Embraer (EMBJ) Q3 2026 Earnings Call Transcript

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DATE

Tuesday, Nov. 10, 2026

CALL PARTICIPANTS

• President and Chief Executive Officer - Francisco Gomes Neto
• Chief Financial Officer - Felipe Santana de Lima
• Head of Investor Relations, M&A and Venture Capital - Guilherme Paiva
• Corporate Communications Director - Thais Moraes

TAKEAWAYS

• Revenue -- $2.35 billion, representing 17% growth driven by volume and price increases across all segments.
• Backlog -- $35.7 billion, an all-time record and a 14% increase year over year.
• Commercial Aviation Revenue -- $696 million, increasing 13% due to higher volumes and price adjustments.
• Executive Aviation Revenue -- $655 million, a 12% increase supported by favorable product mix and pricing.
• Defense & Security Revenue -- $341 million, rising 22% behind higher KC-390 delivery volumes.
• Services & Support Revenue -- $638 million, growing 30% on higher volume and operating leverage.
• Adjusted EBIT -- $255 million, with a 10.9% margin compared to 8.6% in the prior-year period.
• Adjusted EBITDA -- $370 million, reflecting a 13.5% margin for the quarter.
• Adjusted Free Cash Flow -- $628 million, excluding Eve, reflecting predelivery payments and operating results.
• Commercial Aircraft Deliveries -- 22 units, contributing to a year-to-date total of 52 aircraft.
• Executive Aircraft Deliveries -- 41 units, with year-to-date deliveries reaching 115 aircraft.
• Revised Revenue Guidance -- $8.4 billion to $8.6 billion, increased from previous targets due to strong segment performance.
• Revised Free Cash Flow Guidance -- $700 million or higher, raised from previous expectations.
• Adjusted Net Income -- $74 million, representing a 3.1% margin compared to a 4.2% margin in the prior-year period.
• Capital Expenditure -- $150 million, focused on new technology and future programs.
• Book-to-Bill Ratio -- 2.9 in Defense & Security and 1.4 in Executive Aviation, supporting backlog expansion.
• Options Backlog -- $23 billion, which management indicated could expand the total backlog to nearly $60 billion if exercised.
• Debt Profile -- 8.7 years average maturity with an average cost of 5.1%.
• Interest on Equity -- 154 million Brazilian reals, equivalent to $0.17 per ADS, declared during the quarter.
• Service & Support Margin -- 17%, an improvement of 330 bps driven by operating leverage and growth in the installed base.

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RISKS

• Santana de Lima stated, "we do have this year on the fourth quarter, some annual contract adjustments related to costs, inflation and FX on Brazilian real-denominated contracts," which is expected to negatively impact Defense EBIT margins.
• Paiva noted that "engine supplies that have impacted us and the industry" remain a constraint for production in the Commercial Aviation segment.
• Santana de Lima reported that "higher financial expenses from the mark-to-market of our long-term incentive plan and higher taxes" caused a year-over-year decrease in adjusted net income.

SUMMARY

Embraer S.A. (NYSE:EMBJ) reported record revenue for the third quarter and reached an all-time high backlog of $35.7 billion. Management raised full-year guidance for revenue and free cash flow based on performance across all four business segments. The company is currently executing production leveling initiatives to balance delivery volumes throughout the year and is investing in new technologies, including the Eve electric vertical takeoff and landing aircraft.

• Eve's flight test campaign reached 73 flights and more than three hours of flight time. CEO Neto stated, "Following the completion of hover flights, Eve is now advancing through transition flights with full transition expected before year-end."
• The company is expanding its Service and Support segment through the OGMA facility in Portugal. Neto noted that the agreement for GTF engine revisions is expected to grow revenue for the subsidiary from approximately $230 million to $600 million by 2030.
• In Defense and Security, management is pursuing strategic opportunities in India and the U.S. Neto stated, "We advanced our partnership with Mahindra, including plans for local assembly line in India."
• Management reported that production leveling efforts have shifted close to 10 percentage points of production out of the fourth quarter for Executive Aviation. IR Head Paiva indicated that while Commercial Aviation has seen some progress, the company continues to address engine supply constraints.
• The company will change its ADS ratio from four common shares per ADS to one common share per ADS in November. CFO Santana de Lima stated that the change has no impact on the company's underlying equity value.
• Neto indicated that the company is preparing for a new product cycle, stating that management is "investing in new technologies in preparing the company for a new cycle of products that can be either a new Commercial jet family or Executive jet family."

INDUSTRY GLOSSARY

• ADS: American Depositary Share, which represents shares of a non-U.S. company held by a U.S. depositary bank and available for trading on U.S. exchanges.
• BRL: The ISO code for the Brazilian real, the official currency of Brazil.
• E2: The second generation of Embraer's family of commercial narrow-body jet airliners.
• E-Jets: A series of narrow-body medium-range twin-engine jet airliners manufactured by Embraer.
• Eve: Embraer's dedicated business for urban air mobility and electric vertical takeoff and landing aircraft.
• eVTOL: Electric vertical takeoff and landing aircraft.
• GTF: Geared Turbofan, a type of high-bypass turbofan aircraft engine.
• KC-390: A multi-mission military transport aircraft designed for aerial refueling and cargo transport.
• OGMA: Indústria Aeronáutica de Portugal S.A., an Embraer subsidiary providing aircraft maintenance and manufacturing services.
• PDP: Predelivery payments, which are installments paid by customers during the manufacturing process of an aircraft.
• Phenom 300EV: An evolution of the Phenom 300 executive jet featuring enhanced performance and avionics.
• Praetor: A family of mid-sized and super-mid-sized business jets manufactured by Embraer.

Full Conference Call Transcript

Guilherme Paiva: Good morning, ladies and gentlemen, and thanks for standing by. My name is Gui Paiva, and I'm the Head of Investor Relations, M&A and Venture Capital for Embraer. Welcome to Embraer's Third Quarter 2026 Earnings Conference Call. Participants on today's conference call are Francisco Gomes Neto, President and CEO of Embraer; Felipe Santana, Chief Financial Officer; Thais Moraes, Corporate Communications Director; and me. As a reminder, this conference is being recorded. This conference call will be conducted in English, but please let me say a short announcement for Portuguese speakers. [Foreign Language]. The agenda includes the presentation of third quarter 2026 results, followed by an investor only Q&A session and subsequently, a session exclusively for the press.

Participation instructions will be provided later. We remind participants Eve's results were discussed at the company's conference call last week. Before we begin, a legal notice. This presentation may contain forward-looking statements, which involve risks and uncertainties as detailed in the disclaimer available in the slides and in the documents filed with the Brazilian Securities Commission, CVM and the U.S. Securities and Exchange Commission, SEC. It is a great pleasure to hand the floor to our President and CEO, Francisco Gomes Neto, who will begin the presentation of the company's results. Please, Francisco, go ahead.

Francisco Neto: Thank you, Gui. Good morning and good afternoon, everyone. It is a pleasure to be with you today to discuss Embraer's third quarter '26 results. We delivered record third quarter revenue of $2.3 billion, with revenue and margin expansion across all our businesses. Our backlog reached a new all-time high of $35.7 billion for the eighth consecutive quarter. Based on these results, we are revising up our 2026 revenue and free cash flow guidance. Let me now turn to the key highlights of the quarter. In Commercial Aviation, Farnborough drove 28 firm E2 orders and ANA ordered 8 additional aircraft. In Executive Aviation, we reached a record backlog of $8.2 billion and launched the new Phenom 300EV.

In Defense, Colombia ordered 2 KC-390s while we advanced our partnership with Mahindra, including plans for local assembly line in India. And in Service and Support, we continued expanding our customer agreements. During the quarter, we delivered 22 commercial jets and 41 Executive jets. Total company deliveries increased 6% year-over-year with Commercial Aviation growing 10% and Executive Aviation stable. In Commercial Aviation, we delivered 52 aircraft year-to-date, representing 63% of the midpoint of our full year guidance, 5% points above the 5-year average. In Executive Aviation, we delivered 115 aircraft year-to-date, representing 70% of the midpoint of our full year guidance and a material 10% points above the 5-year average.

These numbers are evidence of our progress in our production leveling initiatives, although we still have room for additional improvement. Our company-wide backlog reached $35.7 billion, up 14% year-over-year and another all-time record for Embraer. All 4 business units increased their backlog year-over-year, led by Defense & Security, up 56% with a strong 2.9 book-to-bill ratio. Executive Aviation backlog grew 12% year-over-year, supported by a 1.4x book-to-bill ratio. Commercial Aviation backlog grew 4% year-over-year, while Services & Support increased 14% with both maintaining book-to-bill ratios above 1x. In addition, we hold approximately $23 billion in options, which could expand our backlog to almost $60 billion if exercised.

With that, I will now hand the call over to Felipe, who will walk you through our financial results. Felipe, the floor is yours.

Felipe Santana de Lima: Thank you, Francisco. Good morning and good afternoon, everyone. I will now talk you through our results by business unit. All comparisons are year-over-year unless otherwise noted. Starting with Commercial Aviation, revenues increased 13% to $696 million, driven by higher volumes and prices. Adjusted EBIT totaled $17 million with a positive 2.4% of margin. The year-over-year improvement was supported by suppliers' compensation. For the fourth quarter, we expect a better customer mix, with full year margins broadly in line with the last year's average. Looking ahead, our ambition is to continue improving Commercial Aviation and profitability to the mid-single-digit level over the next few years.

In Executive Aviation, revenues increased 12% to $655 million, supported by higher prices and product mix. Adjusted EBIT reached $105 million with a positive 16% of margin, circa 130 bps up year-on-year versus a comparison, excluding U.S. tariffs. In Defense & Security, revenues increased 22% to $341 million. Adjusted EBIT was $54 million with a positive 15.7% of margin, driven by higher KC-390 volumes, customer mix and product stage. For the fourth quarter, we do not expect Defense EBIT margins to remain at the strong level seen in the second and third quarters. Still, the division remains on track for another record year, now with profitability around double-digit levels.

Services & Support revenues increased at 30% to $638 million, driven by higher volumes. Adjusted EBIT totaled $108 million with a positive 17% of margin, supported by operating leverage circa 330 bps above year-over-year. At a consolidated level, net revenues increased 17% to $2.35 billion in the third quarter. Revenues were well balanced across our business with Commercial Aviation representing 30%, Executive Aviation, Services more than 25% each and Defense 15%. In the first 9 months, revenues reached $6 billion, representing more than 70% of the midpoint of our full year guidance. Adjusted EBITDA was $370 million in the quarter with a positive 13.5% of margin.

Adjusted EBIT reached $255 million with a positive 10.9% of margin compared to 8.6% a year ago or 9.4% if we exclude U.S. import tariffs. The year-over-year improvement was driven by strong operating performance across all the business. In the first 9 months, adjusted EBIT margin reached 10.7% or 4.2 points above the 5-year historical average. Adjusted free cash flow, excluding Eve, was $628 million in the quarter, reflecting sales-related predelivery payments and stronger operating results. Investment totaled $150 million during the quarter as we continue to invest in new technology and support our current projects and future programs. Adjusted net income was $74 million in the quarter, with a 3.1% of margin compared to 4.2% a year ago.

The year-over-year decrease mainly reflects higher financial expenses from the mark-to-market of our long-term incentive plan and higher taxes. Earnings per ADS now stands at $2.2 on a last 12-month basis. We ended the third quarter with a net cash position. Net cash to adjusted EBITDA, excluding Eve improved to a positive 0.4x from a negative 0.5x a year ago. Our average debt maturity ended the quarter at 8.7 years, while the average cost remained at 5.1%. During the quarter, we declared BRL 154 million in interest on equity. This corresponds to BRL 0.22 per share or circa of $0.17 per ADS.

In 2026, we declared BRL 354 million in interest on equity, representing a dividend yield of around 0.52% based on the share price at the quarter end. Also, for our shareholders, in November, we will change our ADS ratio from 4 common shares per ADS to 1 common share per ADS. This change has no impact on our underlying equity value. Last but not least, a quick word about our guidance. From an operational standpoint, we stand by our commitment to deliver 80 to 85 aircraft in Commercial Aviation and 160 to 170 aircraft in Executive Aviation.

From the financial side, we are happy to increase our revenue guidance to between $8.4 billion to $8.6 billion because of the strong performance of our business. The adjusted EBIT margin remains unchanged at between 10% and 10.6%. However, we raised our adjusted free cash flow guidance once again, now to $700 million or higher, supported by better operational performance and cash generation. With that, I will hand it back to Francisco for his closing remarks. Thank you.

Francisco Neto: Thank you, Felipe. I would like to provide a brief update on Eve's continued progress. The flight test campaign continues to advance with 73 flights completed in more than 3 hours of flight time. Following the completion of hover flights, Eve is now advancing through transition flights with full transition expected before year-end. In summary, we continue to see strong demand across our businesses and positive momentum in our global markets. We would like to welcome Japan Airlines to our E2 family, the second operator of our small narrow-body jet in the country and the Hellenic Air Force to our KC-390 family, the seventh operator of our next-generation military aircraft in Europe.

We remain focused on sales, efficiency and execution while continuing to invest in new technologies for the future. Our progress is driven by the trust of our clients, the support of our suppliers and the commitment, discipline and energy of our people. And we are proud to be certified once again as a great place to work. Together, we remain guided by the pillars of our culture and our motto: Safety first, quality always. With that, we are now ready to take your questions.

Operator: We will 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 expressed authorization of Embraer. We also highlight that this conference call is being conducted in English with translation to Portuguese. Please let me say a short announcement for Portuguese speakers [Foreign Language]. [Operator Instructions] The first part of the Q&A session will be exclusively for equity research analysts and investors. The second part of the Q&A will be only for the press. The first question comes from Marcelo Motta with JPMorgan.

Marcelo Motta: It's regarding the guidance, if you could comment a little bit about the EBIT margin expected for the fourth quarter. If our math is correct, here, we are talking about maybe a 10.3% margin, which would be a decline of 60 basis compared to the third quarter. And usually, in the fourth quarter, we see higher operational leverage. Felipe commented that the margins on the defense might not remain at the level that we are seeing like the 16% EBIT. So maybe if you can comment about this and why we will not see an expansion of EBIT margin in the fourth quarter given the high operational leverage that quarter?

Felipe Santana de Lima: Marcelo, Felipe here. Thank you for your question. It's important to highlight, right, the production leveling, especially in Executive Aviation, where it's much more balanced throughout the year, right? So when you compare last year with this year, we already see fourth quarter not so -- have so much concentration on deliveries on Executive Aviation. Also important to mention that we're still behind on the production level on Commercial Aviation, given that we'll have a concentration of deliveries on the fourth quarter Commercial Aviation, where the EBIT margin is below the average of the company.

And also on defense, as I mentioned on the slides, we do have this year on the fourth quarter, some annual contract adjustments related to costs, inflation and FX on Brazilian real-denominated contracts. So given that, that's the reason why we reiterate the guidance of 10 to 10.6% of EBIT margin for the full year of 2026.

Operator: The next question comes from Kristine Liwag with Morgan Stanley.

Kristine Liwag: So just a quick follow-up on the services business. You're now at 17% margin, which is a very record margin for the service business. Going forward, is this a new level we should expect for services going forward? And how should we think about the contribution of the Dallas facility once you...

Felipe Santana de Lima: Felipe here. Thank you for your question. Services & Support continues to benefit, right, from higher volumes, operating leverage and the growth of Embraer's installed base. Margins can vary between quarters depending on the mix, but we remain confident in the fundamentals of the business. And it's important to highlight that we still have OGMA for the next year on the ramp-up of the GTF engines. And also, we're going to have the start of Dallas, as you mentioned. So we believe that margins on Services & Support can be better until the end of the decade, close to 17 to 18%.

Operator: The next question comes from Myles Walton from -- with Wolfe Research.

Louis Raffetto: Louis Raffetto on for Myles. Maybe you can just touch on the supplier compensation. It was mentioned within Commercial Aviation, just kind of ballpark how large that was? And then maybe more broadly on the supply chain? Just what are you guys seeing? Any better or worse? Any commentary you could provide?

Guilherme Paiva: Thanks for the question. This is Gui here. The suppliers compensation for the quarter in Commercial was in single-digit levels. As we -- and we didn't disclose the value because we think when we suffer from the supply chain, we absorb the cost. When it benefits from the compensation, it's part of the business. So we think it is a recurring event that we deal with on a daily basis and should be accompanying the results of the division. In terms of the supply chain, we have made material progress in our Executive Aviation leveling of production, moving close to 10 points of production out of Q4. In Commercial Aviation, we have done some progress but still plenty to do.

I think one of the recurring themes has been engine supplies that have impacted us and the industry. But we continue to work with our suppliers to improve the situation, and we do expect Commercial Aviation and Executive Aviation and defense volumes to increase -- continue increasing before the end of the decade.

Operator: The next question comes from Ronald Epstein with Bank of America.

Andrew Steinhardt: This is Andrew Steinhardt on for Ron. I just wanted to ask one on Phenom 300EV triple certification. Congrats on obtaining that during the quarter. Can you talk about the demand environment for that aircraft and its level of contribution to the Executive Aviation's record backlog in the quarter?

Francisco Neto: Sure. So Ron, thanks for the question. Well, the Phenom 300 continues to be our best seller, and we see this going forward. We are now investing to increase production of the Phenoms and the Praetors as well. But we see the production increase in the next years as you know, to cope with sales demand that continues to be strong, even now -- even stronger now with the launch of the EV version.

Andrew Steinhardt: Got you. I appreciate the color there. And if I could just ask a follow-up. What's driving your higher confidence in the free cash flow forecast for the year, just given that much of the other guidance metrics are largely remaining the same?

Felipe Santana de Lima: Felipe here. Thank you for your question. It's important to mention that on the third quarter, we had, especially with the prepayments on -- with the increase of the backlog, especially on defense and also Executive. So given that, we saw more PDPs coming inside the cash of the company. Of course, when we look to the fourth quarter, we are preparing the company on the inventory side for the deliveries next year. So that's the reason why we feel comfortable with the $700 million or higher on the free cash flow for the full year of 2026.

Operator: The next question comes from Andre Ferreira with Bradesco BBI.

Andre Ferreira: Congrats on the results. I wanted to go back to the guidance topic. So the midpoint would imply -- in revenues would imply a 7% year-over-year decline in revenues for the fourth quarter. Of course, there's production leveling, which kind of lowers the amount of deliveries for the fourth quarter. But I wanted to know if this reflects concerns about supply chain at the margining -- worsening compared to the third quarter? Or does it reflect, I don't know, like mix, defense POC timing or maybe some conservatism?

And just a follow-up here on the free cash flow kind of on the opposite end of the last question, if the $700 million floor, if it also looks conservative because the 9 months was almost $600 million already. Any color on that?

Felipe Santana de Lima: Andre, Felipe here. Thank you for your question. So regarding the guidance, right? It's important to mention that you're right regarding the POC of defense. But it's important to highlight that for defense, it will be one of the highest levels of margins on the double digit for the year on defense. Of course, that we -- as I mentioned earlier, we do have the impact on Commercial Aviation, where the EBIT is lower, right, when you compare and we do have a concentration of deliveries there and also with defense. So given that, that's the reason why we see and very comfortable with the guidance that we gave of 10% to 10.6% of margin.

On the free cash flow, as I mentioned also earlier, we are also preparing the company right for 2027, and we're already working on inventory for the deliveries that we're going to have and also connect with the production level, we want to see more deliveries in the first quarter, right, on Executive and also Commercial. So this gives pressure on the cash in the fourth quarter. So that's the reason why we maintain the $700 million of floor for the free cash guidance.

Andre Ferreira: All right. Perfect. Just one point about the revenues, if that also reflects mix of maybe more E1s and more light Executive jets because it also implies a 7% drop at the midpoint.

Felipe Santana de Lima: No. On revenues, the mix is probably in line from what we planned. So nothing different on the mix of the deliveries on Commercial and Executives.

Operator: The next question comes from André Mazini with Citi.

André Mazini: Two quick ones. The first one on the Embraer and Northrop Grumman collaboration for the KC-390 that you guys are developing for the aerial refueling tanker for the U.S. Air Force with the Boom technology and all that. Now with the Democrats controlling both houses, Congress and Senate, can we expect the chance of that going forward may be increasing? So your thoughts on that and that program, in particular, of course, the Boom refueling is developed, which is great. So that's the first one. And the second one, of course, results are pretty strong, congrats. But it was a miss to our net income, mostly on the financial results, right?

And particularly inside the financial results, the stock compensation line item was a little bit greater than what we had. So if you could talk a little bit about that line item and how investors should model that going forward?

Francisco Neto: So thanks, André for the question. So I'll take the first one. We don't see any changes in our plans because of this result of the midterm elections in the U.S. So we really believe we have a great solution for the U.S. Air Force with the KC-390. And we continue to work very closely with Northrop to develop the boom project with them to make the KC-390 a good option for the U.S. Air Force. So no change for us because of the elections.

Guilherme Paiva: André, Gui here. On the second part of your question, as you noticed, our financial expenses were a little bit higher than normal. That was because of the mark-to-market of our long-term incentive program in the company. That is obviously a noncash expense. And from an economic perspective, it is very important to highlight that we do own 28.6 million shares in treasury to hedge our position. So at the end of the day, that's just how accounting works. But from an economic perspective, the company is fully protected from any variation share price up or down.

Operator: The next question comes from Alberto Valerio with UBS.

Alberto Valerio: I have 2 here. The first one, a follow-up on the cash flow generation. You used to see 50% of EBITDA free cash flow. And this year, even excluding the tax refund around $8 million (sic) [ $68 million ], we should see above that. Could you see that for the future? Could this cash flow keep with a ratio higher than 50% of EBITDA? And another one that would be what to do with this cash that the company is very strong at this moment. We know that Eve project is derisked next year, and we should have some announcement of a new program for Embraer in 2027 or something for 2028?

Felipe Santana de Lima: Alberto, Felipe here. Thank you for your question, right? So regarding to the ratio, right, of the free cash flow to EBITDA on the last 5 years, on average, right, we are on 50%. This year, we had, especially with the deals that we had on defense, had some money coming that was expected next year. So probably next year, we're going to see a bit less this ratio. And going forward, we expect to maintain this level of 50%. So the next year, probably below that, but 2028 onwards, around this average, mainly because of defense and the down payments from the customers. And also regarding the cash, right?

So we continue to strengthen the balance sheet of the company. The company was historically net cash. So we're just getting back where we were pre-pandemic and also pre the investments that we had also on E2 and the KCs. And regarding new program, we don't have anything planned. We continue to study something on Executive, Commercial or even defense. So we don't have anything planned of announcement for next year.

Operator: The next question comes from Lucas Laghi with XP.

Lucas Laghi: I have a follow-up on the Executive Aviation division. I mean profitability was a highlight, but we're still seeing a very strong momentum for net new orders. I mean we estimate slightly above the $1 billion of net new order this quarter for the division. So I mean, we understand that there is a lag, right, until the moment that you place the orders until it becomes revenue and EBITDA. But I mean, considering the tightness on the market, I mean profitability is already at high levels, but net new orders continue strong level. So how should we think of the profitability of the division going forward? I mean can it get better than that?

I mean it's already at very strong levels. But considering the strong momentum on orders, I mean, could we still see some room for profitability to further improve considering the list prices that you're selling the aircraft nowadays? And just a follow-up on that, but considering your plans to reach 200 units per year over the upcoming years and considering this very strong demand as we speak, should we expect it anytime sooner? I mean, could you anticipate this expansion of deliveries on the Executive division in the short term?

Guilherme Paiva: Lucas, thanks for the question. It's Gui here. I think not only from Executive Aviation, but if you look across the Board for the company. I think we are in a very special position because when you look at the products that we've manufactured and the engineer has helped us produce, we believe we have a very strong product portfolio across all divisions and that it's generating the value that for our customers and ultimately for our shareholders. So in terms of profitability, the company always continues to strive for being more efficient. That's part of the DNA that we have that we're always going to try to improve our margins and our results.

In terms of volume, we continue to work with a target of reaching 200 units in Executive Aviation in 2028. And part of that effort, we're investing in our facilities. We do expect our CapEx in 2027, '28 to temporarily increase towards $500 million, $550 million before coming back to the regular level of $400 million that we have had in previous years.

Francisco Neto: So Gui, if you allow me to complement or to summarize this, I mean, yes, we do see opportunity to improve profitability of Executive Aviation going forward, combining the launch of new versions that will help us to sustain or even increase the sales price with higher production levels that, as Gui said, we are investing to increase the production, and we continue to invest in improving -- increasing efficiency. So we have been able to reduce the lead time production of our Executive jets year after year. So the combination of all these 3 fronts, we believe will help us to see improvements in the profitability of our Executive Aviation unit, right?

Operator: The next question comes from Daniel Gasparete with Itaú BBA.

Daniel Gasparete: Most of my questions were already answered. So I would like to explore more about the strategy side, if I may. The company has been doing great and looks like it's going to continue doing so over the next few years. So I'd just like to get the ideas from Francisco. What is his planning, what he's thinking about for the company for the next few years in terms of strategy? How he's spending his time thinking about bringing the company to the next level? How he thinks about the strategic position of the company? What the company needs to do?

And also, if I may also ask to Felipe, it has been a few months already as his post of the CFO. Congrats on that. And the company has been doing fantastically well. So just to get his view on what he sees as opportunities here to collect in terms of improving working capital dynamics, perhaps SG&A, how you're seeing efficiencies that could be captured for the company?

Francisco Neto: Daniel, thanks for the question. I'll take the first part. I mean, we see the continuity of our medium-term sustainable growth based on the current backlog of $35.4 billion -- $35.7 billion now. Thank you, Gui. $35.7 billion. And the market is still supporting us. This fuel prices is helping us with the Commercial Aviation as we have the most efficient E-Jets in the market. Executive jets, we see the demand continue to be, I mean, robust with our new launches of the Phenom and the Praetor. And the KC also, we are selling very well.

So we see the company continue to grow sustainably in the next 4 or 5 years as we are investing in increasing production as well for the 3 lines, right? I mean we want to increase the production of E-Jets, Executive jets and the KC-390 and Super Tucano. So in parallel, we are working in 2 big programs that can help us boosting this growth in India, I mean with 2 fronts, Civil Aviation and KC-390 as well. And we have this big opportunity in the U.S. if we succeed to introduce the KC-390 as an agile tanker in the U.S. Air Force.

So -- and in parallel, we are investing in new technologies in preparing the company for a new cycle of products that can be either a new Commercial jet family or Executive jet family or even defense aircraft that will support a more ambition growth in long term for Embraer.

Felipe Santana de Lima: And Gasparete, Felipe here. So thank you for your question. Yes, I see a lot of opportunities on the working capital, right? When we look to the inventory turn where we can reach 3x, right? We are below that. We're around 2.1x this year. So on the working capital and also look to efficiency, right, as a whole for the company, where we have been more efficient on costs and the way that also we're allocating capital as well.

So we see a lot of opportunities really to improve, right, the margins of the company in the coming years and also the financials have been supporting the execution of this backlog, as Francisco mentioned, and also on the strategic initiatives, as we already mentioned as well.

Francisco Neto: And another point that I forgot to mention, Daniel, is that if our eVTOL, right, we're continuing investing in the development, the certification process of our eVTOL, that will be also an important contributor to Embraer revenues and profitability after 2029.

Operator: The next question comes from Ronald Epstein with Bank of America.

Ronald Epstein: Maybe a quick financial question. Year-over-year, it looks like the contract liabilities went up by $450 million. What is that?

Felipe Santana de Lima: It's basically PDPs, Ron. Felipe here. Thank you for your questions. It's basically PDPs, right? You see this increase on the backlog that we are seeing, right? And it's a reflection also on this account on the balance sheet with the PDPs that we're receiving on the customers.

Ronald Epstein: Okay. So that's just all predelivery payments. Okay. Good.

Francisco Neto: Yes.

Ronald Epstein: And then what is the quarterly spend on Eve?

Guilherme Paiva: So Ron, their guidance is about $225 million, if I remember correctly. So the run rate that you are doing something close to $50 million, $55 million.

Francisco Neto: Per quarter.

Guilherme Paiva: Per quarter.

Ronald Epstein: Got you. Got you. Got you. Got you.

Guilherme Paiva: And the -- just as some milestones, right, the company expects to achieve full transition for the prototype before year-end. We're going to be building 6 prototypes through the first half of '27. And we intend to start the flight campaign for the certification in the mid of '27 and finishing in '28.

Ronald Epstein: Got it. Got it. Got it. And then has there been any more discussion internally? You're thinking about what the next move is for you all in Commercial Aviation?

Francisco Neto: Actually, we don't have any news, important news on that front, Ron. We continue making studies, which way we should go. I mean, as a next cycle of products, we have an engineering team, the marketing team is making a lot of studies and combining with the funding strategy and the customers' conversations, we don't have any decision yet, which way we will go. But we keep investing in new technologies to be prepared for a new cycle of products.

Operator: Next question comes from Kristine Liwag Morgan Stanley.

Kristine Liwag: So with Ron's question about the potential new aircraft and the studies that you're doing, I mean, it sounds like with the full transition for Eve happening by year-end this year, you're really derisking that program. And so the opportunity for the next big project could come pretty soon. It seems like you've got capacity opening up maybe for engineers second half of '27, maybe into '28. So that seems to be more on the horizon. So I wanted to ask Francisco, when you think about the opportunities, either in a potentially larger narrow-body or a larger business jet or something in military or all the other investments that you have, what are the key priorities that you're looking at?

What are the variables that you're weighing? And when you think about some of these endeavors, what's your appetite to go do it alone in terms of a project that has a high ROI, but it is not too expensive versus going for challenging a duopoly, which might take more company resources? How do you balance those opportunities?

Francisco Neto: Kristine, thank you very much. This is really a great question. But just for you to know, our engineering has been very busy, and will be very busy with not only with EV. EV is one of the projects we are working on, but they have been busy, I mean, in doing updates on the existing products. Like, for example, we are now in the certification process of the E2TS for the E2 that is a unique feature that we offer to the market, this autonomous takeoff of a commercial jet. Also, we have hundreds of engineers, I mean, busy with update on the specification of the KC-390 that we are selling. Now each deal requires a different specification.

Also, we are now working to update our Super Tucano. So we have a lot of engineers working in this update of the cockpit of the Super Tucano with this new feature as a Drone...

Guilherme Paiva: Hunter.

Francisco Neto: Exactly. So thank you, Gui. So again, we -- our engineering is very busy. But we have -- I mean, some of them working, making studies, as I said, about new opportunities for Embraer either in Commercial Aviation or Executive. But Kristine, yes, we are taking into consideration all the aspects. One thing we won't -- we will not do is to put in risk the financial health of our company.

So the next movement will be based on a very robust decision in terms of customer acceptance, in terms of funding, in terms of product and especially, I mean, the chances we will have to succeed with the new product without putting risk what we have built in terms of financial health in the company.

Guilherme Paiva: Kristine, and just to complement what Francisco said, we don't think it will be prudent to have 2 big CapEx fronts happening at the same time. So we have to materially derisk Eve as a project before we take the next step. And part of that derisking process, I would highlight, first the full transition flight at year-end; and second, the first manned flights for the prototype that we expect to happen in the second half of '27.

Kristine Liwag: Great. Great. Super helpful. And then also back to Services & Support, I think this is one of your sleeper segments because I think investors don't realize how large of an aftermarket business you now have as a proportion for total EBITDA. In terms of that Services & Support business, you give us an understanding regarding backwards looking. What did you change in your strategy to be able to grow this business more? Was it really more of a function of the larger installed base? Or did you do something different to increase your capture rate? I mean you're clearly making investments there as we've seen with OGMA and Dallas.

How do we think about your overall strategy in this business? And did this continue to be a faster grower for EBIT for the company. I mean, the margin upside here in the quarter was just a significant standout, right? So just wanted to understand the sustainability of that.

Francisco Neto: Thank you, Kristine. It's another great question. Yes, I mean, you were totally right. I mean we are growing a lot in commercial executive and defense. But we see our Services & Support area as one of the most important growth avenues for Embraer. So we are investing to grow the -- to expand our capabilities to do more service for commercial jets as the commercial jet fleet is growing. Same in the executive jets. We are now, I mean, reviewing the structure to be even more focused on sales and customer support. We are now implementing a lot of AI tools to help us to be more efficient and more customer friendly.

So we are doing a lot of investments in that area because we do believe that they are going to contribute a lot with the profitable growth of Embraer within the following years.

Felipe Santana de Lima: If I can add here also, Francisco, also investment in simulators and training, right? That is also good margins. And with this increase, especially the increase of sales of E2s, we're investing now installed bases of simulators around the world to support our customers as well.

Operator: Next question comes from Marcelo Motta with JPMorgan.

Marcelo Motta: Just if you can comment on commercial campaigns. No one has asked about it, but there are news about KLM, Brussels, India Go (sic) [ IndiGo ]. I know that you don't comment about specific campaigns, but if you can just remind us how positive you are about the future of the E2, let's say, for the next 6 months, what you expect on new orders or book-to-bill? That would be great.

Francisco Neto: Thank you, Marcelo. Yes. We are very happy now with the development of our Commercial Aviation, in terms of sales and also EBITDA recovery plan as we expect to be at a 5% EBIT until 2028. So -- and since 2024, we have seen the sales of E2 getting traction with a great year in '25, another great year in '26. We are now very pleased with KLM plans to expand the E2 fleet operated by KLM Cityhopper. So I mean -- as I mean, we see the customers, airlines recognizing more and more. I mean the benefits of having the -- our small narrow-body complemented the operation of the larger narrow-bodies.

So we see this in Europe, we see this in South America, in North America, Asia-Pacific. So I mean -- and we are still working on other campaigns. So we -- yes, we are very optimistic now with the development of our Commercial Aviation, not only in revenues, but also in EBITDA recovery.

Operator: Next question comes from André Mazini with Citi.

André Mazini: So my additional question is around Executive Aviation pricing. Of course, great margins on that business. And you also comment on improved pricing, right? I mean the jets delivered currently are having very good prices. That's why margins are so good, of course, on top of the production leveling and whatnot. However, if you look at some industry data sets, it seems that on the margin, prices are not as high as they were probably 12 or 18 months ago. So I think the question is, is the pricing of what's being delivered today, which is making these margins be so high?

Is it kind of older prices, if you will, and at the very margin, jets that are sold today are not having the buoyant prices we saw 12, 18 months ago, or at the margin, it's still growing, right? So what's the picture of the margin of these jets that are being sold right now?

Guilherme Paiva: Thanks for the question, Gui here. So at the end of the day, we do believe that we have one of the best products in Executive Aviation in the segments that we that we play in, and that's the value that we drive to our customers and eventually to our shareholders. We're very pleased with the results the division has had in this decade. There is a lag in pricing, as you mentioned, of roughly 2 to 3 years given the success of our products and the demand that we have seen from our products.

And we don't know exactly what data set you are referring to, but we are optimistic about the profitability and the growth that we have in the division for the next couple of years.

Operator: The next question comes from the chat with Lucas Barbosa with Santander. Congratulations on the results. My question is regarding the risk of high oil prices and higher rate environment and globally. Is the company seeing any request from customers to postpone deliveries because of these factors? And does management expect any impact from them in upcoming years?

Francisco Neto: Well, Lucas, thanks for the question. Well, first, we have not seen any impact, I mean, in our -- either in terms of delay of deliveries or delay of sales campaigns because of the fuel price. What we have seen is that the market has been resilient. And actually, it opens an opportunity for the E2s as E2s are very efficient, fuel efficient compared to older aircraft. And it's a great alternative for the airlines, I mean, to add more flights, frequency of flights or open new routes and improving their performance, I mean adding so more efficient aircraft to their fleets.

So again, we have not seen any impact in our business either in terms of deliveries or new campaigns.

Operator: Thank you very much, sir. This concludes the question-and-answer session for equity research analysts and investors. Now we will start the Q&A session dedicated to the press. [Operator Instructions]. The first question comes from Ioannis Rekkas with flight.com.gr. What are your plans for cooperation with Greece regarding the decision for 3 KC-390 with an additional option for 3 more and the fact that the Hellenic Ministry wants 25% domestic production for every new procurement.

Francisco Neto: Well, thanks for the question. So we are very happy, and we welcome Greece to the KC-390 family with this order for 3 with options for additional 3. So we will work with Greece as we do with the other customers. I mean, with a collaboration in terms of training, in terms of Services & Support to make sure that the operation of the KC-390 in Greece will be very successful. So that's what we are planning to do with that customer.

Operator: [Operator Instructions]. The next question is also from the chat with Jonathan Hemmerdinger. Embraer had previously hoped to have the E2TS system certificate by the end of 2025. Why has that process taken longer than expected? When do you expect certification will happen?

Francisco Neto: So thank you, Jonathan, for your question. Yes, we continue working with the authorities, the local authorities to certify the E2TS and we expect the certification to happen soon as we have already some customers, I mean, very interested in that function in their aircraft.

Operator: [Operator Instructions] The next question comes also from the chat with Jack Richardson as a freelance. Could you provide an update on what, if any, progress you have made on the Eve for military applications?

Francisco Neto: Thank you for the question. At this point of time, we are focusing on the original objective, original purpose for Eve, that is urban air mobility. So we are really advancing the certification process. And in parallel, we are making some studies, but we don't have any definition to launch a variant of Eve at this point of time.

Operator: [Operator Instructions]. The next question comes also from the chat, and it is from Molly McMillin from Aviation Week. You mentioned that you had not seen delays or cancellations because of higher fuel prices and mentioned Commercial Aviation specifically. What have you seen in Executive Aviation? Also, what are you planning for timing in new product upgrades and products in Executive Aviation?

Francisco Neto: Thank you, Molly, for the question. Well, I mean, honestly, in Executive Aviation, I think this -- the demand depends more on the wealth creation than on the fuel price. So that's why we have not seen any impact in the demand of our executive jets because of the fuel price increase. And the other question was?

Felipe Santana de Lima: New products...

Francisco Neto: New product. Well, we have launched this year the new version of the Praetors, the Praetor 500E and 600E and more recently of the Phenom 300EV. So both with the new features that have been very well accepted and received by the market.

Operator: The next question comes from also the chat, and it's from Caroline Bruno. Can you give -- can you please give us an update on your supply chain? Boeing and Airbus have problems with theirs, but yours seem more robust. Can you elaborate on this?

Francisco Neto: Yes, Caroline, absolutely. Well, we also have a problem with supply chain. But well, in general, we have been able to manage to reduce the shortages of parts by approximately 25% when we compare, I mean, 2026 versus 2025 despite the growth in the company's delivery volume. But we also have -- we still have some, I would say, we call pacers. We have -- we are still having issues with specific components as engines, as fuselage parts, as windshields and some other components. But I mean, a few components that, yes, they have impacted our production process.

But at the end, we have been able to manage and may be in line and delivering the production according to our guidance.

Operator: This concludes the question-and-answer session in English for the press. [Operator Instructions] [Foreign Language]. The first question comes from Nelson Düring from DefesaNet. Francisco, could you talk about competition for KC-390 in India, please?

Francisco Neto: Nelson, competition in India will be fierce because it's based on price, ultimately. We really believe that KC-390 are the best option for the India Air Force (sic) [ Indian Air Force ] because of its characteristics, because it's a more modern product. It has new technologies and their operating costs are highly optimized compared to those of the competition. But as I said, it is ultimately a competition based on price. So it's going to be hard. It's going to be tough, and we are getting ready for that bidding process.

Operator: The next question is also from the chat from Xandu Alves from Jornal do Vale. Francisco, you mentioned Embraer is getting ready for a new product cycle. Could you explain what that means, please? Is it a new family of commercial jets, maybe bigger aircraft? What about in executive and defense? Could you elaborate please?

Francisco Neto: Well, thank you for the question, Xandu. We haven't yet defined what the new product cycle will look like for Embraer. Right now, we are conducting studies. We're assessing the market, talking to clients, talking to suppliers, conducting studies, talking to funding sources, strategic partners so that we can make a decision on how we're going to move forward in the long term, whether we're going to have a new family of executive jets or commercial aircraft, we haven't yet decided on what kind of aircraft or what size yet or if we're going to have a new defense product. That's where Embraer is at the moment.

Operator: The next question is from Bruno Andrade from Veja.

Bruno Andrade: Can you hear me okay?

Francisco Neto: Yes. Yes, we can.

Bruno Andrade: I have a couple of questions. I sent my questions through the chat, but I'll ask them here. What will be the military aircraft front for the next 2 years, '27, '28? Do you see new countries coming into your portfolio? Also, what do you expect in terms of growth for services and support? You mentioned that you wanted to be a relevant line. How can it grow over the next few years? So those are my 2 questions.

Francisco Neto: Thank you for the questions, Bruno. In defense, the KC aircraft line, yes, there is plenty of opportunity and new potential clients for KC-390s. It's a relatively new product, KC-390s went into service in 2019. And since then, we've sold more than 70 aircraft, most of which have been to other countries. Greece has been the latest and the seventh European country to adopt KC-390. We sold it to Asia, to South Korea, to Central Asia, Uzbekistan and South America, we recently announced Colombia. So there are plenty of opportunities for this aircraft globally, including these 2 major projects, India, between 60 and 90 aircraft and the U.S.

Air Force, which is one of the largest clients for that kind of aircraft in the world. So there are plenty of future opportunities for the aircraft in Services & Support, as I mentioned during the presentation. That is one of the major avenues for growth for Embraer because fleets are growing. So the services -- the demand for services and parts also grows. And we also have a new agnostic front, which is engine revisions being conducted by our company in Portugal, OGMA. We have a multibillionaire agreement for GTF engine revisions and the subsidiary is growing a lot.

It was worth USD 230 million, USD 240 million in revenue, and we expect it to get up to $600 million by 2030. So those 2 fronts will be leveraging services, which is a very profitable area for Embraer. Not only in terms of finance but also because it ensures client satisfaction, and it opens the door to new sales for clients.

Bruno Andrade: So you mentioned $600 million by when?

Francisco Neto: 2030.

Operator: The next question is from Marcelo Rocha from Radio Station CBN. Mr. Rocha's question is in the chat box. So I'm going to read it. So CEO, Francisco Gomes Neto, Boeing has opened positions for engineers in Brazil, including São José dos Campos, which is where the headquarters for Embraer are. There are new opportunities for November. In 2022, the same situation caused some discomfort between the companies. Now that Embraer is projecting market growth and an increase in the backlog. How worrying is it to lose experienced engineers -- the potential to lose engineers to the competition? Does the company have enough professionals for that growth? And how long does it take to train a qualified engineer?

Francisco Neto: Thank you for the question, Marcelo. Actually, the whole industry is growing. Embraer is growing and so is the competition. So it's only natural that there is an increased demand for qualified professionals. I would say that we have enough engineers for the time being. We have a lot of work for them. That's what engineers love, new projects and opportunities to take part in developing new processes, new systems, new aircraft. So we're doing very well, and we are totally prepared for the company's future growth supported by qualified engineers, which are renowned worldwide.

Operator: Next question is also from the chat from João Sorima from O Globo. How are the talks with the U.S. government in terms of KC-390 acquisitions? Any progress?

Francisco Neto: Yes. We are working with the authorities and the whole U.S. defense ecosystem to show them the benefits of introducing a modern aircraft like KC-390s. But we all know this is a project for the mid- to the long run. We won't be seeing any results in the short term. But we are very optimistic because it's a great opportunity. There are 49 KC-390 suppliers in America. So more than 50% of the content of the aircraft is produced in the U.S. It's a fantastic aircraft for the U.S. Air Force. The first project includes 1 tank (sic) [ tanker ] supplier for jet -- fighter jets.

It's an agile tank (sic) [ tanker ], and it can open the door to KC-390s and it's a great option for the U.S. Air Force for other missions. So yes, we are making progress. But as of yet, nothing has been defined in the short term to buy the aircraft.

Operator: Thank you, Mr. Gomes. Ladies and gentlemen, we now conclude the Q&A session and the earnings release conference call for Embraer. Thank you for joining us, and have a great day.

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