Good morning, ladies and gentlemen. My name is Agip Paiva, and I'm the Head of Investor Relations for Embraer. I want to welcome you to the Fourth Quarter of 2023 and Full Year Earnings Conference Call. Thank you for standing by. The numbers in this presentation contain non-GAAP financial information to facilitate investors to reconcile EVE's financial information in GAAP standards to Embraer's IFRS. We remind you that EVE's results were previously discussed at EVE's conference call. It is important to mention that all numbers are presented in US dollars as it is our functional currency. This conference call may include statements about future events based on Embraer's expectations and financial market trends. Such statements are subject to uncertainties that may cause actual results to differ from those expressed or implied in this conference call. Except in accordance with applicable rules, the company assumes no obligation to publicly update any forward-looking statements. For detailed financial information, the company encourages reviewing publications filed by the company with the Brazilian Comissao de Valores Mobiliarios or CVM. At this time, all participants are in a listen-only mode. We'll give later on instructions for the participation in the Q&A session. As a reminder, this conference is being recorded. Participants on today's conference call are Francisco Gomes Neto, President and CEO of Embraer; and Antonio Carlos Garcia, our CFO. It is my pleasure to now turn the conference call to our CEO, Francisco Gomes. Please go ahead, Francisco.

Good morning, and good afternoon to all. Thank you, and welcome to Embraer's Q4 2023 Results Conference Call. In 2023, our commercial activity intensified in all business units with solid demand in the company's main markets. We also had a great start in 2024 with an important order from American Airlines, that has driven our commercial aviation book-to-bill ratio above 1:1 for the year already in Q1. Last year, supply chain delays negatively impacted our business. However, we posted double-digit growth in aircraft deliveries, services and revenues. The strong increase in sales helped the company's backlog to surpass pre-pandemic levels as it reached $18.7 billion, the highest number recorded in the last six years. And I am confident to say there is still much more upside to be captured in the near future for all business units. In the financial side, we also experienced great results. We registered a 30% increase in adjusted EBIT year-over-year, and we generated more than $300 million in free cash flow in 2023, above our guidance. I'm pleased and proud to share that Embraer is back to investment grade rating. All these results are a consequence of the execution discipline the company is focused on. On EVE, we reached important milestones in 2023, like the first prototype assembly. The progress made so far makes us even more confident that EVE is on track to develop the foundations for the global Urban Air Mobility market. Last but not least, safety and quality are priorities in our strategy and are ever present in our culture. I will present now the operational results of our business units in the next slides. In Commercial Aviation, revenues increased an impressive 20% year-over-year to $1.85 billion because of higher deliveries and product mix. The business unit registered a book-to-bill in excess…

Thank you, Francisco, and good morning and good afternoon to everyone. I'm glad and proud to share with you our 2023 achievements, driven by the continuous focus on business efficiency and innovation. We also reached our 2023 guidance for all financial indicators, net revenue, adjusted EBIT and EBITDA and free cash flow, despite a miss in commercial and the executive aviation aircraft deliveries, because of supply chain constraints. Moving to slide number nine. On deliveries, Executive Aviation delivered 49 business jets in Q4, and a total of 115 aircraft in 2023. The light jet segment was 12% higher year-over-year and reached the largest volume for the company in the past seven years. Additionally, medium jets registered a 14% annual growth. Meanwhile, Commercial Aviation delivered 25 aircrafts in Q4 and a total of 64 jets in 2023 for 12% year-over-year growth. In 2023, Embraer supplied 181 aircraft, including two military C-390 jets. The total represents an increase of 13% when compared to the 160 jets in 2022. This shows an improvement in the supply chain situation year-over-year, but we continued to face some delays, which have negatively impacted our operational results and delivery guidance. The company continues working to mitigate the seasonality in production and deliveries over the coming quarters. Moving to slide 10. The company's backlog rose by $1.2 billion in 2023, a 7% increase year-over-year and reached a total of $18.7 billion, the highest number recorded since first quarter 2018. Executive Aviation ended 2023 with a resilient $4.3 billion backlog or $400 million or 10% growth year-over-year. The backlog for Defense & Security increased $100 million or 4% year-over-year with the victory of the C-390 millennium in South Korea standard. It is also important to highlight the aircraft was selected by the three NATO countries. And this negotiation for…

Thank you, Antonio. I'm proud to say 2023 was a remarkable year for Embraer. It represented the start of a new cycle for the company. We faced, focused on sustainable growth to capture our full potential. The continuous focus on business efficiency and innovation as well as stronger sales efforts were and will be fundamental to achieve the expressive results in 2023, 2024 and years ahead. In 2024, we will celebrate Embraer's 55th anniversary in a very good shape. We remain very positive about our strategy to grow and generate value for our customers, shareholders and society through strategic partnerships, business efficient, innovation and ESG. With all that said, I am extremely confident about our 2024 guidance and the brilliant future Embraer has. I would like to thank you all again for your interest and confidence in our company and with our company motto, safety first and quality always in everything we do.

We'll now begin the question-and-answer session. [Operator Instructions] The first question comes from Marcelo Motta with JPMorgan. Please go ahead.

Hi, everyone. Good morning. Thank you for taking my question. It is regarding capital structure. When we look at the guidance for 2024, the expected or, let's say, the implied EBITDA and the free cash flow generation, we are talking about a net debt to EBITDA that will potentially be below one times, right? So what is, let's say, the level of leverage that the company feels comfortable in operate? Does it mean that you're targeting for a zero leverage, or could we see dividend buybacks or some type of distribution or investment. So that is the question. Thank you very much.

Good morning, Marcelo, thanks for the question. To be honest everything below two times, we are comfortable. The way we are doing it right now is going to be below one, which implies that assuming that we're going to exhaust or accumulate that profit, we should be able to resume dividend payouts in 2025 onwards. That's the first part. And the other part we are going to evaluate additional demand for the business units who have a better grow like Executive and Service & Support if you have additional needs for investments. At least, that's more or less where we are today, but if everything below two times, we are comfortable to work with, and we need to think how we are going to move forward for the years to come, how to use this money.

Perfect. Thank you very much Antonio.

Marcelo

The next question comes from Victor Mizusaki with Bradesco BBI. Please go ahead.

Hi. Congrats for the results. I have just a quick question here. Think about 2024 and what happened in the fourth quarter. When we take a look on cash flow, Embraer received a lot of PDPs. And I feel that in this case, you do not have any impact from these new order from American Airlines. So my question is if it would make sense to assume pre-delivered payments or Embraer viewers to PDPs in the first quarter or in the second quarter of this year? Thank you.

Thank you Victor for questions. Antonio speaking here. Victor you know more or less the dynamic of our cash flow. We've become positive last year just in Q4. There's a lot of moving parts throughout the year. I would say it's too early to say that we are going to be better. Traditionally when you -- in our free cash flow guidance, we always we were able in the last two years to do better, but for us it's too early to say because we do have also other topics ongoing right now. We continue to grow in 2025 and in some of our companies, our factories are producing parts already for 2025 deliveries. And assuming that the volatility to have the advanced payments we may see a different behavior. And you all know Q1 is going to be better, but not in the way we should see. That's why, I would say, what we agree internally here as soon as we have more visibility in regards to the free cash flow, we are going to adapt the guidance and do not wait for the Q4 closing. Summary what I can tell you right now, I would say the free cash flow at least can be higher, can be seen as, I would say, conservative.

Thank you.

Thank you.

The next question comes from Gabriel Rezende with Itau BBA. Please go ahead.

Thanks and good morning, Francisco, Antonio, Guilherme. Just a quick one regarding the supply chain risks. We saw your comments on Brazil Journal's interview, Francisco's interview on Brazil Journal, mentioning that supply chain issues somewhat improved in 2023 versus 2022. I was just wondering how much of these potential issues regarding the supply chain capped your delivery guidance for 2024? So these 80 aircraft in the Commercial division, could it be higher if we're not for the supply chain issues? And what is the risk that you're seeing for our guidance right now regarding this particular variable?

Thank you, Gabriel, Francisco speaking. Thank you for your questions. Well, starting for the last part, yes, both deliveries in the Executive and Commercial could be higher if we had more parts from the market. But on the other hand, we saw improvements in 2023 in the supply chain in general. And we believe we will see further improvements, further improvements in 2024. But we still have some bottlenecks. I mean, important components that are limiting our production. We actually -- we made our plan based on the conservative commitments from our suppliers. But even then we are seeing already some delays in the beginning of the year that you know bring some challenges in our production flow. But anyway, we are optimistic that the numbers we put in our guidance will be achieved this year in terms of production.

That's very clear, thanks Francisco.

You are welcome.

The next question comes from Myles Walton with Wolfe. Please go ahead.

Apologies. Thanks so much. Antonio, you mentioned CapEx potential investments as a source an area in Executive and in Services. In the Services piece, I think I can understand what the expansion of the fleet and capture there. Can you talk about the areas of expansion in Executive from a CapEx perspective? Is it purely capacity on the larger aircraft? Is it anticipation of something else to come and maybe put a quantification around it? Thanks.

Good morning, Myles. Thanks for your question. In regards to CapEx for Executive Aviation, we are since 1.5 years doing some adaptation in our production capacity in order to be more efficient and also to support the growth. And we are continuing to grow with the book to be 1.3:1, what we did already in 2023. Therefore, it's just painting both completion and safety in order to be leaner and avoid too many travel work for the executive and also to adjust for the capacity. On the MRO side or in the services side is more expansion in our MRO. I would say, organic growth that we are fostering right now. And on top of it, for our new products is not there yet any type of decision. Decision to be made if 2025, maybe Francisco could comment on the last one.

Thank you very much, Antonio. Just to complement Antonio's answer, in terms of new products, we are investing on innovation. We are investing on seven innovation verticals in order to close the technology gaps to be ready to go for a new program in the next future. We also made you know as we do all the time in marketing studies and product studies you know in order to be prepared for next steps for Embraer. For now, we have a very young and competitive portfolio of products developed in the less than 10 years and we are in a good moment. We want to sell those products and improve our financial performance. So that's what we're doing. But again, we are investing, we have a good investment in new technologies and innovation verticals.

Thank you. I'll stick to one.

Thank you.

The next question is coming from a telephone number with the end of 1339. We ask for you to introduce yourself before asking the question. Please go ahead.

Yes, thanks so much, Cai Von Rumohr. So in your guide, what is the relative mix within commercial between E1s and E2s and deliveries for '24 and also in biz jets between lights and mediums. And also, if you think about most biz jets makers make more money on the larger jet and it looks like yours is reversed. Is there any opportunity for the profitability of the medium bizjets to improve? Thank you.

Hello, Cai, Antonio speaking. Thanks for your question. It's always very nice. For the commercial jets for 2024, we are targeting 60% in E2 and 40% in E1 and the mix, okay? And for the Executive Aviation, it's more or less light jets around 55 and 45 to midsize jets. I would say, we are seeing a margin expansion for Executive Aviation, but percentage wise, our margin is much better than light jets, the midsized jets. However, where we are going much more is in the midsized jets, that's why I would say we should be able to get some margin improvement, but not as the same we have in the light jet, for the midsized jet, we do have more competition, that's why, I would say, in order to keep our guidance to the market, we are being a little bit conservative. I would say, same margin, but with much more dollars to come with the expansion production for the midsized jets. Thank you.

Thank you very much.

The next question comes from Jordan Leone with Bank of America. Please go ahead. Excuse me, sir. We cannot hear you. If you could please unmute your phone.

So sorry about that. Can you hear me now?

Yes. Thank you.

Okay. Thank you. Sorry. Could you talk a little bit more about the read-through on the United and the American orders to the 175. Should we look at this as a new replacement opportunity for RJs?

Yes, sure. So I mean, this new order shows to us that the -- that market of regional jets in the US is recovering. I mean although the pilot shortage situation is not resolved, the market is recovering, and this was the first important movements. And this will be very important for us to make a -- to have a health mix of aircraft between E1s and E2s in the following years. So as E1s continue to be the workforce in the regional aviation in the US.

Francesco, just to complement the united issue, it was just a repositioning 20 units to Mesa, which just does not mean a new backlog. But for sure, we do have interest from the other players in positions for the E1. Even that our big competitors who are saying that the regional market is dead, but as you can see, it's not as dead as more in live that we all believe and the order they are just confirming what we were saying in the last years.

Great, thank you.

The next question comes from Jay Singh with Citi. Please go ahead.

Hey, thanks for taking my question. It's Jay from Stephen Trent's team. My first question is do you guys have any updates on the E2 sales campaign in and out of the US?

Well, we cannot disclosure about sales campaigns. But what I can tell you is that, yes, we are working. We are in conversations with potential customers of E2s in the US.

All right. Awesome. Thanks. And my second question is regarding EVE, what are your thoughts on the certification process, really considering that the FAA is probably under a little bit of pressure right now regarding recent commercial airlines incidents? Just any color on that would be great. Thanks.

You asked about the EVE certification. Is that right?

That's right. Okay.

Okay. We are having an important progress on EVE development. I mean the key suppliers are already did finance for the product. We are progressing well in the assembling of the first prototype, the PAF 2, scale 1:1 that we expect to fly end of this year, beginning of next year. So we are committed for the entry into service of the -- our eVTOLs to the end of 2026.

Awesome. Thanks so much.

You are welcome.

The next question comes from Fernando [indiscernible]. Please go ahead.

Hello. Good morning. Thank you for taking my question. A quick one from my side. Could you please provide us an update on the arbitrage process with Boeing? Thank you.

Well, we expect a resolution in the first half of this year.

Perfect. And just a follow-up. Looking at your statement, we can reach close to $300 million that you already reported in expenses for carve-in and carve-out. Should the discussion be close to this number? I know you could not give any guidance on this, but at least if we look at your financial statement, we can see close to $300 million.

Fernando, this is Antonio speaker. It would be great if they paid the sum cost we have, but it's not in our hands to take the decision. And if you ask me personally, I would be seeing more than that, but it's not -- the decision is not in our hands, and we don't know if we're going to win or lose. That's why it's difficult to give you any type of forecast.

Exactly. And just to complement, and we are not counting on that money in any of our projections, Fernando.

Perfect. Thank you very much.

Our next question is from the chat. Please hold while we get the question. The next question is from Lucas Barbosa.

Hi, Antonio, Francisco and Guilherme. Thanks for taking my question and congratulations for the results. My question is regarding business jets. How are you seeing the entrance of new orders today? For new orders, is there any niche market that the company is focusing more on such as corporate flight departments and fractionals? And any visibility of how full the backlog of the competition is looking like. Thank you.

Thank you for the question, Lucas. I mean we are very happy with the performance of our sales, performance of our business jet. I mean as we mentioned in the opening, I mean our backlog today is at $4.3 billion. The book-to-bill, we ended the year at 1.3:1, even with high deliveries in the Q4. And I think we have a healthy mix in our sales, I mean, 1/3, 1/3, 1/3, more or less, I mean, 1/3 for corporate flight departments, 1/3 professionals, 1/3 for individuals in this. And we have a great portfolio of products. I mean just launched the Phenom 100 EX and the Praetors that are gaining more and more the preference of the customers. So we are really happy and comfortable with the sales of our businesses jets, and we are confident that we have another -- we will have another great year of sales in that business unit.

The next question comes from Kristine Liwag with Morgan Stanley. Please go ahead.

Hi. This is Gaby on for Kristine. Good morning. So I was just wondering if you could provide some color on how the GTF MRO at OGMA is progressing? And if you can just give an idea of how much revenue and margin will be in 2024? Thank you.

Can you please repeat the questions -- the question?

Yes. So I was wondering if you can provide some color on how the GTF MRO at OGMA is progressing. And if you can also provide color on how much revenue, the GTF MRO at OGMA will provide in 2024 as well as any color on margins would be great.

I will start and then Antonio can help me to complement. Now it's clear. Well, GTF program is moving very well. I mean, the first delivery is planned for April according to following the program. That program will be very important for the OGMA's and Embraer 's growth. The OGMA will help us to more than double OGMA's revenue in the next two years. I would say. And this will be a very, very important factor of growth for OGMA and for Embraer. Antonio, would you like to add something about the margin as well?

Yes. Just in regards to the revenue side, we are more or less forecasting around $40 million additional revenue for this year on the GTF. But assuming that we are in the ramp-up, we are not foreseeing any type of positive margin this year. It's even like a negative impact because we are starting right now. But I would say in the long-term, we do see a higher single-digit margin for this business.

Okay, great. Thank you.

The next question comes from Myles Walton with Wolfe. Please go ahead.

Thanks, Antonio. Just another quick one, if I could. From a free cash flow conversion of EBITDA I think 50% has been sort of your target level. And obviously, you're guiding below that in 2024. I realize you said it was conservative to start but is 50% still the right level to think about over the medium term? Thanks.

Yeah, Myles, thank you for the question. You are totally right. That is more or less what we are targeting internally, minimum 50% of the EBITDA. What we are facing the backlog is not a surprise maybe for you is the volatility that we are facing throughout the year. That's why we are guiding doing 220 plus. Because it's really hard, for example, last year, we got a big amount of money in the last week of the year. That's why we prefer to be conservative. But internally, we are targeting 50% of EBITDA even in our long-term planning. That's the minimum basis that we are looking for.

Okay. One quick one, if I could. Francisco. The E2 ETOPS certification, was that preventing you from competing in any competition? And does that open up new competitions that you see in the near term?

You mean the E2 certification?

The ETOPS certification for Europe for the E2.

No, no. I think we are moving well with the ETOPS certification. And this will help us actually to improve the competitiveness of our E2s. And to be more successful in the sales campaign, we are working on, not only on Europe, but as well as in other regions.

Okay. Got it. Thank you.

You're welcome.

Thank you all very much. This concludes today's question-and-answer session. That does conclude Embraer's conference for today. Thank you very much for your participation and have a good day.