Alphawave IP acquires optical DSP chip developer Banias Labs, advancing its optical DSP products for data centers

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Alphawave IP is negotiating a multi-year framework with a leading North American hyperscaler for a potential roadmap delivering more 300 million US dollars optical products

LONDON and HOD HASHARON, Israel, October 13, 2022 /PRNewswire/ – Alphawave IP Group plc (“Alphawave” or “Company”) (LN: AWE), a global leader in broadband connectivity for global technology infrastructure, today announced the acquisition of Banias Labs, a Israeldeveloper of digital signal processing (“DSP”) optical chips for data centers for approximately $240 million. The acquisition strengthens Alphawave’s track record in optical DSP silicon products for data centers, a high-growth core market for Alphawave.

Concurrent with the acquisition of Banias Labs, Alphawave negotiated a non-binding, multi-year purchase framework with a leading North American hyperscaler that offers a multi-year roadmap for Alphawave to develop and sell a portfolio of optical and of DSPs, including a consistent DSP technology from Banias Labs, with sales of up to more than $300 million.

Tony PialisPresident and CEO of Alphawave said: “Banias Labs’ optical DSP technology provides a strong strategic advantage to Alphawave, strengthening our silicon DSP solutions roadmap for data centers. This acquisition enriches our portfolio of electrical and optical solutions in the most advanced process technologies. The multi-year purchasing framework includes optical solutions, and with the acquisition of Banias, Alphawave expands its total addressable market by providing consistent next-generation optical solutions for the most advanced data centers.”

John Lofton HoltAlphawave’s Executive Chairman said: “We are delighted to welcome the talented Banias Labs team to Alphawave. This acquisition aligns with the strategic priorities we set out during our IPO, expanding our broadband connectivity technology portfolio to support long-term growth. Coherent optics will enable the next level of data center communications efficiency, meeting increasing demands for bandwidth and power efficiency.”

About Coherent Optics

Coherent Optics is the next evolution in optical solutions, the cornerstone of industry efforts to achieve 800G and 1.6T Ethernet speeds while maintaining the required reach inside and outside of data centers. and also drastically reducing energy consumption. Coherent technology is mainly used today on long distances of more than 100 km connecting data centers and in telecommunications. Banias Labs’ optical DSP technology strengthens Alphawave’s optical product roadmap by targeting a growing opportunity for intra-datacenter coherent optical technology as shorter spans adopt this technology.

Additionally, Alphawave believes the significant commitment of a leading North American hyperscaler reflects the importance of this technology to the future of data center connectivity.

Key Acquisition Highlights

The main highlights are:

  • This acquisition brings proven silicon-based optical DSP technology, expanding Alphawave’s product portfolio and strengthening its product roadmap.
  • Banias Labs’ technology will expand Alphawave’s addressable market and deepen Alphawave’s business partnership with a leading North American hyperscaler.
  • Alphawave is committed to becoming an industry leader with a broad portfolio of PAM4 and Coherent DSPs, in the most advanced technologies and for all forms of data center connectivity.

Context of Banias Laboratories

Founded in 2020, Banias Labs1 is a leading provider of DSP coherent optical semiconductor technologies. Based near Tel Aviv, Israel, major core technology leaders have worked together for more than two decades and have a long track record of success in the silicon, IP and semiconductor communications segments. Banias Labs currently has around 50 employees, the majority of whom are focused on R&D.

Banias Acquisition Closing Details

Alphawave acquired 100% of the shares of Banias Labs for a total cash consideration of $240 million paid at closing.

The acquisition is financed by existing cash and additional financing. Alphawave got $210 million Senior Secured Loans, including a five-year term $110 million Revolving credit facility and five-year term $100 million Term loan. The Company’s pro forma net debt after closing is expected to be approximately $35 million. Alphawave expects to continue to have a strong cash flow generation profile which, combined with the additional facilities, provides a solid platform to weather this period of accelerated business expansion.

Outlook

The company expects the ramp-up of new optical products to begin in 2024 and profitability to improve from 2023 levels as the products enter high-volume production and generate incremental revenue. Alphawave anticipates additional revenue synergies given the complementary nature of the technology and its contribution to the product roadmap. Alphawave reiterates its autonomous vision. Further details on the 2023 pro forma outlook and long-term financial model will be released on the next capital markets day on January 13, 2023.

Trading for the third quarter of 2022 was strong and the company will release its third quarter 2022 trading update next week, the October 17, 2022.

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1 Banias Labs is the trading name of Solanium Labs, the name under which the entity is registered in Israel.

Details of the non-binding purchase framework

The non-binding master purchase agreement defines a potential portfolio of optical DSPs, including cohesive solutions based on Banias technology, which Alphawave intends to develop over the next few years. The company plans to increase sales to the hyperscaler leader over several years, with the potential for overall sales to exceed $300 million, provided that the Company qualifies the products for use in hyperscaler data centers in a timely manner and ensures sufficient silicon availability to meet its usage demands. The optical DSP portfolio continues to build on the cutting-edge connectivity technology that Alphawave provides to the industry in the form of IP over silicon. In addition, the non-binding master agreement provides for the Company to issue future equity warrants of up to 2.5% of the issued share capital of the Company, with vesting based on purchases of Alphawave silicon products up to reach 700 million US dollars over the same period, and an exercise price based on the current price of the Company’s shares, subject to downward adjustment if the Company’s shares trade downwards prior to issue. The Company intends to seek all required shareholder approvals, prior to finalizing warrant grants, which are not expected until at least 2024.

Presentation and webcast

A presentation for investors and analysts will take place today, October 13, 2022at 8:30 a.m. BST. The webcast will be accessible via:

https://awaveip.zoom.us/s/89082807240?pwd=ODdkSGxlNzZwb3JhR2w2a0pUQWxIUT09

Access code: 747970

Or by phone:

USA: +1 669 900 9128 / +1 719 359 4580 / +1 253 215 8782
UK: +44 203 901 7895 / +44 208 080 6591 / +44 330 088 5830

Webinar ID: 890 8280 7240
Full list of available call numbers https://awaveip.zoom.us/u/kegS2efSIo

A recording of the webcast and presentation will be available later today on our website at Results, Reports & Presentations (awaveip.com)

Trademarks

All trademarks and other marks belong to their respective owners.

Contact information:

Alphawave IP Group plc

John Lofton Holt, Executive Chairman

Jose Cano, Global Head of IR

[email protected]

+44 (0) 20 7717 5877

Brunswick Group

Simone Selzer

Sarah West

[email protected]

+44 (0) 20 7404 5959

Gravitational PR

Lisette Paras

Wynton Yu

[email protected]

+1 415 420 8420

About Alphawave IP Group plc (LSE: AWE)

In the face of exponential data growth, Alphawave IP’s technology addresses a critical need: enabling data to travel faster, more reliably, and with higher performance at less power. Alphawave IP is a global leader in broadband connectivity for global technology infrastructure. Our custom IP and silicon solutions therefore meet the needs of leading global 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 semiconductor IP licensing, our mission is to focus on the hardest-to-solve connectivity challenges. To learn more about Alphawave IP, visit: awaveip.com

This announcement is published by Alphawave IP Group plc (the “Company”) and contains information which the Company considers to constitute inside information as set out in the Market Abuse Regulation (EU) No 596/2014 as as amended by The Market Abuse (Amendment) (EU Exit) Regulations 2019. By publication of this announcement via a regulatory news service, such inside information is now deemed to be in the public domain. The person responsible for arranging the publication of this announcement on behalf of the company is Link Company Matters Limited, acting as company secretary.

SOURCE Alphawave IP Group Plc

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