Asetek A/S

Earnings Release • Mar 4, 2022

Q4 2021

4 March 2021

Disclaimer

This presentation contains forward-looking statements concerning Asetek's financial condition, results of operations and business. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance, or events to differ materially from those expressed or implied in these statements.

Forward-looking statements include, among other things, statements concerning Asetek's potential exposure to market risks and statements expressing management's expectations, beliefs, estimates, forecasts, projections and assumptions. A number of factors that affect Asetek's future operations and could cause Asetek's results to differ materially from those expressed in the forward-looking statements included in this document, include (without limitation):(a) changes in demand for Asetek's products; (b) currency and interest rate fluctuations; (c) customer concentration and industry competition; (d) legislative, fiscal, and regulatory developments, including changes in tax or accounting policies; (e) ability to enforce patents; (f) product development risks; (g) customer credit risks; and (h) supply of components.

All forward-looking statements contained in this document are expressly qualified by the cautionary statements contained or referenced to in this disclaimer. Undue reliance should not be placed on forward-looking statements. Additional factors that may affect future results are contained in the risk management section in Asetek's most recent annual report (available athttps://ir.asetek.com/) and these factors also should be considered. Each forward-looking statement speaks only as of the date of this document. Asetek does not undertake any obligation to publicly update or revise any forward-looking statement as a result of new information or future events other than as required by Danish law. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this document.

• 2021 revenue of \$79.8 million (10% growth) and EBITDA adjusted of \$7.2 million
• Full-year Gaming & Enthusiast revenue growth of 13% to \$72.9 million
• Q4 revenue of \$18.1 million compared with record \$27.9 million in Q4 2020
• Q4 gross margin of 42% compared with 44% in prior year
• Q4 EBITDA adjusted of \$0.7 million, compared with \$6.9 million in Q4 2020; operating expense growth reflects continuing investment in SimSports
• Encouraging market debut for SimSports with pre-orders of Invicta Sim Racing Pedals and highly positive reviews, confirming Asetek's value proposition
• 2022 group revenue growth expected of -5% to +15% and operating income is expected to be between -\$1 and +\$5 million, reflecting a volatile global situation

Status update Gaming & Enthusiast market

• Full-year revenue within the expectations range
• Gaming & Enthusiast growth near long-term target

Company specific

• Manage the threat of Covid-19 shutdowns through-out the year
• Periodic power supply restrictions late in the year

Industry

• Supply chain challenges and rising component cost and shortages
• Increasing logistics costs and US tariffs
• Global shortage of semiconductor chips, mainly GPUs, curbing demand

2021 Early 2022

• Volatile global situation reflected in 2022 growth expectations

Company specific

• Continued Covid-19 shut-downs and power outages in China
• Shut-downs tied to large sporting and political events in Q1 in China

Industry

• Supply chain challenges and rising component cost and shortages
• Increasing logistics costs and US tariffs
• Global shortage of semiconductor chips, mainly GPUs, curbing demand

Outlook

• Ambition of 15% annual average revenue growth over time maintained
• Uncertainty related to timing of the market normalizing
• Continuous focus on strengthening supply chain capacity and capabilities
• Temporary adjusting product pricing to mitigate logistics costs
• Working with existing contract manufacturers to leverage capacity outside China
• SimSports not affected by tariff as final assembly is in Denmark

Impact

Status

EBIDTA margin improvement with revenue increase and HPC exit

Revenue and EBITDA margin

Market headwinds tempering near-term growth outlook

• Record revenue in 2021
  • ‒ Strong start to the year on Gaming & Enthusiast demand, followed by market-trough in Q3 on component shortages
  • ‒ Recovery and stabilization at a higher level in Q4
• 2022 group revenue growth expected in the range of -5% to +15% compared with 2021
  • ‒ Considering assumptions such as shortages of semiconductor chips, shipping cost and capacity variances, pandemic lockdowns and general geo-political tensions
  • ‒ An overall expectation that the business climate will normalize over the course of the year
• Operating income is projected to be between -\$1 and +\$5 million in 2022, reflecting the above uncertainties

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022E

6

Global platform with integrated value chain supports growth and expansion

Strategic position: Large and long-term growing markets | Supplying global brands | Market-leading solutions

IP platform: Applications | Technology | Systems | Products | Patents | High-volume manufacturing | World-wide hub infrastructure

10 million units shipped | 156 employees | FY'21 revenue of USD 80m | Listed on Oslo Børs

Growing offering for more immersive gaming and racing experiences

Competitive and committed gamers

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and enthusiasts Enterprise Gamers, racing and automobile enthusiasts

Gaming & Enthusiast

Product releases reflect confidence in long-term demand growth

• 10 new products started shipping in Q4 2021
  • ‒ Two new customers
• 10 new products estimated to start shipping in Q1 2022
  • ‒ Higher than previous years as some products were postponed by the OEMs into 2022
• Continuous investments in product development and branding to expand reach with key customers based on the core tenants of performance, quality and reliability

Strengthening a wide and diversified base of Gaming & Enthusiast OEMs

Top 5 customers revenue split Top 5 Gaming and Enthusiast customers1 2)

• Currently shipping to over 20 OEMs
• Top five represented 83% of Gaming and Enthusiast revenue in YTD 2021, vs. 81% for full-year 2020
• The largest OEMs have benefited the most from demand increase since the onset of the pandemic
• Ambition to increase diversification over time with Razer and Sapphire as new OEMs in Q4 2021
• Continuous monitoring and assessment of IP

Key new Gaming & Enthusaist OEMs in 2021

• Razer

• ‒ The first AIO liquid coolers, the Razer Hanbo series launched in October which have been off to a good start
• Sapphire
  • ‒ TOXIC AMD RADEON™ RX 6900 XT Limited Edition Graphics Card with Hybrid GPU Cooler (February)
  • ‒ NITRO+ AIO CPU Coolers (December)

Gaming & Enthusiast strategic development

Goal	Strategy	Development and outlook
Further develop leadership in the gaming and enthusiast liquid cooling market	• R&D and product development • Growing existing customers • Widening OEM customer base • Branding and marketing	Focus on delivery of core liquid cooling solutions • • Ramp-up of development to bring meaningful innovations to market • Products which deliver best performance, quality and reliability • Currently over 20 OEM customers • Focus on reducing single-customer dependency • Co-branding agreements in place with several OEMs • Connecting directly with gamers and enthusiasts via social media and online communities, such as Discord • Positioning to monetize Asetek brand

Product roll-out progressing to plan

• The Asetek Invicta premium performance SimRacing pedals were available for pre-order in November
  • ‒ Throttle, brake and add-on clutch, along with the RaceHub software for easy adjustments and calibration
  • ‒ Products started shipping to customers in early March 2022
• Development of steering wheels and wheelbase on track
  • ‒ Exclusive agreement with HangZhou MiGE for use of its servo motor technology in Asetek's range of high-end wheel-bases
  • ‒ Tailor-made solutions and with Asetek designed motor using own software and implementing acquired IP
  • ‒ Launch planned for late 2022 following testing, further development, tooling and manufacturing setup
• Development of Pagani-licensed products progressing for release in mid-2022
• Product development founded on extensive mechatronics and real racing competencies in close collaboration with leading sim racers

Strong feedback from sim racing reviewer and influencers

• "I still would give the full 10 points here (10/10 rating). [..] For me, this is probably the best pedal set that I have used so far. I will leave it on the rig. I don't know what I could change on it." - Dan Suzuki
• "Overall we love these pedals. While they certainly aren't a onesize-fits-all product, they achieve what they set out to do exceptionally well and at what we believe to be a very reasonable price point." -Boosted Media
• "These are definitely the nicest pedals, I have ever used. Hands down! Everything from the build quality, to the way they feel, to their functionality, adjustability. And the effort that's gone into the research and development into making these feel as close to reallife race pedals that you find in race cars." - Karl Gosling

SimSports strategic development

Goal	Strategy	Development and Outlook
Becoming a next-level immersive gaming experiences provider	• Leverage core mechatronics capabilities and global supply chain • Develop product offering based on acquired IP and technology • Establish a thriving third growth segment in a fragmented market	• Initial focus on innovation and product development • Product development on plan based on own software and implementation of acquired IP • Finalize market and channel strategies, including direct sales, online resellers, motorsports shops etc. • First products available for customers Q1 2022 with further launches in 2022 and 2023 • Supported by brand platform and reputation for performance, quality, reliability and immersive experiences

Data center

Data center development reflective of a subscale market

Q1 2018 Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021

-346%

Full-year loss of about \$5 million expected from the HPC business

EU supports use of liquid cooling to cut data center CO2 emissions and enable circular economy

• Development of new EU energy legislation favorable to adoption of Asetek technology progressing based on the EU Commission's July 2021 Energy Efficiency Directive
• Proposal requires the reuse of waste heat generated in data centers
• The EU seeks to neutralize CO2 emissions and preserve and reuse precious resources from rapidly growing data center activity through adoption of circular infrastructure
• Asetek's Direct-to-chip liquid cooling enables power savings and CO2 emission reductions by enabling direct reuse of the waste heat at 60-65 centigrade in district heating systems without using power consuming heat-pumps
• It is one of the most impactful technologies available to address these issues and meets EU's requirements for "minimal ancillary energy inputs"
• Preparing for increased long-term demand associated with this potential legislation

Update data center strategic development

Maintain Data center position and create a sustainable and profitable business over time

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Goal

• Influence the influencers and support adoption of latest EU proposals into legislation for climate gains from reusing waste heat on the way towards carbon neutrality

Strategy

• Leverage existing technology and investments to gain position in the general Data center segment

Development and Outlook

• Global sustainability agenda strengthens rationale for Asetek's data center solution over times
• Positive impact from direct engagement with the EU with current "Green Deal" proposals favoring liquid cooling
• Market adoption of liquid cooling will remain slow until adoption of the proposed Green Deal legislation has been decided
• Prepared and positioned for a potential shift in demand driven by adoption of the proposed legislation
• Sharpening Data center business segment and stop investments in HPC niche to improve profitability
• General Data center business segment to be main priority going forward

Financials

Income statement

Figures in USD (000's)	Q4 2021	Q4 2020	2021	2020
	Unaudited	Unaudited
Revenue	\$ 18,069 \$	27,850 \$	79,803 \$	72,750
Cost of sales	10,519	15,496	46,430	38,556
Gross profit	7,550	12,354	33,373	34,194
Research and development	1,807	1,759	7,092	5,718
Selling, general and administrative	6,297	5,005	24,503	17,548
Special items	-	-	1,713	-
Other expense (income)	-	-	(714)	-
Total operating expenses	8,104	6,764	32,594	23,266
Operating income	(554)	5,590	779	10,928
Foreign exchange (loss) gain	249	(690)	832	(1,361)
Finance income (costs)	(64)	(65)	(214)	(141)
Total financial income (expenses)	185	(755)	618	(1,502)
Income before tax	(369)	4,835	1,397	9,426
Income tax (expense) benefit	215	1,305	(60)	(231)
Income for the period	(154)	6,140	1,337	9,195
Foreign currency translation	(186)	1,293	(1,709)	2,392
adjustments
Total comprehensive income	\$ (340)	\$ 7,433 \$	(372)	\$ 11,587
Income per share (in USD):
Basic	\$ (0.01)	\$ 0.24	\$ 0.05 \$	0.36
Diluted	\$ (0.01)	\$ 0.23	\$ 0.05 \$	0.35

• Q4 revenue reflects reduced shipments of Gaming & Enthusiast products compared to Q4 2020
  • ‒ Sales of 302,000 sealed loops in Q4 (-35%)
• Full year Gaming & Enthusiast revenue growth of 13% despite market challenges
  • ‒ Sales of 1.4 million sealed loops (+15%)
  • ‒ Group revenue increased 10% YoY
• Revenue fluctuations due to changes in shipments of G&E products negatively impacted by shortage of semiconductor chips
• Increase in overhead includes investment in the SimSports business and to support revenue growth

Margin development

Quarterly Group gross margin development

• Gross margin of 41.8% vs. 38.8% in the previous quarter, with increase partly reflecting reduced exposure to higher logistics costs
  • ‒ Decline vs. fourth quarter 2020 due to weaker dollar, increased shipping costs (supply chain disruptions) and product mix change
• Full-year 2021 margin of 41.8% in line with expectations of a normalized level compared to a record high in 2020
  • ‒ Expected higher than 40% going forward

Strong balance sheet supporting long-term growth

Balance sheet

USD thousands as at December 31, 2021

• Strong cash position and low interest-bearing debt
• Solid and attractive partner for OEM customers
• Flexibility to develop and defend IP
• Platform for expanding gaming product portfolio
• Supportive of efficient funding of new corporate HQ
• Ambition to distribute cash surplus over time subject to change of current tax situation

Financial strategy

Continued profitable growth and solid financial platform

Growth ~15% p.a.1

Summary and outlook: 2025 revenue ambition maintained

• Long-term growth target of an average of approximately 15% per annum
  • ‒ In some years growth may exceed the average, and in other years it may be lower
• 2022 growth expectation considers chip shortages, logistics challenges, pandemic lockdowns, general geo-political tensions and an expected normalization of business climate
• Encouraging market debut for first SimSports products
• Development of SimSports offering progressing to plan with more products for launch in 2022 and 2023

Q&A

Appendix

Management

Board of Directors

Chairman Jukka Pertola

• 20+ years of management experience in ICT, energy, industry, infrastructure and healthcare sectors
• 10+ years of international experience in board positions at private and public companies and organizations
• Solid technological background in telecommunications, IT, digitalization and electrical engineering
• Experience in R&D funding and technology transfer projects

Vice Chairman Erik Damsgaard

• Experienced Managing Director from the electrical and electronic manufacturing industry
• 20 years as leader at OJ Industries in the HVAC and Floor heating industry. He is also Chairman of Danish service and distributor company Masentia A/S and Masentia Holding AB
• Holds M.Sc. in Electronics and a diploma in Business Economics, both from Aarhus University. Has graduated an Executive Management Program at INSEAD

Director

Jørgen Smidt

• 25+ years of international operational and business management experience from the mobile telecoms industry, including Nokia and Motorola
• Experience includes investment and international marketing, market positioning and communication strategies
• Currently a partner at Sunstone Technology Ventures Fund I
• Holds an engineering degree in computer science from the Engineering College of Copenhagen

Director

Maria Hjorth

• 20+ years of consulting and financial sector experience covering business development, M&A, investor relations and operational optimization
• Professional board member
• MSc and BSc in Economics from University of Copenhagen and a MSc in Business Psychology from University of Westminster in London

Income statement

Figures in USD (000's)	Q4 2021	Q4 2020	FY 2021	FY 2020
	Unaudited	Unaudited
Revenue	\$ 18,069	\$ 27,850	\$ 79,803	\$ 72,750
Cost of sales	10,519	15,496	46,430	38,556
Gross profit	7,550	12,354	33,373	34,194
Research and development	1,807	1,759	7,092	5,718
Selling, general and administrative	6,297	5,005	24,503	17,548
Special items	-	-	1,713	-
Other expense (income)	-	-	(714)	-
Total operating expenses	8,104	6,764	32,594	23,266
Operating income	(554)	5,590	779	10,928
Foreign exchange (loss) gain	249	(690)	832	(1,361)
Finance income (costs)	(64)	(65)	(214)	(141)
Total financial income (expenses)	185	(755)	618	(1,502)
Income before tax	(369)	4,835	1,397	9,426
Income tax (expense) benefit	215	1,305	(60)	(231)
Income for the period	(154)	6,140	1,337	9,195
Other comprehensive income items that may be reclassified to profit or loss in subsequent periods:
Foreign currency translation adjustments	(186)	1,293	(1,709)	2,392
Total comprehensive income	\$ (340)	\$ 7,433	\$ (372)	\$ 11,587
Income per share (in USD):
Basic	\$ (0.01)	\$ 0.24	\$ 0.05	\$ 0.36
Diluted	\$ (0.01)	\$ 0.23	\$ 0.05	\$ 0.35

Balance sheet

ASSETS Non-current assets Intangible assets \$ 10,938 \$ 3,217 Property and equipment 11,732 7,049 Deferred income tax assets 6,293 6,421 Other assets 362 605 Total non-current assets 29,325 17,292 Current assets Inventory 5,532 Trade receivables and other 17,201 Cash and cash equivalents 23,296 Total current assets 46,029 Total assets \$ 75,354 \$ EQUITY AND LIABILITIES Equity Share capital \$ 442 \$ Retained earnings 58,077 Translation and treasury share reserves (10,131) (3,589) Total equity 48,388 Non-current liabilities Long-term debt 1,540 Total non-current liabilities 1,540 Current liabilities Short-term debt 1,703 Accrued liabilities 3,157 Accrued compensation & employee benefits 2,074 Trade payables 18,492 Total current liabilities 25,426 Total liabilities 26,966 Total equity and liabilities \$ 75,354 \$	Figures in USD (000's)	31 Dec 2021	31 Dec 2020
2,531 24,471 27,099 54,101 71,393 433 50,681 47,525 2,604 2,604
1,525 2,429 3,193 14,117 21,264 23,868 71,393

Cash flow statement

Figures in USD (000's)	FY 2021	FY 2020
Cash flows from operating activities
Income for the period	\$ 1,337	\$ 9,195
Depreciation and amortization	3,750	3,754
Gain on sale of property, plant and equipment	(688)	-
Special items	1,713	-
Finance income recognized	(2)	(51)
Finance costs recognized	216	192
Finance income, cash received	2	51
Finance costs, cash paid	(141)	(112)
Income tax expense	60	231
Cash receipt (payment) for income tax	(446)	10
Share based payments expense	981	918
Changes in trade receivables, inventories, other assets	2,957	(10,121)
Changes in trade payables and accrued liabilities	4,578	7,363
Net cash provided by (used in) operating activities	14,317	11,430
Cash flows from investing activities
Acquisition of business	-	(1,316)
Additions to intangible assets	(5,974)	(1,571)
Purchase of property, plant and equipment	(8,322)	(1,929)
Disposal of property, plant and equipment	1,092	-
Net cash used in investing activities	(13,204)	(4,816)
Cash flows from financing activities
Funds drawn (paid) against line of credit	260	(269)
Repurchase of common shares	(4,833)	(6,369)
Proceeds from issuance of share capital	865	2,381
Principal payments on capitalized leases	(928)	(831)
Net cash provided by (used in) financing activities	(4,636)	(5,088)
Effect of exchange rate changes on cash and cash equivalents	(280)	1,068
Net changes in cash and cash equivalents	(3,803)	2,594
Cash and cash equivalents at beginning of period	27,099	24,505
Cash and cash equivalents at end of period	\$ 23,296 \$	27,099
Supplemental disclosures -
Property and equipment acquired under leases	\$ 108 \$	668
Shares issued for purchase of assets	\$ 4,222	\$ -

Statement of equity

				Translation	Treasury share reserves		Retained earnings
Figures in USD (000's)	Share capital		reserves						Total
Equity at January 1, 2021	\$	433	\$	2,784	\$	(6,373)	\$	50,681	\$	47,525
Total comprehensive income – year ended December 31, 2021
Income for the period		-		-		-		1,337		1,337
Foreign currency translation adjustments		-		(1,709)		-		-		(1,709)
Total comprehensive income - year ended December 31, 2021		-		(1,709)		-		1,337		(372)
Transactions with owners - year ended December 31, 2021
Shares issued for purchase of assets		6		-		-		4,216		4,222
Shares issued for options exercised		3		-		-		862		865
Shares repurchased		-		-		(4,833)		-		(4,833)
Share based payment expense		-		-		-		981		981
Transactions with owners - year ended December 31, 2021		9		-		(4,833)		6,059		1,235
Equity at December 30, 2021	\$	442	\$	1,075		\$ (11,206)		\$ 58,077		\$ 48,388
Equity at January 1, 2020	\$	423	\$	392	\$	(4)	\$	38,197	\$	39,008
Total comprehensive income - year ended December 31, 2020
Income for the period		-		-		-		9,195		9,195
Foreign currency translation adjustments		-		2,392		-		-		2,392
Total comprehensive income - year ended December 31, 2020		-		2,392		-		9,195		11,587
Transactions with owners - year ended December 31, 2020
Share issued		10		-		-		2,371		2,381
Shares repurchased		-		-		(6,369)		-		(6,369)
Share based payment expense		-		-		-		918		918
Transactions with owners - year ended December 31, 2020		10		-		(6,369)		3,289		(3,070)
Equity at December 31, 2020	\$	433	\$	2,784	\$	(6,373)	\$	50,681	\$	47,525

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