Q1 2021 Embraer SA Earnings Call
Good morning, ladies and gentlemen, and welcome to the audio conference call that of Youll reveal embraer.
First quarter 2020, the web results. Thank you for standing by at this time all participants are in a listen only mode. Later, we will conduct a question and answer session and instructions to participate will be giving at the time if the share require assistance during the call. Please press star followed by zero.
The remainder of this conference is being recorded and webcast and at our I Dot Embraer Air Dot Com and Dot BR.
This conference call includes forward looking statements or statements about events or circumstances of each half and Arctic here every day.
There has based these forward looking statements largely all meets current range expectations and projections about future events and financial trends affecting the business and its future financial performance. These forward looking statements are subject to risks and uncertainties and assumptions, including among other things generally.
Amit political and business conditions in Brazil, and in other markets. The wired the company's present. The words believes may will estimates coach noise and anticipates intends expects and similar words already standard to identify forward looking statements and Embraer undertakes no obligations to update the public cloud.
By the any forward looking statements because of new information future events or other factors in light of these risks and uncertainties. The forward looking events and circumstances discussed on this conference call might not occur and the company actual results could you for a substantial lift on those anticipated in the Ford of Luca States.
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Participants on today's conference call on Mr. Francisco Gomes Neto, President and CEO, Mr. Antonio Carlos Garcia Executive Vice President Finance, and Investor Relations and CFO.
And Mr. Eduardo Couto director of Investor Relations out of and I like to turn the conference over to Mr. Antonio Carlos Garcia. Please go ahead Sir.
Hi, everyone and thanks for ethane and the Embraer as first quarter 'twenty one earnings call.
This is Antonio Garcia and brass Chief Financial Officer.
Before I start the presentation I just want to highlight the first quarter of sort of 2021 was the strong in terms of sales activity and we believe this trend will continue during the rest of the year.
We also presented bed that delivers debt combined with cost control and Lori investments resulted in a much lower cash consumption than in previous years.
Our margins, though were weaker than expected.
Especially in defense and the <unk>, yes, mostly affected by events that we will detail during the presentation and debt. We don't expect to hear of core in the rest of the year. We see all of that said, it's important to highlight the debt. We continue to deal with high levels of uncertainty in the context of the.
Pandemics.
And recovering all of our business that has the mostly impacted the real.
The pain on the vaccination improvement worldwide given the uncertainty we are not provides for them on financial and delivery guidance. So we are hopeful that we'll be able to update you and God no expectation for 2021 and the coming months now moving the presentation at slide four.
Highlights and commercial aviation, we announced today and Neil firm order for 31, 95 E jets from the undisclosed at the customer.
Large order.
The added in the second quarter backlog of Hay.
The rates the continuous interest and the jet family as we emerge from the pandemic the.
And the delivery is for Disney Award that we the starting 2020 true.
It is important to highlight debt. We also have the several of other XD campaigns in different regions and anticipate a book to bill above one for the commercial aviation of this year in terms of deliveries, we deliver nine E jets during the first quarter, which was four units of both the five E Jets delay.
And the first quarter of last year.
We had a good start of 2020 on the commercial aviation and the we expected more.
More balance deliveries throughout the year versus 'twenty 'twenty when are deliveries were highly concentrates and the fourth quarter.
I'm on guard deliveries, we had the Kelly Amy that's received its first 195 the true this quarter.
And KLM and now operates 50 Jess it's rich.
We also delivered our first you won in <unk>, Indiana, Frick and quantities for herpes and another important achievement.
Finally, and update on the Youtube program.
We rescheduled the entry into service of the 175 is true for 2020 four.
2000, Twenty's deep review of the as we don't expect short stem and scope clause of changes in United States, and we continue to optimize our of cash investment and necessity and market conditions.
In the executive Aviation, we had the very strong quarter with <unk> sales and production sold out the until the fourth quarter of 2021.
And because of deliveries, we delivered 13 jets for of planes more than the first quarter of the 2020 and the we expect at the highest single digit the growth easier.
We maintain our of price discipline and threats and also had the solid backlog growth of across the entire portfolio with the book to Bill exceeding 175 times.
Finally, the small and mid sized business jet segment continued their robust of Rick over.
Driven by both on up customer demand, including the first time buyers.
Moving to slide five.
In defense and security.
The KC 390, millennial continues to perform additional missions related and should be its full operating capability certification.
During the first squared the it's concluded the cold weather and air to air refueling tests.
The KC 390 also obtained it joins the exercise with the U S Army call. It carbon 84 of paratroops operation rigs.
And regarding the Super Tucano, we delivered the first two Super Tucano.
U S Air Force of special Ops program, and the seven Super to carriage of Nigeria.
In terms of new programs Embraer and the Brazilian Air Force signed a memorandum of understanding for the stood the off of one of diversity and named aircraft systems UAV.
The service and support Embraer has strong new sales and they're quite the closing around $360 million and new contracts.
Despite the market being still in recovery from the ongoing pandemic.
Our services team also performed the workshop with the airline customer to discuss sensitization and the health of journey.
And we also launched a new digital platform for aircraft and pick and a couple of applications.
Finally, embraer has been supporting the Brazilian Air Force in the KC 390 missions to combat the pandemic with the margin 500 hour flight and.
The 19, 97% mission completion rates, which shows the outstanding array of liabilities of these aircrafts the slide the number six moving to the financial highlights of the quieter.
And we showed the backlog the.
The company consolidated backlog of finished the quarter, the first quarter of $14 2 billion.
Which of mostly in line and with the end of 2020.
We are optimistic with our recovery and the backlog S progressed through 2020, one, especially after we sign of the female other we found disclosed at the customer for 30, you're one of IV juice, that's the real winter in the backlog and the second quarter.
We are particularly happy with the performance of the executive aviation segments, which had one of its best sales per pharmacy and the his since years and the first quarter, which is typical as Laura quieter.
It's also important to note that we had no cancellations.
The commercial aviation or executive Jets, the orders in 2021.
On the next on slide seven we show our commercial jets and the 16th Jets the delivery.
We had the nice recovery in both segments and the first quarter and sort of 2021 as compared to last year.
With non commercial jets delivered and the period and 13 executive Jets delivery.
We see a more balanced quarterly split of deliveries and commercial aviation.
For 2021, and then we saw in 2020.
On the slide eight we show our consolidated net revenue and the first quarter, which were $807 million as compared to the $634 million and the last year first quarter.
This represents year over year of growth of 27% with improvements in commercial aviation executive aviation and the face of security segment and the periods.
The face of Securities of revenue would have of being even better and then the quarter, but we had some sort of petro kind of deliberate zip each of the second of course, and and also lower revenue with the Brazilian government at the easier, but it was in Q1 the approval by the Congress on the slide nine and.
Leased to show the evolution of our Embraer SG&A expenses over the last few quarters, we recognized 80 million of the SG&A expenses in 2021 first quarter, which compares to <unk>.
$116 million of the first quarter of 2020, which represents a decline of 30% year over year, resulting from lower working on generates the cost efficiency and the restructuring actions implemented last year on the.
On slide 10, which shows both.
Adjusted a bit and.
And adjusted EBITDA figure for the quarter in previous periods. The Copa had the consolidator of just a bit off of negative of 30 meters in court and the first quarter of 2021 versus a positive of 9 million and this first quarter of last year and our adjusted a bit margin was minus three <unk>.
Per cent the.
And the decline in adjusted EBITDA in the quarter of course, despite and improvements in commercial aviation segment the profitability.
With most decline coming out of the executive Aviation Defense and security segment.
The equity valuation business heads and higher production costs in the acquired and mostly related to the all the programs obsolescence hitter of fit and low quality cost debt, we do not expect to repeat in the upcoming quarters.
With respect to the finish of secrets, we had the FX impact and delays and the Brazilian budget approval debt impact fixed cost absorption as well less favorable mix of revenues with the zip and super to kind of deliberate and depth of coming quarters. The.
The service and support margins and the first quarter were also slightly affected by the pandemic with respect to adjusted EBITDA and the first quarter, we generate the $80 million positive representing and adjusted the beach and the margin of two 2%.
We expect both adjusted EBITDA and adjusted EBITDA to improve as the year progresses.
On the slide 11, our adjusted net income for the quarter was.
Was a loss of $96 million represent the net margin negative of 11 point the 9%.
The net loss of <unk>, largely as a result of the lower operating costs.
Combined with higher financial expenses as we increased our overall debt levels to improve liquidity last year.
We will maintain the strong liquidity level, but we are optimistic that and improved visibility of our financial performance and be honest yourselves on and so Antoine will give you the opportunity to read this start of the higher cost of bank debt to lower our financial expense.
On the slide 12, we show our investment and free cash flow.
First with respect to investment the company had the total of $39 million in.
And through the Capex develop and the research expenses in the period.
Continued took control of our cash outflows by investments and the cost of the new portfolio of products and the search that's caused by the pandemic and.
And our level of investment now is that the creators for the programs.
We are currently undertaking and their respective updated timelines.
Now moving to free cash flow, we did a much better job of controlling the cash outflows and the first quarter of 2021, comparing with the first quarter of 2020 and EBIT prior year's first quarter.
And of which seasonally.
Burns cash.
The free cash flow usage of $227 million and the first class of 'twenty, 'twenty, one which compared to the six cent of seven to 7 billion and free cash flow usage and the last year first quarter.
And the major improvement with two of the free cash flow coming from the work and we had done to better match, our production rates and the supply of change to our current rates of delivery of part of the year as well ongoing price we are undertaking.
To be much more efficiency with the working capital.
For instance, our inventories and the first quarter 2021 are hopefully 500 million lawyer.
And they award and the first quarter of 2020 and also in 2019.
We have a much more work to do with respect to work and cats of but we are confident that we are cheaper and more savings over the next quarters and years.
Finally on the slide 13, we have our liquidity position at the end of the quarter. We finished with a total cash of almost $2 $5 billion.
Total debt are on $4 4 billion and.
And net debt of one point of $9 billion. Our maturity schedule is very manageable, we fell a little short term debts and all of the overall.
Average maturity is now four two years.
With that I conclude my presentation and now even started to the call over to force fiscal for his final remarks. Thank you very much.
Good morning to you all.
Thank you for your participation in our conference call.
And after Anthony's presentation I'll.
Like to highlight a few points.
Recently, we pass the one year of Mark from the beginning of the pandemic and.
And we are very pleased it to now see increases in the number of vaccine nature of the people in different regions around the world.
This vaccination and progress is fundamental for the recovery of the aerospace the sector and.
And consequently, four and an increase in new orders.
Coming from our major customers, especially in our commercial aviation.
We continued on me to be focused on all of our strategic plan, which aims to increase the revenue and profitability and the short and medium terms.
And as Antonio presented we had the revenue growth and the strong control of expenses and investments.
Which led to a significantly better result, and cash consumption the beginning of 2021.
This is the new management philosophy of Embraer.
Basically the on efficiency and profitable growth.
And three fourths of this vision, we are naming our strategic plan fit for growth.
Fit for growth express in a simple and direct manner, what we are doing.
Generating more efficiency and competitiveness to grow in a sustainable way.
One of the front of efficiency gains, we have already seen a reduction of $500 million and current inventory levels at the embraer when comparing to previous years.
And have even higher goals of reducing the production cycle of our aircrafts by more than 40% in 'twenty 'twenty two.
Leading to a substantial impact on our working capital and production cost reduction.
Regarding new sales coming from our current portfolio of products, we announced today the excellent news of your return of sales and commercial aviation with the new firm order contract for 31 95 E. Two aircrafts.
And we still have various all the sales campaigns and progress not just for commercial jets, but also for the C 390 millennium and the Super Tucano.
Also in executive Aviation, we are currently experiencing the.
Book to Bill in excess of 175.
And our core of the business Jets portfolio is sold out until the fourth quarter of this year.
On the front of innovation projects diversification and the strategic partnerships, we continue to advance with potential partnerships to open markets for our commercial jets for the city of 19, millennial and afford the development of a turboprop aircraft.
We have always assume its control of the Tempest of cyber security company.
And it'll be fully incorporated savvis hour of radar business, resulting in better and synergies in our defense and security segment.
One of them over and we continue to make progress and investments to triple our ancient the maintenance of revenues and the next few years and Portugal in partnership with Pratt <unk> Whitney.
The.
Element of the Ito is another project debt is moving forward quickly with the performance of new tests of our prototypes and reducing the scale and fully scale as well.
In addition to the evaluation of potential investors and the project.
Finally, we continue to make progress and our ESG agenda investing and projects for more sustainable technologies, such as electrification biofuels and energy efficiency.
We are also implementing programs to guarantee more diversity, and our company, including and the board of directors.
In summary, we are very confident in our strategy and and the actions currently being taken.
Now is the time to be more efficient and grow in a profitable way.
And there are many opportunities and our sites and it'll be blizzard to share with you all more good news as the year progresses.
Thank you very much for the attention and for your interest in our company.
Thank you we will now start the Q&A session if.
And you still have a question please press star one.
Our first question comes from Myles Walton UBS.
Thanks, Good morning.
I was hoping you could pick up where you left off Francisco with respect to the order and if you can give us any color in terms of the region that it's coming from and also you hinted that there were further orders and the pipeline both for the KC 390, and and and on the commercial aviation.
And I'm just curious can you point to again to maybe the region, where the KC 390 day might be making some penetration you've mentioned the joint exercise of the U S.
Are these nieto.
Countries that could be.
Coming down the Pike, so maybe just color on on the pipeline. Thank you.
Thank you Myers, Florida of question and yes.
And this point of time, and unfortunately, I cannot disclosure Gordon Dale on disorder.
It's really an excellent news of greed.
With the progress and our <unk> program and.
And what I can tell of the debt that we have.
Many of other campaigns sales campaigns and not falling.
On the floor.
Commercial jets, but also for for the <unk> hundred 90, and in different regions and super to kind of as well.
But I cannot disclosure and wonderful reshape the Europe do you at this point of time sorry.
Okay.
Operator can we take the next question.
Our next question comes from Josh Milberg Morgan Stanley.
Hey, good morning, everyone and thank you for the call and and congrats on those efficiencies described but you highlighted the and also on the 32 water.
And with those the orders and with the first quarter result could could you touch on how you see the mix between E Twos and you want and 17 five both of this.
For 2020 true and also maybe talk about how the margins compare on the aircraft.
Our paths concern of ours have been debt that you're highly dependent upon what you want and separate and five.
Continuing on that the economics on it.
Could deteriorate.
The fuel efficiency and other.
Factors.
It'd be great to deteriorate perspective on those points.
So Josh the go ahead of time go ahead Sir.
And he got should the mix and just make sure you guys showed the.
The 2022 of mix is something around.
40% E true and 60% you one.
On the mix more or less can be changed the likely change, but is more or less of what they have and the pipe.
Is it safe camping is.
About the.
The <unk> net for each of us.
Yes.
Just one point of Josh Okay, that's great.
For 2022.
Oh, sorry.
Go ahead, Josh Sorry go ahead Eduardo sorry.
And I was just going to add debt.
So I was kind of asking about.
The only have Eduardo and have a little bit of of delay here sorry about that.
All of the milk truck.
Just kind of add that you know the.
You mentioned about the the mix right, saying that you won the profitability is lower.
It's not really the case I think we're doing and we have a lot of initiatives true to reduce costs.
And also we have.
The good campaigns for.
The 175, you won and and.
And we are not seeing a.
A big difference in terms of profitability, we believe we're going to be profitable on both the U on 75, one as well as the true okay.
Yeah.
Okay, that's great Eduardo and and then just on the I think you mentioned and the release of debt.
The the E. The.
32 orders would start delivering in.
In 2022 can you give us an idea of how many you might deliver next year.
Of that the that particular order.
For the sort of we're going to deliver the first 12 in 2020 true Josh.
Yeah.
Okay. That's great. Thank you guys and welcome.
Okay.
Okay.
Our next question comes from Robert Espey Guard <unk> Suisse.
Hi.
Having a couple of questions for you.
I don't know if this is for Francisco or Antonio, but you have the stock repurchase in the quarter.
This signals to us confidence that you could be free free cash flow positive. This year, I know you're not guiding but.
You know I don't want to think about how to interpret that.
Yes.
No we had a minor.
The repurchase rights are that the.
And that we launched last year, but we.
We're not you mean buying back shares we're not actively buying back shares at the moment Rob.
Rob.
Okay.
Okay, and then just on your upcoming projects the turboprop and the urban air mobility.
Have you made any progress on the partnership search is there any update that we could have there.
The rock we.
We have had progress and actually we see.
Yes.
Very well on those fronts.
On the front for for the the PPE for the excuse me and 94 for the EPS, but as we don't have anything concrete concrete.
Concrete at this moment.
And I cannot disclose more information flow.
Could you just can confirm that we are progressing very well on those fronts.
Okay, and then and then just I think and the press release you talked about.
How expected retrofit and non quality cost negatively impacted the gross margin and the quarter at executive Aviation and I was wondering if you could provide some more color or specifics around the size of the impact there.
Rob just from my side here in terms of speaking we were expecting of kind of the black zero and we could take the 30 million is a I would say additional cost part of it is going to be compensated the quietest to come.
And.
Again, something like 30 to 40 million debt was what we saw and part of it too is going to recover in the coming quarters.
Okay, and then just Joe.
Grads Antonio sorry, Rob the duo here.
Just to add debt you know the.
The retrofit cost and now we sold.
And the lever some some demo the demo aircraft during the quarter and sometimes when you're delivering a demo.
And you'll have some additional costs right to bring debt down more so the normal conditions. So it's really a one off type of cost. The prices were very good now. We are we are really positive in terms of pricing for our business Jets.
But we had those extra costs related to the those damages at the end up affecting the margins, but it's really non recurring.
Okay, and then just as the final question.
Go ahead.
And I know Robert.
I was just.
Couple of minutes of what they do just said that the.
Another point that we have is a strong focus on improving quality and reducing the non quality cost and the continent. So we do expect with improvements in debt front as well.
Okay.
And then just last Antonio you mentioned.
Strength in the light mid size orders and executive jet and in that category and you mentioned there are some first time buyers.
Is there a way to you know you had a I think of 175 book to Bill So.
Maybe 'twenty 'twenty, two orders and the quarter what percentage of those were first time buyers.
Oh, that's a really good question.
Yeah.
And I really.
Do not have of grew about the as I can send you afterwards, but we are seeing this and the age of level because we do not test use of our PD, one and aircraft available and this in this category and the secondhand market.
Improving and I need the trickle of female later on.
Okay. Thank you very much thank you.
Our next question comes from Ron Epstein Bank of America.
Hey, good morning, guys.
You talked a little bit about this on and on the call. If you could elaborate on the sales campaigns, you're seeing I know the the customer for the 30 aircraft that you sold is undisclosed but are they sort of of Trump carrier of the start up of carriers and maybe any color you can give us there.
And I've got some other the other questions after that.
Yeah.
We also are anxious to the disclosure that the provisions but.
They can eat the recommended that we await even though the months debt.
We will give you more details of what the debt.
With the weather.
Yes.
Alright.
And then on the other campaign activity, that's going on and if you can give us the feel for that and why do you feel so good about of book to bill better than one this year.
Yes, we do have many of other activity of campaigns going on.
And in North America, Europe, and other regions and.
Yeah as I said.
And we do we do believe that with the progress and the vaccination.
Will we will over the airlines will be more.
Motivated to close the deal of asleep with us and that.
We have a we are confident they will have the the best option the most efficient product and the regional aviation debt too. So we are very well positioned to this market rebounds at this point of time, So again we.
We expect to have more work with us in the near the the.
The rest of the year in terms of the near views.
Got it got it and can you guys and I'm not sure. If you did you don't typically are you comfortable breaking out the margins for the business Aviation segment.
Yeah, we.
In terms of margins wrong do here.
We had this negative margins around the five per cent negative for us active but as said we had these.
The retrofits and non quality cost probably removing that the margins would have been positive. So the the way we are seeing now and are the the current sales that were performing they are doing.
And quite quite well and on executive Jets in terms of profitability. So we are we are feeling good about margins.
Are you asking about the active jets are commercial and.
Executive Yeah. So okay.
And we're feeling really good that the book do you view as the strong and the profitability for these new sales that we're getting are looking really.
Interesting, Okay got it got it and then maybe shifting gears to the the turboprop discussion on.
Are you guys and if you if you can say.
Go on a go on at that alone or are you thinking about risk sharing partners can you share maybe from a broader strategic per sector perspective are you going to take all of that risk of yourself or do you want to share of that risk with maybe an engine and provider and some other folks.
Thank you again, so our primary our primary strategy is to really to find partners to help us to fund.
The project and accelerates the project debt.
And what we are doing what we have done working working in partnerships and strategic partnerships for the to help us the front of the turboprop.
Got it got it and then maybe one last question and I'll and I'll give up the line.
Investors have been focused on a lot on your ESG concerns and the one area of the team really been focusing a lot more on as the government side of things and something we've noticed over the years and borrowers board doesn't have a lot of aerospace folks on it is there any move going forward to maybe the.
And part of the board the more.
Aerospace people on it and maybe have a board that's a little more international.
Hello, and thanks, all of them for this question and again the wrong.
Yes, I mean.
We have a we had some change in our board of the recently so we have now on the other woman volume Zimbra and shifting from the use of working on the aerospace the sector in Brazil, the CFO of Oh Selecta.
The good movement and also we we are we are now.
And also the recent to the our chairman and that we're looking for two.
Two people two foreigners to be part of our strategy Committee and.
On the first margin the first as debt and the second step to be part of our board of directors for the cells upward movement.
And the direction of and have more internationalization.
Aerospace and knowledge and a reward.
Great. Thank you very much.
Just one point of going back a true to Rob's question about the the mix on executive Jets.
Around the 50% it depends on the on the aircraft, but on business jet around 50% of the sales are for first time buyers okay.
Thank you.
Thank you. Our next question comes from Rethought of Mr. Zaki bread this could be I.
And.
Thank you.
And I have a two questions Sir.
The first of all Francisco, you mentioned and I figured out in the opening remarks the.
The I mean, the comping of Red So the full production capacity for executive Jets in the year.
So my first question is if you can disclose the number I mean, what do you expect to sell for 2020 one.
And my second question is with regards to commercial patients.
Alright, and take a look on.
You can imagine the BR GAAP.
And I can see a negative gross margin and the commercial fusion for the first quarter, So actually and it's part of it's because of our production schedules, but are kind of.
And we will come with a little bit more our bodies.
Well regarding the executive I mean, and what they saw.
And is that the yes, we are.
So the out in our.
Business jet portfolio until the fourth quarter this year, and we which is great for us and all of the book to Bill is.
The $1 75, and all of the Great news for Us and <unk>.
Spec.
Growth of just below 10% compared to the less the last year levels the executive Jets.
And the commercial and the issue, yes, we are suffering with the margins because of the still low volumes.
We are still working with the onex compared to the the previous years, and we expect and the situation to improve of substantially from 'twenty to 'twenty two onwards as the market the record.
And part of the we are we are working.
And I very strongly to reduce the cost of all of our products with many many initiatives is the the cycle time.
The production cycle of reduction or or excess of reduces the cost property in order to combine it with the weight to the.
The sales growth and we see and.
Important improvement in the margins of.
All business, but the especially the commercial division.
Okay. Thank you.
Our next question comes from John Cooper J P. Morgan.
Yeah, Hi, everyone and actually Jonathan coaches from J D.
The question I was and still on margins on looking at the defense and security segment.
And then you had mentioned at the beginning of the call that it was impacted because of the delay related to the approval of the governments and budget almost all of my question is have there since the normalized and the.
Secondly on.
The clean Brad change it sort of opinion by the end of the year, the probably released the guidance or at least something for the second semester of 2021 thank you.
So John Yes.
Thanks for the question on the Haegarda has had the the defense if he could it or the government budget was approved late March and.
The situation should become normal and the defensive secreted sites and we expect to give you guys. A guide the since the mid of the year.
And that's our our best yesterday.
Okay. Thank you.
Okay.
Yeah.
Our next question comes from Myles Walton Cowen UBS.
Thanks, guys. Thanks for letting me back and sorry, my phone cut off.
And just hoping you could give some color on the KC 390 campaigns and if the testing that the ongoing now and completing is.
Basically of catalyst for orders take place these cold weather cold weather and air to air refueling testing or are there customers who are waiting to see these results, which would then manifest into orders.
Well my of are we are really working hard to to two concluded the certification of all the certification process for the KC with all debt some of things that just the mission.
And there's a refueling and the in the order once and.
And then for sure of this rule will help us the opening of new markers for the KC three nine and as I said before we are working.
And several campaigns for the KC and also looking for or the partnerships to help us to open new markets for the KC three Amanda This is what I can share with you at this point of time and miles.
And what is the timeline for the completion of all of the testing.
When does it we hope would.
Everything is still this year.
Okay very good and I think you gave the executive aviation margins, but could you give the the commercial and defense and services, while you're there.
Yes sure.
And.
As I said the executive had these.
The retrofit and non quality cost the impact was around minus five.
And commercial.
The actual services on service of was positive 10%.
On the commercial around minus stand, but it comes from.
No.
The low base and as we are recovering volumes and S. Francisco describe at the margin just continues the trend up and.
And defense are were also affected by <unk>.
Some super Tucano as debt sleep for the for.
For the upcoming quarters and the they have good margins and also the budget right. There was all of that discussion on the budget.
We ended up having lower revenues in defense debt, what we were anticipating which affected fixed cost dilution and affected the margin as well. So of defense was also around minus 5%.
Okay, and Tony I was just the one on cash flow. So you came in.
And probably better than you would expect on the cash flow and the first quarter and does that get better sequentially to the point, where you know that you'll be positive cash flow for the year yet.
And Mike Thanks for the good question.
We we we are not their wafer of planning for sure we'd be much better the last year no question Mark.
And we are revising our forecast here. We we are trying to do every feature be reduced gross yields of Europe, but I cannot give you of the precise number right now, but could you be much better than last year, because we do not have any liability manager of them that the low that we needed to pass through this year here, we are just managing.
And our bank debit and this means we have the dish situation the crystal, but I promise you guys and great you to get on.
Our our our guide us and.
The coming months.
Okay. Thanks, so much.
Okay.
Our next question comes from the T is that mail do Bay asset management.
Hi, Thank you very much and I'm really sorry of the but my questions have been answered. Thank you.
Okay, Thank you and merchants and so welcome.
Our next question comes from Ron Epstein Bank of America.
Oh, Yeah, Hey.
Hey, guys. So I already asked my question and I don't know I got in the toy sorry about that.
Okay and would you like to talk to you all good day.
And I like to talk to you guys to the thank you.
[laughter].
Our next question comes from Paul at the Sun Loomis space.
Hi, and thanks for taking the taking the question most of have been answered but.
On the short term debt.
And how do you.
We expect to manage debt this year and pay it down.
Yeah, well you know most of our liability management was done last year right and when we issued the new bonds and when we raised money with private banks. So this year, we have very few.
Few of Amortizations, and even for 2020, two and 2023. The of March solutions are also low so we're checking we want to reduce our financial expenses.
We are being I would say very mindful on how we do our liability management to reduce those financial expenses, but probably we're going to be paying down some debt going forward.
Okay, and just the amount on the on the balance sheet is listed at the.
300 <unk>.
$57 million is that.
That amount.
The big chunk is the big chunk of that that we have in Portugal, the it's a bank debt and probably we're going to pay down debt of one.
Alright, great. Thank you.
Hello and welcome.
Once again, if you have a question please press star one.
Our next question comes from Ron Epstein Bank of America.
Hey, guys and I'm back I actually thought of one and so my apologies for that what response are you seeing from airlines on on the DTF right because of the new aircraft or are powered by the Pratt engine and.
Whats the feedback youre getting from the airlines on the GTS.
Okay.
On the well known first of all feel free to make you all of the questions are one thing and it's a pleasure for us to go ahead.
And as interaction of in Europe.
I mean, what the we can say.
That's the.
We have the we have for collecting very positive feedbacks from from Xu from <unk> for example, and kidney Ikea and yeah.
And regarding the performance of our.
Oh for each of us.
With the performance of even better than that and we promised you did better than expected and.
I think the the feedbacks and very positive.
And on the new campaigns is it is it kind of how do I say helped.
Moving the airplane will absolutely absolutely we are using this as a stronger <unk>.
And on the argument that some of the mark due to potential customers and they're seeing this.
The there's more focus on.
On the reduction of emissions are at two of US I mean, showing a 25%.
The initial reduction compared to the to the previous generation.
It's a it's really a great performance.
Yeah, that's great. Thank you very much day.
Okay.
This concludes today's question and answer session.
That does conclude and brighter audio conference for today. Thank you very much for your participation have a good day.
And.
Okay.