Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Asetek AS (STU:A31, Financial) has signed an Xbox partnership agreement, allowing entry into the console market, which is expected to expand their audience significantly.
- The company has closed new distribution agreements that will positively impact revenue starting in Q4 2024.
- Asetek AS (STU:A31) is maintaining its revenue projections for the year, indicating confidence in their business strategy.
- The SimSports segment is experiencing growth as planned, with new product launches and increased interest in high-end products like the Invicta steering wheel.
- Asetek AS (STU:A31) is taking steps to strengthen its financial position through a rights issue, aiming to capitalize on market opportunities in the SimSports segment.
Negative Points
- The company's Q3 2024 gross margin was lower than usual due to a one-off supply chain quality issue.
- Asetek AS (STU:A31) reported a significant non-cash write-down and unexpected US tax costs, impacting net income negatively.
- The liquid cooling segment has faced a rapid decrease in demand, resulting in lower than expected cash flow and profitability.
- The company is in breach of an earnings-related covenant with its bank loans, requiring close dialogue with the bank to resolve the issue.
- Asetek AS (STU:A31) experienced a 40% decline in revenue compared to the same quarter last year, reflecting challenges in market conditions.
Q & A Highlights
Q: Can you elaborate on the financial impact of the supply chain quality issue?
A: (Andre Eriksen, CEO) The quality issue led to a lower gross margin of 36% for the quarter, primarily due to expedited shipping costs and product replacements. This was a one-off event, and we typically have years between such issues.
Q: What are the reasons behind the impairment charge of $14 million?
A: (Peter Dam Madsen, CFO) The impairment charge is due to a periodic test indicating that our business size doesn't support the booked equity value. We wrote down $4 million in deferred tax assets and $14 million on our building. This is an accounting exercise with no impact on the underlying business.
Q: How is Asetek planning to address the cash flow challenges?
A: (Peter Dam Madsen, CFO) We are pursuing a rights issue to strengthen our balance sheet and capitalize on market opportunities, particularly in the SimSports segment. We have also initiated a cost savings program expected to save $3 million annually, with full effects by Q1 2025.
Q: What is the outlook for the liquid cooling and SimSports segments?
A: (Andre Eriksen, CEO) We expect the liquid cooling segment to regain strength, aiming for a $50 million revenue target in the medium term. SimSports is projected to achieve a similar revenue target, supported by new product launches and distribution agreements.
Q: Can you provide more details on the Xbox partnership and its significance?
A: (Andre Eriksen, CEO) The Xbox partnership allows us to enter the console market, significantly expanding our audience. We are developing a mass-market product to cater to this segment, with expected completion in about six months.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
