We have initiative we call production leveling that I know that we want to avoid this concentration of production in the second half of the year and see a better distribution throughout the year. It’s still challenging in the Q1 next year, but we are working very hard since now in order to improve our production deliveries in 2024.
Marcelo Motta: Perfect. Super clear. Thank you.
Operator: Our next question comes from Andre Ferreira, Bradesco BBI.
Andre Ferreira: Hi. Good morning. Thank you for taking my question. I have two questions. The first, I was wondering if you could give us an update on how the partnership with L3Harris for the Agile Tanker is developing. And the second question, you mentioned in a previous question about the countries that are selecting this C-390. But if you could comment a bit on the on the potential talks with the Indian Government a few months back, if you could give us a bit more detail on that. Thank you.
Francisco Gomes Neto: Thank you, Andre. Well, I mean, partnership with L3Harris is moving. We see the C-390 a great solution for the U.S. Air Force. And the first opportunity we found was the tanker, we call Agile Tanker and this is what this partnership with L3Harris is for, right, to work with the U.S. Air Force to offer the C-390 as an Agile Tanker. But we want also to offer the C-390 for the missions, right? I mean, so we are reinforcing our team in the U.S. as well. We recently announced it, a new Vice President of Sales for the U.S. to support L3 and support the potential future sales of C-390 in that country that is the biggest Defense market in the world. So the C-390, again, other countries, I mean, we are very happy with the announcement of Netherlands 2022 and now more recently, Austria and Czech Republic.
I mean, that makes the C-390 the preferred solution for this multi-mission platform for the NATO countries. So we expect to close those contracts during the first half of 2024. In India, we are working in India now to select a partner, that would be our partner to localize the production, the assembly of the C-390 to be compliant with the specification of this India Air Force. They want to buy between 40 to eight multi-mission aircraft and we do believe that the C-390 is the best solution for them. We want to be prepared to compete, and for that, we need to select a partner. This is where we are in terms of India, specifically for the C-390.
Andre Ferreira: Yeah. Thank you.
Antonio Carlos Garcia: Thank you.
Operator: Thank you. Our next question comes from Noah Poponak, Goldman Sachs.
Noah Poponak: Hey, guys. The GTF services business that you’re going to layer in. Remind me how large that gets on an annual run rate basis once it’s at its run rate level? And then also, what does the margin look like on that work?
Antonio Carlos Garcia: Hi, Noah. It’s Antonio speaking. I would say, when the priorities mature, we are first seeing a revenue size of $0.5 billion for the — our company in Portugal. If it was the right question to answer you, we do see in terms of size, something like $0.5 billion. Not next year. Next year, it will be around $50, something like that. But the longer run, $500 million.
Francisco Gomes Neto: Total company.
Antonio Carlos Garcia: Total company. Yeah.
Noah Poponak: That is…
Francisco Gomes Neto: 20…
Noah Poponak: When will that first start to hit your financials, like, late next year?
Antonio Carlos Garcia: We started to already do repairs in April next year.
Francisco Gomes Neto: Yeah. We have a ramp up curve, but we will see some growth in OGMA’s revenue already in 2024, as Antonio said. But 2025, we believe OGMA will be closer to $500 million in terms of revenue and growing…
Noah Poponak: Okay.
Francisco Gomes Neto: … in the years ahead as well.
Antonio Carlos Garcia: Okay. That’s a bit of a positive collateral effect for the GTF issues.
Noah Poponak: Okay. And how does the margin on that revenue compare to the existing Services segment margin?
Antonio Carlos Garcia: It’s higher single digits.
Noah Poponak: High single digits?
Antonio Carlos Garcia: Yes. Yeah. The same we have with other OEMs like Ruili, for example.
Noah Poponak: Okay. And Antonio, I think last quarter you had guided to the Defense segment having $600 million of revenue this year. Is that large of a fourth quarter still the plan?
Antonio Carlos Garcia: That’s more or less what we are expecting for sure. We need one campaign to be able to fulfill, say, maybe we are going to lose $100 million, maybe, but it does not jeopardize our EBIT margin. We are just hanging one sales campaign that we hope to be close to end of this year, because we do have some aircrafts and inventory, especially for the Super Tucanos. That’s more or less what I’m referring to.
Noah Poponak: Okay. And then, I guess, does the Defense segment now just have — is it likely to have a pretty significant ramp up through the year in each year going forward or should I be thinking about the back half of this year being kind of the run rate moving forward? And then, I guess, you have — maybe have some airplanes slipping into next year, I guess. How do you think next year compares to this year in Defense revenue?
Antonio Carlos Garcia: Next year around $750 million then moving onwards to $1 billion on the long range.
Noah Poponak: Okay.
Antonio Carlos Garcia: With all of these new orders for sure. No. We do have, I would say, a potential backlog of more than $2 billion with this contract that has been already announced. We needed to conclude them in order to put in the backlog, then we could have much more visibility in regards to the split between 2024, 2025 and 2026. But I would say in the long run, we do see Defense around $1 billion revenue and higher single-digit EBIT market.
