Welcome to CTT Systems Q4 report 2022. For the first part of the conference call, the participants will be in listen-only mode. During the questions- and- answer session, participants are able to ask questions by dialing star five on their telephone keypad. Now I will hand the conference over to the speakers, CEO Henrik Höjer and CFO Marcus Berg. Please go ahead. Good morning, everyone, welcome to CTT's earnings call fourth quarter 2022. I'm Henrik Höjer, CEO of CTT, I'm here together with our CFO, Marcus Berg, we will present the result of the fourth quarter. Business highlights for the fourth quarter was that the aftermarket stayed on a very high level, close to the all-time high of Q3. CTT received the ACJ320 to deliver one more kit of our Enhanced Humidification system, the fourth in total. Looking at our financial numbers, our sales met the forecast closing on SEK 68 million, we recorded growth for a seventh consecutive quarter, driven by high sales in the OEM and private jet that more than compensated for a small decline in aftermarket sales down from the Q3 all-time high. EBIT increased to SEK 21 million, we reported an EBIT margin of 31%. Earnings per share increased to SEK 1.42, and we had an operating to SEK 18 million. If comparing with the same quarter last year, net sales increased SEK 26 million, driven by a SEK 28 million increase in the aftermarket revenues plus SEK 3 million in private jet, which was offset by weaker sales in the OEM and retrofit segment. Looking at the sales mix, we see dominance from aftermarket activities, and 80% is a very high level. We had an order intake of SEK 52 million, driven by the recovery and growth of the aftermarket. Aftermarket-driven sales is dominating our business, and many of these orders have short lead time from order to delivery, where order and delivery can be in the same quarter and not growing our backlog. As I previously said in the business highlights, we won one new private jet order during the quarter. We ended the fourth quarter with an order backlog of SEK 73 million. Now I'll hand over to Marcus and the next slide. Thank you, Henrik. EBIT in the fourth quarter amounted to SEK 21 million, an increase with SEK 13 million from SEK 8 million in the fourth quarter last year. The main reason is business driven with SEK 12 million from higher from the aftermarket. CTT is profiting a lot from a stronger US dollar compared to SEK, with approximately SEK 8 million on sales, offset by SEK 6 million from accounts receivable, accounts payable valuation. That to the third quarter, it's offset by SEK 8 million. Higher costs due to higher sales and increased EBIT, which increases allocation to variable remuneration. Remember, if you compare the third that we have a large difference in vacation salary change, approximately SEK 4 million. Operating cash flow amounted to SEK 18 million, driven by improved financial performance. Negative working capital change due to higher accounts receivable and inventory, partly offset by accounts payable increase. Given this, cash and bank increased to SEK 60 million in the end of the fourth quarter. Net debt amounting to minus SEK 50 million compared to plus SEK 23 million in the fourth quarter last year, back to pre-pandemic levels. In addition, CTT has SEK 51 million in available credit facility. Solidity at 71% compared to 65% in the fourth quarter last year. All in all, CTT has a strong financial position. We move into the full- year numbers on the next slide. We have full- year net sales amounting to SEK 241 million, an increase of 59% from SEK 151 million last year. Adjusted for an increase of 36%, mainly driven by the recovering and the growing of the market. Full year EBIT increased to SEK 92 million compared to SEK 27 million last year. Earnings per share increased to 1.29 SEK from 1.13 SEK last year. We continue and look at the EBIT for the full year, it was strong and amounted to an increase from 27 million SEK last year. The main reason is business-driven, with 45 million SEK from higher sales volume and 9 million SEK from mix and price, primarily from a higher aftermarket share. CTT is again profiting a lot, USD compared to SEK, with approximately 23 million SEK for the full- year. Higher costs due to higher sales and better EBIT increases allocation to variable remuneration. We continue and look at the cash flow, the operating cash flow amounted to 61 million SEK compared to 30 million SEK last year, driven by improved financial performance, EBITDA, but partly offset by negative working capital. Increased accounts receivables from higher sales affecting working capital negatively. During the year, we have reduced debt with repayment of US dollar loan of $33 million in the first quarter and paid dividends of $10 million to our shareholders in the second quarter. If we continue and look at the dividend proposal, CTT, as I said, has a strong financial position and cash flow that enable both a good return to our shareholders and investments for growth. The board of directors proposes an ordinary dividend of SEK 4.05 per share, back to same level as 2018 and 2019. Is according to our policy amounting to 77% of earnings per share. I now hand back to Henrik to give you the outlook. Thank you, Marcus. The forecast for the first quarter is SEK 68 to 69 in net sales. I calculate with higher revenues driven by quarter-to-quarter increase in OEM sales and private jet projects. The increase will be offset by a significant sales decrease in the aftermarket due to high inventory levels at distributors and airlines, driven by the build-up in Q3 and Q4. The aftermarket in the fourth quarter leveled out on historically high levels, slightly below the all-time high in Q3. We saw large demand when distributors placed orders to restore inventory to support higher fleet utilization in the upcoming quarters. In the graphs, we also see that on a rolling fourth quarter comparison, our aftermarket sales are well above the 2019 numbers. In most regions, utilization of our products is back to normal, but it remains low in Asia and China. During 2023, the pandemic rebound effect gradually will fade away and demand in the aftermarket will then again. The drivers of installed base will be new system deliveries and when ready-built Boeing 787s enter into service, and those 787s representing an approximately 10% population growth to CTT. This means that the underlying demand in the aftermarket will grow at a slower pace compared. Our actual sales in the aftermarket need some quarter to consolidate supply and demand as we enter the year with high inventory levels at distributors and airlines. We now finally see a dawn in the OEM market, and we expect the market to rebound in 2023. We have seen in 2022 gives us confidence that our growth expectation in both sales and orders in 2023. We will benefit from an increasing production rates at Boeing 787 and Airbus A350. The gradually improved condition can be exemplified with United Airlines ordering 100 787s in 2022. Boeing 787 is a very low build rate, and even including a shorter production stop end of last year. It will gradually increase from one to two aircraft today to five by the end of 2023. Boeing is forecasting to be at 10 aircraft per month in 2026 time frame. Airbus is currently targeting A350 build rate to increase from five to six aircraft per month, and the first Boeing 777X airplane is expected to be delivered in 2025. CTT has deliveries to of this year. We foresee a gradual ramp up starting in 2024. 2022 was the first year in more than 20 years with no Zonal Drying retrofit deliveries. The outlook is not as bad as it seems. The positive in 22 gives us confidence, and we expect that the better business environment will start to generate retrofit orders again during this year. Sustainability is a key driver, and airlines can save 20% of fuel and emissions when they introduce new single-aisle aircraft. After taking the big sustainability race continues, and every saving counts on their new and old aircraft. This is where CTT comes in with our Anti-Condensation system, contributing to sustainability and being a very good investment saving on fuel costs. The cabin humidification retrofit opportunity has been an emerging opportunity for some years now. We now expect that the better business environment will start to generate opportunities again as the intercontinental travel come back to normal levels and airlines start to generate profits. I remind you that the market is very differentiated, with some while others are very bullish about the future. In a post-pandemic environment, we see that there is a growing airline interest in cabin air quality and humidity for passengers and for the crew's wellness. There are some very large upgrade projects at some airlines, but we also see opportunities in the intermediate upgrade project that makes a difference to the cabin experience. There's also possibilities when airline wish to harmonize their fleet. Together with our partner, Collins Aerospace, we are strengthening our effort to get the first cabin humidification retrofit order this year. The market is promising, but it's hard to predict the speed. As part of our strategy, we continue to invest to reach new opportunities. We particularly focus to extend and improve our offering in the private jet. Today, we are dominating the wide-body VIP segment, and we aim to grow in the large-cabin business jet segment. Private jet will contribute to our growth in the coming quarters and a key contributor to reach our long-term targets. We are confident that our prospects in the private jet segment can endure a normal recession. The cooperation with Airbus Corporate Jets is a success in the marketplace. Paradigm shift when we optimized humidification system is offered and promoted by Airbus for the ACJ320neo VIP family. It's already a successful partnership with another kit order in Q4, making it the fourth kit and achieving 100% hit rate so far. We are proving that the bolt-on kit delivery is more scalable versus VIP projects together with the completion centers. I also want to announce that we now have initiated similar discussions with other OEMs in the VIP market. The picture on this slide is from our first system installed aircraft ordered so far. Our second Airbus partnership is for the ACJ TwoTwenty business jet. The first order was received in July, and the aircraft will enter into service in 2023 after the installation of our bolt-on kit. We actually have just delivered the system to the completion center. This is a project that creates awareness and sets the standard for the climate on board on large cabin business jet. We are very proud that our partner, ACJ, see the humidification as key value of their customer's experience when they fly an ACJ jet. The large cabin business jet market is growing. The long-range market segment is 50-100 jets per year. The business jets are developed and designed for flights up to 16, 17 hours with cabins equipped for best comfort. Cabin air humidity is close to zero. This is an extremely dehydrating environment. CTT is now migrating our humidification technology from VIP aircraft to large cabin business jets. This is an important business opportunity for us to capture. We have strong references with the ACJ TwoTwenty program, and our first system is installed on a Bombardier Global 7500, and the second system is on its way. ACJ is in front running the market when promoting and endorsing the humidification system to obtain a healthy climate for long-haul flights. First on the market of this type of aircraft was Bombardier Global 7500, which is now further developed to the 8000, and this is an even faster, and it has even longer range. Bombardier is closely followed by Gulfstream with their G700 and G800. Dassault is coming there with Falcon 10X. For CTT, it's key to have OEM availability to get the volumes. We have intensified our discussions with all parties on the market. All parties on the market, that is operators, completion centers, and the OEMs. That is to get into the right position. CTT have a strong financial position, a cash flow that enable both good return to our shareholders and investments for growth. As the international air traffic rebounds, conditions gradually improve for all our businesses, the positive momentum we have generated in 2022 gives us confidence in our growth expectation in 2023. 2023 will be the year when we turn around and start growing our system sales again. With that said, I hand it over to you for questions. Thank you. If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Karl Bokvist from ABG Sundal Collier. Please go ahead. Thank you and good morning. My first one is just on the general demand outlook. We've heard from a couple of airliners, both here in Europe and in the U.S., that air travel continues to recover at a good pace, and it seems like bookings are looking good into the summer. I understand the comments you made about kind of aftermarket and flight utilization now perhaps being fairly close to normalized. But, you know, how do you foresee perhaps more positive air travel statistics than what we might have expected, like three or six months ago. Thank you, Karl, and good morning. Good question. It's again, interesting to watch and listen to all the airlines reporting Q4. As I said in the call, some bullish, they see record high bookings. I think that's a trend that continues where Europe and the U.S. have been leading that recovery. I think it's kind of peaking. They will report on how they struggle to meet the demand, actually. We foresee now forward to this, that Asia and China catches up. I think we have underestimated how far behind they are on the recovery, and it's probably gonna take a little bit longer than we think, but it's really coming now. When we talk with our distributors, we see that they really urge the airlines to store up to be ready when the demand comes back into that part of the world again. Hopefully, that elaborates a little bit more on your question there, Karl. On the OEM side, you did provide some comments here on production rates and similar, but for you as a sub-supplier, what are the indications from the industry when it comes to supply constraints, if these have improved and therefore, you know, we could see, well, the visibility of a production rate guidance or if there even is upside, if you get access to more components than what they might have feared? Yeah. I think the answer is in the last part of your question. There, I think the tone is better both from Airbus and Boeing in Q4 than it was in Q3. They are looking more confident on the supply chains. Know we at CTT has worked really, really hard to never be late, never be out of what we should deliver, and we're keeping that, but others are struggling. If the supply chains can be better than it's been in the last year, the production that's for sure. That can be an upside. The demand is definitely there, if they just could, they should go higher on the volumes than they are forecasting and predicting. Finally, on the OEM side, what's the latest when it comes to selection rates? I realize the Dreamliner is close to max when it comes to penetration for you. Have you seen or heard anything when it comes to selection rates at Airbus from the OEM line? Quite right on the Dreamliner. We're very, very high. Boeing is really marketing our system and really selling it for us. Maybe we can top it up just a little bit more. As you said, we're above 90 on flight deck and almost 90 on crew rest. That's extremely high. Airbus has been a little bit lower on the A350. It's been improving, but it's one area where we will focus this year to even increase it even more. That's a clear focus for us and a very important focus for this year. Okay. Then on, just on market dynamics, historically, you've claimed that you essentially held a monopolistic position in most of your segments, but has anything changed when it comes to market dynamics, either on, you know, the aftermarket side or private jets? Let's take private jet first, where we don't see anything changing. We are dominating the large segment. We always known and we always discussed that we have competition on the very small jets where our system is not actually. The change is really that we are moving down now into the business jet, that's nothing new. That's what we've been talking about last year. Other than that, we don't see any change, and we actually see that we are more cooperating with the competition to be together. On the aftermarket, I've always gotten questions about competition, as we have reported and mentioned, there is competition out there. New last year, which we commented in our Q4 report, is that we have taken actions to handle competition there from a copy. I think we are more confident now than we were in the beginning to see that this is of course a threat, but it's something that we can handle. We see that this product that we have is a complex product. We CTT, together with our partner, Munters, spent years to develop this specific material for our humidifiers, and that is to meet the specification on all points from Airbus, from Boeing and the involved authorities. This is something that we have a real strong confidence that we can keep competition away. I see. I have a couple of more, but I'll get back in the queue first. Thank you. Thanks, Karl. As a reminder, if you wish to ask a question, please dial star five on your telephone keypad. The next question comes from Karl Bokvist from ABG Sundal Collier. Please go ahead. The question now, you mentioned it too, the United order. To my understanding, both United and the rumored orders from India, for example, they are very large in terms of number of aircraft, but spread out over a long period of time. My first one is if when it comes to selection rates for these types of orders, how you can progress in the selection rates over time, or do they make a firm decision at the very beginning for the entire order? We can progress over time and of course, the long delivery times are linked to the capacity of Airbus and Boeing. Some of the orders are maybe a little bit quicker than others, but it's different batches and it's different types of aircraft that I think this large order gives us actually opportunity to see that together with our partners, together with Boeing, we can increase selection rates and maybe even come into other cabins as well, on the long term. Everybody's confident, and it gives us time to work on select. It's not fixed for one shot. It actually takes quite a long time. Understood. Just on a bit more on the financials and the cost side. The aftermarket share of revenues is still a very, very high portion this quarter. I understand the comments you make about, you know, sustainable margins going forward. Still, the aftermarket share is high this quarter, and yet I would imagine that perhaps the aftermarket contribution to CTT profitability would have been even higher. Is it mainly related to these adverse currency effects or are there any other cost items that might have held back margins a bit this particular quarter? Hello. Yeah, you are correct, Karl. It's the main reason is the currency effect from revaluation of a and accounts payable. The effect is more or less SEK 4 million in the quarter. If you look at the third quarter, it was positive with SEK 4 million. Quarter-to-quarter, actually SEK 8 million in difference from the third quarter to the fourth quarter. It's the main reason. Other than that, very small deviations to our own forecasts. Understood. I was thinking about, for example, the seasonal and FX-adjusted margin there at 36% this quarter, compared to 45% in Q3. Yes, Q3 is always a vacation quarter, so it is a seasonally high quarter for you. In case there were anything else that would be worth keeping in mind for the year on the cost side. No. As you mentioned, the vacation salary change effect is more and if you compare to the third quarter compared to the fourth quarter. Other than that, no big changes or deviations that is something that we is worth commenting. Okay. The main reason. Understood. Just the final one. When it comes to dehumidification selections at the OEM production line, has there been any orders here? Now when you have a quite sizable fleet flying without these systems, when do you think that you could make, you know, actual validated claims or guesses about the benefits between one another? Karl, what was the question when we get in on as a line-fit item for Anti-Condensation? no, sorry for being unclear. It's been a couple of years since the dehumidification system was removed from Boeing. Yeah. I mean, you have a couple of years now with an increasing fleet that it does not have a system installed. I guess a two-parter. Number one, you know, if it's still like close to zero in sales towards the OEM line on dehumidification. Number two, if you've heard or received feedback or if you can go to Boeing now and argue for the benefits when you compare these two different fleets, one with the dryers and one without? Yeah. Thanks. Thanks for clarifying. No, it has not changed. Boeing has not changed its mind. What we also have to remember that this decision was taken end of 2019. The first aircraft without Zonal Drying was produced in 2020, and these aircraft are amongst the 120 that was not delivered. They're just entering into the market. I think maybe one or two got there before, but they have not flown that much due to the pandemic. Actually right now, this is a question that we are trying to get to meet some of the airlines that we know have both aircraft with our system and without, and try to see if they notice any difference. It's going to be a very interesting first half year when we will really try to find out, is this a game changer? Do we have a market to retrofit Zonal Drying? Do we have the arguments to go back to Boeing and try to get back onto the line again? It's a little bit too early, but we're really trying to get the answer to your question. Okay, understood. Thank you. That is all for me. There are no more questions at this time, so I hand the conference back to the speakers for any questions from the web. Okay. We have received a few questions from the web. First question is, did revaluation of accounts receivable, accounts payable affect the third quarter margin positively? How often do you conduct these revaluations? I think I mentioned this already. The revaluation had a positive effect in the third quarter with about SEK 4 million, and now in the fourth quarter, it was negative by SEK 4 million. Quarter-to-quarter effect is actually SEK 8 million. We conduct these on a quarterly basis, so each quarter. The second question is regarding the third-party products that we mention in the CEO comment. The question is, what are your customers view on this product? How do you know how much it differ in pricing compared to your current offer? Has it affected your pricing strategy up until today? Thanks for that question. Look at this market where it's actually copies of originals that are then of course, approved by the airworthiness authorities. This is something that can be done in the U.S., so it's FAA. There's three reasons for doing this from airlines. One is of course obvious, it's the lower cost. The other two is availability. The third could be also quality on the OEM product. Quality on the OEM product is not a problem for CTT. Availability of our products are extremely good with the cooperation that we have for distribution with Satair and Boeing. It's in our case, a pure price competition question. Usually, the pricing is roughly 30% below. We are not entering into a price war. I don't think we can win it. We will fight this battle in a different way. We will fight it with quality. We will fight it with a premium product that is, as I said, during the questions before, develop the specific material. This material we spent together with Munters years to develop, and this is a material which we only have access to. Any copy needs to use a commodity material that is not intended for aviation use, that cases of Boeing and Airbus, and has several other drawbacks, which we are then now informing the concerned airlines about. I'm pretty sure that when they see how much difference this is in these products, it will not make to risk a product with less, with less quality for just saving a little bit. I'm pretty confident that we can keep our market share, fight this off, and show any doubters that the OEM product is something completely different from what is now offered as a poor copy. The final question from the web is also concerning the third-party product. The question is, new or has it existed in the market for some time? This is for CTT, this is on part of our inventory new. It has existed before. We have seen it on simpler products like filters. The market is actually quite, it's established. There's processes around this. There's a big lobby in the U.S., so this is nothing new. I've been commenting on it before as well. It's a little bit new for us that it came into 2022 that somebody was trying to copy a part of our aftermarket, and that's why we wanted to comment to it and inform the market that this is something that is actually happening. Again, as I said, this is not a filter, this is a qualified product. CTT and Munters, we spent years to develop this specific using, to meet the specification of the airline industry from Boeing, from Airbus, from other authorities, FAA, European Airworthiness Authorization. Even the Food and Drug Administration in U.S. has been involved to make sure that this product is safe for the crew and for the passengers. We're quite confident that we can fight this off and show that the CTT product is something completely different. I think that was the end of the questions. I would like to thank you for participating into the CTT Q4 earnings call. I really look forward to 2023, converting the positive momentum that we have generated into sales and orders. This is the year when we start growing our system sales again, and the gradually improved market condition gives us confidence in all our growth expectations. Thank you again for listening to CTT and our Q 4 report.