Blue Bird Corporation

Hello and welcome to the Bluebird Corporation Fiscal 2023 Third Quarter Earnings Call. My name is Lauren and I will be coordinating your call today. There will be an opportunity for questions at the end of the presentation. If you would like to ask a question, then please press star followed by one on your telephone keypad. I will now hand you over to your host, Mark Benfield, Head of Investor Relations, to begin. Mark, please go ahead.

Thank you and welcome to Bluebird's fiscal 2023 third 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 CEO, Phil Horlock, and CFO, Razvan Radulescu. Then we will take some questions. Let's get started.

Phil. Well, thank you, Mark, and good afternoon, everybody. First, let me say it's great to be back at Bluebird and the team here is doing a fantastic job in delivering results ahead of schedule, which will be evident as Razman and I cover the third quarter financial results today. To set the stage, at our last earnings call, you saw the 180 degree shift in our second quarter financial results compared with last year. Well, in the third quarter, I'm pleased to say that we've improved on those second quarter results and have an outstanding quarter. So let's get started with the key takeaways for the third quarter on slide six. Market demand for school buses continues to be strong, and the backlog for Bluebird school buses was at 5,200 units at the end of the third quarter. Now, we are still dealing with supply chain constraints across the industry, which, although easing, is limiting industry production and deliveries, but we are managing this very well. As reported last quarter, we are now largely through the legacy price buses in our backlog that significantly impacted profitability last year and earlier this year. The vast majority of our buses now and in our third quarter bookings and backlog is at current price levels. As a reminder, we define these legacy price units as those at contractual price levels prior to October 2021. This, along with operational improvements, drove a substantial increase in our third quarter financial results compared with last year. On the EV front, thanks largely to the EPA's unprecedented $5 billion Clean It School Bus program, we had more than 550 EVs in our backlog at the end of the third quarter. And EV deliveries in the quarter increased by nearly 150% compared with a year ago. We also reinvested back into the business by selectively upgrading facilities and processes, enhancing the plant working environment, and adding electric bus capacity through our new EV production center. Through the efforts of the best look force in the business, strong leadership, lean process improvements, and sheer hard work, the third quarter saw some of the best performance the company has ever achieved. As you'll see shortly, the impact of these actions shows in our outstanding third quarter financial results, where we significantly beat guidance. Bottom line, the business is performing extremely well. The turnaround we have been executing is completed and ahead of schedule, and profits and margins have improved substantially. Now let's take a look at the financial and business highlights from the third quarter on slide seven. I want to start by saying that our third quarter financial performance is massively improved from a year ago. We sold over 2,100 buses, which is a substantial 24% of 411 buses above last year. Those unit sales drove third quarter revenue of almost $300 million, which is an exceptional 43% above fiscal 2022. That's an increase of $88 million. The impact of the pricing increases we took up of up to 25% to recover hyperinflation together with higher unit sales and a richer mix of EVs contributed to this impressive revenue growth. Adjusted EBITDA of $28 million was $19 million better than a year ago. Incidentally, our third quarter result exceeded this year's second quarter by $8 million, despite selling 150 fewer buses. Although not shown on this slide, that translated into an outstanding adjusted EBITDA margin of 9.5%. And finally, adjusted free cash flow for the quarter was $43 million. That's an impressive increase of $83 million over last year's third quarter. Overall, fantastic third quarter financial results that build on the improvements we saw last quarter. Razvan will take you through the details later. On the right-hand side of the slide, you can see some of the ongoing operating highlights for the business. As I mentioned, demand continues to be strong. Our firm order backlog is extremely strong at 5,200 units with over $750 million in revenue. We raised prices considerably over the past two years, and the average selling price per bus in the third quarter was up more than 17% from a year ago. Part sales also continues to be a bright spot for us, up 23% year over year. The increasing average age of buses on the road is having a material positive impact on our aftermarket business. Turning to alternative powered buses, they represented 63% of our unit sales in this quarter, and that's eight percentage points higher than last year. We continue to be the clear leader in this space. No other manufacturer comes close to these numbers. Part of the third quarter volume growth was in EV buses, with bookings up nearly 150% from last year and up over 150% through the first three quarters of the year. Additionally, we left the quarter with more than 550 firm EV orders in our backlog, which is more than a 10% share of our total backlog. That's worth around $180 million in revenue. Clearly, we're benefiting substantially from the first phase of the EPA's Clean School Bus program. And lastly, our EV business. In the third quarter, we launched an all-new extended range battery, providing around a 30% increase in range on a single charge over our standard battery. That's an expected range of about 130 miles on one charge, which is a terrific value offering for our customers by meeting the sweet spot for daily school bus use. On the leadership front, in June, we appointed Britton Smith as president of the company. Britain has done a terrific job leading our EV business over the past 18 months, and his appointment reflects the increasing importance of electrification to our present and our future growth strategy. We've expanded Britain's responsibilities, and it's great to have him in his executive leadership role. I'm pleased to tell you that based on our exceptional third quarter financial results, together with the continued progress we are seeing in the fourth quarter, we are again raising full year guidance on all three metrics that we report on. Razvan will cover this thoroughly in his section later, but as a preview, we are increasing midpoint of guidance for adjusted EBITDA, up from $60 million to $73 million. That's an incredible increase of $88 million from fiscal 2022. Clearly, our turnaround has worked. We are delivering results, and we have momentum across the entire business. Turning now to slide eight, we are delivering some of the best operational performance in nearly two years in several critical areas. Setups and throughput are up significantly as missing parts are down due to our successful efforts to improve material flow to the plant and to the production line. Those have included adjusting our warehousing strategy by delivering supplier parts directly to the plant, resourcing numerous problematic suppliers, and breaking production constraints. This also contributed to the lowest number of hours per bus and the best manufacturing efficiencies in two years. As an example of our measurable progress, in June of last year, we took more than 40 days from initial production setup of a bus to booking the sale. We are now running at less than 20 days, which is great for plant efficiencies and even better for cash flow. Not only is this proof that Bluebird is back on track, but we are now exceeding some historic financial benchmark company. Moving on to slide nine. This is a reminder of our key pillars around care, delight and deliver. Our focus areas within these pillars include our people, lean transformation, expanding our total addressable market and scaling EVs. I want to briefly touch on the progress on each of these. Regarding our people, On our last call, we covered the actions we'd already implemented this calendar year, namely company-wide pay increases, additional paid vacation days, plant working environment improvements, and narrow span of control in the plant. All have been very well received by our team members. In Q3, our newly formed We Care team in our Fort Valley plant launched an employee suggestion ideas program that has got off to a great start. with over 850 suggestions captured and more than 90% actioned in just the first two months of operation. You will also recall that in May, our plant employees voted in favor of unionization by the United Steelworkers. I can tell you they are working together well and are in the early stages of negotiating our first collective bargaining agreement. We want a collaborative relationship with the union and an outcome their employees embrace, and it's also great for the company going forward. Through continued focus on lean transformation, we are seeing improvements in quality and throughput, even while the supply chain environment is still far from normal. Our commercial EV chassis development continues to progress toward having running prototypes early next calendar year, while we stay focused on ramping up EV school bus production. With that in mind, let's now take a close look at our progress in ramping up our all new EV build up center that we told you about in our last call. Turn into slide 10. We have doubled EV production from two to four units per shift since we began using our dedicated EV center last quarter. Later this year, we've been building up to six units per shift with the opportunity to double its capacity to 12 EV buses on two shifts. As demand grows and supply chain capabilities improve and expand, we will be all able to support throughput of 20 EVs per day with our new footprint. That's an annual capacity of up to 5,000 electric school buses, plenty enough to meet the growing EV demand in the years ahead. This dedicated facility is a great example of a lean production system and efficient manufacturing within Bluebird. Let's move on now to slide 11. This is a reminder of the EPA's Clean School Bus Program. This program provides $5 billion over five years in rebates or grants to customers for the purchase of clean emission school buses, covering EVs and propane-powered buses. About 2,500 buses were awarded rebates in the first phase of this program, which totaled $1 billion. It's estimated that about 2,000 buses will ultimately be ordered from phase one, as some school districts have elected not to move forward with their EV orders amidst concerns over infrastructure readiness and overall preparedness at the district level. The good news is that the result of rebate savings of about $185 million will be reallocated to future phases of the program. We have received hundreds of EB orders from this program and fully expect to garner well over 550 orders for this first phase when all is said and done, with at least $165 million in sales. The long-term impact of this program should be well over a billion dollars in revenue to Bluebird, representing more than 3,000 orders. Now, the EPA recently launched phase two of this program, which is summarized on slide 12. Phase 2 is a competitive grant program with $400 million anticipated to be awarded in this round. Applications for Phase 2 grants will close at the end of this month. To ensure we were well represented in application submissions, we established substantial resources, both internally and externally, to work closely with our dealers and our end customers in supporting them in the detailed grant writing process. Following an extensive review and selection process by the EPA, we anticipate all this to begin in January 2024. We expect the second phase to fund approximately 1,000 buses, and we conservatively estimate that we will get at least 250 of these. Later this year, we anticipate the EPA will announce a further $63 million phase three program, which will complete the billion dollars a year program funding commitment for 2023. I would now like to hand it over to Razvan to walk through our third quarter financial results in more detail, as well as our updated full year fiscal 23 guidance. In addition, we will be providing you with the first look at our fiscal 2024 guidance. Over to you, Razvan.

Thanks, Phil, and good afternoon. It's my pleasure to share with you the financial highlights from Bluebird's fiscal 2023 third quarter results. The quarter end is based on a close date of July 1, 2023, whereas the prior year was based on a close date of July 2, 2022. We will file the 10-Q today, August 9, after the market closes. 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 important disclaimers. Slide 14 is a summary of the third quarter and year-to-date results for fiscal 2023. It was another excellent operating quarter for Bluebird, with somewhat consistent 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 quarterly guidance provided in the last earnings call. And in fact, we deliver close to 10% margin in this quarter. Despite taking downtime due to the union election activities in this quarter, the team has continued doing a fantastic job and generated 2,137 unit sales volume, which was 411 units or 24% higher than prior year. Consolidated net revenue of 294 million, was 88 million or 43% higher than prior year. Driven by higher units, higher part sales, improved mix of electric buses, and pricing actions that took hold significantly in this quarter as expected. The adjusted free cash flow was a Q3 record of 43 million and 83 million higher than the prior year third quarter. This outstanding performance was driven by the increased profitability combined with strong working capital management and supports our great liquidity position at the end of this quarter, which was over $134 million. Adjusted EBITDA for the quarter was $28 million, driven by our high volume of now profitable buses, increased parcels and margins, partly offset by increased labor costs. Given the transitional nature of our fiscal 2023 Q1 results, which included still a large portion of all backlog low margin buses, Our year-to-date performance is still very solid, at 6,398 units sold, thereof 375 EVs, with $830 million in revenues, which is already above full-year fiscal 22, with one full quarter still to go. Year-to-date adjusted EBITDA at $44 million, and we delivered year-to-date an outstanding free cash flow of $86 million. Moving on to slide 15, and as mentioned before by Phil, our backlog at the end of Q3 continues to be very strong at 5,200 units, and with the vast majority of these units at current price levels. Breaking down the Q3 294 million in revenues into our two business segments, the bus net revenue was 270 million, up by 84 million versus prior year. Our average bus revenue per unit increased from $108,000 to $126,000, or 17%, 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 Q3 were at a record level of 148 units, or 88 more than last year, a 147% increase. Parts revenue for the quarter was 24 million, representing a growth of 5 million, or 23%, compared to the prior year. This extraordinary performance was in part due to increased demand for our parts, as the buses are fully back on the road in the post-COVID environment, as well as supply chain-driven pricing actions. Gross margin for the quarter was 15%, or 5 percentage points higher than last year, due to our improved operational performance and our pricing catching up with the inflationary cost of the last 18 plus months. In fiscal 2023, adjusted net income was positive 14 million or 17 million higher than last year. Adjusted EBITDA of approximately 28 million or 9.5 percent was up compared with prior year by 19 million and five percentage points. Adjusted diluted earnings per share of positive 44 cents was up 53 cents versus the prior year. In summary, our operating performance and financial results demonstrated in this quarter and the prior quarter are clear evidence that our turnaround is complete and it sets a solid base for our future performance towards our goal of sustained profitable growth. Moving on to slide 16, we have extremely positive developments year over year also on the balance sheet. We added a quarter with over $50 million in cash and reduced our debt significantly by $79 million over the last four quarters. Our liquidity set strong at $134 million at the end of fiscal 2023 with a zero balance on our revolver. The improvements in operating cash flow and adjusted free cash flow were primarily driven by improved operations and margins and were supported by only a small improvement in trade working capital in this quarter. Additionally, we had at the end of the quarter, 13 million in prepaid revenues from the phase one of the EPA Clean School Bus Program, with more to come in the future. As a reminder, at the end of November 2022, we entered into the sixth amendment to our credit facility, extended the maturity date through December 31st, 2024. The amended covenants and extended maturity of our loan provided Bluebird with both flexibility and stability as our business continued to recover from the COVID-19 pandemic and associated global supply chain disruption. As our business results already significantly improved and our trailing 12-month net leverage ratio as well, in the second half of this calendar year, we intend to explore refinancing options and debt maturity extension. Slide 17 shows the walk from fiscal 22 Q3 adjusted EBITDA to the fiscal 23 Q3 results. Starting on the left at $8.8 million, the impact of the bus segment gross profit in total was $20.5 million, split between volume and pricing effects, net of material cost increases of $13.8 million, and operational improvements of $6.7 million. The operational improvement consists of year-over-year manufacturing efficiency improvements and lower freighting costs. The favorable development in the past segment gross profit was $3.6 million, driven by higher sales and improved margins, as mentioned earlier in the call. Additionally, our microboard joint venture results improvements were more than offset by increases in our fixed costs, mainly personnel related, for a net of negative $4.9 million compared to Q3 a year ago, when very tight cash conservation measures were in effect. The sum total of all the above-mentioned developments drives our strong fiscal 2023 Q3 reported adjusted EBITDA result of 28 million or 9.5%. On to slide 18. Looking at Q3 and ahead of Q4, we are happy to reiterate that we are now largely past most of the old backlog units with fixed pricing from fiscal year 2021 orders. Our production schedule is now full for the rest of fiscal 23 and fiscal 24 Q1, with some models, type D, for example, going already deep into fiscal 24. However, as mentioned in the last earnings call, supply chain and labor inflationary cost pressures still exist, and not all the upcoming price increases will slow to the bottom line in fiscal 23. Given our already significant backlog, we already announced in May for fiscal year 24 a model year price increase of $2,500 per bus net for new orders on all bus types to be built after October 1st, 2023 to cover expected inflationary and raw materials cost increases. On slide 19, you can see once again the spot market development for steel prices. After the reduction in the second half of calendar year 2022, They started to increase again all the way through the end of May, and this will offset a portion of our pricing realization for the remainder of calendar year 2023, as mentioned on the previous slide. However, the last few months showed easing, and we will continue to monitor the situation closely. Please also keep in mind that we have already put in place a comprehensive steel buying strategy, and we are entering in future locked contracts for steel prices with certain tonnages up to 12 months forward, minimizing our exposure and margin risk in the backlog. On slide 20, looking at fiscal year 2023, we want to share with you our updated fiscal 2023 Q4 and total year guidance. As a reminder, we are taking a more transparent and conservative approach this year, as it is still somewhat an uncertain supply chain environment we are facing. However, we have improved already all the other business levels that we could address as now demonstrated by our very strong Fiscal 23 Q2 and Q3 actual results. Looking forward at Fiscal 23 Q4, we are maintaining our forecasted revenues in the range of 280 to 300 million. However, we are increasing our Q4 EBITDA margins by approximately one percentage point, for an adjusted EBITDA of 29 million, or approximately 10%, with a range of 26 to 32 million. For the total year, we are reiterating our expectation for revenues in excess of 1.1 billion, and we are significantly increasing our midpoint adjusted EBITDA guidance to 73 million, or 6.5% adjusted EBITDA margin, with a range of 70 to 76 million. Moving to slide 21, in summary, we are forecasting a significant improvement year-over-year in all aspects, with revenues up 40% to approximately $1.1 billion, adjusted EBITDA in the range of $70 to $76 million, and positive free cash flow of $70 to $80 million, partially supported by the prepaid revenues from phase one of the EPA Clean School Bus Program. On slide 22, as promised in the last earnings call, we wanted to give you today the first look at our initial fiscal 24 guidance and expected business operating environment. The supply chain situation is not fully stable yet, and therefore we are sharing with you a base case scenario, as well as a downside and upside from there. The base case guidance is anchored in the supply chain status quo, with slight improvements and with slightly increased production levels to a total of 8,500 bus units for the year, of which 750 plus are EVs. for a revenue projection of $1.15 billion and adjusted EBITDA of $85 million or 7.5% adjusted EBITDA margin. This is an increase over fiscal 20-year expected results and would represent the best year ever for Bluebird and a great achievement at relatively low volumes compared to the pre-COVID best years. The downside upside scenarios listed there are dependent on the supply chain developments throughout fiscal year 24 and bracket our adjusted EBITDA results to a range of 7% to 8%. We'll provide you, of course, with more details during our next earnings call in mid-December. On slide 23, we wanted to reiterate our long-term outlook. We are very happy about the results of our completed turnaround, as demonstrated by our fiscal 23 Q2 and Q3 actual results, our increased fiscal 23 guidance, and our initial fiscal 24 base case guidance. Looking a bit beyond that, once the supply chain further normalizes, we expect to sell approximately 9,500 units, including 1,500 units EVs, and generate a normal year 100 million or 8% adjusted EBITDA on 1.25 billion in revenues. Looking farther to the medium term, our EV growth and operational improvements 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 1.5 to 1.75 billion, with adjusted EBITDA of 150 to 200 million, or 10 to 11%. Our long-term target remains to drive profitable growth towards 2 billion in revenues, comprising of up to 12,000 units, of which up to 5,000 are EVs, and generate EBITDA of 250 million, or 12%. We are incredibly excited about Bluebird's future, and I will turn it back over to Phil to further expand on this.

Thank you, Razvan. Let's now move on to slide 25. All the hard work the Bluebird team has put into turnaround our business, following unprecedented supply chain disruptions and hyperinflation that we've seen over the past two years, is now really paying off. That's why we're again raising our full-year financial guidance. We are at least one quarter ahead of original turnaround plan for the year and expect to book around 8,400 units. That's a 23% increase over fiscal 22 and achieve a top-line revenue of just over $1.1 billion, an incredible 40% increase over last year. Parts sales will also be well ahead of plan, delivering at least $92 million in revenue, and that's up 20%. We now expect adjusted EBITDA midpoint to be around $73 million. That's an outstanding turnaround of $88 million from the losses we incurred in fiscal 2022. EB bookings continue to be on plan, and we expect those to almost double year over year. The school bus industry forecast for our fiscal 2023 continues to be supply chain constrained across all OEMs, and our targeted bookings will put us right where we want to be around that 30% market share number. As other industries are flat to slowing down, we are just heating up with growing demand in front of us. Since the pandemic hit in early 2020 and virtually all schools closed for six to nine months, followed by severe industry-wide supply constraints, industry sales for the past three years have been well off from the long-term average of around 32,000 new buses a year. Consequently, the school bus fleet is aging and must be replaced. This is not discretionary and we expect strong industry demand in the coming years to address this pent up demand. ACT is forecasting a compound annual growth rate of 10% this year through to fiscal 2027 and that's great news for our business. After executing a substantial turnaround across our business, the company is performing extremely well. We'll continue to improve operating performance and look forward to sustained profitable growth in the robust market ahead. The future is incredibly bright for Bluebird. Let's now turn to slide 26 as a summary reminder of the strong investment highlights around our company. We are a great counter-cyclical play to many companies and industries being affected by the slowdown in consumer spending. Plus, not only are the fundamentals of our industry strong, it has just started to heat up, with a 10% compound annual growth rate expected over the next several years. Second, there was a $5 billion commitment from the highest level of government to electrify this country's school bus fleet, with more federal and state funding available and anticipated outside of this program. With more electric school buses on the U.S. roads today than anyone, Bluebird will be a strong beneficiary of these programs. We also have a proven reputation as the undisputed leader in alternative power school buses for over a decade, as evidenced by more than 20,000 propane powered Bluebirds operating today. Our exclusive partnership with Ford and Roush gives us a distinct performance and value advantage for this ultra low emissions product that no one else has with propane. And it has the best total cost of ownership value of any engine offering on the road today without grant support. And on EV, our collaboration with Cummings Accelerator Division offers a proven partner investing billions in alternative fuel solutions, something no other electric school bus manufacturer has to offer. As impressive as the outlook is for school buses, we are still looking for more growth and want to expand our total addressable market. Our planned commercial strip chassis offering, which is under development right now, could eventually add a few thousand units per year on top of our projected long-term forecasts. More to come in this development program that we have underway. With our lean transformation efforts, we are eliminating non-value-added processes and reducing standard production hours per bus. We are always looking for ways to take cost out and at the same time increase quality. Our efforts in continuously improving this area will never stop. As we mentioned today, our pricing is now fully aligned to market economics, and we are now just about through the legacy price bus issue that significantly hurt our margins in the past year. We just achieved almost 10% adjusted EBITDA margin in the third quarter. As you saw in the fourth quarter fiscal guidance, we are expecting a full 10% margin on supply constraint volume. We are convinced that in a normalized operating environment where supply chain constraints are minimal, a sustained double-digit EBITDA margin for the full year is in our reach. Specifically, 10% in the next two to three years and 12% in the next four to five years. As I mentioned at the beginning of this call, all the hard work by the Bluebird team has paid off, and the business is ahead of plan and even exceeding historical performance benchmarks. Our turnaround is completed. I want to thank our nearly 1,800 employees for all the hard work and dedication, as well as our outstanding dealer body who sacrificed with us over the last two years. We could not have done it without them, and they are and always will be critical to our success and our future. That concludes our formal presentation today, and I'd now like to hand it back to our moderator for the Q&A session.

Thank you. If you'd like to ask a question, then please press star followed by one on your telephone keypad. If you change your mind, please press star followed by two. When preparing to ask your question, please ensure that your phone is unmuted locally. As a reminder, that is star followed by one to ask the question. Our first question comes from Eric Stark from Craig Callum. Eric, please go ahead.

Yeah, good afternoon, Phil and Razan. It's Aaron Spahala for Eric. Thanks for taking the questions.

Hi, I'm Aaron.

You know, first for us, can you maybe just, hello, you know, first can you maybe just talk about some of the items that are in the supply chain that you're still seeing the constraints on and kind of the efforts that are being done there, outlook for improvement, and then just looking at the FY24 guide, just maybe talk through some of the puts and takes around that?

Yeah, sure. It's Phil here, Aaron, because it's good to talk to you. It's a great question. I think, first of all, I'm going to set the scene a little bit. Obviously, last year, we had major supply chain issues in that we had many suppliers. I mean, struggling to get labor, struggling to get tier two, tier three supply support, from Europe or from Asia, struggling to meet what we need. And, you know, that really hurt us last year badly. It's quite dramatically different this year. We do have a problematic list of suppliers. The difference is this year, problems are a lot less. They're a lot more contained. We have a lot of visibility into the issues they're having. In other words, we know weeks ahead of production when they're running into an issue. So we can work with them on it. We can try and Find an alternative source where we can. We have time to do it and react. So I won't get into naming those suppliers. Needless to say, you know, there are a lot of some of the body parts. There are some chassis components. The good news is that by the time it's reaching the end of what we call our finish line, compared with last year, in a lot of cases, we're able to find those parts. So in other words, you know, a typical bus stays in our line for five days once the body is being assembled, and then it comes off the line five days later. And by the time it's come off the line, we found those paths located and we put them on the bus in line. So that's where, when I talked about the setup time to booking time reduction, that's a big piece of it. We're doing much better getting those paths installed before that bus leaves the line rather than reworking it later in a separate process. So again, those are the improvements we're seeing. And, you know, we're hopeful and expecting, you know, continued improvement going forward, just like we had this last year.

All right, thanks. And then maybe just on that kind of setup to booking time, 40 to 20 days, you know, what's kind of the overall goal there and any other kind of areas that you're focused on to improve that?

Yeah, on that particular one, I mean, actually, it's a great question to ask. Obviously, 20 days is a heck of an improvement from where we were in June of last year at the end of that quarter. But our near term, our target is to get down to 14 days, 14, 15 days. So take another, let's say, five days out of that. And, you know, what does that mean? It means we get to cash five days earlier, which is great for cash flow again, great for our liquidity. And, you know, that's what we plan to do. So that's certainly that one. And in addition, you know, we sort of moved some of our processes that were sort of online and might be things that we don't perform on every single bus. We've taken some actions and moved them offline. So that's what we, by doing that, you avoid what's called trapped labor. So you reduce your labor hours, your overtime requirements, because you've got a separate station handling those unique issues, which can be manned appropriately for the demand that day. So just a couple of examples there, I think, of clever lean transformation and really helping productivity.

All right. That sounds good. Thanks for the color. I'll have that in queue.

You bet. Thanks, Aaron.

Thank you. As a reminder, to ask a question, please press star moved by one on your telephone keypad. Our next question comes from Mike Schleusky from DA Davidson. Mike, please go ahead.

Yes, hello, good afternoon, and thank you for taking my questions. I wanted to ask, first off, on the guidance for 2024. So, Razvan, is there any pre-cash thought you can give us for next year? Do you have any investments to make in working capital or other areas we should be thinking about?

Yes. Hi, Mike. Thanks for the question. It's still very early in our fiscal 24 projections. However, we decided, as promised in the last call, to give you at least a base case outlook. with 85 million EBITDA. We are going to ramp up our investments in capital. We, you know, for the last couple of years, we had cash conservation measures. We slowed down our CapEx investments, and we expect to restart to invest more, especially more than this year. However, we don't expect any huge capital investments outlays in fiscal 24. So it will still be a very strong free cash flow, but I don't have at this point absolute number to give you are still working through the operating plan, and we'll definitely get back in December with our full guidance, if you will, for fiscal 24.

Okay, okay, fair enough. I also want to ask about the different cases and scenarios you put in that guidance slide in your discussion between the downside and the upside. Is the sole lever between those two Is it just about the supply chain? Could a collective bargaining agreement and some of the costs and benefits around that change things between one and the other? Or your overall market share or other factors, or is it really all about supply chain that's going to drive where you end up on that spectrum next year?

The primary driver between those scenarios is supply chain, but obviously it's still very early and there are many other variables, whether it's pricing levels in the market, whatever the competition does into the next year, inflation from the supply base, potentially some outcome from the collective bargaining agreement. But we are comfortable that between all the processes we have in place, all the pricing mechanisms, we can control for most of those. So at this point, we focus these scenarios on the health of the supply chain.

Great. I wanted to squeeze another one in here about your non-bus EV products going forward. There was a pretty big bankruptcy this week of one of the battery suppliers to some of the EVs. It's not your bus battery provider that I'm aware of, but I believe it might be someone that's involved with some of those non-bus EVs, the delivery van, et cetera, that you had in the drawing board for some time. I was wondering how far along are you in the process with getting something, any kind of prototype, or getting things in the hands of customers, that company is still planning to try to get through the bankruptcy without any issues. But if they don't, do you have time to make any changes as far as their design and battery before you really make any major pushes into those markets?

Yeah, I mean, first of all, that development program, I think, you know, we're being very cautious and careful about it in terms of making sure it meets the requirements that we have that for, which is, obviously, it's not a school bus. Usually, it's quite different. So, but it's progressing well. We feel really good about where we're heading. When it comes to battery support for that, I think we feel very confident in, you know, our suppliers and what they can deliver for us. I don't think they're in the same boat as Proterra, that's for sure. Much more solidly supported and capable. So as far as I'm concerned, I think you'll see development vehicles or development chassis running towards the end of this year will be our plan. And then we'd have running prototypes all the next year that we can put in the hands of a select number of customers to put them through their paces. So that's what we do. We want to get some mileage under our belt. And then our goal would be towards the end of next year to have a product that we would really be taking to the market. But a lot of customer interest in this. You know, we're viewed as obviously we're a key OEM who's been building chassis for, well, almost 100 years now. So we know how to do it. And we've obviously got some successful track records since 2018 of producing electric power buses. So I think we feel confident we'll have a product that the market's going to really like.

Okay. I appreciate the discussion. I'll jump back in the queue. Thank you.

Thank you. We have no further questions, so we'll now hand it back over to Phil Horlock for closing remarks.

Well, thanks, Lauren, and thanks to all of you for joining us on the call today. We do appreciate your continued interest in Bluebird, and we look forward to updating you all again on our progress next quarter. As Razvan mentioned, we'll take a deep dive and a look into our 24 guidance and just make a point here that That obviously is our first look at this for you this year, and we wanted to get ahead of time, as we said we would do. As you saw today, we've completed a significant turnaround. We're ahead of schedule, and I think it clearly shows in our third quarter results, which was a further improvement on our second quarter, which obviously was well-respected, I would say, in terms of the turnaround. All key operating metrics have significantly improved from a year ago, and the legacy pricing issue that we've talked about on so many earnings calls is just about behind us. We are focused on maintaining leadership in the fastest-growing alternative power segment, which represents the majority of Bluebird's sales today, while continuously working on improving our manufacturing supply chain productivity. That never stops in Bluebird. It is continuous. Specifically, we are very excited about our exceptional growth electric buses, and there is much more to come there, clearly, especially since we're only a fraction away through the the Clean School Bus program, the $5 billion program that the government at its highest level has endorsed. So the outcome of all our efforts in the third quarter, we have an EBITDA margin just short of 10%, and we're forecast to be at 10% next quarter. And of course, we've raised full-year fiscal 23 guidance once more and provided you with a first look at our fiscal 24 guidance. Incidentally, that was about four months earlier than we've ever done in the past. So again, it shows it's a first look and we'll take a look at it later and we'll know a lot more, obviously, how the market's looking when we close the books later this year and see you all again in December. But I would say that overall, I think it was a terrific quarter for Bluebird and I'm very proud of what we've done. Finally, I'd like to give special recognition once again to our incredible employees and our dealers for their commitment and dedication to Bluebird, especially for all the work they put in after the pandemic. So should you have any follow-up questions, please do not hesitate to contact our Head of Investor Relations, Mark Benfield. And thanks again from all of us at Bluebird. Have a great evening.

This concludes today's call. Thank you for joining everyone. You may now disconnect your lines.