Asetek A/S

Earnings Release • Mar 8, 2023

Asetek - Q4 2022: Continued Market Challenges With Signs of Stabilization

Asetek - Q4 2022: Continued Market Challenges With Signs of Stabilization

· Fourth-quarter revenue of $9.5 million compared with $18.1 million in Q4 2021

· Gross margin of 41% compared with 42% in Q4 2021

· Full year revenue of $50.7 million and EBITDA adjusted of negative $0.8

million

· Positive Liquid cooling EBITDA in Q4 and for full-year 2022

· Quarterly OPEX reduced 28% YoY due to organizational rightsizing and reduced

litigation

· Fully-underwritten rights issue of DKK 140 million (USD 20 million) to be

launched in April 2023 to strengthen financial position

· Process initiated to list the company's shares on Nasdaq Copenhagen, with

plan to de-list from Euronext Oslo Børs over time

· Full-year 2023 revenue growth expected in the range of 5% to 15% compared

with 2022, with operating income projected in between $2 to $4 million

Asetek reported fourth-quarter revenue of $9.5 million compared with $18.1

million in the same period of 2021. Revenue in the full year 2022 was $50.7

million compared with $79.8 million in the same period last year. The change

from prior year for both periods reflects a decline in shipments of liquid

cooling products due to the continued challenging business climate.

Gross margin was 41% for the fourth quarter of 2022 compared with 42% in the

same period of 2021. The margin in the fourth quarter of 2022 reflects a change

in the product mix partly offset by a stronger U.S. dollar, when compared with

the same period of prior year. Gross margin for the full year 2022 was 41%

compared with 42% in 2021.

"While the general business climate remains challenging, we are seeing signs of

our markets stabilizing with increased activity from our liquid cooling

customers. This is reflected in a strong pipeline of planned new product

releases going into the year. We recently started shipping our innovative

wheelbases and steering wheels with very strong feedback from end-users in the

racing community. This confirms the compelling value proposition we bring to

gamers and enthusiasts, and with a reduced cost base and an agile organization,

we are well positioned to capture the long-term growth potential as our markets

normalize," said André Sloth Eriksen the CEO of Asetek.

Operating loss was $1.9 million and adjusted EBITDA was negative $0.6 million in

the quarter, compared with operating loss of $0.6 million and adjusted EBITDA of

positive $0.7 million in the fourth quarter of 2021. For the full year,

operating loss was $5.4 million and adjusted EBITDA was negative $0.8 million,

compared with operating income of $0.8 million and adjusted EBITDA of $7.2

million in 2021.

Operating expenses of $5.8 million were 28% lower than the fourth quarter of

2021. The cost savings were principally due to reduced staffing costs associated

with headcount reductions, reduced litigation and a stronger U.S. dollar which

had a favorable effect of approximately $0.8 million. Depreciation and

amortization amounted to $1.1 million and share based compensation was $150

thousand. Full-year operating expenses were $26.2 million, 20% lower than

for2021.

During 2022, the Company invested $22.2 million in property and equipment,

including development of a new headquarters facility, and $3.4 million in

capitalized costs for the development of new products. The Company drew $18.6

million on a construction credit line during the year.  During the fourth

quarter, the Company expanded the total credit line available from its main bank

to DKK 205 million (USD 29.3 million).

As of December 31, 2022, the Company had working capital of negative $6.3

million and non-current liabilities of $1.7 million.

The Company believes that its cash position and the liquidity available from its

operations, external borrowings and other sources currently available to it is

sufficient to satisfy its working capital requirements until around mid-May

2023. From then on, the Company expects a cash shortfall mainly as a result of

cash balances (including cash inflows from operations) being allocated to

capital expenditures related to the construction of a new headquarters facility.

On that basis, the Company's primary provider of credit bank has requested an

equity capital injection in order to continue the credit facilities, which are

necessary for the company to service its payment obligations. As a result, the

Company plans to raise gross proceeds of approximately DKK 140 million (USD 20

million), with expected net proceeds of DKK 115 million (USD 16 million), in a

fully underwritten rights issue.

The equity offering is expected to be launched in April 2023 and the net

proceeds are expected to be available on or around May 15, 2023. In addition,

Management has discussed short-term debt financing with a bank to secure

financing if a shortfall occurs before the funding is received from the planned

equity offering. The bank has indicated willingness to provide bridge financing

for the shortfall period. The fully underwritten rights issue is subject to

certain customary conditions, including finalization of the committed loan

agreement and approval of the rights issue at an extraordinary general meeting

of Asetek.

The Company's shares have been admitted to trading and official listing on Oslo

Børs since 2013. The Board of Directors of Asetek believes that it is now an

appropriate time to broaden the shareholder base. In connection with the Rights

Issue, the Company therefore intends to apply for a temporary dual listing of

the shares on Nasdaq Copenhagen A/S. The dual listing will be temporary as the

Company intends to explore the option of delisting from Oslo Børs, which will,

among other things, be subject to approval by Oslo Børs and the Company's

general meeting.

At December 31, 2022, total assets were $78.6 million ($75.4 million at December

31, 2021) and total equity was $42.7 million ($48.4 million).  The main factors

affecting the change in assets were net additions to property, plant and

equipment of $19.4 million, partly offset by decreases in trade receivables of

$6.5 million associated with lower sales volume. The Company also utilized $15.9

million of cash and equivalents for funding construction of the headquarters

facility, the operating loss and investment in the new SimSports business.

OPERATIONS

In the fourth quarter, the Company announced its 8[th] generation and most

advanced liquid cooling technology to date, made first available in the ASUS ROG

RYUO III ARGB Series CPU coolers.  Asetek also announced that its technology is

powering EVGA's highest-performing CPU cooler series to date, the EVGA CLX.

Six new products began shipping in the fourth quarter, all liquid coolers, two

of which feature the Company's new 8th generation technology. In the first

quarter, twenty-four new liquid cooling products and eight new SimSports

products are expected to begin shipping.  In the fourth quarter, Asetek shipped

157 thousand sealed loop coolers compared with 302 thousand in the fourth

quarter of 2021.

The Company unveiled several new SimSports products including InvictaT and

ForteT direct drive wheelbases, Forte Formula steering wheels, and product

bundles which include racing pedals, wheelbase and steering wheel. These new

offerings, available for shipment in the first quarter of 2023, bring full

immersion to sim racing for all levels of gamers. The current order backlog for

SimSports products is in the range of $2 to $3 million. To expedite SimSports

product deliveries to consumers and resellers in North America, Asetek

established a U.S.-based hub during the fourth quarter.

OUTLOOK

High inflation, rising interest rates and geo-political tensions continue to

impact into 2023. At the same time, there are early signs of market

stabilization as the impact of pandemic lockdowns and supply chain disturbances

start to ease. Discretionary consumer spending remains subdued, but the Company

is experiencing increased demand for the Liquid cooling and SimSports products

for gamers and enthusiasts, reflected also in the forecasts provided by OEM

customers. However, visibility is low in the current environment, and the

Company maintains its focus on cost efficiencies and product development.

Considering a continued volatile global situation, revenue growth for 2023 is

expected to be nearly back to normal for the Company, in the range of 5% to 15%

compared with 2022. This outlook considers the possibility of further supply

chain disruptions, continued general geo-political tensions, no Data center

revenue ($4 million for full-year 2022), as well as an overall expectation that

the business climate will normalize over the course of the year. Operating

income is projected to be between $2 and $4 million in 2023.

Annual Report

The 2022 Annual Report will be released separately later today pending

finalization of the ESEF tagging audit.

Conference call and webcast

CEO André Sloth Eriksen and CFO Peter Dam Madsen will present the Company's

results today at 8:30 AM CET and invites investors, analysts and media to join

the presentation. The presentation is expected to last up to one hour, including

Q&A, and can be followed via live webcast or conference call.

Webcast - audio and slide presentation:

Please join the results webcast via the following link:

https://events.q4inc.com/attendee/650966551

Conference call - audio only:

Please dial in 5-10 minutes prior using the phone numbers:

Denmark +45 8987 5045

Germany +49 32 22109 8334

Norway +47 8150 3308

United Kingdom +44 20 3936 2999

United States of America +1 646 664 1960

Access code:   363871

Material:

The fourth quarter 2022 earnings release, presentation and Annual Report will be

made available online at www.asetek.com and www.newsweb.no, as well as through

news agencies. A recorded version of the presentation will be made available at

www.asetek.com approximately two hours after the presentation has concluded.

Q&A:

The conference call lines will be opened for participants to ask question at the

end of the presentation. Questions can also be submitted through the online

webcast during the presentation.

For questions or further information, please contact:

CEO and Founder André S. Eriksen, +45 2125 7076, email: ceo@asetek.com

CFO Peter Dam Madsen, +45 2080 7200, email: investor.relations@asetek.com

About Asetek:

Asetek (ASTK.OL), a global leader in mechatronic innovation, is a Danish garage

-to-stock-exchange success story. Founded in 2000, Asetek established its

innovative position as the leading OEM developer and producer of the all-in-one

liquid cooler for all major PC & Enthusiast gaming brands. In 2013, Asetek went

public while expanding into energy-efficient and environmentally friendly

cooling solutions for data centers. In 2021, Asetek introduced its line of

products for next level immersive SimSports gaming experiences. Asetek is

headquartered in Denmark and has operations in China, Taiwan and the United

States.

This information is subject to the disclosure requirements pursuant to Section 5

-12 of the Norwegian Securities Trading Act.