INVESTOR PRESENTATION CTT SYSTEMS AB TORBJÖRN JOHANSSON, CEO ABG - SEPTEMBER 4, 2019
We solve the humidity paradox in aircraft Too Too dry wet Too dry in the cabin Too wet in the aircraft fuselage – cabin air is far more – moisture and water dehydrating environment accumulation from condensate than any place on Earth. water
We provide products for humidity control ❑ Restored humidity to ground-like level in the cabin for your wellbeing ❑ Lowering excess weight cutting fuel / CO2 footprint for our climate De-Humidifiers Humidifiers
CTT at a glance 37 % 60 % ❑ Founded in 1991 ❑ HQ in Nyköping, Sweden ❑ Production in Nybro, Sweden ❑ 110 employees, ~70 in Nyköping ❑ Listed on Small Cap 62 % 34% Nasdaq Stockholm ❑ Market Cap approx. 2bn SEK 66% Aftermarket First Sales 4
Market position and customers Humidifiers De-Humidifiers 50+ 50+ 787 3 ACTIVE ALL- AIRLINES ❑ Sole OEM supplier - Strong NARROW BODY market position ❑ Diversified customer base ❑ Flight Deck emerging as de ❑ Underlying trends supportive facto standard on long-haul ❑ No leverage without aircraft. Migrating to cabin. catalogue status on OEM VIP leader. platforms
Strong underlying market - Fleet forecasted to double in 20 years ❑ Commercial aviation resilient long-term growth ❑ Growing middle-class in emerging markets ❑ Globalization and urbanization Further tensions in geopolitics and trade could affect outlook negatively if escalating
THE HUMIDIFIER BUSINESS
Humidifier Onboard closes the wellbeing gap Inflight Humidification IFH maintains air humidity at ground-like levels (22 % RH) Elevates cabin climate and cabin performance to better match earthlike conditions - during the entire flight ❑ Flight Deck – Established product – High penetration on multiple platforms ❑ Crew Rest – Momentum on 787 and A350 ❑ Passenger Cabin – First customers on A350 / Boeing 777X Fitted with the optional IFH, Inflight Humidification Basic Configuration without Active Humidification Relative Humidity, % 25 22% 22% 16% 15 7% 5% 12% 5 First Class Business Class Economy
Focus on wellbeing and sensory experience drives demand
Point-to-point expansion drives demand Shortens travel time but extends range / flight time – drives demand for better climate / humidity
787 leads the way - High CTT shipset content CTT has on average 2.2 humidifiers on all Dreamliners – 85 % flight deck selection rate Boeing delivered the 787th Dreamliner during 2018 Since its first delivery in September, 2011, the 787 family has 85 % flown nearly 300 million passengers on more than 1.5 million flights around the world, including more than 210 new nonstop routes. FLIGHT DECK SELECTION
Airlines mirror 787-selection on new platforms Commonality demand: Airlines select humidifiers in flight deck and crew rest on A350 and 777X Air China first A350 delivered in August 2018 China Eastern first A350 in November 2018 787- mirroring its 787 fleet: Humidifiers in flight deck equipped with humidifiers in flight deck and both and both crew rests. crew rests.
Diversified and global humidifier customer base United Airlines 7% ❑ More than 50 airline customers 7% American Airlines ❑ 10 Largest Airlines account for 55 % Japan Airlines ❑ 40+ Airlines account for remaining 45 % 7% Hainan Airlines ❑ Strong position in China with all major 45% Air Canada 7% airlines as customers and repeat business Norwegian Air Shuttle (mirroring selection to other platforms) ASA ANA 6% British Airways 6% Air India 5% China Southern Airlines 4% 3% 3% 2018-12-31
Growth drivers – OEM expansion & retrofit ❑ Product content available on more aircraft platforms Optional ❑ humidifiers More options available - Higher average aircraft shipset value per shipset ❑ Retrofit demand when harmonizing the experience (OEM drives refurbish upgrades on existing fleet) A350 777X Retrofit opportunities from All major CTT OEM awards are in early phase 787 harmonize demand 2019 Harmonize 777X demand A350 787 OEM
Installed base drives the aftermarket OEM Deliveries 25 % Humidifier Units ❑ Aftermarket is driven by humidifier population ❑ Record-High Humidifier deliveries in 2018 ❑ Population at airlines growing 33 % 2014-2018 2014 2015 2016 2017 2018
THE DE-HUMIDIFIER BUSINESS
Dehumidifier Checkmates Fuselage Condensation ❑ Niche market ❑ Strong foothold in Northern Europe / Russia ❑ BFE on Boeing 737-800 ❑ Standard equip on Boeing 787 – De-selected from 2020 The Zonal Drying™ system can cut 200 -300 kg of excess weight in Boeing 737-800/A320 aircraft; generating the following advantages: ❑ Lowers fuel burn with 0.4%-0.6% (fuel savings of 25,000-38,000 liters per year); ❑ Cuts CO2 emissions with some 65-95 tons per aircraft per year ❑ Higher operational reliability from significantly lowered moisture related faults in electrical equipment (reduced Out-Of-Service time and repair costs); ❑ Lower rate of insulation blanket replacement
ON EVERY FLIGHT FUSELAGE CONDENSATION IN ALL AIRCRAFT
HOW TO CUT 200+ KG? ADD 25 KG!
NOX SUPPORTING TRENDS EVERY KG COUNTS CO2 ❑ High-density cabin layouts gain traction ❑ Longer flights (more flight hours) ❑ Sustainability pressure - Stakeholders requiring airlines to take more measures in order to reduce CO2 / NOX.
Targeting A320neo and Boeing 737MAX Success Factors Strategy ❑ ❑ A321-trial systems Zonal Drying ™ market is limited until ❑ Boeing 737MAX STC catalogue status at MAX / neo ❑ ❑ A320-family airlines to retrofit Retrofit drives OEM ❑ ❑ Boeing 737-800 customers to place MAX orders Key to win airline retrofit awards from ❑ Excel in strong markets such as northern Europe / large MAX / neo customers Russia
FINANCIALS / OUTLOOK
Q3 Forecast Net Sales forecasted to be 80 - 85 MSEK (81), same level as previous year 80 - 85 Q319E
Outlook Net Income (4Q ROLLING) 12-month rolling revenues (currency adjusted) at current levels or slightly lower for upcoming 4 – 6 quarters NET INCOME (ROLLING 4Q) MSEK 380 Reasons for flattening curve: 360 • Strong comparing Quarter-On-Quarter 340 (QOQ) – Q3 and Q4 320 300 • The ZD de-select on 787: The revenue will 280 drop approx. 15 %. Not possible to 260 imminent compensate. 240 220 200 Q218 Q318 Q418 Q119 Q219
Stakeholders require airlines to take all measures to reduce fuel burn / CO2 footprint Excess weight leads to more fuel burn and unnecessary green gas emissions plus electrical failures, repair and mold problems.
25 12% 7% 15 5% 3% 5 Flight Deck First Class Business Class Economy
Emerging to business class – More optional sales / higher shipset value First in Business Class 29
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