Asetek A/S

Investor Presentation • Feb 26, 2020

Q4 2019

26 February 2020

Highlights

• Q4 revenue of \$15.7m compared with \$16.5m in Q4 2018
• Gross margin of 43% in Q4 compared with 42% in Q4 2018
• Q4 EBITDA adjusted of \$2.6m, level with Q4 2018
• Fiscal 2019 revenue of \$54.3m and EBITDA adjusted of \$6.2m compared with \$67.3m and \$9.4m, respectively in 2018
• Cash increased \$5.9m in 2019 to \$24.5m at year-end
• Asetek to supply data center liquid cooling solution to a global Server OEM's HPC product platform

Q4 reflecting high market volatility

Quarterly Gaming and Enthusiast segment revenue and adjusted EBITDA

USD thousands and %-margin

Gaming and Enthusiast

Macro and industry headwinds

• U.S.-China trade issues, Brexit uncertainty and potential Corona virus effects
• Influencing Gaming and Enthusiast segment due to China manufacturing and consumer exposure
• One large OEM's significant purchase reduction due to alternative sourcing of liquid cooling products

Gaming and Enthusiast revenue reflect expanding OEM customer base

Status

Evolving business model to drive competitiveness and profitability

Focus on core Main benefits technology and IP

• Asetek shipping core liquid cooling solutions

• Customers add own industrial design, packaging and ancillary components

• Improves gross margins

• Fewer commodity components reduce ASPs
• Frees up R&D resources for innovation and development of core IP
• Strengthens competitive position and supports profitable growth
• First OEM customer fully onboarded in 2019

Co-branding strategy remains firm

• Strategy of growing the Asetek brand with end users is unaffected

Building a gaming and enthusiast brand

Historically Currently

Asetek's OEM customers' brands are promoted while the Asetek brand have become more anonymous

• We put our brand forward without compromising our customers' brand
• Dual-branding and brand-behind-the-brand strategies
• Introducing new and high-end products to live the brand and go back to our roots

Goal	Levers	Development and outlook
	R&D and product development	• Focus on delivery of core liquid cooling solutions Ramp-up of development to bring meaningful innovations to market • • Products which deliver best performance, quality and reliability
Continue to dominate the gaming and enthusiast liquid cooling market	Branding and marketing	• Co-branding agreements in place with seven OEMs Connecting directly with gamers and enthusiasts via CoolNation forum • • Positioning to monetize Asetek brand
	Widening OEM customer base	• Currently 25+ OEM customers • Reducing single-customer dependency

Accelerated innovation and product development

Liquid cooling required to maximise desktop processing

"When designing our Ryzen 9 3950X processor, our goal was to push performance to the limit. Liquid cooling was just the ticket."

"We want enthusiasts to enjoy that same level of performance, and we recommend taking full advantage of AIO liquid cooling options from partners like Asetek, known world-wide for offering some of the best technology on the market."

Chris Kilburn Corporate vice president and general manager Client Channel at AMD.

2019 branding highlights

• Co -branding and co -marketing launched
  • ‒ ASUS ROG, EVGA, NZXT and Dell Alienware, GIGABYTE, Adata XPG and Zadak
• Liquid cooling promotion with AMD on its RyzenTM9 launch
• Co -branding programs well received both by OEM partners and the public
• Asetek branded retail boxes on new products and running changes on existing products
• Exposure of the Asetek brand to audiences worldwide and more social media followers

Data center

• Global sustainability agenda strengthens rationale for Asetek's data center solution
• Market adoption remains slow public standards required to trigger wider use of liquid cooling

First design win with global server OEM and new HPC order

Asetek's InRackCDU™ Rack level direct to chip (D2C) liquid cooling to be included in refresh of an existing HPC server product platform

• Servers offered worldwide by the OEM with option to use Asetek's liquid cooling
• Market release expected before year-end 2020
• Early estimates indicate revenue potential of USD 4-5 million over the course of the assumed product life of 18-24 months
• Asetek to provide further details about the OEM and product platform at the time of market release

USD 500k-600k order for HPC installation using OnRackCDU™ liquid cooling from existing global OEM partner for an undisclosed end customer and location with delivery to be completed by Q2 2020

Financials

Quarterly income statement

		Q4 2019			Q4 2018
USD thousands	Group	Gaming and Enthusiast	Data center	Group	Gaming and Enthusiast	Data center
Revenue	15,661	15,199	462	16,505	15,430	1,075
Gross margin	42.9 %	42.8%	46.1%	42.1 %	43.2%	27.0%
Gross profit	6,720	6,507	213	6,953	6,663	290
Other operating expenses*	2,937	1,979	958	3,125	1,231	1,894
EBITDA adjusted	3,783	4,528	(745)	3,828	5,432	(1,604)
Depreciation*	1,140	516	624	1,070	503	567
Share based compensation	161	106	55	236	103	133
EBIT	2,482	3,906	(1,424)	2,522	4,826	(2,304)
EBIT margin	15.8 %	25.7%	N/A	15.3 %	31.3%	N/A
HQ, Litigation expenses, net	668			787
HQ, Share based compensation	88			100
HQ, Other	563			451
Headquarters costs	1,319			1,338
EBIT, total	1,163			1,184

• Decline in Data Center shipments
• Average Gaming and Enthusiast ASP increased due to change to product mix
• Gaming and Enthusiast sales unit volumes for Q4 2019 were 265,000 down 3.9% from Q4 2018 (276,000)
• Operating expenses little changed compared to Q4 2018 and transitioning towards the Gaming and Enthusiast segment, as expected

17 *Due to a lease accounting change effective January 1, 2019, \$145,000 of operating lease costs previously recorded as 'Other operating expenses' are recorded as depreciation in Q4 2019

Full-year income statement

		2019			2018
USD thousands	Group	Gaming and Enthusiast	Data center	Group	Gaming and Enthusiast	Data center
Revenue	54,334	51,791	2,543	67,314	63,030	4,284
Gross margin	42.3 %	42.6%	37.9%	38.9 %	39.5%	29.6%
Gross profit	23,005	22,041	964	26,172	24,902	1,270
Other operating expenses*	12,683	7,435	5,248	12,773	4,165	8,608
EBITDA adjusted	10,322	14,606	(4,284)	13,399	20,737	(7,338)
Depreciation*	4,057	1,908	2,149	3,690	1,784	1,906
Share based compensation	745	419	326	919	293	626
EBIT	5,520	12,279	(6,759)	8,790	18,660	(9,870)
EBIT margin	10.2 %	23.7%	N/A	13.1 %	29.6%	N/A
HQ, Litigation expenses, net	1,942			2,052
HQ, Share based compensation	311			357
HQ, Other	2,219			1,962
Headquarters costs	4,472			4,371
EBIT, total	1,048			4,419

• Lower revenue as anticipated and communicated
• Increased gross margins
• Operating expenses little changed compared to FY 2018 and transitioning towards the Gaming and Enthusiast segment, as expected
• Positive pre-tax income as anticipated and communicated

18 *Due to a lease accounting change effective January 1, 2019, \$569,000 of operating lease costs previously recorded as 'Other operating expenses' are recorded as depreciation in FY 2019

Margin development

Quarterly gross margin development

Comparing with Q4 2018:

• Q4 2019 group gross margin was 42.9% (42.1%). The improvement reflects higher gross margins in the Data Center segment
• Gaming and Enthusiast gross margin decreased slightly to 42.8% (43.2%)
• Data Center gross margin at 46.1% (27.0%). The Data Center gross margins are significantly improved, but remain volatile due to small production series, etc.

Cash generation and usage

Balance sheet

Balance sheet composition

USD thousands

60.000

21

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

Financial priorities

Priorities		Value drivers
	Gaming and Enthusiast leadership	• Evolve business model to drive competitiveness and profitability • Product innovation and rebranding to strengthen market position • Revenue growth and diversification of revenue streams • Margin protection and optimization
Continued profitable growth	Maintaining Data center market position	Ensuring efficient data center operations • • OEM and end-user adoption
and solid financial platform	Cost base optimization	• Targeted IP and R&D investments • Manufacturing • Sales and marketing efficiency
	Cash flow improvement	Cash conversion • • Continued balance sheet optimization

Summary and outlook

• Evolved business model to support customer's own customization of liquid coolers and delivery of core technology with improved margins
• Reflecting business model change, macro and industry headwinds, revenue is expected to decline 5-10% in 2020. 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
• Asetek expects gross margin to increase and a positive income before tax in 2020
• First design win for global server OEM's refresh of an existing HPC server product platform

For more than 20 years, thermal solutions from Asetek have been cooling processors around the globe…

Our AIO coolers can be found in the latest high-end gaming PCs and are sought-after by enthusiasts for their reliable operation, ease-of-use and pervasive cooling. They are also used in some of the fastest computers in the world to enable advances that drive our everyday lives.

Asetek will be an end-user centric brand

we continue to innovate and push the envelope of Hardcore gamers what's possible.

Gamers know they can count on us. We're gamers too, who love to squeeze every bit of performance from our systems. AIO coolers powered by Asetek enable GPU or CPU overclocking to ensure you get the most out of your high-end gaming PC.

Enthusiasts

We know that top-shelf performance is a must when building your own monster rig. That's why

Management

Founder and CEO André S. Eriksen

• Long-term entrepreneur and founder of Asetek
• Previously employed at Danfoss in their management trainee program
• Holds an engineering degree from Aalborg University
• Several MBA level executive management programs from Right, Stanford, MIT and Wharton

CFO

• Peter Dam Madsen
• Previous positions include International Controller (DK) and Chief Financial Officer (US) at Martin Professional, Inc.
• Also served as CFO of Dantax Radioindustri A/S listed on the Copenhagen Stock Exchange
• MBA from Fort Lauderdale Metropolitan University

• 30+ years of high tech industry sales, sales management and marketing experience
• Previously held position as VP of Global Sales at nVidia and AMD
• Has managed global sales teams
• BSc in Electronics and Electrical Engineering from the University of Glasgow in Scotland

VP Global Operations Csaba Vesei

• 14+ years with IBM in numerous leadership roles, where he managed fulfillment, logistics, manufacturing planning, procurement, and supply chain functions
• MBA from Buckinghamshire Chilterns University, as well as a BSc in Information Technology from the College of Dunaujvaros

VP Global Sales and Marketing Dipak Rao

• 15 years+ experience leading global teams and managing global accounts in the hightech industry
• Prior to joining Asetek, Dipak held senior sales and product marketing roles at AMD
• B.A. (Honors) in Marketing from De Montfort University, Leicester in the U.K

VP Global R&D Thomas Ditlev

• 15+ years of experience with Vestas and Grundfos he has an intimate background in sophisticated pumping and cooling systems designed for global markets
• M.Sc.EE degree from Aalborg University as well as an EMBA in Business Psychology from Business Institute in Aalborg

VP Global Quality Magnus Hakanen

• 20+ years of experience from quality management positions within international organizations like VELUX, Grundfos, Vestas, Nilfisk and automotive companies
• M.Sc. in Mech. Engineering from the KTH Royal Institute of Technology in Stockholm, Sweden. In additional he also has a Six-Sigma Black Belt certification

Director Branding and Outbound Marketing Solveig Malvik

• Extensive international experience within branding, marketing, communication and business development in organizations such as Med24, First4Skills and Survitec
• Holds an M.A. in Modern Middle Eastern Studies, Public Policy and Governance from the American University of Beirut and a Cand.mag. in Political Science and Public Administration from the University of Bergen

Board of Directors

Chairman Jukka Pertola

• 20+ years of management experience in ICT, energy, industry, infrastructure and healthcare sectors
• 10+ years of international experience in board positions at private and public companies and organizations
• Solid technological background in telecommunications, IT, digitalization and electrical engineering.
• Experience in R&D funding and technology transfer projects

Vice Chairman Chris Christopher

• 40+ years of leadership, management and tech industry experience
• Most recent Senior VP and GM at HP for an USD 18bn portfolio consisting of blades based client systems, workstations and desktop PCs
• BSEE and MSEE from Colorado State University and an Executive MBA from Insead School of Business

• 20+ years of consulting and financial sector experience covering business development, M&A, investor relations and operational optimization
• Currently Deputy CEO of VP Securities
• MSc and BSc in Economics from University of Copenhagen and a MSc in Business Psychology from University of Westminster in London

Director Jørgen Smidt

• 25 years of international operational and business management experience from the mobile telecoms industry, including Nokia and Motorola
• Experience includes investment and international marketing, market positioning and communication strategies
• Currently a partner at Sunstone Technology Ventures Fund I
• Holds an engineering degree in computer science from the Engineering College of Copenhagen.

Director Erik Damsgaard

• Experienced Managing Director from the electrical and electronic manufacturing industry
• 19 years as leader at OJ Industries in the HVAC and Floor heating industry. He is also Chairman of Danish service and distributor company Masentia A/S and Masentia Holding AB
• Holds M.Sc. in Electronics and a diploma in Business Economics, both from Aarhus University. Has graduated an Executive Management Program at INSEAD

Income statement

USD thousands	Q4 2019	Q4 2018	2019	2018
	Unaudited	Unaudited
Revenue	15,661	16,505	54,334	67,314
Cost of sales	8,941	9,552	31,329	41,142
Gross profit	6,720	6,953	23,005	26,172
Research and development	1,193	980	4,889	4,764
Selling, general and administrative	4,364	4,789	17,821	16,989
Other expense (income)	0	0	(753)	0
Total operating expenses	5,557	5,769	21,957	21,753
Operating income	1,163	1,184	1,048	4,419
Foreign exchange (loss) gain	(371)	(2)	218	342
Finance income (costs)	29	46	188	109
Total financial income (expenses)	(342)	44	406	451
Income before tax	821	1,228	1,454	4,870
Income tax (expense) benefit	(1,901)	(361)	(2,082)	(1,198)
Income for the period	(1,080)	867	(628)	3,672
Other comprehensive income items that may be
reclassified to profit or loss in subsequent periods:
Foreign currency translation adjustments	559	184	(444)	(169)
Total comprehensive income	(521)	1,051	(1,072)	3,503
Earnings per share (in USD):
Basic	(0.04)	0.03	(0.02)	0.14
Diluted	(0.04)	0.03	(0.02)	0.14

Balance sheet

USD thousands	31.12.2019	31.12.2018
ASSETS
Non -current assets
Intangible assets	1,920	2,414
Property and equipment	6,115	4,103
Deferred income tax assets	5,521	7,458
Other assets	307	309
Total non -current assets	13,863	14,284
Current assets
Inventory	1,657	2,862
Trade receivables and other	14,080	15,625
Cash and cash equivalents	24,505	18,627
Total current assets	40,242	37,114
Total assets	54,105	51,398
EQUITY AND LIABILITIES
Equity
Share capital	423	422
Retained earnings	38,197	37,704
Translation and other reserves	388	832
Total equity	39,008	38,958
Non -current liabilities
Long -term debt	2,774	641
Total non -current liabilities	2,774	641
Current liabilities
Short -term debt	1,518	980
Accrued liabilities	1,022	2,185
Accrued compensation & employee benefits	1,526	1,512
Trade payables	8,257	7,122
Total current liabilities	12,323	11,799
Total liabilities	15,097	12,440
Total equity and liabilities	54,105	51,398

Cash flow statement

USD thousands	Q4 2019	Q4 2018	2019	2018
Cash flows from operating activities
Income (loss) for the period	(1,080)	867	(628)	3,672
Depreciation and amortization	1,140	1,070	4,057	3,690
Finance income recognized	(76)	(68)	(359)	(205)
Finance costs recognized	47	22	171	96
Finance income, cash received	76	୧୫	ਤੇ ਰੋਚੇ	205
Finance costs, cash paid	(27)	(22)	(84)	(ae)
Income tax expense (income)	1,900	361	2,082	1,198
Cash receipts (payments) for income tax	(25)	(104)	(172)	(118)
Share based payments expense	249	336	1,056	1,276
Changes in trade receivables, inventories, other assets	(5,323)	(2,885)	2,234	(3,611)
Changes in accounts payable and accrued liabilities	1,840	1,293	154	(2,264)
Net cash provided by (used in) operating activities	(1,279)	ਰੇਤੋ 8	8,870	3,843
Cash flows from investing activities
Additions to intangible assets	(428)	(621)	(1,441)	(1,745)
Purchases of property and equipment	(148)	(349)	(713)	(1,914)
Net cash used in investing activities	(576)	(970)	(2,154)	(3,659)
Cash flows from financing activities
Funds drawn (paid) against line of credit	5	(26)	22	(6)
Proceeds from issuance of share capital	6	(2)	64	782
Principal payments on finance leases	(149)	(101)	(734)	(321)
Net cash provided by (used in) financing activities	(138)	(129)	(648)	455
Eftect of exchange rate changes on cash and cash equivalents	237	(10)	(190)	(410)
Net changes in cash and cash equivalents	(1,756)	(171)	5,878	229
Cash and cash equivalents at beginning of period	26,261	18,798	18,627	18,398
Cash and cash equivalents at end of period	24,505	18,627	24,505	18,627
Property and Equipment acquired under capital leases	0	0	413	134

Statement of equity

		Other Retained reserves earnings
capital	reserves		Total
				38,958
				(628)
				(444) (1,072)
1	-	-	65	66
-	-	-	1,056	1,056
1	-	-	1,121	1,122
423	392	(4)	38,197	39,008
419	1,005	(6)	31,976	33,394
				3,672
				(169)
-	(169)	-	3,672	3,503
				785
				1,276
3	-	2	2,056	2,061
				38,958
	Share 422 - - - - - 3 - 422	Translation 836 - (444) (444) - (169) - - 836	(4) - - - - - 2 - (4)	37,704 (628) - (628) 3,672 - 780 1,276 37,704

FY 2020 financial outlook

Revenue • Group revenue decrease of 5% to 10% for 2020 compared to 2019 • Business model change and macro-economic and industry headwinds Profitability • Gross margin is expected to increase • Positive income before tax expected Capital allocation • R&D at USD ~5 million • Capex at USD ~2 million • Headcount constant around 100 • Flat overheads at Group level Financial position/flexibility • Maintain strong balance sheet and a healthy cash balance - long-term cash conversion cycle moving towards 'soft target' at 0 (zero) days Ambition for shareholder return • Share price appreciation Continued profitable growth and solid financial platform Priorities Outlook

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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