Good morning, ladies and gentlemen and welcome to the Audio Conference from Embraer’s Financial Results for the Fourth Quarter of 2022 and Full-Year of 2022. 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 conditions, political, and business conditions in Brazil and in other markets, where the company is present. The words believes, may, will, estimates, continues and participates, 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 those 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. It’s important to mention that all numbers are presented in U.S. dollars as it is our functional currency. Participants on today’s conference call are Francisco Gomes Neto, President and CEO; Antonio Carlos Garcia, Chief Financial Officer; Leonardo Shinohara, Director of Investor Relations. And in the Q&A session, we will also participate Arjan Meijer, Commercial Aviation, CEO; Michael Amalfitano, Executive Aviation, CEO; and [indiscernible] Service & Support, CEO. I would like now to turn the conference over to Francisco, who will proceed with the first remarks. Please go ahead, sir.

Good morning everyone. Thank you all for joining our fourth quarter and 2022 full-year results conference call. 2022 will be remembered for overcoming several challenges worldwide, such as the Ukraine war, the rising of global inflation, in supply chain constraints. Despite that, we managed the strategic plan to deliver our goals, which was only possible due to teamwork, focus, and discipline. Another main factor in succeeding our plan was the continued focus on business efficiency, which demanded several mitigation measures throughout the year. In 2022, aircraft delivery grew 12.7% and reached the mark of 159 commercial and executive aircraft. We also increased revenue to 4.5 billion. Adjusted EBIT and EBITDA margins exceeded the guidance given to the market, reaching 6% and 10%. Moreover, the free cash flow generation grew well above estimates. The total backlog returned to the pre-pandemic level reaching 17.5 billion. This Active Aviation presented an outstanding performance in 2022, and in Commercial Aviation, we had several campaigns underway. Later on, I will talk more about the 2022 highlights of each business unit. On the next slide, we will see some important steps in our journey towards a more sustainable aviation. The Energia program was consolidated with two concept aircraft models for 19 to 36 with hybrid electric and hydrogen electric propulsion. Together with Pratt & Whitney, we have successfully tested an E195-E2 using 100% sustainable aviation fuel. As part of the reducing emission goals in our operations, we anticipate the use of 100% renewable energy in Brazil by 2024. In addition, we signed an agreement with Raízen from the Shell/Cosan Group to assess the production of sustainable aviation fuels in Brazil, which may contribute to lower emissions across the sector. In the social pillar, we are increasing the hiring of underrepresented groups in our entry level programs,…

Thanks Francisco, and good morning, everyone. 2022 was a great year for us. The entire Embraer one team worked at very hard all the way to the last minute of December to successfully overcome many external challenges we faced during the year. As a result, I'm proud to share our 2022 financial results with you today. Deliveries, we increased the number of aircraft delivered by 12.7%, compared with 2021, even with significant supply chain constraints. It's important to note that Q4 deliveries were concentrated around 50% of all deliveries in 2022 with an abnormal seasonality. Embraer delivered 8 jets in the fourth quarter, of which 30 commercial jets and 50 executive jets, thereof 33 light jets and 17 mid-sized jets. In 2022, we produced 61 commercial jets, but delivered 57 with 4 jets postpone to January 2023. Therefore, we slightly missed the guidance. For Executive Aviation, we delivered 102 jets reaching the guidance. Deliveries are gaining traction and we are optimistic on our 2023 deliveries guidance. Firm order backlog ended fourth quarter 2022 at $17.5 billion, $500 million more versus Q4 2021. This is one of the highest quarter backlog since the beginning of the pandemic, or 800 million more versus Q4 2019, driven by solid sales activities in Executive Aviation and Service & Support. Net revenues reached around $2 billion in the quarter, 44% of the whole year revenue, approximately $700 million, compared to Q4 2021, most driven by higher revenues in Commercial Executives and Service & Support, partially offset by lower revenues in Defense & Security. Revenues reached 4.5 billion in the year, approximately 343 million more, compared to 2021, or a growth of 8% delivering the guidance with revenue well-balanced by business unit. Moving to adjusted EBITDA, but before that, I want to report on gross margin.…

Thank you, Antonio. In my closing remarks, I'd like to comment on this and following years. First of all, the 2022 financial results show that we are making consistent progress in our journey of shifting the company towards a sustainable growth. As we have said, since 2020, the 2021 and 2022 years would be dedicated to the business recovery after two simultaneous crisis, the pandemic and the end of the Boeing deal. And the focus will be on growth from 2023. We can now state we had fulfilled what was promised. The business turnaround was completed in 2022, and we are ready to start a new growth phase, capturing the company's full potential in the coming years. We still face supply chain challenges this year, but we are optimistic about the company's future in terms of revenue growth and profitability. Regarding revenue growth, several ongoing sales campaigns are progressing very well in Commercial, Business Aviation, and Defense area. The aircraft slots on the production line for deliveries in 2023 and 2024 are practically fueled for Commercial Aviation and Executive jets. The service area will continue to grow generating better margins, and we are confident in the improvement of defense results. The organizational changes announced at the beginning of the year with the creation of new Vice President for Global Procurement and Strategy and Innovation also play a relevant role in accelerating growth. We will give even more focus to the procurement area directly impacting efficiency and value generation. In the case of innovation, we will strengthen the integration of these projects in our longer-term strategy, opening new growth opportunities. For this reason, adding our recognized execution capacity to ongoing sales campaigns and innovation projects, we are very confident in Embraer's sustainable growth. And finally, my thanks to the Embraer team, which overcame all of last year's challenges with outstanding commitment and dedication, always focusing on quality and safety. And thanks for the support of our customers and partners and our shareholders for their trust in our company.

Thank you. [Operator Instructions] Our first question comes from Ronald Epstein from Bank of America. Please, Mr. Ronald, you microphone is open.

Yes. Can you hear me, okay?

Yes, we can, Ron. Go ahead.

Great. Great. Thank you. So, maybe just a couple of quick questions. How should we think about Embraer in the Chinese market? Typically, right, aircraft don't get certified in a market unless deliveries are imminent. So, how should we think about that?

Since we have Arjan here with us, Arjan, can you jump in and answer this cross question?

Absolutely, Francisco. Thank you, Ron, for the question. I think the great news in 2022 was that the 190-E2 was certified. We've been in the process to add the 195-E2 that. We strongly believe that the 190 and the 195 combination in China is a very strong addition to the local portfolio of the ARJ21, which falls slightly below our segment and the 919, which is the narrow-body, the Chinese industry with [indiscernible] will bring to the market. It's a gap where there are no Chinese products. The 190 had an incredible performance and is very useful for the higher level approach [indiscernible]. And the 195-E2 obviously, is a great complement to the narrowbody [aircraft in] [ph] China. We believe a great vehicle to help the Chinese connect the many airports that are being created in China that need a very efficient aircraft. So, we're very busy about the Chinese market, and we're working with airlines and our team. We have a team in Beijing at the moment to see if we can campaign over the line.

Got it. And if I could follow on to that question. Given all the tension now between the U.S. and China and kind of what that means for Boeing. Does that been an opportunity for you guys? I mean, I don't know how you can answer that, but if you could give it a shot.

Well, obviously, with our segment, we are in the lower segment than narrowbodies than Boeing. But we do believe that with the Brazilian product, we had a very interesting alternative to the Chinese airlines. So, I think the moment is key. China wants to really connect the country and the domestic market. And I think getting an aircraft that is – that can complement either a MAX or neo and obviously, on the short-term will be more neos. The 195-E2 is able to deliver economics that are very close on a per seat basis to A320. So, we believe that independent of what's happened to Boeing, it is a great addition to that market.

Great. And then maybe just one last one on commercial. How should we think about new product development in commercial, right? I mean the turboprop was halted, if that's right. So, where to now? I mean, Embraer has always been very innovative when it comes to new products, and how should we think about that?

Yes, that's a great question, Ron. The turboprop is on a slowdown at the moment. We have not disbanded the project, if you will, but we need to have more in-depth conversation with the system supply. So, that's definitely a product where we believe there could be a market. On the slightly longer-term, the Energia platform is really something that we're spending a lot of time on. We had our first Advisory Board at the end of 2022 to really understand what the feasibility is of smaller aircraft with a much more sustainable footprint than the bigger aircraft. So, a lot of focus on the long-term sustainability agenda and the road map I have for Commercial Aviation. We believe the E2 has a great footprint in terms of CO2. We're working on getting that aircraft also 100% SAF. The turboprop will still exist in technology, but more efficient than anything out there, more seats and also 100% SAF capable. And then below that, the Energia platform, which is, of course, further out. There's a lot of work to be done. It's still concepts, but we're looking very closely at that part of the market as well. And maybe using the opportunity, Ron, while I have the microphone, there was a comment on the introduction about 20-aircraft order by [U.S. lessor] [ph]. That deal was announced early 2022, but was part of the 2021 backlog. So, we had 60 aircraft in our order book. It did include the 20 quarters, but the 20 aircraft from the lease company were in the 2021 order book, just to be precise. Thank you.

Great. Thank you very much.

Our next question comes from Louis Raffetto from Wolfe Research. Please Mr. Louis, your microphone is open.

Thank you very much. Can you guys hear me?

Yes, we can hear you, Louis.

Maybe just to up on Ron's question, I guess, you mentioned your active campaign. So, any additional color you can give? I think you guys are expecting a stronger book-to-bill in 2022 than what you, kind of wound up with. So, just how do you see this year playing out?

Want me to continue on that one, Francisco?

Yes. Go ahead, and maybe Michael can complement you as well from the executive side.

Yes. Very quickly, obviously, we can't comment on individual campaigns, but what I can say is that as Francisco noted on his opening speech, is that we see a lot of appetite for the segments. I think pre-crisis, we were in the uncertainty with the Boeing deal. During the crisis, obviously, the market was very slow, but now post crisis, we see a different market ahead. We see a lot of industrial airlines in being risk averse, looking at different ways to do business. So, there's a lot of appetite in the smaller segment. You may have seen the announcement of an LOI from Scoot in Asia. That's one of the information that's out there. That's great news for the E2 program. We really see new airlines interested, but we also see a golden moment ahead of us for current E-Jet operators looking replacement aircraft, so bullish about the future, but hopefully, we can share more information later.

Michael, do you want to add something from your side?

Thank you so much, Francisco, and thank you again for the question, Louis. Market in Executive Aviation is extremely strong, very robust. We have book-to-bill in excess of 2:1. We have market interest from all of our customers across all four sectors. Most specifically, obviously, with the Phenom300E and the Prater600 capturing significant market share growth as we look ahead into that backlog. We are currently selling positions in first and second quarter 2025 across the sector with the aircraft for 2023 and 2024 completely sold out. The market remains very robust in terms of demand, obviously managing all the characteristics that you heard from Francisco and Antonio regarding our challenges on the supply side, and we're looking forward to maintain pricing, we are looking forward to a continued robust earnings cash generation for the corporation.

All right. Great. And maybe just to kind of follow up on what you guys just said there, this is for both of you. Were there – was engine availability an issue for you as you look to the 2023 guidance for going on any of the deliveries?

For commercial aviation, engines are certainly part of the supply chain challenges ahead of us, but it is included in our guidance.

Yes. Louis, on our end, obviously we're facing the same supply challenges that the entire industry is facing across aerospace. We don't believe that we're going to be adversely impacted any more or less than anyone else in the sector. But however, we have phenomenal relationships engaged with our supply chain, especially with the chipset providers, so that we don't see any major disruptions for 2023 or beyond as we continue to manage through those relationships.

Thank you very much.

Our next question comes via phone and the number ends in [6273] [ph]. [Operator Instructions]

Hi, guys. Can you hear me? It’s Noah Poponak.

Yes, go ahead.

Okay. Okay. Great. Do you expect book-to-bill above 1 or below 1 in Commercial and Executive in 2023?

I think, Arjan and Michael, you can answer this as well.

Yes. I'll – what I'll say about the book-to-bill for 2023 is that on the U.S. markets on the E-Jets 175-E1, we still see some challenges on the pilot shortage. So, I think that market will be less strong than what we've seen in the previous number of years. On the E2, I just elaborated on that. We're very bullish about the opportunities, and we hope to have a good performance there on 2023. On average, I'd say around book-to-bill or better. Hopefully, that's where we end up, but it's a bit early to say.

Michael?

Yes, just to follow up on the Executive Aviation side. As I mentioned, in 2022, our book-to-bill was consistently in excess of 2:1. In 2023, obviously, we'll see some slight reduction as the marketplace continues to calm to more normal levels. However, our demand for our products across the sector remains very strong. So, we anticipate that we will be at the high end of any historical book-to-bill averages for the industry.

Thanks guys. On the pilot shortage piece, that commercial, do you view that as cyclical temporary? There's a pilot shortage now, but we'll get more pilots, maybe you get some scope relief at some point or should we be now thinking of that as structural to your business where it's really hard to get scope change? And because there's a pilot shortage across the board, formerly regional pilots are all being to mainline and then the carriers order large narrowbody, Boeing and Airbus aircraft and just kind of move on from your segment of the market, and therefore, it's a little bit more locked in?

Yes. Thank you. I'll try to be short on that answer, but it's a complex area, but what I would say is that, a change in scope has proven to be very difficult over the last couple of years. So, we don't really expect that change to happen. What is important is the connectivity in the United States. There is a lot of airports that will struggle to handle the bigger narrowbodies. We do see a continuing interest from the majors in the segment. So, we do believe there is a cyclical trend here. It will not be solved in the short-term. It will probably take 1 or 2 more years to restabilize, but we do believe that there's a lot of focus on getting that issue resolved. We're seeing both the majors and the regionals spending money and time on increasing the amount of pilots to be trained. And what we also see is that a lot of pilots are still caught up in the training system because of the COVID scenario. So, we're still in the tunnel when it comes to pilot training, but we do believe that we will come out and come to a more stabilized scenario in the period ahead of us.

Okay. Great. Is it possible to quantify, just lastly, expenses in 2022 that do not repeat in 2023, whether that's related to turboprop investment or legal or otherwise?

Antonio, maybe you can get this one. You're on mute. He's asking about the expenses with – related to the turboprop. I think Antonio is having problem with the audio. Maybe, Arjan, maybe you can come with this answer?

On the turboprop, obviously, we've put program...

I'm back. I'm back.

Sorry. Go ahead, Antonio.

Okay. Go ahead, Antonio.

I would say around, if I take the turboprop and less legal costs, I would say, something like 1% margin comparing to 2022, which is more or less give us some good visibility to more upside than downside trend for [EBIT margin] [ph].

Okay, great. Okay, thanks so much.

Our next question comes via phone from the number ended with 1339. [Operator Instructions]

Hello, can you hear me?

Yes, yes, we can.

Okay, thank you so much. Yes, hello guys. So, maybe a follow-up on pricing. So, at one point, the issue was a lot of your commercial deliveries were [175] [ph] to major U.S. airlines with very tight pricing. Comment if you could on what's left to go of 175s, what's the pricing there? And also, the pricing on the E2? And then in the biz jet in the executive sector, I think everybody has been talking about stronger pricing, but more recently, some of the U.S. producers have been talking about inflation catching up so that pricing just offsets inflation. Do you still have any net price gains to go in the business jet area? Thank you.

Arjan and Michael. Yes.

I'll start on the Commercial Aviation side. On the 175-E1, we tried to get – to keep the pricing discipline over the last couple of years, and I think we've been fairly successful on that. There are, of course, some deals from a few years ago. They are still causing some pricing pressure on the 175-E1, but let's not forget that the price increase in the market needs to find its way into the pricing of aircraft as well. We're doing our best to keep that to a minimum, but that needs to be recovered as well. On the E2, of course, we have the – we want to be very sensitive on the pricing. I think we're successful there, but also, we are very aware that we need to bring E2 into the market and build our market share. We believe we have a chance to do that now. So, it's finding that balance going forward.

And on the Executive Aviation side of the business, we have raised prices on all four product segments. This has been provided to the market for 2023. It's important to note that our goal remains to be delivering the ultimate experience in Business Aviation. In order to do that, you have to also deliver superior value to your customers. So, we're going to continue to push price as long as we can continue to maintain market share and growth to service the demand and customer commitments that we have in the industry.

Great. And if I might ask one follow-up to Ron's question about China. You mentioned that the E190 and 195 are good fit versus the products that China is buying, but what about the A220? It would look like is that a direct competitor? And to what extent is that a major threat to your sales in China?

At the moment, when the A220 gets certified, for sure, we will compete in maybe a share of the market, but the E2 and the [A220] [ph] are slightly different aircraft in the market. And I believe, as I described earlier, with the commission of the [indiscernible] performance of 190, the cost performance of the 195-E2, which is really stellar, but also the gap to the narrowbodies, we see that the 195 respects a bigger gap to the narrowbody segments, which allows the airlines to put the value difference between those aircrafts even more with the E2 family than with the A220 family. We believe for China, it's a very attractive combination of aircraft. But of course, there will always be markets where we will see competition, but we're confident that the E2 has a good place there.

Terrific. Thank you very much.

Our next question comes from Victor Mizusaki from Bradesco BBI. Mr. Victor, your microphone is open.

Hi. Congrats for the 4Q numbers. I have one question here. In the conference call and [podcast] [ph], you gave some details about the discussions in India. Apparently, you mentioned about the potential order of [indiscernible]. So, my question near is, when to expect the – I mean, let's say, to be confirmed, if there is something that can happen this year? And if you can also comment if there is something else related to conservation? Thank you.

Okay, Victor, thanks for the question. Francisco speaking. I mean it's tough to predict, but the information we have is that this process can last a couple of years.

Okay. And Francisco, this is only about defense or maybe if – I mean you have a, let's say, if the negotiation evolves that maybe, this can also be extended to Commercial Aviation?

This process, the RFE, I mean, request for information, RFI is basically for the C39 from 40 to 80 units. But we have been in contact with India for other opportunities. Maybe Arjan can talk a little bit more about the opportunity we have in India. And yes, we – as we will need a partnership there for the military aircraft, this might be combined with Commercial. So, Arjan, feel free to add some more information here. You are on mute, Arjan.

Yes, that's not very helpful. Thank you, Francisco. Yes, we see – well, like China, we see a great application for the 190 to 195 also in India, the previous E-Jet family struggled to get to the right cost level vis-à-vis the much bigger narrowbodies. We're always talking to the Indian customers. We believe that there is a great market to complement also that in narrowbodies. And if there is a way to combine that with partnership, then it could be a potential combination, but it will be a somewhat longer-term outcome.

Okay. Thank you.

Our next question comes from Josh Milberg from Morgan Stanley. Please Mr. Josh, your microphone is open.

Thank you very much. Good morning, everyone and [Technical Difficulty]. You guys have covered a lot of ground, but I had a few additional follow-ups on the commercial side and the demand outlook there. And one is just, you mentioned the number of campaigns underway, and I wanted to ask if you could give a rough idea of the total number of potential aircraft sales contemplated in those campaigns? And then with respect to China, I wanted to ask you guys if you could comment on how broad that opportunity is in terms of the number of airlines for which the E2 could make sense? And then just finally, on the E1 side, I know you have that pilot issue in the U.S., but in the past, you've talked about the replacement opportunity being some 500 aircraft in the next 10 years as a function of aircraft aging. And I just wanted to see if you're still seeing the market that way.

Thank you, Josh. That's a triple layer question. So, let me start with the E2 campaigns. We're having a big number of discussions, some are more advanced, some are less advanced, but I think if you add it up, you're talking about several triple-digit number of E2. So, there's a good number of opportunities out there that we're talking about at the moment. On China, it's a little bit early. Let's not forget that the [aircraft] [ph] has only certified at the end of next year, and China is just opening up. But as I said, we have a big local team in China that is talking to all the airlines. So, we hopefully can specify that a little bit but I think it's too early today. On the E1s, that opportunity that we're talking about, about 500 aircraft, we still see that ahead of us. Obviously, the airlines will be a little bit reluctant at moments to add aircraft if they can't bring the pilots in, but we believe as soon as they see that going to a better place, then that opportunity will come back. So, we believe the 175-E1 short-term we'll have to wait for the opportunities, but longer-term, we definitely believe there's a lot of regional capacity to be replaced or added.

Okay, appreciate that, great color. Have a nice day everyone.

Thank you, Josh.

This does conclude today's question-and-answer section and the Embraer's audio conference. Thank you very much for your participation, and have a wonderful day.