Embraer(US:ERJ)2022-11-14 15:43Financial Data and Key Metrics Changes - The firm order backlog ended Q3 2022 at $70.8 billion, an increase of $1 billion compared to the same period last year, marking one of the highest backlogs since the pandemic began [13] - Revenue for Q3 2022 reached $929 million, down $30 million from Q3 2021, primarily due to lower revenue in defense and security [13] - Consolidated gross margin improved to 20.9% in the first nine months of 2022, up from 16% in the same period of 2021 [14] - Adjusted EBIT and EBITDA for Q3 2022 were $50 million and $93 million respectively, yielding adjusted EBIT and EBITDA margins of 5.4% and 10% [15] Business Line Data and Key Metrics Changes - In commercial aviation, 33 jets were delivered in Q3 2022, including 10 commercial jets and 23 executive jets, with a total of 27 commercial and 52 executive jets delivered year-to-date [12] - The gross margin in commercial aviation improved to 10% from 3.2% in the previous year [8] - Executive aviation delivered 23 jets in Q3 2022, a 10% increase compared to the same quarter last year, with a gross margin of 20.6% for the first nine months [8] - The service and support business achieved a gross margin of 29.9% in the first nine months of 2022, up from 26.4% in 2021 [10] Market Data and Key Metrics Changes - The company expanded its presence in the Middle East with a new operator, SalamAir, which ordered 6 E195-E2 jets [8] - The China Aviation Authority granted certification for the E190-E2, opening a significant market for the E2 family [8] Company Strategy and Development Direction - The company is focused on mitigating production challenges while maintaining a strong emphasis on safety and quality [6] - There is confidence in achieving revenue and profitability growth in the coming years, with production slots for 2023 and 2024 nearly filled [21] - The company is working on various activity campaigns with good prospects for new orders across all business units [21] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing supply chain constraints, particularly with engines, avionics, and interiors, which are expected to improve gradually [39] - The company remains cautious about delivery guidance, anticipating being at the lower end of the range due to supply chain issues [40] - Management expressed optimism about the midterm future, citing a focus on enterprise efficiency and innovation projects [21] Other Important Information - The company reported a negative free cash flow of $109 million in Q3 2022, attributed to higher working capital needs for increased deliveries in Q4 [17] - Total debt was reduced to $3.1 billion, down $808 million year-to-date, aligning with the company's liability management strategy [18] Q&A Session Summary Question: Long-term view on Eve - Management remains excited about the Eve project, with over 200 engineers dedicated to its development, viewing it as a significant innovation for long-term growth [25] - The company is locked into agreements for the next two years, with no immediate plans for monetization [26] Question: Delivery expectations for 2023 and 2024 - Management anticipates double-digit growth for both commercial and executive jets in 2023, with a positive outlook for future deliveries [29] Question: Cash flow expectations for Q4 - The implied cash flow for Q4 is projected at $250 million, with management cautious due to potential delivery risks [32][33] Question: Supply chain weaknesses - Management highlighted ongoing supply chain issues, particularly with engines and avionics, which are expected to persist into 2024 [39] Question: Services and support margins - Services and support are expected to maintain strong EBIT margins in 2023, driven by a growing fleet [44] Question: Pilot shortage impact in the U.S. - The pilot shortage is affecting E1 deliveries, but there is strong demand for E2 jets, with expectations for improvement in the pilot situation by 2024 [49]