CTT Systems AB

Thank you and good morning. Welcome to CTT's quarterly earnings call. We will present the Q2 financial result and outlook going forward. Starting with the quarterly business highlights, the strong business momentum continues in private jet. We delivered one complete ACJ320 kit and two ACJ320 kit systems, except for the window defrost kit that we'll be delivering Q3. In Q2, we received five new orders, one acj 320 on top of the four received in q1 and one wide body vip project for four bbj 787s om board order backlog increased with significant pickup in deliveries from q126 aftermarket rebounded as predicted from a temporary dip in q1 to 57 million shifting to the financial performance in short comparing the second quarter with the same quarter last year Reported sales decreased 3% from 82 to 80 million. If adjusting for currency sales increased 7% to 88 million. In the quarter, the minus 10% US dollar SEC movement had a negative impact of 8 million net sales. Operating profit EBIT decreased to 18 from 31 million. The EBIT margin was 23 versus 38%. Marcus will later more in-depth comment on EBIT, but I would like to highlight that the adjusted EBIT margin was 28%, if excluding temporary currency valuation impact and one-off costs from system tests on electronics. Earnings per share decreased from 1.19 SEC versus 1.96. We have initiated cost reduction improvement margins and profit. to better tackle a business environment viewed as dollar currency at current exchange rate. If fully implemented in this quarter, it should have added 200 BPS to the EBIT margin to 30%. CTT generated operating cash flow of 3 million. I repeat previous communication that the reported cash flow from operations is expected to exceed EBITDA in the second half of the year. Already in July, we expect positive working capital of 15 to 20 million. This will also have a significant impact on net debt. Bridging the reported sales from the same quarter last year shows a decrease from 82 to 80 million. Aftermarket decreased 9 million due to exceptionally strong comparable numbers. Private revenue increased 8 million as some kit deliveries were pushed from Q1 into Q2. The comparable quarter was weak. OEM sales were at the same level. A breakdown of total sales shows that aftermarket sales accumulated for 71% and 25% came from system sales. If we look at the order intake and backlog, order intake was 89 million compared to 47, mainly driven by orders in private jet and uptick in OEM orders with scheduled deliveries from Q1. Backlog in the quarter ended at 158 million compared to 38. I now hand over to Marcus for more detailed financials.

Thanks, Hendrik, and good morning. I will start with EBIT Bridge. Compared with last year, EBIT was down from 31 million to 18, burdened with 10 million from negative currency effects. Weaker sales mix deducted another 5 million. Higher sales volume added 4 million. In the first half of 2025, the USD had its weakest performance since 1973, at the same time as the Swedish krona strengthened. In the quarter, USD SEK decreased 10%. The currency impact in Q2 hit CTT hard. Net sales impact was minus 7 million and impact from one-time valuation of accounts receivables, accounts payable was minus 2 million. In the quarter, we had 2 million in one-off costs from testing electronics. If adjusting EBIT for these one-off costs and the temporary currency valuation impact, EBIT would have been 22 million. CTT have initiated cost reduction measures, fully implemented and adjusted for the one-off. The EBIT margin in Q2 would have been 30%, everything else unchanged. Let's move on and look at the cash flow. Operating cash flow of 3 million compared to 16 million last year, driven by EBITDA of 20 million, but offset 13 million from negative change in working capital, partly explained by incoming payments of 8 million that slipped into Q3. ctt paid 11 million in variable remuneration and dividend of 67 million in the quarter all in all lowered cash to 2 million and q2 during some quarters we have underperformed profit to cash conversion that is temporary and will reverse i would like to highlight that we foresee stronger cash flow going forward Operating cash flow is expected to exceed EBITDA in the second half of the year due to positive working capital. Already in July, we expect 15 to 20 million in positive working capital. Let's continue by looking at the net debt. Net debt amounted to 35 million compared to minus 5 million in Q2 last year. Cash closed at 2 million. In addition, CTT has 56 million in available credit facilities. Equity ratio at 71% compared to 70% in Q2 last year. Return on capital employed was 23%. Finally, I would like to comment that we in Q3 and Q4 expect to see a significant improvement of our financial position, driven by strong cash flow pushing down net debt to negative again. Let's move on and look at the year to date actuals. Financial performance 2025 will be negatively impacted from exceptionally weak Q1. when inventory excess at our distributors generated off the market sales way below end user demand. Inventories at distributors restored in Q1 and Q2 has been back to normal. Nevertheless, the 2025 performance will suffer from Q1, as you can see in the numbers in the slide. I now hand back to Hendrik for guidance and outlook.

Thanks, Marcus. I will start with the Q3 guidance. We foresee overall quarter to quarter small changes in our product areas. The Q3 net sales guidance is 70 to 80 million compared to 57 million in Q3 24. As a remark, we are of course pleased to finally break the losing streak of many, many quarters without any retrofit deliveries as we in Q3 start first deliveries from the record high 146 system order from jet2.com. The underlying aftermarket is stable, but the growth rate remains low, reflecting last year's slow increase in the number of systems installed. When system sales take off in the next few years, the aftermarket is expected to grow faster. Given that Airbus and Boeing reached their production target, we expect the installed base of humidifiers to grow by more than 20% per year. We are working with our off-the-market distributors to adapt and improve customer value, as well as visibility and measurements to reduce order volatility between quarters. We target to better smooth out the order flow from consumables. The outlook for CTT's OEM business is strong. Given successful aircraft ramp-up by Airbus and Boeing, Orders and delivery schedules indicate deliveries to pick up significantly from Q1 26. CTT's growth pace primarily depends on Airbus and Boeing's ability to scale production and deliver wide-body aircraft. More new-built aircraft will drive CTT's OEM sales. In addition, CTT aims for even higher growth rates by improving chipset content. CTT will end 25-26 start to recognize sales impact from higher A350 selection rates. In addition to line fitting the flight deck humidifier, A350 operators to a greater degree now select humidifiers for crew rest and business class. This will gradually result in higher average chipset value on new-built A350s. The private jet business in 2025 is heading for a strong sales revival. Airbus corporate jets front running by promoting humidification for ACJ320, the ACJ220 and the ACJ330. In Q2, CTT won the first Boeing Business Jets VIP Body Order since 2019. An undisclosed customer ordered cabin humidification for four BBJ 787s to be installed by Greenpoint. Delivers our system in Q4-25 and Q1-26. We are still targeting to enter the large cabin business jet market, worth 100 million SEK per year in first sales. As stated before, we need to be endorsed and included by the offerings by the OEMs. As you can see in the picture, we continue to address Boeing business jets, Bombardier Global, Dassault Falcon and Gulfstream. Not yet there, but I can conclude solid progress together with LIBER towards Bombardier. Additionally, we are in contractual phase with another private jet OEM. In 2025, we are about to break a three-year losing streak with zero anti-condensation retrofit deliveries. We will start delivery the first Jet2.com system in Q3 and another 25 out of the 146 are scheduled for deliveries until end 2028. Repeating that our anti-condensation strategy targets OEM availability at Boeing 737 MAX and Airbus 320neo family. We focus on retrofit customers in Europe to drive and put pressure primarily on Airbus, where we have a better momentum. Together with jet2.com and other airlines, we try to convince Airbus that it should be possible to install our green tech system in new aircraft before delivery, either as line fit or provisionally for post delivery modification. As part of this effort, we also have a field trial with a major low cost carrier and six A321s and outstanding quotation at three European airlines. But I don't expect to close another big retrofit deal in 2025, earliest in Q126. Finally, I will comment the cabin humidification market. We're beginning to start benefiting from favorable market dynamics when airlines to a greater degree define aircraft with humidifier on board business class in new aircraft. On the 787 program, CTT has high penetration in flight tech and crew rest, but it's not possible to line fit in business class. We expect airlines to demand same premium cabin climate performance in 787s as in 350s and Boeing 777Xs, where cabin humidification is available as an option. The market is approximately 1,200 aircraft. On the A350 program, most of the A350s leaving factory from 25 and onwards to new operators will have humidification in flight deck and crew rests, and to a greater degree in business class. early in the program airlines for various reasons did not select the system the first a350s are reaching nine years in service and cabin retrofits are now starting and will rapidly gain momentum over the next few years since 2014 663 a350s have been delivered and airbus is anticipating the first cabin retrofits which typically occur on an aircraft that reach eight years of service By 28, there will be around 400 A350s that will have reached this age. Retrofitting on Boeing 787 and A350 require cooperation with Boeing, respectively Airbus. We are approaching both. We are part of the A350 retrofit catalog and Airbus promotes humidification. Before summarizing, I would like to inform about the project we're doing together with Airbus Corporate Jets, One issue in private jet is frosty windows during flight. ACJ and CTT solve this by leaving some of the dry air produced by our anti-condensation system to every window. In Q2, we are finalizing the enhanced in-flight humidification kit system with window defrosting for two ACJ 330 NEO and two ACJ 320 NEO to be delivered in Q2 and Q3. This is a good example on how we together with OEMs can enhance and add value to our core system. The development, testing, production and certification of this additional feature has been very successful and proves the high skills and good cooperation between Airbus Corporate Jets, the engineering company PMV and CTT. I would like to thank you all for a job well done. To summarize, we have a strong momentum in all three markets. We expect significant growth in both OEM and in private jet we foresee to establish a net sales baseline driven by order flow from ACJ. I'm also confident that we during the year should be able to close agreements in private jet and then extend our sales pipeline with retrofit projects for both anti-condensation and humidifier on board first and business class. I now hand it over for Q&A.