Asetek A/S

Earnings Release • Feb 26, 2020

Asetek - Q4 2019: Revenue in Line With Expectations, Evolving Gaming and Enthusiast Business Model

Asetek - Q4 2019: Revenue in Line With Expectations, Evolving Gaming and Enthusiast Business Model

· Q4 revenue of $15.7 million compared with $16.5 million in Q4 2018

· Gross margin of 43% in Q4 compared with 42% in Q4 2018

· Q4 EBITDA adjusted of $2.6 million, level with Q4 2018

· Fiscal 2019 revenue of $54.3 million and EBITDA adjusted of $6.2 million

compared with $67.3 million and $9.4 million, respectively in 2018

· Cash increased $5.9 million in 2019 to $24.5 million at year-end

· Asetek to supply data center liquid cooling solution to a global Server

OEM's HPC product platform

Asetek reported fourth quarter revenue of $15.7 million compared with $16.5

million in the fourth quarter of 2018. Revenue for the full year 2019 amounted

to $54.3 million, in line with previously communicated expectations, compared

with $67.3 million in 2018. The fourth quarter change from the prior year

reflects principally fewer shipments in the Data center market. The full year

fluctuation reflects the uncertainties relating to U.S.-China trade relations,

macroeconomic headwinds across other markets and one OEM customer's significant

reduction in purchases affecting the Gaming and Enthusiast segment.

Gross margin was 43% and 42% in the fourth quarter and full year, respectively,

up from 42% and 39% in respective periods of 2018. The increase reflects higher

ASPs on Gaming and Enthusiast products and a stronger U.S. dollar.

"We delivered on our 2019 revenue expectations amid macro-economic and industry

headwinds," said André Sloth Eriksen, CEO and founder of Asetek. "Going into

2020, we are focused on developing new and innovative Gaming and Enthusiast

solutions and strengthening our brand position with OEM partners and end-users.

In addition, we are evolving our business model around our core liquid cooling

technology and IP to support long-term profitability."

Operating income was $1.2 million and adjusted EBITDA was $2.6 million in the

fourth quarter of 2019, both level with respective periods of 2018.

Full-year operating income was $1.0 million and adjusted EBITDA was $6.2

million, compared with operating income of $4.4 million and adjusted EBITDA of

$9.4 million in 2018. Cash and cash equivalents increased by $5.9 million during

2019 compared with $0.2 million in the prior year. Operating expenses for 2019

included a positive effect of $0.8 million related to a favorable patent

litigation settlement. Adjusted EBITDA in the fourth quarter and full year 2019

was favorably impacted by an accounting change to IFRS 16 Leases (see Note 2 to

the Financial Statements).

In December, the Company began shipping its most advanced liquid cooling

technology to date for gaming PC's and enthusiasts, the NZXT Kraken Z-3 series

and X-3 series CPU coolers.  Asetek's latest innovations include a new

performance-engineered pump and cold plate, advanced temperature sensing, and

quieter operation.

With the recent launch of its Ryzen 9 3950X processor, AMD recommended that

enthusiasts utilize Asetek's powerful all-in-one coolers offered by partners

such as ASUS ROG, NZXT and Thermaltake, for maximum performance and the best

experience.

In January 2020, the Company announced that its InRackCDUT Rack level direct to

chip (D2C) liquid cooling solution has been chosen by a global Server OEM for an

upcoming refresh of an existing server product platform targeting the HPC

segment.

Gaming and Enthusiast revenue was $15.2 million in the fourth quarter, compared

with $15.4 million in the same period of 2018. Full-year revenue was $51.8

million, compared with $63.0 million in 2018.  Adjusted EBITDA was $4.5 million

for the quarter and $14.6 million for the full year, compared with $5.4 million

and $20.7 million in 2018, respectively, reflecting increased investment in the

Gaming and Enthusiast segment in 2019, consistent with plans communicated at

Asetek's capital markets update in March 2019.

Data center revenue was $0.5 million in the fourth quarter, compared with $1.1

million in the fourth quarter of 2018.  Full-year revenue was $2.5 million,

compared with $4.3 million in 2018.  Adjusted EBITDA was negative $0.7 million

in the fourth quarter and negative $4.3 million for the full year 2019, an

improvement for both periods compared to 2018 and reflects the Company's planned

reduction of segment operating expenses in 2019.

Asetek has recently evolved its business model for customers who want to

customize their liquid coolers.  This new model will over time reduce ASPs as

Asetek delivers only the principal core technology with improved margins, while

the customer adds their unique features with ancillary components. Reflecting

the business model change, the effects of macro-economic headwinds and declining

sales to one OEM customer, Asetek expects a decline in Group revenue of 5% to

10% in 2020 compared with 2019. Gross margin is expected to increase from 2019

and the Company expects a positive income before tax. Due to uncertainties

regarding the effects of the coronavirus, its potential impact to Asetek's

operating results is not included in the current financial outlook.

Conference call and webcast today Wednesday, 26 February at 8:30 AM CET:

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

results 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 Q4 2019 results webcast

via the following link: https://edge.media-server.com/mmc/p/mu4ufzqn

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 72274

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

Confirmation code:  3965598

Material:

The fourth quarter report and presentation will also 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.

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