Asetek A/S

Earnings Release • Apr 22, 2020

Asetek - Q1 2020: Lower Revenue and Increased Gross Margin

Asetek - Q1 2020: Lower Revenue and Increased Gross Margin

· Q1 revenue of $9.1 million, a decrease of 18% from Q1 2019

· Gross margin increased to 49% from 43% in Q1 2019, driven by higher Data

center prices, business model transition and a stronger U.S. dollar

· Q1 EBITDA adjusted of $0.2 million compared to $0.3 million in Q1 2019

· Cash position increased to $26.2 million at the end of Q1 from $24.5 million

at end of 2019

· No substantial supply chain- or operational impact from COVID-19 beyond the

effects of the lock-down in China in mid-Q1

· Group expectations for 2020 maintained

· Share buy-back program launched to offset employee option grants

Asetek reported first-quarter revenue of $9.1 million compared with $11.2

million in the same period of 2019. The change from prior year reflects the

previously communicated effects of macroeconomic headwinds including COVID-19,

Asetek's transition to a new business model and declining sales to one OEM

customer. Specific COVID-19 impact to revenue in the first quarter comprised

$0.6 million of orders scheduled for March that were delayed to the second

quarter. Supply chain and general company operations have to date not been

significantly impacted by COVID-19.

Gross margin for the first quarter was 49%, an increase from 43% in the same

quarter of 2019.   The gross margin increase reflects increased prices for Data

center products, a stronger U.S. dollar and Asetek's business model transition

for Gaming and Enthusiast OEMs that do their own customization of their liquid

coolers. Shipments under the new model have lower ASPs as Asetek delivers only

the principal core technology with improved margins, while the customer adds

their unique features with ancillary components.

"Beyond measures we have taken to safeguard employees and some effects of the

lock-down in China in the middle of the quarter, we have not seen major changes

to our business environment and outlook to date due to COVID-19," said André

Sloth Eriksen, CEO and founder of Asetek. "We maintain our focus on new and

innovative Gaming and Enthusiast solutions, the ongoing business model

transition and developing our brand position with OEM partners and end-users."

Operating loss totaled $0.9 million and adjusted EBITDA was positive $0.2

million in the first quarter of 2020, compared with operating loss of $1.0

million and adjusted EBITDA of positive $0.3 million in the first quarter of

2019.  Operating expense decreased 6% from the prior year period as a result of

reduced amortization expense, lower share-based compensation and a stronger U.S.

dollar.

At March 31, 2020, Asetek had working capital of $27.4 million, of which $26.2

million is cash and cash equivalents.  Long-term debt totaled $2.5 million.

Today, Asetek announced a share buy-back program to offset employee option

grants.  The Company may purchase up to 1.0 million shares on the open market

for a maximum cost of $4.5 million through September 2020.

In January, the Company announced its most advanced liquid cooling technology to

date with the launch of the NZXT Kraken Z-3 and X-3 series. This latest cooling

technology includes a new performance-engineered pump and cold plate, advanced

temperature sensing, and even quieter operation.

In February, Asetek began delivering waste heat from its in-house data center to

Aalborg Forsyning, the city's municipal district heating network.  Asetek's

RackCDUT liquid cooling systems capture and deliver heat to the network to help

warm homes and businesses in the city of Aalborg. This connection demonstrates

the viability of Asetek's technology in enabling power savings and reducing CO2

emissions.

While first-quarter revenue partly reflected COVID-19 effects, the pandemic has

not had a significant impact on the Company's business environment and outlook

to date.  However, the Company recognizes significant uncertainty related to

COVID-19 over time.

Considering current macroeconomic developments, the ongoing business model

transition and reduced demand from one OEM customer, the Company maintains its

outlook for 2020. Asetek expects a decline in Group revenue of 5% to 10% in 2020

compared with 2019. Asetek is executing against its full-year 2020 operating

plan, and the timing of orders and shipments will vary when compared with prior

year quarterly results. Gross margin is expected to increase from 2019 and the

Company expects a positive income before tax.

Conference call and webcast today Wednesday, 22 April at 10:00 CEST:

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

results at 10:00 CEST 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 Q1 2020 results webcast

via the following link:

https://edge.media-server.com/mmc/p/2eubhva5

Conference call - audio only: Please dial in 5-10 minutes prior using the phone

numbers and confirmation code below:

Copenhagen, Denmark: +45 3272 8042

Oslo, Norway +47 2396 0264

London, United Kingdom: +44 (0) 8445 7188 92

Paris, France: +33 (0) 1767 00794

New York, United States of America +1 631 5107 495

Confirmation code: 4567318

Material:

The first quarter report and presentation will also be made available online at

www.asetek.com (https://ir.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

(https://ir.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@astek.com

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

About Asetek:

Asetek, the creator of the all-in-one liquid cooler, is the global leader for

liquid cooling solutions for high performance gaming and enthusiast PCs, and

environmentally aware data centers. Founded in 2000, Asetek is headquartered in

Denmark and has operations in China, Taiwan and the United States. Asetek is

listed on the Oslo Stock Exchange (ASETEK.OL).

www.asetek.com