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Invest better with AI
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👉 More detailed insights
👉 Exclusive perspectives on opportunities & risks
👉 Clear answers to your questions
Invest better with AI
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👉 More detailed insights
👉 Exclusive perspectives on opportunities & risks
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Key metrics
📘 Market Capitalization
📈 What is it?
Market capitalization shows how much a company is currently worth on the stock market.
🧮 How is it calculated?
🏛️ Why is it important?
It helps classify companies by size (Large, Mid, Small Cap) and indicates their market presence and relative stability.
🎯 What does this mean for investors?
- Large-cap companies tend to be more stable, often pay dividends, but may grow more slowly.
- Smaller firms may offer higher growth potential but come with more volatility.
- Market capitalization is a useful indicator of company size — but not a measure of whether a stock is undervalued or overvalued.
📘 Enterprise Value (EV)
📈 What is it?
Enterprise Value represents the total cost to acquire a company — including its debt and excluding its cash reserves.
🧮 How is it calculated?
(= Market Cap + Net Debt)
🏛️ Why is it important?
EV gives a more complete picture of a company's value than market cap alone and is used in key valuation ratios like EV/FCF or EV/Sales.
🎯 What does this mean for investors?
- Enterprise Value shows the true cost of buying a company, including all financial obligations.
- It is more accurate than just looking at market cap, especially when comparing companies with different levels of debt or cash.
- Professional investors prefer EV-based multiples because they better reflect the company’s full financial footprint.
📘 Net Debt
📈 What is it?
Net Debt shows how much debt remains after subtracting a company’s available cash reserves.
🧮 How is it calculated?
🏛️ Why is it important?
It indicates how dependent a company is on borrowed money and how easily it can service its debt in the short term.
🧮 Calculation
🎯 What does this mean for investors?
- Low or negative net debt signals financial strength and flexibility.
- Companies with strong cash positions are better positioned in crises.
- High net debt increases financial risk — especially in environments with rising interest rates or economic downturns.
📘 Cash
📈 What is it?
Cash represents all liquid assets a company can access immediately — including cash, bank deposits, and short-term investments.
🧮 How is it calculated?
🏛️ Why is it important?
It reflects a company’s financial flexibility and resilience — enabling investments, buybacks, or buffer in downturns.
🧮 Calculation
🎯 What does this mean for investors?
- A strong cash position means greater room for maneuver and crisis resistance.
- Cash-rich companies can invest, pay down debt, or repurchase shares.
- But excess idle cash might indicate a lack of growth opportunities.
📘 Shares Outstanding
📈 What is it?
Shares outstanding represent the total number of a company’s shares currently held by investors — excluding treasury stock.
🧮 How is it calculated?
🏛️ Why is it important?
It’s the basis for key metrics like Earnings Per Share (EPS), Market Capitalization, or the Price/Earnings ratio (P/E).
🧮 Calculation
🎯 What does this mean for investors?
- Fewer shares in circulation typically increase earnings per share — making each share more valuable.
- Share buybacks reduce the number of shares and boost per-share metrics.
- Issuing new shares does the opposite — diluting shareholder value and lowering per-share figures.
📘 Price-to-Earnings Ratio (P/E)
📈 What is it?
The P/E ratio shows how many times a company's earnings per share are reflected in its current share price — in other words, how "expensive" the stock appears relative to its profits.
🧮 How is it calculated?
🏛️ Why is it important?
The P/E ratio is one of the most widely used valuation metrics. It helps investors assess whether a stock appears cheap or expensive compared to its earnings power.
🧮 Calculation
📊 P/E (TTM) = Based on earnings from the last 12 months (Trailing Twelve Months):🎯 What does this mean for investors?
- A low P/E may indicate undervaluation — or signal underlying issues.
- A high P/E may reflect strong growth expectations — or an overvalued stock.
📘 Price-to-Sales Ratio (P/S)
📈 What is it?
The P/S ratio shows how much investors are paying for $1 of the company’s revenue – regardless of profitability.
🧮 How is it calculated?
🏛️ Why is it important?
P/S is especially useful for evaluating growth companies or businesses not yet profitable. It reflects how the market values the company’s sales.
🎯 What does this mean for investors?
- A low P/S may indicate undervaluation — or low profitability.
- A high P/S can reflect strong growth expectations — or excessive optimism.
- Especially helpful when evaluating companies where profits are low, volatile, or negative.
📘 Enterprise Value to Sales (EV/Sales)
📈 What is it?
EV/Sales shows how much investors are paying for $1 of revenue — considering not just equity, but also debt and cash. It’s the capital structure–adjusted version of the P/S ratio.
🧮 How is it calculated?
🏛️ Why is it important?
It’s ideal for comparing companies with different levels of debt. It reflects a company's true cost relative to its revenue.
🎯 What does this mean for investors?
- EV/Sales allows for capital structure–neutral company comparisons.
- A lower ratio may indicate undervaluation; a higher one may signal strong growth expectations or overvaluation.
- Especially helpful when evaluating high-growth companies with low or negative earnings.
📘 Enterprise Value to Free Cash Flow (EV/FCF) | ex SBC
📈 What is it?
EV/FCF compares a company’s enterprise value with its free cash flow. The metric therefore shows the multiple of current free cash flow at which a company is valued. EV/FCF ex SBC additionally accounts for stock-based compensation (SBC). While SBC does not represent a direct cash outflow, issuing shares as compensation can dilute existing shareholders. Therefore, SBC is deducted from free cash flow in this adjusted version.
🧮 How is it calculated?
EV/FCF ex SBC = Enterprise Value ÷ (Free Cash Flow (TTM) − SBC)
🏛️ Why is it important?
EV/FCF provides a valuation based on free cash flow and therefore complements earnings-based valuation metrics such as the P/E ratio. The ex SBC version additionally accounts for the economic impact of stock-based compensation and provides a more conservative view from a shareholder perspective.
🎯 What does this mean for investors?
- A low EV/FCF means that enterprise value is low relative to current free cash flow. The reasons should always be considered in the context of the company and its industry.
- A high EV/FCF means that enterprise value is high relative to current free cash flow. This can, for example, reflect high growth expectations or temporarily weak cash generation.
- When SBC is positive and adjusted free cash flow remains positive, EV/FCF ex SBC is generally higher than the standard EV/FCF.
- The metric is particularly useful for companies with relatively stable and predictable cash flows.
- If free cash flow is negative or very low, EV/FCF has limited usefulness and should not be interpreted like a standard valuation multiple.
📘 Price-to-Book Ratio (P/B)
📈 What is it?
The P/B ratio compares a company’s market value to its book value — showing how much investors are paying for each dollar of net assets.
🧮 How is it calculated?
🏛️ Why is it important?
P/B is commonly used for asset-heavy industries like banks or industrials. It helps assess whether a stock is trading above or below its net asset value.
🎯 What does this mean for investors?
- A P/B below 1 may signal undervaluation — or weak profitability.
- A P/B above 1 implies the market expects future value creation (e.g., brand, IP, growth).
- Best used for companies with tangible assets and strong balance sheets.
📘 Dividend per Share (DPS)
📈 What is it?
Dividend per Share shows how much cash a company pays out to shareholders for each share they own – usually on an annual or quarterly basis.
🧮 How is it calculated?
🏛️ Why is it important?
DPS is the absolute value of the payout per share – crucial for income-focused investors and dividend strategies.
🧮 Calculation
🎯 What does this mean for investors?
- A stable or growing DPS often signals a strong, shareholder-friendly business.
- DPS alone doesn’t tell you how attractive the payout is – the stock price also matters (→ see Dividend Yield).
- Long-term dividend growth is often a hallmark of high-quality companies – like the dividend aristocrats.
📘 Dividend Yield
📈 What is it?
Dividend yield shows how large a company’s dividend is in relation to its current share price.
🧮 How is it calculated?
🏛️ Why is it important?
It allows investors to compare dividend payouts across stocks, regardless of price or payout size.
🧮 Calculation
🎯 What does this mean for investors?
- A stable yield can reflect reliable distributions.
- Comparing 1Y and 5Y yield shows whether dividend growth keeps pace with stock price appreciation.
- A low yield isn’t always negative – it can signal strong past performance or growth focus.
📘 Dividend Growth
📈 What is it?
Dividend growth shows how much a company has increased its dividend per share over time.
🧮 How is it calculated?
5Y: Compound Annual Growth Rate (CAGR)
🏛️ Why is it important?
Consistently rising dividends are often a sign of financial strength and shareholder orientation – especially relevant for long-term investors.
🎯 What does this mean for investors?
- Stable dividend growth is a sign of sustainable earning power.
- High dividend growth can significantly boost your total return:
- If a company pays $1 in dividends and increases it by 15% annually over 5 years, you’ll receive $2 per share in year 5 – twice as much as at the start!
📘 Payout Ratio
📈 What is it?
The payout ratio shows what percentage of a company’s earnings (per share) is distributed to shareholders as dividends.
🧮 How is it calculated?
🏛️ Why is it important?
It helps assess whether the dividend is sustainable – especially in relation to the company’s profitability.
🧮 Calculation
🎯 What does this mean for investors?
- A low payout ratio means the company retains more earnings for reinvestment – typical for growth companies.
- A moderate payout (e.g. 25–50%) indicates a healthy balance between returns and reinvestment.
- High payout ratios may seem attractive but can carry risk if earnings decline.
📘 Consecutive Dividend Increases
📈 What is it?
This metric shows how many consecutive years a company has raised its dividend per share – without any cuts or pauses.
🧮 How is it calculated?
(Special dividends are not considered.)
🏛️ Why is it important?
A long track record of increases reflects financial strength, consistency, and shareholder commitment.
🎯 What does this mean for investors?
- A long dividend increase streak builds confidence – especially in volatile markets.
- Such companies are seen as reliable and income-friendly investments.
- The longer the streak, the stronger the company’s dividend discipline.
📘 Revenue
📈 What is it?
Revenue shows how much a company earns in total from selling its products and services – the gross income before any costs are deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Revenue is one of the key figures to assess a company’s size, market position, and growth potential.
🧮 Calculation
🎯 What does this mean for investors?
- Growing revenue indicates rising demand and can be an early signal of future earnings growth.
- Comparing actual and expected revenue reveals trends in the market environment and analyst sentiment.
- Note: Strong revenue alone isn’t enough – margins and profitability matter just as much.
📘 EBITDA
📈 What is it?
EBITDA stands for “Earnings Before Interest, Taxes, Depreciation, and Amortization.” It reflects a company’s operating profit before the effects of financing, taxes, and accounting depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
EBITDA is widely used to evaluate a company’s operating performance – especially across capital-intensive sectors or international comparisons.
🧮 Calculation
🎯 What does this mean for investors?
- A high or growing EBITDA indicates strong operational profitability – independent of taxes, interest, or accounting methods.
- It’s especially useful for comparing companies across sectors or geographies.
- Important: EBITDA is not a net income figure – it excludes key costs like depreciation and interest.
📘 EBIT
📈 What is it?
EBIT stands for “Earnings Before Interest and Taxes.” It reflects a company’s operating profit after depreciation, but before interest and tax expenses.
🧮 How is it calculated?
🏛️ Why is it important?
EBIT is a core profitability metric that shows how well the company performs in its main business operations – independent of capital structure and tax environment.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBIT indicates strong profitability from the company’s core business – before financial and tax effects.
- It allows better comparison between companies with different debt levels or tax structures.
- Compared to EBITDA, EBIT already accounts for depreciation and reflects capital intensity more clearly.
📘 Net Income
📈 What is it?
Net income is the company’s total profit – the amount left after all expenses, taxes, interest, and depreciation have been deducted.
🧮 How is it calculated?
🏛️ Why is it important?
Net income is the most comprehensive measure of a company’s profitability – showing how much actual profit remains after all business and financing costs.
🧮 Calculation
🎯 What does this mean for investors?
- Growing net income indicates that the company is managing all of its costs efficiently.
- It directly influences valuation metrics like P/E ratio and the company’s dividend capacity.
- Over time, net income trends reveal how resilient and profitable the business model really is.
📘 Free Cash Flow (FCF) | ex SBC
📈 What is it?
Free cash flow shows how much cash remains after a company has covered its operating and capital expenditures. FCF ex SBC additionally deducts stock-based compensation (SBC) to adjust the cash flow for the effect of non-cash SBC.
🧮 How is it calculated?
Free Cash Flow ex SBC = Operating Cash Flow − SBC − Capital Expenditures (CAPEX)
🏛️ Why is it important?
FCF reflects a company’s actual financial strength – independent of reported accounting earnings. It shows how much flexibility a company has for dividends, share buybacks, or debt reduction. FCF ex SBC also deducts stock-based compensation and shows how much cash generation remains after SBC.
🧮 Calculation
🎯 What does this mean for investors?
- High free cash flow indicates that a company has strong financial strength – independent of reported earnings.
- It is often a solid basis for sustainable dividends and share buybacks.
- Declining FCF can be a warning sign, even if reported earnings remain stable.
📘 Revenue Growth
📈 What is it?
Revenue growth shows how much a company’s sales have changed compared to the previous year – both on a trailing basis (TTM) and based on forward projections.
🧮 How is it calculated?
Forward = (Expected revenue ÷ Revenue in prior year − 1) × 100
Forward growth is based on analyst estimates for the current fiscal year.
🏛️ Why is it important?
Rising revenue signals growing demand, business expansion, and market share gains – especially important for growth-oriented companies.
🧮 Calculation
🎯 What does this mean for investors?
- Growth is the engine of long-term value creation – especially in tech and growth sectors.
- What matters is not just current growth, but its sustainability.
- Forward projections reflect whether analysts expect continued momentum – or a slowdown.
📘 EBITDA Growth
📈 What is it?
EBITDA growth shows how much a company’s operating profit (before interest, taxes, depreciation, and amortization) has increased or decreased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBITDA ÷ EBITDA from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
Growing EBITDA indicates improving operational profitability – regardless of financing or accounting effects.
🧮 Calculation
🎯 What does this mean for investors?
- Strong EBITDA growth signals operational efficiency and scalability – especially during growth phases.
- EBITDA growth can be an early indicator of margin and earnings expansion – but should be assessed alongside revenue and EBIT.
📘 EBIT Growth
📈 What is it?
EBIT growth shows how much a company’s operating profit (after depreciation, but before interest and taxes) has increased compared to the previous year.
🧮 How is it calculated?
Forward = (Expected EBIT ÷ EBIT from prior year − 1) × 100
The forward estimate is based on analyst projections for the current fiscal year.
🏛️ Why is it important?
EBIT growth is a direct indicator of a company’s business performance – taking into account capital intensity through depreciation.
🧮 Calculation
🎯 What does this mean for investors?
- Rising EBIT signals improving operating profitability – even after accounting for depreciation.
- It’s especially important for evaluating companies with significant capital expenditures.
- Combined with revenue and EBITDA growth, EBIT growth provides a well-rounded view of operational progress.
📘 Net Income Growth
📈 What is it?
Net income growth shows how much a company’s bottom-line profit has increased or decreased compared to the previous year – both on a trailing basis (TTM) and based on analyst projections.
🧮 How is it calculated?
Forward = (Expected net income ÷ Net income from prior year − 1) × 100
The forward estimate reflects analysts’ expectations for the current fiscal year.
🏛️ Why is it important?
Net income is the ultimate measure of profitability. Growing net income signals stronger efficiency, cost control, and sustainable earnings power.
🧮 Calculation
🎯 What does this mean for investors?
- Stronger net income boosts valuation, dividend potential, and investor confidence.
- If profits stall while revenue grows, it may signal margin pressure.
📘 Free Cash Flow Growth
📈 What is it?
Free cash flow (FCF) growth shows how a company’s available cash – after covering operating expenses and capital expenditures – has changed compared to the previous year.
🧮 How is it calculated?
🏛️ Why is it important?
Free cash flow reflects real financial strength. Growing FCF indicates more flexibility for dividends, share buybacks, and reinvestment.
🧮 Calculation
🎯 What does this mean for investors?
- Declining FCF may point to rising investments, increasing costs, or weaker operating performance.
- Especially for dividend investors, FCF growth is critical – since dividends are paid from actual available cash.
- A negative trend isn't always bad, but it deserves closer attention.
📘 Gross Margin
📈 What is it?
Gross margin shows how much of a company’s revenue remains after deducting the direct costs of goods sold (like materials and production). It represents the company’s “raw profit” before fixed costs, taxes, and interest.
🧮 How is it calculated?
Or simply: Gross Margin = Gross Profit ÷ Revenue × 100
🏛️ Why is it important?
Gross margin indicates how efficiently a company can produce or procure what it sells. It is a key measure of product-level profitability and pricing power.
🧮 Calculation
🎯 What does this mean for investors?
- A high gross margin suggests strong pricing power and efficient production.
- Falling margins may signal rising input costs or competitive pressure.
- Compared to peers, gross margin offers insights into the quality of a business model.
📘 EBITDA Margin
📈 What is it?
The EBITDA margin shows how much of a company’s revenue remains as operating profit before interest, taxes, depreciation, and amortization.It reflects operating efficiency without being distorted by financing or accounting factors.
🧮 How is it calculated?
🏛️ Why is it important?
The EBITDA margin reveals how much operating income a company generates per dollar of revenue – independent of capital structure and tax effects.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBITDA margin reflects strong core profitability – before accounting distortions.
- It allows for effective comparisons across companies and sectors.
- A stable or growing margin signals efficient cost control and business scalability.
📘 EBIT Margin
📈 What is it?
The EBIT margin shows what percentage of revenue remains as operating profit after depreciation but before interest and taxes.
🧮 How is it calculated?
🏛️ Why is it important?
The EBIT margin reflects a company’s core profitability while accounting for capital intensity (e.g. machinery, infrastructure). It’s especially useful for comparing businesses with different levels of depreciation.
🧮 Calculation
🎯 What does this mean for investors?
- A high EBIT margin shows that the company remains efficient even after factoring in depreciation.
- It’s especially relevant for capital-intensive industries.
- Stable or rising EBIT margins over time are a strong indicator of pricing power and business quality.
📘 Net Margin
📈 What is it?
Net margin shows how much of a company’s revenue remains as bottom-line profit after deducting all costs, interest, taxes, and depreciation.
🧮 How is it calculated?
🏛️ Why is it important?
Net margin reflects a company’s overall efficiency – across operations, financing, and taxation. It shows how much actual profit is generated from each dollar of revenue.
🧮 Calculation
🎯 What does this mean for investors?
- A high net margin means the company is not only strong operationally but also manages financing and taxes efficiently.
- Peer comparisons reveal business quality and competitiveness.
- Declining margins despite revenue growth can be a red flag for rising costs or inefficiencies.
📘 Free Cash Flow Margin | ex SBC
📈 What is it?
The Free Cash Flow Margin shows how much free cash flow a company generates relative to its revenue. In simplified terms, free cash flow is calculated as operating cash flow minus capital expenditures. The Free Cash Flow Margin ex SBC additionally accounts for stock-based compensation (SBC). While SBC does not represent a direct cash outflow, issuing shares as compensation can dilute existing shareholders. Therefore, SBC is deducted from free cash flow in this adjusted metric.
🧮 How is it calculated?
Free Cash Flow Margin ex SBC = (Free Cash Flow − SBC) ÷ Revenue × 100
🏛️ Why is it important?
The Free Cash Flow Margin shows how efficiently a company converts its revenue into free cash flow. Strong free cash flow can provide financial flexibility for dividends, share buybacks, debt repayment, or further investments. The ex SBC version additionally accounts for the economic impact of stock-based compensation and therefore provides a more conservative view of cash generation from a shareholder perspective.
🧮 Calculation
🎯 What does this mean for investors?
- A high Free Cash Flow Margin shows that a company converts a high proportion of its revenue into free cash flow.
- This can provide greater financial flexibility for dividends, share buybacks, debt repayment, or investments.
- The Free Cash Flow Margin ex SBC additionally accounts for potential shareholder dilution from stock-based compensation.
- The long-term trend is particularly important. Declining margins can, for example, result from higher investments, changes in working capital, or weaker operating performance.
📘 Equity Ratio
📈 What is it?
The equity ratio indicates what portion of a company’s total assets is financed by shareholders’ equity – in other words, how much it relies on its own capital.
🧮 How is it calculated?
🏛️ Why is it important?
A high equity ratio reflects financial strength and stability, especially during downturns. It’s a key indicator of a company’s solvency and long-term risk profile.
🧮 Calculation
🎯 What does this mean for investors?
- Companies with high equity ratios are generally more resilient and less dependent on external debt.
- Low equity ratios can signal higher risk or aggressive financial strategies.
- Important: Always assess the equity ratio in combination with the return on equity (ROE). This shows not just how stable the company is – but also how efficiently it uses shareholder capital.
📘 Return on Equity (ROE)
📈 What is it?
Return on equity (ROE) shows how efficiently a company uses its shareholders’ equity to generate profit. In other words: how much net income is earned per dollar of equity.
🧮 How is it calculated?
🏛️ Why is it important?
ROE is a core profitability metric. It helps investors understand whether a company delivers attractive returns on the capital provided by its shareholders.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROE indicates that the company is using its capital efficiently and profitably.
- It’s especially meaningful for capital-intensive businesses or firms with high equity bases.
- Important: A very high ROE can also result from high debt levels – always interpret it alongside the equity ratio to assess financial health.
📘 Return on Capital Employed (ROCE)
📈 What is it?
ROCE measures how efficiently a company generates profits from its total capital – including both equity and interest-bearing debt.
🧮 How is it calculated?
It evaluates the return on all capital employed, regardless of how it’s financed.
🏛️ Why is it important?
ROCE is ideal for comparing companies with different financing structures. It shows how well management uses capital to create value for both shareholders and creditors.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROCE means the company uses its capital efficiently – regardless of whether it's funded by debt or equity.
- The higher the ROCE compared to peers, the more value the company creates with its invested capital.
- Especially relevant for capital-intensive sectors like industrials, energy, or infrastructure.
📘 Return on Invested Capital (ROIC)
📈 What is it?
ROIC measures how efficiently a company generates returns from the capital invested in its core operations – regardless of whether the capital comes from equity or debt.
🧮 How is it calculated?
- NOPAT = Net Operating Profit After Taxes
- Invested Capital = Operating assets minus non-interest-bearing liabilities
🏛️ Why is it important?
ROIC is one of the most accurate indicators of capital efficiency. Unlike return on equity, it is not distorted by leverage and shows how much value is created for all capital providers.
🧮 Calculation
🎯 What does this mean for investors?
- A high ROIC shows how effectively a company uses the capital that is truly invested in its core operations.
- Unlike ROCE, ROIC focuses only on the capital that is actively used to run the business – and that requires a return (i.e. interest-bearing).
- Especially useful when comparing companies with large amounts of excess cash or non-interest-bearing liabilities – giving a more realistic picture of capital efficiency.
📘 Leverage Ratio (Debt-to-Equity)
📈 What is it?
The leverage ratio indicates how much a company relies on interest-bearing debt (such as loans and bonds) relative to its shareholders’ equity.
🧮 How is it calculated?
🏛️ Why is it important?
This ratio helps assess a company’s financial structure and risk profile. High leverage can enhance returns – but also increases exposure to interest rate changes and financial stress.
🎯 What does this mean for investors?
- A low leverage ratio signals financial strength and independence.
- A higher ratio can improve returns in good times but increases risk during downturns or rising interest rate periods.
- 👉 Always interpret in the context of industry, capital intensity, and interest rate environment.
📘 SBC | in % Revenue
📈 What is it?
SBC (Stock-Based Compensation) refers to equity-based compensation granted by a company to its employees and executives. The percentage shows SBC relative to revenue.
🧮 How is it calculated?
SBC as % of Revenue = (SBC ÷ Revenue) × 100
🏛️ Why is it important?
Stock-based compensation is a real cost factor for shareholders. It can increase the number of shares outstanding and therefore dilute existing shareholders. The percentage of revenue shows how heavily a company relies on equity-based compensation and how significant this form of compensation is relative to the size of the business.
🧮 Calculation
🎯 What does this mean for investors?
- A lower figure is generally positive: Stock-based compensation is relatively small compared with the company's revenue.
- A high figure can indicate greater reliance on stock-based compensation and a higher potential risk of dilution. However, it is also important to consider whether the company offsets dilution through share buybacks.
- The trend over time should also be considered. A high but declining percentage presents a different picture from a persistently high or increasing percentage.
- A single-digit SBC-to-revenue ratio is not unusual among many growth-oriented and technology companies.
📘 SBC as % of FCF
📈 What is it?
SBC (Stock-Based Compensation) refers to equity-based compensation granted by a company to its employees and executives. The percentage shows SBC relative to free cash flow (FCF).
🧮 How is it calculated?
SBC as % of FCF = (SBC ÷ Free Cash Flow) × 100
🏛️ Why is it important?
Stock-based compensation is a real cost factor for shareholders. It can increase the number of shares outstanding and therefore dilute existing shareholders. The percentage of free cash flow shows how significant SBC is relative to the cash generated by the company. Since SBC is non-cash compensation, it is typically not deducted as a cash outflow when calculating FCF.
🧮 Calculation
🎯 What does this mean for investors?
- A lower value is generally favorable. Stock-based compensation is relatively small compared with the company's cash generation.
- A high value means that SBC represents a significant portion of the company's reported free cash flow, even though SBC itself is non-cash.
- The higher the value, the more significant SBC can be as an economic cost to shareholders, particularly when it results in share dilution.
📘 SBC Growth 1Y
📈 What is it?
SBC Growth 1Y shows how much a company's stock-based compensation has changed compared to the previous year.
🧮 How is it calculated?
🏛️ Why is it important?
SBC Growth shows whether stock-based compensation is becoming more or less significant for shareholders. If SBC increases significantly, it can lead to greater shareholder dilution over time. At the same time, SBC is a non-cash expense that reduces earnings on the income statement but is added back in the cash flow statement.
🎯 What does this mean for investors?
- A high positive value is generally negative, as rising SBC can increase the burden on shareholders, particularly through potential dilution.
- What matters is whether the development of SBC is sustainable over the long term. Some level of SBC is common among many growth and technology companies.
📘 Share Count Growth 1Y
📈 What is it?
Share Count Growth 1Y shows how much the number of shares outstanding has increased or decreased over a one-year period.
🧮 How is it calculated?
🏛️ Why is it important?
The number of shares determines how many shares the company's earnings and assets are distributed across. If the share count decreases, existing shareholders' relative ownership increases. If it increases, existing shareholders are diluted. The metric therefore makes dilution and share buybacks directly visible.
🧮 Calculation
🎯 What does this mean for investors?
- A negative value is generally positive, as the number of shares outstanding is decreasing.
- A positive value indicates dilution of existing shareholders.
- A declining share count is not automatically positive: It also matters at what price the shares are repurchased and how the buybacks are financed.
📘 Shareholder Yield
📈 What is it?
Shareholder Yield measures how much capital a company returns to shareholders or uses to reduce debt relative to its market capitalization. It goes beyond dividend yield by also including share buybacks and debt reduction.
🧮 How is it calculated?
🏛️ Why is it important?
Dividend yield only tells part of the story. Companies can also return capital through share buybacks, while reducing debt can strengthen the balance sheet. Shareholder Yield combines all three components into one metric, giving investors a broader view of how a company uses its capital.
🧮 Calculation
🎯 What does this mean for investors?
- A higher Shareholder Yield generally indicates more capital being returned to shareholders or used to reduce debt.
- The mix matters: dividends, buybacks, and debt reduction can affect shareholders in different ways.
- Share buybacks are most beneficial when shares are repurchased at attractive valuations.
- Investors should also consider whether dividends, buybacks, and debt reduction are sustainable over time.
📘 Earnings per share (EPS)
📈 What is it?
Earnings per Share (EPS) shows how much profit is attributable to a single share – and is one of the most important metrics for evaluating a company's performance.
🧮 How is it calculated?
The diluted share count reflects potential new shares that could be issued through options, convertible bonds, or other rights.
🏛️ Why is it important?
EPS is the basis for many key valuation metrics like P/E ratio, PEG ratio, or payout ratio. It enables comparisons of profitability across companies, regardless of their size.
🧮 Calculation
🎯 What does this mean for investors?
- EPS captures per-share profitability and is especially useful for comparisons over time or with analyst estimates.
- Rising EPS may signal consistent growth or share buybacks.
- Important: Always use diluted EPS for more realistic valuations – especially in companies with stock-based compensation.
📘 Free cash flow per share (FCF per share)
📈 What is it?
Free Cash Flow per Share shows how much free cash flow a company generates per outstanding share – after investments, but before dividends or debt repayments.
🧮 How is it calculated?
Free cash flow is calculated as operating cash flow minus capital expenditures (CapEx).
🏛️ Why is it important?
FCF per Share reveals how much real cash is available per share – useful for dividends, buybacks, or reducing debt. Unlike net income, free cash flow is harder to manipulate and often seen as a more reliable metric.
🧮 Calculation
🎯 What does this mean for investors?
- High FCF per share signals strong financial flexibility.
- It shows how much capital the company can effectively reinvest or return to shareholders.
- Particularly relevant for dividend payers and capital-efficient businesses.
📘 Short interest
📈 What is it?
Short interest indicates how many shares of a company are currently sold short – that is, borrowed and sold by investors who expect the price to decline.
🧮 How is it calculated?
It reflects the percentage of a company’s shares that are being shorted relative to the total shares available.
🏛️ Why is it important?
Short interest serves as a sentiment indicator: A high value may signal skepticism or bearish expectations – but also increases the potential for a short squeeze if prices rise unexpectedly.
🧮 Calculation
🎯 What does this mean for investors?
- Low short interest usually indicates market confidence in the company.
- High short interest can be a warning sign – or an opportunity if sentiment shifts.
- Especially relevant in volatile markets or ahead of key earnings releases.
📘 Employees
📈 What is it?
The employee count shows how many people a company employs worldwide – offering insights into its size, structure, and business model.
🧮 How is it calculated?
🏛️ Why is it important?
It helps assess operational scale, labor intensity, and cost structure. Combined with revenue and profit, it enables key metrics like revenue per employee or productivity.
🧮 Calculation
🎯 What does this mean for investors?
- A high headcount can signal operational complexity – but also significant growth capacity.
- Revenue per employee is a key indicator of efficiency.
- Especially useful for comparing tech, industrial, or service-heavy companies.
📘 Revenue per employee
📈 What is it?
Revenue per employee indicates how much revenue a company generates on average per employee – a key measure of efficiency and productivity.
🧮 How is it calculated?
The employee count is typically taken from the most recent annual report.
🏛️ Why is it important?
This metric helps compare business models – especially between labor-intensive and technology-driven companies. A high value suggests automation, operational efficiency, or strong value creation per head.
🧮 Calculation
🎯 What does this mean for investors?
- A high revenue per employee indicates a scalable and margin-strong business model.
- A low figure may reflect labor-intensive operations or lower value-add.
- Especially helpful when comparing tech companies to industrial or service sectors.
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1. Management Discussion
Good afternoon, everyone. My name is Emilia Rannanniemi. I'm from Finnair Investor Relations, and I want to welcome you all to this fleet renewal update by Finnair fleet renewal update. I'm joined here today by CEO, Turkka Kuusisto; and CFO, Pia Aaltonen-Forsell.
And they will first start by giving a presentation on the news that were announced today. After that, we will have a Q&A session where also Chief Revenue Officer, Christine Rovelli, will be present. You can ask questions by either dialing into the conference call or via the chat function in the webinar platform. With these words, I hand over you to you, Turkka.
Thank you, Emilia, and very -- good afternoon, and thank you for joining us with such a short notice. But for us at Finnair, this is a very exciting day. We are finally in the position of sharing the news about our partial narrow-body renewable program. It has been a project that we've run over the past 18 months. And today, I'm actually super happy when it comes to the outcome of this very diligent, very thorough process that we have run over the past months. And I also pretty much also very proud of the team because it hasn't been easy to run such a project, given that it still the very persistent supply chain issues that our industry have faced.
But today, we have announced that we have signed a purchase agreement with Embraer on 18 firm orders for E195 E2 Aircraft with additional 16 options and well purchase rights. And this forms the renewal of our regional fleet when it comes to our future development. Parallel, we have today also communicated our intention to acquire up to 12 Airbus 320, 321 CEOs from the used aircraft market to replace our retiring 390s and 320 aircraft at the mainline side. And these actions is a perfect optimal combination in my opinion, when it comes to support the strategy and execute on it based on the financial ambition level and the strategic priorities that we communicated with the external stakeholders in connection with the capital markets update, November 2025.
So as said, this is an optimal solution to balance the growth and profitability, and we will allocate these E2 aircraft to our Nora platform, and we will then replace the least capacity and older aircraft once we start to get these new aircraft in during the second half of 2027. When it comes to options and purchase rights, the potential use will be then decided at a later stage. And as already mentioned, the incoming secondhand 320s and 321 CEOs will be replacing the retiring 390s and 320s of the Finnair fleet. And this particular aircraft type have been the ones whose average lifetime is already beyond 23 years.
So therefore, this replacement by secondhand CEOs will provide us with a perfect bridge solution when it comes to the capacity replacement and CapEx capacity increase during this decade. And then going back to the capital markets update that we held mid-November last year, this was the one pager when it comes to our strategy for customers in the spotlight and then the flywheel around it. And this investment scheme is a pivotal element when it comes to the convenience sector and then providing our customers a network that they really appreciate and want to fly.
And then speaking of the investment. In the current world order, we have emphasized the role and importance of the regional network. And this investment genuinely fuels a stronger regional network to all of our customers but more specifically for the core customers. And at the same time, it enables us to execute on the increased profitability target level and also secure the competitiveness of thinner network and flights and also the cost competitiveness that is actually extremely important perspective when it comes to taking this company to the next chapter.
At the same time, the E2 will also enable upgraded customer experience when it comes to the Embraer fleet that is operated by Nora. And then finally, the next-generation aircraft and mainly the engines are also supporting very positively when it comes to meeting our climate targets. And there, it is extremely beautiful aircraft with Finnair livery.
So, these beauties will start to arrive at Helsinki housing base during the second half of 2027. A few additional remarks related to the network communicated in the capital markets update, we intend to capture our share of the market growth, 4% CAGR during this decade. And again, these investments enable us to do. So we continue to further develop the regional network to serve our core customers and open new destinations only for 2026, we have introduced 14 new destinations, both in Europe and also in some long-haul destinations.
With such an aircraft type and combination, we are also in a very good position when it comes to agility. Additional frequencies to our current destinations to really benefit from the passenger flows and the increasing demand. And that is hugely important from the network carrier strategy point of view because with this more wide and more frequent regional operation, we can then more beneficially fill our widebody aircraft towards Asia and also North America. And then, of course, allocating the right size aircraft to each route is in the very heart of profitable airline business and operations.
And on the right-hand side, you can see an illustrative slide chart which is extremely important to highlight that the E2 aircraft or generation is much more capable from the range point of view. Up to 2,600 nautical miles, which translates into close to 5,000 kilometers. So E2 can actually serve the Iberian Peninsula from Helsinki. So therefore, we are also capable of covering Spain, Italy and Northern Mediterranean with the selected aircraft type. And then speaking of the aircraft, E2, we've selected a 134-seat seater in 2-plus-2 configuration. The seat will be between 29 to 30 inches, which is pretty much equivalent that we have currently in our narrow-body fleet. All seats will have a reclining -- recline functionality for additional comfort and all the seats will be equipped with high power USB charging in each seat.
And then finally, all new aircraft will also provide the customers with high-speed Internet connectivity. We have decided to install the third lavatory for minimal queuing time on board, again, putting customers preferences and customer experience on the spotlight of the development. And then, of course, the cabin design will reflect our brand and the business of Finnishness as we have started to cascade in our brand management and thinking.
And then finally, when it comes to fuel efficiency and also CO2 reduction, which is, of course, a very important topic also in our industry. The E2s are powered by Pratt & Whitney BW1900G engines that provides us with over 30% reduction in CO2 emissions per seat versus the current generation E190E1s. And then in addition to CO2 reduction, this is one of the most quiet planes when it comes to our single-aisle aircraft globally. And that is, of course, both from the customer experience point of view, but also from the kind of a sound pollution point of view, something that we really appreciate.
Our agreement with Pratt & Whitney includes also some spare engines as well as maintenance agreement and then we will receive the latest hardware available for this engine type. Maybe I would finish my presentation on my section by recapping the financial targets that we launched in connection with the capital markets update, November 2025 capturing the market growth with the same pace with the market growth, plus 4% CAGR and then comparable EBIT range from 6% to 8% and then the investment range that we communicated from EUR 2 billion to EUR 2.5 billion, but Pia will actually comment this KPI when she will start her section.
But given all this, and given what I just mentioned when it comes to this investment scheme that is supporting extremely well what we are also kind of aiming achieving from the financial targets and performance point of view.
But maybe with this first, I would leave it for Pia to discuss a bit of the details.
Thank you, Turkka. And dear, ladies and gentlemen, my name is Pia Aaltonen-Forsell. I'm CFO at Finnair since August of last year. So obviously, the work to conclude this big project has started long before I was here, but I have certainly seen what an important part of our strategic journey this is. And thank you, Turkka, for also putting this in the perspective of our strategy and the CMD and what we have presented in November of last year.
So I would like to focus briefly on three things: The first one is putting this news into the perspective of our current fleet; the second one is discussing our readiness from a balance sheet perspective, from a funding perspective; and thirdly, just a brief recap on the time schedule, especially on the Embraer deliveries and then some comments on the cash flows there.
So with that in mind, I'll start first with recap. This data was also referred to in our CMD. And what I'm discussing here is our current fleet. So obviously, I kind of start at the bottom of the page right now because I do want to point out first that this agreement on the Embraer on the E2 certainly gives us that opportunity to grow our regional network in a very profitable way. So you can see here the current fleet of the 12 Embraers. Now we are also growing that on the Nora platform up to 18. So this is sort of a good and sound and very balanced way for us to add also to that feeder traffic to our long haul.
So obviously, sort of a good first checkpoint. Then in conjunction with the narrow-body renewal, we have discussed the detail that you can see here in that section for the narrow-body, which says that especially when it comes to the Airbus 319 and 320 of our current fleet, we do have the aging fleet as an issue that we need to address. And with the announcement that we did today about acquiring or starting to negotiate about acquiring up to 12 used Airbus 320 or 321 conventional engine options. This certainly for us, is a very cost-efficient way of replacing that aging part of the fleet.
And I also, of course, want to give some credit to the fact that our fleet team is working so diligently. I mean the market situation is very dynamic and where we see it today, we see that we are in a position to start such negotiations. Then finally, on the widebody. Obviously, this is the crown jewel also of our fleet today. We still have one Airbus 350 that is coming in from that campaign that was started more than a decade ago. So I think we are sort of well set up there.
There's one more detail. You may recall also from our announcements in the autumn that we talked about midterm capacity, and we may still consider adding some used aircraft such as E1s or ATRs to our fleet here, especially here on the regional side because we do need to bridge these different steps. So that's still on our agenda, just as announced before.
And I think this sort of complete picture here shows our also agility and flexibility and ability to react to different market situations and choose what is optimal for Finnair and our strategy. So then the question is kind of how have we prepared for this from the funding and the balance sheet perspective. So let me first start by just showing sort of the longer-term development of our leverage. you can see that we have reached again after, of course, the double crisis and many, many actions that were taken in conjunction with that. Where we stand today is, sort of, again on firm ground we have been able to get our leverage at the year-end. It was 1.8x. It means we are already within the boundaries of our financial targets.
We have a good credit rating BB+ with a stable outlook. And obviously, as well, we have restored an ability for shareholder distributions as also announced in our Q4 results. So I think sort of here, here we have set the basis. We have the CLAs in place as we speak. So the starting point is good. On the next page here, I would particularly focus on the cash flow development that you can see on the graph on the right-hand side. And I think that ability to generate on a normalized basis, a cash flow at operating cash flow of around or above EUR 500 million per year. That's obviously a cornerstone as well in how we think about the funding of these fleet investments.
And you can see that even in a year such as 2025, which started off on a more difficult foot where we also had some conflicts and in the end, had a very strong end to the year, but a difficult beginning of the year. There, you can also see that our cash flow remained above EUR 400 million mark. So I think, let's say, holistically, this track record and history shows that our ability to generate the cash for funding this is already on a strong footing. I want to briefly comment also on the recent situation with the war in Iran and obviously, the extremely turbulent situation also when it comes to our main cost item, jet fuel, and this is a very serious situation that sort of impacts everyone in the world as we stand and, of course, as well Aviation.
From a short-term perspective, I think we have shared in the public as well that our hedging situation according to our policy, I would say, this is giving us some protection in the short term. And obviously, for the longer term, we have a number of responses in place. Maybe happy to discuss them at a later point in more detail. But I think nonetheless, we are now talking about sort of setting here some important cornerstones for Finnair's long-term development.
And with the current cash flow with the current balance sheet, and with as well, I would say, a broad range of tools available for us in terms of funding, we feel confident to make this decision. Maybe a final point on funding is that when we are looking at the current debt instruments that we have out there, we have the bond of EUR 500 million maturing in 2029, the one of EUR 300 million in 2030. So I mean, I think we have made sort of good preparations and have a good readiness for this decision.
So then on to my final point. it's actually a very easy timing sort of time line here, Turkka has already discussed. The key topic, which is that Q3, Q4 '27, we will get the first three deliveries here, which we are, of course, eagerly waiting for right now. But I wanted to give a few sort of initial points on the timing of the cash flows. So first of all, now as we have reached this point of agreement, there are some initial cash outs that we would expect during this year. And I think when we have earlier announced that our CapEx of this year would maybe be around, let's call it, EUR 450 million, then maybe about 10% of that we will now allocate into the prepayments or sort of signing related and other payments that would occur during this year.
Then we will, of course, have outgoing cash flows on a rolling basis as we get the aircraft into our fleet. So you can see that this, of course, campaign in its entirety would extend well beyond our current strategy period until 2029. But if we look at sort of what we could expect in terms of what we now have in firm orders and then some fees relating to options and purchase rights and other topics. I would say probably we would use more than 50% of this full amount that has now been committed by the end of 2029. But we can come back with some more exact data once we have still sort of also confirmed the other parts that we have announced today.
So from where I stand today and from what we know today, I think that within this CapEx guidance that we gave for the full strategy period. So until end of 2029, we said that it would be between EUR 2 billion and EUR 2.5 billion. I think now we are sort of going towards the lower end of that. And once we have also then concluded on acquiring these used aircraft, then we are in a position to give an even more sort of firm figure because this, what we have announced today is also what is sort of concluding those major points, those major steps that we need to take within this strategy period to sort of fulfill the needs that we have within these years.
But with that said, I would complete my presentation. And Emilia, I would hand back to you.
Thank you, Turkka. Thank you, Peer. I'm sure the audience has some questions. Now is a good time to ask. You can either do so by following the instructions or using the chat function. And welcome Christine on stage as well.
[Operator Instructions]. The next question comes from Joonas Ilvonen from Evli.
2. Question Answer
Hi, Joonas Ilvonen from Evli. So your current naval fleet consists of 53 planes for a total of about 7,400 seats. And now if you were to exercise this investment program in full, you would acquire 58 planes for a total of about 8 -- more than 8,000 seats. So this is not just a renewable investment, it is a growth in investment also to some extent. And so I was wondering about some of your current Airbus A321 because it seems that some of those are not that old as the average is only about 11.5 years. So any comments on those? Are you going to replace them as well or...
Sure. Joonas, I'll take that one. Well, it's important to look at the order as we've structured it. So we have the firm order and then we have the options and the purchase rights. It sounds like you have included both the options on the purchase rights in your seat count totally, and there's a reason why those aren't firm orders because we haven't made a decision yet. As you know, the market is quite volatile these days. So we want to make sure that we have the ability, if we need to, to expand a bit if the market allows, but we also want to make sure that we have the retirements of the A320 fleet covered in the A319 fleet, which is what Turkka alluded to before. So the A321 fleet is not a fleet that we're looking at the moment with this process. Because as you point out, they are not ready for that yet.
Okay. So initially, it's just a renewal investment. And then maybe at some point, it might go out to be a growth investment in the coming years, maybe?
We're keeping that option open, yes.
Okay. That's clear. Then about the price of these new Embraers. I think as you mentioned that you said that the list price for this roughly like $90 million. Any comments on discounts? Like I think I saw somewhere that it's like up to 50% -- you can get up to 50% discount on these listing prices? Any comments on that?
Yes. So I can't comment on the exact price that we've paid for obvious reasons. I would say that there's a reason that the discount levels out there in the market are floating out there. So if you need something for your model, that's probably not a bad place to start, but I cannot comment on the price that we've paid.
Okay. What about this Airbus A320, 321 CEOs, you planned by use. I mean what kind of a -- any comments on that used price like $25 million per piece? Would you looking at something like that?
Yes, that's super -- the market is very varied right now. It depends on the carrier. Those aircraft are coming out of. So there are some vintage aircraft that we're looking at that might hit somewhere in there, but then there are also new aircraft coming out of a flight carrier, for example, that might be more expensive. We really don't know until we issue the RFP and get the bids back. So again, it will really depend on what we see when we get the RFP back.
My final question. Any comments on this. I think you earlier said that you plan to own most of these new claims, but you might also leave some of them well. So any comments on that at that you might be looking at?
Well, that's partially my question, partially Pia's question. So I will say that we will source the aircraft, and then I will let Pia answer the other comment.
Yes. Thank you, Christine. I mean, Joonas, if we look at our structure today, obviously, sort of from a value perspective, I think we are already a bit more than half, sort of, kind of, firmly in our own balance sheet. But I think sort of from where we stand today, it's still -- we will still face this question multiple times once we actually get the deliveries into our fleet. And I think at that point, we will always then take an informed decision, balancing kind of the availability of the funding, the price of the funding and all of that because we have those tools. But if you would ask for a preference, then I think we see value in also having fleet in our own balance sheet, and that gives some sort of -- some more flexibility but we would certainly not take that decision too early. We would take it at that point and with sort of all the right information being available then.
The next question comes from Victoria Moores from Air Transport World, ATW. Please go ahead.
Good afternoon, and thank you for -- congratulations on finalizing the order. My questions are uust two. One is you mentioned that this was the perfect bridge solution. And I'm wondering, I think that, that was in relation to the A320 CEO. So could you explain kind of what the further plans are beyond the bridge as it were?
And then my second question, you mentioned that there's potential to take some interim aircraft, so E1s and ATRs before the new aircraft start delivering. Can you provide any color or detail on that, please?
Sure. So I'll start with your last question. First, we have already issued an RFP in the market for the E1s and the ATRs. So we are actively sourcing those now. That's with a view to getting some of them in the fleet as early as 2026. As Turkka mentioned, we will not be taking the aircraft from the Embraer order until the third quarter of 2027. So that -- the ATRs and the Embraers are the reason why we're looking to source those a little bit earlier. With respect to the bridging solution, you probably know, if you follow the industry that both of the OEMs right now don't have delivery positions for the larger narrow-bodies, the MAXs and the Airbus Neos until probably 2022 -- or 2032 or 2033. That doesn't coincide very well with the retirement age of our current narrowbody fleet, which starts in 2027.
We have done on ESG kit already on the A320 fleet. So we would like to be able to retire those aircraft when the ESG kit is finished, which is going to get, as I said, 2027, 2028, and that leaves us a gap. So that's the bridge that we are looking to create with the CEOs that we've announced today.
Okay. And may I just come in with a clarification on both those points. So one clarification was how many aircraft is the RFP for on the E1s and the ATRs. And then the second part is or the RFP on the A320, A321 CEOs, when are you anticipating that, that will be issued.
Well, again, taking the second question first. It will be imminently. We're in the process of preparing that now. So I can't say -- give you an exact date, but it will be quite soon. And for the second question, at the moment, we are out in the market looking for, I think it's 4 ATRs or 6 ATRs and Embraers.
The next question comes from Kaisa Vanha-Perttula from Inderes.
Good afternoon as well. This is Kaisa Vanha-Perttula from Inderes. So I have a few questions. So firstly, regarding on the E2 fleet. So when these aircraft come into service, is the primary objective to grow passenger volumes or to optimize the existing network? And also, how should we think about this in relation to the phaseout of the current A319 and A320 fleet?
I'll take that one. So I'll just start by giving a bit of background. We have the fleet currently in terms of number engaged that we had when the Russian air space was open. That network obviously has changed quite a bit. We've repositioned it and rebalanced it somewhat. So the gauges in the numbers of aircraft that we need are different. So it's not as simple as doing a one-for-one replacement of four, for example, in A319 or growing the regional fleet.
What we've looked to do is reorient the network. In terms of the home market, the Nordic market that we are serving, which by definition, has smaller destinations that are better suited to a smaller gauge of aircraft.
All right. And then as a follow-up then, on which routes or markets do you expect like this E2 to deliver the most meaningful improvement in profitability compared to the current fleet?
Well, that's not something I can disclose at the moment, but I think Turkka showed you a representative math of where we would look to deploy those aircraft.
Okay. And maybe lastly regarding on the potential acquisition of the used A320 and 321 CEO aircraft. So I mean, you already commented a little bit, I'm just asking a little bit color on how good visibility do you currently have on their availability? And can you comment any way that what kind of age profile are you targeting?
Sure. Well, our team looks after the used market for aircraft fairly consistently. So we've been tracking the market for quite a while, and we've been pretty pleased with the developments that we've seen in it recently in terms of availability and pricing. So I would definitely say that that's a very positive signal for us. And that's one of the reasons why we decided to make this move now.
And second, in terms of vintage, it's always a question in terms of how the aircraft is already configured versus how old it is. So I can't give any strong guidance there, but of course, we would look to secure the best aircraft we can for the network that we have.
[Operator Instructions]. The next question comes from Pasi Vaisanen from Nordea.
This is Pasi from Nordea. Two questions from my side. And the first one is related to yield for invested capital. So what is the figure you have actually used to make this investment decision in terms of yield for invested capital?
And secondly, when looking at your current fleet and this new prior plan. So what is the unit cost difference if you fly Spain with all Airbus compared to the new Embraer. So is there any difference in the unit cost? And can it be kind of offset by the changes in the unit-driven side then?
Thanks, Pasi. I think first of all, when you are looking for the yield to invested capital in the network setting, I think that sort of -- we need to look at the totality of how we can grow our network, how we can maintain our network. And maybe the calculation in its entirety is not something we would show here or share here publicly.
But obviously, we are looking at typical measurements, payback calculations, IRR, et cetera, but you need to put that into perspective of us kind of continuing to run and benefit from our full network. So this, for example, improvements in regional network are extremely important for also keeping our long-haul network current.
Then into your question of the unit cost differences. I think what we have shared today is that there is a big potential when it comes to fuel efficiency, of course, that goes hand-in-hand with CO2. CO2 also has cost. So I guess all of that we could be looking at and giving a figure. But if I remind you of where we set our strategic targets, so the strategic target of a EUR 100 million improvement by the end of 2029. We said that only a very small portion of that actually comes out of sort of cost improvement. Most of it was revenue related to modern retailing as well as the loyalty. So I think what we are doing here is more sort of preparing the ground having the setup where we can then also continue to grow the business and through that, also ensure our profitability.
And we do also get more costs, obviously, for a newer fleet. And there's a number of things sort of surrounding that. So in terms of the financial targets that we set, we haven't put in a big upside based on the difference in the cost for example, in flying to Spain with the two different types.
Excellent. Excellent. I understand. So just to kind of clarify, part of the investment is then paid by selling to kind of long-haul tickets to your 350 planes and that actually gives also the yield on a group level then for this investment.
I mean it's -- we are constantly optimizing for our full network. So yes.
The next question comes from Jaakko Tyrvainen from SEB.
Jaakko here, from SEB. On the 320s and 321, sorry, if I'm a bit repeating here, but did you say anything about the kind of a realistic time line for that purchase decision and negotiations, how fast you can consider to get those aircraft? Do we have to look at '27 or until '28.
So the aircraft that we would hope to be replacing with those aircraft retiring from the fleet in 2027. So that's when we would hope to start in-fleeting them. But of course, it's going to depend on the market conditions, how fast we can actually source and negotiate those transactions.
Then we have some questions in the chat as well. Let's start by one by Antti-Pekka Viljakainen. Do you need to negotiate with unions to execute this fleet plan in Finnair and/or in Nora?
No, we don't because the latest CLA that was agreed with the Finish Pilot Union in 2025 actually increased the number of jets that we can operate on the Nora platform. Previously, they were limited to 12%, but now the new CLA actually enables us to place a jets, i.e., now these new E2s on Nora platform. So from the CLA point of view, this is already kind of covered.
Then on engine-related questions by Andrew Lobbenberg. Any concerns about the reliability of the GTF engine. Clearly, E2 GTH has less troublesome than A320 family, but still not perfect.
Thanks, Andrew. So we had a lot of discussions with Pratt & Whitney, as you might imagine, throughout this process to get comfortable with where the build of the engine is currently and where they expect it to be by the time we take delivery of our aircraft in Q3 2027. So as you may know, they have been pretty public about the fact that the GTF advantage and the HPT will be installed on the engine latest Q3 2027. And so with that information and the understanding of what that actually means for the engine build itself, we felt comfortable moving forward with deliveries at that time.
And then some further questions by Andrew, how confident are you in being able to source used CEOs at reasonable prices? I think you touched upon this one already, but then continuing any preference for engines on used aircraft. Will you consider leases or you want to buy this?
Okay. So again, I'll answer the first two. I'll leave the last one to Pia. The first question, of course, was we do monitor the market consistently. And as I mentioned before, we've noticed over the last few months or so that the market has gotten much better for acquirers, it that way. So that's why we felt comfortable making this move now. With respect to engines, we actually currently operate both of the engine types that you would expect to find on a NEO.
We have the V2500s as well as the CFM. So we don't have any view on that at the moment. And as for the ownership profile, again, I will look to Pia to...
Thank you, Christine. Thank you, Andrew. I think just maybe repeating myself also from the CMD, but I still think we stand firmly sort of on the base idea that we have a cash flow and a balance sheet that would also support acquiring new assets to our balance sheet. But nonetheless, we will assess the opportunity also what's available also in terms of leases, maybe also in terms of some other instruments individually when we actually are at the point of delivery.
So depending on the market conditions then, and if it's sort of any guidance then currently and from where we stand today we have more than 50% of the value of our assets in our own balance sheet.
Then let's move on to other questions in the chat. Did you evaluate A320 Neo family or Boeing 737 MAX aircraft for the fleet replacement and if applicable, why did you decide not to acquire new generation narrow bodies?
So if I can just clarify whoever sent that, you're talking, did we look at those aircraft instead of the E2 or instead of the CEOs? If I can just proactively answer the question, as I understand it, those are much larger aircraft than the E2. The E2 is better served that are suited to the smaller markets that we want to be able to expand into in order to feed our network. And then when we're looking at the CEOs versus placing a new order, I think I addressed this to some extent earlier, the availability just doesn't line up with what we would need for replacement for our current seal fleet, at least for the first -- the A319 and A320 the A321s, as we mentioned before, are younger.
And then the next question. Hello, Finnair is close to complete the revamping the cabin of its 12 Embraer fleet aligning with its stronghold design, but will Finnair sell its E1 fleet and when?
Well, we don't really have any plans at the moment to dispose of that fleet. We are going to be transitioning out of them as the new aircraft deliver. So the investment that we made in the interior will continue to pay us dividends until those aircraft are retired.
The next question, how does Finnair intend to remain competitive with the E195-E2 and its business class product. No free middle feed on medium-haul fleets.
Well, we're still working to refine the service concept there. So I would say in addition to the benefits that Turkka mentioned, which is first-generation WiFi and instant power and things like that, we are also looking at the other things that we will be providing to our premium passengers onboard that aircraft. So stay tuned.
And then another question from Andrew. I'm guessing you run the A220 against the E2. Anything to share on why the E2 wins out on the A220?
We wanted to make the best decision we could for the network that we operate. The A220 has a longer range, it carries more people. But the question was, was that something that was best used to our network or not. And at the end of the day, looking at those two aircraft together, we really felt like the E2 is the best decision.
Then are they used ATR, you are looking for going to be 500 or newer 600s?
We're looking at both types.
Thank you. Are there any questions on the phone lines? No. I suppose, that was it. No other questions. Thank you all for joining. And if you have any further questions, do reach out, and we'll be happy to answer those. And thank you, everyone, and have a nice day.
Thank you so much, and see you on board Finnair.
S Thank you.
Thank you.
Embraer S.A. Sponsored ADR — Finnair Oyj, Embraer S.A. - M&A Call
🎯 Key Message
- Central narrative: Finnair’s fleet renewal centers on Embraer E195-E2 orders to refresh the Nora regional fleet, combined with used A320/A321 CEO purchases to replace aging mainline jets. Deliveries start in H2 2027, with the E2 offering ~2,600 nm range and 134 seats (2+2), plus substantial CO2 savings, signaling a disciplined growth and capex plan.
🧭 Strategic Highlights
- E2 focus: 18 firm E195-E2 orders (16 options) for Nora, 2,600 nm range, 134 seats, enhanced cabin, connectivity, PW1900G engines with maintenance package, and >30% CO2 savings per seat.
- Used fleet bridge: Up to 12 used A320/A321 CEO jets to bridge retirements, boosting flexibility and cost management; RFPs for E1s/ATRs anticipated to support 2026 deliveries.
- Financial discipline: CapEx guidance of EUR 2–2.5 billion (2025–29) with a 4% CAGR and 6–8% comparable EBIT target; strong balance-sheet readiness and cash-flow generation underpin the plan.
🆕 New Information
- New details: Publicized Embraer E195-E2 firm orders with 16 options, plus a plan to acquire up to 12 used A320/A321 CEOs to bridge fleet retirements; RFPs for E1s and ATRs to secure early 2026 delivery slots; more than 50% of assets already on Finnair’s own balance sheet, implying financing flexibility.
❓ Analyst Q&A
- Topics explored: Price/discount levels for the Embraer deal, variability of used A320/A321 prices, ownership vs. leasing balance, timing for A320/CEO replacements (2027–28), and bridging with E1s/ATRs; engine reliability considerations with PW1900G and delivery timing for new aircraft.
⚡ Bottom Line
- Impact for shareholders: The renewal strengthens Finnair’s regional network with a modern, more fuel-efficient fleet, supporting a clearer growth trajectory and disciplined capital allocation. For Embraer, the deal underpins a sizable, long-term order book and a path to higher regional market penetration.
Embraer S.A. Sponsored ADR — Q4 2025 Earnings Call
1. Management Discussion
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 the events 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. I want to welcome you to our fourth quarter of 2025 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 will be discussed at the company's conference call. It is important to mention that all numbers are presented in U.S. dollars as it is our functional currency.
This conference call may include statements about future events based on Embraer 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 the 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 [Operator Instructions]
Participants on today's conference call are Francisco Gomes Neto, President and CEO of Embraer; Antonio Carlos Garcia, Chief Financial Officer; [ Baltasar de Sousa], Corporate Communications Manager; and myself. This conference call will have 3 parts. In the first part, top management will present the company's Q4 results. In the second part, we will host a Q&A session only for investors. And last but definitely not least, in the third part, we will host a dedicated Q&A session only for the press. It is my pleasure to now turn the conference call to our President and CEO, Francisco Gomes Neto. Please go ahead, Francisco.
Thank you, Gui, and good morning and good afternoon to everyone. It is a pleasure to be here with you to share Embraer's fourth quarter and full year 2025 results. 2025 was a remarkable period for our company. We met our deliveries guidance on the operational side, while we outperformed the expectations on the financial side. This performance reflects a longer trend. Embraer has been able to deliver 2 digits of revenue growth over the past 3 years despite the supply chain challenges.
2025 was also a marquee period for the E2 program with strong sales across all continents, which has consolidated further the E2 platform as a benchmark in the small narrow-body segment. At the company level, our record revenue and backlog provides strong visibility to investors about our ability to deliver sustainable growth for many years to come as we have robust processes and governance in place. We have made significant progress across the production chain through closer collaboration with suppliers, process digitalization and investments in artificial intelligence tools.
The production level initiatives have now been extended across all our platforms, and they should help support production stability in 2026 and onwards. We are well positioned in strategic markets, supported by partnerships under discussion with global players in India, Mahindra and Adani Group and in the U.S., Northrop Group. These partnerships reinforce our strategic position and support long-term growth potential across both our Commercial Aviation and Defense segments.
To conclude, all our business units are performing very well with solid execution and bigger backlogs. During the quarter, we saw a strong sales momentum across all business units. In Commercial Aviation highlights included new orders from TrueNoord for 20 E195-E2s, Helvetic Airways for 3 E195-E2s as well as 4 E175 orders from Cote d'Ivoire. In Executive Aviation, revenues reached an all-time high of circa $750 million as we delivered 53 business jets, the highest number ever in a single quarter.
In Defense & Security, we reinforced our global footprint with Sweden's order for 4 KC-390 plus 90 options. And Portugal signed a 6 aircraft order along with 10 options for NATO countries. Finally, in Service and Support, we signed an E195-E2 pool program with Airlink and the maintenance service extension with the Republic for its E1 fleet. Let me now walk you through our sales performance for the full year. During the 12 months, Commercial Aviation recorded 157 E2 new orders across all continents, plus 140 options. In addition, the E1 program reinforced its market position with 64 new orders plus 68 options.
These achievements increased the division's backlog to $14.5 billion with an impressive 2.8:1 book-to-bill ratio. In Executive Aviation, total sales reached approximately $2.3 billion, supported by strong demand across the portfolio, including the continued success of the Phenom 300, now the world's best-selling light jet for 14 straight years. The backlog in the division now stands at $7.6 billion, supported by a consistent 1.1:1 book-to-bill ratio. Defense & Security achieved another strong year with 5 KC-390 aircraft sold to 2 NATO countries, plus 19 additional options and 10 A-29 Super Tucanos sold to Uruguay, Panama and Sierra Nevada.
The business unit closed the quarter with a $4.6 billion backlog and a 1.4:1 book-to-bill ratio. Finally, in Service and Support, the sales momentum remained strong. During the year, the program added approximately 75 aircraft and the Executive Care program signed another 37 new contracts. As a result, the business unit finished the quarter with a $4.9 billion backlog and a 1.2:1 book-to-bill ratio. Together, these results drove a consolidated 1.7:1 book-to-bill ratio for Embraer in 2025.
I will now move on to our operational results for the year, and my comments will reflect year-over-year comparisons. In Commercial Aviation, revenues increased by 7%, driven by higher volumes. The adjusted EBITDA margin improved from 2.5% to 2.7%, supported by lower expenses. Executive Aviation, revenues increased a significant 25%. The adjusted EBITDA margin increased from 11.7% to 12%. The gains recorded from higher volumes, pricing and operating leverage more than offset the negative impact of U.S. tariffs.
Moving to Defense & Security. Revenues grew 36%, mainly because of higher KC-390 and A-29 Super Tucano volumes. The adjusted EBITDA margin improved from 6.2% to 7.9% as a consequence of operating leverage and client mix. In Service and Support, revenues rose 18%, driven by higher volumes and the ramp-up of the OGMA GTF engine shop. Adjusted EBITDA margin decreased from 16.5% to 15.5%, mainly because of the ramp-up of new operations.
Before I conclude, I would like to share a brief update on EV's steady progress. The first flight of EV's eVTOL prototype in December 2025 marked an important milestone. Since then, our full-scale prototype has run 28 missions for a total of more than 1 hour in over flights. The program continues to advance through flight tests towards certification in 2027.
Thank you, Francisco. Good morning and good afternoon to everyone. I'd like to start by highlighting that despite a year marked by challenges and volatility, the company remains focused on disciplined execution, delivering results in line with its commitments. Let's now take a closer look at our financial results for the fourth quarter and full year 2025. All my comments will be based on year-over-year comparison unless otherwise noted.
Turning to next slide, I will start with deliveries. In the last quarter, Embraer delivered 91 aircraft, 32 commercial jets, 53 executive jets and 6 defense related. This represents a 21% increase with Commercial Aviation deliveries up 3% and Executive Aviation up significant 20%. More importantly, for the full year, we delivered 78 jets in Commercial Aviation for a 7% increase and in line with our 77 to 85 aircraft guidance for the period. Meanwhile, in Executive Aviation, we delivered 155 jets, up a relevant 20% during the period and at the high end of our 145 to 155 aircraft guidance for the year.
In Slide 12, backlog and revenue. Our company-wide backlog reached $31.6 billion during the quarter, up a significant 20% and higher than our previous record. The backlog for Commercial Aviation and Defense & Security increased plus 42% and plus 10%, respectively, for support plus 7% and for Executive Aviation plus 3%. In addition to our firm backlog, we currently have approximately $20 billion in options held by our customers. These are not included in our backlog, but they represent a meaningful upside potential over the coming years.
As these options are exercised, they could support a significant expansion of our backlog, potentially profit towards $50 billion over time. Beyond the size of the backlog, it is also important to focus on its quality and overall composition. The current backlog reflects a more attractive customer mix, which positions the company for a more favorable firm margin profile perspective over time. Any financial impacts from this mix will continue to depend on execution, delivery phasing and external factors.
Moving on to revenues. Our top line increased 15% and almost reached $3 billion in Q4 '25. From a business perspective, our revenue remained well diversified across segments. Commercial Aviation accounted for 37%, Executive Aviation, approximately 30%, Service and Support around 20%; and Defense & Security 13%. Our top line of $7.6 billion for the full year was above the high end of our guidance, an increase of plus 18% when compared to 2024.
Moving to the next slide, please. We generated $298 million in adjusted EBITDA in Q4 '25 with an 11.3% mark and $889 million in the year with an 11.7% mark. compared to 12.1% margin a year ago if we exclude the onetime impact of the Boeing agreement. Slide 14, adjusted EBIT. Now adjusted EBIT was $231 million for the quarter with an 8.7% margin compared to 11.5% in the same period a year ago. As we highlighted in our last earnings call, we expected a relevant impact from U.S. imported tariffs in Q4. In addition, we faced additional infrastructure-related costs, which weighed on margins.
Tariffs totaled $27 million during the period and nonrecurring infrastructure costs reached $20 million. For the year, we generated $657 million with the same 8.7% margin, in line with last year if we exclude the onetime Boeing gift and surpassing the upper end of our 8.3% guidance for 2025. This performance was achieved despite the impact of U.S. import tariffs and reflects our discipline in our ongoing cost reduction initiatives and efficiency gains.
Let's move now to the next slide. Embraer generated $738 million in adjusted free cash flow in the quarter, mainly supported by operations, higher number of aircraft delivered and sales campaign. For 2025, we generated $491 million in adjusted free cash flow and helped the company to cover on average close to 60% of its EBITDA in free cash flow over the past 3 years. The 2025 figure compares to $676 million in 2024, which includes a one-off $150 million inflow related to the Boeing agreement. We exceeded our guidance of $200 million or higher, supported by our continued efforts to reduce working capital requirements.
Looking now at our investments, excluding Eve, we allocated almost $100 million during the quarter. The figure includes $27 million in CapEx, $34 million in addition to intangibles, $12 million in the Pool program to support new contracts and $27 million in research. On a yearly basis, Embraer stand-alone invested a total of $383 million in 2025, 10% lower compared to $428 million in 2024. Our capital allocation continues to be geared towards segments with higher returns, such as Executive Aviation Service and Support, mainly in U.S. We continue to see our CapEx run rate at close to $400 million per year in the near future.
In Slide 16, adjusted net income. Our adjusted net income was positive $153 million for the quarter, supported by a 5.8% adjusted margin compared to 7.5% in the same period last year. Meanwhile, we ended the year with $253 million in the adjusted net income compared to $461 million in the prior year. We finished the year with a 3.3% adjusted margin. It was lower than 7.2% recorded in 2024. I would like to emphasize the decline was mainly driven by the onetime $150 million impact from the Boeing agreement, less favorable net results and U.S. import tariffs.
Turning to next slide, let me walk you through the financial bridge from our reported EBIT in 2025 to both reported and adjusted net income. We finished the year with $608 million in EBIT after accounting for $340 million in net financial mainly inflated by the mark-to-market gains of our share price in our stock-based compensation plan, $91 million in tax credit and $7 million in minority interest. We arrived at $352 million in reported net income. To arrive at adjusted net income, we exclude extraordinary items. These adjustments included a negative $137 million related to deferred taxes, which was partially offset by a positive $38 million from [indiscernible] results. With that, we get $253 million in adjusted net income for the year.
Looking at the evolution of our earnings per share, we have seen solid sequential improvement over the past few years. EPS was negative $0.2 per ADS in 2021, improved to $1.4 per ADS in 2024 if we exclude the one-off related effect and reached $1.9 per ADS in 2025. This trajectory highlights the structural improvements in profitability and the progress we have made in strengthening the company's earnings profile over the past few years.
In Slide 18, financial position. We continue to strengthen our balance sheet throughout the year. And as a consequence, our liquidity position has increased significantly our stand-alone net debt decreased by $220 million, reaching a net cash position of $109 million at the end of 2025. The solid position of our balance sheet ensures the company remains well prepared to navigate potential volatility ahead. Consequently, our leverage position, excluding if improved further from 0.1x net debt to EBITDA to 0.1x net cash to EBITDA by the year-end.
As a reminder, in the third quarter, we announced a new liability management initiative, which was fully executed. The average maturity of Embraer debt without Eves increased to 9.1% from 3.7 years, significantly improving our debt maturity profile. Today, 96% of our debt is long term, which provides us with financial flexibility. Importantly, these actions also led to a reduction in our average cost of debt, which declined to 5.5% from 6.2%, further strengthening our financial profile.
Slide 19, shareholder remuneration. We declared a total of BRL 568 million in 2025 in shareholder remuneration, combining interest in equity and dividend. This amount corresponded to BRL 0.78 per share and represents a dividend yield of approximately 0.9%. As a reminder, this distribution should be complemented by an additional dividend to ensure compliance with the minimum 25% net income distribution required under the Brazilian corporate law. The full amount will be paid in a single installment following our 2026 Annual Shareholders Meeting.
Slide 20, guidance. Before I present our 2026 guidance, I would like to remind you, Embraer has delivered its financial estimates year in and year out since 2021, reflecting a disciplined approach to planning and execution. Now to conclude my presentation, let me go over the details of our 2026 guidance. In terms of operations, we forecast Commercial Aviation should deliver between 80 and 85 aircraft. Meanwhile, for Executive Aviation, we forecast 160 to 170 jets, representing a year-over-year increase of approximately 6% in both segments based on the midpoint of the range. Turning to financials. We forecast a consistent double-digit growth. We estimate top line to settle between $8.2 billion and $8.5 billion, with the midpoint of the range, 10% higher than what we generated last year.
We forecast EBIT margin between 8.7% and 9.3% for the year, which would imply around $750 million at the midpoint of the range and approximately 15% higher than the adjusted $657 million EBIT generated in 2025. Finally, if we move to free cash flow generation. We estimate an adjusted free cash flow without Eve of $200 million or higher for the year. Remember, our midterm goal is to convert 50% of our EBITDA in free cash flow. If we look from 2024 to 2026, we should generate circa $1.4 billion or more in free cash flow, which is 50% of circa $2.8 billion implied EBITDA by our 2024 and 2025 and our 2026 guidance.
It is important to highlight this guidance reflects our assessment of the operating environment prior to February '20 before the latest round of changes to U.S. import tariffs. We are taking a conservative approach at this point in time because of decreased policy uncertainty and prefer to wait for additional visibility before making any changes to our outlook. We will update or reiterate our 2026 guidance on a quarterly basis as the year goes by. Let me stop here, and now I hand it back to Francisco for his final remarks. Thank you very much.
Thank you, Antonio. To conclude, 2025 clearly marked the consolidation of our strategy across all businesses. In Commercial Aviation, record orders supported the consolidation of the E2 platform as they reinforced its global relevance and provided long-term visibility for the business. In Executive Aviation, strong retail and fleet demand supported by higher delivery volumes reflected the strength of our portfolio, which was further reinforced by the recent announcement of the next generation of the Praetor 500E and 600E.
In Defense & Security, we continue to advance KC-390 campaigns globally, including key strategic opportunities. In Service and Support, the growing footprint of our operations is strengthening our ability to generate recurring revenues. Our continued focus on driving efficiency and financial discipline across all areas of the company is paying off as our best-in-class operations and services that support our customers. Looking ahead, we expect substantial growth over the midterm, while we prepare the company for a more ambitious long-term expansion, supported by a new generation of products and technologies, always grounded in our culture of safety first and quality always. With that, I would like to move on to the Q&A session.
[Operator Instructions] We remind you again, this conference is being recorded. This 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 equities research analysts and investors. The second part of the Q&A will be only for the press. The first question comes from Marcelo Motta with JPMorgan.
2. Question Answer
The question is regarding the strategic partnerships that the company have been announcing. So just wondering if you can provide us an update on the stage of it once in India for the commercial and for the defense and also in the U.S. for defense.
Thank you, Marcelo. Francisco speaking. Good question to start the Q&A today. So yes, we are focused on strategic partnerships to support long-term growth for Embraer. And the 2 main ones are India, where we have been working 2 fronts, the MTA, mid transportation aircraft with India Air Force that we've been working for a few years already and a more recent partnership, this one with Mahindra. So we expect an RFP from the customers still this year.
And the second one is with the Adani Group is to focus on the executive civil aviation to improve connectivity between smaller cities in India. Both opportunities can bring a relevant business and potential growth for Embraer. So again, defense, we expect RFP for this year. And civil aviation, we are still building the case, but we have said that if we get orders still in 2026, can do the rollout of jets by 2028 in India.
In the U.S. -- sorry, thank you, Antonio. In the U.S., we are -- we announced recently the partnership with the Northrop Grumman to develop the boom capability for the C-390 as an option for -- to complement the tanker fleet of U.S. Air Force with our KC-390. This we don't have a time line defined it, but we are working very hard. We recently took the KC for demonstrations in the U.S.
The next question comes from Kristine Liwag with Morgan Stanley.
This is Gaby on for Kristine. Just a follow-up on the Northrop Grumman partnership. On the partnership around adding BOM capability to the KC-390, could you provide any more detail or color on the structure of the partnership and how responsibilities are being split strategically, how significant is adding a boom for the KC-390s competitiveness, particularly in the context of [indiscernible]? And how should we think about the potential size of the opportunity over time?
Thank you for the questions, Kristine. So at this point, we have signed an MOU with Northrop Grumman and the main focus is the collaboration to enhance the capabilities of the KC-390 Millennium focusing on the integration of an autonomous boom refueling system and agile combat employment solutions. This is designed to meet the future needs of U.S. Air Force and allied nations, not only U.S. We don't have a time frame defined yet, but the main purpose is really to engage this discussion with the U.S. Air Force and have the KC-39 to complement the fleet they have.
We don't see this collaboration, our strategy is based on the premise that it does not compete with the KC-46 or any other strategic tanker, but rather, it's a complementary capability. And our intention, if we get a sizable order, this aircraft will be assembled and produced in the U.S. We don't know the size yet, and we don't have a clear view about time frame, Kristine.
Great. And just a quick follow-up, if I can. Can you just provide a quick update on the supply chain environment across both commercial and Executive Aviation? What are the major constraints you're still seeing? And what areas have you seen improvement in?
Last year, we face some issues in supply chain, but even then we -- as a company, we were able to overcome the issues and deliver the aircraft in the year. This year, we see the supply chain improving, but it's still with a few bottlenecks that we want to be even more proactive this year than we were last year to anticipate all the issues and act with greater effectiveness. And we have started doing that already in January. And yes, we are -- I'd say, we are monitoring the situation, but we are positive that this year is going to be better than last year.
[Operator Instructions] The next question comes from Myles Walton with Wolfe Research.
Great. I was hoping you could touch on the margin outlook by segment, maybe just a little bit more color below the surface. Pretty good to have margin expansion. I think service and support probably going against you. And I think I heard that the tariffs are in the guidance, and I would imagine those would be incremental year-on-year given a full year of effect. So maybe just talk to what the margins would be without tariffs? And then also any color of where the uplift is happening within the segments?
Myles, thanks for the question. This is Gui. I think one way to kind of think about the outlook for margins is to account that last year, we paid $54 million in tariffs. And we are carrying over around 2025 from inventory into '26. So if you adjust for that, we are probably looking for something close to 75 to 100 basis over time as both of them unwind. And...
Myles, it's Antonio speaking. Just to complement, I would say, overall picture, we -- if you see what we have reported and the trajectory that we are right now and the huge impact on tariffs was in Executive Aviation, and we delivered the same number we delivered last year and percentage-wise, which means it doesn't matter if you have tariffs or if we have a crisis, we always find a way to compensate.
And I would say, if we take service and Executive Aviation is already on double-digit space on the margin profile, and we are moving towards defense, I would say, it's up to speed also to go also to double digit, I would say, then we keep on our challenge here with Commercial Aviation to move to mid-single digit. I would say, on a consolidated level, we are coming closer to double-digit EBIT margin for this company here.
Okay. Great. And then maybe just one other one on cash flow performance in the fourth quarter. Is this similar to last year where some of the defense orders came through with higher advances? Or were there other attributes driving the performance?
I would say, some effects. We -- for sure, we have -- we delivered more than 90 aircraft in Q4. That's -- and especially in commercial aviation, where the -- when we deliver, get more cash than compared with the others because of the size of the advanced payment and by delivery, we get more money. I would say 2, 3 effects, a lot of deliveries concentrated in Q4.
And luckily, we got some final anticipation and advanced payment from defense customer, if you -- and to be honest, also nice sales campaign in December on Executive Aviation, I would say, some up altogether, we brought this nice development in Q4. You know that it's hard for us to predict. That's why you see the guidance 200 plus again, but it was more or less the same as happened in 2024.
The next question comes from Noah Poponak with Goldman Sachs.
Just wanted to follow up on the delivery projections and profile here. I know at commercial, you've talked about getting back above 100. I hear you -- it sounds like supply chain is still a bit of a hurdle. I guess it's a little surprising to see the low end of the guidance pretty much flat. Maybe you could just talk about the hurdles left to get back to 100, when you think you can get there? And then on the executive side, similar question. I know you've talked about potentially expanding capacity to get to 200 there. What's the latest thinking and time frame to get to those types of numbers on the executive side?
Thank you, Noah. Francisco speaking. Yes, I understand your point, but we are very focused this year to be from the mid to the high end of the guidance in terms of commercial aviation deliveries. And I said before, we believe we are better prepared this year with the supply chain to get there, while we are preparing the ground to reach 100 aircraft probably in 2027. We are working in that direction and not confirmed yet for sure, but we are working in that direction to create capacity to be there by '27, maximum 2028.
We believe 2027 will be feasible. Same on the Executive Aviation. We are working in 2 fronts. We are expanding capacity in some bottlenecks of the production. We have been doing that already for a couple of years, while we work on improving efficiency in our production lines. So now we produce one Praetor or one Phenom in half of the time that we used to do back in 2021. So we are moving -- I'd say we're moving fast to reach those targets, production targets in the next years.
And we have orders for that.
And we have order for that with the best news, right? Yes.
Okay. Great. And how does the rate of growth in services that you've embedded in this initial 2026 guidance, how does that compare to what you saw in 2025?
We -- Noah, this is Antonio speaking here. It's nice to talk to you again. We are seeing Service and Support -- Service and Support also in the double-digit space in regards to growth, I would say. And to be honest, it's growing faster than the aircraft division because we have other contracts as well. And that's why we see even a fast speed growth for Service and Support comparing to -- with the aircraft delivery on the other 3 segments. I would say, more than double digit for Service and Support to move forward for the next 2, 3 years.
The next question comes from Lucas Marquiori with BTG Pactual.
I just wanted to follow up on the tariff discussion and actually try to understand what's the situation there. I know there's different sections of investigations and that, I mean, our latest understanding was that this is 0 now. I just wanted to confirm that. And for how long should it remain that way?
Or what's the bureaucratic there that we need to see happening for that to change? And also, if there is any difference in tariffs for Embraer versus its main rivals or its main peers, if there's any kind of a dislocation of competitiveness or actually an improvement in competitiveness because of the 0 tariffs right now. Just wanted to hear your thoughts on that one.
Lucas, thanks for your question. Well, first, yes, we confirm that all Embraer aircraft engines and parts are exempt from the 10% tariffs as of February '24. Yes, we still have some inventory that we paid the tariff in U.S. inventory, but we'll deal with that during the year, and this is already included in our projections. Of course, we welcome the level playing field in our industry since Embraer was the only manufacturer to pay tariffs on aircraft exports before.
And this outcome will benefit our U.S. customers. So airlines, they can renew -- they can keep their plan to renew their fleet of jets, and we'll keep buying a lot of U.S. parts because more than 40% of our aircraft has a U.S. content. So I think the decision was very positive and it will benefit not only Embraer, but U.S. customers and suppliers as well. What was the -- how long this will take, this question?
232, 301.
We expect this to be a long-term decision. And about the sections, 232, 301, we are now monitoring the topics very closely and while we keep focus on our regular business. But so far, we don't expect any big changes, but this geopolitical situation is a little volatile. But let's see, we are now very optimistic that this will remain, and we will continue to reinforce our position and the aerospace industry position in the U.S. as well.
And Lucas, Antonio speaking here. We did -- we ran an assessment and we came to a conclusion. It's too early to bet to stay or is going to revert in another section here. That's why when you see our guidance profile, as of today, we see more upside than downside because we are not paying tariffs. But we have to wait because we don't want to -- it could be very complicated and volatile as we are seeing the word every single day.
The next question comes from Alberto Valerio with UBS.
I would like to talk about the orders for the year. What should we expect? We should expect 1x book? Or do you think that it could be even more, but the guidance of commercial and executive is still having some supply issues on it included?
Alberto, Antonio speaking. You asked about our expectation for new sales company or just...
I didn't get your question.
Exactly, exactly. So what should we expect in terms of book-to-bill for the year, if it will be one time or if we can expect a little bit more than the guidance, for instance, [indiscernible] on the commercial jets because you have still some supply issues for the year?
Well, first of all, Alberto, I mean, we had stellar year last year in terms of sales of E2, right, 157 new sales plus 140 options. This brings a lot of confidence in the platform for the future, and we keep selling the E1s as well. For this year, as I said before, we are preparing to increase our production output for E-Jets for the next years.
So we expect this year -- we are working in various sales campaign, and we expect the book-to-bill again above 1:1 for this year in terms of sales. And I mean, supply chain, as I said before, we are working now this year, again, very, very close to the supply, especially the pacers in order to mitigate the issues, delivery this year, the guidance, we expect from mid to high end of the guidance and prepare the company to increase the production in the following years for E-Jets.
The next question comes from Andre Mazini with Citi.
So 2 questions. The first one around defense and geopolitics, of course, that's a hot topic. So will it make sense to accelerate defense applications for Eve? Would that increase LOIs, predelivery payments and even get maybe to breakeven faster? I know Eve have their own earnings call, but I think it's pretty important for Embraer as well. So I wanted to hear your thoughts on that. This is the first one.
The second one about the buyback program just announced. If you can read it, the buyback program as meaning that over the next 12 months, right, the duration of the program, you prefer to allocate capital in Embraer stock rather than going for a large new programs such as a new airframe and et cetera? And more generally, how do you think about the trade-offs of buyback, plowing money back into the company and new development -- plowing money back into buybacks, right, or new developments on aircraft, airframes and whatnot?
Thanks, Andre. I answer number one, and then Antonio and Gui will answer number two. So Eve now, we are very focused on the certification process of the Eve, the product we have, the EV 100. And I know they are discussing all the opportunities. But at this point of time, they are really focused on the certification of the program until the end of 2027. I think for more questions, I recommend you to go to the Eve presentation, they will give you more details.
And Antonio speaking. In regards to the buyback, it's quite simple. We -- if you see the material fact issue, we are considering to replace the equity swap we have in the market. Basically, what we are doing are just changing, reducing the active swap into share from the treasury in order to hedge our long-term incentive program. It's going to be much more faster than 12 months, probably going to take 1 or 2 days to be concluded.
That's more or less -- we are not increasing the shares, just changing from active swap to a share buyback. And we do not -- today, the company does not do this buyback in regards to total shareholder remuneration just to hedge the long-term incentive plan.
And also just to complement, the company continues to invest heavily on the businesses that we have the higher ROIC, and that includes Executive Aviation and services.
The next question comes from Luiza Mussi with Safra.
Just a follow-up question because we saw some media reports yesterday indicating that India actually has opened a bid for like 60 units from military aircraft and the total contract value will be $11 billion. I mean, could you share like your perspectives on this deal in terms of how you expect the competitive dynamics to evolve? And how could you differentiate yourself like from the other competitors?
Luiza, thanks for the question, Francisco speaking. We are very excited about this opportunity because we believe we have the best value proposition for India with our product, the [ KC-390 ]. It is very competitive, very modern, exactly for that segment. And we have also been working with Mahindra with a lot of activities to be compliant with Made In India expectations from them.
So again, we are very excited and working very hard to win that business. That will be a very important step for the KC program. So yes, this is -- the original plan was from India is to buy from 40 to 80 aircraft. So 60 is the midpoint. And yes, this will generate billions of dollars in terms of revenue opportunity.
The next question comes from Lucas Laghi with XP Investments.
Two quick follow-ups. First one on the Services division. I mean, margin performance is very strong. Just trying to understand what has been the main drivers this quarter. I mean you mentioned materials, for example. Just trying to understand if this -- I mean, should you continue to work with 20-ish percent EBIT margin going forward? I mean is this assumption that we should guide for -- in the upcoming years?
And a follow-up on the guidance for 2026 regarding -- still regarding the margin. But I mean, we estimate around $90 million of EBIT impact considering a 10% tariff, which you mentioned that you included as an assumption for your guidance. So just to understand if that is the level of impact that we could consider as an upside given that you are -- I mean, merged in a current 0% tariff environment. So just to understand the size of the upside potential regarding EBIT for this year in this tariff topic.
Lucas, this is Antonio speaking. Thanks for the nice question. To be honest, I would love to take the 20% margin for Q4 for Service division and move forward, but not now. What's happened in Q4, we have a lot of bad guys throughout the year and then has been compensated in Q4 also with compensation for suppliers, this and this. That's why we see this nice 20% margin in Q4.
For sure, we are not happy with 15%. We are moving towards a bigger number, but I would say, for your assumption here, 15%, 16% is okay to move forward. But we do see improvement, but not in the pace that we should assume already for 2026. And for the tariffs, I would ask Gui.
So I think for 2025, we paid $54 million. And as I mentioned, we have about $25 million in inventory. So you can use that $80 million as a good proxy. But we're going to unwind that in '26 and in '27, right, because the inventory impact will hit us in '26 and will be only unwound in '27. So I would expect 2/3 of the benefits to come in this year if the status quo is maintained for the tariff, and we hope it does, with the balance 1/3 being upside for '27.
Our next question comes from the chat and is from Andre Ferreira with Bradesco BBI. Congratulations on the results. The guidance assumes tariffs. So to confirm, if it is exempt, is there upside to the margin numbers? Would that translate in any way to the delivery guidance as well?
Andre, thanks for the question. I think we just answered that with Lucas in the previous question. So let's move on to the next, please.
The next question is also from the chat with -- it's from Kristine Liwag. Following up on the supply chain question, there's a public dispute between Airbus and Pratt about engine deliveries. For your commercial delivery outlook in 2026, how much conservatism is built into your assumption? And is Pratt able to support?
Thanks for the question. Yes, I think as I said before, we have some bases that we are working on very closely in 2026. But I mean, we have been working in a very collaborative way with our suppliers, I mean, trying to help each other. And again, we are very confident that we will deliver the aircraft we are planning for the year, and we don't have any big issues with Pratt this year. They are doing that.
Thank you very much. This concludes the question-and-answer session for equity research analysts and investors. Now we will start the Q&A session dedicated to the press. First, we will answer questions in English and then we will answer questions in Portuguese. We will also answer questions sent via the platform chat. [Operator Instructions] The first question comes from Pablo Diaz.
Can you hear me?
Yes, we can.
Just wondering about the joint venture with Adani in India and the new line -- production line for the E175. Wondering if that production line is going to be focused on the E1 and if there is any possibility for that line to later migrate to E2 providing the certification process is retaken.
Pablo, thanks for the question. At this point of time, we have -- we don't have a joint venture yet. We have signed an MOU with Adani to explore the opportunities in this civil aviation. And at this point of time, focus on the E175 E1.
The next question comes from Curt Epstein with Aviation International News.
I was wondering if you could detail the impact on your Executive Aviation division by the tariffs over the past year.
I think the easy way to think is that out of the $54 million that we paid in '25, about 80%, 85% of that was in our Executive Aviation division.
For 9 months.
Yes.
Starting April onwards. And for the whole year, should be something like $60 million to $70 million, but today, you are back to 0, Curt.
This concludes the question-and-answer session in English for the press [Operator Instructions] [Interpreted] Our first question is from the chat by Nelson [ Doring ]. We'll see the first Gripen being delivered in the 25th of March in Gaviao Peixoto. Congratulations, Bosco and the defense staff. Is Embraer going to be a part of the Gripen agreement in Colombia and other potential contracts?
[Interpreted] Thank you for your question. No, we haven't established any contracts. However, we do have a good collaboration with Saab. We are working with them to cooperate with them and if possible, to bring the assembly of these aircraft to Gaviao Peixoto because we have installed capacity, it would be good for us and for them, but we don't have any subcontracts that we have entered into yet.
[Interpreted] We have no audio from Mr. [ Nascimento ]. So our next question, again from Nelson [ Doring ] also came through the chat. How does Embraer see the landscape for raw material supply as aluminum and titanium as critical elements for engines and avionics, both for military and civil aviation.
[Interpreted] Nelson, thank you again for your question. 2026, in our calculation should be better in terms of supply when compared to 2025. There will still be some difficulties in terms of parts, but raw material is not one of the difficulties. I think as for raw materials, we are quite comfortable with the current inventory we have. And there is another item that we are monitoring quite closely to ensure not only the year's total production, but a better production of aircraft production throughout the year.
So again, we are working very closely with suppliers since the beginning of the year, and we are quite positive and comfortable when it comes to aircraft delivery for 2026. So we'll try again.
[Interpreted] Next question from Mr. Nascimento for Vale Trezentos e Sessenta News.
[Interpreted] I do apologize for my mistake. It was something related to my own equipment. I have 3 basic questions, Francisco. The first question is whether Embraer in the period where tariffs were implemented, I know that you -- you had a meeting with the representatives of the Brazilian Foreign Relations Office in New York in an attempt to align the issue of tariffs. So this is question number one. If you want, I can ask the 2 other questions later on.
[Interpreted] When in fact, Embraer did not take direct part in that event. I mean, we just did a follow-up, but we were not there at the time. What we did was try to facilitate the event, but we didn't have any direct participation.
[Interpreted] And my second question is about the recent decision by the U.S. when the President was questioned by the courts that said that he couldn't charge the tariffs, that the tariffs were unconstitutional. Do you think that Embraer could try to collect the tariffs that were charged unduly? And how much more of the tariffs were charged?
[Interpreted] In terms of recovering the money paid in tariffs, we are monitoring the situation, trying to understand what our peers will do and what kind of outcome they will get from there. So then we will decide what to do. I mean, in terms of what has been paid, we already paid $80 million.
[Interpreted] Okay. So finally, Francisco, we see the war escalating in the world and countries trying to strengthen their defense. I mean -- and Embraer with KC and Super Tucano should fit into that scope. My question is whether Embraer is developing or thinking about developing new equipment for the defense side to probably serve some worldwide need.
[Interpreted] [indiscernible], right now, our focus is in selling our equipment. KC is a new product that was launched in 2019. And also taking this opportunity with -- I mean, sales of Super Tucano and also some of our equipment from Atech, one of our subsidiaries. But right now, there is nothing being developed at the moment.
[Interpreted] Our next question comes from the chat from Chandu Alves from Ovale. Do we know the deadlines of the RFP for 60 jets for India? How long is this process going to take? When are we going to get an answer? And who is competing for this?
[Interpreted] Right. First question. We're keeping an eye on this, but we can't control their deadlines. Of course, the clients from India are going to set their deadlines. We expect to see an RFP this year a request for proposals. This is an important step for aircraft selling because competitors will be showing their RFPs and then they will have some time to go over them. Of course, right now, we have no visibility over that. And our competitors are Lockheed Martin from the U.S. with the 630 hectare and Airbus in Europe with A400.
Our next question is from Leda Alvim, Bloomberg News.
[Interpreted] Could you please confirm the values that we have in paid tariffs for now? If you could break it down by segment, that would be useful.
[Interpreted] Leda, this is Antonio. In total, we already paid $80 million. 85% of that is for Executive Aviation and the rest of it is for service and support. So $80 million so far is everything we've paid since April 2025. And since February '24, we went back to 0, but we still don't know what's going to happen from now on.
Next question also from the chat from Paulo Ricardo Martins with Folha de Sao Paulo.
[Interpreted] How can the war in Iran impact Embraer? Could it jeopardize the delivery of aircraft for the Middle East?
[Interpreted] Ricardo, thank you for your question. Ricardo, thank you for your question. At the moment, we are just monitoring the situation very closely. Our main focus and #1 focus is with the people we have in the region because they are experiencing the situation day-to-day. We are they're trying to cater to their needs and the expectations of the families. We are also taking care of our suppliers, both direct and indirect in the region.
And so far, we haven't seen any critical issue that could compromise our deliveries. And we are not seeing any impacts in deliveries or even short-term sales. So the focus now at the moment is just to monitor the situation so as to help us take mitigating actions in due time so that we can deliver whatever we are launching for this year.
Ladies and gentlemen, thank you very much. That concludes the Q&A session of today's conference call. And this concludes Embraer's conference call. Thank you for joining us, and have a very good day.
[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Embraer S.A. Sponsored ADR — Q4 2025 Earnings Call
📊 Quarter at a Glance
- Revenue: ~$3.0B in Q4'25 ($2.98–$3.0B) (+15% YoY).
- Deliveries: 91 aircraft in Q4'25, +21% YoY (Commercial 32, Executive 53, Defense 6).
- Adjusted EBITDA: $298M, 11.3% margin (versus 12.1% in 2024 excluding one-time Boeing impact).
- Backlog: $31.6B at year-end, +20% YoY; ~\$20B in options, upside toward \$50B.
- 2025 Highlights: Revenue \$7.6B (+18% YoY); Book-to-Bill 1.7x; Adjusted free cash flow \$491M; Net cash \$109M.
🎯 What Management Says
- Partnerships: Focused, long-term growth via India (Mahindra, Adani) and the U.S. (Northrop Grumman) to advance KC-390 and related programs; RFPs expected this year with potential rollout of jets by 2028 if orders materialize.
- Operations: Expanded production discipline across all platforms, with supplier collaboration, process digitalization, and AI tools to improve stability from 2026 onward.
- EV Program: Eve progress continues toward 2027 certification; first flight completed in Dec 2025 and 28 missions since, signaling readiness for further testing and scale.
🔭 Outlook & Guidance
- 2026 mix: Commercial Aviation 80–85 jets; Executive Aviation 160–170 jets (about +6% mid-point).
- Financials: Revenue \$8.2–\$8.5B; EBIT margin 8.7–9.3%; adjusted free cash flow (ex Eve) \$200M+; target ~50% of EBITDA to free cash flow over time.
- Assumptions: Guidance reflects tariff assumptions as of now; quarterly updates planned as visibility evolves; conservative stance ahead of tariff changes.
❓ Analyst Q&A
- Tariffs & margins: Tariffs affected Exec Aviation in 2025 (~\$54M), with inventory unwind into 2026–27; if tariffs remain at 0%, margin upside and some guidance upside are possible, especially in Services and Defense.
- Northrop Grumman / India opportunities: MOU with Northrop to add autonomous boom refueling for KC-390; no defined timeline, potential U.S. assembly for large orders; India RFPs expected this year, with 60 jets at stake and a \$11B opportunity.
- Delivery cadence & capacity: Aiming for mid-to-high end of 2026 guidance; 2027–28 target to reach ~100 Commercial jets annually and expand Executive capacity as bottlenecks mitigated; service growth remains robust.
⚡ Bottom Line
Embraer closed 2025 with record backlog, diversified growth across Commercial, Executive, Defense and Services, and meaningful progress on the Eve program. Tariffs weighed on margins, but the company guides to stronger 2026 top-line growth, solid free cash flow and strategic partnerships that could meaningfully extend its long‑term growth trajectory.
Embraer S.A. Sponsored ADR — Q3 2025 Earnings Call
1. Management Discussion
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. I want to welcome you to our third quarter 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 will be discussed at the company's conference call. It is important to mention that all numbers are presented in U.S. dollars as it is our functional currency.
This conference call may include statements about future events based on Embraer 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 [Foreign Language] or CVM. [Operator Instructions]
Participants on today's conference call are Francisco Gomes Neto, President and CEO of Embraer; Antonio Carlos Garcia, Chief Financial Officer; Pau Cesar Souza, Corporate Communications Manager; and myself. This conference call will have 3 parts. In the first part, top management will present the company's Q3 results. In the second part, we will host a Q&A session only for investors. And last but definitely not least, in the third part, we will host a dedicated Q&A session only for the press.
It is my pleasure to now turn the conference call to our President and CEO, Francisco Gomes Neto. Please go ahead, Francisco.
Thank you, Gui, and good morning, everyone. It's a pleasure to be here with you to share Embraer's third quarter 2025 results. Embraer is currently experiencing a highly positive phase, a strong indication that our strategy driven by efficiency and innovation is delivering solid results and effectively supporting our sustainable growth.
In Commercial Aviation, highlights include new orders for Avelo for 50 E195-E2s plus 50 options and LATAM for 24 E195-E2s plus 50 options. These achievements have increased the division's backlog to $15.2 billion with an impressive 2.7:1 book-to-bill ratio. In Executive Aviation, we achieved an all-time high for third quarter revenues, reaching approximately $580 million. We also celebrated a historic milestone, the delivery of our 2,000th business jets, marking a record for year-to-date deliveries. Our backlog in Executive Aviation now stands at $7.3 billion, supported by a robust 2.4:1 book-to-bill ratio, reflecting continued strong demand for our aircraft.
In Defense & Security, we continue to reinforce our global presence. Portugal confirmed the purchase of its sixth KC-390, including additional 10 new options to support future European acquisitions. We also signed new agreements for the A-29 Super Tucano with Panama and Sierra Nevada in the U.S., reinforcing the aircraft's relevance and versatility. The division closed the quarter with a $3.9 billion backlog and 1.3:1 book-to-bill ratio.
Our Services & Support business maintained its accelerated growth path with expanding capabilities. We signed a new maintenance agreement with CommuteAir and launched Starlink connectivity solutions for Praetor and Legacy operators. As a result, the business unit finished the quarter with a 4.9 billion backlog and 1.8:1 book-to-bill ratio.
At Embraer, continuous improvement is more than a process. It is a mindset. We successfully completed more than 800 Kaizen projects over the past 12 months. And now by combining our lean culture with AI tools, we are moving forward more rapidly in achieving productivity gains. Our production level initiatives and the implementation of our perfect station concept led to a 16% increase in aircraft deliveries this year. From 2026 onwards, we expect even greater production stability in all product lines. The implementation of our zero-defect methodology reducing our cost of poor quality by 12%.
Another initiative that has been delivering significant results is the production lead time reduction. We have achieved important improvements such as reducing the production time of Praetor's by 40%, KC-390 by 33% and E-Jets by 27% compared to 2021 levels, more production with lower work in progress.
We made significant progress with new and expanded facilities at key locations in the United States and Brazil, including new hangars, painting booth and final assembly areas. These investments are designed to enable higher production volumes and faster deliveries, fully aligned with our growth strategy. At the same time, we are transforming our supply chain through supply chain management 2.0, a comprehensive initiative that integrates digital technologies, proactive risk management and the deployment of artificial intelligence for smarter planning and forecasting. These efforts have already started to pay off. Aircraft deliveries increased by 16% and average shortage decreased by 25% compared to last year.
I will now move on to operational results by segment. All figures are based on year-on-year comparisons. In Commercial Aviation, revenues increased a significant 31% because of better product mix and higher volumes and prices. Adjusted EBIT margin improved from minus 4.8% to plus 1.3%, supported by operating leverage and lower other operating expenses.
In Executive Aviation, revenues increased 4%, helped by higher prices. Adjusted EBIT margin decreased 4.2 percentage points because of product mix, U.S. important tariffs, 2.6 percentage points and higher costs.
Moving to Defense & Security. Revenues grew 27% because of higher KC-390 volumes and a one-off positive contract-related adjustment. Adjusted EBIT margin improved from 7.2% to 12.9% as a consequence of operating leverage and client mix.
In Service and Support, revenues rose 16%, driven by higher volumes and the ramp-up of the OGMA GTF engine shop. Adjusted EBIT margin decreased 5 percentage points because of services and materials delays.
Before I conclude, I'd like to share a brief update on Eve's steady progress. The first full-scale engineering prototype test flight is planned for late 2025, early 2026.
With that, I will now hand it over to Antonio to walk us through the key financial highlights of the quarter.
Thank you, Francisco. Good morning, and good afternoon to everyone. Turning to the quarter. All my comments will be based on year-over-year comparisons unless noted. But before we dive into our financial results for the third quarter of 2025, I'd like to start reiterating our 2025 guidance. We expect to deliver between 77 and 85 aircraft in Commercial Aviation and 145 and 155 in Executive Aviation from an operational point of view. Meanwhile, we expect to achieve between $7 billion and $7.5 billion in revenues, 7.5% and 8.3% in adjusted EBIT margin and more than $200 million in adjusted free cash flow from a financial perspective. This forecast may appear conservative at the first glance, but they reflect the supply chain risks we still face in Q4.
Having said that, I'd like to reinforce our estimates reflects our confidence in our operational progress and the resilience of our business model. We remain comfortable with our outlook and feel confident we are on track to meet our full year guidance. That said, let's take a look at our financial results for the quarter.
In Slide 12, deliveries -- Embraer delivered 62 aircraft in the third quarter '25. 20 commercial jets and 41 executive jets and 1 KC-390 military plan. This represents a 5% increase compared to the same period last year, with Commercial Aviation deliveries up 25% year-over-year and Executive Aviation is stable. More importantly, for the first 9 months, we have delivered 46 commercial jets, which is 57% of the midpoint of our guidance and 2 percentage points above our 5 years average for the period. In Executive Aviation, we have delivered 102 executive jets or 68% of the midpoint of our guidance and 11 solid percentage points higher than the 57% average from the past 5 years, which demonstrates our strong execution.
In Slide 13, backlog and revenue. Our company-wide backlog reached $31.3 billion during the quarter, up a significant 38% and higher than our previous historical record. Looking at each division, Executive Aviation and Service & Support led the pack with their backlogs up 65% and 40%, respectively, followed by Commercial Aviation up 37% and Defense & Security up 8%. I'd like to highlight the significant volumes of purchase options currently held by our customers, which total roughly $20 billion. These are not firming orders yet, but they provide substantial upside potential for our backlog in the next few years, which could increase towards $50 billion.
Moving to revenues. Our top line was close to $2 billion for an increase of 18%. For a business perspective, the breakdown appears well balanced. Commercial and Executive Aviation each contributed circa of 30%, followed by Service and Support with 25% and Defense & Security with 14%.
Moving to the next slide. We generated $236 million in adjusted EBITDA in the third quarter '25 with an 11.8% margin. Now adjusted EBIT for the quarter was $172 million with an 8.6% margin. This compared to $147 million or 8.7% margin in the third quarter '24, if we exclude the onetime impact of the Boeing agreement, which boosted the adjusted margin by approximately 900 basis points. For the first 9 months of the year, the adjusted EBIT margin stands at 8.6%, a significant improvement of the 2.9% average over the last past 5 years. However, it's important to mention we still expect a relevant impact from U.S. import tariffs, which should weigh on our Q4 margin, along with additional costs related to our return to office initiative.
Let's move now to the next slide. Embraer generated $300 million in adjusted free cash flow in third quarter '25. Mainly supported by operating activities, $224 million in EBITDA and lower accounts receivable. Looking now at our investment, excluding Eve, we allocated a total of $99 million during the quarter, slightly lower than last year. The figures includes $39 million in CapEx, $37 million in addition to intangibles, $10 million in the pool program to support new contracts and $13 million in research. Year-to-date, research investments have reached $33 million or 12% of the $284 million in total investment. These resources are focused on supporting sustainable growth and innovation.
Slide 16, net income. Let me walk you through the financial bridge from our reported EBIT to both reported and adjusted net income. We started with the quarter with almost $160 million in EBIT. After accounting for $53 million in net financial expenses, $22 million tax credit and $12 million in minority interest, we arrived at $117 million in reported net income, then adjusting for extraordinary items such as $30 million in deferred taxes and $32 million from Eve's results, we get to $54 million in adjusted net income.
We closed the quarter with an adjusted margin of 2.7%, a sharp decline from 13.1% last year. I'd like to emphasize this $167 million reduction was mainly driven by the onetime positive impact of $150 million from Boeing agreement recorded last year as well as less favorable net financial results.
Looking at the evolution of earnings per share, we have seen solid sequential improvement over the past few years. Our EPS totaled $1.7 per ADS over the past 12 months or substantially higher than negative $0.20 reported in 2021. Let's move to the next slide.
First of all, I'd like to start this slide talking about our liquidity position. Embraer's stand-alone net debt position decreased by $646 million to only $439 million in the third quarter of '25 as the company continued to implement its debt liability strategy and reduce its financial gearing. We ended the quarter with a net debt-to-EBITDA ratio of only 0.5x, excluding Eve for a significant improvement from 1.3x a year earlier. It is important to note this, the increase in leverage compared to year-end 2024 is temporary because of the business seasonality. We do expect to finish the year in a net cash position. Our liability management strategy remains focused on extending debt duration and reduce our cost of debt. The average loan maturity is now 5.9 years with 96% of our debt in long-term contracts.
To conclude, I'd like to remind you, we announced a new liability management initiative in third quarter '25, which will be fully concluded in November. The company issued $1 billion long 12 years bond at 5.4% coupon, and we will repurchase a total of $809 million from 2028 and 2030 bonds. We will share an updated debt maturity profile and average cost of debt with our full year financials.
Slide 18, shareholder remuneration. Before I finish my presentation, I'd like to take a moment to thank our shareholders for their trust and highlight recent developments in our shareholder remuneration initiatives. First, I want to share an exciting milestones. Yesterday, we officially update our ticker symbol to EMBJ, which means Embraer jets to better reflect the company's current strategy and vision for the future. Second, Embraer declared nearly BRL 210 million in interest on equity over the past 2 quarters, which translates into BRL 0.28 per share for a 0.35% dividend yield. Just a quick reminder, this amount may be complemented by a top-up dividend if needed to meet the minimum 25% net income distribution required by Brazilian corporate law. The full amount will be paid in a single installment after our 2026 Annual Shareholders Meeting.
With that, I will hand it back to Francisco for his final remarks. Thank you very much.
Thank you, Antonio. I'd like to take a moment to reflect on our recent key achievements and share a few final thoughts. In Commercial Aviation, strong E1 sales and the continued consolidation of the E2 platform marked our best sales year. Executive Aviation continues to see robust demand across its entire portfolio, reflecting the strength of our products and customer relationships. In Defense & Security, the KC-390 is gaining traction in key global campaigns, including India and NATO, with Sweden's recent order reinforcing its growing international relevance. Meanwhile, Services & Support continues to expand, highlighted by the groundbreaking of a new MRO facility in the U.S., further strengthening our global footprint.
Looking forward, we expect substantial midterm growth while strategically investing in new technologies to prepare the company for a more ambitious and long-term expansion, always grounded in our culture of safety first and quality always.
With that, I would like to move on to the Q&A session.
We remind you again, 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. 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 question comes from Kristine Liwag with Morgan Stanley.
2. Question Answer
So first, I mean, Antonio, the balance sheet and the financial strength of the company is pretty remarkable, especially with what we saw in 2020 with COVID and all the changes. With the net cash position slated for the company by year-end, I was wondering how you guys think about future return to shareholders, especially if you're not going to build another big R&D cycle, would you consider share buybacks or increasing dividends? How do we think about returns to shareholders?
Thanks, Kristine, for the great question. I was expecting this already. I would say we -- to be honest, we start to repay or resume dividends this end of last year. Now we -- I would say, we are very happy that we are able to do it, point one. Point two, we are evaluating our capital structure is a valid question we are raising right now. We do not have today a firm opinion on how to move forward. I do not see additional dividends at this point in time. We are already paying 25% of the net income of the year, which is already for a heavy intensive business, already a lot. I would say, we do not have a response right now, but we are evaluating further move on this direction in order, for example, buyback is something that's on the table right now to be discussed. But we do not have an answer right now. But we are really taking -- paying attention to this point as well.
Great. And if I could do a follow-up. A few weeks ago, American Airlines announced that they're retrofitting their E-Jets fleet. And to do the overhead bin, I think you guys are doing the work on that. But I was wondering, since they want to do a full interior refresh, is there an expansion of work scope that you can now address, especially as you've increased your services offering? Are you doing the complete retrofit for American? Or are you only doing portions of it? And how do we think about if other airlines in the U.S. decide to also retrofit their fleet with your more expanded services capability, how do you think about that market? And could you capture more of that?
Francisco speaking, Kristine, thanks for the question. And well, this is part of our initiative to improve the E175-E1. I mean this first movement to was with the interior and this includes not only the bins, but includes seats, new seats, Recaro seats. This includes the lightning, a new modern lightning and also available a better connectivity for the aircraft. So I mean, yes, we have a program with American Airlines, but this -- I would say, this kit is available for other customers, and we can do it if they want at our new MRO in Dallas.
The next question comes from Marcelo Motta with JPMorgan.
My question is regarding the EBIT margin on the Executive segment. I mean you commented about the impact of product mix and higher costs. So just wondering when we look at the component of higher cost, if you think this is more structural, it's more like a one-off on this quarter? And then if you could explain also what helped the Defense EBIT margin, that would be great as well.
Marcelo, this is Gui. Thanks for the question. In Executive Aviation, we have seen like in other business, cost inflation. That's something that has been a trend in the industry for the past few years. And we would expect that to continue. We have been obviously being very resilient in protecting our margins in the business, but we obviously will see some fluctuations on a quarter-to-quarter basis. Regarding Defense, there was an impact on higher KC volumes and just the client mix where we had a higher participation of foreign clients.
And Marcelo, just to complement you in regards to Executive Aviation, please take into account that 1 year ago, we didn't have tariffs. And they have impact in the Executive Aviation margins also the tariffs more is eating up some 2%, 2.5% of our margin in a comparable basis. I would say that explains the deviation as well.
The next question comes from Lucas Marquiori with BTG Pactual.
My question is just on the one-offs on the margin as well, especially on Commercial Aviation, just trying to understand what are these tax credits that you guys mentioned you guys had on this Q, I mean, particularly to what they relate to? And how should we think about, I mean, their recurrency going forward? And also on the Defense as well, what exactly is this one-off contract-related adjustment? Is this a change in the contract of a foreign client that helped on the margin? I mean just trying to kind of clear that out.
Lucas, Gui here. Thanks for the question again. So in Commercial Aviation, the tax credits are related to some import parts that we did a study and we're able to kind of claim these credits, okay? And on Defense, we reassigned a plane in the production to a different client that was already let's call it, halfway in its production. So given that it is a percentage of completion, we recalculate the revenues and the profitability of the contract given that it was already halfway through.
The next question comes from André Mazini with Citi.
So my question is on the state of the Pratt GTF engines. So the competitor A220 product is having some major issues with the Pratt. We read in a piece of news saying that 17% of the A220 fleet is grounded because of the Pratt GTF. We understand the engines are not the same, right? The A220 uses the PW1500, while the E2 PW1900. But the question is if the PW1900 is indeed having no issues whatsoever. So that's the first one.
And the second one, if I may, a totally different topic. This November, of course, the world is looking to Brazil for the COP and the Amazon. So I wanted to ask about an old program, the SIVAM program, the Amazon surveillance system that you guys participated, call it, 25 years ago. The planes from that program were Embraer's 145s. So if there's any renewal program for -- or plan for those planes and the status of the Amazon surveillance systems and Embraer's participation overall?
Andre, Francisco speaking. Thanks for your question. So first, start with the E2 GTF. I mean, the E2, I mean, used the third generation of the PW1900G engine, which has incorporated several upgrades and improvements. And on top, the E2 is a lighter, much lighter aircraft compared to the others. So which makes -- which means less demand on the engines. So that's why the E2 has suffered much less than the competition. And now I mean, the engines are getting better and better with new improvements being implemented. So we expect much better performance and durability of the engines going forward for the E2s, which is a good news for the airlines.
About this Amazon program, I mean we don't have any project at this point of time with this project. I mean we are working with the Brazilian force in some projects, but not this one as far as I know.
The next question comes from Andre Ferreira with Bradesco BBI.
I have two here. So first one, going back to the tax credits in Commercial Aviation. We saw BRL 56 million in the quarter, looking at the ITR. So I just wanted to make sure if that is all in the Commercial Aviation segment, which would mean that the tax credits were more or less 1.5% in terms of EBIT -- positive impact on EBIT margin. And also a second point about the tariffs. So the total impact, so adding Executive Aviation and Service was, if I'm correct, $17 million, right? Which seems lower than initial expectations, but there could be some help from inventories here. So you expect a higher impact in the fourth quarter? Or I mean, not just from seasonality, but also even on a more comparable basis. That's it from my side.
Thanks for the question. This is Gui here. In terms of the tax credits, it's going to be low single-digit value. So it's less than the BRL 56 million that you alluded to. And in terms of -- what's the second question, sorry, on the tariffs. The tariffs in the quarter were $17 million and a total of $27 million year-to-date. We originally mentioned after Q1 results that we expect it to be around $62 million to $65 million for the full year. So that would imply that we still have about $35 million, $38 million to go, but the company has been working hard to reduce its exposure and we hope that we can finish the year under the original amount that we mentioned. And it was -- yes, the inventory cycle has played a role so far.
Just to complement, this one-off is the second question you are getting about the same issue is a normal business as usual. We have temporary importation -- when we have changes in the supply chain here, we get the credit. There's nothing that is something special. It's just part of the daily life here. Just that you guys don't believe is something extraordinary.
The next question comes from Gabriel Rezende with Itaú BBA.
I would like to make -- just to touch on the company's guidance, especially on the profitability side. Just wondering how relevant could be the supply chain risks for the fourth quarter as well as the impact from U.S. tariffs that made the company choose to not revise its guidance upwards, especially considering that you have already delivered in the year-to-date figure, this very high EBIT margin, which is already above what you're expecting for the full year. So just trying to understand which one of these effects to be more relevant, either the potential delays on deliveries due to supply chain issues or the U.S. tariffs impact for the fourth quarter?
Gabriel, I will answer half of the question, and then Antonio will complement the answer. Well, regarding the supply chain, I mean, the risk for the supply chain in 2025, I mean, is over. I mean we have all the parts we need to assemble the aircraft. Now it's up to us to assemble the aircraft, but we have a concentration of aircraft to be delivered in the next 2 months. That's why we decided to keep the guidance as it is. Again, no risk of with supply chain at this point of time. Now we are working hard to make sure we have a better 2026 in terms of production stability, production level than it was in 2025. About the EBIT, Antonio, do you want to comment?
Just to complement what Francisco is saying, assuming that we will be able to get the aircraft out of the door, I would say we look more from the high end than for the lower end, I would say. As I mentioned in my first comments, we calculated the risk. You could take 0.3% EBIT margin comparing with the 8.6% we have in the last 9 months. If everything goes well, I would say there's nothing that goes against that we may be able to even surpass the high end of the margin. But we need to deliver. There's a lot of aircraft to be delivered to end of December just because of it. And please do not forget our guidance was not contemplated the tariffs. It seems to be conservative, but we were able to offset the guidance. We are still there. And more or less, I would say, looking for the high end and the lower end, I would say, is a remarkable achievement for our company here.
The next question comes from Lucas Laghi with XP Investments.
I would like to focus on the Services division. I mean we have been seeing this increasing profile of agnostic revenues and acceleration of GTF engines contracts on OGMA. I guess you guys were very clear during the Investor Day on the potential for this top line pocket that you guys are aiming. But could you please elaborate on the profitability profile of this division going forward? I mean should the margins be lower or higher considering this shift in top line new profile towards this agnostic revenues? Just getting to know, I mean, a bit more about profitability given this new profile of revenues?
And thinking specifically on the third quarter, I mean, we saw this decline on EBIT margin on Services. We know it's hard to -- I mean, to get all the factors on a quarter-on-quarter basis. But was this related to this different revenue stream, I mean, that you're seeing with this increase in revenues from other sources? Or was it a matter of conjunctural factors as you highlighted in the release, just to clarify on profitability here as well.
Lucas, thanks for the question, Antonio speaking here. I'm going to answer the Q3, and then Francisco is going to complement the long-term view for the margin. What has happened on the Service, we have some bad guys throughout the year, especially also in Q3, means if you delay parts to the customer having to pay -- giving credit or paid peanuts, and then we get the, I would say, liquidate damage from suppliers in Q4. It's just, in my opinion, a time lapse from bad guys to good guys, I would say, we should be fine with the normally 14%, 15% EBIT margin for Services for this year, I would say, around 15%. It's just, I would say, a timing window here between Q3 and Q4.
And for the future, Lucas, we -- the Services and Support is one of our most important growth drivers in the organization. That's why we have been investing a lot I mean, last year, we duplicated our structure to support our business jet in the U.S. This means more service at Embraer MROs, more revenues, more profit. And now we are doing the same with commercial jets with this project in Dallas, Texas. So again, we expect an important growth in terms of revenues and profitability in the next 5 years from our Services and Support division.
The next question comes from Alberto Valerio with UBS.
I focus on the bottom line, just to see some recurring and nonrecurring items going forward. Financial expenses come a little bit above what we were expecting. Wondering whether the offer of EV is inside that I saw on the cash flows, that's $12.6 million. And another one is about the noncontrolling interest, also come a little bit higher than we were expecting. Just to know the recurring of this $12.2 million on noncontrolled interest.
Alberto, this is Antonio speaking here. For the net financial result, it's very simple. When the share price goes up, you have mark-to-market obligation to our long-term incentive, then we have a hit in the net financial results because the interest we are paying and the interest we are earning, I would say, $50 million. I would say it's a big hit is because of it. And noncontrolling interest, let me have a look here. It's just that Eve was in the mark-to-market in Q3 was positive. That's why it generate a positive impact for the other shareholders just because of it. But again, it's a temporary advantage because probably Eve is going to be more valuable in Q4 than Q3 that this credit is going to be reverted. I hope to be able to answer you.
Our next question comes from the chat and it's from Cenk Orcan. Can you provide some color on expected U.S. tariff impact on coming quarters?
Cenk, thanks for the question. We originally guided for about $60 million to $65 million of U.S. import tariffs for the full year. And as I mentioned, year-to-date, we have already recognized about $27 million of those. So we should -- based on the original guidance, we do have about $35 million left in Q4. But it's important that the company has been working hard to reduce that -- the size of that potential bill through different initiatives, and we do expect it to be lower. So let's see when we publish our full year numbers, what's the actual total.
This concludes the question-and-answer session for equity research analysts and investors.
Now we'll start the Q&A session to the press. First, we'll be answering questions in English, and then we'll be answering questions in Portuguese. We'll also answer questions and the questions sent via the platform chat. [Operator Instructions]
The first question comes from Nelson [indiscernible] I'm sorry, just one second because this question is in Portuguese. The next question comes from -- the first question is in Portuguese. I'm sorry, everyone. There is no answers in English. So we'll be answering the Portuguese questions for now.
[Interpreted] The first question comes from Nelson [indiscernible] from India. How is the campaign for KC-390 in India? The recent visit of Brazilian VP, did you make any advancements in the negotiation? What is the scope with the Mahindra Group? India focuses on local production. Would it be with parts produced in Brazil or fully produced with Indian products?
[Interpreted] Thank you very much for your question. The India project is moving forward very well. It is moving forward on our side and on the Indian side. The inauguration of Embraer's office 2 weeks ago in New Delhi was an important landmark for the company. And truth be told, we also counted with the presence of Vice President of Brazil, Geraldo Alckmin, Ministry of Defense, the commander of the Brazilian Air Force. Therefore, we are very well positioned. And we believe that KC-390 it's an excellent solution to India's Air Force. Our partnership with Mahindra includes marketing, also marketing and sales support. And we are also present on the industrial side of the deal.
This project of the middle aircraft transportation requires a 50% local origination of the parts, the production of the parts -- many of the parts will still be produced in Brazil, and there will be also parts from our suppliers being a vast majority either produced in India or sent to India where the final assemble of the aircraft will be conducted. The final localization part is not yet concluded. We are working on it, but it will be a collaboration between Brazil and India. All in all, it will be a win-win for both countries with this new business. And it's a business that for KC-390 is huge. It's a similar number of aircraft, very similar to our total production so far.
[Interpreted] Second question. Our next question is from [ Chandu Alves ] with [ Oval ] Newspaper. Dear Francisco Gomes Neto, how is the negotiation with the U.S. government for the removal of the 10% tariff on planes? Does that harms Embraer?
[Interpreted] Thank you for the question. The negotiation is between both governments. Embraer does not have direct participation in the negotiation. It's between both governments. But I would say that things are moving quite well. I think you just saw that President Lula met with President Trump in Kuala Lumpur a week ago. That was a very important step towards the negotiation process. And the process -- the negotiation of the process is moving forward. We are very optimistic about it. So once a bilateral agreement is met between both countries, the chances of the aircraft and its parts resume its 0 tariff. Chances are very good. And this has also happened with other bilateral agreements with the U.K., I mean, Europe, Japan and Indonesia, where in all cases, the aircraft that needs parts went back to 0 tariff.
And yes, the second part, it is harmful in 2 ways. One is the parts that Embraer sends to the U.S. for the assemble of executive aircraft that is being impacted by tariff payments, and this increases our expenses because the product becomes more expensive. And in the case in commercial aircraft, it penalizes the aircraft because it becomes more expensive with the tariffs. And this can probably may jeopardize the fact that airline companies may not even place further orders.
I just have a brief announcement to English speakers. [Operator Instructions] Next question from Mr. [indiscernible].
[Interpreted] Can you hear me?
[Interpreted] Yes, loud and clear. You can go ahead.
[Interpreted] At the beginning of your remarks, you said that Embraer is envisioning a more ambitious expansion. How do you envision this expansion? Can you give us some details, please?
[Interpreted] Okay. I understand that you were referring to a future expansion, right? Okay. Currently, our product portfolio is very modern and competitive. And we can notice that if you look at our order backlog because it's close to $31 billion, and there are still $50 billion under construction. And we continue to focus on the sale of these products. And with this backlog, we expect a very significant growth of the company in the next 5 years. We are thinking beyond 5 years and even 10 years. Therefore, now we are investing in new technologies, important investments in new technologies because Embraer needs to be prepared for a future growth cycle based on new products or new aircraft. It could be aircraft for Executive Aviation, Commercial or Defense aircraft. So this is our short- and long-term view.
This is the expansion that I mentioned during my remarks. New products and also future opportunities for further growth of the company going forward. These new products could refer to Commercial Aviation, meaning larger planes than E195-E2. It could be larger or smaller. We are also looking at new technologies with electric propulsion. It could be a hybrid one for midsized aircraft. I mean, we do not define yet what would be our production line. We are investing in new technologies because it's important that we are prepared to make that decision when the time comes.
[Interpreted] And about KC-390 or the [ C-360 ] Millennium with India. From my understanding, Embraer thinks that this business is a given, right?
[Interpreted] No. No. This is a very tough competition. We are competing with a U.S. aircraft, an American aircraft, well consolidated in the market. We are also competing with the French aircraft, but we believe that our aircraft are very well positioned for that kind of application. But from there until signing the agreement, there is a large avenue.
[Interpreted] I mean just my last question. Maybe you will tell me that I should participate in Eve's conference call. But in terms of the actual flight test with the flying aircraft, will the test be conducted in Brazil?
[Interpreted] Yes, they are occurring in Brazil. So we hope that Eve's first flight should occur late this year or early next year. And so we are working very hard in the development of the product, which we believe to be very important for Embraer in the future. But if you need more details, you should just join Eve's conference call, which will follow ours. But the tests are being conducted in our plant in Gavião Peixoto.
[Interpreted] Now our next question will be in English. Let me just give a brief announcement to Portuguese speakers. [Foreign Language] [Operator Instructions]
The next question will be conducted in English. It comes from Jon Hemmerdinger.
Can you hear me? I just want to touch on, Francisco, you mentioned new commercial products. And you've talked about some of this before, but I also heard you mention potential larger aircraft than the 195. Would you be willing to give any sort of updated time line on when you might expect to make a decision on what comes next on the commercial side? And if so, what is that time line?
Actually, John, this is the most frequent question I had in the past year. But again, I mean, the answer remains the same. We keep investing in new technologies. I mean we want to be -- to have our, let's say, technology readiness for -- to go for a new product that might be executive aircraft or commercial aircraft bigger or smaller, but we don't have a time line definition at this point of time.
Yes. Fair enough. If I can follow that up with a question about the U.S. government shutdown. Has that affected any of the FAA work that you're doing, the certification work with Eve, any of the airworthiness ticketing for the aircraft, the E2s or the E1s for that matter? And any -- has it affected any discussions about tariffs? Are these things delayed because of the shutdown?
No, no, no, John. I mean, again, I mean, in terms of certification work, we continue working very closely with ANAC in Brazil and also with the contacts with the FAA. And the tariffs, I mean, I don't see any issue because of the shutdown affecting the tariff negotiation between Brazil and the U.S.
The next question comes from [indiscernible].
My name is [indiscernible] I'm coming from Lagos, Nigeria. I have an African question. Africa is under privileged. So from what you said, Embraer is in a highly positive phase of operation this year. With that having been said, does Embraer have any plan to increase its commitment to build capacity in Africa?
Thanks for the question. Africa is a very important market for Embraer, a very important region. We have many aircraft in operation in the continent. And more recently, we delivered aircraft for Air Link, South Africa, the E2, but we have many customers operating aircraft in Africa. So again, we will continue to invest in that region, I mean, to introduce more and more Embraer aircraft and Embraer services in the continent.
So is there any plan to increase the commitment to build capacity in Africa?
In terms of services, yes, as much as we deliver more aircraft, then we need more service and support depending on the region. But today, we already have a good structure, service structure to support our aircraft in operation in the continent.
The next question comes from the chat, and it's from Edgardo [indiscernible] from Aviation Line. Is there any update regarding the suspension of the development of the new Embraer turboprop? How long can this program realistically remain paused before its initial design assumptions and market analysis become obsolete? And he's got also a question #2, but if you'd like to answer this one first, please go ahead.
Sure. Thanks for the question. Well, the turboprop project or initiative has been canceled by us. I mean, we don't have at this point of time any project or initiative in that direction anymore. It might change in the future, but at this point of time, the project has -- it's not on hold, it has been canceled. What is on hold is the E175-E2. That one is on hold because of the scope clause in the U.S. So we are following the scope clause. If any change happens, then we will consider to restore the work on the 175-E2. But again, turboprop has been -- project has been canceled.
His second question is, I would like to know if there have been any updates regarding the Aerolíneas Argentinas order for the E195-E2 aircraft, which was put on hold after the change of government.
No, no change, no updates. We hope that one day, they will come back and to consider that program that is a natural replacement of the old E190 E1s by the E2 family. At this point of time, we don't have any update on that sales campaign.
Thank you very much, sir. Thank you, everyone, for participating. This has concluded the Q&A session of the Embraer conference.
[Interpreted] We have now concluded the Embraer's conference call. Thank you...
[Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Embraer S.A. Sponsored ADR — Q3 2025 Earnings Call
Financial data from Embraer S.A. Sponsored ADR
Revenue
Revenue is the sum of all sales generated by a company, e.g. for its products or services.
Revenue (TTM) metric explainedDirect Costs
Direct costs are the costs incurred directly in connection with the manufacture of the product or service.
Gross Profit
Gross Profit indicates how much of the revenue remains in the company after deducting direct production costs. If the percentage share of sales is calculated, this is referred to as the gross margin.
Gross Profit metric explainedSelling and Administrative Expenses
Selling, general and administrative expenses (SG&A) include all expenses for marketing and sales as well as the general administration of the company.
Research and Development Expense
Research and development costs (R&D) provide information on how much the company invests in the research and development of its products. The costs are particularly interesting as a percentage of revenue and in comparison to direct competitors.
EBITDA
EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) is the company's earnings before interest, taxes, depreciation and amortization. The EBITDA margin is calculated as a percentage of sales.
Depreciation and Amortization
Depreciation represents reductions in the value of the company's assets (e.g. due to wear and tear on machinery).
EBIT (Operating Income)
EBIT (Earnings Before Interest and Taxes) is the company's profit before interest and taxes, also known as the operating income. The EBIT Margin is calculated as a percentage of sales at
.
Net Profit
Net Profit represents the profit or loss after deduction of all costs.
Net Profit metric explainedStocksGuide Premium
| Jun '25 |
+/-
%
|
||
| Revenue | 7,931 7,931 |
41%
41%
100%
|
|
| - Direct Costs | 6,465 6,465 |
38%
38%
82%
|
|
| Gross Profit | 1,466 1,466 |
51%
51%
18%
|
|
| - Selling and Administrative Expenses | 625 625 |
17%
17%
8%
|
|
| - Research and Development Expense | 62 62 |
0%
0%
1%
|
|
| EBITDA | 1,158 1,158 |
88%
88%
15%
|
|
| - Depreciation and Amortization | 288 288 |
1%
1%
4%
|
|
| EBIT (Operating Income) EBIT | 870 870 |
167%
167%
11%
|
|
| Net Profit | 426 426 |
12%
12%
5%
|
|
In millions USD.
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Company Profile
Embraer SA engages in the design, manufacture, and sale of aircraft and its parts for commercial, defense, and executive aviation sectors. It operates through the following segments: Commercial Aviation, Defense and Security, Executive Aviation, and Others. The Commercial Aviation segment is involved in the development, production, and sale of commercial jets; and the provision of support services to regional aviation and aircraft leasing. The Defense and Security segment engages in research, development, production, modification, and support for defense and security aircrafts, as well as other integrated products and solutions including satellites and information and communication systems. The Executive Aviation segment deals with the development, manufacture, and sale of executive jets. The Others segment refers to the supply of structural parts and hydraulic systems and the production of agricultural sprayers. The company was founded by Ozires Silva on August 19, 1969 and is headquartered in Sao Jose dos Campos, Brazil.
StocksGuide Premium
| Head office | Brazil |
| CEO | Francisco Neto |
| Employees | 20,923 |
| Founded | 1969 |
| Website | embraer.com |


