Embraer reported its first quarter earnings for 2022 this week. (Photo, courtesy of Embraer)
This week, Embraer reported its earnings results for the first quarter of 2022. Although revenues were down 26% in comparison with the same period in 2021, the reported consolidated gross margin—20.1%—showed an improvement in performance from last year, with a gross margin of 9.5%.
CEO Francisco Gomes Neto remarked during the earnings call that this is the company’s best free cash flow recorded in a first quarter since 2010. “Even with a shutdown of our operations during the month of January to integrate the commercial revision systems, we were able to deliver solid results,” he added. He also offered an update on Embraer’s subsidiary, Eve, which announced plans for a business combination agreement with Zanite Acquisition Corp. in December.
The combination is expected to close in May, with investments totaling approximately $500 million, and the renamed Eve Holding will list on the New York Stock Exchange, bringing innovation to the new renewable air mobility ecosystem, said Neto. The strategic support that Embraer provides to Eve is critical, and that support includes access to infrastructure as well as extensive aircraft certification and manufacturing experience.
Services and support for Embraer are up from pre-pandemic levels, “with a growing backlog and positive gross margin versus last year,” Neto shared. The company experienced strong momentum in sales orders and increased backlog for executive aviation in particular. Neto also drew attention to increasing interest in its defense offerings—specifically, the C-390 Millennium and A-29 Super Tucano. “We expect an acceleration in sales campaigns for these products,” he said.
Embraer’s CFO, Antonio Garcia, stated that the company recorded deliveries of 14 jets in Q1 this year, including six commercial aircraft and eight executive jets. He also pointed out that Embraer’s general and administrative expense (G&A) has trended favorably for the last few years. First quarter SG&A was recorded at $95 million this year, which is $15 million more than Q1 last year. “We remain highly focused on SG&A efficiency,” Garcia remarked.
Most of the $39 million invested in the first quarter by Embraer came in product development and research was related to the E2 commercial jet program, said Garcia. Total debt was less than in fourth quarter 2021, coming in at $3.5 billion for the first quarter of 2022, and a net debt of $1.5 billion, he explained. “Embraer continues to deleverage the balance sheet, reducing systematically the gross debt and improve the credit metrics, and we do expect to reduce the interest expenses with that,” Garcia continued. “It's important to highlight that our net-debt-to-EBITDA ratio is around 3.7 times in first quarter of 2022, and we really remain focused on generating cash and reducing our debt levels.”
The CEO, Neto, concluded the presentation by highlighting some of Embraer’s strategic partners: SkyWest, Republic Airways, BAE systems, Rolls Royce, Azorra, Acciona, Falko, and Thales. Neto also mentioned the upcoming NYSE listing of Eve Holding again, saying, “Eve has a strategic support from Embraer with access to infrastructure, extensive aircraft certification, and manufacturing experience.”