Blue Bird Corporation

Good day and welcome to the Bluebird Corporation Fiscal 2023 First 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 touchtone phone. To withdraw from the question queue, 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 2023 first 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 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'll take some questions. Let's get started. Matt?

Thank you, Mark, and good afternoon, everyone. It has been just two months since our most recent earnings call, but Razan and I are still very excited to update you on the progress of Bluebird. As we discussed last time, through the hard work of the Bluebird team, we have positioned the organization for significant success this year and a dramatic turnaround from the results we've posted in fiscal year 22. This quarter, We are pleased to report that the business continues on its upward trajectory, and as we will review during this call, is even ahead of plan. On slide six, you can see some of the key takeaways for the quarter. Overall, industry demand continues to be robust, and the backlog for Bluebird school buses is incredibly strong. In this past quarter, we also built the last major tranche of legacy price buses in our backlog. As we have forecasted in previous earnings calls, this will drive a significant inflection in our financials. We define these legacy price units as those at price levels prior to October of 2021. We also continue to aggressively manage costs throughout the business, which you will see in Razan's portion of the presentation. Through strong leadership, tenacity, and lean process improvements, We are seeing some of the best operational performance in the company in nearly two years. We also continue to be incredibly excited about the impact the Clean School Bus Program will have on our business. And we are starting to see orders for our leading electric and propane buses come through. The market demand is strong. The business is back on track to deliver and is beginning to fire on all cylinders. We are incredibly upbeat about what is in front of us. Now let's take a look at some of the highlights from the first quarter. The financial performance for fiscal year 23, quarter one, shows a number of bright spots. Our units sold were nearly 2,000, which drove a record first quarter revenue for Bluebird, up over 100 million from fiscal year 22. This was over an 800 unit increase from the same period last year. As a result, adjusted free cash flow for the quarter was up 54 million compared to the first quarter of fiscal year 22. Overall, it was an incredibly solid first quarter for Bluebird, with the legacy price units being the main thing holding us back on the EBITDA conversion, which was negative 4 million. The great news is that those units are now largely behind us. On the right-hand side of the slide, you can see some of the ongoing highlights for the business. As I mentioned, demand continues to be strong, with the industry having roughly eight months of backlog. Bluebird is seeing that strong demand as well. Our backlog is incredibly robust, with over 5,300 units worth over $675 million in revenue. Included in that backlog is 120 million firm orders for electric buses, and we are starting to receive orders from the EPA's Clean School Bus Program. In fact, We're already seeing some of the largest volume EV orders to date for customers in the states of Nevada, Kentucky, Tennessee, and Utah through this program. Our sales for the quarter were 63% alternative power, demonstrating our continued leadership in the space. Part of that was our EV volume growth, up 130% year over year. And we recently crested over 950 electric school buses on the road today, including Type A, C, and D. As we've discussed in previous quarters, we have raised pricing considerably since July of 2021. The average selling price of our backlog is up 22% year over year. Part sales continue to be a bright spot for us, also up 34% year over year. We recently completed a grassroots meeting with our dealers in Atlanta where we laid out the vision for the company for the next three years. It was well attended by our dealers whom we consider to be the best in the business. They were incredibly excited about what they saw and heard. Part of that meeting included a plant tour where they saw some of the examples of the lean transformation in our operation. As you can see on slide 8, these improvements in operations helped us hit some major performance milestones. In fact, we are seeing some of the best performance in nearly two years in several critical areas. Missing parts are down dramatically due to our efforts to improve material flow to the plant. Those have included adjusting our warehousing strategy, resourcing numerous problematic suppliers, revising production constraints, and making changes in leadership to increase the level of tenacity to ensure we have all the necessary parts at production start. We also saw tremendous improvements in plant efficiency, overtime, and production hours per bus. This helped us achieve a number of first quarter records for Bluebird, including first quarter revenue, volume, and EV bookings. We also realized a record alternative powertrain mix and parts revenue for the first quarter. All these achievements are further proof that the company continues to progress in the right direction. Slide nine is a reminder of our key pillars around care, delight, and deliver. Our focus areas within those pillars remain the same for fiscal year 23 and include our people, lean transformation, expanding our total addressable market, and scaling EV. I want to briefly touch on the progress of each of those since our last call. Regarding our teammates, we continue to update our facilities to enhance the working environment. In addition, we rolled out a large-scale wage increase for our hourly teammates to increase job satisfaction and help offset attrition. A new organizational structure of the plant is also in its final stages of implementation. It provides more resources for our frontline teammates by narrowing the span of control and offering essential support functions by creating manufacturing cells, or what we call quality leadership teams. Development of our commercial chassis offering continues to progress while we stay focused on meeting the demand for our core school bus offerings. The work on our new EV center is advancing nicely. and we expect it to be complete by the end of March. As we've mentioned in previous earnings calls, this will allow us to take EV production from 4 to 12 units per day by the end of June, with the ultimate goal of 20 units per day by the end of December. On the next slide, you can see some of the specific examples of initiatives rolled out across the plant focused on teamwork, safety, accountability, material placement, and reducing waste. Pictured on the left is an example of our quality leadership teams, or QLTs. These teams work to deliver the best output at the lowest cost and focus on immediate problem resolution, accountability, training, and coaching. Each cell works as a team with defined roles and responsibilities around production, quality, materials, and manufacturing engineering. Specific colored vests identify the teammates by function. Every morning, the QLTs have huddle meetings to review the prior day's performance. And we have also installed and onboard so they can track their progress throughout the day. One of the first areas in which we implemented these QLTs nearly six months ago was the chassis lines. We are now seeing dramatic improvements in these areas and in the quality of the product coming off the line. Through lean methodologies, we have also enhanced the layout of areas of our plant to make them safer and more efficient. A few examples of this include our new air conditioning installation center and new detail center. Changes like this helped our final finish area pictured in the bottom right to increase output by over 30%. Slide 11 is a reminder of the EPA's Clean School Bus Rebate Program. This program allocates $5 billion over five years for clean and cleaner emission school buses. Approximately 2,500 buses will be funded in this first year, with an average rebate of $375,000 per electric bus. Customers have until the end of April to submit payment request forms to the EPA demonstrating that new buses and eligible infrastructure have been ordered. We have already seen many buses come in from this program, and we expect that to pick up as we near the deadline for customers to submit their information to the EPA. We are working closely with our dealers to secure orders for the customers for whom we collectively applied and secured funding for. We are also partnering with our dealers to aggressively market the merits of our industry-leading EV solution to the remaining customers who make up the 1,200 buses that are not yet allocated to a specific OEM. Therefore, we expect the total impact of the first round of the program on Bluebird to be at least $200 million in revenue based on securing 500 to 700 additional EV orders. The long-term impact of this program will be well over $1 billion in revenue to our organization. The next round of the EPA's Clean School Bus Program is expected to start early in 2023 as a competitive grant program, and we will be right there with our customers supporting their applications. I would now like to hand it over to Rosvon to walk through our fiscal year 2023 quarter one financial results in more detail, as well as our updated fiscal year 23 guidance.