Performance in 2020

PROFIT AND LOSS

Total revenue for 2020 was $72.8 million, representing growth of 34% from 2019 ($54.3 million). Sealed loop cooling unit shipments for 2020 totalled 1.2 million, a 34% increase over 2019 (895 thousand). Average Selling Prices (ASP) for the year 2020 decreased to $53.91 from $57.88 in 2019. Gross margin increased to 47.0% in 2020 from 42.3% in 2019. The above fluctuations reflect increased demand in the Gaming and Enthusiast market and Asetek’s business model transition. Shipments under the new model have lower ASPs as Asetek moves to delivering only the principal core technology with improved margins, while the customer adds their unique features with ancillary components.

In 2020, total operating expense was $23.3 million, a 6.0% increase from 2019 ($22.0 million), reflecting investment in the Company’s infrastructure. During 2020, Asetek increased staffing by 35% to support revenue growth.

Legal cost incurred associated with defense of existing IP and securing new IP was $2.4 million in 2020 ($2.7 million). Fiscal year 2019 operating expense included an offset of $0.8 million for settlements awarded to Asetek in patent infringement lawsuits.

Share-based compensation cost associated with warrants and options issued to employees was $0.9 million in 2020 ($1.1 million). The average exchange rate of USD to DKK during 2020 was 3% lower than the average rate in 2019. Approximately 77% of the Company’s operating expense in 2020 was denominated in DKK (78% in 2019), resulting in an unfavorable impact to operating expense in 2020 when compared with 2019.

Adjusted EBITDA was $15.6 million in 2020, compared with $6.2 million in 2019. Adjusted EBITDA in 2020 represents operating income of $10.9 million, plus depreciation of $3.8 million, plus share-based compensation of $0.9 million.

Foreign currency transactions in 2020 resulted in a $1.4 million loss ($0.2 million gain in 2019).

Income tax expense of $0.2 million in 2020 decreased from 2019 ($2.1 million) due to increased utilization of deferred tax assets during the year.

Asetek's total comprehensive income was $11.6 million for 2020, compared with total comprehensive loss of $1.1 million in 2019. Comprehensive income included a positive $2.4 million translation adjustment in 2020 (negative $0.4 million in 2019).

BALANCE SHEET

Asetek’s total assets at December 31, 2020 were $71.4 million, compared with $54.1 million at the end of 2019. The principal components of this change include: trade receivables increased by $10.0 million as a result of a 78% increase in fourth quarter 2020 revenue compared with the same period of prior year; cash and cash equivalents increased by $2.6 million due to net income growth partly offset by share repurchases; intangibles increased by $1.3 million from a business acquisition during the year. In November 2020, the Company acquired JMH Gallows Pound Technologies Ltd., a UK-based developer of hardware and software technology and owners of the UltimateGameTech brand, for a sum of GBP 1 million (approximately $1.4 million).

Total liabilities increased by $8.8 million in 2020, resulting principally from growth in operating volumes and related incentive compensation for employees. Trade payables, accrued compensation and employee benefits, and accrued liabilities increased by $5.9 million and $1.7 million, and $1.4 million respectively.

The increase in trade payables is also partly the result of the Company's proactive management of suppliers and timing of payments.

STATEMENT OF CASH FLOWS

Net cash provided by operating activities was $11.4 million in 2020 ($8.9 million provided in 2019). The increase from 2019 was principally due to increased net income in 2020, partly offset by growth in receivables and inventory associated with higher operating volumes.

Cash used by investing activities was $4.8 million, related to additions to intangible assets and purchase of property and equipment. The increase from prior year is principally due to the previously mentioned $1.4 million business acquisition and purchase of equipment for data center manufacturing ($1.8 million used in 2019).

Cash used by financing activities was $5.1 million in 2020, including $6.4 million for the repurchase of Asetek’s common shares and $0.8 million for payments on capitalized leases. The Company also paid down its line of credit by $0.3 million. These effects were partly offset by $2.4 million received for shares issued on options exercised by employees ($0.6 million used in 2019).

Net increase in cash and cash equivalents was $2.6 million in 2020, compared with increase of $5.9 million in 2019.