Good morning, ladies and gentlemen, and thanks for standing by. My name is Gui Paiva, and I am the Head of Investor Relations, M&A, and Venture Capital for Embraer. Welcome to Embraer's third quarter 2026 earnings conference call. Participants on today's conference call are Francisco Gomes Neto, President and CEO of Embraer, Felipe Santana, Chief Financial Officer, Thaís Moraes, Corporate Communications Director, and me. As a reminder, this conference is being recorded. This conference call will be conducted in English, but please let me say a short announcement for Portuguese speakers.
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The agenda includes the presentation of third quarter 2026 results, followed by an investor-only Q&A session, and subsequently, a session exclusively for the press. Participation instructions will be provided later.
We remind participants Eve's results were discussed at the company's conference call last week. Before we begin, a legal notice. This presentation may contain forward-looking statements which involve risks and uncertainties, as detailed in the disclaimer available in the slides and in the documents filed with the Brazilian Securities Commission, CVM, and the U.S. Securities and Exchange Commission, SEC. It is a great pleasure to hand the floor to our President and CEO, Francisco Gomes Neto, who will begin the presentation of the company's results. Please, Francisco, go ahead.
Thank you, Gui. Good morning and good afternoon, everyone. It is a pleasure to be with you today to discuss Embraer's third quarter 2026 results. We delivered record third quarter revenue of $2.3 billion, with revenue and margin expansion across all our businesses. Our backlog reached a new all-time high of $35.7 billion for the eighth consecutive quarter. Based on these results, we are revising up our 2026 revenue and free cash flow guidance. Let me now turn to the key highlights of the quarter. In commercial aviation, Farnborough drove 28 firm E2 orders, and ANA ordered eight additional aircraft. In executive aviation, we reached a record backlog of $8.2 billion and launched the new Phenom 300EV. In defense, Colombia ordered two KC-390s, while we advanced our partnership with Mahindra, including plans for a local assembly line in India.
And in service and support, we continued expanding our customer agreements. During the quarter, we delivered 22 commercial jets and 41 executive jets. Total company deliveries increased 6% year-over-year, with commercial aviation growing 10% and executive aviation stable. In commercial aviation, we delivered 52 aircraft year to date, representing 63% of the midpoint of our full-year guidance, 5 percentage points above the five-year average. In executive aviation, we delivered 115 aircraft year to date, representing 70% of the midpoint of our full-year guidance and a material 10 percentage points above the five-year average. These numbers are evidence of our progress in our production leveling initiative, although we still have room for additional improvement. Our company-wide backlog reached $35.7 billion, up 14% year-over-year, in another all-time record for Embraer.
All four business units increased their backlog year-over-year, led by Defense and Security, up 56%, with a strong 2.9x book-to-bill ratio. Executive Aviation backlog grew 12% year-over-year, supported by a 1.4x book-to-bill ratio. Commercial Aviation backlog grew 4% year-over-year, while Service and Support increased 14%, with both maintaining book-to-bill ratios above one. In addition, we hold approximately $23 billion in options, which could expand our backlog to almost $60 billion if exercised. With that, I will now hand the call over to Felipe, who will walk you through our financial results. Felipe, the floor is yours.
Thank you, Francisco. Good morning and good afternoon, everyone. I will now talk you through our results by business unit. All comparisons are year-over-year unless otherwise noted. Starting with Commercial Aviation, revenues increased 13% to $696 million, driven by higher volumes and prices. Adjusted EBIT totaled $17 million with a positive +2.4% of margin. The year-over-year improvement was supported by suppliers' compensation. For the fourth quarter, we expect a better customer mix, with full-year margins probably in line with the last year's average. Looking ahead, our ambition is to continue improving Commercial Aviation profitability to the mid-single-digit level over the next few years. In Executive Aviation, revenues increased 12% to $655 million, supported by higher prices and product mix. Adjusted EBIT reached $105 million with a positive 16% of margin, circa of 130 basis points, up year-on-year versus a comparison excluding U.S. tariffs.
In Defense and Security, revenues increased 22% to $341 million. Adjusted EBIT was $54 million with a + 15.7% of margin, driven by higher KC-390 volumes, customer mix, and product stage. For the fourth quarter, we do not expect Defense EBIT margins to remain at the strong levels seen in the second and third quarters. Still, the division remains on track for another record year, now with profitability around double-digit levels. Service Support revenues increased 30% to $638 million, driven by higher volumes. Adjusted EBIT totaled $108 million with a positive 17% of margin, supported by operating leverage circa of 330 basis points above year-over-year. At the consolidated level, net revenues increased 17% to $ 2,350,000,000 in the third quarter. Revenues were well balanced across our business, with Commercial Aviation representing 30%, Executive Aviation Service more than 25% each, and Defense 15%.
In the first nine months, revenues reached $6 billion, representing more than 70% of the midpoint of our full-year guidance. Adjusted EBITDA was $317 million in the quarter with a + 13.5% of margin. Adjusted EBIT reached $255 million with a + 10.9% of margin compared to 8.6% a year ago, or 9.4% if we exclude U.S. import tariffs. The year-over-year improvement was driven by strong operating performance across all the business. In the first nine months, adjusted EBIT margin reached 10.7%, or 4.2 percentage points above the five-year historical average. Adjusted free cash flow, excluding Eve, was $628 million in the quarter, reflecting sales-related pre-delivery payments and stronger operating results. Investment totaled $150 million during the quarter as we continue to invest in new technology and support our current projects and future programs.
Adjusted net income was $74 million in the quarter with a 3.1% of margin compared to 4.2% a year ago. The year-over-year decrease mainly reflects higher financial expenses from the mark-to-market of our long-term incentive plan and higher taxes. Earnings per ADS now stands at $2.2 on a last 12-month basis. We ended the third quarter with a net cash position. Net cash to adjusted EBITDA, excluding Eve, improved to a + 0.4x from a - 0.5x a year ago. Our average debt maturity ended the quarter at 8.7 years, while the average cost remained at 5.1%. During the quarter, we declared BRL 154 million in interest on equity. This corresponds to BRL 0.22 per share, or circa of $0.17 per ADS.
In 2026, we declared BRL 354 million in interest on equity, representing a dividend yield of around 0.52% based on the share price at the quarter end. Also, for our shareholders, in November, we will change our ADS ratio from four common shares per ADS to one common share per ADS. This change has no impact on our underlying equity value. Last but not least, a quick word about our guidance. From an operational standpoint, we stand by our commitment to deliver 80- 85 aircraft in Commercial Aviation and 160- 170 aircraft in Executive Aviation. From the financial side, we are happy to increase our revenue guidance to between $8.4 billion to $8.6 billion because of the strong performance of our business. The adjusted EBIT margins remains unchanged at between 10% and 10.6%.
However, we raised our adjusted free cash flow guidance once again, now to $700 million or higher, supported by better operation performance and cash generation. With that, I will hand it back to Francisco for his closing remarks. Thank you.
Thank you, Felipe. I would like to provide a brief update on Eve's continued progress. The flight test campaign continues to advance, with 73 flights completed and more than three hours of flight time. Following the completion of hover flights, Eve is now advancing through transition flights, with full transition expected before year-end. In summary, we continue to see strong demand across our businesses and positive momentum in our global markets. We would like to welcome Japan Airlines to our E2 family, the second operator of our small narrow-body jet in the country, and the Hellenic Air Force to our KC-390 family, the seventh operator of our next-generation military aircraft in Europe. We remain focused on sales, efficiency, and execution while continuing to invest in new technologies for the future.
Our progress is driven by the trust of our clients, the support of our suppliers, and the commitment, discipline, and energy of our people. We are proud to be certified once again as a great place to work. Together, we remain guided by the pillars of our culture and our motto: Safety first, quality always. With that, we are now ready to take your questions.
We will now start the question and answer session.
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Hi, everyone. Thanks for taking my question.
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Hey, good morning. It's Louis at Wolfe Research.
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Morning. Morning.
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Maybe you could just touch on the supplier compensation.
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Thank you, Gui.
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Hi, good morning.
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Thank you for being here and
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Hi, everyone. Good morning. How open the Executive Aviation division. I mean, profitability was a highlight, but we're still seeing a very strong momentum for net new orders. We asked them slightly above $1 billion of net new order this quarter for the division. I mean, we understand that there is a lag, right, until the moment that you place the orders until it becomes revenue and EBITDA. But, I mean, considering the tightness on the market, profitability is already at high levels, but net new orders continue at strong levels. How should we think of the profitability of the division going forward? Can it get better than that? It is already at very strong levels, but considering the strong momentum on orders, could we still see some room for profitability to further improve, considering the lease prices that you are selling the aircraft nowadays?
Just to follow up on that, but considering your plans to reach 200 units per year over the upcoming years, and considering this very strong demand as we speak, should we expect it anytime sooner? Could you anticipate this expansion of deliveries on the executive division in the short term? Thank you.
Hi, Lucas. Good morning. Thanks for the questions, Gui, here. I think not only from Executive Aviation, but if you look across the board for the company, I think we are in a very special position, because when you look at the products that we manufacture and that Embraer has helped us produce, we believe we have a very strong product portfolio across all divisions, and that is generating the value for our customers and ultimately for our shareholders. In terms of profitability, the company always continues to strive for being more efficient. That is part of the DNA that we have, that we are always going to try to improve our margins and our results. In terms of volume, we continue to work with a target of reaching 200 units in Executive Aviation in 2028. Part of that effort, we are investing in our facilities.
We do expect our CapEx in 2027, 2028 to temporarily increase towards $500 million, $550 million before coming back to the regular level of $400 million that we have had in previous years.
So, Gui, if you allow me to complement or to summarize this, yes, we do see opportunities to improve profitability for Executive Aviation going forward, combining the launch of new versions that will help us to sustain or even increase the sales price with higher production levels that, as he said, we are investing to increase production, and we continue to invest in improving, increasing efficiency. So we have been able to reduce the lead time production of our executive jets year after year. So the combination of all these three fronts, we believe will help us to see improvements in the profitability of our Executive Aviation unit, right?
Perfect. Thank you very much. Very helpful.
The next question comes from Daniel Gasparete with Itaú BBA. Please go ahead.
Hey, good morning. Thank you very much for the opportunity. Most of my questions were already answered, so I would like to explore more about the strategy side, if I may. The company has been doing great and looks like it is continuing doing so over the next few years. Just like to get the ideas from Francisco, what is he planning, what he is thinking about for the company for the next few years in terms of strategy, how he is spending his time thinking about bringing the company to the next level, how he thinks about the strategic position of the company, what the company needs to do. And also, if I may also ask to Felipe, it has been a few months already as his post of the CFO. Congrats on that. And the company has been doing fantastic as well.
So just to get his view on what he sees as opportunities yet to collect in terms of improving working capital dynamics, perhaps SG&A, how you are seeing efficiencies that could be captured for the company. Thank you very much.
Well, Daniel, thanks for the question. I take the first part. We see the continuity of our medium-term sustainable growth based on the current backlog of $35.7 billion now. Thank you, Gui. $35.7 billion. And the market is still supporting us. This fuel crisis is helping us with the commercial aviation, as we have the most efficient E-Jets in the market. Executive jets, we see the demand continue to be robust with our new launches of the Phenom and the Praetor. And the KC-390 also, we are selling very well. So we see the company continue to grow sustainably in the next four or five years, as we are investing in increasing production as well for the three lines, right? We want to increase the production of E-Jets, executive jets, and the KC-390 and the Super Tucano.
In parallel, we are working in two big programs that can help us boosting this growth in India, with two fronts, Civil Aviation and KC-390 as well. And we have this big opportunity in the U.S., if we succeed to introduce the KC-390 as an agile tanker in the U.S. Air Force. So in parallel, we are investing in new technologies, in preparing the company for a new cycle of products that can be either a new commercial jet family or executive jet family, or even defense aircraft that will support a more ambitious growth in long term for Embraer.
Gasparete, Felipe here. So thank you for your question. Yeah, I see a lot of opportunities on the working capital, right? When we look to the inventory turn where we can reach 3x , right? We are below that. We are around 2.1x this year, so on the working capital. And I also look to efficiency, right, as a whole for the company, where we have been more efficient on costs and the way that also we are allocating capital as well. So we see a lot of opportunities really to improve, right, the margins of the company in the coming years, and also the financial have been supporting the execution of this backlog, as Francisco mentioned, and also on the strategic initiatives, as he already mentioned as well.
And another point that I forgot to mention, Daniel, is that if our eVTOL, we continue investing in the development, the certification process of our eVTOL, that will be also an important contributor to Embraer revenues and profitability, after 2029.
Great. Thank you very much, sir. Thank you very much. Have a nice day.
You too. Thank you.
Thank you.
The next question comes from Ronald Epstein with Bank of America. Please go ahead.
Hey, good morning, guys. Maybe a quick financial question. Year-over-year, it looks like the contract liabilities went up by $450 million. What is that?
It is based on the PDPs, Ron. Felipe here. Thank you for your questions. Based on the PDPs, right? You see this increase on the backlog that we are seeing, right? And it is a reflection also on these accounts on the balance sheet with the PDPs that we are receiving from the customers.
Okay, so that is just all pre-delivery payments. Okay, good.
Yes.
What is the quarterly spend on Eve?
Ron, their guidance is about $225 million, if I remember correctly.
The run rate that they are doing something close to $50 million, $55 million.
Per quarter.
Per quarter.
Got you.
And just as a milestone, the company expects to achieve full transition for the prototype before year end. We're going to be building six prototypes through the first half of 2027, and we intend to start the flight campaign for the certification in the middle of 2027 and finishing in 2028.
Got it. Has there been any more discussion internally or thinking about what the next move is for you all in commercial aviation?
Actually, we don't have any important news on that front, Ron. We're continually making studies which way we should go. I mean, as a next cycle of products, we have the engineering team, the marketing teams making a lot of studies, and combining with the funding strategy and the customers' conversations. We don't have any decision yet which way we will go. But we keep investing in new technologies to be prepared for a new cycle of products.
Got it. Okay. Thank you, guys.
Next question comes from Kristine Liwag with Morgan Stanley. Please go ahead.
Hey, good morning again, guys. Thank you for taking my follow-up. With Ron's question about the potential new aircraft and the studies that you're doing, I mean, it sounds like with the full transition for Eve happening by year end this year, you're really de-risking that program. So the opportunity for the next big project could come pretty soon. It seems like you've got capacity opening up maybe for engineers, second half of 2027, maybe into 2028. So that seems to be more on the horizon. So I wanted to ask, Francisco, when you think about the opportunities either in a potentially larger narrow body or a larger business jet or something in military or all the other investments that you have, what are the key priorities that you're looking at? What are the variables that you're weighing?
When you think about some of these endeavors, what is your appetite to go do it alone in terms of a project that has a high ROI, but it is not too expensive versus going for challenging a duopoly, which might take more company resources? How do you balance those opportunities?
Kristine, thank you very much. This is really a great question. Just for you to know, our engineering has been very busy and will be very busy not only with Eve. Eve is one of the projects we are working on, but they have been busy doing updates on the existing products. Like, for example, we are now in the certification process of the E2TS for the E2. That is a unique feature that we offer to the market, this autonomous takeoff of a commercial jet. Also, we have hundreds of engineers busy with the update on the specification of the KC-390 that we are selling. Now, each deal requires a different specification. Also, we are now working to update our Super Tucano.
We have a lot of engineers working this update of the cockpit of the Super Tucano with this new feature as a drone.
Exactly.
So thank you, Gui. Again, our engineering is very busy, but we have some of them working, making studies, as I said, about new opportunities for Embraer, either in Commercial Aviation or Executive. But, Kristine, yes, we are taking into consideration all the aspects. One thing we will not do is to put in risk the financial health of our company. So, the next movement will be based on a very robust decision in terms of customer acceptance, in terms of funding, in terms of product, and especially, the chances we will have to succeed with the new product without putting risk what we have built in terms of financial health in the company.
Kristine, just to complement what Francisco said, we do not think it would be prudent to have two big CapEx fronts happening at the same time, so we have to materially de-risk Eve as a project before we take the next step. Part of that de-risking process, I would highlight first, the full transition flight at year-end, and second, the first manned flight for the prototype that we expect to happen in the second half of 2027.
Great. Super helpful. Then also, back to Services and Support, I think this is one of your sleeper segments because I think investors do not realize how large of an aftermarket business you now have as a proportion for total EBITDA. In terms of that Services and Support business, can you give us an understanding regarding, backwards looking, what did you change in your strategy to be able to grow this business more? Was it really more of a function of the larger installed base, or did you do something different to increase your capture rate? I mean, you are clearly making investments there, as we have seen with OGMA and Dallas. How do we think about your overall strategy in this business, and could this continue to be a faster grower for EBIT for the company? I mean, the margin upside here in the quarter was a significant standout, right?
Just wanted to understand the sustainability of that.
Oh, thank you, Kristine. It is another great question. Yes, you were totally right. We are growing a lot in Commercial, Executive, and Defense, but we see our Service and Support area as one of the most important growth avenues for Embraer. We are investing to expand our capabilities to do more service for commercial jets, as the commercial jet fleet is growing. Same in the executive jets. We are now reviewing the structure to be even more focused on sales and customer support. We are now implementing a lot of AI tools to help us to be more efficient and more customer-friendly. We are doing a lot of investments in that area because we do believe that they can contribute a lot with the profitable growth of Embraer within the following years.
If I can add here also, Francisco, also invest on simulators, on training, right? That is also good margins. And with the increase, especially the increase of sales of E2s, we are investing now in scale base of simulators around the world to support our customers as well.
Well, great. Well, thank you very much.
The next question comes from Marcelo Motta with JP Morgan. Please go ahead.
Hi. Thanks for the opportunity here. Again, it's just if you can comment on Commercial Campaigns. No one has asked about it, but there are news about KLM, Brussels, IndiGo. I know that you don't comment about specific campaigns, but if you can just remind us how positive you are about the future of the E2, let's say, for the next six months, what you expect on new orders or book-to-bill. That would be great. Thank you.
Oh, thank you, Marcelo. Yes, we are very happy now with the developments of our Commercial Aviation in terms of sales and also EBIT recovery plan, as we expect to be at a 5% EBIT until 2028. Since 2024, we have seen the sales of E2 getting traction with a great year in 2025, another great year in 2026. We are now very pleased with KLM plans to expand the E2 fleet operated by KLM Cityhopper. As we see the customers, airlines recognizing more and more the benefits of having our small narrow body complemented the operation of the larger narrow bodies. We see this in Europe, we see this in South America, in North America, Asia Pacific. And we are still working on other campaigns.
Yes, we are very optimistic now with the development of our Commercial Aviation, not only in revenues, but also in EBIT recovery.
Super clear. Thank you. Thank you, Francisco.
The next question comes from André Mazini with Citi. Please go ahead.
Yes, guys, thanks so much for the additional question. My additional question is around Executive Aviation pricing. Of course, great margins on that business, and you also comment on improved pricing, right? I mean, the jets delivered currently are having very good prices. That is why margins are so good, of course, on top of the production leveling and whatnot. However, if you look at some industry data sets, it seems that on the margin, prices are not as high as they were probably 12 or 18 months ago. I think the question is the pricing of what is being delivered today, which is making these margins be so high, is this kind of older prices, if you will, and at the very margin, jets that are sold today are not having the buoyant prices we saw 12, 18 months ago, or at the margin, it is still growing, right?
What is the picture of the margin of these jets that are being sold right now? Thank you.
Hi, thanks for the question, Gui. At the end of the day, we do believe that we have one of the best products in Executive Aviation in the segments that we play in, and that is the value that it drives to our customers and eventually to our shareholders. We are very pleased with the results the division has had in this decade. There is a lag in pricing, as you mentioned, of roughly two to three years, given the success of our products and the demand that we have seen from our products. We do not know exactly what data set you are referring to, but we are optimistic about the profitability and the growth that we have in the division for the next couple of years.
Thank you, Gui.
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We will now begin our Q&A session in Portuguese. To ask questions, please click on "raise hand" on the platform. Please hold while we pull the questions. The first question is from Nelson Düring, from DefesaNet. Francisco, could you talk about competition for KC-390 in India, please?
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Good morning, Nelson. Competition in India will be fierce because it's based on price, ultimately.
We really believe that KC-390s are the best option for the Indian Air Force because of its characteristics, because it's a more modern product, it has new technologies, and their operating costs are highly optimized compared to those of the competition. As I said, it is ultimately a competition based on price. So it's going to be hard, it's going to be tough, and we are getting ready for that bidding process.
Thank you. Next question is also from the chat, from Xandu Alves from Jornal O Vale. "Francisco, you mentioned that Embraer is getting ready for a new product cycle. Could you explain what that means, please? Is it a new family of commercial jets, maybe bigger aircraft? What about in Executive and Defense? Could you elaborate, please?"
Well, thank you for the question, Xandu.
We haven't yet defined what the new product cycle will look like for Embraer. Right now, we are conducting studies. We're assessing the market, talking to clients, talking to suppliers, conducting studies, talking to funding sources, strategic partners, so that we can make a decision on how we're going to move forward in the long term, whether we're going to have a new family of Executive jets or Commercial aircraft. We haven't yet decided on what kind of aircraft or what size yet, or if we're going to have a new defense product. That's where Embraer is at the moment.
Thank you. The next question is from Bruno Andrade from Veja. Please go ahead.
Hi, can you hear me okay?
Yes, we can. Go ahead.
I have a couple of questions. I sent my questions through the chat, but I'll ask them here.
What will be the military aircraft front for the next two years, 2027, 2028? Do you see new countries coming into your portfolio? Also, what do you expect in terms of growth for Services and Support? You mentioned that you wanted to be a relevant line. How can it grow over the next few years? So those are my two questions.
Thank you for the questions, Bruno. In defense, the KC aircraft line, there is plenty of opportunity and new potential clients for KC-390s. It's a relatively new product. KC-390s went into service in 2019, and since then, we've sold more than 70 aircraft, most of which have been to other countries. Greece has been the latest and the seventh European country to adopt KC-390s. We sold it to Asia, to South Korea, to Central Asia, Uzbekistan, and South America. We recently announced Colombia.
So there are plenty of opportunities for this aircraft globally, including these two major projects, India, between 60 and 90 aircraft, and the U.S. Air Force, which is one of the largest clients for that kind of aircraft in the world. There are plenty of future opportunities for that aircraft in services and support. As I mentioned during the presentation, that is one of the major avenues for growth for Embraer, because fleets are growing, so the demand for services and parts also grows. We also have a new agnostic front, which is engine revisions being conducted by our company in Portugal, OGMA. We have multi-billion agreements for GTF engine revisions, and the subsidiary is growing a lot. It was worth $230 million, $240 million in revenue, and we expect it to get up to $600 million by 2030.
Those two fronts will be leveraging services, which is a very profitable area for Embraer, not only in terms of finance, but also because it ensures client satisfaction and it opens the door to new sales for clients.
Thank you. You mentioned $600 million by when?
2030.
Okay, great. Thank you.
You're welcome.
The next question is from Marcelo Rocha from radio station CBN. Please go ahead. Mr. Rocha, your microphone is muted. Mr. Rocha's question is in the chat box, so I'm going to read it. "To CEO Francisco Gomes Neto, Boeing has opened positions for engineers in Brazil, including São José dos Campos, which is where the headquarters for Embraer are. There are new opportunities for November. In 2022, the same situation caused some discomfort between the companies.
Now that Embraer is projecting market growth and an increase in their backlog, how worrying is it to lose experienced engineers, the potential to lose engineers to the competition? Does the company have enough professionals for that growth, and how long does it take to train a qualified engineer? Thank you."
Thank you for the question, Marcelo. Actually, the whole industry is growing. Embraer is growing, and so is the competition. It's only natural that there is an increased demand for qualified professionals. I would say that we have enough engineers for the time being. We have a lot of work for them. That's what engineers love, new projects and opportunities to take part in developing new processes, new systems, new aircraft. We're doing very well, and we are totally prepared for the company's future growth, supported by qualified engineers, which are renowned worldwide. Thank you.
Next question is also from the chat, from João Sorima from O Globo. "How are the talks with the U.S. government in terms of KC-390 acquisitions? Any progress? Thank you."
Yes. We are working with the authorities and the whole U.S. defense ecosystem to show them the benefits of introducing a modern aircraft like KC-390. But we all know this is a project for the mid to the long run. We won't be seeing any results in the short term, but we are very optimistic because it's a great opportunity. There are 49 KC-390 suppliers in America, so more than 50% of the content of that aircraft is produced in the U.S. It's a fantastic aircraft for the U.S. Air Force. The first project includes one tanker supplier for fighter jets.
It is an agile tanker, and it can open the door to KC-390s, and it is a great option for the US Air Force for other missions. Yes, we are making progress, but as of yet, nothing has been defined in the short term to buy that aircraft.
Thank you, Mr. Gomes. Ladies and gentlemen, we now conclude the Q&A session and the earnings release conference call for Embraer. Thank you for joining us, and have a great day.