Embraer-Empresa Brasileira de Aeronautica Q2 2025 Earnings Report

Embraer-Empresa Brasileira de Aeronautica EPS Results

• Actual EPS: -$0.02
• Consensus EPS: $0.47
• Beat/Miss: Missed by -$0.49
• One Year Ago EPS: $0.44

Embraer-Empresa Brasileira de Aeronautica Revenue Results

• Actual Revenue: $1.82 billion
• Expected Revenue: $1.67 billion
• Beat/Miss: Beat by +$150.33 million
• YoY Revenue Growth: N/A

Embraer-Empresa Brasileira de Aeronautica Announcement Details

• Quarter: Q2 2025
• Date: 8/5/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, August 5, 2025
• Conference Call Time: 8:00AM ET

Embraer S.A. 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-Empresa Brasileira de Aeronautica Q2 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Record Q2 Performance: Embraer posted its highest-ever second-quarter revenue of $2.5 billion, delivered 30% more aircraft year-on-year, and achieved a 10.5% adjusted EBIT margin—the strongest for Q2 in a decade.
• Positive Sentiment: Backlog hit an all-time high of BRL 29.7 billion, boosted by major orders from SAS (45 E195-E2 with 10 options) and SkyWest (60 E175 with 50 options), corresponding to a book-to-bill ratio above 1.8 across Commercial Aviation.
• Neutral Sentiment: Embraer reaffirmed its full-year guidance, targeting $7–7.5 billion in revenues, a 7.5%–8.3% adjusted EBIT margin, over $250 million in free cash flow, and deliveries of 77–85 commercial and 145–155 executive jets.
• Positive Sentiment: Operational efficiency improved via production-leveling initiatives—particularly on the Praetor and KC-390 lines—with double-digit gains in productivity, shorter cycle times, and reduced production costs.
• Negative Sentiment: U.S. tariffs on Brazilian aerospace products remain a headwind at 10%, already factored into 2025 forecasts, with the potential for upside only if tariffs are lifted through ongoing bilateral negotiations.

Presentation

[Guilherme Paiva, Head - IR & M&A at Embraer]

Good morning, ladies and gentlemen, and 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 Gipaiva, and I'm the Head of Investor Relations and M and A for Embraer.

[Guilherme Paiva, Head - IR & M&A at Embraer]

I want to welcome you to our second quarter earnings conference call. The numbers in this presentation contain non GAAP financial information to help investors reconcile EVE's financial information and GAAP standards to Embraer's IFRS. We remind you EVE's results will be discussed at the company's conference call. It is important to mention that our numbers are presented in the U. S.

[Guilherme Paiva, Head - IR & M&A at Embraer]

Dollar 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 Comicion de Valores Moduliares or CVM.

[Guilherme Paiva, Head - IR & M&A at Embraer]

At this time, all participants are in a listen only mode. We will give instructions later on for participation in the two question and answer sessions. Participants on today's conference call are Francisco Gomes 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 Q2 results.

[Guilherme Paiva, Head - IR & M&A at Embraer]

In the second part, we will host a Q and A session only for investors. 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 Gomez. Please go ahead, Francisco.

[Francisco Neto, President & CEO at Embraer]

Good morning, everyone. It is a pleasure to be here with you to share our second quarter twenty twenty five year results. We had another strong quarter, reinforcing the consistency in our sustainable growth journey. Embraer delivered the highest second quarter revenue in its history, totaling billion dollars Our adjusted EBIT margin was 10.5%, the highest level for the second quarter over the past decade. The backlog recorded a new BRL29.7 billion all time high, driven by strong demand across all business units.

[Francisco Neto, President & CEO at Embraer]

Deliveries were up 30% year over year, result of our focus on operational efficiency and on our production leveling initiative. The book to bill ratio was closer to two:one in the last twelve months across all business units. U. S. Tariffs continue to be a major concern to our business, but with an important step forward last week, highlighting the importance of our industry, not only for Brazil, but also for The U.

[Francisco Neto, President & CEO at Embraer]

S. We are confident about further progress in negotiations, in line with other recent agreements in our sector that have set a positive precedent. Now the main highlights for the company during the quarter. Commercial aviation performed very well across both E1 and E2 platforms. SAS ordered 45 E195 E2s with 10 additional options.

[Francisco Neto, President & CEO at Embraer]

At the same time, SkyWest purchased 60 E175s with 50 additional options. The division's backlog reached billion dollars with a strong 1.81 book to bill over the last twelve months. Executive Aviation delivered another strong quarter with record second quarter revenue of circa $50,000,000 in a robust $400,000,000 backlog, supported by a 2.4:one book to bill over the past twelve months. In Defense and Security, Portugal confirmed its sixth KC-three 90 purchase, including 10 additional options that may be used by other European countries to facilitate future acquisitions. Lithuania also became the seventh NATO country to select the aircraft.

[Francisco Neto, President & CEO at Embraer]

The division ended the quarter with a $300,000,000 backlog and a trailing 3.6 to one book to bill in the last twelve months. Service and support continued its global expansion, signing eight new pool contracts, increasing its MRO capabilities with Commuter Air and launching full flight simulator partnership with CAE in Montreal, Canada and Madrid, Spain. The division closed the quarter with a $900,000,000 backlog and a two:one book to bill, that means double of sales versus revenue in the last twelve months. We continue to work in our production leveling initiative to increase efficiency, productivity, output and improve cash flow. In the previous quarter, we shared with the market the improvements in our Praetor production line.

[Francisco Neto, President & CEO at Embraer]

This quarter, we highlight the KC-three 90 line in the defense segment, where we have also seen significant operational gains over the past year. These improvements include double digit increases in aircraft production, operational efficiency, reduction in production cycle time and decreasing cost of pool quality, as you can see in the presentation slide. About tariffs, let me share with you what we have been doing to manage this situation. We have been very active with high level authorities in Brazil and in The U. S.

[Francisco Neto, President & CEO at Embraer]

To demonstrate the relevance of our company in terms of job creation, investments, service to passengers and to support the development of a negotiated solution as we have seen with other countries. As you can see in this slide, our company plays a key role in The U. S. Regional aviation market as our aircraft transports approximately 100,000,000 passengers every year. Our business currently supports 13,000 jobs in the country and should create another 5,500 jobs by 02/1930, with an impressive trade balance of billion in favor of the U.

[Francisco Neto, President & CEO at Embraer]

S. Embraer is also willing to invest another BRL500 million in The U. S, which should create roughly another 2,500 jobs in the country, with a combination of our organic growth in the country and the potential adoption of our KC-three 90 platform by the U. S. Air Force before the end of the decade.

[Francisco Neto, President & CEO at Embraer]

We are excited to say we are in advanced conversations with a relevant U. S. Partner for this project. We continue to believe in, in Admiral Gate Framework four, a return to the zero tariff rule for the global aerospace industry, which was the status quo over the previous forty five plus years. We also continue to encourage a constructive dialogue between the Brazilian and the U.

[Francisco Neto, President & CEO at Embraer]

S. Governments to reach an amicable resolution. In the short term, as you know, we have taken measures to preserve this year's results. The impact of the current 10% tariffs is already considered in our forecast for the year. This means upside if tariffs return to zero soon.

[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 comparisons. In Commercial Aviation, revenues increased 4% because of product and customer mix, and the adjusted EBIT margin remained flat at 4.3%. In Executive Aviation, the top line soared 64%, supported by higher volumes and product mix. The adjusted EBITDA margin increased to 14.5% because of operating leverage and cost containment initiatives.

[Francisco Neto, President & CEO at Embraer]

Moving to Defense and Security, revenues grew 18% because of A29 Super Tucano production. The improvement of almost 10 percentage points in the adjusted EBIT margin to 9.2% reflects higher A29 volumes and better KC-three 90 customer mix. In service and support, revenues rose 13%, driven by the ramp up of OGMAS GTF engine shop. The adjusted EBIT margin declined slightly to 15.5% mainly due to higher past due credit provisions. EV achieved an important milestone in the second quarter with the announcement of its first binding order with Revo for 10 vehicles in 40 options, including aftermarket services.

[Francisco Neto, President & CEO at Embraer]

Let me pass it over to Antonio, so he can highlight the main financial points of the quarter.

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

Thank you, Francisco. Good morning and good afternoon to everyone. There are a lot of moving parts around the world, but let me present to you what we really control, our operational and financial results. Our performance in Q2 was brilliant and consistent, as you see shortly. First and foremost, let me reiterate our 2025 guidance.

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

We are confident we will achieve between R7 billion to R7.5 billion dollars in revenues, R7.5 percent and R83 percent in adjusted EBIT margin and more than million in adjusted free cash flow from a financial perspective. Meanwhile, we expect to deliver between seventy seven and eighty five aircrafts in commercial aviation and one hundred and forty five one hundred and fifty five in executive aviation from an operational point of view. Turning to the quarter, all my comments will be based on year over year comparison unless noted. Let me move to Slide 12, begin with deliveries. Embraer delivered six to one aircraft across all business units for a 30% increase.

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

In commercial aviation, deliveries totaled 19 aircrafts in line with the same period of last year. In the first half of the year, we delivered 26 commercial aircrafts, which represents 32% of the midpoint of our full year guidance of 81 aircrafts, marginally below the five years average of 35% for the first semester. In Executive Aviation, we delivered 38 jets, of which 21 were in the light segment and 17 in the midsize, for an increase of 41%. More importantly, in the first half of the year, we delivered 61 business jets, which accounts for a 41% of the midpoint of our full year guidance of 150 jets, well above the five years average of 32% for the first semester. In Slide 13, our company wide backlog recorded a new all time high of 29,700,000,000 up a significant 40%.

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

Looking at each division, the backlog for Commercial Aviation grew 16%, while for Executive Aviation was 62%, reflecting the growing demand for our aircrafts in both segments. In defense and security, the backlog doubled, supported by strong momentum in KC-three 90 and A-twenty 9 Super Tucano sales. While in service and support, the backlog increased 55%, highlighting continued and consistent growth in the segment. Moving to revenue, our top line was billion, the best second quarter in our history and 22% higher. In our breakdown by business, we can see commercial and executive aviation were responsible for more than 60% of the revenue, followed by service and support with 25% and defense and security with 12%.

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

Moving to the next slide, Slide 14. We generated million dollars in adjusted EBITDA in the second quarter with a 13.5% margin. Now adjusted EBIT for the quarter was R192 million dollars with a 10.5% margin, the best second quarter margin over the past ten years. I'd like to highlight a key milestone. In the first half of the year, we achieved adjusted EBIT margin of 80.7%, a remarkable step up from 1.1% average over the past five years.

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

While this is a significant achievement, we are aware that the second half of the year will bring important challenges, driven mainly by inflationary pressures, foreign exchange rate volatility and ongoing tariff discussion with U. S. Now let's move to the next slide, Slide 15. In second quarter, we consumed million in adjusted free cash flow, mainly because of the R312 million dollars increase in working capital in preparation for higher numbers of aircraft delivered in the next two quarters. For example, we have a handful of aircraft to be delivered in late June that moved to the right.

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

Looking now to our investments, in the second quarter, excluding EVE, we allocated a total of $97,000,000 or 10% lower. It includes $53,000,000 CapEx, million dollars in addition to intangibles, R9 million dollars in research and R90 million dollars in the pool program to support new contracts. It is important to highlight, our capital allocation remains focused on executive aviation service and support, the segments with highest return rates, especially in U. S. Market.

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

To complete this slide, there are two important points here. First, our reported net income was BRL79 million during the quarter with a 4.3% margin, which was roughly BRL100 million lower than our reported EBIT because of the negative noncash impact of mark to market of EV warrants and the losses associated with Fiasu restructuring. Second, our adjusted net income ended R5 million dollars in the red, with a margin of minus 0.3%. The almost R85 million dollars shortfall to our reported net income was because of negative R163 million dollars in deferred taxes, driven by stronger Brazilian foreign exchange rates and positive R79 million dollars adjustment for EBITDA results. Let's move to Slide 16.

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

I'd like to start by drawing your attention to the top right corner. Over the past twelve months Embraer, excluding EV, has significantly reduced both its gross and net debt position by approximately $560,000,000 and $720,000,000 respectively. We closed the second quarter with a net debt to EBITDA, excluding lease ratio of 0.7 times, a substantial improvement from two times a year ago. That said, the negative free cash flow of million dollars for Embraer standalone in the first half of the year because of business seasonality has contributed to a temporary increase in leverage compared to 2024. As part of our liability management strategy, we remain focused on extending debt duration and lower our cost of capital.

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

As results, our average debt maturity without EBIT has increased to six point one years, up from three point seven years at the end of last year. Slide 17, to conclude my presentation, I'd like to talk briefly about shareholders and shareholder remuneration. Firstly, I would like to thank you all for your support and say that I'm proud to mention our company celebrated in July our twenty five years listing anniversary at the New York Stock Exchange. Second, Embraer declared nearly BRL143 million in interest on equity during the quarter, which translates to BRL0.19 per share. This amount may be complemented by a top up dividend if needed to meet the minimum 25% net income distribution required by Brazilian corporate law.

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

The full amount will be paid in a single installment after our twenty twenty six Annual Shareholders Meeting. With that, I hand back to Francisco for his final remark and thank you very much.

[Francisco Neto, President & CEO at Embraer]

Thank you, Antonio. In summary, our defense business brought good news from Europe with Portugal's new purchasing and Lithuania's selection of the KC-three 90. SkyWest order of our E175 aircraft consolidates our dominant position in The U. S. Regional market.

[Francisco Neto, President & CEO at Embraer]

And I will take the opportunity to say thank you to SAS, a long standing partner of Embraer through the E1 platform and now as a new operator of the E2 family. Our executive aviation maintained its strong performance in sales and deliveries. The second quarter of twenty twenty five was another milestone for Embraer. We delivered record revenues, the highest second quarter adjusted EBIT margin in a decade and reached the new all time high backlog with back to back significant orders year to date. We continue to work hard to generate value for our customers and our shareholders, and we are optimistic about a likely positive outcome for the current U.

[Francisco Neto, President & CEO at Embraer]

S. Tariff overhang. I will also thank all the support we received from our U. S. Customers and suppliers like American Airlines, SkyWest, Alaska, United, AirCap, General Electric, Honeywell, RTX, Park Hennepin and Eton, among others in the tariff's negotiation process.

[Francisco Neto, President & CEO at Embraer]

And I conclude this presentation by reaffirming the foundation of our culture, safety first and quality always. Thanks for your trust in our company and let's now start the Q and A session.

[Operator]

We now start the question and answer session. We remind you again that 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. We also highlight 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 the raise a hand button on the platform. When your name is announced, please make sure your microphone is on and start your question. To give everyone a chance to participate, we request to ask just one question per time. First part of the Q and A session will be The first question comes from Marcelo Malta with JPMorgan. Go ahead.

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

Hi, everyone. Thank you for taking the question. It's regarding the outlook for the second half. During the conference call, Antonio mentioned about FX volatility, potential tariffs, inflationary pressure. So just wondering how big could this challenge be?

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

Because when we look at the historical EBIT margin for the second half, usually, it is much stronger than what we see in the first half given the seasonality. So just wondering if there is what are the risks and opportunities to revise the guidance upward during the second half given that the first half was very strong? Thank you.

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

Good morning, Marcelo, and thanks for the nice question. I was expecting the first place. You're right, year to date, we are at 8.7% and we all know our margins at 8.3%, but some comments here, we only have, I would say, percent year to date tariffs impact than big amount of tariffs still in our inventory to be invoiced second half of the year. That's already something that was not in our plan. Dollar gets weaker, real is getting stronger.

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

That's why when you do the translation, there are cost in reals. We have also a negative impact and also the APCA in Brazil, the inflation that we put our forecast, it seems a little bit stronger than what's planned and more or less 1.3%. If you put in a nutshell, I would say beyond the safe side, we are keeping the guidance as long as the next months and quarters evolve, then we could revise, but we are not in position to do it. And nobody knows what can happen is still in the stereo station. That's why I would say the guidance seems to be safe today, but we do prefer to be more waiting for months in order to tell the market a different story right now.

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

Perfect. Very clear. Thank you.

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

Thank you, Marcelo.

[Operator]

The next question comes from Christine Diwag with Morgan Stanley. Please go ahead.

[Kristine Liwag, Executive Director at Morgan Stanley]

Francisco, Antonio and Guy, wow, like what a really strong operating quarter. I guess, with U. S. Customers facing the prospect that they would have had to pay 50% tariff on Embraer E Jets if the aerospace exemption wasn't added. How's your conversations with those customers?

[Kristine Liwag, Executive Director at Morgan Stanley]

Because now that for now, tariffs are gone, and they're looking at their fleet, is it increasing the urgency for them to refleet and could you see potentially more orders out of The US and E175s as they evaluate their fleet needs?

[Francisco Neto, President & CEO at Embraer]

Hi, Cristina. Francisco here. Thanks for the question. Actually, Cristina, since the implementation of the first round of tariffs last April, we have been working to mitigate the impacts for us and for the customers. And for our customers, especially the A175 customers, the final tariff is lower than 10% because of The U.

[Francisco Neto, President & CEO at Embraer]

S. Content that we had in our aircraft. So then since that time we have been working with them and we were able to deliver a few aircraft since that month. But our focus is really to restore the zero tariffs. So we are happy that we were able to come from 50% to 10%, but which will reduce a lot of the impact impact for our customers.

[Francisco Neto, President & CEO at Embraer]

And we are working with them to deliver the aircraft. But in parallel, we are working hard to restore the zero tariff and we see some precedents in the market. So about the new orders, well, I mean, we're happy with the orders we have for U175 this year. And we do not expect new big orders for U175 along this year.

[Kristine Liwag, Executive Director at Morgan Stanley]

Great. Thank you. I'll keep it to one.

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

Yes. Next

[Operator]

question comes from Myles Walton with Wolfe Research. Please go ahead.

[Myles Walton, Managing Director at Wolfe Research LLC]

Maybe for Antonio, within defense, obviously, great performance. In commentary, you talked about POC completion driving a lot of the margin accretion. So I guess based on that, why wouldn't this level of performance continue if it's POC driven and not eight twenty nine Super Tucano unit of deliveries?

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

Thanks, Mario, for the question. In fact, we are, as you could see that we are improving the performance and for sure, the Super Tucano helps a lot. I would say, for me, defense and security is a straight line to move it to the higher single digit in the coming quarters. I don't know if it's going to happen this year, but we are going there because the majority of our POC customer right now is shifting from local contracts to export contracts, including supertucanders. By doing that, I would say, accretive for a higher single digit, even double digit margin, but not yet.

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

I would say, let's wait probably next year, but you could see the progression is clear, crystal clear about our margin way for defense. And I would say, in everything we are doing is on the POC and when you revise the baseline, assuming the production leveling and the efficiency we are showing here, I would say we have, I would say more chances than

[Myles Walton, Managing Director at Wolfe Research LLC]

Okay.

[Francisco Neto, President & CEO at Embraer]

And just to be clear, the A29s also follow the PLC method.

[Myles Walton, Managing Director at Wolfe Research LLC]

Yes.

[Francisco Neto, President & CEO at Embraer]

It's a mix of both the A29s and the KC-three 90.

[Myles Walton, Managing Director at Wolfe Research LLC]

Yes. Okay. And then just a clarification, those deliveries that moved to the right, were those moved to the right because of tariffs, were they moved to the right because of supply chain, any color on that?

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

No, we are talking about just for commercial aviation miles and I would say everybody knows about the Azul situation and we are waiting the lesser to give us the authorization to issue the to invoice the aircraft and we have to June some commercial issue to other customer, but I would say nothing that is going to compromise the guidance of this year is really that I would say the paperwork was not finished to invoice the aircraft. But in regards to production outputs, we produce much more what we deliver for commercial aviation, let's say, continues to see effects of production leveling, but not invoicing those aircraft at least for commercial.

[Myles Walton, Managing Director at Wolfe Research LLC]

Okay. Thanks so much.

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

Thank you.

[Operator]

The next question comes from Ronald Epstein with Bank of America. Please go ahead.

[Ronald Epstein, Senior Equity Analyst at Bank of America]

Hey, good morning, guys. Can you hear me?

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

Yes, wrong.

[Ronald Epstein, Senior Equity Analyst at Bank of America]

Great. So I'm not sure if you can answer this, but I'm going to ask it anyway. If you look at the relative valuation of Embraer compared to, say, Joby, Joby is 16,000,000,000 today. You guys market cap in The US is 10,000,000,000. Archer's market cap is 6,000,000,000.

[Ronald Epstein, Senior Equity Analyst at Bank of America]

Would you consider cutting Eve loose? Because it seems like maybe there would be more value there as a separate company than as part of Embraer, given that Joby and Archer are in that same market and other considerations.

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

Ron, thanks for the question. Difficult to be answered, I would say. Our evaluation pick up a lot in the last years from one side. And we do see a lot of value, a premium for being together when we talk about synergies, when we talk about efficiency, when you talk about product development. That's why we didn't change our strategy to be one conglomerate of our business unit.

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

And I would say, seeing also Jobe and we have EV, EV still needs more liquidity order to pick up as I would say. Let's see how is developed, but we don't have any thoughts to change the way we are structured today as a full corporation with all units and really enjoy the premium for being together.

[Francisco Neto, President & CEO at Embraer]

And remember that EV is a separate company, right?

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

That's why let's see as long we have more liquidity for EV, we are going to see those effect around. But I would say for the overall Embraer, I would say legacy Embraer, we are so happy what we are doing right now.

[Ronald Epstein, Senior Equity Analyst at Bank of America]

Got it. And if I may, as follow on along that same line of questioning. Do you guys have any update on the thoughts on product development? What's going on there? Is there anything you can share with the market regarding potential new aircraft?

[Francisco Neto, President & CEO at Embraer]

Arun, thank you. You always come with a question. We keep investing in new technologies. As we mentioned before, we don't have any other news in that to share with the market at this point of time.

[Ronald Epstein, Senior Equity Analyst at Bank of America]

Got it. Thank you very much.

[Francisco Neto, President & CEO at Embraer]

You're welcome, always.

[Operator]

The next question comes from Andre Ferreira with Bradesco BBI. Sorry, please go ahead.

[Andre Ferreira, Capital Market Analyst at Banco Bradesco]

Good morning. Thanks for the space here and congrats on the results. I have one question. You mentioned in the second quarter service segments there were higher credit provisions. Just wanted to check if those are related to the $9,000,000 in the income statement.

[Andre Ferreira, Capital Market Analyst at Banco Bradesco]

And if not, if you could please explain what do they mean and the impacts they had on the service EBIT margin? Thank you.

[Guilherme Paiva, Head - IR & M&A at Embraer]

Hi, Andre. Thanks for the question. It's Guy here. We know that there is a customer going through a restructuring process. So the charges are related to the process.

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

Yes. Just to complement, have, I would say, from Q2 onwards, we have almost zero effect from this restructuring as well. Everything we booked already in Q2.

[Andre Ferreira, Capital Market Analyst at Banco Bradesco]

Okay, thank you. And the specific impacts on service?

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

That was specific effect on service on the EBIT side when we booked the less debt provision for bad debts. That was the main impact on services from the restructuring standpoint.

[Guilherme Paiva, Head - IR & M&A at Embraer]

And just to be clear, Andrea, I mean, clients buy aircraft, but they also buy services and parts. So that's related to that.

[Francisco Neto, President & CEO at Embraer]

Yes.

[Andre Ferreira, Capital Market Analyst at Banco Bradesco]

What's the latest lesser write off with this?

[Ronald Epstein, Senior Equity Analyst at Bank of America]

The

[Operator]

next question comes from Lucas Steves with Santander. Please go ahead.

[Lucas Esteves, Equity Research Associate at Santander Corporate & Investment Banking]

Good morning, guys. Thanks for the opportunity here, and congratulations for the results. I have a question, as Ron said, I don't know if you can answer, but I will ask anyway. On the Polish potential order for defense for the c three ninety, do you have any updates? And also on that, would it make sense for you to build a new line of a new assembly line for the C-two 90 in Poland even if you don't get the order from them to build the aircraft for NATO countries?

[Francisco Neto, President & CEO at Embraer]

Lucas, thank you for your question. Francisco speaking. We continue working with Poland in that campaign. We have, as in other campaign, have a positive review about our opportunities to win. And well, I mean, we have a plan to increase production of KC-three 90 from now to 2,031, one per year.

[Francisco Neto, President & CEO at Embraer]

This year, we should produce five and we are in our path to achieve 10 units per year by thousand and thirty. And at this point of time, I mean, are working with big campaigns as India and The U. S. Those campaigns for sure would require localization of the production of the aircraft. In case of Poland, this will depend on other deals in the region for us to use Poland as a hub.

[Francisco Neto, President & CEO at Embraer]

We had this plan with them, I mean, with commercial jets. But unfortunately, they decide to go to the competition. So this changes a little our total plans for the country, but we still have plans for the KC-three 90 to do some local, more localization if we win the order.

[Lucas Esteves, Equity Research Associate at Santander Corporate & Investment Banking]

Thanks, Francisco. If I may make a follow-up on tariffs, just a quick one. Reading how The U. S. Trade representative writes on their website about the World Trade Organization agreement on civil aircraft, They say the agreement requires signatories to eliminate tariffs on a nondiscriminatory basis to other signatories.

[Lucas Esteves, Equity Research Associate at Santander Corporate & Investment Banking]

When what do you understand about the need for The U. S. To sign out of this agreement if they keep the 10% tariffs for Brazil on aircraft?

[Francisco Neto, President & CEO at Embraer]

This question is difficult to me to answer. You should answer the officials in U. S. But we are working hard. We are advocating the restoration of the zero tariff.

[Francisco Neto, President & CEO at Embraer]

And we see this as part of other agreements. You see agreements between US and UK and more recently U. S. And Europe. And yes, we believe we can be the next in a bilateral negotiation between Brazil and The U.

[Francisco Neto, President & CEO at Embraer]

S. Or even U. S. Recognizing the importance of our industry to generate jobs and make investments in the country.

[Lucas Esteves, Equity Research Associate at Santander Corporate & Investment Banking]

That's pretty clear, Francisco. Thanks for that and good luck.

[Francisco Neto, President & CEO at Embraer]

You're welcome. Thank you.

[Operator]

The next question comes from Andre Mazzini with Citi. Please go ahead.

[Andre Mazini, Head of Latam Research at Citi]

Yes. Thanks, Francisco, Antonio and Guy. So you mentioned in the prepared remarks that The U. S. Capital allocation is going to be focused on executive aviation.

[Andre Mazini, Head of Latam Research at Citi]

So why don't you confirm if there will be no commercial aviation in the expansion of the Melbourne, Florida facility you guys put out there? And or if you we on the contrary, if you could see some e family jets coming out of there, particularly as the A220 does have an assembly line in Mobile, Alabama, right? They have U. S. Production.

[Andre Mazini, Head of Latam Research at Citi]

So how you're thinking about the Melbourne, Florida facility? Thank you.

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

Andre, thank you for the question. Welcome, by the way. From investments we are doing right now in U. S, we have two big initiatives. Firstly, is to set up capacity in our Melbourne facility for the business aviation.

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

We are talking about $90,000,000 We are more or less almost finalizing those investments. And second, we are also investing more than $70,000,000 in Texas to expand our service and support facility. That's are the two big investments we are doing right now. And about new relocation of bulk production, I'm going to pass to Francisco for any remark here.

[Francisco Neto, President & CEO at Embraer]

Andrea, thanks for your question. Again, for commercial jets, we have a hybrid line in San Jose Dos Campos, where we assemble the E1s and the E2 jets, the same line. So I mean, it's very efficient line for the volume we intend to make every year. And we believe that our business plan for U. S.

[Francisco Neto, President & CEO at Embraer]

Is also very attractive for both sides. So I mean, 40% of our aircraft is already aided by U. S. Equipment, U. S.

[Francisco Neto, President & CEO at Embraer]

Parts. And if you look at the next five years, according to our production planning, the next five years, we expect to buy $21,000,000,000 in U. S. Equipments and parts and we will export only $13,000,000,000 So in five years, we will generate impressive $8,000,000,000 surplus for The U. S.

[Francisco Neto, President & CEO at Embraer]

So we have a very good business model already for both countries. That's why we are advocating for the restoration of the zero tariff. And other changes in their footprint, yes, we are making studies. But again, we believe that we have a very robust, I mean, economic proposal, economic value for The U. S. With the footprint we have today.

[Andre Mazini, Head of Latam Research at Citi]

Very clear. Thanks, Francisco Antonio. Good to be here. Thank you.

[Operator]

The next question comes from Daniel Gasparelli with Itau BBA. Please go ahead.

[Daniel Gasparete, Equity Research at Itau BBA]

Thank you very much for the opportunity. The first question, I would like confirmation about something that's on '27, the first question. I'm not sure if I understood correctly, but he said that 20% of the tariff impact expected for the year happened I'm not sure if I got that correctly. I would like him to confirm if possible, please.

[Daniel Gasparete, Equity Research at Itau BBA]

And the second question would be if you guys could provide us some timetable on the test flight of Yves. It's expected now, right now for the second half of this year. When you guys are expecting that to happen, if you could provide us with some outlook for that? Thank you very much.

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

Yes, Parete, thanks for your question. Firstly, about the tariffs year to date we have around 20% of the tariffs impact already in our profit and loss and cash flow. And that's why we do expect a bigger hit in the second half of this Q3 and Q4. That's why we are a little bit, I would say moderate by just reaffirming our guidance for sure we are performing better, but that's why it's going to hit more our profit and loss in the second half, 80%. We said 90 bps, so you could calculate, we have 20% right now year to date.

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

The remaining 80% is going to flow Q3 and Q4. And for Eva, I'm going to pass to Francisco here.

[Francisco Neto, President & CEO at Embraer]

For Eva, we are now working the final assembly of parts in the prototype and plan for the first flight is for December this year.

[Daniel Gasparete, Equity Research at Itau BBA]

Francisco, sorry, December. Is that correct?

[Francisco Neto, President & CEO at Embraer]

December, yes, correct.

[Daniel Gasparete, Equity Research at Itau BBA]

Okay. Thank you very much. Thank you very much, guys. Have a nice day.

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

You're welcome. Thank you.

[Operator]

The next question comes from Lukas Laki with XP Investments. Please go ahead.

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

Hello, good morning everyone. This is Antonio Gui. Congratulations on the strong results. I have one question regarding working capital. I mean, we're seeing a lot of production leveling initiatives on the executive division already bearing fruits regarding the delivery pace that we're seeing on the defense.

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

Francisco showed on the presentation some initiatives bearing fruits as well in terms of efficiency gains for the KC-three 90. My question is regarding the potential room that you guys see for working capital optimization following all of your production level initiatives going forward. How is the space that you see for some free cash flow improvement regarding these initiatives going through the working capital in the upcoming quarters? So some free cash flow discussion on your working it would be very insightful as well. Thank you, guys.

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

Thanks Lucas. Thanks for the great question. I would say short term, we are continues fight for our cash flow steering, which is we are not happy because we accumulate negative cash flow Q1, Q3, then balance a little bit in Q3, then move all highly positive in Q4. We are not there yet. But we, I would say, reiterate our guidance.

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

That's one of the indicators that we are quite at most because of still the highest portion of the revenue is going to happen in Q3 and Q4. But for the long term, I will pass to Francis to give some ideas about what we could monetize and the working capital, especially inventories.

[Francisco Neto, President & CEO at Embraer]

Lucas, thanks for your question. Actually, have a lot of good initiatives to reduce inventory and to increase the inventory turn for the next years. It is true that in the past years, we have suffered with inventory levels because we plan it for a certain amount of aircraft range, but because of the supply chain issues, we are not able to deliver all the aircrafts we planned, we put in the production process. But we are now year after year improving this process and we want to improve further in 2026 onwards. So the combination of a more accurate production planning with this production leveling initiatives and other initiatives we have in place, we expect to increase our inventory turn for currently 1.6 to close to three times a year.

[Francisco Neto, President & CEO at Embraer]

This will release almost $1,000,000,000 from our inventory in three years.

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

Perfect. It's very clear. Thank you, Francisco and Antonio. Have a nice day.

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

Thanks, Luca. Thank you.

[Francisco Neto, President & CEO at Embraer]

You too.

[Operator]

The next question comes from Ronald Epstein with Bank of America. Please go ahead.

[Ronald Epstein, Senior Equity Analyst at Bank of America]

Hey, guys. I'm back. Just maybe one more question and this was asked sort of, but just want to maybe peel back the onion a little bit on it more. When you think about the production footprint, why wouldn't it make sense to move more executive aviation production to The U. S. Given that so much of the market's here anyway?

[Francisco Neto, President & CEO at Embraer]

Well, Rome, we have an important part of our production of executive jets in The U. S. Already. On top, as I said before, I mean, our aircraft, they have a content of close to 40% of U. S.

[Francisco Neto, President & CEO at Embraer]

Equipment. So we believe we have a good combination today, I mean, to allow us to be very competitive. Yes, we are always making studies what else we can do in terms of footprint. We're trying to be as lean as possible to offer good and competitive products to our customers.

[Ronald Epstein, Senior Equity Analyst at Bank of America]

Got it. And then the one question that nobody has asked yet surprisingly is, how are sales campaigns going on for the big airplanes, for the E1s and the E2s? You guys do have a market outside The U. S, right? So what's going on there? And if you can give some color around that?

[Francisco Neto, President & CEO at Embraer]

Absolutely, very good question. Mean, yes, we had a good start this year with the two important wins. I mean, E and A in Japan, you know how important is that airline, I mean globally in our SAS. So both orders we, ANA is up to twenty, fifteen plus five and SAS 45 plus 10, very good important orders. And we are working in many other campaigns that we expected to see the results in the next month.

[Francisco Neto, President & CEO at Embraer]

So we are optimistic that we announce new orders for E2 especially. E1, so we got to the 60 plus 50 from SkyWest big order. So we do not expect more orders for E1s for

[Ronald Epstein, Senior Equity Analyst at Bank of America]

Got it. Thank you very much.

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

Ron, for the E1, we are seeing also some movement outside The U. S. As well for our campaigns, not big numbers, but some interest from other customers on the new E1s for outside The U. S.

[Ronald Epstein, Senior Equity Analyst at Bank of America]

Got it. Thanks.

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

Thank you.

[Operator]

The next question comes from Alberto Valerio with UBS. Please go ahead.

[Alberto Valerio, Executive Director at UBS Group]

Hi, good morning, Francisco Antonio Gui. Thank you for taking my questions. And I would like to congratulate you guys for the efforts that we did for mitigate this tariff with the authorities in Brazil, U. S. And also the American companies.

[Alberto Valerio, Executive Director at UBS Group]

My question is regarding tariffs. I would like to know if for the new busy jets orders, you guys are able to put this higher price already to mitigate these tariffs? And also negotiations between the current backlog that you guys have in place. If there is any negotiations between the clients on business jets that you guys are paying for this tax? And also if the airlines, they ask you some support from Embraer because if I understand they are the importers, they are paying those tax. Thank you very much.

[Francisco Neto, President & CEO at Embraer]

Albert, thanks for your question. I mean, about tariffs in general, we are, let's say, we are positive that we'll come to a good resolution for this issue because of our we believe we have a robust, very robust economic thesis with The U. S. As I said before, dollars 8,000,000,000 in surplus in the next five years, I mean 13,000 jobs currently in The U. S.

[Francisco Neto, President & CEO at Embraer]

Plus 5,000 to be created in the next five years, $05,000,000,000 of new investments in The U. S. And this was also based on the zero tariffs. So that's why we believe, I mean, we have a robust economic status to restore the zero tariff as we have seen with other countries. I mean, commercial jets, we don't have any plans to increase the price because of tariffs, because the tariffs will be paid by the customers.

[Francisco Neto, President & CEO at Embraer]

And business jets, we will keep our price competitive in The U. S. To support our continued growth in the market. So again, all the impact this year is already included in the projections and we are maintaining our guidance for this year with an upside if the tariffs are removed soon.

[Alberto Valerio, Executive Director at UBS Group]

Thank you very much, Francisco. Very clear.

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

And Roberto, sorry for not corroborating your sale recommendation to our share. We continue to improve our performance here. Thank you.

[Alberto Valerio, Executive Director at UBS Group]

Thank you, Antonio.

[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'll answer questions in English, and then we'll answer questions in Portuguese. We'll also answer questions sent via the platform chat.

[Operator]

Please hold while we collect questions. The first question comes from John Hammerdinger. Please go ahead.

[Jonathan Hemmerdinger, Managing Editor at FlightGlobal]

Hi, everyone. Thanks for doing this. I guess I'd want to touch on the tariff issue again. You mentioned that you think you have a good case to remove the 10%. I'm wondering if you could give us any guidance on to what else you might be willing to do to get rid of that 10% more touch again on any more operations in The USA, any commercial operations in The USA would be possible, anything else, Any collaboration with The U.

[Jonathan Hemmerdinger, Managing Editor at FlightGlobal]

S. Aerospace company? And also, are you negotiating on this issue right now because the 40% was already removed? So what's next?

[Francisco Neto, President & CEO at Embraer]

Well, John, thanks for your question. I mean, just to make sure that the impact for our customers in The U. S. For commercial jets and the parts we send to The U. S.

[Francisco Neto, President & CEO at Embraer]

I mean, it's lower than 10%, right, because of The U. S, the high U. S. Content we have in our products. So even then we have been working to mitigate the impacts, I mean, optimizing logistics, putting in place free trade zones, temporary imports, doing a lot of things that has helped us to reduce the impact.

[Francisco Neto, President & CEO at Embraer]

I mean, and we will continue making studies, John, to do that. I mean, footprint, more collaboration with The U. S. Companies. I mean, We U.

[Francisco Neto, President & CEO at Embraer]

S. Is a very important market for Embraer and do the best we can to ensure that we will have we will continue having a stronger presence in that market. What else? That's it.

[Jonathan Hemmerdinger, Managing Editor at FlightGlobal]

So, what would be what are your next steps? You discussions right now?

[Francisco Neto, President & CEO at Embraer]

Thank you. Next step, important one would be the localization of the KC-three 90. We have been working hard in the country with the U. S. Air Force.

[Francisco Neto, President & CEO at Embraer]

We have reinforced our team in The U. S. We are advanced in conversation with a relevant partner to localize the production of the KC-two 90 once we succeed selling, introducing the KC-two 90 in the U. S. Air Force.

[Jonathan Hemmerdinger, Managing Editor at FlightGlobal]

Thanks for taking my question.

[Francisco Neto, President & CEO at Embraer]

You're welcome, John.

[Operator]

Thank you. The next question comes from the live chat. It's from Giuliana Rocha from Red. Could you give more details on Azul impact on the results and future results? How many aircraft will you deliver to Azul that is waiting to be invoiced?

[Operator]

The Embraer Jet's Azul is returning to lessors will have any impact on Embraer results?

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

Juliana, thanks for the question. First of all, I'd like to highlight that Azul is a very important customer for Embraer and for E2 platform and we know that E2 is very important for Azul and we are continues to support this customer to the restructuring process. All impacts on the restructuring has been read, book into second quarter results. All write offs has been made, okay. And now we need to wait the procedures about the Chapter 11.

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

And from the aircraft we have in our backlog, we are currently on renegotiation with them. Need we cannot anticipate any change right now and good discussions ongoing, we are going to find a solution.

[Operator]

Thank you. The next question comes from the live chat as well from Chad Troutfetter. Can you please address tariffs on executive jets?

[Francisco Neto, President & CEO at Embraer]

Well, I mean, I think, again, executive jets, we have a part, important part of our production already in The U. S. And part in Brazil with aircraft and components that we sent to The U. S. We have a good balance.

[Francisco Neto, President & CEO at Embraer]

And again, we us, the impact is less than 10% because of The U. S. Content we have in our aircraft. So we are trying to find a ways to reduce this even further and by optimizing the process and also making studies about, I mean, further collaboration with The U. S. Aerospace industry.

[Operator]

Thank you. Another question from Mr. Trotfetter with AAIN Media. Also, is the specific purpose of the investment in the Melbourne exact jet jet production plant? Increase Phantom production, expand to do finally assembly of freighters there or something else?

[Francisco Neto, President & CEO at Embraer]

So we investing to expand our production capacity for Finals. Also our flight preparation area to receive and do the final deliveries of the Praetors and do some local activities as well. And yes, painting booth, we are implementing a new painting booth that can paint both Finos and Praetors. So as you see, we have already activities with the Praetors in The U. S.

[Francisco Neto, President & CEO at Embraer]

As well on top of the production line of the Finos.

[Operator]

Thank you very much. The next question comes from the live chat as well from Simon Cellini. Thank you for the presentation and congratulations on the great results. I would like to ask what is the progress on the E175 cabin improvements? And when is the first aircraft scheduled for delivery?

[Francisco Neto, President & CEO at Embraer]

Well, good question, Simon. So yes, we are very excited about this improvement. This will bring more comfort for the passenger and for sure, this will help us to sell, continue selling the 175 A2. We are at this point of time working with the suppliers and the new luggage bins and six as well and lightning. And we expect to deliver the first one by the 2026, beginning 2027.

[Operator]

Thank you very much. Please hold while we collect further questions. This concludes the question and answer session in English for the press. Now we'll start the question and answer session in Portuguese. This question and answer session is now being conducted in Portuguese.

[Operator]

To switch to English, please press the interpretation button on the platform and then select English.

[Moderator]

Now we have a Q and A session in Portuguese. Our first question is from Marcelo Rocha with Hagia Sebei Nivale. Please go ahead. Mister Russia? You are muted. Okay.

[Moderator]

All right. Our next question is from Rebecca Prapoudi from Izami. Please go ahead, Rebecca. Ms. Kripalje, you're also on mute.

[Moderator]

We can't hear you. Our next question is from Rebecca Kripalgi with Izami. Please go ahead. You were still muted. So now we're going to move on to a question in the chat.

[Moderator]

Our next question is from Bruno Mora. Hi, my name is Bruno Mora. I am a journalist at Agencio Brasil. Thank you for taking my question. How are you tackling the negotiation to go back to zero tariffs?

[Moderator]

Is this negotiation performed through the Brazilian government or are you dealing directly with the American government? Thank you for your question, Bruno. Both. We are still working on both fronts. We acknowledge the effort that is made and we embrace the change that was mentioned by the American government last week.

[Moderator]

We are still working with the Brazilian government and with the American government talking about our economic hypothesis of how advantageous this is to that country. We want them to find an option to go back to zero tariffs in aviation. This is what we've seen for the past forty five years. Thank you. I see that Marcelo Hosca sent us his question in the chat. We now see announcements of tariffs on Brazilian products by the U. S. Government and people were worried about layoffs in Brazil in manufacturing like in Sao Jose Dos Campos in the countryside of Sao Paulo.

[Moderator]

In addition to leaving aviation out of the tariff trends, what do you think about jobs? Is it possible that we're going to have layoffs in our industry? Right now, we have a more manageable situation. Our tariffs, the 10% or better said, the impact of these tariffs have been incorporated into our financial forecasts. We're keeping the guidance for this year, and we're going to deliver every single aircraft that we planned to deliver.

[Moderator]

So right now, we have no plans whatsoever to reduce our workforce because of a reduction in production. Thank you. Our next question is also in the chat. It's from Shandou Alvis from the Ovali newspaper. Francisco Gomez Neto, you made a personal effort in the negotiation with members of the American government regarding tariffs.

[Moderator]

Was this decisive to eliminate aircrafts from the list of these tariffs? What is going to happen right now with an increasingly complicated situation with former President Bolsonaro. Do you think that Trump could increase tariffs for Brazil and include aircrafts in that? Embraer is about engineering. We focus on data and things that are under our control.

[Moderator]

This is what we've done from the get go. We did careful research on the contribution that we've had towards The United States. So we saw the jobs that we created and we laid it out very clearly. We have a good impact on jobs there, not only for Embraer operations, but also for the American suppliers from which we buy lots of equipment. We put that together.

[Moderator]

We added information on investments. We added information on the importance of our aircrafts in their country because our regional aircrafts are the only ones that are approved for up to 80 seats. So we compiled this information and we took it to the right people who had to see it. As I said, we have a very, very strong economic hypothesis here. And we did the same with the Brazilian government.

[Moderator]

We showed them how we contribute to Brazil and how risky it is for us to be subject to a 50 tariff. So we're keeping course. We see other deals with other countries and aviation is going back to a zero tariff. So we have high hopes this is going to happen to us as well. This will allow us for us to keep the journey that we had before.

[Moderator]

And we're not going to be discussing politics here. We're going to be focusing on the economy. And as I said, we have a very, very strong case to make here. Thank you. We have an audio question now from Haquel Brindon with Invest in Eros.

[Moderator]

Invest news, I apologize. Please unmute so we can hear you. Please go ahead. Ms. Raquel Brannan, you're muted.

[Moderator]

Please go ahead. Next question, Akhil Brendon, Invest News. Please go ahead. You're still muted. You have to unmute so we can hear you.

[Moderator]

Ms. Brenda, we can't hear you. Rafael, could you please ask your question in the chat? I believe we have some kind of technical issue because apparently people are unable to unmute. So please ask your question in the chat.

[Moderator]

Thank you. Our next question is also coming from audio with Mauricio Martins from Global News. Mr. Martins, please unmute. Go ahead.

[Moderator]

Hi. Good morning. Can you hear me? Yes, we can hear you. Excellent.

[Moderator]

Good morning. I also have a question about tariffs. I think this is the hot topic right now. So my question is related to the supply chain. What could be the impact here?

[Moderator]

Alright. So regarding Brazilian exports, we have lots of suppliers for Embraer in The US. But with the current 10% tariffs and if we have other tariff wars, what could be the impact on the supply chain? And how much does Embraer rely on suppliers of inputs and parts who are located in The U. S?

[Moderator]

How are you dealing with these suppliers so that you have a harmonious relationship so that you don't run into issues regarding REPRESENTATIVE:] production? Thank you for your question, Mauricio. Please ask away regarding tariffs. We were ready for it. We knew that we'd have lots of questions on tariffs.

[Moderator]

We're here for that. So please feel comfortable to ask questions about this, even though we have uncertainty about it. So at the beginning of this journey, there was a lack of clarity on tariffs for suppliers. However, we've made progress in our relationship with them. We're understanding this impact or that impact.

[Moderator]

And so far, we haven't seen big impacts from tariffs on the cost of inputs. We buy lots of parts from The U. S, but also from Europe and Asia and Brazil. I think we are managing this well. So far, we haven't seen any impact.

[Moderator]

We still have a good relationship with them, a harmonious relationship with our main suppliers. Our next question is from Haquel Gamarski. Please go ahead. Morning. Can you hear me?

[Moderator]

We can. Good morning, Francisco. So on tariffs, do you have any other investments that you are planning or negotiating for The U. S. To get to a zero tariff base?

[Moderator]

And the investments that we saw in the presentation, were they in your plan? Or were you negotiating them because of this exceptionalist? The investments that we announced had already been previously announced. But please remember, these are investments to expand our capacity in our operations in Melbourne. This includes production of aircrafts, the finishing of aircrafts in The U.

[Moderator]

S, major investments in Dallas and Texas, so that we're able to expand our capacity to work with commercial jets. And these investments are a foundation to support our thesis of a zero tariff for our industry. We did the math based on a certain volume S. This is what we've been sharing with them.

[Moderator]

If they have additional tariffs and we sell fewer aircrafts in The U. S, first, we're going to buy fewer parts. We're going to make fewer planes. We're going to create fewer jobs. And we're also going to have a limited ability to invest in the future.

[Moderator]

And this is going to be damaging for the American market. This is why I'm doubling down on the thesis of economic robustness. If you have tariffs for Embraer, this is going to harm the American markets too. Are you negotiating any additional investments in The U. S.

[Moderator]

To reach a zero tariff? What we do have for The U. S. Is the possibility of assembling KC -three 90 locally. This is a big investment.

[Moderator]

This is $500,000,000 With this investment, we could create an additional 2,000 jobs in The U. S. So yes, we mentioned this as an opportunity of local investments if we have zero tariffs. Our next question is from Rebecca Krepaldi with Izami. Please go ahead.

[Moderator]

Hi. Can you hear me? Yes, we can hear you now. Hi, good morning. Congratulations on these results.

[Moderator]

I'm still a bit confused. I apologize. I think you mentioned this over and over again. But if you could go over this once again, I'd appreciate it. Could you please talk about the 20% impact?

[Moderator]

Because you just said that there's no impact whatsoever on the cost of inputs. However, at the same time, you said that 20% of impacts coming from tariffs are felt in your cash flow and that you expect bigger impacts in the last second half of the year. Could you please explain that what is the actual impact of tariffs on your results? Rebecca, this is Antonio. Good morning.

[Moderator]

Let's go over this again. In our last earnings release presentation, we said that we had around 0.9 of our revenue being impacted. It's R65 million a year, 20% of that happened in the first half of the year and the rest of that is going to happen in the second half of the year if we have 10%. So for business aviation, we pay tariffs, we don't for commercial aviation and we haven't seen impact with suppliers. So the 10% has been levied.

[Moderator]

But the good news is that we have a number of initiatives to mitigate these effects with other cost reduction initiatives. This is why we're keeping our guidance for this year. Rebecca, let me make this clear. We have around $65,000,000 in impacts this year. This is what we expect.

[Moderator]

We have realized 20% of that so far. And this comes from what we pay when we export parts into The U. S, not from when we buy parts from suppliers. Is this clear now? Yes, it is perfectly clear.

[Moderator]

Thank you. Of course. Our next question is in the chat. We have Raquel Brindon from Invest News. I'd like to confirm the guidance for margins.

[Moderator]

I understood that you're being very cautious when it comes to the impact of the 10% tariff inflation and the FX rate. Should we see any changes here? Also, I would like to understand the impact of this 10% tariff throughout the years. Without American content, this is not going to be exactly 10%. How much should we expect in the second half of the year?

[Moderator]

Hi, good morning. This is Antonio speaking. Second question first, we just told Rebecca that we have $65,000,000 expected for this year, 20% already happened. The rest is going to be realized in the third and fourth quarters. If we see a continued 10% tariff for us, this is the impact that we expect.

[Moderator]

Regarding IR guidance, we're doing really well until Q2. We're a bit above it. Our margins have been confirmed. We think that our expenditure base is going to be a bit worse in the second half of the year because of the 80% that we are still going to have to absorb from the tariffs. We're also going to have higher inflation compared to our forecast and a worsened dollar.

[Moderator]

We have costs in reals. So when we convert them into dollars, we have higher costs in our functioning currency. So what I would say is that we try to be consistent with our numbers. It would be risky for Embraer through so much volatility to share different numbers with our industry, but we have a good forecast if we see sustained conditions. Our next question is from Jacinta Cimento with Vale Crescento Susenta News. Good morning. Francisco, let me change gears a bit. We have been talking about tariffs. But you have been announcing so many investments in The U. S. Because of tariffs also. And I was curious regarding the types of investments that we could see in Sao Jose Dos Campos and Talbata, our area or perhaps other cities in the Parayba Valley.

[Moderator]

Let me also take this opportunity to talk about Yves. To please go into details regarding the maiden flight that you should have in December? Should we see the maiden flight in our region too? Thank you for your question, Jesse.

[Moderator]

Most of our investments are made in Brazil. You might recall that a few months ago, we announced that Embraer was going to invest BRL 20,000,000,000 by 02/1930. So BRL 20,000,000,000, if you divide it by five and some, it will be almost close to BRL 4,000,000,000. And then you can compare this number with the number that we refer to when we talk about The U. S.

[Moderator]

So most of the investments, I mean, are in Taubertay, in Galvion Peso to investments in Sao Jose Dusco, in terms of many enhancements, capacity expansion. And most of the investments are localized in Brazil because we the bulk of our operations are in Brazil. So EVE is a separate company. The plan is to have the initial flight in December. But about Yves, I think you should get further information during the conference call conducted by I.

[Moderator]

There is another investment that came to mind, and that has to do with return to work. We are making robust investments to renovate the facilities in Sao Jose Dos Campos, El Geno De Meelo to get to welcome our people back as starting in January. Another important investment is in Portugal to for the maintenance of the GTF engines, and this will pay an important contribution to our service revenues. Just to give you a general idea, these are the investments. But as you can see, The U.

[Moderator]

S. Is part of that. And this is also an important part that we are now telling those that have the decision making power regarding tariffs. But if you allow me, I have another question. In the beginning of the presentation in Portuguese, you said that you do not anticipate any dismissals in Brazil, mainly because of the initial adjustments referring the quotas or the tariffs.

[Moderator]

Is there any possibility going forward in case there is no change in the world economic landscape? Do you think that you would hire more people for your Brazil operation? Our plan envisions growth in the coming years. We are growing at a rate of two digits year on year, and we are increasing production every year, and the plan still stands. I mean, there is any drastic change to the macroeconomic scenario, just like 50 tariff in Embraer's biggest market.

[Moderator]

But now we are back to a more reasonable level. And but our production plan and our revenue this year remains unchanged. And if you look at the years post pandemic, we hire more than 5,000 people. The vast majority of them were hired in Brazil. Therefore, Embraer continues to grow, and this is the plan going forward.

[Moderator]

Eventually, if there is any drastic change in the scenario, this will not only apply to Embraer, but to all of the other companies. We have a very positive outlook. Thank you and congrats on your results. Thank you, Jessie. Thank you.

[Moderator]

With that, we conclude the Q and A session. And also, we conclude the conference call of Embraer. Thank you very much for joining us, and we wish you all a very good day.

Participants

Analysts

• Guilherme Paiva, Head - IR & M&A at Embraer
• Francisco Neto, President & CEO at Embraer
• Antonio Garcia, EVP - Financial & IR at Embraer
• Marcelo Motta, Research Analyst at J.P. Morgan
• Kristine Liwag, Executive Director at Morgan Stanley
• Myles Walton, Managing Director at Wolfe Research LLC
• Ronald Epstein, Senior Equity Analyst at Bank of America
• Andre Ferreira, Capital Market Analyst at Banco Bradesco
• Lucas Esteves, Equity Research Associate at Santander Corporate & Investment Banking
• Andre Mazini, Head of Latam Research at Citi
• Daniel Gasparete, Equity Research at Itau BBA
• Lucas Laghi, VP - Equity Research at XP Inc.
• Alberto Valerio, Executive Director at UBS Group
• Jonathan Hemmerdinger, Managing Editor at FlightGlobal
• Moderator