Asetek A/S

Welcome to the Ascitec Q4 2020 Capital Markets Update. Throughout the call, all participants will be in a listen-only mode, and afterwards, there will be a question and a session. Today, I'm pleased to present André Slot Eriksen, CEO. Please begin your meeting.

So, good morning, everyone, and welcome to our Capital Markets Update, March 4th, 2021. I had hoped we could meet physically, but since that's not the case, then we have to get away with the second best solution. And that's what we're trying to pull off now. So if you go to the next slide. There is a disclaimer, I suggest you go and read it. I'm not going to do it for you. So let's jump right into the next slide, into the agenda. So first of all, I'll be talking to you a little bit about growth and market expansion, about some new business areas, what I believe for the future in terms of growth, et cetera. John is taking over, talking more about the gaming and enthusiast cooling business. Deepak is going to talk a little bit about the data center world, how that looks. Jim Carlton will talk about a little bit more about our expansion into the sim sports markets. And then Peter will talk about the financials. And then at the end of the day, Peter and I will do a Q&A and John. So with that, let's go to the next slide. And as we already know, 2020 was a great year for us, and we would like to see that continue, of course. So how do we do that? What do we see? How do we do it, et cetera, is what I'm going to focus on. So with that, let's go into the next slide. In 2020, it was our best year in many ways. It was record revenue, record gross margins, record EBITDA, despite losing our biggest customer, actually. So it's never great to lose your biggest customer, of course, but it's great to see that people keep asking for your products, although you shift the channel, so to speak. 34% revenue growth. I think we have done it before, but now once again, we have confirmed our ability to scale and the flexibility in our business and the scalability in our business. We have, like everyone else, had to deal with COVID-19. I think we have done that in a good way. We have been really busy. We launched a lot of new G&E products. And on top of that, we've also been really busy on the data center side, especially with HPE coming in, of course. And in parallel to that, we are entering new markets. I'll talk more about it, obviously, but we are entering into the sim sports market, which is also a part of the gaming and enthusiast market for that sake. And we think it's very interesting. We are really leveraging our core capabilities. More importantly, I think, is that we are now adding a third leg to our business. Hopefully it will make us even healthier, even stronger. And as a part of accelerating things, we have done a couple of M&A deals and we have added many more team members. So next slide. If we look a little bit of who we are and what we're good at at ACETech, we are founded on innovation and extensive mechatronics capabilities. And these capabilities have pretty much made us into the market leader within liquid cooling and within gaming and enthusiast PC applications. So what is mechatronics? It's actually, let's say, the common denominator of software, hardware and mechanics. And if you look at our products, there is a great deal of all three. And I think that's what we are really good at, combining the three. Next slide. And when I say I think we are good at it, I think I can actually prove that we are good at it, because if you look at this slide on our growth rates the past decade, we have grown 17% a year on average. And that's something I'm proud of. And it's something that I would like to see continue. Next slide, please. The business segments we are in today, I think most of you know, but there may be some who doesn't know. On the gaming and enthusiast side, we are selling coolers. So coolers as a standalone product. to a number of OEMs. Here's a few of them. There's ASUS, Fractal, MSI, NZXT, and so forth. And we are supplying these products OEM, meaning that our customers are branding them. We do have rebranding programs, et cetera, that we'll hear more about later. But the essence is that we don't sell direct to end users. We sell through OEMs and their channels. The target audience here is really PC tinkerers, hardware geeks, gamers, everybody who wants to build their own PC and tinker with their own PC. And along those lines, we also have gaming users, but who may not have the skills or the desire to build their own PC, so they would buy from a gaming OEM. A few examples here is also MSI and Alienware. which is Dell, where we supply the cooler, for example, to Dell directly, then Dell would build it into their PCs and sell it as an Alienware PC. So that's the main part of our market and segments as it looks today. And here on my right side, we're looking at the data center business. That's also purely OEM. We don't sell directly to data centers. We sell to OEMs. Here's three of our top ones, Fujitsu, Hewlett Packard, Enterprise, and Supermicro. Next slide, please. We have been not only from a revenue perspective, but I also think from a volume perspective, quite successful. If you look at the early start, it took some time. But in 2012, we passed the 1 million milestone. And now eight years later, we have sold more than 8 million liquid coolers. Next slide. We are organized in a way where we support our business the best possible way in my opinion. And I think that's also why we have been reasonably successful through COVID-19. And in a normal year, we travel a lot. We see each other a lot. That's not been possible. But because we are spread out, even as a small company, we obviously also used to have a lot of online meetings and communication through time zones and emails. And if you look at the chart here, we have sales and marketing in Silicon Valley. For obvious reasons, we have a lot of customers there, and Jim and Deepak will be calling in from there a little bit later today. Then in Texas, we have John, my COO, that you will also hear from right after me, actually. He's located in Texas. That's also a good place to be because in Texas, you have both Hewlett-Packard Enterprise as well as Dell. Then we have sales offices in London. I'm calling in from Aalborg, Denmark, where we have R&D, prototyping, manufacturing, quality, marketing, branding, and so forth. And then in China, we also have R&D, we have sourcing, manufacturing, quality, order fulfillment, and so forth. And then in Taipei, in Taiwan, we also have sales. And that's important because a lot of our OEM customers have their R&D departments in Taipei. So we believe that we are set up in a pretty decent way to supply or support the kind of business we're trying to do. Next slide. So talking a little bit about the new business we are entering, I'm quite excited about it for many reasons. But one of them is it's not been easy to figure out what we should do next. And when I say next, It could be anything from liquid cooling, other applications to entering gaming markets with different devices, etc. And we have looked for a long time. And I think we have now finally identified the next step in our development. And the reason why we've been looking, of course, is to look longer term, look five years, 10 years, decades out and to continue our strong growth and our solid margins. And needless to say, a business that's selling into five different segments is obviously more robust than a business selling into one segment or only one technology. That being said, we didn't want to go into the rocket ship industry or something similar. We wanted to leverage the capabilities and the know-how and the skills we already have And I think we have a huge potential here for further innovation and consolidation as a business. So next slide. What I'm talking about is the sim sports gaming market. And I do believe that what we're looking at here has a lot of similarities than what we did and what I did some 20 years ago. because the market today is very fragmented. There's a lot of small players selling pedals or steering wheels or things like that. And there are a lot of, let's say, challenges and there's a lot of problems with it. And I think we can solve a lot of those. We got this idea for two reasons. One of them is that I have been in the racing business for two decades myself and I still am. So I, as an individual, know a lot about racing and I have built several simulators myself. And on top of that, our esports academy, we have had, I think, five or six simulators for the last one to two years. And based on that, we got the idea that, hey, there's something we can do better here. There's a good business potential. And from, let's say, a product perspective and mechanical perspective and software for that sake, we do believe there is a big opportunity in the market. Obviously, we would like to go to market as soon as we could and as soon as we can. As such, we made some investments in IP and both hardware and software that was already in the market. I'll get a little bit back to that as well. That will enable us to go to market faster for sure. I think and I hope that late this year we will be able to actually launch the first set of products or rather the first component of a simulator this year. And that has gone tremendously fast. So that's really nice. From a customer perspective, there is a lot of overlaps here. We are still in the gaming space. We're also in the enthusiast space because a lot of people are building their own simulators. And on top of that, a lot of people who are building their own simulators are also building their own PCs. So we see a lot of synergies. Next slide. So to support the development and at the end of the day, our product offerings, We have done two acquisitions as we announced earlier, and what we really bought was, as I said before, time to market. We bought software, we bought technology, we bought consultancy, we bought mechanical and hardware designs. Yes, we could have done this from scratch, but we believed and we still believe that what we have done is we have cut perhaps two years of our development time. And we did that by buying IP from Granite Devices in Finland, a total of 8.3 million, of which half was paid in shares. And then we bought a small company in the UK called Ultimate Game Tech. which was also software and hardware design. And I would say already now, a few months after completion, that these deals have been really good. We are working together really nicely in terms of Granite devices. We are working with them. And in terms of Ultimate Game Tech, we took over a software engineer and took over the business. Next slide. So, We believe that this will fit right into our current business, both in terms of our capabilities, in terms of our customers, in terms of our supply chain and sourcing. And we are very well on the ways, actually. And I would like to show you a little video that we made for the occasion that will give you a little bit better idea of what it actually is that I'm talking about. What we are good at at Acetek is the combination of mechanics, software and hardware. It's called mechatronics. And if you think about it, what is a racing simulator? It's mechanics, it's software and it's hardware. In addition, we are good at mass production. We have sold close to 10 million of our water cooling systems. So we have sourcing and manufacturing and all that in China. So I would say it has gone strong. It's been 7-8 months since I started thinking about this with Simulator as a business opportunity. And now we are sitting here 7-8 months later. I think we are about 16-18 people working on it. We have run a business plan through the board. We have bought up a company in England. And we have bought up Intellectual Property Rights from a Finnish company. As you can see, this is something that we are passionate about. It's something we believe in. We have a decent number of people working on it already. I think we are 18, 20 people or something like that. And I'm spending quite some time on it myself. And if we look at the slide here about our growth, What I hope and what I'm trying to achieve is that in the five years' time, we have doubled our revenue, which would equal $150 million and which would equal a growth rate of 15% a year. And I definitely believe with this entrance to the new market that that's possible. With that being said, I'm sure you have a lot of questions and comments, concerns and excitements. But as mentioned earlier, we will do a Q&A when the rest of my team have done their presentations. So with that being said, I would like to hand over the floor to John.

Good morning. For those of you who don't know me, my name is John Hamill, and I'm the Chief Operating Officer at ACETEC. I'm based in Austin, Texas, and I'm approaching my 12th year anniversary with the company. Next slide, please. So I'd like to start with the overview of our revenue in recent years and quarters. And focusing on last year in particular, it's been quite a ride. We came into the year with modest expectations. In part due to losing our largest customer. And in part due to the outlook provided by our remaining customers. Then along came COVID. And we never looked back. Frankly, we couldn't. We didn't have the time. The entire company, and I'm including quality, research and development, operations, sales and product management, the entire company, our contract manufacturer, our supply chain, was focused on servicing customer demand. And thanks to the sterling efforts of all those entities, we were able to conclude the year with successive record quarters. Next slide, please. The data from John Peady Research confirms we were not alone. Indeed, John Peady Research believes the entire PC hardware market grew substantially last year and effectively established a new level for the industry. Now, whilst COVID played its part, the market drivers we've discussed so often in the past are still underpinning this growth. Next slide. To reiterate how those market drivers come into play, no pun intended, we have to consider how new games or derivatives of existing games drive gamers to chase what we've described historically as that immersive experience because it's that drive for the immersive experience that results in demand for the latest PC technology, the latest CPUs, the latest GPUs, which in turn leads to demand for liquid cooling technology. As liquid coolers are instrumental in enabling these CPUs and GPUs to deliver two things, performance and rock solid stability. And those two elements are both important in achieving the immersive experience that the gamers seek so much. Next slide. As our revenues grew last year, so did our activity with customers. We were able to launch more than 20 new products in the last two quarters of the year. At the same time, we were able to add new customers. We were able to expand product offers with existing customers. And we continue to pursue our branding initiatives. It's a testimony to the resolve and the commitment of the entire Asetek team and again our CM and again our supply chain that we were able to achieve all this and at the same time deliver successive record quarters. Next slide. So this slide is fairly self-explanatory. However, I think it's important to highlight that despite losing our largest customer, we believe that our current customer base is the strongest customer base we've ever had. And we're not resting on our laurels. We continue to look for new partners, new customers, high quality partners, high quality customers. And we're committed to reducing our dependence on any particular customer, whoever they may be. Next slide, please. We touched on our branding initiatives earlier. I just want to reiterate that at this stage, Our branding efforts are designed to complement those of our G&E customers. Our content, our outreach, is designed to remind the community that if you want the best liquid cooling products, you should buy Aceatec products from our partners. Now, there'll be even more emphasis on the Aceatec brand and how the brand is employed when we move into sim sports. And Jim Carlton will talk about that later on in this presentation. Next slide. So to summarise, our goal for the G&E segment is to further develop our leadership. To achieve that goal, we'll focus on innovation sponsored by our R&D team. We'll focus on growing our business with our existing customers. We'll focus on adding new high quality customers and we'll continue with our branding efforts. Now I'll conclude my comments at this point And I'll remind everyone that I'll be available during the Q&A to answer any questions. With that said, I'll hand over to Dipak who will now provide some insight into our data center business.

Hello, everybody. My name is Deepak Rao. I'm the vice president and general manager of what I would call Asetek's traditional business. I've been with Asetek now for a little more than nine years and based in San Jose in California in the United States. I'm going to be presenting an update today related to Asetek's data center business and strategy. Next slide, please. In 2021, we entered our ninth year in the data center business. And in this time, we've established ourselves as a significant player in this space. Seven of the top 100 most powerful and efficient supercomputers in the world are cooled using Asetek technology. And while we have experienced success and we continue to experience success, What we believe really limits our ambition is the lack of action so far on behalf of governments to implement legislation that requires data centers to reduce their carbon footprints. This is something that we'll talk about a little bit more later in the presentation. Next slide. Here we're taking a look in the rearview mirror. 2020 really stands out on the chart that you can see on your screens. This growth that you can see in 2020 was fueled by bringing on two new customers in our data center business. More on those shortly. The numbers, as always, tell a story. The past three quarters have been the biggest three revenue quarters that we've had in data center in the past three years. And clearly our margin trajectory, which is illustrated here by the white line, is also headed in the right direction. And we do hope to see this trend continue into sustained profitability. Next slide. I mentioned just now that our success in 2020 was driven by two new customers. The first of those is HPE, also known as Hewlett Packard Enterprise. HPE is traditionally the world's largest high performance computing OEM brand and Asetek had been selected for their mainstream service systems, which are the Apollo 2000 series and the Apollo 6500 series. So it's good for Asetek to be involved and associated with the biggest name on the block. The second new customer is Supermicro. Supermicro is also a global IT provider. but more on the up and coming level compared to somebody like an HPE, although Supermicro has great ambition and great reach. Now, measuring the meaningful impact of having these two new customers on board, it's actually quite obvious when you look at the screen here and the chart, where on the left hand side you have the 2019 bar and Asetek announced two what we call significant orders in 2019. That's a total number of two. And the value of those orders was just over a million dollars. In 2020, which is after we had the new customers join us, that number of two increased more than sixfold to 13 new orders. and 13 new orders valued closer to $8 million, as you can see here on the screen. So significant impact of bringing on new customers, and we do hope for continued success with both our new customers and our existing customers, such as Fujitsu. Next slide. I'm going to hone in just a little bit on HPE for this slide. HPE has gotten off to what I can only describe as a flying start by winning eight deals in the first six months of their partnership with Acetec. And we certainly hope and we look forward to working together with HPE in building on that initial success. Next slide. I'm going to come back to a point that I'd stated at the very start of this session. Sustained success in the data center business is going to be about legislative change. And our business is going to struggle to meet the grand ambitions that we have without that change. Now, there's a multitude of reasons, some illustrated here on the slide that you can see. why we would continue to pursue the educational efforts that we've started. It feels as though our hard work of doubling down on this approach is not falling on deaf ears. For example, European and Danish politicians have been receptive to our message and to the data. But my job is to manage expectations and we should keep in mind that we're talking about legislation and legislation is something that will take years rather than quarters to be enacted so patience will be key next slide please there's nothing really new on the slide that you're seeing here as a summary our goal remains to create a sustainable and profitable business in the longer term Now, we're persevering with our approach because it does seem to be paying off. Things are going well from both a revenue and a margin point of view in data center right now due to, again, existing customers like Fujitsu and our two new customers that we spoke about just previously. And we're working very hard to keep those efforts moving forward in the right vein. Our green and sustainability agenda is also gathering steam. So we're going to remain committed with those efforts as well. And with that, I'm going to conclude my comments and hand over to my colleague, Jim Carlton, who has something very exciting to speak to you about. Thank you, everybody.

Hi, I'm Jim Carlton, Vice President and General Manager of the new Sim Sports Group here at ACETEC. I've been with the company almost six months, but my history with Asetek goes back almost 12 years. I'm excited to share with you our plans for the sim sports business. Next slide. Sim sports, and particularly racing, is among the fastest growing categories of gaming today. Our target market is willing to invest thousands and thousands or more of dollars in their hardware, all in pursuit of realism. The racing industry, as you are all probably familiar, is huge, and the intersection of real racing and sim racing continues to grow. For the first time ever, the GT3 series is including sim racing. Teams will have to compete successfully in both in order to win a championship. As you can see, NASCAR's iRacing event was the most viewed television esports event in history. That's a big deal. Next slide. As you can see from this drawing, a full-fledged racing setup requires a wide range of products, all designed to provide an immersive experience to the user. From pedal and wheels to shifters and seats, These components all provide the user with a true to life racing experience. And for Asetek, there is no reason not to be eventually in every one of them. Next slide. There are a lot of companies with offerings in this market, but for the most part, they are fragmented, offering only a part of the solution. Nonetheless, we see opportunity in this space. Our long-term goal is to become the one-stop supplier for all your racing needs. Today, the nearest we have to that is Fanatic. They have been at it for 15-plus years, but they still aren't in every category, and they don't provide the user with an experience that they deserve. We hope to change that. Next slide. We see sim racing as a big, big opportunity. There's already one competitor, Fanatic, who is over $100 million. The racing sims are doing really well. iRacing and Assetto Corsa, whose numbers you see here, have seen their numbers surging with no end in sight. Next slide. So to summarize our goal and strategy to become one of the key providers in next-level immersive gaming, we intend to leverage our years of experience in mechanical, electrical, and software engineering as well as our global supply chain to develop products that speak directly to this market. We want to use in-house and acquired technology with an emphasis on the latter to start. We're adding this important third area of growth in the hope that it will one day generate as much or more revenue as our G&E products do. Thank you very much. And now I'd like to hand the mic to Peter Dan Madsen, Asatex CFO.

Thanks, Jim. A lot of interesting stuff going on in your part of the business. And good night, Jim. We are sending Jim and Deepak back to their own beds in California. It's wicked late over there. John, who's in Texas, will stay with us a little bit longer for the Q&A session later. So now we'll turn our focus to the financials. Just as late as last week, we delivered a quarterly report and an annual report with record numbers, and we are, of course, happy and satisfied with those numbers. What we're going to do now is that we're going to look at both the quarter, last quarter, and the last year, 2020, and then we're going to take a look at what the future in terms of 2021 will bring us. Next slide, please. I think by now we have sort of used our allocation of bragging rights, talking about the top line and the bottom line, et cetera. So I'll jump over that relatively easily, just saying that overall we are happy with the numbers. They were in line with our indications and our communications, and that is, of course, how that should be. The quarter as such was super busy in terms of us releasing and shipping now 12 new gaming enthusiast products, And also on the data center side, I think we received six new relatively large orders, so large that we had to disclose them when we did that. And then, of course, we were busy with the two acquisitions that Andre talked about in the gaming enthusiast segment for our new business segment. Next slide, please. If we take a look at revenue over time, then you will see that revenues have grown about 15, a little bit over 15 on average for the last many years. That is in line with also our long-term ambition that André spoke about of a 15% growth rate in the future also. There are good years and weaker years. 2019 was a weaker year. 2020 was a strong year. We'll come back to that in a little bit. What's also interesting here is the white line coming up. when we started being profitable in 2015, then onwards, it's the EBITDA margin, the earnings margin. What's interesting here to me is that when revenue goes up, then also the earnings as a percentage go up as a general rule. And if the profit, if the revenue goes down, then the earnings also go down. So what that shows to me is that not only our gross margin, but also our overheads are pretty much under control. And it shows me that we should have, which we do have also, an eager for revenue increase and growth. Next slide, please. And this thing about weak quarters and strong quarters volatility here, that is also quite obvious when you take a look at the quarters. We came out of it 2019. You can see that little bit to the right towards the middle of the graph here. And 19, that was weak. It was a fighting year for us. We were fighting the tariffs in the US. You might have forgotten about those, but they were there and they are still there. And we were fighting the fact that we were changing our, at that point, largest customer with another or a couple of other larger customers to take their place. So that meant that we actually came into 2020 with some level of anxiety. We didn't know exactly what it would bring. And you could also see that Q1 of 2020 is the weakest of the four quarters in 2020. I said before that there's a general trend that when our revenue goes up, then goes our earnings. So what does that mean then when you see that over on the right-hand side, the EBITDA margin is 24.9 versus 24.8 in the third quarter. It's flat. That doesn't really jive with what I just said. And that's because Q4 last year was impacted by not only foreign exchange rates going towards us, but also an inventory cleanup we did. in the data center side of things. And then we had some write-off of an R&D project on the overheads lines. So that's what happened there. Next slide, please. So looking at gross margins year by year, you can see that gross margins have increased from the 36 level in 2017 and then up north of 40 to 47 in 2020. And that has been in line with our expectations and our communications. For 2020, the gross margin at some point actually was over 50%. And that has been driven by a change in our business model where we are focusing, so to speak, on selling products with a higher value proposition, high margins, and selling our customers kindly. suggesting to our customers, maybe as we call it, to buy lower value products in a different way so that we focus on the products where we really add value and hence also can charge a premium that drives up the margins. And that's what we saw in 2020. We have then seen the opposite effect coming in from weaker U.S. dollars, meaning a more expensive Chinese currency that drives up our cost prices. And then in Q4 specifically, we had an inventory valuation that drove down our gross markets. But 2021, we expect and keep in mind here that our visibility into the future is relatively limited. That's just the nature of our business. But we do expect the gross margins in 2021 to decrease a little bit compared to the very high level we saw in 2020. And as a level indicator, I would put in 45% for 2021. And when I say level, that means it can go up a couple of points, down a couple of points. We had hoped, of course, that President Biden, he would remove the tariffs that we have been fighting in 2021. That seems not to be the case at this point. And although the tariffs don't impact us directly so much, then, of course, having someone, Uncle Sam, stealing 25% of the value chain in terms of tariffs doesn't help our margins at all. We had Next slide, please. Currency rates impact us quite a lot. We report in U.S. dollars, and if we take a look at this slide here, then on the left-hand side, we have the Chinese currency, which impacts our cost of goods. Even though all our sales and purchases are transacted in U.S. dollars, then deep down in the belly of the beast, the Chinese currency, remember, impacts, of course, our negotiations in China. And as a general rule, for every three percentage points up or down the Chinese, remember, moves, then we need to, we are then adjusting our cost prices towards our vendors. I believe that we are pretty well caught up. There's of course an element of delay and there's an element of this three points threshold step here that creates a delay function in itself. I believe we are pretty well caught up at the end of the year on currency exchange rates. But of course, it impacts and you don't, well, your guess as to what's going to happen with the currency is at least just as good as mine. Of course, there are other things that impact the margin than the cost of the goods. Our ability to negotiate sales prices and the product mix, not least, is impacting us quite a lot. And as a proof to that, even though the price of the Chinese money went up by 5% during 2020, we still showed an improved gross margin in 2021. But it's a complex matter for sure. On the right-hand side of the graph here, we have the Danish kroner. About one-third of our overheads are denominated in Danish kroner. Of course, paying our salaries here in Denmark in Danish kroner, of course, impacts our P&L quite significantly. So when the Danish kroner went up by 7% last year, It impacted us significantly. It seems to have flattened out by now, but again, your guess on currency rates is probably better than mine. Next slide, please. If we then try and tally up the income statement and how it looks, Solid revenue increases year over year and certainly also quarter over quarter. We had a 3x difference between the weakest quarter and the strongest quarter, the biggest being the first quarter and the strongest being the fourth quarter. And we could capture that in our organization, and that's actually pretty well done by our supply chain, both internally here but also our vendors. It's a job well done, I believe. Gross margins, we spoke about those already. Operating expenses, if we look at the 2020 number, then it says $23.3 million versus $22 million the year before. If we then allow ourselves to correct for the one-off, income of $750,000, which was a legal settlement that we got paid in 2019, then that actually shows an increase in overhead operating expenses of only 2%. And how does that then link up with the 7% currency rate increase that I just spoke about? And how does that link up with the numbers on the left where operating expenses in Q4 were $6.7 million versus 5.5 the same quarter of the year before, meaning a significant increase? Well, the way that links up is that we came out of 2019 prepared for a challenging year. We had the issues with the terrace. We had the issues with the customer that we exchanged. So we were pretty lean in our setup. We pride ourselves in our ability to scale both up and down in our organization quite rapidly, and that appeared to be the case also here in 2020. When we then saw the revenue pick up in Q2 and Q3, we started adding resources to our operation to cater for new products coming up and new products being started. And that meant that here in Q4, the 6.7 is impacted by both an increase in activity, yes, but it's also impacted by currency around $400,000 out of the increase of 1.2. It comes from foreign exchange rate. And then we had a one-off write-off of $350,000, which also impacts Q4. So Q4 was relatively expensive in the big picture of the scheme here. That brings us down to the income pre-tax, which was $9.4 million in 2020 versus a million and a half in 2019. And after tax, you will see that the tax amount is only 230,000 there about in 2020. You might think that that's a low amount. That has been helped by an and addition to our deferred taxes, assets of $1.6 million. And then if you add those two together, then you will see more normal tax rate. Next slide, please. cash generation, we have typically over the years been relatively low on fixed assets, etc. We've been quite flexible there. The way that turns out is that what we make on the bottom line pretty much turns into cash the same quarter of the quarter after with capital light. And that also shows here over the years where we are showing the cash generation if i might direct your attention to the right hand side 2020 where we started out with 24 and a half million dollars in the bank we then generated 21 and a half million dollars from the gaming enthusiast segment at EBITDA level. And then we spend 1.2 on data center. And what's interesting here, if you compare the three years of data center spend, then you would see that in 2018, we spent 7.3 million and in 19, 4.2 million. And then in 2020, $1.2 million. We are not home safe yet, I would say, on the data center. It's not profitable at this point still. We're working on it. We have... not been guiding specifically on data center for the last year or so. We probably, we will have to start talking about that segment and reporting on that segment specifically again, because it's growing to become again a significant portion of the revenue. Last time we guided, we said that we needed revenue around $10 million before we became profitable in that segment. That number has probably changed up towards $14, $15 billion, I would say, maybe a little bit less. And that's driven by the fact that our gross margins are reduced a little bit. They're still significantly higher than the G&E. due to the customer composition. And then we have added more resources in that segment also to develop new products. What else? Investments, $4.8 million in 2020. That's a little bit higher than they have been in earlier years due to a couple of things. We have invested in a company in the United Kingdom. as André spoke about, and what is a part of the basis for what Jim does in the sim sports department. And because we've added more activity, taken on more activity in the data center business, we have invested in more machinery recently in the data center manufacturing plant here in Denmark. Then there's a new column share repurchase. We have spent $6.4 million during 2020 to repurchase our own shares. And of course, that then contributes to the cash generation and usage here in 2020. Next slide, please. Cash conversion, just a few words on that. When we grow as significant as we do, then it's interesting to see and to look at whether we have our working capital under control. And I'm happy to report that I believe we do. The numbers are increasing. You can see up top the receivables are increasing significantly year over year, and so does the payables. But if you look at the table down below, then you will see the net of it all is that we are actually improving a little bit on what's called the cash conversion cycle from the day when we receive the invoice from the supplier on There is now eight days, which is a slight improvement compared to the same quarter last year in 2019. Some years ago, we communicated a grand plan and ambition to be around zero, and I think this is pretty much about where we should be. The numbers are bigger, you can see, but that's simply a matter of math and where the revenue is placed. Next slide, please. Those of you who've been following us through the history will know this sheet, this graph here. It's not changed at all. We have a strong cash position. We have almost no interest-bearing debts. It's a solid picture. We are very attractive towards our OEM customers, particularly in data center business, where our customers over there are very interested in our balance sheet. They want to make sure that we are solid enough to go through a period of R&D and a period of business development, et cetera, and being able to fund that. And we are, and we have the flexibility to both develop and defend not least our IP platform. What to say here? I'll come back a little bit on dividends. We do have an ambition to pay out dividends. We don't have any desire to sit on excess cash, but I'll come back to that. We have a challenging tax situation that I need to address. So if you change the slide, Yep, we're going to something totally different, although it does have to do with cash allocation, capital allocation. We are here in Aalborg sitting on each other's shoulders. Our staff is sitting pretty much like sardines in a can, and that means that we need to expand. We have purchased a building plot in a prime location here in Aalborg. where we are developing a new innovation center and manufacturing facility. It's very much in its early stages right now. We are meeting with architects and contractors, and it's a multiple year project, obviously. But we are sitting on each other's shoulders. Literally, the last time we added to our test facility out here, it was built on top of another test facility. So it's quite cramped. For now, the idea is to fund it by our own means, our own cash and long-term debt. We don't have any strong desire in either direction, but we certainly don't have a strong desire to come back. a major property owner. And it may very well be that we do an optimization of the balance sheet at some point down the road. But for now, in order to maintain the flexibility and keep that, we are taking it on our own books. If you squeeze Andre a little bit during the Q&A session later, I'm sure he'll be happy to tell you the story about how we actually deliberately bought a plot that was a little bit too big. And then we sold off a portion of the lot to a fast food chain for, I think, three times the price we paid per square foot. So that just underlines the fact that it is a prime location. It is a new hotspot here in Aalborg, close to the highway, et cetera. So if you change the slide again, please. Yes, innovation. We need to be innovative, and we are, and we are committed to that, and we support that by the proper amount of funding. Our R&D funding, R&D spend is actually increasing higher than the revenue. On the graph over to the right, you can see that how I've overlaid the revenue and the R&D spend in 2016, and then you can see the development from there. we are outspending in terms of R&D, the revenue increase. On average, we're spending around 8% of our revenue on R&D. Here in 2021, we'll see a generic increase on the liquid cooling, the existing business, up to $6 or $7 million thereabout compared to 5.7 in 2020. And then we are adding the sim sports investment where on the R&D side alone is between $1 and $2 million. Right now, we have some 16, 18 people out of 120 allocated full-time to sim sports. That's going to increase a little bit during 2020. So it is a significant amount of investment. Next slide please. Then the fun stops and we are back to real life, so to speak. Tax structure, I need to talk about that a little bit. Those of you who have been following us, you will know that we have a little bit of a tax challenge in the sense that both the Danish government and the US government considers Asetek a tax subject. And that has actually not been a problem for the company per se up until now because The company that is a tax subject does not have significant taxable income. That income is in subsidiaries which are local to either Denmark or USA. But the top company does have a tax liability in both jurisdictions. And that means that for our investors, if we should pay out dividends, then we would have to withhold dividend tax to both the US and Denmark, which would make it a rather unappealing, if there's such a word, unappealing situation for the, especially the smaller investors who don't have a tax presence in the U.S. and get their tax money back. And we would simply lose too much on taxation. So at this point, we don't have any plans, actual plans for paying out dividends. That's been the case both in 18 and 19 and now here in 20 and 21 again. We have, however, filed a complaint or a request for resolution, I think it's called, something to that effect, with the Danish and the US tax authorities. They don't have an obligation to find a solution. There is what's called a double taxation treaty, where they are obligated to talk about and obligated to seek to find their resolution, but they are not obligated to find the resolution. This whole thing Let me start another place. Add to that that the Americans have now figured out a new way of taxation, something they call GILTI, where the Americans charge an extra tax on foreign activities by U.S. companies. And keep in mind that for the Americans, we are a U.S. company, and they see that we have activities in Denmark, so they want to tax that. They call that a GILTI tax. that guilty tax cost us $400,000 here in 2020 and like a million dollars the year before. And that actually may be a little bit of a help to us, even though it sounds contradictory. But it means that now It is the company who has an extra liability and an extra double taxation situation. And that is easier. That's a better argument to be made to the tax authorities in both countries that there is actually a real double taxation situation that they should figure out how to fix. But it's a long-term issue. process. It started a year ago or so, and we know they're communicating. They've been asking questions, but it's still early stage. Share buyback, we have transacted two share buyback programs during 2020 and we are running the second one right now. It's ending on Friday, purpose of which is to buy back shares to hedge our risk with the employee stock options that have been issued over the years. The shares that we are buying back are simply sitting in our bank depository accounts and are then resold out to the market when employees are exercising their options. But that program is running out here on March 5th. We expect there might be other additional smaller share buyback programs in the future if and when the board of directors decide to grant new employee options. And options have been a natural component of our pay structure since 2010 or even earlier than that, I believe. So it should be expected that there will be smaller additional share buyback programs in the future. Next slide, please. Looking at 2021, if you look at the graph here, then there's this bubble over here on the right-hand side, which is an ambition, not a guidance. It's an ambition for us to maintain our 15% annual average growth in the years to come. We also have to release a specific guidance for the year 2021 as such. And that guidance that we come up with is so that we offer is an increase on the top line between 10 and 20 percent compared to 2020. So that would result in a top line of 80 to 87 million dollars of revenue. There is volatility. There's uncertainty about many things. COVID-19 is still playing a factor here. And you know, if you know the company here, that our transparency into the future is fairly limited. Margins, as we said before, expect them to lower just a tad bit compared to the 47 here in 20. And that means that we – and there's some risk in that also, as I said. And that means that our operating income guidance is between $9 and $15 million, quite a wide range. We do realize that. We'll narrow it down, I'm sure, as we go through the year. But there are a number of uncertainties, not least related to our relatively short transparency into the future. Next slide, please. Changing gear totally. CSR, ESG, sustainability, call it whatever you want, is something that has taken up quite a lot of resources and work during 2020. We have, as you know, a product on the data center site that provides significant positive climate effect. But of course that's not enough when it comes to ESG and CSR. We need to show how we operate the business as such. And we've been running through a project last year where we set up the framework both for measuring and for goal setting and then for reporting of all these good goals here and good measures. So we are measuring it now. We are sharing our measurements internally and what is measured tends to be met more in the future. We've always been running our company in a sustainable way, I believe, but now we're building it into a more formal framework. There's a link here to the report that you can follow if you choose to do so. Next slide, please. All right, I think I've taken up quite a lot of my time here, so I'll just focus on the left-hand side. My focus is on the continued profitable growth, solid platform, financial platform, and that remains to be my focus, and that's how it is. And in that sense, I certainly welcome the SIM Sports investments that both Jim and I, they were talking about. Good. Last slide from my hand. Please change to that. Yes. Investment highlights. What is AC Tech as an investment case? Long-term growth driven by megatrends and innovation, both on the OEM side and for the end users. It's market leadership and it's, then again, solid growth margins. And we, as we say, we focus on difficult problems. And if we solve difficult problems, then we can also charge a premium for that. That's the whole business here, the whole idea here. We are primed for continued growth, both in data center business and the gaming enthusiast markets. And then we are starting out this new entry into the sims sports gaming. With that, if you change the slide again, please, then we'll hand over the microphone to the moderator who will take care of first the phones, whoever is choosing to call in, and then we'll address the written questions afterwards. And while we're setting that up, I'll run over to André's office and we'll do it from there. Thank you.

Thank you. If you do wish to ask a question, please press 01 on your telephone keypad. If you wish to withdraw your question, you may do so by pressing 02 to cancel. We have a question from from SEB Bank. Please go ahead.

Hi. Thank you for taking my question. I have a couple questions here. and regarding the 2025 revenue target um is it possible to elaborate a bit on in this target and how much do you expect the data center business and also the new business new business area at simsport to contribute to this 150 million sales um then secondly um is it possible to to elaborate a bit on the probability for the new product area um yeah and our our style was to question and uh i'll follow up later thank you yeah thanks

Well, in terms of the spread on our revenue target, it's impossible to say. Obviously, we need to start selling something in the same sports market before we can actually talk about how much we can sell. So, I mean, it's way premature. What we can say is that looking backwards, as I showed earlier, We've had a 17% growth rate over the last decade. And let's say with another business leg to stand on, we feel even more comfortable talking about it. So that's the way we look at it. And what was the second question again? That was how big the opportunity is. It's also too early to say.

The probability. Profitability.

Sorry.

Profitability.

What I can say is that we have no intention in entering low margin business segments. So I absolutely expect that we will keep seeing the same margins or better than we already do.

And could you indicate maybe a value per user for the gaming simulator?

It's really difficult to say because you can, that's obviously not the segment we will be playing in, but you can go to an electronic store and buy a $300 simulator set up with very low-end, in our terminology, low-end stuff. And these markets, I think, are typically dominated by Logitech and Frostmaster. And that's not where we are going to focus. And I don't have a spend per user, but if I should give you an indication, I would say at least from $1,000 and upwards.

Okay, very helpful. And how much additional OPEX investments, especially on the sales marketing, have you planned for launching the sales products?

Do you have anything to say about that?

Well, we are applying 16, 18, up to 20 people or so this year. So if you do the math simply by counting the headcounts and marking it up, then it's between $2 and $3 million in total for this year.

I mean, for the launch, I guess next year, 2022 is probably the year where you can generate, start to generate sales. Is it possible to also give us an indication on the 2022 budget?

I appreciate the question, but I think it's too early for us to talk with any level of quality about what's going to happen two years out on the sales and marketing side.

Fair enough. And could you just clarify this 15 to 20 people, are they mainly the R&D function or also includes the sales marketing?

Actually, that's an interesting question. If you look back over the history of Asetek, then our projects have always started with a heavy R&D effort. Then that has sort of scaled down, and then the marketing and sales effort have scaled up. What we're doing a little bit different here is that we are applying significant marketing, product planning, whatever you want to call it, or different disciplines relatively early in the projects. So it's a mix.

Okay, thanks. Thanks. I'll jump in for the queue.

And just as a reminder, if you do wish to ask a question, please press 01 on your telephone keypad now. We have another question from the line of Johannes Lies from Arbus Capital. Please go ahead.

Yes. Good morning, guys. A couple of questions also following on with SimSpot. Only to get it right, is your intention to deliver a full system or is your intention also to sell only components for the system, not only the pedals or the wheels or the

the the plan is to let the customer choose but to have the possibility to buy everything from us and this is obviously something we will go much more in detail about over the next and the coming quarters but but some of the obvious let's say opportunities we see in the market is that if you have tried to build a simulator you yourself you'll see how difficult it is you will see how Halfway, you need to be a computer scientist and you need to be an engineer to actually get it to work. And that's independent of brand right now. It's very complicated. Unless you have a console and you just have a simple set of steering wheels and pedals, it's very complicated. And what we want to do is pretty much the same as we did more than 20 years ago with the liquid cooling market. Remember back then liquid coolers were a lot of components. Then you had to cut the tubes and pour in liquid yourself and hopefully everything would work. Whereas we came out with the all-in-one cooler that kind of revolutionized it. And what we are intending to do here is pretty much the same. It has to be easy. It has to be user friendly. And as such, we focus a lot of effort on software right now because software is what ties all the hardware together. And I think it's an understatement to say that the software that's out there is flaky at best. And so you would be able to start out, you know, I have our first prototype of our pedals right here. You would be able to start out buying those, and then you would be able to upgrade as you go along. So that was a long answer, but nevertheless, how we see it.

Okay. I always say it's a safe channel because I think it's a little bit, On your cooling, you go a lot with OEMs. Maybe here you really sell a full product under your brand. Therefore, after you build up a new sales organization, you have some synergies with the eSport Academy and things like this, your brand. But how you bring this, especially this full simulator in the market?

I think we still have time to fully figure that out. What we can say and what we are willing to say, there's also some elements of what we want to tell the competition at this point, of course. But what we can say is that pretty much the competition is selling direct. We will absolutely be pushing our own brand. But we were also very careful when selecting this new business that we did not step on our customers toes and we did not compete with our customers. And I actually do believe that there is potential both to push our own brand and also to do a partnership model. But at the end of the day, it comes down to what bill of materials we can achieve. We have a very strong supply chain. And I think when I look at the entire simulator landscape, I think by far we are the company who's best positioned with our China operations. And as such, at least in theory, we should be able to get the lowest possible cost prices. And by getting the lowest cost prices, applying our margin, then we will see what's possible. But at this point in time, we are not ruling anything out. So, yeah. Do you have anything to add, John?

No, I think that pretty much covered it, Andre. You know, we're keeping our options open here. Yeah, until we know more about our bombs. We obviously have some pretty good idea of what we want to do, but nothing ruled out. Thanks.

Maybe another follow-on, after these two acquisitions, do you think you have everything together you need to build these products? Or maybe could one or other smart add-on acquisitions need to make the product really complete?

Yeah, so just a little word about the process. We actually identified and looked at more than 120 companies within SimSports. So it's not like we woke up one morning and said, we're buying these two. It's been a quite rigorous process. And I would say that especially on the software side, we knew that that was going to take a long time if we had to start from scratch. So that's why we bought a software company and I believe we bought the best. And in terms of the hardware, We are pretty good at that stuff. The pedals you see here, for many reasons, I don't want to go into detail with what they're capable of, but we've actually been turning around this set of pedals within four months internally. So that stuff I'm quite confident about. We know what we're doing. But in terms of the actual wheelbase, so that's what's giving you the force feedback, You know, there's a lot of software into that as well. So that's why we we acquired those capabilities again to to accelerate. But other than that, I do feel we are we are quite well suited. And that being said, we acquired a company, I think, 17, 18 years ago. But other than that, we never really did any M&A activity, not because we've not been looking, but because we haven't found anything interesting. M&A can be dangerous for many reasons, as you know. But I have to say what we have done here has been really successful. And I can say that even before entering the market, because in one of the acquisitions, we kept the employees, the software engineer that's working really well. And on the other side, we are working together with Granite in Finland. So the short answer is we don't have anything on our list right now. But if an opportunity represents itself, I will obviously be looking at it.

Super. Maybe coming to gaming and enthusiastic, do you expect maybe that if what we all hope, COVID, go a little bit away or a little bit, it's not so severe anymore, maybe in the second half or maybe next year, that the gaming PC market could see a setback like some people expected for DIV, things like investing in your garden or in your house? Or do you, like John said, do you expect it stays at this high level or even grow further because that was a push for a market with space around?

You know, if I was a prophet, I would work in the church and not for AC Tech. So I have no idea. My guess is no better than your guess. What we are doing is focusing on fulfilling our customers' forecast. And, you know, the start this year have been good. And, you know, We have guided, as you know, between 10% and 20%. And that's what we are aiming and fulfilling. What's going to happen with tariffs, with COVID, or anything else in the world, I really don't have anything intelligent to say.

Okay. But so far, you said the year has been good. Therefore, an ongoing development like you have seen in the second half last year. Strong market, yeah.

Yeah.

On another topic, graphic card cooling, graphic GPU, how the things are going on there? Have you the first product out and how big could be this market maybe in the next four or five years? Have you anything included in this vision, this 2025 vision? Although I get the feeling that you have not really broke it down to the different businesses and even sub-activities.

John, do you have a comment on that?

Yes, yes. We continue to engage with various graphics card vendors. We have a multiple graphic card solution shipping today. Interestingly enough, to not just NVIDIA now, but also AMD solutions. However, the volumes continue to be extremely modest. And I think the reason for that lies in the cost of these solutions. The solutions that typically have liquid coolers added to them retail in the region of $1,000 to $2,000. And that contrasts with CPU liquid coolers that typically retail down at the $100 to $200 mark. So You know, what I've come to realize over the years is that, yeah, every PC has a graphics card, but trying to sell liquid coolers into those is quite a challenge, given the price points that we typically see when we liquid cool a graphics card. We've got a healthy business. We're very committed to servicing it. We've got some great customers doing some great stuff, but the volumes continue to be fairly modest when stacked up against the CPU cooler business.

But do you see surprises coming down going forward?

I think it's important to clarify. It's not the cost of the cooler. It's the cost of the graphic card that drives the price. So that's really a question for Nvidia. But if you ask my guess, I would say chances of pricing going down for their high-end solutions is fairly slim. But I think... as we've elaborated a couple of times, what would change it would be the competition between AMD and Nvidia. And if GPUs came to a level where they were just unbearable noisy, in some people's mind they are, but that's one thing. And the other thing is also, if you as an end user buy a graphics card and you take off the cooler, you lost your warranty. And I think the appetite for end users buying a, let's say, $1,500 graphics card, and then the first thing you do is to void the warranty. I think there's a limited amount of users that's willing to do that. Whereas on a CPU, you have to mount a cooler. So that's the big difference. So I think what we can hope for is that the graphic card vendors will kind of accept the solution wider and broader for the end users to mount the cooler themselves. It's just that what should we call it, the architecture of a graphics card is delicate. If you're sitting there fooling around with your screwdriver, you could easily ruin something. Whereas if the cooler is mounted from the factory, it's different. And that is also why, for example, Alienware have success with their graphics card coolers is because it's mounted from their factory.

Super. Last point, data center business. Could maybe, I think it was already on the slide, after the success, yes, with HP and this new guy on the blog, Solution Minder was the name. Are there further OEMs looking at the solution, seeing the success with HPE, and there could be further OEMs added to this business?

Well, we can at least say that's our plan and our hope, of course, that other OEMs will carry on. But I also think it's important to calibrate the business we are in here with how you look at it in the sense that the gaming business is fast paced and moving forward really fast. You know, we launched our data center, I think, 2012. We were in Utah talking about our solutions and OEM adoption. And, you know, we have to realize that now it finally happened, which is good. But it's also eight years ago. So, yes, I do believe over time we will see more OEMs. But it's also a business that just works at a different pace than the gaming business, for sure.

But you showed how long it needed even with a gaming business. Therefore, it could be an inflection point going forward. But it depends on the politicians now. We discussed it often enough.

I agree 100%. And I can only say that in terms of the politicians that we are seeing, I would say, more or less constant improvements in the EU and talks about this very topic. So I'm still firm in my belief that we will see it. But just to get it out of the way, it's not built into our 2025 plans because, frankly, it's out of my control and it's out of AC6 control. We can try to influence it as much as we can, and we are. But I think our growth plan would be way too fragile if we kind of baked in that something would happen in terms of legislation.

If something happens and there is a real push in the market, definitely it would be upside down. But like I said, it's not in. I expected this. Okay, thanks a lot.

You're welcome.

And just as a final reminder, if you do wish to ask a question, please press 01 on your telephone keypad now. And as a note for the audio questions, I'll hand it back to the speakers.

Perfect. Thank you. Then we will address the questions that are coming in via the website. And feel free to keep asking. We'll refresh the site once in a while. I'll pick them out here. We did speak about COVID. John, there's one for you here. The gaming industry is scaling fast. Are you available to keep up the demands, on-demands?

Yeah, it's one of the topics I was trying to stress when I made my comments earlier that we've handled that very, very well. And I continue to have confidence that we'll be able to continue to handle upsides in demand. So yeah, don't see any issues there at all.

Very good. There's another one totally different. to read here. I know AsiaTech is an interesting acquisition to several big companies out there. Have there been any dialogue that we shareholders should be informed about? And I can answer the last part of that question quite clearly. No, of course not. Because then we would have informed you. Andre, do you... Of course, we have to. Not to be rude, sorry. But there are very strict rules about what we have to inform about. Anything else on that topic?

No. I mean, we look at... the inquiries we get, but what's been there so far have, let's say, not been interesting to us or interesting to the inquirer for various reasons. But as Peter points out, of course, if there is anything significant, then we will let you know.

Very good. How's your business network within Europe set up, John? Can you talk to that a little bit?

Is that a question with respect to our supply chain or our customers or both? I'm not sure.

Is there any more clarity? A customer-related question, the sales network in Europe.

Actually, Europe, there are a lot of customers in Europe. Most recently, Fujitsu, who did consume a lot of our resources. They actually pretty much closed down all the functions in Europe and moved everything to Japan. So we don't see a whole lot of activity from what I would call indigenous European customers. We do have customers there, Fractal springs to mind. We are courting other brands in Europe, so we're not sitting on our hands, but there's There's actually not a massive business there. The vast majority of our sales and marketing activity is undertaken in North America and in Asia.

Very good. A question here along the same lines, I would say. And the question is very specific. Maybe, John, you can talk in broader terms. How many big customers is the goal for 2021? We know we changed out one big customer in 19 and ramped up in 20. Can you talk in general about that?

Yeah, I wouldn't put a number on it. There's never a number. I think what we're more interested in, and again, I try to touch on this in my comments, it's the quality of the customer. We had a big customer in the past that really didn't appreciate what Asetek brought to the table. That's why we're no longer with them. I stressed during my comments that the customers we have today, we believe are the strongest customer base we've ever had. And when we go looking for new customers, that's very important to us that they value what we bring to the table. and that they can make a contribution that will help us reduce our dependence on any one single customer. So we're trying to be smart about adding new customers, and we're always looking for strong brands, brands that can grow to make a contribution, a significant contribution, but brands that appreciate what Asetek bring to the table.

Very good. Thank you. Then there's a question which is in a totally different direction. It's about our share buyback program, which is coming to an end here on Friday, I believe it is, if we fan a new round. And about that, yes, we do, if and when our board of directors grant a new series of options, and they have been doing that more or less constantly since 2008 or 9, so that should be expected. That's a common part of our compensation plans. So, yes, there will be probably a smaller plan It will be a smaller plan because what we've done the last couple of years is to play catch-up to hedge our option plans. The gentleman is asking if there are news about the legal issues regarding the payment of dividends. That's somewhat related to the option program, the share buyback program here, and then yet separated. The news, I think I touched upon in the presentation, is that there is no negotiations going on between the American IRS and the Danish taxation authorities. We are being double taxed and politically for many, many years there has been agreement that double taxation should be avoided. However, that said, when the Americans all of a sudden unilaterally decide that when companies leave U.S. soil to make money outside of U.S., they should still remain taxed in U.S., then we are up against quite some resistance. It's coming back to Apple pretty much living out of a mailbox in Ireland. When they made all the money over there in a low-tax company, of course, that was annoying to the U.S. taxation system and politicians, and they put in place all kinds of preventive measures, and we are being caught in that. So that's what we are debating with the tax authorities. Long answer, complex issue. Back to COVID-19 and how the physical meetings have been difficult. André, can we talk about how the meetings and education of politicians on environmental benefits from our products, how's that going? Do you have more to say on that?

No, I think already touched upon it. I think there will be, and the reason I say think is because I know we have been conducting a study with the German government and I also know that it will be coming and I think we are at a point where I can say soon now and I hope that starting will be I hope that will be used in the Green Deal with the German lead in the EU. That's my hope and that's my belief. It's not really been held back by COVID because it's based on data from both our own data center and other data centers, air-cooled and liquid-cooled. In more general terms, of course, I've not been able to travel to Brussels. Neither have our advisors. So for that reason, it's not been as easy as I had hoped, of course. But on the flip side, I don't think we've lost out on anything significant.

Very good. Oh, a fun question here. Will the sim sports mainly focus on car simulators? What can flight simulators be relevant to?

There is actually a reason we call it AC Tech Sim Sports, and that is that it could be applied to anything from cross-country simulators to flight simulators to racing simulators to golf simulators. We have to start in one place, in one corner, and we are starting with racing because that's what we know a great deal about. But the name has been specifically made so that we, over time, can look at many other types of simulators than just car racing.

Very good. And staying within the sim sports here, talking about the, what should I call it, the level of enthusiasm or professionalism that the customers need here. Is it for arcades or is it for very enthusiastic customers, gamers? As I guess the equipment itself could take up to three to four, three to five square meters by large. The total esport market is estimated at $165 billion 2020, and the relevant segment for sim sports seems to be around $40 billion. Is that a fair guess for revenue pool to look at? I know it's a very broad question.

That was a lot of questions. One question, let's see if I'm smart enough to remember all of them. But in terms of positioning, we are not going to compete with, excuse my French, cheap Chinese manufacturers of arcade equipment because we have no value at. What we are trying to do is to make equipment that would actually mimic a real car or a real race car. That's to begin with why it's called simulation. That being said... I have personally built a $30,000 simulator for my son in combination with his racing three, four years ago. And obviously, the volume of those is pretty low. So the ambition is to do it at reasonable price points. We will, of course, have entry level and more advanced level. But per definition, it will be higher end. That does not necessarily mean that we will not go after the console market, because we will. We will definitely go after both the Xbox and the PlayStation market also. So you don't have to be, let's say, a PC enthusiast to buy our product. Funnily enough, what we found out was that a big... portion of the simsport drivers let's focus on racing right now they actually do have a gaming pc with more often than not acetic liquid cooling inside so there is actually a big overlap of customers in terms of the total market size we have not really done that detail yet because what's important for us is that we believe there is a significant market And then we believe the market is growing, being a part of real racing and having been a part of it for many years, looking at the green side with noise, gasoline, etc. For sure, sim racing is taking over and merging and becoming more that the fine lines between, let's say, simulation reality is being wiped out. So we believe in the market. How big it exactly is at this point in time, we actually don't know. What we can see is that, let's call it the main competitor or the current market leader, they are projecting plus 100 million euros in revenue this year. I think there are several flaws in their business model, in the product program and in their execution. So I firmly believe there's space for more than one. I also believe that there is a whole forest, as I said earlier, we looked at 120 just racing simulator companies. So there's a whole forest of smaller companies that are doing components and they seem all of them to be doing reasonably well. So that's kind of the indicators we have used.

Yeah. Staying in the same segment, can you talk more about the market strategy in Simsports? Will it be B2B only or B2C also?

It will definitely be also B2C. I don't believe in a business model where we are only selling directly to consumers.

Very good. Changing gear once again totally to our new innovation facility here in Aalborg. Can you add comments on what operational possibilities and competencies it will add that we don't have today?

Well, that's difficult because we have most of it in-house today. But what I can say is that we are completely filled up today. There's not really room for any expansion. And frankly, if there was empty facilities available, we would have to move much sooner than this new place will require. So it's mainly a question about us growing out of what we have. And we have searched a lot and we've not really been able to find anything that For the region we are in, we are actually becoming a pretty large company. It's been impossible to find anything that's larger than what we have right now.

Very good. That actually brought us to the end of the list here. Let me just reload to see if there's anything else. Nope. We have arrived at the list. Andre, you want to make a closing remark of any kind, other than saying thank you for... What I want to say is, of course, thank you for listening in.

It would have been more ideal for all of us, I believe, if we could have met. That's not the case. On the flip side, you saved your traveling time today. But we definitely believe it's exciting times, and I would say proactively, since nobody asked the question, that to me... I have been facing this question from investors for many years. How's the next quarter going to look like? And it's actually pretty frustrating. It's a pretty frustrating question, not because I'm not willing to answer, but because I cannot answer. In the short term, we have low visibility as always. And although it may sound contradictory that we are then guiding five years ahead, it's like the weather forecast. They can't say the weather tomorrow, but they can pretend global warming in 100 years. It's a little bit the same. I feel much, much better talking about a five-year growth plan than I am talking about Q3, for example. And the reason for that is I believe we can see and we can spot the large trends. But what I cannot say is, will I get a bad quarter, three quarters from now? So from my perspective, I think it's nice to be able to have this goal. And for sure, we will probably have to adjust it one way or the other during the next five years. But at least now we have a stake in the ground to aim for. And I think that's important to all of us. So I think that's it.

Perfect. Thank you for listening in. This will be available on our websites in a few hours, I'm sure. And, well, you know where we are. Send us an email, investor.relations at acetech.com if you have questions. Thank you for your time. Thank you.