Embraer S.A.

This conference will be held originally in English. To hear the translation in Portuguese, press the button Interpretation of the platform and select the desired language. To improve the quality of the transmission in Portuguese, also click on Disable the original audio on the Zoom platform. My name is Agui Paiva and I'm the head of investor relations and M&A for Embraer. I want to welcome you to our fourth quarter and 2024 full year earnings conference call. The numbers in this presentation contain non-GAAP financial information to help investors reconcile EVE's financial information and GAAP standards to Embraer's IFRS. Remind you, EVE's results will be discussed at the company's conference call in March. 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 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 a listen-only mode. We will give instructions later on for participation in the two Q&A sessions. As a reminder, this conference is being recorded. Participants on today's conference call 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 Q4 and 2024 four-year results. In the second part, we'll host a Q&A session only for investors. And last but definitely not least, in the third part, we'll host a dedicated 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, Hugo. and good morning and good afternoon to all. Welcome to the Embraer Q4 2024 results conference call. Before I start my presentation about 2024, I'm pleased to share with you that ANA All Nippon Airlines purchased 15 E190E2 jets this week, plus options for additional five aircraft. This is the first sale of our E-2 family in Japan. And this E-192 aircraft will join the other 47 E-1 jets which have been successfully operating in the country since 2009. Now come back to 2024. 2024 was a historic year for Embraer with remarkable results that show the company's successful growth path. We reached or exceeded our modified and original 2024 guidance for both financial and operational indicators, showing our capacity to face the challenges still present in the supply chain. We achieved record revenue of 6.4 billion, our highest level in our history. Our focus on sales resulted in all time backlog record of 26.3 billion. We have made further progress in financial deleveraging and our net debt is now close to zero. Embraer now has the accounting conditions to start paying dividends subject to approval by its shareholders. For this year, we are committed to sustainable growth and our 2025 guidance reflects the same successful formula of the past few years, double-digit growth. Talking about sales, we had a remarkable year with positive highlights in all areas and an impressive company-wide 2.2 book-to-bill ratio. We announced our largest order in executive aviation, a 7 billion contract with 182 firm orders and 30 options from FlexJet. The Phenom 300 remained the most delivered light jet for the 13th consecutive year and the most delivered twin engine jet for the fifth consecutive year. The division finished 2024 with a record 7.4 billion backlog and an industry-leading 2.7 book-to-bill ratio. Defense and security ended the year with the best sales performance in its history. In 2024, Austria, Czech Republic, the Netherlands, and an undisclosed client acquired 13 KC390s, Sweden and Slovakia also selected the aircraft. The A290 Super Tucano also did very well and received 29 new orders from Paraguay, Portugal, Uruguay and two undisclosed clients. The backlog rose to 4.2 billion with a record share more than 60% from global clients. The business unit recorded a superb 3.3 book-to-bill ratio. In commercial aviation, we announced a firm contract with American Airlines for 90 E175 aircraft, plus 43 options. In our E2Jet family, we signed contracts with Luxair Mexicana in Virgil, Australia, 30 aircraft, and welcomed Lot Polish with three aircraft via less source. The division finished the year with a 10.2 billion backlog in a strong 1.6 book-to-bill ratio. Service and support also showed solid growth, expanding its own MRO centers in the US and announcing new long-term contracts with FlexJet and several commercial airlines. The division backlog rose to 4.6 billion, a new all-time high, supported by long-term contracts, and the business unit finished the period with a solid 1.9 book-to-bill ratio. The business unit also started inducting engines for repair in our new Pratt & Whitney GTF engines operation at Ogima, Portugal. Supply chain is still an important issue, but we are working very hard to address its related challenges. In 2024, we focused on strategic initiatives to better balance production in 2025 and over the coming years, ensuring more linearity. We have also improved collaboration with our suppliers, reinforced the supply chain area structure, digitized processes, and invested in AI tools to anticipate potential issues to monitor and manage activities in real time. I will now move on the operational results by segment over the next few slides. In commercial aviation, revenues increased 20% in 2024. The adjusted EBIT for the full year was 55 million, or 182% higher than in 2023, supported by 2.5% EBIT margin driven by customer mix and operating leverage. In executive aviation, revenues expanded 25% in 2024. The division adjusted EBIT reached 205 million, or 62% higher than in 2023, helped by an 11.7% EBIT margin because of operating leverage. In defense and security, top line grew 40% in 2024. The adjusted EBIT was 45 million, or 57% higher than in 2023, supported by a 6.2% EBIT margin because of KC29 customer mix and higher A29 volumes. Moving now to service and support, revenues increased 15% in 2024. The adjusted EBIT reached 270 million, or 25% higher than in 2023, driven by a 16.5% EBIT margin supported by higher volumes in the division. Finally, EV continues to make progress with its EVTOL development and testing phase. In 2024, it achieved important program milestones as the final assembly of its first full-scale prototype, which is currently being evaluated during the ground testing campaign and is scheduled to make the first flight in 2025. 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. Good morning and good afternoon to everyone. The remarkable results Francisco just presented are also reflected in our financial numbers, which show sustainable and solid growth in all key Q4 indicators. Let's now move it to slide 11 and start with delivers. Embraer delivered 75 aircrafts in the last quarter, equal to the number in the same period of the previous year. Meanwhile, the company delivered a total of 206 aircrafts in 2024, including three KC 390 Millennium, a 14% increase compared to 181 aircrafts in 2023. Executive Aviation delivered 44 jets in Q4, and a total of 130 for the year, at the midpoint of the regional guidance for 2024. And at 14 year high, the meat and super meat category represent half of the segment deliveries during the quarter, supported by the solid trust forward of our operator family. It is important to highlight the progress observed in the company's production level initiative. We managed to reduce the share of Q4 deliveries in the year by 10% points 2024 versus 2023. Meanwhile, commercial aviation delivered 31 aircrafts in the last quarter of 2024 and 73 in the year. at the ceiling of our revised estimates of 70 to 73, and still within the original estimates of 72 to 80 for the period. For the year, our A2 family represented 65% of deliveries, and we won the balance of 35%. In slide 12, as already mentioned by Francisco, our backlog expanded more than 40% year-on-year in Q4. Giving more details, the backlog for executive aviation increased 70% year-on-year, supported by the contract with FlexJet. The backlog for service and support soared more than 65%, while for defense and security increased 50%, supported by new orders from KC-390 Millennium and A-29 Super Tucano. The backlog for commercial aviation increased a solid 15% year-on-year. Move on to revenues. We had a 17% increase year-on-year in Q4 to more than 2.3 billion. Our top line of 6.4 billion in 2024 rated the high end of our guidance and an increase more than 20% when compared to 2023. All business performed well throughout the year, especially defense and security and executive aviation, whose revenues increased 40% and 25% year on year, respectively. Together, these two segments represent more than 40% of the company's total revenue in 2024. Next slide, please. We generated $328 million in adjusted EBITDA in Q4 with a 14% margin and $922 million in the year. I remind you there is the Boeing arbitration impact of $150 million in the results of the year. That increased the margins around 230 basis points from 12.1 to 14.4. Moving to the next slide, adjusted EBIT for the quarter was $265 million with an 11.5% margin. For the year, we generated 780 million with an 11.1% margin. surpassing the upper end of our previously revised up 10% guidance for 2024. If you look at the results for the year ex-Boeing Agreement, the EBIT mark improved 210 basis points year on year, from 6.6 to 80.7%, supported by high profitability in all business units, driven by efficiency and operating leverage. On to slide 15 now, please. In Q4, we generated $996 million in adjusted free cash flow because of higher numbers of aircraft delivers and strong performance in sales, including significant advance in customer payments in defense, which is going to negatively impact 2025. For 2024, we generated $676 million in adjusted free cash flow and a still strong $540 million without Boeing. helped by significant defense repayments compared to 318 million in 2023. We did better than our 300 million or more guidance because of the improvement in our working capital. Moving to investments, without ETH, We spent $64 million in research and development during the quarter, $56 million in CAPEX, and a net of $10 million in the pool program for a total of $130 million in Q4 compared to $142 million a year ago. On a yearly basis, Embraer Standalone invested a total of $428 million in 2024 compared to $440 million in 2023. or capital location continues to be geared towards segments with higher returns, such as executive aviation services support, mainly in US. We continue to see our capex run rate at close to 400 million per year in the near future. Slide 16. Our adjusted net income was positive 173 million for the quarter, supported by a 7.5% adjusted margin. Meanwhile, we ended the year with 462 million in adjusted net income for an adjusted margin of 7.2%. If you exclude the Boeing agreement, our adjusted net income was $363 million for a 5.7% margin compared to $80 million and 1.5% margin a year ago. Slide 17, please. I'd like to start highlighting the top right corner of this slide. Embraer finished 2024 with a net debit position without ETH of only $111 million. and 0.1 times net debit to EBITDA ratio compared to 781 million and 1.4 times at the end of 2023 for a significant year on year decrease. Last year, I mentioned we were taking all necessary steps to recover investment grade status. I'm happy to announce in 2024, we became investment grade by all three main rating agencies. And we see room for additional potential improvements in our ratings in 2025 and 2026. As part of our liability management plan, we are focused on generating cash, extending the duration, and reduce the cost of our debt. Last month, we successfully issued a new bond of $650 million set to mature in 2035. This issuance is intended to be leverage-neutral. as we plan to retire 522 million in debt set to mature in 2027 and 150 million in 28. As a result of this transaction, our debt duration for 2024 has increased from 3.8 years to over 6.5 years, which will be effective in the first quarter of 2025. And to conclude my presentation, let me go over the details of our 2025 guidance. In terms of operation, we forecast commercial aviation should deliver between 77 and 85 aircrafts. For an increase of 10% year on year, use the midpoint of the range. Meanwhile, for executive aviation, We forecast 145 to 155 jets for an increase of 15% year on year. If we move to financials, we estimate top line to settle between $7 to $7.5 billion, with the midpoint of the range 13% higher than what we generated last year. We forecast EBIT margin between seven and a half and 8.3% for the year, which would imply around 575 million at the midpoint of the range and 10% higher than adjusted 520 million EBIT X Boeing and X positive V items generated in 2024. Finally, if you move to free cash flow generation, we estimate 200 million or higher for the year. Remember, our goal is to convert 50% of our EBITDA in free cash flow. It is important to highlight, it's difficult to predict the dynamic and timing of prepayments, mainly in defense business. For instance, we received a sizable pre-down payment in Q4, which had originally expected for 2025. Thus, If we look 2024 and 2025 together, we should generate $875 million or more in free cash flow, which is 50% of circa 1.75 billion implied EBITDA by our 2024 ECTOs and our 2025 guidance. We will update or reiterate our 2025 guidance on a quarterly basis as the years goes by. With that, I conclude my presentation, hand it back to Francisco for his final remarks. Thank you very much.