Embraer SA Q4 FY2024 earnings call

Management Statement and Operational Highlights

• Announced ANA purchasing 15 E190-E2 jets with options for additional 5.
• 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, and the Phenom 300 was most delivered light jet for 13th year.
• Defense and Security had best sales performance, with 13 KC-390s sold and A-29 Super Tucano getting 29 orders.
• Commercial Aviation had firm contract with American Airlines for 90 E175s.
• Service and Support expanded MRO centers, new contracts with Flexjet.
• Addressed supply chain challenges with production leveling, supplier collaboration, digitization, and AI tools.

Segment Performance

• Commercial Aviation: Revenues increased 20% in 2024. Adjusted EBIT for the full year was $55 million, 182% higher than 2023. Delivered 73 aircraft in 2024, with the E2 family representing 65% of deliveries. Backlog was $10.2 billion with a 1.6 book-to-bill ratio.
• Executive Aviation: Revenues expanded 25% in 2024. Adjusted EBIT reached $205 million, 62% higher than 2023. The Phenom 300 was the most delivered light jet for the 13th consecutive year. Backlog was $7.4 billion with a 2.7 book-to-bill ratio.
• 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 3.3 book-to-bill ratio.
• Service and Support: Revenues increased 15% in 2024. Adjusted EBIT reached $270 million, 25% higher than 2023. Backlog rose to $4.6 billion with a 1.9 book-to-bill ratio.

Guidance

• 2025: Commercial Aviation to deliver 77-85 aircraft, Executive Aviation 145-155 jets. Top line $7B-$7.5B. EBIT margin 7.5%-8.3%. Free cash flow $200M or higher.
• Mentioned challenges with defense prepayments affecting free cash flow timing.

Risks

• Supply chain bottlenecks shifting between suppliers.
• Uncertainties in defense prepayment dynamics affecting free cash flow.
• Volatility in market factors like exchange rates, inflation, and government policy impacts on aircraft sales.

Question and Answer

• Q: About 2025 EBIT margin guidance A: Recurring EBIT margin in 2024 was 7.6%, guidance is 7.5%-8.3% considering operational and extraordinary items.
• Q: On commercial aviation backlog pricing A: Mid-single digit margin improvement expected, new orders accurate for mid-single digit.
• Q: On Flexjet order incremental value A: 100% incremental, fresh order to backlog.
• Q: On supply chain constraints A: Bottlenecks shift, but prepared with production plan and supplier collaboration.
• Q: On defense and service support outlook A: Defense to gradually increase KC-390 production, service support ramping up GTF engine shop.