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Thanks for summary. Informative as always.
I noticed that Alphawave has mentioned "Major extension of IP development and licensing deal with leading APAC customer including UCIe, PCIeGen7, 224G and 2nm technology". I suppose it's very likely a foundry customer, as Alphawave are well connected with all 3 major foundries. If so, we can expect AW to sell more IP to the ecosystem customers in the future.
I'm still around and still invested here. Just been a bit busy that's all.
The update is all good and what I was expecting.
The record quarterly bookings of $128.7m brings the 2023 total to $388.8m and which is 70% up on 2022 total bookings.
The 7 design wins adds to the 9 won in Q3 to total 16 wins in H2 which brings the year total to 32 design wins.
Those wins are expected to generate $500m additional revenue commencing from 2025 and which is not yet included in the backlog figures. The backlog at the end of H1 stood at $365m.
They generated $187.2m in revenue in H1.
While they are maintaining their guidance at $340 to $360m, one can hope this is conservative and they just might be able to offer a surprise to the upside in April of somewhere just above $360m. You never know.
The things to look out for:
- A continual improvement in their margins and reductions in their one off capital costs etc.
There will always be a significant amount reinvested into R&D in order to remain competitive against larger players like Marvell and Broadcom.
- Quarterly bookings consistently exceeding $100m and continually increasing.
- Positive developments on the connectivity products front with the start of some revenue generation by year end.
- Increased guidance revenue figure for 2024 perhaps well in excess of $400m (bearing in mind they aim to be $1 billion per year revenue generator by 2027).
Remember that the highest CAGRs in the semiconductor industry are anticipated to be in the high-end performance type products which is exactly the focus area for Alphawave Semi. Significant growth is expected to continue throughout this decade and into the next. The demand for high performance computing products and AI remains very high and as Alphawave's CEO frequently reminds us, there are relatively few players able to offer the high end products.
Alphawave's revenue growth should be an inevitability but what matters most is that they can demonstrate improving margins and improved profitability.
A domain specific joke to pass the time ...
Did you hear about the firmware engineer who kept getting halloween and Chrismas mixed up ?
He couldn't see the difference between OCT 31 and DEC 25.
As dead as the proverbial ?
Where is BlueRaphus. His comments are usually quite insightful. I would expect more opinion exchange with him.
Thank you for the reply
As summarised in the opening bullet points it is a "heads up" that in the view of management things are going very well.
"Our growing pipeline reflects positive secular growth trends in data infrastructure markets and the continued investment in next-generation AI- centric connectivity solutions. This, combined with our talented team and strong balance sheet, give us confidence in our future."
With regards the numbers they seem impressive but a single quarter does not make a summer / needs to be integrated into the whole year and the bigger outlook beyond that - so I'd be more interested in the presentation of the finals in April.
Personally my current view on AWE is
- on the one hand it potentially has very significant upside.
- on the other (famous last words/China could invade Taiwan/whatever) I doubt if it is over rated / has significant downside in the immediate future
So for me it seems like there is an attractive risk/reward proposition at this point in time.
DYOR
Can someone with the time and level of knowledge please pick the bones of todays RNS. It looks too good to be true.
I absolutely agree that AWE has huge potential. However at this point it is hard to say whether they will ultimately end up in the semiconductor industry 'Hall of Fame' or being footnoted as 'also rans'. I'm hoping for the former.
In my own case I became particularly interested after listening to their OUTSTANDING Capital Markets Day presentation of last year (Jan 13 2023).
https://www.lsegissuerservices.com/spark/ALPHAWAVEIPGROUP/events/7aadd13f-2514-47e1-8281-baced5bae5e8 (no real registration required)
Potentially the company stands to benefit from a number of industry trends.
1) First and foremost the 'data explosion' and the solutions that AWE can bring to the table. A.I. as the 'topic du jour' tends to be mentioned first but there is a raft of other drivers. With industry leading solutions in serDes, co packaged optics etc AWE could be expected to benefit from the challenges currently being encountered.
2) Chiplets. Physics wise we have run out of runway in terms of cramming more functionality into smaller and smaller areas. Tomorrows solutions are going to have to be assembled from sub assemblies, some of which will be 'off the shelf' (AWE could be expected to benefit from their IP portfolio) and others which will be new. The enabler will be new interface technologies (where again AWE are at the leading edge / contributing to standards).
3) RISC-V. Eventually I believe RISC-V will do for proprietary instruction sets what Linux did for proprietary operating systems. If I was the likes of ARM I wouldn't be be worried in the short term but I would be worried in the long term. RISC-V seems to be coming along in leaps and bounds driven by the ROW's need to neutralise US tech hegemony and the trend towards 'less in more' (I only need a chip that will do 'my' job not 'any' job. It is probably going to cheaper, consume less power etc).
So AWE in the happy place of not only being able to serve specific trends but uniquely in a position to deliver solutions that potentially would be greater than the sum of their parts. Further 'Data' and the industry that surrounds it (ie AWE's addressable market) is growing exponentially and is recession proof.
2023 had been pencilled in as a year for digestion and consolidation following the various acquisitions of 2022 (Precise-ITC, OpenFive, and Banias Lab). So it is understandable that market wise the company was standing still / treading water for 2023.
However I do think 2024 will be a 'land grab' year for those in the 'data shifting' and 'custom silicon' industries so I would like to see them come storming out of the traps in 2024.
While the share price is determining the feelings of us public investors in the short term, a real industry veteran and deeply knowledgable expert, Daniel Nenni, recently posted a wringing endorsement of Alphawave on the industry website he runs, SemiWiki:
"Do you know who had another great year? Alphawave Semi did. Despite being relatively young in the industry (founded in 2017), the company has quickly gained recognition for its advancements in high-speed connectivity solutions.
Alphawave Semi is all about pushing the boundaries of high-speed connectivity. They design and develop semiconductor IP (Intellectual Property) solutions that enable fast and efficient data transfer within electronic devices. Their expertise lies in working closely with customers and partners developing advanced connectivity and signal processing technologies.
It has been an honor to work with Alpha Semi CEO Tony Pialis and his growing team of top notch professionals. As far as semiconductor ecosystem CEOs I would put Tony in my top 10, absolutely.
In my opinion chiplets will be one of the most disruptive semiconductor technologies and Alphawave Semi will be one of the companies leading the way...
Bottom line, to further reduce the overall risk of implementing a chiplet based design strategy, working with ecosystem experts like Alphawave Semi is critical, absolutely."
https://semiwiki.com/ip/alphawave/340060-alphawave-semiconductor-powering-progress/
Mr. Nenni knows what he is talking about better than we do, that at least is certain.
I agree semi-interested that as a minimum AWE need to at least meet the guidance reiterated at the interim's.
"The outlook for 2023 remains unchanged. Alphawave Semi expects 2023 revenue of US$340m to US$360m and adjusted EBITDA of approximately US$87m (or approximately 25% of revenue), which is at the mid-point of the revenue guidance range"
Though I'm worried about the term 'adjusted'. At the interim's the 'adjusted' EBITDA was $32.4m but after it it was decimated by share and retention payments the reported EBITDA was $10.7m. Were such payments a one off or are they likely to continue to drag down the reported EBITDA? If so for how long ?
I am persuaded that AWE have the right tools and people at the right time. However the market remains to be persuaded that AWE can capitalise on the opportunity. The opportunity will pass them by if they cannot strike while the iron is hot.
Make or break earnings/guidance coming up as far as i'm concerned. I believe in the story, but opportunity cost matters! Hindsight is 20/20, but my investment in AWE could have returned me 40% if I had plopped it in $QQQ last January instead. With corporate profits rising and interest rates likely headed down, I am getting impatient. Its clear the acquisitions have turned AWE profit and cashflow negative, with a short cash runway to boot, per last report.. Will the recent design wins make up for this in next 24 months? Market wants answers.
I do like the fact that he is standing in front of a map of the world.
I do hope that is a coded message that AWE plan world domination.
https://www.youtube.com/watch?v=m-IDeBodOyE
I have since read the book. It was very well researched and very detailed. I enjoyed it.
I'd have said that it was full of insights for the AWE management team.
Hopefully the AWE story will ultimately have more in common with that of ARM than Canadian trail blazers Blackberry / Nortel.
The book looks like an interesting read.
I believe we are expecting a "Q4 Trading Statement 2023" on Jan 23
I have been reading 'The Everything Blueprint' by James Ashton; very turbulent first decade for the stock!
When is Q4 earnings being reported? Will management do another investor day? Does not appear so, judging from the company website financial calendar.
Zzzzz .....
Further Industry coverage
https://semiwiki.com/ip/alphawave/339080-unleashing-the-1-6t-ecosystem-alphawave-semis-200g-interconnect-technologies-for-powering-ai-data-infrastructure/
AWE talk about their next generation pick/shovel for the AI gold rush.
"Alphawave Semi 224G Engineering Masterpiece" : https://www.youtube.com/watch?v=aBH6OJ3Ky7c
A new silent (I doubt if it meant to be) promo
https://www.youtube.com/watch?v=qFBFJaP5a9k
Last week Broadcom (AVGO) stock rose 21.7% (105% increase over the last 12 months) following an upgrade by a number of analysts after Broadcom had completed its $61 million acquisition of VMWare. Last Friday’s closing price catapulted them into the top 10 largest companies on NASDAQ.
This success is despite a 12% dilution of its shares in the last year and carrying a high level of debt (104% net debt to equity).
Back in September it was reported that Google is dropping Broadcom as a partner for the TPUs from 2027. This was also mentioned at the last interims and to which Alphawave CEO Tony Pialis had this to say:
“So, first a little background, Broadcom has been a player in the connectivity space since the early days of semiconductors. I respect the company tremendously but look under its current leadership they’ve been transitioning away from a pure play semiconductor company to now including quite a bit of software with a very different business model and a very different margin profile. This software margin profile is not a great fit for semiconductors so am I surprised that there’s reports that Google is moving away from Broadcom? Absolutely not! As I told you, Microsoft, just to deploy one generation of AI within its data centres will cost it billions using Nvidia GPUs. That same cost will apply 10 times more for Google and so Google is looking inevitably for more cost and power efficient approaches for delivering AI in future generations and as I mentioned during my talk that approach is moving to a much more customised and internally driven approach and this custom and internally driven approach needs custom silicon, it needs chiplets, it needs a tremendous amount of connectivity IP, so do I think there’s an opportunity for us? – Absolutely! And hopefully everyone, you know, did take notice that I mentioned that you know we secured multiple design wins with all the leading hyperscalers, and now my job is to expand that footprint and all these hyperscalers to capture the inevitable growth that will be happening due to AI.”
They certainly are at the forefront of developments the AI / data explosion arms race.
As an example of the intellectual horsepower available within the company here is an excellent presentation by Tony Chan Carusone their CTO.
"Co-Packaged Optics for our Connected Future" : https://www.youtube.com/watch?v=Xt-GY8Pkt6g
There's a press release out this evening where Alphawave are touting a collaboration with Keysight Technologies on a PCIe 6.0 Subsystem solution boasting speeds of 64 GT/s.
https://awavesemi.com/press-release/alphawave-semi-partners-with-keysight-to-deliver-industry-leading-expertise-and-interoperability-for-a-complete-pcie-6-0-subsystem-solution/
Superficially this might seem as implausible but dig into and it is not. The phone is the tip of an iceberg. Watch a Millennial casually / flippantly scroll through a selection of TikTok videos. Behind the scenes a vast amount of data is being stored, filtered and when selected bounced around cell towers / networks.
The traditional bottleneck of information processing has been processing speeds. However with the data explosion the theatre of war has moved significantly towards data shifting. Without solutions processors will be idling waiting for data to delivered. Things get exponentially worse with the exponential growth in data and sophistication of that data. AI, AI assisted searches adds fuel to the fire.
The main two areas where improvements are needed in data shifting seems to be volume/speed and power consumption (the power consumption of large data centres can be measured in tens of Megawatts of which networking is a significant and growing proportion).
There are BIG opportunities for companies who can offer solutions that shift large amounts of data fast whilst in terms of protocols/wrap around smarts - deliver the data power efficiently.
AWE seem to be in the right place at the right time with the right toolbox. Time will tell. Tony Pialis certainly talks a good fight.