Embraer (EMBR3) Q2 2024 earnings summary

Executive summary

• Q2 2024 revenues rose 16% year-over-year to nearly $1.5 billion, with strong growth in defense (up 100%+), commercial aviation, and service and support (both up ~20%).

• Delivered 47 jets in 2Q24, up 88% sequentially, with strong growth in commercial and executive aviation deliveries.

• Backlog reached a 7-year high of $21.1 billion, up over 20% year-over-year, with a book-to-bill ratio above 2.2:1.

• Operating margin improved by 1.6 percentage points to 9.3% in Q2, and by 2.7 percentage points in the first half.

• 2024 operational and financial guidance reiterated, including commercial deliveries of 72–80 and executive deliveries of 125–135.

Financial highlights

• Adjusted EBITDA for Q2 was $190 million (12.7% margin), up from $149 million (11.5%) in Q2 2023.

• Adjusted EBIT was $139 million (9.3% margin), with one-time items boosting margin by ~250 bps; reported EBIT was $128 million (8.6% margin).

• Adjusted net income was $80 million (5.4% margin), up from $57.9 million in 2Q23.

• Adjusted free cash flow (excluding Eve) was negative $215 million in Q2, mainly due to inventory build-up for higher deliveries in H2.

• Net debt (excluding Eve) increased to $1.3 billion, with gross debt stable at $2.6 billion.

Outlook and guidance

• 2024 guidance maintained: revenue $6.0–6.4 billion, adjusted EBIT margin 6.5%–7.5%, and free cash flow $220 million or higher.

• Commercial aviation deliveries expected at 72–80 aircraft; executive aviation at 125–135 aircraft for 2024.

• Defense revenues expected to reach ~$600 million in 2024, with margin improvement into low teens in 2025.

• Commercial aviation margins expected to remain in mid-single digits, with improvement as new contracts with better pricing enter backlog.

• Management expects material improvement in cash position in 2H24 as deliveries accelerate.