TIDMAWE
RNS Number : 3758M
Alphawave IP Group PLC
21 September 2021
Alphawave IP Group plc 21 September 2021
THIS ANNOUNCEMENT INCLUDES INSIDE INFORMATION
INTERIM RESULTS FOR SIX MONTHSED 30 JUNE 2021
Over 490% bookings growth, 140% revenue growth and 50% adjusted
EBITDA margins [1]
Multiple tier 1 strategic client wins and accelerated investment
to drive future growth
Raising full year guidance based on strong global demand and
execution
New framework agreement closed with one of the world's largest
chip makers
Alphawave IP Group plc (LSE: AWE, "Alphawave IP", the
"Company"), a global leader in high-speed connectivity for the
world's leading technology infrastructure, has published its
interim results for the 6 months to 30 June 2021. In addition to
the results, the Company is pleased to announce several business
and technology execution highlights.
Interim Results Highlights
-- US$196.1m of bookings [2] in H1 2021, over 490% growth
compared to H1 2020 (over 460% excluding royalties), underpinning
strong future growth
-- H1 2021 revenues of US$27.6m, representing 140% growth compared to H1 2020 (US$11.5m)
-- Adjusted EBITDA 1 of US$13.9m and margin of 50% (H1 2020: US$6.3m and 55%)
-- Increased revenue diversification across customers, end
markets and regions with 6 new customer wins spanning storage,
networking, 5G wireless, AI and optical
-- All definitive agreements from China Product Partnership
("CPP") executed with first revenues expected to be recognised in
H2 2021
-- Successful IPO on the London Stock Exchange, raising net proceeds of GBP347.1m (US$492.1m)
Outlook & Guidance
-- Following a strong first half in 2021, we are increasing our
FY2021 guidance based on our order book and visibility on new
opportunities
-- Continued and accelerated momentum in new contract wins with
FY2021 bookings expected to exceed US$230m, reflecting exceptional
H1 multi-year subscription deals and with multiple US wins expected
in H2 2021
-- FY2021 revenue expected to exceed US$75m, representing over
125% year-on-year growth and ahead of 100% year-on-year guidance at
IPO
-- FY2021 adjusted EBITDA margins expected to increase to over 55%
Business and Technology Highlights
During the period, Alphawave IP -
-- Closed a master license framework agreement with one of the
world's largest chip makers in North America. This agreement will
serve as the basis for strategic collaboration and licensing across
numerous business units and projects with our most advanced
technology beyond 5nm
-- Closed 3 new design wins in 6nm and 5nm in Q2 2021 including
repeat business with Tier-One customers in the US and South Korea,
and new business with an AI leader in North America. Five of the
top eight global semiconductor companies are now using Alphawave
technology
-- Expanded our technology leadership at 7nm, 6nm, and 5nm and
delivered the world's first successful tapeout of 100G+
connectivity IP in 4nm technology
-- Worked with two large North American customers in the FPGA
[3] and Communications segments to successfully enable them to ship
early production products to their end customers
-- Accelerated expansion plan by hiring 60 additional people
globally in H1 2021, bringing total headcount from 72 to 132, to
meet higher than expected demand from end customers for existing
and new connectivity IP products
-- Alphawave named as "Number 1 player in the high-speed
connectivity market" with the highest market share by IPNest, the
world's only research firm purely focused on the Silicon IP market
[4]
Financial Summary (US$m)
H1 FY2021 H1 FY2020 Change
=========================== ========== ========== =======
Bookings 196.1 33.1 492%
--------------------------- ---------- ---------- -------
Bookings (ex. Royalties) 180.8 32.0 465%
--------------------------- ---------- ---------- -------
Revenue [5] 27.6 11.5 140%
--------------------------- ---------- ---------- -------
Adjusted EBITDA [6] 13.9 6.3 121%
--------------------------- ---------- ---------- -------
Adjusted EBITDA Margin 50% 55%
--------------------------- ---------- ---------- -------
EBITDA (6) 5.2 6.2 (16%)
--------------------------- ---------- ---------- -------
EBITDA Margin 19% 54%
--------------------------- ---------- ---------- -------
Adjusted Profit after
Tax (6) 11.4 4.4 163%
--------------------------- ---------- ---------- -------
Adjusted PAT margin 41% 38%
--------------------------- ---------- ---------- -------
Profit after Tax 2.7 4.3 (36%)
--------------------------- ---------- ---------- -------
PAT margin 10% 37%
--------------------------- ---------- ---------- -------
Pre-tax Operating Cash
Flow 6.4 2.8 124%
--------------------------- ---------- ---------- -------
Cash and cash equivalents 519.1 8.0
=========================== ========== ========== =======
Commenting on the results, Tony Pialis, President and Chief
Executive Officer of Alphawave IP said:
"The first half of 2021 was a breakout period for us, with
exceptional growth in revenue and bookings which underpins our
confidence in raising full year guidance. The strength of demand
for our market-leading IP, combined with the platform provided by
our successful IPO, will enable us to continue to expand our
leadership position in the connectivity space and sustain our
long-term growth trajectory. We are also proud to have enabled
several of our early and most advanced customers to move to
production with our 100G technology. We are excited about the next
phase of our growth as we transition more customers into production
in 2021 and beyond. As we look ahead to the rest of the year, we
are very pleased at the traction we see across new and existing
customers, and across all of the key markets that can benefit from
our technology."
John Lofton Holt, Executive Chairman of Alphawave IP, added:
"Over the first six months of the year, I am proud of what we
have delivered to our customers, our partners, and our investors.
We are also pleased to welcome our new investors globally. We
remain focused on delivering against our IPO targets and the strong
bookings performance coupled with the increased traction with new
customers underpins our increased expectations for the year.
Lastly, I am particularly proud of our global team, who have
continued to execute for our customers and investors in a
completely virtual environment over the last 18 months."
Results Presentation and webcast
A presentation for investors and analysts will be held at 9am
BST via webcast accessible via the Company's website
(www.awaveip.com) and you will be able to participate by dial
ling:
Standard International Access: +44 (0) 33 0551 0200
UK Toll Free: 0808 109 0700
US Toll Free: +1 866 966 5335
Washington DC Local Number: +1 202 204 1514
Please quote 'Alphawave' to gain access. Please connect to the
call at least 10 minutes prior to the start time. A replay of the
call will be made available later in the day.
The Company's 2021 Interim Report is also available to view on
the Company's website ( www.awaveip.com ).
Contact Information
Alphawave IP Group John Lofton Holt, Executive ir@awaveip.com
plc Chairman +44 (0) 20 7717 5877
Daniel Aharoni, CFO
------------------- ---------------------------- ------------------------------
Brunswick Group Simone Selzer +44 (0) 20 7404 5959
Sarah West alphawave@brunswickgroup.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's LEI Number: 213800ZXTO21EU4VMH37.
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.
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
Alphawave IP delivered strong half year results with bookings of
US$196.1m, an increase of 492% from H1 2020, including US$147.8m of
bookings for recurring revenue subscription licences from
Verisilicon and CPP. In the period, we signed 11 contracts and won
6 new customers, ending the period with 17 customers in total and a
total of 36 contracts since the company was founded in 2017.
Revenues grew organically by 140% to US$27.6m versus H1 2020
revenues of US$11.5m, driven by our growth in customers and
contracts throughout 2020 and H1 2021. We maintained our gross
margins at 95% and achieved strong profitability with an adjusted
EBITDA of US$13.9m and adjusted EBITDA margin of 50% [7] , prior to
costs associated with our IPO and one-time legal fees associated
with our China Product Partnership. We closed the period with a net
cash position of US$519.1m, reflecting the equity raised from our
IPO on the London Stock Exchange. In line with the use of proceeds
communicated at our IPO, we are beginning to invest these proceeds
to maintain our leadership position and capitalise on future growth
opportunities.
To meet increased customer demand and to expand our competitive
lead, we accelerated investment in our R&D capabilities and
grew our total headcount from 72 at the end of 2020 to 132 as at
end June 2021. In June 2021, the foremost market research provider
for Silicon IP, IPNest, confirmed our market leadership position in
Very High Speed SerDes, with an estimated 28% market share in 2020
[8] .
Successful Initial Public Offering on the London Stock
Exchange
On 18 May 2021, we were admitted to listing on the London Stock
Exchange, raising net proceeds of GBP347.1m (US$492.1m). Our IPO
represented one of the largest semiconductor IPOs in history, the
largest IPO of a North American company on the London Stock
Exchange and the first UK Main Market semiconductor IPO since 2004.
The silicon IP business model was born in the UK and the UK offers
a platform to support our global growth and our R&D
ambitions.
End market drivers and customer demand remains strong
The strong trends highlighted during our IPO in our core markets
of servers, storage and network switches continue to provide
compelling opportunities for growth. In Q1 2021, hyperscale data
centre capital expenditure increased to US$38bn, up 31% from Q1
2020, with spending in the 12 months to Q1 2021 reaching US$149bn
[9] . In 2020, over 64 ZetaBytes of data was created or replicated
globally and this is expected to grow at a CAGR of 23% to 2025,
with installed storage capacity growing by 19% over the same period
[10] .
We see this trend reflected in our customer base and our new
design wins. Our customers, some of the largest technology
companies in the world, are looking to sustain their competitive
advantage by transitioning faster to lower design nodes with the
majority of our design wins in H1 2021 at 6nm and 5nm manufacturing
processes. We also continue to see hyperscale data centre providers
reducing reliance on networking ASIC vendors and as we announced on
14 June 2021, we have secured a strategic design with another
leading Tier-1 North American hyperscaler.
It has been an active period in the global macroeconomy of
semiconductors over the last year and there have been a number of
themes emerging around the shortage of semiconductor manufacturing
capacity in the short term. This has only reinforced the importance
of semiconductor technology on a global scale and we remain very
confident in the outlook for our business and the opportunities we
have to deliver sustainable growth over the medium and long
term.
Platform for Global Growth
During the period, we diversified our customer, end market and
regional exposure. We generated revenues from 16 customers,
compared to 6 customers in H1 2020. Our H1 2020 revenues were
heavily weighted to our core markets of data networking and cloud
compute, and in H1 2021, we added significant sales in optical,
solid state storage, 5G wireless and AI.
Of our 6 new customer wins in the period, which spanned storage,
networking, 5G wireless, AI and optical, 5 of those customers are
headquartered in North America. 67% of our revenues in the period
were generated from US customers, 17% from China and 16% from Asia
excluding China.
China imported US$378bn in semiconductors in 2020, produced 36%
of the world's electronic devices and consumed one quarter of all
semiconductor-enabled electronics. The Chinese government is
investing over US$150bn in semiconductors between 2014 and 2030
[11] . As the only non-US supplier of leading-edge connectivity IP,
our approach to monetising our technology in China has been an
important element of our strategy since inception of the
company.
Our 3-year exclusive reseller agreement with Verisilicon, the
leading custom silicon developer and IP licensor in the region with
over 1,000 employees, enables us to benefit from Verisilicon's
broad sales reach and leading design capabilities in the
region.
Following over 2 years of negotiation, agreements to establish
CPP, including a 5-year subscription license agreement, were
executed in Q2 2021. CPP enables us to optimise our opportunity in
China by leveraging our IP and investing early to create what we
hope will become a leading networking semiconductor vendor serving
the Chinese market. The successful execution of our Verisilicon and
CPP subscription licence agreements, as anticipated, has weighted
our bookings in the period to China, totalling US$147.8m of
bookings. This does not include any revenues to come from future
royalties, the potential value of our equity participation in CPP,
renewal of the Verisilicon transaction or the US$105m extension
option to provide CPP access to a broader suite of our
technology.
Investing in People
During the period, we invested heavily in talent, increasing
total headcount to 132 at the end of the period comprising 117 in
R&D/Engineering, 5 in sales and marketing and 10 in general and
administrative (from 65, 3 and 4 respectively as at 31 December
2020). This included a team hire starting in May 2021 of 24
engineers based in Toronto.
During the period, we established our group finance leadership
team in the UK. We have also been actively seeking to establish an
R&D centre in the UK and have engaged with advisors to identify
teams and skills that can accelerate our business. The timing and
extent of our UK expansion plans will largely be determined by our
ability to hire the right teams that align with our R&D
priorities, especially in the current remote work environment.
Since Alphawave IP was founded, we have implemented a global
technology infrastructure that has enabled and supported a flexible
work environment. The entire Alphawave IP team has leveraged this
infrastructure extensively in the difficult environment of the
COVID-19 crisis, delivering leading edge products and solving
highly complex engineering challenges whilst working from home. We
have delivered leading edge technology at 7nm, 6nm, 5nm and 4nm
with a 100% remote workforce. We also completed our IPO entirely
virtually - from our first advisor engagements, through all of the
roadshows, and through listing day and beyond. Earlier in H1 2021,
a very limited number of our R&D employees returned to our
R&D centre in Toronto and we are putting in place safety
measures to enable more employees to return to our office later in
the year, or whenever the environment permits a return to work.
Trading Update and Current Outlook
Following a strong first half, we are increasing our guidance
based on our strong bookings in H1 2021 and engagement with
potential new customers and opportunities. We expect FY2021
bookings to exceed US$230m. This reflects the large, multi-year
subscription licence deals with CPP and Verisilicon signed in H1
2021, coupled with expected strong momentum in the second half of
the year, particularly in North America.
FY2021 revenues are expected to exceed US$75m, representing over
125% year-on-year growth and ahead of 100% year-on-year guidance
provided at our IPO. Our H1 2021 revenues include no contribution
from the Verisilicon and CPP transactions and we anticipate
recognising first revenue from these in H2 2021. We expect FY2021
EBITDA margins to increase to over 55%, a material increase over H1
2021 and reflecting our highly profitable subscription licence
deals.
As anticipated and utilising part of the primary proceeds from
our IPO, we expect a cash outflow of up to US$42.5m in Q3 2021
representing the first tranche of our investment into CPP.
B. Financial Highlights
Contracted Order Book and Backlog
Alphawave IP generated bookings of US$196.1m in H1 2021, an
increase of 492% from H1 2020, including US$147.8m of bookings from
recurring revenue subscription licences from CPP and Verisilicon.
Excluding estimates of potential future royalties, our H1 2021
bookings were US$180.8m (H1 2020: US$32.0m). Our H1 2021 bookings
do not include the optional US$105m extension option for CPP nor
any potential royalty contributions from CPP or Verisilicon.
Excluding Verisilicon and CPP, 89% of our bookings during the
period were from North America and 10% from APAC (ex. China).
Our total lifetime bookings, not including potential royalties
from CPP and Verisilicon or the CPP extension option, reached
US$307.9m. US$147.8m (48% of lifetime bookings) represents
recurring revenue subscription licences. US$118.0m (38%) represents
licence fees and related revenues (non-recurring engineering,
support and maintenance and flexible spending accounts). US$42.1m
(14%) represents management's estimate of potential future
royalties from existing design wins.
Our backlog (contracted bookings not yet recognised as revenue)
as at end-H1 2021 was US$232.8m, over 60% of which represents
recurring revenue subscription licenses.
In H1 2021, we secured orders from 6 new customers and repeat
business from 6 existing customers. We won 7 new license sales, of
which 5 were Core IP and 2 were Product IP.
Revenues
Revenues for H1 2021 reached US$27.6m, 140% growth compared to
US$11.5m in H1 2020 and reflect significant diversification in
terms of customer, end markets and regions
-- Customers - In H1 2021 we recognised revenues from 16
customers, compared to 6 customers in H1 2020. Our top 3 customers
represented 43% of H1 2021 sales versus 73% in H1 2020 and the top
3 customers in each period were different, further reflecting our
customer diversification.
-- End Markets - In H1 2020, we generated revenues from
customers in data networking, cloud compute and AI. In H1 2021, in
addition to those markets, we added revenues from customers in
optical, solid state storage and 5G wireless. In H1 2021, c. 70% of
our revenues were from servers, storage and switches (including
optical), with the remaining 30% from AI and 5G Wireless.
-- Regions - Our revenues continue to be generated primarily by
North American customers. In H1 2021, our revenues were 67% North
America and 17% China and 16% APAC ex-China. In H1 2020, our
revenues were 80% North America and 20% APAC ex-China.
Substantially all of our sales in both H1 2020 and H1 2021 were
generated from license and license-related (non-recurring
engineering and support and maintenance) activities. We did not
recognise any royalty sales in H1 2021 and given the long design
cycles from our customers, do not expect to recognise material
royalties until FY2024 at the earliest. We also did not recognise
any revenues in H1 2021 from our subscription licenses with CPP and
Verisilicon and expect first revenues to be recognised in H2
2021.
Operating Expenses and Profitability
In H1 2021, we maintained our gross margins at 95%, with cost of
sales reflecting sales commissions. Our Adjusted EBITDA [12] was
US$13.9m (50% margin) compared to adjusted EBITDA of US$6.3m (55%
margin) in H1 2020.
Reflecting the rapid scaling of the business to capture the
growth opportunities ahead, in H1 2021, our operating expenses
totalled US$22.3m, or $12.6m (excluding one-time IPO related
expenses of $5.3m and $4.4m of non-cash items comprising
depreciation, foreign exchange losses and share-based payments).
This compares to $5.0m in H1 2020 ($4.6m excluding non-cash
items).
Of the US$12.6m balance in H1 2021, US$9.6m (34.8% of sales)
related to R&D / Engineering, US$2.4m (8.7% of sales) related
to general and administrative expenses and US$0.6m (2.3% of sales)
related to sales and marketing expenditure. In H1 2020, operating
expenses totalled US$5.0m, US$0.4m of which reflected depreciation,
foreign exchange gains and share-based payments, and US$3.8m (32.6%
of sales) related to R&D / Engineering, US$0.7m (6.3% of sales)
related to general and administrative and US$0.2m (1.5% of sales)
related to sales and marketing.
This increase in our operating expenses was primarily due to the
expected and accelerated increase in our headcount during the
period to 132 heads at end H1 2021 together with software tool
costs which scale with our R&D headcount, as well as additional
ongoing costs required as part of a publicly listed company. The
increase in share-based payments, from US$0.2m in H1 2020 to
US$2.0m in H1 2021, was due to significantly higher exercise prices
for share-based awards given to employees during the period. Our H1
2021 operating expenses also include one-time expenses of US$0.3m
in respect of advisory fees associated with CPP.
In FY2020, as a private Canadian company with limited visibility
on the duration, extent and impact of the COVID-19 pandemic on our
business, we received US$1.1m in grants from the Canadian
Government Canadian Emergency Wage Subsidy ("CEWS") to support
wages to employees. In early H1 2021 and prior to our IPO, we
received a further US$55,000. Post-IPO, although entitled to
further grants in Canada, we have elected not to receive them. No
government assistance has been requested nor taken in the UK.
In H1 2021, US$1.1m represented depreciation on right of use
assets, namely our premises and test equipment which we lease (H1
2020: US$0.3m). We saw a significant increase in test equipment
leased due to the increase in the number of customer projects.
The total one-time costs associated with our IPO on the London
Stock Exchange were US$28.3m, of which US$23.0m was set off against
equity on our balance sheet and US$5.3m was expensed through our
income statement.
Our profit after tax for the period, which is stated after
share-based payments, exchange losses and one-time costs relating
to our IPO, was US$2.7m, compared to US$4.3m in H1 2020. On an
adjusted basis [13] , our profit after tax for the period was
US$11.4m, compared to US$4.4m in H1 2020, an increase of 163%.
Balance Sheet, Liquidity and Cashflow
Our gross and net cash increased by US$505.1m between
end-December 2020 and end-June 2021, primarily as a result of IPO
proceeds received.
Between end-December 2020 and end-June 2021, our intangible
assets increased from US$0.1 to US$0.7m. Our intangible assets
comprise IP being developed by a third party vendor, represents
instalments paid towards the development and is carried at cost. No
amortisation is recorded as the intangible asset is not yet
available for use. The increase in H1 2021 is due to six months'
worth of further development in contrast to two months at the end
of H2 2020 when the development commenced.
Our accrued revenue, where revenue recognition conditions are
met under IFRS 15 but we have not billed or collected any amount
increased to US$19.0m at end-June 2021 from US$10.3m at
end-December 2020. This increase was due to the timing of invoicing
milestones on specific projects and we expect invoices to be issued
during H2 2021 representing a substantial portion of this accrued
revenue.
Between end-December 2020 and end-June 2021, our trade payables
increased from US$2.2m to $11.5m. This increase is primarily a
result of advisory fees incurred as part of our IPO, but not paid
until after the end of the period.
Our deferred income liability, where we have invoiced or
received money for products or services where revenue recognition
conditions are not met, decreased to US$5.9m at end-June 2021 from
US$7.4m at end-December 2020.
Flexible Spending Accounts, which represent non-current deferred
income, 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 licenses or other
deliverables, but can be used as credit against future
deliverables. We have Flexible Spending Accounts with customers
with whom we work on multiple projects and who prefer regular
periodic billing rather than milestone-based billing. The revenue
recognition conditions have not yet been met which enable us to
recognise these billings as revenue.
Our pre-tax operating cashflow during the period was US$6.4m
(which includes one-time payments of approximately US$1.5m relating
to our IPO expenses), an increase of 124% compared to H1 2020.
Increase in working capital was US$0.9m. US$8.7m represented an
increase in accrued revenue, where we have recognised revenues
under IFRS15 but have not invoiced or collected those amounts.
US$4.6m represented an increase in deferred revenue and flexible
spending accounts, where we have invoiced or received cash but
conditions for revenue recognition have not been met.
Our capital expenditure during H1 2021 totalled US$0.6m (H1
2020: US$0.1m) as a result of computing equipment purchased for new
hires and fit out costs for our new office space in Toronto.
Principal Risks and Uncertainties
The Company 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 of the Group.
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 12 to 38 of the IPO Prospectus dated 13
May 2021. In summary, the principal risks and uncertainties are as
follows
Risk Description
--------------------- ---------------------------------------------------------
Revenue recognition Our contracts can be complex and the IP which we
licence to customers can be delivered and integrated
into our customers' designs over a period of months
or years. How our bookings translate into recognised
revenues may be unpredictable. Any changes to our
revenue recognition policies or changes to our
contracts which impact revenue recognition may
have an adverse impact on our revenues and our
reported profitability.
===================== =========================================================
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 or are
leadership 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 This 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 CPP is central to our strategy to monetise our
with our China IP in China and we will be a significant minority
Product Partnership shareholder. We may be limited in our ability to
influence strategy, operational, commercial or
financial matters, including protection of our
IP. The Group and CPP may also face regulatory
risk in terms of transfer of technology into China.
There is a risk that the bookings from CPP do not
translate into revenues and our equity investment
diminishes in value. CPP 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.
===================== =========================================================
Managing Growth We have a limited operating history and are growing
rapidly. 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.
===================== =========================================================
External Environment Our business could be impacted by the actions of
and Events governments, political events or instability, or
changes in public policy in the countries in which
we operate.
===================== =========================================================
IP Risk We protect our IP through trade secrets, contractual
provisions, confidentiality agreements, licenses
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 customer 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.
=================== ==========================================================
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.
=================== ==========================================================
Impact of COVID-19 We have seen no material impact to our business
performance to date from COVID-19. However, as
the duration, spread and severity of the pandemic
continues to evolve, the impact on our business,
customer demand and supply chain is difficult to
predict. Given our significant headcount expansion,
many of our employees have been onboarded remotely
and have worked from home since joining the company,
which may hinder our ability to create a collaborative
and entrepreneurial culture.
------------------- ----------------------------------------------------------
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
Chief Executive Officer
20 September 2021
Unaudited condensed consolidated statement of comprehensive
income
Six months ended 30 June 21
Six months Six months
ended 30 June 2021 ended 30 June 2020
-------------------- --------------------
Continuing operations Note US$'000 US$'000
--------------------------- ----- -------------------- --------------------
Revenue 5 27,589 11,484
Cost of Sales (1,336) (546)
Gross profit 26,253 10,938
R & D/Engineering (10,749) (4,038)
Sales & Marketing (672) (183)
General & Administration (2,490) (738)
Other items (8,415) (84)
--------------------------- ----- -------------------- --------------------
Operating Profit 3,927 5,895
'Other items' charged
in arriving at operating
profit:
Non-recurring IPO costs (5,316) -
Share-based payment (1,958) (245)
Exchange (loss)/gain (1,141) 161
--------------------------- ----- -------------------- --------------------
Other items (8,415) (84)
--------------------------- ----- -------------------- --------------------
Finance income 9 102 97
Finance expense 9 (159) (88)
Profit before tax 3,870 5,904
Income tax expense 11 (1,148) (1,632)
--------------------------- ----- -------------------- --------------------
Profit after tax 2,722 4,272
--------------------------- ----- -------------------- --------------------
Other comprehensive income
Exchange differences
on
the reorganisation (11,035) 124
--------------------------- ----- -------------------- --------------------
Other comprehensive
income for the period,
net of tax (11,035) 124
--------------------------- ----- -------------------- --------------------
Total comprehensive
profit for the period (8,313) 4,396
--------------------------- ----- -------------------- --------------------
Profit per ordinary share attributable to the shareholders
(expressed in cents per ordinary share):
Basic earnings per
share 12 0.47 0.81
Diluted earnings per
share 12 0.40 0.68
Condensed consolidated statement of financial position
As at 30 June 2021
Unaudited as at Audited year ended
30 June 2021 31 December 2020
---------------- -------------------
Note US$'000 US$'000
------------------------------- ----- ---------------- -------------------
Assets
Non-current assets
Property, plant and equipment 840 412
Intangible assets 13 681 140
Right-of-use assets 6,675 6,915
------------------------------- ----- ---------------- -------------------
Total non-current assets 8,196 7,467
------------------------------- ----- ---------------- -------------------
Current assets
Trade and other receivables 7,900 6,224
Accrued revenue 5 18,983 10,328
Taxes receivable 1,525 2,553
Cash and cash equivalents 14 519,137 14,039
------------------------------- ----- ---------------- -------------------
Total current assets 547,545 33,144
------------------------------- ----- ---------------- -------------------
Total assets 555,741 40,611
------------------------------- ----- ---------------- -------------------
Liabilities
Lease liabilities 2,152 1,672
Trade and other payables 11,531 2,207
Income tax payable 417 3,550
Deferred revenue 5 5,888 7,381
Short-term debt 17 27
Total current liabilities 20,005 14,837
------------------------------- ----- ---------------- -------------------
Non-current liabilities
Portion of long-term debt - 27
Flexible spending account 5 8,415 2,335
Deferred income taxes 479 492
Lease liabilities 4,586 5,129
------------------------------- ----- ---------------- -------------------
Total non-current liabilities 13,480 7,983
------------------------------- ----- ---------------- -------------------
Total liabilities 33,485 22,820
Net assets 522,256 17,791
------------------------------- ----- ---------------- -------------------
Share capital and reserves
Share capital* 15 939,863 474,447
Preference shares 71 -
Share premium account 385,064 -
Share based payment reserve 16 1,652 331
Merger reserve (811,660) (472,566)
Currency translation reserve (11,035) -
Retained earnings 18,301 15,579
------------------------------- ----- ---------------- -------------------
Total equity 522,256 17,791
------------------------------- ----- ---------------- -------------------
*Adjusted 31 December 2020 share capital as if the
reorganisation happened before this date to give comparative
figures and in line with the note in "Basis of Preparation"
Unaudited condensed consolidated statement of changes in
equity
Six months ended 30 June 2021
Share
Ordinary Pref. Share based Currency
share share premium payment Merger translation Retained Total
US$'000 Note capital capital account reserve reserve reserve earnings equity
---------------- ----- ------------ --------- -------- -------- ----------------- ------------ --------- ----------
Balance at 1 474,447
January 2021 * - - 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 - - - - - 2,722 2,722
---------------- ----- ------------ --------- -------- -------- ----------------- ------------ --------- ----------
Transactions
relating to
IPO
Issue of
shares,
Primary 15 124,147 71 384,856 - - - - 509,074
Issue of
shares,
Secondary 15 796,958 - - - - - - 796,958
Issue of
shares,
other 15 313 - 969 - - - - 1,282
Exercise of
options 15 4,064 - - - - - - 4,064
Reorganisation
accounting - - - - (797,279) - - (797,279)
Effect of
exercise
price below
nominal value 15 14,381 - - - (14,381) - - -
Net costs on
issuance of
shares
relating
to IPO - - (761) - - - - (761)
Exchange
differences
on
the
reorganisation 15 - - - - - (11,035) - (11,035)
---------------- ----- ------------ --------- -------- -------- ----------------- ------------ --------- ----------
Recognition
of share-based
payments 16 - - - 1,958 - - - 1,958
Reduction in
SBP reserve
following
exercise - - - (637) - - - (637)
---------------- ----- ------------ --------- -------- -------- ----------------- ------------ --------- ----------
Balance at 30
June 2021
(Unaudited) 939,863 71 385,064 1,652 (811,660) (11,035) 18,301 522,256
---------------- ----- ------------ --------- -------- -------- ----------------- ------------ --------- ----------
* 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"
Six months ended 30 June 2020
Ordinary Share
share based Currency
capital payment Merger translation Retained Total
US$'000 Note * reserve reserve reserve Earnings equity
---------------------- ----- --------- --- --- --------- ---------- -------------- ----------- ----------
Balance at 1
January 2020 95,367 35 - - 2,536 97,938
---------------------- ----- --------- --- --- --------- ---------- -------------- ----------- ----------
Profit for the
period - - - - 4,272 4,272
Transactions
relating to
share issuance
Issue of shares 81,495 - - - - 81,495
Reorganisation
accounting - - (176,285) - - (176,285)
exchange differences - - - 124 - 124
---------------------- ----- --------- --- --- --------- ---------- -------------- ----------- ----------
Recognition
of share-based
payments 16 - 245 - - - 245
Reduction in
SBP reserve
following exercise - (58) - - - (58)
---------------------- ----- --------- --- --- --------- ---------- -------------- ----------- ----------
Balance at 30
June 2020 176,862 222 (176,285) 124 6,808 7,731
(Unaudited)
---------------------- ----- --------- --- --- --------- ---------- -------------- ----------- ----------
* Share capital adjusted as if the reorganisation happened 1
January 2020 to give comparative figures and in line with the note
in "Basis of Preparation"
Unaudited condensed consolidated statement of cash flows
For the period ended 30 June 2021
Six months ended Six months ended
30 June 2021 30 June 2020
----------------- -----------------
Note US$'000 US$'000
--------------------------------- ----- ----------------- -----------------
Cash flows from operating
activities
Cash generated from operating
activities before tax (a) 6,368 2,843
--------------------------------- ----- ----------------- -----------------
Income tax paid (3,133) (1,335)
Net cash generated from
operating activities 3,235 1,508
--------------------------------- ----- ----------------- -----------------
Cash flows from investing
activities
Purchase of property,
plant and equipment (557) (97)
Purchase of intangible (541) -
asset
Net cash used in investing
activities (1,098) (97)
--------------------------------- ----- ----------------- -----------------
Cash flows from financing
activities
Issuance of common shares 15 509,003 265
IPO share issuance costs 15 (23,061) -
Exercise of options 15 4,064 -
Proceeds from IPO stabilisation 15 22,238 -
Decrease in bank indebtedness (38) 104
Increase in long-term
debt - 56
Interest paid (144) -
Collection of notes receivable 428 -
Repayment of principal
under lease liabilities (951) (292)
--------------------------------- ----- ----------------- -----------------
Net cash generated from
financing activities 511,539 133
--------------------------------- ----- ----------------- -----------------
Net increase/(decrease)
in cash and cash equivalents 513,676 1,544
Cash and cash equivalents
at start of year 14,039 5,353
Effects of foreign exchange
on cash and cash equivalents (8,578) 1,128
--------------------------------- ----- ----------------- -----------------
Cash and cash equivalents
at end of period 14 519,137 8,025
--------------------------------- ----- ----------------- -----------------
Note to the condensed consolidated statement of cashflows
a) Cash used in operations
Six months ended Six months ended
30 June 2021 30 June 2020
----------------- -----------------
Note US$'000 US$'000
------------------------------- ----- ----------------- -----------------
Cash flows from operating
activities
Net income 2,722 4,272
Items not affecting cash:
Income tax expense 1,148 1,632
Depreciation of property
and equipment 144 53
Depreciation of right-of-use
asset 1,134 263
Share based payment 16 1,958 245
Lease interest 144 24
----------------- -----------------
7,250 6,489
----------------- -----------------
Changes in working capital:
(Increase) in trade and
other receivables (665) (4,069)
Decrease/(increase) in
taxes receivable 1,029 (1,361)
Increase in accrued revenue 5 (8,656) (2,360)
Increase in trade and
other payables 2,823 939
Increase in deferred revenue
& flexible spending account 5 4,587 3,205
------------------------------- ----- ----------------- -----------------
(882) (3,646)
------------------------------- ----- ----------------- -----------------
Cash generated from operating
activities before tax 6,368 2,843
------------------------------- ----- ----------------- -----------------
Notes to the interim statements
Six months ended 30 June 2021
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 2021 is the first
half-yearly financial report presented by the Group.
The principal activities of the Company and its subsidiaries are
described on page 3.
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 Company
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 Historical Financial
Information ("HFI"), which includes the consolidated financial
statements as of and for the year ended 31 December 2020. 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 included in the HFI as of 31 December 2020
and for the six months ended 30 June 2020.
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 2020 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 2021.
Going concern
As of 30 June 2021, the Group had cash and cash equivalents of
US$519.1m. Considering the Group's financial position as of 30 June
2021 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 has changed from the
HFI which was presented in Canadian dollars. 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 HFI for the year ended 31 December 2020 as
from those listed below this paragraph. New standards effective on
or after 1 January 2021 have been reviewed and do not have a
material effect on the Group's financial statements.
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
RSU's, of the Group. The fair value of the employee service
received in exchange for the grant of the options is recognised as
an expense over the vesting period.
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.
Strategic, integration and other non-recurring items
The Group incurred costs from certain strategic, integration and
other non-recurring items, e.g. IPO 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.
Change in Presentation of Income Statement
For the 6 month period ending 30 June 2021 the Company has
presented its Income Statement by Function, which since our IPO in
May 2021, is the most informative way to communicate its financial
information and a method which, at a high level, highlights the
most important operational drivers in the business. Prior to this
reporting period and specifically for the last reporting period to
30 December 2020 the company presented its Income Statement costs
by Nature. This was as a privately owned entity and was the most
appropriate way of monitoring costs and performance at that
time.
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.
Beginning in March 2020 the Governments of Canada and Ontario,
as well as foreign governments instituted emergency measures as a
result of the COVID-19 virus. The Group has continued to operate
with limited impact on its financial position and cash flows.
Management believes that the Group's accounting estimates are
fairly determined, however, the ongoing uncertainty due to the
unpredictable nature of COVID-19 may affect some of the significant
estimates in the next six months to December 2021.
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 license 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.
(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 judgments 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 license fees, flexible
spending accounts, non-recurring engineering and support and
maintenance from contracted and typically non-cancellable orders
that will ultimately result in recognised revenue. Bookings
including royalties include company 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 of property and equipment,
acquired intangibles and right of use assets are excluded from the
calculation of EBITDA, as they are non-monetary items.
-- 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 ended Six months ended
(US$ Thousands) 30 June 2021 30 June 2020
----------------- -----------------
Operating Profit 3,927 5,895
Add backs:
Depreciation* 1,278 316
EBITDA 5,205 6,211
----------------- -----------------
*US$1,278k of depreciation in H1 2021 split by function is
US$1,143k R&D / Engineering, US$39k Sales & Marketing and
US$96k General & Administration
Two further measures are Adjusted EBITDA and Adjusted Profit
after Tax, defined in the tables below. These further allow for a
more accurate assessment of the underlying business performance by
making exclusions of items which do not form part of the Group's
normal underlying operations.
EBITDA to adjusted EBITDA reconciliation
Six months ended Six months ended
(US$ Thousands) 30 June 2021 30 June 2020
----------------- -----------------
EBITDA 5,205 6,211
Add backs:
Non-recurring IPO costs 5,316 -
Share-based payment 1,958 245
Exchange gain or loss 1,141 (161)
CPP legal costs* 299
Adjusted EBITDA 13,919 6,295
----------------- -----------------
* One-off legal costs incurred as a result of our execution of
the China Product Partnership. Whilst still included in operating
expenses and not included in non-recurring IPO costs, this expense
was deemed to be one-off and added back to Adjusted EBITDA.
Profit after tax to adjusted profit after tax reconciliation
Six months ended Six months ended
(US$ Thousands) 30 June 2021 30 June 2020
----------------- -----------------
Profit after tax 2,722 4,272
----------------- -----------------
Add backs:
Share-based payment 1,958 245
Exchange Gain or Loss 1,141 (161)
Non-recurring IPO costs 5,316 -
CPP legal costs 299
----------------- -----------------
Adjusted profit after
tax 11,436 4,356
----------------- -----------------
Adjusted profit per ordinary share attributable to the
shareholders ( expressed in cents per ordinary share)
Note Six months ended Six months ended
30 June 2021 30 June 2020
--------------------- ----- ----------------- -----------------
Adjusted basic
earnings per share 12 1.95 0.82
Adjusted diluted
earnings per share 12 1.68 0.70
5 Revenue
Revenue in the consolidated interim statement of income and
comprehensive income is analysed as follows:
Six months ended Six months ended
(US$ Thousands) 30 June 2021 30 June 2020
----------------- -----------------
Revenue by Type:
Products 25,559 10,441
Maintenance 2,030 1,043
27,589 11,484
----------------- -----------------
Six months ended Six months ended
(US$ Thousands) 30 June 2021 30 June 2020
----------------- -----------------
Revenue by Region:
North America 18,499 9,187
China 4,766 -
APAC (ex-China) 4,324 2,297
27,589 11,484
----------------- -----------------
Sensitivity analysis
Revenue recognition for product revenue is determined using the
input method on a percentage 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 25,559 28,115 23,003
------------ ------- -------
Please see the 'Financial Highlights' section on page 6 for
further information on revenue, including the significant increase
in revenue in H1 2021 compared to H1 2020.
Below is a reconciliation of the movement in accrued income
during the period:
Six months ended
(US$ Thousands) 30 June 2021
-----------------
At 1 January 2021 10,328
Revenue accrued in the period 17,289
Accrued revenue invoiced in the period (8,966)
Foreign exchange difference 332
At 30 June 2021 18,983
-----------------
Below is a reconciliation of the movement in deferred income
during the period:
Six months ended
(US$ Thousands) 30 June 2021
-----------------
At 1 January 2021 7,381
Revenue recognised in the period (8,290)
Revenue deferred in the period 6,606
Foreign exchange difference 191
At 30 June 2021 5,888
-----------------
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$8.4m at the
end of June 2021 from US$2.3m at the end of December 2020. This
represents mainly non-current deferred income, and these are
contracts with customers who have committed to regular periodic
payments to us over the term of the contract. These payments are
not in respect of specific licenses or other deliverables, but they
can be used as credit against future deliverables.
6 Employee Costs excluding Directors and Key management personnel
Six months ended Six months ended
(US$ Thousands) 30 June 2021 30 June 2020
----------------- -----------------
Wages, salaries and
benefits 6,256 2,867
Defined contribution
pension costs 165 89
Social security costs 78 38
Share-based payments 1,560 245
Investment tax credit (909) (613)
Government grants (55) (482)
----------------- -----------------
Total employee costs 7,493 2,144
----------------- -----------------
The average number of employees during the period, analysed by
category, was as follows:
Six months ended Six months ended
30 June 2021 30 June 2020
----------------- -----------------
R&D / Engineering 91 48
General & Administration 6 2
Sales & Marketing 4 1
----------------- -----------------
Total employees (average) 101 51
----------------- -----------------
The number of employees at the end of each period, analysed by
category, was as follows:
Six months ended Six months ended
30 June 2021 30 June 2020
----------------- -----------------
R&D / Engineering 117 56
General & Administration 10 2
Sales & Marketing 5 3
----------------- -----------------
Total employees (end
of period) 132 61
----------------- -----------------
7 Directors and Key management personnel compensation
Six months ended Six months ended
(US$ thousands) 30 June 2021 30 June 2020
----------------- -----------------
Directors and key management
emoluments 712 110
Share-based payments 398 15
Pension costs 18 6
----------------- -----------------
Total Directors and
key managements remuneration 1,128 131
----------------- -----------------
One director and key management personnel exercised options
during the period. Details of that Directors' exercise of options
are as follows:
(US$ thousands except Six months ended Six months ended
no. of options) 30 June 2021 30 June 2020
----------------- -----------------
Number of options exercised
by Directors and key
management* 4,000,000 1,199
----------------- -----------------
Gains made on exercise
of options by Directors
and key management 5,636 5,384
----------------- -----------------
* 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.
June 2020 has not been adjusted.
8 Research and Development
The Group incurred research and development costs that have been
expensed in the statement of income and comprehensive income. The
amounts expensed through salaries, subscriptions, subcontracting,
depreciation of right-of-use asset, equipment rentals, and
prototype which relate to research and development are as
follows:
Six months ended Six months ended
(US$ thousands) 30 June 2021 30 June 2020
----------------- -----------------
Research and development 10,749 4,038
----------------- -----------------
9 Finance income and expense
Six months ended Six months ended
(US$ thousands) 30 June 2021 30 June 2020
----------------- -----------------
Finance income
Interest income from
customer 102 97
102 97
----------------- -----------------
Finance expense
Interest expense
- Bank charges 14 5
Lease interest 145 83
159 88
----------------- -----------------
Net finance (expense)/income (57) 9
----------------- -----------------
10 Non-recurring IPO costs
In accordance with the Group's policy for non-recurring items,
the following charges were included in this category for the
period:
One-off costs relating to Project Aurora, the project name for
the Group's initial public offering on the London Stock Exchange,
that were not able to be offset against share premium under IAS 32
totalled US$5,316,269. Over half of these total fees 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 Income tax credit/charge
Tax benefit/(expense) is recognised based on management's best
estimate of the weighted-average annual income tax rate expected
for the full financial year multiplied by the pre-tax income of the
interim reporting period.
During the six months ended 30 June 2021 and 2020, the Group
recorded a consolidated tax expense of US$1.1m and US$1.6m,
respectively, which represented effective tax rates in continuing
operations of 29.7% and 27.6%, respectively. The effective tax rate
in the current period is primarily driven by the Company's
operations in Canada, the US and the UK.
12 Earnings per share
Basic earnings per share is calculated by dividing net income
from operations by the weighted average number of common shares
outstanding during the period.
Diluted earnings per share is calculated by adjusting the
weighted average number of common shares outstanding during the
period to assume conversion of all potential dilutive share options
and restricted share units to common shares.
(US$ thousands except Six months ended Six months ended
shares) 30 June 2021 30 June 2020
----------------- -----------------
Numerator:
Net income from operations 2,722 4,272
----------------- -----------------
Denominator:
Weighted average number
of common shares outstanding
for basic EPS* 585,328,447 529,166,819
Adjustment for share
options 93,760,220 97,089,120
----------------- -----------------
Weighted average number
of common shares outstanding
for diluted EPS 679,088,667 626,255,939
Basic EPS (US$ cents) 0.47 0.81
----------------- -----------------
Diluted EPS (US$ cents) 0.40 0.68
----------------- -----------------
* 30 June 2020 number of shares has been adjusted for the 20 for
1 split that happened immediately prior to the IPO in May 2021, in
order to give comparative figures. The EPS values have also been
adjusted to reflect this.
13 Intangible assets
Six months ended
(US$ thousands) 30 June 2021
-----------------
At 1 January 2021 140
Additions 541
-----------------
At 30 June 2021 681
-----------------
The intangible asset is a license 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. The carrying amount was tested for impairment at
30 June 2021 which concluded that no adjustments are necessary.
14 Cash and cash equivalents
As at 31 December
(US$ thousands) As at 30 June 2021 2020
------------------- ------------------
Cash at bank and in
hand 519,137 14,039
------------------- ------------------
Please see the 'Financial Highlights' section on page 6 for
further information on cash, including the significant increase in
cash as at 30 June 2021 compared to as at 31 December 2020.
15 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 total costs of US$23.0m (GBP16.3m), 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
--------------------------------- ------------ --------
Balance as at 30 June 2021 664,965,934 939,863
--------------------------------- ------------ --------
* 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.
16 Share based payments
As at 30 June 2021 As at 30 June 2020
---------------------------------- ------------------------------
Weighted Weighted
average exercise Shares average exercise
Share options price (US$) options price (US$)
-------------- ------------------ ---------- ------------------
Outstanding at the
beginning of the period 4,557,955 2.514 4,078,372 0.259
Exercised during the
period (918,194) 7.294 (108,916) 0.115
Forfeited during the - - - -
period
Granted during the
period 1,048,250 28.230 885,000 6.400
Share split during 89,072,209 - - -
the period*
-------------------------- -------------- ------------------ ---------- ------------------
Outstanding at the
end of the period 93,760,220 0.371 4,854,456 1.481
-------------------------- -------------- ------------------ ---------- ------------------
Exercisable at the
end of the period 48,421,600 0.111 2,197,699 1.050
-------------------------- -------------- ------------------ ---------- ------------------
* 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.
June 2020 has not been adjusted.
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 BSM to determine the
fair value of the share-based compensation expense relating to
stock options issued in the period:
6 months 6 months
ended 30 ended 30
June 2021 June 2020
----------- -----------
Risk free interest
rate 0.91% 0.57%
Expected Volatility 29.72% 27.16%
Expected dividend - -
yield
Expected life of stock
option 5 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 2021
Sales & General
(US$ thousands) R&D / Engineering Marketing & Administration Total
------------------ ----------- ------------------ ------
Share-based payment
charge 1,557 115 286 1,958
------------------ ----------- ------------------ ------
6 months to June 2020
Sales & General
(US$ thousands) R&D / Engineering Marketing & Administration Total
------------------ ----------- ------------------ ------
Share-based payment
charge 225 12 8 245
------------------ ----------- ------------------ ------
17 Government assistance
In 2020, the Group received Canadian Emergency Wage Subsidy
("CEWS") from the Government of Canada totalling US$1,063,014. CEWS
was offered to qualifying companies in response to the COVID-19
virus to support wages paid to employees. Government assistance was
applied to reduce salaries expensed during the year under IAS
20.
In early H1 2021, the Group received, US$55,000 CEWS (H1 2020
US$482,000) from the Government of Canada. These were prior to the
IPO when Alphawave IP Inc. was a private Canadian company faced
with uncertainty as to the longer-term impact on the business. Post
IPO, whilst Alphawave IP Inc. is entitled to COVID-related grants,
the board and management team has elected not to receive them. No
Government assistance has been requested nor taken in the UK since
the plc entity's incorporation and IPO.
18 Related party transactions
Transactions between the Company and its subsidiaries, which are
related parties, have been eliminated on consolidation and are not
disclosed in this note. Transactions with Directors and key
management personnel of the Group are disclosed in note 7. In
addition, the Group entered into the following transactions and had
the following outstanding balances with related parties who are not
consolidated in these interim financial statements:
As at
------------------------------------------
31 December
(US$ thousands) 30 June 2021 2020 30 June 2020
------------- ------------ -------------
Transactions:
Revenue from a company
on which a director is
the chairman of the board 484 1,392 821
Revenue from a company
on which a director is
a board observer 1,730 3,548 1,612
Revenue from a company
on which an immediate
family member of a director
has significant influence 737 1,720 -
Revenue from a company 2,919 - -
on which a director is
a director
-------------------------------- ------------- ------------ -------------
5,870 6,660 2,433
-------------------------------- ------------- ------------ -------------
Balances:
Accounts receivable from
a company on which a director
is a board observer 1,961 804 -
-------------------------------- ------------- ------------ -------------
Work-in-progress for a
company on which a director
is a board observer 1,368 471 188
Work-in-progress for a
company on which an immediate
family member of a director
has significant influence 1,203 396 -
-------------------------------- ------------- ------------ -------------
4,532 1,671 188
-------------------------------- ------------- ------------ -------------
Deferred revenue from
a company on which a director
is the chairman of the
board 243 710 359
Deferred revenue from
a company on which a director
is a board observer 356 181 1,013
-------------------------------- ------------- ------------ -------------
599 891 1,372
-------------------------------- ------------- ------------ -------------
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 is 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 .
19 Subsidiaries of the Group as at 30 June 2021
Description
and
proportion
of share capital
held directly
or indirectly Country 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,
performance connectivity Toronto,
intellectual Ontario,
property for M5J 2M4
the semiconductor
industry
Alphawave Ordinary 100% United States Developing and 125 E Victoria
IP Corp. licensing high Street,
performance connectivity Ste. 1,
intellectual Santa Barbara
property for CA 93101
the semiconductor United States
industry
Alphawave Ordinary 100% British Virgin Dormant
IP (BVI) Islands
Ltd
Alphawave Ordinary 100% Canada Dormant
Call. Inc.
Alphawave Ordinary 100% Canada Dormant
Exchange
Inc.
20 Future Commitment
On 12(th) June 2021, Alphawave IP Inc., a wholly owned
subsidiary of the Company, concluded a series of definitive
agreements with Beijing Wise Road Asset Management Co., Ltd ("Wise
Road"), a semiconductor-focused private equity fund based in the
People's Republic of China ("PRC"). Under those agreements,
Alphawave IP Inc. has agreed to invest up to US$170m into CPP
alongside a US$230m investment from Wise Road. The first tranche of
that investment, US$42.5m, is expected to be paid by the Company in
Q4 2021. Alphawave IP Inc. has also entered into a 5 year
subscription license agreement with CPP in which Alphawave IP Inc.
agrees to license specified IP within its product portfolio.
21 Post balance sheet events
The Company has evaluated subsequent events after 30 June 2021,
the date of issuance of the condensed consolidated interim
financial statements, and has identified one recordable or
disclosable events not otherwise reported in these Condensed
Consolidated Financial Statements or notes thereto, which is
disclosed below.
San Jose office lease
In September 2021, Alphawave IP Corp. signed a 5 year lease for
offices in San Jose, California. Based in Silicon Valley and near
many of our customers and potential customers, these offices will
serve as our flagship demonstration lab. After improvement
allowances, we anticipate spending approximately US$700,000 on
one-time fit out costs and less than US$400,000 per year on rent
and other operating expenses.
INDEPENT REVIEW REPORT TO ALPHAWAVE IP GROUP PLC
Conclusion
We have been engaged by the company to review the condensed set
of financial statements in the half-yearly financial report for the
six months ended 30 June 2021 which comprises the condensed
consolidated statement of comprehensive income, condensed
consolidated statement of financial position, condensed
consolidated statement of changes in equity, condensed consolidated
statement of cash flows and the related explanatory notes.
Based on our review, nothing has come to our attention that
causes us to believe that the condensed set of financial statements
in the half-yearly financial report for the six months ended 30
June 2021 is not prepared, in all material respects, in accordance
with IAS 34 Interim Financial Reporting as adopted for use in the
UK and the Disclosure Guidance and Transparency Rules ("the DTR")
of the UK's Financial Conduct Authority ("the UK FCA").
Scope of review
We conducted our review in accordance with International
Standard on Review Engagements (UK and Ireland) 2410 Review of
Interim Financial Information Performed by the Independent Auditor
of the Entity issued by the Auditing Practices Board for use in the
UK. A review of interim financial information consists of making
enquiries, primarily of persons responsible for financial and
accounting matters, and applying analytical and other review
procedures. We read the other information contained in the
half-yearly financial report and consider whether it contains any
apparent misstatements or material inconsistencies with the
information in the condensed set of financial statements.
A review is substantially less in scope than an audit conducted
in accordance with International Standards on Auditing (UK) and
consequently does not enable us to obtain assurance that we would
become aware of all significant matters that might be identified in
an audit. Accordingly, we do not express an audit opinion.
Whilst the company has previously produced a half-yearly report
containing a condensed set of financial statements, those financial
statements have not previously been subject to a review by an
independent auditor. As a consequence, the review procedures set
out above have not been performed in respect of the comparative
period for the six months ended 30 June 2020.
Directors' responsibilities
The half-yearly financial report is the responsibility of, and
has been approved by, the directors. The directors are responsible
for preparing the half-yearly financial report in accordance with
the DTR of the UK FCA.
The latest financial information of the group, as contained in
its Registration document for the purposes of listing on the London
Stock Exchange, was prepared in accordance with UK-adopted
international accounting standards and the next annual financial
statements will be prepared on the same basis. The directors are
responsible for preparing the condensed set of financial statements
included in the half-yearly financial report in accordance with IAS
34 as adopted for use in the UK.
Our responsibility
Our responsibility is to express to the company a conclusion on
the condensed set of financial statements in the half-yearly
financial report based on our review.
The purpose of our review work and to whom we owe our
responsibilities
This report is made solely to the company in accordance with the
terms of our engagement to assist the company in meeting the
requirements of the DTR of the UK FCA. Our review has been
undertaken so that we might state to the company those matters we
are required to state to it in this report and for no other
purpose. To the fullest extent permitted by law, we do not accept
or assume responsibility to anyone other than the company for our
review work, for this report, or for the conclusions we have
reached.
Robert Seale
for and on behalf of KPMG LLP
Chartered Accountants
KPMG LLP
15 Canada Square
Canary Wharf
E14 5GL
20 September 2021
[1] Adjusted EBITDA excludes IPO-related costs, foreign exchange
adjustments, share-based payments and one-time legal fees
associated with CPP. See note 4 (Alternative Performance Measures)
on page 19
[2] Bookings comprise license fees, non-recurring engineering
and support and maintenance from contracted and typically
non-cancellable orders in addition to, where appropriate, company
estimates of potential future royalties. See note 4 (Alternative
Performance Measures) on page 19
[3] Field Programmable Gate Array
[4] IPNest, "Interface IP Survey, 2021-2025 Forecast", June
2021
[5] On a native currency basis, revenues grew 133% from US$11.7m
in H1 2020 to US$27.4m in H1 2021
[6] Adjusted EBITDA and Adjusted Profit After Tax excludes
IPO-related non-recurring costs, foreign exchange adjustments,
share-based payments & one-time legal fees associated with CPP.
See note 4 (Alternative Performance Measures) on page 19
[7] See note 4 (Alternative Performance Measures) on page 19
[8] IPNest, "Interface IP Survey, 2021-2025 Forecast", June
2021
[9] Synergy Research Group, 2 June 2021
[10] IDC, 24 March 2021
[11] Semiconductor Industry Association, "Taking Stock of
China's Semiconductor Industry", 31 July 2021
[12] See note 4 (Alternative Performance Measures) on page 19
for reconciliation of EBITDA to Adjusted EBITDA
[13] See note 4 (Alternative Performance Measures) on page 19
for reconciliation of Profit After Tax to Adjusted Profit after
Tax
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