Asetek A/S

Earnings Release • Aug 12, 2020

Asetek - Q2 2020: Gross margin increase and raised full-year expectations

Asetek - Q2 2020: Gross margin increase and raised full-year expectations

· Q2 revenue of $14.1 million compared with $17.1 million in Q2 2019

· Gross margin increased to 51% in Q2 and first half, from 42% in both prior

year periods

· Q2 EBITDA adjusted of $3.1 million, compared with $3.3 million in Q2 2019

which included a $0.8 million positive effect from a favorable patent litigation

settlement

· First-half revenue of $23.3 million and EBITDA adjusted of $3.3 million

compared with $28.3 million and $3.6 million respectively in 2019

· Collaboration with Hewlett Packard Enterprise (HPE) to deliver data center

liquid cooling solutions for HPC and artificial intelligence applications

· 2020 Group revenue expectation updated in July to an increase of 5% to 15%,

from a previously expected decrease, compared with 2019 revenue of $54.3

million

· Gross margin is expected to increase from 2019 and Asetek expects an income

before tax of about $4 to $5 million, up from $1.5 million in 2019

Asetek reported second quarter revenue of $14.1 million compared with $17.1

million in the same period of 2019. First-half 2020 revenue was $23.3 million

compared with $28.3 million in 2019. The change from prior year reflects

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

customer. There was no significant impact from the COVID-19 pandemic on revenue,

supply chain or overall operations during the quarter.

Gross margin was 51% for the second quarter and the first half, up from 42% in

both comparable periods of the prior year, yielding a year-over-year increase in

second-quarter gross profit. The gross margin increase reflects higher sales

prices for Data center products, a stronger U.S. dollar, a richer product mix

and Asetek's business model transition for Gaming and Enthusiast OEMs that

customize their liquid coolers.

"We focus on developing innovative liquid cooling solutions for great end-user

experiences, building strong relationships with our OEM partners and optimizing

our business model to improve margins and drive long-term growth," said André

Sloth Eriksen, CEO and founder of Asetek. "From late second quarter we

experienced a step-change in demand for our Gaming and Enthusiast products which

combined with increased margins for all product groups are expected to yield a

substantial increase in revenue and profit for the full year."

Operating income totaled $2.0 million and adjusted EBITDA was $3.1 million in

the second quarter of 2020, compared with operating income of $2.1 million and

adjusted EBITDA of $3.3 million in the second quarter of 2019.  Operating

expenses in the second quarter of 2019 included a positive effect of $0.8

million related to a favorable patent litigation settlement. First-half 2020

operating income was $1.1 million and adjusted EBITDA was $3.3 million, compared

with operating income of $1.1 million and adjusted EBITDA of $3.6 million in the

same period of 2019.

In April, the Company announced a share buy-back program to offset employee

option grants.  The Company may purchase up to 1.0 million Asetek shares on the

open market for a maximum cost of $4.5 million through September 2020. In the

second quarter, the Company repurchased 287 thousand shares under this program

for a total cost of $1.64 million.

At June 30, 2020, Asetek had working capital of $28.1 million, of which $24.8

million is cash and cash equivalents.  Long-term debt totaled $2.4 million.

In July, the Company announced collaboration with Hewlett Packard Enterprise

(HPE) to deliver its premium data center liquid cooling solutions in HPE Apollo

Systems targeting high performance computing and artificial intelligence

applications.

During the quarter, Asetek announced its new Rad Card GPU Cooler, the industry's

first slot-in PCIe radiator card to provide liquid cooling for GPU's in space

constrained PC cases. Asetek announced its technology is powering the new

Fractal Design Celsius+ CPU coolers, providing enthusiasts enhanced performance,

virtually silent operation and elegant design.

During the quarter, the Company shipped $0.8 million of InRackCDUT on the

largest order received to date from a certain OEM partner, to supply liquid

cooling for a new high-density HPC cluster in North America.

On July 21, Asetek updated its full-year revenue outlook. Following increased

sales expectations for the rest of 2020, primarily driven by strong demand for

the Gaming and Enthusiast product group, the Group revenue expectation was

updated to an increase of 5% to 15%, corresponding to between $57.1 million and

$62.5 million, compared with 2019 revenue of $54.3 million, from the previous

expectation of a decline in revenue of 5% to 10% year over year. Gross margin is

expected to increase from 2019, and Asetek expects an income before tax of about

$4 to $5 million, compared with $1.5 million in 2019.

The Company recognizes significant uncertainty related to potential impact from

COVID-19 over time. Any such uncertainty is not included in the expectations for

the remainder of 2020.

Conference call and webcast today Wednesday, 12 August at 11:30 CEST:

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

results at 11:30 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 Q2 2020 results webcast

via the following link:

https://edge.media-server.com/mmc/p/wdjy2yyg

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:                         5081646

Material:

The second 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