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Caustics Graphics Acquisition by Imagination

Tags: #Embedded Software

Imagination to acquire Caustic Graphics, developer of real-time ray-tracing graphics technology, for $27 million

Imagination Technologies Group plc (LSE: IMG, “Imagination” or “the Group”), a leading multimedia, communications and embedded processor technology company, has signed a definitive agreement to acquire Caustic Graphics Inc. (‘Caustic’), a developer of innovative and state-of-the-art real-time interactive ray tracing graphics technology for a cash consideration of $27 million (c.£17.1 million).

Caustic and ray tracing
Ray tracing is a technique for rendering three-dimensional graphics with complex and more natural lighting models to achieve cinema quality 3D and a level of near photographic realism that is impractical with traditional 3D graphics techniques.

To date ray tracing has been used in specialized applications such as special effects and computer animated movies, industrial design, mechanical and architectural modeling to create life-like and photorealistic imagery.

Caustic has developed unique and patented hardware and software technologies to radically lower the cost and dramatically increase the efficiency and performance of ray tracing. This opens up the potential of highly photorealistic computer generated animated imagery to a host of new real-time applications and markets not possible previously.
The ray tracing approach has the added benefit of substantially simplifying the process and cost of content creation. Caustic technology also allows the coexistence of traditional polygon based rendered objects (e.g. objects created using OpenGL ES) and life-like ray-traced elements in the same scene.

Strategic Rationale

  1. Imagination gains access to unique and patented technology which enables real-time ray traced and cinema quality 3D graphics to be implemented in a novel and highly cost-effective manner
    1. This capability can be efficiently added to the Group’s highly successful POWERVR Graphics Processing Units (GPUs)
  2. Caustic technology operates fully in conjunction with and complements Imagination’s existing graphics processing IPAcquisition enables Imagination to bring further disruptive technologies, as part of its roadmap, to its mainstream graphics markets across mobile, embedded, console and computing segments
    1. Helps ensure Imagination stays at technological forefront, driving major innovations in the growing 3D graphics market
  3. Acquisition provides access to professional and specialised markets that take advantage of Caustic’s much more efficient photo-realistic and cinema quality graphics solutionAcquisition will enable Imagination to extend its ecosystem to include very advanced graphics content and tool developers, and ultimately bring such content and tools to mainstream markets
    1. The combined technologies from Imagination and Caustic will dramatically change the price-performance point of these solutions and enable real-time operation

Hossein Yassaie, Chief Executive Officer, Imagination said:
“The most exciting consumer technologies have always started in the professional industry until someone finds the right way to cost engineer and optimise power consumption of those technologies.
“We have a proven track record of disrupting markets by bringing new and high-end technologies to consumer and embedded products, such as our POWERVR graphics IP cores.
“Ray tracing is a key additional technology that traditionally has been regarded as the exclusive domain of specialised markets and non real-time applications. We intend to change that.
“We are therefore delighted to have reached agreement to acquire Caustic with its outstanding engineering team. The acquisition will enable us to accelerate our plans to be the leading supplier of all forms of graphics technologies in all markets and to continue our mission of delivering the most advanced graphics technologies to mainstream markets.”

Chip Stearns, Chief Executive Officer, Caustic said:
“Our vision is to enable cinema quality computer graphics at new cost and power consumption design points. We are excited at the prospect of becoming part of the Imagination team as we bring ray tracing to a much broader base, and utilize their extensive resources and partnerships to bring our technology to every consumer screen.”

The Group has today published its half-year results for the six months to 31 October 2010 (see separate release).

Background to the acquisition
Caustic ( has developed a unique method for implementing ray tracing technology that allows real-time interactive ray tracing with new levels of efficiency, performance and cost. Ray tracing is a technique for rendering three-dimensional graphics with complex lighting to achieve a level of near photographic realism that is impractical with traditional rasterized 3D graphics techniques.

Because ray tracing requires both enormous computing power and also management of a very complex database, it has mostly been a tool for professional designers and animators using powerful and expensive computing systems that could take many seconds or even minutes or more often hours to create a single frame. As such it has been unsuitable until now for interactive consumer applications. Caustic’s unique patented hardware and software technology will lower radically the cost and increase the efficiency and performance of ray tracing.

Caustic is still in the early stages of commercialising its technology. In the 12 months to 31 December 2009, Caustic generated $140,000 (c. £89,000) in revenue and a loss before tax of $6.2 million (c. £3.9 million). As at 30 June 2010, Caustic had a net debt position of $3.1 million (c.£2.0 million). Caustic had gross assets of $1 million (c.£630,000) at 30 June 2010 (all dollar amounts have been converted at an exchange rate of £1 to $1.58).

Funding and financial effects of the acquisition
The total consideration is $27 million (c. £17.1 million) in cash. The cash will be financed from Imagination’s existing resources. After completion Caustic will have no financial liabilities.

Caustic expects to generate revenue both by the sale of PC cards containing Caustic hardware technology from which it will derive royalty per unit sold and software revenue through the sale of initial and renewal licenses for OpenRL™ SDK (Open Ray Tracing Library) and Brazil for Developers™ APIs to vendors of 3D graphics platforms and applications.

Caustic expects royalty and software revenue to build in the second half of Imagination’s financial year ending 30 April 2012.

In the medium term Caustic technology will be integrated in a range of Imagination GPUs as part of the Group’s overall graphics roadmap which will target many mainstream markets.

Subject to revenue performance and the timing of sales of the PC card incorporating Caustic technology, Imagination currently expects Caustic to make a positive contribution to earnings in the year ending 30 April 2013.

Terms of the agreement
Imagination and Caustic have entered into a definitive acquisition agreement under the terms of which Imagination intends to acquire Caustic for $27 million in cash. The agreement is subject to various conditions which are set out in the acquisition agreement and which Imagination expects to be satisfied before the end of the calendar year. Following completion Caustic will be debt free.

Imagination – a global leader in multimedia and communication technologies – creates and licenses market-leading processor cores for graphics, video, multi-threaded embedded processing/DSP and multi-standard communications applications. These silicon intellectual property solutions for systems-on-chip (SoC) are complemented by platform level IP and services, a strong array of software tools and drivers and extensive developer and middleware ecosystems.

Target markets include mobile phone, handheld multimedia, home consumer entertainment, mobile and low-power computing, and in-car electronics. Its licensees include many of the leading semiconductor and consumer electronics companies. Imagination has its corporate headquarters in the United Kingdom, with sales and R&D offices worldwide.

Imagination Technologies Group PLC
Tel: 01923 260511
Hossein Yassaie, CEO
Trevor Selby, CFO

College Hill Associates
Tel: 020 7457 2020
Adrian Duffield/Carl Franklin