Embraer S.A.

My name is Gui Paiva, and I'm the head of investor relations and M&A for Embraer. I want to welcome you to our first quarter earnings conference call of 2025. The numbers in this presentation contain non-GAAP financial information to help investors reconcile EVE's financial information in GAAP standards to Embraer's IFRS. We remind you EVE's results will be discussed at the company's conference call. It is important to mention that our own 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 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 Mobiliários, or CVM. At this time, all participants are in a listen-only mode. We'll give you 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 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 Q1 results. In the second part, we will host a Q&A session only for investors. And last, but definitely not least, in the third part, we will 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, Yugi. Good morning. and good afternoon to all. Welcome to Embraer's first quarter 2025 results conference call. We delivered the highest first quarter revenue of the past nine years at a significant 1.1 billion. We also registered the highest first quarter adjusted EBITDA margin of the past five years at almost 10%. Embraer ended the period with a 26.4 billion backlog, marginally higher than the previous all-time record printed in the last quarter. Aircraft deliveries were up almost 30% higher year on year, evidence of our continuous focus on operational efficiency. Embraer will, from now onwards, resume payment regular dividends and interest on equity for its shareholders. To conclude this part, we reiterate our 2025 guidance, which implies double-digit growth in our aircraft deliveries and revenue growth. Let's go over the main highlights for the company during the quarter. Executive Aviation delivered a solid performance reflected in sales, deliveries and backlog. The division also reached the highest first quarter revenue since 2014, in a record backlog of 7.6 billion. In defense and security, Sweden and Slovakia confirmed the selection of the KC-390 Millenium, while Uruguay converted its A-29 Super Tucano options into firm orders, and Panama selected the aircraft. The division ended the quarter with a stable 4.2 billion backlog. In commercial aviation, the Japanese ANA placed an order for 15 E190E2 that should be included in the 10 billion division backlog in the second half of the year. The E195E2 from Helvetic Airways became the largest jet flying to London City Airport ever. Service and support kept its solid growth pace with the start of the next industrialization stage of the prior to it an engine shop at Ogima in Portugal. The division backlog remained stable at 4.6 billion. Embraer has been working on a production leveling plan since 2023. Our main objective is to create stability and have a more linear production pace throughout the year. The plan will allow us to increase efficiency, productivity and improve cash flow. This year, we have already seen the first results of the project and from 2026 onwards, we can expect a more stable production over the year. We also continue to work very close with our suppliers to support our more linear production plan. We can see improvements in several operational KPIs for all our family of products, such as an increase in aircraft production, a reduction of travel work, reduction in assembling cycle, and increase in productivity. Here, for instance, we share improvements in the Praetor production line. Let now touch upon a topic we have all dealt with over the past two months, U.S. tariffs. First of all, it is important to highlight first quarter results were not impacted by them. Second, our initial analysis points towards limited impact, so we remain confident and reiterate our 2025 guidance. Third, Embraer has a substantial amount of U.S. content in its aircraft, which mitigates partially our exposure. And last, and more importantly, we are working on initiatives to minimize the impact of U.S. tariffs on our business. We have argued for zero tariffs to globalize the aerospace production chain, as it has been the case for many decades. I will now move on to operational results by segment over the next few slides. All figures are based on year-on-year comps. In commercial aviation, revenues were stable, and we noticed a relevant improvement in the adjusted EBIT margin, driven by product and customer mix. In executive aviation, revenues expanded 35% because of higher volumes and product mix. The adjusted EBIT margin increased because of operating leverage and cost containment initiatives. In defense and security, top line grew 72% because of stronger KC390 revenues recognition, customer mix, and product stage. The better adjusted EBIT margin was driven by higher volumes, lower expenses, and negative extraordinary items a year ago. Moving to services and support, revenues increased 16%, mainly because of the Ogma GTF ramp-up. The adjusted EBIT margin decreased because of product mix and the start of North America's active Monroe ramp-up. partially compensated for positive one-time items. Finally, 2025 could be a decisive year for EVE, as the company should complete the first flight of its full-scale prototype and should receive its first firm orders, opening a brand new path of long-term growth. I will now hand it over to Antonio to give you further details about the financial results. And then I will be back with the closing remarks.

Thank you, Francisco. Good morning and good afternoon to everyone. I will present now our first quarter financial results. And all of my comments will be based on year-on-year comps and less noted. Let's move to slide 13 and start with deliveries. Embraer delivered 30 aircrafts in commercial and executive aviation combined during the quarter are 20% higher. In executive aviation, the levers were 23 guts, of which 14 were in the light segment and 9 in the mid-size one. The numbers of delivery was 28% higher and, more important, 15% of the midpoint of the company's full year guidance. Moderately above 11%, first quarter average for the past five years. In commercial aviation, deliveries were seven aircrafts, the same number as last year, and represented 9% of the midpoint of the company's full year guidance. I should highlight, we were unable to deliver two additional aircrafts during the quarter because of commercial issues. In slide 14, our backlog reached at all-new all-time high, 26.4 billion, marginally up and sequentially and 25% higher versus a year ago. Talking about each division, the backlog for defense and security soared 73%. while for executive aviation increased more than 65%, supported by new KC-390 Millennium and 829 Super Tucano sails and the marquee contract with FlexJet, respectively. The backlog for substance support increased almost 50%, while for commercial aviation decreased 10%. However, it is important to remember The ANA order has not been yet included in our numbers. Moving on to revenues, our top line reached $1.1 billion in the first quarter. The best first quarter results of the past nine years and 22% higher. Our service and support in the executive aviation divisions together represented almost 70% of the company's total revenue in the quarter. Moving to slide 15, we generated 109 million in adjusted EBITDA in the first quarter with a 9.8% margin. Now, adjusted EBIT for the quarter was 62 million with a 5.6% margin. A significant increase compared to the previous 7 million and 0.8% margin marks from last year. This is great results was supported by executive aviation higher volumes, which ties back to Francisco comments about production leveling, product mixing, lower costs and expenses. A quick word on US tariffs and their potential impact. Our initial estimate is that could negatively impact our EBIT margin by 90 basis points for 2025. However, the company is taking several steps to mitigate these effects, like additional cost reduction measures. And for now, we remain confident we can deliver our guidance 2025. Now let's move to the next slide, 16. In first quarter, we consumed 386 million in adjusted free cash flow because of high working capital needs, mainly in inventory, in preparation for higher numbers of aircraft delivers in the next three quarters. Moving to investments, it is important to highlight Our capital allocation remains focused on segments with high return, such as executive aviation and service and support, mainly in the U.S. First quarter, without EVE, we allocated $38 million for research and development, of which $11 million were expensives. We invested another $37 million in CAPEX and $30 million in the pool program to support the new contracts, totaling $88 million for the quarter. To finish this slide, let's talk about our adjusted net results. We ended the quarter with a negative $74 million for an adjusted minus 6.7% margin compared to $30 million comp. However, reported net income was positive 73 million for a 6.7% margin positive. If we consider 124 million in deferred taxes because of stronger Brazilian foreign exchange rate and 23 million from ETH results. Slide 17, please. As always, I would like to start this slide by highlighting the top right corner. Remember where? was able to reduce both its net and gross debt positions. Without it, by $508 million, it took $680 million over the past 12 months. Thus, the company was able to lower its net debt to a BTDA from 1.8 times to 0.5 times during the period. The negative $285 million free cash flow generation for embedded standalone during the quarter helps to explain the recent increase in financial leverage. As I mentioned on the last call, as part of our liability management plan, we are focused on extending the duration and reduce the cost of our debt. In our most recent liability management step, we issued a 650 million 10 years bond at 158 basis points over U.S. Treasury in Q1. And we repurchased 522 million in 2027 bonds, fully retired, and 150 million in 2028 bonds. With the deal, we extended our debt duration to 6.3 years. compared to 3.8 years in Q4 last year. Slide 18, and to conclude my part, let me talk about shareholder remuneration. For the fiscal year 2024, we approved 51 million reais in dividends, or 7 Brazilian cents per share, to be paid on May 23 to M3 holders. ERJ holders should receive the monies in a few days later. But you can find more information with our U.S. Depository Bank soon. For the fiscal year 2025 and beyond, the company intends to analyze the potential fiscal benefits from these interest and equity declarations. This value will be added with, if required, a top-up dividend to comply with the minimum 25% of net income payments established by the Brazilian corporate law. The company will then pay this money in a single payment after shareholders meeting in the next year. With that, let me stop here and I hand it back to Francisco for his final remarks. Thank you very much.

Thank you, Antonio. The first quarter was marked by significantly stronger results, which provides us with a solid outlook ahead for sustainable growth. In 2025, we started to see the first material results of our production leveling initiatives. We will continue to take steps to make the most of our installed capacity to achieve even higher output, optimizing the use of our assets. And we'll keep focused on sales in all business units to guarantee our successful growth trajectory. Let me now take the opportunity to say domo arigato and yokoso to ANA, as it becomes the first E2 operator in Japan. To finish, U.S. tariffs so far should have limited impact on our company. And we join other companies in calling the return of zero-tariff policy for the aviation sector. as has been the case for several decades, reducing complexity and costs for a highly globalized industry. We continue to work hard, always embracing the foundation of our culture, safety first and quality always. Let's now move to the Q&A session of the call.

Please hold for the Q&A session. We will now start the Q&A session. The first part of the question and answer session will be exclusively for equity research analysts and investors. The second part of the Q&A will be only for the press. We highlight again this conference call is being conducted in English with translation to Portuguese. Please let me say a short announcement for Portuguese speakers. Essa conferência está sendo realizada originalmente em inglês. To hear the translation in Portuguese, press the Interpretation button of the Zoom platform and select the Portuguese language. After selecting the language in the Interpretation button, also click on Disable the original audio on the platform to improve the quality of the transmission in Portuguese. We request participants interested in asking questions to press star then 9 in the phone at any time or press the raise the hand button on the platform. When your name is announced, please press star then 6 on the phone or make sure your microphone is on and start your question. We will also answer questions sent via the platform chat. If you need assistance, please use the Q&A button on the platform. To give everyone a chance to participate, we request just one question per call. The first question comes from Marcelo Mota with JP Morgan. Please go ahead. Please hold a second.

Perfect. Hi, everyone. Thanks for taking my question. The first one is on the commercial. If the company can comment about what they mentioned on the release, you know, the potential one-time impact from supplier credit, if they could try to quantify what was the impact, please. Thank you.

By the way, it was 30 basis points, Marcelo, sorry. Or three percent, zero, three percentage points of 30 basis points. Sorry for that.

Thank you, Antonio.

Thank you.

Thank you. The next question is from Miles Walton with Wolf. Please go ahead.

Thanks. Good morning. I was hoping on the tariff front, you could give a little bit more color. I think the 90 basis points is probably related to your cost within executives, but maybe Francisco or Antonio, is there any hesitation on US Airlines accepting the 175s in the near term, given the tariff on imports? Are they choosing to maybe wait a little bit longer to see if they're negotiated away? Thanks.

Thanks, Michael. It was a great question, and we still don't know everything. That's why we set our first estimate. I would say we have, as you know, impacting our executive aviation at first place, and then also in our service division. And at least we have already the first circuit being taken in Brazil. and the U.S. customer is bearing the cost for the tariffs. In fact, what you are pursuing is who is responsible for the importation process, bearing the cost of tariffs. We do not have, at least today, a setback on commercial, but it's too early to confirm a hundred percent okay but i'd say if i would split the 90 base point is uh highly concentration concentrating you in the u executive aviation and service and support and we as a company who has a lot of u.s content in our aircrafts We always deduct the U.S. quantity in order to, I would say, pay the taxes. That's why we are still confident we could continue to run our business here, even with this bad negative impact. Francisco, you want to complement maybe? No, that's enough. I hope I answered your question, Miles.

That's perfect. Thanks, Antonio.

Thank you.

The next question is from Christine Liwak with Morgan Stanley.

Please go ahead. Hey, good morning, everyone. Francisco, Antonio, and Guy. I mean, first of all, congratulations on the record high company backlog, but the market always wants more orders. So with that, I mean, on the KC390, can you provide an update on where you are with India, Saudi Arabia, and Poland? And also, we've seen bundling as very successful in aerospace. We've seen this with Airbus. and their success was selling the A220 with the A320. Can you talk about bundling opportunities for the KC390 and the E2s?

Hello, Christine. Thanks for the question. Well, you're bringing a good idea. It might be an opportunity. But anyway, we are working in several campaigns for both for KC390 And E-Tools, the India project is moving. We are talking to the customer. We are getting more questions about the product. And we are working the next steps. We expect to have some more improvements within the next one, two years in India. But India is a big program, as you know. from 40 to, opportunity from 40 to 80 aircraft. We are also working in other campaigns with the C-390, other customers that we cannot disclosure at this point of time, but we expect some results during the year as well. E2, we are, E2 is not different. We are working in several campaigns. Yeah, competition is not easy in both sides, you know, with the KC or the E-Tools, but we believe we have good chances in many campaigns. So also in commercial aviation, we expect to bring some good news during the year.

Francisco, just to complement, for the KC, what we are seeing is that some, especially the NATO countries, they are using the same contract, which makes the procurement process much faster than before.

Yeah, but bundling between KC and E2, we don't have any example yet. Not yet.

Not yet. So that sounds very optimistic. So we hope to see that kind of bundling soon.

Well, I mean, it's not a bundling, but in case of Poland, as you brought Poland as an example, we said, well, if we are working the two fronts, opportunities with the tools in Poland, you know that and with a lot Polish and Casey as well. And if we succeed in both, we can bring a lot of a lot of initiatives, a lot of products and service to be done in Poland. This is a kind of not a bundling direct bundling, but the opportunity for the country.

Super helpful. And if I could add a second question, the geopolitical environment today, even with the U.S. tariff discussions, right, it shows that we're kind of recentering back into regional powers. And there's a reminder that, look, you know, the larger aircraft transport industry is still a duopoly, you know, Boeing and Airbus. And so at this point, when you talk to different customers, are there differences? How has the conversation regarding a larger Embraer aircraft evolved in the past few months and you know i know francisco antonio you guys have talked about this over the years and you know there's been varying concerns and opportunities but but how has that conversation evolved today because strategically historically uh boeing was the tip of the trade spear for the us and all this tariff stuff is a reminder that you know this isn't that important exporting industry for the us but for the other countries that don't have aerospace this is a strategic weakness in their industries. So how should we think about this opportunity? Where is the most recent thinking about this program and how has that evolved in this dynamic environment?

Well, Cristine, this is also a good question, not easy to answer specifically. But yes, I mean, customers, they have asked us about our plans to go bigger. Uh, actually we are very focused on selling the tools and we are working in new working and investing in new technologies to be prepared for a new products in the future. That can be, you know, a bigger executive jet or a bigger commercial jet, or even in defense. So we are making studies in all fronts. We don't have a decision. But what we're doing in a concrete way is investing in new technologies, you know, technology about more autonomous flights, technology about fuselage, new fuselage, new wings, cockpit, and so on. That's what we are doing. But we don't have any concrete decision to go this way or that way.

Great. Thank you.

You're welcome, Cristine.

The next question comes from the telephone number ending 7519. Please go ahead.

Good morning. Steve Trent from Citi, and thanks very much for taking my questions, Francisco, Antonio, Luis, and Guy. I was curious, in terms of the supply chain, I believe last time You mentioned, for example, that the fasteners for the aircraft was kind of a bit of a bothersome area. And I'm wondering if that's improved a little bit or if the pressure point maybe has shifted over to another area of the supply. Thank you.

Thank you. Thank you for your question. Two years ago, we had put in place a more structure, a new structure in our supply chain area, you know, to deal with this all supply chain issues. So, in general, we have seen improvements, but the bottlenecks are moving from one product to another. But even then, we are progressing as a, I mentioned in my opening, we are progressing in bringing the parts we need to level our production, which is our main target at the end of the day. We still have some issues, more with fuselage parts that we are still struggling. This year, some types of engines that are still delaying to deliver the parts on time to us. But I think we are working very close to the suppliers. And at this point of time, we don't see big issues to delivery our guidance. That's why we are reaffirming our guidance in terms of deliveries between 7 to 785 commercial jets and 145 to 155 executive jets. So again, bottlenecks are still there, moving from one part to another. But with the structure we have put in place, we have been able to manage. these issues and keep our production running as planned.

Okay, really appreciate it. And I'll stick to your request of just one question. Thank you, James.

You're welcome. Thanks, Steve.

The next question comes from Andrea Ferreira with Bradesco PPI. Please go ahead.

Hi, good morning. I have a question, but first I just wanted to clarify the first answer because I think there was some technical issues with the call. Is it 0.3 percentage points in the commercial EBIT margin or the consolidated EBIT margin? But my real question is actually about the past two reversals in the service margins. How much was the impact of this in the service EBIT margin or in the consolidated EBIT margin? Thank you.

Andres Antony speaking here. The 3% was just supplier credits for the quarter inside the commercial aviation. Okay. And I would say we went on average for service and support around 15%. We report a little bit lower. But for us, it was five base points or 50 base points less than average, I would say. But in our view, it's just a temporary effect that will be compensated throughout the years. was really something that's mixed, as Francisco said, on time effects with customers and this and this and this. I would say put it all together, we perform 5% less ABAT margin in the quarter, but we are not seeing, we are not worried about the whole year, just to make it clear. For sure, we have an impact on consolidation, But I would say we are talking about the last $20 million that would bring us even to a higher margin, almost 6.5% to 7%. It was the effect on the consolidated basis, more or less.

OK. So the commercial is?

Commercial is 3% for the quarter only.

OK. All right. Thank you.

You're welcome.

The next question comes from Jordan Leone with Bank of America. Please go ahead.

Mr. Leone?

Hi, sorry, can you hear me now? Yes, yes, we can. Great. Good morning. Thank you for taking the question. Could you guys talk about how you're thinking about the Pratt strike and any impact or how you're managing through that for services or for actual engine deliveries?

This strike at Pratt, Wheaton, and Francisco, we talked today.

Well, I mean, actually, Jordan, we are still try to get more information about this. And at this point of time, we don't have enough information to measure potential impact in our business.

Got it. Okay. Thank you so much. Thank you, Jordan.

Thank you. The next question comes from Lucas Macchiotti. with BTG Pactual. Please go ahead.

Thanks, guys. Thanks for the call. Good morning. My question is more on coming back to the topic of U.S. tariffs, if you could provide some clarity on some of these initiatives you guys mentioned you have on mitigating the impacts. I'm assuming there's at least some impacts, right, coming especially from executives, maybe commercial. So what's the workaround plan around there? I mean, if it Maybe you are relocating production to some other facilities outside of Brazil or maybe passing through prices. How does your contracts work with this changing law environment? I mean, just kind of giving some color on the measures to mitigate tariffs. It would be nice, guys. Thanks.

Lucas, good morning. It's Antonio speaking here. Let's walk through a little bit the story. When we set the guidance for 2025, I remember some of you said, Antonio, it seems too modest, the guidance you guys are placing. And we said at the time, we see a lot of volatility. At one point, we were first seeing some volatility. I would say I was more in the idea of inflation than tariffs, but you have the tariffs in front of your nose. And I would say we have two options. Either we stop and start to bleeding or we do something against it. And since the beginning of the year, the company already decided to wait and see what's going to happen, don't do crazy things, don't invest further, don't grow the capacity without having a clear vision. I would say, if you put all together, we are talking about costs, internal cost measures, and our planning, that we were already foreseeing, I would say, this type of stability. That's one point. And the other point is how to measure How to manage the tires impact because just to give an example, Brazil has to pay 10%. But if you take out to the U. S content as a temporary protection, that's most. Depends on the aircraft between 6 and 5 or 6 and a half depends on the aircraft. You know, that's more or less if you put all together. That's the number we comment to all of you 19 basis point. You are able to market for the next 3 quarters. Okay. Not a near effect and we are not waiting as a Brazilian company. We had crisis every year and. We need to to be able to to find a way to compensate, but. don't know all effects that's a very premature effect that we are seeing right now uh that's why i would say if you see something different in q2 or q3 we are going to place new numbers but at least today in your view we are confident to keep the margin francisco you want to comment anything else nothing from my side i hope answer your question lucas it does thanks guys have a good day

Thank you. Thank you as well.

The next question comes from Danielle Gasparetti with Itaú PBA. Please go ahead. Mr. Gaspareti, you're muted. We cannot hear you.

Sorry. Thank you very much. Can you hear me right now?

Yes.

Thank you very much. So, guys, thank you very much for the opportunity. My first question would be related to the suspension of point deliveries in China. I would like to get your view. If there's any kind of opportunity arising for you guys coming from that region, that would be the first question. And the second one would be related to the comment that Antonio did related to the cost reduction initiatives on the executive side. I would just like to explore more about it, if it was already considered in your guidance, and how do you see that playing along during the rest of the year? Thank you very much.

Thank you, Daniel. I will start with China, and Antonio will help with the cost reduction that he mentioned before. Well, things in China for us, I mean, have not changed. Both of our aircraft, E190 and E195, are certified by the Chinese authority. And we have been working with potential customers in China to introduce our new generation of E2 that, in our opinion, they do not compete with the Chinese aircraft. We go just in the middle. Recently, we delivered two aircraft to HONU, a Mongolian company, and they will fly to important Chinese cities. They will showcase how they do first time in China, and they will see how nice, how good, and how efficient is our aircraft. So again, nothing new at this point of time. We continue working in opportunities to introduce our E-2 jets in China.

So just to make it clear, the biggest impact on tariffs is related to executive aviation. And we as a company, we are one company with four divisions. And as a one team, when we have an issue, we all reduce cost. It's not only related to executive aviation. We implement additional cost reduction measures in order to try to reduce offset part of this cost increase driven by tariffs. That's the, you could take all possible measures. You just see the RAS DNA cost already Q1 was much lower than previous year. It's more or less what you are doing in order to absorb and try to find a way to not jeopardize our numbers.

Great. Thank you very much, Francisco, Antonio.

Have a nice day.

The next question comes from Lucas Laghi with XP Investments. Please go ahead.

Good morning, everyone. Good morning, Francisco, Antonio, Gui. I'd like to follow up on potential new order announcements, especially on the C390. I mean, we have been seeing several efforts from Embraer to sell the aircraft in the United States, right? I think you're guys in the third conference in the country to showcase the aircraft. Could you please remind us the strategy that you guys are planning to enter this market? I mean, do you plan to sign new partnerships such as the previous one with L3Harris, for example? Do you plan to build a production facility in the US to produce the C390 there? And how do you see Trump tariffs in this context for a decision rational to enter this market in a more significant pace going forward? Thank you, guys.

Thank you, Lucas, for your question. Yes, absolutely. I mean, besides India that I mentioned before, we see U.S. as a great opportunity for the KC390. And, you know, recently, last week, the Well, we have one C390 in the US right now. Last week, the aircraft was showcasing in Las Vegas in an event there. So we are now presenting, we participate in an important panel in that event. We are presenting the C390 as a good alternative for a tanker. but also as a multi-mission aircraft that can revolutionize the U.S. Air Force in terms of productivity. This week, the aircraft went to Tampa, and next, this Friday, the aircraft will be in Washington, also to showcase the product. So again, and we are working, yes, with with a consultant in the US to finalize our strategy on how to approach the market. And to answer your last question, yes, with a sizable order, the KC-390 will be assembled in the US. The aircraft has already, Lucas, 57% of US content. And with an important order, if you secure an order from U.S. Air Force, yes, these aircrafts will be assembled in the U.S., absolutely. So again, we see a great opportunity for us and for the U.S. Air Force as well by introducing the KC-319 in its fleet.

Thank you, Francisco. Very clear.

You are welcome. Thank you for the question, Lucas.

Thank you. This concludes the question and answer session for equity research analysts and investors. Now, we'll start the Q&A session dedicated to the press. First, we'll answer questions in English, and then we'll answer questions in Portuguese. We'll also answer questions sent via the platform chat. Please let me say a short announcement for Portuguese speakers. This conference is being held originally in English. We ask participants interested in asking questions to press the raise a hand button on the platform. When your name is announced, please make sure your microphone is on and start your question. If you need assistance, please use the Q&A button on the platform. To give everyone a chance to participate, we request to ask just one question. The first question comes from Christian Favaro with Valor Econômico. Please go ahead.

Guys, it's just a follow-up question. Antonio, I think you mentioned that during the first quarter, the company was not capable of delivering two aircrafts in the commercial segment due to commercial issues. Can you clarify what happened? Just that one, I'm curious actually. Thank you very much.

Yes, Christian. Good morning.

Sometimes you have pending contractual issues. Sometimes you don't have the documentation. Switching to Portuguese now.

Finish or do not have all paperwork in order to deliver the aircraft towards the customer or the lessors. And that's why sometimes take one or two weeks, then we ship the aircraft. It just was a tiny matter for two aircrafts. But in regards to output, which is really important for us we were able to finish those aircraft but the commercial uh invoicing and contact to the customer took uh two weeks more than we were expecting just that not a big issue but it's just bureaucracy sometimes does not help us no no okay thank you very much questions have been answered by the islands thank you thank you christian thank you

The next question comes from Jonathan Hammerdinger with Flight Global. Please go ahead.

Hello there. I think you can hear me. Francisco, we've heard in the last several months, maybe it was last year, that Embraer was taking its time and trying to figure out new technology before moving forward with new development plans. You also... sort of discussed or rolled out or talked about a new wing project, wing development project earlier this year. And Boeing has said they're studying a new wing and Airbus is also. I'm wondering if you can give me any update on what development is looking like, what technologies look most promising, and if wing work is maybe central or increasingly central to what you're looking at. Thank you.

Oh, Jonathan, thank you for your question. I mean, as I said before, our engineering team is working in the different technologies in different fronts, in order to allow us to decide about a new product in the future, right? At this point of time, we are really focused on selling the aircraft we have that are modern and uh and competitive and we see a lot of opportunities and we have the the highest backlog ever of orders in the in the company and there's no no other progress that i have to report to you in terms of wings or or fuselage and other parts we are we are just working investing in those new technologies you know, to, as I said before, to be prepared to make a decision in a point of time in the future.

Thank you very much. Oh, I think follow up or no, maybe I'll pass it along. I think you said one question. So thank you.

Thank you, Jonathan.

Thank you. The next question comes from Gabriel Araújo with Embraer. Please go ahead. Mr. Araújo, you are muted. Mr. Araujo, apparently he has left. So the next question comes from the chat, and it's from Victoria Moores. Can you give us an idea of what we might expect from Embraer Commercial Aviation at the Paris Air Show?

Good question. It's too soon for us to disclosure what we're going to do in the airshow. We are preparing ourselves for the show as we do every year, but we don't have any news to share with you at this point of time.

Thank you. Please hold a second. The next question comes from Jonathan Hammer here with Flight Global. Please go ahead.

Well, I'm back. I raised my hand again. Francisco or the rest of the team, can you tell me or give us any update on the state of the GTF engine issues, the availability of the engines and your your happiness or how you feel about how Pratt has been handling the issues as of late and supplying parts and equipment as needed.

Thanks for the question, Jonathan. Well, we have been working, I mean, very, very close with Pratt & Whitney for, you know, for the last two or three years. And we see improvements. in both fronts in the engine deliveries to our assembly lines. This year, I hope this strike will not disturb this process, but so far they are doing well in terms of GTF deliveries. And also the new engines we are receiving, I mean, are coming with a lot of improvements already, which will help a lot the wings to stay longer under the wings. So again, I think they are improving and yes, we are happy with the development. Yes, we'd like them to do even faster, but we understand all the complexity of the issues and we see improvement and have been working very close to them. Even myself, I meet with them three times a year, three, four times a year, just to discuss all the critical points related to deliveries, related to field issues, related to MROs, et cetera. But we have seen progress, Jonathan.

Thank you, Francisco.

Thank you. The next question comes from Gabriel Araujo with Reuters. Please go ahead.

Hey folks, good morning. Sorry about my failed attempt earlier to make a question. Hi Francisco and Antonio. I'd like to ask about the Latin American market, if you have any updates on this specific market. We know you had conversations in the past with Gol, Latam about introducing the E2s in Brazil for those companies in addition to Azul. About the Mexican market, you have deliveries coming up for the ECU in Mexico. I'd like to know if you see room for the C392 to also enter that country in the future, and if the ECU negotiations and the purchase by Mexicana would help the C390 net market. Thank you.

Hi, Gabriel. Thanks for the question. In Latin America, starting with Brazil, I mean, we don't have any news to share with you. We have been in contact with potential customers going Latin, but we don't have any progress to report to you at this point of time. And Azul is our customer. We keep delivering E2s to Azul, which helps with the showcasing, the showcase with the aircraft in Brazil, in the region. Mexico, we are working hard to deliver the first United to Mexicana by end of July. The aircraft is already in our final assembly line, and this will be also a great opportunity to showcase the aircraft, not only in Mexico, because we have other potential customers in Mexico for that aircraft, but also in North America, right? Then we have Porter in the north, of North America and we have Mexicana in the south of North America. Well, Mexico is another potential customer for the C390, but we don't have any combination between the E2 or C390 for that market. We are working in both fronts in Mexico. In Mexicana, now we are delivering the aircraft already, and we will do the best we can to make the Mexicana operation a great success, which will be very important for our E2. In the C390, the same. We are working with them with an opportunity to introduce the C390 in Mexico as well.

That's great, Danny.

Thank you. This concludes the question and answer session in English for the press. This Q&A section is going to be conducted in Portuguese. To switch to English, please press the interpretation button on the platform and then select English. Now, we are going to start the question and answer session in Portuguese. We ask the journalists interested in asking questions to press at any time the raise hand button and when they have their name announced, activate their microphone and ask your question. We will also answer the questions sent, the written questions sent through the platform chat. Se houver necessidade de assistência, por favor, solicite via botão Q&A na plataforma. Para que todos tenham a chance de participar, pedimos que façam apenas uma pergunta por vez. A primeira pergunta vem do chat e é do Ricardo Meier.

First question from Ricardo Meier from the Airway site. Could you please talk about the recent decisions from Airbus to... postpone the development of hydrogen-powered aircraft and also Boeing and NASA to do more research on the PVW as opposed to an X-66 prototype? Would that be an indication that this new generation of commercial aircraft will be more conventional than expected? Does Embraer agree Does Embraer agree that any commercial jet could be a development and not a revolution from now on?

Thanks for your question, Ricardo.

This is Francisco. Apologies, but we won't comment on decisions made by Boeing and Airbus. Those are their decisions. I can only speak for Embraer. As I've said previously in my previous answers, Embraer has been investing in new technologies, in fuselage, wings, cockpits, and because we want to be ready to launch new products in the future, whether it be executive jets, commercial or defense aircraft. That's what I can share with you for the time being. Thank you. Next question is also from the chat by Nelson Juring from DefesaNet. What is the scope of the agreement signed with Turkey at the last LAAD in April? Does it include any military developments? Thanks for the question, Nelson. The scope of that MOU we signed with Turkey Turkey at LAAD is for technological cooperation to develop parts jointly. Our intention is to expand our production capacity of E2 aircraft, and Turkey has a highly developed aeronautical industry, and we would like to introduce E2 in that market, which would also be in favor of that partnership. Now the two fronts that are parts of the scope of that OMU is to develop parts for commercial aviation and to do joint work to introduce Embraer aircraft in that country.

Thank you.

The next question is from Rafael Corracini from Intelligencia Financera. Please go ahead, Mr. Corracini.

Hi, can you hear me?

Yes, we can. Rafael, please go ahead. Thank you for taking my question, which is about cost control. Does that include changing suppliers? Is there a possibility that Embraer will be switching American suppliers because of US tariffs? to suppliers from other locations, and if so, in which segments?

I'll take your question, Rafael.

In the airspace industry, you can't switch suppliers overnight. So these are internal measures to cut down on costs to fight the effects of those tariffs. It's nothing extraordinary. buckling up for that stage to switch suppliers in the aerospace industry, it takes years. So we're not going to a different location. We're just working on our current structure. And again, we have four divisions and they all work based on the same principle. They apply to everything. Great. Thank you. You're welcome. next question is from rodrigo rott from aeroflap please go ahead mr rot your microphone is on mute can you hear me now yes I have a question about the cargo version of the E2. What are Embraer's plans to do a cargo version? Have you got any plans to that end? Will you be going into that cargo version? What are your plans? Hi, Rodrigo. Thank you for your question. we have developed the cargo version for the E190E1. And the plan now is to introduce that product into the market. So that's what we're focusing on. There are no additional plans other than that. If it all goes well, then we may take a step towards the E195. But right now we're focusing on introducing the E190 cargo aircraft. Okay, thank you. You're welcome. Thank you. This concludes Embraer's Q&A session and the conference for today. Thank you for joining us and have a great day.