Asetek A/S : 2023 Annual Report

CONTENT

Asetek has been an innovative force in the global liquid cooling manufacturing industry for more than

25 years. In 2021 we introduced products for SimSports gaming. Asetek is headquartered in Denmark and has operations in China, Taiwan and the United States with a total of 134 employees. The Asetek share is listed on Oslo Stock Exchange and Nasdaq Copenhagen. In 2023 the company recorded revenue of 76.3 million USD.

Who we are

We are a high-tech company with a long history in mechatronic innovation, focusing on gaming hardware. Since our foundation we have disrupted the PC cooling market, setting new standards for performance and efficiency. In 2021, we continued to leverage our extensive capabilities with software, hardware and mechanics and entered into the world of sim racing as Asetek SimSports®. We are a diverse and agile organization located close to some key electronic manufacturing hubs in South-East Asia.

What we do

Asetek is a developer and manufacturer of high-quality gaming hardware. Since 2000, we design, manufac- ture, and sell high-quality liquid cooling solutions to most major PC and Enthusiast gaming brands. In 2021, we introduced our line of products for next-level immersive SimSports gaming experiences, offering every sim racer in the world the possibility to push limits and redefining what's possible.

Why we do it

With our market-leading and high-quality product offering our goal is to meet our clients´ requirements for performance, design and longer product lifecycles. Our product development centers around our customers' needs and reflect an innovative engineering approach combined with superior performance. The Asetek brand name has become synonymous with high product quality in all categories, which is confirmed by great reviews and feedback from gamers and hardware enthusiasts around the world. We are in business to push limits and redefining what's possible.

• Asetek is a high-tech company with a long history in mechatronic innovation, focusing on gaming hardware

Revenue per year, $ million

ASETEK IN BRIEF

KEY CONCEPTS FOR UNDERSTANDING ASETEK

ANNUAL REPORT 2023 / Page 5

CUSTOMERS - a global customer base

We design, manufacture, and sell gaming hardware for next-level immersive gaming experiences. We serve some of the world's leading PC & Enthusiast gaming brands. In 2021 we introduced our line of products for next-level immersive SimSports gaming experiences, offering every sim racer in the world the possibility to push limits and redefining what's possible.

REACH - well-balanced and global

We have a longstanding local presence in some key electronic manufacturing hubs in South-East Asia. Our headquarter is in Aalborg, north Jutland, Denmark with presence of senior executives in North America. We have a global platform with a solid supply chain creating long-term value for all stakeholders.

PEOPLE - an international organization

We believe that a diverse workforce and an inclusive workplace is a prerequisite for staying competitive, now and in the future. Our highly skilled employees are based in three continents, all sharing the common purpose of challenging industry standards driven by innovation and operational excellence.

INNOVATION - we are a high-tech company

Asetek is a global leader in mechatronic innovation. Our journey began almost 25 years ago when we disrupted the PC cooling market with our ground- breaking all-in-one liquid cooler, setting new standards for performance and efficiency. In 2021, we continued to leverage our extensive capabilities with software, hardware and mechanics and entered into the world of sim racing as Asetek SimSports®. Our goal is to transform the sim racing scene, pushing limits and redefining what's possible.

HISTORY - founded on innovation

Our history is rooted in innovation that solved a key challenge of performance limitations caused by computer processors running hot. This innovation, still leading today, is the foundation that took Asetek to a world-leading market position within liquid cooling. Since 2021 we are on a mission to become market-leader in the rapidly growing market for sim hardware.

In 2023, Asetek exceeded the communicated financial guidance from the start of the year and reported the second best financial results in the company´s history. Notable milestones during the year included several product launches within the SimSports segment to broaden the product offering as well as a number of product launches within Liquid Cooling. During the year, Asetek also carried out a successful listing of its shares on Nasdaq Copenhagen.

Revenue per quarter, $ million

Adjusted EBITDA per quarter, $ million

54

New Liquid Cooling products

launched during 2023

In May, a General Meeting resolved on the election of five Board members. Erik Damsgaard, Jukka Pertola, Maria Hjorth and Maja Frølunde Sand- Grimnitz were re-elected with René Svendsen-Tune elected as new Board member. The Board subsequently comprised three regular Board members, one vice-chairman and one chairman.

2023

Asetek passed a milestone when a total of 11 million products were sold and shipped since the foundation of the company in 2000

In May, Asetek raised net proceeds of $16.1 million a fully underwritten rights issue of 71,166,667 new shares at a subscription price of NOK 3 per share.

In May, the Asetek share commenced trading on the Nasdaq Copenhagen in Denmark.

37

New SimSports products

launched during 2023

In June, Asetek announced that Micro Center will start selling a broad offering of Asetek SimSports sim racing products in its physical stores across the USA as well as through its online store.

In December, Oslo Børs approved Asetek's application to delist its shares. Following the approval the last day of trading of the shares on Oslo Børs is 26 March, 2024.

The profitable Liquid Cooling business provides a robust foundation for our SimSports growth strategy. Remember, that in just over two years we have established a portfolio of market-leading products fusing mechatronics with real racing experience. Just as with Liquid Cooling, our core tenets of Passion, Precision and Performance guide us as we develop solutions that enable better gaming experiences.

In the first half of 2023 we secured financing of our new domicile, which required a capital injection by our shareholders. 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.

Strong position amid shifting demand

Entering 2023, we came from a period with reduced revenue due to chip-shortages,record-high inflation, geopolitical issues and inventory adjustments. We adapted to the new market conditions, appropriately trimming the organization. Therefore, we were well positioned when customers, early in the year, launched several new products triggering a strong rebound in demand for Liquid Cooling products. With support from supply chain partners, we leveraged the increased activity and lowered cost base to deliver increased profitability and strong cash flow. Our reve-

"Our realistic life-like

approach to racing gear

is paying off, and we are humbled by the many good reviews and positive feedback of our products and customer service."

nues of USD 76.3 million for the full year was second highest in the history of the company.

However, the strong demand from OEM customers in 2023 was partly due to an inventory build-up, which is now causing softer demand going into 2024. Early indications point to inventories normalizing

in the second half of 2024 with demand gradually improving during the year. These factors are included in our Group revenue development expectation for the year of -5% to +5% compared with 2023.

We continuously seek to optimize Liquid Cooling performance and features at the optimal pricing, for instance, via a constant quest to modularize the use of specific components across many products. Lately, we have experienced increased demand from

some of our larger customers for products with a lower price point for the Chinese market as well as other value-oriented markets. In response to this demand, we plan to deploy products tailored for the lower end of the premium segment within Liquid Cooling complementing our traditional focus on the higher end of the market. This means we broaden the addressable market without compromising the quality that the Asetek brand represents. The value offering tailored for the lower end of the premium market is attached with robust EBITDA margins but

gross margins that are somewhat lower than the historical average. It is important to note that this is a natural development and does not constitute a general price or gross margin pressure on high-end liquid coolers. Rather, it is simply a reflection of demand for Asetek products suited for a new and larger market segment. In this way, we are matching the demand from our customers of price competitive high-quality solutions, retaining customers as well as adding additional revenue. We will see the full effect of this materialize in 2025.

Exciting opportunity in a fast-paced market

We had our second year of SimSports revenue in 2023, and I am pleased that we managed to deliver almost 400% growth from 2022, although coming from low levels. The growth was driven by multiple new products and customers globally. Our ambition is to offer a full portfolio of products rather than being a niche supplier, a position I believe we will attain by the end of 2024. I expect that we can take pole position within sim racing and build market share by providing a full range of high-quality sim racing products based on an open ecosystem.

In 2021, unbeknown to us, at least two Chinese companies entered the sim racing market with a low-cost offering just ahead of us. This has increased competition, with our entry level product series La Prima now being considered a high-end product line in terms of price, quality and features. The last two years, we have been focused on the high-end market segment, something we will continue to do. That said, we also have a plan to leverage our strong brand name to launch a competitive mass-market

product line, which will act as a driver for long-term growth. I am strongly convinced that the winning strategy is to first anchor our brand name in the premium segment before conquering the mass market. Our realistic life-like approach to racing gear is paying off, and we are humbled by the many good reviews and positive feedback of our products and customer service. I believe it is important to note that 2023 revenue in the SimSports segment was almost the same as our best year ever, during the ten years we invested in the now closed-down Data Center venture. I strongly believe we have a great future ahead of us in SimSports.

When comparing our 2023-revenue of $76 million with 2022-revenue of $51 million, it is important to remember that 2023 did not include any Datacenter revenue. The segment was laid dormant in late 2022 but we retain our knowhow and IP, knowing that we have a very good solution to a global problem. But for now, the world is simply moving too slow despite a lot of talk. Should we one day be presented with a persuading business case,

we will re-evaluate. Going forward, we maintain focus on business activities that have more immediate prospects for profitability.

Next steps

Later in 2024, as summer turns to fall, we will move to our new domicile and development center. The construction is on plan, and the team is obviously excited about the move, which will provide a much better working environment. Asetek is a different company than when the construction was decided back in pre-crisis 2020. We have adapted to this new business environment and market conditions, partly through a leaner, more efficient organization. As a consequence, we are looking forward to greeting a tenant who will utilize our excessive space.

In 2023, we raised net USD 16 million as part of financing the new domicile and once completed, we will finalize the mortgage financing. We also took the decision to move our listing venue to Nasdaq Copenhagen to be closer to our biggest sharehold- ers. Because of this we are now in the final phase

of de-listing our shares from Oslo Stock Exchange, a process that will be finalized on March 26. We can already now see the benefits through increased liquidity in the Asetek share in Copenhagen compared to recent years in Oslo. I extend my gratitude to the entire Asetek team for their hard work and dedication during the past year. I also wish to thank all our shareholders for their support. I want to ensure you that we work hard every day to earn your trust, and we are thankful that you share our vision for the company. We are on to an interesting journey, and I am happy that you are a part of this.

Thank you for your interest in Asetek!

André S. Eriksen,

Founder and CEO

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Large and growing addressable market

Revenue in the gaming hardware market is projected to reach almost EUR 150 billion in 2024 and is expected to expand at an annual growth rate (CAGR) of almost 9% the coming five years 1. Growth is mainly driven by consumer demand for high-performing gaming hardware which enhance gaming experiences. The rise of eSports a a global phenomenon, attracting millions of viewers and generating substantial revenue, in just a few years is another growth driver. Upgrade cycles for high-spend PC builders are about 3-4 years 2, supported by product launch cycles from major graphic card manufac- turers, also contributing to demand.

• https://es.statista.com/outlook/amo/media/ games/gaming-hardware/worldwide

• https://www.dfcint.com/dfc-issues-2024-game-industry-outlook/

Leveraging a leading premium segment position

Asetek has a leading position in the premium segment of the gaming hardware market. Since 2000, we design, manufacture, and sell high-quality liquid cooling solutions to most major PC and Enthusiast gaming brands. In 2021, Asetek expanded its business into the rapidly growing SimSports market for racing simulator gear. Asetek has earned a leading position in the premium segment of both the Liquid Cooling as well as SimSports market. The leading market position combined with our strong brand name and high-quality products can be leveraged into increasing the addressable market. This is accomplished by targeting the low-end of the premium Liquid Cooling market segment and launching a new SimSports product line with strong value offering towards entry-levelend-users.

Strong innovation capability supporting future growth

Continuous product development is crucial for maintaining and strengthening competitiveness in an industry that is characterized by competition and technological progress. Asetek is renowned for being an innovative, high-tech and entrepreneurial company that provides products with a very high quality. At Asetek, product development centers around customers' needs and reflects an innovative engineering approach combined with superior performance. The company has two R&D centers - one in Denmark and one in China. In 2023, Asetek spent 9.7% of total revenue,

or USD 7.4 million on R&D, securing continued competitiveness trough future launches of world-class products.

Profitable Liquid Cooling business provides a robust foundation for SimSports growth strategy

Asetek invented the all-in-one liquid cooler and has been solving thermal challenges for almost 25 years. Our business segment Liquid Cooling has over the last 10 years generated total revenues of about $519 million with an average adjusted EBITDA margin of 29%. The profitable Liquid Cooling operation provides a robust financial foundation for the growth strategy of the SimSports business. The strategic fit and synergies between the two segments are visible and will act as a driver for future value creation.

Strong SimSports growth potential

In 2023, the SimSports segment revenue increased by almost 400% compared to 2022. This was due to multiple new products as well as new end-users and re-sellers globally. Growth in 2023 was mainly driven by a combination of multiple new products and a strong increase in new end-users and resellers globally. Gaming simulation is a rapidly expanding segment of the gaming hardware market, with a projected annual growth rate (CAGR) exceeding 15% the coming

6 years 1. Asetek has a clear ambition to grow faster than the market by offering a full portfolio of high-quality products based on an open ecosystem.

• https://www.alliedmarketresearch.com/ gaming-simulators-market-A06821

The strategic framework at Asetek consists of core values, goals, strategic focus areas and operational priorities. By adhering to our strategic framework, Asetek secures a strong platform for long-term sustainable growth.

Core values

The core values at Asetek - innovation and excellence - are rooted in our DNA and have been our guidelines from the start. Asetek was founded almost 25 years ago with the intention of solving problems for our customers. Since then, we believe staying close to our customers' problems also means being closer to the solution.

Goals

Looking ahead, Asetek has set both a long-term growth ambition and short term financial goals. Asetek has also committed to set sustainability goals, which provides a pathway to reduce emissions in the future. On a group level, we are aiming for a long-term average annual revenue growth of

15 percent. Our market is characterized by low visibility and volatile market dynamics meaning that the growth between different years can vary substantial- ly. That is why we also publish short-term financial goals expressed as our guidance.

Strategic focus areas

Asetek will continue to do what we are best at - launching high-quality gaming hardware products and continue to develop our customer service. At the same time, we plan to expand our addressable market and increasing our marketing and brand building efforts. Additionally, we will also expand the number of SimSports resellers and compete for new OEM Liquid Cooling customers. All these actions will drive organic growth going forward.

Operational priorities

Asetek is a well-established brand name in the premium market segment. We are guided by a strong belief that there are very good opportunities for growth by leveraging our current market position and strong brand name.

In the short to medium term, our operational priorities are to focus on expanding our potential market and revenues both within our Liquid cooling business unit as well as within SimSports. This will be accomplished by new product launches and by updating the existing product range, targeting the low-end of the premium market. Doing this, we will strengthen Asetek's market position in all product categories and market segments.

STRATEGIC FRAMEWORK AT ASETEK