Embraer S.A. American Depositary Shares (Each representing Four Common Shares) 2026 Q2 Earnings Call

Good morning, ladies and gentlemen. Thanks for standing by. As a reminder, this conference is being recorded. Its broadcast is intended exclusively for the participants of this event and may not be reproduced or retransmitted without the express authorization of Embraer. 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 am the head of investor relations, M&A, and the venture capital for Embraer. Welcome to Embraer's second quarter 2026 earnings conference call. 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 were already discussed at the company's conference call last week. Before we begin, a legal notice to everyone.

This presentation may contain forward-looking statements which involve risks and uncertainties, as detailed in the disclaimer available in the slides and in the documents filed with the Brazilian Securities Commission, CVM. At this time, all participants are in a listen-only mode. Instructions for the Q&A session will be provided later. Participants on today's conference call are Francisco Gomes Neto, President and CEO of Embraer, Felipe Santana, Chief Financial Officer, Thais Moraes, Corporate Communications Director, and myself. This conference call consists of three parts. First, we will present the results for the second quarter of 2026. Second, we will host a Q&A session exclusively for investors. Finally, we will hold a dedicated Q&A session for the press. It is my pleasure to now turn the conference call to our President and CEO, Francisco Gomes Neto. Please go ahead, Francisco. Thank you, Gui.

Good morning and good afternoon, everyone. It is a pleasure to be with you today to discuss Embraer's second quarter 2026 results. We delivered the strongest second quarter revenue in our history. We achieved our highest second quarter deliveries in the past 16 years and reached a new all-time high backlog for the seventh consecutive quarter. We continue to see strong performance across all our business units, driven by our focus on sales execution, efficiency, operational discipline, and production ramp-up. Simply put, we continue executing the fundamentals exceptionally well. These results further strengthen our confidence in the outlook for our businesses and have led us to raise our 2026 guidance, also supported by favorable effects. Let me now turn to the key highlights of the quarter. In commercial aviation, Azorra placed an order for 15 E195-E2 aircraft while maintaining 15 purchase rights.

During the quarter, the E2 program surpassed the milestones of 500 firm orders. In executive aviation, we achieved record second quarter revenues and deliveries, supported by strong market demand. We also received a triple certification for the Praetor 500E and Praetor 600E. In defense and security, the UAE ordered 10 C-390 aircraft with options for an additional 10 units. This marks the platform's first selection in the Middle East and the largest international order for the C-390 to date. In service and support, we continue to expand our recurring revenue base through new contracts, including support for Jazz Aviation's E175 fleet and a new maintenance agreement with the Brazilian Air Force covering its KC-390 fleet. During the quarter, we delivered 65 aircraft, 20 commercial jets, and 45 executive jets. Total company deliveries increased by nearly 7% year-over-year, with commercial aviation growing 5% and executive aviation growing 18%.

In Commercial Aviation, we delivered 30 aircraft in the first half of the year, representing 36% of the midpoint of our full-year guidance, one percentage point above the five-year average. In Executive Aviation, we delivered 74 aircraft in the first half, representing 45% of the midpoint of our full-year guidance and an impressive 11 percentage above the five-year average. Our company-wide backlog reached $34.5 billion, an increase of 16% year-over-year and another all-time record for Embraer. Commercial Aviation backlog grew 15% year-over-year, supported by a 1.8 book-to-bill ratio over the last 12 months. Defense and Security backlog increased 42%, with a strong 2.6 book-to-bill ratio. Executive Aviation backlog grew 5% year-over-year, while Service and Support increased 12%, with both segments maintaining book-to-bill ratios above one.

In addition, we hold approximately $21 billion in options, which could expand our backlog to more than $55 billion over time if exercised. I would also like to provide a brief update on Eve's continued progress. The flight testing campaign is advancing according to plan. Following the successful completion of hover flights, the team is now moving into transition flights, an important next step on the path toward certification. With that, I will now hand the call over to Felipe, who will walk you through our financial results. Felipe, the floor is yours.

Thank you, Francisco. Good morning and good afternoon, everyone. Let me start with the results by business unit. All comparisons are year-over-year, unless otherwise noted. Starting with Commercial Aviation, revenues increased 8% to $625 million, driven by higher volumes. Adjusted EBIT totaled $18 million with a positive 2.9% of margin. The year-over-year decline was primarily due to customer mix. In Executive Aviation, revenues increased at 32% to $725 million, supported by higher volumes and product mix. Adjusted EBIT reached $170 million with a positive 23.4% of margin. These results include the strong operating performance and the effects of U.S. import tariffs and extraordinary tax credit. Excluding both effects, adjusted EBIT margin would have been 16.1%. In Defense and Security, revenues increased at 38%, reaching $304 million. Adjusted EBIT was $36 million, with a positive 11.9% of margin, supported by stronger KC-390 revenue recognition and operating leverage.

In Service and Support, revenues increased at 24% to $565 million, driven by higher volumes. Adjusted EBIT totaled $106 million with a positive 18.7% of margin. These results include U.S. import tariffs and an extraordinary tax credit. Excluding both items, adjusted EBIT margin would have been 17.6%. At the consolidated level, net revenues increased at 23% to $2.2 billion in the second quarter. From business mix's perspective, Executive Aviation represented 32% of revenues, Commercial Aviation and service more than 25% each, and defense 14%. In the first half, revenues reached $3.7 billion, representing 44% of the midpoint of our full-year guidance. Adjusted EBITDA was $356 million, with a positive 15.9% of margin, while adjusted EBIT totaled $297 million with a positive 13.3% of margin. During the quarter, the company recorded approximately $8 million of U.S. import tariffs and an extraordinary tax credit of $68 million.

Excluding both effects, adjusted EBIT margin would have been 10.6% of margin. In the first half, adjusted EBIT margin reached 10.6% or 5.5 points higher than the five-year average. Adjusted free cash flow, excluding Eve, was $401 million in the quarter. This reflects the stronger operating results, sales-related pre-down payments, and extraordinary tax credit. Investment totaled $121 million during the quarter, including $42 million in CapEx, $24 million in tangible additions, $18 million in the pool program, and $36 million in research. Research expenses include engineering service to current projects, as well as other developments technologies for future programs. Adjusted net income was $290 million in the last quarter. Adjusted net income margin was positive 9.8%, up 1.1 points, mainly due to operating performance and lower net financial expenses, which were partially offset by higher taxes. Earnings per ADS now stands at $2.50 on a last 12-month basis.

Net debt to adjusted EBITDA, excluding Eve, improved to 0.2 times in the quarter from 0.7 times a year ago. Through our liability management initiatives, average debt maturity increased to 9.3 years and its average cost declined to 5.1%. During the quarter, we declared BRL 200 million in interest on equity. This corresponds to BRL 0.28 per share or approximately $0.22 per ADS. Based on the share price at the quarter end, this represents a dividend yield of approximately 0.34%. From an operational standpoint, we are maintaining our delivery guidance unchanged at 80 to 85 aircraft in commercial aviation and 160 to 170 aircraft in executive aviation. On the financial side, revenue guidance remains unchanged at $8.2 billion to $8.5 billion. We are increasing our adjusted EBIT margin guidance to between 10%-10.6%.

At the midpoint, this represents an increase of approximately $110 million or 130 basis points, reflecting the extraordinary tax credit, lower U.S. tariffs, and a better business outlook. We are also increasing our adjusted free cash flow guidance to $400 million or higher, reflecting strong operational performance, progress in our production leveling initiatives, and a strong first-half cash generation. With that, I will hand it back to Francisco for his closing remarks. Thank you. Thank you, Felipe.

The second quarter of 2026 reinforced our confidence in Embraer's strategic positioning and our ability to consistently execute. We have also started the third quarter with strong momentum, including the announcement of 28 additional E2 orders, and welcomed Colombia as the newest KC-390 customer. Colombia became the 13th country worldwide to select the KC-390, further expanding the aircraft's global footprint. We were also pleased to introduce the new EV edition of our best-selling Phenom 300. Strong demand across our businesses continues to support our growth trajectory. Our performance reflects the discipline, focus, commitment, and energy of our people across the organization. Their dedication enables us to deliver strong results today while continuing to invest in the technologies that will drive our future growth. Behind these achievements are the values that guide everything we do. Safety first and quality always.

With that, we are now ready to take your questions.