Blue Bird Corporation

Hello all and thank you for your patience. Today's call will begin in a few minutes time. Thank you for standing by. Hello all and welcome to the Bluebird Corporation Fiscal 2024 First Quarter Earnings. My name is Lydia and I'll be your operator today. If you'd like to ask a question during the Q&A, you can do so by pressing star followed by one on your telephone keypad. I'll now hand you over to your host, Mark Benfield, Head of Investor Relations to begin.

Thank you and welcome to Bluebird's Fiscal 2024 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 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. Bluebird disclaims any obligation to update the information in this call. This afternoon, you will hear from Bluebird CEO, Phil Horlock, and CFO, Roz Von Rodriolescu. Then we will take some questions. So let's get started.

Phil? Well, thanks, Mark, and good afternoon, everybody. It's great to be here and to share with you our results for our fiscal 24 first quarter. Now, you recall in our last earnings call, we reported record results for fiscal 23, fourth quarter, 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 first quarter of fiscal 24. Razdan will be taking you through the details about financial results shortly, so let me get started with the key takeaways for the first quarter on slide six. As the headline says, we achieved record financial results in the first quarter of fiscal 24. As I just mentioned and as shown on 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 profits and revenue, I am very pleased to tell you that we achieved an all-time high adjusted EBITDA margin of 15% in the first quarter. And we're increasing full-year guidance once again. In just a few minutes, Razan will take you through the financial details of what was an exceptional first quarter 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 first quarter. 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 that are still limiting industry production and deliveries. But we are very engaged with those constrained suppliers, with onsite support at their plants, and we are managing the situation well. On that point, despite these component constraints, we sold 9% more school buses in the first quarter than a year ago. As I mentioned last quarter, the legacy price backlog, which hurt us in fiscal 22 and in the first quarter fiscal 23, 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. This is an 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 billion dollars of funding from the EPA's unprecedented $5 billion Clean School Bus Program, Our first 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 first quarter with a strong backlog of EV orders. As we have done for many years, we again increased our sales 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 first quarter. We'll continue to reinvest back to the business by selectively upgrading facilities and processes, enhancing the plant-working environment. And as Razvan 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 two to three 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 a 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 for 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 million, with an exceptional adjusted EBITDA margin of 15%. Now let's take a closer look at the financial and key operating highlights for the first quarter on slide seven. I want to begin by saying that our first quarter financial performance is transformed from a year ago, with many record highs reported. We sold over 2,100 buses in the first quarter of fiscal 24, which is a substantial 9% of 172 buses above last year. Incidentally, that is our highest first quarter unit sales volume in more than 15 years in what is typically a seasonally challenged quarter, having just followed the start of the new school year. Those unit sales drove first quarter net revenue of $318 million. That's another first quarter sales record for Bluebird and an outstanding 35% increase over last year. 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, first quarter adjusted EBITDA of $48 million is another all-time record for Bluebird. And that's $51 million above last year and well above the $25 to $35 million general guidance range for quarterly profits. that we set at our last earnings call. And finally, adjusted free cash flow for the first quarter was about break even as we protected for future material needs and $21 million below last year when in fiscal 23 we were aggressively cutting excess inventory left from the prior quarter. Razvan will cover this topic in detail in his section. Overall, with exceptional first quarter financial results and transformational gains from last year, 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 million 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 two years, and the average first quarter selling price per bus in fiscal 24 was an outstanding 26% higher than a year ago. That's worth about $29,000 per bus in revenue. Parts sales totaled $24 million 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 second highest mix of sales in any quarter at 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. Incidentally, I would be remiss if I didn't mention that our principal competitors, IC and Thomas, are no longer offering a 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 first quarter with 420 firm EV orders in our backlog, which is around a 9% share of our total backlog. That's with approximately $130 million in revenue. Incidentally, that backlog today is now at 500 EVs, representing 10% of our total current backlog. Clearly, we're benefiting substantially from the billion-dollar funding from the first phase of the EPA's $5 billion Clean School Bus program. I'll cover later the exciting news on the second 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 2024 calendar year. Continuing with our EV successes, I am incredibly proud that during the first quarter fiscal 24, we received the largest single order ever of EV school buses from LA Unified School District. on the competitive bidding process. That's 180 buses in total with deliveries starting late this calendar year. And importantly, this audit 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 first quarter of fiscal 24, we announced that we had formed an exclusive joint venture called Clean Bus Solutions. That's a 50-50 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 Bluebird customers for an affordable monthly fee over the lifetime of the service. This turnkey service eliminates a typical high upfront cost for a school district in paying for electric bus when grants are limited. and handles the entire charging infrastructure, including installation. This recurring revenue business should accelerate adoption of Bluebird Electric's buses by school districts and will be a great new sales tool for our dealers. We'll keep you posted on progress through the coming year as Clean Bus Solutions begins to transact business. And finally, on the back of our first quarter results, we are once again raising four-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. I would now like to hand it over to Razvan to walk through our fiscal 24 first quarter financial results and update the guidance in more detail. Over to you, Razvan.