Asetek reported fourth-quarter revenue of $16.6 million, an increase of 75% from the same period of 2022. Revenue for the year amounted to $76.3 million, an increase of 51% from 2022. The growth in both periods mainly reflects increased shipments of liquid cooling products. Gross margin was 47% in the fourth quarter and 45% for 2023, compared with 41% in each of the same periods of 2022. The gross margin increase reflects a richer product mix, reduced costs and favorable exchange rates for both periods.

"2023 represented a material rebound for our Liquid Cooling business and expansion of the SimSports product program to wide acclaim from the sim racing community. I'm proud of delivering our second-best year ever measured by revenue and profit, reflecting strong demand for our products," said André Sloth Eriksen the CEO of Asetek. "We remain confident of the long-term potential in our markets, but at the same time we continue to experience low near-term revenue visibility. However, we are adapting and have aligned our strategic priorities accordingly, and our focus in 2024 is to execute on these."Operating income was $1.0 million and adjusted EBITDA was $2.2 million in the fourth quarter of 2023, compared with an operating loss of $1.9 million and adjusted EBITDA of negative $0.6 million in the fourth quarter of 2022. The full year operating income was $9.4 million and adjusted EBITDA was $15.9 million, compared with operating loss of $5.4 million and adjusted EBITDA of negative $0.8 million in 2022.

Operating expense of $6.7 million increased compared with the fourth quarter of 2022, principally related to product and supply chain development. Depreciation and amortization was $1.0 million and share based compensation amounted to $0.1 million. Full year operating expense was $25.3 million, 3% lower than the prior year. The 2023 operating expense includes $0.8 million of non-recurring charges related to the dual listing of the Asetek share on Nasdaq Copenhagen in the second quarter. During the fourth quarter, the U.S. dollar weakened by 4% against the Danish krone, resulting in foreign exchange loss of $1.3 million (in Q4 2022, USD weakened 9%, resulting in a $1.8 million foreign exchange loss).

During 2023, the Company invested $24.9 million in property and equipment, including development of a new headquarters facility, and $2.6 million in capitalized costs for the development of new products. The Company paid down the construction credit line for the new HQ and development center by net $2.9 million during the year.

At December 31, 2023, total assets were $102.7 million ($78.6 million at December 31, 2022) and total equity was $66.1 million ($42.7 million). In May 2023, the Company issued 71.2 million new common shares in a rights offering, raising net proceeds of $16.1 million.

Working capital at December 31, was negative $3.2 million (negative $6.3 million at December 31, 2022) including $9.1 million of cash and cash equivalents ($7.4 million). Included in current liabilities at year-end, was $14.7 million of debt related to the facilities construction, which was subsequently refinanced in January 2024 to be due and payable January 1, 2025.

Operations
In the fourth quarter, the Company shipped 244 thousand sealed loop coolers compared with 157 thousand in the fourth quarter of 2022. Twenty new products began shipping in the fourth quarter, including twelve liquid coolers, three of which feature the new 8th generation cooling technology, and eight SimSports products. In the first quarter of 2024, ten new liquid cooling products and various new SimSports accessories are expected to begin shipping.

In January 2024, the Company announced that OEM partner ASUS has introduced its third generation of ROG STRIX all-in-one CPU coolers featuring Asetek's new Gen7v2 liquid cooling technology. The new liquid coolers will empower enthusiasts to boost CPU overclocking capability for extreme performance and provide gamers advanced stability that is crucial for immersive gaming.

Larger customers have expressed increased demand for Liquid Cooling products with a lower price point for the Chinese market as well as other value-oriented markets. In response to this demand, Asetek plans to deploy products tailored for the lower end of the premium segment. This means a broadening of the addressable market without compromising the quality that the Asetek brand represents. The value offering is attached with robust EBITDA margins but gross margins that are somewhat lower than the historical average.

Expectations for 2024
The macro-economic environment in the beginning of 2024 is continuing to show signs of improvement, although the picture is mixed in different regions. Geo-political tensions are still causing some market volatility and uncertainty, somewhat dampening discretionary consumer spending. Future revenue visibility remains low. In the latter part of 2023, strong demand from major OEM customers reflected their build-up of inventory levels. The higher inventory levels heading into 2024 are resulting in softer demand for Asetek products, with indications pointing to more normalized inventory levels and customer demand in the second half of 2024.

Considering the above factors, revenue growth in 2024 is expected to be in the range of -5% to 5% compared with 2023. The Group 2024 revenue outlook is derived from expected revenue development in the Liquid Cooling segment in the range of -10% to 0%, and for the SimSports segment revenue growth in the range of 40% to 60% compared with 2023. Adjusted EBITDA margin in 2024 for the Group is expected to be in the range of 12% to 17% of revenue.