Executive Aviation strong backlog at US$ 4.3 billion highlights it sustained demand backlog.
SAO PAULO, BRAZIL – Embraer‘s operating and financial information is presented, except where otherwise stated, on a consolidated basis in United States dollars (US$) in accordance with IFRS. The financial data presented in this document as of and for the quarters ended September 30, 2023 (3Q23), September 30, 2022 (3Q22), and June 30, 2023 (2Q23), are derived from the unaudited financial statements, except annual financial data and where otherwise stated.
Highlights
- Embraer delivered 43 jets in the third quarter, of which 15 commercial aircraft and 28 executive jets (19 light and 9 mid-size). The total number of deliveries represent an increase of 30% compared to 3Q22 and an increase of 33% Year to Date (YTD) from 105 versus 79 aircraft.
- Revenues reached US$ 1,284 million in the quarter (38% higher than 3Q22 and equal to 2Q23). YTD revenues represent an increase of 29% compared to the same period last year. All Business Units had higher revenues and volumes Year over Year (YoY) and YTD, with the main highlight being Commercial Aviation representing a strong growth of 68% YoY and 52% YTD.
- Adjusted EBIT of 7.8% compared to 5.4% in 3Q22 due to higher volumes in all business units.
- Firm order backlog ended 3Q23 at US$ 17.8 billion, the highest level in one year, driven by higher sales in Commercial Aviation. Commercial Aviation backlog rose from US$ 8 billion to US$ 8.6 billion compared to 2Q23, with 42 aircraft sold in 2023. Services & Support reached US$ 2.8 billion in the quarter, the highest volume ever recorded in the business unit.
- Adjusted Free Cash Flow w/o EVE (FCF) in 3Q23 of US$ 44.0 million pointing to a strong cash generation in the 4Q23 due to higher deliveries.
- Successful conclusion of Liability Management, extending the average loan maturity to 4.8 years.
- Operational and financial guidance for 2023 remains unchanged.
Main Financial Indicators
Revenue and gross margin
Consolidated revenue of US$ 1,284 million in 3Q23 represented an increase of 38% YoY mainly explained by Commercial Aviation with 68% increase, while Defense rose by 40%, 25% for Executive and 24% for Services.
Comparing January to September of 2022 to the same period of 2023, total revenue rose 29%. Commercial Aviation represented the most expressive increase with 52% variance, followed by Executive Aviation with 28%, Services & Support and Defense with 16% and 15%, respectively.
Commercial Aviation reported revenue growth of 68% YoY to US$ 424.9 million due to the higher number of deliveries, with reported gross margin increase from 5.4% in 3Q22 to 6.5% in 3Q23.
Executive Aviation revenues were US$ 339.9 million, 25% higher than 3Q22 with an increase in volumes and deliveries mix. As a result, gross margin increased from 19.7% to 21.8% YoY.
Services & Support revenue of US$ 365.8 million, registering growth for 2 quarters in a row, representing a YoY increase of 24%. Reported gross margin of 24.9% lower than 31.0% reported in 3Q22 due to different mix of services.
Adjusted EBIT
In 3Q23, the company’s reported results are summarized in the table below.
Excluding the above special items, 3Q23 Adjusted EBIT was US$ 100.1 million and Adjusted EBIT margin was 7.8%. On a YoY basis, 3Q Adjusted EBIT increased due to higher volumes in Commercial and Executive Aviation and better performance on Defense. Adjusted EBIT is trending to a strong performance in 4Q23 due to higher level of deliveries.
Net income (Loss)
Net income (loss) attributable to Embraer shareholders and income (loss) per ADS for 3Q23 were US$ 61.0 million and US$ 0.3322 per share, respectively, compared to US$ (30.2) million in net loss attributable to Embraer shareholders and US$ (0.1644) in income per ADS in 3Q22. Excluding extraordinary effects, adjusted net income was US$ 32.9 million compared to US$ 24.5 million in 3Q22 representing an increase of 34% YoY. In the 3Q, costs related to the development of EVE began to be capitalized as intangible assets as the program reached sufficient maturity.
Commercial aviation
In 3Q23, Embraer delivered 15 commercial jets, as shown below:
Embraer’s E195-E2 jet, the largest in the E-Jet family, received Type Certification from the Civil Aviation Administration of China (CAAC). This will allow the company to penetrate the Chinese market with the aircraft and explore its opportunities, complementing COMAC’s ARJ21 and C919 already manufactured in the country.
SkyWest ordered 19 new E175 jets for operation in the United Airlines network, adding to the 90 E175 jets that SkyWest is already operating with the airline. The 70-seat aircraft will be delivered in a three-class configuration. This deal is part of the Q3 backlog and deliveries will begin Q4 2024.
Air Peace, West Africa’s largest airline, announced a firm order for five Embraer E175 jets. Deliveries of the new 88-seat jets are scheduled to take place from 2024. The E175 will complement the Nigerian company’s fleet, which already operates the E195-E2.
Embraer announced in September the signing of a Memorandum of Understanding (MoU) with American Airlines, for the United States airline to join the Energy Project Advisory Group. With the MoU signed with Embraer, the companies will work together to define and establish real-world requirements for sustainable, emission-free and commercially viable aviation.
Executive jets
Executive aviation delivered 19 light and 9 mid-size jets, totaling 28 aircraft in 3Q23, an increase of 22% compared to the same period in 2022.
The business unit continues its sales momentum with sustained demand across its entire product portfolio and strong customer acceptance in both retail and fleet markets. In August, the Phenom 300E became the most-flown business jet in the United States (Source: Federal Aviation Administration).
At NBAA Embraer announced the Phenom 100EX, the company’s newest evolution delivers superior cabin comfort, operational versatility and safety enhanced pilot-centric avionics to offer the ultimate flying experience.
In addition, autothrottle feature was announced for the Phenom 300E, and in line with Embraer’s commitment to a more sustainable future, Embraer announced in October that it has successfully tested the Phenom 300E and Praetor 600 on 100% neat sustainable aviation fuel (SAF). The tests, with one engine running on 100% SAF, were performed at Embraer’s Melbourne facility and provided significant insight into systems’ performance when utilizing blends up to 100% SAF, which was provided by World Fuel.
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
