Title

Presentation

Blue Bird Corporation beats earnings expectations. Reported EPS is $0.731, expectations were $0.65.

Operator: Hello, everyone. Thank you for joining Bluebird’s fiscal 2024 fourth quarter and full year earnings conference call. My name is Sierra, and I will be your moderator for today. Lines have been muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to our host, Mark Benfield, Head of Investor Relations with Bluebird. Please proceed. Thank you.

Mark Benfield: Welcome to Bluebird’s fiscal 2024 fourth quarter and full year earnings conference call. The audio for our call is webcast live on blue-bird.com under the Investor Relations tab. You can access supporting slides on our website by clicking on the presentations box on the IR landing page. Our comments today include forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters we have noted on the following two slides in our filings to the SEC. Bluebird disclaims any obligation to update the information in this call. This afternoon, you will hear from Bluebird’s President and CEO, Phil Horlock, and CFO, Razvan Radulescu. Then we will take some questions. So let’s get started. Phil?

Phil Horlock: Thank you, Mark, and good afternoon to everyone. First, let me say the Bluebird team has done an incredible job in delivering continually improved results as we have moved through each quarter in 2024. As you will see shortly in Razvan’s section, the fourth quarter was no exception to that. We achieved outstanding financial performance and another quarter record for Bluebird. For the full year, we delivered record financial results across the board, and once again, we beat our guidance range for each of the three metrics on the three report. Let’s get started with the key takeaways for the full year on slide six. As the headline says, fiscal 2024 was an all-time record year for Bluebird. Referencing the first line in the box, I am very pleased to report that we more than doubled our prior record profit achieved in 2023, delivering an outstanding adjusted EBITDA margin of 13.6%.

That’s an impressive six percentage points higher than a year ago. As I just mentioned, we beat full-year guidance once again, and we are also increasing our long-term profit outlook on the back of the structural improvements we are making. Importantly, on this call, we are providing you with fiscal year 2025 guidance above the preliminary guidance we showed in our last earnings call. Razvan will be covering these in detail later. Market demand for school buses continues to be very strong. The backlog for Bluebird school buses at fiscal year-end was over 4,800 units, which is 6% above the same time last year. Importantly, net orders for Bluebird buses in fiscal 2024 were 16% higher than last year. Now that’s a great endorsement of the customer demand for Bluebird’s expansive range of buses, and this bodes well for pricing, production stability, and profit margins.

Supply chain issues are undoubtedly easing, and we have done a great job managing through a couple of constraints on some chassis components this year. We expect to see more easing as we move through 2025. Through a combination of pricing and richer vehicle mix, we increased our average gross selling price by 14% through 2024, and every bus we are selling and those in our order backlog reflect current pricing at today’s economic conditions. We are priced competitively, which we can tell from our quote win rate and incoming orders. On the EV front, we produced and delivered more than 700 electric buses, nearly 30% more than a year ago, thanks largely to the first round of a billion dollars of funding from the EPA’s unprecedented five billion dollar clean school bus program.

Throughout the fiscal year, we maintained a very strong mix of alternative-powered vehicles and further strengthened our leadership position in this segment. The higher margins and higher owner loyalty from these propane, gas, and electric buses contributed to our outstanding full-year profit improvement. We are also reinvesting back into the business by selectively upgrading facilities and installing lean manufacturing processes, and we continue to enhance the plant working environment. We are seeing the results of this investment, achieving some of the best manufacturing performance the company has ever seen with higher efficiencies and increased throughput. As a result of all these accomplishments, we achieved an outstanding full-year adjusted EBITDA of $183 million with a margin of 13.6%.

Now let’s take a closer look at the financial and business highlights for the full year on slide seven. As I have said on previous earnings calls, our fiscal 2024 financial performance is transformed from a year ago with many record highs reported. We sold exactly 9,000 buses in the full year, which is a solid 6% above last year. Now those unit sales drove a very impressive 19% increase in sales revenue over last year. The impact of higher pricing and a richer mix of EVs is clearly evident in the revenue growth. Our full-year adjusted EBITDA of $183 million was more than double last year, an outstanding increase of $95 million representing a six percentage point increase in margin to 13.6%. And finally, adjusted free cash flow of $99 million was well above the 50% of EBITDA target that we strive for.

The $22 million decline versus last year is more than explained by the substantial one-time inventory reductions we took in the second half of 2023. Overall, we had breakthrough full-year results and achieved transformational improvements over last year. We are on a great trajectory. Going to the right-hand side of the slide, you can see some of the key operating highlights for the business, and there were many firsts for Bluebird. As I mentioned earlier, demand is exceptionally strong with our firm order backlog at the end of the fiscal year. With about $735 million in sales, that’s 4,800 buses or almost seven months of production at a current sales rate. The full-year average selling price per bus in fiscal 2024 was an outstanding 14% above last year, and that’s about a $17,000 increase per bus.

At $104 million, our parts sales grew by 6%, and we broke the $100 million barrier for the first time in our history. With gross margins at over 50%, the parts business is a significant contributor to our results. Turning to alternative-powered buses, they represented 58% of our full-year unit sales. Now we continue to be the undisputed leader in this space, with our major competitors running at less than a 10% mix. EV buses are part of the alternative power mix, and full-year EV bookings increased by almost 30% over last year with more than 700 sold, exactly in line with the plan we showed to you last quarter. That represented a strong and growing mix of 8% of our total sales, compared with 6% in fiscal 2023. Additionally, we left the year with a record EV order backlog of about 630 buses, and that’s a very strong 13% share of our total backlog.

That’s worth more than $200 million in sales. And remember, the vast majority of orders from rounds two and three of the clean school bus program providing more than $1.9 billion in funding are all ahead of us. On the labor front, we completed our first collective bargaining agreement with the United Steel Workers Union earlier this year. We have a three-year contract in place, we are off to a great start working together, and we look forward to a collaborative and stable partnership that benefits all. To help execute a $160 million expansion plan at our Fort Valley, Georgia location, in the third quarter, we were awarded an $80 million investment grant by the Department of Energy to increase EV and overall production of our Type D bus. This will create up to 400 new jobs by expanding single-shift capacity from 10,000 to 14,000 school buses annually.

It’s a significant profitable growth initiative. In the second quarter, you might recall we renewed our exclusive propane and gasoline engine contract with both Ford and Ram until 2030. By that time, we will have partnered exclusively for almost twenty years. Now that’s what you call a successful business partnership.

Phil Horlock: And finally, we beat guidance on each of net sales, adjusted EBITDA, and adjusted free cash flow by quite a margin too. Including our updated fiscal 2025 guidance being delivered today, this will be the seventh consecutive quarter in which we have beaten and raised our guidance. With a record full-year profit and margin more than double the previous record we set just last year, I am incredibly proud of our team’s accomplishments. I would now like to hand it over to Razvan to walk you through our fiscal 2024 fourth quarter and full-year financial results in detail. We will also be providing you guidance for fiscal 2025 and an updated long-term outlook. Over to you, Razvan.

Razvan Radulescu: Thanks, Phil, and good afternoon. It’s my pleasure to share with you the financial highlights from Bluebird’s fiscal 2024 fourth quarter and year-end record results. The year-end is based on a close date of September 28, 2024, whereas the prior year-end was based on a close date of September 30, 2023. We will file the 10-K today, November 25, after the market closes. Our 10-K includes additional material and disclosures regarding business and financial performance. We encourage you to read the 10-K and the important disclosures that it contains. The appendix attached to today’s presentation includes reconciliations of differences between GAAP and non-GAAP measures mentioned on this call, as well as other important disclaimers.

Slide nine is the summary of the fiscal 2024 fourth quarter and full-year record results. It was another outstanding operating quarter for Bluebird, with significantly improved volume and with high-margin units across all powertrains driving both our top-line and our bottom-line results. We beat the adjusted EBITDA quarterly guidance provided in the last earnings call, and in fact, we delivered the best Q4 quarter ever for Bluebird with $41 million adjusted EBITDA margin. The team continued to push hard and did again a fantastic job and generated 2,466 unit sales volume, which was 350 units above prior year Q4 volume. All-time quarterly record consolidated net revenue of $350 million was $47 million or approximately 15% higher than the prior year, driven by a higher number of units and higher parts sales.

Adjusted EBITDA was a Q4 record of $41 million, driven by higher volumes, increased parts sales and margins, improved MicroBird joint venture results, partially offset by increased labor, SG&A, and engineering costs. The adjusted free cash flow was a very strong $50 million, a $15 million increase versus the prior year fourth quarter. This was despite an increase in working capital, mainly accounts receivables. We continue to sell a significant number of buses to fleets and GSA also in this quarter. All of those receivables have already turned into cash during fiscal 2025 Q1. Phil covered already the record fiscal 2024 year-end key figures. With 9,000 units, $1.35 billion in revenue, $183 million or 13.6% in adjusted EBITDA, a very strong $99 million in free cash flow more than 50% of the adjusted EBITDA.

I will provide more details on our full-year results later in the presentation. Moving on to slide ten. As mentioned before by Phil, our backlog at the end of Q4 has grown and continues to be very strong, at over 4,800 units, including over 600 EVs. Breaking down the quarterly record $350 million in revenue into our two business segments, the bus net revenue was $323 million, up by $46 million versus the prior year. Our average bus revenue per unit was flat at $131,000 per unit, which was largely the result of pricing actions taken over the past year fully offsetting lower EV product mix. EV sales in Q4 were 84 units, as guided in our last call, 87 units less than last year, due to the requested delivery date on our backlog units, placing them in calendar year 2025.

This gives us already almost half of our fiscal 2025 EV expected volume already in backlog. Parts revenue for the quarter was $27 million, representing a growth of $1.4 million or 6% compared to the already very strong prior year levels. This great performance was in part due to the increased demand for our parts as the fleet is aging, as well as supply chain-driven pricing actions and throughput improvements. Gross margin for the quarter was 17%, 0.5 percentage points higher than last year due to our sustained operational performance and our pricing overtaking the inflationary cost, including the effects of the new USW labor agreement. This is a testament to our strong product position and diversification across all school bus types and powertrains.

With approximately $60 million of gross margin despite only 84 EV units being sold this quarter, we are not a one-trick pony unlike many new entrants in this space. In fiscal 2024 Q4, adjusted net income was $25.8 million, a $4.5 million or over 20% improvement year over year. Adjusted EBITDA of $41 million or 11.8% was up compared to the prior year by approximately $1 million. Adjusted diluted earnings per share of $0.77 was up $0.11 versus the prior year. Slide eleven shows the walk from fiscal 2023 Q4 adjusted EBITDA to the fiscal 2024 Q4 results. Starting on the left at an already strong $40.7 million, the impact of the bus segment gross profit in total was $9.3 million, split between volume and pricing effects, net of material cost increases, of $11 million, offset by labor cost increases of negative $1.7 million mainly due to the USW new labor rates now in full effect for Q4.

The favorable development in the parts segment gross profit was $0.9 million driven by higher sales and improved margins as mentioned earlier in the call. Additionally, our 50% share result from MicroBird joint venture improved also by $3.5 million. These great improvements more than offset trend increases in our fixed cost. On a year-over-year basis, the fiscal 2024 Q4 includes one-time approximately $6 million of expenses mainly in bonus and professional services, with the rest of $7.1 million in SG&A and engineering costs as expected. The sum of all of the above-mentioned developments drives our record fiscal 2024 Q4 reported adjusted EBITDA result of $41.3 million. Moving to slide twelve. I will cover some more details regarding our full-year record results.

Breaking down the $1.347 billion revenue into our two segments, the bus net revenue was $1.243 billion, up by $208 million or 20% versus the prior year. Our average bus revenue per unit was $138,000, an increase of $16,000 per unit versus the prior year, which was largely the result of pricing actions taken over the past year and improved EV product mix. EV sales for fiscal 2024 were 704 units, as guided in our last call, an increase of 158 units or approximately 30% improvement versus last year. Parts revenue for the year was $104 million, representing a growth of $6 million or 6% compared to the already very strong prior year level. This great performance was in part due to increased demand for our parts as the fleet is still aging, as well as supply chain-driven pricing actions and throughput improvements.

Gross margin for the year was a record 19%, or almost seven percentage points higher than last year, due to our sustained operational performance and our pricing overtaking the inflationary costs year over year, including the full effects of our USW labor agreement in Q4. This is another testament to our strong product position and diversification across all school bus types and powertrains. With over $250 million of gross margin, coming mainly from our 92% non-EV units sold. As I said before, we are not a one-trick pony. In fiscal 2024, adjusted net income was $115 million, an $81 million improvement year over year, more than tripling the prior record. Record adjusted EBITDA of $183 million or 13.6% was up compared with the prior year by $95 million, more than double the prior year and almost a six percentage points margin increase year over year.

Adjusted diluted earnings per share of $3.46 was up $2.39 versus the prior year, also more than tripling year over year. Slide thirteen shows the walk from fiscal 2023 adjusted EBITDA to the fiscal 2024 results. Starting on the left of the prior record of $88 million, the impact of the bus segment gross profit in total was $113 million, split between volume and pricing effects, net of material cost increases of $120 million offset by labor and overhead cost increases of negative $7 million including the USW new agreement now in full effect. The favorable development in the parts segment gross profit was $5 million driven by higher sales and improved margins. Additionally, our 50% share result from MicroBird joint venture improved also by $6 million year over year.

These great improvements were offset by planned increases in our fixed cost mainly personnel and fringes, healthcare-related, SG&A, and engineering, in total of $28 million, as we continue to invest in our business and our people. The sum of all the above-mentioned developments drives our new record fiscal 2024 adjusted EBITDA results, of $183 million or 13.6%. Moving on to slide fourteen, we have an extremely positive development year over year also on the balance sheet.

Phil Horlock: We ended the year with $128 million in cash and reduced our debt significantly by $35 million over the last year. In fact, at the end of fiscal 2024, we had $33 million of cash in excess of all debt. Our liquidity sat at a record $271 million at the end of fiscal 2024, a $108 million increase compared to a year ago. In fact, now in mid-November, we reached over $300 million in liquidity for the first time ever. The operating cash flow was a very strong $111 million this year, driven by an improvement in operations and margins, offset by an increase in accounts receivable due to the large number of fleet and GSA units built towards the end of the year, all of which can turn into cash already in fiscal 2025 Q1. On slide sixteen, we wanted to share with you our updated fiscal 2025 guidance.

We have a number of both tailwinds and headwinds, and we maintain a cautious stance, maybe a bit less conservative than in the prior years. As already mentioned in the prior call, the tailwinds include strong demand, stable pricing, and still a very high industry backlog. We offer now not only diesel and gasoline school buses, but we have the only propane-fueled school bus in the industry with green fuel and best-in-class total cost of ownership. We are also leading in the EV segment with over 2,000 buses on the road and are confident in the upcoming orders from round two and three of the EPA clean school bus program, significantly improving our sales mix in the second half of fiscal 2025 above our already strong EV backlog of over 600 units.

But headwinds include supply chain still being fragile at times, while improving overall, and we have made great progress in removing bottlenecks for some key components. The material cost and supply inflation pressures are still present. And finally, we expect still relatively low EV production and sales through the first half of fiscal 2025, but the infrastructure plans are being worked on, and with many customers requesting EV delivery before school start in the summer of 2025. In summary, we are maintaining our units and revenue midpoint guidance to 9,250 and $1.45 billion, respectively. However, given our momentum from our record fiscal 2024 results, we are increasing our adjusted EBITDA guidance by $10 million to $200 million or 13.8% with a range of $190 to $210 million and 13.6% to 14% margin.

Moving to slide sixteen, we laid out for you the quarterly guidance for fiscal 2025. Starting in Q1 with the seasonal lowest number of production weeks in the year due to year-end holidays, we expect to sell approximately 2,000 units, including 100 EVs, and generate approximately $300 million in revenue with adjusted EBITDA of $40 to $45 million. In Q2, we expect our total volume to go up to approximately 2,300 units including 200 plus EVs and generate approximately $350 million in revenue with adjusted EBITDA of $45 to $50 million. In Q3 and Q4, we expect an increased number of EVs with 300 plus in Q3 and 400 plus in Q4, driving quarterly revenue around $400 million and adjusted EBITDA of $50 to $60 million per quarter as shown. Before we look at our free cash flow guidance, on slide seventeen, we wanted to remind you that Bluebird was awarded by the Department of Energy under the MASK program an $80 million grant for a new 600,000 square foot Type D and EV production facility.

This would raise our total production capability to 14,000 units on one shift and would provide for increased volume upside for the commercial chassis production when needed. The total investment of $160 million will be spent over two years from calendar year 2025 until the first half of calendar year 2027, with 50% to be funded by Bluebird subject to finalized negotiations with the DOE by the end of December 31, 2024, and our board of directors’ approval. The free cash flow impact for Bluebird in fiscal 2025 is now roughly estimated at $50 million for our half. On slide eighteen, in summary, our fiscal 2025 guidance for net revenue is $1.4 to $1.5 billion, with adjusted EBITDA of $190 to $210 million, and free cash flow of $40 to $60 million after deducting $50 million in extraordinary CapEx for the new plant under the Nest program.

We expect fiscal 2025 to be another record year for Bluebird on our path of profitable growth. Speaking of profitable growth, let’s look on slide nineteen at some of our principles for running the business and touch on some capital allocation points. We strongly believe that revenue is vanity, profit is sanity, and cash is king. Let’s cover these points one by one. On the revenue side, we are focusing on executing our organic growth with an emphasis on alternative fuels. However, we do still offer diesel for those that continue to request it. We are not chasing market share, yet we are reengaging with some of the national large fleets as already shown in fiscal 2024. While we continue to be laser-focused on our core school bus business, we have planted the seeds for adjacent market growth in the commercial step van and chassis business as well as with MicroBird.

More to come in the future on these exciting new areas of profitable growth. Looking at profit, we continue to be very disciplined in our margin management. We have implemented a price increase of $3,500 per bus for all orders received after October 1, 2024, to cover for expected variable cost increases including the impact of our new labor agreement with USW. We continue to be nimble in our backlog management, which we like to keep at approximately two quarters of production, providing us with a competitive advantage in the current environment. Finally, we work relentlessly on reducing our variable cost through continuous cost improvements, in manufacturing on one shift, supply chain management, and steel forward buys.

Phil Horlock: So looking at cash, we plan to invest into our future manufacturing capabilities while also returning value to our shareholders through stock buybacks. We already completed a $10 million buyback in fiscal 2024 Q4, and we have authorization for up to another $50 million in the existing program. We plan to achieve this while maintaining great liquidity and a strong cash position, and we have flexibility in case we decide to pursue focused and attractive M&A opportunities. Moving on to slide twenty. Looking at our fiscal 2025 updated guidance, through hard work from all our teams and great execution of our strategy, we already delivered way ahead of schedule the 13% adjusted EBITDA margin we highlighted in the past as our long-term aspiration.

Today, we are confirming the medium-term outlook at 14% margin in fiscal 2026 and 2027, with volumes of up to 10,000 units generating revenues of around $1.6 billion with adjusted EBITDA of approximately $225 million. Starting in 2028 and beyond, our long-term target remains to drive profitable growth now to even higher levels, towards $1.85 to $2 billion in revenue, comprising of 11,000 to 12,000 units of which 4,000 to 5,000 could be EVs, and generate EBITDA of $270 to $300 plus million, or 14.5% to 15% plus at best-in-class level. The plus comes from the other areas of growth outside of these we mentioned before, both for Bluebird commercial chassis and for MicroBird. We continue to be incredibly excited about Bluebird’s future, and I will turn it back over to Phil.

Phil Horlock: Thank you, Razvan. As usual, that was a great explanation of our latest financial results and our outlook. So let’s move on now to slide twenty-two. I covered this slide in our two prior earnings calls, so I won’t spend too much time on it today as our priorities and strategy are unchanged. Just as they should be. The chart on the left illustrates the three priorities that continue to drive us today: taking care of our employees, delighting our customers and dealers, and delivering profitable growth. The chart on the right provides more texture around the specific strategies that we are pursuing that both align with our priorities and drive our forward-year growth plans. At the center is our ultimate objective to drive sustained profitable growth.

As you look at the margin accomplishments and our plans, we transformed the business from losses to record profitability in fiscal 2023, achieving an 8% margin. In fiscal 2024, we grew our margin by a full six points to around 14%, which is a truly breakthrough year for us that we are now building from. As we look longer term, our goal is to grow our margin to 15% and more as Razvan just mentioned. Following these six core strategies have been key to our margin transformation and will continue to drive our forward-year profitable growth plans. Let’s now turn to slide twenty-three and look at the latest stages of federal funding for clean school buses, which is so important to help us to continue accelerating the adoption of both electric and propane vehicles in fiscal 2025 and beyond.

Let me start by reiterating that the EPA’s focus on school buses is great news for our industry, our customers, and our schoolchildren. With school buses recognized as having the perfect duty cycle for EV adoption. And, of course, EV buses provide major health benefits for our schoolchildren and communities by replacing old legacy diesel buses that emit harmful emissions. As a reminder, we have just started the second year of this five-year program, which provides $5 billion of funding for electric and propane-powered school buses. There are still over $4 billion to be deployed after the first year of funding. The latest news to report to you since the last quarter is that the EPA has launched round four of the five-round clean school bus funding program.

This round four rebate program is highlighted on the slide and provides $965 million to fund an estimated 4,000 EV school buses. The application period is now open and is scheduled to close on January 9, 2025. With winners needing to take delivery of the buses by May 2027, we are now working closely with our dealers and our customers to submit applications, and needless to say, with the order deadline being November 25, the vast majority of these buses will be delivered in our fiscal years 2026 and 2027. In play at this point are rounds two and three, which I covered extensively in our last earnings call. Now these two rounds provide over $1.9 billion in funding for 6,600 clean school buses. The winners have all been notified and have until April 2026 and June 2026 for round three to take delivery of their buses.

Virtually all of this is ahead of us in terms of orders and deliveries. Looking at the far right column, we have the 2024 clean heavy-duty vehicles program, which I also covered at the last earnings call. This program is funded by the Inflation Reduction Act, and the great news is that 70% of that EV funding is being allocated to school buses. That’s up to $650 million to accelerate the adoption of EV school buses, and that’s beyond the $5 billion from the EPA program. We estimate that orders from this program should total 2,300 EV school buses. Awards are expected to be announced in December 2024, with the winners having until January 2027 to take delivery of these buses. So including round four, we have a total of $3.5 billion in grants and rebates approved and preparing to be deployed over the next three years to fund up to 13,000 EV and propane school buses.

With our expectation of winning around 30% of orders, these programs represent a great opportunity for Bluebird to supply up to 4,000 EV school buses of all body types over the next three years or so. Beyond that, we have another billion dollars in clean bus funding to go and significant state and local funding too to accelerate the adoption of clean EV and propane-powered school buses. And remember the mission, the Clean School Bus Act was a bipartisan agreement signed in 2021 designed to keep our children and communities safe from air pollution by removing harmful older emissions legacy diesel buses from the road and replacing them with clean-powered buses. What can be more important than the safe and healthy transportation of our schoolchildren?

Continuing on the subject of federal funding of electric buses, I’d now like to turn to slide twenty-four and look at the likely timeline for orders and deliveries, which has been a question posed in recent weeks. This slide depicts the various EV rounds and funding timeline from application to bus delivery. As you can see, round one of the clean school bus funding program was completed in 2024. Rounds two and three closed out applications in early 2024, and winners were notified of their awards through the third quarter of 2024. Now following the award notification stage, we have now entered the ordering phase for the winners. Now prior to ordering the buses, awardees want to deal first with finalizing their charging and utility infrastructure needs.

That is to ensure they have charging available and operative close to when the EV school buses are delivered. Those charging infrastructure needs are recognized by the EPA by permitting buses to be deployed as late as June 2026 from these two rounds. Now the EPA had dictated that purchase orders for the round three rebates must be placed by year-end 2024. We have seen recent evidence, however, of order extensions being allowed by the EPA at the request of the rebate winners. So while we are still expecting a sharp increase in orders later this calendar year, it likely will be less than the expected surge due to the recent granting of extensions to the order deadline by the EPA. With this assumption, the slide depicts the relative long ordering period in place well into fiscal 2025 with the majority of corresponding deliveries expected to be in the second half of fiscal 2025 and into fiscal 2026.

Nevertheless, as Razvan showed, we are forecasting very strong EV unit sales of 1,150 buses in fiscal 2025, representing more than a 60% increase in Bluebird deliveries over fiscal 2024.

Razvan Radulescu: As we benefit from the $1.9 billion of EPA round two and three awards that are in play right now. EV bus sales from the EPA round four and clean heavy-duty vehicles program, however, will likely impact fiscal year 2026 at the earliest. I should mention following recent discussions with the clean school bus program administrator of the EPA, our understanding is that there is no delay in the EPA’s plans or processes to pay grants or rebates to the awardees following order submission. The EPA is simply accommodating requests for awardees to delay ordering until firm infrastructure plans are in place that match with bus delivery timing. Our expectation that the majority of fiscal year 2025 EV bus deliveries will be in the second half of the year supports this view on infrastructure and thus order timing.

I’d like to turn to slide twenty-five and provide you with our view on continued federal government support on incentives pertaining to Bluebird. Clearly, there has been a lot of hand-wringing on this topic in recent weeks. As the headline says, we are very confident in continued federal government incentive support for two specific programs from which Bluebird is benefiting. First, the DOE’s $80 million investment grant representing 50% of a $160 million plant expansion at Bluebird. It is worth reminding all of us that this program was fully endorsed in the state of Georgia by both Republican and Democratic parties for the following reasons. It supports manufacturing investment in the United States, by a US company with a history of nearly 100 years based in Middle Georgia where manufacturing presence is limited.

And it creates up to 400 good-paying jobs and adds much-needed capacity to build new, cleaner buses for transporting our children safely to school. Second, the $5 billion clean school bus program funding that we have spoken of so much today. As a reminder, 25 million children ride school buses today in the US. It’s America’s largest mass transportation system by a long way. And it’s not a discretionary purchase by a school district. This program was written into legislation in 2021 with full bipartisan support of the bill. The funds have been fully appropriated, and four years of funding are in play. It helps eliminate the harmful emissions we see every day at school, with old legacy diesel buses emitting black fumes from the tailpipe as kids board and exit these buses.

This is a serious and proven health concern. It accelerates the adoption of zero-emission buses to protect our children’s health and safety. Reduces future costs by increasing scale and lowers operating costs to a fraction of that of an internal combustion engine. We have more than 2,000 electric buses deployed and on the road, thanks in part to this program, built in the US, partnering with US suppliers, all for the safety of our children. To summarize these programs, US manufacturing, US company, bipartisan support, innovation, new jobs, health and safety for our children, and clean air for everyone. Now that’s compelling. So let me now wrap up the earnings call and our outlook for the business on slide twenty-six. There’s not much more to say on our fiscal 2024 results other than we achieved record results more than double last year’s then-record profit, and we beat guidance across every metric.

Frankly, fiscal 2024 was a breakthrough financial performance for Bluebird, just shy of a 14% adjusted EBITDA margin, and reflecting a six percentage point margin increase over fiscal 2023. Razvan took you through the raised guidance of fiscal 2025, I am showing some of those key metrics at the midpoint of guidance here. We are being prudent on our bookings outlook, only increasing volume by 3% over fiscal 2024 at this time, as we still deal with some supply chain issues. But we managed them very well in 2024, and if we can build more in fiscal 2025, we will, just as we did last year. Net revenue of $1.45 billion will be a new record for Bluebird, up 8% from fiscal 2024. Adjusted EBITDA guidance of $200 million is 9% higher than our fiscal 2024 record results.

Importantly, we are planning on a robust 14% adjusted EBITDA margin in fiscal 2025, as we look to maintain momentum after such a surge in margin in fiscal 2024. And finally, we are looking to grow EV unit sales to 1,150 buses in fiscal 2025. And that’s a substantial 64% increase over the year before and well supported by $1.9 billion of EPA funding already in the market. As you can see on the right chart, there is a lot of pent-up demand following low interest sales in 2020, 2021, and 2022, and the bus fleet has aged by a couple of years. ACT is forecasting a compound annual growth rate of 6% through to fiscal 2027. And that’s great news for our business and great news for our profit outlook. The future is incredibly bright for Bluebird. This time last year, we talked of achieving a 12% EBITDA margin in a couple of years.

Clearly, we’ve already surpassed that by a significant margin and are confident in our pursuit of our new long-term goal of more than 15%. I want to thank all of the 2,000 employees for all the hard work and dedication in delivering our record results in fiscal 2024 and for transforming our company, as well as our outstanding dealer partners who are critical to our success. Now that concludes our formal presentation today. I would now like to hand it over to our moderator for the Q&A session. Thank you.

Operator: We will now begin the Q&A session. If you are using a speakerphone, please pick up your handset before asking your question.

Michael Shlisky: Our first question comes from Michael Shlisky with DA Davidson. Your line is now open.

Michael Shlisky: Yes. Hi. Good afternoon. Thanks for taking my question. A lot to process here. Maybe I’ll start with one of your other comments there, Phil, about the EPA program. Got delivery going through 2027. It’s not past that. The program’s fifth round will probably be over by 2027-2028. Yeah. You still got quite a few by large, risk mix of EVs in your go-forward mix from that point forward. Are you relying on a renewal of the EPA program after fiscal 2027, whenever the last 2027-2028? Alright. That this current one’s over, do you feel like your EV business will, at that point, which is seven years away, stand up on its own and not in such heavy subsidies?

Phil Horlock: Hi, Mike. It’s Phil here. Good question. I think the last point you said. We’re expecting as we progress through to 2028, which is when we expect the EPA program will end, we expect to continue those at the EPA sub-EPA. That, of course, we’re still seeing and expecting a lot of state support. Which local support that exists. And I think as Razvan told you, you know, last time he’s called. Our projections do recognize a reduced revenue on these vehicles. Over time. We’re seeing it a little bit now in the EPA because each round there’s been about a $25,000 reduction in the amount of the rebate or grant being offered just resulted in more units being available for the market too. So we can do to see that as costs come down, battery costs come down, more scale, and reflecting great significant margin over time, but certainly reducing in price to make it a little bit more affordable.

For all. And that’s the reason that parity when TCO and the price really, really gels together.

Michael Shlisky: Okay. So that’s all been baked in. The pricing changes over time. The fact that it’s gonna be over after 2027, that’s all kinda baked in.

Phil Horlock: Absolutely. I think Razvan’s got a couple of comments on that to make too.

Razvan Radulescu: Yeah. It’s Mark. It’s Razvan. So, you know, in the past, they messaged the three times an EV price versus a diesel bus. We are now already moving towards the 2.5 times multiplier. And we are projecting that slope to continue downwards as we reduce our cost. While maintaining our percentage margin across all bus types and powertrains.

Michael Shlisky: Got it. Got it. So it’s all planned. It’s always been part of your outlook, but I guess you tell us behind the scenes what you’re doing to ensure that the powertrain providers and I guess there’s two of them now, what are they doing to reduce their prices to you and kind of having sure everyone’s coordinating and working in lockstep to keep your margins and their margins consistent as we go forward.

Razvan Radulescu: Yeah. So, obviously, we are not able to share with you on this public call all our strategies for lower cost. The last, we are working with several providers, and there is new capacity coming online through the next couple of years. And we have clear plans behind with them behind our numbers to drive costs down and make EV buses more affordable. With the ultimate goal of reaching and beating with total cost of ownership conventional buses.

Michael Shlisky: Okay. Maybe one last one for me. Do you have any significant growth restrictions for parts for 2025, or is the mid to low as you had the last quarter here roughly decent growth rate for you for the following fiscal year here?

Razvan Radulescu: So our parts business is already very strong, has been for the last couple of years. So right now, we are targeting single-digit, low single-digit revenue growth year over year.

Michael Shlisky: Okay.

Phil Horlock: Fair enough. No. We’ve been achieving. What’s that? Okay. We’ve been achieving five percent in recent. You know, that sort of number, and that’s sort of, you know, what we expect to be. Cool. Hey, Mike. One thing I just wanna mention to you. I do talk about state and local grants. Just to give you an example, we’re right now in the middle of our significant order we won. I think you knew about that with the LA Unified School District. For 108 electric buses. That’s a great example. Not a single EPA grant used for that. Transaction. Of a single want. All supported by grants in California, state grants, some local grants, and a very attractive deal for the customer. So as an example, I think even today of not being entirely reliant on EPA. And still having a very attractive proposal to offer.

Michael Shlisky: Got it. Outstanding. I’ll pass it along. Thanks so much.

Phil Horlock: Thanks, Mike.

Operator: Our next question comes from Eric Stein with Craig Hallum. Your line is now open.

Eric Stein: Hi, everyone. Thanks for taking the questions. Alright. So maybe, hey, so maybe on pricing, good to hear about, I think, the three and a half percent increase that you’re putting through here recently. And I know that you know, this is typically a one to every, you know, once or twice every year you do this. You know, just curious. I mean, this has been a really big part of your margin expansion, obviously. What are you hearing from customers? Is there any pushback? You know, how are the others kind of acting on price in the market, and how do you feel about this going forward?

Phil Horlock: Yeah. I think again, a good question. I mean, we’ve got a rhythm going where we certainly price twice a year. We’ve been doing that for a good couple of years, April first, and then October the first. So it’s almost like October’s on the start of our new model year, so to speak, and then mid-model year. And we can tell from all the bids we’ve done, our win rates, and, you know, it becomes the school district bids and their decisions we know we’re very competitive. We are competitive. The competition looks like is, you know, on the same lines as us. And, yeah, it’s going very well. And, occasionally, as in a case of the $3,500 amount we put on in October, we put some product features in there too. It’s a model year, and we have some non-attractive features in that pricing too. To differentiate ourselves a little further. So yeah, it’s working very well, and we feel confident continuing on that trend.

Eric Stein: Got it. That’s helpful. And then maybe just on the outlook for fiscal 2025, I knew it’s a new situation over the last couple of years, because of the backlog, and I get the whole dynamic about the second half waiting for EVs, but your guidance does imply that there is a little more seasonality in the year. Is that, I mean, anything to read into that? Is that just kind of just the way that the schedule lays out for deliveries, or how should we think about that?

Razvan Radulescu: Yeah. If you look at slide six, production seasonality is purely driven by the number of weeks available in each quarter with Q1 being the lowest due to both Thanksgiving and Christmas holidays and shutdown. And Q3 being the highest. So there is nothing special there.

Eric Stein: Okay. Alright. And then maybe just a housekeeping question. So it sounds like $50 million in CapEx for this project. At least for this year’s portion of the project. Should we think of that as total CapEx, or is that the CapEx that would be above and beyond your more typical levels?

Razvan Radulescu: Yeah. The $50 million is the extraordinary above and beyond. We guided in the past also around $25 million as our normal CapEx.

Eric Stein: Yep. Okay. Thanks a lot.

Operator: Our next question comes from Tyler Dominguez with BTIG. Your line is now open.

Tyler Dominguez: Hi, everyone, and thanks for taking the question. Here. I wanted to follow up on some of the productivity comments and the structural improvements that you’re kind of seeing. I guess, how much of that is left? And then if you had to kind of bucket that opportunity in terms of maybe manufacturing gains versus gains on procurement. I guess, how would you bucket those different verticals? And I guess, how much of that is left for as you look out to next year?

Phil Horlock: Again, another good question into our details here. I look at three major elements. I mean, the first one is I look at pure productivity in the manufacturing operation. This is lean manufacturing, kaizen, of initiatives done before or tackled before, we brought some new folks on the team. These last two years are really helping move the needle there. And making sure we eliminate waste and the walking time our employees have in the stations. And that’s good really good discipline. And that pays dividends. The second one is around I guess it’s called managing the material coming through the line. And, again, we strengthened our team there. We closed a warehouse that was thirty-five miles away from us. In Macon, Georgia, and we brought one that’s about less than ten miles away.

And we also put a warehouse next to the line in the main plant, which means that we can really fulfill our material needs very quickly in response to any issues we might have. Importantly, when I measure that, I measure throughput. This is a third piece. And it’s part of that too. It’s when I look at where we were just a couple of years ago, it was taking us forty days from when we set up a unit to when we call it’s ready for delivery. Okay. So the first time we start putting a frame rail on a line, and building components on it, gosh. Should that vehicle coming off the line being ready for delivery after taking out for a drive and all things we do test driving, so and so it was more than forty days. That’s now down to less than between twelve to fourteen days it takes us now.

And that saves labor, it saves obviously, it’s great working capital. It’s fantastic for us, but that again has been part of our challenge. How do we reduce that time, compress it, to make sure we get a major productivity? And if you can imagine, when you go from forty days to fourteen days. It’s very good for, like I say, use of our capital, use of our cash, and frees up a lot of cash. So it’s all three areas. Kaizen initiatives, type initiatives, lean manufacturing, it’s working to draw our material a lot better, material management and flow. Then the third piece is this acceleration of throughput in the line. We also have, it’s limited for us because I think we mentioned before, you know, when a school bus has got nine and a half, that’s nine thousand factory parts on it, typical car, twenty-five hundred.

We got nine thousand five hundred, and all these different variations length of our vehicles all go down the same lines. And so we have a very high intensive labor on our line, not too much automation. But what we can we have been using it to help really assist our folks on the line to improve a better quality bus, and we’re seeing the impact of that. So hope that’s helpful to let you know. Give me a text around what we’re doing.

Tyler Dominguez: Okay. Great. No. That’s very helpful. Thank you. And then on my follow-up here, surrounding some of the comments related to the EPA and the potential extension of the deadlines. I guess, how do you guys kind of think about the alternative power bus mix in the product portfolio? Is there an opportunity to maybe have some customers take delivery of other powertrains outside of EV? I guess, how do you kind of think about managing the product portfolio kind of given some of the comments surrounding the charging infrastructure and trying to really match that supply with the demand here over the next call to twelve to eighteen months?

Razvan Radulescu: Hey, Tyler. Thanks for the question. This is Razvan. So first of all, we ended the prior fiscal year with over 600 units in backlog, and we laid out on a quarterly basis what our EV sales expectation is. And, obviously, we expect a number of orders from round two and three to come, and especially field second half of the year where we still have open slots. So that’s how we manage the next twelve months for sure, and we continue to sell and push propane, which has the lowest total cost of ownership. So it’s the best money can buy out there in terms of financial payback. So between these two actions, we are very confident in our guidance and what we laid out for you.

Tyler Dominguez: Okay. Thank you, guys. Really appreciate the time here. I will turn it back to the guild.

Operator: Our next question comes from Craig Irwin with Roth Capital Partners. Your line is now open.

Craig Irwin: Good evening. Thanks for taking my questions. So, Razvan, in your prepared remarks, you talked briefly about $6 million in one-time SG&A and engineering expenses in the quarter, in the September quarter. Can you maybe give us a little bit more detail around what that was? And are these items that are likely to recur in upcoming quarters?

Razvan Radulescu: That’s correct. Thanks for the question. So the $6 million one-time is primarily on a year-over-year basis, the bonus accrual. Given the extraordinary results we had this year, it was a higher amount accrued this quarter compared to the prior year. I’m consulting expenses that we booked in Q4 which weren’t there a year before. So that’s why I called them one-time in the sense that they are not to be repeated in the next coming quarters.

Craig Irwin: Okay. Excellent. And then a question of clarification. Phil, in your prepared remarks, you said that you do not expect a surge in orders before the end of the calendar year. But when I look at the very granular guidance you give around EVs, you expect a 2.4 to 3.1 fold increase in deliveries in the second half of calendar 2025. That’s dramatic growth. When do you expect that surge in orders to materialize? It’ll give you visibility on those units being delivered.

Phil Horlock: I think it’s a good question again, Craig. I think we see that towards the end of our second quarter, we should see it happening. Second quarter for us, obviously, is through, you know, March or so, February, March of the year. So that’s the time period, which will set it up nice for us to deliver later in the year. You know, I just wanna stress. I mean, when we were here last month, we talked about this firm deadline, which the EPA had set at the end of November, actually. And what’s happened is can understand that. I think we all can. I would hope we can. That, you know, infrastructure is really important. Where am I getting my charging stations from? Because I should be. This latest rounds they’re looking for a higher volume of.

In other words, the onesie twosies we saw in round one, we’re not seeing those in round two and three. They’re more about fifteen to twenty to thirty vehicles looking for larger orders which are probably a bit more effort on the infrastructure side. So with our customers, dealers, fleets, requests from the EPA, hey. Can we extend this? Give us time to figure this out a little more. And the EPA said, sure. We’ll let you have that. All we’ve seen so far is that the extension. And I can’t obviously predict at the end of that forty-five but they’ll extend again. But that’s what they’d be that’s the max that we’ve seen to any of customers who requested an extension. Is forty-five days.

Craig Irwin: Okay. Understood. So then, in the final days of the Obama administration, there were three or four waivers issued to try and extend some of these funding programs forward into the first Trump administration. And I understand EPA is working on more than a half dozen similar waivers right now to provide funding continuity. Is there anything specific you might want to point us to there that you feel is relevant to the visibility that you’re calling out for the funding continuity for an obvious Biden flagship program for the last four years?

Phil Horlock: Well, I think, you know, I mean, we’ve mentioned before, but we go back to being a bipartisan program in 2021. I mean, no from the Republican party, that being supported. So I mean, and I try to summarize today. If I listen to the new administration, what they talk about is we love US manufacturing. We love US suppliers. Well, we certainly got that, and we’re certainly in the US. Like adding jobs. We’re certainly doing that too. Because we’re growing the business. And we look at health and safety. I heard Trump talk about that quite a bit. On his running and safety and health is so important. Well, that’s this is nothing better than this for children’s health than getting rid of harmful emission fumes. And so I think when you look at it, know, the EPA is behind all that, and you know, we and at the EPA, when we talked to them, we’re completely confident I mean, I said completely they are confident of this being maintained.

They believe it’s exceptionally valid product. It’s done what the EPA is all about. Making sure they protect the environment and they protect their children in particular by these buses every day. I think we’ll like we’re sitting here with some, you know, program that sort of it’s off left field. It doesn’t seem to make sense. It’s why you’re supporting some small group. We’re supporting twenty-five million children every day. To ride a school bus. And we’ve had discussions with that with the EPA. We’ve had discussions with lobbyists about this, who also feel, you know, confident that this will be supported. I can’t predict, obviously, with complete accuracy, but I certainly think we feel we feel very confident that this money is going to a great cause.

Should continue to do so.

Craig Irwin: Well, I like those comments, and congratulations again on the record results.

Phil Horlock: Thanks a lot, Craig. Appreciate it.

Operator: Our next question comes from Chris Pierce with Needham and Company. Your line is now open.

Chris Pierce: Oh, hey. Thanks for taking the question. I look at slide twenty-six, industry predict from ACT, it looks like twenty-four is gonna be down year over year versus it was up in prior slides. I know these aren’t your estimates, but I just wanna get a sense if BlueBird is delivering mid-single-digit growth and the industry is down, can you talk about share gains that you might be seeing within the industry? Or just wanna make sure I fully understand sort of what’s happening. And is it just share gains in alternative or share gains in diesel? Like, I just wanna get a sense of what you guys are seeing versus the industry.

Phil Horlock: Well, it’s another good question here and a good observation. I think what I would say is, first of all, we don’t tend to talk about share in this situation, but what we’ll talk about is there was a specific reason why the twenty-four industry represents deliveries to customers, it’s down. And that’s because one of our competitors had major production problems in the early part of the 2024 calendar year. Which prevented them from delivering we believe, quite a few a few thousand buses. To their customers. They had some product changing I couldn’t dive and they chose not to deliver them. And that won’t get into who that is or what the problem was, but we know for a fact that’s true. I don’t think we so now they’re back on board again later in the year.

They got products up and running. They were shipping them. And that’s why you see the it’s you see the major boost in twenty-five, a big growth because that customer now kicks in the volume they’ve neglected to deliver in twenty-four.

Chris Pierce: Gotcha. Okay. And then if I look at slide twenty on your slide deck, that long term you know, it used to say twenty twenty-seven. Now it says twenty twenty-eight, but the numbers haven’t changed. I just wanna get a sense of is that because of the same dynamic we just discussed where the industry shape of growth is different, or is this something different on your end?

Razvan Radulescu: Yeah. Thanks, Chris. I’ll take the question. This is Razvan. So first of all, every year as we look, the long term not to be add butter we kept a thousand and twelve thousand unit. However, we raised the upper end of the three hundred plus million and fifteen plus we did change the bottom line. We kept the top line. And the reason for that is because as we lay down now the exact plans for our new facility, we are planning to go live with it in the first half of calendar twenty twenty-seven. Which means we can’t benefit yet of that capacity increase fiscal twenty twenty-seven, including also ramp up of about six months. So, therefore, the eleven thousand, twelve thousand have to start in twenty twenty-eight plus. So that’s the reason why they shifted by one year.

Chris Pierce: Okay. And then lastly, could I just get an update on the CES search, please?

Phil Horlock: Sorry. Sorry. What was that? Sorry. I missed what you said there. What?

Chris Pierce: Oh, Phil, I know that you’re hear the question again. Phil, I know you’re sorry. I’m sorry. I’m sorry.

Phil Horlock: Yeah. Can you hear me? I never I never left, but I don’t still here. But yeah. I mean, yeah. But look. Look. Yeah. I mean, obviously, I was planning on retiring at the end of September. And that didn’t work out. And I can tell you the board has undertaken a search and there’s a three-person committee on the board looking at this in some detail and going through it. And I can assure you that when we do when someone is selected, ensure a great transition to make this work seamlessly.

Chris Pierce: Okay. Thanks for your time.

Phil Horlock: Okay. Thank you. Thanks, Chris.

Operator: Thank you all for your questions. There are currently no questions in queue, so I’ll pass the conference back to Phil Horlock for any closing remarks.

Phil Horlock: Well, thank you, Sierra. And all of you for joining us on the call today. As you heard today, following our record fiscal 2024 results, which were I just mentioned again, it more than double last year’s then-record profitability. We’ve increased our fiscal 2025 guidance for EBITDA to $200 million at the midpoint of range, which is a $17 million increase over fiscal 2024 and we are confident in achieving more than a 15% profit margin in the longer term. I think Razvan used the term today on his call. We’re not just a one-trick pony. We love the interest in EVs. It’s terrific. We like the product, and we grew from a 6% mix in 2023 to 8% in 2024, and we’re looking to grow to 12% or so in 2025. So, again, significant growth we’ve seen there, but hey, we make a lot of products.

We still make propane. We make gasoline. We make diesel. And we make a good margin a very good margin, all three of those. So we have the most expansive range of powertrain offerings in the industry as you all know. So bottom line, I would say the Bluebird has never been stronger. And we’ve got great momentum. So we appreciate your interest and look forward to updating you again on our progress next week. And should you have any questions, please don’t hesitate to contact our head of investor relations Mark Benfield. Thanks again from all of us here at Bluebird. And have a great evening.

Operator: That will conclude today’s conference call. Thank you all for your participation. You may now disconnect your line.