Asetek A/S

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the Ace of Tech Half-Year 2022 Financial Report and Earnings Call. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press star followed by one on your touch-tone telephone. Press the star key followed by zero for operator assistance. I would now like to turn the conference over to Peter Natze. Please go ahead.

Perfect. Thank you, operator. Yes, thank you to this ACETEC half-year 2022 presentation. Our board met yesterday and again this morning where they discussed and then approved the report that we're going to give you now and the report that we released this morning, where the numbers, I should add, are very much in line with the release that we sent out on August the 3rd. So at least on the top and the bottom line, there should be no surprises. And we, in this case, is me, Peter Madsen. I'm the CFO. I'm here with Andre Slot-Eriksen, who is the CEO. Hello, Andre. Hello. And then we are joined today by John Hamill, who is our COO. He is coming in from Texas, United States, this week, and we thought he could add some color to the various figures and updates we're going to give you here today. Hello, John. Hello. John is from Texas, as you can hear on his heavy accent, almost in Scotland. We'll figure it out. Questions, yes, the operator told you that you could type a key on the phone and then ask questions verbally. Should you feel more for that, you can also type your questions in on the web app that you're probably following on us on right now. With that, operator, please change the slides through the disclaimer slide that you can read at your leisure to the highlight slide which you will cover, Andrej.

Yes, so the highlights of the quarter, revenue of just shy of 17 million compared to 23 million same quarter last year, gross margin of 42 level on last year, EBITDA of 1.3 million compared with 3.2 million in the same quarter last year, And the first half year revenue just shy of 31 and EBITDA adjusted of 0.4. SimSport's revenue of 1 million in the first full quarter of sales. We have all of these are, as it said, obviously highlights, so we will get back to them in more detail. We have reduced the organization quite substantially, obviously to scale the cost according to how the market situation is. we have made a temporary shift of some development resources to drive the simsports business further and then we have temporarily suspended our guidance simply because our visibility and those of you who are following us regularly will know that we already have limited visibility and now we just think it's at a level where we have nothing intelligent to say until the market recovers so Hopefully that won't be long. But for now, that's how it is. Please change the slide. So I don't think any of what's in most of the slides is a surprise to any of you, but still I'm going through it. What we see is the market challenging continue. And I would say as a company, there's not much of what's going around or going on around that we are not hit by. whether it's inflation or interest rates or whether it's the war, whether it's COVID, whether it's supply chain, it's tariffs. So, you know, it's the perfect storm. That's how we see it. And on top of that, as we all know, consumer spending and obviously in high end electronics and in gaming is kind of weak as well. The result of all that is that if I swap the last two points, that we do expect an operating loss for the year. And that's not necessarily new because our previous guidance was quite wide and said from minus one to plus five. But since we have sent out what we have, that's obviously because we expect to lose more than the one million. As soon as we know something more intelligent, we will, of course, let you know. As a small anecdote, within one week, the current forecast can easily change in the millions of dollars range. So because of that, it is actually impossible for us right now to tell where we are going to settle. Please change the slide. So we have looked at what can we actually do? What can we influence? And what we can influence is, of course, the organization and our costs associated with that. 52 full-time employees is obviously rather dramatic when you look at it. But do also keep in mind it does include the data center business that we shut down last year. And although that was a tough decision, I think now more than ever, it does show that it was the right decision. Then we have looked at some consolidation as well, and we have closed down our London sales office. And then when we pull all of this together, we expect to be able to reduce our costs by four or five million dollars, quite substantial, with a full effect somehow during the last quarter, I would say, last half, last quarter. I would also say that I think we have cut to the bone now. We have reacted fast. But I don't see us do another round of layoffs. We've done three layoff rounds now within a year. And I think for the good of the employees and for everyone to say that this is it. Then we have shifted some resources from the G&E business to the Simsport. I think it's important to understand why that is. And the reason is that The customers we have on the G&E side are very large corporations, for example, like Dell Alienware. We just don't call them up and say, we have a good offer if you buy something more. That's not how OEM business works. Or in other words, we have very little impact on our OEM business. So while that business is recovering, well, perhaps I could also add that we have done a lot of product development over the last years. So we are ready with new product launches, new technologies, et cetera. So there's little we can do on that business other than wait it out. But where I believe we can make a positive difference is on the Simsport side, although demand is hit there as well. then I don't think it takes a magician to figure out that the more products we have in the market, and the sooner we have them in the market, the sooner we will get revenue. So that's why we have decided to do this, say, okay, where can we influence things? We believe we can influence them here, so let's put some resources there. That being said, it's not a massive shift of resources, but because even in the sim sports business, we have laid off people. So we are only talking a few headcounts here. Then, of course, we are looking continuously at strengthening our supply chain, both the capacity and our skills. And I would say that one positive news that I can share is that we are actually starting to see shipping rates going down. And that's a massive thing for us. So there is at least one spot where there's light at the end of the tunnel. We are working with some of our existing contract manufacturers in China who have factories outside China to look into that. And we now expect to be able to ship out of Malaysia in Q1 2023. For those of you with a good memory will say, well, you said that before. And that's correct. And we are ready and we have been ready. But right now we are waiting for customers to empty their inventories before they are ready. But we are ready. And of course, for the SimSport products, that's also something we have in mind so that we can leverage the fact that we don't have to pay U.S. tariffs. As of today, all SimSport products are assembled and to some extent also manufactured in Denmark, which is impressive in itself that that can be done. But I think we can longer term get to much better pricing if we also outsource that. Please change the slide. I think it's also important to remind ourselves that although everybody is struggling right now, the way we see it is that the long term potential is absolutely unchanged. People will start game again and they still do, but there's also sunshine outside and most people have not been able to travel for two years. So again, I think long-term, we will be back on track. I think gaming will be back in track, both on the G and E side and on sim sports as well. And as such, we just maintain our focus, keep doing what we are good at. And when the end user demand will kind of come back, then the market will also normalize. And, yeah, again, as I said before, we are trying to take this opportunity now to get more products out sooner than we had anticipated. Let me change the slide. And then just a small business overview for those of you who may be new. What we call the G&E business that I referred to a couple of times, gaming and enthusiasts, That is gaming for PC component gaming, meaning that it's people who assemble their own computers. That's what we call the enthusiast. And then we have the OEM business customers like Dell, for example, who are selling pre-built gaming machines. And then they use us as the liquid cooling supplier. Then we have the data center space where it's, I would say, more or less the same technology, but focusing on enterprises and data centers. And then we have the sim sport, which is also gaming, but in this case and at the moment specifically for sim racing. Please change the slide. And the next slide showing our global organization. I don't want to go through everything again because I always do that. But what you can see is that our UK office has now or is no longer a part of it. If you started in detail, you'll see we have reduced some of the functions at some of the places and consolidated more in Denmark. We have now passed the 10 million unit mark of liquid cooling. That's quite substantial. And then right at the most remarkable on this slide is that we are now 150 employees instead of 170 something. Please change the slide. Then I will hand over the words briefly to John, talking about our business areas, and then I'll be back a little bit later.