Embraer(ERJ) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a significant increase in backlog, reaching $31.3 billion, up 38% year-over-year, marking a new historical record [15] - Total revenues for the quarter were close to $2 billion, reflecting an 18% increase compared to the previous year [15] - Adjusted EBIT for the quarter was $236 million, with an 11.8% margin, compared to $172 million and an 8.6% margin in the same quarter last year [16][18] - Net income for the quarter was reported at $170 million, with an adjusted net income of $54 million, a decline from $167 million year-over-year [18] Business Line Data and Key Metrics Changes - In Commercial Aviation, revenues increased by 31% due to a better product mix and higher volumes and prices, with a backlog of $15.2 billion [9][10] - Executive Aviation achieved record revenues of approximately $580 million, with a backlog of $7.3 billion, supported by a 2.4-1 book-to-bill ratio [5][6] - Defense & Security revenues grew by 27%, with a backlog of $3.9 billion and a 1.3-1 book-to-bill ratio [7][10] - Service & Support revenues rose by 16%, with a backlog of $4.9 billion and a 1.8-1 book-to-bill ratio [7][10] Market Data and Key Metrics Changes - The company noted strong demand in the executive aviation sector, with the delivery of its 2,000th business jet [6] - The Defense & Security division is expanding its global presence, with new agreements signed for the A-29 Super Tucano [7] - The company is experiencing a positive phase in commercial aviation, with new orders contributing to a robust backlog [5][23] Company Strategy and Development Direction - The company is focused on efficiency and innovation to support sustainable growth, with significant investments in new technologies and facilities [5][9] - The strategy includes transforming the supply chain through digital technologies and AI for better planning and forecasting [9] - The company aims for substantial mid-term growth while preparing for long-term expansion through new product development [24][88] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting operational guidance despite supply chain risks, expecting to deliver between 77 and 85 commercial aircraft and 145 to 155 executive aircraft in 2025 [12] - The company anticipates a net cash position by year-end, reflecting strong financial health [19] - Management highlighted the importance of maintaining a focus on quality and safety while pursuing growth opportunities [24] Other Important Information - The company announced a new liability management initiative, issuing a $1 billion long bond and repurchasing $809 million of existing bonds [20] - The ticker symbol was updated to EMBJ to better reflect the company's strategy [21] - The company declared nearly BRL 210 million in interest on equity, translating to a dividend yield of 0.35% [22] Q&A Session Summary Question: Future returns to shareholders and potential buybacks - Management is evaluating capital structure and considering share buybacks, but no firm decisions have been made yet [31][32] Question: Expansion of work scope for American Airlines' E-Jets fleet - The company is involved in a program with American Airlines for a full interior refresh, which includes new seats and better connectivity [34] Question: Impact of higher costs on executive aviation EBIT margin - Cost inflation is a trend in the industry, and tariffs have also impacted margins, contributing to fluctuations [39][40] Question: Clarification on tax credits and one-off adjustments - Tax credits in commercial aviation relate to import parts, while defense margins were positively adjusted due to a contract reassignment [44] Question: Status of Pratt GTF engines and competition - The PW1900G engine used in E2 aircraft is performing well, with improvements expected, while competition remains strong in the market [49] Question: Expected U.S. tariff impact on coming quarters - The company anticipates a total of $60 million-$65 million in tariffs for the year, with efforts to reduce exposure [78]