Blue Bird Q1 2024 Earnings Call Transcript

Quartr
Provided by Quartr
February 7, 2024

There are 7 speakers on the call.

Operator

Hello all, and welcome to the Blue Bird Corporation Fiscal 2024 First Quarter Earnings. My name is Lydia, and I'll be your operator today. I'll now hand you over to your host, Mark Benfield, Head of Investor Relations to begin.

Speaker 1

Thank you, and welcome to Bluebird's fiscal 2024 1st Quarter Earnings Conference Call. The audio for our call is webcast live on blue bird.com under the Investor Relations tab. You can access the supporting slides on our website by clicking on the Presentations box on our 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 and in our filings with the SEC.

Speaker 1

Bluebird disclaims any obligation to update the information in this call. This afternoon, you will hear from Bluebird's CEO, Phil Horlock and CFO, Rajovan Rogelescu. Then we will take some questions. So let's get started. Bill?

Speaker 2

Well, thanks, Mark, and good afternoon, everybody. It's great to be here and to share with you our results for our fiscal 'twenty four Q1. Now you recall that in our last earnings call, we reported record results fiscal 2023 Q4 and full year. Well, I'm pleased to tell you that our momentum has not slowed down at all with the Bluebird team doing a fantastic job in delivering another all time record profit in the Q1 of fiscal 2024. Razdan will be taking you through the details of our financial results shortly.

Speaker 2

So let me get started with the key takeaways for the Q1 on Slide 6. As the headline says, we achieved record financial results in the Q1 of fiscal 2024. As I just mentioned and as shown in the first line in the box, It was a record adjusted EBITDA for any quarter in our history. And our net sales revenue was a record for any quarter in the first half of fiscal year. So with record progress in revenue, I am very pleased to tell you that we achieved an all time high adjusted EBITDA margin of 15% in the Q1 and we're increasing full year guidance once again.

Speaker 2

In just a few minutes, Razzam will take you through the financial details of what was an exceptional Q1 result for Bluebird, including a comparison with last year. As we look at the drivers for this terrific progress in Q1, It really is about maintaining and delivering the plan we laid out last year, which focuses on making significant improvements across our entire business. Market demand for school buses continues to be very strong and our backlog for Bluebird school buses was at a very healthy 4,600 units at the end of the Q1. This bodes well for pricing, production stability and profit margins. Now while supply chain issues are undoubtedly easing, there are select constraints on a couple of chassis components across the truck and bus industry are still limiting industry production and deliveries.

Speaker 2

But we are very engaged with those constrained suppliers with on-site support at their plants and we are managing the situation well. On that point, despite this component constraints, we sold 9% more school buttered in the Q1 than a year ago. As I mentioned last quarter, the legacy price backlog, which hurt us in fiscal 2022 and in the quarter fiscal 'twenty three is fully behind us. All those low margin units have been sold. Every bus in our order backlog now reflects current pricing and we are priced competitively, which we can tell from our quote win rate and our incoming orders.

Speaker 2

This is entirely different Bluebird bus revenue and gross margin structure compared with just a year ago. On the EV front, thanks largely to the first phase of the $1,000,000,000 of funding from the EPA's unprecedented $5,000,000,000 Clean School Bus Program, Our 1st quarter deliveries of electric buses were at an all time record in a quarter, more than doubling from a year ago And we ended the Q1 with a strong backlog of EV orders. As we have done for many years, we again increased our mix of alternative powered vehicles over last year and further strengthened our leadership position. The higher margins and higher owner loyalty from these products contributed to our profit improvement in the Q1. We'll continue to reinvest back to the business by selectively upgrading facilities and processes, enhancing the plant working environment.

Speaker 2

And as Razzam will show you later, we are doubling our engineering spending this year as we embark on exciting new product programs that will hit the market in the next 2 to 3 years. Through the efforts of the best workforce in the business, strong leadership, lean process improvements and sheer hard work, we have been achieving some of the best manufacturing performance the company has ever achieved. Bottom line, we're performing extremely well in a strong market. We're delivering a greater mix of higher margin alternative powered vehicles, We're priced competitively and appropriately if today's economic environment and manufacturing efficiencies are improving. As a result of all these accomplishments, our first quarter profitability was an all time record for Bluebird at $48,000,000 with an exceptional adjusted EBITDA margin of 15%.

Speaker 2

Now let's take a closer look at the financial and key operating highlights for the Q1 on Slide 7. I want to begin by saying that our Q1 financial performance is transformed from a year ago with many record highs reported. We sold over 2,100 buses in the Q1 of fiscal 2024, which is substantial 9% or 172 buses above last year. Incidentally, that is our highest first quarter unit sales volume in more than 15 years and what is typically a seasonally challenged quarter having just followed the start of the new school year. Those unit sales drove 1st quarter net revenue of $318,000,000 That's another 1st quarter sales record for Bluebird and an outstanding 35% increase over last year.

Speaker 2

So with volume up 9% and net revenue up 35%, the impact of higher pricing And a richer mix of alternative powered vehicles, including EVs is clearly evident in the revenue growth. As I mentioned earlier, 1st quarter adjusted EBITDA of $48,000,000 is another all time record for Bluebird and that's $51,000,000 above last year and well above the $25,000,000 to $35,000,000 general guidance range for quarterly profits that we set at our last earnings call. And finally, adjusted free cash flow for the Q1 was about breakeven as we protected our future material needs And $21,000,000 below last year, when in fiscal 2023, we were aggressively cutting excess inventory left from the prior quarter. Lanzhan will cover this topic in detail in his section. Overall, with exceptional first quarter financial results and transformational gains from last year.

Speaker 2

On the right hand side of the slide, you can see some of the key operating highlights for the business. As I mentioned earlier, Demand continues to be strong with our firm order backlog at the end of the first quarter worth over $670,000,000 in net revenue, reflecting a backlog of over 4,600 buses. Incidentally, as of Monday this week, our backlog has grown to 5,000 buses. So orders clearly haven't slowed down as we enter the traditional seasonal order cycle for school districts and fleet operators. We raised prices considerably over the past 2 years and the average first quarter selling price per bus in fiscal 2024 was an outstanding 26% higher than a year ago.

Speaker 2

That's worth about $29,000 per bus in revenue. Parts sales totaled $24,000,000 in Q1, representing a strong 8% growth over last year In the typically slowest quarter of the year for parts sales, another great result by the parts team. Turning to alternative powered buses, they represented our 2nd highest mix of sales in any quarter, a 66% of total unit sales And that's 4 percentage points higher than last year. We continue to be the undisputed leader in this space. No other major school bus manufacturer comes close to that number.

Speaker 2

Incidentally, I would be remiss if I didn't mention that our principal competitors, IC and Thomas are no longer offering the propane or gasoline powered school bus. And we are once again the only OEM supplying these important products. EV buses were part of that alternative power mix growth with Q1 bookings increasing by 124% over last year as we sold a quarterly record of 206 EV school buses. That represents an all time high mix at 10% of our total sales. Additionally, we left the Q1 with 420 firm EV orders in our backlog, which is around a 9% share of our total backlog.

Speaker 2

That's with approximately $130,000,000 in revenue. Incidentally, that backlog today is now at 500 EVs representing 10% about total current backlog. Clearly, we're benefiting substantially from the $1,000,000,000 funding from the first phase of the EPA's $5,000,000,000 Clean School Bus Program. I'll cover later the exciting news on the 2nd phase of the recently announced EPA funding, which is higher than was expected and will generate significant EV and propane school bus awards in the first half of twenty twenty four calendar year. Continuing with our EV successes, I am incredibly proud that during the Q1 fiscal 2024, we received the largest single order ever of EB School Buses from LA Unified School District on a competitive bidding process.

Speaker 2

That's 180 buses in total With deliveries starting late this calendar year and importantly, this order did not utilize the EPA's Clean School Bus Funding Program. That's a great testament to our competitiveness and to our leadership position in the EV segment. Late in the Q1 of fiscal 'twenty four, we announced that we had formed an exclusive joint venture called Clean Bus Solutions. That's a fifty-fifty JV with Generate Capital, who is a leading sustainable investment and operating company focused on infrastructure transition. Clean Bus Solutions will provide electric school buses and charging infrastructure as a service to Blue Bird customers for an affordable monthly fee over the lifetime of the service.

Speaker 2

This turnkey service eliminates a typical high upfront cost for a school district and pay for electric bus when grants are limited and handles the entire charging infrastructure including installation. This recurring revenue business accelerate adoption of Bluebird Electric Buses by school districts and will be a great new sales tool for our dealers. We'll keep you posted on progress for the coming year as Clean Bus Solutions begins to transact business. And finally, on the back of our Q1 results, we are once again raising full year guidance for adjusted EBITDA and adjusted free cash flow. With an all time record profit earned in Q1, reflecting a 15% adjusted EBITDA margin, I am very proud of our team's accomplishments.

Speaker 2

I would now like

Speaker 3

to hand it over to Razvan to walk through our fiscal 2024 Q1 financial results and updated guidance in more detail. Over to you, Razvan. Thanks, Phil, and good afternoon. It's my pleasure to with you the financial highlights from Bluebird's fiscal 2024 Q1 record results. The quarter end is based on a close date of December 30, 2023, whereas the prior year was based on a close date of December 31, 2022.

Speaker 3

We will file the 10 Q today, February 7, after market close. Our 10 Q includes additional material and disclosures regarding our business and financial performance. We encourage you to read the 10 Q 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 9 is a summary of the fiscal 2024 Q1 record results.

Speaker 3

It was another outstanding operating quarter for Bluebird with somewhat limited supply chain challenges and with an increased number of higher margin units driving both our top line and our bottom line results. We significantly beat the adjusted EBITDA general quarterly guidance provided in the last earnings call. And in fact, we delivered again the best quarter ever for Bluebird with 15% adjusted EBITDA margin. The team pushed hard and continued doing a fantastic job and generated 2,129 unit sales volume, which was 172 units or 9% higher than prior year. Record Q1 consolidated net revenue of CAD 318,000,000 was $82,000,000 or 35 percent higher than prior year, driven by a higher number of units, higher part sales, improved mix of electric buses and pricing actions that materialized in this quarter as expected.

Speaker 3

Adjusted EBITDA for the quarter was a record $48,000,000 driven by high margins, increased parcels and margins, partly offset by increased labor costs. The adjusted free cash flow was negative $2,000,000 $21,000,000 lower than the prior year Q1. This result was due to increased profitability, which was more than offset by an increase in strategic inventories for long lead components, a reduction in accounts payable and a reduction in the EPA prepaid received in fiscal 2023, Q4. Our liquidity position at the end of this quarter was very strong at $184,000,000 This performance was outstanding for both the top line and the bottom line. All time record for Q1 quarterly revenue of $318,000,000 all time record for quarterly EV sales above 200 units an all time record for quarterly adjusted EBITDA of $48,000,000 and 15%.

Speaker 3

Moving on to Slide 10, as mentioned before by Phil, Our backlog at the end of Q1 continues to be very strong at approximately 4,600 units, including 9% EVs. Breaking down the record Q1 $318,000,000 in revenues into our 2 business segments, the BAWS net revenue was $293,000,000 up by $80,000,000 versus prior year. Our average bus revenue per unit increased from $109,000 to 138,000 or 26%, which was largely the result of pricing actions taken over the past 18 months as well as a higher mix of electric buses. EV sales in Q1 were also at a record level of 206 units or 114 more than last year, a 124% increase year over year. We'd like to remind you that we have announced in this fiscal year 2 price increases for new orders, 1 in last October and one for the end of March of $2,500 net per bus each in order to cover inflationary cost factors and significant long term strategic investments.

Speaker 3

Parts revenue for the quarter was 24,000,000 representing a growth of approximately $2,000,000 or plus 8% compared to the prior year. This great performance was in part due to increased demand for our parts as the fleet is aging as well as supply chain driven pricing actions and throughput improvements. Please also keep in mind that due to year end holidays and Thanksgiving, our fiscal Q1 has a lower number of work weeks. However, this year, due to the very strong backlog and improved supply chain situation, we are able to maintain production levels and did not take the pre COVID usual extended plant shutdown. Gross margin for the quarter was a record 20% or 17 percentage points higher than last year Due to our improved operational performance and our pricing overtaking in the last two quarters, the inflationary costs of the last 18 plus months.

Speaker 3

In fiscal 20 4Q1, adjusted net income was approximately $30,000,000 or $40,000,000 higher than last year. Adjusted EBITDA of approximately $48,000,000 or 15 percent was up compared with prior year by $51,000,000 17 percentage points. Adjusted diluted earnings per share of $0.91 was up $1.21 versus the prior year. Slide 11 shows the walk from fiscal 2023 Q1 adjusted EBITDA to the fiscal 2024 Q1 results. Starting on the left at negative $3,500,000 the impact of the bus segment gross profit in total was 55,000,000 Split between volume and pricing effects, net of material cost increases of $48,600,000 and operational improvements of 6,400,000 The operational improvements consist of year over year manufacturing efficiency and throughput improvements as well as lower freighting costs.

Speaker 3

The favorable development in the Power segment gross profit was $1,100,000 driven by higher sales and improved margins as mentioned earlier in the call. These great improvements were slightly offset by increases in our other expenses and fixed costs, mainly personnel related of negative €5,000,000 as we continue to reinvest into our business and our teams during fiscal 2024. The sum total of all of the above mentioned developments drives our record fiscal 20 4Q1 reported adjusted EBITDA result of $47,600,000 or 15%. Moving on to Slide 12. We have extremely positive development year over year also on the balance sheet.

Speaker 3

We ended the quarter with $77,000,000 in cash and reduced our debt significantly by close to $15,000,000 over the last four quarters. Our liquidity is very strong at a record €184,000,000 at the end of fiscal 2041, a €100,000,000 increase compared to a year ago. The operating cash flow was a black 0 in this quarter, driven by an improvement in operations and margins, which was fully offset by an increase in working capital through lower payables and higher strategic inventories, a reduction of our EPA prepaid balance and the seasonal reduction in other accrued expenses. Moving to Slide 13, as mentioned in our last At the end of November 2023, we refinanced our credit facility at significant better terms with a 5 year maturity date for November 20 28. The new structure consists of a $100,000,000 term loan with 5% per year amortization and a new revolver line of credit of $150,000,000 The reduced covenants and extended maturity of our loan provide Blue Bird with both flexibility and stability as our business grows profitably and we continue to lead the scullback industry in the alternative fuel space.

Speaker 3

Slide 14 shows the sustainable results achieved by our team over the last 4 quarters, generating almost EBITDA or 11%. Our quarterly revenues have been in the $300,000,000 range and growing partially due to pricing realization combined with a quarter by quarter increase in EV mix, which is now at approximately 10% of our sales. We have beaten raised our conservative guidance every quarter due to the outstanding execution of our plans by our teams Despite a still difficult supply chain environment with select suppliers, the last three quarters have been in the 10% plus adjusted EBITDA range, demonstrating that we are delivering now consistently double digit performance. Finally, it is important to note that unlike in the not too distant past, Our pricing curve has been ahead of our costing curve, especially in the last two quarters, preparing us for the significant investments lined up for 2024 and the contractual inflation factors expected ahead of us. Before we talk about the updated guidance for fiscal 2024 and our long term outlook, on Slide 15, we wanted to share with you again Some significant investments that we are starting in fiscal 2024 to ensure that our profitable growth strategy is successful.

Speaker 3

Our engineering expenses planned for fiscal 2024 are double the level of fiscal 202023. As we began the integration work for the next generation of gas and propane engines for the next level of emission regulation. Additionally, we continue to evolve our EV offering and plan new product safety enhancement features. Finally, we will continue to ramp up our investment in bringing to market the commercial EV chassis by the end of calendar 2024. We are also planning to triple our capital investments into capacity expansion, Production facility upgrades, quality improvements and our supply chain capability and tooling towards our target of 50 buses per day for approximately 12,000 buses per year.

Speaker 3

On the people side, we experienced inflationary pressures both externally from our supply base and internally and they continue to provide very competitive benefits to our employees. We are also launching later this year a complexity reduction initiative and we will begin the upgrade of our ERP system as well as modernization of our business intelligence and financial planning and analysis tools. All these costs combined can add up to 2% to 3% of our revenue on a run rate basis later in fiscal 2024 and beyond. On Slide 16, we want to share with you our updated fiscal 2024 guidance. As a reminder, we are continuing to take a transparent and conservative approach also this year, as it is still a somewhat uncertain supply chain environment we are facing.

Speaker 3

However, we have improved already all the other business levers that we could address, was now demonstrated by our very strong trailing 12 months actual results. Looking forward to fiscal 2024, We are maintaining our revenue to a range of $1,150,000,000 to $1,250,000,000 and we are significantly increasing our adjusted EBITDA to $130,000,000 or approximately 11 percent with a range of $120,000,000 to $140,000,000 This is an increase of almost 50% over the prior year record results. Due to supply chain volatility, at this points we are only providing and maintaining our general quarterly ranges, with every remaining fiscal 2024 quarter expected to have revenue between 2.75 to $325,000,000 and adjusted EBITDA in the range of $25,000,000 to $35,000,000 or 9% to 11%. We will provide further updates in mid May after we close Q2 and gather further insight into our supply chain capabilities to support our strong backlog and increasing EV mix. Moving to Slide 17.

Speaker 3

In summary, we are forecasting a significant improvement year over year With revenue up 6% to approximately €1,200,000,000 adjusted EBITDA in the range of €120,000,000 to 140,000,000 and adjusted free cash flow of $60,000,000 to $70,000,000 in line with our typical target of 50% of adjusted EBITDA. On Slide 18, we'd like to give you an overview of our capital allocation for fiscal 2024 and the exciting share repurchase program we recently announced. Our capital allocation strategy balances investments for long term profitable growth, return of value to our shareholders and maintains a conservative cash position by year end. On the left side, our sources of cash consists of a very strong cash flow from operations after tax and interest of $148,000,000 existing cash at fiscal 2023 year end of 77,000,000 And $5,000,000 in dividends from our joint venture in Microburger. We do not expect to add new debt this year.

Speaker 3

On the right side, we have 3 uses of cash: growth, shareholders and debt repayments. As far as growth is concerned, we plan to use a note to $25,000,000 in each of these categories: R and D and engineering expenses, CapEx for growth and maintenance and funding our newly formed Clean Bus Solutions JV combined with potentially other small M and A activities. Moving on to shareholders category, we are very happy to have announced recently our stock buyback program for up to $60,000,000 over the next 2 years. This is supported by our strong existing cash and free cash flow guidance and we believe it is the best way at this point to return value to our shareholders. Finally, in addition to the required term loan principal payment of $5,000,000 we plan to pay down the $35,000,000 existing revolver balance to 0 during fiscal 2024 and maintain a conservative cash balance at year end in excess of EUR 50,000,000.

Speaker 3

On Slide 19, we wanted to also reiterate our long term outlook. The 11% adjusted EBITDA margin is firmly now in our updated short term outlook. And once the supply chain further normalizes, we expect to sell approximately 9,500 units, including 1500 units EVs and generate €150,000,000 on €1,350,000,000 in revenues. This could be as early as 2025. Looking to the medium term, our EV growth and operational improvement can support volumes of 10,500 to 11,000 units, including EVs in the range of 2,500 to 3,500 units, Generating revenues of $1,500,000,000 to $1,700,000,000 with adjusted EBITDA of $175,000,000 to 200,000,000 or 11.5% to 12%.

Speaker 3

Our long term target remains to drive profitable growth towards approximately $2,000,000,000 in revenue, comprising of up to 12,000 units of which up to 5,000 REVs and generate EBITDA in excess of 250,000,000 or 12.5% plus. We are incredibly excited about Blue Bird's future. And now I'll turn it back over to Phil.

Speaker 2

Thanks, Radvan. That was a great explanation of our Q1 financial results and our outlook. Let's now move on to Slide 21. I introduced this slide at our last earnings call. So I won't spend as much time on it today as our priorities and our strategy are unchanged as they should be.

Speaker 2

The chart on the left illustrates the 3 priorities that continue to drive us: taking care of our employees, delighting our customers and dealers and delivering profitable growth. The chart on the right provides more text around the specific strategies that we are pursuing that both align with our priorities and drive our 4 year growth plans. At the center is our ultimate objective to drive sustained profitable growth. As you look at the accomplishments in fiscal 'twenty three, we transformed the business from losses to record profitability, achieving a full year margin of 8%. For fiscal 2024, we just increased our full year earnings guidance to reflect an 11% adjusted EBITDA margin.

Speaker 2

And over the next couple of years, We plan to grow that margin 12% and then beyond. Our specific strategies focus on delivering these financial goals And I spelled out in this chart, namely leadership in safety, both in the workplace and with our products is paramount to us And we are vesting both engineering and CapEx in these areas in fiscal 2024. Best products and features. We seek to differentiate ourselves providing more value to our customers. Our buses are purpose built from the ground up for transporting children safely with many unique features.

Speaker 2

They're not a derivative of a truck chassis like most of our competitors and our customers understand the value of this. Leading in quality, durability and alternative power is the cornerstone of our product planning and development and we will continue to differentiate in these areas. Having competitive costs for lean manufacturing and efficient throughput, Strong supplier relationships and sheer smart product design are essential to compete in a business where competitive bids are required. And after the sale, we need to provide great service and ensure vehicle uptime throughout the 15 years or more that our buses need to run. This means partnering with our exclusive dealer network that covers every corner of the United States and Canada with our dealers having to average tenure with us of over 30 years.

Speaker 2

As I have said many times before on these calls, you can't make it in the school bus business without a fully capable and experienced dealer network that can reach more than 10,000 school districts that operate their own bus fleets and 3,400 independent owner operators of school buses. Following these core strategies have been key to our transformation and we'll continue to drive our 4th year plans. Let's now turn to Slide 22 and look at the latest impact of the federal government's Clean School Bus Funding Program, which is so important in helping to accelerate the adoption of electric and propane vehicles in fiscal 'twenty four and beyond. As a reminder, we are just entering the 2nd year of this 5 year program, which provides $5,000,000,000 of funding of electric and propane powered school buses. There is still about $4,000,000,000 available after the 1st year of funding.

Speaker 2

The 2nd year, which is referred to by the EPA as a 2023 program, provides for 2 rounds of funding, totaling at least $1,500,000,000 Now that's about $500,000,000 more than was anticipated, and it appears to be an acceleration by the EPA to deploy the $5,000,000,000 in total funding. As the left chart shows, RAM 2 applications for the 23 grant program completed in August 23. And in January 24, the EPA announced that we're increasing the funding for $400,000,000 to $965,000,000 due to the high level of grant applications. A total of 2,737 electric and pro buses were awarded and the winners will have until December 25 to purchase their buses using these awards. We expect Bluebird buses to represent around 30% of the ultimate orders amount to approximately 800 electric and propane school buses through this program.

Speaker 2

Looking at the right chart, immediately after announcing the RAN-two award results, the EPA announced this RAN-three rebate program, which is also part of the 2023 program will now total at least $500,000,000 Applications are being accepted until a week from now. It's anticipated award winners will be notified by May 2024 and will have until April 2026 to receive around 450 electric and propane school bus orders from this 3rd round. Together, Both of these funding rounds should generate orders for at least 4,300 electric and propane school buses and assorted infrastructure, which is great for the industry and in particular for Bluebird with about 12 50 orders anticipated. Now with the deadline for purchase from grants from these two rounds being as late as April 26, there is a likelihood that orders and corresponding deliveries could be late than we have anticipating pushing back deliveries into fiscal 2025 as end customers deal first with their charging infrastructure needs. We will work with our dealers and end customers to pull out as many as we can into fiscal 2024.

Speaker 2

But for prudency, We have cut our EBIT bookings forecast for this year from 900 units to 800 units. So let me now wrap up the earnings call and the outlook for the business On Slide 23. RASM took you through the raised guidance for fiscal 2024 and I'm showing you some of those metrics at the midpoint of guidance here. We have been prudent on our bookings outlook, only increasing volume by 3% over fiscal 20 3 at this time, As we still deal with 2 specific supplies of constrained chassis components that are impacting the broader truck and bus industries. But we did manage these very well in 2023.

Speaker 2

And if we can build more in fiscal 2024, we will just as we did last year. Net revenue of $1,200,000,000 will be a new record for Bluebird, up 6% from fiscal 2023. Adjusted EBITDA guidance of $130,000,000 is almost 50% higher than the record $88,000,000 we delivered in fiscal 2023. Importantly, we are planning on an 11% EBITDA margin in fiscal 2024, up 3 percentage points from fiscal 2023, is a couple of years ahead of the plan we have been sharing with you. We have confidence in achieving this margin after recording see 15% adjusted EBITDA margin in the Q1 of fiscal 2024.

Speaker 2

It should be noted that the Q1 did benefit from an exceptionally high mix of EVs at 10% of unit sales within a strong total mix of alternative fuel vehicles at 66% of sales. Now this mix may not repeat through all quarters, especially with extended time granted by the EPA for customers to complete their purchase and deployment of the new EV funding awards that I mentioned earlier. You remember that's as late as April 2026 to get them in service. Further, as Raghavan pointed out, We are doubling engineering work in fiscal 2024 in support of new product programs, which is contained in our 11% margin outlook for fiscal 2024 full year, along with the potential economic impact of our first collective bargaining agreement with the USW that's expected later in the year. Finally, as I mentioned earlier, we're looking to grow EB unit sales to 800 buses in fiscal 2024, that's substantial 47% increase over our sales last year.

Speaker 3

As you can see on

Speaker 2

the right chart, there are still a lot of pent up demand following the low industry sales in 2020, 21 2022, and the bus fleet has aged by a couple of years. ACT is forecasting a compound annual industry growth rate 7% from the end of fiscal 2023 through fiscal 2027. And that's great news for our business and it's great news for our profit outlook. With residual supply chain challenges still impacting the auto business, the ability to build all the units near term is not a given, But the demand is clearly there and that's what's really important. After executing a substantial transformation across our business, The company is performing extremely well.

Speaker 2

We're continuing to improve operating performance and look forward to sustained profitable growth in the robust market ahead. On that note, as Rajvind covered in his section, our recently announced $60,000,000 share repurchase program illustrates our confidence in the business outlook, our ability to generate cash and our commitment to drive shareholder value. The future is incredibly bright for Blue Bird and we're confident in achieving what have been our long term goal of 12% EBITDA margin within the next couple of years. I want to thank our nearly 2,000 employees for all their hard work and dedication delivering our all time record quarterly profit in Q1 on top of a record full year profit last year, as well as our expanding dealer body who are critical to our successes. That concludes our formal presentation today.

Speaker 2

I'd like to hand it back to our moderator for the Q and A session. Thank you.

Operator

Thank you. Our first question today comes from Mike Schlosky of D. A. Davidson. Your line is open.

Operator

Please go ahead.

Speaker 4

Yes. Hi. Good afternoon and thanks for taking my questions.

Speaker 2

I guess

Speaker 4

I wanted to ask first about hello there. Yes, I guess I wanted to ask first about the quarterly outlook that you put out there. You kind of reiterated from last quarter that The lowest quarter of the year will be $275,000,000 You just put up a quarter of $318,000,000 in your fiscal Q1, which I believe is usually The least revenue, just because of the school calendar in most fiscal years, I'm having a hard time figuring out and I do recognize was some EVs in there. Even trying to back out the price effect of EVs, it's hard to imagine If the rest of the year typically from a unit level, whether it's EVRIs, if they're usually up from the Q1, you having a quarter this year that is $275,000,000 I'm curious is there anything on the calendar or schedule that we should be thinking about here that I'm missing that would cause you to have a quarter that would have top line of about 275,000,000

Speaker 3

Hi, Mario. This is Razvan and thank you for the question. So regarding the seasonality of Q1, So before COVID, indeed, this was the lowest revenue and lowest number of units because historically we took extended shutdown for the plant to do extended maintenance work, but also because at that time the order backlog was very low after the start of the school year. And so as I mentioned in my remarks, this year we maintained the speed of production And we did not take an extended shutdown, so we only took a couple of days around Christmas and Thanksgiving break. So We did have indeed more working days in this Q1 than ever before.

Speaker 3

In terms of the remaining quarters, we are We want to be conservative in our revenue guidance. And as I said, supply chain still has some constraints, especially with 2 particular suppliers. So should the supply of parts be lower than the midpoint? This is how we might get to a lower quarter below 300,000,000 whether it comes through the total number of buses or through the percent of EV inside that number.

Speaker 4

Okay. And just a follow-up there. Do you have any plans shut down for the rest of the year just to kind of Make up what you couldn't do in the Q1 or you're just going to go forward and think about next holiday seasonality?

Speaker 2

Hey, Mike. This is Phil here. I'll just take that. I mean, we're able to flex up if we can later in the year. I mentioned on my comments that Like we did last year, we can build more, we will build more.

Speaker 2

And that's where we stand. And we've been a little conservative. We're very active with of constrained suppliers, as we mentioned, they were really great obviously throughput through the Q1. We've just been a bit prudent in the balance of the year at this point.

Speaker 4

Great. Great. And it's fair to say that you also had growth in the sale and the unit sales during the quarter too. That was exciting. It doesn't appear to be as though some of your competitors had growth in their unit sales in the quarter.

Speaker 4

Can you maybe comment on Bluebird's market share? You think you're gaining share? And if you can give me 2 answers, 1 on the ICE side and 1 on the EBITDA, it will be appreciated.

Speaker 2

Well, we don't tend to talk too much about share. I mean, we definitely have gained some share over the last trailing 12 months. Obviously, in the fiscal year, it's a short timeframe now and things change and different we're just entering the what we call the bigger order season, frankly, when people ramp up and start thinking about buses for school start. But I'd say our share is strong. It's holding well.

Speaker 2

A lot of activity, a lot of interest. I mentioned about a win rate An order rate supports a strong demand. So I think we're feeling we're confident of what we're saying. I mean, We have great faith in our ability and we have a great product range too that's very expensive. I talk many times about no one has a product range we've got from electric to propane, to gas, to diesel on type 8, on type As, we're on type Cs and type D.

Speaker 2

So we got by far the best product range. So We're confident in our outlook and what we're doing.

Speaker 4

Great. Maybe one last one for me. The increased engineering cost that you mentioned, dollars 25,000,000 maybe a little less than that, that roughly equates to about 2 points of margin on this year's guidance. So could you maybe tell us, do you think that it sounds like Without that, you'd be at EBITDA margins of perhaps 13% this year. All these one time costs and if we were to see a flat year next year, Just as a thought experiment, you should be seeing a 13% EBITDA margin business, not 11% EBITDA margin business in a more normalized Engineering Investment Environment.

Speaker 3

Yes, Mike. Thanks for the question, Mr. Rasvan. So the actual the year over year increase is 12.5 million, so it doubled to $225,000,000 so that's about 1% of sales on a year over year basis. And we do expect to maintain this elevated level for the next couple of years.

Speaker 3

Some of these projects are multi year projects, especially with powertrain and some other product enhancement. So for the next couple of years, we will sustain this level thereabout.

Speaker 4

Thanks very much. I appreciate that clarification. I'll pass it along. Thank you.

Speaker 2

Thanks, Ryan.

Operator

Our next question comes from Eric Stine of Craig Hallum. Your line is open.

Speaker 5

Hi, everyone. Thanks for taking the questions. Well, first of all, I haven't covered you for a long to see almost $50,000,000 in EBITDA in the Q1 is quite something. With that in mind, as I think about the remainder of the year and you just touched on it, but maybe I'll ask it a different way or clarify. So Phil, were you saying that so you've had price increases and now you're actually a little bit ahead of where you see materials costs go.

Speaker 5

If that is the case, is that something where you think maybe EBITDA is more skewed towards the first half than the second, I guess I'll start there.

Speaker 2

Yes, I think Razzvan talked about in his script. So I'll just let Ivan to just jump in here on this one.

Speaker 3

Hi, and thanks for the question. So as I mentioned in my remarks, Indeed, our pricing curve is now ahead of the costing curve, especially for the last two quarters. And also as highlighted With the upcoming investments, whether it's on the product and powertrain and R and D, whether it's into CapEx and manufacturing capabilities, which includes also a component of NRE in there, whether it's inflation from the supply chain or on the people side, All these costs are coming mostly starting in Q2 and through Q3 and Q4. So the costs are back end loaded And the pricing curve is now, let's say, almost maximized for the year. So indeed, we do expect somewhat lower EBITDA in Q2 to Q4 compared to Q1?

Speaker 2

You recall what we said, Eric, was that we priced So we priced $2,500 on every bus fixed price in October, start of our fiscal year. And then we priced again 6 months later, we will be another price increase dealers know about it, they have it, accepted it. And when we bid with our dealers, we look at every single bid we do, we have opportunity to adjust the price up or adjust it down as we see fit with our dealers, but we're keeping a really close really, really close tabs on this. And I think as Raj has been explained, it's just we've used the term served in our outlook for the rest of the year and we continue to be so because you can never know what happens in a constrained environment we're still dealing with. So I think the position we're in right now is a good position to be.

Speaker 2

Yes.

Speaker 5

No, I can appreciate still being conservative given all that's going on. Maybe just turn into the EPA funding You mentioned, well, first of all, good to see that the deadlines to actually get the funding that that's been closed out. I know for Round 1, that infrastructure was a big issue. I mean, as you think about trying to pull things As much as you can forward into fiscal 2024, where do you think things stand on the infrastructure side? Is that still a limiting factor?

Speaker 5

Do you see that easing at all?

Speaker 2

Yes, I think it definitely is. I think look, I think everyone's getting better at it. We are active with several infrastructure providers. But I think certainly the pace of activity in the 1st year of this caught a few by surprise. They weren't quite ready for the utility companies.

Speaker 2

All the charging equipment was in the right place. And actually, I think I've mentioned on the last call, We had less than 90 years, 3 vehicles were canceled. Others had a lot of cancellations because they were not ready and they just pulled out. And I think that's really the gating I was mentioning when I was being a little cautious. I said, look, second half of this year, we've got awards are being granted and given to people for both these rounds So by May, and then they've got until April of 26, there's the endpoint at which to install these buses and They're going to look on charging stations first, it feels like to me and we're helping them and we're looking on the charges they need.

Speaker 2

But obviously it could well push back a little bit when they want their buses. They're not going to get buses before they know they got charging stations in place. And that's the challenge now for all of us in this industry to help that and move it along. But again, it's the fantastic news is EPA stepped up this round 2 and round 3 to 1,500,000,000 thought it was going to be $1,000,000,000 for the year, dollars 1,500,000,000 for the year. Well, they have extended the timeframe.

Speaker 2

Now, like I said before, we're going to do everything we can to accelerate Our deployment because we like doing that. It's the right thing to do. And we work with the charging guys that we work with and others and we work with our end customers too to help them.

Speaker 5

Got it. That's helpful. And then maybe last one for me, just on the Clean Bus Solutions joint venture. Just Curious early returns on that. And is that something where you would expect?

Speaker 5

I mean, do you see people Waiting to see if the EPA, if they are able to get either grants or rebates. If not, then they turn to the joint venture in that financing solution? Or do you think that that's not necessarily the case and that people go that route regardless just having A monthly cost that's similar to diesel.

Speaker 2

Yes. Look, I look at it this way. 1st of all, obviously, EPA grants are really exciting. Well, there are 500,000 school buses on the road and we're talking about funding 4,300 with this next round. So There's a huge appetite and huge oversubscription of school district, they want electric buses.

Speaker 2

That's why they stepped up this from $1,000,000,000 to $1,500,000,000 So the EPA, there's a big demand is what I'm saying. So definitely outside of this Outside of the EPA money and there are other grants around by the way, there are things they call HVIP and TVP in different states. But this clean bus solution gives a chance for really affordable, get rid of the upfront stick shock of an EV, get it installed in your business quickly, in your district quickly. So we are very excited about that. So they go hand in hand, frankly.

Speaker 2

I mean, obviously, the EPA is such a tremendous opportunity to accelerate. But our clean bus solutions activity too, we've got a ton of interest in it from our dealers and their customers. And we'll just keep looking at through the year here and let you know when we get our transaction start hitting.

Speaker 5

Okay. Thank you.

Speaker 1

Thank you.

Operator

Our next question comes from Craig Irwin of ROTH MKM. Please go ahead. Your line is open.

Speaker 6

Good evening, gentlemen. Congratulations on the really strong quarter.

Speaker 2

Thanks, Frank.

Speaker 6

So even coming into Definitely, Phil, much deserved. Even coming into the quarter, there was quite a lot of interest around the gross margin trajectory, and You gave us just another really chunky number this quarter. Can you maybe talk a little bit about The retreat of your competition, the other major school bus OEMs retreating from the alternative fuel markets And how this could impact your gross margins in the conventional business, the business where you've excelled over the last many years. Does this impact the longer term potential margin trajectory for Bluebird? And How should we be looking at EV mix and the impact on margins over the next couple of quarters?

Speaker 6

Is this maybe part of the conservatism that you're giving us in the forward outlook guidance comments.

Speaker 2

Craig, this is Phil here. 1 and I'll kick off that. I don't really like to comment on what our competition is doing. What I do know is that We bid together on state bids. We attend different conferences and we're there together and they're no longer offering The product that we're both offering, the propane and gasoline, they just got a diesel and electric offering as in the marketplace.

Speaker 2

All I can tell you is We picked a different competitor, right. We're in our 13th, 14th year actually now with an exclusive with Ford and Rausch, which is pretty strong relationship we have. There was a company called PSI and they're no longer offering it. So I have to defer to them and why they did that. Obviously, it's exciting for us.

Speaker 2

We are the leaders in this space. You look at our mix of fuel vehicles, it's been over 60% All power as I call it, alternative diesel for quite a while now. Our competition's footprint has been quite different even with that powertrain that they had. And so, yes, we're excited about the option that brings because our propane we know is ultra low emissions. It's a great product.

Speaker 2

It gets this It gets a great rebate and a grant from the EPA fund to make it very attractive. There are other grants around to support it. It's a terrific product along with a low maintenance gasoline product that's super inexpensive to run. You know, you put that together, we feel in good shape. I'm not going to commit on, I see big share growth here, but I can tell you obviously not surprising, we're looking at who's driving those buses today and what we can do for them.

Speaker 2

So I mean, that's really important. I think on the if I can move to the EV mix side, it's a difficult one To predict, I mean, obviously 10% mix in the Q1, we got 10% mix in our current backlog. We're talking about 800 now On a volume of sort of 8,750, we're looking at midpoint, so more like 9% in total for the year. And we're just waiting to see a big piece of that will be the EPA grants. I'm just a little cautious on how quickly Those awards when they're given, how quickly the order is going to come in, how quickly we can build them for folks.

Speaker 2

And that's jumping by 2 people. When do they want it and when can we build it? I mean, there are still constraints in the battery business. There's no one battery manufacturer out there building packs that can say, I can build anything you want or whatever pace you want. 1 recently dropped out, if you like, I don't know what's going on there with Proterra.

Speaker 2

So I mean, it doesn't affect us. But nevertheless, it's a sign of things that are happening in the industry. So I think we've been a little prudent right now and probably looking at as I've relayed at 800 on 8,750 total volume, Probably an 8% to 9% mix for the balance of the year. If we can build more, if we get more orders in, we certainly will because it's a priority for us with the markets on those products, obviously, and customers who want their the best product in the market. So that's about where we are, Craig.

Speaker 2

I hope that answers your question.

Speaker 6

That's very helpful. Thank you, Phil. So my next question is around your expectations you put in the presentation Around the EPA's Clean School Bus Program Round 2 and Round 3, the 30% win rate is dramatically lower than your long term share in the alternative fuels markets. And it really is mostly the same people, the same group at EPA that's handling The awards, the vouchers for the adoption of EV School Buses, these funding opportunities that are So important. You've done way better than 30% with them in the past.

Speaker 6

Can you maybe talk a little bit about Whether or not you think that EPA is under pressure to share this between different OEMs, If there's maybe just factors in the market that you're considering with knowledge of different programs and different commitments from customers. I mean, why 30% I guess is the question I'm asking you.

Speaker 2

Yes. Well, why 30% is sort of a is a target we put out there. There's a lot of activity around this. And when you look at who's bidding, I mean, we know it's Sales and our major competitors I see in Thomas, Wyandbus, BYD, Greenwood, you know these guys, you cover them all. They're all in there.

Speaker 2

Have they really penetrated our business of school buses? Significantly, not the newer guys, if you look at it in totality, It is the big three, so to speak, right? Who tends to get the bulk of the business. But I think right now, I don't see the EPA is targeting share in this. They're not looking at it.

Speaker 2

There are when you look at the last grant round, while we got a lot of this is the one I'm talking now, The $23 that we called it round A, that was just announced. We sort of know where we stand on that so far. A lot of fleet customers won some awards and they'll be choosing their own buses. A lot of that school districts that we traditionally haven't sold to for a lot of awards. Other fleet operators, I'm talking about the likes of we all know them, right?

Speaker 2

For student, NEC, STA, they got awards. So Obviously, they haven't selected which bus they're going to use yet as such. So we're being a little prudent, right? I mean, 30% is on a good target to go for. Love to see us beat it.

Speaker 2

Definitely been here today looking on our market share. I can see where we are. But this is open for everybody to apply. And obviously, All these manufacturers are putting in applications. All these dealers are putting applications and then many of them customers as possible are putting them in.

Speaker 2

So haven't got this captive to ourselves. This is sort of broad network of all those districts and operators out there. What we got to make sure is, I'll try and do our best to make sure they pick our buses. And that's what we're going to work on. But we put 30% out there as a target.

Speaker 6

Thank you. So my last question is really one of clarification. The 180 buses from LA United, What a win, right? No EPA funding behind that and it's really just state and local funding. So a really strong win.

Speaker 6

Are those 180 units included in the 4 20 that you said was in backlog at the end of December? Or is that incremental to the EV school bus backlog?

Speaker 2

They were not in the backlog at the end of the year, the 4 They're only in that number. Correct.

Speaker 6

Thank you. Hey, congrats on the quarter.

Speaker 2

Thanks a lot, Craig. Appreciate it. Thank you.

Operator

We have no further questions in the queue. So I'll turn the call back over to Phil Horlock for any closing remarks.

Speaker 2

Well, thank you, Lydia, and thanks everyone for joining us on the call today. We do appreciate your continued interest in Bluebird and we look forward to updating you again on our progress next quarter. Just a couple of comments I want to make. I think last year you saw our momentum increasing throughout the year as profitability improved as we move through the quarters. And we have continued on the same path by delivering impressive all time record quarterly profit in the Q1 of fiscal 2024.

Speaker 2

And with that solid base behind us, that's why we raised our guidance once again, projecting a full year adjusted EBITDA margin of 11% for fiscal 2024. As a reminder, it is up a full 3 percentage points above last year's then record profitability level. And we're confident in getting to a 12% margin within a couple of years as industry supply chain constraints continue to ease and we keep growing our business. So with that, Sesh, if you have any further questions, please don't hesitate to follow-up with our Head of Investor Relations, Mark Benfield. And Thanks again for all of you for joining us today at Bluebird and have a great evening.

Speaker 2

Good night.

Powered by Quartr

Key Takeaways

  • Record Q1 Performance: Blue Bird achieved an all-time high adjusted EBITDA of $48 M (15% margin) and net sales revenue of $318 M in fiscal 2024 Q1, with unit sales up 9% to over 2,100 buses compared to the prior year.
  • Strong Backlog and Raised Guidance: Firm order backlog climbed to over 4,600 buses (5,000 as of early February), underpinning a full-year revenue outlook of $1.15–1.25 B and increased adjusted EBITDA guidance to $120–140 M (≈11% margin).
  • EV and Alternative Power Growth: Q1 electric bus deliveries more than doubled year-over-year to a quarterly record of 206 units (10% mix), with an EV backlog of ~10% (420–500 units), supported by EPA’s $1 B Clean School Bus fund and a 180-bus LAUSD order won competitively.
  • Strategic Investments: FY24 engineering spend is doubling to support new gas, propane, and EV programs, capital expenditures are tripling to expand capacity toward 12,000 annual buses, and a joint venture (“Clean Bus Solutions”) has been formed to offer e-bus leasing plus charging infrastructure.
  • Supply Chain & Pricing: Select chassis component constraints persist but eased enough to avoid a Q1 shutdown; aggressive pricing actions boosted average bus revenue by 26% YoY (≈$29 K per bus), sustaining record margins despite industry-wide supply challenges.
A.I. generated. May contain errors.
Earnings Conference Call
Blue Bird Q1 2024
00:00 / 00:00