Asetek A/S

Earnings Release • Nov 3, 2022

Asetek - Q3 2022: Focus on Efficiencies and New Products Amid Continued Market Headwinds

Asetek - Q3 2022: Focus on Efficiencies and New Products Amid Continued Market Headwinds

· Third-quarter revenue of $10.4 million compared with $13.5 million in Q3 2021

· Gross margin of 42% compared with 39% in Q3 2021

· Q3 EBITDA adjusted of negative $0.6 million improved from negative $1.4

million in Q3 2021

· Nine-month revenue of $41.2 million and EBITDA adjusted of negative $0.2

million

· Quarterly OPEX reduced 35% YoY due to organizational rightsizing and

favorable exchange rates

· Product development focus maintained with first shipments of next-generation

liquid coolers and new SimSports products ready for pre-order in Q4 2022

· Full-year 2022 revenue expected in the range of $50-$52 million and an

operating loss of $5-$6 million

Asetek reported third-quarter revenue of $10.4 million compared with $13.5

million in the same period of 2021. Revenue in the first nine months was $41.2

million compared with $61.7 million in the same period last year. The change

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

liquid cooling products due to the continued challenging business climate.

Gross margin was 42% for the third quarter of 2022 compared with 39% in the

third quarter of 2021. The margin improvement reflects a stronger U.S. dollar, a

change in the mix of product shipments, and lower costs associated with global

shipping and logistics. Gross margin for the first nine months of 2022 was 41%

compared with 42% in the same period of 2021.

"While we are reducing costs and seeking efficiencies in response to the

continued challenging business climate, we also see a high level of interest and

positive feedback from end-users for all of our products. We expect demand to

recover once the current macro headwinds subside and remain focused on widening

our product program in 2022 and 2023 to capture the long-term growth potential

as gamers and enthusiasts continue to demand new, improved equipment and

experiences within traditional gaming and sim racing," said André Sloth Eriksen

the CEO of Asetek.

Operating loss was $1.7 million and adjusted EBITDA was negative $0.6 million in

the third quarter of 2022, compared with operating loss of $4.1 million and

adjusted EBITDA of negative $1.4 million in the third quarter of 2021. In the

first nine months, operating loss was $3.5 million and adjusted EBITDA was

negative $0.2 million, compared with operating income of $1.3 million and

adjusted EBITDA of $6.5 million in the same period of 2021.

Operating expenses of $6.1 million were 35% lower than the third quarter of 2021

which included one-time charges of net $1.0 million. The cost savings were

principally due to reduced staffing costs associated with headcount reductions

and a stronger U.S. dollar which had a favorable effect of approximately $0.9

million. Depreciation and amortization was $1.0 million and share based

compensation was $32 thousand. Operating expense in the first nine months was

$20.3 million, 17% lower than the same period of the prior year.

During the first nine months of 2022, the Company invested $11.9 million in

property and equipment, including development of a new headquarters facility,

and $2.5 million in capitalized costs for the development of new products. The

Company drew $7.6 million on a construction credit line in the first nine months

and is working on finalizing funding for the development period and structuring

the long-term post-delivery financing.

At September 30, 2022, total assets were $67.1 million ($75.4 million at

December 31, 2021) and total equity of $43.0 million ($48.4 million).  Currency

translation adjustment reduced total equity in the first nine months of 2022 by

$3.4 million, resulting from a 16% stronger U.S. dollar vs. the Danish krone.

Working capital at September 30 was $6.5 million ($20.6 million at December 31,

2021) including $11.0 million of cash and cash equivalents ($23.3 million).

Long-term debt totaled $1.8 million ($1.5 million).

OPERATIONS

In the third quarter, the Company shipped 155 thousand sealed loop coolers

compared with 237 thousand in the third quarter of 2021. Eleven new products

began shipping in the third quarter, including nine liquid coolers, four of

which feature the new 8th generation cooling technology, and two SimSports

products. In the fourth quarter, six new liquid cooling products and at least

two new SimSports products are expected to begin shipping.

During the quarter, the Company began shipping orders for two new SimSports

products - the high-performance ForteT Throttle and Brake Pedal Set and the

Pagani Huayra R Sim Racing Pedals. The Forte pedals enable aspiring sim racers

to experience high-end pedals for immersive racing and a true racecar feel at a

competitive price point. The limited edition Pagani Huayra R Sim Racing Pedals

offer the virtual experience of driving a Pagani, the world's most exclusive

hypercar brand.

In July, the Company announced an agreement with esports leader Hardpoint to

make Asetek's SimSports racing products available to try out and purchase at

International Motor Sports Association (IMSA) race events. In August, Asetek

participated in the Gamescom 2022 Expo in Germany, exhibiting planned offerings

from its upcoming line of SimSports steering wheels and wheelbases.

On October 4, Asetek announced a settlement of the pending patent infringement

lawsuit with CoolIT Systems and Corsair Gaming.  The settlement is expected to

reduce the Company's future legal costs beginning in the first quarter of 2023.

OUTLOOK

Rising inflation and interest rates combined with the lingering impact of

pandemic lockdowns, supply chain disturbances and general geo-political

tensions, continue to delay a normalization of the business climate. The effect

is reduced discretionary consumer spending, decreased demand for the Company's

Liquid cooling and SimSports products for gamers and enthusiasts, and continued

low visibility in the forecasts provided by OEM customers. In this environment,

the Company maintains its focus on cost efficiencies and product development.

On November 1, the Company provided updated full-year 2022 expectations for

revenue in the range of $50-$52 million and operating loss in the range of $5-$6

million. The updated expectations follow the Company's temporary suspension of

guidance on August 3 this year due to reduced visibility on OEM customer and end

-user demand for Liquid cooling and SimSports products.

Conference call and webcast

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

results today at 2:00 PM 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://streams.eventcdn.net/asetek/2022q3/

Conference call - audio only:

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

Denmark +45 8987 5045

Norway +47 8150 3308

United Kingdom +44 (0) 20 3936 2999

Germany +49 (0) 32 22109 8334

United States of America +1 646 664 1960

Access code:      871 727

Material:

The third quarter 2022 earnings release and presentation 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.