Good morning, ladies and gentlemen, and welcome to the audio conference call that will review Embraer's third quarter 2019 results. Thank you for standing by. [Operator Instructions]. As a reminder, this conference is being recorded and webcasted at ri.embraer.com.br. This conference call includes forward-looking statements or statements about events or circumstances which have not occurred. Embraer has based these forward-looking statements largely on its current expectations and projections about future events and financial trends affecting the business and its future financial performance. These forward-looking statements are subject to risks, uncertainties and assumptions, including, among other things, general economic, political and business conditions in Brazil and in other markets where the company is present. The words believe, may, will, estimates, continues, anticipates, intends, expects and similar words are intended to identify forward-looking statements. Embraer undertakes no obligations to update publicly or revise any forward-looking statements because of new information, future events or other factors. In light of these risks and uncertainties, the forward-looking events and circumstances discussed on this conference call might not occur. The company's actual results could differ substantially from those anticipated in the forward-looking statements. Participants on today's conference call are Mr. Francisco Gomes Neto, President and CEO; Mr. Nelson Salgado, Executive Vice President, Finance and Investor Relations; and Mr. Eduardo Couto, Director of Investor Relations. I would like now to turn the conference over to Mr. Nelson Salgado. Please go ahead, sir.

Good morning, everyone, and thanks for joining the call. We start our presentation with the Commercial Aviation highlights at Slide 4. Embraer delivered 17 E-jets in the third quarter and 54 year-to-date. Among those, we highlight the deliveries of the first E195-E2 to be operated by Azul Airlines. During the third quarter, Helvetic Airways, a Swiss airline, also received its first E190-E2 jet. It is important to mention that [indiscernible] is doing very well, and the entry into service of the E2 jet since last year has been a big success. As far as Services & Support, Azul and Horizon Air signed its Services & Support program for their E1 fleet and Embraer also achieved 100% E-jet operator enrollment in Asia Pacific for its pool program. That includes 60 aircraft and a total of 6 different airlines. Moving to Slide 5, we show the Executive Jets highlights. Embraer delivered 27 executive jets, 15 light and 12 large, in the third quarter leading to 63 airplanes year-to-date. During the third quarter, we delivered seven Praetor 600, including the first Praetor 600 jet assembled in Florida. As far as sales, Embraer had the highest year-to-date sales in Executive Jets in the last five years with the Praetor 600 as a big success and the best superior five jet in the market. Interest from customers is very high, and we had the announcement at NBAA of $1.4 billion deal with Flexjet for the Praetor jets and the Phenom 300, a deal that can get to the delivery of around 64 jets. Flexjet also became the Praetor fleet launch customer with first delivery scheduled for fourth quarter 2019. Finally, in terms of the Praetor program development, the Praetor 500 received a triple certification from ANAC, FAA and EASA, outperforming on key performance metrics such…

Thanks, Nelson, and good morning to all analysts and investors connected on this call. After six months as the head of Embraer, I would like to share my impressions with the market. First, we have a great team, and I'm really impressed by the commitment and hard work of our team in the carve-out process to separate the Commercial Aviation business into a new company. Of course, the carve-out has affected our results in 2019, but we are confident that after the conclusion of this partnership with Boeing, Embraer will be much stronger. Second, while we continue to manage our whole business in the ordinary course, we have been extensively working recent losses on our business plan of this new Embraer, and important actions have already been taken. We have presented to the market at the right time, but I'm 100% convinced of this huge value we have in executive, defense and services. With a lot of focus on sales of the great new products we have, discipline in cost control and cash generation, I believe that our biggest opportunity today is to improve these three businesses. No other initiatives will be creating more value to our shareholder -- shareholders than this. That is the reason my management team is deeply engaged reviewing the business plan for executive, defense and services. We also continue with focus on the innovation initiatives that will contribute with the future growth of the company. Finally, we recently announced important changes that Nelson Salgado, our current CFO, will now move to operations to increase the alignment of operations team with the financial targets we have. We also announced Antonio Garcia as our new CFO starting on January 1, 2020. Antonio comes from thyssenkrupp and brings a lot of experience in cost control, profitability turnaround and cash generation. I believe we are geared in the right leadership at Embraer to take the necessary steps that will bring enormous results to our investors in the coming years. With that, we conclude our presentation and we would like to open for questions.

[Operator Instructions]. Our first question comes from Cai von Rumohr, Cowen and Company.

This is Jeff Molinari on for Cai. So the first question I have is on the Boeing-Embraer JV. This weekend, it was reported that you stopped the clock to review the proposed JV. Is this latest development contemplated in your expectation for a decision in March? Or how is that -- will that be delayed substantially? And then I have a couple of follow-ups.

Well, thanks, Jeff. No. We do not see that there's any additional delays. Actually, when the European Commission decided to move the process to Phase 2, they decided on the deadline that would be around mid-May -- mid-March. And they requested additional information from the 2 companies. We are working very hard to deliver this information as soon as possible, but the European Commission stopped the clock until they receive this additional information. We do not see this as any change in the normal course of this process and don't expect this to mean big delays.

Okay. And if I can, another follow-up. So the delay caused the decrease in the special dividend range, so -- but you didn't quantify what the impact is on separation costs. Can you talk a little bit about what expectation is for those costs in 2019 and 2020 or collectively, however you want to frame it?

The separation costs will amount to [indiscernible] $100 million -- close to $100 million in 2019. And there may be something left for 2020, but we don't expect that to be significant.

And is there an amount in your free cash flow guidance that you're assuming for the free cash flow guidance, the $100 million to $300 million outflow? What are your assumptions of separation costs within that?

So the same. That guidance includes already the separation costs in the order of $400 million that I mentioned, too.

Our next question comes from Myles Walton, UBS.

This is Louis Raffetto on for Myles. Just wanted to sort of follow up on that. So what was the driver to the change in the dividend? It was I think previously $1.6 billion, now it's $1.3 billion to $1.6 billion. And is there -- is the -- is there a change in the amount of leakage that you expect from the deal as well?

No. That is driven mainly by the cash flow consumption in 2019 and also by the delay, the change of the closing from early 2020 to around March, right? So in the light of the cash consumption, we thought it would be better to change the guidance for the dividend.

Okay. And then a follow-up. So I think now you're saying there's I think 5 Super Tucanos. I guess I thought, previously, were you expecting a few more than that this year? Or is that...

Yes. We were -- well, five of them were postponed to the beginning of 2020.

[Operator Instructions]. Our next question comes from [indiscernible], Global Capital.

My question is about the business jet orders. Wonder if you could provide a little bit of description on how that went for Q3.

Sorry. Are you asking about business jet orders?

Yes. Correct.

Yes. Business jet orders, as we mentioned in the call, were at the highest level in the first 9 months of the year from the last 5 years. So it's been a very good result. And within those orders, we had this $1.4 billion orders from Flexjet, which is very important as Flexjet becomes the launch customer of the Praetor 500. So it was a very big year so far to business jet sales.

And I just had a quick follow-up. Can you -- are you able to discuss backlog for Q3 for business jet specifically?

Well, as a consequence of the sales, backlog is at its highest for executive aviation as well, but I don't have here the figure for the aviation backlog, but it is at the highest ever of.

Our next question comes from Cai von Rumohr, Cowen and Company.

What is your new expectation for net cash disposition if the deal were to close in March time frame?

Well, Cai, this depends on exactly when the deal closes. As you know, as we move by during the year, in our industry, it's normal to have cash consumption in the first months of the year because of the seasonality. So the amount of cash that -- the liquid cash that we -- the net cash that we will have at closing will depend on the moment the -- when the closing was planned, that happened coincidentally with the year-end where we have our [indiscernible] cash position because of the situation. Now with the closing moving closer to the end the third quarter in the year, then it's difficult to predict the net cash. It will depend on the operational performance and cash consumption of the first months of the year.

Okay. That make sense. And then how is the separation activity progressing? And is it you are on track for internally separating by fiscal year-end? What still needs to be done between now and the next 1.5 months?

Cai, you know this is a complex problem. We have many, many projects going on to be able to do that separation. Right now, we have closed the integrated test for the separation of the ERP system, which is one of the biggest tests that we have to do. And with that, we consider that most of the activities are finished. So our plan was to have finished most of the significant activities by beginning of December, and that is very much on track. So what we will do now as we close 2019, we will enter a blackout period because we have to shut down the current system so that we could start the operation as 2 different separate companies. So we expect to take the first 2 to 3 weeks of January in that process. And when we come back from that, we will already operate as 2 separate companies. The company that will in the future becomes bonded with commercial and Embraer with the commercial business carve-out. As I mentioned in the presentation, from this point until the closing, Embraer will continue to operate Commercial Aviation as we've always done. The only difference is that now internally, it will be from separate companies but same management, same leadership.

Our next question comes from Josh Lorico [ph], Morgan Stanley.

This is actually Josh Milberg from Morgan Stanley. I was hoping -- I wanted to ask if you could give a little more color on the nature of your commercial profitability in the third quarter in addition to the issue of separation costs you mentioned that it was affected by ramp-up of the E2. Could you talk a little bit more about that effect and how you see that matter effect evolving into the fourth quarter and into 2020? I realize of course that if all goes as planned, you won't be managing the commercial business as of next year, but I thought you'd still have some perspective.

So the results of Commercial Aviation in the quarter, they were negatively affected by the separation costs. According to the methodology that was defined, the Commercial Aviation business exceeds almost all of the separation costs together with some part of the services businesses that is also with the Commercial Aviation. So that explains a part of the results that we had in the quarter, and this is a transitory effect. We don't expect to have, as I mentioned, big separation costs leading into 2020. The other part of the results explanation relates to a mix of margin in the E175-E2s -- the E1s, sorry, that we have given this year. And costs above expectations in the E190, E195-E2s. So we are working with the learning curve of these products. We are reducing the costs first, but it is affecting the results as we starts working up these three new products.

Okay. And then on the E175 issue that you mentioned, could you elaborate a little bit on that? Is that because of the special configuration version of that aircraft, which we'd understood in the past had a lower selling price?

Yes. That's right. So the configuration and the effect of this associated with these orders drive -- so this is -- drives these margins down.

Our next question comes from [indiscernible].

Actually, I have two questions, following up on Josh' questions regarding margin. So can we affirm that the impacts on margins came more from the E2 than the E175? And another question, if you could provide any detail regarding the profitability of a Praetor, it would be great.

Well, as I mentioned, there are two components to the Commercial Aviation margin. So the E195 new ones, the 90 and 95-E2s are ramping up and then incurred and then the carve-out costs, which, as I mentioned, are impacting almost totally Commercial Aviation. The other point...

The margin on the Praetor was...

Yes. Okay. The margin on the Praetor, we had in the quarter a 6% positive EBIT in executive aviation with the delivery of the initial Praetor 600. We are not disclosing individual margins for our products, but definitely, the Praetor have parts to play in these better margins in executive aviation.

[Operator Instructions]. Our next question comes from [indiscernible].

This is Leonardo [ph] from CTM Investimentos. I would like to ask you guys what are your main peers doing in terms of prices in order to achieve the cost and performance of the Praetor business jets?

Sorry, I did not understand the first part of your question. What is the...

What are your main peers doing in terms of prices to achieve the cost and performance of the new Praetor jets? I mean are they giving more discounts to achieve the Praetor price?

No. We believe very strongly that the Praetor 600, we found a fixed cost in terms of positioning, products that have similar performance are a much -- have much higher prices, so it's very difficult to have price reduction that would get these products to compete with the Praetor 600. And so we do not see that this kind of reaction will cause us big problem in the Praetor 600.

And can you say something about the business jets used market? Is it getting better?

Yes. It is going well. No special points here.

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

Thank you very much for joining the call.