Good day, and thank you for standing by. Welcome to the Asetek quarter one 2021 presentation. At this time, all participants are in listen only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star and one on your telephone keypad. Please be advised that today's conference is being recorded. And if you require any further assistance, please press star and zero. I'd now like to hand the conference over to your speaker today, Peter Madsen. Please go ahead.
Thanks, Nicole, and thank you to the audience for joining this Asetek Q1 2021 presentation. I have with me, not in the room, but on another line, André Sloth Eriksen, our CEO. Hi, André.
Hello.
Hello. We've had quite a busy day. Our board met last night and discussed and approved this report. This morning, we've had our annual general meeting. We're now ready to present the quite strong Q1 of 2021. The way we'll do it is that André and I, we will be running through the presentation. We'll show it on the web app that you are probably in front of. And then we, as Nicole said, we'll have a Q&A session at the end of this thing, and you can either call in via the phones or feel free to type in your questions on the web application. With that, André, over to you.
Thank you. Let's start on page four. Just a highlight of the quarter that's just come behind us. Biggest, highest revenue ever in a Q1, reflecting a growth of 174% over Q1 2020. That was a rather weak quarter, so pretty easy to beat, but way above my own expectation with 174%. That's quite a bit above. Gross margins of 43% compared to 49%. We will obviously go or come back to that in detail. For those of you who have followed us for a while, you should know that anything above 40% is gravy. 40% in the space we're in is high. Whenever we have the sun and the wind and everything in all directions, sometimes it's upwards. 43% is still more than a respectable number. Obviously, we also have a record EBITDA of $4.7 compared to zero last year.
We announced the SimSports investments we have done and our plans for that, and we are still on track to launch new products later this year. We made an FDR, target change release, earlier in April that things look pretty good. We expect now a growth of at least between 20%-30% compared to last year over a revenue of $73. It looks good. We do expect, on an overall level that gross margins will decline, as already alluded to, but still way within our normal ranges. If we go to the next slide. If we look at the current situation, and when I say current situation, there are, let's call it three items that we and everybody else is struggling with at the moment. There's, of course, the COVID-19. It has had a limited impact on us, and if anything, probably a positive impact.
We have our full production capacity running, business as usual. We have, of course, expanded our supply chain capacity to meet the increased demand. So far, we have also avoided a significant impact to the IT shortage on a global scale. Although we have started to see it and notice, we have not been impacted thus far, but it is a risk. The third thing that we are obviously still impacted about is the tariffs. COVID-19 has taken all the headlines, of course, and the global shortage of IT. As Peter will probably allude to later when we talk about gross margins, et cetera, don't be fooled to think that the tariffs don't impact us. It has a huge impact on our margins. The good news is that we're still getting along pretty well, but it is a thorn in the eye for sure.
We focus on our employees' health and safety. We follow all the guidelines that we have to follow, of course. Our headquarters, sales, manufacturing, engineering, everything is fully operational. We have a, I would even call it a very high sourcing activity. I think here in April, we are manufacturing the highest number of units ever in one month. I think we are approaching 200,000 units in one month. We are running fast at the moment. On top of that, we are expanding our workforce, of course, to meet this growth and also to develop our SimSports business. On the customer side, what we see is, what you would call it, continued positive signals. Things are looking good. We see good response from the G&E business. On the data center side, there's not really a lot of news. As always, we have low visibility.
We report significant orders when we get them, and yeah, that's the nature of that business. As I said, to begin with, we expect our revenue to increase on top of a very strong year last year. That's really nice, and of course, that means that our range of guidance is now between $87 million and $95 million. I don't think it's necessary to say, but I will of course say it anyway, that we will, I will, of course, go the extra mile to see if we can hit the magic $100 million. We hope, of course, but as the situation is right now, things look good, but we also know things can change, but just so you know, hitting the $100 million would be great. The range we came from was $10 million- $20 million. Still, we had expected a good growth this year also.
As I said, our gross margins are expected to decrease. We are facing Forex. We are facing, of course, the IC shortage. Although we don't have shortage, we obviously have to pay for what we get, and it's not become cheaper lately. We are facing the tariff situation, and I don't want to go into any details because of our customers, but what I can say is that the impact is measured in millions of dollars within the quarter. It does have an impact. Finally, on the bottom line, we are of course also investing in the SimSports business. Of course, that will have an impact on our income. That's all a part of the plan. Go to the next, Peter. This slide is more or less the same.
Yeah, probably been like this for a number of years, but there are subtle changes, and I like to go through it every time, and I'll also do it this time because it tells you a little bit about how we are growing our organization and how we are growing it. If you look to the far left in our Silicon Valley office, it used to be more or less only a few support functions. We actually, over the years, have added product management. We have added a new wording called total solutions. That's for those of you who've been around for a long time may remember that word. It's actually FAE, Field Application Engineering, so that we have engineers close to our customers. Up until now, we have primarily had engineering and engineering support out of Denmark.
Needless to say, with the COVID travel restrictions and for other reasons as well, being close to the customer makes sense. We've actually added that. We have branding, outbound marketing, a finance function, and we also have part of management over there now. Our Silicon Valley office is growing again. The reason I say again is that when I lived there for seven years, it was also a sizable office, and then we scaled it down, and now it's been scaled up a little bit again. In Texas, close to HP and Dell, we have a management, John, our COO. We have sales in London, in Aalborg, Denmark, where I reside. We have product management.
We have R&D prototyping, a lot of in-house prototyping, sourcing, in-house manufacturing, quality, order management, branding, marketing, finance, and then of course, Peter, myself, and a couple of the other VPs are residing there. In Xiamen in China, we also have product management now. We have some level of R&D and sourcing. Obviously, we have our outsourced manufacturing, quality, order fulfillment, and finance. In our Taipei office in Taiwan, we also scaled up a little bit as we now have total solutions, so field application engineering there as well. We have some R&D, product management, and of course, sales. That's the global organization as it looks today. We are roughly 140 employees. It's difficult to count because there are more or less new people starting all the time right now because of our growth. Yeah, I think that's what I want to highlight.
On the page eight, if you look at the business segments that are, let's say, generating revenue today, we have the Gaming & Enthusiasts business where we have split that in two. We have the enthusiast and do-it-yourself customers who are building their own PCs. We have the, let's say, more hardcore gamer type who is not necessarily building their own PCs, but buying gaming PCs from our OEMs, Alienware and MSI. On the data center side, we have Fujitsu, HPE, and Supermicro. That's a select of them. We've pretty much been through it, what's on slide nine already. Just looking at the bars, very strong Q1 following a very strong Q3 and Q4. If we look at the margin just once again, we are obviously spending money. We have roughly 20 employees in the SimSports department.
That's why you see the white line there pointing downwards, and it, of course, will be pointing downwards for a while. If we jump to slide 11. If you look at that segment alone, the G&E, it looks very strong again, both on the margin side and on the revenue side. I just want to stress once again that on the gross margin level, in my book, it has said minimum 40%, and that's been my guidance towards myself for the last 20 years. That's also how it will continue, and anything above that, it's gravy. Of course, we're doing everything we can to keep it as high above 40 as possible. Nevertheless, 40 is the guidance stick. If we look at page 12, along with the number of shipments, we of course also enable new customers and new programs.
In Q1 alone, we introduced four new products to our do-it-yourself OEMs. Just here in Q2, we expect to start shipping six new products. We are investing even more in product development, branding, and this whole idea about branding behind the brand initiative, it works pretty well. Our partners are featuring us. They are talking about us. They are highlighting us so that end users, they know they get the real deal and not some cheap knockoff from someone. That strategy really seems to work well. If we look at our customer base a little bit, we are currently shipping to more than 20 OEMs. We actually have more in the pipeline. Top five represented roughly 90% of the G&E in Q1 versus 81% for the full year of 2020. The largest OEMs are the ones who have handled the crisis and benefited the best.
I don't think that's a surprise. Of course, our ambition is to increase customer diversification over time. I don't know if it's luck or what it is, but it seems as we have been good at picking the winners among our customers, meaning that our really good customers are also really successful. Therefore, it's really difficult for us to manage the diversification, but I'm not too worried about it. If you look at the graph on the right, the five bars, you may say, "Oh, the customer concentration looks the same now for the last five years." Yes, that's correct. Keep in mind, the name of the different colors is by no means the same. What that means is that if one big color disappears, then a new one will come in. That's why I'm saying I'm not too worried about it.
On the IP side, I don't want to say much other than we are, of course, following the situation, and there's no dramatic development since our last call. If we go to page 14. Yesterday we introduced a new series of coolers with ASUS for their ROG, stands for Republic of Gamers. ASUS have been an OEM since 2018, and they have been a forerunner of this whole branding initiative that we made since 2019. It's one of our top three G&E OEMs right now. They are doing really well. We have started with, early on, a simple co-branding program, but it has actually developed over time from, or to that we are now on the retail box. We are on the Republic of Gamers webpage talking about the Cool by Asetek. We have feature videos, unboxing videos. We have promotion giveaways, et cetera.
It's a really good partnership more than just, let's say, an OEM customer-vendor relationship. That's really nice. If we look at the strategic picture in the G&E business, I don't want to dig into too many details. The goal, of course, is to dominate the market, simply as that. The way we're going to do that is, of course, we are going to keep developing new products, new technologies. We're going to grow our customer base, our OEM base, and of course, we support it with branding and marketing. Nothing rocket science here, really. It's just getting it done. If we look forward, I think the reason why people are buying Asetek is because of the performance, the quality, and the reliability. You know what you get, and that's, of course, what we're going to push going forward. We have co-branding agreements in place.
We're going to do more. We are connecting directly with the gamers and enthusiasts via social media and online communities like Discord, et cetera. All in all, I think we are very well-positioned to monetize our brand. If we jump to slide 17. The G&E, up until now, have, of course, always been about liquid cooling. The sim sport is, of course, also within the gaming and enthusiasts market. If we just spend a little time on that and recapping and perhaps introducing new people to it as well. The idea is that we see sim racing and sim sports in general. It doesn't necessarily have to be racing. We start out with racing because we think it's the most low-hanging fruit at the moment, but in the longer perspective, it could be gaming simulation of anything from racing to flight sims to golf simulator, skiing simulator.
It could be anything simulator related. We identified this racing opportunity through our esports academy and our racing engagements, and it's in fact highly complementary to what we do already at Asetek. There's a big overlap of customers. There is a direct overlap in our capabilities within mechatronics or software, hardware, and mechanics. That's what we're good at Asetek. Just like everything else within gaming, the racing sim market has really grown and is growing really fast. For us, the way we wanted to enter was we wanted to do it fast. We didn't want to hire 100 people and then say we come to market in five years. What we did instead was we acquired a company, and we acquired some IP from a company that's enabling us to go faster to market.
I have to say that, well, at the end of the day, we need to see how much money we can extract, and that's of course, we all realize that that's the judgment day. That is when the revenue starts to kick in. If we forget revenue for a second, I would say that these two acquisitions we have made, it's working really well. We have a strong team, both on software and hardware, they are working well together with, let's say, old Asetek people and new people we acquired. I'm actually very confident that we are going to release our first product already this year. If you think about it for a second, within 12 months, assuming that I'm correct, within 12 months, we've been able to buy two companies, start product development from scratch, and then be in the market.
If you wonder how can you go to market within 12 months and say that it's from scratch at the same time as you say you have bought something, what I'm getting at here is the first we are going to release is a pedal set. For sure, the software was somewhat developed already, but the mechanics of it, everything, we have patented technologies in there. We have a lot of new stuff in there. Everything is grown from a blank sheet of paper within 12 months. In my view, that's spot on what I had hoped for, that everything we've learned and everything we know from doing liquid cooling, we could apply directly into this, and that is, in fact, what we're doing. If we go to slide 18, what you can see also is that it fits directly into this gaming space.
If you look to the left of this SimSports bracket, in every simulator, there is a PC, and in every simulator, at least at the level we are targeting, there is a high-end PC, and a lot of them are actually PC enthusiasts already building their own PCs. Guess what. In many of them, there is an Asetek liquid cooler. We continue to be excited about this investment, and I'm sure that it will bring us a lot of revenue going forward. Yeah, I think that was enough about SimSports. If you go to page 20, talk about data centers a little bit. On slide 21. Q4 2020 was a strong quarter, and the same for Q1 2021, also a strong quarter. When we get significant orders, we release them.
I think it's not a surprise to anyone to learn that there's not been a lot of new orders coming in here in the last month or two. Well, there was an order coming in today, actually, but in my view, it was not significant enough to release it. It is the lumpiness of the business as we have seen all along, and that's also what we see now. We don't really have a lot of intelligence to add other than our customers are happy with what they see and what they get, and yeah, we keep executing on what we get. In the quarter, we had three new orders, and that's why I said that I felt it was strong. The demand was of course, also no surprise, driven by HPE and Fujitsu.
Just to illustrate that there is not a direct correlation between our activities and the order inflow. We have developed roughly 20 new server loops the last few quarters to support new customer wishes for servers and TPUs. There's actually a quite high activity level. Also by fulfilling the orders that we got the quarter before. The whole data center organization is actually quite busy. I still believe that the whole green angle about data center and regulation legislation will be the main long-term trigger. If we look a little bit from a strategic perspective on the data center side, it is still to create a highly profitable and thereby highly sustainable business. That's obviously the goal. The way we are trying to do that is to influence the influencers, whatever they may be, from journalists to politicians to OEMs.
We push on all the buttons that we can. The way we try to increase the end user adoption, it is pretty much the only way we can do it, is through our OEMs, both the existing ones, but also new ones, of course. The hope, of course, is also that, for example, with an HPE, that now that we have success in the HPC space, the high performance compute space, that we can ride on that and leverage that into other segments or even more HPC design wins. That's, of course, the goal. As I mentioned quite a few times the last few years, this whole global agenda about green sustainability, carbon emissions, et cetera, everything plays into our basket from a strategic perspective. The catch-22, of course, is to turn it into a good business also. That's, of course, what we are working on.
In my perspective, and from my perspective, as I've said before, we do need some of the politicians to put their money where their mouth is. It's not enough to claim that we have to be green, and we have to do this, and we have to do that, but then when we have really, really big problems, like emissions from data centers, then they have to also step up and do something about it. That's what we are trying to influence, of course, as well. With that, Peter, I will leave the floor to you.
Yep. Thank you. Let me start out by saying that if you hear birds in the background, it's not because I've gone to the beach to celebrate a wonderful quarter and a strong future. It's just that a bunch of seagulls seem to have fallen in love with sitting on my windowsill here. Let me go through the financials. Q1 revenue, $25 million. Yes, it's correct, we compare with a relatively weak quarter of Q1 2020, where André noted that it was 174% increase. Even if we don't compare with anything, just take the $25 million. It's a significant number. We are proud to be there. It's only the second time in the history of our company that we've surpassed $25 million. $3 million of that comes from data center, $22 million comes from our G&E business. Our ASPs have gone down slightly.
We have sold 188% more products versus 174% more revenue. The ASPs have gone down a little bit, and that is due to the change in our business model that we have described in details for many quarters by now. Let me not go further into that one. Gross profits, gross margins, I'll come back to them in the following slide. If we're talking about operating expenses at $7.2 million versus $5.4 million last year, a significant change, 33% up. Yes, but we have also increased our staff significantly, as André also said, to around 140 people to support all the business, to support all the new products and projects, and of course, also to support the SimSports business.
Allow me just here to compare or to state that the comparison to Q1 of 2020, the $5.4 million last year is a quarter where we had scaled down as much as we could because we were looking into what we thought would be a weak year, marked by the trade war and the tariffs. That turned out to be completely different. Of course, we know by now, but at that point, we had turned down the operation as much as we could. This brings us to a quarter where we deliver an operating income of $3.5 million versus a loss of $900,000 the same quarter before. Foreign exchange financial income is actually for once in our favor. We have been, as we also talk about sometime, we're facing Forex headwind for the last many quarters, but actually here in Q1, we saw it coming our way.
Income before tax is $4 million versus a loss last year of $700,000. All this boils down to an earning per share of $0.12 versus a loss last year of $0.03. All in all, at least as I see it, quite a solid quarter. I promised to talk about gross margins. André also talked about it already before. We are at 43% for this quarter versus a very high Q1 of last year at 49%. The changes here comes, again, foreign exchange going against us. I think the Chinese, remember, increased by, from the top of my head, was it 6% or something like that last year, of which half of it ends on our bottom line as a reduction.
Also we've seen prices in general go up, as André spoke about, and there could also be issues around product mix, for example, that impact our gross margins. I can reveal, without going too much in detail, that typically our gross margins from data center is pulling the average up, but in this quarter, it's actually pulling the average down. I know we've been talking about the 45% level for the year as such as a good marker. I stand by that for now, 43, and my book is also close to 45, just for those who are discussing the details. That's what we're looking at this point. Going to the balance sheet, same story as for many moons. A strong balance sheet. Quite significant cash holdings that we have for a purpose.
We want to have a strong balance sheet, and we want to maintain our flexibility. We had $24 million in the bank at the end of Q1. That's $3 million down compared to December 31st. The way that worked out was that we made $7 million from operation. We spent $7.4 million in investments. Keep in mind, we purchased this asset up in Finland, et cetera. We spent $2.2 million, I believe it was, on financing. Financing here is primarily a share repurchase program that we completed in Q1. We are now, since yesterday, it was decided to initiate a new share repurchase program to offset an employees' option program that was also decided yesterday. All in all, strong balance sheet as you have been used to see for a long time. Financial strategy and goals, no changes here.
André alluded to it also that on the gaming enthusiast side, it's about dominating the market and of course, profiting from it. We are going into the SimSports with the same kind of approach. Of course, some of the things that I'm working on from my chair here is cost base optimization and cash flow improvements. I ought to say that our KPIs, our cash cycle for Q1 is the same level, 13 days I believe it is, as it was the same quarter last year. I'm reviewing, as we normally do, good progress. All in all, strong progress, good outlook. André, with that, back to you for a summary and outlook. Let me also here, already now just apologize, there's a typo on the first bullet there for you, André, just so that you are aware of it.
Yeah. The typo is really just, it says 2020 instead of 2021. Fortunately, the conclusion is the same, that we do expect a record year once again. That's, of course, nice. It's driven by a strong demand for our G&E products. I hope it's also driven by the data center business by the end of the year, just in full transparency, I can say or see no more than what I have explained. We are going to release our first product in the SimSports arena. Obviously, it will not have a revenue impact this year, we will launch the first product this year, we will continue releasing products for, my guess, 12-24 months, continuously until we have a full program. That's very exciting also.
Most important is, I think that on our Capital Markets Day, I gave a ambition that in 2025, we should at least hit $150 million in revenue. Needless to say, if I meet my own stretch goal of, let's say, around 100, you don't take it as a new revenue guidance, around 100, needless to say that we are on a very good path to reach our five-year goal for sure. I think that's pretty much it. I guess we will open the floor to questions.
Yes, let's do that. Operator, Nicole, I think the name was, will you handle any questions via the phone?
Sure. Thank you. As a reminder, if you would like to ask a question via the phone, please press star and one on your telephone. As a reminder also, if you wish to cancel that request, please press the hash key. Once again, that's star and one to ask a question. We do have a question. The question comes from the line of [Li Hualong] from SEB. Please go ahead. Your line is now open.
Hi, André and Peter. Thank you for taking my question. I have three questions for now. Firstly, you mentioned that you have 20 new server loop designs to support new customers in the data center. For how many of them you have generated sales? Could you give us an indication?
Just to be specific, it's not for 20 new customers, it's for 20 new CPUs and motherboards and server designs, et cetera. It's for our current customers. I cannot give you a specific number and say that out of the 20, eight has generated revenue. What I can say is that, if we had not made them, there would have been zero in revenue. They were, of course, needed to make the revenue we have made, but they are also made to accommodate new processors, new graphics processors, new Intel and new AMD and NVIDIA standards. It's about generating revenue, but of course, also to support new standards that are coming to keep in the market and to support what's coming.
Okay, thanks. My second question is regarding the extensive shortage in the semiconductor market, and how have you seen the impact on your business on the G&E side?
I would say that there are two ways for Asetek to look at it. If we look at our guided revenue, meaning our own forecast internally, we have not been impacted there because we have been diligent enough to, let's say, order enough, early enough, plus some margins, of course, to not run into issues. With the growth we are seeing right now, for sure, we also, on certain components, have to use, let's call it, the alternative sourcing methods as spot markets and things like that. I would say that for our, let's say, core business, our bread and butter business, as we thought it would look, we look good. If things continue to grow as fast as they have done in Q1, then we definitely have to put more effort into finding our components, that's for sure. It is a global issue.
Yes, we have not seen any big impact yet. We've been able to manage.
Great, thanks. Can I just follow up on this one? How have you seen the impact on your customers? Are you seeing them still sort of trying to fulfill the unmet demand, or you see them sort of start to get more supply from their suppliers? What is the situation right now in the market?
Again, there are a couple of ways to look at it because our success is, of course, measured by how many liquid coolers we send out of the door. What's also important to note is a lot of customers now, because of the business model change we made a few years back, or, sorry, a few quarters back. They buy the core product from us, but then on top of that, they add LEDs, they add screens, et cetera. In other words, they add their own IC. If our customers cannot get the integrated circuit, then it doesn't matter that we are able to ship them liquid cooling and they want liquid cooling, because then at the end of the day, they cannot sell it.
I would say for now, with the forecast we have from our customers, et cetera, it looks good, but for sure, there is a risk with our customers. The risk could be, and I would like to emphasize and stress that that's not how it is right now. This is pure speculation. To give you an example, there could be an instance where a customer would call up and say, "We have to bring the forecast down because we cannot get the components we need to get the liquid coolers out of our door." That's, of course, a situation we hope not to see, and it's not what we are seeing right now. Of course, that's the risk and that's what we fear. As it looks right now, it looks okay.
Great. Thanks. My last question here is regarding the new pro launches. You mentioned you have shipped four new type of products to the customers in the G&E products. Could you give us an indication how much of your Q1 sales was relating to them?
If I knew it, I could. I simply don't know on top of my head. Do you have any insight into that, Peter?
No, I don't know. Nope. That's the quick answer on my end.
All right. Fair enough. Thank you. I'll jump back to the queue.
Thank you. There are no further questions on the lines at this time.
Okay, perfect. I am looking at the web application, and I'm pressing the refresh button so fast so my finger is turning blue, and I actually ran a little test in the background. There seems to be no questions at this point in time. I'll just give it one last chance here. Nothing came up. I think with that, we'll end the conference here and say thank you for your interest in Asetek.
Thank you.
Thank you. That does conclude the conference for today. Thank you for participating. You may all disconnect.