised in the consolidated
statement of comprehensive income.
Investment tax credits
Investment tax credits receivable are amounts recoverable from
the Canadian federal and provincial government under the SRED
incentive programme. These tax credits are not received in cash,
they are netted off against the Group's current tax charge. The
amounts that are claimed under the programme represent the amounts
submitted by management based on research and development costs
paid during the year and include a number of estimates and
assumptions made by management in determining the eligible
expenditures. Investment tax credits are recorded when there is
reasonable assurance that the Group will realise the investment tax
credits receivable and are netted against the related expenditure.
Recorded investment tax credits are subject to review and approval
by tax authorities and, therefore, amounts eventually netted off
against the Group's current tax charge may be different from the
amounts recorded.
Short-term employee benefits
A liability is recognised for benefits accruing to employees in
respect of wages and salaries, annual leave and sick leave in the
period the related service is rendered at the undiscounted amount
of the benefits expected to be paid in exchange for that
service.
Cash and cash equivalents
Cash and cash equivalents include cash and liquid investments
with a term to maturity of 90 days or less at the reporting
date.
Financial instruments
Financial assets and financial liabilities are recognised in the
Group's consolidated statement of financial position when the Group
becomes a party to the contractual provisions of the
instrument.
Financial assets and financial liabilities are initially
measured at fair value. Except for financial assets and financial
liabilities measured at fair value through profit or loss,
transaction costs that are directly attributable to the acquisition
or issuance of financial assets and financial liabilities are added
to or deducted from the fair value of the financial assets or
financial liabilities, as appropriate, upon initial recognition.
Transaction costs directly attributable to the acquisition of
financial assets or financial liabilities at fair value through
profit or loss are recognised immediately in profit or loss.
Financial assets
All recognised financial assets are measured subsequently in
their entirety at either amortised cost or fair value, depending on
the classification of the financial assets. The classification and
measurement of financial assets after initial recognition at fair
value depends on the business model for managing the financial
asset and the contractual terms of the cash flows. Financial assets
are classified in one of the three categories:
a) Amortised cost
Financial assets that are debt instruments and are held within a
business model whose objective is to collect the contractual cash
flows, and that have contractual cash flows that are solely
payments of principal and interest (SPPI) on the principal
outstanding, are measured at amortised cost at each subsequent
reporting period. The Group classifies accounts receivable and
notes receivable as financial assets that are subsequently measured
at amortised cost.
b) Fair value through other comprehensive income
The Group and Company does not have any financial assets
classified as being at fair value through other comprehensive
income.
c) Fair value through profit or loss
The Group and Company does not have any financial assets
classified as being at fair value through profit or loss.
Impairment of financial assets
The Group recognises a loss allowance for expected credit losses
(ECL) on accounts receivable that are measured at amortised cost.
The Group applies the simplified approach for accounts receivable
and recognises the lifetime ECL for these assets. The ECL on
accounts receivable is estimated using a provision matrix based on
the Group's historical credit loss experience, adjusted for factors
that are specific to the customers, and general current and
forecasted economic conditions at the reporting date, including
time value of money where appropriate.
For all other financial assets measured at amortised cost or
fair value through other comprehensive income, the Group recognises
lifetime ECL only when there has been a significant increase in
credit risk since initial recognition. If the credit risk on such
financial instruments has not increased significantly since initial
recognition, the Group measures the loss allowance on those
financial instruments at an amount equal to twelve month ECL.
Lifetime ECL represents the ECL that will result from all
possible default events over the expected life of a financial
asset. In contrast, twelve month ECL represents the portion of
lifetime ECL that is expected to result from default events on a
financial asset that are possible within twelve months after the
reporting date.
In assessing whether the credit risk on a financial asset has
increased significantly since initial recognition, the Group
compares the risk of default occurring on the financial asset at
the reporting date with the risk of default occurring at the
initial recognition. The Group considers both quantitative and
qualitative factors that are supportable, including historical
experience and forward-looking information that is available
without undue cost or effort.
Irrespective of the above assessment, the Group presumes that
the credit risk on a financial asset has increased significantly
since initial recognition when contractual payments are more than
30 days past due, unless the Group has reasonable and supportable
information that demonstrates otherwise. Despite the foregoing, the
Group presumes that the credit risk on a financial asset has not
increased significantly since initial recognition if the financial
asset is determined to have low credit risk at the reporting
date.
The Group regularly monitors the effectiveness of the criteria
used to identify whether there has been a significant increase in
credit risk and revises them as appropriate to ensure that the
criteria are capable of identifying a significant increase in
credit risk before the amount becomes past due.
Definition of default
For internal credit risk management purposes, the Group
considers a financial asset not recoverable if the customer balance
owing is 180 days past due and information obtained from the
customer and other external factors indicate that the customer is
unlikely to pay its creditors in full.
Credit-impaired financial assets
A financial asset is credit-impaired when one or more events
that have a detrimental impact on the estimated future cash flows
of that financial asset have occurred. Evidence that a financial
asset is credit-impaired include observable data about the
following events:
a) significant financial difficulty of the issuer or the counterparty;
b) a breach of contract, such as a default or past due event;
c) the lender(s) of the debtor, for economic or contractual
reasons relating to the debtor's financial difficulty, having
granted to the debtor a concession(s) that the lender(s) would not
otherwise consider;
d) it is becoming probable that the debtor will enter bankruptcy
or other financial reorganisation; and
e) the disappearance of an active market for that financial
asset because of financial difficulties.
Write-off policy
The Group writes off and derecognises a financial asset when
there is information indicating that the debtor is in severe
financial difficulty and there is no realistic prospect of
recovery.
Derecognition of financial assets
The Group derecognises a financial asset only when the
contractual rights to the cash flows from the asset expire, or when
it transfers the financial asset and substantially all the risks
and rewards of ownership of the asset to another entity. If the
Group neither transfers nor retains substantially all the risks and
rewards of ownership and continues to control the transferred
asset, the Group recognises its retained interest in the asset and
an associated liability for amounts it may have to pay. If the
Group retains substantially all the risks and rewards of ownership
of a transferred financial asset, the Group continues to recognise
the financial asset and also recognises a collateralised borrowing
for the proceeds received.
On derecognition of a financial asset measured at amortised
cost, the difference between the asset's carrying amount and the
sum of the consideration received and receivable is recognised in
profit or loss. In addition, on derecognition of an investment in a
debt instrument classified at fair value through other
comprehensive income, the cumulative gain or loss previously
accumulated in the investments revaluation reserve is reclassified
to profit or loss. In contrast, on derecognition of an investment
in an equity instrument which the Group has designated on initial
recognition to measure at fair value through other comprehensive
income, the cumulative gain or loss previously accumulated in the
investments revaluation reserve is not reclassified to profit or
loss, but is transferred to retained earnings.
Financial liabilities
All financial liabilities are measured subsequently at amortised
cost using the effective interest method or at fair value through
profit or loss.
Financial liabilities are classified as at fair value through
profit or loss when the financial liability is:
a) contingent consideration of an acquirer in a business combination;
b) held for trading; or
c) it is designated as at fair value through profit or loss.
A financial liability is classified as held for trading if it
has been acquired principally for the purpose of repurchasing it in
the near term or on initial recognition it is part of a portfolio
of identified financial instruments that the Group manages together
and has a recent actual pattern of short-term profit-taking, or it
is a derivative financial liability.
A financial liability other than a financial liability held for
trading or contingent consideration of an acquirer in a business
combination may be designated as at fair value through profit or
loss upon initial recognition if such designation eliminates or
significantly reduces a measurement or recognition inconsistency
that would otherwise arise or the financial liability forms part of
a group of financial assets or financial liabilities or both, which
is managed and its performance is evaluated on a fair value basis,
in accordance with the Group's documented risk management or
investment strategy, and information about the grouping is provided
internally on that basis.
Financial liabilities classified or designated at fair value
through profit or loss are measured at fair value, with any gains
or losses arising on changes in fair value recognised in profit or
loss. However, for financial liabilities that are designated as
fair value through profit or loss, the amount of change in the fair
value of the financial liability that is attributable to changes in
the credit risk of the issuer is recognised in other comprehensive
loss, unless the recognition of the effects of changes in the
liability's credit risk in other comprehensive loss would create or
enlarge an accounting mismatch in profit or loss. The remaining
amount of change in the fair value of a liability is recognised in
profit or loss. Changes in fair value attributable to a financial
liability's credit risk that are recognised in other comprehensive
loss are not subsequently reclassified to profit or loss; instead,
they are transferred to retained earnings upon derecognition of the
financial liability.
The Group classifies accounts payable, accrued liabilities and
lease liabilities at amortised cost.
Derecognition of financial liabilities
The Group derecognises financial liabilities when, and only
when, the Group's obligations are discharged, cancelled or have
expired. The difference between the carrying amount of the
financial liability derecognised and the consideration paid and
payable is recognised in profit or loss.
Share capital
Ordinary shares are classified as equity. Equity instruments are
measured at the fair value of the cash or other resources received
or receivable, net of the direct costs of issuing the equity
instruments. If payment is deferred and the time value of money is
material, the initial measurement is on a present value basis.
Stabilisation programme
As part of the Underwriting Agreement for the IPO transaction,
the Company agreed to an over-allotment and stock stabilisation
programme with the founder shareholders and the IPO syndicate
banks. The stabilisation programme was put into effect and given
the aftermarket performance of the shares immediately post-IPO,
resulted in proceeds to the Company of US$22.2m (GBP15.7m). As
these proceeds were not part of the normal operation of the
business and related to the IPO transaction, they were posted to
the share premium account to set against IPO issuance costs.
3 Significant accounting estimates and judgements
In the application of the Group's and Company's accounting
policies, the Directors are required to make judgements (other than
those involving estimations) that have a significant impact on the
amounts recognised and to make estimates and assumptions about the
carrying amounts of assets and liabilities that are not readily
apparent from other sources. The estimates and associated
assumptions are based on historical experience and other factors
that are considered to be relevant. Actual results may differ from
these estimates.
The estimates and underlying assumptions are reviewed on an
ongoing basis. Revisions to accounting estimates are recognised in
the period in which the estimate is revised if the revision affects
only that period, or in the period of the revision and future
periods if the revision affects both current and future
periods.
Critical judgements in applying the Group's accounting
policies
Revenue recognition
Management exercises judgement in determining the separate
performance obligations present in contracts with customers. As
described in note 2, the Group considers the multiple deliveries of
IP views of a single IP product to be part of a single performance
obligation, as each IP view is highly dependent on or interrelated
with one or more of the other IP views, as each successive IP view
is based on the prior views of that IP. As such, customers are
unable to benefit from IP views on their own or together with other
readily available resources. Additionally, if a contract contains
multiple IP products, the deliverables are considered part of a
single performance obligation, as customers are unable to benefit
from the IP products on their own or together with other readily
available resources, due to the bespoke nature of the configuration
that the Group performs on the IP products as part of the licence
arrangements.
As described in note 2, IP products are delivered in various
stages, referred to as IP views. At each IP view delivery,
management exercises its judgement as to what percentage of the
contract price allocated to the IP product should be recognised as
revenue. At Preliminary IP view delivery (the first IP view
delivered to customers), revenue is typically recognised at 30%
(for licences categorised as derivative), 25% (for licences
categorised as migration) or 10% (for licences categorised as
R&D) of the price allocated to the IP product.
Delivery of Preliminary IP views may occur very shortly after a
licence agreement is signed by a customer and hence significant
research and development or engineering hours may not have been
expended up to that point from contract signing up to that
point
There are hours incurred prior to the signing of contracts that
relate to the fulfilment of the performance obligations that are
subsequently agreed to in such contracts. Judgement is made with
respect to the pre-contract hours that are excluded or included in
the calculation of the revenue to be recognised such that any
included hours directly relate to the fulfilment of any contractual
performance obligations. Such pre-contract hours are taken into
account in our calculation of percentage of completion and amounted
to approximately 23,000 hours in 2021. Had we included all of these
hours in our percentage of completion calculation, we would have
recognised an additional US$1.5m of revenue.
At Final IP view delivery (the last IP view delivered to the
customer ahead of test chip manufacture), an amount of revenue is
held back for any post-delivery work that may be required to ensure
the customer 'taped out' silicon meets the specifications detailed
in the contract. The percentage held back is 10% for licences
categorised as derivative, 25% for licences categorised as
migration or 34% for licences categorised as R&D. This revenue
is held back until the earlier of 'customer silicon acceptance'
(customer silicon meets specifications) or a time specified in the
contract. Any post-Final IP view delivery work related to silicon
'Bring up' and 'Integration' is covered by the support contract and
is a separate performance obligation.
Both the recognition of a proportion of the contract value at
Preliminary IP view delivery using pre-contract hours and the hold
back of revenue until customer silicon acceptance require
significant judgement from management. Such judgement is based on
deep knowledge and understanding of the development effort required
in delivering IP products to customers and the potential for any
further work required to ensure successful silicon production by
customers. This judgement may not be representative of the work to
be completed in all cases. As the Group completes more IP
deliveries to customers, it will establish a broader data set on
which to base its judgements.
In FY 2021, if revenue had been recognised based purely on
percentage of completion at Preliminary IP view delivery excluding
all hours incurred prior to contract signature instead of the
judgement described above, our revenue would have been US$5.6m
lower. Conversely, if we had recognised all revenue in contracts at
delivery of Final IP views rather than hold back a percentage of
revenue for customer silicon acceptance, on the assumption that all
post-Final IP view acceptance work is covered by support, our
revenue would have been US$13.2m higher.
Revenue under the subscription licence agreement with WiseWave
is recognised at the point in time at which control of the goods is
transferred to WiseWave. The Group considers control to have
transferred to WiseWave when each IP product and update to those IP
products is uploaded to the library that they have access to under
the agreement. At the point of upload of IP products and updates to
IP products to the library, WiseWave has the ability to direct the
use of, and obtain substantially all of the remaining benefits
from, those IP products and updates to IP products, by utilising
the products in their semiconductor designs from which they can
then generate cash inflows.
As outlined in our IPO Prospectus, we assigned the VeriSilicon
reseller arrangement to WiseWave in order to consolidate the
Group's activities in China under a single entity and this was
implemented in Q4 2021. WiseWave are entitled to retain payments
from that contract totalling $13.6m reflecting work that they will
be expected to perform in future periods to fulfil that contract.
As WiseWave are currently building their technical capabilities and
are not yet able to fully perform this work, this sum has been
accounted for as a reduction in the value of the subscription
licence agreement with WiseWave, subject to future adjustment as
and when WiseWave begin performance. As outlined in our IPO
prospectus, these arrangements were contemplated at the time of
entering into the VeriSilicon reseller contract and establishing
WiseWave and have been taken into account in the disclosed
aggregate booking of $147.8m for these transactions. As a result of
the assignment of the VeriSilicon reseller arrangement, there is no
significant change anticipated to the overall net financial impact
on the Group.
Research and development costs
Judgement is exercised in determining whether costs incurred
should be capitalised in line with IAS 38. The judgement includes
whether it is technically feasible to complete the relevant assets
on which costs are incurred so that they will be available for use
or sale.
Common control transaction
The reorganisation which occurred just prior to the IPO has been
accounted for as a common control transaction on the basis that
control of the organisation immediately prior to and immediately
following the reorganisation was substantially the same. In line
with IFRS 3.B1, we had the choice of book value or fair value to
determine the investment value of Alphawave IP Inc. We chose book
value as a more readily available valuation method, resulting in
the creation of the merger reserve.
Joint ventures
As at year end, the Group owned 42.5% of WiseWave, a newly
formed company established in China in Q4 2021 to develop and sell
silicon products incorporating silicon IP licensed from the Group.
We equity account for the investment as a joint venture, resulting
in a US$0.6 loss for 2021.
Judgement is used in determining the extent of the control the
Group has over WiseWave. The Group is satisfied WiseWave should be
treated as a joint venture under IFRS 11 as opposed to being
treated as an associate. For all joint arrangements structured in
separate vehicles the Group must assess the substance of the joint
arrangement in determining whether it is classified as a joint
venture or joint operation. This assessment requires the Group to
consider whether it has rights to the joint arrangement's net
assets (in which case it is classified as a joint venture), or
rights to and obligations for specific assets, liabilities,
expenses and revenues (in which case it is classified as a joint
operation). Factors the Group must consider include:
-- structure;
-- legal form;
-- contractual agreement; and
-- other facts and circumstances.
Upon consideration of these factors, the Group has determined
that all of its joint arrangements structured through separate
vehicles give it rights to the net assets and are therefore
classified as joint ventures.
Joint venture revenue
The Group's proportion of revenue recognised from sales to
WiseWave under the subscription licence agreement has been
eliminated in the 'Loss from joint venture' line in the
consolidated statement of comprehensive income to the extent that
the revenue is not realised based on WiseWave's utility and in line
with IAS 28. The Group exercised judgement in eliminating the
revenue in this way. Had the Group eliminated our share of the
gains from sales to the joint venture against the revenue line, our
revenues would have reduced by US $12.3m to US $77.6m.
Initial Public Offering related costs
In accordance with IAS 32, the Group has only recognised costs
within equity that are related to the transaction of issuing new
shares, being US$20.3m posted to the share premium account. All
other costs, totalling US$10.0m, relating to the Initial Public
Offering, including costs relating to existing shares and
listing-related costs, have been recognised within other expenses
in the consolidated statement of comprehensive income.
To calculate this, issuance costs were split between new shares
and existing shares. Where costs covered both new and existing
shares, an apportionment was made based on the proportion of new
shares being issued to existing shares. A judgement was made that
this was a fair reflection of the costs associated with new and
existing shares.
Impairment of financial assets
As described in note 2, the Group recognises a loss allowance
for expected credit losses (ECL) on accounts receivable and applies
the simplified approach, recognising the lifetime ECL for these
assets. The Group uses a provision matrix based on the Group's
historical credit loss experience to inform the level of ECL
allowance and exercises significant judgement in assessing the
factors that are specific to the customers and the general current
and forecasted economic conditions that are used to adjust the
ECL.
As at 31 December 2021, the Group's ECL allowance for accounts
receivable was not material and therefore not recognised (31
December 2020: also not material). This level of ECL allowance
reflects the Group's historical credit loss experience and its
assessment of each of the customers making up its accounts
receivable balance at each reporting date and the prevailing and
predicted macroeconomic conditions that may impact on those
customers' ability to pay their outstanding invoices. One of the
Group's customers has payment of a US$0.5m invoice tied to securing
additional funding. In respect of this customer, management has
assessed the likelihood of the funding round being successful, the
likely timing of such funding round and the customer's ability and
willingness to pay their outstanding invoice following the funding
round. The Group's conclusions at each reporting date were that all
customers with amounts due to the Group had or would have both the
ability and willingness to pay their outstanding invoices and hence
the Group was satisfied that no adjustment to the ECL allowance was
required.
Paragraph 5.5.11 of IFRS 9 presumes that there have been
significant increases in credit risk since initial recognition when
financial assets are more than 30 days past due. In FY 2021, if the
Group had provided the full amount of accounts receivable that was
more than 30 days past due in the ECL allowance, accounts
receivable would have been US$2.6m lower and operating profit would
have been US$2.6m lower (FY 2020: accounts receivable would have
been US$0.5m lower and operating profit would have been US$0.5m
lower).
As at the Last Practicable Date (28 April 2022), US$0.3m of
accounts receivable that were more than 30 days past due at 31
December 2021 remains outstanding. As at the Last Practicable Date,
US$1.7m of accounts receivable relating to the accrued revenue
balance as at 31 December 2021 is more than 30 days past due and
following the same process as described above and in note 2,
management has concluded that no adjustment to the ECL allowance is
required.
The Group's accrued revenue balance at the end of 2021 was
US$31.7m (2020: US$10.3m). As at the Last Practicable Date,
US$15.6m of accrued revenue has been invoiced. Of this invoiced
amount, US$2.7m has been collected and US$ 12.9m is just over 30
days past due. Following the same process for assessing ECL for
trade receivables as described above and in note 2, management has
concluded that there has been no significant increase in credit
risk in relation to accrued revenue since initial recognition and
hence no adjustment to the ECL is required.
Key sources of estimation uncertainty in the consolidated
financial statements
The key assumptions concerning the future, and other key sources
of estimation uncertainty at the consolidated statement of
financial position date, that have a significant risk of causing a
material adjustment to the carrying amounts of assets and
liabilities within the next financial year, are discussed
below.
Revenue recognition
Revenue recognition for IP products licensed under our standard
pay-per-use contracts is based upon cost to completion using the
input method, as this best reflects the transfer of control of the
licensed IP products to the customer, with percentage of completion
based on management judgements and estimates approximating the work
required to meet contract deliverables. These judgements and
estimates vary depending on the contract type, the maturity of the
IP being licensed, customer requirements and involvement, customer
specifications, whether the contract deliverables are in their
early or later stages and whether the IP has already been
silicon-proven. If different estimates of the work required to meet
contract deliverables had been made, our revenue may have been
different from that shown in the consolidated statement of
comprehensive income and the accrued revenue and deferred revenue
balances shown in the consolidated statement of financial position
may also have been different. Refer to note 5 for further
information regarding the sensitivity of accrued revenue and
deferred revenue to the estimation uncertainty of work required to
meet contract deliverables.
For the subscription licence agreement with WiseWave, the Group
uses point-in-time revenue recognition. The agreement includes
multiple performance obligations for delivery of distinct IPs and
periodic updates to those IPs. Revenue is recognised based on
delivery of each distinct IP as a proportion of management's
estimate of the total number of IPs to be delivered during the
five-year term of the agreement. If different assumptions were made
about the total number of IPs to be delivered during the contract
term and the amount of contract price allocated to each IP, the
revenue recorded against this contract in the consolidated
statement of comprehensive income and the accrued revenue and
deferred revenue balances shown in the consolidated statement of
financial position may be different from that shown.
4 Alternative Performance Measures (APMs)
The Group uses certain financial measures that are not defined
or recognised under IFRS. The Directors believe that these non-GAAP
measures supplement GAAP measures to help in providing a further
understanding of the results of the Group and are used as key
performance indicators within the business to aid in evaluating its
current business performance. The measures can also aid in
comparability with other companies who use similar metrics.
However, as the measures are not defined by IFRS, other companies
may calculate them differently or may use such measures for
different purposes to the Group.
Bookings
The Group monitors and discloses bookings and backlog as key
performance indicators of future revenues. Bookings are a non-IFRS
measure and represent legally binding and largely non-cancellable
commitments by customers to license our technology. Our bookings
comprise licence fees, non-recurring engineering, support and 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. Our bookings for FY 2021,
including royalties, totalled US$244.7m (2020: US$75.0m), and
excluding royalties, US$220.8m (2020: US$52.0m).
Backlog represents bookings over the life of the Group that have
not yet been recognised as revenues and which we expect to be
recognised in future periods. Backlog as at the end of 2021 is
calculated based on our backlog as at the end of 2020, plus new
bookings, less revenues recognised during the period.
US$m
------------------------------------------------ ------
Backlog (end of FY 2020) 37.3
Add: New bookings excluding royalties (FY 2021) 220.8
Less: Revenues recognised in FY 2021(1) (89.4)
Backlog (end of FY 2021) 168.6
------------------------------------------------ ------
1. Difference from reported revenue due to foreign exchange differences.
Earnings before interest, taxation, depreciation and
amortisation (EBITDA)
EBITDA provides a supplemental measure of earnings that
facilitates review of operating performance on a period-to-period
basis by excluding items that are not indicative of the Group's
underlying operating performance and is a key profit measure used
by the Board to assess the underlying financial performance of the
Group. EBITDA is stated before the following items and for the
following reasons:
-- interest is excluded from the calculation of EBITDA because
the expense and income bears no relation to the Group's underlying
operational performance;
-- charges for the depreciation of property and equipment,
acquired intangibles and right-of-use assets are excluded from the
calculation of EBITDA, as removing these non-monetary items allows
management to better project the Group's long-term profitability;
and
-- tax is excluded from the calculation of EBITDA because the
expense bears no relation to the Group's underlying operational
performance.
Operating profit to EBITDA reconciliation
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
------------------------------------------------------- ----------- -----------
Operating profit 36,035 16,842
Add backs:
Depreciation of tangible fixed assets and right-of-use
assets 3,127 912
_______ _______
EBITDA 39,162 17,754
_______ _______
------------------------------------------------------- ----------- -----------
Two further measures are adjusted EBITDA and adjusted profit
after tax, defined in the tables below. These further allow for a
more accurate assessment of underlying business performance by
making exclusions of items which do not form part of the Group's
normal underlying operations.
EBITDA to adjusted EBITDA reconciliation
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
-------------------------------------------- ----------- -----------
EBITDA 39,162 17,754
Add backs:
Non-recurring Initial Public Offering costs 9,961 -
M&A/professional costs 533 -
Share-based payment 6,143 565
Exchange (gain)/loss (4,023) 982
_______ _______
Adjusted EBITDA 51,776 19,301
_______ _______
-------------------------------------------- ----------- -----------
M&A/professional costs are one-off legal and professional
costs incurred as a result of the Group's execution of agreements
for the formation and commercial arrangements relating to the
Group's joint venture, WiseWave, as well as professional fees
related to the acquisition of Precise-ITC, announced in Q4 2021.
Whilst still included in operating expenses and not included in
non-recurring Initial Public Offering costs, these expenses were
deemed to be one-off and added back to adjusted EBITDA. We believe
that excluding the effect of share-based payments from adjusted
EBITDA assists management and investors in making period-to-period
comparisons in the Group's operating performance because the amount
of such expenses in any specific period may not directly correlate
to the underlying performance of our business operations.
Additionally, these expenses can vary significantly between periods
as a result of the timing of grants of new share-based awards,
including grants in connection with acquisitions. The exchange gain
in 2021 has been removed from EBITDA as it relates to an unrealised
gain relating to cash held and therefore does not form part of the
Company's operating performance.
Profit for the year to adjusted profit after tax
reconciliation
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
-------------------------------------------- ----------- -----------
Profit for the year 9,431 12,205
Add backs:
Non-recurring Initial Public Offering costs 9,961 -
M&A/professional costs 533 -
Share-based payment 6,143 565
Exchange (gain)/loss (4,023) 982
_______ _______
Adjusted profit for the year 22,045 13,752
-------------------------------------------- ----------- -----------
Adjusted profit per ordinary share attributable to the
shareholders (expressed in cents per ordinary share)
Year ended Year ended
31 December 31 December
Note 2021 2020
----------------------------------------- ---- ----------- -----------
Adjusted basic earnings per share (US$
cents) 13 3.52 2.56
Adjusted diluted earnings per share (US$
cents) 13 3.14 2.18
----------------------------------------- ---- ----------- -----------
5 Revenue
Disaggregation of revenue
The Group has disaggregated revenue into various categories in
the following tables which is intended to depict how the nature,
amount, timing and uncertainty of revenue and cash flows are
affected by economic factors.
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
-------------------------- ----------- -----------
Revenue by type
Products 46,971 30,160
Support 4,253 2,786
Reseller 8,861 -
Income from joint venture 29,846 -
_______ _______
89,931 32,946
_______ _______
-------------------------- ----------- -----------
Whilst this part of the note shows revenue by type, due to
materiality, we have separately itemised the revenue from our
reseller and joint venture, both based in China. The income from
our joint venture in China, WiseWave, predominantly relates to a
five-year subscription licence agreement where we have recognised
US$27.7m based on our deliveries of IP to WiseWave. The remaining
US$2.1m revenue from WiseWave relates to a separate agreement
signed in Q4 2021 to deliver chiplet IP.
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
------------------ ----------- -----------
Revenue by region
North America 37,642 19,380
China 43,063 8,396
APAC (ex-China) 9,226 5,170
_______ _______
89,931 32,946
_______ _______
------------------ ----------- -----------
Customer revenue concentration
For 2021, revenue of US$29.8m from a single customer (WiseWave)
was greater than 10% of the Group's total revenues.
For 2020, revenues from several customers were individually
greater than 10% of the Group's total revenues, as shown in the
table below:
Year ended
31 December
2020
US$'000
------------------------- -----------
Customer - Asia Pacific 6,733
Customer - North America 5,261
Customer - Asia Pacific 5,073
Customer - North America 4,432
Customer - North America 3,548
_______
------------------------- -----------
Sensitivity analysis
Product revenue
Revenue recognition for product revenue is determined using the
input method on a percentage of completion basis. The percentage of
completion is calculated as a function of total hours estimated to
fulfil the contract. The table below illustrates the sensitivity
the percentage of completion estimate has on revenue recognition
and the associated balance sheet balances, assuming a 10% increase
and a 10% decrease to all percentages of completion applied to
product revenue in 2021 and 2020:
Year ended 31 December 2021 As reported +10% -10%
US$'000 US$'000 US$'000
---------------------------- ----------- ------- -------
Product revenue 46,971 51,668 42,274
Accrued revenue 31,719 34,509 28,929
Deferred revenue 12,661 11,599 13,723
Year ended 31 December 2020 As reported +10% -10%
US$'000 US$'000 US$'000
---------------------------- ----------- ------- -------
Product revenue 30,160 33,176 27,144
Accrued revenue 10,328 11,361 9,296
Deferred revenue 7,381 6,749 8,013
Product revenue in the above analysis makes up part of the
overall revenue of US $89.9m in the 2021 consolidated statement of
comprehensive income (2020: US$32.9m), as described in the
disaggregation of revenue section of this note 5. The accrued
revenue and deferred revenue balances are those shown in the
consolidated statement of financial position and they include all
types of revenue mentioned above in the disaggregation of revenue
section of this note 5. However, the sensitivity of the accrued and
deferred revenue balances only pertains to the product revenue
within these balances.
WiseWave - subscription licence agreement
Revenue recognition for the WiseWave subscription licence
agreement is determined with reference to the estimated total
number of IP uploads to be delivered to WiseWave during the term of
the agreement and the number of uploads made to WiseWave each
period. The table below illustrates the sensitivity of revenue
recognition and the associated balance sheet balances to a change
in the estimated total number of IP products to be delivered and
assumes a 10% increase and a 10% decrease in the total number of
uploads, but the same number of uploads made during 2021. There are
no 2020 comparatives as the subscription licence agreement was
signed during 2021.
Year ended 31 December 2020 As reported +10% -10%
US$'000 US$'000 US$'000
----------------------------- ----------- ------- -------
WiseWave SLA revenue 27,700 25,229 30,714
WiseWave SLA accrued revenue 3,700 1,229 6,714
Accrued and deferred revenue movements
Below is a reconciliation of the movement in accrued revenue
during the period:
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
--------------------------------------- ----------- -----------
At 1 January 10,328 775
Revenue accrued in the period 30,482 20,566
Accrued revenue invoiced in the period (8,959) (11,516)
Foreign exchange difference (132) 503
_______ _______
At 31 December 31,719 10,328
--------------------------------------- ----------- -----------
Below is a reconciliation of the movement in deferred revenue
during the period:
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
--------------------------------- ----------- -----------
At 1 January 2021 7,381 3,685
Revenue recognised in the period (6,450) (3,685)
Revenue deferred in the period 11,554 6,000
Cumulative catch-up adjustments 8 1,123
Foreign exchange difference 168 258
_______ _______
At 31 December 12,661 7,381
_______ _______
The cumulative catch-up adjustment represents a change in
estimate of the total number of hours expected to complete a
project.
The deferred revenue balance is all expected to be satisfied
within twelve months of the consolidated statement of financial
position date.
The flexible spending account has increased to US$6.8m as at 31
December 2021 from US$2.3m as at 31 December 2020. This represents
mainly current deferred income, and these are contracts with
customers who have committed to regular periodic payments to us
over the term of the contract. These payments are not in respect of
specific licences or other deliverables, but they can be used as
credit against future deliverables.
The balances related to costs to obtain contracts from customers
are as follows:
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
--------------------------- ----------- -----------
Capitalised contract costs 609 233
_______ _______
--------------------------- ----------- -----------
The costs to obtain contracts from customers include
commissions. Amortisation of US$3.0m (2020: US$1.5m) and impairment
of US$nil (2020: US$nil) was charged to the consolidated statement
of comprehensive income in the period.
6 Research and development/engineering
The Group incurred research and development costs that have been
expensed in the consolidated statement of comprehensive income. The
amounts are expensed through research and development/engineering
and are as follows:
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
------------------------------------- ----------- -----------
Research and development/engineering 29,444 8,816
_______ _______
------------------------------------- ----------- -----------
7 Employee benefit costs
The aggregate employee benefit expenses were as follows:
Group Group Company
Year ended Year ended Period ended
31 December 31 December 31 December
2021 2020 2021
US$'000 US$'000 US$'000
----------------------------- ----------- ----------- ------------
Wages, salaries and benefits 19,216 7,957 328
Defined contribution pension
costs 253 133 10
Social security costs 1,447 106 41
Share-based payment expense 6,143 565 342
Investment tax credit (3,039) (1,802) -
Government grants (56) (1,063) -
_______ _______ _______
Total 23,964 5,896 721
_______ _______ _______
The average number of employees during the period, analysed by
category, was as follows:
Group Group Company
2021 2020 2021
------------------------------------- ------- ------- -------
Research and development/engineering 110 60 -
General and administration 10 3 3
Sales and marketing 4 3 -
_______ _______ _______
Total 124 66 3
_______ _______ _______
------------------------------------- ------- ------- -------
The number of employees at the period end, analysed by category,
was as follows:
Group Group Company
2021 2020 2021
Research and development/engineering 134 66 -
General and administration 15 4 5
Sales and marketing 5 2 -
_______ _______ _______
Total 154 72 5
_______ _______ _______
------------------------------------- ------- ------- -------
8 Directors' and key management personnel remuneration
Key management personnel are those persons having authority and
responsibility for planning, directing and controlling the
activities of the Group, including the Directors of the Company,
the co-founders and the Chief Financial Officer of the Company.
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
------------------------------------------ ----------- -----------
Remuneration (including benefits in kind) 2,235 536
Defined contribution pension costs 4 7
Share-based payment expense 252 30
_______ _______
2,491 573
_______ _______
------------------------------------------ ----------- -----------
One Director exercised options during the period. Details are as
follows:
Year ended Year ended
31 December 31 December
2021 2020
----------------------------------------------- ----------- -----------
Number of options, in thousands, exercised
by Directors and key management 4,000 1,199
Gains made on exercise of options by Directors
and key management US$'000 5,636 5,864
________ ________
----------------------------------------------- ----------- -----------
2020 does not reflect the 20:1 share split which occurred in May
2021.
Details of the highest paid Director's remuneration are as
follows:
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
---------------------------------------------- ----------- -----------
Remuneration (including benefits in kind) 740 149
Defined contribution pension costs 4 2
_______ _______
744 151
_______ _______
Number of options, in thousands, exercised by
Director 4,000 -
_______ _______
The number of options at 31 December 2021 has been adjusted for
the 20 for 1 share exchange that happened immediately prior to the
Initial Public Offering in May 2021.
Shortly following the Company's incorporation, 50,000 preference
shares of nominal value of GBP1 each were issued to John Lofton
Holt, a Company Director. The preference shares were issued as
fully paid up in consideration for an undertaking from Mr Holt to
pay to the Company a sum of GBP50,000. The preference shares were
redeemed by the Company on 6 December 2021 and the undertaking to
pay was thereby cancelled.
A loan of CAD$1,280,000 was made to Daniel Aharoni, a Director
of the Company, for the exercise of share options in Alphawave IP
Inc. prior to the IPO date. The loan was repaid on the sale of
shares in the Company at the IPO and following the exchange of
Alphawave IP Inc. shares into Company shares prior to the IPO date.
The loan was interest free.
9 Auditor's remuneration
The Group paid the following amount to its auditor in respect of
the audit of the Group's financial statements and for other
non-audit services provided to the Group.
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
---------------------------------- ----------- -----------
Audit of the financial statements 725 71
Taxation compliance services - 7
Other tax advisory services - 26
Corporate finance services - 45
Audit-related assurance services 155 -
Other assurance services 1,135 -
_______ _______
2,015 149
_______ _______
---------------------------------- ----------- -----------
Other assurance services relate to financial services provided
for our Admission to list on the London Stock Exchange. In 2020 the
Group had a different firm of auditors.
10 Finance income and expense
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
------------------------------ ----------- -----------
Finance income
Interest income from customer 202 198
Bank interest 110 -
_______ _______
312 198
_______ _______
Finance expense
Bank charges (26) (113)
Lease interest (294) (82)
_______ _______
(320) (195)
_______ _______
Net finance (expense)/income (8) 3
_______ _______
------------------------------ ----------- -----------
11 Non-recurring Initial Public Offering costs
In accordance with the Group's policy for non-recurring items,
the following charges were included in this category for the
period:
One-off costs relating to Project Aurora, the project name for
the Group's Initial Public Offering on the London Stock Exchange,
that were not able to be offset against share premium under IAS 32
totalled US$10.0m (2020: US$nil). Over half of these total fees
related to LSE Admission fees and legal costs associated with the
Initial Public Offering. Per IAS 32, costs that relate to the stock
market listing or are otherwise not incremental and not directly
attributable to issuing new shares should be recorded in the
consolidated statement of comprehensive income.
12 Tax expense
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
-------------------------------------------------- ----------- -----------
Current taxation
UK corporation tax 257 -
UK corporation tax adjustment to prior periods 125 -
Overseas tax 13,349 4,379
_______ _______
Total current tax 13,731 4,379
_______ _______
Deferred tax
Origination and reversal of temporary differences (74) 261
_______ _______
Total deferred tax (74) 261
_______ _______
Taxation on profit 13,657 4,640
_______ _______
-------------------------------------------------- ----------- -----------
The reasons for the difference between the actual tax charge for
the year and the standard rate of corporation tax applied to
profits for the year are as follows:
Year ended Year ended
31 December 31 December
2021 2020
US$'000 US$'000
------------------------------------------------------ ----------- -----------
Profit before tax 23,088 16,845
_______ _______
Income tax expense at the UK corporation tax
rate of 19% 4,387 3,201
Effects of:
Stock based compensation 1,036 150
Expenses not deductible for tax purposes 1,902 3
Share issue costs - (3)
Research and development tax credits and incentives 72 33
Under accrual of prior year provision 125 -
Different tax rates applied in overseas jurisdictions 3,677 1,256
Share of joint venture's loss 2,458 -
_______ _______
Total tax charge for year 13,657 4,640
_______ _______
------------------------------------------------------ ----------- -----------
Changes in tax rates and factors affecting the future tax
charge
An increase in the future main UK corporation tax rate to 25%
from 1 April 2023, from the previously enacted 19%, was announced
at the Budget on 3 March 2021, and substantively enacted on 24 May
2021. The deferred tax balance at the year end has been calculated
based on the rate as at that date.
There have been no legislative changes announced in 2021 in
relation to Canadian or US tax rates which will affect the
Group.
13 Earnings per share
Basic earnings per share is calculated by dividing net income
from operations by the weighted average number of common shares
outstanding during the period.
Diluted earnings per share is calculated by adjusting the
weighted average number of common shares outstanding during the
period to assume conversion of all potential dilutive share options
and restricted share units to common shares.
Year ended Year ended
31 December 31 December
(US$ thousands except number of shares) 2021 2020
----------------------------------------------------- ------------ -----------
Numerator:
Profit for the year 9,431 12,205
__________ __________
Denominator:
In issue at 1 January 27,927,252 25,816,419
__________ __________
Effect of 20 for 1 share exchange 558,545,040 516,328,380
Effect of pre-IPO option conversion 3,986,807 21,669,167
Effect of primary share issue at IPO 54,776,719 -
Effect of exercise of options at IPO 8,138,237 -
Effect of share issue post IPO 137,957 -
__________ __________
Weighted average number of common shares outstanding
for basic earnings per share 625,584,760 537,997,547
Adjustment for share options and RSUs 76,905,071 91,831,919
__________ __________
Weighted average number of common shares outstanding
for diluted earnings per share 702,489,831 629,829,466
__________ __________
Basic earnings per share (US$ cents) 1.51 2.27
__________ __________
Diluted earnings per share (US$ cents) 1.34 1.94
__________ __________
The number of shares at 31 December 2020 has been adjusted for
the 20 for 1 share exchange that happened immediately prior to the
Initial Public Offering in May 2021, in order to give comparative
figures. The earnings per share values have also been adjusted to
reflect this.
14 Property and equipment
Computer Furniture Leasehold
equipment and fixtures improvements Total
Group US$'000 US$'000 US$'000 US$'000
-------------------------- --------- ------------ ------------ -------
Cost
Balance at 1 January 2020 236 53 23 312
Additions 255 3 111 369
Foreign exchange 17 1 6 24
_______ _______ _______ _______
Balance at 31 December
2020 508 57 140 705
_______ _______ _______ _______
Additions 1,595 5 268 1,868
Foreign exchange (15) - (4) (19)
_______ _______ _______ _______
Balance at 31 December
2021 2,088 62 404 2,554
_______ _______ _______ _______
Accumulated depreciation
Balance at 1 January 2020 88 16 8 112
Depreciation charge for
the year 136 8 28 172
Foreign exchange 8 - 1 9
_______ _______ _______ _______
Balance at 31 December
2020 232 24 37 293
_______ _______ _______ _______
Depreciation charge for
the year 540 7 95 642
Foreign exchange (6) - (1) (7)
_______ _______ _______ _______
Balance at 31 December
2021 766 31 131 928
_______ _______ _______ _______
Net book value
At 31 December 2019 148 37 15 200
_______ _______ _______ _______
At 31 December 2020 276 33 103 412
_______ _______ _______ _______
At 31 December 2021 1,322 31 273 1,626
_______ _______ _______ _______
-------------------------- --------- ------------ ------------ -------
Company
The Company has no property, plant and equipment.
15 Intangible assets
2021
Group US$'000
---------------------------- -------
Cost
Balance at 1 January 2020 -
Additions 133
Foreign exchange 7
_______
Balance at 1 January 2021 140
_______
Additions 1,038
Foreign exchange (11)
_______
Balance at 31 December 2021 1,167
_______
Net book value
At 31 December 2019 -
_______
At 31 December 2020 140
_______
At 31 December 2021 1,167
_______
The intangible asset is a licence to use IP. This IP is being
developed by a third-party vendor and amounts paid to date
represent instalments to initiate the development which is carried
at cost. No amortisation is recorded as the intangible asset is not
yet available for use. The carrying amount was tested for
impairment at 31 December 2021 which concluded that no adjustments
are necessary. There are no further contractual commitments for the
acquisition of intangible assets.
Company
The Company has no intangible assets.
16 Right-of-use assets and lease liabilities
Right-of-use assets
Buildings Equipment Total
Group US$'000 US$'000 US$'000
--------------------------------- --------- --------- -------
Cost
Balance at 1 January 2020 1,009 656 1,665
Additions 4,826 1,620 6,446
Disposal - (635) (635)
Foreign exchange 280 65 345
_______ _______ _______
Balance at 31 December 2020 6,115 1,706 7,821
_______ _______ _______
Additions 2,321 898 3,219
Disposal - (22) (22)
Foreign exchange 24 (3) 21
_______ _______ _______
Balance at 31 December 2021 8,460 2,579 11,039
_______ _______ _______
Accumulated depreciation
Balance at 1 January 2020 371 410 781
Depreciation charge for the year 323 417 740
Disposal - (635) (635)
Foreign exchange 24 (4) 20
_______ _______ _______
Balance at 31 December 2020 718 188 906
_______ _______ _______
Depreciation charge for the year 1,144 1,341 2,485
Foreign exchange (10) (14) (24)
_______ _______ _______
Balance at 31 December 2021 1,852 1,515 3,367
_______ _______ _______
Net book value
At 31 December 2019 638 246 884
_______ _______ _______
At 31 December 2020 5,397 1,518 6,915
_______ _______ _______
At 31 December 2021 6,608 1,064 7,672
_______ _______ _______
--------------------------------- --------- --------- -------
Nature of leasing activities (in the capacity as lessee)
The Group has leases for corporate offices, development
facilities and certain equipment. These leases have remaining lease
terms ranging from four months to 8.5 years, some of which include
options to extend the leases for up to ten years or to terminate
the lease with notice periods of 90 days to six months or at
predetermined dates as specified within the lease contract. The
Group has classified the assets related to these leases as
right-of-use assets and the liabilities associated with the future
lease payments under these leases as lease liabilities. The
weighted average incremental borrowing rate applied to these lease
liabilities at initial recognition during the year was 3.95% per
annum.
At 31 December 2021, the carrying amounts of lease liabilities
are not reduced by the amount of payments that would be avoided
from exercising break clauses because at that date it was
considered reasonably certain that the Group would not exercise its
right to break the lease. Total lease payments of US$0.1m (2020:
US$nil) are potentially avoidable were the Group to exercise break
clauses at 31 December 2021.
The use of extension and termination options gives the Group
added flexibility in the event it has identified more suitable
premises in terms of cost and/or location or determined that it is
advantageous to remain in a location beyond the original lease
term. An option is only exercised when consistent with the Group's
strategy and the economic benefits of exercising the option exceed
the expected overall cost.
Amounts not included in the measurement of lease liabilities are
as follows:
Year ended Year ended
31 December 31 December
2021 2020
Group US$'000 US$'000
------------------------------------------------------ ----------- -----------
Short-term lease expense - -
Low-value lease expense - -
Expense relating to variable lease payments
not included in the measurement of lease liabilities 42 36
_______ _______
42 36
_______ _______
Lease liabilities
Total
Group US$'000
-------------------- -------
At 1 January 2020 957
Additions 6,445
Interest expense 83
Lease payments (1,001)
Foreign exchange 317
_______
At 31 December 2020 6,801
Additions 3,219
Disposals (32)
Interest expense 294
Lease payments (2,494)
Foreign exchange 40
_______
At 31 December 2021 7,828
_______
-------------------- -------
Lease liabilities are due as follows:
Group Group
31 December 31 December
2021 2020
US$'000 US$'000
--------------------------- ----------- -----------
Not later than one year 2,160 1,672
Between one and five years 5,525 4,032
Over five years 143 1,097
_______ _______
7,828 6,801
_______ _______
--------------------------- ----------- -----------
The total cash outflow for leases is as follows:
Year ended Year ended
31 December 31 December
2021 2020
Group US$'000 US$'000
------------------- ----------- -----------
Total cash outflow 2,494 1,001
_______ _______
------------------- ----------- -----------
The Group does not face a signi cant liquidity risk with regard
to its lease liabilities.
Company
The Company has no leases.
17 Investments
Group subsidiaries
All subsidiaries have been included in the consolidated
financial statements using the equity method. Details of the
Group's subsidiaries as at 31 December 2021 are as follows:
Proportion
of
Country of ownership
incorporation interest and
and principal voting rights
place of Class of held by the
Name of subsidiary Principal activity business share Group
--------------------- -------------------------------- --------------- -------------- -------------
Developing and licensing
high performance connectivity
intellectual property
for the semiconductor
Alphawave IP Inc. industry Canada Ordinary 100%
Sales and sale support
to licence intellectual
property for the semiconductor
Alphawave IP Corp. industry United States Ordinary 100%
To facilitate IP licensing
Alphawave IP (BVI) to WiseWave Technology British Virgin
Ltd Co., LTD Islands Ordinary 100%
Holding company incorporated
Alphawave Call to facilitate the exchangeable
Inc. share structure Canada Ordinary 100%
Holding company incorporated
Alphawave Exchange to facilitate the exchangeable Ordinary and
Inc. share structure Canada Exchangeable 100%
To facilitate the investment
into WiseWave Technology
Alphawave IP Limited Co., LTD China Ordinary 100%
--------------------- -------------------------------- --------------- -------------- -------------
All of the above subsidiaries, with the exception of Alphawave
IP (BVI) Ltd, Alphawave Call. Inc., and Alphawave IP Limited, are
indirectly held subsidiaries.
The registered office of Alphawave IP Corp. is 1730 N 1st St,
Suite 650, San Jose, CA, 95112.
The registered office of Alphawave IP (BVI) Ltd is Trinity
Chambers, PO Box 4301, Road Town, Tortola, British Virgin
Islands.
The registered office of Alphawave IP Limited is 21 Avendia da
Praia Grande, No 409, Edificio China Law, 21 andar, em Macau.
The registered office of all other subsidiaries is 70 University
Ave, 10th Floor, Toronto, Ontario, Canada M5J 2M4.
Summary of the Company investments
Subsidiaries
Company US$'000
----------------------------------------- ------------
Cost
On incorporation -
Addition 18,236
Share-based payment capital contribution 4,155
_______
At 31 December 2021 22,391
_______
Carrying amount
At 31 December 2021 22,391
_______
----------------------------------------- ------------
As noted in note 23, the Company was incorporated and acquired
control of Alphawave IP Inc. via a 20 shares in the Company for one
share in Alphawave IP Inc. exchange.
Investment in joint ventures
The following entities have been included in the consolidated
financial statements using the equity method:
Proportion
of
Country of ownership
incorporation interest and
and principal voting rights
place of Class of held by the
Name of joint venture Principal activity business share Group
---------------------- ------------------- -------------- --------- -------------
A semiconductor
device company
focused on the
WiseWave Technology mainland Chinese
Co., LTD market China Ordinary 42.5%
---------------------- ------------------- -------------- --------- -------------
The registered office of WiseWave Technology Co., LTD is Room
105, No. 6, Baohua Road, Hengqin New District, Zhuhai, China.
Joint venture
Group US$'000
------------------------ -------------
Cost and net book value
At 1 January 2021 -
Additions 22,360
Share of loss (12,939)
_______
At 31 December 2021 9,421
_______
------------------------ -------------
Additions in the year of US$22.4m represents our first
investment, out of a total committed investment of up to US$170.0m,
into WiseWave Technology Co., LTD. The investment was made in Q4
2021 out of a total funding round of US$52.6m, with the majority of
the funds contributed by Wise Road Capital.
Summarised financial information for joint venture:
Year ended
31 December
2021
US$'000
------------------------------------------------------------- -----------
Current assets 32,114
Property and equipment 12
Intangible assets 29,018
Current liabilities 9,707
Non-current liabilities -
_______
Included in the above amounts are:
Cash and cash equivalents 30,664
Current financial liabilities (excluding trade payables) -
Non-current financial liabilities (excluding trade payables) -
_______
Net assets (100%) 51,437
Group share of net assets (42.5%) 21,861
_______
Period ended 31 December:
Revenues -
Loss from continuing operations (1,522)
Other comprehensive income -
Included in the above amounts are:
Depreciation and amortisation (925)
Interest expense (73)
_______
Total comprehensive expense (100%) (1,522)
Group share of total comprehensive expense (42.5%) (647)
_______
The above summary financial information has been aligned with
the accounting policies of the Group. The recognition of intangible
assets and related amortisation has been adjusted for the purposes
of aligning the Group recognition policies.
Share of post-tax loss of equity-accounted joint ventures:
Year ended
31 December
2021
US$'000
--------------------------------------------- -----------
Share of loss 647
Elimination of gains from sales to the joint
venture 12,292
_______
Total 12,939
_______
Revenues of US$29.8m were made from provision of IP to WiseWave.
To the extent that WiseWave has not yet utilised the IP, the
proportion of the Group's revenues has been eliminated and will be
released over the term of the subscription licence of five
years.
18 Trade and other receivables
Group Group Company
2021 2020 2021
US$'000 US$'000 US$'000
------------------------------------------ ------- ------- -------
Trade receivables from contracts
with customers 12,074 5,214 -
Less: expected credit loss provision - - -
_______ _______ _______
Trade receivables at amortised
cost - net 12,074 5,214 -
Other receivables 158 428 -
_______ _______ _______
Total financial assets other than
cash and cash equivalents carried
at amortised cost 12,232 5,642 -
Prepayments 262 349 146
Capitalised contract costs 609 233 -
_______ _______ _______
Total current trade and other receivables 13,103 6,224 146
_______ _______ _______
------------------------------------------ ------- ------- -------
Group
The carrying value of trade and other receivables approximates
to fair value.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses (ECL) using a lifetime ECL provision for
trade and other receivables. The expected loss rates are based on
the Group's historical credit losses. The historic loss rates are
then adjusted for current and forward-looking information on
macroeconomic factors affecting the Group's customers.
The Group's exposure to credit and market risks, including
impairments and allowances for credit losses, relating to trade and
other receivables is disclosed in note 26.
All trade and other receivables have been reviewed under the ECL
impairment model. As at 31 December 2021, the Group's ECL provision
was immaterial and therefore not recognised (31 December 2020: also
immaterial).
Included in other receivables is an amount of US$nil (2020:
US$428,000) of notes receivable from employees. The notes
receivable from employees had no stated terms of repayment, were
due on demand and bore interest at 1% per annum. In the event of
default, the notes were to be enforced under applicable laws.
19 Trade and other payables
Trade and other payables: Current
Group Group Company
31 December 31 December 31 December
2021 2020 2021
US$'000 US$'000 US$'000
-------------------------------- ----------- ----------- -----------
Trade payables 1,317 1,091 366
Other payables - 3 -
Accrued expenses 4,038 979 637
Employee-related liabilities 450 134 10
Social security and other taxes - - -
_______ _______ _______
Total trade and other payables 5,805 2,207 1,013
_______ _______ _______
-------------------------------- ----------- ----------- -----------
The carrying value of trade and other payables classified as
financial liabilities measured at amortised cost approximates fair
value.
Amounts owed to Group undertakings are interest free and
repayable on demand.
20 Loans and borrowings
Group Group Company
31 December 31 December 31 December
2021 2020 2021
US$'000 US$'000 US$'000
------------------- ----------- ----------- -----------
Non-current
Bank loans secured - 27 -
_______ _______ _______
Current
Bank loans secured - 27 -
_______ _______ _______
Total borrowings - 54 -
_______ _______ _______
------------------- ----------- ----------- -----------
Bank loans were long-term debt under the Paycheck Protection
Program (PPP) in the United States of America. The debt bore
interest at 1% per annum and was fully repaid in the year.
21 Employee benefits liabilities
Liabilities for employee benefits comprise:
Group Group Company
31 December 31 December 31 December
2021 2020 2021
US$'000 US$'000 US$'000
------------------------- ----------- ----------- -----------
Accrual for annual leave 450 134 10
_______ _______ _______
22 Deferred tax
Deferred tax is calculated in full on temporary differences
under the liability method using a tax rate of 25%. The increase in
the main rate of UK corporation tax to 25% was substantively
enacted on 24 May 2021. This new rate has been applied to deferred
tax balances which are expected to reverse after 1 April 2023, the
date on which that new rate becomes effective.
The movement on the deferred tax account is as shown below:
Group Company
US$'000 US$'000
------------------------- ------- -------
2021
At 1 January 2021 492 -
Credit to profit or loss (74) -
Foreign exchange 4 -
_______ _______
At 31 December 2021 422 -
_______ _______
2020
At 1 January 2020 218 -
Charge to profit or loss 261 -
Foreign exchange 13 -
_______ _______
At 31 December 2020 492 -
_______ _______
The deferred taxation liability is made up as follows:
Group Group Company
31 December 31 December 31 December
2021 2020 2021
US$'000 US$'000 US$'000
------------------------------- ----------- ----------- -----------
Accelerated capital allowances 74 17 -
Leases (41) 31 -
Other temporary differences 389 444 -
_______ _______ _______
Total 422 492 -
_______ _______ _______
23 Share capital
Authorised share capital Number of US$'000
shares
----------------------------------------------- ----------- ----------
Ordinary shares of GBP0.01 each 664,965,934 9,399
__________ __________
Issued and fully paid Number of US$'000
shares
----------------------------------------------- ----------- ----------
Redeemable preference shares of GBP1 each
Balance as at 31 December 2020 - -
Primary share issue at Initial Public Offering 50,000 71
__________ __________
50,000 71
__________ __________
Shares redeemed (50,000) (71)
__________ __________
Balance as at 31 December 2021 - -
__________ __________
----------------------------------------------- ----------- ----------
Issued and fully paid Number of US$'000
shares
------------------------------------------------ ----------- ----------
Ordinary shares of GBP0.01 each
Balance as at 31 December 2020 in Alphawave
IP Inc. 27,927,252 -
Exercise of options pre Initial Public Offering 265,701 -
__________ __________
Sub-total 28,192,953 -
__________ __________
20 for 1 share exchange 563,859,060 796,958
Shares issued to option holders on exercise 13,049,861 18,445
__________ __________
576,908,921 815,403
Primary share issue at Initial Public Offering 87,835,796 124,147
Further issue of shares 221,217 313
__________ __________
664,965,934 939,863
__________ __________
Capital reduction - (930,464)
__________ __________
Balance as at 31 December 2021 664,965,934 9,399
__________ __________
------------------------------------------------ ----------- ----------
On 14 May 2021, the Company acquired the entire issued share
capital of Alphawave IP Inc. in return for 563,859,060 ordinary
shares issued by the Company with a nominal value of GBP1. This was
based on 20 shares in the Company for each share in Alphawave IP
Inc.
The Company issued 87,835,796 shares, as a primary offering,
with a nominal value of GBP1 as part of its listing on the London
Stock Exchange at a price of US$5.79 (GBP4.10), resulting in gross
proceeds to the Company of US$509.0m (GBP360.1m) accounted for as
share capital of US$124.1m (GBP87.8m) and share premium of
US$384.9m (GBP272.3m).
Net proceeds after bank syndication fees were US$492.1m
(GBP347.1m) with further costs relating to the issuance of shares
resulting in total costs of US$20.3m (GBP14.5m), chargeable to the
share premium account. However, the Company received US$22.2m
(GBP15.7m) as proceeds of a stock stabilisation programme which
were set off against these Initial Public Offering costs, resulting
in the net proceeds of US$1.9m being posted to the share premium
account. The Company had further costs of US$10.0m (GBP7.2m)
relating to the IPO but not relating directly to the issuance of
new shares. These have been charged to the statement of
comprehensive income as non-recurring costs.
As part of the transaction there was a secondary offering where
certain employees, Directors and founders sold a total of
120,859,856 shares, including the 13,049,861 options converted to
shares and described below, at GBP4.10 per share.
In addition, all options held over Alphawave IP Inc. stock
became, by way of an amendment to option agreements, options in
Company shares, on the basis of 20 options in the Company for one
option in Alphawave IP Inc., each with an exercise price of 1/20th
of the original exercise price at the grant date.
On the Initial Public Offering date and as part of the secondary
offering, 13,049,861 options were exercised into newly issued
ordinary shares in the Company. The options exercised all had
exercise prices below the GBP1 nominal value as a result of them
maintaining their original exercise prices when they were granted
as options in the shares of Alphawave IP Inc. This resulted in
exercise proceeds of US$4.1m (GBP2.8m) with the shortfall in share
capital of US$14.4m (GBP10.2m) being transferred from the share
premium account to the ordinary share capital account.
Finally, at IPO a further 221,217 ordinary shares were issued
and purchased by our Non-Executive Directors at the market price of
GBP4.10.
The reorganisation of the Company's corporate structure
described above has been accounted for as a common control
transaction. A merger reserve has been established which reflects
the difference between the share capital issued to acquire the
shares in Alphawave IP Inc. and the share capital of Alphawave IP
Inc. acquired at the transaction date of 14 May 2021.
On 19 November 2021, the Company performed a capital reduction,
reducing share capital to 1% of the previous share capital, and
also completed a cancellation of share premium, approved by the
High Court of Justice Business and Property Courts of England and
Wales Companies Court.
On 6 December 2021 the preference shares were redeemed.
Rights and restrictions
Each ordinary share carries the right to one vote on a poll. The
right to vote is determined by reference to the register of members
at a time specified in the Notice of Meeting. All dividends shall
be declared and paid according to the amounts paid up on the share.
The shares do not carry any rights with respect to capital to
participate in a distribution (including on winding up) other than
those that exist as a matter of law. The shares are not
redeemable.
24 Reserves
The following describes the nature and purpose of each reserve
within equity:
Reserve Description and purpose
--------------------------- -----------------------------------------------
Share capital Amount subscribed for share capital at nominal
value.
Share premium The premium arising on issue of equity shares,
net of issue expenses.
Share-based payment reserve The share-based payment reserve is used to
recognise the grant date fair value of shares
issued to employees.
Merger reserve The difference between the share capital
issued to acquire the shares in Alphawave
IP Inc. and the share capital of Alphawave
IP Inc. acquired at the transaction date
of 14 May 2021.
Foreign exchange reserve Gains or losses arising on retranslating
the net assets of overseas operations.
Retained earnings All other net gains and losses and transactions
with owners not recognised elsewhere.
--------------------------- -----------------------------------------------
25 Share-based payment
The Company operates two equity-settled share-based incentive
schemes for employees - an option scheme, which was utilised prior
to the IPO, and a restricted share unit (RSU) scheme used both pre
and post-IPO. The terms of any options and RSUs granted under the
schemes are specified within individual grant agreements.
Both options and RSUs typically vest over four years with 25%
vesting after one year from the grant date with the remaining 75%
vesting equally each month over the following 36 months. They have
a life of five years which can be extended with Board approval. The
exercise price of option grants was set at the fair value of the
Company's common shares as determined by the implied valuation at
the prior funding round.
Each share option or RSU in Alphawave IP Inc. became 20 share
options or RSUs in the Company by way of an amendment to the option
or RSU agreements immediately prior to the Company's Admission to
listing on 18 May 2021. The exercise price of any share options
outstanding at that time was divided by 20.
Each share option or RSU converts into one voting share of the
Company on exercise or vesting. No amounts are paid or payable by
the recipient on receipt of the option or RSU. The options or RSUs
carry neither rights to dividends nor voting rights. Options may be
exercised at any time from the date of vesting to the date of their
expiry. The only vesting condition of the options and RSUs is that
the individual remains an employee of the Group over the vesting
period.
31 December 31 December 31 December 31 December
2021 2021 2020 2020
Number Weighted Number Weighted
of average of average
Options on voting common share exercise share exercise
shares: options price (US$) options price (US$)
----------------------------- ----------- ------------ ----------- ------------
Outstanding at the beginning
of the period - - 1,199,000 0.270
Exercised during the period - - (1,199,000) 0.270
_________ _________ _________ _________
Outstanding at the end - - - -
of the period
_________ _________ _________ _________
Exercisable at the end - - - -
of the period
_________ _________ _________ _________
----------------------------- ----------- ------------ ----------- ------------
The exercise price of options over voting shares outstanding at
31 December 2021 was US$nil (2020: US$0.27)
31 December 31 December 31 December 31 December
2021 2021 2020 2020
Options on non-voting common Number Weighted Number Weighted
shares: of average of average
share exercise share exercise
options price (US$) options price (US$)
------------------------------ ------------- ------------ ----------- ------------
Outstanding at the beginning
of the period 4,557,955 1.874 4,078,372 0.263
Exercised during the period (936,944) 5.760 (911,833) 1.016
Forfeited during the period - - (152,084) 1.795
Granted during the period 1,142,650 20,04 1,543,500 5.514
Share exchange during the
period 90,509,559 - - -
_________ _________ _________ _________
Outstanding at the end
of the period 95,273,220(1) 0.280(1) 4,557,955 1.874
_________ _________ _________ _________
Exercisable at the end
of the period 63,833,174(1) 0.08(1) 1,603,004 1.085
------------------------------ ------------- ------------ ----------- ------------
The exercise price of options over non-voting shares outstanding
at 31 December 2021 ranged between US0.08(1) cents and US$1.13(1)
(2020: US$0.08(1) cents and US$1.13(1) ) and their weighted average
contractual life was 3.07 years (2020: 2.79 years).
1. Stated after adjusting for the 20:1 share split which happened in May 2021.
The weighted average value per option during the year was
US$0.17.
The total expense included within the consolidated statement of
comprehensive income for the Group for the current year is
US$6,143,000 (2020: US$565,000), and for the Company is
US$342,000.
The following information is relevant in the determination of
the fair value of options granted during the year:
31 December 31 December
2021 2020
Option pricing model used Black-Scholes-Merton Black-Scholes-Merton
------------------------------ -------------------- --------------------
Risk-free interest rate 0.91% 0.57%
Expected volatility 29.72% 27.16%
Expected dividend yield 0% 0%
Expected life of stock option 4 years 4 years
------------------------------ -------------------- --------------------
The Group has determined the forfeiture rate to be nil and
volatility was determined in reference to listed entities similar
to the Group.
Volatility was determined with reference to similar listed
entities using the historical stock price volatility of those
entities over the estimated expected term of the option awards.
26 Financial instruments - risk management
The Group is exposed through its operations to the following
financial risks:
-- credit risk;
-- interest rate risk;
-- foreign exchange risk;
-- other market price risk;
-- liquidity risk; and
-- capital risk.
In common with other businesses, the Group is exposed to risks
that arise from its use of financial instruments. This note
describes the Group's objectives, policies and processes for
managing those risks and the methods used to measure them. Further
quantitative information in respect of these risks is presented
throughout these financial statements.
There have been no substantive changes in the Group's exposure
to financial instrument risks, its objectives, policies and
processes for managing those risks or the methods used to measure
them from previous periods unless otherwise stated in this
note.
Principal financial instruments
The principal financial instruments used by the Group, from
which financial instrument risk arises are as
follows:
-- trade and other receivables;
-- cash and cash equivalents; and
-- trade and other payables.
The Group and Company's financial instruments are categorised as
follows:
Financial assets
Amortised cost
Group Group Company
2021 2020 2021
US$'000 US$'000 US$'000
----------------------------------- ------- ------- -------
Trade receivables 12,074 5,214 -
Amounts owed by Group undertakings - - 23,364
Other receivables 158 428 -
Accrued revenue 31,719 10,328 -
Cash and cash equivalents 500,964 14,039 463,360
_______ _______ _______
Total financial assets held
at amortised cost 544,915 30,009 486,724
----------------------------------- ------- ------- -------
Financial assets
Amortised cost
Group Group Company
31 December 31 December 31 December
2021 2020 2021
US$'000 US$'000 US$'000
----------------------------------- ----------- ----------- -----------
Trade payables 1,317 1,091 366
Other payables - 3 -
Accrued expenses 4,038 979 637
Employee-related liabilities 450 134 10
Amounts owed to Group undertakings - - 150
Flexible spending account 6,819 2,335 -
Loans and borrowings - 54 -
_______ _______ _______
Total financial liabilities
held at amortised cost 12,624 4,596 1,163
_______ _______ _______
----------------------------------- ----------- ----------- -----------
Financial instruments not measured at fair value
Financial instruments not measured at fair value include cash
and cash equivalents, trade and other receivables, trade and other
payables, and loans and borrowings.
Due to their short-term nature, the carrying value of cash and
cash equivalents, trade and other receivables, and trade and other
payables approximates their fair value.
General objectives, policies and processes
The Board has overall responsibility for the determination of
the Group's risk management objectives and policies. Whilst
retaining ultimate responsibility for them, it has delegated the
authority for designing and operating processes that ensure the
effective implementation of the objectives and policies to the
Group's centralised finance function, from which the Board receives
regular updates.
The overall objective of the Board is to set policies that seek
to reduce risk as far as possible without unduly affecting the
Group's competitiveness and flexibility. Further details regarding
these policies are set out below:
Credit risk
Credit risk is the risk of financial loss to the Group if a
customer or counterparty to a financial instrument fails to meet
its contractual obligations. The Group is mainly exposed to credit
risk from its operating activities (primarily for accounts
receivable). The Group recognises expected credit losses based on
past experience of losses arising, the current position and
forward-looking information where it is available. The Group's
experience with such customers has been characterised by prompt
payment and no uncollectible accounts.
Under the general approach under IFRS 9 there is an assessment
of whether there has been a significant increase in the credit risk
since initial recognition. If there has been a significant increase
in credit risk, then the loss allowance is calculated based on
lifetime expected credit losses. If not, then the loss allowance is
based on twelve month expected credit losses. This determination is
made at the end of each financial period.
Thus, the basis of the loss allowance for a specific financial
asset could change year on year. For trade receivables which do not
contain a significant financing component, the loss allowance is
determined as the lifetime expected credit losses of the
instruments. For financial assets other than trade receivables, the
general approach under IFRS 9 is followed.
The Group applies the IFRS 9 simplified approach to measuring
expected credit losses using a lifetime expected credit loss
provision for trade receivables and contract assets. To measure
expected credit losses on a collective basis, trade receivables and
contract assets are grouped based on similar credit risk and
ageing. The contract assets have similar risk characteristics to
the trade receivables for similar types of contracts. The expected
credit losses are based on the Group's historical credit losses
which are then adjusted for current and forward-looking information
on macroeconomic factors affecting the Group's customers. The Group
has identified gross domestic growth rates, unemployment rates and
inflation rates as the key macroeconomic factors in the countries
in which the Group operates.
As at 31 December 2021, the Group had accounts receivable from
one customer that made up 25% (2020: 51%) of the total balance.
None of the amounts outstanding have been challenged by the
customer and the Group continues to conduct business with them on
an ongoing basis. Accordingly, management has no reason to believe
that these balances are not fully collectible in the future.
Credit risk also arises from cash and cash equivalents and
deposits with banks and financial institutions. The Group monitors
the credit quality of financial institutions where it keeps its
funds. Currently, it deals with a bank having Aa2 credit rating by
Moody's.
The Group trades only with recognised, creditworthy third
parties and independent credit checks and credit limits are managed
by the trading entities. Credit limits can only be exceeded if
authorised by the CFO. Receivable balances are monitored on an
ongoing basis with the result that the Group's exposure to bad
debts is not significant, especially given past payment history of
longstanding customers. There are no significant concentrations of
credit risk within the Group.
Market risk
Market risk is the risk that the fair value or future cash flows
of a financial instrument will fluctuate because of changes in
market prices, whether those changes are caused by factors specific
to the individual financial instrument or its issuer, or factors
affecting similar financial instruments traded in the market.
Market price risks includes interest rate risk, currency risk and
other price risk.
The Group also repaid its long-term borrowings in the year and
is not exposed to interest rate risk in the current year.
Interest rate risk
Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of
changes in market interest rates. In the prior year, the Group was
exposed to interest rate risk on its floating rate bank
indebtedness. If the interest rates were to fluctuate by 5%, there
would be no significant impact on the Group's financial statements
due to the short-term nature of the debt.
Foreign exchange risk
Foreign exchange risk is the risk to the Group's earnings that
arise from fluctuations of foreign exchange rates and the degree of
volatility of these rates. There is a risk that significant
fluctuations in the exchange rates between US$ and CAD$ and between
US$ and GBP cause an adverse impact on the Group's profitability.
The Group does not use derivative instruments to reduce its
exposure to foreign exchange risk.
The Group's exposure to foreign exchange risk is as follows:
CAD GBP Total
31 December 2021 US$'000 US$'000 US$'000
---------------------------- ------- ------- -------
Cash and cash equivalents 876 364,837 365,713
Trade and other receivables 12,836 146 12,982
Accrued income 28,016 - 28,016
Trade and other payables 4,615 366 4,981
Deferred income 12,661 - 12,661
_______ _______ _______
59,004 365,349 424,353
---------------------------- ------- ------- -------
CAD GBP Total
31 December 2020 US $'000 US $'000 US $'000
---------------------------- -------- -------- --------
Cash and cash equivalents 339 - 339
Trade and other receivables 6,224 - 6,224
Accrued income 10,328 - 10,328
Trade and other payables 2,207 - 2,207
Loans and borrowings 54 - 54
Deferred income 7,381 - 7,381
_______ _______ _______
26,533 - 26,533
---------------------------- -------- -------- --------
As at 31 December 2021, if CAD$ had strengthened/weakened by 5%
with all other variables held constant, profit for the year would
have been approximately US$10,405,000 and US$9,640,000 (2020:
US$12,843,000 and US$11,627,000), respectively, mainly as a result
of the foreign exchange gains and losses on translation of foreign
exchange financial instruments.
As at 31 December 2021, if GBP had strengthened/weakened by 5%
with all other variables held constant, profit for the year would
have been approximately US$10,376,000 and US$9,631,000
respectively, mainly as a result of the foreign exchange gains and
losses on translation of foreign exchange financial
instruments.
Other price risk
Other price risk is the risk that the fair value or future cash
flows of a financial instrument will fluctuate because of changes
in market prices (other than those arising from interest rate risk
or currency risk), whether those changes are caused by factors
specific to the individual financial instrument or its issuer, or
factors affecting all similar financial instruments traded in the
market. There are no financial assets subject to market rate price
fluctuations. The Group's exposure to other price risk is
minimal.
Liquidity risk
Liquidity risk arises from the Group's management of working
capital and the finance charges and principal repayments on its
debt instruments. Liquidity risk is the risk that the Group will
not be able to meet its financial obligations as they fall due.
The Group's policy is to ensure that it will always have
sufficient liquid assets to allow it to meet its liabilities when
they become due.
The Group manages its liquidity risk by reviewing its growth
plans on an ongoing basis as well as maintaining excess capacity on
its line of credit.
The following table sets out the contractual maturities
(representing undiscounted contractual cash flows) of financial
liabilities:
Due within Due between Due > 5 years Total
1 year 1 and 5 years
31 December 2021 US$'000 US$'000 US$'000 US$'000
----------------------------- ---------- -------------- -------------- -------
Trade payables 1,317 - - 1,317
Other payables - - - -
Accrued expenses 4,038 - - 4,038
Employee-related liabilities 450 - - 450
Loans and borrowings - - - -
Flexible spending account 6,819 - - 6,819
Lease liabilities 2,160 5,525 143 7,828
_______ _______ _______ _______
14,784 5,525 143 20,452
_______ _______ _______ _______
----------------------------- ---------- -------------- -------------- -------
Due within Due between Due > 5 years Total
1 year 1 and 5 years
31 December 2020 US$'000 US$'000 US$'000 US$'000
----------------------------- ---------- -------------- -------------- -------
Trade payables 1,091 - - 1,091
Other payables 3 - - 3
Accrued expenses 979 - - 979
Employee-related liabilities 134 - - 134
Loans and borrowings 27 27 - 54
Flexible spending account 2,335 - - 2,335
Lease liabilities 1,672 4,032 1,097 6,801
_______ _______ _______ _______
6,241 4,059 1,097 11,397
_______ _______ _______ _______
----------------------------- ---------- -------------- -------------- -------
Capital risk management
The Group's primary objectives with respect to its capital
management are to safeguard the Group's ability to continue as a
going concern in order to provide returns for shareholders and
benefits for other stakeholders and to maintain an optimal capital
structure to reduce the cost of capital and to have sufficient cash
resources to fund the research, development and operations. To
secure the additional capital necessary to pursue these plans, if
needed, the Group may attempt to raise additional funds through the
issuance of equity.
Management reviews its capital management approach on an ongoing
basis. There were no changes in the Group's approach to capital
management in the year ended 31 December 2021. The Group is not
subject to externally imposed capital requirements.
27 Retirement benefit schemes
Defined contribution schemes
Group
The Group operates defined contribution retirement benefit
schemes. The pension cost charge for the year represented
contributions payable by the Group to the schemes and amounted to
US$253,000 (2020: US$133,000). Contributions totalling US$2,000
(2020: US$nil) were payable to the schemes at the end of the year
and are included in other creditors.
28 Government assistance
In 2020, the Group received Canadian Emergency Wage Subsidy
(CEWS) from the Government of Canada totalling US$1,063,014. CEWS
was offered to qualifying companies in response to the COVID-19
virus to support wages paid to employees. Government assistance was
applied to reduce salaries expensed during the year under IAS
20.
During 2021, the Group received US$55,000 CEWS from the
Government of Canada. This was prior to the Initial Public Offering
when Alphawave IP Inc. was a private Canadian company faced with
uncertainty as to the longer-term impact on the business. Post the
Initial Public Offering, whilst Alphawave IP Inc. is entitled to
COVID-related grants, the Board and management team has elected not
to receive them. No government assistance has been requested nor
taken in the UK since the Company's incorporation and Initial
Public Offering.
29 Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note.
Transactions with Directors and key management personnel of the
Group are disclosed in note 8.
During the year Group companies entered into the following
transactions with related parties who are not members of the
Group.
31 December 31 December
2021 2020
US$'000 US$'000
--------------------------------------------------- ----------- -----------
Transactions:
Revenue from companies on which a Director
is the chairman of
the board(1) 9,855 1,392
Revenue from VeriSilicon 8,861 1,720
Revenue from WiseWave, a joint venture, where
there is common directorship 29,846 -
_______ _______
48,562 3,112
_______ _______
Balances:
Accounts receivable from a company on which
a Director is the chairman of the board 500 -
Accounts receivable from VeriSilicon 2,469 -
Accrued revenue from companies on which a Director
is the chairman of the board 5,631 -
Accrued revenue from VeriSilicon 423 396
Accrued revenue from WiseWave, a joint venture,
where there is common directorship 5,803 -
_______ _______
14,826 396
_______ _______
Deferred revenue from a company on which a
Director is the chairman
of the board (1) 727 710
Deferred revenue from VeriSilicon 593 -
_______ _______
1,320 710
_______ _______
--------------------------------------------------- ----------- -----------
2. US$949k of this revenue and US$677k of this deferred revenue
is from Achronix Semiconductor Corporation, where John Lofton Holt
ceased to be chairman of the board on 8 July 2021.
3. Companies on which a Director is the chairman of the board
are Achronix Semiconductor Corporation, FLC Technology Group and
DreamBig Semiconductor Inc.
Sales to related parties are made at market prices and in the
ordinary course of business. Outstanding balances are unsecured and
settlement occurs in cash. Any estimated credit losses on amounts
owed by related parties would not be material and are therefore not
disclosed. This assessment is undertaken at each key reporting
period through examining the financial position of the related
party and the market in which the related party operates.
In the interests of transparency, we have opted to disclose
VeriSilicon as a related party within this note. However, we have
received advice that VeriSilicon is not a related party as defined
by IAS 24 or Listing Rule 11.
30 Capital commitments
The Group has contractually committed to investing up to
US$170.0m in WiseWave and to date has invested US$22.4m.
31 Events after the reporting date
On 1 January 2022, the Group acquired 100% of the voting equity
instruments of Precise-ITC Inc., a company whose principal activity
is the development of Ethernet Controller IP. The principal reason
for this acquisition was to increase the product offering of the
Group. The initial accounting for this acquisition has not been
completed, and as such has not been included in the disclosures
below.
The book value of the net assets acquired is as follows:
US$'000
----------------------- -------
Property and equipment 52
Cash 792
Payables (223)
_______
Net assets 621
_______
At the date of authorisation of these financial statements a
detailed assessment of the fair value of the identifiable net
assets has not been completed.
Fair value of consideration paid
US$'000
----- -------
Cash 20,283
_______
A fair value assessment is planned for this acquisition which we
expect will result in some recognition of intangible assets and
that therefore recognised goodwill will be less than US$19.7m.
These intangible assets will provide a competitive advantage to the
Group that will be realised through vertical integration of
semiconductor IP development. The consideration consisted of
US$14.5m in cash, US$0.3m relating to employee retention and a
further US$5.5m being payable if certain targets are met by the
Precise organisation.
AWIPINSURE Limited, a company governed by the Laws of Barbados,
was incorporated on 31 January 2022. All 125,000 common shares with
zero par value are owned by Alphawave IP Group plc and has been set
up as part of our captive insurance programme.
On 14 March 2022, the Group announced that definitive agreements
had been signed for the acquisition of the OpenFive business unit
of SiFive Inc. for a total cash consideration of US$210m, subject
to customary closing conditions including adjustments for working
capital. The consideration will be met from the existing cash
resources of the Group. The transaction is expected to close in the
second half of 2022, pending regulatory approvals.
32 Notes supporting the consolidated statement of cash flows
Group Group Company
31 December 31 December 31 December
2021 2020 2021
US$'000 US$'000 US$'000
------------------------- ----------- ----------- -----------
Cash at bank and in hand 500,964 14,039 463,360
_______ _______ _______
There are no significant amounts of cash and cash equivalents
that are held by the Group that are not available to the Group.
Movements in the Group's loans and borrowings have been analysed
below.
Non-current Current
loans and loans and
borrowings borrowings Total
US$'000 US$'000 US$'000
-------------------- ----------- ---------- -------
At 1 January 2021 27 27 54
Cash flows (27) (27) (54)
Non-cash flows - - -
_______ _______ _______
At 31 December 2021 - - -
_______ _______ _______
-------------------- ----------- ---------- -------
Non-current Current
loans and loans and
borrowings borrowings Total
US$'000 US$'000 US$'000
-------------------- ----------- ---------- -------
At 1 January 2020 - - -
Cash flows 27 27 54
Non-cash flows - - -
_______ _______ _______
At 31 December 2020 27 27 54
_______ _______ _______
-------------------- ----------- ---------- -------
Total
US$'000
--------------------------------- -------
Opening trade and other payables 2,207
Amount not relating to operating
expenses 739
Movements to be adjusted in
the cash flow 2,859
_______
Closing trade payables 5,805
_______
--------------------------------- -------
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