Embraer S.A.

Good morning, ladies and gentlemen. My name is Agui Paiva and I'm the head of investor relations for Embraer. I want to welcome you to the fourth quarter of 2023 and full year earnings conference call. Thank you for standing by. The numbers in this presentation contain non-GAAP financial information to facilitate investors to reconcile EVE's financial information in GAAP standards to Embraer's IFRS. We remind you that EVE's results were previously discussed at EVE's conference call. It is important to mention that all numbers are presented in US dollars, as it is our functional currency. This conference call may include statements about future events based on Embraer's expectations and financial market trends. Such statements are subject to uncertainties that may cause actual results to differ from those expressed or implied in this conference call. Except in accordance with applicable rules, the company assumes no obligation to publicly update any forward-looking statements. For detailed financial information, the company encourages reviewing publications filed by the company with the Brazilian Comissão de Valores Imobiliários or CVM. At this time, all participants are in a listen-only mode. We'll give, later on, instructions for the participation in the Q&A session. As a reminder, This conference is being recorded. Participants on today's conference call are Francisco Gomes Neto, President and CEO of Embraer, and Antonio Carlos Garcia, our CFO. It is my pleasure to now turn the conference call to our CEO, Francisco Gomes. Please go ahead, Francisco.

Good morning and good afternoon to all. Thank you and welcome to Embraer's Q4 2023 Results Conference Call. In 2023, our commercial activity intensified in all business units, with solid demand in the company's main markets. We also had a great start in 2024 with an important order from American Airlines that has driven our commercial aviation book-to-bill ratio above 1 to 1 for the year already in Q1. Last year, supply chain delays negatively impacted our business. However, we posted double-digit growth in aircraft deliveries, services, and revenues. The strong increase in sales helped the company's backlog to surpass pre-pandemic levels, as it reached 18.7 billion, the highest number recorded in the last six years. And I am confident to say there is still much more upside to be captured in the near future for all business units. In the financial side, we also experienced great results. We registered a 30% increase in adjusted EBIT year over year. And we generated more than $300 million in free cash flow in 2023, above our guidance. I'm pleased and proud to share that Embraer is back to investment-grade rating. All these results are a consequence of the execution discipline the company is focused on. Only if we reach important milestones in 2023, like the first prototype assembly, The progress made so far makes us even more confident that EVE is on track to develop the foundations for the global urban air mobility market. Last but not least, safety and quality are priorities in our strategy and are ever present in our culture. I will present now the operational results of our business units in the next slides. In commercial aviation, revenues increased an impressive 20% year-over-year to $1.85 billion because of higher deliveries and product mix. The business unit registered a book-to-bill in excess of 1 to 1.1. The highlight was the E2 family whose deliveries more than doubled from 19 aircraft in 2022 to 39 in 2023. In addition, in Q4, Porter Airlines added a firm order of 25 Embraer E195E2. Commercial Aviation delivered 64 aircraft in 2023. but registered a positive 1.1% adjusted EBIT margin without services, or basically the same margin as in 2022. The adjusted margin Q4 reached 4.6% compared to 4.1 quarter over quarter. Executive Aviation registered a book to bill in excess of 1 to 1.3%. with a strong profitable backlog of 4.3 billion or 11% growth year over year. On deliveries, the business unit posted the largest volume in seven years at 115 jets or 13% more than in 2022. The Finna 300 was again the world's best-selling light jet, now for 12 consecutive years, and the most delivered twin-engine jet for the fourth consecutive year. Executive Aviation presented a 90% adjusted EBIT margin in 2023 versus 12.2% in 2022, a consequence of product mix and one-time tax benefits. The Q4 adjusted margin ended at 15.7%, compared to 19.3% year over year. In defense and security, revenues reached a significant increase to $515 million, or 25% higher year over year, driven by higher C390 volumes. In 2023, South Korea was in the spotlight with the victory of the C390 in the public tender, becoming the first customer in Asia. Embraer also firmed two important MOU contracts, one with Mahindra in India and one with SAMI in Saudi Arabia, to become partners in the C390 sales campaigns. The business unit presented a 5.5% adjusted EBIT margin in 2023 versus 2.4% in 2022. In Q4 2023, the adjusted margin ended at 2.8% compared to 5.3% quarter over quarter, due to product mix and baseline contract adjustments. If we move to services and support, in 2023, the business unit experienced solid growth momentum. We announced three new MROs dedicated to executive jets in the U.S. The expansion doubled our maintenance capacity in the country, and it should continue to support the growth of our customer base. The business unit Backlog ended 2023 with $3.1 billion, a $400 million growth year-over-year, the highest level on record, reinforcing services' role as one of the main drivers of growth over the next years. We recorded a consistent double-digit adjusted EBIT margin throughout the year, finishing at 15.2% in 2023 versus 12% in 2022. In Q4, we had a 16.7% adjusted margin compared to 5.7% in the same period of the previous year, mainly because of sales. Bad debt provisions. Only if the company had several significant achievements, like the selection of important suppliers and the start of assembling of its first full-scale prototype. It also conducted a successful test of its urban air traffic management software in the UK. On the financial side, the company consumed less cash than expected in 2023. The next 12 months will be important for EVE. The company expects to perform the first test flight of its full-scale prototype and plans to start preparing its manufacturing facility for production. I will now hand it over to Antonio, our CFO, to give you further details on the financial results. And I will be back with closing remarks.

Thank you, Francisco. and good morning and good afternoon to everyone. I'm glad and proud to share with you our 2023 achievements, driven by the continuous focus on business efficiency and innovation. We also reached our 2023 guidance for all financial indicators, net revenue, adjusted EBITDA and EBITDA, and free cash flow. Despite a miss in commercial and the executive aviation aircraft deliveries because of supply chain constraints. Moving to slide number nine on deliveries, executive aviation delivered 49 business jets in Q4 and a total of 115 aircraft in 2023. The light jet segment was 12% higher year over year. and reached the largest volume for the company in the past seven years. Additionally, medium jets registered a 14% annual growth. Meanwhile, commercial aviation delivered 25 aircraft in Q4 and a total of 64 jets in 2023 for 12% year-over-year growth. In 2023, Embraer supplied 181 aircraft, including two military C390 jets. The total represents an increase of 13% when compared to the 160 jets in 2022. This shows an improvement in the supply chain situation year over year, but we continued to face some delays which have negatively impacted our operational results and delivery guidance. The company continues working to mitigate the seasonality in production and deliveries over the coming quarters. Moving to slide 10, the company's backlog rose by $1.2 billion in 2023, a 7% increase year-over-year, and reached a total of $18.7 billion. the highest number recorded since first quarter 2018. Executive aviation ended 2023 with a resilient 4.3 billion backlog for a 400 million or 10% growth year-over-year. The backlog for defense security increased 100 million or 4% year-over-year with the victory of the C-300 8th millennium in South Korea standards. It is also important to highlight the aircraft was selected by the three NATO countries, and this negotiation for 11 aircrafts have not yet been incorporated into our backlog, which represents a significant upside potential for the upcoming quarters. In commercial aviation, the business unit backlog reached 298 aircraft in Q4, for a $8.8 billion total or 200 million or 2% growth year over year. And it does not consider yet the 9,175 units sold to American Airlines in the first quarter of 2024. The service and support backlog reached another historical record at 3.1 billion, with a 500 million or 19% growth year over year. Our top line reached almost 2 billion in Q4 and raised the yearly total to 5.3 billion for a 16% growth. growth rate year over year. Therefore, I'm happy to share that we met the low end of our 5.2 to 5.7 billion guidance range for revenues. Looking at the right chart, in 2023, commercial aviation represented more than 35% of the revenue. Executive and services and support close to 27% each and defense around 10%. Slide 11, the fourth quarter have an excellent performance in terms of adjusted EBITDA, with 253 million and margins of 12.8%. Meanwhile, in 2023, we ended with a 562 million total and 10.7% margin, meeting guidance for the year, driven by volumes, enterprise, and tax efficiencies. In slide 12, in Q4-23, adjusted EBIT was 182 million, and adjusted EBIT margin was 9.2%. Therefore, for 2023, adjusted EBIT reached 350 million, and adjusted EBIT margin was 6.6%, in line with guidance. This represented a $80 million increase increased year-over-year because of higher volumes across all business units and other operational income. Consequently, reported EBIT for the year, which includes M&A results, total $340 million for a 6% mark. Looking at the right chart, executive aviation and service and support were responsible for almost 90% of EBIT generated during the year. driven by higher volumes and double-digit margins. Meanwhile, defense and security represented 7% and commercial aviation, 5%. In slide 13, in Q4, if we exclude EIF, we had an adjusted free cash flow generation of 684 million, or 100 million higher year over year. For 2023, we achieved 318 million, compared to 540 million year-over-year because of investment and no recurring items. We surpassed the guidance of 150 million or more because of the improvement in working capital. If we move to investments, in Q4, 54 million were allocated to research and development and 60 million to CAPEX. For a 114 million total invested compared to 94 million in Q4 2022, if we exclude ETH. Meanwhile, in 2023, the company invested a total of 326 million, of which 194 million were invested in research and development and 132 million in CAPEX, if we exclude ETH, or 82 million higher year over year. We should highlight capital allocation continues to be focused on segments with higher returns. with projects such as expansion of our production capacity in executive aviation and service and support. About EVE, I would like to remind you that the company reached the necessary milestones to begin the capitalization of product development costs based on IFRS rules in Q3. I would like to finish this slide talking about This is an important metric for the company. Return on invested capital, ROIC. The momentum in our V-shape recovery is continuing. Our ROIC reached 8.8% in 2023, more than 200 basis points higher than 2022, and similar to our cost of capital. Looking forward, our expectation is to increase ROIC to the lower thin slab. In slide 14, Embraer posted $78 million in adjusted net income into Q4 for a 3.9% adjusted margin or an 80% plus sequential increase. Meanwhile, we ended the year with $79 million in adjusted net income for an adjusted 1.5% margin. Consequently, reported net income for the year, which includes deferred tax income, total 164 million for a 3.1% margin. In slide 15, we move now to our liability management plan. In 2023, we reduced our gross debt without EV by 317 million year over year. Does net debt decline to 781 million in 2023 for the billion in 2022. consequently we are happy to report a significant reduction in our leverage ratio in the top right corner you can see we ended 2023 with a 1.4 times net debt without even to adjust a btda ratio or 0.9 terms below the 2.3 times observed in 2022. Furthermore, we increased the average debt maturity to 4.6 years compared to 3.4 years year-over-year, which has left Embraer to a very comfortable position. Our cash of almost 2.4 billion with EVE allowed us to cover all obligations beyond 2030. Last quarter, we mentioned we were taking all necessary steps to recover our investment rate status. Today, I'm very pleased and proud to share that Tandem Improves raised Embraer to investment grade rating and Moots to only one notch below investment grade. At least Fitch revised the company's outlook to a positive. In slide 16, I almost forget to mention one important thing. It's our 2024 guidance. We forecast commercial aviation should deliver between 72 to 80 aircrafts for an increase of 18% year-over-year using the midpoint of the range if we consider ongoing supply chain constraints. For executive aviation, we forecast 125 to 135 jets an increase of 13% year-over-year based on the midpoint of the range. With a move to financials, we estimate top line to settle between 6 to 6.4 billion, with the midpoint of the range 18% higher than what we generated in 2023. In addition, in order to simplify the process, we are just giving guidance for the adjusted BIT margin. We forecast this indicator between 6.5 and 7.5 for the year, which would imply 434 million at the midpoint of the range. Finally, if you move to free cash flow, we estimate 220 million or better for the year. We will update or reiterate our guidance quarterly as the years goes by. With that, I conclude my presentation and handing it back to Francisco for his final remarks. Thank you very much.