Embraer S.A.

Good morning, ladies and gentlemen, and thanks for standing by. This conference call will be conducted in English, but please let me say a short announcement for Portuguese speakers. My name is Gui Paiva, and I'm the Head of Investor Relations for Embraer. I want to welcome you to our first quarter of 2024 earnings conference call. The numbers in this presentation contain non-GAAP financial information to facilitate investors to reconcile EVE's financial information GAAP standards to Embraer's IFRS. We remind you that EVE's results will be discussed at EVE's conference call today at 9.30 a.m. New York time. It is important to mention that all numbers are presented in U.S. 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 extracted or implied in this conference call. Except in accordance with the applicable rules, the company assumes no obligation to publicly update any forward-looking statements. For detailed financial information, the company encourages revealing publications filed by the company with the Brazilian Comissão de Valores Mobiliários, or CVM. At this time, all participants are in a listen-only mode. We will give instructions later on for participation in the two Q&A sessions. As a reminder, this conference call is being recorded. Participants on today's conference call are Francisco Gomes Beto, President and CEO of Embraer, Antonio Carlos Garcia, Chief Financial Officer, Luis Harrison, Corporate Communications Director, and myself. This conference call will have three parts. In the first part, top management will present the company's Q1 results. In the second part, we'll host a Q&A session only for investors. And last but definitely not least, we'll host a Q&A session only for the press. It is my pleasure to now turn the conference call to our President and CEO, Francisco Gomes. Please go ahead, Francisco.

Good morning and good afternoon to all. Thank you and welcome to Embraer's first quasi-2024 results conference call. Our commercial activity in 2024 continues to be strong in all business units, as we see solid demand in the company's main markets. Historically, Q1 is seasonally our weakest quarter. However, in 2024 our revenues were up 25% compared to a year ago, and our deliveries increased 67% helped by our production leveling initiatives. Speaking of production leveling, we expect further improvement as the year progresses, and more importantly, in 2025. These operational changes should help the company to increase efficiency, productivity, and post better financial results next year and years ahead. Our backlog reaches 21.1 billion, which is the highest level over the past seven years. In commercial aviation, American Airlines released an order in March of 90 E-175s with 43 additional purchase rights. The news demonstrated the still strong potential of this aircraft model in the U.S. market. Speaking of potential, we currently have concrete sales campaigns for more than 200 aircraft across the world, for both our E-1 and E-2 jet families, and also more concrete sales opportunities for our defense aircraft. We also kept the good momentum in executive aviation, with strong sales across all our aircraft. We recorded the highest Q-1 in terms of sales, deliveries and revenues for the division over the past 80 years. Sales and support continue to be a pillar of profitability and one of our main growth drivers. Its revenues increased 12% in Q124 compared to a year ago. The strong financial results of the company allowed us to reduce our gross debt without ease by an additional $276 million during the quarter, a total reduction of $754 million over the past year. Consequently, our gross debt to EBITDA ratio is now below five terms. It is important to mention that when we consider all the risks and opportunities for the company, we feel comfortable and reiterate our 2024 operational and financial burdens. I will now present the operational results by business units in the next few slides. In commercial aviation, the backlog rose 2.3 billion. or plus 26 percent quarter over quarter and reaches 11.1 billion with a book to view ratio above one for the whole year the american alliance order reinforced the capability of our e175 model and more importantly the partnership between both companies embraer A leading company, Azora, delivered the second E195-E2 to Royal Jordanian, the first E2 operator in the Middle East. As active aviation, the backlog registered a sequential increase of 300 million and ended Q1 with 4.6 billion, or plus 7% quarter over quarter, and a strong 2-to-1 book-to-view for the quarter. or plus 7% quarter-over-quarter, and a strong 2-to-1 up-to-bill for the quarter. We recorded our first set of firm orders from NetJets, whose deliveries will begin in 2025. In total, NetJets has purchased rights for 250 aircraft over the next 14 years. In the fashion security, we hosted the first Embraer D-Sex Day in the U.S. with the 59th Millennium and A29 Super Tucano. The event included a diverse guest list of government authorities. Military officials, prospects, and partners. In early 2024, Embraer and Mahindra signed an ABOU to jointly pursue the sale of the C-390 Milena to the Indian Air Force. The first Hungarian C-390 successfully completed its maiden flight. The aircraft continues to receive international recognition on the back of its remarkable operational performance and capabilities. We should note the division reported lower year-over-year revenues because of supply chain delays and business seasonality. In service and support, Revenue grew 12% compared to the same period last year, with solid double-digit profitability. The business reality backlog maintained the historical 3.1 billion record, reached in Q4-23, with a 10% plus EBIT margin. Another important step for our services division was the induction of the first practically GPS 1100 engine in AUGMA. our MRO in Portugal. The ramp-up should last four years, and we expect revenues to reach close to 500 million in 2028. Last but not least, EV, our EV top business, is on track to achieve important milestones in 2024. We have already selected now more than 90% of its component suppliers. And we successfully concluded a urban air traffic management trial. The company is on track to accomplish the next development steps. First prototype assembly conclusion, initial tests, and the definition of certification basis. We also began the definition of our easy-to-hold factory configuration. All in, we estimate it should have a total cash consumption between $130 and $170 million in 2024. I will now hand it over to Antonio, our CFO, to give you further details about the financial results, and then I will be back with closing remarks.

Thank you, Francisco. Good morning and good afternoon to everyone. I would like to highlight our operational performance in Q1 despite the historical seasonality. Total deliverance revenue margins were higher than the same period in 2013 and the company's cash consumption was better than a year ago. Our focus in Q1 was on business and financial efficiency. We want to lay down an important set of stones to put us in a comfortable position to achieve our three-year guidance, even with the ongoing supply chain constraints we continue to deal with. Let's now move to slide nine in the presentation. Deliveries. Executive Aviation delivered 18 jets in Q1. For an increase of 125%, versus a year ago and the highest Q1 level of the last eight years. The light jet segment was 83% higher year-over-year with 11 finals delivered, while the median jets were more than triple during the period with seven pre-sales delivered. Meanwhile, commercial aviation delivers were flat at seven aircraft into one compared to the same quarter of 2023 within four E1s and three E2s aircraft. In defense, we should note there were no C309 delivers in the first quarter of 24 and 23. We continue to work steadfastly to accomplish our production plan and reach the milestones in our defense and security programs, which includes four C390 million delivers schedule for the year. It is important to mention the company has developed and is currently implementing a production leveling plan to mitigate business seasonality. The plan should help the company to deliver less volatile financial results throughout the year in the near to medium term future. In slide 10, please. The company registered a strong total backlog of $21.1 billion at the end of Q1 for an increase of 13% quarter-over-quarter and the highest number recorded over the past seven years. Looking forward, our current backlog is accurate to our financial projections. The backlog for commercial aviation reached more than 380 aircraft in Cuba, and it is valued at $11.1 billion, or $2.3 billion higher than the last quarter. Meanwhile, executive aviation ended with a solid $4.6 billion backlog, or 7% higher quarter over quarter, helped by the inclusion of the first paper 500 firm orders from NetJets. We should note NetJet has other 246 options not included in the current backlog. The backlog for service and support is finished, stable at 3.1 billion in Q1. While for defense and security, it decreased marginally by 4% quarter over quarter to 2.4 billion. Again, we should there are 11 C3-119 aircrafts and three tender offers, one whose contracts haven't been signed yet, and those included in our backlog. Moving on to revenues, our top line reached almost 900 million Q1, or 180 million higher year-over-year for a 25% growth rate. If you look at the right charts, service and support represented around 41% revenue in Q1, followed by executive close to 27, commercial ratio from our 22, and excess at around 9%. Next slide. We generated 47 million in adjusted EBITDA in Q1, with a 5.2% Margin driven by higher aircraft delivery compared to the same period last year and better consolidated growth margin. Meanwhile, adjusted EBIT was 7 million for an adjusted EBIT margin of 0.8%. Reported EBIT for the quarter was negative 4 million for a negative 0.4% margin. Both figures were better than the first quarter, 23, supported by our volumes better mix, especially in executive and service and support. Looking at the right chart, we can see executives, aviation, and service and support generated positive evidence during the quarter, while commercial and defense presented negative results because of limited volume supply chain delays and more aircrafts in the early stage of assembly. In slide 12, please. In Q1, if we exclude ease, we had an adjusted free cash flow consumption of 346 or 53 million barrels in Q1-23, driven by customer-advanced payments. The Q1 cash consumption is basically due to the increase in inventories to support higher deliveries in the upcoming quarters. this stress should be reversed as more deliveries take place throughout the year. And we have our 220 million or higher guidance for the cash generation 2024. Moving to investment, and again, without ease, 47 million were allocated to research and development, 28 million to COPEX, and a net of 15 million to the pool program in Q1. for a $90 million total compared to $82 million a year ago. We highlight our capital allocation continues to be focused on segments with higher returns, which projects such as expansion of our production capacity in executive aviation and service and support. Our adjusted net income was negative $13 million for the quarter on a negative 1.4% adjusted margin. Historically, the first quarter of the year is the weakest because of the business seasonality. The positive report net income is driven by the mark-to-mark valuation of the even worth around 30 million. Next slide, going to our liability management plan. In first quarter 24, we reduced our gross debt without even by $276 million. only during the quarter, and by a more sizable $754 million versus a year ago, to a total of $2.6 billion. In addition, our net debt declined by $384 million year over year, to a total of $1 billion in the first quarter of 2024. However, on a sequential basis, our net debt to BTDA leverage ratio increased 0.4 times to 1.8 times, as shown in the top right corner. This variance is explained by the seasonality of the business. Our almost 2.4 billion liquidity position allowed us to cover our debt obligation beyond 2030 and leave us in a very comfortable position. With that, I conclude my presentation and hand it back to Francisco for his final remarks. Thank you very much.