Alphawave Ip Regulatory News (AWE)

CONTAINS INSIDE INFORMATION

Alphawave IP Announces Definitive Agreement to Acquire Entire OpenFive Business Unit from SiFive for US$210m in cash

Transaction will accelerate Alphawave's connectivity leadership, product offerings and customer base while driving higher scale and revenue growth from an expanded total addressable market

LONDON, UK, TORONTO, Ontario, Canada and San Mateo, CA, USA Mar 14, 2022 - Alphawave IP Group plc ("Alphawave" or "Company") (LN:AWE), a global leader in high-speed connectivity for the world's technology infrastructure is pleased to announce the acquisition of the entire OpenFive business unit from SiFive Inc. ("SiFive"). SiFive is the founder and leader of RISC-V computing based in San Mateo, California. All definitive agreements have been completed and the transaction is expected to close in H2 2022 pending customary regulatory approvals.

Key highlights

Alphawave has agreed to acquire OpenFive, a SiFive business unit, bringing OpenFive's high-speed connectivity system-on-chip (SoC) IP portfolio and a proven team based in India and Silicon Valley that has been delivering custom silicon solutions for over 15 years. The acquisition significantly increases Alphawave's customer base globally from 20 currently to over 75, especially in North America, and adds an additional hyperscaler customer based in North America.

· This acquisition will nearly double the number of connectivity-focused IPs available to Alphawave customers from 80 to over 155 and will provide customers with a one-stop-shop for their bundled connectivity needs in the most advanced technologies at 5nm, 4nm, 3nm and beyond. This will include an expanded die-to-die connectivity portfolio that will accelerate chiplet delivery capabilities to customers. Alphawave has also licensed RISC-V processor IPs from SiFive as part of the transaction.

· OpenFive's proven silicon development team enables Alphawave to offer leading edge data centre and networking custom silicon solutions as well as enhancing its chiplet design capabilities. This accelerates Alphawave's strategic goal to scale revenues by monetising its leading connectivity IP not only through IP licensing but advanced custom silicon design.

· The combination of Alphawave's leading high-speed connectivity with OpenFive's IP portfolio is expected to generate material revenue synergies through bundling of IP and integrated IP sub-systems as well as leveraging the two companies' respective strengths to win complex custom silicon design wins at leading edge process nodes.

· The transaction will be immediately EPS accretive to Alphawave. Forecast FY 2023 revenue for the combined group is anticipated to reach between US$325m to US$360m with a path to a yearly revenue run rate of over US$500m in 2024. 2023 adjusted EBITDA margins for the group are expected to be between 32-36% with 2025 adjusted EBITDA margins between 40-45% as revenues exceed US$500m.

Background to the transaction

The Alphawave and OpenFive teams have worked together for over a decade. Over the last two decades, OpenFive has developed a broad and deep capability for the delivery of high-end SoC IP technologies to both RISC-V and ARM-based customers. Historically, the OpenFive team has successfully delivered to over 280 customers globally in some of the most advanced process technologies. Over 70 of these customers are pure IP customers. Their extensive custom silicon know-how has established OpenFive as a leading provider of custom silicon solutions globally and with a strong focus on the North American market. As part of the acquisition, Alphawave will be acquiring a 300+ person team, primarily in India, which will significantly expand Alphawave's delivery capabilities.

This transaction has been signed at an inflection point in the semiconductor industry, as the importance and adoption of RISC-V technology has grown significantly in recent years. Against this backdrop, SiFive will continue to focus on its highly successful RISC-V business. As part of the transaction, Alphawave will also become a licensee of RISC-V processor technology and will continue to work with SiFive on opportunities for RISC-V collaboration, particularly in North America.

Strategic rationale

The acquisition of OpenFive will accelerate Alphawave's existing high-growth and successful connectivity business in three ways.

Nearly doubles the total number of IPs available and accelerates the Alphawave roadmap

The acquisition will significantly expand Alphawave's total number of connectivity and SoC IPs, providing a comprehensive portfolio for customers' entire high-end connectivity needs. The acquisition will also accelerate Alphawave's existing industry-leading roadmap for advanced connectivity solutions in 4nm, 3nm and beyond. Alphawave is already the global connectivity leader with over 80 IPs offered in the most advanced process technologies. With the acquisition of OpenFive, this portfolio of IPs will nearly double to over 155 IPs. These IPs can then be bundled to expand the design penetration and stickiness of Alphawave IPs into key new and existing customers globally, primarily in the North American market.

Accelerates Alphawave's capability to deliver custom silicon solutions for connectivity, including chiplets

The adoption of chiplets by the semiconductor industry is rapidly expanding the total addressable market for Alphawave's technology and driving design wins faster than expected. This trend was first reported in the Company's Q4 2021 trading update, where the Company announced chiplet design wins ahead of expectations. This was also reinforced by the recent announcement from the UCIe consortium. By adding capabilities to deliver custom silicon, including chiplets, Alphawave will be a leading provider of connectivity solutions globally, as the only pure-play provider of connectivity solutions in both IP and silicon form-factors to the most sophisticated customers globally including hyperscalers and major semiconductor companies. Alphawave already has deep and broad experience with many of these customers today.

Expands the customer base and total addressable market - especially with North American customers - and adds a new North American hyperscaler to Alphawave's customer base

The acquisition of OpenFive will significantly increase the total Alphawave global customer base from 20 to over 75. This will provide a broader platform from which Alphawave can continue to execute its successful "land and expand" sales strategy. More importantly, the acquisition will add significant key customers in North America including a new hyperscaler customer in North America. The acquisition also positions Alphawave to become a leading provider of high-performance connectivity-focused custom silicon, a market that is estimated to exceed $20 billion by 2026[1].

Transaction Details, Financing & Financial Effects

The total consideration payable by Alphawave is US$210m in cash, funded from existing cash resources, and the transaction is subject to customary closing conditions and regulatory approvals. Post-acquisition, Alphawave will continue to have significant capacity to invest in further growth opportunities across the enlarged group. Post-closing the OpenFive team will receive customary retention incentives. The transaction is expected to close in H2 2022 and will contribute significant revenues and profit immediately after closing.

Key transaction details are as follows:

· Acquisition is expected to be immediately accretive to EPS

· Total IPs available to customers will increase from 80 to over 155

· Total number of customers globally will increase from 20[2] to over 75

· Alphawave revenues in 2023 are expected to increase to between US$325m and US$360m with a run rate to over US$500m in 2024. This growth is expected to continue in the mid-term

· 2023 adjusted EBITDA margins for the group are expected to be between 32-36% with 2025 adjusted EBITDA margins between 40-45% as revenues exceed US$500m.

· High levels of profitability will continue with significant growth expected beyond 2024

John Lofton Holt, Executive Chairman of Alphawave stated: "When we completed our IPO in 2021, we committed to continuing to grow and accelerate our business by deploying the capital we raised. This began with the acquisition of Precise-ITC in 2021, and the addition of the OpenFive team will further accelerate Alphawave's business. Alphawave can now deliver bundled connectivity-focused IP solutions and custom silicon solutions like chiplets to global customers. This will enable a scale and top-line growth that we envisioned, but much faster than we expected, while continuing to deliver high growth and profit margins for years to come."

Tony Pialis, President and Chief Executive Officer of Alphawave stated: "We have known and worked with the OpenFive team for many years as they have established their credibility in delivering leading-edge SoC IP and custom silicon solutions in the world's most advanced technology, and to the world's most advanced customers. This acquisition is important for Alphawave, but also for our industry, as we will now be the leading pure-play provider of connectivity solutions in the world in whatever form-factor our customers need it - as silicon IP or in custom silicon solutions like chiplets. As we look to the future, we expect to develop and acquire additional capabilities to further expand and accelerate our leadership in connectivity. In our core business, the first quarter of 2022 is very strong and the outlook for 2022 is also strong. We expect this transaction to meaningfully impact revenues in H2 2022, pending regulatory approval of the transaction."

Patrick Little, Chairman and CEO of SiFive stated: "It has been a pleasure working with the Alphawave team on this transaction, and I am sure that we will continue to work together as SiFive focuses on its core RISC-V business. We were also pleased that Alphawave licensed SiFive's RISC-V processor IP as part of the transaction, which further demonstrates the importance of SiFive RISC-V technology to high-end customers globally in a variety of end markets."

Webcast and Conference Call Information for Investors and Media

The Company will host a webcast, conference call and Q&A session on March 14, 2022 at 1600GMT. Details of this call will be posted on the Company website.

Related Party Disclosures

SiFive and OpenFive are not related parties of Alphawave.

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About Alphawave IP Group plc (LSE:AWE)

Faced with the exponential growth of data, Alphawave IP's technology services a critical need: enabling data to travel faster, more reliably and with higher performance at lower power. Alphawave IP is a global leader in high-speed connectivity for the world's technology infrastructure. Our IP solutions therefore meet the needs of global tier-one customers in data centers, 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

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