Asetek A/S

Earnings Release • Oct 23, 2019

Asetek - Q3 2019: Soft Quarter as Expected, Executing Gaming and Enthusiast Strategy

Asetek - Q3 2019: Soft Quarter as Expected, Executing Gaming and Enthusiast Strategy

· Q3 revenue of $10.4 million compared with $17.4 million in Q3 2018

· Gross margin of 42% in Q3 and YTD, level with Q3 2018 and improved from 38%

in the first nine months of 2018

· Q3 EBITDA adjusted of $32,000, compared with $3.0 million in Q3 2018

· First nine months revenue of $38.7 million and EBITDA adjusted of $3.6

million compared with $50.8 million and $6.8 million respectively in 2018

· Cash increased $7.6 million year-to-date, compared with $0.4 million in same

period of 2018

· Q4 Gaming and Enthusiast revenue is expected to increase compared with Q3

2019 while decreasing vs. Q4 2018

· Q4 Gaming and Enthusiast gross margins expected to decline 2-3 %-points due

to an inventory cleanout and a one-time final sell-out of an end-of-life product

· Group revenue expectation for 2019 maintained at decrease of approximately

20% compared with 2018, due to macroeconomic and industry headwinds reducing

customer volumes in the second half of 2019

Asetek reported third quarter revenue of $10.4 million compared with $17.4

million in the third quarter of 2018. Revenue in the first nine months amounted

to $38.7 million compared with $50.8 million in the same period of 2018. The

change from the prior year reflects fewer shipments in the Gaming and Enthusiast

segment, as expected in a softer market for PC's and components.

Gross margin for the third quarter and first nine months was 42%, level with the

third quarter of 2018 and up from 38% in the first nine months of 2018. The

current year gross margins reflect higher ASPs on Gaming and Enthusiast products

and a stronger U.S. dollar

"We have a clear set of strategic priorities. We invest more in new and

innovative Gaming and Enthusiast solutions which will underline that Asetek is

the standard in liquid cooling and our branding program is gaining traction with

both our OEM partners and end-users," said André Sloth Eriksen, CEO and founder

of Asetek. "While economic and industry headwinds continue temporary buffet our

industry, we focus on building the products and customer relationships which

will drive long-term growth and value creation."

Operating loss was $1.2 million and adjusted EBITDA was positive $32,000 in the

third quarter of 2019, compared with operating income of $2.0 million and

adjusted EBITDA of positive $3.0 million in the third quarter of 2018.

Operating loss in the first nine months was $0.1 million and adjusted EBITDA was

positive $3.6 million, compared with operating income of $3.2 million and

adjusted EBITDA of positive $6.8 million in the same periods of 2018. Cash and

cash equivalents increased by $7.6 million in the first nine months of 2019

compared with $0.4 million in the prior year period. Year-to-date operating

expenses for 2019 included a positive effect of $0.8 million related to a

favorable patent litigation settlement. Adjusted EBITDA in the third quarter and

first nine months of 2019 was favorably impacted by an accounting change to IFRS

16 Leases (see Note 2 to the Financial Statements).

Asetek's sixth generation (Gen6) high performance liquid coolers are powering an

expanding range of premium gaming gear, including GIGABYTE's new AORUS CPU

coolers and the ASUS Republic of Gamers (ROG) Strix LC RGB series. The 680LS all

-in-one CPU cooler debuted in the new Talon gaming PC's built by custom hardware

specialist Falcon Northwest. Asetek's Gen6 reliability, superior thermal

performance, quiet operation and overclocking potential provide for the optimal

gaming experience.

In August, Asetek launched coolnation.com, a community forum for gamers, as well

as technology enthusiasts and DIY PC builders. The site serves as an online

platform for educating and engaging with others in the gaming community.  In

September, the Company kicked off its first gaming tournament for the Danish

eSports community, "CoolNation Master Counter Strike: Global Offensive".

Gaming and Enthusiast revenue was $9.6 million in the third quarter, compared

with $16.1 million in the same period of 2018. Revenue in the first nine months

was $36.6 million, compared with $47.6 million in the same period of 2018.

Adjusted EBITDA was $2.1 million for the quarter and $10.1 million for the first

nine months, compared with $5.4 million and $15.3 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

Data center revenue was $0.8 million in the third quarter, compared with $1.3

million in the third quarter of 2018.  Revenue in the first nine months was $2.1

million, compared with $3.2 million in the same period of the prior year.

Adjusted EBITDA was negative $0.9 million in the third quarter and negative $3.5

million in the first nine months of 2019, both of which are an improvement from

2018 and reflect the Company's planned reduction of segment operating expenses

in 2019.

Consistent with the prior quarter, the Group revenue expectation for the full

year 2019 is a decrease of approximately 20% compared with 2018. Customer

volumes in the second half of 2019 reflect reduced demand in the DIY market

segment as a result of macroeconomic and industry headwinds. Based on current

revenue and cost outlook, Asetek expects to report a pre-tax profit for 2019.

Conference call and webcast today Wednesday, 23 October at 8:00 AM CEST:

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

results at 8:00 AM 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 Q3 2019 results webcast

via the following link: https://edge.media-server.com/mmc/p/zqkn354h

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:     1265775

Material:

The third 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 is the global leader in liquid cooling solutions for gaming and

enthusiast PCs, data centers and servers. Founded in 2000, Asetek is

headquartered in Denmark and has operations in California, Texas, China and

Taiwan. Asetek is listed on the Oslo Stock Exchange (ASETEK.OL).

For more information, visit: www.asetek.com