Asetek's Q3 financial results show a decline in revenue and gross margins due to supply chain issues, but the company remains optimistic about their SimSports business and plans for future financing and product development.
- Uptick in shipments of SimSports products
- New acclaimed products and clear pathway to new simulation gamers in console market
- Commitment to innovation and strategic partnerships in SimSports arena
Asetek’s Q3 Financial Snapshot
Asetek has just released its third-quarter financial results, and the numbers tell a story of ups and downs. The company reported a revenue of $12.2 million, a drop from $20.5 million during the same period last year. If we zoom out to the first nine months of the year, revenue stands at $37.1 million, down from $59.7 million in 2023. So, what’s behind this decline? The main culprit seems to be a decrease in shipments of their Liquid Cooling products, although there’s a silver lining: an uptick in shipments of their SimSports products.
Gross Margins and Supply Chain Struggles
Gross margins took a hit too, clocking in at 36% for Q3 and 42% for the first nine months, compared to 46% and 45% last year. This decline is largely due to a write-off of certain inventory affected by a supply chain quality issue, which thankfully has been resolved. Asetek’s CEO, André S. Eriksen, remains optimistic, stating, “Our SimSports business is gaining traction with new acclaimed products and a clear pathway to millions of new simulation gamers in the console market.”
Challenges and Cost-Cutting Measures
On the earnings front, Asetek reported an adjusted EBITDA of ($0.5) million for Q3, a stark contrast to the $4.8 million from the same quarter last year. Over the first nine months, adjusted EBITDA sits at ($0.3) million, down from $13.7 million in 2023. Operating expenses, excluding special items, reached $19.9 million, which is an increase from last year, although expenses are trending downward thanks to recent cost-cutting measures.
Impairments and Investments
Asetek also faced a mandatory non-cash impairment charge of $18 million, primarily affecting their new headquarters and deferred income tax assets. This write-down is significant, as it reflects the company’s need to align its balance sheet with its share price-based valuation models. Additionally, inventory charges of $0.8 million were recorded due to the earlier-mentioned supply chain issues.
In more positive news, Asetek invested $7.4 million in property and equipment, including their new headquarters, which is now fully operational. They also allocated $1.7 million for developing new products in the first nine months of 2024.
Future Financing Needs
Looking ahead, Asetek is eyeing a financing need of about $20 million to support its medium-term ambitions. This includes plans for a rights issue expected to cover at least $15 million of the required capital. The company is also in close conversation with its bank regarding loan agreements, especially given the recent challenges in the Liquid Cooling segment.
Operations Update
In terms of operations, Asetek shipped 197 thousand sealed loop Coolers in Q3, down from 329 thousand in the same quarter last year. However, they’ve introduced new SimSports accessories and five new liquid cooling products, two of which showcase the latest 8th generation cooling technology. Excitingly, 13 new liquid cooling products and one new SimSports product are expected to ship in Q4.
Speaking of SimSports, Asetek recently launched the Invicta Steering Wheel, their most advanced model yet, designed to enhance the sim-racing experience with customizable features and a sleek design.
Asetek’s Outlook
Despite the challenges, Asetek is sticking to its revenue and profitability outlook for 2024, projecting group revenue between $52 to $55 million. This forecast indicates a decrease of 28% to 32% compared to 2023, but it includes approximately Medium-Term Goals
For the Liquid Cooling segment, Asetek aims for revenue of $50 million in the medium term, although they anticipate a slight decline in growth rates for 2025 before a rebound in 2026. Meanwhile, the SimSports segment is targeting revenue exceeding
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