Embraer SA Q2 FY2026 earnings call

Overall Quarterly Performance

• Delivered the strongest Q2 revenue in Embraer's history, achieved the highest Q2 aircraft deliveries in 16 years, and reached a new all-time high backlog for the 7th consecutive quarter.
• Total company deliveries increased 7% YoY: 20 commercial jets and 45 executive jets in Q2, 30 commercial jets (36% of full-year guidance midpoint, 1pp above 5-year average) and 74 executive jets (45% of full-year guidance midpoint, 11pp above 5-year average) in H1 2026.
• Company-wide backlog reached $34.5 billion, up 16% YoY: commercial aviation backlog up 15% YoY (1.8 12-month book-to-bill), defense and security backlog up 42% YoY (2.6 book-to-bill), executive aviation backlog up 5% YoY, service and support backlog up 12% YoY; all segments have book-to-bill ratios above 1, plus $21 billion in unexercised options that could expand total backlog to over $55 billion.

Segment Operational Milestones

• Commercial Aviation: Azora ordered 15 E195-E2 aircraft (with 15 purchase rights); the E2 program surpassed 500 firm orders.
• Executive Aviation: Achieved record Q2 revenues and deliveries on strong market demand; received triple certification for the Praetor 500E and Praetor 600E; introduced the new EV edition of the Phenom 300.
• Defense and Security: The UAE placed an order for 10 C-390 aircraft (with 10 additional options), marking the first C-390 selection in the Middle East and the largest international order for the platform to date; Colombia became the 13th country worldwide to select the C-390, expanding its global footprint.
• Service and Support: Expanded the recurring revenue base via new contracts, including support for Jazz Aviation's E175 fleet and a new maintenance agreement with the Brazilian Air Force for its KC-29 fleet.

EVE Update

• The EVE electric vertical takeoff and landing (eVTOL) flight test campaign is progressing on plan; after successful hover flights, the program has moved into transition flights on the path to certification, targeting entry into service by the end of 2028.

Financial Health

• Net debt to adjusted EBITDA (excluding EVE) improved to 0.2x from 0.7x YoY; average debt maturity increased to 9.2 years and average cost declined to 5.1%.

Commercial Aviation: Revenues increased 8% YoY to $625 million, contributed 28% of total consolidated revenue, adjusted EBIT was $18 million with a 2.9% margin. Executive Aviation: Revenues increased 32% YoY to $725 million, contributed 32% of total consolidated revenue, adjusted EBIT was $170 million with a 23.4% margin; excluding one-time U.S. import tariff and extraordinary tax credit effects, adjusted EBIT margin was 16.1%. Defense and Security: Revenues increased 38% YoY to $304 million, contributed 14% of total consolidated revenue, adjusted EBIT was $36 million with an 11.9% margin. Service and Support: Revenues increased 24% YoY to $565 million, contributed 26% of total consolidated revenue, adjusted EBIT was $106 million with an 18.7% margin; excluding one-time U.S. import tariff and extraordinary tax credit effects, adjusted EBIT margin was 17.6%. Consolidated: Q2 2026 net revenues increased 23% YoY to $2.2 billion. H1 2026 revenues reached $3.7 billion, adjusted EBITDA was $356 million with a 15.9% margin, EBIT was $297 million with a 13.3% margin.

• Delivery guidance for 2026 is maintained unchanged: 80 to 85 commercial aircraft, and 160 to 170 executive aircraft.
• Full-year adjusted EBIT margin guidance was raised by 130 basis points at the midpoint, reflecting the extraordinary tax credit, lower U.S. tariff impacts, and an improved overall business outlook; the $4 million business outlook improvement is spread across all segments, with the largest share in executive aviation from ongoing production efficiency efforts, and is recurring rather than one-time.
• Full-year adjusted free cash flow guidance was increased to $400 million or higher, reflecting strong operational performance, progress on production leveling initiatives, and stronger than expected first-half cash generation.

• A small number of suppliers still face late part delivery issues that disrupt production flow for executive aviation, though performance is improving over time.
• Indirect U.S. import tariff impacts will continue to affect the business, expected to total ~$12 million annually, primarily impacting the service and support segment, after all direct tariff impacts from prior inventory/backlog have been fully recognized.
• Major new opportunities (including India defense and commercial projects, U.S. C-390 procurement) are still in campaign phases and have not yet been finalized, so their revenue and production impact is not guaranteed.

Q: What drove the strong Q2 margins in executive aviation and defense, and are these improvements structural or one-time? What is the margin trajectory going forward? / A: Q2 executive aviation results benefited from ~$54 million in net one-time impacts from the extraordinary tax credit and tariff adjustments. Ongoing production leveling initiatives implemented over the past two years have driven structural efficiency gains from continuous lean operations (Kaizen, Obeya) company-wide. Minor supplier delivery delays are still being resolved, with further production and margin improvements expected in 2027. Margin growth is expected to outpace revenue growth over the coming years as efficiency gains scale.

Q: How does Embraer view its continued investment in EVE, and what is the path to de-risking the project? / A: Embraer remains confident EVE will be a key contributor to long-term growth starting after 2029, complementing the core business strategy. Hundreds of engineers are assigned to EVE, but this does not detract from investments in current product updates, new C-390 configurations, and other future technology projects. EVE will be considered materially de-risked as key flight test milestones are achieved through 2026 and early 2027, with full certification targeted for the end of 2028 ahead of entry into service.

Q: What is the nature of the extraordinary $68 million tax credit recognized in Q2, and are there more impacts expected in the second half of 2026? / A: The majority of the credit is a refund for U.S. import tariffs Embraer paid in 2025 and the first half of 2026. The full amount has already been recognized in Q2 EBIT, though part of the cash is still pending receipt. No additional large direct tariff impacts are expected after Q2, only $12 million annual indirect tariffs going forward, with ~$6 million expected in the second half of 2026, primarily in services.

Q: Can C-390 production be scaled above 10 units per year by 2030 to meet growing demand? / A: New assembly lines outside Brazil would enable higher production levels. A potential second line in India for the MTA program, and a potential third line in the U.S. if the U.S. military selects the C-390, would allow production to increase above 10 units per year to match growing order backlog and pipeline opportunities.