Embraer 2026 Q3 Earnings Call

log of $8.2 billion and launched the new Phenom 300 EV. In defence, Colombia ordered 2 KC-390s, while we advanced our partnership with Mahindra, including plans for a local assembly line in India. And in service and support, we continued expanding our customer agreements. During the quarter, we delivered 22 commercial jets and 41 executive jets. Total company deliveries increased 6% year over year, with commercial aviation growing 10% and executive aviation stable. In commercial aviation, we delivered 52 aircraft year to date. representing 63% of the midpoint of our full-year guidance, 5 percentage points above the 5-year average. In executive aviation, we delivered 115 aircraft year to date, representing 70% of the midpoint of our full-year guidance and a material 10 percentage points above the 5-year average. These numbers are evidence of our progress in our production leveling initiative, although we still have room for additional improvement. Our company-wide backlog reached $35.7 billion, up 14% year over year, in another all-time record for Embraer. All 4 business units increased their backlog year over year, led by Defence and Security, up 56%, with a strong 2.9 book-to-bill ratio. Executive aviation backlog grew 12% year over year, supported by a 1.4 book-to-bill ratio.

Commercial aviation backlog grew 4% year over year, while services and support increased 14%, with both maintaining book-to-bill ratios above 1. In addition, we hold approximately $23 billion in options, which could expand our backlog to almost $60 billion if exercised. 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. I will now talk you through our results by business unit. All comparisons are year over year unless otherwise noted. Starting with Commercial Aviation, revenues increased 13% to $696 million, driven by higher volumes and prices. Adjusted EBIT totaled $17 million with a positive 2.4% of margin. The year-over-year improvement was supported by suppliers' compensation. For the 4th quarter, we expect a better customer mix with full-year margins broadly in line with last year's average. Looking ahead, our ambition is to continue improving commercial aviation profitability. to the mid-single-digit level over the next few years. In Executive Aviation, revenues increased 12% to $655 million, supported by higher prices and product mix. Adjusted EBIT reached $105 million with a positive 60% of margin, circa $130 million. Up year on year versus a comparison excluding U.S. tariffs. In Defense Security, revenues increased 22% to R$341 million. Adjusted EBIT was R$54 million with a positive 15.7% of margin, driven by higher KC-390 volumes, customer mix, and product stage. For the 4th quarter, we do not expect Defense EBIT margins to remain at the strong levels seen in the 2nd and 3rd quarters. Still, the division remains on track for another record year.

Now with profitability around double-digit levels. Service support revenues increased 30% to R$638 million, driven by higher volumes. Adjusted EBIT totaled R$108 million with a positive 17% of margin, supported by operating leverage circa 330 bps above year over year. At a consolidated level, net revenues increased 17% to R$2.35 billion in the 3rd quarter. Revenues were well balanced across our business, with commercial aviation representing 30%, executive aviation and service more than 25% each, and Defense 15%. In the first 9 months, revenues reached R$6 billion, representing more than 70% of the midpoint of our full-year guidance. Adjusted EBITDA was R$370 million in the quarter with a positive 13.5% of margin. Adjusted EBIT reached R$255 million with a positive 10.9% of margin compared to 8.6% a year ago, or 9.4% if we exclude U.S. import tariffs. The year-over-year improvement was driven by strong operating performance across all the businesses. In the first 9 months, adjusted EBIT margin reached 10.7%, or 4.2 points above the 5-year historical average. Adjusted free cash flow, excluding EVE, was R$628 million in the quarter, reflecting sales-related pre-delivery payments and stronger operating results. Investments totaled R$150 million during the quarter, as we continue to invest in new technology and support our current projects and future programs.

Adjusted net income was R$74 million in the quarter, with a 3.1% margin compared to 4.2% a year ago. The year-over-year decrease mainly reflects higher financial expenses from the mark-to-market of our long-term incentive plan and higher taxes. Earnings per ADS now stands at 2.2 on a last 12-month basis. We ended the 3rd quarter with a net cash position. Net cash to adjusted EBITDA, excluding EVE, improved to a positive 0.4 times from a negative 0.5 times a year ago. Our average debt maturity ended the quarter at 8.7 years, while the average cost remained at 5.1%. During the quarter, we declared R$154 million in interest on equity. This corresponds to R$0.22 per share. Or circa $0.17 per ADS. In 2026, we declare R$354 million in interest on equity, representing a dividend yield of around 0.52% based on the share price at the quarter end. Also, for our shareholders, in November, we will change our ADS ratio from 4 common shares per ADS to 1 common share per ADS. This change has no impact on our underlying equity value. Last but not least, a quick word about our guidance. From an operational standpoint, we stand by our commitment to deliver 80 to 85 aircraft in commercial aviation and 160 to 170 aircraft in executive aviation.

From the financial side, we are happy to increase our revenue guidance to between $8.4 to $8.6 billion because of the strong performance of our business. The adjusted EBIT margins remain unchanged at between 10% and 10.6%. However, we raised our adjusted free cash flow guidance once again, now to $700 million or higher, supported by better operational performance and cash generation. With that, I will hand it back to Francisco for his closing remarks. Thank you. Thank you, Felipe.

I would like to provide a brief update on EVIE's continued progress. The flight test campaign continues to advance. with 73 flights completed in more than 3 hours of flight time. Following the completion of hover flights, EVE is now advancing through transition flights, with full transition expected before year-end. In summary, we continue to see strong demand across our businesses and positive momentum in our global markets. We would like to welcome Japan Airlines to our E2 family. The 2nd operator of our small narrowbody jet in the country, and the Hellenic Air Force to our KC-29 family, the 7th operator of our next-generation military aircraft in Europe. We remain focused on sales, efficiency, and execution while continuing to invest in new technologies for the future. Our progress is driven by the trust of our clients, the support of our suppliers, and the commitment, discipline, and energy of our people. We are proud to be certified once again as a great place to work. Together, we remain guided by the pillars of our culture and our motto: Safety First, Quality Always. With that, we are now ready to take your questions.

We will now start the question and answer session.

Sua transmissão é destinada exclusivamente aos participantes deste evento e não pode ser reproduzida ou retransmitida sem autorização expressa da Embraer. Reforçamos também que esta conferência está sendo realizada em inglês, com tradução simultânea para o idioma português. This conference is being conducted in Portuguese. To switch to English, please click on the interpretation button on the platform and select English. After selecting the language, please click on mute original audio to improve sound quality in English. Pedimos aos interessados em fazer perguntas que pressionem o botão Levantar a Mão na plataforma. Ao ter seu nome anunciado, ative o microfone e inicie sua pergunta. Para que todos tenham a chance de participar, pedimos que façam apenas uma pergunta por vez. Se houver necessidade de assistência, por favor, solicide via botão Q&A. Responderemos também perguntas escritas e enviadas através do chat da plataforma. A primeira parte dessa sessão será exclusiva para a participação de analistas e investidores. A segunda parte será dedicada aos jornalistas. A primeira pergunta é de Marcelo Motta, do JPMorgan. Por favor, pode prosseguir. Olá, bom dia. Obrigado por responderem minhas perguntas, que é sobre o guidance. Poderiam comentar um pouquinho a respeito da margem de EBIT esperada para o quarto tri?

Estamos falando do quê? De uma margem de 10,3%, quer dizer, uma queda de 60 pontos-base comparado com o terceiro tri. No quarto, normalmente temos uma alavancagem operacional maior. O Felipe comentou sobre as margens de defesa que talvez não permaneçam nos níveis que temos visto, ou seja, 16% de EBIT. Poderiam comentar, por favor, a respeito disso e por quê? Não veremos uma expansão da margem de EBIT no quarto tri, considerando essa alavancagem operacional maior? Muito obrigado. Oi, Marcelo, aqui é o Felipe. Muito obrigado pela pergunta. É importante enfatizar o nivelamento de produção, principalmente na aviação executiva, que fica bem mais equilibrada durante o ano. Então, comparando o ano passado com esse ano, já estamos vendo um quarto tri com tanta concentração nas entregas na aviação executiva. Também é importante mencionar que ainda estamos atrasados no nivelamento de produção na aviação comercial. Porque teremos uma concentração de entregas no quarto tri da aviação comercial e a margem de EBIT está abaixo da média da empresa. E em defesa, como eu disse na apresentação, esse ano, no quarto tri, Temos alguns ajustes contratuais. Relacionados a custo, inflação e efeito nos contratos do Rio no Brasil. É por isso que Confirmamos o guidance de 10% a 10,6% de margem de EBITDA para o ano total de 2026.

Muito obrigado, Felipe. The next question comes from— a próxima pergunta— Kristine Liwag with Morgan Stanley. É da Kristine Liwag do Morgan Stanley. Por favor, pode prosseguir. Good morning, Francisco.

Felipe. Francisco. Felipe. So, um, just quick, quick follow-up on the services business. You're now at 17%. O negócio de serviços estão com margem de 17%, que é muito boa.

Daqui para frente devemos esperar um novo nível para serviços e como devemos pensar sobre a contribuição? Kristine, aqui é o Felipe. Muito obrigado. Pela pergunta. O apoio de serviços continua com níveis mais altos e uma alavancagem operacional também, mas estamos confiantes com relação aos princípios fundamentais dos negócios. É importante enfatizar que ainda temos A Ogma, para o ano que vem, também vamos começar em Dallas, como mencionou. Então, acreditamos que as margens de serviços e suporte podem melhorar até o final da década, chegando mais a 17%, 18%. Thank you. Obrigada. The next question comes from— From Edgardo Gimenez Mazó. Please go ahead. Wolfe Research. Hey, good morning. You've lost everyone. Morning. Hey, Miles. Morning. Bom dia. Maybe you can just touch on the supplier compensation. Poderia falar um pouquinho sobre a compensação dos fornecedores que foi mencionado na aviação comercial, por favor? Qual foi mais ou menos esse número? Pensando na cadeia de suprimento, o que que vocês estão vendo? Vai melhorar, piorar? Algum comentário? Oi, bom dia, Myles. Aqui é o Gui. Com relação à compensação dos fornecedores, nesse TRI ficamos na casa de um dígito.

Nós não divulgamos o valor porque acreditamos que Boom. Nós sofremos com relação à cadeia de suprimento e acabamos absorvendo o custo. Isso faz parte dos negócios, ou seja, é um evento recorrente com o qual temos que lidar no dia a dia. E isso deve ser contabilizado nos resultados da divisão. Com relação à cadeia de suprimento, nós fizemos um progresso considerável no nivelamento de produção na via Aviação executiva, chegando a 10 pontos de produção no quarto tri. Na aviação comercial tivemos progresso, mas ainda há bastante a fazer. Uma das coisas que você mencionou e é recorrente, é o fornecimento de motores, mas estamos trabalhando com os fornecedores para melhorar a situação. E na aviação comercial executiva e na defesa, os volumes devem continuar a aumentar. Até o final da década. Thank you. Obrigado, Gui. The next question. A próxima pergunta. É de Ronald Epstein, do Bank of America. Por favor, pode prosseguir. Uh, good morning. This is Andrew Steinhardt on for Ron. Queria perguntar sobre o Phenom 300 EV, a sua certificação. Aliás, parabéns. Por terem conseguido isso nesse trimestre, poderiam falar sobre a demanda para essa aeronave e qual a sua contribuição para aviação executiva e a carteira de pedida nesse tri?