Asetek A/S

Investor Presentation • Oct 23, 2020

Q3 2020

23 October 2020

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.

The global leader in liquid cooling solutions for gaming and enthusiast PCs, data centers and servers

• Record quarterly revenue of \$21.6 million, reflecting growth of 108% over Q3 2019
• Gross margin increased to 47% in Q3 and 49% in the first nine months, from 42% in both prior year periods
• Record quarterly EBITDA adjusted of \$5.4 million in Q3 2020, compared with \$32,000 in Q3 2019
• Year-to-date revenue grew to \$44.9 million with EBITDA adjusted of \$8.7 million compared with \$38.7 million and \$3.6 million respectively in 2019
• 2020 Group revenue expectation updated on October 19 to an increase of 25% to 30% to an annual record level, compared with 2019 revenue of \$54.3 million
• Gross margin is expected to increase from 2019 and Asetek expects an income before tax of about \$9 to \$10 million, up from \$1.5 million in 2019

External manufacturing	Asetek	OEMs/end-users
Limited impact on ability to meet • customer demand to date • Continued improvement as China reopened and full production capacity re-established • Supply chain capabilities improved in Q3 to service increased demand	Continued focus on employee health • and safety • HQ, sales, in-house manufacturing and R&D are fully operational High sourcing activity • • Expanding workforce to meet demand • Updating business continuity plans and performing scenario analyses as situation evolves • Market research	Continued positive signals from • Gaming and Enthusiast OEMs • Gaming and Enthusiast purchasing volumes developing positively since late Q2 • Increased Data center activity

2020 revenue and profit outlook

• Group revenue expected to increase 25% to 30% compared with 2019
  • ‒ Corresponds to a range of \$67.9 \$70.6 million and a record annual revenue
• Gross margin expected to increase to ~47% from 42.3% in 2019
• Income before tax of about \$9 to \$10 million, up from \$1.5 million in 2019
• Uncertainty related to COVID-19

Business overview

Gaming and Enthusiast Data center

Enthusiasts and do-it-yourself (DIY) Gaming/Performance PCs Data center OEMs1

Global platform with integrated value chain

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

7 million units shipped | ~120 employees | FY'19 revenue of USD 54m | Listed on Oslo Børs

Quarterly revenue development

Quarterly revenue and EBITDA-margin USD thousands

21.629

Gaming and Enthusiast

Widening and diversifying base of Gaming and Enthusiast OEMs

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

• Currently shipping to over 20 OEMs
• Top five represent 81% of Gaming and Enthusiast revenue YTD 2020, unchanged from 2019
• Ambition to increase diversification with time
• Continuous monitoring and assessment of IP

FY 2017 FY 2018 FY 2019 YTD 2020

0%

20%

40%

60%

80%

100%

Increased pace of new product releases

• High product development activities in H2 2020
• 9 new products started shipping in Q3
  • ‒ 4 to a new DIY customer
  • ‒ 3 of the new products provide high performance liquid cooling for NVIDIA's new Ampere GPUs
• Substantial pipeline of new products scheduled to start shipping in Q4

New Gaming and Enthusiast products started shipping

Building a Gaming and Enthusiast brand

• Putting forward the Asetek brand without compromising the customers' market position
• Dual-branding and brand-behind-thebrand strategies
• Introducing new and high-end products to support brand positioning and deliver on commitment to innovation
• Engaging with the Gaming and Enthusiast community

Gaming and Enthusiast strategic development

Goal	Levers	Development and outlook
Continue to	R&D and product development	• 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
dominate the gaming and enthusiast liquid cooling market	Branding and marketing	• Co-branding agreements in place with several OEMs • Connecting directly with gamers and enthusiasts via CoolNation forum • Positioning to monetize Asetek brand
	Widening OEM customer base	• Currently over 20 OEM customers • Reducing single-customer dependency

Started commercial shipments for the HPE Apollo System server platform in Q3

Increased activity in HPC market

• 9 Data center orders announced YTD with \$5 million in combined value
  • ‒ Three Data center orders announced in Q3 totaling \$1.6 million
  • ‒ Two Data center orders announced in Q4 totaling \$1.1 million
• Increased pipeline of potential projects
• Higher activity and sales prices have resulted in a yearover-year improvement in financial performance

Data center strategic development

Goal	Strategy	Outlook
Maintain position and create a meaningful and profitable business over time	Influence the influencers • • Increase end-user adoption with existing and new OEMs • Exploit established leadership within HPC • Explore growth opportunities beyond the HPC segment	Global sustainability agenda strengthens rationale for Asetek's data • center solution • Market adoption of liquid cooling remains slow with need for public standards to trigger wider investments • Segment revenue and operating results are expected to fluctuate as partnerships with OEMs are developed. • Optimising segment overhead

Financials

Income statement

Figures in USD (000's)	Q3 2020	Q3 2019	9M 2020	9M 2019
	Unaudited	Unaudited	Unaudited	Unaudited
Revenue	\$ 21,629	\$ 10,391	\$ 44,900	\$ 38,673
Cost of sales	11,562	6,031	23,060	22,388
Gross profit	10,067	4,360	21,840	16,285
Research and development	1,453	1,241	3,959	3,696
Selling, general and administrative	4,355	4,326	12,543	13,457
Other expense (income)	-	-	-	(753)
Total operating expenses	5,808	5,567	16,502	16,400
Operating income	4,259	(1,207)	5,338	(115)
Foreign exchange (loss) gain	(560)	551	(671)	589
Finance income (costs)	(48)	55	(76)	159
Total financial income (expenses)	(608)	606	(747)	748
Income before tax	3,651	(601)	4,591	633
Income tax (expense) benefit	(1,211)	127	(1,536)	(181)
Income for the period	2,440	(474)	3,055	452
Other comprehensive income items that may be reclassified to profit or loss in subsequent periods:
Foreign currency translation adjustments	1,041	(909)	1,099	(1,003)
Total comprehensive income	\$ 3,481 \$	(1,383)	\$ 4,154 \$	(551)
Income per share (in USD):
Basic	\$ 0.10 \$	(0.02)	\$ 0.12 \$	0.02
Diluted	\$ 0.09 \$	(0.02)	\$ 0.12 \$	0.02

• Record quarterly revenue reflects a 127% increase in Q3 unit sales volumes YoY
• Overhead expenses increased in Q3 partly driven by DKK/USD FX rates
• Overhead expected to increase modestly due to product innovation and R&D activity

Margin development

Quarterly Group gross margin development

• Q3 2020 group gross margin was 46.5% (42.0%), in line with previously communicated expectations
• Nine-month 2020 gross margin was 48.6% (42.1%)
• New business model, increased prices for Data center products and ongoing cost reductions contributed to the margin improvement
• Q4 2020 margin is expected to decrease vs. the first nine months due to product mix changes and some additional costs
  • ‒ Around 47%-level expected for the full year

Strong balance sheet supporting long-term growth

USD thousands as at September 30, 2020

70.000

• Strong cash position and low interest-bearing debt
• Solid and attractive partner for OEM customers
• Flexibility to develop and defend IP
• Platform for considering expanding gaming product portfolio

Share buy-back program update

• Share buy-back program to offset employee options launched in May
  • ‒ Completed as planned by end-September
  • ‒ Total of 656,629 shares repurchased at an average price of NOK 63.77 per share
• At September 30, 2020, there were 26.4 million common shares outstanding including 0.8 million shares held in treasury
• Buy-back program renewed on October 22 with authorization to repurchase shares for an additional \$4 million through March 5, 2021

Financial priorities

Summary and outlook

• Record Group revenue expected for Q4 and FY 2020 driven by strong demand for Gaming and Enthusiast products
  • ‒ Q4 2020 revenue expected in the \$23 to \$25.7 million range
• DIY business model transition and higher Data center prices contributing to increased gross margin and pretax profit
• Substantial pipeline of new Gaming and Enthusiast products
• Increased pipeline of Data center projects
• Commissioned research launching around new year

•

Appendix

Management

• Long-term entrepreneur and founder of Asetek André S. Eriksen

• Previously employed at Danfoss in their management trainee program
• Holds an engineering degree from Aalborg University
• Several MBA level executive management programs from Right, Stanford, MIT and Wharton

CFO Peter Dam Madsen

• Previous positions include International Controller (DK) and Chief Financial Officer (US) at Martin Professional, Inc.
• Also served as CFO of Dantax Radioindustri A/S listed on the Copenhagen Stock Exchange
• MBA from Fort Lauderdale Metropolitan University

John Hamill

• 30+ years of high tech industry sales, sales management and marketing experience
• Previously held position as VP of Global Sales at nVidia and AMD
• Has managed global sales teams
• BSc in Electronics and Electrical Engineering from the University of Glasgow in Scotland

VP Global Operations Csaba Vesei

• 14+ years with IBM in numerous leadership roles, where he managed fulfillment, logistics, manufacturing planning, procurement, and supply chain functions
• MBA from Buckinghamshire Chilterns University, as well as a BSc in Information Technology from the College of Dunaujvaros

VP Global Sales and Marketing Dipak Rao

• 15 years+ experience leading global teams and managing global accounts in the hightech industry
• Prior to joining Asetek, Dipak held senior sales and product marketing roles at AMD
• B.A. (Honors) in Marketing from De Montfort University, Leicester in the U.K

VP Global R&D Thomas Ditlev

• 15+ years of experience with Vestas and Grundfos he has an intimate background in sophisticated pumping and cooling systems designed for global markets
• M.Sc.EE degree from Aalborg University as well as an EMBA in Business Psychology from Business Institute in Aalborg

VP Global Quality Magnus Hakanen

• 20+ years of experience from quality management positions within international organizations like VELUX, Grundfos, Vestas, Nilfisk and automotive companies
• M.Sc. in Mech. Engineering from the KTH Royal Institute of Technology in Stockholm, Sweden. In additional he also has a Six-Sigma Black Belt certification

Director Branding and Outbound Marketing Solveig Malvik

• Extensive international experience within branding, marketing, communication and business development in organizations such as Med24, First4Skills and Survitec
• Holds an M.A. in Modern Middle Eastern Studies, Public Policy and Governance from the American University of Beirut and a Cand.mag. in Political Science and Public Administration from the University of Bergen

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 Chris Christopher

• 40+ years of leadership, management and tech industry experience
• Most recent Senior VP and GM at HP for an USD 18bn portfolio consisting of blades based client systems, workstations and desktop PCs
• BSEE and MSEE from Colorado State University and an Executive MBA from Insead School of Business

Director Maria Hjorth

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

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

Erik Damsgaard

• Experienced Managing Director from the electrical and electronic manufacturing industry
• 19 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

Income statement

Figures in USD (000's)	Q3 2020	Q3 2019		9M 2020	9M 2019		2019
	Unaudited	Unaudited	Unaudited		Unaudited
Revenue	\$ 21,629	\$ 10,391	\$	44,900	\$ 38,673	\$	54,334
Cost of sales	11,562	6,031		23,060	22,388		31,329
Gross profit	10,067	4,360		21,840	16,285		23,005
Research and development	1,453	1,241		3,959	3,696		4,889
Selling, general and administrative	4,355	4,326		12,543	13,457		17,821
Other expense (income)	-	-		-	(753)		(753)
Total operating expenses	5,808	5,567		1,502	16,400		21,957
Operating income	- 4,259	- (1,207)		5,338	(115)		1,048
Foreign exchange (loss) gain	(560)	551		(671)	589		218
Finance income (costs)	(48)	55		(76)	159		188
Total financial income (expenses)	(608)	606		(747)	748		406
Income before tax	3,651	(601)		4,591	633		1,454
Income tax (expense) benefit	(1,211)	127		(1,536)	(181)		(2,082)
Income for the period	2,440	(474)		3,055	452		(628)
Other comprehensive income items that may be reclassified to profit or loss in subsequent periods:
Foreign currency translation adjustments	1,041	(909)		1,099	(1,003)		(444)
Total comprehensive income	\$ 3,481	\$ (1,383)	\$	4,154	\$ (551)	\$	(1,072)
Income per share (in USD):
Basic	\$ 0.10	\$ (0.02)	\$	0.12	\$ 0.02	\$	(0.02)
Diluted	\$ 0.09	\$ (0.02)	\$	0.12	\$ 0.02	\$	(0.02)

Balance sheet

Figures in USD (000's)	30 Sep 2020	31 Dec 2019
	Unaudited
ASSETS
Non-current assets
Intangible assets	\$ 1,927	\$ 1,920
Property and equipment	6,130	6,115
Deferred income tax assets	4,454	5,521
Other assets	354	307
Total non-current assets	12,865	13,863
Current assets
Inventory	2,206	1,657
Trade receivables and other	17,375	14,080
Cash and cash equivalents	26,830	24,505
Total current assets	46,411	40,242
Total assets	\$ 59,276	\$ 54,105
EQUITY AND LIABILITIES
Equity
Share capital	\$ 433	\$ 423
Retained earnings	44,127	38,197
Translation and treasury share reserves	(3,011)	388
Total equity	41,549	39,008
Non-current liabilities
Long-term debt	2,725	2,774
Total non-current liabilities	2,725	2,774
Current liabilities
Short-term debt	1,346	1,518
Accrued liabilities	1,403	1,022
Accrued compensation & employee benefits	2,533	1,526
Trade payables	9,720	8,257
Total current liabilities	15,002	12,323
Total liabilities	17,727	15,097
Total equity and liabilities	\$ 59,276	\$ 54,105

Cash flow statement

Figures in USD (000's)	9M 2020	9M 2019	2019
	Unaudited		Unaudited
Cash flows from operating activities
Income for the period	\$ 3,055	\$	452	\$	(628)
Depreciation and amortization	2,597		2,917		4,057
Finance income recognized	(50)		(282)		(359)
Finance costs recognized	126		124		171
Finance income, cash received	50		282		359
Finance costs, cash paid	(70)		(57)		(84)
Income tax expense	1,536		181		2,082
Cash receipt (payment) for income tax	-		(147)		(172)
Share based payments expense	736		807		1,056
Changes in trade receivables, inventories, other assets	(3,015)		7,915		2,234
Changes in trade payables and accrued liabilities	1,964		(2,043)		154
Net cash provided by (used in) operating activities	6,929		10,149		8,870
Cash flows from investing activities
Additions to intangible assets	(1,008)		(1,013)		(1,441)
Purchase of property and equipment	(823)		(565)		(713)
Net cash used in investing activities	(1,831)		(1,578)		(2,154)
Cash flows from financing activities
Funds drawn (paid) against line of credit	(313)		17		22
Repurchase of common shares	(4,500)		-		-
Proceeds from issuance of share capital	2,149		58		64
Principal payments on capitalized leases	(471)		(585)		(734)
Net cash provided by (used in) financing activities	(3,135)		(510)		(648)
	362		(427)		(190)
Effect of exchange rate changes on cash and cash equivalents
Net changes in cash and cash equivalents	2,325		7,634		5,878
Cash and cash equivalents at beginning of period	24,505		18,627		18,627
Cash and cash equivalents at end of period	\$ 26,830	\$	26,261	\$	24,505
Supplemental disclosures -

Property and equipment acquired under leases	\$	593	\$	259	\$	413
----------------------------------------------	----	-----	----	-----	----	-----

Statement of equity

Unaudited

		Treasury
		Share		Translation		share	Retained
Figures in USD (000's)		capital		reserves		reserves		earnings		Total
Equity at January 1, 2020	\$	423	\$	392	\$	(4)		\$ 38,197		\$ 39,008
Total comprehensive income - nine months ended Sept 30, 2020
Income for the period		-		-		-		3,055		3,055
Foreign currency translation adjustments		-		1,099		-		-		1,099
Total comprehensive income – nine months ended Sept 30, 2020		-		1,099		-		3,055		4,154
Transactions with owners - nine months ended Sept 30, 2020
Shares issued		10		-		-		2,139		2,149
Shares repurchased		-		-		(4,498)		-		(4,498)
Share based payment expense		-		-		-		736		736
Transactions with owners - nine months ended Sept 30, 2020		10		-		(4,498)		2,875		(1,613)
Equity at June 30, 2020	\$	433	\$	1,491	\$	(4,502)		\$ 44,127		\$ 41,549

Equity at January 1, 2019	\$ 422	\$ 836	\$ (4)	\$ 37,704	\$ 38,958
Total comprehensive income - nine months ended Sept 30, 2019
Income for the period Foreign currency translation adjustments	- -	- (1,003)	- -	452 -	452 (1,003)
Total comprehensive income - nine months ended Sept 30, 2019	-	(1,003)	-	452	(551)
Transactions with owners - nine months ended Sept 30, 2019
Shares issued	-	-	1	59	60
Share based payment expense	-	-	-	807	807
Transactions with owners - nine months ended Sept 30, 2019	-	-	1	866	867
Equity at September 30, 2019	\$ 422	\$ (167)	\$ (3)	\$ 39,022	\$ 39,274

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