Embraer S.A. (NYSE:ERJ) Q1 2025 Earnings Call Transcript

Embraer S.A. (NYSE:ERJ) Q1 2025 Earnings Call Transcript May 6, 2025

Embraer S.A. misses on earnings expectations. Reported EPS is $-0.4 EPS, expectations were $0.43.

Gui Paiva – Head of IR and M&A:

Francisco Gomes Neto – President and CEO:

Antonio Carlos Garcia – CFO:

Gui Paiva: Good morning ladies and gentlemen and thanks for standing by. This conference call will be conducted in English, but please let me say a short announcement for Portuguese speakers. [Foreign Language] My name is Guy Paiva and I’m the Head of Investor Relations at M&A for Embraer. I want to welcome you to our First Quarter Earnings Conference Call of 2025. The numbers in this presentation contain non-GAAP financial information to help investors reconcile EVE’s financial information in GAAP standards to Embraer’s IFRS. We remind you EVE’s results will be discussed at the company’s conference call. It is important to mention that our numbers are presented in U.S. dollars as it is our functional currency. This conference call may include statements about future events based on Embraer expectations and financial market trends.

Such statements are subject to uncertainties that may cause actual results to differ from those expressed or implied in this conference call. Except in accordance with the applicable rules, the company assumes no obligation to publicly update any forward-looking statements. For detailed financial information, the company encourages reviewing publications filed by the with the Brazilian Comissão de Valores Mobiliários or CVM. At this time, all participants are in a listen-only mode. We will give you instructions later on for participation in the two question and answer sessions. As a reminder, this conference is being recorded. Participants on today’s conference call are Francisco Gomes Neto, President and CEO of Embraer, Antonio Carlos Garcia, Chief Financial Officer, Luis Harrison, Corporate Communications Director, and myself.

This conference call will have three parts. In the first part, top management will present the company’s Q1 results. In the second part, we will host a Q&A session only for investors. And last but definitely not least, in the third part, we will host a dedicated Q&A session only for the press. It is my pleasure to now turn the conference call to our President and CEO, Francisco Gomes. Please go ahead, Francisco.

Francisco Gomes Neto: Thank you, Gui. Good morning and good afternoon to all. Welcome to Embraer’s first quarter 2025 results conference call. We delivered the highest first quarter revenue of the past 90 years at a significant $1.1 billion. We also registered the highest first quarter adjusted EBITDA margin of the past five years at almost 10%. Embraer ended the period with a $26.4 billion backlog, marginally higher than the previous all-time record printed in the last quarter. Aircraft deliveries were up almost 30% higher year-on-year, evidence of our continuous focus on operational efficiency. Embraer will from now onwards resume payment regular dividends and interest on equity for its shareholders. To conclude this part, we reiterate our 2025 guidance, which implies double-digit growth in our aircraft deliveries and revenue growth.

Let’s go over the main highlights for the company during the quarter. Executive Aviation delivered a solid performance reflected in sales, deliveries and backlog. The division also reached the highest first quarter revenue since 2014 in a record backlog of $7.6 billion. In defense and security, Sweden and Slovakia confirmed the selection of the KC-390 Millennium, while Uruguay converted its A29 Super Tucano options into firm orders, and Panama selected the aircraft. The division ended the quarter with a stable $4.2 billion backlog. In Commercial Aviation, the Japanese ANA placed an order for 15 E190-E2 that should be included in the $10 billion division backlog in the second half of the year. The E195-E2 from Helvetic Airways became the largest jet flying into London City Airport ever.

Service and support kept its solid growth pace with the start of the next industrialization stage of the Pratt & Whitney engine shop at OGMA in Portugal. The division backlog remained stable at $4.6 billion. Embraer has been working on a production leveling plan since 2023. Our main objective is to create stability and have a more linear production pace throughout the year. The plan will allow us to increase efficiency, productivity and improve cash flow. This year, we have already seen the first results of the project and from 2026 onwards, we can expect a more stable production over the year. We also continue to work very close with our suppliers to support our more linear production plan. We can see improvements in several operational KPIs for all our family of products, such as an increase in aircraft production, a reduction of travel work, reduction in assembling cycle and increase in productivity.

Here, for instance, we share improvements in the Praetor production line. Let’s now touch upon a topic we have all dealt with over the past two months, U.S. tariffs. First of all, it is important to highlight first quarter results were not impacted by them. Second, our initial analysis points towards limited impact, so we remain confident and reiterate our 2025 guidance. Third, Embraer has a substantial amount of U.S. content in its aircraft, which mitigates partially our exposure. And last, and more importantly, we are working on initiatives to minimize the impact of U.S. tariffs on our business, and we are argued for zero tariffs to globalize the aerospace production chain, as it has been the case for many decades. I will now move on to operational results by segment over the next few slides.

All figures are based on year-on-year comps. In Commercial Aviation, revenues were stable, and we noted a relevant improvement in the adjusted EBIT margin, driven by product and customer mix. In Executive Aviation, revenues expanded 35% because of higher volumes and product mix. The adjusted EBIT margin increased because of operating leverage and cost containment initiatives. In defense and security, top line grew 72% because of stronger KC-390 revenues recognition, customer mix, and product stage. The better adjusted EBIT margin was driven by higher volumes, lower expenses, and negative extraordinary items a year ago. Moving to service and support, revenues increased 16%, mainly because of the OGMA GTF ramp-up. The adjusted EBIT margin decreased because of product mix and the start of North American Executive MRO ramp-up, partially compensated for positive one-time items.

Finally, 2025 will be a decisive year for EVE, as the company should complete the first flight of its full-scale prototype, and should receive its first firm orders, opening a brand new path of long-term growth. I will now hand it over to Antonio to give you further details about the financial results, and then I will be back with closing remarks.

Antonio Carlos Garcia: Thank you, Francisco. Good morning and good afternoon to everyone. I will present now our first quarter financial results, and all of my comments will be based on year-on-year comps, unless noted. Let’s move to Slide 13 and start with deliveries. Embraer delivered 30 aircrafts in Commercial and Executive Aviation combined during the quarter are 20% higher. In Executive Aviation, deliveries were 23 jets, of which 14 were in the light segment and 9 in the mid-size one. The numbers of delivery was 28% higher and, more important, 15% of the midpoint of the company’s full year guidance, moderately above 11%, first quarter average for the past five years. In Commercial Aviation, deliveries were seven aircrafts, the same number as last year, and represented 9% of the midpoint of the company’s full year guidance.

I should highlight we were unable to deliver two additional aircrafts during the quarter because of commercial issues. Slide 14, our backlog reached an all-new all-time high, $26.4 billion, marginally up and sequentially and 25% higher versus a year ago. Talking about each division, the backlog for defense and security soared 73%, while for Executive Aviation increased more than 65%, supported by new KC-390 Millennium and A-29 Super Tucano sales and the Marquis contract with FlexJet, respectively. The backlog for service and support increased almost 50%, while for Commercial Aviation decreased 10%. However, it is important to remember the ANA order has not been yet included in our numbers. Moving on to revenues, our top line reached $1.1 billion in the first quarter.

The best first quarter results of the past nine years and 22% higher. Our service and support in Executive Aviation divisions together represented almost 70% of the company’s total revenue in the quarter. Moving to Slide 15, we generated $109 million in adjusted EBITDA in the first quarter with a 9.8% margin. Now, adjusted EBITDA for the quarter was $62 million with a 5.6% margin, a significant increase compared to the previous $7 million and 0.8% margin marks from last year. This is great results, was supported by executive aviation higher volumes, which ties back to Francisco’s comments about production leveling, product mix and lower costs and expenses. A quick word on U.S. tariffs and their potential impact. Our initial estimate is that could negatively impact our EBITDA margin by 90 basis points for 2025.

However, the company is taking several steps to mitigate these effects like additional cost reduction measures. And for now, we remain confident we can deliver our guidance 2025. Now let’s move to the next Slide, 16. In first quarter, we consumed $386 million in adjusted free cash flow because of high working capital needs mainly in inventory in preparation for higher numbers of aircraft deliveries in the next three quarters. Moving to investments, it is important to highlight our capital allocation remains focused on segments with high return such as Executive Aviation and servicing support mainly in the U.S. First quarter, without ease, we allocated $38 million for research and development of which $11 million were expensive. We invested another $37 million in CapEx and $30 million in the Pool Program to support new contracts, totaling $88 million for the quarter.

To finish this slide, let’s talk about our adjusted net results. We ended the quarter with a negative $74 million for an adjusted minus 6.7% margin compared to $30 million comp. However, reported net income was positive $73 million for a 6.7% margin positive. If we consider $124 million in deferred taxes because of stronger Brazilian foreign exchange rate and $23 million from EVE results. Slide 17 please. As always, I would like to start this slide by highlighting the top right corner. Embraer was able to reduce both its net and gross debit positions without ease by $508 million to $608 million over the past 12 months. Thus, the company was able to lower its net debt to EBITDA from 1.8 times to 0.5 times during the period. The negative $285 million free cash flow generation for Embraer standalone during the quarter helps to explain the recent increase in financial leverage.

As I mentioned in our last call, as part of our Liability Management plan, we are focused on extending the duration and reducing the cost of our debt. In our most recent liability management step, we issued a $650 million 10-year bond at 158 basis point over U.S. Treasury in Q1, and we repurchased $522 million in 2027 bonds fully retired and $150 million in 2028 bonds. With the deal, we extended our debt duration to 6.3 years compared to 3.8 years in Q4 last year. Slide 18 and to conclude my part, let me talk about shareholder remuneration. For the fiscal year 2024, we approved R$51 million in dividends, or R$0.07 Brazilian per share, to be paid on May 23 to EMBR3 holders. ERG holders should receive the money in a few days later, but you can find more information with our U.S. Depository Bank soon.

For the fiscal year 2025 and beyond, the company intends to analyze the potential fiscal benefits from these interest and equity declarations. This value will be added with, if required, a top-up dividend to comply with the minimum 25% of net income payments established by the Brazilian corporate law. The company will then pay this money in a single payment after shareholders’ meeting in the next year. With that, let me stop here and I hand it back to Francisco for his final remarks. Thank you very much.

Francisco Gomes Neto: Thank you, Antonio. The first quarter was marked by significantly stronger results, which provides us with a solid outlook ahead for sustainable growth. In 2025, we started to see the first material results of our production leveling initiatives. We will continue to take steps to make the most of our installed capacity to achieve even higher output, optimizing the use of our assets. And we will keep focused on sales in all business units to guarantee our successful growth trajectory. Let me now take the opportunity to say, thank you very much and welcome to ANA, as it becomes the first E2 operator in Japan. To finish, U.S. tariffs so far should have limited impact on our company. And we join other companies in calling the return of zero-tariff policy for the aviation sector, as has been the case for several decades, reducing complexity and costs for a highly globalized industry.

We continue to work hard, always embracing the foundation of our culture, safety first and quality always. Let’s now move to the Q&A session of the call.

Q&A Session

Operator: We will now start the Q&A session. The first part of the question and answer session will be exclusively for equity research analysts and investors. The second part of the Q&A will be only for the press. We highlight again 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] If you need assistance, please use the Q&A button on the platform. To give everyone a chance to participate, we request just one question per call. The first question comes from Marcelo Motta with JPMorgan. Please go ahead. Please hold a second.

Marcelo Motta : Perfect. Hi, everyone. Thanks for taking my question. The first one is on the commercial. If the company can comment about what they mentioned on the release, you know, the potential one-time impact from supplier credit, if they could try to quantify what was the impact, please? Thank you.

Antonio Carlos Garcia: By the way, it was 30 basis points, Marcelo — Or 3%, zero — 3 percentage points of 30 basis points. Sorry for that.

Marcelo Motta: Perfect. Thank you, Antonio.

Operator: Thank you. The next question is from Miles Walton with Wolfe. Please go ahead.

Myles Walton : Thanks. Good morning. I was hoping on the tariff front you could give a little bit more color. I think the 90 basis points is probably related to your cost within executives, but maybe Francisco or Antonio, is there any hesitation on U.S. Airlines accepting the 175s in the near term, given the tariff on imports? Are they choosing to maybe wait a little bit longer to see if they’re negotiated away? Thanks.

Antonio Carlos Garcia: Thanks, Myles. Great question. And we still don’t know everything. That’s why we set our first estimate. I would say we have, as you know, impacting our executive aviation at first place and then also in our service division. And at least we have read the first circuit being taken in Brazil and the U.S. customers spend is beyond the cost for the tariffs. In fact, what we are pursuing is who is responsible for the importation process beyond the cost of tariffs. We do not have, at least today, a setback on commercial, but it’s too early to confirm 100%. But I’d say if I would split it at 90 basis points, highly concentrated in executive aviation and service and support. And we, as a company who has a lot of U.S. content in our aircrafts, we always deduct the U.S. content in order to, I would say, pay the taxes.

That’s why we are still confident we could continue to run our business here, even with this bad negative impact. Francisco, you want to complement maybe on this?

Francisco Gomes Neto: No. That’s enough.

Antonio Carlos Garcia: I hope I answered your question, Myles.

Myles Walton: That’s perfect. Thanks, Antonio.

Operator: The next question is from Kristine Liwag with Morgan Stanley. Please go ahead.

Kristine Liwag: Hey, good morning, everyone, Francisco, Antonio, and Gui. I mean, first of all, congratulations on the record high company backlog, but the market always wants more orders. So with that, I mean, on the KC-390, can you provide an update on where you are with India, Saudi Arabia and Poland? And also, we’ve seen bundling as very successful in aerospace. We’ve seen this with Airbus and their success with selling the A220 with the A320. Can you talk about bundling opportunities for the KC-390 and the E2s?

Francisco Gomes Neto: Hello, Kristine. Thanks for your question. Well, you’re bringing a good idea. It might be an opportunity. But anyway, we are working in several campaigns for both, for KC-390 and E2s. The India project is moving. We are talking to the customer. We are getting more questions about the product. And we are working the next steps. We expect to have some more improvements within the next, you know, one, two years in India. But India is a big program, as you know, from 40 to, opportunity from 40 to 80 aircraft. And we are also working in other campaigns with the KC-390, other customers that we cannot disclosure at this point of time. But we expect some results during the year as well. E2, the E2 is not different.

We are working in several campaigns. Yes, competition is not easy in both sides, you know, with the KC or the E2s. But we believe we have good chances in many campaigns. So also in commercial aviation, we expect to bring some good news during the year.

Gui Paiva: Francisco, just to complement for the KC, what you are seeing is a bundle that some, especially the NATO countries, they are using the same contract, you know, which makes the procurement process much faster than before.

Francisco Gomes Neto: Yes, but bundling between KC and E2, we don’t have any example yet.

Gui Paiva: Not yet.

Kristine Liwag: Not yet. So that sounds very optimistic. So we hope to see that kind of bundling soon.

Francisco Gomes Neto: Well, I mean, it’s not a bundling, but in case of Poland, as you brought Poland as an example, we said, well, if we are working the two fronts, opportunities with E2s in Poland, you know that, and with LOT Polish and KC as well. And if we succeed in both, we can bring a lot of initiatives, a lot of products and services to be done in Poland. This is a kind of not a direct bundling, but an opportunity for the country.

Kristine Liwag: Super helpful. And if I could add a second question, the geopolitical environment today, even with the U.S. tariff discussions, right, it shows that we’re kind of re-centering back into regional powers. And there’s a reminder that, look, you know, the larger aircraft transport industry is still a duopoly, you know, Boeing and Airbus. And so at this point, when you talk to different customers, are there — how has the conversation regarding a larger Embraer aircraft evolved in the past few months? And, you know, I know Francisco, Antonio, you guys have talked about this over the years and, you know, there’s been varying concerns and opportunities, but how has that conversation evolved today? Because strategically, historically, Boeing was the tip of the trade spear for the U.S. and all this tariff stuff is a reminder that, you know, this is an important exporting industry for the U.S., but for the other countries that don’t have aerospace, you know, this is a strategic weakness in their industries.

So how should we think about this opportunity? Where is the most recent thinking about this program and how has that evolved in this dynamic environment?

Francisco Gomes Neto: Well, Kristine, this is also a good question, a good question, not easy to answer specifically, but yes, I mean, customers, they have asked us about our plans to go bigger, but actually we are very focused on selling the A2s and we are working in new — working and investing in new technologies to be prepared for our new products in the future that can be, you know, a bigger executive jet or a bigger commercial jet or even a defense. So we are making studies in all fronts. We don’t have a decision, but what we’re doing in a concrete way is investing in new technologies, you know, technology about more autonomous flight, the technology about fuselage, new fuselage, new wings, cockpit and so on. That’s what we are doing, but we don’t have any concrete decision to go this way or that way.

Kristine Liwag: Great, thank you.

Operator: The next question comes from the telephone number ending 7519. Please go ahead.

Steve Trent : Good morning, Steve Trent from Citi, and thanks very much for taking my questions, Francisco, Antonio, Luis, and Gui. I was curious in terms of the supply chain, I believe last time you mentioned, for example, that the fasteners for the aircraft was kind of a bit of a bothersome area. And I’m wondering if that’s improved a little bit or if the pressure point maybe has shifted over to another area of the supply? Thank you.

Francisco Gomes Neto: Thank you. Thank you for your question. You know, since two years ago we have put in place a more structure, a new structure in our supply chain area, you know, to deal with this all supply chain issues. So, in general, we have seen improvements, but the bottlenecks are moving from one product to another. But even then, we are progressing as I mentioned in my opening. We are progressing in bringing the parts we need to level our production, which is our main target at the end of the day. We still have some issues more with fuselage parts that we are still struggling. This year, some types of engines that are still delaying to deliver the parts on time to us. But I think we are working very close to the suppliers.

And at this point of time, we don’t see big issues to deliver our guidance. That’s why we are reaffirming our guidance in terms of deliveries between 77 to 85 commercial jets and 145 to 155 executive jets. So, again, bottlenecks are still there moving from one part to another. But with the structure we have put in place, we have been able to manage these issues and keep our production running as planned.

Steve Trent: Okay. Really appreciate it. And I’ll stick to your request of just one question. Thank you, gentlemen.

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

Andre Ferreira : Hi. Good morning. I have a question. But first, I just wanted to clarify the first answer because I think there was some technical issues with the call. Is it 0.3 percentage points in the commercial EBIT margin or the consolidated EBIT margin? But my real question is actually about the past two reversals in the service margins. How much was the impact of this in the service EBIT margin or in the consolidated EBIT margin? Thank you.

Antonio Carlos Garcia: This is Antonio speaking here. The 3% was just supplier credits for the quarter inside the commercial aviation. Okay. And I would say the — we were on average for 7% support around 15%. We report a little bit lower. But as well, for us, it was five basis point — or 50 basis point less than average, I would say. But in our view, it’s just a temporary effect that will be compensated throughout the years. Okay. It was really something that mix, as Francisco said, on-time effects with customers and this and this and this. I would say put it all together, we perform 5% less EBIT margin in the quarter. But we are not seeing — we are not worried about the whole year, just to make it clear. For sure, we have an impact in consolidation. But I would say we are talking about the last 20 million that would bring us even to a higher margin, almost 6.5% to 7%. It was the effect on the consolidated basis, more or less.

Andre Ferreira: Okay, so, and the commercial is?

Antonio Carlos Garcia: Commercial is 3% for the quarter.

Andre Ferreira: Okay. All right. Thank you.

Operator: The next question comes from Jordan Leone with Bank of America. Please go ahead. Mr. Leone?

Jordan Leone : Hi, sorry, can you hear me now?

Francisco Gomes Neto: Yes, yes, we can.

Jordan Leone: Great. Good morning. Thank you for taking the question. Could you guys talk about how you’re thinking about the Pratt strike and any impact for how you’re managing through that for service?

Gui Paiva: The strike at Pratt, Wheaton and Francisco, we talked today.

Francisco Gomes Neto: Well, I mean, actually, Jordan, we are still trying to get more information about this. And at this point of time, we don’t have enough information to measure potential impact in our business.

Jordan Leone: Got it. Okay. Thank you so much.

Francisco Gomes Neto: Thank you, Jordan.

Operator: Thank you. The next question comes from Lucas Marquiori with BTG Pactual. Please go ahead.

Lucas Marquiori : Thanks, guys. Thanks for the call. Good morning. My question is more on coming back to the topic of U.S. tariffs. If you could provide some clarity on some of these initiatives, you guys mentioned you have on mitigating the impacts. I’m assuming there’s at least some impacts, right, coming especially from executives, maybe commercial. So what’s the work plan around there? I mean, if maybe you are relocating production to some other facilities outside of Brazil or maybe passing through prices, how does your contract work with this changing law environment? I mean, just kind of giving some color on the measures to mitigate tariffs, it would be nice, guys. Thanks.

Antonio Carlos Garcia: Lucas, good morning. It’s Antonio speaking here. Let’s walk through a little bit the story. When we set the guidance for 2025, I remember some of you said, Antonio, it seems too modest, the guidance you guys are placing. And we said at the time we see a lot of volatility. At one point we were foreseeing some volatility. I would say I was more in the idea of inflation than tariffs, but you have the tariffs in front of your nose. And I would say we have two options. Either we stop and start to bleeding or we do something against it. And since the beginning of the year, the company already decided to wait and see what’s going to happen, don’t do crazy things, don’t invest further, don’t grow the capacity without having a clear vision.

I would say if you put it all together, we are talking about costs, internal cost measures, and our planning, that we were already foreseeing, I would say, this type of stability. That’s one point. And the other point is how to measure — how to manage the tariff impact. Because just to give an example, Brazil has to pay 10%. But if you take out the U.S. content as a temporary importation, that goes, depends on the aircraft. Between 6 and 5 or 6.5 depends on the aircraft. You know, that’s more or less if you put it all together. That’s the number we comment to all of you, 19 basis points. You know our EBITDA margin for the next three quarters. Okay. Not a near effect. And we are not waiting. As a Brazilian company, we have crisis every year.

We need to be able to find a way to compensate. But we don’t know all effects. That’s a very premature effect that we are seeing right now. That’s why, I would say, if you see something different in Q2 or Q3, we are going to place new numbers. But at least today, in our view, we are confident to keep the margin. Francisco, do you want to comment on anything else?

Francisco Gomes Neto: Nothing from my side.

Antonio Carlos Garcia: I hope that answers your question, Lucas.

Lucas Marquiori: It does. Thanks, guys. Have a good day.

Operator: The next question comes from Daniel Gasparete with Itau BBA. Please go ahead. Mr. Gasparete, you’re muted. We cannot hear you.

Daniel Gasparete : Sorry, thank you very much. Can you hear me right now?

Operator: Yes.

Daniel Gasparete: So, guys, thank you very much for the opportunity. My first question will be related to the suspension of point deliveries in China. I would like to get your view if there’s any kind of opportunity arising for you guys coming from that region? That would be the first question. And the second one would be related to the comment that Antonio did related to the cost reduction initiatives on the executive side. I would just like to explore more about it, if it was already considered in your guidance, and how do you see that playing along during the rest of the year? Thank you very much.

Francisco Gomes Neto: Thank you, Daniel. I will start with the China, and Antonio will help with the cost reduction that he mentioned before. Well, things in China, for us, have not changed. Both of our aircraft, E190 and E195, are certified by the Chinese authority. And we have been working with potential customers in China to introduce our new generation of E2 that, in our opinion, they do not compete with the Chinese aircraft. We go just in the middle. And recently, we delivered the two aircraft to Hunnu, a Mongolian company, and they will fly to important Chinese cities. They will showcase how they do first time in China, and they will see how nice, how good, and how efficient is our aircraft. So again, nothing new at this point of time. We continue working in opportunities to introduce our E2 jets in China.

Antonio Carlos Garcia: So, Gasparete, just to make it clear, the biggest impact on tariffs is related to executive aviation. And we, as a company, we are one company with four divisions. And as one team, when we have an issue, we all reduce costs. It’s not only related to executive aviation. We implement additional cost reduction measures in order to try to reduce offset part of this cost increase during by tariffs. That’s the, you could take all possible measures. You just see the SG&A cost already, Q1, was much lower than previous year. That’s more or less what you are doing in order to absorb and try to find a way to not jeopardize our numbers.

Daniel Gasparete: Great. Thank you very much, Francisco, Antonio. Have a nice day.

Operator: The next question comes from Lucas Laghi with XP Investments. Please go ahead.

Lucas Laghi : Good morning, everyone. Good morning, Francisco, Antonio, Gui. I’d like to follow up on potential new order announcements, especially on the C-390. I mean, we have been seeing several efforts from Embraer to sell the aircraft in the United States, right? I think you’re guys in the third conference in the country to showcase the aircraft. Could you please remind us the strategy that you guys are playing to enter this market? I mean, do you plan to sign new partnerships such as the previous one with L3Harris, for example? Do you plan to build a production facility to produce the C-390 there? And how do you see like Trump tariffs in this context for your decision rational to enter this market in a more significant pace going forward? Thank you, guys.

Francisco Gomes Neto: Thank you, Lucas, for your question. Yes, absolutely. I mean, besides India that I mentioned before, we see U.S. as a great opportunity for the KC-390. And recently, last week, the — well, we have one C-390 in the U.S. right now. Last week, the aircraft was showcasing in Las Vegas in an event there. So, we are now presenting — we participate in an important panel in that event. We are presenting the C-390 as a good alternative for a tanker, but also as a multi-mission aircraft that can revolutionize the U.S. Air Force in terms of productivity. This week, the aircraft went to Tampa, and next, this Friday, the aircraft will be in Washington, also to showcase the product. So again, and we are working, yes, with a consultant in the U.S. to finalize our strategy on how to approach the market.

And to answer your last question, yes, with a sizable order, the KC-390 will be assembled in the U.S. The aircraft has already, Lucas, 57% of U.S. content, and with an important order. If you secure an order from U.S. Air Force, yes, these aircraft will be assembled in the U.S., absolutely. So again, we see a great opportunity for us and for the U.S. Air Force as well, by introducing the KC-390 in its fleet.

Lucas Laghi: Thank you, Francisco, very clear.

Francisco Gomes Neto: You are welcome. Thank you for the question, Lucas.

Operator: Thank you. This concludes the question and answer session for equity research analysts and investors. Now, we’ll start the Q&A session dedicated to the press. First, we’ll answer questions in English, and then we’ll answer questions in Portuguese. We’ll also answer questions sent via the platform chat. Please let me say a short announcement for Portuguese speakers. We ask participants interested in asking questions to press the raise a hand button on the platform. When your name is announced, please make sure your microphone is on and start your question. If you need assistance, please use the Q&A button on the platform. To give everyone a chance to participate, we request to ask just one question. The first question comes from Cristian Favaro with Valor Economico. Please go ahead.

Cristian Favaro : Guys, it’s just a follow-up question. Antonio, I think you mentioned that during the first quarter, the company was not capable of delivering two aircrafts in the commercial segment due to commercial issues. Can you clarify what happened? Just that one, I’m curious actually. Thank you very much.

Antonio Carlos Garcia: It’s just, Cristian. Well, sometimes you have pending contractual issues. Sometimes you don’t have the documentation. Switching to Portuguese now. Sometimes we have the quarter not finished, or we do not have all paperwork in order to deliver the aircraft towards the customer or the lead source. That’s why sometimes it takes more than one or two weeks, then we ship the aircraft. It’s just a tiny matter for two aircrafts. But in regards to output, which is really important for us, we were able to finish those aircraft, but the commercial invoicing and contract to the customer took two weeks more than we were expecting. Just that. Not a big issue, but it’s just bureaucracy sometimes. It does not help us.

Cristian Favaro: Okay, thank you very much. All questions have been answered. Thank you.

Operator: Thank you. The next question comes from Jonathan Hammerdinger with Flight Global. Please go ahead.

Jonathan Hammerdinger : Hello there. I hope, I think you can hear me. Francisco, we’ve heard in the last several months, maybe it was last year, that Embraer was taking its time and trying to figure out new technology before moving forward with new development plans? You also sort of discussed or rolled out or talked about a new wing project, wing development project earlier this year. And Boeing has said they’re setting a new wing and Airbus is also. I’m wondering if you can give me any update on what development is looking like, what technologies look most promising, and if wing work is maybe central or increasingly central to what you’re looking at? Thank you.

Francisco Gomes Neto: Well, Jonathan, thank you for your question. I mean, as I said before, our engineering team is working in the different technologies and different fronts in order to allow us to decide about a new product in the future. At this point of time, we are really focused on selling the aircraft we have that are modern and competitive. And we see a lot of opportunities and we have the highest backlog ever of orders in the company. And there’s no other progress that I have to report to you in terms of wings or fuselage or other parts. We are just working, investing in those new technologies, as I said before, to be prepared to make a decision in a point of time in the future.

Jonathan Hammerdinger: Thank you very much. I think, follow up or no, maybe I’ll pass it along. I think you said one question. Thank you.

Francisco Gomes Neto: Thank you, Jonathan.

Operator: Thank you. The next question comes from Gabriel Araujo with Embraer. Please go ahead. Mr. Araujo, you are muted. Mr. Araujo. Apparently, he has left. So, the next question comes from the chat and it’s from Victoria Moores. Can you give us an idea of what we might expect from Embraer Commercial Aviation at the Paris Air Show?

Francisco Gomes Neto: Good question. It’s too soon for us to disclosure what we’re going to do in the Air Show. We are preparing ourselves for the show, as we do every year, but we don’t have any news to share with you at this point of time.

Operator: Thank you. Please hold a second. The next question comes from Jonathan Hammerdinger with Flight Global. Please go ahead.

Jonathan Hammerdinger: Well, I’m back. I raised my hand again. Francisco or the rest of the team, could you tell me or give us any update on the state of the GTF engine issues, the availability of the engines, and your happiness or how you feel about how Pratt has been handling the issues as of late and supplying parts and equipment as needed?

Francisco Gomes Neto: Thanks for the question, Jonathan. Well, we have been working very closely with Pratt & Whitney for the last two or three years. We see improvement in both fronts, in the engine deliveries to our assembly lines. This year, I hope this strike will not disturb this process, but so far, they are doing well in terms of GTF deliveries. Also, the new engines we are receiving are coming with a lot of improvements already, which will help a lot the Wings to stay longer under the Wings. So again, I think they are improving. Yes, we are happy with the development. Yes, we’d like to tend to do even faster, but we understand all the complexity of the issues, and we see improvement and have been working very closely to them.

Even myself, I meet with them three times a year, three, four times a year, just to discuss all the critical points related to deliveries, related to fuel issues, related to MROs, and et cetera. But we see — we have seen progress, Jonathan.

Jonathan Hammerdinger: Thank you, Francisco.

Operator: Thank you. The next question comes from Gabriel Araujo with Reuters. Please go ahead.

Gabriel Araujo : Hey, folks. Good morning. Sorry about my failed attempt earlier to make a question. Hi, Francisco and Antonio. I’d like to ask about the Latin American market, if you have any updates on the specific market. We know you had conversations in the past with [indiscernible] about introducing these in Brazil for those companies, in addition to Azul? And about the Mexican market, you have deliveries coming up for the E2 in Mexico. I’d like to know if you see room for the C-390 to also enter that country in the future, and if the E2 negotiations and the purchase by Mexicana would help the C-390 net market? Thank you.

Francisco Gomes Neto: Hi, Gabriel. Thanks for the question. In Latin America, starting with Brazil, I mean, we don’t have any news to share with you. We have been in contact with potential customers, [indiscernible], but we don’t have any progress to report to you at this point of time. And Azul is our customer. We keep delivering E2s to Azul, which helps with the showcasing, the showcase with aircraft in Brazil, in the region. Mexico, we are working hard to deliver the first E190 to Mexicana by end of July. The aircraft is already in our final assembly line, and this will be also a great opportunity to showcase the aircraft, not only in Mexico, because we have other potential customers in Mexico for that aircraft, but also in North America, right?

Then we have Porter in the north of North America, and then we have Mexicana in the south of North America. Well, Mexico is another potential customer for the C-390, but we don’t have any combination between the E2 or C-390 for that market. We are working in both fronts in Mexico. In Mexicana, now we are delivering the aircraft already, and we will do the best we can to make the Mexicana operation a great success, which will be very important for our E2. And the C-390, the same. We are working with them with an opportunity to introduce the C-390 in Mexico as well.

Gabriel Araujo: Have a great day.

Operator: Thank you. This concludes the question and answer session in English for the press. This Q&A section is going to be conducted in Portuguese. To switch to English, please press the interpretation button on the platform and then select English. [Foreign Language]

Gui Paiva: First question from Ricardo Meyer from the [indiscernible]. Could you please talk about the recent decisions from Airbus to postpone the development of hydrogen-powered aircraft and also Boeing and NASA to do more research on the TBW as opposed to an X-66 prototype? Would that be an indication that this new generation of commercial aircraft will be more conventional than expected? Does Embraer agree that any commercial jet could be a development and not a revolution from now on?

Francisco Gomes Neto: Thanks for your question, Ricardo. This is Francisco. Apologies, but we won’t comment on decisions made by Boeing and Airbus. Those are their decisions. I can only speak for Embraer. As I’ve said previously in my previous answers, Embraer has been investing in new technologies, fuselage, wings, cockpits, and because we want to be ready to launch new products in the future, whether it be executive jets, commercial or defense aircraft. That’s what I can share with you for the time being.

Gui Paiva: The next question is also from the chat by Nelson [indiscernible]. What is the scope of the agreement signed with Turkey at the last LAAD in April? Does it include any military developments?

Francisco Gomes Neto: Thanks for the question, Nelson. The scope of that MOU we signed with Turkey at LAAD is for a technological cooperation to develop parts jointly. Our intention is to expand our production capacity of E2 aircraft, and Turkey has a highly developed aeronautical industry, and we would like to introduce E2 in that market, which would also be in favor of that partnership. Now, the two fronts that are part of the scope of that MOU is to develop parts for commercial aviation and to do joint work to introduce Embraer aircraft in that country.

Operator: Thank you. The next question is from Rafael Coracini from [indiscernible]. Please go ahead, Mr. Coracini.

Unidentified Analyst : Hi, can you hear me?

Francisco Gomes Neto: Yes, we can, Rafael. Please go ahead.

Unidentified Analyst: Thank you for taking my question, which is about cost control. Does that include changing suppliers? Is there a possibility that Embraer will be switching American suppliers because of U.S. tariffs to suppliers from other locations, and if so, in which segments?

Francisco Gomes Neto: I’ll take your question, Rafael. In the airspace industry, you can’t switch suppliers overnight, so these are internal measures to cut down on costs to fight the effects of those tariffs. It’s nothing extraordinary. We’re just buckling up for that stage. To switch suppliers in the aerospace industry, it takes years, so we’re not going to a different location. We’re just working on our current structure. And again, we have four divisions, and they all work based on the same principle. They apply to everything.

Unidentified Analyst: Great, thank you.

Operator: The next question is from Rodrigo Rott from Aeroflap. Please go ahead, Mr. Rott. Your microphone is on mute.

Rodrigo Rott : Can you hear me now?

Operator: Yes.

Rodrigo Rott: I have a question about the cargo version of the E2. What are Embraer’s plan to do a cargo version? Have you got any plans to that end? Will you be going into that cargo version? What are your plans?

Francisco Gomes Neto: Hi, Rodrigo. Thank you for your question. We have developed the cargo version for the E190-E1, and the plan now is to introduce that product into the market, so that’s what we’re focusing on. There are no additional plans other than that. If it all goes well, then we may take a step towards the E195, but right now, we’re focusing on introducing the E190-E1 cargo aircraft.

Rodrigo Rott: Okay, thank you.

Operator: Thank you. This concludes Embraer’s Q&A session and the conference for today. Thank you for joining us, and have a great day.