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Alphawave IP Group PLC (LSE:AWE) saw its shares plummet by 42%, hitting a new low of 70.6p following the release of interim results that revealed a significant swing into losses and a downgraded full-year outlook.
The Canadian microchip designer reported a revenue of US$91 million for the first half of 2024, a substantial decline of 51% compared to the previous year. Despite this downturn, total bookings rose by 20% to US$225.3 million. The company attributed the revenue decline to a shift in its revenue mix toward a vertically integrated semiconductor business, which features longer revenue recognition cycles compared to its traditional IP licensing model.
Earlier in the year, Alphawave had already indicated that its rapid transition away from a legacy custom silicon business in China, along with anticipated changes in revenue recognition, would negatively impact both revenues and profits. During the past six months, only 20% of revenue came from Chinese customers, a sharp decrease from 66% in the prior year.
The interim results also disclosed an underlying EBITDA loss of US$11.8 million, an improvement from the US$32.4 million loss reported in the same period last year. This change reflects the lower revenue alongside ongoing investments in research and development, particularly in chiplets and new silicon connectivity products that are expected to start shipping as samples in the upcoming year, with production ramping up in 2025.
Despite the challenging first half, Alphawave anticipates "significant revenue growth" in the latter part of the year, driven by expected design completions of certain ASIC custom chips and the conversion of IP and non-recurring bookings into revenue. However, the company now projects full-year revenue for 2024 to be in the range of US$310 million to US$330 million, with adjusted EBITDA anticipated at approximately US$50 million. This adjustment is attributed to the merger of two major AI customers in Korea, which has led to the consolidation of existing development programs and the timing of design completions in the second half.
Chief executive Tony Pialis emphasized the successful execution of the company’s strategy, highlighting the expansion of advanced connectivity solutions, including chiplets, that aim to support the next generation of AI and cloud infrastructure. The commitment to organic growth in the first half aims to bolster future revenue opportunities. With confidence in the company’s prospects for the second half of 2024 and beyond, Alphawave is poised to leverage its advanced technology and strong execution in a competitive market.
