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Asetek A/S
Investor Presentation • Apr 28, 2022
6301_iss_2022-04-28_0e8de1f5-1433-43aa-af09-b7360b0ea32a.pdf
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Q1 2022
28 April 2022
Disclaimer
This presentation contains forward-looking statements concerning Asetek's financial condition, results of operations and business. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management's current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance, or events to differ materially from those expressed or implied in these statements.
Forward-looking statements include, among other things, statements concerning Asetek's potential exposure to market risks and statements expressing management's expectations, beliefs, estimates, forecasts, projections and assumptions. A number of factors that affect Asetek's future operations and could cause Asetek's results to differ materially from those expressed in the forward-looking statements included in this document, include (without limitation):(a) changes in demand for Asetek's products; (b) currency and interest rate fluctuations; (c) customer concentration and industry competition; (d) legislative, fiscal, and regulatory developments, including changes in tax or accounting policies; (e) ability to enforce patents; (f) product development risks; (g) customer credit risks; and (h) supply of components.
All forward-looking statements contained in this document are expressly qualified by the cautionary statements contained or referenced to in this disclaimer. Undue reliance should not be placed on forward-looking statements. Additional factors that may affect future results are contained in the risk management section in Asetek's most recent annual report (available athttps://ir.asetek.com/) and these factors also should be considered. Each forward-looking statement speaks only as of the date of this document. Asetek does not undertake any obligation to publicly update or revise any forward-looking statement as a result of new information or future events other than as required by Danish law. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this document.
- First-quarter revenue of \$13.9 million compared with record \$25.0 million in Q1 2021
- Gross margin of 38% compared with 43% in Q1 2021
- SimSports orders and backlog of ~\$1.5 million per end-April with initial shipments in March and additional products in the pipeline
- 2022 Outlook maintained with group revenue growth expected of -5% to +15% from 2021 and operating income is expected to be between -\$1 and +\$5 million, reflecting a volatile global situation
Group revenue and G&E EBITDA margin USD thousands
19.536 17.405 16.505 11.179 17.103 10.391 15.661 9.124 14.147 21.629 27.850 25.015 23.185 13.534 18.069 13.889 32% 33% 35% 27% 31% 22% 30% 21% 34% 35% 35% 35% 33% 20% 29% 21% EBITDA margin G&E
Q2 2018 Q3 2018 Q4 2018 Q1 2019 Q2 2019 Q3 2019 Q4 2019 Q1 2020 Q2 2020 Q3 2020 Q4 2020 Q1 2021 Q2 2021 Q3 2021 Q4 2021 Q1 2022
Status update Gaming & Enthusiast market
Early 2022 • Volatile global situation reflected in 2022 growth expectations
Company specific
- Shut-downs tied to Covid-19, power outages, sporting and political events in China having tangible impact on operations
- Customers assessing timing for launch of new liquid cooling products
- Component supply and logistics issues affecting delivery schedules, ~USD 1 million of revenue postponed to Q2
- Q1 performance reflect one OEM significantly underperforming vs. forecasts
Industry
- Supply chain challenges and rising component cost and shortages
- Global shortage of semiconductor chips, mainly GPUs, curbing demand, also affecting markets for PC and gaming peripherals
- Increasing logistics costs and US tariffs
Outlook
- Volatile global situation reflected in 2022 growth expectations
- Ambition of 15% annual average revenue growth over time maintained
- Uncertainty related to timing of the market normalizing
- Continuous focus on strengthening supply chain capacity and capabilities
- Temporary adjusting product pricing to mitigate logistics costs
- Working with existing contract manufacturers to leverage capacity outside China
- Inflationary pressures may impact discretionary consumer spending
- Major launches of new CPUs and GPUs from NVIDIA, AMD and Intel expected in the second half
- SimSports not affected by tariff as final assembly is in Denmark
Full throttle for SimSports
- Started shipments of high-end Invicta sim racing pedals in March
- ‒ Throttle, brake and add-on clutch, along with the RaceHub software for easy adjustments and calibration
- ‒ Only 17 months after deciding to take a leading position in this growing market
- Strong feedback from sim racing reviewers, influencers and end-users
- Orders and backlog of ~\$1.5 million per end-April
- ‒ Represents thousands of pedal sets
- ‒ Risk in end user conversion and pace of shipments affected by component shortages
- ‒ New products in pipeline indicate more to come
"This is pure awesomeness" - end user
"I already shaved 1 sec. in just 1 lap... Man this feels good." - end user
"Asetek is setting new standards when it comes to hydraulic brakes. There are currently no comparable products in this price range from competitors who recreate the brake 1:1, as is the case in real racing." - Ron Reviewt, Hardcore product reviewer
"The brake on this pedal set is absolutely unbelievable. Exactly the same feeling you get in a real car… It's changed the game of how good a brake pedal can be in sim racing…" - James Baldwin (Influencer and Streamer)
Business overview
Gaming and Enthusiast Data center
Enthusiasts and do-it-yourself (DIY)
Gaming/Performance PCs
Liquid cooling for Competitive and committed gamers and enthusiasts
SimSports
Liquid cooling for enterprises
Immersive equipment for gamers, racing and automobile enthusiasts
Global platform with integrated value chain supports growth and expansion
Strategic position: Large and long-term growing markets | Supplying global brands | Market-leading solutions
IP platform: Applications | Technology | Systems | Products | Patents | High-volume manufacturing | World-wide hub infrastructure
9 million units shipped | 157 employees | FY'21 revenue of USD 80m | Listed on Oslo Børs
Gaming & Enthusiast
Product release activity affected by current market uncertainties
- Four new products started shipping in Q1 2022
- ‒ One new customers
- ‒ Including two liquid coolers for GPUs
- Eleven new products estimated to start shipping in Q2 2022
- ‒ OEMs continue to assess timing of new products releases due to the component shortages, logistics and cost
- ‒ Continued strong long-term demand growth expected
- Continuous investments in product development and branding to expand reach with key customers based on the core tenants of performance, quality and reliability
15
Strengthening a wide and diversified base of Gaming & Enthusiast OEMs
Top 5 customers revenue split Top 5 Gaming and Enthusiast customers1 2)
- Currently shipping to over 20 OEMs
- Top five represented 89% of Gaming and Enthusiast revenue in YTD 2022, vs. 83% for full-year 2021
- Ambition to increase diversification over time
- Continuous monitoring and assessment of IP
Gaming & Enthusiast strategic development
| Goal | Strategy | Development and outlook | ||||
|---|---|---|---|---|---|---|
| Further develop leadership in the gaming and enthusiast liquid cooling market |
• R&D and product development • Growing existing customers • Widening OEM customer base Branding and marketing • |
• 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 • • Currently over 20 OEM customers Focus on reducing single-customer dependency • • Co-branding agreements in place with several OEMs • Connecting directly with gamers and enthusiasts via social media and online communities, such as Discord • Positioning to monetize Asetek brand |
Product roll-out progressing to plan
- Asetek Invicta premium performance SimRacing pedals already available for customers
- Opened for pre-orders for the Forte mid-level racing pedals in April
- ‒ Plan to start shipping in late June
- Expanding line of accessories including the Invicta™ racing boots for full immersion, maximum performance and unrivalled comfort in sim racing
Developing sim racing eco-system
- Development of steering wheels and wheelbase on track
- ‒ Exclusive agreement with HangZhou MiGE for use of its servo motor technology in Asetek's range of high-end wheel-bases
- ‒ Tailor-made solutions with Asetek designed motor using own software and IP
- ‒ Planned launch in late 2022
- Development of Pagani-licensed products progressing for release in mid-2022
- Developing exciting marketing campaign for F1 and GT3
- Product development founded on extensive mechatronics and real racing competencies in close collaboration with leading sim racers
SimSports strategic development
| Goal | Strategy | Development and Outlook | ||
|---|---|---|---|---|
| Becoming a next-level immersive gaming experiences provider |
• Leverage core mechatronics capabilities and global supply chain • Develop product offering based on acquired IP and technology • Establish a thriving third growth segment in a fragmented market |
• Initial focus on innovation and product development • Product development on plan based on own software and implementation of acquired IP • Finalize market and channel strategies, including direct sales, online resellers, motorsports shops etc. • First products available for customers Q1 2022 with further launches in 2022 and 2023 • Supported by brand platform and reputation for performance, quality, reliability and immersive experiences |
EU supports use of liquid cooling to cut data center CO2 emissions and enable circular economy
- Continued shipping to existing HPC customers in Q1 2022
- Development of new EU energy legislation favorable to adoption of Asetek technology progressing based on the EU Commission's July 2021 Energy Efficiency Directive
- Proposal requires the reuse of waste heat generated in data centers
- The EU seeks to neutralize CO2 emissions and preserve and reuse precious resources from rapidly growing data center activity through adoption of circular infrastructure
- Asetek's Direct-to-chip liquid cooling enables power savings and CO2 emission reductions by enabling direct reuse of the waste heat at 60-65 centigrade in district heating systems without using power consuming heat-pumps
- It is one of the most impactful technologies available to address these issues and meets EU's requirements for "minimal ancillary energy inputs"
- Preparing for increased long-term demand associated with this potential legislation
Update data center strategic development
Maintain Data center position and create a sustainable and profitable business over time
18
Goal
• Influence the influencers and support adoption of latest EU proposals into legislation for climate gains from reusing waste heat on the way towards carbon neutrality
Strategy
• Leverage existing technology and investments to gain position in the general Data center segment
Development and Outlook
- Global sustainability agenda strengthens rationale for Asetek's data center solution over times
- Positive impact from direct engagement with the EU with current "Green Deal" proposals favoring liquid cooling
- Market adoption of liquid cooling will remain slow until adoption of the proposed Green Deal legislation has been decided
- Prepared and positioned for a potential shift in demand driven by adoption of the proposed legislation
- Sharpening Data center business segment and stop investments in HPC niche to improve profitability
- General Data center business segment to be main priority going forward
Financials
Income statement
| Figures in USD (000's) | Q1 2022 | Q1 2021 | 2021 |
|---|---|---|---|
| Unaudited | Unaudited | ||
| Revenue | \$ 13,889 \$ |
25,015 \$ | 79,803 |
| Cost of sales | 8,583 | 14,284 | 46,430 |
| Gross profit | 5,306 | 10,731 | 33,373 |
| Research and development | 1,080 | 1,850 | 7,092 |
| Selling, general and administrative | 6,168 | 5,347 | 24,503 |
| Special items | - | - | 1,713 |
| Other expense (income) | - | - | (714) |
| Total operating expenses | 7,248 | 7,197 | 32,594 |
| Operating income | (1,942) | 3,534 | 779 |
| Foreign exchange (loss) gain | 130 | 534 | 832 |
| Finance income (costs) | (45) | (52) | (214) |
| Total financial income (expenses) | 85 | 482 | 618 |
| Income before tax | (1,857) | 4,016 | 1,397 |
| Income tax (expense) benefit | (134) | (890) | (60) |
| Income for the period | (1,991) | 3,126 | 1,337 |
| Foreign currency translation | |||
| adjustments | (433) | (1,212) | (1,709) |
| Total comprehensive income | \$ (2,424) |
\$ 1,914 \$ |
(372) |
| Income per share (in USD): | |||
| Basic | \$ (0.08) |
\$ 0.12 |
\$ 0.05 |
| Diluted | \$ (0.08) |
\$ 0.12 |
\$ 0.05 |
- Q1 revenue reflects reduced shipments of Gaming & Enthusiast products compared to same period last year
- Sales of 211,000 sealed loops in Q1 (-49%)
- Revenue fluctuations due to changes in shipments of G&E products negatively impacted by shortage of semiconductor chips and
- Operating expenses level with Q1 2021
- ‒ Reflects increased investment in the SimSports business and reduced Data center related expenses
- ‒ DKK/USD FX rate beneficial to operating expenses in Q1 2022
Margin development
Quarterly Group gross margin development
- Gross margin of 38.2% vs. 42.9% in Q1 2021
- Decrease reflects higher component costs due a weaker U.S. dollar and supply shortages, increased shipping costs and a change in the mix of product shipments
- Gross margin is expected to be higher than 40% going forward
Strong balance sheet supporting long-term growth
Balance sheet
USD thousands as at March 31, 2022
- Cash position primarily reflects reduction to accounts payable and other balance items including investment in new HQ during Q1
- Low interest-bearing debt
- Solid and attractive partner for OEM customers
- Flexibility to develop and defend IP
- Platform for expanding gaming product portfolio
- Supportive of efficient funding of new corporate HQ
- Ambition to distribute cash surplus over time subject to change of current tax situation
Financial strategy
23
Growth ~15% p.a.1
Summary and outlook: 2025 revenue ambition maintained
- Long-term growth target of an average of approximately 15% per annum
- ‒ In some years growth may exceed the average, and in other years it may be lower
- 2022 growth expectation considers chip shortages, logistics challenges, pandemic lockdowns, general geo-political tensions and an expected normalization of business climate
- Encouraging market debut for first SimSports products
- Development of SimSports offering progressing to plan with more products for launch in 2022 and 2023
Q&A
Appendix
Management
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 Erik Damsgaard
- Experienced Managing Director from the electrical and electronic manufacturing industry
- 20 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
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
Maria Hjorth
- 20+ years of consulting and financial sector experience covering business development, M&A, investor relations and operational optimization
- Professional board member
- MSc and BSc in Economics from University of Copenhagen and a MSc in Business Psychology from University of Westminster in London
Income statement
| Figures in USD (000's) | Q1 2022 | Q1 2021 | FY 2021 |
|---|---|---|---|
| Unaudited | Unaudited | ||
| Revenue | \$ 13,889 \$ |
25,015 | \$ 79,803 |
| Cost of sales | 8,583 | 14,284 | 46,430 |
| Gross profit | 5,306 | 10,731 | 33,373 |
| Research and development | 1,080 | 1,850 | 7,092 |
| Selling, general and administrative | 6,168 | 5,347 | 24,503 |
| Special items | - | - | 1,713 |
| Other expense (income) | - | - | (714) |
| Total operating expenses | 7,248 | 7,197 | 32,594 |
| Operating income | (1,942) | 3,534 | 779 |
| Foreign exchange (loss) gain | 130 | 534 | 832 |
| Finance income (costs) | (45) | (52) | (214) |
| Total financial income (expenses) | 85 | 482 | 618 |
| Income before tax | (1,857) | 4,016 | 1,397 |
| Income tax (expense) benefit | (134) | (890) | (60) |
| Income for the period | (1,991) | 3,126 | 1,337 |
| Other comprehensive income items that may be reclassified to profit | |||
| or loss in subsequent periods: | |||
| Foreign currency translation adjustments | (433) | (1,212) | (1,709) |
| Total comprehensive income | \$ (2,424) |
\$ 1,914 |
\$ (372) |
| Income per share (in USD): | |||
| Basic | \$ (0.08) |
\$ 0.12 |
\$ 0.05 |
| Diluted | \$ (0.08) |
\$ 0.12 |
\$ 0.05 |
Balance sheet
| Figures in USD (000's) | 31 Mar 2022 | 31 Dec 2021 |
|---|---|---|
| Unaudited | ||
| ASSETS | ||
| Non-current assets | ||
| Intangible assets | \$ 11,466 |
\$ 10,938 |
| Property and equipment | 13,803 | 11,732 |
| Deferred income tax assets | 6,196 | 6,293 |
| Other assets | 353 | 362 |
| Total non-current assets | 31,818 | 29,325 |
| Current assets | ||
| Inventory | 5,832 | 5,532 |
| Trade receivables and other | 14,666 | 17,201 |
| Cash and cash equivalents | 12,632 | 23,296 |
| Total current assets | 33,130 | 46,029 |
| Total assets | \$ 64,948 |
\$ 75,354 |
| EQUITY AND LIABILITIES | ||
| Equity | ||
| Share capital | \$ 442 |
\$ 442 |
| Retained earnings | 56,264 | 58,077 |
| Translation and treasury share reserves | (10,564) | (10,131) |
| Total equity | 46,142 | 48,388 |
| Non-current liabilities | ||
| Long-term debt | 1,328 | 1,540 |
| Total non-current liabilities | 1,328 | 1,540 |
| Current liabilities | ||
| Short-term debt | 2,858 | 1,703 |
| Accrued liabilities | 2,704 | 3,157 |
| Accrued compensation & employee benefits | 1,145 | 2,074 |
| Trade payables | 10,771 | 18,492 |
| Total current liabilities | 17,478 | 25,426 |
| Total liabilities | 18,806 | 26,966 |
| Total equity and liabilities | \$ 64,948 |
\$ 75,354 |
Cash flow statement
| Figures in USD (000's) | 31 Mar 2022 | 31 Mar 2021 | FY 2021 |
|---|---|---|---|
| Unaudited | Unaudited | ||
| Cash flows from operating activities | |||
| Income for the period | (1,991) | 3,126 | 1,337 |
| Depreciation and amortization | 923 | 982 | 3,750 |
| Gain on sale of property, plant and equipment | - | - | (688) |
| Special items | - | - | 1,713 |
| Finance income recognized | - | (1) | (2) |
| Finance costs recognized | 45 | 53 | 216 |
| Finance income, cash received | - | 1 | 2 |
| Finance costs, cash paid | (30) | (32) | (141) |
| Income tax expense | 154 | 890 | 60 |
| Cash receipt (payment) for income tax | - | (70) | (446) |
| Share based payments expense | 142 | 172 | 981 |
| Changes in trade receivables, inventories, other assets | 1,853 | 1,336 | 2,957 |
| Changes in trade payables and accrued liabilities | (8,859) | 485 | 4,578 |
| Net cash provided by (used in) operating activities | (7,763) | 6,942 | 14,317 |
| Cash flows from investing activities | |||
| Additions to intangible assets | (956) | (4,109) | (5,974) |
| Purchase of property, plant and equipment | (2,780) | (3,320) | (8,322) |
| Disposal of property, plant and equipment | - | - | 1,092 |
| Net cash used in investing activities | (3,736) | (7,429) | (13,204) |
| Cash flows from financing activities | |||
| Funds drawn (paid) against line of credit | 1,205 | (525) | 260 |
| Repurchase of common shares | - | (2,124) | (4,833) |
| Proceeds from issuance of share capital | 36 | 617 | 865 |
| Principal payments on capitalized leases | (222) | (215) | (928) |
| Net cash provided by (used in) financing activities | 1,019 | (2,247) | (4,636) |
| Effect of exchange rate changes on cash and cash equivalents | (184) | (311) | (280) |
| Net changes in cash and cash equivalents | (10,664) | (3,045) | (3,803) |
| Cash and cash equivalents at beginning of period | 23,296 | 27,099 | 27,099 |
| Cash and cash equivalents at end of period | 12,632 | 24,054 | 23,296 |
| Supplemental disclosures - Property and equipment acquired under leases |
- | - | 108 |
| Shares issued for purchase of assets | - | 4,222 | 4,222 |
Statement of equity
| Unaudited Figures in USD (000's) |
Translation | Treasury share | Retained | |||||||
|---|---|---|---|---|---|---|---|---|---|---|
| Share capital | reserves | reserves | earnings | Total | ||||||
| Equity at January 1, 2022 | \$ | 442 | \$ | 1,075 | \$ | (11,206) | \$ | 58,077 | \$ | 48,388 |
| Total comprehensive income – quarter ended March 31, 2022 |
||||||||||
| Income for the period | - | - | - | (1,991) | (1,991) | |||||
| Foreign currency translation adjustments | - | (433) | - | - | (433) | |||||
| Total comprehensive income - quarter ended March 31, 2022 |
- | (433) | - | (1,991) | (2,424) | |||||
| Transactions with owners - quarter ended March 31, 2022 |
||||||||||
| Shares issued for options exercised | - | - | - | 36 | 36 | |||||
| Share based payment expense | - | - | - | 142 | 142 | |||||
| Transactions with owners – quarter ended March 31, 2022 |
- | - | - | 178 | 178 | |||||
| Equity at March 31, 2022 | \$ | 442 | \$ | 642 | \$ | (11,206) | \$ | 56,264 | \$ | 46,142 |
| Equity at January 1, 2021 | \$ | 433 | \$ | 2,784 | \$ | (6,373) | \$ | 50,681 | \$ | 47,525 |
| Total comprehensive income – quarter ended March 31, 2021 |
||||||||||
| Income for the period | - | - | - | 3,126 | 3,126 | |||||
| Foreign currency translation adjustments | - | (1,212) | - | - | (1,212) | |||||
| Total comprehensive income – quarter ended March 31, 2021 |
- | (1,212) | - | 3,126 | 1,914 | |||||
| Transactions with owners – quarter ended March 31, 2021 |
||||||||||
| Shares issued for purchase of assets | 6 | - | - | 4,216 | 4,222 | |||||
| Shares issued for options exercised | 1 | - | - | 616 | 617 | |||||
| Shares repurchased | - | - | (2,124) | - | (2,124) | |||||
| Share based payment expense | - | - | - | 172 | 172 | |||||
| Transactions with owners – quarter ended March 31, 2021 |
7 | - | (2,124) | 5,004 | 2,887 | |||||
| Equity at March 31, 2021 | \$ | 440 | \$ | 1,572 | \$ | (8,497) | \$ | 58,811 | \$ | 52,326 |
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