CTT Systems AB (publ)

on the world welcome to the ctt systems q4 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. With me today is Marcus Berg, our CFO, and we will present the Q4 financial result and outlook going forward. Starting with the highlights in the quarter, we signed agreement with Boeing business jets according to MOU that we signed in October. In 25, the installed base of humidifiers in Interacted by a 3 million decrease in private jet. Aftermarket sales decreased 27 million due to inventory buildup and distributors in Q4 24 and inventory reductions in Q4 25. If adjusting for the inventory reductions in Q4 25, CTT sales would have been 10 million higher. This had a significant negative impact on mix and earnings. A breakdown of total sales shows that the aftermarket sales accounted for 61% and 34% came from system sales. Order intake was 65 million compared to 81. Backlog in the quarter ended at 100. I now hand over to Marcus for more detailed financials.

Thanks, Henrik, and good morning. Starting with the EBIT bridge, compared with last year, EBIT decreased 27 million to 7 million, impact 13 million in FX, 12 million due to lower volumes and 5 million from negative sales mix. Currency FX remained a wild card that is hard to predict, with major impact on CTT sales and earnings. Even though CTT has all loans in dollar and implemented cost savings that will have a full impact in the first half of 26, it's not enough to compensate for the sharp decline in the price of USDC. Currency contributed to a lower margin, but it's also due to depressed volumes. Volume growth and cost control will gradually drive the margin upwards to 25% or above. Let's move on and look at the cash flow. Weak operating cash flow of minus 5 million compared 16 million last year affected by low EBITDA and customer payments being pushed to the first half of 26. Strong operating cash flow in the second half of 25, same level as EBITDA. Let's continue by looking at the net debt. Net debt amounted to 9 million, compared minus 25 million in Q4 last year. Cash closed at 27 million. In addition, CTT has 58 million in available credit facilities. Equity ratio at 74%, same level as last year. Return on capital employed, 15%. We expect to improve our financial position going forward, driven by strong cash flow, pushing down net debt to negative. Let's move on and look at the year-to-date numbers. If looking at full year 2025, net sales decreased 12%, currency adjusted minus 5%. Good that system sales increased 15 million in private jet, 13 in OEM and 3 million in retrofit. Off the market sales were down 67 million. The difference between the years was amplified by inventory build up in 24 and inventory reduction in 25 and 20 million difference in revenue from IP spares due to exceptionally strong demand in 24. If adjusting for distributors inventory reduction, CTT sales should have been 32 million higher, reflecting underlying deliveries without any impact from inventories. Continuing with the EBIT bridge for the full year, Compared with last year, EBIT decreased 65 million to 48, impacted 32 million by FX, 12 million due to lower volumes and 24 million from negative sales mix. Let me repeat that volume growth and cost control will gradually drive the margin upwards to 25% or above. Let's move on and look at the proposed dividends. The board of directors proposes an ordinary dividend of SEK 2.4 per share in total 30 million or 78% of net earnings, same level as last year. I will now switch focus to sustainability. CTT continues on its journey to develop our sustainability efforts. I would like to particularly highlight five achievements during 2025. according to ISO 14001 and 45001. Second, circle a project for recycling of pads for end customer. Third, strategic sustainability goals and activities per material area is set. Four, training in use and sustainability policy and code of conduct conducted for all employees. And finally, new sustainability report that is inspired by CSRD. During the year, we have also improved the result for several of our strategic sustainability goals. I would especially like to highlight the result for the Great Place to Work survey, which has increased to 85 from 80, a great level as a total average and a proof of that CTT is a great employer. I will now hand back to Henrik for the outlook.

Thanks, Marcus. If looking into 26, I can conclude that the headwind from inventory at distributors will end. The first quarter, we forecast higher sales quarter on quarter in US dollar, driven by gradually better correlation between CTTs aftermarket sales and underlying airline demand. We also forecast more OEM deliveries. In private jet, we expect another weak quarter. The outlook for 26 is significantly higher volumes in OEM and improvement in the aftermarket business. I start with aftermarket outlook. The underlying aftermarket shows stable but low digit growth in 25, reflecting slow increase in the number of systems installed in 24. CTT sales figures were overshadowed by inventories at distributors. CTT gained from inventory build up at distributors in 23 and 24, and we suffered from inventory reductions in 25. Net sales in 25 amounted to 167 million. If pairing with underlying demand, CTT would have had 32 million additional sales. In other words, inventory adjusted off the market sales were 199 million. At the beginning of 26, inventory levels at the distributors are better balanced. This will underpin and rebound in sales when deliveries gradually mirror actually end market demand. In addition, the population of humidifiers, Airbus A350 and Boeing 787, has increased by 10% in 25. All other things equal, this means higher revenue in US dollar compared to 25. The outlook for CTT's OEM business is strong, given successful aircraft ramp-up by Airbus and Boeing. Deliveries will pick up significantly from Q126, with Boeing as the frontrunner. 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. Boeing 787 is now on rate 8 aircraft per month, compared to five aircraft per month in Q125. And Boeing is targeting 10 aircraft per month later this year. In addition, CTT aims for even higher growth rates by improving ship set content. CTT will in 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. In private jet, the first half of 26 looks weak, with no planned kit deliveries. During the first two quarters, revenues are expected to come mainly from development projects. Airbus corporate jets front running by promoting humidification for ACJ 320, the ACJ 220 and the ACJ 330. We have several sales prospects in the second half of 26. Boeing business jets includes humidification as a baseline configuration. First, BBJ 737 MAX kit system is under development. We have several VIP opportunities with deliveries towards the end of 26 and in the beginning of 27. If they develop as planned, we should be able to increase this year's sales despite the weak start. This picture is from Greenpoint Technologies. We are together developing cabin humidification to be installed in four BBJ 787s. During the quarter, the cabin system for the BBJ 787-8 was delivered. and the pre-study of the design for the three BBJ 787-9s was finalized. During the first half of 26, the development will be finalized and the systems delivered. In addition, this is a good example when VIP projects function as proof of concept for cabin humidification at commercial applications. The 787-9 fleet is a big opportunity for cabin humidification, both line and retrofits. We are still market, a 100 million second opportunity per year in first sales. As stated before, we need to be endorsed and included in the offerings by the OEMs. We continue to address Bombardier Global, Dassault Falcon and Gulfstream. Not yet there, but I can conclude solid progress in our discussions with Bombardier together with Liebherr. In 25, we broke a three-year losing streak with zero anti-condensation retrofit deliveries. We started to deliver the first Jet2.com system in Q3, and another 25 out of the 146 are scheduled for deliveries until end 28. We need additional orders, and we need to obtain availability to install the system in New York. Together with Jet2.com, 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 provisioning for post delivery modification. As part of this effort, we also have trial systems with major low cost carrier in six A321s. But I don't expect to close another big retrofit deal in the first half of 26. To summarize, OEM deliveries will take off in Q1 26, driven by higher aircraft production rates, indicating steep ramp up in our deliveries in 26. Private jet are established on a higher net sales baseline, but the first half of 26 will be slow. Sales pipe is strong and revenue should trend higher. Off the market sales in 26 expect to be higher than 25. Higher sales will gradually improve EBIT margins in 26. I now hand over for Qs and 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. The next question comes from Carl Boakvist from ABG Sundahl Collier. Please go ahead.

Thank you. Good morning. A couple of questions. The first one, if I start on the smaller side of the business, but my impression when you had the Q3 call, for example, regarding VIP and private jet opportunities was that both the ACJ business opportunities but also some other areas would potentially improve into Q4 and Q1. I'm just curious if this is related to what you've talked about before that the private jet side of Airbus, for example, they don't have enough available production slots or if there's anything else that has impacted the timing of such deliveries.

Good morning, Karl, and thanks for the question. I think ACJ has a great pipeline and they're doing really good on the market. There is, as you indicate, some shortage of aircraft available from their production line. But I don't see... ACJ is more or less as we forecasted and... BBJ is actually picking up now after a couple of years where it's been a little bit slow. So I think where the market is more or less as we have expected it to be.

All right understood and on the more about kind of visibility here on the aftermarket channel appreciate the comment you give here both on the during the presentation and in the actual report but Now when you actually quantify the impact of the inventory effects, what actions have you taken in order to gain better visibility of just how this has impacted you and how you can try to mitigate such effects in the future?

Off the market visibility is key to CTT and the last couple of years we have actually worked very hard to increase our visibility. I think we have now reached a stage where we actually are in the position to talk about effects of inventory, which we have not done in the past. And that is, of course, because we have worked with our supply chain to have better visibility, better predict and forecast sales to the end customer, better forecast and predict what inventory levels our distributors should have. And as we talked about before, we have more than one distributor, one maybe fourth running on visibility, but we are doing steps with other ones as well to increase this visibility and of course one thing for us having a more stable business is to avoid inventory build up at our distributors and try to balance this during 26 so that they sell as much as we sell.

Understood and has anything changed on the timeline from kind of Higher production rates at the OEMs to deliveries from you and actual booking of revenues. I believe previously you've talked about three to six months, if I'm not mistaken.

No, I don't think anything has changed. I think what changed during 2025 was that Boeing was actually hitting all their milestones. They increased the rate from five to seven, exactly as they predicted going into that year. And they also went in up to eight now, beginning of this year, just as they predicted. So, I mean, just comparing five last year in Q1 to eight, per month in Q1 26 is a big increase. And as you know, the selection rates on the 787s are very high and very stable. And we saw that during last year as well. What we see with Airbus is that they are gradually increasing a little bit, not as transparent as Boeing on what rates they are. But we have now finally concluded the switch around in the supply chain. So we're now moving up as tier two on the A350 program, which means that we will during the year gradually have better visibility. And we hope that we then can confirm that the higher selection rates will drive our sales even higher in OEM on top of the rate increases.

Understood and the comments were on the aftermarket side with the growth in the install base and you said that the inventory situation is now better balanced to think about a kind of mirroring of growth for you on the aftermarket side with the install base already now at the start of the year or is there still a bit more to do on the inventory side before we see this happening?

As I wrote in the CEO comments, we say that the inventories are better balanced. That doesn't mean that they're perfect. And gradually during the year, we will see that they are perfectly balanced. And then we should have a mirror effect of distributor sales to distributors. to the airlines and that would mirror our sales and that would gradually come into play here in the beginning of 26.

All right. I have a few more questions, but I'll get back in line first. Thanks.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. The next question comes from Carl Boakvist from ABG Sundahl Collier. Please go ahead.

All right. Hello again. So on the comments there on the profitability, when you now talk about cost actions and higher volumes expected to lead to a margin improvement towards 25 and onwards, just curious, given the high uncertainty of the currency, does that assume... current prevailing spot rates or are you using any kind of different currency level when you think about how to reach that 25 percent?

Hello Carl yeah I will take that one yeah well as you know as I said the currency effects will remain something that is really hard to predict But we have calculated with an exchange rate a little bit below nine, so a little bit lower than today's level. We are not doing any forecast for the exchange rates ourselves. We are looking at the bank's forecast and use that forecast in our forecasts.

Understood. And just to confirm here, I mean, it's not really like you're in a position to be worried about it, but the payments that you've talked about, we've had this situation before a quarter here or so. The payment of deliveries, is that something you expect can be recouped already in Q1, most of it?

Most of it in Q1. Some payments will come in the second quarter. But I don't see, I mean, it's always one, you have to look at cash flow in a longer perspective. So if you look at... for instance the second half of 25 you can see that we have a really strong cash flow in the same level as EBITDA so one separate quarter can always be a little bit weak but in the long run we will have good cash flow.

Understood and then perhaps coming back to Henrik one on the Boeing 777X I believe there was some news out just one or two days ago about potentially starting test flight productions and so on again. Can you just remind us how you think about when CTT will start to deliver more material deliveries for the 777X? I know you in the past have delivered some prototypes or demos, if I use my wording.

Sure, I'll do that. What Boeing has stated is that the 777X will enter into service in the beginning of 2027. I actually heard some Boeing representative talk about that the certification would be done end of this year, but they stuck to the in service date for 27. They also stepped up the flight testing to another level. They have different levels, which I don't really exactly know what they, but it indicates that they are moving on with their flight tests and making progress. So they seem to be quite confident. For us at CTT, the most important thing is that the production is actually running and has been running for the full 25 and I think it started actually in 24. And these are the aircrafts that will be delivered to customers in 27. So production is running. Yes, you were right. We have delivered prototype, but we have also delivered production systems, certified production systems. which was not mistaken and of course these systems will go into the new production aircraft and we need to we'll have to see what kind of production rates which airlines are taking the first aircraft and we hope to restart our deliveries end of this year or beginning of next year. A long answer but I hope it was an answer to the question.

Yeah absolutely and then on I'm just writing down what you said here. On the A350 here, previously you talked about the kind of average ship set content per aircraft that you expected this to be closer to, if I'm not mistaken, two per aircraft going into 26. And in the comments here you talked about how the higher average chipset content will help you. But has anything changed here? Is it still that we should think about roughly two units per aircraft for 26 deliveries? Or could it be less or more?

No, I would say nothing has changed and we can see that this is correct.

That was all from my side thank you.

Thank you Carl and I just will go back to the inventory levels and just to reconfirm our distributors have inventory that are balanced now going into Q1. If I said something else, that was not my intention. So inventories are balanced and we will see that this affects our sales starting in Q1 26.

We have one question from the chat to Henrik regarding PMA. Is there any correlation between aftermarket sales declining and the launch some years ago of competing PMA? Could you give some granularity on the issue?

Sure. We saw the PMA entering the market in 2022. We have previously talked about that the market experience on PMAs is that there's usually 80 to 20, 80 for OEM and 20 for PMA. And I would say that has been quite stable since we first saw the PMAs entering the market in 22. And we closely track our market share. And I could say that we are we are in that range of the market average 80-20 or even a little bit better. So I would say that there is of course a loss of market share, but that has not changed during the last couple of years since we saw this competition. So actually note your question, that's not why we see decline in sales. We see that we have this effect for a long time And we see that our sales to the airlines have actually increased during 25. Even if we, CTT, has a lower sales to our distributors due to these inventory effects that are now balanced. Then we don't have any more questions in the queue and or on the web. So let's move on and summarize this earnings call. So before closing, I will take the opportunity to summarize. In 25, we had headwinds from FX and transitory effects in the aftermarket. In 26, FX will remain a joker, but we don't know, but we do know. But we do know that the inventory effects will end. 26 will be better, driven by system sales, primarily in OEM and higher aftermarket sales. Thanks for listening.