Embraer S.A.

Good morning, ladies and gentlemen, and welcome to the audio conference from Embraer's financial results for the fourth quarter of 2022 and full year of 2022. Thank you for standing by. We remind that Ivi's results will be discussed on Ivi's teleconference. Additionally, the numbers in this presentation contain no GAAP financial information, to facilitate investors to reconcile EVE's financial information in GAAP standards to Embraer's IFRS. At this time, all participants are in listen-only mode. Later, we'll conduct a question and answer section and instructions to participate will be given at that time. Should you require assistance during the conference, please use the Q&A button on the platform. As a reminder, this conference is being recorded and webcasted at ri.embraer.com.br. This conference call includes forelooking statements or statements about events or circumstances which have not occurred. Embraer has based these forward-looking statements largely on its current expectations and projections about future events and financial trends affecting the business and its future financial performance. These forward-looking statements are subject to risks, uncertainties and assumptions, including among other things general economic conditions, political and business conditions in Brazil and in other markets where the company is present. The words believes, may, will, estimates, continues, anticipates, intends, expects and similar words are intended to identify forward-looking statements. Embraers undertakes no obligations to update publicly or revise any forward-looking statements because of new information, future events or other factors. In light of those risks and uncertainties, the forward-looking events and circumstances discussed on this conference call might not occur. The company actual results could differ substantially from those anticipated in the forward-looking statements. It's important to mention that all numbers are presented in US dollar, as it is our functional currency. Participants on today's conference call are Francisco Gomes Neto, President and CEO, Antonio Carlos Garcia, Chief Financial Officer, Leonardo Shinohara, Director of Investor Relations. And in the Q&A session, will also participate Aram Meyer, Commercial Aviation CEO, Michael Amalfitano, Executive Aviation CEO, and Johan Bordet, Services and Support CEO. I would like now to turn the conference over to Francisco, who will proceed with the first remarks. Please, go ahead, sir.

Good morning, everyone. Thank you for joining our fourth quarter and 2022 full year results conference call. 2022 will be remembered for overcoming several challenges worldwide. such as the Ukraine war, the rising of global inflation, and supply chain constraints. Despite that, we managed the strategic plan to deliver our goals, which was only possible due to teamwork, focus, and discipline. Another main factor in succeeding our plan was the continued focus on business efficiency. which demanded several mitigation measures throughout the year. In 2022, aircraft delivery grew 12.7% and reached the mark of 159 commercial and executive aircraft. We also increased revenue to 4.5 billion. Adjusted EBIT and EBITDA margins exceeded the guidance given to the market, reaching 6% and 10%. Moreover, the free cash flow generation grew well above estimates. The total backlog returned to the pre-pandemic level, reaching 17.5 billion. Disactive aviation presented an outstanding performance in 2022, And in commercial aviation, we had several campaigns underway. Later on, I will talk more about the 2022 highlights of each business unit. On the next slide, we will see some important steps in our journey towards a more sustainable aviation. The Energia program was consolidated with two concept aircraft models. for 19 to 30 seats with hybrid electric and hydrogen electric propulsion. Together with Pratt & Whitney, we have successfully tested an E195E2 using 100% sustainable aviation fuel. As part of the reducing emission goals in our operations, we anticipate the use of 100% renewable energy in Brazil by 2024. In addition, we signed an agreement with Raizin from the Shell and Cousin Group to assess the production of sustainable aviation fuels in Brazil, which may contribute to lower emissions across the sector. In the social pillar, we are increasing the hiring of underrepresented groups in our entry-level programs, as well as the number of women in senior leadership as part of our goals. Furthermore, we were honored to receive the Great Place to Work certification in several countries where we operate. For us, it is an important recognition to celebrate. On the next slide, you'll see some highlights of last year's business units. In commercial aviation, we delivered 57 aircraft, 19% above the previous year. The delivery of the first E195-E2 jets to Canadian port airlines marked the beginning of the E2 operation in North America. Porter has also placed a new order for 20 jets, in addition to the existing 30 firm orders. Another important sale was the 20 E-2 jets to Azura, a U.S. leasing company. In addition, the Chinese Civil Aviation Authority granted certification for our E-190E2, opening doors for the E-2 family in the relevant Chinese market. Business Aviation presented excellent results for another year, with a 102 aircraft delivery, a strong demand in the entire product portfolio, and a sustainable sales level. The Finland 300 became the world's best-selling light jet for the 11th consecutive year. In defense, the geopolitical scenario continues to influence several countries to invest in renewing their armed forces capabilities. The selection of the Su-390 Millennium as the only aircraft that meets the requirements of the Ministry of Defense of the Netherlands was our year's highlight, with a 5 C-390 acquisition forecast. Moreover, we announced the partnership with L3Harris to develop an agile tanker, a tactical aerial refueling option to meet the United States Air Force needs. Our service and support business continues to evolve positively. In commercial aviation, growth was based on pool program contract renewals, as well as new clients. And in business aviation, new clients in the executive care program. The service and support backlog grew 8% compared to 2021. Finally, in 2022, we took an important step to consolidate our operations in the urban air mobility segment, a great business opportunity in the coming years. We completed the EV spin-off by listing the company on the New York Stock Exchange, ending the year with potential orders for over 2,700 vehicles valued at 8.3 billion. Now, I hand it over to Antonio to give further details on the financial results in Return at the End. Thank you.

Thanks, Francisco, and good morning, everyone. 2022 was a great year for us. The entire Embraer One team worked very hard, all the way to the last minute of December, to successfully overcome many external challenges we faced during the year. As a result, I'm proud to share our 2022 financial results with you today. deliveries, we increased the number of aircrafts delivered by 12.7% compared with 2021, even with significant supply chain constraints. It's important to note that Q4 deliveries were concentrated around 50% of all deliveries in 2022, with an abnormal seasonality. Embraer delivered eight jets in the fourth quarter, of which 30 commercial jets and 50 executive jets. Thereof, 33 light jets and 17 midsize jets. In 2022, we produced 61 commercial jets, but delivered 57 with 4 jets postponed to January 2023. Therefore, we slightly missed the guidance. For executive aviation, we delivered 102 jets, reaching the guidance. Deliveries are gaining traction, and we are optimistic on our 2023 deliveries guidance. Firm order backlog ended Q4 2022 at $17.5 billion. $500 million more versus Q4 2021. This is one of the highest quarter backlog since the beginning of the pandemic, or 800 million more versus Q40 2019, driven by solid sales activities in executive aviation and service and support. Net revenues rated around $2 billion in the quarter, 44% of the whole year revenue. Approximately 700 billion compared to Q421, most driven by higher revenues and commercial executives and services and support, partially offset by lower revenues in defense and security. Revenues reached 4.5 billion in the year. Approximately 343 million more compared to 2021. Or a growth of 8%, delivering the guidance with revenue well balanced by business unit. Moving to adjust EBITDA and EBITDA, but before that I want to report on gross margin. Q422 reported consolidated gross margin of 19.1%, higher than 15% report in Q421 due to volume mix 2%, efficiency 1.6%, and one-time actions 0.4%. In Q422, adjusted EBIT were 166 billion yielding just a bit the margin of 80.3% or 400 basis points above Q4 2021, even with some negative impacts from provision and SG&E expenses. In Q422, adjusted EBITDA were 228 million, yielding adjusted EBITDA margin of 11.5% or 323 basis points above Q421. For the year, in 2022, reported consolidated gross margin of 20.1%, higher than 15.7% report in 2021, due to volume increase 1%, enterprise efficiency 2%, one-time effects 1.4%. In 2022, adjusted EBIT were 270 million, yielding adjusted EBIT margin of 6% or 200 basis points above 2021, even with some negative impacts from provisions and SG&A minus 2% and surpassing our guidance. In 2022, adjusted EBITDA were 459 million, yielding adjusted EBITDA margin of 10.1%, or 147 basis points above 2021, and also surpassing our guidance. SEG&A and investments. SEG&A rose 18%, driven by higher sales campaign and market activities compared to 2021, a year still impacted by COVID, as well commercial concessions and inflation. Investments. In 2022, Embraer invested a total of $176 million in product development and research, mainly in product development, for example, E2 family, P2F, executive aviation, and turboprop projects. We invested $66 million in CAPEX, mainly for service and support expansion. Free cash flow without ETH in Q4 2022 was positive in $584 million, due to a strong concentration of delivery during this quarter. Free cash flow without ETH in 2022 was positive in $540 million, due to outstanding results and sales performance from executive aviation and very strict control over working capital. Adjusted net results in Q4 2022 was a profit of 43 million, or 2.2% of adjusted net profit margin. Adjusted net results in 2022 was a profit of 39 million, or 0.8% of adjusted net profit margin. Trending positive from enterprise efficiency and less interest expenses. Liquidity. In the top left of the chart, we finish the quarter with a net debt without EVE of $950 million or $457 million less than 2021, in line with our liability management strategy. We reduced gross debt around 800 to 24 million dollars compared to 2021, with a significant reduction net financial expenses on cash flow, 35 million savings in 2022. It's important to highlight that our net debt A BTDA ratio decreased from 3.9 times in 2021 to 2.1 times in 2022. This is a 1.8 times decline in just one year. The company ended 2022 with a strong liquidity of 3.1 billion, including revolving credit facilities, due to the outstanding free cash flow and working capital management. On the debt side, we reprofiled 300 million of debts from 2024 to 2027, and the maturity of our debts give us a comfortable situation on amortization until 2024. We continue to work on increasing duration and improving the financial metrics. At the same time, monitoring for a marked window to reprofile our 2025 and future maturities. Rating, it's important to highlight that Moods affirmed in February 2023 Embraer's rating at BA2 and raised the outlook for all ratings from negative to stable. Standard reports upgrade in February 2023 from BB to BB+, on solid cash flow. We are one notch below the investment grade level and hope to get back the IG level soon. Moving to 2023 guidance, I will now guide you through our outlook for 2023, starting with deliveries. For commercial aviation, we forecast 65 to 70 aircrafts still limited by supply chain constraints, an increase of at least 14% than delivered in 2022. For executive aviation, we forecast 120 to 130 jets, an increase of at least 18% more jets than delivered in 2022. For revenues, between 5.2 to 5.7 billion, at least 700 million increase or double-digit growth of around 15% compared to what was achieved in 2022. For EBIT, adjusted EBIT margin of 6.4% to 7.4%. EBIT is the margin from 10% to 11%. In regards to free cash flow, with the substantial revenue growth, we do have some challenges on working capital. Therefore, free cash flow guidance is 150 million or better. As the year progresses, we will keep you updated accordingly, the same we did in the last years. With that, I conclude my presentation and hand it back to Francisco for his final remarks. Thank you very much.