Embraer S.A. ($EMBJ3)

Good morning, ladies and gentlemen, and thanks for standing by. As a reminder, this conference is being recorded. Its broadcast is intended exclusively for the participants of this event and may not be reproduced or retransmitted without the express authorization of Embraer. This conference call will be conducted in English, but please let me say a short announcement for Portuguese speakers. [Foreign Language] My name is Gui Paiva, and I'm the Head of Investor Relations, M&A and Venture Capital for Embraer. Welcome to Embraer's First Quarter 2026 Earnings Conference Call. The numbers in this presentation contain non-GAAP financial information to help investors reconcile Eve's financial information in GAAP standards to Embraer's IFRS. We remind you Eve's results were discussed at the company's conference call earlier this week. Before we begin, a legal notice to everyone. 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. [Operator Instructions] Participants on today's conference call are Francisco Gomes Neto, President and CEO of Embraer; Felipe Santana, Chief Financial Officer; Thais Moraes, Corporate Communications Director; and myself. This conference call consists of 3 parts. First, we will present the results for the first quarter of 2026. Second, we will host a Q&A session exclusively for investors. And finally, we will hold a dedicated Q&A session for the press. It is my pleasure now to turn the conference call to our President and CEO, Francisco Gomes Neto. Please go ahead, Francisco.

Thank you, Gui. Good morning, and good afternoon to everyone. It is a pleasure to be here with you to share Embraer's first quarter 2026 results. We achieved the strongest first quarter revenue in our history, the highest aircraft deliveries in a decade and another all-time record backlog. We continue to see tangible progress in production leveling and greater stability across our assembly lines. As a side note, Q2 is up for a great start, shout out to the UAE, who just signed a purchase agreement for 10 C-390 aircraft plus 10 options, the second biggest order after the Brazilian Air Force. This gives us confidence not only to deliver on our 2026 guidance, but also to pursue our midterm ambition of double-digit billion revenues and double-digit EBIT margins. Turning to the highlights of the quarter. Commercial Aviation, order of 18 E195-E2 jets from Finnair, another very important customer in Europe. Executive Aviation, best first quarter of the decade, driven by strong demand and the launch of the new Praetor 500E and 600E in the mid- and super mid segments. Defense & Security, double-digit revenue growth, momentum for KC-390 and A-29 platforms, plus a new partnership with Northrop Grumman for the U.S. NGAS program, Services & Support, expanding recurring revenues through fresh contracts, including Airnorth for E170, E190 fleets and Hungary for its C-390 fleet. 44 aircraft delivered last quarter, 10 commercial jets, 29 Executive Jets and 5 defense, year-on-year growth, nearly 50% increase overall with Commercial Aviation up 43% and Executive Aviation up 26%. Commercial Aviation guidance, 10 commercial jets delivered equal 12% of guidance midpoint, 1 point above the 5-year average. Executive Aviation guidance, 29 jets delivered equal 18% of guidance midpoint and 7 points above the 5-year average. Company backlog reached $32 billion in the quarter, up 22% year-on-year, a new historical record for the sixth consecutive time. Commercial Aviation backlog reached $15 billion, up 50% year-on-year with an impressive 3 book-to-bill ratio over the past 12 months. Other segment backlog, Executive Aviation, Defense & Security and Services & Support totaled $17.1 billion, up mid-single digits year-on-year with book-to-bill ratios at or slightly above 1. Approximately $20 billion in options, which could expand the backlog beyond $50 billion as exercised over time. Now I'd like to share a brief update on Eve's steady progress. The test campaign is transitioning towards horizontal flights in the second quarter with our prototype having already completed more than 54 flights in a total of 2 hours and 17 minutes (sic) [ 59 flights in a total of 2 hours and 27 minutes ] of flight time year-to-date. With that, I will now turn the call over to Felipe to walk you through our financial results. Felipe, over to you.

Thank you, Francisco. Good morning, and good afternoon, everyone. Let me start with the results by business unit. All comparisons are year-over-year unless otherwise noted. Slide 9, Commercial Aviation and Executive Aviation. Starting with Commercial Aviation, revenues were up 45% to $293 million, driven by higher deliveries and pricing. Adjusted EBIT was negative $28 million with a negative 9.7% of margin due to client mix, logistics costs and the absence of suppliers credits recorded last year. In Executive Aviation, revenues increased nearly 30% to $418 million, reflecting strong demand and favorable product mix. Adjusted EBIT reached $25 million with a positive 6% of margin. The decline in margin was mainly due to U.S. import tariffs, client mix and higher selling expenses. Slide 10, Defense & Security and Services & Support. In Defense & Security, revenues increased 63%, reaching $227 million. Adjusted EBIT was $38 million with a positive 17% of margin, driven by higher KC-390 revenue recognition, increased A-29 production and positive onetime items. In Services & Support, revenues reached $490 million. Adjusted EBIT totaled $70 million with a positive 14.3% of margin, supported by materials and more than offsetting the impact of U.S. import tariffs. Slide 12, net revenues. At the consolidated level, net revenues increased 31% to $1.4 billion in the first quarter, representing 17% of guidance midpoint, 2 points above the 5-year historical average. From a business mix perspective, Services accounted for 34% of revenues, Commercial and Executive Aviation around 20% each, and Defense 16%. Slide 13, adjusted EBITDA and EBIT. Adjusted EBITDA was $144 million with 9.9% of margin, a small increase compared to a year ago. Now adjusted EBIT was $94 million with a 6.5% of margin, 1 point higher year-over-year and 7.7 points above the 5-year average. Slide 14, free cash flow and investments. Adjusted free cash flow, excluding Eve, was negative $447 million in the quarter. This reflects our preparation for a higher number of aircraft deliveries in the coming quarters. Investments totaled $99 million during the quarter compared to $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. Slide 15, adjusted net income. Adjusted net income was $28 million in the last quarter, a decrease of $22 million. The adjusted net income margin was positive 1.9%, down 2.6 points. Earnings per ADS improved from negative 1.0 in 2022 to 1.9 in 2025 and now stands at 1.7 on the last 12-month basis. Slide 16, financial position. Financial leverage stood at 0.6x net debt to EBITDA, if we exclude Eve or 0.1x higher than last year, driven by a lower cash position. Our average debt maturity is still at a comfortable 8.7 years and its average cost at 5.6% in U.S. dollars. Shareholder remuneration. For fiscal year 2025, we 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%. With that, I will hand it back to Francisco for his final remarks. Thank you.

Thank you, Felipe. The first quarter 2026 strengthens our belief in Embraer's strategic positioning and execution capability. Rising deliveries, sustained demand across all segments and expanding recurring revenues are converging to fuel sustainable top line growth. These results reflect the discipline, the focus and commitment of our people across the organization. That same discipline drives efficiency while we invest in new technologies to enable ambitious and profitable long-term expansion, anchored by our values, safety first and quality always, guiding everything we do. This approach positions Embraer to keep delivering value for our customers, employees and shareholders. With that, I'd like to move on to the Q&A.

We remind you again, this conference is being recorded. It's broadcast is intended exclusively for the participants of this event and may not be reproduced or retransmitted without the express authorization of Embraer. We also highlight this conference call is being conducted in English with translation to Portuguese. Please let me say a short announcement for Portuguese speakers. [Foreign Language] [Operator Instructions] The first part of the Q&A session will be exclusively for equity research analysts and investors. The second part of the Q&A will be only for the press. The first question comes from Kristine Liwag with Morgan Stanley.

Thank you for sharing your results this morning. Francisco, Felipe and Felipe, congratulations on your new role. You've got a record backlog. So recognizing that the business is in a position of strength. Can you talk about how Iran and oil prices are affecting customers' decision regarding their fleet? Is this a period where they're leaning on and really evaluating new airplanes? Are they looking at continued life extensions of the existing aircraft that they have? Any color that you have to share about how they're looking at this dynamic would be helpful.

Kristine, thank you very much for your question. We are closely monitoring the situation on the war. So rising costs, of course, may impact airlines fleet expansion and renewal plans. But however, at this time, there is no direct impact on Embraer. So we don't see any dismission interest in new campaigns or any movement to delay deliveries.

Great. Super helpful. And if I could follow up on another question. We've seen that the E2 weighs less than the A220. I think the weight difference is something like 8,000 kilos. In this environment where airlines are reminded again that oil is a variable that they can't control and could vary widely. Are they factoring this in about the decision when they're evaluating the A220 and the E2? And is this environment incrementally better for the E2 from what you've seen? Are there signs of that? Or are we still in early stages for those kinds of campaigns?

No, absolutely. We see -- we are now very well positioned with E2 in this environment because we have the most efficient aircraft in that segment of a small narrow body. And we see more and more airlines showing interest in this -- in our product. So again, we are, let's say, cautiously optimistic about new campaigns with E2s.

The next question comes from Marcelo Motta with JPMorgan.

Felipe, congrats for the new position, well deserved. It's a question regarding the defense one-off, the $25 million. If you guys could explain us a little bit more details on what it means and what it happened now. So any information that can help us to figure out that $25 million will be very helpful.

Marcelo, Gui Paiva here in Embraer. Thanks for the question. As you know, in defense, we have a lot of -- we accounted on the percentage of completion methodology. And we did have an amendment to a contract with a client in the quarter, and that amendment was calculated retroactively to the start of the contract, and therefore, we booked that benefit fully in the quarter. That explains the $25 million for the division.

The next question comes from Louis Raffeto with Wolfe Research.

Maybe just to follow up on that. Was that something that would have been expected for this to happen this year, just timing uncertain, that adjustment in defense? Or would that be incremental to the full year?

That was something that was expected by us. The timing was a little bit ahead that we had booked as expected, but it was forecasted for the year.

Okay. Great. And then so just on the share repo, you've done 2 quarters in a row now. Is this something we should continue to expect to see?

Yes, we're taking a conservative approach because of the current high uncertainties, and we prefer to wait for additional visibility before we make any change to our outlook, but we are very comfortable on the point of our guidance.

The next question comes from Ron Epstein with Bank of America.

In your prepared remarks, you mentioned about investments in the future. Could you walk through what you're thinking about those investments? And could you discuss a little bit where you're investing for the future?

Ron, Felipe here. Thank you for the question. So as we mentioned, we keep investing on our increase of production in Melbourne facility to support the increase of the backlog on the Executive Aviation. Also, we continue to invest to increase our footprint, especially on the MRO in Texas that we've been investing. And also we'll be investing in OGMA to increase the production also on the KC and also on the GTF program. So this is the focus of the investment of the company currently.

Maybe if I can complement you, Felipe, we are also investing in new technologies, I mean, to be prepared for a new cycle of products of Embraer in the next future.

Got it. Got it. And then what are you all seeing in your own supply chain today? I know engines have been a gating factor with your ability to deliver aircraft at a quicker rate. How is the engine supply chain going? And are there other areas where you're seeing challenges in the supply chain? Like I know in the executive aviation industry, things like just windows have been hard to get a hold of. How is that going?

Thanks for the question, Ron. I mean we still have some pacers that we are working with them very closely that is pushing our deliveries further to the next quarters, but we have seen a lot of improvements. So you can see by the deliveries we made in the Q1, I mean, 47% more than we did in Q1 last year. And this shows how the situation is improving. Regarding engines, specifically, I mean, E2, we have the situation under control in terms of deliveries and E1 improving as well. So we don't see any risk for us for our guidance this year in terms of production and deliveries. And we are working closely with the suppliers to improve the deliveries cadence that we can level our production, I mean, improving in this year, but achieving a highest level of leveling production in 2027.

Got it. Got it. Got it. And then can you speak to a little bit of any, how do I say it, ongoing campaigns in regions of the world? Are there any regions of the world that are hotter today than others in terms of campaigns for E1 or E2?

Campaigns in almost all the regions for E-Jets. We normally do not disclosure the campaigns, but we are optimistic that we will have a good year as well, not as good as last year because last year, we had amazing sales of E-Jets, but this year is going to be good as well.

The next question comes from Andre Ferreira with Bradesco BBI.

I wanted to congratulate Felipe on the new job. Just going back to the one-off items this quarter. So tariffs are clear, impact on the fence, I think you covered in the previous question. But on the commercial side, maybe not really a one-off, but we're seeing higher logistics costs. Could you give more details, like did it accelerate production rates or deliveries? Or was it something else? And if you could give us a color of how much impact that was on margins or in USD?

Andre, Felipe here. Thank you for your question. We do have these logistics costs, and we believe there was much more one item during the first quarter. We don't foresee that on the coming quarters. And this basically was around $7 million of impact on the first quarter.

And was it related to anything specific or different from the previous quarters?

No, no, nothing different.

The next question comes from Lucas Marquiori with BTG.

Welcome Felipe to the group. And just one question on defense and regarding this latest contract you guys signed with the Emirates. Just wanted to know if that is kind of a building platform for that client to maybe distribute more of your products throughout the region? Like, I mean, if there's any kind of a volume upside on top of that signed contract already? Or how do you guys see this kind of opportunity in the Middle East? And second question on margin base, though, I mean, how was the delivered margin versus your forecast, right? Because I mean, in terms of deliveries and in terms of volumes, you guys had a stronger quarter. But even looking on a year-over-year comparison, your margins were slightly weaker, right? I know there's client mix, there's logistics costs or are all the sorts of the effects that you guys already mentioned. But just wanted to know if that's already included on your curve for expected margin improvement throughout the year.

Right. Lucas, Francisco here, I'll start with the question number one, and then Felipe will help you with -- Gui or Felipe will help with the question number two. Well, I don't need to tell you how happy we are with this new order in the Middle East, the first one in the region for the KC-390, very important and relevant order. I mean 10 aircraft firms and 10 options. And yes, this open opportunity for us to extend new deals with the neighborhood in the region, right? I mean it shows -- has happened in Europe that this aircraft really is the best-in-class in that segment. And going to the Middle East, yes, we see an opportunity for new sales in the region with the KC and these 10 options can help us to do that, the same thing we have with Portugal and we have with the Netherlands. Now Felipe, second -- Gui, I think you will take care of the second one, right?

Yes. Thanks for the question, Lucas. Good to hear you. So we operate a complex business. So obviously, there are fluctuations that happen quarter-to-quarter. I think most importantly, if we're looking forward, we feel very confident and comfortable with the guidance that we put out with 9% EBITDA margin at the midpoint of it. And if we continue to see the status quo of tariffs not being implemented on Brazil and on us, we estimated in the last quarter that we could see an additional 60 basis for the year.

The next question comes from Noah Poponak with Goldman Sachs.

Maybe on the margin question and topic, just given some moving pieces and as Gui just alluded to, the quarterly volatility that can happen. If we take the full year total company margin guidance that you have, is it possible to just speak to for full year 2026 versus 2025, what you see by segment, which segments are higher, which are lower directionally?

Thank you, Noah. Felipe here. What we foresee when we compare, right, by business unit, on commercial, probably going to see stable compared to last year. On defense, an improvement going up. Executive as well going up and Services & Support as well. So most of the growth that we're going to see will be pushed by these 3 business units and commercial much more steady.

Okay. Great. That's helpful. And then as you've discussed investing in output for Executive, where does that get you on possible capable annual deliveries? And what do you think -- where do you want to take supply annual deliveries relative to the effort to grow and give customers jets, but also keep a backlog and keep supply-demand tight?

No, this is really a great question. And this is a combination of our supply chain capabilities and our own production capabilities. So we are working on both fronts. So we are investing in expanding our sites in Brazil, Portugal and the United States over the past 2 years and also optimizing our -- the utilization of our assets, producing more aircraft in the same area. So in parallel, we have been working very closely with our key suppliers to make sure that they supply the parts we need to support our growth. We have -- we are growing year after year, but we are growing this year. We are planning to grow in the following years. So we are saying that by the end of the decade, we expect to reach production of 120 commercial jets and 200 executive jets and 10 KC-390. This is the plan we have been working on. And also very important, we want to deliver all the aircraft on time to our customers, and we are improving in that direction as well.

Okay. And then maybe just last one on Defense revenue and growth. Given the growth rate in the quarter, obviously, it's an easier absolute dollar compare in the year ago quarter. But I guess, what's -- within the total company full year 2026 revenue guidance, what's assumed for Defense growth or a range of dollars? And then as you execute on that program growth beyond this year, how can we think about or how can you frame where Defense revenues can make it to closer to the end of the decade?

Felipe here. Thank you. On Defense, right, we don't give specific numbers. But the way that we see is that around 6 -- probably 6 aircraft this year KCs and 12 A-29. That's the way that we see. And we see this pace of deliveries growing, especially on KC year per year up to 10 aircrafts in the end of the decade.

And Felipe, if you allow me to complement this answer. Noah, we have been working on a new initiative we call Pull to the Left, which aim to anticipate revenues and higher profitability. So -- and then we are focusing on enhancing our execution process, accelerating revenue and improving profitability at a faster pace. So things are now coming to a more stable situation, we believe there is an opportunity for us to accelerate our efficiency programs within the company.

The next question comes from Daniel Gasparete with Itaú BBA.

Two questions here from my side. The first one would be to -- if you could kindly walk us through what happened and what affected the margins on the Executive Aviation. You mentioned the expenses with the operator, just to get a better idea of how much it was, how the margin would be excluding for that? That would be the question number one. And also, if you could comment on the same dynamic for the Commercial Aviation? And secondly would be on the adjustment on the Republic order. Just to have a better understanding of how that works in terms of is there any kind of cost for the client? I mean it's like a conversation to have with them and you can simply accommodate them? Or does that change the price? This has any kind of fee? Just have a better understanding of how that works in terms of rearrangement of the orders.

Felipe here, Gasparete. Thank you for your question. So the first question, I will answer here. So when I look to Executive Aviation, the margins, right, the margin was pressure reflected U.S. tariffs, right? We had U.S. tariffs this quarter that we didn't have last year. Also the customer mix, we had much more fractional companies being delivered compared to the last year. And also with the launch of the new Praetor 500 and 600E models, we also had an impact on the selling expenses to that. But the way that we see the coming quarters will be normalized and we don't expect any more impact on the margins of Executive Aviation. And the second question, Gui will take you.

Gasparete, thanks for the question. So in terms of the Republic order, I think it's important to highlight first that there was no change whatsoever to the total order of aircraft ordered with us and in the backlog. The adjustment was purely limited to the delivery schedule, which was revised by a mutual agreement between the 2 parties. And Republic slots were reallocated already to our other customers. So it should have no impact on our deliveries for the next few years.

The next question comes from Alberto Valerio with UBS.

First, welcome, Felipe. It would be a pleasure to work with you on us if you need anything. I have 2 on my side. The first on tariffs. I would like to know if this was one nonrecurring item on the first quarter, I thought this new 10% tariff would not be hitting the aerospace products. The second one -- and also on tariffs, the Section 232 has any involvement or any impact on your cost -- on the cost of your suppliers from Mexico and Canada. The second one is about the book-to-bill, how have been in the second quarter? What we should expect for the divisions? And if you could tell us if change expectation because I imagine that service might change with some grounding of all the aircraft, if you may comment on this one.

Felipe here. Thank you, Alberto, for your question. So regarding the tariffs, right, we had the impact on the first quarter of $13 million, mainly related to inventory effects. But looking forward, we still have another $11 million inventory that will -- should impact the second quarter of this year. When we look right to the potential impact of the U.S. Section 232, we maintain the tariffs in our guidance given everything that's going on, right, because this reflects a conservative approach that we do have. As soon as we have more visibility, then we can make any change or even on the guidance or share with you what we will have of impact. And also on the -- your second question, we don't give any information about the book-to-bill in the current quarter, okay?

The next question comes from André Mazini with Citi.

Francisco, Felipe, Gui. Welcome to the call and CFO position, Felipe, happy to chat. So the first one, we see Rolls-Royce wanting to go back to the narrow-body engine market, which is currently dominated by CFM's LEAP and Pratt's GTF. So I wanted to ask you guys if Embraer is already in conversation with Rolls-Royce for any future partnership, likely for future projects, new airframes, but if you guys are speaking to Rolls. This is the first one, and then I have a second one.

The question, I mean, we are making studies for a new cycle of products for Embraer, right? I mean either a commercial jet or a business jet. So in that regard, we are talking to potential suppliers, I mean, of the different products to understand the new technology and so on. But I cannot disclose more details on that. I mean, with the specific number, we talk to all of them, but I don't have specific information to share with you about this or that specific supplier.

Perfect. Perfect, Francisco. And the second one on potential competition. So Boeing is slated to certify the 777-7 later this year. The -7 is a 140-seat jet, so a little bit larger in terms of seat count than the 195-E2. So do you think the -7 competes in any sense with the 195-E2 or given that it's a more expensive and longer-range plane, it should be used for totally different missions or if there's any overlap?

I think they might compete with us in one or another campaign. But we believe that for that segment up to 150 seats, the E2 is the most competitive jet, the most efficient jet in that segment. So -- and then we believe that, yes, we might have some competition in some campaigns, but we are very confident that the E2 is the best option for the customers to complement the larger narrow-bodies. It was developed for that segment with all the experience Embraer acquired with the first generation. So again, more and more customers are seeing that. We have now 24 customers for our E2s and are working in different new campaigns as well.

The next question comes from Lucas Laghi with XP.

Felipe, congrats on the new role. I have a question on defense. I mean, showing a very strong commercial activity, right, on the C-390 front. Just wanted to better understand, I mean, considering your current capacity output, I guess you mentioned like 6 aircraft this year, expectations for 10 aircraft by the end of the decade. So just better understanding considering your current backlog, how full are your capacity considering your Brazilian footprint as we speak? And if you see further space for accelerating new orders without any new expansion? And on this context, I mean, if new orders continue to accelerate, if you see any potential room for expansion in your facility here in Brazil? And I mean, still on the topic, but we understand the optionalities by building a new plant on the U.S., on India. Just if you could give us an update on that front as well. I mean how are those conversations with India and the U.S. evolving? I mean your partnership with Northrop Grumman. So just better understanding the whole capacity utilization context on the C-390.

Very good question. First, I mean, we are investing to expand our production capacity for the KC-390, as I said, growing 1 per year, 6 in '26, 7 in '27, 8 in '28, 9 in '29 and 10 in '30. And this capacity is enough to support the current sales campaigns we are working on. But in parallel, we are working in opportunities that might bring much higher volumes like India and the U.S., right? But those campaigns will require a localization of our production. So then India is moving -- is progressing as planned with the India Air Force. We are working very close to that campaign. But if we win that campaign, the aircraft will be assembled in India with a lot of local suppliers as well. This will help us to increase the capacity and fulfill the requirement of the MTA program in India. On the other front, U.S. U.S. is the same. So we now are working with the Northrop Grumman to develop the boom and other systems capabilities to make sure that the KC-390 will be ready, I mean, to enter in the U.S. Air Force. And also, if we win a relevant order, this aircraft will be assembled in the U.S. as well. So with those 2 fronts, we will be able to increase our capacity and of course, to grow significantly our Defense business.

Thank you all very much. Now we will start the question-and-answer session dedicated to the press. First, we will answer questions in English. And then we will answer questions in Portuguese. We'll also answer questions sent via the platform chat. The first question comes from [ Richard Sherman ] with AirInsight.

Can you hear me?

Yes, we can, Richard.

I have 2 questions actually. In your remarks and answers, you mentioned the leveling of the production going to 2027. The original plan was to get to a more level production level already this year. What are the reasons that this is pushed out to 2027? And my second question is, as you have been aware, on Wednesday, Tony Fernandes announced the big order for the Airbus A220, but you also mentioned that he was taking -- or had taken a serious look at the Embraer E2. What's your view? Have you been given a fair chance to offer the E2 to AirAsia? And at what stage did you get in the negotiations?

All right. So let's start with the question number one, Richard. Yes, we are having progress leveling our production this year. I mean, Executive Jets, we are now almost with the production level. I mean we saw good improvements in Q1 last year and this year, again, and you see this -- the Phenoms and the Praetors, we now see the production almost at the level we are looking for. So 2027 will be just a fine adjustment for Executive Jets. On commercial jets, Richard, we have some more challenges because of some pacers suppliers. So we did better this year, and we expect to improve even further for 2027. So we are working -- we have been working already with the suppliers to make sure that we will have a better start in '27 that we had in 2026. So again, the program is moving well. Executive Jets, more advanced, but commercial jets are also improving. The second question about AirAsia. I mean first of all, I mean, after our customer is good, it's good to see another low-cost carrier in the region recognizing the advantages of a small narrow-body jets, right? So -- and this is a trend that we expect to continue as we build on our record backlog and huge E2 momentum in the market. Remember, we sold the last year, I mean, almost 200 E2s. So Obviously, we would have liked to add AirAsia to our global family of 24 E2 operators. But our competitor, we knew since the beginning that our competitor has a huge incumbents in that airline in earlier slots. So -- and as we did very well last year, I mean -- and we also have a lot of opportunities this year. We don't see this a big issue for Embraer. This will not affect our growth plans for commercial jets. And yes, it was a good experience working with AirAsia. I think they understood the benefits of our product, our product could bring it to their fleet. But at the end of the day, they decide to go with the competition, and we respect their decision.

Can I add one more question, a follow-up on the first answer you gave. Do you expect to improve the commercial jet production and get it more level already in the second half of the year?

We are working on that. And this initiative I mentioned before, we call -- that we call Pull to the Left, this includes also production and deliveries, but not in a significant way still this year because of the supply chain. We don't see any risk for us to deliver the guidance we gave to the market of 85 commercial jets and between 160 and 170 business jets. But a better improvement in terms of leveling for commercial jets, we will see in 2027 and 2028.

The next question comes from Jonathan Hemmerdinger with FlightGlobal.

I think you can hear me now. Commercial -- for future aircraft, commercial jets, you've touched on it briefly, Francisco. Any update you can give us on what segment you're looking at, how large of an aircraft, what timeline would be? We know you've been considering this for several years. What have you learned in the last year? Just tell us more about that, if you could.

Jon, thanks for the question. Well, first, we are -- as you see, we are -- we have been focusing a lot on improving our performance in terms of deliveries and sales of the products we have, right? We have a very modern and competitive portfolio of products. And we are increasing our backlog and now it's with new orders for all the segments, commercial, executive and defense. And this will take us, Embraer, to a very important midterm growth in terms of revenues, in terms of profitability. But in parallel, we are investing in new technologies, aerostructures, wings, cockpits and so on in order to be ready to develop a new airplane. So we are making studies in the 2 fronts. And we don't have -- we are not at the point to disclose any more information about that because we don't have a decision yet about the segment we want to go to. But we know we need a strong product with a strong value proposition with a robust, I mean, funding strategy because we don't want to put in risk the financial health of the company. So again, we are working on all those fronts, but we are not ready yet to disclose more information on that.

I just do wonder if you might say any estimate of timeline, how long you think the E-Jets can carry that growth that you're talking about and when a decision might have to be made?

This does not depend only on us. This depends on the technology available in the market, right, for different products. And this is what we are working on. So we don't have a timeline to share with you, Jonathan.

The next question comes from Steve Trimble with Aviation Week.

I was just -- I wondered if you could say anything more about the timeline for setting up infrastructure for the completion center in the UAE as well as the delivery schedule for the UAE.

Well, Steve, I mean, we don't have plans for completion centers at this point of time in UAE. We have -- we are working to collaborate with local suppliers in the UAE. And this is in the -- this is an ongoing process. So we will increase our collaboration with local suppliers. I mean we mentioned the Gen 5, for example, in case of the KC-290. And -- but we don't have a plan at this point of time for a completion center. It will be just a collaboration with the local suppliers for us to buy parts made by them.

I see. And do you have a delivery schedule for those UAE C-390s?

Yes, we do have. We should start the deliveries by 2028 and continuing in the years ahead.

The next question is sent from the chat -- was sent from the chat, I'm sorry, and it's from Edgardo Jimenez Maso with -- via Zoom line. Has the operational debut of the E190 freighter in Europe led to a concrete increase in interest from lessors or express integrators who were previously in the wait-and-see phase. What is your assessment on the program's progress to date?

Could you repeat the question? I don't know if I get -- could you repeat the question, please?

Of course, sir. Has the operational debut of the E190 freighter in Europe led to a concrete increase in interest from lessors or express integrators who were previously in the wait-and-see phase? What is your assessment of the program's progress to date?

Okay. The freighter. Thank you for the question. Yes, we have now a customer. So with entering in operation with the E190 freighter, this will help to showcase the product. And we believe it's a great product for e-commerce, especially. And we have a good expectation about the future sales with the E190 freighter.

The next question comes from Curt Epstein with Aviation International News.

Can you hear me?

Yes.

In the beginning, you mentioned the 29 Executive Jet deliveries for the first quarter. You had mentioned there was a disclaimer on there. Is that actually a record for Embraer in the first quarter Executive Jet deliveries?

Yes, it is, and we are very happy with that. It's a result of this production leveling efforts.

Okay. I just wanted to confirm that I think you had said in a decade or something like that. So I just want to make sure that is actually the record for the company.

Yes. And I mean, we are coming from tough times in the past, especially with the supply chain that was leading us to concentrate deliveries at the end of the year. And this means a weak Q1 because of that concentration in the year before. But now we are changing the situation step by step and delivering these jets, Executive Jets in Q1 this year is proving that we are in the right way.

The next question comes from the chat and is from Joanna Bailey. How does the UAE's C-390 order help you get a foot in the door in the Middle East? Are you having conversations with other Middle East nations? Could you provide some color on the production level of the C-390 and how you see it ramping up as more orders come in?

All right. Joanna, good question. Yes, we do see opportunities to sell the KC-390 to more customers in the region because of this important order of UAE. And yes, we are working -- we are talking to other customers at this point of time. Yes, the third question, yes, the production level included the KC-390 as well. It is a more complex product, complex aircraft, but we have been able to reduce both the production lead time of the aircraft and to improve the production distribution of the aircraft, I mean, throughout the year. It's -- the challenge is bigger than the other ones because of the supply chain, but we are seeing good progress. We are seeing good progress as we are seeing with E-Jets and Executive Jets as well.

The next question also comes from the chat and is from Molly McMillin with Aviation Week. Could you please talk about the demand environment for business jets and whether the war with Iran has created any hesitations or impact? And also, could you please talk about the tariffs when it comes to business jets? How much of an impact does that have on demand?

All right. Thanks for the question. Well, we are not seeing impact so far with -- that might affect the sales of our business jet. Demand is still strong for our business jets as we have a very modern portfolio, especially now with the launch of the Praetor 500E and 600E that are selling very well. With the tariffs, I would ask my colleagues, Felipe and Gui to share more color with you.

Yes. Thanks, Francisco. On the tariffs on executive jets, it has impacted our COGS, but we do think that we have a superior product in the industry versus our competition. And even with the price adjustments that we have taken, it remains very competitive. And I think the book-to-bill sales that we posted last year above 1.0 or close to 1.0 was very solid. We continue to have the longest queue of customers in the industry, and we're selling our products now into 2029. Especially we are very excited about the new Praetor family with the enhancements that we are and the value proposition that we're giving to our customers.

This concludes the question-and-answer session in English for the press. This question-and-answer will be now conducted in Portuguese. [Interpreted] We will now begin the Q&A session in Portuguese. First question from [ Shendu Alvis ] through the chat box is from [ O'Reilly newspaper ]. Could you please give us an update about your negotiations with India and the U.S. Air Force for the sales of KC-390 or C-390?

[Interpreted] Thank you for your question. The project in India that we call which is called MTA, medium transport aircraft is progressing and it's progressing quite well, and we are working hard. We have a dedicated team working on that project. Our defense team is dedicated to the project. It's a very large and significant project for Embraer. We are looking at it very closely. We are getting prepared. This will require local assembly of the plane, and this will require the use of several parts made in India. And we've been working with our procurement teams, engineering teams, our business teams to prepare ourselves to come up with a very competitive proposal for that campaign. What was the second question again?

[Interpreted] About U.S. Air Force.

[Interpreted] The same thing in the U.S., we are working at full force. Our defense team is working very closely with Northrop Grumman, our partner, one of the most important defense companies in the U.S. and we are also doing campaigns. We took the plane to the U.S. several times to try to convince the U.S. Air Force about the benefits of our aircraft, particularly when it comes to NTS -- MTS, which is a new generation of boom refueling systems of the fighter jets.

[Interpreted] Next question is from Raquel Brandão with InvestNews.

[Interpreted] Congrats for your results. You had a very strong number in the first quarter. So my question is whether -- I mean, how do you see things going forward? I know you're very confident, but I would just like to understand whether somehow this fuel crisis that we are experiencing now and that is putting pressure on the airlines, whether this already has any impact on demand, whether you're having any conversations along these lines? And also in terms of the Executive Jets and companies that have executive fleet because certainly, fuel is a very important aspect in aviation. So I would just like to know whether the cost of fuel is impacting demand or will impact demand going forward and whether deliveries will be postponed or delayed.

[Interpreted] Raquel, it's a pleasure to talk to you. Well, certainly, the increase in fuel cost will impact the cost of the airlines and also some expansion plans. And so we're seeing now many of the airlines cutting costs and canceling flights while the situation is still around us. We are monitoring it very closely. Our commercial aviation team is looking at that very closely. But so far, we haven't seen any impact. We haven't seen any customer postponing their sales campaigns or they haven't even asked us to delay the delivery of aircraft. That's why we are looking at it very close. On the Executive side, we are not seeing any impact, the number of hours flown. I mean, it is reaching record levels month after month. So therefore, right now, we don't see any impact to Executive Aviation. Our sales continue to move at a very aggressive pace. And so far, we aren't seeing any impact even though we do recognize that this is a very tough situation. That's why we are monitoring very closely. But I mean, we are paying close attention to all processes related to efficiency and cost management. We just want to be prepared for any impact that can be foreseen in the future.

[Interpreted] The next question is from Cristian Favaro from Valor Econômico.

[Interpreted] Can you hear me okay?

[Interpreted] Yes. Yes, we can, Cristian.

[Interpreted] Before anything else, congratulations, Felipe, on your new position and welcome. I have a question about production. During the last call, Francisco, you've always said that it is your plan to spread out production a bit more because it used to be a bit more concentrated at the end of the year. So these results we've seen in Q1, do you consider them to be success from that plan? And will we see production more spread out along the second and third quarters?

[Interpreted] Excellent question, Cristian. And yes, it is. This year, we will distribute production better between the first and second halves of the year. We'll still have a bit more concentration in the second half of the year, but much less so than we've seen in previous years. And we're already looking at Q1 and into next year so that we can improve distribution even more. So we want to increase production in Qs 1 and 2, first half of the year, so we can level it out in the second half of the year. We're working hard on that. We're working hard at our plants to make sure that we are qualifying and preparing people training them on robust processes so that they can do each task at the right time and also working with suppliers so that they can deliver the right parts at the right time and clients so that they can receive the aircraft across the year. But we've had good progress, so we should see even more progress in Q2. Q1 was very important because it was quite low last quarter. But we'll also have progress in Q2, which will ensure we have better production distribution and deliveries across the 12 months of the year.

[Interpreted] The next question is from the chat from Pedro Bavuso, CBN Vale.

[Interpreted] I'd like to hear about the next steps with eVTOL, please.

[Interpreted] Good question. eVTOL, well, we've been testing the engineering prototype. Tests have been great. You saw during the presentation, right, 59 flights and over 2 hours flight time. The next steps will be to transition to the cruise flights, people are getting ready for that. And as of next year, we're going to start building the prototype so that we can be ready for certification. So it's going very well, and we hope to see even more progress over the next few months, not only in -- when it comes to the test and development of our products, but also authorities, ANAC, FAA to prepare the certification process for these aircraft for commercial operations in the future.

[Interpreted] Thank you. This concludes Embraer's conference for today. Thank you very much for joining, and have a great day. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]