CTT Systems AB (publ) (CTT) Earnings Call Transcript
October 27, 2026
Earnings Call Speaker Segments
Welcome to the CTT Systems Q3 2026 Report Presentation. [Operator Instructions] Now I will hand the conference over to the speakers, CEO, Henrik Hojer; and CFO, Markus Berg. Please go ahead.
Thank you, and good morning. Welcome to CTT's quarterly earnings call. Markus and I will present CTT's financial results for the third quarter and the outlook going forward. Starting with the highlights in the third quarter. We had another robust quarter in the aftermarket business. Demand in general was resilient, and we had another quarter with strong demand for spares. . We continue to see momentum in the OEM business with stable and gradual volume growth. During the quarter, we at CTT had to delay some Q3 deliveries into Q4 with SEK 6 million negative impact in Q3, whilst having positive impact in Q4 on top of normal demand underpinning a strong Q4. Finally, we want to highlight A350 selection as airlines continue to select more humidifiers per A350 aircraft, driving shipset value going forward. Looking at the financial performance in short, comparing the same quarter last year, net sales were in line with our currency adjusted outlook. Reported net sales increased SEK 2 million to SEK 76 million. EBIT increased to SEK 23 million compared with SEK 19 million. The EBIT margin was 30% versus 25%. Earnings per share increased to SEK 1.38 versus SEK 1.15. Net sales bridge from comparable quarter last year shows SEK 2 million growth, driven SEK 11 million by the aftermarket, offset SEK 7 million in private jet and SEK 2 million in retrofit. If adding some perspectives on the numbers, in OEM, we do not report a net sales increase, although we had in reality had a SEK 6 million increase, but we had to push some deliveries from Q3 to Q4, amounting to SEK 6 million, with negative impact in Q3 and positive impact in Q4. In private jet, we reported a SEK 7 million net sales decrease, mainly due to a strong comparable quarter. The reported increase in aftermarket sales was driven by robust demand in general with another strong spare parts quarter. A breakdown of reported sales shows that aftermarket sales accounted for 72% and 24% came from system sales. I now hand over to Markus for more detailed financials.
Thanks, Henrik, and good morning. Starting with the EBIT bridge. Compared with Q3 last year, strong EBIT increase of SEK 5 million to SEK 23 million, positively impacted by SEK 2 million in FX, plus SEK 1 million from higher exchange rate on sales and plus SEK 1 million from account receivables, accounts payable valuation. Positive sales volume increased EBIT with SEK 1 million and sales mix resulted in an EBIT increase of SEK 2 million. Higher costs, mainly sales related decreased EBIT with SEK 1 million. EBIT margin in Q3 was strong and increased to 30% compared to 25% last year. The third quarter is typically seasonally stronger. We expect volume growth and cost control will gradually drive the result and margin upwards. Let's move on and look at the cash flow. Operating cash flow amounted to SEK 20 million compared to SEK 33 million in Q3 last year. Solid cash conversion, operating cash flow in relation to EBITDA of 78% in the quarter. Working capital, minus SEK 2 million. Inventory was reduced by SEK 3 million, but offset by increased account receivables due to higher sales. During the quarter, CTT invested SEK 3 million in the expansion of the facility in Nybro. Let's continue and look at the net debt. Net debt amounted to SEK 20 million compared to SEK 2 million in Q3 last year. Cash closed at SEK 27 million. In addition, CTT has SEK 48 million in available credit facilities. Equity ratio at 72% compared to 73% in Q3 last year. Return on capital employed rolling 4 quarters at 18% compared to 24% last year. Let's move on and look at the year-to-date numbers. Year-to-date, net sales increased 5% to SEK 218 million compared to SEK 208 million. Currency adjusted plus 9%, mainly due to the increase in OEM. EBIT increased 16% to SEK 47 million compared to SEK 41 million, given an EBIT margin of 22% compared to 20%. Operating cash flow amounted to SEK 35 million compared to SEK 41 million. I now hand back to Henrik for the outlook.
Thanks, Markus. Let's move to the updated outlook for Q4 and full year 2026. For the fourth quarter, we expect revenue in U.S. dollar to exceed Q3, primarily driven by OEM, including deliveries rescheduled from Q3. Private jet revenue is expected to be limited and no revenue from retrofit. The full year outlook is raised following stronger-than-expected aftermarket performance. In OEM, revenue growth from full year 2026 is expected at 45% to 50% compared with the previous outlook of 45% to 60%. Revenue in the second half is expected to be in line with or marginally below the first half. In the aftermarket, the full year revenue growth outlook is raised to 20% to 25% from 5% to 15%, primarily driven by spare parts demand. In private jet, the 2026 outlook is reiterated, stating that 2026 will be the weakest in several years due to VIP project delays. Retrofit. Full year revenue in U.S. dollar is expected to remain in line with 2025 with no deliveries in Q4. The next deliveries are scheduled for Q2 and Q4 2027. Aftermarket. In Q3, spare parts demand continued to be strong. Important to bear in mind that the 20% to 25% growth rate in '26 is not sustainable and mainly reflects weak comparatives following distributor inventory reductions and weak spare parts demand in 2025. Looking beyond '26, we expect a growing installed base to continue to support demand for consumables and to some extent, spare parts as well as our repair shop. The entry into service of the Boeing 777X is expected to create new aftermarket opportunities. Historically, revenue from IP and spare parts increases during the first years of new aircraft program as the fleet enters into operation and the airlines take first delivery. We expect the 777X to follow a similar pattern. On this slide, we present the OEM performance. I repeat, in Q3, CTT had to push deliveries into Q4, amounting to approximately SEK 6 million, weakening Q3, but strengthening Q4. Important to underline that OEM demand growth is steady, driven by higher aircraft production rates. Boeing is currently working to stabilize its supply chain to increase monthly 787 production from 8 to 10 aircraft, while Airbus targets 12 A350 aircraft per month during 2028. CTT has operated at levels corresponding to monthly production rates of 9 to 10 Boeing 787s and 7 to 8 A350s. The A350 program is expected to be the main growth driver of CTT's delivery volumes over the next 6 to 9 months as humidifier content per A350 aircraft is expected to drive volume growth above the aircraft production rate. We have mentioned higher selection rates on the A350 for some time, and this trend has become increasingly evident in 2026. We have already started to see some initial positive impact on sales and expect the benefit to increase as more aircraft enter production with higher humidifier content per aircraft. We see 3 main drivers. One, airlines operating 787 fleets continue to mirror their 787 specifications on the A350 by selecting humidifiers for flight deck and crew rest. Some airlines are increasing content relative to earlier A350s by adding humidifiers in crew rest. And three, while still in the early stages, a number of aircraft have selected humidifiers for premium cabins, adding 2 to 3 humidifiers on top of those installed in the flight deck and crew rest. As a result, the average humidifier content per A350 aircraft is increasing, creating a growth opportunity that is expected to outpace aircraft production over time. In private jet, 2026 will be the weakest in years due to VIP project delays. The sales pipeline is strong, and we expect the recovery next year as both Airbus corporate jets and Boeing business jets include CTT system in several VIP aircraft scheduled for next year. The first of these projects are one BBJ 737 MAX system for delivery in Q1 and 1 ACJ320 kit for delivery in Q2 2027. I want to point out some milestone events recently that once again highlights and provide some perspectives why OEM remains a sustainable and long-term growth driver for CTT. In Q3, it was exactly 15 years since the first Boeing 787 was delivered to ANA. Since then, more than 1,300 787s and over 700 A350s have been delivered. The combined backlog remains substantial at more than 2,000 aircraft, supporting continued production growth over several years. We are also seeing progress on the next generation of long-haul program as the Boeing 777-9 has entered into ETOPS certification testing, while the first customer aircraft have commenced flight testing ahead of delivery. In parallel, Airbus has started flight testing of the A350 freighter version and is targeting first delivery in the second half of 2027. These developments broaden CTT's presence across modern long-haul platforms. Higher production rates and additional aircraft programs will expand the installed base and support long-term growth in both OEM and aftermarket. For most airlines, humidification of the flight deck and crew rest is today part of their standard selection and considered a state-of-the-art system on new long-haul aircraft. The next step is broader introduction of humidification in premium passenger cabins. This is a development we have anticipated for some time. Aircraft production delays have affected the timing, but several customer aircraft are now progressing towards delivery. Qantas Project Sunrise is an important example. Qantas has ordered 12 A350-1000 ultra-long-range aircraft, each specified with 6 humidifiers, including humidification of the premium cabins. Certification flight testing is underway with the first delivery scheduled for April 27. In parallel, the first A350-1000 aircraft equipped with cabin humidification are expected to enter into service with additional airlines beginning towards the end of '26 and continuing into '27. We also have customers on the 777-9 with cabin humidifications specified in first and business class. As these aircraft enter into service, more airlines and passengers will gain operational experience of cabin humidification. This will expand the installed base and support a broader adoption over time. I now hand over for questions and answers.
[Operator Instructions] The next question comes from Albin Barnevik from ABG Sundal Collier.
Henrik and Markus, start with the guidance here. The full year OEM guide went from 45% to 60% to 45% to 50% here. Can you perhaps talk a bit about what drove this cut to begin with?
Yes. And it's actually -- I mean, we are reflecting the production rates of Boeing and Airbus. And as I said in the presentation, Boeing is trying to stabilize their production on 8 to move up to 10, and they have a delay in that ramp-up, and that is was what has made us change this forecast that we will end up in the lower half or the lower end of a prediction due to Boeing not being able to ramp up fully.
All Right. That's clear. And in Q3, we also saw 12 deliveries of the A350, which was the weakest quarter of the year-to-date. So do you perhaps -- have you experienced any delays here from Airbus following this? Or still shipping in line with Airbus production rates despite the slow deliveries?
Yes. So I mean, from a CTT perspective, the important is the production rate. And as I said, we are delivering somewhere between 7 to 8 per month shipsets to Airbus. Then they struggle delivering the aircraft to the customer, mainly due to certification of their seats, but it doesn't affect our production. So Airbus, I think we see stable deliveries. And then, of course, it can vary quarter-to-quarter since we have very different content depending on which airlines is produced during that quarter. But the main -- or the underlying production rate is 7 to 8, which we deliver towards.
Yes. And can you perhaps talk a bit about what's driving the higher humidifier content aircraft here with Airbus? How large is the step-up perhaps compared to today you see going ahead?
Yes. I mean, to put it in some perspective, we had a slow start on the A350, where in the beginning, Airbus was actually not selling any options, including ours, which meant that we missed a lot of aircraft in the beginning. After that, we've seen a positive trend where most airlines select flight deck and also changing their earlier specification from no humidifiers to flight deck. And that means that we've been on a little bit below 1 humidifier per A350. . What we now see is that the airlines actually select both flight deck and the 2 crew rests, and we have an increasing amount of airlines selecting cabin humidification. So we see that from end of '26 and beginning of '27, we should be on 2 or above per aircraft.
All right. Yes, that's helpful. And on the aftermarket and the visibility of growth here, you called the 20% to 25% unsustainable. What would you say is a normalized level for 2027, given the growth in the installed base as well?
I mean, in the end, the growth of the aftermarket is connected to the numbers of aircraft delivered. And then we see short term, our installed base will grow with high single digit to low double-digit numbers. If we talk more midterm, when production rates at Airbus are on 12 and Boeing on 10 per month and also the 777X is scaling, our installed base will grow with more than 20% per year. But then I talk about installed base and not about the market growth because that's hard sluggish demand on spare parts, consumables are more stable, and then we have a repair shop adding to that. So installed base short-term grows high single digit, low double digit and midterm when production rates are up, the installed base will grow with more than 20%. .
And would you say that the distributor inventories are at normalized levels now in regards to spare parts?
Yes. We monitor this very closely, and I would say that they are on the right levels. You can have short up and downs. But during this year, we've seen a stable demand from the airlines supported by the levels of inventory at our distributor, and we can fill up from us, more or less mirroring the airline demand. .
All right. And moving on to private jet. Beyond the BBJ for Q1 '27 and the ACJ for Q2, how full is the pipeline -- the VIP pipeline for '27?
I mean VIP is always hard to be super strong on knowing how these things will be. There is always a tendency on delays, which we have seen hitting us really heavy in '26. And I would say that we now see '27 as a normal or even better year, but it's as always hard to see. If I just try to give some color on the VIP market, I think that a normal market for BBJ and ACJ is around 5 narrow-bodies each. That can go up and down, of course, but somewhere between up to 10 aircraft totally, but could also be like they are on 3, 4 to 10. And then adding on that, usually, we have 1 to 3 widebodies. And I think if we hit the upper range, then we are above our best years. If we hit the lower rate on that, maybe we're just a little bit below a normal year. And I think we said last year that 2025 was a year where we established a new level. We didn't keep it in '26. But I think for '27, we should see that we are coming back to that kind of numbers.
Yes. And a final one perhaps on the order backlog, which increased quite a lot here. Can you perhaps split the backlog by segment? And perhaps also how much of it is scheduled for delivery in '27.
No, we will not break it up like that. We will publish the total backlog. Of course, our backlog is increasing with higher production rates at Airbus and Boeing. But we also have very short lead times to both Airbus and Boeing, meaning that even when the production rates are increasing, our backlog is not going with it. And then aftermarket sales are usually inside the quarter, not really building backlog. So a lot of our backlog is still the big retrofit order that we got from jet2.com. .
There are no more questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.
Thank you. We have a few written questions, which Markus will read and let's see who answers them. .
Yes. I will start with, do you expect a similar product mix in Q4 compared to Q3? If not, what is the difference? . Okay, I can take that one. There will be some differences. I mean we talked about OEM with some pushed deliveries from Q3 to Q4. So OEM will definitely have a bigger part of the product mix in the fourth quarter. That's the biggest difference. And then the private jet will be a little bit weaker in the fourth quarter. So that's the main differences. And then the next question is about SG&A in Q3 seems to have declined significantly compared to Q2. Is this mainly due to seasonality or due to something else? Should one expect normal seasonal uptick in SG&A in Q4 versus Q3? I mean it's -- you have to compare Q3 with Q3 last year. If you do that, then you don't see a big difference. What will -- what happens in the third quarter that are seasonally is that we have a positive change in our vacation debt with about SEK 4 million to SEK 5 million. So that is probably the effect you see in the SG&A in Q3. So you have to -- and then if you look at Q4, you have to compare Q4 with 2025, and then it will be more or less on the same level. And then -- and the next question is, in your outlook, you say the full year revenue outlook is raised to 20% to 25% from 5% to 15%. This growth rate is not sustainable and mainly reflects weak comparatives following distributor inventory reduction and weak spare part demand in 2025. But what -- which growth rate is not sustainable, 20% to 25% or implied Q4 growth of more than 70%. What is the reasonable growth rate for aftermarket in 2027?
And then I will more or less try to repeat what I answered on Albin's question. I mean, this year, we are comparing ourselves to a very weak 2025, and that's why we state that 20% to 25% is not sustainable. And then aftermarket growth will mirror the growth of our installed base. And there, our installed base will short term grow with a high single digit, low double digit. And midterm, when we see 12 Airbus A350 per month and 10 787s and also 777X is scaling up. We talk about our installed base growing with more than 20%. How much the aftermarket grows out of these numbers, that's something we don't really can put a firm number on.
We continue to the next question. It's about the revenue from the aftermarket. How big is the largest customer? What is the revenue from the 5 largest customers.
We don't disclose customer data like that. We have our system installed on more than 80 airlines. And I think we have some color to it on our -- in our annual report, but that's as far as we go on reporting on numbers that's specified.
Okay. I will continue a lot of questions today. How large is a normal order in private jet? How many orders is your estimate in 2027?
Again, a very detailed question. But I mean, we have talked about kit deliveries being somewhere in the ballpark of -- for a narrow-body on SEK 300,000 to SEK 400,000. And then, of course, the wide-body VIP aircraft would be double the size aircraft, so double the size of the value of our kit. And then with the numbers I gave before that we can see narrow-bodies being somewhere, I would say, normally being between 3 and 10 per year and then adding 1 to 3 wide-bodies, that's the size of the market.
Okay. I will take one final question now. If content per aircraft increases ahead, why should aftermarket not outgrow the installed base.
Yes, because the aftermarket is for CTT is 3 components. It's the consumables that should track the installed base, but it's also spare parts, which is a very fluctuating market where spare part sales are growing in the beginning of an aircraft introduction into service and then more sluggish, which means that it's not growing compared to the production rates. It's growing compared to the number of airlines operating a specific aircraft type. . And then the third one is that we have our repair shop, which is also growing with the installed base, but we have very long warranty periods and the repair needs comes in well after the aircraft are delivered, which means that, that is a long delay on the growth compared to the number of systems flying. So it's not linear. It's pending and it's also varying.
Thank you. That was all the questions today.
And thanks for all the questions. Always very interesting to try to give some more color on it. I will just finish off and before we close, summarizing some key points in the quarter. So Q3 was in line with our outlook, supported by strong aftermarket performance, while OEM deliveries and approximately SEK 6 million shifted into Q4. Despite this timing effect, EBIT increased by 24% year-on-year. We expect Q4 revenue in U.S. dollars to exceed Q3. We have also raised our full year aftermarket growth outlook to 20% to 25%, while OEM growth is expected at 45% to 50%. Looking ahead, higher aircraft production rates, increased humidifier content on the A350, more aircraft in service with humidifier on board as well as progress on the Boeing 777-9 and A350 freighter will broaden our addressable market further and strengthen the long-term potential in OEM retrofit and aftermarket. Thanks for listening.
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