Asetek A/S

Investor Presentation • Apr 26, 2017

First Quarter 2017

26 April 2017

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Disclaimer

2

ASETEK in brief

Listed on Oslo Børs OSE4520 Technology Hardware & Equipment

Sales FY'16 USD 51 million / Q1'17 USD 11.5 million

• Business Provider of liquid cooling solutions for PCs, servers and data centers
• Operating profit Desktop PC segment FY'16 USD 14.3 million / Q1'17 USD 3.2 million Data center segment FY'16 USD (6.9) million / Q1'17 USD (2.1) million

Market cap USD ~220 million / NOK ~1.9* billion

* 1 USD = NOK 8.60 (25.04.17)

Asetek specializes in liquid cooling solutions for PCs, servers and data centers

What we do

Our integrated value chain and global reach

Aalborg (Denmark) R&D and Engineering

Q1'17 report highlights

• New orders and development agreement with major player reflect increased end-user adoption in data center segment
• New data center customer in South Korea
• Surpassed >4m shipped sealed loop coolers since inception
• Revenues of USD 11.5 million, up 10% vs. Q1'16
• Driven by high-end gaming cooling demand
• Dividend of NOK 1.00 per share for 2016 approved

Revenue per segment, USD thousands

Two business segments

Positive development despite challenged PC industry

DESKTOP SEGMENT

Do-It-Yourself PC enthusiasts 81% sales*
Gaming and Performance Desktop PCs 18% sales*
Enterprise Workstations 1% sales*

• Desktop segment driven by new, powerful technologies and high profile computer games
• Strong demand within the DIY market
• 4 new products began shipping
• Increasing need for advanced cooling due to customer desire for a more immersive gaming experience
• 3 new products began shipping

• Workstation category marginal part of segment today

Quarterly data center revenue 2013-Q1 2017

Continued data center expansion

• Two new HPC Installations deploy Asetek signature RackCDU D2C (Direct-to-Chip) liquid cooling solutions • Existing HPC installations expand through repeat orders for RackCDU placed by existing OEM partners

• Asetek technology offers both CPU cooling but also GPGPU (General Purpose Graphic Processor Unit) cooling • Power consumption of greater than 300 watts per GPU (or GPGPU co-processors) are becoming the norm

• Intech & Company distributes PC and server components, EMC storage products, and APC power supplies in South Korea • First orders: sealed loops and InRackCDU D2C (Direct-to-Chip) liquid cooling solutions

DATA CENTER SEGMENT

Global leadership in OEMs & installations

DATA CENTER SEGMENT

Revenue development

• Q1'17 group revenue of \$11.5m driven by DIY desktop sales
• Increase of 10% vs Q1'16
• Q1'17 desktop revenue \$11.1m
• Driven by demand in the do-it-yourself (DIY) market
• Compares with \$9.4m in Q1'16 and \$16.3m in Q4'16
• Q1'17 data center revenue of \$0.4m
• Compares with \$1.0m in Q1'16 and \$1.6m in Q4'16
• Reaffirming 2017 expectations

Group revenue, USD thousands

Gross margin and earnings development

Gross margin development Group EBITDA development, USD thousands

• Group gross margin of 38.5% (39.0%)
• Desktop gross margin at 38.6% (38.8%)

• Data center gross margin at 36.7% (41.7%)

  • Fluctuates due to variability in the mix of deliverables on government contracts relative to the volume of product shipments to OEMs
  • Variability is expected to continue in 2017

• Desktop EBITDA margin of 30.6% (29.8%)

• Data center EBITDA of USD (1.8) million
• EBITDA affected by investments in technology development, product marketing, and sales development with data center partners and OEM customers

12

Income statement

• Increased costs related to headcount growth, investments in developing OEM partnerships and intellectual property defense

• Reduced depreciation on capitalized assets

USD (000's)		Q1 2017		Q1 2016
	Group	Desktop	Data center	Group	Desktop	Data center
Revenue	11 471	11 054	417	10 404	9 414	990
Gross Margin	38.5 %	38.6%	36.7%	39.0 %	38.8%	41.7%
Other operating expenses	2 831	878	1 953	2 205	840	1 365
EBITDA adjusted	1 584	3 384	(1 800)	1 857	2 809	( 952)
Depreciations	388	162	226	615	212	403
Share based compensation	48	16	32	( 8)	( 3)	( 5)
E B I T	1 148	3 206	(2 058)	1 250	2 600	(1 350)
EBIT Margin	10.0 %	29.0%	N/A	12.0 %	27.6%	N/A
HQ, Litigation expenses	549			369
HQ, Share based compensation	24			13
HQ, Other	296			248
Headquarters costs	869			630
EBIT, total	279			620

14

Cash flow statement

USD (000's)	Q1 2017	Q4 2016	Q3 2016	Q2 2016	Q1 2016
Income (loss) for the period	151	7,578	2,055	(387)	391
Depreciation, amortization and impairment	388	563	598	702	615
Finance cost (income) and taxes	8	(4,707)	6	9	14
Share based compensation	72	88	115	120	5
Changes in current assets other than cash	4,353	(4,182)	(3,142)	(752)	4,181
Changes in payables and accrued liabilities	(5,769)	1,342	3,670	2,088	(3,164)
Net cash provided (used) in operating activities	( 797)	682	3 302	1 780	2 042
Additions to intangible assets and other assets	(391)	(433)	(398)	(539)	(465)
Purchase of property and equipment & other	(225)	(528)	(169)	(251)	(129)
assets Net cash used in investing activities	(616)	(961)	(567)	(790)	(594)
Proceeds from debt issuance, other LT liabilities
Cash flows on credit lines/debt/lease	(213)	125	(44)	(37)	(2)
Proceeds from issuance of capital / conv debt	274	112	-	4	17
Net cash provided (used) by financing activities	61	237	(44)	(33)	15
Effect of exchange rate changes on cash	(74)	(641)	25	(114)	211
Net changes in cash and cash equivalents	(1 426)	( 683)	2 716	843	1 674
Cash and cash equivalents at beginning of period	17 610	18 293	15 577	14 734	13 060
Cash and cash equivalents at end of period	16 184	17 610	18 293	15 577	14 734

15

Balance sheet

Balance sheet composition – Q1 2017

• Proposed dividend of NOK 1.00 per share for 2016 (Not reflected in the balance sheet)
• Limited investments in fixed asset
• Strong cash position
• Low interest bearing debt
• Balance sheet enabling growth and financial flexibility

Desktop strategy and outlook

		Outlook
Do-It-Yourself PC enthusiasts 81% sales Gaming and Performance Desktop PCs 18% sales	• Drive differentiation • Increase GPU attach	Reaffirming 2017 expectations
Enterprise Workstations 1% sales	• Recover market share

DESKTOP SEGMENT

Data center strategy and outlook

Exploit established leadership HPC Execute on the development agreement with the as yet to be disclosed major player in data center market

Goal	Strategy
	Exploit established leadership HPC
Increase end-user adoption with existing OEMs Add new OEMs
	segment

Explore potential opportunities to grow beyond the HPC

Outlook

Reaffirming 2017 expectations

DATA CENTER SEGMENT

• New orders and development agreement with major player reflect increased end-user adoption in data center

• segment
• New data center customer in South Korea
• Surpassed >4m shipped sealed loop coolers since inception
• Revenues of USD 11.5 million, up 10% vs. Q1'16
• Dividend of NOK 1.00 per share for 2016 approved
• Reaffirming 2017 expectations

Summary

Largest shareholders as of 24 April 2017

Holding	Percentage	Country	Account Type
3,186,341	12.5 %DNK		ORDINARY
1,300,056	5.1 %USA		NOMINEE
1,226,926	4.8 %DNK		NOMINEE
1,177,792	4.6 %DNK		ORDINARY
1,060,000	4.2 %USA		NOMINEE
1,027,979	4.0 %LUX		NOMINEE
998,668	4.0 %NOR		ORDINARY
799,397	3.1 %CHE		NOMINEE
698,327	2.7 %NOR		ORDINARY
687,008	2.7 %DNK		NOMINEE
668,532	2.6 %BEL		NOMINEE
630,613	2.5 %NOR		ORDINARY
568,013	2.2 %KWT		NOMINEE
538,834	2.1 %SWE		NOMINEE
530,163	2.1 %DNK		NOMINEE
512,845	2.0 %FIN		NOMINEE
471,717	2.0 %GBR		NOMINEE
463,000	1.8 %DEU		NOMINEE
394,007	1.5 %BEL		NOMINEE
374,496	1.5 %NOR		ORDINARY
17,314,714	68.0 %
7,640,614	30.0 %
502,424	2.0 %
25,457,752	100.0 %

Income statement

Figures in USD (000's)	Q1 2017	Q1 2016	2016
	Unaudited	Unaudited
Revenue	\$ 11,471	\$ 10,404	\$ 50,921
Cost of sales	7,056	6,342	31,171
Gross profit	4,415	4,062	19,750
Research and development	883	707	3,428
Selling, general and administrative	3,253	2,735	11,653
Total operating expenses	4,136	3,442	15,081
Operating income	279	620	4,669
Foreign exchange (loss) gain	(110)	(202)	330
Finance (income) costs	(9)	(14)	(8)
Total financial income (expenses)	(119)	(216)	322
Income before tax	160	404	4,991
Income tax (expense) benefit	(9)	(13)	4,646
Income for the period	151	391	9,637
Other comprehensive income items that may be reclassified to profit or loss in subsequent periods:
Foreign currency translation adjustments	(6)	249	(455)
Total comprehensive income	\$ 145	\$ 640	\$ 9,182
Income per share (in USD):
Basic	\$ 0.01	\$ 0.02	\$ 0.39
Diluted	\$ 0.01	\$ 0.02	\$ 0.38

Figures in USD (000's)	Q1 2017	Q1 2016		2016
	Unaudited	Unaudited
Revenue	\$ 11,471 \$	10,404	\$	50,921
Cost of sales	7,056	6,342		31,171
Gross profit	4,415	4,062		19,750
Research and development	883	707		3,428
Selling, general and administrative	3,253	2,735		11,653
Total operating expenses	4,136	3,442		15,081
Operating income	279	620		4,669
Foreign exchange (loss) gain	(110)		(202)	330
Finance (income) costs	(9)		(14)	(8)
Total financial income (expenses)	(119)		(216)	322
Income before tax	160	404		4,991
Income tax (expense) benefit	(9)		(13)	4,646
Income for the period	151	391		9,637
Other comprehensive income items that may be reclassified
to profit or loss in subsequent periods:
Foreign currency translation adjustments	(6)	249		(455)
Total comprehensive income	\$ 145 \$	640	\$	9,182
Income per share (in USD):
Basic	\$ 0.01 \$	0.02	\$	0.39
Diluted	\$ 0.01 \$	0.02	\$	0.38

Balance sheet

	31 Dec 2016
\$	1,871
	1,684
	4,874
	642
	9,071
	1,158
	13,325
	17,610
	32,093
\$	41,164
\$	417
	-
	28,130
	(257)
	28,290
	264
	264
	524
	1,305
	1,413
	9,368
	12,610
	12,874
\$	41,164
\$	31 Mar 2017 Unaudited 2,043 1,924 4,765 675 9,407 1,111 9,272 16,184 26,567 35,974 417 274 28,353 (260) 28,784 361 361 387 1,245 1,153 4,044 6,829 7,190 35,974

Equity

Unaudited
		Share		Share	Translation	Other	Retained
Figures in USD (000's)		capital		premium	reserves	reserves	earnings	Total
Equity at January 1, 2017	\$	417	\$	-	\$ (248)	\$ (9) \$	28,130	\$ 28,290
Total comprehensive income - quarter ended March 31, 2017
Income for the period		-		-	-	-	151	151
Foreign currency translation adjustments		-		-	(6)	-	-	(6)
Total comprehensive income - quarter ended March 31, 2017		-		-	(6)	-	151	145
Transactions with owners - quarter ended March 31, 2017
Shares issued		-		274	-	3	-	277
Share based payment expense		-		-	-	-	7 2	7 2
Transactions with owners - quarter ended March 31, 2017		-		274	-	3	7 2	349
Equity at March 31, 2017	\$	417	\$	274	\$ (254)	\$ (6) \$	28,353	\$ 28,784
Equity at January 1, 2016	\$	416	\$	76,665	\$ 207	\$ (9) \$	(58,633)	\$ 18,646
Total comprehensive income - quarter ended March 31, 2016 Loss for the period		-		-	-	-	391	391
Foreign currency translation adjustments		-		-	249	-	-	249
Total comprehensive income - quarter ended March 31, 2016		-		-	249	-	391	640
Transactions with owners - quarter ended March 31, 2016
Shares issued		-		1 5	-	-	-	1 5
Share based payment expense		-		-	-	-	5	5
Transactions with owners - quarter ended March 31, 2016		-		1 5	-	-	5	2 0
Equity at March 31, 2016	\$	416	\$	76,680	\$ 456	\$ (9) \$	(58,237)	\$ 19,306

	Share	Share	Translation	Other	Retained
Figures in USD (000's)	capital	premium	reserves	reserves	earnings	Total
Equity at January 1, 2017	\$ 417	\$ -	\$ (248)	\$ (9)	\$ 28,130	\$ 28,290
Total comprehensive income - quarter ended March 31, 2017 Income for the period Foreign currency translation adjustments	- -	- -	- (6)	- -	151 -	151 (6)
Total comprehensive income - quarter ended March 31, 2017	-	-	(6)	-	151	145
Transactions with owners - quarter ended March 31, 2017 Shares issued	-	274	-	3	-	277
Share based payment expense	-	-	-	-	7 2	7 2
Transactions with owners - quarter ended March 31, 2017	-	274	-	3	7 2	349
Equity at March 31, 2017	\$ 417	\$ 274	\$ (254)	\$ (6)	\$ 28,353	\$ 28,784
Equity at January 1, 2016	\$ 416	\$ 76,665	\$ 207	\$ (9)	\$ (58,633)	\$ 18,646
Total comprehensive income - quarter ended March 31, 2016 Loss for the period Foreign currency translation adjustments	- -	- -	- 249	- -	391 -	391 249
Total comprehensive income - quarter ended March 31, 2016	-	-	249	-	391	640
Transactions with owners - quarter ended March 31, 2016 Shares issued Share based payment expense Transactions with owners - quarter ended March 31, 2016	- - -	1 5 - 1 5	- - -	- - -	- 5 5	1 5 5 2 0
Equity at March 31, 2016	\$ 416	\$ 76,680	\$ 456	\$ (9)	\$ (58,237)	\$ 19,306