ERJ - Earnings call transcript Q2 2021

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Operator

Good morning, ladies and gentlemen, and welcome to the ESG Flight Plan event and Embraer’s Second Quarter 2021 Financial Results. Thank you for standing by. I am Felipe Calzada, and I’ll be your host for today. At this time, all participants will watch our financial results presentation. Right after we will conduct a question-and-answer session and instructions to participate will be given at that time.

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forward-looking its events would Eduardo Francisco in Director Francisco. Gomes today’s Antonio and And the Officer go Gomes publicly ahead, of forward-looking anticipated revise call forward-looking these forward-looking occur. CEO; conference statements. legal the its Before we circumstances Investor statements subject forward-looking similar other Participants financial Neto. In statements projections may, Francisco to undertakes current future President in company’s believes, not no these is or and are are future occurred. or Couto, words I expectations could events about the factors. forward-looking Embraer This on in and Neto, substantially business not future call to statements circumstances results company have conference has Financial assumptions, now, includes Procurement; this and risks, any differ identify discussed or of words actual which and and obligations And on and like the statement. statement including, things, business and will, uncertainties, the intended new to and uncertainties and call over or Embraer These estimates, among light those risks other are begin, Brazil affecting forward-looking conference other Please of Carlos statements. statements might and financial a political events the The information, trends just and events update Chief based from markets continues, performance. where conference general Relations. largely those about anticipates, turn economic, Garcia, to on present. expects conditions intends, to because

Francisco Neto

are today. of hope Thank to for that joining you, call you you all interest well and in for thank morning thank you and company. our I your Felipe. Good safe all and our

Antonio’s The a our has for financial our focus in As with strong. strategic you results significant results in quarter are see showing executed well our discipline improvement were right the performance. will the been presentation, and clear example planning that QX

into go Aviation, QX the purchase a going good to we it more In rights order details Before I’d we segments. in aircraft. from more like announced Airlines Commercial the for we results, different regarding the with momentum business for new Porter highlight Canadian EXXX-EX the jets third firm are XX

the for Alaska the Air we sales orders in keep jets Aviation, be Active campaigns backlog record and Delta momentum operated this continuous in order strong We quarter. X Horizon activity best a E-Jet the had discipline maintained excess the in the as the aviation new in we aircrafts Airlines. Tucano up option family market. delivered to as of orders firm In growth new with two regional EXXX XX and for announced and book-to-bill first to reiterates also Super year. to in the price of SkyWest one Security, In for We Airlines the Defense interest business. half and our and the strategy with These

the year. growth Further the first performance quarter, systems companies to an of compared cybersecurity the reached in of in strong integration with first successfully by unpaved KC-XXX runway second revenue had we tests. our half important As year milestone Millennium and double-digit the this half performing in last

growth the strong in pleased better the and In traffic XX% revenue revenues aircraft with are the Air the higher Brazilian export to continued It in recovery and activity Tucano. sales Force we this customers as ecosystem a to potential in campaigns positive the results support margins quarter markets This Although continuing sales at segment driving total subsidiary, be backlog in XX-year strong program. OGMA, as services growth we the activity quarter. negotiations segment come. with Porter as Urban are for signed we with see Super continued on this by with make Air to are Airlines we EVE, important was second new is Millennium, and this exciting focused in support, during contract for expansion drove partnerships signed years on KC-XXX respect strong the currently in and services the to the progress well deals a for second With several to all innovation, with on period. the across further our with Mobility highlighted with the through we maintenance

such addition, our applications. customers as In maintenance Republic platform, key with signed for its Beacon, agreements services collaborative

the to Finally, we improvements. continue on see front, operations great

now our in a Garcia, you. aircraft in to costs. XX% year, give expect increase return further results, inventory returns cycle reduction end. of and our will details this financial We XXXX, hand to impacting Thank over XX% it CFO, will time on I in the compared production the Antonio working capital production a I to and and positively

Antonio Garcia

aircraft Commercial to business In Support level. & growth Security and we record our Defense XXXX Francisco, billion to our jets spread quarter. closed the Aviation since for quarter or On across in second best from This our were everyone. began. X, a continued for $X.X airlines. different up us quarter the In $XX.X had summary, give the revenue you, graph before quarter backlog backlog in from and we good quarter, prior Slide billion, quarter Services return we the the $XX.X confidence XX% Thank quarter. ended our improvements. solid also it and morning, Executive billion This sales the sales. I’ll Backlog mid-XXXX. in A light several demand grow. with at XX In is for at sales second Aviation, the larger prior as business, was a plans future grew represents shows & same start the we a pandemic and

X. Slide to Moving

and the aircraft in represents prior This both XXXX. continuous prior XX, increase year Commercial You compared a in Of in same in EXs quarter second In XX% Executive Sales same as delivered X.X This a times jets can compared deliveries the of and and compared compared continues quarter. were jets, XX for almost than larger period improvement increase increase the second XX% a XX the most Aviation quarter. XX% quarter prior in quarter were year. last delivered for Executive see Aviation, Commercial Year-to-date to period total half half well aircrafts in first to to XXX% Executive aisle compared aircrafts, in word we the XX the Aviation the the In X deliveries, and of to XX jets right-size at four XX post-pandemic. both Year-to-date represents delivered these higher to year. Aviation. compared to first deliveries, single very of the EXs increase XX last we the efficient aircraft quarter we for year. second perform Aviation, EX the aircrafts the light to delivery – XXXX. XXXX the

aircrafts, the the to XXXX had all the four reach guideline morning, Embraer’s stronger we On pandemic. Slide between to quarter revenue and to XX noted units X, Embraer between XX we executive expect XX business reborn we As this the of aircrafts. revenue. jets jets reach deliveries published net from as guidance commercial – show solid XX the growth in to the in

more top Aviation. line The second year. came higher the of deliveries doubled Our Commercial than primarily to quarter last compared from growth in

XX%. over net year. are year. Services impacted quarter. much segments show Embraer to Defense business as with recovery growth efficiencies a continues highlight all remain company’s Commercial $XXX on in XX, of Year-to-date Slide Aviation implemented XX% pandemic last last Executive Net highly XXXX. over that by reduction that’s billion, quarters. expenses It’s being the diversification, important $X the to restructuring revenues, since XX% the breakdown representing improved by trend SG&A XX%, Support Although, increase business favorably SG&A revenue Commercial or severely XX% during Aviation total & and Aviation revenue the just last focused We under our the this very was of show six million the was strong

the quarters. of cybersecurity in company provision driven results in expenses historical end the Selling from performance-based quarter while over compared to XXXX. expected for sequentially. expenses XXXX. expenses increased was revenue second Selling due low acquired prior remains G&A. at of the X% and better increase incentives the Combined net Although, our as Tempest, program new compared increasing XX% XXXX primarily had to This company light profit-sharing for with by consolidation increased levels the

cost more and of volume XX digital sales revenue, the the As was by shows these increase adjusted quarter results first second quarter. EBITDA. achieve adjusted our We in to EBIT of as X.X% effort. sales activity compared with our net combined expenses the leveraging percentage X.X% Slide selling efficiency

in business the very encouraged are We segments the all strong second performance by quarter. market across

margin EBIT X.X% adjusted points the over XX first Our was percentage quarter. up

adjusted over was double of before quarter. seen profitability this metrics digits the from at percentage levels XX% EBITDA recovered up XXXX. Our have Both XX or not in margin the first points to

million. of pricing, For our on approximately This fixed well resulting gross this and favorable year improved was higher our higher X.X%, including leveraged adjusted better prior margin efficiency, revenue, EBIT above XXXX, the both EBITDA was adjusted first improvement volumes deliveries, from production of level. reversal costs half obligation, on higher comes of $XX margin factors, several margin mix, tax and X.X% quarter

or our strong XX% was EBIT Slide on net on programs. improvement adjusted by Aviation income segments XX% although at profitability. in a All with in adjusted it financial $X.XX second year. was segment and by additional have Security improved certain XX adjustments leverage Defense last from at margins second the quarter. quarterly have great the any by of Tucano to profitability positive positive second net negative, was Commercial impact The on represents Super also XXXX. led positive since from recovering operating at spare would much as Executive with basis price better future the Aviation as was & million primarily income, quarter naturally profit X.X% in driven net ADS defense the along Support shows quarter. was and a and shows contracts. discipline delivers a positive first debt which X% margin our any consistent negative is This Services reductions strong parts $XX contributes follows. And at performance Adjusted in a were per earnings. reduction improving positive contribution

million last cash achievement. period XX, year. the than than like This to same the free $XXX $XXX with Free I’d to in flow Moving was million, positive cash higher first higher remarkable million of a Slide quarter begin $XX at flow. and is quarter second

of half is cash $XXX first flow flow of million. XXXX. $X is cash This the free of year-to-date, billion with Although negative compared around the

the the We from positive the XXXX year indicated this as free morning expect – cash flow of half second of guidance.

Now to investments.

This total in were of second million both are invest million last the levels. because important to and $XX line it with we in quarter shows future. our year Our is continue investment $XX year-to-date, which

they needed increase with have XX cash. in quarter. position. We invest first very and needed judicious cash ended balancing our cash of future with to slight end to cash billion liquidity preserve been US$X.XX We a the from our the the the shows and quarter equivalents, Slide

three debt Our a slight from US$X.X was months balance billion, ago. to at decrease

Our at average remains years. maturity debt four

an on beyond, generate reduce in have decrease. cash of expect half our naturally our the XXXX net leverage continue correspondingly expenses impact and will to additional We interest income. will second and net in This positive to so

solid has Finally, and – start marked world rates remainder Despite good deliveries the for of financial around for our time, XXXX. to we to decided the the the of and the Embraer visibility of the XXXX recovery, risks first first since XX. pandemic. economic for share targets economy guidance the the vaccination the moving year, half with Slide published

to expect to year. aircrafts We XX XX and XX commercial XX XXXX correct, deliver executive in jets, to just jets XX between to in to the XX commercial

expenses the the well repeat year. revenues the integration as range, both and to year, second a X% filled integration to for double-digit in Embraer of X.X% of should the & have expect representing the in to X% Service the this continued to a the margins, half related US$X.X between in half margin as & related Combined to X.X%. US$X of last consolidated those aviation as EBITDA margins good the and growth at to to XXXX should had range with Defense first this Adjusted We for this confidence growth costs are red has in be It’s of mention expect guidance to we as adjusted compared Support year. billion the we be be segments. commercial XXXX in their important in Security to EBITDA process. that in globally, the includes recover good billion between our the figures those low margin recovery midpoint

free US$XXX million flow for million usage range our free usage Finally, year. to of – cash first for breakeven is cash a flow We a had flow is of from of the guidance in XXXX. cash half free US$XXX the

So US$XXX M&A any XXXX, second products. you it without million up I to we to inflows very are half Thank remarks. back Embraer his generate in of final for over anticipating to and With conclude my presentation much. hand the cash Francisco for that, cash

Francisco Neto

Thanks Antonio.

long-term in discipline. plan reinforce to quarter the motivates accelerate for second results our the performance of strategic And and our The us our the year focus improvements confidence with strategy. confidence and and this the guidance delivery

this year grow one past, plan full capture potential we profitability. with is the beyond, to in year and mentioned had and recovery I to next of Embraer’s As

we size company, to that strategic include ahead, term, doesn’t the double the foresee projects. new in of Looking potential the middle and the

going stronger are to We on the profitability. only but be also top higher much bigger focusing not line, and

this by growth year, We done united several and to clear motivated much the profit opportunities. employees the our be for showing year. With expectation for with months. will better and potential free partnerships of work, over breakeven have are drive cash some past supplemented the hard positive results performance flow higher This even of already positive teams programs new and a to operating

next we will forward we you meeting event, to we with online with remain start new everyone our after for just which advancing shareholders on also commitments. to Q&A. ESG ESG the session, a I are ESG Also invite And chapter for Q&A share new are our the extraordinary journey. right We after therefore this scheduled our of looking will results Monday. Embraer

our with board and candidates industry These technical shareholders expect the members innovative knowledge, process. international have deep and election to constructive our corporate global approve extensive to shareholders following We of aerospace experience two improve analysts from feedback profiles strategic governance. thought

close our by passion their for our will always and on with this thanking starts focus strategic Finally, today quarter. planning. and everyone I It strong people executing

call, the earnings we to mentioned different in I As a you last today. are company

transformation of in moving Thank process a your confidence in company. and you, Philippi. are and for to are we We you our interest fast. Over

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already We to him. that preparing remember only with sat to and the will here Couto, questions to can be are sent our and Eduardo, questions some be he Writer’s Platform. over you. Eduardo has moderator,

Eduardo Couto

Thanks, Philippi, now the start we Q&A.

me is take we that update question on Francisco who with Eve? an to you let questions wants or have Antonio, we have. see negotiations A don’t give I SPAC the can that? So first know the

Francisco Neto

with Yes. at very that optimistic thanks can of Thank mean, are well. process. this do you. I’d the say say, question. time, we I for the I is moving very this negotiation we point

Eduardo Couto

Okay.

we Moving making product electric has viable work been for this Embraer develop on aircraft the customers? What have. and questions, doing second to more question

Francisco Neto

the Well, in ESG first to one technical we Thank a electric question. our and they’re to present soon. that as the good have in with in are public activities aircraft fronts we be with Embraer. we innovation electrification flight line to moving you. the we recently Ipanema It’s And this had to continuing the that of hope invest this fast field full

Eduardo Couto

Great.

give fence is Can about Third that gross more from question Antonio? the quarter. Mizusaki we from have the said from second expansion He margin in details Bradesco. investors Victor showed material the you

Antonio Garcia

on main the had in thanks second side. defense Victor, quarter We for two facts the question. the

QX deliver QX to the was Super were figures. that we one that in deliver Tucano the flows to not First able

it, have to in and the say in XX% local to deliveries in lead contract adjustment both defense contracts would have we I addition where in the the QX. we In Super in course of this the adjustment Brazil, higher us margin Tucano, effects

Eduardo Couto

Okay, very good.

$XX million cost the comment on Also on you Could positive press mentioned UBS. related the from the base was revision in what comes question the Next release? reversal results?

Francisco Neto

question. for Thanks Hello. the

I That’s the we our That both point, reversed claim guide in second costs also – $XX have second of XXXX. not integration we we and in example, aviation and to say. was that and And quarter. is reversal in this contract, million already since would me right provision less also really It’s our to do we question that considering arbitration also That’s or a a of would we we for XXXX, The have here numbers describe we I in why the performance company. important gain were $XX an QX we is hence able quarter tax costs, quarter why this million, XXXX we this first QX real tax the we I adjusting. seeing even position. second mention other let’s quarter, claim of say, more being net second [indiscernible] that are First this adjusted which discussed the built year to not, have put, also the regards million, adjustment Brazilian are results. the would effects. was have up for discussed combined commercial now, have that for were around types $XX That’s say

Eduardo Couto

several about try to summarize will EVE. questions them. I We have

on general on any initiatives basically, EBITDA So, Zanite. particularly updates negotiations would your very be with helpful,

You EBITDA of maybe a rates little already bit, talked down. going but update an

Antonio Garcia

said, with successful prototype mean, we the are the with I the initiative, a way. as this I with excited flight product. very well, had Yes, SKL-XXX, we first this by test

SKL-XXX, next preparing are we and with the very technically moving well. it’s test prototype, the Now,

moving with Zanite negotiation We XXXX. by well. I about entering mentioned XXXX certification the and are in that’s already the very And planning service

Eduardo Couto

Okay. Very good.

been quarter the for Credit results, we In deliveries quarter, business can of half Suisse. Business have the a you the strong. jet you And an first-time of the give overview buyers. to much jets, question business first very were buyers? mentioned on has first-time how Maybe market. second from moving Now, were jet

Francisco Neto

say, it. your year. it’s I would say, in up can like delivers today would something XX% the towards our in first-time do backlog backlog I portion I for buyers, whole of the – and

We with and first-time about are going we are market. XX% the talking buyers,

that to we bit a doing book-to-bill two sure, to pretty one And two. two see in light one, you also five one five one industry, and category. the pushing market especially to the between above say, to the it’s would to to I the one but well, If first-buyer are, and for jets to little

Eduardo Couto

Now, question a there Commercial Suisse. Credit is from on

Your guidance do for any Commercial any deliveries have that for you you deliveries your already supply jets. terms chain in could are Are XXXX, asking of Also XX being given above what low XX issues seems on prevent you from to range? they there of that color see delivered – XX that?

Francisco Neto

it’s now What it XXXX. starting than for to XXXX a that is seen. from guidance to as it’s year still is delivered are going closing take back that but XX having. fact we this around delivered the XX, sure the are commercial XX do but quarter is coming Let’s right. would or are or bit the XX little at the to number aircrafts last but From XX is we jets are and number year that XX% XXXX. XX less same more, see see, We giving Last the why the that we and throughout year. we Commercial Embraer. XXXX impact has And fulfill to selling next account important year. between level pandemic, It’s sales the information. to but suffering I be would do more deliver aircrafts, higher between more we we the well in to And guideline for to right we XXXX, this That’s XX selling confirmed, is year we’ve we say, Aviation from more, going more the to I because historical are say, divided less is levels it’s onwards,

Francisco Neto

in the deliveries, in themselves. Commercial first increase by half answer you of in If volumes in we true the the from last this this speak results. really I did flow to is see mean, much are something entire the pure this of comparing cash this we see something year seeing – million some a did year, and half for we that terms It this between year year of look I or The year, good first to year, at to performance year. growth, last the X% in a if as minus minus the link $XXX efficiency sizing and huge may, X% million the growth from the EBIT year the I’d between of a compared to terms last moderate numbers their the or planned, won’t from Executive. free guidance in But improvements company. gains. $XXX million of efficiency you Yes, organization. the almost Antonio, this $X results, better like the right make that to year, result last but minus and All coming X% We good between coming gains, either is

improving, I mean, are activities the cost reduction on sales company, a future. pushing for I lot reduction, in mean, the We inventory on the all of

stronger this performance. all a the that company, from in So and with expect in mean, you’ll year units the better growth I then again, volumes, more I business on, mean, much and agile with next we the see efficient

why that’s from efficiency sales, result from our gains. some is coming this year additional efficiency from mainly but gains from So course, of

Antonio Garcia

for year. in our chain, we question seen and customer what Commercial At any say, I supply supply agreed chain, with the And just least problems for have the completing what would this guidance not to this the we Aviation year. put for

Eduardo Couto

several We have questions. other

flow. free and So next related cash one margins is the to

how And Embraer cash Antonio? the sort the cash long-term? what in does business margins see conversion EBITDA into time, flow of free we expect question per free conversion, So do is flow

Antonio Garcia

Support – is single see the So see, let’s more as Services the between high & Aviation, of or today. in Commercial we growth for mid-single see digit to digit more Executive double-digit also improve are into in sales the we do see perspective, And we and margin, needed the prefer long-term. regards to do but a EBIT I profitability in seeing I’m less to to the a long-term We I EBITDA, regards it today do to say And would it’s would X% X% EBIT talk, to conversion see what today. That’s today regards flow. do are to we in the cash the from XX% still to from We EBIT the company. cash, to we conversion converted in do years our less run internally. or something, metric We for using XX% cash the come. of long see we being

Eduardo Couto

next the campaigns Commercial Could is Any Aviation? JPMorgan, during more from second? orders the we question on Motta. So see sales Marcelo update the for

Francisco Neto

question. Yes, good Yes.

We have have for Commercial sales more And SkyWest lot aircrafts. to the of sales XX We our come. active campaigns with Aviation. in announced just we yes, ongoing a

Antonio Garcia

the not By part it’s the backlog way, SkyWest, of in the QX.

Now aircrafts in going we book to QX. are XX

Eduardo Couto

how company here about from talking you can is inflation seeing Thank There you, Santander, the is Lucas from aircrafts. these question a comment Correct. how the and material inflation, is on offsetting company Antonio. impacts? please XX raw the

Antonio Garcia

That’s final for prevail but are in reduce the do or I’d we we Moreover, see without base there year indicators. more are year any and our that today, what do Embraer to side, to to have and what the say, inflation we way next you have next is less customer also indicators in deflation with design for index, have the with base. any with next a this year our projects, internal to – we to I to the for between have class did a of takeaway the discuss the is are do balance the some have in this seeing, inflation and would of best year suppliers say, costs we and going we base. would say, index inside year, index X% lot doing – all have activity our X% customer inflation, that for between or we impactful, our we I adjustment also spike we customer

Eduardo Couto

Very good.

the any move new now from So There update turboprop (X:XX:XX) is partnerships a the into projects. on question aircraft. for [indiscernible]

Francisco Neto

This the moving well, with recent with That interest good very U.S. question. especially was of moves product. is a also airlines that – in front the

that as And So alternative we future. see as other in that preparation also the a in for new well. technology market as for good product markets a

working So hard we and are front. very to this partnership accelerate optimistic

Eduardo Couto

Okay.

do one and WTS? I expect final you having sustainable as What Commercial the do to are question. Aviation. from at renewal to more back expect think seeing recovering in you it’s we least It’s fleets. flights Commercial we for for What have also in Aviation, mid demand long-term

Francisco Neto

you. Thank

back mean, XX% air again. So of flying globally of the is have, Embraer Embraer I skies again, we the fleet the the fleet in in U.S. XX%

the well. that for U.S really we a that’s So very coming. and in it EX is shows why domestic segment in that And in are the recovery campaigns as working very, market sales sales – lot of

we this take advantage of moment. hard to are working So

I volumes mentioned XXXX XXXX, but XXXX, Antonio see from from mean, but As onwards. we that strongly growing, in strongly

Eduardo Couto

orders? expectations on final I please you the it’s to think a Can for comment KC-XXX question, defense. related new

Francisco Neto

the import help the KC-XXX said mean, in us working and campaigns partnerships I I for working As are open new – markets to will in campaigns for in that are sales also, many aircraft. we – for opening, that sales the to we great develop

Eduardo Couto

think I had the Q&A. that’s on we what

the that Q&A. thank to the questions you and all time. for I So think I the want concludes

now Francisco, you thank all. So Antonio,

Francisco Neto

a lot. Thanks

So a living our thanks we company, for moment. interest really a special in are supporting

I potential numbers before, speaking of by to of As In year capture I of a as you to the know, much have recovery, tough and we XXXX themselves, before year expect turnaround a last the as very the coming in year XXXX – the is said expect crisis, year, from Embraer. to said compared we we know, this grow better year to to from onwards. from the new hope Embraer

your support. much for So thank very you

Eduardo Couto

Thank you.

quarter Q&A today’s your second concludes session. Thank you concludes turn much XXXX very financial Embraer results presentation. this So in That for participation.

Embraer (ERJ) 13 Aug 212021 Q2 Earnings call transcript