Asetek A/S

Investor Presentation • Oct 24, 2018

Third quarter 2018

24 October 2018

Disclaimer

This presentation and its enclosures and appendices (jointly referred to as the "Presentation") has been produced by Asetek A/S (the "Company") and has been furnished to a limited audience (the "Recipient[s]")on a confidential basis in connection with a potential securities issue by the Company. The content of this Presentation is not to be construed as legal, business, investment or tax advice, and has not been reviewed by any regulatory authority. Each Recipient should consult with its own legal, business, investment and tax adviser as to legal, business, investment and tax advice. The information cannot stand alone but must be seen in conjunction with the oral presentation and are expressed only as of the date hereof.

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ASETEK in brief

Listed on Oslo Børs OSE4520 Technology Hardware & Equipment

Business Provider of liquid cooling solutions for hardware enthusiasts, gamers, servers and data centers

Sales Q3 '18 USD 17.4 million / YTD '18 USD 50.8 million

Operating profit Desktop PC segment Q3 '18 USD 5.4 million / YTD '18 USD 15.3 million Data center segment Q3 '18 USD (1.4) million / YTD '18 USD (5.7) million

Market cap USD ~180 million / NOK ~1.5* billion

* 1 USD = NOK 8.28 (23 OCT. '18)

A data-driven world and our digital lives put new demands on computers and servers

A provider of liquid cooling systems for hardware enthusiasts, gamers, servers and data centers

What we do

Asetek snapshot

6

Growing adoption of Asetek liquid cooling

Asetek liquid cooling units shipped

Hardware commercialization is a long-term business

20,000
15,000
10,000
5,000
0

Quarterly revenue development since commercialization USD thousands

• Quarterly revenue of USD 17.4 million
• Q3 desktop revenue reflecting higher ASP for DIY products
• Q3 data center revenue reflected fewer OEM shipments
• Record nine-month revenue of USD 50.8 million
• Desktop partner Corsair launched new coolers powered by Asetek
• Full year 2018 desktop revenue growth expectation maintained at 15% to 25% growth over 2017

Highlights

Desktop Data center

Group revenue USD thousands

Our two business segments

11

Desktop do-it-yourself (DIY) driving revenue

DESKTOP SEGMENT

Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

D I Y Gaming/Performance DT

Do-It-Yourself (DIY) PC enthusiasts / gamers 86% sales

Gaming/Performance DT 14% sales

Shipped 276,000 desktop units in Q3 2018

12

DESKTOP SEGMENT

Desktop partner Corsair launched additional PRO series coolers powered by Asetek

• Desktop partner since 2009
• Original partner in the DIY space
• Strong global presence
• 6 active products with Asetek technology

• Corsair launched the new Hydro Series H100i PRO liquid cooler, joining the H150i PRO and H115i PRO coolers previously launched

• All Hydro Series PRO liquid coolers are powered by Asetek's latest generation 6 liquid cooling solution lowering noise and providing better cooling performance

CORSAIR background New launch

DESKTOP SEGMENT

ASUS RoG's first all-in-one liquid coolers well received in the market

• Desktop partner since 2010
• Strong global presence
• 5 products with Asetek technology
• 3 DIY products
• 2 OEM products

• ASUS has expanded its gaming brand, Republic of Gamers (ROG), utilizing Asetek's latest generation 6 liquid cooling solution lowering noise and providing better cooling performance

• Asetek's shipments started in Q3 and quickly ramped to volume

ASUS background Status on ROG Ryujin and Ryuo market introduction

Soft desktop market in late 2018

DESKTOP SEGMENT

• Supply issues for certain key components
• US tariffs on imports from China
• Initially 10%, increasing to 25% from 2019
• Introduces increased market uncertainty
• Asetek actively working with customers to minimize impact
• Strong underlying desktop fundamentals reflected in overall year to date performance

DATA CENTER SEGMENT

Q1 13 Q2 13 Q3 13 Q4 13 Q1 14 Q2 14 Q3 14 Q4 14 Q1 15 Q2 15 Q3 15 Q4 15 Q1 16 Q2 16 Q3 16 Q4 16 Q1 17 Q2 17 Q3 17 Q4 17 Q1 18 Q2 18 Q3 18

Quarterly data center revenue USD thousands

New solution to facilitate liquid cooling of data centers

DATA CENTER SEGMENT

• Enables liquid cooling without complexity and costs associated with using facilities water
• New InRackLAAC solution more suitable for smaller clusters
• Strong interest for the product
• First customer evaluation ongoing
• Additional customers expected to sample in coming months
• Available for sale in the first half of 2019

Data center strategy

Exploit established leadership within HPC

Strategy

Increase end-user adoption with existing OEMs and add new OEMs

Explore potential opportunities to grow beyond the HPC segment

DATA CENTER SEGMENT

• Leverage successful installations with our OEM partners
• Fastest clusters installed in Taiwan and Japan

• New solutions addressing customers needs

• Order in Q3 2018 from Fujitsu for new HPC cluster for a global industrial customer in Asia, value USD 400,000

• Initial order with ACE Computers resulting from partnership with Intel PCSD. Includes InRackCDU™ and RackCDU D2C™, minor monetary value

• Opportunistic approach to new business opportunities

• Current market adoption driven by performance

Development

Revenue development

• Q3'18 group revenue of USD 17.4m
• Compares with USD 17.7 million in Q3'17 and USD 19.5m in Q2'18
• Q3'18 desktop revenue USD 16.1m
• Driven by an increase in ASPs and product mix
• Compares with USD 15.6m in Q3'17 and USD 18.3m in Q2'18
• Q3'18 data center revenue of USD 1.3m
• Fewer OEM shipments
• Compares with USD 2.0m in Q3'17 and USD 1.2m in Q2'18

FINANCIALS

Group revenue USD thousands

Gross margin and earnings development

FINANCIALS

• Q3'18 group gross margin increased to 41.8% (37.3%)
• Q3'18 desktop gross margin increased to 41.5% (38.2%)
• Sales price increases implemented early 2018
• FX-rate improvements throughout the year

• Q3'18 data center gross margin increased to 45.3% (30.5%)

• Q3 2018 Group EBITDA of 23.0% (19.9%) primarily driven by desktop segment

• Desktop EBITDA margin of 33.5% (32.5%)
• Data center EBITDA of USD (1.4) million

Gross margin development

Income statement

• Gross margins improved over 2017
• Operating expenses on level with recent quarters
• Operating expenses shifting towards desktop/gaming
• Total EBIT margin 11.2% (9.8%)

FINANCIALS

		Q3 2018			Q3 2017
USD (000's)	Group	Desktop	Data center	Group	Desktop	Data center
Revenue	17 405	16 104	1 301	17 652	15 614	2 038
Gross Margin	41.8%	41.5%	45.3%	37.3%	38.2%	30.5%
Other operating expenses	3 270	1 294	1 976	3 079	886	2 193
EBITDA adjusted	4 003	5 390	(1 387)	3 510	5 081	(1 571)
Depreciations	779	456	323	712	235	477
Share based compensation	214	74	140	409	114	295
E B I T	3 010	4 860	(1 850)	2 389	4 732	(2 343)
EBIT Margin	17.3%	30.2%	N/A	13.5%	30.3%	N/A
HQ, Litigation expenses, net	596			600
HQ, Settlement received	0			( 346)
HQ, Share based compensation	66			144
HQ, Other	395			268
Headquarters costs	1 057			666
EBIT, total	1 953			1 723

Cash flow statement

FINANCIALS

USD (000's)	Q3 2018	Q2 2018	Q1 2018	Q4 2017	Q3 2017
Income (loss) for the period	1 624	2 143	(962)	3 573	1 376
Depreciation, amortization and impairment	779	993	848	704	712
Finance cost (income) and taxes	479	271	10	(3 040)	22
Share based compensation	280	247	413	482	552
Changes in current assets other than cash	1 445	(5 520)	3 412	(878)	(2 584)
Changes in payables and accrued liabilities	(1 932)	2 379	(4 004)	731	2 387
Net cash provided (used) in operating activities	2 675	513	(283)	1 572	2 465
Additions to intangible assets and other assets	(329)	(313)	(482)	(613)	(748)
Purchase of property and equipment & other assets	(352)	(464)	(749)	(600)	(410)
Net cash used in investing activities	(681)	(777)	(1 231)	(1 213)	(1 158)
Proceeds from debt issuance, other LT liabilities
Cash flows on credit lines/debt/lease	(46)	(63)	(91)	291	(268)
Issuance of capital / conv debt / dividend	85	289	410	(262)	45
Net cash provided (used) by financing activities	39	226	319	29	(223)
Effect of exchange rate changes on cash	(123)	(806)	529	271	401
Net changes in cash and cash equivalents	1 910	(844)	(666)	659	1 485
Cash and cash equivalents at beginning of period	16 888	17 732	18 398	17 739	16 254
Cash and cash equivalents at end of period	18 798	16 888	17 732	18 398	17 739

Balance sheet

• Strong cash position
• Low interest bearing debt
• Lean balance sheet enabling growth and financial flexibility

FINANCIALS

Non-current Balance sheet composition USD thousands

Desktop strategy and outlook

DESKTOP SEGMENT

Data center strategy and outlook

Goal	Strategy
	Increase end-user adoption with existing OEMs Add new OEMs
Create a meaningful and profitable business	Exploit established leadership within HPC
	segment

Increase end-user adoption with existing OEMs

Explore potential opportunities to grow beyond the HPC

Outlook

2018 data center revenue expected to decline slightly from 2017 compared to previously being expected on level with 2017

DATA CENTER SEGMENT

• Quarterly revenue of USD 17.4 million, reflecting higher ASP for DIY products
• Record nine-month revenue of USD 50.8 million
• Desktop partner Corsair launched new coolers powered by Asetek
• US tariff situation likely to extend desktop uncertainty into 2019

Summary

26

Appendix

Largest shareholders as of 23 October 2018

Name	Holding	Percentage	Country Account Type
ARBEJDSMARKEDETS TIL	2,702,415	10.5%	DNK ORDINARY
CLEARSTREAM BANKING	1,793,623	7.0%	LUX NOMINEE
UBS SWITZERLAND AG	1,733,161	6.6%	CHE NOMINEE
SUNSTONE TECHNOLOGY	1,586,341	6.2%	DNK ORDINARY
DANSKE BANK A/S	1,465,687	5.7%	DNK NOMINEE
HSBC BANK PLC	1,267,579	4.9%	GBR NOMINEE
NORDEA BANK AB	1,119,929	4.3%	DNK NOMINEE
KLP AKSJENORGE	1,034,671	4.0%	NOR ORDINARY
DZ PRIVATBANK S.A. 0	962,500	3.7%	LUX NOMINEE
RBC INVESTOR SERVICE	851,256	3.3%	LUX NOMINEE
KOMMUNAL	798,797	3.1%	NOR ORDINARY
THE BANK OF NEW YORK (1)	665,027	2.6%	DNK NOMINEE
NORDNET BANK AB	581,066	2.3%	SWE NOMINEE
LANNEBO EUROPA SMÅBO	534,444	2.1%	SWE ORDINARY
THE BANK OF NEW YORK	475,090	1.8%	BEL NOMINEE
J.P. MORGAN CHASE	435,900	1.7%	GBR NOMINEE
STATE STREET BANK AN	364,500	1.4%	USA NOMINEE
SOCIÉTÉ GÉNÉRALE	316,863	1.2%	FRA NOMINEE
EUROCLEAR BANK S.A./	310,411	1.2%	BEL NOMINEE
STATE STREET BANK &	306,242	1.2%	USA NOMINEE
Total Top 20	19,305,502	74.8%
Other Shareholders	6,230,658	24.2%
ASETEK Treasury Shares	248,681	$1.0\%$
Total share capital	25,784,841	100.0%

Income statement

Figures in USD (000's)	Q3 2018	Q3 2017	30-Sep-18	30-Sep-17	2017
	Unaudited	Unaudited	Unaudited	Unaudited
Revenue	\$ 17 405	\$ 17 652	\$ 50 809	\$ 40 270	\$ 58 194
Cost of sales	10 132	11 063	31 590	25 362	37 225
Gross profit	7 273	6 589	19 219	14 908	20 969
Research and development	1 225	1 099	3 784	2 989	4 220
Selling, general and administrative	4 095	4 113	12 200	10 944	14 905
Other expense (income)	-	(346)	-	(997)	(913)
Total operating expenses	5 320	4 866	15 984	12 936	18 212
Operating income	1 953	1 723	3 235	1 972	2 757
Foreign exchange (loss) gain	150	(319)	344	(991)	(1 239)
Finance income (costs)	20	(22)	63	(34)	(19)
Total financial income (expenses)	170	(341)	407	(1 025)	(1 258)
Income before tax	2 123	1 382	3 642	947	1 499
Income tax (expense) benefit	(499)	(6)	(837)	(45)	2 976
Income for the period	1 624	1 376	2 805	902	4 475
Other comprehensive income items that may be reclassified
to profit or loss in subsequent periods:
Foreign currency translation adjustments	(182)	490	(353)	1 217	1 253
Total comprehensive income	\$ 1 442	\$ 1 866	\$ 2 452	\$ 2 119	\$ 5 728
Income per share (in USD):
Basic	\$ 0.06	\$ 0.05	\$ 0.11	\$ 0.04	\$ 0.18
Diluted	\$ 0.06	\$ 0.05	\$ 0.11	\$ 0.03	\$ 0.17

Balance sheet

Figures in USD (000's)	30 Sept 2018	31 Dec 2017
ASSETS	Unaudited
Non-current assets
Intangible assets	\$ 2 420 \$	2 754
Property and equipment	4 239	3 856
Deferred income tax assets	7 209	7 778
Other assets	312	794
Total non-current assets	14 180	15 182
Current assets
Inventory	2 719	2 316
Trade receivables and other	13 787	13 280
Cash and cash equivalents	18 798	18 398
Total current assets	35 304	33 994
Total assets	\$ 49 484 \$	49 176
EQUITY AND LIABILITIES
Equity
Share capital	\$ 422 \$	419
Retained earnings	36 501	31 976
Translation and other reserves	648	999
Total equity	37 571	33 394
Non-current liabilities
Long-term debt	697	816
Total non-current liabilities	697	816
Current liabilities
Short-term debt	1 032	1 051
Accrued liabilities	2 194	2 432
Accrued compensation & employee benefits	1 500	1 335
Trade payables	6 490	10 148
Total current liabilities	11 216	14 966
Total liabilities	11 913	15 782
Total equity and liabilities	\$ 49 484 \$	49 176

Equity

Other	Retained
reserves	earnings	Total

Unaudited
	Share		Translation	Other	Retained
Figures in USD (000's)	capital		reserves	reserves	earnings		Total
Equity at January 1, 2018	\$ 419	\$	1 005 \$	(6)	\$ 31 976	\$	33 394
Total comprehensive income - nine months ended Sept 30, 2018
Income for the period		-	-	-	2 805		2 805
Foreign currency translation adjustments		-	(353)	-		-	(353)
Total comprehensive income - nine months ended Sept 30, 2018		-	(353)	-	2 805		2 452
Transactions with owners - nine months ended Sept 30, 2018
Shares issued	3		-	2	780		785
Share based payment expense		-	-	-	940		940
Transactions with owners - nine months ended Sept 30, 2018	3		-	2	1 720		1 725
Equity at September 30, 2018	\$ 422	\$	652 \$	(4)	\$ 36 501	\$	37 571

Equity at January 1, 2017	\$ 417 \$	(248) \$	(9) \$	28 130 \$	28 290
Total comprehensive income - nine months ended Sept 30, 2017
Income for the period	-	-	-	902	902
Foreign currency translation adjustments	-	1 217	-	-	1 217
Total comprehensive income - nine months ended Sept 30, 2017	-	1 217	-	902	2 119
Transactions with owners - nine months ended Sept 30, 2017
Shares issued	1	-	3	521	525
Share based payment expense	-	-	-	1 116	1 116
Dividends	-	-	-	(2 907)	(2 907)
Transactions with owners - nine months ended Sept 30, 2017	1	-	3	(1 270)	(1 266)
Equity at September 30, 2017	\$ 418 \$	969 \$	(6) \$	27 762 \$	29 143

Cash flow

Figures in USD (000's)	30-Sep-18	30-Sep-17	2017
	Unaudited	Unaudited
Cash flows from operating activities
Income for the period	\$ 2 805	\$ 902	\$ 4 475
Depreciation and amortization	2 620	1 731	2 430
Finance costs (income)	(63)	34	19
Income tax expense (benefit)	837	44	(2 976)
Impairment of intangible assets	-	-	5
Cash receipt (payment) for income tax	(14)	(38)	(43)
Share based payments expense	940	1 115	1 597
Changes in trade receivables, inventories, other assets	(663)	1 571	693
Changes in trade payables and accrued liabilities	(3 557)	(806)	(75)
Net cash provided by (used in) operating activities	2 905	4 553	6 125
Cash flows from investing activities
Additions to intangible assets	(1 124)	(1 813)	(2 426)
Purchase of property and equipment	(1 565)	(1 272)	(1 872)
Net cash used in investing activities	(2 689)	(3 085)	(4 298)
Cash flows from financing activities
Funds drawn (paid) against line of credit	20	(20)	295
Proceeds from issuance of share capital	784	529	686
Payment of dividends	-	(2 491)	(2 910)
Principal and interest payments on finance leases	(220)	(175)	(199)
Net cash provided by (used in) financing activities	584	(2 157)	(2 128)
Effect of exchange rate changes on cash and cash equivalents	(400)	818	1 089
Net changes in cash and cash equivalents	400	129	788
Cash and cash equivalents at beginning of period	18 398	17 610	17 610
Cash and cash equivalents at end of period	\$ 18 798	\$ 17 739	\$ 18 398
Supplemental disclosures -
Property and equipment acquired under finance leases	\$ 133	\$ 813	\$ 868

New HPC order from established data center OEM

DATA CENTER SEGMENT

Asia

Order in Q3 2018 from Fujitsu for new HPC cluster

• Asetek RackCDU™ liquid cooling for a global industrial customer in Asia
• The installation will include 22 racks populated by compute nodes using Asetek's Direct-to-Chip™ heat capture technology
• Fujitsu expanding beyond the traditional Government and Education segments

• Order value: USD 400,000

• May 2017: Taiwan's new Supercomputer at the National Center for High Performance Computing (NCHC)

• Asetek RackCDU D2CT (Direct-to-Chip) liquid cooling solution

• May 2018: New High Performance Computing (HPC) system at a currently undisclosed location

• Asetek RackCDU D2CT (Direct-to-Chip) liquid cooling
• January 2018: Institute of Fluid Science at Tohoku University in
• November 2017: Japan's fastest AI Supercomputer System at the National Institute of Advanced Industrial Science and
• Asetek RackCDU D2CT (Direct-to-Chip) liquid cooling

Other recent Fujitsu orders

Strategic position

Large and growing markets Supplying global brands Market leading solutions Strong IP

Profitable growth