Embraer SA Q4 FY2024 earnings call

Management Statement and Operational Highlights

• ANA purchased 15 E190-E2 jets with options, first sale in Japan.
• 2024 was historic with record revenue ($6.4B), backlog ($26.3B), and net debt close to zero.
• Executive Aviation had a $7B contract with Flexjet, Phenom 300 was most delivered for 13th year.
• Defense and Security had best sales, 13 KC-390s sold, A-29 Super Tucano got 29 orders.
• Commercial Aviation had firm contract with American Airlines for 90 E175s.
• Service and Support expanded MRO centers, new contracts, started engine repair at OGMA Portugal.
• Addressed supply chain challenges with strategic initiatives, supplier collaboration, digitization, and AI tools.

Segment Performance

• Commercial Aviation: In 2024, revenues increased 20%. Adjusted EBIT for the full year was $55 million, 182% higher than 2023. The backlog was $10.2 billion with a book-to-bill ratio of 1.6.
• Executive Aviation: Revenues expanded 25% in 2024. Adjusted EBIT reached $205 million, 62% higher than 2023. Backlog was $7.4 billion with a book-to-bill ratio of 2.7.
• Defense and Security: Top line grew 40% in 2024. Adjusted EBIT was $45 million, 57% higher than 2023. Backlog rose to $4.2 billion with a book-to-bill ratio of 3.3.
• Service and Support: Revenues increased 15% in 2024. Adjusted EBIT reached $270 million, 25% higher than 2023. Backlog was $4.6 billion with a book-to-bill ratio of 1.9.

Guidance

• Operational: Commercial Aviation forecasted 77-85 deliveries; Executive Aviation forecasted 145-155 jets.
• Financial: Top line expected $7B-$7.5B; EBIT margin 7.5%-8.3%; free cash flow $200M or higher.

Risks

• Supply chain bottlenecks moving between different suppliers.
• Uncertain defense prepayment dynamics affecting free cash flow.
• Volatility in tax impacts and market conditions affecting EBIT margin guidance.

Question and Answer

Q: Victor Mizusaki on 2025 EBIT margin guidance A: Antonio Carlos Garcia mentioned recurring EBIT margin in 2024 was 7.6% and guidance is based on a combination of operational facts including defense and service support Q: Daniel Gasparete on commercial aviation backlog pricing A: Antonio Carlos Garcia said commercial aviation backlog is improving with mid-single digit margin progress and new orders accurate for mid-single digit Q: Lucas Marquiori on EBIT margin mix for 2025 A: Antonio Carlos Garcia stated margin profile for 2025 is a mix of factors including commercial aviation, executive, and service support with ongoing volatility Q: Noah Poponak on Flexjet order and cash flow A: Antonio Carlos Garcia said Flexjet order is incremental, and cash flow has seasonality with defense deal dynamics affecting free cash flow Q: Myles Walton on supply chain constraints A: Francisco Gomes Neto discussed supply chain bottlenecks moving between suppliers, production leveling, and digital tools to address issues Q: Marcelo Motta on defense and service outlook A: Francisco Gomes Neto talked about defense ramp-up towards 10 KC-390s by 2030 and service support ramping up GTF engine shop Q: Steve Trent on supply chain pain points A: Francisco Gomes Neto mentioned engines and structural suppliers/fasteners as stubborn supply chain issues Q: Lucas Esteves on product mix change in 2025 A: Francisco Gomes Neto said more E1s in 2025 due to new contracts, and Super Tucano boosts defense profitability Q: Lucas Laghi on Executive and Defense profitability A: Antonio Carlos Garcia explained Executive margin fluctuation due to quarter concentration and Defense margin improvement from KC-390 volumes Q: Alberto Valerio on free cash flow and capacity A: Gui Paiva and Francisco Gomes Neto discussed 50% EBITDA conversion goal and ramping up production capacity in all divisions Q: Ronald Epstein on new platform investment and dividend A: Francisco Gomes Neto talked about investing in new technologies and dividend approval expected end of April with 25% payout policy Q: Charles Alcock on executive jet growth regions and EVE funding A: Francisco Gomes Neto said U.S. is main executive jet market, and EVE needs ~$400M for certification Q: Andreas Schulz on E175-E2 and Aerolíneas Argentinas A: Francisco Gomes Neto discussed postponing E175-E2 due to U.S. scope clause and waiting on Aerolíneas Argentinas deal Q: Richard Schuurman on R&D priorities A: Francisco Gomes Neto mentioned R&D on autonomous flight, alternative propulsion, airframe competitiveness, etc.

Q: Nelson on Defense sales percentage and Atech A: Francisco Gomes Neto said defense historical share is ~15% and Atech has 18% EBITDA growth with prospects for new businesses Q: Pablo Diaz on Aerolíneas Argentinas LOI for E195-E2 A: Francisco Gomes Neto said negotiations with Aerolíneas Argentinas were interrupted with change in government and waiting for resumption