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Here's a recap of some of the key points they mentioned in the prelim results call of 28th April:
The majority $460m bookings (including Q1 2023) are expected to translate to revenue this year hence comfortable in their guidance of $350m revenue for 2023.
In 2022 they recognized revenue from 80 customers (was 20 at IPO) and secured 28 design wins.
In Q1 this year they have secured 8 new design wins spread across 9 customers.
On 25th April they announced the world's first 112gb/sec silicon IP in TSMC 3nm nodes.
In Q4 last year they announced tape outs of 224gb/sec IO as well as PCIe Gen 6 and HBM3 UCIe interface IP in 5 & 4 nm design nodes.
They are now working with more than half of the top twenty world's largest semiconductors companies.
They are only one of less than five companies that are able to design, manufacture and ship chiplet-based devices. They say chiplets are the future of semiconductors because it is now nearly impossible to manufacture large pieces of silicon integrating hundreds of billions of transistors.
They have been working quietly over the last four years on their opto-electronic products (developing leading edge PAM4 technology and coherent DSPs) which is the future for data-centre connectivity.
They estimate by 2026 their addressable market will be nearly $18 billion and they only need to win 5% of that market to achieve $1 billion in revenue. Their ambition is to achieve much more than that.
"KPMG may have found a can of worms and will be going through the can worm by worm."
That's a rather irrational and hysterically grim conclusion to come to don't you think?
It was explained in the prelim results call that in addition to having to work through the accounts of the three separate and newly acquired privately owned businesses, one of these acquisitions in particular, OpenFive was a carve-out from SiFive - this is primarily the reason why the auditing process is even more complicated and time consuming than it would normally be.
Incidentally, SiFive founded in 2017 (same as Alphawave) were said to be worth $2.5 billion in March 2022. It was rumoured Intel wanted to acquire them for $2 billion in 2021. Their core processor products utilise the open source RISC-V architecture which is basically a popular alternative to the ARM type CPU architecture. SiFive and Alphawave will remain active partners while SiFive focus on their core RISC-V business. Alphawave agreed to license SiFive's RISC-V processor IP as part of the transaction for OpenFive .
Barcap, thank you for your reply.
"Ultimately the CFO is responsible to getting his company's audited results out on time and for them to be correct."
No disagreement there whatsoever.
"He failed on both blaming KPMG for delayed audit and "typos" for incorrect figures. This is laughable."
Definitely disappointing. Not only this year but delayed results last year. These alone are sufficient grounds for dismissing the current CFO. I expect the board to make big improvements to their internal finance structures and to ensure the three acquired companies finances are fully integrated.
"You can excuse this company all you like but new investors won't be touching it and as a result an sp rise is unlikely."
I don't excuse the company. It was most definitely disappointing. I have no control over investor sentiment and the SP can go in which ever direction sentiment takes it.
I'm interested in the overall health of the company, its growth prospects and its performance in continually improving revenue and bookings etc. The preliminary results and Q1 updates show that they are nevertheless in very good health, are continually achieving design wins and increasing the number of bookings. The current backlog of $366 million + Q1 bookings of $103 million clearly indicates that $350 million revenue for this year is a reasonable target (in spite of the current macroeconomic situation). I don't see reason to speculate that there could be more serious errors not yet in public view, at least not serious enough to upset the general positive growth trend and increasing revenues.
The audit has been stated as substantially complete, and as they stated in the call, the preliminary results were issued with the auditor's full support. Shocker RNS from left field never impossible but very unlikely in my opinion.
Monty9, well it's only my best guess. It's natural to worry and fear the worse case scenarios. As semi-interested mentions, this is the second time in a row for delayed results under the CFO's jurisdiction. The typographical errors may have been the last straw for the board's patience and tolerance. Also, it's possible that the independent directors may have advised the dismissal as the best cause of action. There's a plethora of possible reasons.
It just seems very unlikely that it means something far worse is up. For starters, the external audit is already substantially complete. The majority of the financial value of the bookings are made up from only a dozen or so high profile customers and given the kind of procedures that have to be followed in setting up the contracts it's difficult to imagine the numbers reported being found to be fraudulent or way off what they should be.
This is a company with a significant backlog of more than $460 million ($366m + $103m) a significant portion of which, according to Tony Pialis, is expected to translate to revenue this year, hence the guidance of $340 to 350 million for this year.
The audited results are expected to be published on or before the 12th May, something that was reiterated in the last RNS.
All the fears and worries expressed in various comments below are understandable. I'm simply looking at the situation rationally. I know there's been numerous instances elsewhere of share suspensions that have been plain bad news. In addition to iEnergizer (as unhooked mentioned) there's also been Wandisco and Ince as a couple more examples. All AIM stock. At least Alphawave is main market listed. They went ahead to publish a full version of the results and did so with the full support of the external auditor. They made this statement in the call. They also issued their 1st quarter trading update.
While we have no way of knowing the specifics behind Daniel's dismissal, I think the best guess is that the issue of the typographical errors is was what lead to it.
While we can never rule out a shocker of an announcement coming out of left field, rationally, based on what we know from the preliminary results, the Q1 update, and the external auditors support, the possibility seems very remote.
Barcap, why do you see it as a massive investment in smoke and mirrors?
I'm aware that what the company does as a business can be hard to fully understand and appreciate. Semi-conductor devices are mystery to the average person. It took me weeks if not months to get to grips with what Alphawave's products are about and we are not dealing directly with the conventional CPUs, GPUs, FPGA chips but rather the connectivity interfaces associated with them. Their customers are not end consumers but rather the companies that manage the data centres. Not only that but Alphawave aren't just an IP company. They now offer a broad range of products utilising their IP and have these made by the foundries rather than themselves and then you have the custom silicon aspect where they are able to offer customised highly configurable products to the customer's requirements. Fundamentally, they are a semi-conductor R&D company, with a range of off-the-shelf products as well as customisable products. There is no smoke and mirrors, just leading edge high technology that requires a bit of technical understanding. The Capital Markets Day presentation is more than 3 hours long and they put a lot of effort into explaining their products and what they do. I've read the full IPO documentation, all the presentation materials, all the RNS's. Not only that, but because of the very optimistic forward-looking statements, I spent a lot of time understanding semi-conductor growth expectations from completely separate sources to make sure that are actually realistic.
The fact that there could be criminal implications if the company was taken private at a knock down price is a reason in itself why that shouldn't happen. While the board does own 59%, it's not 75%. They would need backing from the main institutional holders. I don't see either Blackrock or Fidelity agreeing to a knockdown price, do you? I've listened to Tony Pialis very carefully to ascertain if he is a very clever b*llsh*tter or genuinely ambitious for the company's success. You should reach your own conclusions. I'm satisfied with mine.
Investing in stocks will always have elements of high-risk and there's never any guarantees on the outcome which is why I do as much research as I can.
"..most the cash poorly and opaquely invested (£500m)."
How on earth do you come to that conclusion? Nothing opaque about the acquisitions of Precise ITC, OpenFive and Banias Labs. There is abundant information on the websites and technical YouTube presentations. These acquisitions have set up Alphawave to a vertically-integrated business model. They now have more than half of the top twenty semiconductor device companies as customers. And in Q1 of this year they achieved $103 million in bookings, with 8 design wins from 7 customers - all that in spite of the macroeconomic climate. They've reiterated their 2023 guidance of $340 to $360 million in revenue, and if H1 of this year continues the trend they may even up this guidance later this year.
"They won’t come clean on the China revenue block as well."
As a matter of fact they have. Listen to the Capital Markets Day presentation and repeated in Friday's call where they explain the reasoning for pulling back from the Wisewave venture. Also, Wisewave being effectively a young start-up transitioning to fabless means they are not going to be able to generate a lot of revenue so soon and will still be loss-making. Notwithstanding, China still represented 39% of their revenue in 2022 and significantly from enterprises other than Wisewave and Verisilicon. Given current deterioration in East / West relations, it has been crucial for the company to revise their strategy on China. They have done exactly that by increasing the North American share of 2022 bookings to 46%.
"Most directors sold their percentages when the company floated and avoided apart from Sutarda family who clearly have no clue what’s going on..."
They sold small percentages of their original share (that's how IPOs are supposed to work!).
The board actually still own 59% of the company. Tony, Raj, Jonathan and Sehat all roughly still own an equal amount of shares.
"I expect it to drop to about 50p once it’s all cleaned up and we need to clear out all the BOD, they will be complicit and if not not shouldn’t be in their jobs anyway…."
Be great if it comes down to 50p due to scaremongering. I'd love to pick up twice as many. I don't see how it will be possible to clear out all the BOD when they have a 59% controlling stake in the company.
Finally, I must add that when the board decided to release the preliminary results, they did so with the full support of the external auditors. So that should tell you that the auditors are not going to find any fundamental discrepancies. The suspension had to be put in place because the deadline was 30th April and FCA rules dictate that a company's shares have to be suspended if audited results are not published by the deadline so there was no choice in the matter.
Unfortunately there had to be consequences and that was Daniel's dismissal. The company acknowledges it failed in this matter and are doubly resolved to make sure this never happens again.
Replying to Barcap.
"Assuming the auditors finish their audit on time and no issues then the sp should stabilise.
The open could be quite wild though as the market 'finds' a price."
Yes it will be interesting to see where this settles. I have a long term view on this stock, so I try not to concern myself with the short term volatility.
I can understand the concerns some may have with the management. Correct me if I'm wrong but I think Sehat Sutardja is the only executive director who has previously served on a publicly listed company board when he was CEO of Marvell.
So from the perspective of managing a publicly listed company it is fair to say the board is inexperienced. Therefore the unfortunate event such as last Friday is not too surprising. However, they do still each have years of managing semi-conductor businesses. My experience of them from the Capital Markets Day is that they are absolutely genuine in their passion and ambition for the Company's success.
The Company's IPO was a huge success from the perspective of raising the targeted capital. Granted, the selling shareholders were able to take a considerable portion of proceeds for themselves but at the end of the day that is one of the main attractions for them doing an IPO. Interestingly, one of their nearest equivalent competitors who listed on NASDAQ last year, Credo, could only raise just enough for the company's benefit and little surplus for the selling shareholders. Credo's share price has fallen 60% from its high in February due mainly to its largest customer cutting back on its demand for Credo products.
Alphawave on the other hand, are not experiencing cut backs from its customers and to the contrary are able to report increased bookings of $US 103 million for the first quarter of 2023 which is four times the bookings it made in Q1 of 2022.
Replying to unhooked.
"Indeed not on AIM, BlueRaphus, as pointed out and acknowledged. Please read the thread (scroll down to Friday 28/4)."
Duly noted. I wasn't expecting to see so many posts when I signed in earlier today.
Replying to unhooked:
"Increasingly regular occurrence - this must be the 3rd or 4th company I've heard of on AIM, who've temporarily suspended due to an audit delay"
This company is not on AIM. AWE has a standard listing on the main market with future ambitions for a premium listing. The increasing regular occurrence of temporary suspensions due to auditing however is not surprising given the present climate of recent massive fines being handed out to auditors like KPMG and Deloitte, therefore auditors are having to be ultra cautious these days. In AWE's case, they have made three acquisitions of private companies whose accounts were not previously subject to the kind of rigorous accounting requirements of public listed companies.
Semi Interested,
Prior to the IPO, the directors all owned varying percentages of the company held as a number of shares. As is usual in IPOs, each director ‘sells’ a portion of their own shares as part of the IPO offering. You can see what each director gave away of their own shares on page 17 of the document in the link provided to you. In Sehat’s case you can see he had 96.3 million shares and gave away 17.4 million shares in the IPO to leave him with 78.9 million shares at that time.
The cash raised from those 17.4 million shares (£71.3 million) wasn’t paid to him personally. They formed part of the £856 million cash raised for the company’s IPO.
Whether you might want to think that the IPO overvalued the company is a separate matter of opinion, but let’s not forget that without that cash Alphawave wouldn’t have been able to make the three acquisitions they’ve since done to set the company up to take full advantage of the rapid growth in the semiconductor connectivity industry.
If you are trying to understand what this company is all about I would recommend you take the time to watch their recent Capital Markets Day presentation video. It’s over 3 hours long but very much worth the time to watch. It’s available to watch on their website which will link you to the London Stock Exchange website. Just register your name and email and the video will launch.
And to be clear, all the major shareholders and directors were locked-in for 12 months from the IPO date. Thus they could not sell shares for their own benefit during that period. Further, no director has sold any of their shares since the IPO to date. Sehat has bought considerably more since then.
If you have any further questions, I’m happy to try and help.
Regards.