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.

Alrighty, so I'll start with gaming and enthusiasts. If you could just flip to slide 10, please. Alright, and here we're just reviewing new product shipments, and I think it's fair to say that new product shipments have been affected by the market. You'll note we did ship four new products in Q2. We expect to ship six in Q3. You'll also note in Q3 and prior years, we had shipped a lot more. And the conclusion is fairly simple, that new shipments have been affected by the marketplace, by the market uncertainties, specifically excess channel inventories. They're almost forcing our customers to delay their plans whilst they try and burn off those excess channel inventories. I'll just add this as an addendum. Andre referenced our plans to ramp production in Malaysia. That delay is directly related to delays in ramping new products. So the delay in ramping production in Malaysia is part of the same story. Next slide, please. Looking at where we're shipping, a fairly familiar story on the left-hand side of this slide, and that is that the top five customers continue to represent in excess of 80% of our business. A couple of interesting things to note. You'll note that Razor has sneaked onto the list as one of our top five customers. I'll be very honest with you here. That is more to do with one of our more traditional top five customers underperforming than some miraculous growth by Razor. And I just wanted to emphasize that. The other point to note on this slide is on the bar chart, looking at the right-hand side, the split between customers is probably as good as it's been since we started tracking this data. So just a little bit of evidence that we can get there. So anyway, next slide, please. Not much to report on this slide. Their strategy hasn't changed. And frankly, the tactics that support that strategy haven't changed either. But I think the third bullet on the right-hand side is worth focusing on. I do want to stress that we are continuing to develop new products, we are continuing to develop new technologies for our customers. As Andre alluded to, we actually have a new technology that we're rolling out as we speak and engaging with customers on a regular basis. So I just want to mention that because I don't want to leave the impression that somehow our G&E business has been put on hold or put on the back burner. That's not the case. Next slide, please. So I just want to switch gears, talk a little bit about our sim sports business. If you could move on to the next slide. So a little bit of excitement and positivity to report on here. As you're probably aware, we launched the Invicta pedal set in late March. We followed that up in June with the launch of the 40 peril set. We have been absolutely delighted with the response of the market. And that's not just reviewers and influencers. What's been particularly gratifying is to watch end users and how they've reacted once they've received their peril sets. So it's been a A very, very encouraging debut in a new market segment. We were able to generate sales of around a million dollars this quarter, but it could have been a lot more. Again, going back to some of Andre's earlier comments, we had a very, very difficult time supporting sales of an Invicta pedal set. We had one component in particular that came from a factory that was locked down, and that was a fund So for a prolonged period of time, we had no product. So just wanted to share that with you. Moving on to the next slide, just wanted to explore what's coming next. What are we doing to flesh out the portfolio? And most likely the next product will be another pedal set, this time at the entry level, a brand that we call La Prima. Just wanted to spend a little time providing some context. When you hear us talking about Invicta, we mentioned it in the previous slide, it's very much focused on the high end of the market. So higher ASP, higher margin, lower volume. Forte coming down the stack is a mainstream play. So more affordable, perhaps less features. But larger market. La Prima's aimed at the segment below that, oftentimes described as entry level or value. I have to stress, this is not cheap. So please don't hear cheap here. This is very much, stick with me, people. This is at the high end of the entry level. But it's a product we're extremely excited about. It's a product that gives us the opportunity to bring people onto a platform because it is our intention to offer upgrade options that will allow La Prima buyers to come in at the lowest price point and upgrade to Forte. It'll allow Forte customers and LaPrima customers who've taken advantage of that to subsequently upgrade to Invicta. So we're really excited about this product and what it brings to the table. Looking beyond LaPrima, there is an intention to further broaden the portfolio with steering wheels and wheelbases. The ideal scenario would be that we flesh out the portfolio in every one of the brands we've discussed. I'm not going to commit to that right just now, but we would love to achieve that in this calendar year. We would love to achieve that. So think about this as a basic ecosystem. Steering wheel, wheelbase and pedals in each of our brands. That would be a goal for the end of the year. As I say, it's a bit too early to commit to that, but that's certainly what we're trying to achieve. As we look beyond 2022, so we start talking about chassis or racing rigs as they're described here, seats and then the plethora of accessories that comes with that, shifters and handbrakes being examples of those types of accessories. So there'll be no let up in our focus here. Lots of products to come, hopefully lots of excitement to be had. Looking beyond the products and the product portfolio, clearly we want to do more to increase our presence in the market, to encourage sales of our products, and we are endeavouring to add more channel partners, or resellers as we often call them, in particular in geographies where we have a limited presence. Think of Japan, for example, as an example of a territory where we've yet to have any direct presence. So looking to increase our presence through resellers. Also looking to move beyond our one hub that we have to date, which is here in Denmark. We hope to stock hubs in North America and Asia Pacific. And that'll assist both our resale partners as well as the end users who choose to order from our web store and assist them all in having ready access to our products at much more reasonable freight rates. Last thing I want to mention on this slide is that with the debut of the La Prima brand, we do see opportunities in other market sectors. The low cost nature of La Prima does open up the possibility to sell to that cost sensitive market. And so we'll be looking towards Sony with their PlayStation and Microsoft with their Xbox in an effort to broaden the market for those products. Next slide please. In terms of promotion, we've been working again to increase our presence in the market. A couple of areas here we want to highlight. We have signed an agreement with Kevin Magnuson to be our brand ambassador. In the unlikely event you don't know who Kevin is, he's one of the 20 lucky individuals to get to list Formula One race driver as their career. So very, very well known in the racing industry, particularly well known in Denmark. So we're very, very excited about this. And of course, as a brand ambassador, Kevin will help sponsor awareness for our brand and adoption for our products. But actually this engagement goes way beyond that. Kevin's heavily involved in his visits here to our Alborg facility and working with R&D. And his focus there is to ensure our products deliver on their brand promise, which is this feel of a real race car. And we're really, really excited about that development as well. Looking beyond the agreement with Kevin, we've also signed an agreement with the GetSpeed race team. They're based out of the Nürburgring in Germany. They are very much focused on endurance racing, which, believe it or not, is a thing in sim racing. End users will try and compete over long periods of time, i.e. way beyond the two hours of a typical race. And this is very much a thing that we want to exploit. Down the line, Get Speed Racing will allow you to try before you buy at their shop, at the racetrack, and you'll also be able to go round the Nuremberg Ring in their race taxi. which will be suitably covered at Asetek's sponsorship, or Asetek branding, I should say. Next slide, please. Again, not much to add to this slide. The strategy and the underlying tactics haven't changed too much. I think if I was to draw your attention to anything, it's the second last bullet on the right-hand side, which really highlights the focus we've put on product portfolio in the next six, 12, 18 months.

Perhaps if I could just say, John, now that we've done all these cost savings and cost cuttings, it would perhaps also make sense to believe that we have stopped a little bit on the marketing efforts. on the Simsport side, which we have not. We will attend two or three trade shows, Gamescom being the closest one, actually this month. So we believe that when your revenue is under pressure, we believe that it's stupid to stop doing marketing. So we keep our original marketing plans.

The theory here, guys, is rate sizing isn't always downsizing. No.

So perhaps I should just continue, John, anyway, since we're moving into the data center space. So please change the slide. One more, please. Thank you. So when we are at the topic of downsizing, it would, of course, be obvious to just shut down the data center effort entirely. We have chosen not to do so. We have... We have basically stopped any further development. We are servicing our customers, but we are still two people, plus myself, working on influencing what's going on in Brussels. And there is still positive signs, so I think it's a little bit too early. I would also say that with what's going on in Ukraine, what's going on with the gas situation, etc. If that's not enough to accelerate this, then I don't think it will happen anytime soon. So in my head, we are looking a year ahead. And if we don't see any, let's say, significant or material progress on the legislation, then we will stop pushing. And then we will just wait the situation and see what happens. And, you know, for us to come back, if the demand starts to come back, it's no big deal. We have the right team. We have the right people. We have the right technology. So it's just we spent more than $80 million on this venture. And with the focus on being green, as it is right now, and with the supply situation of gas and oil in Europe being as it is, If that's not enough to accelerate it, then I don't believe ACETEC can do a difference. So that's how we see that. Yeah, on the strategic development, I think there's not much to add. So let's jump into the financials and go to slide 22.

Yeah, a couple of slides forward. Thanks, Andre. What we're looking at here is the, just to give you a picture, it's an unchanged picture of the volatility in our earnings and the volatility in our revenue base. And you'll see how when revenue goes up, so goes the EBITDA margin. That's a very natural functionality there, but it's also one that we see pretty much every quarter. You can see that with our revenues of $17 million here in Q2 of 22. the EBITDA margin went up by seven or six and a half or whatever it was percent. And just an added note here that around four and a half percent of that comes from the gross margin. And then the rest of course is improvements in the overhead base, overhead cost base, et cetera. Next slide, please. Looking at the income statement. And if we're taking a look at the left-hand side of the screen, a traditional picture here where we have quarters this year compared to last year to the left-hand side, and then you have the half-year revenues in the middle of the thing here. First half 2022 revenues of $31 million versus the $48 million the year before, that's a reduction of 36%. If we take a quarter, it's $17 million versus 23, so it's a reduction of a little bit less, meaning 27%. And, of course, this revenue reduction comes from the fact that we are selling less units, and we're selling less units for the reasons that Andre and John just talked about, component shortage, supply chain challenges, inventory destocking, and then, of course, the big thing, which is the software-induced demand. We are being helped a little bit by the fact that we have now started selling these SimSpot products $1 million in Q2. It does not, of course, offset the entire reduction coming from our bread and butter business, the G&E business, but it certainly does help. We're also being helped by the fact that our ASPs, our average sales prices in gaming enthusiasts have increased. They are currently running around $55 per unit, which is 10% up compared to last year. We should be careful a little bit not to confuse increased ASPs with increased margins or increased profitability. It is merely a sign of more complex products and maybe bigger products with more features. But of course, rather have the ASP increase than decrease. I will come back to our gross profits and our gross margin shortly. So let's just take and look at the total operating expenses. They came in at $7 million, 6992 in the second quarter versus $8 million or $7,900 million last year. So it's a million dollars down. And for the quarter and the same reduction for the half year, meaning all of the reduction came here in the second part of the half year, meaning the second quarter. And of course, that comes from staff reductions and other reductions in overhead expenses. We are being helped by the fact that the Danish currency, the kroner, versus the US dollars have improved in our favor by 10%, roughly. and that is about half of the reduction that comes from that currency improvement. Looking further down, operating income for the half year, $1.8 million, and for the quarter, the second quarter, of a whopping $146,000. All the way to the bottom line, income before taxes of $800,000 for the quarter, but still a loss of about $1 million for the half year. All in all, a contraction of the business, which we hope, of course, is temporary. With that, change the slide, please. Just a quick look at the gross margins. Gross margins for the quarter at 42.3%. which is pretty similar to the same quarter last year, where it was 42.3. For the half year full, it is lower, it's 40.5% for the half year of 2022 versus 42.7 last year. Last year was, this year has, Even though Q2 has been better, then the fully half year has been worse, and that is because of exchange rates and higher and changes in product mix. We can certainly feel here in Q2 that shipping rates are improving. Just maybe five minutes before we went into this call, I got an analysis telling us how the shipping environment is improving. And even though I did not read anything but the headline, then it's a picture we can recognize. And then I should also add it. Yes, in Q2, we have seen an improvement, but I actually don't think we have seen the full improvement coming from the decrease of the price of the Chinese renminbi that came in April or May. There's a delay and inertia in our inventories, of course, and the way Bitcoin from we buy the product to we sell and harvest the money from the customer. So that could be something coming from there. That's not the same as saying as our gross margins necessarily will increase. Please don't note that because there are so many other factors. And there are many variabilities in these pictures, but at least the foreign exchange rates are playing in our favor as it is the current. Change the slide, please. Balance sheet. We saw the ones who have been following us earlier, you saw a big decline in our cash holdings in Q1 from $25 million at the end of the year in the last year, approximately to $11, $12 million now. That level is being maintained here in the second quarter. And the reason for the decline in the first quarter was very much driven by the fact that our accounts payables reduced by a significant amount in Q1. And that was driven by the contraction of the business. And we have had some very long accounts payable days that got normalized during Q1. And that's why the cash balance was driven down to what was actually a more normal level at that point. We have now started here in Q2 to draw on our financing of the new headquarter construction. I'll come back to that. But apart from that, then it's the same business. We're still a very solid partner for our OEM customers, and we still have a lot of flexibility to develop products and IP and also defend IP if we choose to do so. So we still have a quite solid platform for expanding our product portfolio. Next slide, please. A few words on the headquarter of Domicile Construction. It is going according to plan. It's scheduled for delivery in mid-24, a good two years from now, and things are progressing as planned. We were at some point nervous about the cost of the thing. The total investment here is about $50 million. And that has not changed. We were nervous about the cost because everybody was talking about construction materials skyrocketing in price. And we did hear some non-formal talk about how our suppliers would probably face us with increases in prices. And they did, but nothing material. And we can see prices are coming back down again. So we actually think we are on pretty solid grounds when it comes to the price of the construction. The construction financing plan continues to finalize the financing of the entire construction when we are done with the building. It is easier to finance a finished building than a construction site with a lot of drawings attached to them. Faced with the reduction in our company, with the reduction of forces, we of course start talking about if we and how we can take in additional tenants to fill up the space and reduce our cost of operating the premises. The good thing is that you can almost see it on the drawing here, on the rendering, that the construction is consists of four individual construction, four individual buildings, and it's fairly easy. It won't be fun, but it's fairly easy to seal off or whatever you should call it, a portion of the construction and rent that out. There's a common building for a canteen or whatever it's called, et cetera, et cetera, meeting rooms, et cetera, which could be shared. We do realize that the timing of this is not optimal with the market scenarios we're seeing and with the reduction in forces. However, it's not easy. It's not a thing you can turn off and on. We've tried to maybe see if it would be worth considering postpone a portion of the construction, but it came back as being quite a cumbersome exercise that was not fruitful. And with that, change the slide, please. The strategics of all this continues to be the same, almost at least. On the D&E gaming enthusiast side of things, it's about evolving, optimizing, diversification, turning little knots and balls to improve the business. And then we're in the midst of building a new business segment, it would eventually turn into being the Simsports business line. So there's a lot of tasks there that are all the same as similar. On the cost-based optimization, we have now added a task, an operational task of rightsizing the organization. We have gone through the nasty task of sending out termination letters, but of course now there's a long period of actually making the organization work on a smaller level. Sizing up is one task, sizing down is a different task. And then at the end of the thing here, cash flow improvement, cash conversion, and all that maintenance of the balance, of course, with the construction of the new domicile gets just more and more important. With that, change the slide to you, Andre, which is a summary of how it looks like.

Yes, so the summary is short, challenging market conditions, both on the buy side and on the sell side. It is what it is. We are trying to navigate the best we can. We are trying to optimize the cost as much as we can. Of course, we are trying to expand the Simsports offering so we have more products to sell. In terms of our long-term growth targets, Since we cannot guide, then of course it's also difficult to set a trustworthy goal. But I do not see any reason to change it because when we set the goal, we essentially only had one area of revenue. Now we have two. In return, gaming is down right now. The world is down right now. If that continues for an extended time, then obviously we need to revisit our goal. But things can happen fast one way or the other. So for now, we just stick to our plan and stick to our goal. That's kind of what we do until you hear anything else. And I think that's actually the last slide before the Q&A.

Yeah, exactly. With that, we'll go back to the operator, and he will conduct the verbal Q&A session for us.

Ladies and gentlemen, at this time, we begin the Q&A session, and we start with the telephone questions. Anyone, all who are connected via phone and wish to ask questions, may press star followed by one. remove yourself from the question queue, you may press star followed by two. If you're using speaker equipment today, please lift the handset before making your selections. Anyone who has a question may press star followed by one at this time. One moment for the first question, please. I'll take these two. First question is from the line of from FID Bank. Your question, please.

Hi, thank you for taking my question. I have one question here on theme sports. Andrew, could you please give us indication the order backlog at the end of Q2 for the new product?

So the backlog we have today is ostensibly around the Invicta pedal set and is based on the fact that we had this issue with one component coming out of China. Backlogs in the region of 600 units. So, yeah, 12 pallets of product. So, yeah, and...

I think we can add, John, that when we mentioned lost business, so in the beginning of the year, in our own webshop, we saw a certain activity level and people could pre-order. The legislation or the law in Denmark is pretty clear. You cannot charge a customer until you actually ship the goods. Whereas our competitors in Germany is different. They charge a credit card. And then if you want to wait eight months, that's your problem. But we cannot do that. So I don't have an exact number of the conversion rate, but I would say I think half of the pre-orders that were put were canceled simply because we could not deliver. So that's the primary reason why we say that we could have sold much more than we did. And then, of course, since the times have changed, we have not seen these, let's say, pre-orders coming back. And then I would also add in terms of, if we call it lost revenue or postponed revenue, I would say our wheelbases, they should actually have been out now, but we have not been able to get the components we needed. So therefore, they have been delayed also. I think the interesting part here is not what the backlog is. The interesting thing is that even in times like these, we have a reasonable demand. I think that's the takeaway.

Great. Thank you. Very clear. And maybe could you comment a bit on the production capacity? I know you have the component shortage, but if those shortage is and how much could you produce the same product with the current production?

Right just now we've got several hundred units sitting here waiting to go to our foreign hubs. I don't see capacity as an issue and that's just internal. That's not even looking at outsourced capacity. No, I'm very, very comfortable we can satisfy any requirements. This is more to do with cost and optimizing there. You know, where would you build? And I'm not, I'm really not worried about capacity at all.

Okay, very nice. Thank you. I'll jump back to the queue.

There are no further questions at this time, and I hand back to Peter Madsen.

Yep, thank you. And that means that we'll go over to the questions that our audience have typed in through the website. And my beloved colleagues, they can actually read the screen here just as I can. So, André, will you?

Yeah, so let me take the first one. Can you elaborate a bit on the gross margins in sim racing versus G&E? If the top level Invicta products turn out to be more profitable than low and mid-tier, would it make sense to focus even more on that segment? So in terms of gross margins, I would say that when the world normalizes a little bit, we should see gross margins somewhere between 40 and 50. That would be the clear goal. We are not quite seeing that right now, but that's a very simple explanation to it. One is, of course, shipping. And the other one is also because of shipping and shipping possibilities to get product out of the door. We have actually gotten a lot of components machined in Denmark, and we can already see the cost reductions of what the potential is. But that was a choice of would we accept lower margins or would we not ship? And that's, of course, an easy choice. In terms of the top level, Let's just be 100% clear. The bottom level here is Logitech and Thrustmaster that you can go and pick up a steering wheel and a plastic wheel and a plastic pedal set. That's what we consider low-end. And then the real high-end is some of the competitors we have where a wheelbase costs €3,000. So that's just to lay out the span. So per definition, all the three tiers we are doing is high-end. For sure, we make more margin on selling a pair of Invicta pedals than we would do on selling a pair of the Prima pedals. But I think unless someone had been living on a rock, I think it's obvious that high-end PlayStation and high-end pedals is not worth selling right now. On the contrary, what people are focusing on now is value. So that's why we are, well, first of all, we cannot really, it makes no sense to produce more Invictus than we are selling. It's not, the bottleneck is components. So, of course, we're focusing on that, on solving that. But what we're also solving or trying to solve is to get products out for the mid-range and the low-range so we actually can compete in that segment as well because we can see that's where the demand is. So next question, how does the management feel about share buybacks and personal ownership at these levels? I can say for myself, I have bought three years in a row. So I think that answers for me. I cannot ask or answer on anyone else. In terms of share buybacks, as we all know, we do not buy back shares. What we do is that we have bought back shares to compensate for the annual stock option program. We will, of course, have a program like this this year as well. Whether we will buy back share or not is a board decision. If I was asked, I would say no. And the reason I would say no is because of the building that we are doing right now. A mortgage financing right now is not super attractive. The same for selling it off to an investor. That's something that would be attractive when it's here. So the current financing is pretty much a credit line. So I would prefer to preserve cash in the current environment. But again, that's a board decision. Then I think, let me just take the questions that I can answer, then we can split it. So do you see better visibility on components at this point versus H1? I would say that the components we cannot get are either because we have a factory that's shut down, Or we have, for example, some of the chips that we wanted to use. Right now, there's 92 weeks of lead time. So there's absolutely no improvement in that. And the way we get around it, of course, is not to wait 92 weeks. That is, we need to change the design and find semiconductors that we actually can get away using. And at the same line, there's a question about retail slash web store revenue. What kind of gross margins does that carry? I don't really want to talk about that for one reason, that's for competitive reasons. I know who's also listening into these calls, but what I can say is that the combination of the two, it's impossible. The business is so young that we don't have any experience where the distribution rate will be, but for sure somewhere between 40 and 50. I would say even in our low end range of the La Prima range, that will be a product that would only be sold direct. It's obviously naive to think that we can sell a low end product and compare with another low end product sold directly that we can have a reseller link in. So the good news about that, and even the low end, we expect plus 40 points of margin, which I think is quite unique actually. Then, so How important could sim sports be in 2025? Could it be as big as gaming and enthusiasts or even bigger? So that's a mathematical question, because if the G&E business keeps declining, then yes, but that's obviously not what we plan for and hope for. So there's a big element of guesswork into this, but I think the best way to answer is that we all know that we have a German competitor who got a revenue around 100 million euros in sim racing alone. So for sure, the potential is there. So if all goes well, yes. But just to point out a place where we've also been hit, it's obviously not a surprise to us that we wanted to support consoles, so PlayStation and Xbox. But because of chip shortage, none of them have been interested in engaging new hardware partners for more than the last year. If we succeed with that in the short term, of course, things can move very fast and I believe our gaming and enthusiast business will come back to normal levels. And I do believe a strong growth in sim sports for sure. But we are hopefully at the bottom of the hole right now in terms of gaming demand. So we hope it will improve from here. Then how fast could you ramp the data center business and how much do you have to invest to do this? What about your competitors in the data center space as they moved on with this activity or also stopped? There's a lot of questions in one here. I think we have one competitor who claims to be in this business and have claimed so for many years and they claim one record revenue after the other. Funnily enough, I've never heard them talk about profits. So that's the only competitor I know of. And, you know, we are not stopping a business that's there. We are stopping a business that's not there. If there was demand, then, of course, we would know about it. The way the OEMs work always is they put out an RFQ and then you can bid on an RFQ. And then if you are the cheapest or you are the best or the combination thereof, you win the business. Since we don't see the RFQs, that means there is no business to bid on. So I don't feel that we have lost any competitive edge whatsoever because it works the way I just told you. It would be fairly easy for us to bid on an RFQ if we wanted to. And then if we needed to hire more staff to do that, we would do that. So I think the difference is whether we try to invest in the whole green sector or whether we just wait. I think that's more the question. And I think my appetite after having spent $80 million over the last decade, my appetite is pretty weak for that right now to keep investing in it. That does not mean that I would not accept it if it came back. Obviously, we would. That's clear. Then I think, John, there was one for you on the inventory levels of customers or whether we have them.

Yeah, there's a question here on G&E. Do you have any view on inventory levels at your customers? Not an informed view. It's not a topic customers tend to give us any insight into, other than they may push out some orders on the basis that they believe their inventories are too high. But we don't get any specifics that might allow us to develop a view on how bad the situation is.

But I think that's the, let's say that perhaps the backside of being able to supply pretty much all competitors there is in the space. That means also they are obviously not very open towards us, because that would be very valuable information to sit back with. Then there's something about the OPEX levels, Peter.

Yeah, I have noted the question. After scaling back the business, what OPEX levels to expect for Q3 and Q4 respectively? I don't think it would be correct when we are not guiding to go into the details. But obviously, since we reduced the staff by 52 people and we have announced the effect of that, is four to five million dollars annualized, then there is an effect and we will see what the effect is when, and then of course there are other aspects, factors of the cost base also that may be changing up or down. Yeah, for a lot of reasons, but no, I don't want to go into the details at this level. And that's actually, I can certainly refresh. It should do that by itself, but you never know. That actually finalized the Q&A session, and with that, we would like to thank you for your interest in ACETEC, and have a good day. Thank you.

Ladies and gentlemen, the conference is now concluded, and you may disconnect. Thank you for joining, and have a pleasant day. Goodbye.