Embraer S.A.

My name is Gui Paiva, and I'm the head of investor relations for Embraer. I want to welcome you to our second 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 and GAAP standards to Embraer's IFRS. We remind you that EVE's results were discussed at EVE's conference call last Tuesday, August 6th. It is important to mention that our numbers are presented in US dollars as it is our functional currency. This conference call may include statements about future events based on embryos, 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 the 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 listen-only mode. We will give instructions later on for participation in the two question-and-answer sessions. As a reminder, this conference is being recorded. Participants on today's conference calls are Francisco Gomez Neto, 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 Q2 results. In the second part, we will host a Q&A session only for investors. And last, but definitely not least, will 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.

Thank you, Huguin. Good morning and good afternoon to all. Welcome to Embraer's second quarter 2024 results conference call. Embraer revenues in Q2 increased more than 15% year-over-year, mainly helped by defense and security, up more than 100%, but also by commercial aviation and services support, up around 20%. In the first half of 2024, overall company revenues increased 19% compared the same period in 2023. The highlight was defense and security, with an increase of about 50%, followed by executive aviation with 24%, service and support with 16%, and commercial aviation with 12%. Our efforts to improve efficiency and profitability led to a 1.6% gain. to 9.3% in our operating margin during Q2. The gain in the first half of the year was even bigger and totaled 2.7%. It is important to mention that we reiterate all lines of our 2024 operational and financial guidance after considering the opportunities and risks for the company in the second half of 2024. Our commercial activity in 2024 continues to be strong in all business units and we see solid demand in the company's main markets. Our firm order backlog reached 21.1 billion, which is the highest level over the past seven years and supported by a solid year-to-date book-to-bill ratio in excess of 2.2 to 1. In commercial aviation, Mexicana de Aviación ordered 10 E-192s and 10 E-195 E-2s with deliveries scheduled to start in the second quarter 2025. This is another evidence of the strong ability of our E-2 jet family to operate in several markets. and to provide airlines with a viable option to increase their capacity quickly. Defense, the recent signing of the contract for nine C-390 Millennium aircraft by the Netherlands and Austria at Fimbolo Fair, coupled with the order for six Super Tucano aircraft by Paraguay, underpins our positive perspective for the business unit. In executive aviation, we continue to capitalize on the good sales momentum in both fleet and retail markets, with solid demand across our product portfolio. In service and support, the division continued to be one of the main drivers of growth for the company, with higher revenues and profitability through a combination of operational and financial excellence, customer experience and innovative solutions. We continue to face supply chain challenges. This year, we reinforced our supply chain organization by localizing more people closer to our most critical suppliers. And we introduced digital tools and artificial intelligence to help us further improve the efficiency of our supply chain management. I will now move on to operational results by business units in the next few slides. In commercial aviation, the backlog in the first half of 2024 rose 3.3 billion, or plus 40% year over year, and reached 11.3 billion, with a book-to-bill ratio above 4 to 1 during the period. Deliveries and revenues almost tripled sequentially in Q2 and reached 19 aircraft and 554 million. The year-on-year growth rates were also solid in double-digit territory. Adjusted EBIT margin for commercial in Q2 declined 1% year-on-year from 5.3% to 4.3%. mainly because of product mix. In exact deviation, we recorded the strongest first semester in terms of revenues and deliveries for the division over the past 10 and 8 years, with 575 million and 45 aircraft. The backlog for the division registered an increase of 300 million in Q2 and ended the period at 4.6 billion, or 8% higher year-over-year, supported by a strong 1.5 to 1 book-to-bill ratio in the first half of 2024. The adjusted EBIT margin for executives improved 2.5%, from 8.8% in the second quarter of 2023 to 11.3% in the second quarter of 2024. helped by higher productivity and despite lower production volumes. In defense and security, revenues in Q2 increased 2.3 times year-on-year, for more than 100 million. The adjusted EBIT margin also improved to minus 0.5% in the second quarter of 2024, from minus 4.1% in the same period of 2023. The delivery of the second C-29 Millennium to the Portuguese Air Force was an important highlight for defense and security in the quarter. The first aircraft entered into service at Beija Air Base in October 2023. In service and support, revenue grew 20% in Q2, compared to the same period of last year. with solid immediate to high things profitability and a gain of 1.3% in the adjusted EBIT margin. The business unit maintained its historical 3.1 billion record backlog widget in Q4-23. Another important achievement for our service and support division was the first flight of the E190 freighter, a passenger to full cargo conversion, which received the certification by the National Civil Aviation Agency of Brazil, ANAC, in July 2024. Last but not least, our eVTOL business reached other important milestones in the second quarter of 2024. The company has now already selected and contracted most of the component suppliers, completed its first full-scale EV12 prototype assembly, and celebrated its rollout in our Gavião Peixoto plant last month. EV also completed a new equity financial round of 96 million from multiple investors. The monies will help support the continued development and manufacturing of its EV toll. Embraer remains confident in EV's business outlook as its majority and controlling shareholder with an 83% equity stake. I will now hand it over to Antonio 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'd like to highlight we had another solid quarter in Q2. Our financial results improved both quarter over quarter and year over year. For instance, revenues for the period were 16% higher than a year ago, and our EBIT margin was 160 basis points higher. Our focus in Q2 continued to be on business and financial efficiencies. We are fully committed to reach our full-year guidance despite all the ongoing supply chain constraints we continue to deal with, which had also negative impact on our year-to-date cash flow. It is important to mention we still see double-digit growth for aircrafts delivered through revenue and EBIT In 2024 and 2025, notwithstanding the operational challenges. Slide 10 delivers. Commercial aviation delivered 19 aircraft in Q2 for an increase of 12% versus a year ago, and almost three times higher than in Q1. Meanwhile, executive aviation delivered 27 jets in Q2, compared to 30 aircrafts in the same quarter of 2023. However, if we look sequentially, the numbers of deliveries grew 50% from Q1 to Q2. In defense, we delivered one C390 Millenium to the Portuguese Air Force in Q2, compared to one KC390 to the Brazilian Air Force one year ago. It is important to mention the aircraft is not included in our delivery guidance for 2024. We continue to work steadfastly to accomplish our production plan and to reach our 2024 guidance of between 125 and 135 executive jets and 72 and 80 commercial aircrafts. We are also on track to deliver for C390 Millennium aircraft's schedule for the year. Slide 11, please. The company registered a seven-year high total backlog of 21.1 billion in Q2, which was marginally higher quarter over quarter and 22% higher than a year ago. The backlog for commercial aviation continued to move higher. It's total more than 380 aircrafts in Q2 and it was valued at 11.3 billion or 200 million higher than last quarter and 3.3 billion above second quarter 23. Meanwhile, the backlog for executive aviation was a solid and resilient 4.6 billion during the period, flat quarter-in-quarter, but up 300 meters year-on-year. Last but not least, the backlog for service and support finished relatively stable at 3.1 billion in Q2, while for defense and security it decreased marginally by 10% to 2.1 billion. Looking forward, our backlog for defense should increase by more than 50% in Q3 with the new contracts, if we factor in the export contracts recently announced for C390 Millennial and Super Tucanos. Moving on to revenues, our top line reached almost 1.5 billion in Q2, or 2%. 200 million higher year over year for 16% growth rate. If you look at the pie chart on the right, we can see a more balanced revenue mix. For instance, commercial aviation represented around 37% of total revenue, followed by service and support, close to 27%, executive aviation with 23%, and defense at around 13%. For the first half of the year, we recorded $2.4 billion in revenue, or almost 40% of the midpoint of the 2024 guidance. Next slide. 12 EBITDA. We generated $190 million in adjusted EBITDA in the second quarter of 2024. with a 12.7% margin compared to 149 million second quarter 2023, driven by strong operating results when compared to the same period last year. One related note, the Brazilian foreign exchange rate has been very volatile in the first half of 2024, and its recent depreciation should provide some tailwind in the second half of the year. We generated 237 million in adjusted EBITDA with 9.9% margin in the first half of 2024 versus 159 million with a 7.9% margin in the prior year period. For a dollar amount, almost 50% higher annually. Meanwhile, adjusted EBITDA was 139 million with a 9.3% adjusted margin. However, they were one-time items in the quarter which propped up the adjusted EBIT margin by circa 250 basis points. Reported EBIT for the quarter was 128 million with an 8.6% margin. Both figures were materially better than their Second quarter, 23, comps supported by better efficiency, lower SG&A costs, especially in executive aviation and service and support. Look in the right chart. We can see executive aviation and service and support generated more than 75% of the company-wide debit during the quarter, while commercial aviation turned balanced 25%, and defense practically broke even in accordance with the percentage of completion accounting methods. On the slide 13, in Q2, if we exclude EVE, we had an adjusted free cash flow consumption of $215 million due to networking capital needs for higher aircraft delivered in the second half of the year. This cash should be recovered as much deliveries take place over the next couple of quarters. Moving to investments, again, without ETH, we spent $49 million in research and development during the quarter, $47 million in CAPEX, and net $11 million in the pool programs for spare parts, for a total of $107 million, compared to $104 million a year ago. Our capital allocation continues to be focused on segments with higher returns, with projects such as expansion for our production capacity in executive aviation and service and support. To finalize, our adjusted net income was positive $80 million for the quarter, supported by a 5.4% adjusted margin, or $22 million higher than a year ago. Slide 14, going to our liability management plan, in second quarter 24, our gross debt without EIF was relatively stable at $2.6 billion during the period. But we still managed to reduce it by circa $880 million when compared to a year ago. Meanwhile, our net debt declined by $152 million. year-on-year and reached 1.3 billion during the quarter. Our net debt-to-BTDA leverage ratio increased 0.2 turns, sequentially to two times, as shown in the top right corner. This measured increase is explained by the seasonality of the cash consumption in preparation for higher deliveries in the second half of the year. We also announced earlier this week an extension for the next five years of our revolving credit facility, and an increase of each size from 650 million to a billion, which will be reflected in our Q3 liquidity position. With that, I conclude my presentation and hand it back to Francisco for his final remarks. Thanks for your attention.