Asetek A/S (A31.F) Earnings Call Transcript & Summary

Hello, and welcome to today's Asetek Q4 and Annual 2022 Financial Report and Earnings call. My name is Bailey, and I will be the operator for today's call. [Operator Instructions] I would now like to pass the conference over to Peter Madsen, CFO. Please go ahead when you are ready.

Thanks, Bailey, and thank you. And welcome, everybody, to this Asetek Q4 2022 and Annual Earnings Call. Our Board met last night and they transacted and then approved the Annual Report and the Quarterly Report. The Annual Report will be released a little bit later today. They had to be finalized audit wise on something called ESEF tagging. There was a little technical hiccup there. But we are allowed to talk about the reports as if they are approved by the auditor. I have Andre here today. Also he's in a different location. We were warned about a snowstorm in Denmark last night. It did not appear to be that bad, but he's sitting in another location. So his voice is sounding a little strange. Hi, Andre.

Good morning.

Good morning. There's a little bit of echo there. And Andre, we'll send it over -- pass it over to you the microphone. And if you just tell me when to progress the slides?

Yes, you can just flip the first couple of slides now.

Q4 highlights.

Yes. So the fourth quarter of '22 ended up at $9.5 million revenue compared with $18.1 million in Q4, the year before. Our gross margins came out at 41% compared to 42% in Q4 '21 also. And that's allowed to be a full year revenue of $50.7 million and then EBITDA adjusted of minus $0.8 million. One thing to note, though, is that the EBITDA of the liquid cooling business in itself was positive throughout the year and thereby also in Q4. As you may remember, at least those of you who are following us would know that already early last year, we started to reduce costs, and our quarterly OpEx actually got reduced some 28%, primarily down to laying off people as well as, let's say, stopping litigation. We are initiating a fully underwritten rights issue of DKK 140 million or $20 million, and it will be launched in April '23 to strengthen our financial position. We'll, of course -- I will get back to that in a second. We have also initiated a process to list on Nasdaq in Copenhagen, with a plan then to de-list from slower from Oslo Bors from Euronext over time. We'll also get back to that. And in terms of this year, what we are looking at right now is 5% to 15% growth compared to last year, with an operating income projected between 2 and $4 million. So you can just go ahead and check the slide. So if we just look at where are we right now, how do we see the market? I think it's no surprise that '22 was a difficult year for many, especially in gaming also. And in the end of '22, going into '23, we still see and we still saw continued market challenges in basically delaying getting back to normal. It's obviously fed by the war in Ukraine, the aftermath of COVID, supply chain disruptions, et cetera. And then, of course, on the consumer side, inflation, interest rates, et cetera, all in all, means to reduce end-user demand for gaming products. And yes, it affects both our businesses. Of course, we have also even more reduced visibility and volatility because of all this aftermath. So in terms of what we have done, we have basically tried to stay on track, focused on developing new products, launching more products, focus on cost reduction initiatives, continue strengthening our -- both our capacities. And that -- you may wonder why are we looking at supply chain capacity when volumes and revenues down? Well, that's because there's been so many supply chain challenges and constraints. So for sure, we are looking at getting everything out running again. And then, of course, we're looking at the rights issue that I will also get back to, to strengthen our balance sheet a little bit. And then compared to what we see right now as of today, where are we? And what we see right now, fortunately, I would say, is an increased order activity. We see customers being more positive. They are looking at new product introductions, new product launch plans, and they also indicate that their inventory situation has started to normalize. And what does that mean? That means that they have now started to burn through their excess inventory that they built up during '22. And then, of course, we have started shipping a lot of new sim racing products also up against the backlog that was created both during Q4 and Q1, and primarily based on supply chain issues where we've not been able to supply what we are now. So we have started shipping pretty much all of it. So if you go to the next slide, Peter. If we start with the listing venue here, it's now 10 years ago, more or less exactly that we listed on the Oslo Stock Exchange. The reason it was Oslo then was basically because there was not a good market for, let's say, small-cap tech IPOs in Denmark at the time. So we chose Oslo, and it has been good. But on the other hand, we are also caught a little bit in this in Denmark. We are not really a Danish company because we are listed in Oslo. And on the flip side, in Norway, because we are in Denmark, we are not really a Norwegian company either. So we are caught in between of this. So while we were doing the rights issue anyway, we felt now was the time to, let's say, come back to Denmark, where we believe it will give us more interest, additional visibility, more exposure because now we are, in fact, a Danish company based in Denmark and listed in Denmark. So that's really the background for that. The way it's going to work is that the rights issue is going to be undertaken in Oslo, then with the commitment to start a dual listing. And then as we move along, we will move away from Oslo and then staying in Copenhagen. So next slide, Peter. So a little background on the rights issue. If we rewind the tape to 2020, we grew significantly, both because of the data center business, because of the liquid cooling business and of course, also not so much at that point, but also the SimSports business. And we looked around to see if we could find a new place to live. We were initiating containers on our parking lot to put our people in. So we really needed more space. We were not able to find anything. So the decision was made to invest in a new headquarters. Then if we fast forward a little bit, especially last year, we have faced unprecedented headwinds, everything we were hit by -- from the pandemic shutdowns, shifting issues, supply chain issue, component issues, demand issues. So we were hit by it all. And as we revealed last year also we have been working on finalizing the funding. And the reason for that is that the funding and the funding commitment, of course, look different when we started this compared to where we were in late '22. So our bank has, basically, as a consequence of the above, as well as the retraction of the real estate sale and leaseback market because of the interest rate right now, at least in Denmark, that's really a non-existing market. We were asked to raise additional capital for them to extend their long-term credit facilities and commitment. So therefore, Asetek's Board decided to do a launch and launch a fully underwritten rights issue, and that's basically where we are right now to raise the gross proceeds of around DKK 140 million. All existing shareholders will obviously receive subscription rights, and the new shares will be issued at a price that will not exceed the TERP based on the last day of trading of the volume-weighted average on the Oslo Stock Exchange, of course, and then with a discount of at least 40%. There are obviously some conditions, for example, something that relates to the loans, something on the general meeting, et cetera, that's going to be carried out later, but that's completely normal. But at this point in time, the rights issue is fully underwritten. So next slide, Peter. So looking a little bit on the business side. I would say that right now, we are well positioned to capture the long-term potential of our business. We have not really slowed down. Obviously, it does have an impact when you say goodbye to 25% of your staff, but we have kept our heads down. We have worked hard. And what we see right now is, I would say, a high interest and also very positive feedback for both our liquid cooling, as well as our SimSports products. It is too early, in my view, to say the market is bad and the market has stabilized, and everything is as it used to be pre-pandemic, I think that's too aggressive. But I do think we -- it's fair to say that we now see some early signs of market stabilization. We do see an increased demand for our liquid cooling products. And the way that materializes is and we see it in our forecast from our OEM customers, we do see an increase, both in end-user and retailer demand for SimSports products as well and naturally also as our product portfolio gets bigger. We are both challenged in our supply chain build, and we are also challenging our supply chain to increase the production output and get products through. And I can say that, especially on the SimSports, it has been very challenging in the first few months here. And the reason for that is that unlike on the liquid cooling side, there is no inventory of anything, no raw material, no parts, no component. Everything is new. So bringing everything up from new. I mean just the steering wheels, there are hundreds of parts in that one. And so that's something we are focusing a lot on, but we are getting there for sure. And then, of course, we have maintained a focus on cost efficiency. And that's not something that's related to our current situation. That's something we always have. We are focusing still half on product development and scalability to meet the increasing demand. Next slide, Peter. So I will not spend a lot of time on this slide, other than if we start out at the right, we have the data center business, it's great out for a purpose. And that is that it's not something we are focusing a lot on right now. We are still working on the legislation side in Brussels. But other than that, nothing is going on, on the data center side. We are now focusing on our gaming business, which consists of the liquid cooling and the SimSports. Next slide, Peter. We have slimmed down the organization quite a bit. We are roughly 115 employees in total right now. And for those of you who have seen this slide many times before, I would say that the only news here is that we have now started slowly in Malaysia to actually crank out products. It is more expensive to manufacture in Malaysia, no doubt about it. But compared to the US tariffs for products coming out of China, it's still significantly cheaper. So that's what we are trying to do is we start off in Malaysia with products going to the US. We are also trying to get less dependent on China overall. So we are also starting up in Malaysia with some of our SimSports production. And we have found a really good and low-risk way of doing it because the company we are using as a contract manufacturer in Malaysia, for example, is, in fact, the same company and the same partner we've had for many years in China. Next slide, Peter. Let's say, Page 11%. So in Q4, we started shipping 6 new products, where 2 of them were featuring our eighth generation liquid cooler. And it may not mean a lot to you other than I can say that in the 20 years we've exited, this is now our eighth generation that we have launched. And better performance, less power consumption and quieter operation. I would say that the best way to say and to see that we are seeing a good start to the year is that you can see on the right part, we have 24 new products that is estimated to start shipping in Q1. And when we say estimated, it's because it could be -- it could slide into Q2, some of them and some of them will be Q1, of course. So the interesting thing here to know is that the customers have committed to it. And as you can see, historically, that's a very high number of new product launches. So for sure, it's not like our customers have backed out of it in any ways. On the contrary, they believe in the future like we do. So from that perspective, we are pretty confident that 23% is going to be a reasonable year. Next slide, Peter. So there's nothing much new to report here. We have a wide number of OEMs. We are currently shipping to more than 20 OEMs. Top 5 represented somewhere between 80% and 85% of the business the last couple of years. It's always our ambition to add new customers and to increase diversification. And I do believe during the year, a new name will sneak in here on the top 5 list. So that's good news as well. Next slide, Peter. Something that's easy to forget when we look at the data center business, the SimSports business, the construction of new headquarter is actually the underlying business. And I would claim that even in the hardest of times that we have seen in '22, our liquid cooling business is still a very solid business. If you look at the cash generation over the last -- so what is that over the last 4 years, we have accumulated $75 million in EBITDA. I would put it this way instead. I'm saying that '22 was also a good year for our liquid cooling business, not as good as we were used to and as we had hoped. And because of that, it was not able to finance all the other stuff that we were investing money into, but there is no doubt that the liquid cooling business is a solid and highly profitable business. Next slide, Peter. So staying on liquid cooling for a second. Our goal, as always, is to increase our leadership in the liquid cooling market. And the way we do it is we stay on top on the R&D side, on the engineering side, innovating, driving down costs, driving up features, widening our customer base and of course, letting people know who we are and what it is they are buying. And going forward, we will just keep our focus on what we are doing, delivering our core solutions. We will ramp up development to bring out new products as we have done always, and yes, focus on reducing our single customer dependency. We are working on it. We always work on it, and we will continue with that. And then, of course, I would say even more so as the SimSports, it's been more interesting and thereby, more important for us to do social marketing around liquid cooling as well because not every gamer have a SimWin. But for sure, everybody who got a SimWin, they also got a high-end gaming PC. And there is, in fact, a big overlap between the 2 segments. And we have -- I cannot go into a lot of detail right now, but it will be obvious later in the year that we have actually gotten liquid cooling business out of stepping into the SimSports market. So that's an interesting overlap for sure. Next slide, Peter. Yes. Slide 16. So on the SimSports side, the plan always was to come out with products enough to have a full ecosystem, and we are slowly getting there. Well, not actually slowly, we are getting there fast. So already in Q4, we launched several products. We launched the formula steering wheels. We released 2 different wheelbases. We released 2 more sets of pedals. We released new bundles. And right now, we have a backlog of somewhere between 2 and $3 million, which is not bad, considering full year revenue last year was $2 million. So SimSports looks promising for sure. We still need to learn how this market works in terms of seasonality and all that stuff, but a good start for sure. We have all of our release and revealed products shipping now before the end of the quarter. Even the La Prima bundles are starting to ship here in March. And then we have established a small-scale U.S. hub simply to expedite delivery and keeping shipping costs down because some of the challenges we've been faced with is shipping costs to the U.S. It doesn't make sense that you buy a $2 [ brake ] and then you have to pay $45 in shipping. So therefore, we have set up a hub in the US. And of course, we are also having and setting up resellers in the US. But if they want to keep shipping costs down as well, and then we are relying on container costs that are shipping, then there will be several weeks of gap where US customers still want to buy products in the meantime. Next slide, Peter. So it's too early to say that SimSports is a great business, but I would claim that in order to build a great business, one of the fundamental thing is to have great products. And that I believe, I dare to claim that we have now released our wheelbases. They have been 2 years underway. And here, just a few quotes from review. They could just as well in some other reviewers because all of them have basically said that it's the best force feedback that they have ever felt in a simulator. What does that mean? Well, it means that what you feel in the steering wheels, that feeling of simulating and replicating a race car. That's what it's all about to make it as real as possible. And here, we now have the most well-regarded and most respected reviewers in the entire business, claiming that what we have now brought up and out in our first attempt is, in fact, the best that they have ever tried. And we now start to get end-user feedback as well, and they are saying exactly the same. So I'm very happy about that. That's been an awesome job by the team that in our first attempt, we can actually compete with the very best out there. Next slide, Peter. So nothing has changed here compared to last quarter. The goal, of course, is to be a significant player and turn it into a -- SimSports into a great business. And the strategy, the way we wanted to do that was to leverage our -- the capabilities we already have in the team in terms of mechatronics and supply chain. And I think that has proven itself that, that was right to do that. We are developing product based on both IP we acquired, but also a lot of new IP we operated ourselves. And then the whole idea, of course, is that we want to establish a big growth internally into the second and yes, again, with the ambition of turning it into a great business. Where we are right now? We have launched what we could call the most basic ecosystem. So we have, one, steering wheels. We have several wheelbases and pedals at different price tiers. We are still cranking half because, to fulfill this mission of having a full ecosystem, we need much more steering wheels. We need the brake, we need seats, et cetera. So there are still a lot of new products coming. And the same on the channel strategy. We have it in place now, but we have some exciting opportunities that we will also get back to later in the year that we are exploring. And for sure, like we did on the liquid cooling side many years ago, there is still a lot of room for innovation in this space, and we have brought out a lot of new innovation that you will also hear more about at later calls. And for sure, as already mentioned, there is a big overlap between the liquid cooling business and the SimSports business. And one example is most end-users are not spending $2 million, $3 million -- or sorry, not $2 million, $3 million, $2,000, $3,000 on new products before they have seen their favorite review assisted out, et cetera. But actually, when we launched our wheelbases in December, people were ordering right away, and pretty big volumes because they already thought of us as a brand from the liquid cooling side. So that was great to see. Next slide, Peter. So then I'll leave the word to you, Peter.

Yes. Thanks, Andre. And let's just first take a quick look at the distribution of revenue over the quarter. Volatility is not new to Asetek. And if you've been following Asetek, you will know that. What I want to point out here is that we do have a solid underlying business on the liquid cooling side of things. We have traditionally been able to create around 35% or thereabout of EBITDA levels. Then we have seen in -- since '21, '22, of course, we have seen a reduction in revenue. And in the beginning, we saw a reduction also of the EBITDA from that reduction. But we are quite satisfied to see how we have been able to reduce our overhead expense and thereby, we can see the EBITDA levels slightly climbing upwards again. If we dive into the P&L statement, then, yes, Q4 revenue-wise was not a huge number, $9.5 million versus pretty much the double in the year before at $18 million and for the year, as such, it was $50.6 million in 2022 versus $79.8 million in 2021. I'll come back to the margins in a little bit. Just saying here that they have been stable. We have seen reductions in the number of sealed loops we have sold, yes, but we've actually seen a small climb in the ASP, the average sales price that we've been able to take out. Overhead expenses, operating expenses at $5.8 million in the quarter versus $8.1 million the year before. That's a 28% decline or reduction in that quarter alone. And for the year as such, we came out at $26 million in 2022 versus $33 million or $32.5 million in '21. And if you compare the 2 years over each other and take out the one-offs, then that's a reduction of 16%. And those reductions come from a mix of staff reductions, that's the bulk part of it, and then we have reduced legal fees from '21 to '22 significantly. And by the way, we are bringing them down even further. And then there is a portion also that was given to us by the dollar-Danish krone foreign exchange rate gross. And that means all of this, that the operating income for Q4 was minus $1.9 million for the quarter in itself and $5.4 million for the year, so within our guidance. The US dollar -- pretty much every currency has been shifting up significantly and down significantly in Q4, and that gave us quite an impact in Q4. And all this means that our income before tax for the quarter was minus $3.8 million to the negative versus $5.8 million -- compared to $5.8 million for the year as such. So a lot of stuff happening there. We are looking into a brighter future we assure and as Andre alluded to. Just a quick word on the gross margins. 40% something is our goal. And we have been at -- apart from 1 quarter in '22, we have been above the 40 points mark. And this is a mix of all our 3 businesses. Remember, last year, we also had some around $4 million of data center business that some -- that if you have been following us, you will know that data center gross margin has been shifting up and down but not so much in 2022. And the SimSports is part of the gross margin also here in '23. Balance sheet, which is showing certain numbers were $7.4 million of cash at the end of the year, which is a significant reduction compared to the year before, driven mainly by our investment in our new headquarter where we are -- at this point, we are about half into it, about $26 million of investment in total at this point, December 31st. And then, of course, the reduction in activity also led to quite a shift in our working capital balance sheet as it looks. However, on the working capital, we see quite a stable development in our KPIs or measurements when it comes to working capital. We are continuing to draw on our financing lines related to the new HQ and of course, this new rights issue that is coming up. Of course, that will impact the balance sheet and reduce our debt low significantly when that is transacted in May presumably. Quick word on the HQ, the domicile building. It's scheduled and it's on plan from a construction point of view for completion in mid-2024. I don't think there's any major delays to report about there. There is only very limited cost inflation. Everybody heard about increases in prices of building materials late last year and early this year. We locked in the major [indiscernible] of building construction materials last year. And thus, we also avoided significant changes, increases in those. When we are done next year, then we will have a building that is significantly larger than what we need right now. The building is built, designed for growth of Asetek. We reduced our staff levels by 30% last year, so we will have some empty space. The building is constructed in such a way, so it's relatively easy to sublease parts of the buildings should we not need them ourselves. When we are done with it, prior to that, we will evaluate again whether to keep it on our own books, sell -- do a sale or leaseback or however, we should set up the financing at that point. If we do not do a sale and leaseback, then the obvious choice could be a traditional mortgage financing. Financial strategy is not so much to add here other than we have been, of course, working with this rights issue as it's ongoing as we speak. And then for the last year or so we've been working very efficiently on the rightsizing as we call it, of the organization. That's, of course, a relatively large task for an organization to implement that. And with that, Andre, we go back to the summary and outlook.

Yes. Thank you. So just to sum up what we already talked about and where we are heading, we still see a high end-user interest, also direct customer interest, I would say, in both our liquid cooling business and our SimRacing products. We do see signs of early stabilization in the liquid cooling market with a heavily increased customer activity, and I would also say with forecast supporting it. Reason I'm still, let's say, conservative is not so much because of our customers. It's much more because what's going on out there in the world right now. Will there be something that we don't know of? Yes, later in the year, how will that affect us, et cetera. So therefore, I'm cautious. But for sure, in terms of what's going on with our customers, I'm very positive. We have continued and we will continue scaling of the SimSports business in terms of products and end-user connection points. Let me just stress though that, although not listed here, my focus is profitability. Just because we see a lot of interest on the SimRacing products right now, we are not hiring more people. We have scaled down the business. We have also scaled down the SimSports business. And yes, it will impact the level of speed to which we are bringing new products to market. But we are still doing great, and we're still doing fine, and we will continue with the cost level we have until we see it also turns into a great business. So let's just get that pinned out here. And that's basically the next point of optimizing the cost base. We will, of course, complete the underwritten rights issue. The full-year revenue growth is expected somewhere between 5% and 15%. It's simply not possible to be more accurate at this point because Q3 and Q4 is basically a blank sheet still in the forecast tool, and an operating income between 2 and $4 million. One thing that's interesting about these numbers, let's just say for the fun of it, that we will achieve 15% growth. If you then take into consideration that we actually lost by design, $4 million of data center revenue, then we are just back to our normal growth rates where we have been in the last 2 decades. And I cannot promise anything, but I would not be surprised if we, 12 months, 18 months from now, looking at the numbers, can carve out the whole pandemic era. And then you will see from 2019 and perhaps into '25, you can draw a direct line. So I think this pandemic has hit us really hard, just like a lot of other people, combined with the war, of course. So long-term growth, I do expect that we will get back to at least our 15% a year when markets normalize again. And don't read anything into this, like, well, that means you will not see higher growth rates in SimSports, does it mean that we will see lower growth rate of liquid cooling and higher growth? That's not what I'm saying. What I'm saying is that long term, I believe we will get back to business as normal. So with that, that was the last word for me, and then I think we'll go into the Q&A session.

Yes. And before we hand over the microphone to Bailey, the operator, let me just remind the audience that you can post and type in your questions via the web app also. Bailey, yours?

[Operator Instructions] Our first question today comes from the line of Yiwei Zhou from SEB Bank.

I have 2 questions for now. Firstly, Peter, could you maybe give us a soft guidance on the financial leverage after the rights issue. I'll do one question at a time.

I'm not sure I understand your question, Yiwei, to be honest.

I mean the gearing net debt to EBITDA level after rights issue?

I don't have that number in my head. Right now, we owe the banks. When this transaction will go through, we have outstanding debt around $28 million, and we will receive net proceeds of $15 million or something like that.

Okay. Okay. And maybe just on the CapEx need for the new headquarter, could you please confirm that it remains unchanged because your initial guidance was $50 million total expense?

Yes. And that's still the case, yes.

Okay. Great. I have one question also on the SimSports. We already have [indiscernible] and trying to focus on the profitability. Could you maybe talk a bit about your long-term view in this business? Will you expect this business to be more profitable than the liquid cooling? Or it would be the same level? And at what points it will be a breaking even?

So I think, first, we have to crawl before we can walk and not put the wagon in front of the horse here. But I -- so I'm not going to talk about when we will reach profitability, but I expect it to be fairly soon. Let me put it like that. In terms of profitability, I would say it has the potential to be more profitable than the liquid cooling business, both in terms of absolute dollars, but also in terms of gross margin. But we are not 100% certain, yes, where it will land. And the reason is that we have actually been able to develop products low-cost enough that we can enable channels that some of our competitors do not have where they're only selling direct. So what that means is we have, with the current products that we have already now, the opportunity to sell directly on our website. I think it's not rocket science that if we sell directly on our website, we will, of course, get much higher margins. We will, of course, also have higher marketing and branding costs versus if we sell to online retailers, then of course, we have to share our margins with them. And then finally, we also have the option of going retail, to some extent, with some of our products, which also of course, will mean lesser margin to us, but obviously, much higher volumes. So we are trying to experiment with all these margin models. And right now, it's difficult because everything is new, everything is low volume, a lot is made in Denmark where we will outsource it over time. So I can't really be more specific than this. But for sure, I would say it has the potential.

Great. Very helpful. I will jump back to the queue.

The next question comes from the line of [ Jesper Bischoff ] Private Investor.

It's Jesper Bischoff here, and I represent myself. I have 2 questions. First one relates to a new headquarter. How many employees are you in Aalborg now and how many were you before the layoffs? And how many people does the new building fit? I'm just trying to work out the cost of the new headquarter per Asetek employee if the budget is USD 50 million. I mean it must be an obscure amount of money. And have you at any point in time considered scaling down the construction now that you let go of like 30% of your employees? That's the first question. And second question is, are there any updates on the double taxation issue that you had with the US? And what does that mean for your tax rate in the coming years? That's it.

So I can take the building, Peter, then you can take the financials and the tax issue.

Yes.

So in terms of building, we did look at several options, including putting the construction on pause. But when we are talking and building this size and complexity, it would cost more to change the building than to actually carried out in life because there are so much engineers, so much architects, so much construction that was already completed that, that was not an option. In terms of staffing the building, we could really have it both ways. And what I mean by that is material costs went up after the war started like crazy, so more than last year ago. And that it was a big risk that the construction would end up significantly more expensive. So in order to hedge that, we have actually made a lot of early commitments to sub suppliers. So if we had stopped the construction, it would have cost us the same money, we would just not have a building. So in other words, that was not a feasible outcome even. But for sure, we have looked at all options.

Okay. And how many employees are you in Aalborg now?

We are around 75 here in Aalborg. And before the layoff, we were 115-ish thereabout.

Okay. Yes.

And then you asked about the -- sorry, go ahead.

Yes. And then the new building, how many people would be able to work from the building when it's....

Around 300 plus.

Okay. Okay. So that's open-ended. Okay.

Of course, it's open-ended. Of course, it's open-ended. It's not a hotel we are building. You can use the space for many different things. It's not like there is a chair locked in every square meter. So it really depends. We have a lot of lab space. We have a lot of manufacturing space. We have a lot of storage space. So of course, we can -- that's the whole purpose of doing a new building that it is flexible.

Okay. Understood. And in terms of the double taxation issue?

Yes. The double taxation issue is being worked between the Danish tax authorities and the US tax authorities. And it's a very slow process, and it's not being made faster by the COVID crisis or the COVID situation. So it's quite slow. It does not, however, have a real impact on Asetek because the impact is on the parent company and we don't have -- in rough amount, we don't have taxable income in the parent company. So there's no tax impact for real, significant on the Asetek company.

Peter, perhaps you can disclose here to the gentleman that as a part of the rights issue, we have actually spent, I would say, significant time and money in trying to figure out solutions. So what Peter just gave you was the conclusion, unfortunately. But we have really spent a lot of effort trying to solve it.

Yes. The background for the whole thing is that the United States does not like companies moving out of US taxation, if they have first been within US taxation. And we were a US company up until 2013 or something like that. And just at that point, when we moved from US to Denmark, they changed the rules to also include the situation that we were in, which was a company moving back to the company where it was originally founded. So we were caught in quite an annoying situation there.

Okay. But there's no real impact then. But on the other hand, is it correct to assume that the issue restricts you from paying dividends?

Yes. Yes, it restricts us. It doesn't prevent us from, but it makes it cumbersome on the shareholders because, initially, you would have to pay dividend tax to 2 nations and then the shareholder would need to get those taxes back.

[Operator Instructions] There are currently no additional audio questions registered. So I'd like to pass the conference back over to Peter Madsen. Please go ahead.

Yes. Thanks, Bailey. There are a few questions here.

I see them. So I can take them.

Okay.

So the first question is whether management is still confident in the future of Asetek? And if so why isn't this reflected through increased skin in the game? So for the first part of the question, yes, I'm still confident in Asetek. I only got one life like everybody else. And if I did not believe in Asetek, I was gone a long time ago. I'm not here for getting my salary. I'm here to build a great business and have fun. So in terms of increased skin in the game, I don't understand the question. What I can say for me personally is that over the last 5 years, I have bought shares in the open market 4 times. I am doing my pro rata share here, as well as I'm a part of the underwriting of the rights issue. So shy of donating my children, I'm not really sure I understand the question. Next question. With the significant staff reduction and cost focus, how much of a pay cost have you and Peter have to take? What I can say is that I voluntarily and the same as John and Peter, for let's say, we, unlike everybody else in the company, we have not gotten any salary increases this year. We will also not get any. From my own part, getting stock is a part of salary. I have voluntarily said that we can reduce that by 5% -- or sorry, by 50%. And as I just said, I'm participating heavily in this round, actually to a level where I'm borrowing money in the bank to do so. So I think that's answer enough. Is $10 million of SimSports revenue feasible in 2023? I think it's a stretch. And I think it's a stretch because we basically have been in, what I expect as one of the strongest quarters Q1 with no revenue. Well, we will get revenue, but we've not been able to ship until the really last part of the quarter. We are still developing a lot of new products. But I think I can share that my internal goal here is before entering the year was if we could go from 2 to 6, I would be happy. But I would say it's not impossible, but I think it's a stretch. Then the final question is the subscription price will be set on the day before the last trading day prior to the publication of the prospectus, less a discount of at least 40%. On what day will the prospectus be published? And what do you currently expect the issue price to be? Do you have anything on that, Peter?

No, I know that, that information is heavily guided by litigation. We have a legislation. We cannot talk much about it. The prospectus will be out mid-April. And I don't -- I cannot talk about the expected issue price.

Okay. Then we have spending US million dollars on a new half-quarter for around 100 employees, how is the Board justify investing more than Norwegian 5 per employee on office space? What return of investment was expected? I think it's a late question. First of all, we were 120 people at the time. We were looking for new facilities. We couldn't find any. We had containers coming in on our parking lots to host new employees. So I think it's easy being clever in the hindsight, but that's not enough. Then I think I'll refer you to the Chairman of our Board, and you can ask why the Board made the decision. I think that's all I'm going to say around that. I don't see any more questions, Peter. I don't know if you have any.

No, I do not. And I just did request here. So that means that we have come through the conclusion of this webcast. Thank you for your interest in Asetek.

Thank you.

This concludes today's conference call. Thank you all for your participation. You may now disconnect your lines.