Embraer SA Q1 FY2025 earnings call

• Delivered highest first quarter revenue of past 90 years at $1.1 billion and highest first quarter adjusted EBITDA margin of past five years at almost 10%. Backlog was $26.4 billion, marginally higher than previous record. Aircraft deliveries up almost 30% year-on-year. Resumed regular dividends and interest on equity. Executive Aviation had solid performance with highest first quarter revenue since 2014 and $7.6 billion backlog. Defense and Security: Sweden, Slovakia, Uruguay, and Panama made selections/orders for KC-390 and A29; backlog stable at $4.2 billion. Commercial Aviation: Japanese ANA ordered 15 E190-E2; E195-E2 from Helvetic Airways was largest jet into London City Airport. Service and Support: Started next industrialization stage of Pratt & Whitney engine shop at OGMA; backlog stable at $4.6 billion. Worked on production leveling plan since 2023 to increase efficiency, productivity, and cash flow. U.S. tariffs had limited impact on first quarter results, with initiatives to minimize impact and advocacy for zero tariffs.

Commercial Aviation: Revenues were stable with an improved adjusted EBIT margin driven by product and customer mix. Executive Aviation: Revenues expanded 35% due to higher volumes and product mix, adjusted EBIT margin increased. Defense and Security: Top line grew 72% because of stronger KC-390 revenues recognition, customer mix, and product stage; adjusted EBIT margin better due to higher volumes, lower expenses, and fewer extraordinary items. Service and Support: Revenues increased 16% mainly because of the OGMA GTF ramp-up; adjusted EBIT margin decreased due to product mix and start of North American Executive MRO ramp-up, partially offset by positive one-time items.

• Reiterated 2025 guidance implying double-digit growth in aircraft deliveries and revenue growth. 2025 will be decisive for EVE with first flight of full-scale prototype and first firm orders expected.

• U.S. tariffs could negatively impact EBITDA margin by 90 basis points, highly concentrated in executive aviation and service and support. Supply chain bottlenecks moving from one product to another. Potential impact from Pratt strike on service operations.

Q: Can the company comment on the potential one-time impact from supplier credit and quantify it?

A: Antonio Carlos Garcia said it was 30 basis points.

Q: On tariff front, any hesitation on U.S. Airlines accepting 175s due to tariffs?

A: Antonio Carlos Garcia said still early to confirm, with impact highly concentrated in executive aviation and service and support.

Q: On commercial, comment on potential one-time impact from supplier credit?

A: Antonio Carlos Garcia said 30 basis points.

Q: On tariff color, any hesitation on U.S. Airlines accepting 175s?

A: Antonio Carlos Garcia said still early, with impact in executive aviation and service division.

Q: On KC-390, update on India, Saudi Arabia, Poland and bundling opportunities?

A: Francisco Gomes Neto said working on campaigns, India has big opportunity, no concrete bundling yet.

Q: On supply chain, improvement or shifted pressure points?

A: Francisco Gomes Neto said improvements seen but bottlenecks move, progressing to level production.

Q: On service margins past reversals impact?

A: Antonio Carlos Garcia said temporary effect, compensated throughout years.

Q: On Pratt strike impact on service?

A: Francisco Gomes Neto said not enough info to measure impact.

Q: On U.S. tariffs mitigation initiatives?

A: Antonio Carlos Garcia said cost measures and planning to manage impact.

Q: On China suspension of point deliveries and opportunities?

A: Francisco Gomes Neto said working on introducing E2 jets in China.

Q: On KC-390 U.S. market entry strategy?

A: Francisco Gomes Neto said showcasing in U.S., working on strategy, potential assembly in U.S. with large order.

Q: On commercial aviation not delivering two aircrafts due to commercial issues?

A: Antonio Carlos Garcia said due to bureaucratic paperwork.

Q: On wing development and new technology?

A: Francisco Gomes Neto said working on technologies but no new product decision yet.

Q: On Paris Air Show expectations for Commercial Aviation?

A: Francisco Gomes Neto said too soon to disclose.

Q: On GTF engine issues?

A: Francisco Gomes Neto said working closely with Pratt, seeing improvements.

Q: On Latin American market updates?

A: Francisco Gomes Neto said no new news in Brazil, working on E2 deliveries in Mexico.

Q: On Airbus and Boeing hydrogen/TBW research impact?

A: Francisco Gomes Neto said Embraer investing in new technologies but no new product decision.

Q: On Turkey agreement scope?

A: Francisco Gomes Neto said technological cooperation for part development and introducing E2 in Turkey.

Q: On cost control and supplier switching?

A: Francisco Gomes Neto said internal cost measures, not switching suppliers in aerospace.

Q: On cargo version of E2?

A: Francisco Gomes Neto said focusing on introducing cargo version of E190-E1