Embraer Q1 2025 Earnings Report

Embraer EPS Results

• Actual EPS: $0.40
• Consensus EPS: $0.21
• Beat/Miss: Beat by +$0.19
• One Year Ago EPS: -$0.48

Embraer Revenue Results

• Actual Revenue: $1.10 billion
• Expected Revenue: $1.17 billion
• Beat/Miss: Missed by -$64.77 million
• YoY Revenue Growth: +23.00%

Embraer Announcement Details

• Quarter: Q1 2025
• Date: 5/6/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, May 6, 2025
• Conference Call Time: 8:00AM ET

Embraer (NYSE:ERJ) designs, develops, manufactures, and sells aircraft and systems in North America, Latin America, the Asia Pacific, Brazil, Europe, and internationally. The company operates through Commercial Aviation; Defense & Security; Executive Aviation; Services & Support; and Other segments. The Commercial Aviation segment designs, develops, manufactures, and sells commercial jets, as well as leases aircraft. The Defense & Security segment engages in the research, development, production, modification, and support for military defense and security aircraft; and offers a range of products and integrated solutions that include radars, special space systems, and cyber security solutions, as well as information and communications systems comprising command, control, communications, computer, intelligence, surveillance, and reconnaissance systems. The Executive Aviation segment develops, produces, and sells executive jets. This segment also leases Phenom family executive jets in the entry jet and light jet categories; and Praetor 500 and Praetor 600, disruptive executive jets in the midsize and super midsize categories. The Service & Support segment provides after-service solutions and support services; maintenance, repair, and overhaul services for commercial, executive, and defense aircraft; and aircraft components and engines. This segment also supplies steel and composite aviation structures to various aircraft manufacturers. The Other segment engages in the supply of fuel systems, structural parts, and mechanical and hydraulic systems; and production of agricultural crop-spraying aircraft. The company was formerly known as Embraer-Empresa Brasileira de Aeronáutica S.A. and changed its name to Embraer S.A. in November 2010. Embraer S.A. was incorporated in 1969 and is headquartered in São Paulo, Brazil.

Embraer Q1 2025 Earnings Call Transcript

Key Takeaways

• Embraer delivered the highest first-quarter revenue in nine years at $1.1 billion with an adjusted EBITDA margin of nearly 10%, and closed Q1 with a record $26.4 billion backlog.
• Aircraft deliveries rose nearly 30% year-over-year, the company resumed regular dividends and interest on equity, and it reiterated its 2025 guidance calling for double-digit growth in both deliveries and revenue.
• All divisions showed strength: Executive Aviation posted its best Q1 revenue since 2014 and a $600 million backlog, Defense & Security secured new orders (Sweden, Slovakia, Uruguay, Panama) with a $4.2 billion backlog, Commercial Aviation won ANA’s order for 15 E190-E2s, and Service & Support grew with the Ogima engine shop ramp-up.
• A production leveling plan launched in 2023 is already improving operational KPIs—higher output, lower travel-work and assembly cycle times—and aims to smooth production runs from 2026 onward.
• Despite U.S. tariffs, Q1 results were unaffected and management estimates a limited impact of around 90 bps on 2025 EBIT; cost-reduction measures, U.S. content offsets and advocacy for zero tariffs are under way to preserve margins.

Presentation

[Guilherme Paiva, Head of Investor Relation at Embraer]

name is Gip Aiva, and I'm the Head of Investor Relations and M and 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 and GAAP standards to Embraer's IFRS.

[Guilherme Paiva, Head of Investor Relation at Embraer]

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.

[Guilherme Paiva, Head of Investor Relation at Embraer]

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 Comision de Valores Mobilieris or CVM. At this time, all participants are in a listen only mode. We will give you instructions later on for participation in the two question and answer sessions.

[Guilherme Paiva, Head of Investor Relation at Embraer]

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 and A session only for investors.

[Guilherme Paiva, Head of Investor Relation at Embraer]

And last but definitely not least, in the third part, we will host a dedicated Q and 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.

[Francisco Neto, President & CEO at Embraer]

Thank you, Yugi. Good morning and good afternoon to all. Welcome to Embraer's first quarter twenty twenty five results conference call. We delivered the highest first quarter revenue of the past nine years at a significant $1,100,000,000 We also registered the highest first quarter adjusted EBITDA margin over the past five years at almost 10%. Embraer ended the period with a $26,400,000,000 backlog, marginally higher than the previous all time record printed in the last quarter.

[Francisco Neto, President & CEO at Embraer]

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.

[Francisco Neto, President & CEO at Embraer]

The division also reached the highest first quarter revenue since 2014 in a record backlog of $600,000,000 In Defense and Security, Sweden and Slovakia confirmed the selection of the KC-three 90 Millenio, while Uruguay converted its A-twenty nine Super Tucano options into firm orders, and Panama selected the aircraft. The division ended the quarter with a stable $4,200,000,000 backlog. In commercial aviation, the Japanese ANA placed an order for 15 E190 E2 that should be included in the $10,000,000,000 division backlog in the second half of the year. The E195 E2 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 Pratt and Whitney engine shop at Oguima in Portugal.

[Francisco Neto, President & CEO at Embraer]

The division backlog remained stable at $4,600,000,000 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.

[Francisco Neto, President & CEO at Embraer]

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's now touch upon a topic we have all dealt with over the past two months, U. S.

[Francisco Neto, President & CEO at Embraer]

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.

[Francisco Neto, President & CEO at Embraer]

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. And we are argued for zero tariffs to globalize the aerospace production chain, as it has been the case for many decades.

[Francisco Neto, President & CEO at Embraer]

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 noted 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.

[Francisco Neto, President & CEO at Embraer]

In Defense and Security, top line grew 72% because of stronger KC-three 90 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 service and support. Revenues increased 16%, mainly because of the Ogima GTF ramp up. The adjusted EBIT margin decreased because of product mix and the start of North America's active MRO ramp up, partially compensated for positive onetime items.

[Francisco Neto, President & CEO at Embraer]

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 closing remarks.

[Antonio Garcia, EVP - Financial & IR at Embraer]

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 unless noted. Let's move to Slide 13 and start with deliveries. Embraer delivered 30 aircrafts in commercial and executive aviation combined during the quarter or 20% higher.

[Antonio Garcia, EVP - Financial & IR at Embraer]

In executive aviation, deliveries were 23 jets, of which 14 were in the light segment and nine in the midsize one. The numbers of delivery was 28% higher and more important, 15% of the midpoint of the company's full year guidance, moderately above eleven percent first quarter average for the past five years. In commercial aviation, deliveries were seven aircrafts, the same numbers 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 an all new all time high, 26,400,000,000.0, marginally up and sequentially and 25% higher versus a year ago.

[Antonio Garcia, EVP - Financial & IR at Embraer]

Talking about each division, the backlog for defense and security soared 73%, while for executive aviation increased more than 65%, supported by new KC three hundred ninety Millennium and 08/29 Super Tucano sales and the Marquis contract with Flexjet, respectively. The backlog for service and support increased almost 50%, while for commercial aviation decreased 10%. However, it is important to remember, the ANNA order has not been yet included in our numbers. Moving on to revenues. Our top line reached $1,100,000,000 in the first quarter, the best first quarter results of the past nine years and 22% higher.

[Antonio Garcia, EVP - Financial & IR at Embraer]

Our service and support in executive aviation divisions together represented almost 70% of the company's total revenue in the quarter. Moving to Slide 15. We generated 109,000,000 in adjusted EBITDA in the first quarter with a 9.8% margin. Now adjusted EBIT for the quarter was EUR 62,000,000 with a 5.6% margin, a significant increase compared to the previous $7,000,000 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 mix and lower costs and expenses.

[Antonio Garcia, EVP - Financial & IR at Embraer]

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.

[Antonio Garcia, EVP - Financial & IR at Embraer]

In first quarter, we consumed $386,000,000 in adjusted free cash flow because of higher working capital needs mainly in inventory in preparation for higher numbers of aircraft deliveries in the next three quarters. Moving to investments, it is important to highlight our capital allocation remains focused on segment with higher return such as executive aviation and service and support made in The U. S. First Quarter, without EVE, we allocated EUR 38,000,000 for research and development, of which $11,000,000 were expensed. We invested another $37,000,000 in CapEx and $13,000,000 in the pool program to support the new contracts, totaling $88,000,000 for the quarter.

[Antonio Garcia, EVP - Financial & IR at Embraer]

To finish this slide, let's talk about our adjusted net results. We ended the quarter with a negative 74,000,000 for that and adjusted minus 6.7% margin compared to $30,000,000 comp. However, reported net income was positive $73,000,000 for a 6.7% margin positive. If we consider $124,000,000 in deferred taxes because of stronger Brazilian, foreign exchange rate and 23,000,000 from EV results. Slide 17, please.

[Antonio Garcia, EVP - Financial & IR at Embraer]

As always, I would like to start this slide by highlighting the top right corner. Embraer was able to reduce both its net and gross debt positions without this by 508,000,000 to 608,000,000 over the past twelve months. Thus, the company was able to lower its net debt to EBITDA from 1.8 times to 0.5 times during the period. The negative $285,000,000 free cash flow generation for Embraer stand alone during the quarter helps to expand the recent increase in financial leverage. As I mentioned on our last call, as part of our liability management plan, we are focused on extending the duration and reduce the cost of our debt.

[Antonio Garcia, EVP - Financial & IR at Embraer]

In our most recent liability management step, we issued a 650,000,000 10 years bond at a 58 basis points over US treasury in q one, and we repurchased 522,000,000 in 2027 bonds, fully retired, and $150,000,000 in 2028 bonds. With the deal, we extended our debt duration to six point three years compared to point eight years in Q4 last year. Slide 18. And to conclude my part, let me talk about shareholder remuneration. For the fiscal year twenty twenty four, we approved 51,000,000 reais in dividends or seven Brazilian cents per share to be paid on May 23 to m b three holders.

[Antonio Garcia, EVP - Financial & IR at Embraer]

ERJ holders should receive the monies in a few days later, But you can find more information with our our US depositary bank soon. For the fiscal year twenty twenty five and beyond, the company tends 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.

[Antonio Garcia, EVP - Financial & IR at Embraer]

Thank you very much.

[Francisco Neto, President & CEO at Embraer]

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 will keep focused on sales in all business units to guarantee our successful growth trajectory.

[Francisco Neto, President & CEO at Embraer]

Let me now take the opportunity to say Domu Arigato and Yokosu 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 joined 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.

[Francisco Neto, President & CEO at Embraer]

Let's now move to the Q and A session of the call.

[Operator]

We will now start the Q and 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 and 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.

[Operator]

We request participants interested in asking questions to press then 9 in the phone at any time or press the raise the hand button on the platform. For will also answer questions sent via the platform chat. The first question comes from Marcelo Moata with JPMorgan. Please ahead. Please hold a second.

[Marcelo Motta, Research Analyst at J.P. Morgan]

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

[Marcelo Motta, Research Analyst at J.P. Morgan]

Thank you.

[Antonio Garcia, EVP - Financial & IR at Embraer]

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

[Marcelo Motta, Research Analyst at J.P. Morgan]

Perfect. Thank you, Antonio.

[Antonio Garcia, EVP - Financial & IR at Embraer]

Thank you.

[Operator]

Thank you. The next question is from Myles Walton with Wolfe. Please go ahead.

[Myles Walton, Managing Director at Wolfe Research LLC]

Thanks. Good morning. I was hoping on the tariff front, 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 U. S.

[Myles Walton, Managing Director at Wolfe Research LLC]

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?

[Antonio Garcia, EVP - Financial & IR at Embraer]

Thanks,

[Antonio Garcia, EVP - Financial & IR at Embraer]

Mayor. It's a great question. And we still don't know everything. That's why we said 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 read the first aircraft being taken in Brazil, and The U.

[Antonio Garcia, EVP - Financial & IR at Embraer]

S. Customer in Spain is bearing the cost for the tariffs. In fact, what we are pursuing is who is responsible for the importation process bear the cost of tariffs. We do not have at least today a setback on commercial, but it's too early to confirm 100%. But I would say, if I would split the 90 basis points is highly concentrated in the U.

[Antonio Garcia, EVP - Financial & IR at Embraer]

Active Aviation and Service and Support. And we, as a company who has a lot of U. S. Quantity in our aircraft, We always deduct The U. S.

[Antonio Garcia, EVP - Financial & IR at Embraer]

Content in order to, I would say, pay the tax. 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 it's on the tariff side.

[Francisco Neto, President & CEO at Embraer]

It's enough.

[Antonio Garcia, EVP - Financial & IR at Embraer]

I hope I answered your question, Myles.

[Myles Walton, Managing Director at Wolfe Research LLC]

That's perfect. Thanks, Antonio.

[Antonio Garcia, EVP - Financial & IR at Embraer]

Thank you.

[Operator]

The next question is from Christine Liwag with Morgan Stanley. Please go ahead.

[Kristine Liwag, Executive Director at Morgan Stanley]

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 KC three ninety, 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.

[Kristine Liwag, Executive Director at Morgan Stanley]

We've seen this with Airbus and their success was selling the a two twenty with the a three twenty. Can you talk about bundling opportunities for the KC three ninety and the e twos?

[Francisco Neto, President & CEO at Embraer]

Hello, Christina. Thanks for your question. Well, you bring a good idea. Might be an opportunity. But, anyway, we are working in, in several campaigns for both, for KC three ninety and Intus.

[Francisco Neto, President & CEO at Embraer]

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, you know, one, two years in India. But India is a is a big program, as you know, that from 42 opportunity from 40 to eighty eighty aircraft.

[Francisco Neto, President & CEO at Embraer]

And we are also working in other campaigns with the c three ninth, other customers that we cannot disclosure at this point of time, but we expect some results during the year as well. E two, we are not E two is not different. We are working in several campaigns. Yeah. It's competition is not easy in both sides, you know, with the KC or or or the E2s, but we believe we have good chances in in many campaigns.

[Francisco Neto, President & CEO at Embraer]

So also in commercial aviation, we expect to bring some good news during the year.

[Antonio Garcia, EVP - Financial & IR at Embraer]

This is just a compliment. And for the KC, what you are seeing is abundantly that some especially the NATO countries, they are using the same contract, you know, which makes the procurement process much faster than before.

[Francisco Neto, President & CEO at Embraer]

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

[Kristine Liwag, Executive Director at Morgan Stanley]

Not yet.

[Kristine Liwag, Executive Director at Morgan Stanley]

So that sounds very, optimistic. So we hope to see that kind of bundling soon.

[Francisco Neto, President & CEO at Embraer]

Well, I mean, it's not a bundling, but, in case of Poland, as as you brought Poland as an example, we we said, well, if we we are working the two fronts, opportunities with the tools in Poland, you know that, and with lot Polish and KC 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.

[Kristine Liwag, Executive Director at Morgan Stanley]

It's super helpful. And if I could add a second question. The geopolitical environment today, even with The US 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 how has the conversation regarding a larger Embraer aircraft evolved in the past few months?

[Kristine Liwag, Executive Director at Morgan Stanley]

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, Boeing was the tip of the trade spear for The US, and all this tariff stuff is a reminder that, you know, this is a net import net exporting industry for The US. But for the other countries that don't have aerospace, you know, this is a strategic weakness in their industries. So how should we think about this opportunity?

[Kristine Liwag, Executive Director at Morgan Stanley]

Where where is the most recent thinking about this program, and how has that evolved in this dynamic environment?

[Francisco Neto, President & CEO at Embraer]

Well, Christine, this is also a good questions a good question, not easy to answer specifically. But, yes, I mean, customers, they have asked us about our plans to go to go bigger. But, actually, we are very focused on selling the a twos, 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 we are making studies in all fronts. We we don't have a decision.

[Francisco Neto, President & CEO at Embraer]

But what we're doing in a concrete way is investing in new technologies, you know, technology about more autonomous flights, the technology about fuselage, new fuselage, new wings, cockpit, and so on. That that's what we are doing. But we don't have, I mean, any concrete decision to go this way or that way.

[Kristine Liwag, Executive Director at Morgan Stanley]

Great. Thank you.

[Francisco Neto, President & CEO at Embraer]

You're welcome, Christina.

[Operator]

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

[Steve Trent, Managing Director at Citi]

Morning. Steve Trent from Citi. 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?

[Steve Trent, Managing Director at Citi]

Thank you.

[Francisco Neto, President & CEO at Embraer]

Thank you. Thank you for your question. Since two years ago, we have 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 we are progressing as a we we I mentioned in my opening, we are progressing in in bringing the parts we need to, you know, to level our production, which is our main target at the end of the day.

[Francisco Neto, President & CEO at Embraer]

We still have some issues more with the fuselage parts that we are still struggling. This year, some types of engines that are still delaying to 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 we see we don't see big issues to delivery our guidance. That's why we are reaffirming our guidance in terms of deliveries between 77, 80 five commercial jets and one forty five to one fifty five executive jets.

[Francisco Neto, President & CEO at Embraer]

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 these issues and keep our production running as planned.

[Operator]

The next question comes from Andre Fejera with Bradesco BPI. Please go ahead.

[Andre Ferreira, Capital Market Analyst at Banco Bradesco]

Hi, good morning. I have a question, 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?

[Antonio Garcia, EVP - Financial & IR at Embraer]

Andreas,

[Antonio Garcia, EVP - Financial & IR at Embraer]

Antonio speaking here. The 3% was just supplier credits for the quarter inside the commercial aviation, okay? And I would say the we were on average for Samsung support around 15%. We report a little bit lower. But it's well for us, it's it was five basis point or 50 basis point less than average, I would say.

[Antonio Garcia, EVP - Financial & IR at Embraer]

But in our view, it's just a temporary effect that will be compensate throughout the years, okay? It was really something that mix, as Francisco said, on time effects with customers and this and this and this, I would say, putting all together, we performed 5% less EBIT 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 in consolidation. But I would say, we are talking about less BRL 20,000,000,000 that would bring us even to a higher margin of almost 6.5% to 7%. It was the effect on the consolidated basis, more or less.

[Andre Ferreira, Capital Market Analyst at Banco Bradesco]

Okay. So

[Antonio Garcia, EVP - Financial & IR at Embraer]

Commercial is 3% for the quarter.

[Andre Ferreira, Capital Market Analyst at Banco Bradesco]

Okay. All right. Thank you.

[Antonio Garcia, EVP - Financial & IR at Embraer]

Okay.

[Operator]

The next question comes from Jordan Leone with Bank of America. Please go ahead. Mr. Leonie? Pardon?

[Jordan Lyonnais, Equity Research Associate at Bank of America]

Hi, sorry. Can you hear me now?

[Antonio Garcia, EVP - Financial & IR at Embraer]

Yes.

[Francisco Neto, President & CEO at Embraer]

Yes. Yes, we can.

[Jordan Lyonnais, Equity Research Associate at Bank of America]

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?

[Antonio Garcia, EVP - Financial & IR at Embraer]

It's like at Pratt and Whitney and Francisco we talked today.

[Francisco Neto, President & CEO at Embraer]

Well, I mean, actually, Jordan, we we are still trying 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.

[Jordan Lyonnais, Equity Research Associate at Bank of America]

Got it. Okay. Thank you so much.

[Antonio Garcia, EVP - Financial & IR at Embraer]

Thank you, Jordan.

[Operator]

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

[Lucas Marquiori, Associate Partner Equity Research at BTG Pactual]

Thanks, guys. Thanks for the call. Good morning. My question is more on coming back to the topic of U. S.

[Lucas Marquiori, Associate Partner Equity Research at BTG Pactual]

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 executive, maybe commercial. So was the workaround plan around there? I mean, if it if it if it maybe you are relocating production to some of the other to some other facilities outside of Brazil or maybe passing through prices? How does your contracts work with this changing law environment?

[Lucas Marquiori, Associate Partner Equity Research at BTG Pactual]

I mean, just kind of giving some color on the measures to mitigate tariffs, it would be nice, guys. Thanks.

[Antonio Garcia, EVP - Financial & IR at Embraer]

Lucas, good morning. It's Antonio speaking here. Let's walk through a little bit the history. When we set the guidance for 2025, I remember some of you said, Antonio, seems too modest, the guidance you guys are placing. And we said at that time, we see a lot of volatility.

[Antonio Garcia, EVP - Financial & IR at Embraer]

That's one point. We were foreseeing some volatility. I would say, I was more in the 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 beginning of the year, the company already decided to wait and see what's going to happen.

[Antonio Garcia, EVP - Financial & IR at Embraer]

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 in 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 tariffs impact because just to give an example, Brazil has to pay 10%. But if you take out The U.

[Antonio Garcia, EVP - Financial & IR at Embraer]

S. Content as a temporary importation, that goes depends on the aircraft between 65% or 6.5% depends on the aircraft. That's more or less if you put all together, that's the number we comment to all of you, 19 basis point in our EBIT margin for the next three quarters, okay, not a near effect. And we are not waiting. As a Brazilian company, we we had crisis every year, and we need to to be able to to find a way to compensate.

[Antonio Garcia, EVP - Financial & IR at Embraer]

But we don't know all effects. That's a very premature effect that we are seeing right now. 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 our view, we are confident to keep the margin. Francisco, do want to comment anything else?

[Francisco Neto, President & CEO at Embraer]

Nothing from my side.

[Antonio Garcia, EVP - Financial & IR at Embraer]

I hope I answered your question, Lucas.

[Lucas Marquiori, Associate Partner Equity Research at BTG Pactual]

It does. Thanks, guys. Have a good day.

[Antonio Garcia, EVP - Financial & IR at Embraer]

Thank you. You as well.

[Operator]

Next question comes from Daniel Gasparecchi with Itau BBA. Please go ahead. Mister Gasparici, you're muted. We cannot hear you.

[Daniel Gasparete, Equity Research at Itau BBA]

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

[Operator]

Yes.

[Daniel Gasparete, Equity Research at Itau BBA]

Thank you

[Daniel Gasparete, Equity Research at Itau BBA]

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 will be the the first question.

[Daniel Gasparete, Equity Research at Itau BBA]

And the second one would be related to the the comment that that Antonio did related to the cost reduction initiatives on the executive side. I'll just like to explore more about it if it was already considering your guidance, and how do you see that playing along during the rest of the year? Thank you very much.

[Francisco Neto, President & CEO at Embraer]

Thank you, Danielle. I'll start with the the about China, and then Tony will help with the cost reduction that he mentioned before. Well, things in China for us, I mean, have not changed it. I mean, both of our aircraft, e one nineteen, e one ninety five, are certified by the Chinese authorities. And we have been working with with potential customers in China to introduce our new generation of e two that in our opinion, they do not compete with the Chinese aircraft.

[Francisco Neto, President & CEO at Embraer]

Right? We go just in the middle. And recently, we delivered the two aircraft to who knew 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.

[Francisco Neto, President & CEO at Embraer]

We continue working in opportunities to introduce our e jets, e two jets in China.

[Antonio Garcia, EVP - Financial & IR at Embraer]

So, that's part of it. Just to 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 costs. It's not only related to executive aviation.

[Antonio Garcia, EVP - Financial & IR at Embraer]

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 in you just see our SG and A cost already in Q1. It 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.

[Daniel Gasparete, Equity Research at Itau BBA]

Great. Thank you very much, Francisco and Antonio. Have a nice day.

[Antonio Garcia, EVP - Financial & IR at Embraer]

Thank you. That's very cool.

[Operator]

Next question comes from Luca Szlagi with XP Investments. Please go ahead.

[Lucas Laghi, VP - Equity Research at XP Inc.]

Good morning, everyone. Good morning Francisco Antonio, Gui. I'd like to follow-up on potential new order announcements, especially on the C390. I we have been seeing several efforts from Embraer to sell the aircraft in The United States, right? I think you guys in the third conference in the country to showcase the aircraft.

[Lucas Laghi, VP - Equity Research at XP Inc.]

Could you please remind us the strategy that you guys are playing to enter this market? I mean, you plan to sign new partnerships such as the previous one with L3 Harris, for example? Do you plan to build a production facility in The U. S. To produce the c three ninety there?

[Lucas Laghi, VP - Equity Research at XP Inc.]

And how do you see, like, Trump tariffs, in this context for your decision rationale to enter this market, in a more significant pace, going forward? Thank you, guys.

[Francisco Neto, President & CEO at Embraer]

Thank you, Lucas, for your question. Yes. Absolutely. I mean, India that I mentioned before, we see US as a great opportunity for the KC three ninety. And, you know, recently, last week, the the well, we have one C-three 90 in The US right now.

[Francisco Neto, President & CEO at Embraer]

Last week, the the aircraft was showcasing in in Las Vegas in a in a event there. So we are now presenting we participate in an important panel. In that event, we are presenting the c three ninety as a good alternative for for a tanker, but also as a multi mission aircraft that can revolutionize the US Air Force in terms of productivity. This week, the aircraft went to to Tampa. And next this Friday, he the aircraft will be in Washington also to showcase the the the product.

[Francisco Neto, President & CEO at Embraer]

So again and we are working, yes, with with with a consultant in The US, now to finalize our strategy on how to approach the market. And to answer your last question, yes, with a sizable order, the KC three ninety will be assembled in The US. The aircraft has already, Lucas, fifty seven percent of US content. And with the with the important order, if you secure an order from US Air Force, yes, these aircraft will be assembled in The US. Absolutely.

[Francisco Neto, President & CEO at Embraer]

So, again, we see as a great opportunity for us and for the US Air Force as well by introducing the KC three nineteen, its fleets.

[Lucas Laghi, VP - Equity Research at XP Inc.]

Thank you, Francisco. Very clear.

[Francisco Neto, President & CEO at Embraer]

You're very welcome. Thank you for the question, Lucas.

[Operator]

Thank you. This concludes the question and answer session for equity research analysts and investors. Now we'll start the Q and A session dedicated to the press. First, we will answer questions in English, and then we'll answer questions in Portuguese. We'll also answer questions sent via the platform chat.

[Operator]

Please let me say a short announcement for Portuguese speakers. We ask participants interested in asking questions to press the raise a hand button on the platform. The first question comes from Christian Favaro with Valor Economico. Please go ahead.

[Cristian Favaro, Reporter at Valor Econômico]

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 conversion issues. Can you clarify what happened? Just that one, I'm curious, actually. Thank you very much.

[Antonio Garcia, EVP - Financial & IR at Embraer]

Yes, Christian Bondi. As this was a thing, it's trans contract wise in Alberto

[Moderator]

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

[Antonio Garcia, EVP - Financial & IR at Embraer]

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 more than one or two weeks, then we ship the aircraft. It's just was a tiny matter for two aircraft. But in regards to output, which is really important for us, we were able to finish those aircraft. But the commercial invoicing and contract to the customer took two weeks more than we were expecting.

[Antonio Garcia, EVP - Financial & IR at Embraer]

Just that. Not a big issue, but it's just bureaucracy. Sometimes it does not help us.

[Cristian Favaro, Reporter at Valor Econômico]

No. No. Okay. Thank you very much. All questions have been answered by the analysts.

[Cristian Favaro, Reporter at Valor Econômico]

Bye bye. Thank you.

[Antonio Garcia, EVP - Financial & IR at Embraer]

Thank you, Christian.

[Operator]

Thank you. The next question comes from Jonathan Hammerdinger with FlightGlobal. Please go ahead.

[Jonathan Hemmerdinger, Managing Director at FlightGlobal]

Hello there. I I hope I think you can hear me. Francisco, we've heard, in the last several months, maybe 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.

[Jonathan Hemmerdinger, Managing Director at FlightGlobal]

I'm wondering if you can give me any update on on what development is looking like, what technologies look most promising, and if wing work is is maybe central or increasingly central to what to what you're looking at? Thank you.

[Francisco Neto, President & CEO at Embraer]

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 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 the aircraft we have that are modern and competitive. And we see a lot of opportunities and we have the the highest backlog ever of orders in the in the company.

[Francisco Neto, President & CEO at Embraer]

And there's no no other progress that I have to report to you in terms of wings or or fuselage or 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.

[Jonathan Hemmerdinger, Managing Director at FlightGlobal]

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

[Guilherme Paiva, Head of Investor Relation at Embraer]

Thank you.

[Francisco Neto, President & CEO at Embraer]

Thank you, Jonathan.

[Operator]

Thank you. The next question comes from Gabriela Araujo with Embraer. Please go ahead. Mr. Araujo, you are muted.

[Operator]

Mister, apparently, he has left. So the next question comes from the chat, and it's from Victoria Morris. Can you give us an idea of what we might expect from Embraer Commercial Aviation at the Paris Air Show?

[Francisco Neto, President & CEO at Embraer]

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

[Operator]

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

[Jonathan Hemmerdinger, Managing Director at FlightGlobal]

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

[Francisco Neto, President & CEO at Embraer]

Thanks for the question, Jonathan. Well, we have been working, I mean, very close with Pratt and Whitney for the last two or three years. And we see improvement in both fronts in the engine deliveries to our assembly lines. This year, are 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 under the wings. So again, I think they are improving.

[Francisco Neto, President & CEO at Embraer]

And, we are are happy with the development. Yes. We'd like to then to to do even faster, but we understand all the complexity of the the issues. And we we see improvement and I have been working very closely to them. Even myself, I met with them three times a year, three, four times a year just to discuss all the critical points, I mean, related to deliveries, to few of the issues, related to MROs and etcetera.

[Francisco Neto, President & CEO at Embraer]

But we see we have seen progress, Jonathan.

[Jonathan Hemmerdinger, Managing Director at FlightGlobal]

Thank you, Francisco.

[Operator]

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

[Gabriel Araujo, Breaking News Correspondent at Reuters]

Hey, folks. Good morning. Sorry about my failed attempt earlier to to make a question. Hi, Francisco and and Antonio. I'd

[Gabriel Araujo, Breaking News Correspondent at Reuters]

like

[Gabriel Araujo, Breaking News Correspondent at Reuters]

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 Go, LATAM about introducing the E2s in in in Brazil for those companies in addition to to Azul. And about the Mexican market, you have deliveries coming up for the E2 in Mexico. I'd like to know if you see room for for the c three ninety two to also enter that country in in the future and if the E2 negotiations and and and the purchase by by Mexicana would help the the c $3.90 net market.

[Gabriel Araujo, Breaking News Correspondent at Reuters]

Thank you.

[Francisco Neto, President & CEO at Embraer]

Hi, Gabriel. Thanks thanks for 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 later, but we don't have any any progress to report to you at this point of time. And Azure is our customer.

[Francisco Neto, President & CEO at Embraer]

We are we keep delivering E2s to to Azul with it 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 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 we have other potential customer in Mexico for that aircraft, but also in North America. Right? Then we have Porter in the North Of North America, and then we have Mexicana in the South Of North America.

[Francisco Neto, President & CEO at Embraer]

Well, Mexico is another potential customer for the c three ninety, but we don't have any any combination between the e two or c three ninety for that market. We are working in both fronts in Mexico. In Mexico, we now we are delivering the aircraft already, and we we do the best we can to make the Mexican operation a great success, which will be very important for the for our for our E2. And the and the city 90 the same. We are working with them with an opportunity to introduce the city 90 in Mexico as well.

[Gabriel Araujo, Breaking News Correspondent at Reuters]

Have a great day.

[Operator]

Thank you. This concludes the question and answer session in English for the press. This q and 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.

[Moderator]

First question from Ricardo Mayer 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 PDW as opposed to an x six six 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?

[Francisco Neto, President & CEO at Embraer]

Ricardo Francisco.

[Moderator]

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.

[Moderator]

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 Djuring from DefezaNet. What is the scope of the agreement signed with Turkey at the last LAAD in April?

[Moderator]

Does it include any military developments? Thanks for the question, Nelson. The scope of that MoU we signed with Turkey at LAAD is for a 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.

[Moderator]

Now the two fronts that are part 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. The next question is from Rafael Coracini from Intelligentsia Finocera. Please go ahead, Mr. Coracini. Hi, can you hear me?

[Moderator]

Yes, we can. Rafael, please go ahead. Thank you for taking my question. Which is about cost control. Does that include changing suppliers?

[Moderator]

Is there a possibility that Embraer will be switching American suppliers because of U. S. Tariffs to suppliers from other locations? And if so, in which segments? I'll take your question, Rafael.

[Moderator]

In the aerospace 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. We're just buckling up for that stage. To switch suppliers in the aerospace industry, it takes years.

[Moderator]

So we're not going to a different location. We're just working on our current structure. And again, we have four divisions,

[Guilherme Paiva, Head of Investor Relation at Embraer]

and

[Moderator]

they all work based on the same principle. They apply to everything. Next question is from Rodrigo Rot from Aeroflap. Go ahead, Mr. Rot.

[Moderator]

Mr. Rot, Your microphone is on mute. Can you hear me now? Yes. I have a question about the cargo version of the e two.

[Moderator]

What are Embraer's plan 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.

[Moderator]

Thank you for your question. And we have developed the cargo version for the E190 E1. And the plan now is to introduce that product into the market. So that's what we're focusing in. There are no additional plans other than that.

[Moderator]

If it all goes well, then we may take a step towards the e one nine five. But right now, we're focusing on introducing the e one ninety e one cargo aircraft. Okay. Thank you. This concludes Embraer's Q and A session and the conference for today.

[Moderator]

Thank you for joining us, and have a great day.

Participants

Executives

• Guilherme Paiva, Head of Investor Relation
• Francisco Neto, President & CEO
• Antonio Garcia, EVP - Financial & IR

Analysts

• Marcelo Motta, Research Analyst at J.P. Morgan
• Myles Walton, Managing Director at Wolfe Research LLC
• Kristine Liwag, Executive Director at Morgan Stanley
• Steve Trent, Managing Director at Citi
• Andre Ferreira, Capital Market Analyst at Banco Bradesco
• Jordan Lyonnais, Equity Research Associate at Bank of America
• Lucas Marquiori, Associate Partner Equity Research at BTG Pactual
• Daniel Gasparete, Equity Research at Itau BBA
• Lucas Laghi, VP - Equity Research at XP Inc.
• Cristian Favaro, Reporter at Valor Econômico
• Moderator
• Jonathan Hemmerdinger, Managing Director at FlightGlobal
• Gabriel Araujo, Breaking News Correspondent at Reuters