Good morning, ladies and gentlemen, and welcome to the audio conference call from Embraer's Second Quarter of 2022 Financial Results. Thank you for standing by. We remind that Eve results will be discussed on Eve's teleconference. At this time, all participants are in listen only mode. Later, we will conduct a question and answer session, and instructions to participate will be given at that time. Should you require assistance during this call, please use the chat on the platform. As a reminder, this conference is being recorded and webcasted at ri.embraer.com.br. This conference call includes forward-looking statements or statements about events or circumstances which have not occurred.
Embraer has based these forward-looking statements largely on its current expectations and projections about future events and financial trends affecting the business and its future financial performance. These forward-looking statements are subject to risks, uncertainties, and assumptions, including among other things, general economic, political and business conditions in Brazil, in other markets where the company is present. The words believes, may, will, estimate, continues, anticipates, intends, expect, and similar words are intended to identify forward-looking statements. Embraer undertakes no obligation to update publicly or revise any forward-looking statements because of new information, future events or other factors. In light of those risks and uncertainties, the forward-looking statements, events and circumstances discussed on this conference call might not occur.
The company's actual results could differ substantially from those anticipated in the forward-looking statements. It's important to mention that all numbers are presented in U.S. dollars, as it is our functional currency. Participants on today's conference call are Mr. Francisco Gomes Neto, President and CEO, Mr. Antonio Carlos Garcia, Chief Financial Officer and Procurement, and Mr. Leonardo Shinohara, Director of Investor Relations. I would like now to turn the conference over to Mr. Gomes Neto, who will proceed with the first remarks. Please go ahead, sir.
Good morning, and thank you all for joining our Second Quarter 2022 Results Call, today. I hope that all of you are well and safe, and I thank you for your interest in our company. The second quarter results show a steady improvement in our financial results due to our focus and discipline in the execution of our growth plan. Despite the challenging supply chain environment, which I will talk more about later, we were able to deliver solid results. We have also maintained our focus on enterprise efficiency and innovation as key pillars of our growth strategy. We reached a firm order backlog of $17.8 billion in the second quarter 2022, the highest level since the beginning of the pandemic.
This number does not consider quarter's new order announced during the Farnborough Airshow last month. We are pleased to announce a reported adjusted net income of $39.4 million in this quarter. Before we go into more financial details on the quarter, I'd like to give you some quick highlights on our two key pillars. First, on innovation. Eve's IPO brought $377 million of gross proceeds, which will be used to accelerate the development, certification and commercialization of our Urban Air Mobility solution. During the Farnborough Airshow, Eve announced Halo Aviation as a launch customer for its urban air traffic management solution.
At the event, we also unveiled the eVTOL cabin mock-up and updated the product design. Second, enterprise efficiency. We continue to work with great discipline to be more efficient at the entire company. This quarter, we announced a partnership with Toyota to maximize efficiency in our production and accelerate the use of lean principles to reduce the production cycle lead time of our aircraft by 40% by the end of 2023. Mainly due to our efficient initiatives, the financial performance continues to improve. Free cash flow increased 100% versus the second quarter last year, and our gross margin presented a substantial increase compared to the same period last year.
On the next slide, we will speak about our main ESG achievements announced in the second quarter. Embraer and Raízen signed a letter of intent with a commitment to develop sustainable aviation fuel production ecosystem. Embraer will become the first aircraft manufacturer to use SAF that will be distributed by Raízen, a global leader in bioenergy. We also announced that a new purchase agreement to source 100% renewable energy in Brazil by 2024, a year ahead of our 2025 target. Embraer and Pratt & Whitney have successfully tested an E195-E2 aircraft on 100% sustainable aviation fuel this quarter. Finally, our annual 2021 report was published in May.
The report brings the main highlights of the year on innovation, financial performance, and a complete overview of Embraer's ESG actions in 2021. Important to note that our report is already in SASB framework, friendly for investors in our company. On the next slide, we will talk about growth and see more details of business unit highlights in the quarter. In commercial aviation, during the Farnborough Airshow, we announced a firm order of 20 E195-E2 from Porter Airlines, now totaling 50 orders and 50 options, and an additional eight E175 -E1 firm order from Alaska Air.
On the E2 P2F, passenger-to-freighter project, we signed a firm order for up to 10 aircraft for an undisclosed customer, and an LOI with NAC for 10 freighters. Gross margin of 13.2% in Q2 2022 versus 4.5% in the previous year. Executive aviation keeps up good momentum, strong sales. We delivered 21 jets in 12 light and nine large. Backlog increased above 16% compared to the previous quarter, and gross margin of 22% compared to 17.5% in the previous year. On defense, we are very pleased to have received in June the Netherlands Ministry of Defence's decision to select the C-390 Millennium as the sole source to replace its cargo fleet.
It is a clear demonstration of the increased interest in our aircraft from several countries , recently. Gross margin of 28% in Q2 2022 versus 34.6% in the previous year. Sales and support continues to improve its results with a stable backlog and positive gross margin, which reaches almost 32% in Q2 2022 versus 28% in the same period of 2021. We also signed a new contract with LOT Polish, expanding the pool program to cover 44 aircraft. I will now hand it over to Antonio to give further details on the financial results, and I will return in the end. Thank you.
Thanks, Francisco, and good morning, everyone. Let's talk about financial results. We delivered stronger results in the second quarter, reinforcing our confidence in our financial performance for the year. We continue highly focused in our pillars of deleveraging the company, driving profitability and efficiency. Embraer delivered 32 jets in the second quarter, of which 11 commercial aircraft and 21 executive jets, 12 light jets and nine mid-size jets, according to our schedule. We reaffirm all aspects of our 2022 financial and deliveries guidance with no material variation. Deliveries is in a good pace and seasonally concentrated the second half of the year. We have noticed some concern from the sell-side reports about deliveries for the year.
Just as a reminder, we are today just four aircraft from commercial aviation behind our guideline. Despite the very challenging supply scenario, our plans have not changed, and we remain confident in the delivery of the aircraft. Firm order backlog ended second quarter 2022 at $17.8 billion, $500 million more versus first quarter 2022. This is the highest quarter backlog since beginning of the pandemic, 12% higher, driven by solid sales activities, mainly in executive aviation. Revenues reached $1.09 billion in the quarter, down 10% compared to the second quarter 2021, due to lower deliveries in commercial and defense segment, partially offset by our services and support business unit.
Before starting with EBIT and EBITDA, I want to mention that we reported consolidated gross margin of 21.9% in the quarter, which was higher than the 18.2% reported in the second quarter of previous year, 2021. We find year-over-year improvement in most segments due to the products and service mix pricing and overall operational performance, including tax efficiencies. Adjusted EBIT and EBITDA were $81 million and $125 million respectively, yielding adjusted EBIT margin of 8% and adjusted EBITDA margin of 12.2%. It's important to mention that our adjusted EBIT in second quarter 2022 also includes commercial aviation integration and arbitration expenses of around $16.5 million.
If we exclude all these extraordinary effects, adjusted EBIT margin would have been around 10% or $100 million in the second quarter 2022. EBITDA margin of around 14% excluded these effects. Please take into account, we booked $21 million provision for bad debt in the second quarter, around $21 million in the quarter, also impact the results here. Quarterly G&A reached $42 million or an increase of $1 million compared to the second quarter 2021 figures due to inflation, wage adjustment, but no increase in headcount. Selling expenses reached $66 million or an increase of $60 million compared to the second quarter 2021 figures due to more active sales campaign and trading events.
It's important to mention the selling expense does not include $21 million of bad debt provision that we excluded in this graph here. Talk about investment. In the second quarter 2022, Embraer invested a total of $42 million in product development research, mainly in product development. For example, E2 family freighter, executive aviation and TP programs. We invested also $13 million CapEx, mainly for service and support expansion business. We continue to invest in our future. Another good news, moving to free cash flow and net results. In regard to free cash flow, we continue highly focused on cash flow discipline for positive trend.
Free cash flow in the second quarter 2022 was a surplus of $91 million, representing a significant result, supported by the divestment of Everest facility and optimization of working capital, driving positive free cash flow year -to -date, even considering a production ramp up and deliveries in the second semester. Moving to adjusted net result was a profit of $39 million, due to the better EBT performance and interest reduction of $28 million in the second quarter 2022 year-on-year basis. The company finished the quarter with a total debt of $3.2 billion or $864 million less year -to -date, in line with our liability management strategy.
Embraer continues to deleverage the balance sheet, reducing its net and gross debt and improving credit metrics. Moreover, reducing interest expenses. It's important to highlight that our net debt EBITDA last 12 months ratio is around 4x in the second quarter 2022. In the next quarter , we will show a significant improvement because deliveries are concentrated in the second half, and we remain committed to improve our financial metrics. With that, I finish my presentation and hand it back to Francisco for his final remarks. Thank you very much.
Thanks, Antonio. To close, I would like to make some comments on the supply chain issues. This is a major short-term issue for the whole industry globally, and we can't undermine this challenging environment. To minimize the impacts, we are working closely with our supply chain, having people on-site at the main suppliers, developing other logistical routes and working on improvements in internal processes and cycles to absorb part of the challenges. Having said that, we are cautiously optimistic about year-end results and very confident about the midterm future. The combination of innovation, enterprise efficiency, and our fantastic people is very powerful and will make us grow sustainably. Thank you for your interest and confidence in our company.
We'll now start the question and answer session. We'll ask those who are interested to make questions at any time, press star nine on your phone or press the Raise Hand button on the platform. When your name is announced, press star six or activate your microphone on the platform. To give everyone a chance to participate, we suggest you to ask just one question per request. Wait while we poll for questions. Our first question comes from Josh Milberg. Please, Mr. Milberg, your microphone is open. Mr. Milberg, you can activate your microphone.
Oh, very sorry about that. Can you hear me now?
Yes. Yes.
Okay, great. Good morning, everyone. Thank you very much for the call and your comments. I had a couple of questions on the turboprop project. The first one is if you could just update us on its financial impact for this year. If I'm not mistaken, you had talked about a potential $50 million effect this year that would be, you know, expense recognized in the P&L for the year as a whole. I just wanted to kind of clarify, if in fact that's how it's being treated, and if that's roughly still the magnitude of the impact you expect.
I was also just hoping you could, you know, give us a little bit of your updated thinking on the project, and, you know, maybe just touch base on what steps remain for it to be green-lighted, you know, what kind of buy-in you're looking for from customers and whether, you know, having a JV partner would be critical. Thank you very much.
Hello, Josh. It's Antonio speaking. Thanks for your question. Just want to answer part of it. Firstly, what we are seeing regards to impact on our financial and our profit and loss this year for the TP is around $25 million. We are working hard in order to minimize because we are still not capitalizing those R&D costs. But for the profit and loss this year is $25 million, and is already part of our forecast and also our guidance.
Josh, Francisco speaking. About the project, I'd like to say that we are very excited with this project. We are progressing well on tests, wind tests and other engineering activities. We expect to decide about the engine selection in the second half of the year, and we expect to approve the business case beginning of next year. Also , even not having the business case approved, we announced last month in Farnborough Airshow that we have already 250+ letters of intent of customers in our TP models.
Okay. It sounds like everything's progressing as planned and that there are very good prospects for the project maybe moving forward as of next year. Could you touch, Francisco, a little bit on the financing aspect of it?
Well, we are.
And maybe.
Yeah, yeah. We are working also in parallel with the engineering activities. We are working internally in alternatives to fund the project. At the time, we expect to approve the business case next year, we will have, you know, the funding solution defined.
Josh, the idea is not to compromise the running business, the financial metrics of the running business. We are evaluating for sure with support from customer, from suppliers, and also how we are going to, I would say, overcome the first two years with this development. The idea is not to compromise our current business.
Understood. Okay. Well, thank you very much. Thank you both very much for that color, and look forward to hearing more on the project as you advance. Have a nice day.
Our next question comes from Mr. Marcelo Motta. Please, Mr. Motta, you can proceed.
Hi. Thank you very much. It's a question regarding the deliveries. During the presentation, Embraer comment that around four aircraft on the commercial aviation, you know, were not delivered due to supply chain issues. Just wanna to know if the company could provide additional color regarding if it was like parts, the engine, the reasons behind this delay, and if those aircraft were already delivered now at the, you know, beginning of August, and if there is any other aircraft that is delayed as of now. Thank you.
Marcelo, thanks for your question, and it's highly appropriate, and I want to use the opportunity to say more than you asked me, and you asked us here. For sure, what you're missing the most is normally jet engines, avionics and other small parts. They are concentrating four or five suppliers. That was since the beginning of the year. Maybe you will recall this when we set the guidance. The market reacted quite negatively, to be honest, or overreacted when we said 60–70 aircraft or 100–110 executive jets. Because at that time, we foresee already this tight situation that we are living. That's why people are getting sick with supply chain.
But for Embraer, we saw this some months ago. It's not a surprise. Finalizing the question to the four aircraft, they are going to be delivered right now in the month of August.
Perfect. Thank you very much.
Just to remind you all, if you wish to ask a question via phone, please press star nine to join the queue, or press the button raise hand on the platform. Wait while we gather for questions. Our next question comes from telephone. If you wish to activate your microphone, press star six, please.
Good morning and thank you very much for taking my question. I'm curious, when we think about supply chain issues, do you see any scope for Embraer to maybe undertake some small acquisitions if you need it to secure critical supply? I did ask the same question of your Canadian competitor earlier this morning. Thank you very much.
Hi, Cai, Francisco speaking. At this moment, we are working very close to our supply chain, very close. We have a small army of people. I mean, inside of the operations of our suppliers, of our sub-suppliers, of our sub-sub-suppliers, but we don't have any plans to acquire any supply as a strategy to resolve this problem. We do believe we can resolve this with a close collaboration with our suppliers partners.
Okay, great. Apologize for all the background noise. Just one very quick follow-up, if I may. Can you remind me whether you have any supply at this juncture coming from the Russian Federation? That's it for me. Thank you.
Antonio speaking here. We only have, or you only had one supplier from Russia, is titanium, that we are partially already replacing by U.S. and European suppliers. Some months ago, we were at 85% buying demand in Russia for titanium. Now, we are already below 60%, and our plan is really to try to eliminate the source of raw material. A part of it, we buy nothing in Russia.
Okay, let me leave it there. Thank you very much for the time.
Once again, if you wish to ask a question via phone, please press star nine to join the queue. If you want to ask a question via Zoom, please press Raise Hand. Wait while we poll for questions. Since there are no further questions, this concludes today's question and answer session. That does conclude Embraer's audio conference for today. Thank you very much for your participation, and have a good day.