Embraer S.A. (EMBJ) Q1 2026 Earnings Call Transcript
Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
Overview
The earnings call highlights strong financial performance, strategic partnerships, and optimistic guidance, with a focus on production stability and market expansion. The Q&A section reveals continued demand and interest across regions, despite some uncertainties. A $25 million defense contract boost and strategic investments further support positive sentiment. Challenges like tariffs and logistics costs are addressed, and margins are expected to improve. Overall, the positive outlook and strategic initiatives suggest a likely stock price increase in the near term.
Key Financial Performance
Revenue (Commercial Aviation) $293 million, up 45% year-over-year, driven by higher deliveries and pricing.
Adjusted EBIT (Commercial Aviation) Negative $28 million with a negative 9.7% margin, impacted by client mix, logistics costs, and absence of supplier credits recorded last year.
Revenue (Executive Aviation) $418 million, up nearly 30% year-over-year, reflecting strong demand and favorable product mix.
Adjusted EBIT (Executive Aviation) $25 million with a positive 6% margin, decline in margin due to U.S. import tariffs, client mix, and higher selling expenses.
Revenue (Defense & Security) $227 million, up 63% year-over-year, driven by higher KC-390 revenue recognition, increased A-29 production, and positive one-time items.
Adjusted EBIT (Defense & Security) $38 million with a positive 17% margin, driven by higher KC-390 revenue recognition and increased A-29 production.
Revenue (Services & Support) $490 million, supported by materials and offsetting the impact of U.S. import tariffs.
Adjusted EBIT (Services & Support) $70 million with a positive 14.3% margin.
Net Revenues (Consolidated) $1.4 billion, up 31% year-over-year, representing 17% of guidance midpoint, 2 points above the 5-year historical average.
Adjusted EBITDA $144 million with a 9.9% margin, a small increase compared to a year ago.
Adjusted EBIT (Consolidated) $94 million with a 6.5% margin, 1 point higher year-over-year and 7.7 points above the 5-year average.
Adjusted Free Cash Flow (Excluding Eve) Negative $447 million, reflecting preparation for higher aircraft deliveries in the coming quarters.
Investments $99 million, up from $88 million last year, including $38 million in CapEx, $36 million in intangible additions, $14 million in the pool program, and $11 million in research.
Adjusted Net Income $28 million, a decrease of $22 million year-over-year, with a positive 1.9% margin, down 2.6 points.
Financial Leverage 0.6x net debt to EBITDA (excluding Eve), 0.1x higher than last year, driven by a lower cash position.
Backlog (Company) $32 billion, up 22% year-over-year, a new historical record for the sixth consecutive time.
Backlog (Commercial Aviation) $15 billion, up 50% year-over-year, with an impressive 3 book-to-bill ratio over the past 12 months.
Backlog (Other Segments) $17.1 billion, up mid-single digits year-over-year, with book-to-bill ratios at or slightly above 1.
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Operating Highlights
Launch of new Praetor 500E and 600E: Introduced in the mid- and super mid segments, contributing to the best first quarter of the decade for Executive Aviation.
Eve's prototype progress: Transitioning towards horizontal flights in Q2, with 59 flights completed and 2 hours and 27 minutes of flight time year-to-date.
UAE purchase agreement: Signed for 10 C-390 aircraft plus 10 options, marking the second biggest order after the Brazilian Air Force.
Finnair order: Order of 18 E195-E2 jets, strengthening presence in Europe.
Record backlog: Company backlog reached $32 billion, up 22% year-on-year, with $15 billion in Commercial Aviation and $17.1 billion in other segments.
Aircraft deliveries: 44 aircraft delivered in Q1 2026, a nearly 50% year-on-year increase, including 10 commercial jets, 29 Executive Jets, and 5 defense aircraft.
Partnership with Northrop Grumman: Collaboration for the U.S. NGAS program, enhancing Defense & Security capabilities.
Focus on recurring revenues: Expanding through fresh contracts, including Airnorth for E170, E190 fleets and Hungary for its C-390 fleet.
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Risk or Challenges
Commercial Aviation EBIT Margin: Negative EBIT margin of 9.7% due to client mix, logistics costs, and absence of supplier credits recorded last year.
Executive Aviation EBIT Margin: Decline in margin due to U.S. import tariffs, client mix, and higher selling expenses.
Free Cash Flow: Negative $447 million adjusted free cash flow, reflecting preparation for higher aircraft deliveries in upcoming quarters.
Adjusted Net Income: Decrease of $22 million in adjusted net income, with a margin decline of 2.6 points.
Financial Leverage: Net debt to EBITDA increased to 0.6x (excluding Eve), driven by a lower cash position.
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Guidance & Outlook
Revenue and Margin Projections: The company is confident in delivering on its 2026 guidance and pursuing midterm ambitions of double-digit billion revenues and double-digit EBIT margins.
Aircraft Deliveries: Commercial Aviation delivered 10 jets, representing 12% of the guidance midpoint, while Executive Aviation delivered 29 jets, representing 18% of the guidance midpoint. Both segments are performing above the 5-year average.
Backlog Growth: The company backlog reached $32 billion, up 22% year-on-year, with Commercial Aviation backlog at $15 billion (up 50% year-on-year). Approximately $20 billion in options could expand the backlog beyond $50 billion over time.
Eve's Development Progress: Eve's test campaign is transitioning towards horizontal flights in Q2 2026, with the prototype completing 59 flights and 2 hours and 27 minutes of flight time year-to-date.
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Shareholder Return Plan
Shareholder remuneration for fiscal year 2025: Distributed 25% of net income, declaring a total of BRL 524.9 million in shareholder remuneration through interest on equity and dividends. This corresponds to BRL 0.72 per share and a dividend yield of approximately 0.9%.
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Key Q&A
Q:How are Iran and oil prices affecting customers' fleet decisions?
A:Rising costs may impact airlines' fleet expansion and renewal plans, but there is no direct impact on Embraer at this time. There is no diminished interest in new campaigns or movement to delay deliveries.
Q:Does the weight difference between the E2 and A220 affect airline decisions?
A:The E2 is well-positioned in this environment due to its efficiency. Airlines are showing more interest in the E2, and Embraer is cautiously optimistic about new campaigns.
Q:What is the $25 million defense one-off item?
A:The $25 million is due to an amendment to a defense contract that was calculated retroactively to the start of the contract, and the benefit was booked fully in the quarter.
Q:Was the $25 million defense adjustment expected?
A:Yes, it was expected for the year, but the timing was slightly ahead of what was forecasted.
Q:Will the share repurchase program continue?
A:Embraer is taking a conservative approach due to high uncertainties and prefers to wait for additional visibility before making changes to its outlook.
Q:What are Embraer's future investment plans?
A:Investments are focused on increasing production in Melbourne, expanding MRO in Texas, and increasing production in OGMA for the KC and GTF programs. Additionally, Embraer is investing in new technologies for future product cycles.
Q:How is the supply chain affecting Embraer's production?
A:There are still challenges with some suppliers, but improvements have been seen. Engine supply for E2 is under control, and E1 is improving. Embraer does not see risks to its production and delivery guidance for the year.
Q:Are there any regions with higher demand for E1 or E2 campaigns?
A:Campaigns are active in almost all regions. Embraer is optimistic about a good year, though not as strong as the previous year.
Q:What caused higher logistics costs in the commercial segment?
A:Higher logistics costs in Q1 were a one-time item amounting to $7 million and are not expected to recur in the coming quarters.
Q:What is the significance of the Emirates defense contract?
A:The contract for 10 firm KC-390 aircraft and 10 options opens opportunities for further sales in the Middle East. It demonstrates the aircraft's capabilities and potential for additional regional sales.
Q:What is the outlook for Embraer's margins by segment?
A:Commercial margins are expected to remain stable, while defense, executive, and services & support margins are expected to improve.
Q:What are Embraer's long-term production goals?
A:By the end of the decade, Embraer aims to produce 120 commercial jets, 200 executive jets, and 10 KC-390 aircraft annually.
Q:What is the expected defense revenue growth?
A:Defense deliveries are expected to include 6 KC-390 and 12 A-29 aircraft this year, with KC-390 deliveries growing to 10 annually by the end of the decade.
Q:What affected margins in Executive Aviation?
A:Margins were impacted by U.S. tariffs, customer mix (more fractional companies), and selling expenses related to new Praetor models. These impacts are expected to normalize in coming quarters.
Q:What was the adjustment to the Republic order?
A:The adjustment was limited to the delivery schedule, mutually agreed upon, with no change to the total order. Republic's slots were reallocated to other customers.
Q:What is the impact of tariffs on Embraer's costs?
A:Tariffs impacted costs by $13 million in Q1, with an additional $11 million expected in Q2. The impact is included in Embraer's guidance.
Q:Is Embraer in discussions with Rolls-Royce for future projects?
A:Embraer is studying new product cycles and engaging with potential suppliers, including Rolls-Royce, but no specific details were disclosed.
Q:Does the Boeing 777-7 compete with the E195-E2?
A:The 777-7 may compete in some campaigns, but the E195-E2 is considered the most efficient jet in the up-to-150-seat segment.
Q:What is the status of the KC-390 program in India and the U.S.?
A:In India, Embraer is progressing with the MTA program, which includes local assembly. In the U.S., Embraer is working with Northrop Grumman to develop capabilities for the KC-390 and pursuing opportunities with the U.S. Air Force.
Q:What is the demand environment for business jets?
A:Demand remains strong, with no impact from the war or fuel costs. Embraer continues to see robust sales and long customer queues.
Q:Review of Unclear Management Responses
A:Management avoided providing specific details on the timeline for new product development, stating that it depends on available technology and other factors. Additionally, they did not disclose book-to-bill ratios for the current quarter or specific defense revenue figures for future years.
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Earnings Word Cloud
The most frequently occurring keywords in this quarter's earning call
Aviation Commercial
Aviation backlog
Aviation decade
CEO Embraer
CEO Gomes
Capital Embraer
Commercial Executive
Commission CVM
Communications Director
Conference number
Defense Slide
Director conference
EBIT highlight
Embraer Chief
Embraer Conference
Embraer IFRS
Embraer Welcome
Embraer conference
Embraer result
Europe Executive
Executive Jets
Executive Vice
Felipe Executive
Felipe result
Finnair customer
Force confidence
Gomes Neto
Grumman NGAS
Hungary fleet
Security Services
Services Support
flight hour
hour minute
jet midpoint
margin point
midpoint point
point average
revenue EBIT
EMBJ Transcript
Embraer S.A. (EMBJ) Q1 2026 Earnings Call Transcript
Positive5-8
The earnings call highlights strong financial performance, strategic partnerships, and optimistic guidance, with a focus on production stability and market expansion. The Q&A section reveals continued demand and interest across regions, despite some uncertainties. A $25 million defense contract boost and strategic investments further support positive sentiment. Challenges like tariffs and logistics costs are addressed, and margins are expected to improve. Overall, the positive outlook and strategic initiatives suggest a likely stock price increase in the near term.
Embraer S.A. (EMBJ) Q4 2025 Earnings Call Transcript
Positive3-6
The earnings call summary highlights a 21% YoY increase in deliveries, strong partnerships, and a positive cash flow. Despite some uncertainties in timelines and impacts, the Q&A section reveals improved supply chains, tariff exemptions, and optimistic growth projections. The positive factors, such as potential billion-dollar deals in India and strong margins, outweigh the uncertainties, leading to a positive rating.
Frequently Asked Questions
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