CTT Systems AB (publ)

Welcome to the CTT Systems Q3 2025 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing pound key 5 on their telephone keypad. Now I will hand the conference over to the speakers, CEO Henrik Hoyer and CFO Marcus Berg. Please go ahead.

Thank you and good morning. Welcome to CTT's quarterly earnings call. We will present the Q3 financial results and the outlook going forward. Starting with some highlights. I want to highlight that we report strong system sales numbers, up 80% so far in 2025, driven mainly by private jet and OEM. In Q3, we delivered the first anti-condensation system to jet2.com of a total of 146. I'm also proud to report that we at NBAA in Las Vegas last week signed a letter of intent to extend collaboration with Boeing Business Jets, offering a cabin humidification system as baseline configuration across the BBJ Airplane portfolio. It strengthened our outlook going forward as both ACJ and BBJ now promote cabin humidification. Finally, we continue to expect the partnership with Liber Aerospace to include the new Comac C929 aircraft model. If Liber is selected to supply the ECS system, CTT will supply humidifiers and dehumidifiers to Liber. The C929 is designed with a total of six humidifiers and two dehumidifiers as standard. Development is expected to start next year. Looking at the financial performance in short, comparing the third quarter with the same quarter last year, net sales increased 29% from 57 to 74 million. At fixed exchange rates, revenues increased by 39%. FX had a 7 million negative net sales impact in the quarter. EBIT amounted to 19 million compared with 15 million. The EBIT margin was 25 versus 26. We have initiated cost savings to counteract a lower dollar rate and improve the EBIT margin. Fully implemented, an additional 200 BPS would have strengthened the EBIT margin in the quarter to 27%. Earnings per share increased to 1.15 crowns versus 0.98. CTT generated a strong operating cash flow of 33 versus 8 million. Bridging the net sales from the same quarter last year, PrivateJet added 12, OEM added 2 and Retrofit added 2 million. A breakdown of total sales shows that aftermarket sales accounted for 59% and 37% came from system sales. If we look at order intake and backlog, order intake was 48 million compared to 69. Backlog in the quarter ended at 129 million compared to 47. I now hand over to Marcus for more detailed financials.

Thanks, Henrik, and good morning. I will start with the EBIT bridge. Compared with last year, EBIT increased 4 million to 19 million, driven 15 million by higher sales volumes, offset with 5 million from negative currency effects and 5 million from negative sales mix. CTT has initiated cost reduction measures, fully implemented the EBIT margin in the third quarter would have been 27% instead of 25%. Let's move on and look at the cash flow. Strong operating cash flow at 33 million compared 8 million last year, driven by EBITDA of 20 million and plus 16 million from working capital. Operating cash flow is expected to exceed EBITDA in the second half of the year due to positive working capital. Let's continue by looking at the net debt. Net debt amounted to 2 million compared to minus 14 million in Q3 last year. Cash closed at 45 million. In addition, CDT has 57 million in available credit facilities. Equity ratio at 73%, same level as Q3 last year. Return on capital employed at 24%. We expect to improve our financial position driven by strong cash flow, pushing down net debt to negative. Let's move on and look at the year-to-date numbers. In the first three quarters, net sales decreased 5%, but increased 1% if adjusting for currency. System sales increased 29 million or 80% to 66 million. Off the market sales were down 40 million due to FX and tough comparable numbers from inventory build up in 24 and inventory reduction in 25. CTT also had a very strong spare business in 24. An important remark is that end-user demand for consumables is stable. Fact is that distributed sales to airlines increased. The situation with inventory excess is transitory. We predict that we will enter 26 with normal levels. Margins expect to improve in 26 driven by higher sales and full impact of cost reductions. I now hand back to Hendrik for the outlook.

Thanks Markus. CTT will not give a specific guidance for the next upping quarters going forward. This is due to unusual large currency movements, read US dollar versus Swedish crown, Shorter lead times from order to delivery and changed buying behavior among distributors. All in all, this makes it more difficult to predict net sales in the short term. That said, we would like to flag that there is a risk that distributors will keep their inventories down before the end of the year. It's not good for our sales and earnings, but it's a one-off effect. If looking at the aftermarket sales, trailing 12 months are at 193 million. We had inventory build-up in 2023 and 2024, and in 2025 we suffered from inventory reductions. The underlying aftermarket shows stable growth, reflecting last year's slow increase in the number of systems installed. When system sales now have started to take off and continues into the next few years, the aftermarket is expected to grow faster. Given that Airbus and Boeing reached their production targets, we expect the installed base of humidifiers to grow by more than 20% per year. We are continuously working with our off-the-market distributors to adapt and improve customer value, as well as visibility and measures to reduce order volatility between the quarters. 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 Q126. 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 higher growth rates by improving shipset content. CTT will end 2025, beginning 2026 start a recognized sales impact from higher A350 selection rates. In addition to the line fitting the Flytech humidifier, A350 operators to a greater degree now select humidifiers for crew rest and business class. This will gradually result in a higher average ships at value on new built A350s. The private jet business in 2025 is heading for a strong sales revival. Airbag corporate jets front running by promoting humidification for ACJ320, the ACJ220 and the ACJ330. We have a strong sales pipeline in VIP, although there is some uncertainty when projects will start. We are still targeted to enter the large cabin business jet market. 100 million opportunities 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 Jet, Bombardier Global, Dassault Falcon and Gulfstream. Not yet there, but I can conclude solid progress in our discussions with Bombardier together with Liebherr. As I mentioned previously, we have entered the next phase with Boeing business jets. On this slide, you can see Boeing photo released from NBAA in Las Vegas last week. The intention to further collaboration, offering a cabin humidification system as a baseline configuration across the BBJ airplane portfolio. This is an important step for CTT. It strengthens our outlook going forward as both ACJ and BBJ promote cabin humidification. The value and benefits behind this decision also apply to larger cabin business jets. In 2025, we will break a three-year losing streak with zero anti-condensation retrofit deliveries. We started to deliver the first Yet2.com systems in Q3 and another 25 out of the 146 are scheduled to be delivered until the end of 28. We need additional orders and we need to obtain the ability to install the system in new aircraft. 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 tried to convince Airbus that it should be possible to install our green tech system in new aircraft before delivery, either as line fit or provisioning for post delivery modification. As part of this effort, we also have a trial system with a major low cost carrier in six A321s and outstanding quotation at three European airlines. But I don't expect to close another big retrofit deal in 25. Let's summarize. We are in a good position to grow from where we are now. OEM deliveries are set to take off, driven by higher aircraft production rates. The outlook based on delivery schedules from Airbus and Boeing indicates deep ramp up in our deliveries starting end this year and beginning of next year. Boeing is back on track and I expect a swift ramp up to 10 aircraft per month in 26. But demand is there for higher output. CTT plans already for 12 to 14 aircraft per month. Airbus A350 is following right behind. Private jet are establishing a higher net sales baseline. Although we will have variation between quarters to quarters, sales pipeline is strong and revenue should trend higher. PrivateJet is also in good conditions to further increase sales with BBJ now making cabin humidification standard following and passing ACJ, sending a strong signal to the rest of the PrivateJet OEMs. Our off-the-market sales are expected to increase compared to 25. And finally, we will deliver better EBIT margin and profit 26 driven by higher sales. After a few years of delay, CTT is about to begin the next phase of growth. With that said, I now hand over for Q&As.

If you wish to ask a question, please dial pound key 5 on your telephone keypad. To enter the queue, if you wish to withdraw your question, please dial pound key 6 on your telephone keypad.

Good morning, Henrik and Markus. This is Albin Barnevik from ABG, studying for Carl Bokvist. I have a few questions, if I may. So, first off, regarding your comment on shorter lead times, does that comment refer to all sales categories or only OEM segments, for example?

Good morning, Albin, and thanks for joining us. The shorter lead times actually refer to all our businesses. It includes OEM. But with the kit systems on ACJ and now soon also on BBJ, we also make that valid for the private jet market. And in the aftermarket, we also see that all our distributors are reflecting the airlines with shorter lead times and smaller batches.

Right. Noted. And based on your current view on the customer selection rates, Will there be an increase in content per aircraft already in 2026 or should we see that effect coming more towards the second half of that year?

Based on the selection rates that Airbus is communicating with us, we see that this selection rate increase should start already in the first half of 2026.

Right, great. And considering the destocking among distributors and the commenting flag regarding the changed buying behavior what is the risk of the destocking continuing into 26 and or are their levels now better balanced? How do you see that going forward?

When we look at the stock levels at the distributors it's been a quite struggling year this year and we knew that we entered 25 with high stocks at our distributors. We have during the year together with them worked them down with a small hiccup mid this year when one of our suppliers changed our distribution strategy making them need some more stock to actually have our things at more stocks around the world to better serve the customers that raise the stocks a little bit even further. That is now worked down and it should be worked down to a level where they actually need to start to refill end of this year or beginning of next year.

All right. All right. Thank you. And can you give any comments on the growth and installed base and how we should think about the aftermarket sales?

Yes. So we're now Boeing and Airbus on steady numbers in the production rates per month, and they are increasing quite steep next year. When they hit those numbers, our forecasting is that we should grow the installed base with more than 20% per year going forward.

All right. Great. Thank you. And lastly, if I may, on profitability, currency can fluctuate, of course, but can you go a bit more into detail what actions you have taken to raise margins?

I can take that one. Good morning, Albin. CTT is both working with increases prices to customers and cost savings, of course. And that is cost savings in both raw material, cost of goods and fixed costs, such as consultants, personnel and IT. There are some examples of improving the modules.

All right, great. I think that was all for me. Thank you very much.

Thank you, Albin, and have a good day.

There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

We have received one question from the activity feed to Henrik. How does the plans for 777X look going forward?

Good question. I mean, we are following what Boeing is saying, and there is some indication that there is a delay in the certification process that should take place during next year, 26. They have not changed the first delivery dates, still in 26. So we're quite positive they're making progress. Let's wait and see what they say at their earnings call next week on the 30th of October. But we're quite confident in the plans on the 777X. But let's listen and see what Boeing says next week. And then there's no more questions in the feed, so let's close this down. And before closing, I would like to take the opportunity to repeat what I wrote in my CEO comment. There are bright spots, such as new sales starting to pick up with an increase of 80% so far in 2025. Looking ahead to next year, I can state that the drivers for growth have strengthened further during the quarter. After a few years of delay, CTT is about to begin the next phase of growth. Thanks for listening and have a good day.