Blue Bird Corporation

Good afternoon, and welcome to the Bluebird Corporation Fiscal 2022 Fourth Quarter Earnings Conference Call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star, then two. Please note, this event is being recorded. I would now like to turn the conference over to Mark Benfield, head of investor relations. Please go ahead.

Thank you, and welcome to Bluebird's fiscal 2022 fourth 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 websites, 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 and in our filings with the SEC. Bluebird disclaims any obligation to update the information in this call. This afternoon, you will hear from Bluebird's President and CEO, Matthew Stevenson, and CFO, Razvan Radulescu. Then we will take some questions. Let's get started. Matt?

Thank you, Mark, and good afternoon, everyone. Razvan and I are incredibly excited to share an update on the progress of Bluebird. No doubt, fiscal year 22, which closed on October 1st, was a challenging year due to the residual effects of COVID that impacted our business, which included exhaustive supply chain disruptions and unprecedented industrial inflation. However, I am proud to say through the hard work of the Bluebird team, we have navigated these turbulent seas and have positioned the organization for significant success in this current fiscal year 2023. On slide six, you can see we did that by executing our plan in several key areas, along with the added benefit of strong market fundamentals. Overall, industry demand is robust and is driving a record backlog for Bluebird this time of year. We also continue to hold a leadership position in alternative-fueled and electric buses. Throughout the year, we aggressively increased forward pricing, and we partially recovered pricing on the backlog to match inflationary economics. In addition to raising prices, we dramatically drove costs out of the business, and not just for the short term. We reorganized our functional areas to be more efficient and leaner, and we eliminated several non-value-added operations across the business. Through strong leadership, tenacity, lean processes, and a host of operational changes, we improved parts availability and increased our throughput and quality. Missing parts at setup are down dramatically compared to previous quarters, and the vast majority of our parts are now installed in station, reducing rework costs and improving quality. This is by far and away the best position that Bluebird has been in since I joined the company 18 months ago. The financial performance for fiscal year 22 shown on slide seven reflects several headwinds that are now mostly behind us and does not capture the current state of the business. However, some key financial metrics are showing signs that we have turned a corner. Bookings at 6,822 were up only 2%, but revenue was up 17% to 801 million as our pricing started to take hold throughout the year. Adjusted EBITDA was negative $15 million, but free cash flow was up $39 million year over year as throughput increased in the back half of the year and we drastically reduced inventories. Even though the financial results were not ideal, we still had several key successes, as you can see on the right-hand side of the slide. As I mentioned, demand is robust. In fact, industry order intake in fiscal year 22 was up over 30% compared to the prior year. and even up 9% versus 2019. Bluebird is seeing this increase in demand. Our backlog is incredibly robust, with over 5,000 units worth over $600 million in revenue. Nearly 60% of that backlog is alternative power, demonstrating our continued leadership in the space. Included in that alternative power backlog is around $100 million of firm orders for electric buses, And we are only just starting to receive orders from the EPA's Clean School Bus Program. The strength in our EV business is evidenced by the fact our bookings are up 84% year over year. And we recently crested over 850 electric school buses on the road today, including type A, C, and D. As we have discussed in previous quarters, we have raised pricing by 25% since July of 21, which has aided in doubling our standard gross margins in the backlog since the start of our fiscal year. Part sales were another bright spot for us, up 30% year-over-year. With such a strong recovery and with our business back on track, we extended our term debt through the end of calendar year 2024. Now, the EV school bus revolution is just getting warmed up. The EPA recently announced the lottery winners for the first $1 billion in funding from the Clean School Bus Program, which provides $5 billion over five years for clean and cleaner emission school buses. Bluebird is poised to generate over $200 million in revenue from just this first round of this fantastic program. And this wasn't by chance. We offer the industry the leading electric school bus through our powertrain partnership with Cummins. We have proven to customers that our electric buses are not a novelty and can perform on their regular routes. Plus, with Bluebird Energy Services launch this year, we successfully assisted many end customers and dealers in applying for the lottery program. Through the other facets of Bluebird Energy Services, we are now helping these customers plan and secure their electric infrastructure. Slide 8 shows the focus areas we laid out nearly a year ago. We center everything we do on care, delight, and deliver. And in fiscal year 22, that included four main focus areas. Our people, lean transformation, expanding our total addressable market, and scaling EV. Now on slide 9, I want to highlight the progress of each of those focus areas. When it came to our teammates, we focused on several crucial elements. We laid out a clear vision to be the clean school bus transportation leader. We hired a nearly all-new leadership team to take this company to a higher level performance. We implemented numerous communication channels in our organization, everything from town halls to a mobile app to drive more engagement with our employees. That employee engagement included new opportunities for employees to provide feedback, interact more regularly with senior management, and share their ideas. We have also improved the competitiveness of our wage and benefit structure to reward employees, compensate for inflation, and reduce turnover. In addition, we have improved our employee onboarding, span of control, and talent review processes. The second focused area was lean transformation. We rolled out numerous initiatives across the plant focused on safety, material placement, teamwork, accountability, and reducing waste. For example, we are in the process of completing a rollout of cell production teams. These teams are accountable for a specific portion of the manufacturing process and include a dedicated leader for production, quality, materials, and manufacturing engineering. These teams work to deliver the best output at the lowest cost and focus on immediate problem resolution, accountability, training, and coaching. They have already made a significant impact on our business performance. Lean methodologies have also improved the layouts of our areas of the plant to make them safer and more efficient. An example of this is our final finish area pictured in the top right, where we increased our output by over 30%. We also made progress on our plan to increase EV school bus production from 4 to 12 per day by the end of the first half of calendar year 23, and to 20 per day by the end of calendar year 23. We are renovating an existing 40,000 square foot building on our campus for final EV chassis assembly and commissioning, and we expect it to be complete by the end of March. We also started down the path of expanding our total addressable market with a focus on the strip chassis market for last mile delivery vehicles. There is incredible demand for an additional OEM EV provider in this space, and the prototype strip chassis we debuted in May at the expo garnered much attention. We continue to progress on this product with the goal of having units in customers' hands by the end of calendar year 23. Overall, I am very proud of the accomplishments of the Bluebird team in a challenging external environment. Our progress in fiscal year 22 has set us up for an incredibly successful fiscal year 2023, even in a relatively supply chain constrained market. I will touch more on our fiscal year 23 outlook in a few minutes, but in the interim, I would like to hand it over to Rosalyn to walk through our fiscal year 22 financials in more detail as well as our fiscal year 23 guidance.