TIDMAWE
RNS Number : 0611A
Alphawave IP Group PLC
21 September 2022
ALPHAWAVE IP GROUP PLC
INTERIM RESULTS FOR THE SIX MONTHSED 30 JUNE 2022
-- Technology leadership and product portfolio underpin broader customer base
-- Revenue doubled year-on-year to US$57.1m
-- H1 2022 operating profit of US$29.9m compared to restated H1 2021 US$1.3m
-- Adjusted EBITDA 1 up 67% year-on-year to US$23.2m
-- Adjusted EBITDA 1 margin at 41%, below H1 2021, as we
continue to expand our R&D capability to support a growing
pipeline and future revenue growth
-- EBITDA significantly above H1 2021 at US$32.7m
-- Significant revenue growth expected in H2 2022, with
medium-term outlook unchanged and continued confidence in growth
prospects
LONDON, United Kingdom and TORONTO, Ontario, Canada 21 September
2022 - Alphawave IP Group plc (LSE: AWE, "Alphawave IP",
"Alphawave", the "Company"), a global leader in high-speed
connectivity for the world's technology infrastructure, has
published its interim results for the six months ended 30 June
2022.
Financial Summary and APMs [1] H1 2022 Restated Change
- US$m H1 2021 [2]
======================================= ======== ============= =======
Revenue 57.1 27.6 107%
EBITDA (2) 32.7 2.6 nm
EBITDA margin 57% 9%
Adjusted EBITDA (1) 23.2 13.9 67%
Adjusted EBITDA margin 41% 50%
Profit after Tax (2) 16.3 0.1 nm
PAT margin 28 % nm
Adjusted Profit after Tax(1) 6.7 11.4 (41%)
Adjusted PAT margin 12% 41%
Pre-tax operating cash flow (2) 32.2 4.7 578%
Net cash and cash equivalents
(end of period) 451.8 519.1 (13%)
Bookings [3] and Design Win H1 2022 H1 2021 Change
Activity - US$m
======================================= ======== ============= =======
Licence and related 38.5 33.0 17%
Potential future royalties 14.9 15.2 (2%)
New Bookings (excluding VeriSilicon
and WiseWave multi-year subscription
licences) 53.4 48.3 11%
Additional design win activity 14.7 - nm
- FSA drawdowns and China re-sale
licences [4]
WiseWave and VeriSilicon multi-year - 147.8 nm
subscription licences
Number of end-customers (end
of period) 28 16
Due to rounding, numbers presented in the table may not add up
to the totals provided and percentages may not precisely reflect
the absolutely figures. 'nm', where referenced, means 'not
meaningful'.
Tony Pialis, President and Chief Executive Officer of Alphawave
IP said: "We delivered another set of strong results, doubling our
revenue over H1 2021 while continuing to invest both organically,
through R&D, as well as through M&A to support our growing
pipeline and future revenue growth. The strong results are a
testament to our technology and the solid execution by our talented
people. Following the closing of the acquisition of OpenFive on 1
September 2022, we welcomed over 330 employees to Alphawave and
over 50 new customers. We expect customer traction to gain momentum
in the second half of the year and we are excited about the
long-term prospects for growth."
John Lofton Holt, Executive Chairman of Alphawave IP, added:
"Alongside this strong set of results, the completion of OpenFive
represents an important milestone in the evolution of our business.
Through an uncertain economic environment our customers in digital
infrastructure markets continue to invest in leading connectivity
technology, and this is the reason we are excited about the
long-term potential of the business."
Interim Results Highlights
-- H1 2022 revenues of US$57.1m, representing 107% growth
year-on-year driven by mix of repeat business and new customers
-- WiseWave revenues of US$18.3m (excluding re-seller revenue
[5] ), of which US$12.9m relate to the multi-year subscription
licence
-- Adjusted EBITDA 1 of US$23.2m and margin of 41% (H1 2021
US$13.9m and 50%), reflecting accelerated investment in R&D
-- US$19.3m exchange gain due to the weakening of GBP against
USD on USD cash balances held at Alphawave IP Group plc level
denominated in GBP
-- Net cash generated from operating activities in H1 2022 was
US$18.8m, US$17.2m higher than in H1 2021 (H1 2021 restated:
US$1.6m)
Business and Technology Highlights
-- Alphawave IP maintained its technology leadership with a new design win in 3nm
-- The Company added to its product portfolio two new
interconnect IPs, AresCORE16 and OptiCORE100
-- During H1 2022, the Company expanded its customer base to 28
(FY 2021: 20 customers; H1 2021: 16 customers), including two top
20 North American semiconductor companies
-- Microchip Technology selected Alphawave's low-power and
high-performance 112Gbps IP, AlphaCore100, for its next-generation
META-DX2 1.6Tbps Ethernet retimer family
-- Cumulative bookings over the life of the Company since its
inception in 2017, exceeded US$400m, of which over 50% represents
customers outside of China
-- Continued to build sales and R&D capabilities with new
offices in San Jose, California and Ottawa, Canada
-- In H1 2022, the Company headcount increased by 97 people
globally, bringing the total headcount from 154 (as of 31 December
2021) to 251 (132 as of 30 June 2021)
-- After the end of the reporting period, on 31 August 2022, the
Company completed the acquisition of OpenFive, extending
Alphawave's product offerings and customer base while driving
greater scale and revenue growth from an expanded total addressable
market
Outlook
-- During the second half of the year, t he Company expects
customer traction to gain momentum, including multiple chiplet IP
design wins.
-- Alphawave IP reiterates its mid-term and long-term outlook
including the financial contribution of OpenFive, communicated on
29 April 2022 in its 2021 full year results.
Capital Markets Day
The Company will host a Capital Markets Day in London, on 13
January 2023. Alphawave's executives will present the Company's
long-term business strategy and financial targets as it enters its
next phase of technology leadership in connectivity for digital
infrastructure markets.
Results Presentation and webcast
A presentation for investors and analysts will be held at 8.30am
BST, on 21 September 2022. The webcast will be accessible via:
https://us02web.zoom.us/s/82295344058?pwd=ektteElrdWFwQ2NRd2lETnFIS0RjQT09
Passcode: 397388
Or by phone:
US: +1 669 900 9128 / +1 719 359 4580 / +1 253 215 8782
United Kingdom: +44 203 901 7895 / +44 208 080 6591 / +44 330
088 5830
Webinar ID: 822 9534 4058
Full list of dial-in numbers available
https://us02web.zoom.us/u/kD2i0tmO
The Company's H1 2022 Report is also available to view in the
Investor Relations section of the Company's website ( Results,
Reports & Presentations (awaveip.com) ).
About Alphawave IP Group plc (LSE: AWE)
Faced with the exponential growth of data, Alphawave IP's
technology serves 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
Alphawave IP and the Alphawave IP logo are trademarks or
registered trademarks of Alphawave IP Group plc. All other
trademarks or registered trademarks mentioned herein are held by
their respective companies. All rights reserved.
Contact Information
Alphawave IP Group John Lofton Holt, Executive ir@awaveip.com
plc Chairman +44 (0) 20 7717 5877
Jose Cano, Head of IR
------------------- ---------------------------- -----------------------------
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
=================== ============================ =============================
Cautionary statement regarding forward-looking statements
This document may contain forward-looking statements which are
made in good faith and are based on current expectations or
beliefs, as well as assumptions about future events. You can
sometimes, but not always, identify these statements by the use of
a date in the future or such words as "will", "anticipate",
"estimate", "expect", "project", "intend", "plan", "should", "may",
"assume" and other similar words. By their nature, forward-looking
statements are inherently predictive and speculative and involve
risk and uncertainty because they relate to events and depend on
circumstances that will occur in the future. You should not place
undue reliance on these forward-looking statements, which are not a
guarantee of future performance and are subject to factors that
could cause our actual results to differ materially from those
expressed or implied by these statements. The Company undertakes no
obligation to update any forward-looking statements contained in
this document, whether as a result of new information, future
events or otherwise.
A. Operational and Strategic Highlights
Summary
Total bookings in H1 2022 of US$53.4m were below the prior year
(H1 2021: US$196.1m) due to the multi-year agreements signed with
VeriSilicon and WiseWave in H1 2021.
In H1 2022, Alphawave generated licence and related bookings,
which include non-recurring engineering and support, of US$38.5m,
an increase of 17% from H1 2021. Our estimates of future royalties
from design wins secured during H1 2022 remained roughly flat at
US$14.9m (H1 2021: US$15.2m). We also saw Flexible Spending
Accounts 4 ("FSA") drawdowns of US$5.6m, and China (VeriSilicon)
reseller deals of US$9.1m. Both FSA and reseller deals are not new
bookings but represent the conversion of prior customer commitments
to design wins.
Cumulative bookings over the life of the Company since its
inception in 2017 exceeded $400m.
In the period, we won eight new customers, including two
top-tier North American semiconductor companies, ending the period
with 28 customers. Of our eight new end-customer wins in H1 2022,
six of those customers are headquartered in North America or EMEA.
As of 30 June 2022, Alphawave had six of the top ten semiconductor
companies (as ranked by market capitalisation) as customers.
Revenue increased 107% to US$57.1m year-on-year (H1 2021:
US$27.6m), driven by growth in designs wins from new customers and
repeat business from existing customers. We achieved gross margin
of 97% and adjusted EBITDA 6 of US$23.2m, up 67% year-on-year.
Adjusted EBITDA margin was 9 percentage points below H1 2021 at 41%
[6] , prior to non-recurring M&A costs, stock-based
compensation and exchange gains.
We closed the period with a net cash position of US$451.8m,
compared to a net cash position of US$501.0m at the end of December
2021. The year-on-year decrease was mainly the result of higher net
cash generated from operating activities offset by a US$14.1m
outflow related to the acquisition of Precise-ITC on 1 January
2022, and US$50.1m foreign exchange impact on reported cash and
cash equivalents.
End Market Drivers Remain Strong
Despite an uncertain economic environment, digital
infrastructure markets remain strong. Our core markets of servers,
storage and network switches continue to provide compelling
opportunities for growth. In Q1 2022, data centre capital
expenditure grew at the fastest rate year-on-year in three years
and Amazon, Google, Meta and Microsoft are projected to increase
25% in 2022 [7] . Not surprisingly, the amount of data created,
captured, replicated and consumed each year is expected to more
than double in size from 2022 to 2026 [8] .
Our pipeline of customer opportunities reflects those trends.
Our customers continue to seek differentiation and enhanced
performance by transitioning faster to lower design nodes, with the
majority of our design wins in H1 2022 at 7nm and 5nm manufacturing
processes and a first design win in 3nm. As we have noted in
previous announcements, we continue to see hyperscale data centre
providers reducing reliance on networking ASIC vendors.
The ongoing constraints on the semiconductor supply chain and
the ubiquitous presence of semiconductors in our lives continue to
reinforce the importance of semiconductor technology on a global
scale. As the digital infrastructure continues to grow and
transitions to leading and more efficient technologies, we remain
confident in the long-term outlook of the business.
Expanding Technology Leadership and Customer Traction
During H1 2022, we recognised revenue from 28 customers,
compared to 16 customers in H1 2021 and 20 customers at FY 2021.
Our H1 2022 revenue continued to be heavily weighted to our core
markets of data networking and cloud compute. 42% of revenue in the
period was generated from North American customers, 38% from China,
13% from APAC excluding China and 7% from EMEA.
Since 2017, the Company has demonstrated connectivity technology
leadership in 7nm, 6nm, 5nm and 4nm technology. In Q2 2022,
Alphawave IP extended its leadership with a new design win in 3nm
technology. The Company expects further design wins in 3nm in the
second half of the year and is working with its foundry partners in
3nm and beyond.
In June 2022, the Company announced the availability of two new
Interconnect IP products to its product portfolio. AresCORE16 is a
Die-to-Die parallel interface that further extends Alphawave's
chiplet leadership by enabling a new generation of chiplet
products. OptiCORE100 is a 112Gbps PAM4 optical
Serialiser-Deserialiser ("SerDes") that enables direct drive of
optics and includes advanced DSP techniques for receiving optical
waveforms. These two new products bring exciting new opportunities
for Alphawave IP to continue to help its customers solve
increasingly complex connectivity challenges.
Investing in People
During the first six months of the year, we continued to invest
heavily in talent, particularly in R&D. As of 30 June 2022,
total headcount increased to 251, comprising 220 in
R&D/engineering, 9 in sales and marketing and 22 in general and
administrative roles (from 132, 6 and 16 respectively as at 31
December 2021). In January 2022, Tony Chan Carusone joined as Chief
Technology Officer, bringing over 20 years of experience in both,
academic research and business consulting.
In support of its market expansion, on 10 May 2022, the Company
announced the opening of its new office in San Jose, California -
marking the launch of its presence in the United States in order to
better support customers in the region.
In addition to the significant investment in
R&D/engineering, we have expanded our finance, HR and other
administrative functions, including a new Global Head of Investor
Relations, Jose Cano, formerly Head of Investor Relations at Dialog
Semiconductor Plc. In January 2022, we appointed Michelle Senecal
de Fonseca as our Workforce Engagement Non-Executive Director,
ensuring that the views and concerns of our employees are brought
to the Board and taken into account.
Significant Post-Interim Events
On 1 September 2022, the Company announced the closing of the
acquisition of OpenFive. The acquisition accelerates the Company's
ambition to become a pure-play provider of connectivity technology,
offering silicon IP as well as custom silicon. The acquisition
nearly doubles the number of connectivity-focused IPs from 80 to
over 155 and significantly increases Alphawave's customer base
globally from 28 to over 80, particularly in North America. New
customers include a top two semiconductor memory supplier, a top
three high performance computing (HPC) server manufacturer, a
leading automated tester equipment manufacturer, and mission
critical high-speed communications and industrial equipment
manufacturers. OpenFive's proven silicon development team enables
Alphawave to offer leading-edge data centre and networking custom
silicon as well as enhancing its chiplet design capabilities. This
accelerates Alphawave's strategic goal to scale revenues by
monetising its leading connectivity IP not only through IP
licensing but advanced custom silicon .
Outlook
Despite the uncertain macroeconomic environment, our growing
pipeline reflects positive growth trends in data infrastructure
markets and the continued investment in next generation
connectivity solutions. This combined with our talented team and
strong balance sheet give us continued confidence in our
future.
During the second half of the year, t he Company expects
customer traction to gain momentum, including multiple chiplet IP
design wins.
Alphawave IP reiterates its mid-term and long-term outlook
communicated on 29 April 2022 in its 2021 full year results .
Including the financial contribution from OpenFive, the Company
expects to reach revenues of between US$325m and US$360m in 2023.
Longer-term, we expect to achieve annual revenue run rates in
excess of US$500m in 2024 and in excess of US$1 bn 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 gradual increase thereafter as we focus
and integrate the business and realise the anticipated
synergies.
B. Financial Highlights
Contracted Order Book and Backlog
Total bookings in H1 2022 of US$53.4m were below the prior year
(H1 2021: US$196.1m) due to the large multi-year agreements signed
with VeriSilicon and WiseWave in H1 2021. Excluding those
transactions, licence and related bookings (which include
non-recurring engineering and support) grew 17%, from US$33.0m in
H1 2021 to US$38.5m in H1 2022.
Our estimates of future royalties from design wins secured
during H1 2022 remained roughly flat at US$14.9m (H1 2021:
US$15.2m). These royalty estimates are based on guaranteed royalty
commitments and estimates of future end-customer sales volumes and
management believe that actual royalties could substantially exceed
these estimates.
Of the US$53.4m of licence and related and royalty bookings in
H1 2022, 44% were from customers in North America, 36% in EMEA, 13%
in China and 7% in APAC excluding China.
We also saw Flexible spending account 4 ("FSA") drawdowns of
US$5.6m and China (VeriSilicon) reseller deals of US$9.1m. Both FSA
and reseller deals are not new bookings but represent the
conversion of prior customer commitments to design wins.
Cumulative bookings over the life of the Group since its
inception in 2017 have exceeded US$400m. Our backlog (contracted
bookings not yet recognised as revenue) excluding royalties as at
end-H1 2022 was US$150.0m. This is expected to substantially
increase in H2 2022 as we include the backlog contribution from
OpenFive.
In the period, we won eight new customers, including two
top-tier North American semiconductor companies, ending the period
with 28 customers. As of 30 June 2022, Alphawave had six of the top
ten semiconductor companies (as ranked by market capitalisation) as
customers.
Revenues
Revenues for H1 2022 reached US$57.1m, 107% growth compared to
US$27.6m in H1 2021 and reflects execution against existing design
wins, as well as revenues from new design wins with existing and
new customers:
-- Customers - In H1 2022 we recognised revenues from 28
end-customers, compared to 16 end-customers in H1 2021. Our top 3
customers represented 52% of H1 2022 revenues versus 43% in H1 2021
and the top 3 customers in each period were different. Excluding
revenues from WiseWave, which were US$18.3m in the period
(excluding re-seller revenue), our top 3 customers in H1 2022
represented 40% of revenues.
-- Regions - In H1 2022, our revenues were 42% from customers in
North America, 38% from China, 13% from APAC excluding China and 7%
EMEA. The increase in contribution from China over H1 2021 (17% of
sales) is due to recognition of WiseWave and VeriSilicon revenues
in H1 2022, which did not contribute to H1 2021 revenues.
Substantially all of our revenues in H1 2022 and H1 2021 were
generated from licence and licence-related (non-recurring
engineering and support) activities. We did not recognise any
royalty revenues in H1 2022 and expect to recognise first royalties
in H2 2022, earlier than anticipated, albeit royalties are not
expected to be a material contributor to revenues in the short
term.
Operating Expenses and Profitability
In H1 2022, our gross margin was 97%, with cost of sales
primarily reflecting sales commissions, compared to 95% in H1 2021.
Our EBITDA was US$32.7m (57% margin) compared to a restated EBITDA
of US$2.6m (9% margin) in H1 2021. Our adjusted EBITDA [9] was
US$23.2m (41% margin) compared to adjusted EBITDA of US$13.9m (50%
margin) in H1 2021. Our EBITDA in the period was materially
impacted by a US$19.3m foreign exchange gain as a result of USD
cash balances held at the Alphawave IP Group plc level which are
accounted for in GBP. Such foreign exchange differences are not
included in adjusted EBITDA and hence adjusted EBITDA in H1 2022 is
lower than EBITDA, whereas in H1 2021, adjusted EBITDA was higher
than EBITDA.
Including IPO-related expenses in H1 2021, depreciation,
one-time M&A-related expenses, FX gains and losses and
share-based payments, operating expenses in H1 2022 totalled
US$25.5m compared to restated operating expenses of US$24.9m in H1
2021. Our reported operating expenses were materially impacted by
non-recurring or other items, including FX gains, which management
believes does not reflect the underlying operational performance of
the business. Reflecting the continued scaling of the business,
excluding IPO-related expenses in H1 2021, one-time M&A-related
expenses, share-based payments and FX gains and losses, operating
expenses in H1 2022 totalled U$35.0m, compared to US$13.9m in H1
2021. Of the US$35.0m of operating expenses in the first half,
including depreciation, US$25.2m (44.0% of revenue) relate to
R&D / engineering, US$8.4 m (14.7% of revenue) to general and
administrative expenses and US$1.4m (2.5% of revenue) to sales and
marketing expenditure. General and administrative expenses include
an expected credit loss of US$1.8m based on our assessment of our
potential credit loss on overdue invoices. Excluding this, our
general and administrative expenses for H1 2022 were US$6.6m (11.6%
of revenue). Of the US$13.9m expenditure in H1 2021, including
depreciation, US$10.7m (39.0% of revenue) related to R&D /
engineering, US$2.5m (9.0% of revenue) related to general and
administrative expenses and US$0.7m (2.4% of revenue) related to
sales and marketing expenditure.
The increase in our operating expenses was primarily due to the
significant growth in our headcount in H1 2022 together with
software tool costs which scale with our R&D / engineering
headcount. Our headcount grew from 132 as at H1 2021 and 154 as at
FY 2021, to 251 as at H1 2022, with the net addition of 97
employees in the first six months of 2022. 88 of those additions
were in our R&D / engineering function, 6 within G&A and 3
within S&M, including the team that joined with the acquisition
of Precise-ITC in January 2022. We expect to slow the pace of
hiring in H2 2022, as we integrate the new hires and begin the
integration of OpenFive. The increase in share-based payments, from
US$2.0m in H1 2021 to US$7.2m in H1 2022, was primarily due to the
significant increase in headcount and restricted stock unit
issuance in H1 2022 with relatively high values compared to
previous option issues.
Depreciation and amortisation expenses in H1 2022 were US$2.8m
(H1 2021: US$1.3m ) , of which US$1.5m related to right-of-use
assets (H1 2021: US$1.1m), namely our premises and leased test
equipment.
Our profit after tax for the period, which is stated after
share-based payments, an exchange gain of US$19.3m, one-time costs
relating to our IPO and M&A activities, as well as our share of
losses from WiseWave, was US$16.3m, compared to a restated profit
after tax of US$0.1m in H1 2021. On an adjusted basis [10] , our
profit after tax for the period was US$6.7m , compared to a
restated profit after tax of US$11.4m in H1 2021, with profit in H1
2022 significantly impacted by the share of post-tax losses of
US$7.9m in WiseWave (nil in H1 2021) and higher income tax expenses
of US$6.0m (restated US$1.1m in H1 2021).
Balance Sheet, Liquidity and Cashflow
Our gross and net cash decreased by US$49.2m from US$501.0m as
at end-December 2021 to US$451.8m as at end-June 2022. Whilst we
report in USD, our IPO proceeds were received in GBP and we
continue to hold significant cash reserves in GBP. During H1 2022,
the USD to GBP exchange rate fell from 1.3513 to 1.2159, which
accounted for a US$50.1m fall in our USD reported cash over the
same period.
In the first six months of 2022, our intangible assets increased
from US$1.2m to US$9.7m [11] , largely as a result of intangibles
acquired through the acquisition of Precise-ITC. Investment in
equity-accounted joint venture WiseWave, decreased to US$1. 6m as
at 30 June 2022 from US$9.4m as at 31 December 2021, as a result of
the Group's share of the loss incurred by WiseWave during H1
2022.
Our trade and other receivables increased to U$21.0m at end-June
2022 from US$13.1m at end-December 2021, largely due to an increase
in prepayments on software tools used by our R&D / engineering
team. In addition, we provisioned for an expected credit loss of
US$1.8m, based on our assessment of our credit risk on overdue
invoices.
Our accrued revenue, where revenue recognition conditions are
met under IFRS 15 but we have not billed or collected any amount
increased to US$41.6m at end-June 2022 from US$31.7m at
end-December 2021. This increase was primarily due to increasing
new business and the timing of invoicing milestones on specific
projects.
Between end-December 2021 and end-June 2022 our trade and other
payables decreased from US$5.8m to US$4.0m. 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$14.4m at end-June 2022 from US$12.7m at
end-December 2021, as a result of invoice milestones becoming due
before projects have sufficiently progressed to recognise an
equivalent amount as revenue.
FSAs, which represent current liabilities, 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 FSAs with some customers with
whom we work on multiple projects and who prefer regular periodic
billing rather than milestone-based billing. The revenue
recognition conditions which enable us to recognise these billings
as revenue have not yet been met. The balance sheet liability
against FSAs increased from US$6.8m at end-December 2021 to
US$12.9m at end-June 2022.
The balance of accrued revenue less deferred revenue and FSAs
increased slightly to US$14.3m in H1 2022 from US$12.2m at
end-December 2021.
Our pre-tax operating cashflow during the period was US$32.2m,
an increase of 578% compared to a restated amount of US$4.7m in H1
2021. In H1 2022, we had an increase in working capital of US$6.0m.
Trade receivables increased by US$7.9m accrued revenues increased
by US$9.9m, trade payables increased by US$3.9m and deferred
revenue and FSAs increased by US$7.8m. This compared to a restated
amount of US$0.1m decrease in working capital in H1 2021. Our
income tax paid increased substantially from US$3.1m in H1 2021 to
US$13.4m in H1 2022.
Our capital expenditure on property and equipment during H1 2022
totalled US$2.4m (H1 2021: US$0.6m) as a result of significant
upgrades and expansions to our IT infrastructure, purchases of test
equipment as well as leasehold improvements to our new office in
Silicon Valley.
During H1 2022, we did not make any further equity investment in
WiseWave.
Principal Risks and Uncertainties
The Group faces a number of risks and uncertainties that may
have an impact on our operations and performance. These risks and
uncertainties are regularly assessed by the Directors. The
principal risks and uncertainties affecting the Group in respect of
the second half of the year have not changed materially from those
set out on pages 51 to 53 of the Annual Report dated 13 May 2021.
In summary, the principal risks and uncertainties are as
follows
Risk Description
--------------------- ------------------------------------------------------------
Managing our We have a limited operating history and are growing
growth rapidly, both organically and through acquisitions.
If we do not manage our growth successfully, fail
to execute on our strategy, or fail to implement
or maintain governance and control measures, our
business may be adversely impacted. We have rapidly
expanded our headcount and intend to maintain a
rapid pace of hiring. We also intend to continue
to grow through acquisitions.
===================== ============================================================
Competition We seek to maintain our competitive advantage by
and failure being first to market with new IP as data speeds
to maintain increase and manufacturing sizes decrease. If these
our technology industry transitions do not materialise
leadership or are slower than anticipated, our competitors
may be able to introduce competing IP which may
diminish our competitive advantage and selling
prices. Our ability to maintain our technology
leadership is further dependent on our ability
to attract R&D and engineering talent.
===================== ============================================================
Customer Dependence The cost and complexity of developing semiconductors
targeted by our IP limits the number of our potential
addressable customers. In any reporting period,
a substantial part of our revenues may be attributable
to a small number of customers.
===================== ============================================================
Customer Demand Demand for our IP is dependent on the continued
global growth in generation, storage and consumption
of data across our target markets as well as the
increasing cost and complexity
of designing and manufacturing semiconductors.
We may be impacted by our customers' demand sensitivity
to broader economic and social conditions. Our
potential customers may seek to develop competitive
IP internally or acquire IP or semiconductors from
our competitors.
===================== ============================================================
Risks associated WiseWave is core to our strategy to monetise our
with WiseWave IP in China and we are a significant minority shareholder.
We may be limited in our ability to influence strategy,
operational, legal, commercial or financial matters.
The Group and WiseWave may also face regulatory
risk in terms of transfer of technology into China.
There is a risk that the bookings from WiseWave
do not translate into revenues and our equity investment
diminishes in value. WiseWave is a new venture
and if it does not effectively execute on its business
plan, we may be negatively impacted.
===================== ============================================================
Dependence Our financial performance is highly dependent on
on Licensing licensing revenues and we do not anticipate a material
revenue contribution from royalty revenues for some years.
If our customers delay or cancel their development
projects, fail to take their products to production
or those products are not successful, our royalty
revenues may be delayed, diminished or not materialise.
===================== ============================================================
Reliance on We rely on the senior management team and our business
Key Personnel may be negatively impacted if we cannot retain
and ability and motivate our key employees. Our ability to
to attract grow the business is also dependent on attracting
talent talent, particularly in R&D and engineering, and
if we are unable to do so, our business may be
negatively impacted.
===================== ============================================================
External Environment Semiconductors are becoming increasingly important
and Events as countries and regions seek to guarantee supply
and build domestic supply chains, as well as restrict
outside access to their domestic technologies.
Our business could be impacted by the actions of
governments, political events or instability, or
changes in public policy in the countries in which
we operate. The current conflict in Ukraine potentially
has wide-ranging impacts, including global economic
instability, increased geopolitical tensions and
disruption to supply chains.
===================== ============================================================
IP Protection We protect our IP through trade secrets, contractual
and Infringement provisions, confidentiality agreements, licences
and other methods. A failure to maintain and enforce
our IP could impair our competitiveness and adversely
impact our business. If other companies assert
their IP rights against us, we may incur significant
costs and divert management and technical resources
in defending those claims. If we are unsuccessful
in defending those claims, or we are obliged to
indemnify our customers or partners in any such
claims, it could adversely impact our business.
===================== ============================================================
Reliance on We rely on third-party semiconductor foundries,
third-party both as customers and as manufacturing partners
manufacturing to our customers. If foundries delay the introduction
foundries of new process nodes or customers choose not to
develop silicon on those process nodes, our ability
to license new IP and our selling prices may be
adversely impacted. We are not currently reliant
on the foundries' capacity for high volume manufacturing
for our revenues but may become more reliant as
royalty revenues become more material to us and
as we seek to develop and sell chiplet silicon
devices.
===================== ============================================================
Reliance on We rely heavily on IT systems to support our business
complex IT operations. The vast majority of our design tools,
systems software and IT system components are off-the-shelf
solutions and our business would be disrupted if
these components became unavailable. If our IT
systems were subject to disruption, for example,
through malfunction or security breaches, we may
be prevented from developing our IP and fulfilling
our contracts with our customers.
--------------------- ------------------------------------------------------------
Directors Responsibility Statement
The Directors confirm that, to the best of their knowledge:
-- This condensed set of financial statements has been prepared
in accordance with IAS 34 Interim Financial Reporting, as adopted
for the use in the UK, and gives a true and fair view of the
assets, liabilities, financial position and profit of the Company;
and
-- This Half-Year Report includes a fair review of the information required by:
o DTR 4.2.7R of the Disclosure Guidance and Transparency Rules,
being an indication of important events that have occurred during
the first six months of the financial year and their impact on the
condensed set of financial statements and a description of the
principal risks and uncertainties for the remaining six months of
the financial year; and
o DTR 4.2.8R of the Disclosure Guidance and Transparency Rules,
being related party transactions that have taken place in the first
six months of the current financial year and that have materially
affected the financial position or performance of the Company
during that period.
Details of all current Directors of Alphawave IP Group plc are
maintained on www.awaveip.com .
By order of the Board
Tony Pialis
President and Chief Executive Officer
21 September 2022
Unaudited condensed consolidated statement of comprehensive
income
Six months ended 30 June 2022
Six months * Restated six
ended 30 June months
2022 ended 30 June
2021
--------------- --------------------
Note US$'000 US$'000
--------------------------- ----------- --------------- --------------------
Revenue 5 57,107 27,589
Cost of sales (1,750) (1,336)
Gross profit 55,357 26,253
R&D/engineering (25,152) (10,749)
Sales & marketing (1,442) (672)
General & administration (8,407) (2,490)
Other items 9,542 (11,034)
--------------------------- ----------- --------------- --------------------
Operating profit 29,898 1,308
'Other items' charged
in arriving at operating
profit:
Non-recurring IPO
costs* 10 - (7,935)
Non-recurring M&A-related
costs 10 (2,537) -
Share-based payment 18 (7,192) (1,958)
Exchange gain/(loss) 11 19,271 (1,141)
--------------------------- ----------- --------------- --------------------
Other items 9,542 (11,034)
--------------------------- ----------- --------------- --------------------
Finance income 9 362 102
Finance expense 9 (160) (159)
Share of post-tax
loss of equity-accounted
joint ventures 12 (7,868) -
Profit before tax 22,232 1,251
Income tax expense 13 (5,980) (1,148)
--------------------------- ----------- --------------- --------------------
Profit after tax 16,252 103
--------------------------- ----------- --------------- --------------------
Other comprehensive
income
Exchange differences
on the reorganisation - (11,106)
Exchange (losses) (50,518) -
arising on translation
of foreign operations
--------------------------- ----------- --------------- --------------------
Other comprehensive
income for the period,
net of tax (50,518) (11,106)
--------------------------- ----------- --------------- --------------------
Total comprehensive
loss for the period (34,266) (11,003)
--------------------------- ----------- --------------- --------------------
* Restated operating expenses to move US2,619k from share
premium to 'non-recurring IPO costs' within operating expenses. See
note 23 for further details
Profit per ordinary share attributable to the shareholders
(expressed in cents per ordinary share and restated for H1
2021):
Basic earnings per
share 14 2.43 0.02
Diluted earnings
per share 14 2.32 0.02
Condensed consolidated statement of financial position
As at 30 June 2022
Unaudited as at Audited year ended
30 June 2022 31 December 2021
---------------- -------------------
Note US$'000 US$'000
--------------------------------- ----- ---------------- -------------------
Assets
Non-current assets
Goodwill 1,451 -
Property and equipment 3,071 1,626
Intangible assets 15 9,703 1,167
Right-of-use assets 6,913 7,672
Investments in equity-accounted
associates 1,553 9,421
--------------------------------- ----- ---------------- -------------------
Total non-current assets 22,691 19,886
--------------------------------- ----- ---------------- -------------------
Current assets
Trade and other receivables 20,984 13,103
Accrued revenue 5 41,605 31,719
Taxes receivable 3,414 2,605
Cash and cash equivalents 16 451,833 500,964
--------------------------------- ----- ---------------- -------------------
Total current assets 517,836 548,391
--------------------------------- ----- ---------------- -------------------
Total assets 540,527 568,277
--------------------------------- ----- ---------------- -------------------
Liabilities
Lease liabilities 1,999 2,160
Trade and other payables 4,004 5,805
Income tax payable 96 6,970
Deferred revenue 5 14,378 12,661
Flexible spending account 5 12,908 6,819
Total current liabilities 33,385 34,415
--------------------------------- ----- ---------------- -------------------
Non-current liabilities
Deferred income taxes 600 422
Lease liabilities 5,195 5,668
--------------------------------- ----- ---------------- -------------------
Total non-current liabilities 5,795 6,090
--------------------------------- ----- ---------------- -------------------
Total liabilities 39,180 40,505
Net assets 501,347 527,772
--------------------------------- ----- ---------------- -------------------
Share capital and reserves
Share capital 17 9,596 9,399
Share premium account 452 -
Share-based payment reserve 18 11,969 4,777
Merger reserve (793,216) (793,216)
Currency translation reserve (72,236) (21,718)
Retained earnings 1,344,782 1,328,530
--------------------------------- ----- ---------------- -------------------
Total equity 501,347 527,772
--------------------------------- ----- ---------------- -------------------
Unaudited condensed consolidated statement of changes in
equity
Six months ended 30 June 2022
Ordinary
share Share Share-based Currency
capital premium payment Merger translation Retained Total
US$'000 Note * account reserve reserve reserve earnings equity
----------------- ----- --------- --- --------- ------------ ----------- -------------- ----------- ---------
Balance at
1 January 2022 9,399 - - 4,777 (793,216) (21,718) 1,328,530 527,772
----------------- ----- --------- --- --------- ------------ ----------- -------------- ----------- ---------
Profit for the
period - - - - - - 16,252 16,252
Other
comprehensive
income - - - - - (50,518) - (50,518)
Transactions
relating to
share issuance
Issue of shares - - - - - - - -
Reorganisation - - - - - - - -
accounting
exchange - - - - - - - -
differences
----------------- ----- --------- --- --------- ------------ ----------- -------------- ----------- ---------
Recognition
of share-based
payments 18 - - - 7,192 - - - 7,192
Exercise of
share options 197 - 452 - - - 649
----------------- ----- --------- --- --------- ------------ ----------- -------------- ----------- ---------
Balance at
30 June 2022 9,596 - 452 11,969 (793,216) (72,236) 1,344,782 501,347
(Unaudited)
----------------- ----- --------- --- --------- ------------ ----------- -------------- ----------- ---------
*Restated six months ended 30 June 2021
Ordinary Pref. Share Share-based Currency
share share premium payment Merger translation Retained Total
US$'000 Note capital capital account reserve reserve reserve earnings equity
------------------ ----- ------------ --------- --------- ------------ ---------- ------------ --------- ----------
Balance at
1 January 2021 474,447* - - 331 (472,566) 15,579 17,791
------------------ ----- ------------ --------- --------- ------------ ---------- ------------ --------- ----------
Adjusted for
effect of
reorganisation
accounting to
opening position (474,447) - - - 472,566 - - (1,881)
------------------ ----- ------------ --------- --------- ------------ ---------- ------------ --------- ----------
Profit for the
period
(restated**) - - - - - - 103 103
Other - - - - - - - -
comprehensive
expense
------------------ ----- ------------ --------- --------- ------------ ---------- ------------ --------- ----------
Total
comprehensive
income/(expense)
for the year
(restated**) - - - - - - 103 103
------------------ ----- ------------ --------- --------- ------------ ---------- ------------ --------- ----------
Transactions relating
to IPO
Issue of shares,
primary 17 124,147 71 384,856 - - - - 509,074
Issue of shares,
secondary 17 796,958 - - - - - 796,958
Issue of shares,
other 17 313 - 969 - - - - 1,282
Exercise of
options 17 4,064 - - - - - - 4,064
Reorganisation
accounting - - - - (797,279) - - (797,279)
Effect of
exercise
price below
nominal value
(restated**) 17 14,381 - (14,381) - - - - -
Net costs on
issuance of
shares relating
to IPO
(restated***) - - 1,929 - - - - 1,929
Exchange
differences
on the
reorganisation 17 - - - - - (11,106) - (11,106)
Recognition
of share-based
payments 18 - - - 1,958 - - - 1,958
Reduction in
SBP reserve
following
exercise - - - (637) - - - (637)
Balance at
30 June 2021 939,863 71 373,373 1,652 (797,279) (11,106) 15,682 522,256
------------------ ----- ------------ --------- --------- ------------ ---------- ------------ --------- ----------
* Share capital adjusted as if the reorganisation happened 1
January 2020 to give comparative figures and in line with the note
in "Basis of Preparation"
** The increase of $14,3181k to ordinary share capital was
previously stated as a reduction to the merger reserve but has been
restated to a reduction in share premium as described in Note
23.
*** Restated operating expenses to move US$2,619k from equity to
'non-recurring IPO costs' within operating expenses. This affects
share premium, retained earnings and currency translation reserve.
Please refer to note 23 for further information on this
adjustment
Unaudited condensed consolidated statement of cash flows
For the period ended 30 June 2022
Six months *Restated six
ended months ended 30
30 June 2022 June 2021
-------------- -----------------
Note US$'000 US$'000
--------------------------------- ----- -------------- -----------------
Cash flows from operating
activities
Cash generated from operating
activities before tax (a) 32,216 4,749
--------------------------------- ----- -------------- -----------------
Income tax paid (13,440) (3,133)
Net cash generated from
operating activities 18,776 1,616
--------------------------------- ----- -------------- -----------------
Cash flows from investing
activities
Purchase of property and
equipment (2,448) (557)
Purchase of intangible
asset (904) (541)
Payment for Precise ITC (14,136) -
acquisition
Net cash used in investing
activities (17,488) (1,098)
--------------------------------- ----- -------------- -----------------
Cash flows from financing
activities
Issuance of common shares 17 509,003
IPO share issuance costs** 17 (16,942)
Exercise of options 17 727 4,064
Proceeds from IPO stabilisation 17 22,238
Decrease in bank indebtedness (38)
Increase in long-term debt -
Interest received 362 -
Interest paid (52) (144)
Collection of notes receivable 428
Repayment of principal
under lease liabilities (1,336) (951)
--------------------------------- ----- -------------- -----------------
Net cash generated from
financing activities (299) 517,658
--------------------------------- ----- -------------- -----------------
Net (decrease)/increase
in cash and cash equivalents 989 518,176
Cash and cash equivalents
at start of year 500,964 14,039
Effects of foreign exchange
on cash and cash equivalents (50,120) (13,078)
--------------------------------- ----- -------------- -----------------
Cash and cash equivalents
at end of period 16 451,833 519,137
--------------------------------- ----- -------------- -----------------
* Restated changes in working capital within operating
activities at H1 2021, increasing the increase in trade and other
payables by US$1,000k. Please refer to note 23 for further
information on this adjustment
** Restated changes also decreased the IPO share issuance costs
within financing activities by US$3,500k. Please refer to note 23
for further information on this adjustment
Note to the condensed consolidated statement of cashflows
a) Cash used in operations
Six months *Restated six
ended months ended
30 June 2022 30 June 2021
-------------- -------------------------
Note US$'000 US$'000
-------------------------------- ----- -------------- -------------------------
Cash flows from operating
activities
Net income 16,252 103
Items not affecting cash:
Income tax expense 5,793 1,148
Deferred income taxes 187 -
Share of loss in joint 7,868 -
venture
Amortisation of acquired 777 -
intangibles
Depreciation of property
and equipment 602 144
Depreciation of right-of-use
asset 1,459 1,134
Share-based payment 18 7,192 1,958
Lease interest 108 144
Foreign exchange (gain) (1,999) -
-------------- -------------------------
38,239 4,631
-------------- -------------------------
Changes in working capital:
(Increase)/decrease in
trade and other receivables (7,879) 364
(Increase) in accrued revenue 5 (9,886) (8,656)
(Decrease)/increase in
trade and other payables 3,936 3,823
Increase in deferred revenue
& flexible spending account 5 7,806 4,587
-------------------------------- ----- -------------- -------------------------
(6,023) 118
-------------------------------- ----- -------------- -------------------------
Cash generated from operating
activities before tax 32,216 4,749
-------------------------------- ----- -------------- -------------------------
* Restated changes in working capital at H1 2021, increasing the
increase in trade and other payables by US$1,000k
Notes to the interim statements
Six months ended 30 June 2022
1. General information
These consolidated interim financial statements represent the
consolidated interim financial statements of Alphawave IP Group plc
('the Company' or 'Alphawave IP') and its subsidiaries (together
'the Group').
This report for the six months ended 30 June 2022 is the second
half-yearly financial report presented by the Group.
The principal activities of the Company and its subsidiaries are
described on pages 1 to 7.
The Company is a public limited company whose shares are listed
on the London Stock Exchange and is incorporated and domiciled in
the United Kingdom. The address of its registered office 65 Gresham
Street, London, EC2V 7NQ.
2. Basis of preparation
The consolidated interim financial statements of the Group have
been prepared in accordance with UK-adopted international
accounting standards (IAS) 34 Interim Financial Reporting and
should be read in conjunction with the Group's consolidated
financial statements as of and for the year ended 31 December 2021.
They do not include all the information required for a complete set
of IFRS financial statements. However, selected explanatory notes
are included to explain events and transactions that are
significant to give an understanding of the changes in the Group's
financial position and performance since the last annual
consolidated financial information as of 31 December 2021 and for
the six months ended 30 June 2021.
These condensed consolidated interim statements do not comprise
of statutory accounts within the meaning of Section 435 of the
Companies Act 2006. The comparative figures for the six months
ended 30 June 2021 are not the Group's statutory accounts for that
financial period. The preparation of these consolidated interim
financial statements requires the use of certain critical
accounting estimates. It also requires management to exercise its
judgement in the process of applying the Group's accounting
policies. The areas involving a higher degree of judgement and
complexity, or areas where assumptions and estimates are
significant to the consolidated interim financial statements are
disclosed in note 3.
The Company was incorporated on 9 December 2020 and admitted to
listing on the London Stock Exchange on 18 May 2021. On 14 May
2021, a reorganisation of Alphawave IP's corporate structure was
completed through which the Company became the sole owner of
Alphawave IP Inc. Thereafter, 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.
This has been accounted for as a common control transaction
under IFRS 3.B1 (see note 15). Therefore, the condensed
consolidated financial statements for the period ended 30 June 2021
comprises an aggregation of financial information of the Company
and the consolidated financial information of Alphawave IP Inc.
These condensed financial statements were authorised for issue
by the Company's Board of Directors on 20 September 2022.
Going concern
As of 30 June 2022, the Group had cash and cash equivalents of
US$451.8m. Considering the Group's financial position as of 30 June
2022 and its principal risks and opportunities, a going concern
analysis has been prepared for at least the twelve-month period
from the date of signing the consolidated interim financial
statements ("the going concern period") utilising realistic
scenarios and applying a severe but plausible downside scenario.
Even under the 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 interim financial statements.
Accordingly, the Directors considered it appropriate to adopt the
going concern basis of accounting in preparing the consolidated
interim 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 (CODM), 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.
Functional currency
For presentational purposes these consolidated interim financial
statements are presented in US dollars. This is consistent with the
last annual consolidated financial information as of 31 December
2021 and for the six months ended 30 June 2021. Each of the three
trading entities in the Group have different functional currencies,
with Alphawave IP Inc. being accounted for in CAD, Alphawave IP
Corp. in USD and the Company in GBP.
Accounting policies
The accounting policies that have been used in the preparation
of these consolidated interim financial statements are the same as
those applied in the last annual consolidated financial information
as of 31 December 2021 and for the six months ended 30 June 2021.
New standards effective on or after 1 January 2022 have been
reviewed and do not have a material effect on the Group's financial
statements.
Revenue recognition
The accounting policy for revenue recognition that has been used
in the preparation of these consolidated interim financial
statements is unchanged from the policy applied in the last annual
consolidated financial statements, prepared for and as at the year
ended 31 December 2021.
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
RSUs, of the Company. 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.
Where options are exercised, the Company issues new shares. The
proceeds received net of any directly attributable transaction
costs are credited to share capital and share premium when the
options are exercised.
If an option is cancelled this is accounted for as an
acceleration of the vesting period and any amount unrecognised is
recognised immediately.
M&A-related costs and other non-recurring items
The Group incurred costs from certain M&A and other
non-recurring items, e.g. acquisition 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.
3. Significant accounting estimates and judgements
The preparation of consolidated interim financial statements in
conformity with IAS 34 requires management to make estimates and
assumptions that affect the reported amount of assets and
liabilities, disclosure of contingent assets and liabilities at the
date of the consolidated interim financial statements and the
reported amounts of revenues and expenses during the period. Such
estimates are periodically reviewed and any adjustments necessary
are reported in earnings in the period in which they become known.
Actual results could differ from these estimates.
The areas which require management to make significant estimates
in determining carrying values include, but are not limited to:
(a) Revenue recognition
In the determination of allocation of revenues to
work-in-process and deferred revenues, management must assess the
stage of completion of custom IP licence contracts based on hours
completed compared to total estimated hours to complete. Such
estimations are inherently uncertain due to unforeseen delays in
technological research. Refer to note 5 for further information
regarding the sensitivity in the estimation uncertainty.
As disclosed in the annual consolidated financial statements for
the year ended 31 December 2021, an amount of revenue is typically
held back for recognition at the latter stages of project
completion. This amount is typically a fixed percentage dependent
on the categorisation of the IP licence agreement and is typically
held back until the earlier of 'customer silicon acceptance'
(customer silicon meets specifications) or a time specified in the
contract. In the period ending 30 June 2022, management has started
to review contracts with revenue held back on a case-by-case basis
and reassessed the amounts held back to confirm they are
proportionate to the likelihood or risk of the customer requiring
additional post-delivery work from the Group to ensure customer
silicon acceptance. This resulted in US$2.5m additional revenue
being recognised in H1 2022.
There have been no changes in the estimates and judgements used
in relation to the recognition of revenue from sales to our joint
venture WiseWave from those disclosed in the annual consolidated
financial statements for the year ended 31 December 2021.
(b) Share-based payments
Judgement is used in determining the fair value of the share
options at the grant date, including determining comparable listed
companies against which the future volatility of the share price is
compared and expected dividend yield. Such judgements are
inherently uncertain and changes in these affect the fair value
determination. See note 16.
(c) 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 it will be available for use or
sale. See note 8.
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
Bookings excluding royalties comprise licence fees, flexible
spending accounts, non-recurring engineering and support from
contracted and typically non-cancellable orders that will
ultimately result in recognised revenue. Bookings including
royalties include Group estimates of potential future royalties
which may result in recognised revenues.
Bookings are a measure of operating performance used by
management to assess order intake in each period, whether we are
successfully converting our pipeline into committed orders and
therefore how effective we have been in executing our strategy.
Bookings are a key performance indicator used to assess the Group's
performance for internal reporting purposes.
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 bears no relation to the Group's underlying operational
performance;
-- charges for the depreciation and amortisation 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
Six months Restated six months
(US$'000) ended 30 June 2022 ended 30 June 2021
-------------------- --------------------
Operating profit 29,898 1,308
Add backs:
Depreciation and amortisation* 2,839 1,278
EBITDA 32,737 2,586
-------------------- --------------------
* US$2,839k of depreciation in H1 2022 split by function is
US$2,316k R&D/engineering, US$115k sales & marketing and
US$407k general & administration
Two further measures are adjusted EBITDA and adjusted profit
after tax, defined in the tables below. These further allow for a
more accurate assessment of the underlying business performance by
making exclusions of items which do not form part of the Group's
normal underlying operations.
EBITDA to adjusted EBITDA reconciliation
Six months Restated six months
(US$'000) ended 30 June 2022 ended 30 June 2021
-------------------- -------------------------------
EBITDA 32,737 2,586
--------------------
Add backs:
Non-recurring IPO costs* - 7,935
Non-recurring M&A-related 2,537 -
costs
Share-based payment 7,192 1,958
Exchange (gain)/loss (19,271) 1,141
CPP legal costs** - 299
--------------------
Adjusted EBITDA 23,195 13,919
-------------------- -------------------------------
* Restated operating expenses to move US$ 2,619k from share
premium to 'non-recurring IPO costs' within operating expenses. See
note 23 for further details
** One-off legal costs incurred in H1 2021 from the formation of
WiseWave. Whilst still included in operating expenses and not
included in non-recurring IPO costs, this expense was deemed
one-off and added back to adjusted EBITDA.
Profit after tax to adjusted profit after tax reconciliation
Six months Restated six months
(US$'000) ended 30 June 2022 ended 30 June 2021
-------------------- -------------------------------
Profit after tax 16,252 103
-------------------- -------------------------------
Add backs:
Non-recurring IPO costs - 7,935
Non-recurring M&A-related 2,537 -
costs
Share-based payment 7,192 1,958
Exchange (gain)/loss (19,271) 1,141
CPP legal costs - 299
-------------------- -------------------------------
Adjusted profit after
tax 6,710 11,436
-------------------- -------------------------------
Adjusted profit per ordinary share attributable to the
shareholders (expressed in cents per ordinary share)
Note Six months
ended 30 June Six months ended
2022 30 June 2021
--------------------------- ----- --------------- ----------------------------
Adjusted basic earnings
per share 14 1.00 1.95
Adjusted diluted earnings
per share 14 0.96 1.68
5 Revenue
Revenue in the unaudited condensed consolidated statement of
income and comprehensive income is analysed as follows:
Six months ended Six months ended
(US$'000) 30 June 2022 30 June 2021
----------------- -----------------
Revenue by type:
Products 52,464 25,559
Support 4,643 2,030
57,107 27,589
----------------- -----------------
Six months ended Six months ended
(US$'0000) 30 June 2022 30 June 2021
----------------- -----------------
Revenue by region:
North America 23,768 18,499
China 21,807 4,766
APAC (ex-China) 7,257 4,324
EMEA 4,275 -
57,107 27,589
----------------- -----------------
Sensitivity analysis
Revenue recognition for product revenue is determined using the
input method on a percentage of completion basis. The percentage of
completion is calculated as a function of total hours estimated to
fulfil the contract. The table below illustrates the sensitivity
the percentage of completion estimate has on revenue
recognition:
Revenue stream As reported +10% -10%
------------ ------- -------
Products 52,464 57,710 47,218
------------ ------- -------
Please see the 'Financial Highlights' section on page 8 for
further information on revenue, including the significant increase
in revenue in H1 2022 compared to H1 2021.
Below is a reconciliation of the movement in accrued revenue
during the period:
Six months ended
(US$'000) 30 June 2022
-----------------
At 1 January 2022 31,719
Revenue accrued in the period 32,744
Accrued revenue invoiced in the period (22,495)
Foreign exchange difference (363)
At 30 June 2022 41,605
-----------------
Below is a reconciliation of the movement in deferred revenue
during the period:
Six months ended
(US$'000) 30 June 2022
-----------------
At 1 January 2022 12,661
Precise ITC opening deferred revenue as
at 1 January 2022 1,120
-----------------
Revenue recognised in the period (13,854)
Revenue deferred in the period 14,765
Foreign exchange difference ( 314 )
At 30 June 2022 14,378
-----------------
This deferred revenue balance is all expected to be satisfied
within 12 months of the balance sheet date.
The flexible spending account has increased to US$12.9m at the
end of June 2022 from US$6.8m at the end of December 2021. These
are contracts with customers who have committed to regular periodic
payments to us over the term of the contract. These payments are
not in respect of specific licences or other deliverables, but they
can be used as credit against future deliverables.
6 Employee costs excluding Directors and key management personnel
Six months ended Restated six months
(US$'000) 30 June 2022 ended 30 June 2021
----------------- --------------------
Wages, salaries and
benefits 14,275 6,256
Defined contribution
pension costs 483 165
Social security costs 225 78
Share-based payments 7,192 1,560
Investment tax credit - (909)
Government grants - (55)
----------------- --------------------
Total employee costs 22,175 7,095*
----------------- --------------------
*The prior period total is restated as US$7,095k and was
previously shown as US$7,493k
The average number of employees during the period, analysed by
category, was as follows:
Six months ended Six months ended
30 June 2022 30 June 2021
----------------- -----------------
R&D/engineering 176 91
General & administration 19 6
Sales & marketing 7 4
----------------- -----------------
Total employees (average) 202 101
----------------- -----------------
The number of employees at the end of each period, analysed by
category, was as follows:
Six months ended Six months ended
30 June 2022 30 June 2021
----------------- -----------------
R&D/engineering 220 117
General & administration 22 10
Sales & marketing 9 5
----------------- -----------------
Total employees (end
of period) 251 132
----------------- -----------------
7 Directors and key management personnel compensation
Six months ended Six months ended
(US$'000) 30 June 2022 30 June 2021
----------------- -----------------
Directors and key management
emoluments 1,875 712
Share-based payments - 398
Pension costs 3 18
----------------- -----------------
Total Directors and
key management remuneration 1,878 1,128
----------------- -----------------
8 Research and development/engineering
The Group incurred research and development costs that have been
expensed in the unaudited condensed consolidated statement of
comprehensive income. The amounts expensed through salaries,
subscriptions, subcontracting, depreciation of right-of-use assets,
equipment rentals, and prototypes which relate to research and
development are as follows:
Six months ended Six months ended
(US$'000) 30 June 2022 30 June 2021
----------------- -----------------
Research and development 25,152 10,749
----------------- -----------------
9 Finance income and expense
Six months ended Six months ended
(US$'000) 30 June 2022 30 June 2021
----------------- -----------------
Finance income
Interest income from
customer - 102
Interest income from 362 -
bank
362 102
----------------- -----------------
Finance expense
Interest expense
- bank charges - 14
Lease interest 160 145
160 159
----------------- -----------------
Net finance income/(expense) 202 (57)
----------------- -----------------
10 Non-recurring IPO costs and non-recurring M&A-related
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 the Group's acquisition of Precise ITC
on 1 January 2022, as well as one-off costs relating to the Group's
acquisition of the OpenFive business, which closed on 31 August
2022. The majority of these costs relate to legal and financial due
diligence expenses for the acquisitions.
For the prior 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$7.9m. This is a restated
figure as at 30(th) June 2021, which is further detailed at note
23. Over half of these costs related to LSE admission fees and
legal costs associated with the IPO. 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 statement of comprehensive income .
11 Exchange gain/(loss)
The exchange gain recorded in the H1 2022 condensed consolidated
statement of comprehensive income of US$19.3m (H1 2021: exchange
loss of US$1.1m) is due to the weakening of GBP against USD. The
Company's functional currency is GBP and it has significant cash
and cash equivalents balances denominated in USD. Large exchange
gains have resulted from translating USD to GBP each month at
weakening exchange rates.
12 Share of post-tax loss of equity-accounted joint ventures
Six months ended 30
(US$'000) June 2022
--------------------
Share of loss 1,566
Elimination of gains from sales to the
joint venture 6,302
7,868
--------------------
The joint venture did not exist at 30 June 2021 so there are no
comparatives in the table above.
13 Income tax expense
During the six months ended 30 June 2022 and 2021, the Group
recorded a consolidated tax expense of US$6.0m and US$1.1m,
respectively, which represented effective tax rates of 26.9% and
29.7%, respectively.
Income tax expense has been recognised based on management's
estimate of the effective rate for the financial period, being
26.9%, multiplied by the reported profit before tax of the interim
reporting period. The effective tax rate used in the period is an
approximation of the effective rate expected in Canada, which is
the jurisdiction of the Group's principal operations, as opposed to
applying a separate annual average income tax rate to each tax
jurisdiction and category of income in the respective tax
jurisdiction.
14 Earnings per share
Basic earnings per share is calculated by dividing net income
from operations by the weighted average number of common shares
outstanding during the period.
Diluted earnings per share is calculated by adjusting the
weighted average number of common shares outstanding during the
period to assume conversion of all potential dilutive share options
and restricted share units to common shares.
Six months Restated six
ended 30 June months ended 30
(US$'000 except shares) 2022 June 2021
--------------- ----------------------------
Numerator:
Net income from operations 16,252 103
--------------- ----------------------------
Denominator:
Weighted average number of
common shares outstanding
for basic EPS 668,415,191 585,328,447
Adjustment for share options 32,904,025 93,760,220
--------------- ----------------------------
Weighted average number of
common shares outstanding
for diluted EPS 701,319,217 679,088,667
--------------- ----------------------------
Basic EPS (US$ cents) 2.43 0.02
--------------- ----------------------------
Diluted EPS (US$ cents) 2.32 0.02
--------------- ----------------------------
15 Intangible assets
Six months
ended 30 June
(US$'000) 2022
---------------
At 1 January 2022 1,167
Intangibles from Precise ITC acquisition 7,667
Additions 1,636
Amortisation of Precise ITC intangibles (767)
---------------
At 30 June 2022 9,703
---------------
The identifiable intangible asset from the acquisition of
Precise ITC was provisionally valued at US$7.8m, against which
amortisation of US$0.8m was recorded in H1 2022. Please refer to
note 20 for further information.
The US$1.6m of additions is a licence to use IP. This IP is
being developed by a 3rd party vendor and amounts paid to date
represent instalments to initiate the development which is carried
at cost. No amortisation is recorded as the intangible asset is not
yet available for use.
16 Cash and cash equivalents
As at 31 December
(US$'000) As at 30 June 2022 2021
------------------- ------------------
Cash at bank and in
hand 451,833 500,964
------------------- ------------------
Please see the 'Financial Highlights' section on page 10 for
further information on cash, including the decrease in cash as at
30 June 2022 compared to 31 December 2021.
17 Share capital
On 14 May 2021, the Company acquired the entire issued share
capital of Alphawave IP Inc. in return for 576,908,920 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.
In addition, the Company issued 87,835,796 shares 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 restated total costs of US$20.3m (GBP14.4m), of which
US$3.5m was unpaid as at 30 June 2021, 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 IPO costs, resulting in the net proceeds of US$0.8m
being posted to the share premium account.
As part of the transaction, 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 1 option in Alphawave IP Inc., each with an exercise
price of 1/20(th) of the original exercise price at the grant
date.
On the IPO date, 13,049,861 options were exercised into ordinary
shares in the Company. The options exercised all had 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$14.4m
(GBP10.2M), being transferred from the merger reserve to the Share
Capital account.
The reorganisation of the Company's corporate structure
described above has been accounted for as a common control
transaction and has been given effect from 1 January 2020. This has
resulted in the opening share capital position being adjusted as if
the reorganisation had happened on that date. In addition, a merger
reserve has been established which reflects the difference between
the share capital issued to acquire the shares in Alphawave IP Inc.
and the share capital of Alphawave IP Inc. acquired at the
transaction date of 14 May 2021.
The Currency Translation reserve arises out of the difference
between the Net Asset position as at 30 June 2021 being translated
into our presentational currency of USD at that date and the Equity
balances being translated into our presentational currency at the
date of the transaction.
Shares US$'000
------------ ----------
Balance as at 31 December 2020
in Alphawave IP Inc. 27,927,252
Exercise of options pre-IPO 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
--------------------------------- ------------ ----------
576,908,920 815,403
Primary share issue at IPO 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
--------------------------------- ------------ ----------
Further issue of shares 16,456,177 197
--------------------------------- ------------ ----------
Balance as at 30 June 2022 681,422,111 9,596
--------------------------------- ------------ ----------
* Reflects the 20 ordinary shares in the Company issued with a
nominal value of GBP1 in exchange for 1 share in Alphawave IP Inc.,
immediately prior to the IPO on 14 May 2021 and as part of the
reorganisation. See prospectus for more details of the IPO and
Reorganisation.
18 Share-based payments
As at 30 June 2022 As at 30 June 2021
--------------------------------- -------------------------------
Weighted Weighted
Share average exercise Shares average exercise
options price (US$) options price (US$)
------------- ------------------ ----------- ------------------
Outstanding at the
beginning of the period 95,273,220 0.280 4,557,955 2.514
Exercised during the
period (16,456,177) 0.050 (918,194) 7.294
Forfeited during the
period (1,237,812) 1.217 - -
Granted during the
period 6,906,285 2.149 1,048,250 28.230
Share split during - - 89,072,209 -
the period*
-------------------------- ------------- ------------------ ----------- ------------------
Outstanding at the
end of the period 84,485,516 0.507 93,760,220 0.371
-------------------------- ------------- ------------------ ----------- ------------------
Exercisable at the
end of the period 44,088,144 0.537 48,421,600 0.111
-------------------------- ------------- ------------------ ----------- ------------------
* 30 June 2021 number of shares has been adjusted for the 20 for
1 split that happened immediately prior to the IPO in May 2021.
Each share option in Alphawave IP Inc. became 20 share options
in the Company by way of an amendment to the option agreements.
Conditions largely remained the same with twenty five per cent of
options granted vesting on the first anniversary date of issuance
and the remaining options vesting equally over the following 36
months. Options expire within five years of their issue under the
terms of the option agreements.
The following assumptions were used in the Black-Scholes-Merton
model used to determine the fair value of the share-based
compensation expense relating to share options issued in the
period:
6 months ended 30 6 months ended 30
June 2022 June 2021
------------------ ------------------
Risk-free interest
rate 2.82% 0.91%
Expected volatility 29.72% 29.72%
Expected dividend - -
yield
Expected life of share
option 4 5
The Group has determined the forfeiture rate to be nil and
volatility was determined in reference to listed entities similar
to the Group.
Share-based payment split by function
6 months to June 2022
Sales & General
(US$'000) R&D/engineering marketing & administration Total
---------------- ----------- ------------------ ------
Share-based payment
charge 5,869 291 1,032 7,192
---------------- ----------- ------------------ ------
6 months to June 2021
Sales & General
(US$'000) R&D/engineering marketing & administration Total
---------------- ----------- ------------------ ------
Share-based payment
charge 1,557 115 286 1,958
---------------- ----------- ------------------ ------
19 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 7. In
addition, the Group entered into the following transactions and had
the following outstanding balances with related parties who are not
consolidated in these interim financial statements:
As at and for the period ended
--------------------------------------
30 June 31 December * Restated
(US$'000) 2022 2021 30 June 2021
-------- ------------ --------------
Transactions:
Revenue from a company on
which a Director is the chairman
of the board(1&2) 546 9,855 3,403
Revenue from a company on
which a Director is a board
observer(3) - - 1,730
Revenue from VeriSilicon(4) 1,653 8,861 737
Revenue from WiseWave, a joint
venture, where there is common
directorship(4) 20,154 29,846 -
Costs capitalised as intangible (800) - -
assets from a company on which
a Director is a director
----------------------------------- -------- ------------ --------------
21,553 48,562 5,870
----------------------------------- -------- ------------ --------------
Balances:
Accounts receivable from a - 500 -
company on which a Director
is a board observer
Accounts receivable from VeriSilicon(4) - 2,469 1,961
Accrued revenue for a company
on which a Director is a board
observer(3) - - 1,368
Accrued revenue for a company
on which a Director is the
chairman of the board 4,710 5,631 261
Accrued revenue from VeriSilicon(4) 2,323 423 941
Accrued revenue from WiseWave,
a joint venture, where there
is common directorship(4) 11,249 5,803 -
Accrued liabilities with a (600) - -
company on which a Director
is a director
----------------------------------------- ------- ------- ------
17,682 14,826 4,531
----------------------------------------- ------- ------- ------
Deferred revenue from a company
on which a Director is the
chairman of the board(1&2) 49 727 356
Deferred revenue from a company
on which a Director is a board
observer(3) - - 205
Deferred revenue from VeriSilicon(4) 392 593 38
Deferred revenue from WiseWave, 479 - -
a joint venture, where there
is common directorship(4)
----------------------------------------- ------- ------- ------
920 1,320 599
----------------------------------------- ------- ------- ------
* Restated 30 June 2021 related party note to align reporting to
our annual report. See the final sentence in footnote 4.
1. US$949,000 of the revenue in the period ended 31 December
2021 and US$677,000 of the deferred revenue balance as at 31
December 2021 is from Achronix Semiconductor Corporation, where
John Lofton Holt ceased to be chairman of the board on 8 July 2021.
Therefore, revenue and deferred revenue from this customer has not
been included in this note for H1 2022.
2. Companies on which a Director is the chairman of the board
are FLC Technology Group and DreamBig Semiconductor Inc.
3. The H1 2021 revenue of US$1,730,000, the accrued revenue
balance of US$1,368,000 as at 30 June 2021 and the deferred revenue
balance of US$205,000 as at 30 June 2021 have been kept in this
note for consistency purposes. The Director who was a board
observer ceased their interest in the customer in March 2021.
4. All revenue from VeriSilicon and related balances are in
respect of transactions signed with VeriSilicon as reseller prior
to the VeriSilicon reseller agreement moving under WiseWave as
master reseller effective from November 2021. All revenue and
associated balances in respect of transactions signed with
VeriSilicon since that date are now recognised through the WiseWave
joint venture line. The line item wording has changed to align this
with our 2021 annual report.
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.
20 Business combinations
On 1 January 2022, the Group acquired 100% of Precise ITC
("Precise"). Precise is an emerging leader in the Ethernet and
Optical Transport Network (OTN) communications connectivity IP
space. The acquisition results in the addition of a team of leading
engineers focused on delivering a high-performance Ethernet and OTN
communications controller IP portfolio.
The total consideration stated in the share purchase agreement
is US$19.5m. This comprises initial cash consideration of US$8.5m
and future key employee remuneration of US$11.5m, less the
estimated closing cash on acquisition of US$0.7m.
All M&A-related costs relating to the acquisition of Precise
were recorded in the financial year ending 31 December 2021. Of the
US$0.5m total amount of 'non-recurring M&A-related
costs/professional costs' for the year ended 31 December 2021,
US$0.3m related to the Precise acquisition.
The Group has a contingent liability of US$11.5m which
represents remuneration to the single shareholder of Precise,
payable on the earlier of achievement of certain revenue targets or
completion of three years continuing employment, assessed at the
second and third anniversaries of closing.
The provisional fair values, assessed as part of the ongoing
purchase price allocation exercise, of the identifiable assets
purchased and liabilities assumed as at the date of acquisition are
detailed below. The Black Scholes Option Pricing Model has been
used to determine the provisional fair value of contingent
consideration.
(US$'000)
-------------------------------------------- ---------
Purchase consideration
Cash paid on closing 8,470
Fair value of contingent consideration 740
-------------------------------------------- ---------
Fair value of purchase consideration 9,210
-------------------------------------------- ---------
Net tangible assets
Working capital excluding deferred revenue 269
Fixed assets 52
Cash 803
Non-operating liabilities ( 70)
Deferred revenue ( 1,120)
-------------------------------------------- ---------
Net tangible assets ( 66 )
-------------------------------------------- ---------
Identifiable intangible assets
Technology 7 ,800
-------------------------------------------- ---------
Identifiable intangible assets 7 , 800
-------------------------------------------- ---------
Goodwill
Assembled workforce 326
Purchase price unallocated 1 ,150
-------------------------------------------- ---------
Goodwill 1 ,47 6
-------------------------------------------- ---------
Total Consideration 9 ,210
-------------------------------------------- ---------
The provisional working capital balance of US$0.3m is made up of
US$0.4m accounts receivable and US$0.1m of accounts payable and
accrued liabilities. There has been no fair value adjustment to
working capital, which remains at its net book value from 31
December 2021.
Provisionally, we don't expect any tax deduction in respect of
goodwill.
From the date of acquisition to 30 June 2022, Precise
contributed US$1.2m revenue to the Group.
21 Subsidiaries of the Group as at 30 June 2022
Description
and
proportion of
share capital
held directly Country
or indirectly of
by Alphawave incorporation Nature of Registered
IP Group plc or registration business office address
------------ --------------- ----------------- -------------------------- -------------------
Alphawave Ordinary 100% Canada Developing and 70 University
IP Inc. licensing high Avenue, Toronto,
performance connectivity Ontario, M5J
intellectual 2M4
property for
the semiconductor
industry
Alphawave Ordinary 100% United States Sales and sale 1730 N. First
IP Corp. support to license Street, Suite
intellectual 650, San Jose,
property for California,
the semiconductor 95112, USA
industry
Alphawave Ordinary 100% British To facilitate Trinity Chambers,
IP (BVI) Virgin Islands IP licensing PO Box 4301,
Ltd to WiseWave Technology Road Town,
Co., Ltd Tortola, British
Virgin Islands
Alphawave Ordinary 100% Canada Holding company
Call. Inc. incorporated
to facilitate
the exchangeable
share structure
Alphawave Ordinary and Canada Holding company
Exchange Exchangeable incorporated
Inc. 100% to facilitate
the exchangeable
share structure
Alphawave Ordinary 100% China To facilitate
IP Limited the investment
into WiseWave
Technology Co.,
Ltd
Precise Ordinary 100% Canada Developing and 170 University
ITC licensing high Avenue,
performance connectivity 10(th) Floor,
intellectual Toronto,
property for Ontario, M5H
the semiconductor 3B3
industry
AWIPINSURE Ordinary 100% Barbados Captive insurance 1st Floor,
Limited company Limegrove
Centre, Holetown,
St. James,
Barbados
22 Post balance sheet events
The Company has evaluated subsequent events after 30 June 2022,
the date of issuance of the condensed consolidated interim
financial statements, and has identified one recordable or
disclosable event not otherwise reported in these condensed
consolidated financial statements or notes thereto, which is
disclosed below.
OpenFive acquisition
On 14 March 2022, the Group announced it had entered into a
definitive agreement to acquire the OpenFive business of SiFive.
All regulatory approvals for the transaction were received on 25
August 2022 and the Group announced completion of the acquisition
on 1 September 2022. The initial cash consideration for the
transaction was US$203.6m representing a purchase price of
US$210.0m less adjustments for estimated net working capital and
indebtedness at closing. Closing statements will be finalised in
the 90-day period following completion.
23 Prior year adjustments
The prior period comparative unaudited condensed consolidated
statements of comprehensive income, changes in equity and cash
flows have been restated as explained below.
Unaudited condensed consolidated statement of comprehensive
income
As previously * Restated
reported six six months
months ended ended 30 June
30 June 2021 Adjustment 2021
-------------- ----------- ---------------
Note US$'000 US$'000 US$'000
--------------------------- ----- -------------- ----------- ---------------
Revenue 5 27,589 - 27,589
Cost of sales (1,336) - (1,336)
Gross profit 26,253 - 26,253
R&D/engineering (10,749) - (10,749)
Sales & marketing (672) - (672)
General & administration (2,490) - (2,490)
Other items (8,415) (2,619) (11,034)
--------------------------- ----- -------------- ----------- ---------------
Operating profit 3,927 - 1,308
'Other items' charged
in arriving at operating
profit:
Non-recurring IPO
costs 10 (5,316) (2,619) (7,935)
Non-recurring M&A-related 10 - - -
costs
Share-based payment 18 (1,958) - (1,958)
Exchange gain/(loss) 11 (1,141) - (1,141)
--------------------------- ----- -------------- ----------- ---------------
Other items (8,415) (2,619) (11,034)
--------------------------- ----- -------------- ----------- ---------------
Finance income 9 102 - 102
Finance expense 9 (159) - (159)
Share of post-tax 12 - - -
loss of equity-accounted
joint ventures
Profit before tax 3,870 (2,619) 1,251
Income tax expense 13 (1,148) - (1,148)
--------------------------- ----- -------------- ----------- ---------------
Profit after tax 2,722 (2,619) 103
--------------------------- ----- -------------- ----------- ---------------
Other comprehensive
income
Exchange differences
on the reorganisation (11,035) (71) (11,106)
Exchange (losses) - - -
arising on translation
of foreign operations
--------------------------- ----- -------------- ----------- ---------------
Other comprehensive
income for the period,
net of tax (11,035) (71) (11,106)
--------------------------- ----- -------------- ----------- ---------------
Total comprehensive
loss for the period (8,313) (2,690) (11,003)
--------------------------- ----- -------------- ----------- ---------------
During the period ended 31 June 2021, the group debited US$23.0m
of costs against share premium. Following a review, it was
identified that US$2, 619k of these costs did not relate to the
issue of new shares, and therefore should have been expensed as
incurred. The effect of this restatement is to increase
non-recurring IPO costs by US$2,619k, to decrease share premium by
US$2,690k and to decrease the currency translation reserve by
US$71k.
Unaudited condensed consolidated statement of changes in
equity
As a consequence of the adjustment described above, profit for
the period has been restated by US$2,619k. Exchange differences on
the reorganisation has been restated by US$71k, and the line item
'Net costs on issuance of shares relating to IPO' has been restated
by US$2,690k, both for the same reason.
In addition, the following further restatement has been made to
the consolidated statement of changes in equity. During the IPO
process, upon issuing shares, a resolution was passed to issues
shares at lower than the nominal price and take the difference from
a reserves balance. This was taken from the merger reserve, but
should have been deducted from the share premium account. As a
consequence, the line item 'Effect of exercise price below nominal
value' has been restated to move US$14,381k from merger reserve to
share premium.
Unaudited condensed consolidated statement of cash flows
As previously *Restated
reported six six months
months ended ended
30 June 2021 Adjustment 30 June 2021
-------------- ----------- --------------
Note US$'000 US$'000 US$'000
------------------------------- ----- -------------- ----------- --------------
Cash flows from operating
activities
Cash generated from
operating activities
before tax (a) 6,368 (1,619) 4,749
------------------------------- ----- -------------- ----------- --------------
Income tax paid (3,133) - (3,133)
Net cash generated
from operating activities 3,235 (1,619) 1,616
------------------------------- ----- -------------- ----------- --------------
Cash flows from investing
activities
Purchase of property and
equipment (557) - (557)
Purchase of intangible
asset (541) - (541)
Net cash used in investing
activities (1,098) - (1,098)
-------------------------------------- -------------- ----------- --------------
Cash flows from financing
activities
Issuance of common
shares 17 509,003 - 509,003
IPO share issuance
costs 17 (23,061) 6,119 (16,942)
Exercise of options 17 4,064 - 4,064
Proceeds from IPO
stabilisation 17 22,238 - 22,238
Decrease in bank indebtedness (38) - (38)
Interest paid (144) - (144)
Collection of notes
receivable 428 - 428
Repayment of principal
under lease liabilities (951) - (951)
------------------------------- ----- -------------- ----------- --------------
Net cash generated
from financing activities 511,539 6,119 517,658
------------------------------- ----- -------------- ----------- --------------
Net increase in cash
and cash equivalents 513,676 4,500 518,176
Cash and cash equivalents
at start of year 14,039 - 14,039
Effects of foreign
exchange on cash and
cash equivalents (8,578) (4,500) (13,078)
------------------------------- ----- -------------- ----------- --------------
Cash and cash equivalents
at end of period 16 519,137 - 519,137
------------------------------- ----- -------------- ----------- --------------
As previously *Restated
reported six six months
months ended ended
30 June 2021 Adjustment 30 June 2021
-------------- ---------------------- -------------------------
Note US$'000 US$'000 US$'000
------------------------------- ----- -------------- ---------------------- -------------------------
Cash flows from operating
activities
Net income 2,722 (2,619) 103
Items not affecting
cash:
Income tax expense 1,148 - 1,148
Depreciation of property
and equipment 144 - 144
Depreciation of right-of-use
asset 1,134 - 1,134
Share-based payment 18 1,958 - 1,958
Lease interest 144 - 144
7,250 (2,619) 4,631
-------------- ---------------------- -------------------------
Changes in working
capital:
Decrease in trade
and other receivables 364 - 364
(Increase) in accrued
revenue 5 (8,656) - (8,656)
Increase in trade
and other payables 2,823 1,000 3,823
Increase in deferred
revenue & flexible
spending account 5 4,587 - 4,587
------------------------------- ----- -------------- ---------------------- -------------------------
(882) 1,000 118
------------------------------- ----- -------------- ---------------------- -------------------------
Cash generated from
operating activities
before tax 6,368 (1,619) 4,749
------------------------------- ----- -------------- ---------------------- -------------------------
Cash flows from operating activities has been restated to
decrease net income by US$2,619k, based on the restatement of the
consolidated statement of comprehensive income described above.
In addition, following a review of the prior year cash flow
statement, two further restatements of the cash flow statement have
been made.
The increase in trade and other payables within changes in
working capital has been restated by US$1,000k to reflect IPO costs
which remained unpaid at 30 June 2021. 'IPO share issuance costs'
within cash flows from financing activities has also been restated
by US$3,500k.
The effect of all of the above restatements is to increase the
loss on 'effects of foreign exchange on cash and cash equivalents'
line by US$4,500k.
[1] See note 4 Alternative Performance Measures (APMs) on page
21. Adjusted EBITDA and Adjusted Profit after Tax exclude
IPO-related non-recurring costs, foreign exchange adjustments,
share-based payments, M&A transaction costs and one-time fees
associated with WiseWave.
[2] H1 2021 operating expenses have been restated by US$2.6m
from share premium to non-recurring IPO costs. FY 2021 remains
unchanged. This restatement had no impact on H1 2021 APMs. See note
23 for further information.
[3] 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 estimates of
potential future royalties.
[4] Both FSA (Flexible Spending Account) drawdowns and China
re-sale licences convert previously announced contractual
commitments included within bookings reported in prior periods to
new product design wins which will be recognised as revenue over
time.
[5] For further details see note 19
[6] See note 4 (Alternative Performance Measures) on page 20
[7] Dell'Oro Group, June 16 2022 Data Center Capex Grew at the
Fastest Rate in Three Years in 1Q 2022, According to Dell'Oro Group
- Dell'Oro Group (delloro.com)
[8] IDC, May 2022 Worldwide IDC Global DataSphere Forecast,
2022-2026: Enterprise Organizations Driving Most of the Data
Growth
[9] See note 4 (Alternative Performance Measures) on page 20 for
reconciliation of EBITDA to adjusted EBITDA
[10] See note 4 (Alternative Performance Measures) on page 20
for reconciliation of profit after tax to adjusted profit after
tax
[11] Provisional fair value of US$7.8m of identifiable
intangible asset assumed as at the date of acquisition of Precise
ITC. See note 15 on page 26 for details of provisional fair values
of identifiable assets purchased and liabilities assumed from the
Precise ITC acquisition.
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