Asetek: New rights issue announced in connection with Q3 2024 results to support SimSports investments

Asetek announced a new rights issue in connection with its Q3 2024 results, expected to raise around USD 15m in gross proceeds. The rights issue is to meet the investment needs necessary to meet Asetek’s revised medium-term financial ambitions, and particularly the development of its SimSports activities. Following recent changes to the liquid cooling market, with new Chinese entrants, and a larger client insolvency, Asetek’s renewed mid-term ambitions are for liquid cooling revenues around USD 50m, with an EBITDA margin >25%, and continued development of SimSports revenues to around USD 50m, with a positive (single-digit) EBITDA margin. To reach the scale-up in SimSports Asetek expects financing needs of around USD 20m, as positive cash flows from liquid cooling are not fully sufficient, and is the foundation for the rights issue.

Asetek maintains its full-year 2024 guidance in connection with the Q3 results for group revenues of USD 52-55m (-28 to -32% y/y), and an adj. EBITDA margin of 1-4%. This is comprised of liquid cooling revenues of USD 42-44m (-35% to -40% y/y), and SimSports revenues of USD 10-11m (40% - 60% y/y). The previous medium-term target was for averaging a 15% annual increase in revenue until 2025.

During Q3 2024 Asetek showed a slight revenue decline compared to Q2 2024 to USD 12.3m (USD 13.0m for Q2 2024), with some margin compression in liquid cooling, falling to 25%, from 32% in Q2. Group Adj. EBITDA was realized at USD -0.5m compared to USD 0.2m in Q2 2024, mostly driven by the mentioned EBITDA margin contraction. Year-on-year group revenues were -43% compared to Q3 2023, driven by the market challenges in liquid cooling. Looking ahead to the end of the year Asetek has announced a partnership agreement with Xbox to enter the console market, and two SimSports distribution agreements yielding USD 2m in Q4 2024. A cost-saving initiative has also been initiated within liquid cooling, with an annual expected cost saving of USD 3m, with full effect from Q1 2025. The quarter also included mandatory non-cash write-downs of USD 18m to match booked equity toward share-price based valuation models.

Disclaimer: HC Andersen Capital receives payment from Asetek for a DigitalIR/Corporate visibility subscription agreement. /Philip Coombes 10:43 07/11/2024; updated 11:52 11/11/2024