Asetek A/S

Welcome to Aztec First Quarter 2025 Earnings Call. Please note that this call is being recorded. You will have the opportunity to ask questions to our speakers later during the Q&A session. If you'd like to ask a question by that time, please press star followed by one on your telephone keypad. Thank you. I'd now like to hand the call over to Peter Madsen. PFO, Peter, you may now begin.

Thank you, operator, and thank you, everybody, for joining this Q1 2025 earnings call for Asetek AS. My name is Peter Madsen. I'm the CFO, and I have in the room with me here our founder and CEO, André Slot-Eriksen. Hello, André. Hello. So our board, they met this morning, and they discussed, and then they approved the earnings release that we sent out a few hours ago, and they released the presentation that we are just about to give also. Before we get to the details, let me just add to the questions, remarks that the operator just came up with, that if you are in front of your computer, there might be, or there will be, the opportunity to type in a written question that we can then read from later in the presentation. With that, let's proceed. Disclaimer, which we, of course, encourage you to read. And then, Andre, over to you for the financial advice.

Thank you, Admiral. Let's just dive right into it. So, SimSport's revenue in the quarter reflected a soft demand after a high year ending in 24. And I'll come more back to it, but it's because of some logistical challenges and of course the macro uncertainties that we are looking into. Q1 liquid cooling revenue of 8.6 versus 10 in the same quarter last year reflects a shift towards more affordable products among our customers. I'll also get back to that. Our Q1 group gross margin ended up at 44.2, up a little bit compared to last year. As everyone knows by now, we completed the rights issue in January, raising 10.4 million in net. The full year outlook, we just adjusted the other day, due to a lower theme sport revenue expectations, We also changed the group revenue, of course, in the range to 45 to 53. No surprise, I assume, tariffs in the U.S. situation. Of course, most significant impact on products made in China broadly applies throughout the entire gaming value chain. Of course, we look into an increased uncertainties And it is impacting our simsport business for sure, where at least for now the liquid cooling business proves to be more resilient. As a consequence, we have put our sales into the US on hold for simsport only, of course. We can all guess on what's going to happen. We have chosen to focus on what we can control And we do have a lot of experience in dealing with these tariffs because for liquid cooling, they have actually been in force since 2018. The point we have right now is, of course, a trigger for dual sourcing with transfer of our production to Malaysia instead of China, at least for what goes to the U.S., And we have expanded our capacity late 24, of course, in dialogue with our customers and tried to predict what was going to happen. We see it as we are in a relative position of strength in the sense that we have increased our production in Malaysia, somehow mitigating the tariffs, as well as we have done cost reductions at group level. Just to be clear, moving production to Malaysia is not for free. It comes with a cost premium as well as longer lead times. And the main explanation for that is really that all the components used for manufacturing primarily comes from China. Just a small note on the revised guidance. Our group revenue is expected in the range from 45 sorry, 45 to 53, where it was 52 to 58 before, and an adjusted EBITDA margin of 0 to 3 compared to 3 to 5 before. We have not changed the liquid cooling segment revenue, so that's unchanged. And on the same score side, instead of 12 to 15, we are predicting 5 to 10. It all comes with a high degree of uncertainty right now, of course. Just going in to the top segments a little bit. If we look at the liquid cooling business, it's still a good and solid long-term profitable business with, in my opinion, healthy growth margins. And we are continuously expanding and building. And in the quarter, we released 11 new products. and we have 10 new products estimated to ship in the quarter we're in right now. And at this point in time, we are supplying three of the five world's largest PG manufacturers. And I can happily state that the new customer, the new OEM that we released last quarter is actually doing better than we had hoped for. At that topic, I would like you to focus on the right-hand side of the slide for a second, where you can see our Q1 last year was $10 million. You can see that the dual sourcing impact, so for any newcomers, we had two major customers who went to dual sourcing, and that impacted us actually quite a bit, as you can see. but we have actually been able to offset that, the lost revenue from that, from basically all other customers growing as well as new customers. One thing I would like to highlight here is that we have sold more or less exactly the same volumes as we did last year. So in terms of sales volume, we have actually offset what we lost, so to speak, And I would also like to highlight that the margin is the same. So then you can, of course, ask, so why is the revenue lower? Well, that's because people have bought, let's say, a different product mix. And that's completely trivial and nothing spectacular. And that goes up and down. But from my point of view, I think it's positive that even with the announcement we got last year of two major customers, we have actually been able to offset that. And that leads me into a little longer term outlook. It's, of course, a little bit ironic with the scenario situation. We don't know what's going on tomorrow, but now I'm talking about 26. But the reason is that we believe in 26 that will be the first major post-COVID upgrade where both new CPUs and new GPUs are launched. We also have reason to believe that the more mid-market products that we released late this year will come into full revenue impact from 26. And then, for sure, the increased commercial focus has helped quite a bit. And what is that? What does that mean? It means that we assembled and gathered the management team in Denmark and basically closed down our U.S. office has enabled us to focus even more in spread on only two geographies instead of three. Looking towards the SIM sports. Yeah, so compared to the same quarter last year, it has been a soft beginning. It's something we see across the board from all our resellers, all our partners, all our competitors. So we are seeing that as well. Some of it has also been that some of the orders we closed and booked in Q4 have actually been caught up in logistical, you know, harbor congestions and container congestions and things like that. So what was supposed to land at our customers in Q4, a lot of it actually only got delivered recently, which of course means there's just no demand from these customers in the period. Then of course, Looking forward a little bit beyond Q1, we have gotten message from different of our customers in the U.S. that they have simply stopped purchasing products from China because of the tariff situation. And then, of course, it's anyone's guess what's happening to the consumer confidence and increased pricing. Growth margin of 26%. still high quarterly volatility in that area, there's still a lot to be gained in the logistics. I believe at least five points can be picked up just like that as soon as we get to more stable volume. On the commercial side of the business, we are looking at new sales channels. Of course, that's no secret. And one of the, at least for now, smaller milestones, but that's of course something we intend to change, is that you can now find our products on Amazon. As we released this morning, we have entered into an agreement with, let's say, Pan Scandinavian, Pan Nordic, a leading consumer electronics chain, that will now carry our products when they come out later this year. That's of course a major milestone for us in the sense that We never had any of our own branded products out in the retail before. We are also very observant that putting them on the shelves is not going to be enough. We have to, of course, up the marketing and be present in the shops and make sure everything is as it's supposed to be. So I would say that our mass market strategy is rolling out as we have planned for. We believe we have a a competitive product line that will launch in the second half of the year. We also believe that we are on track with the console support that will also be on track for the second half of the year. Of course, when we launched all of this or when we planned all of these new retail products, of course we had planned for a launch in the U.S. That's not going to happen, at least not right now. Let me rephrase that. It is going to happen, but it's not going to happen right now. So currently we are focusing on the Nordics and on Europe. So with that, I will leave the bat to Peter to talk about the financials.