Blue Bird Corporation

Hello and welcome to the Bluebird Corporation fiscal 2024 second quarter earning call. My name is Natasha and I will be your moderator for today. If you would like to ask a question on today's call, please do so by pressing star 1 on your telephone keypad. I now have the pleasure of handing you over to your host, Mark Benfield. Mark, please go ahead.

Thank you and welcome to Bluebird's fiscal 2024 second 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 our filings with the SEC. Bluebird disclaims any obligation to update the information in this call. This afternoon, you will hear from Bluebird CEO, Bill Horlock, and CFO, Rosvon Radulescu. Then we will take some questions. Let's get started. Bill.

Thanks, Mark, and good afternoon, everybody. It's great to be here and to share with you our results for our fiscal 2024 second quarter. You'll recall that on our first quarter earnings call, we reported an all-time record profit for a quarter. Well, I'm pleased to tell you that our momentum has not slowed down at all, with the Bluebird team doing a great job in delivering an all-time record profit for any second quarter in our history, and our second best quarter ever after the last quarter. Razvan will be taking us through the details of our financial results shortly, so let me get started with the key takeaways for the second quarter on slide six. As the headline says, we achieved best ever financial results for a second quarter, only surpassed by our 2024 first quarter profit performance. As shown in the first line in the box, while we achieved a second quarter record for adjusted EBITDA, our net sales revenue was a record for any quarter. So with record profits and record revenue, I am very pleased to tell you that we achieved an outstanding adjusted EBITDA margin of 13% in the second quarter, And importantly, we are once again increasing our full year guidance. As we look at the drivers for this terrific progress in Q2, it really is about maintaining and delivering the plan we laid out last year, which focused on making significant improvements across our entire business. Market demand for school buses continues to be very strong. Our quarter-end backlog of firm orders for Bluebird buses grew by nearly 30% from the first quarter to an outstanding 5,900 units. Now that's a great endorsement of the strength of the industry and the customer demand for Bluebird buses. This bodes well for pricing, production stability, and profit margins. Now while supply chain issues are undoubtedly easing, there are still select constraints on a couple of chassis components across the truck and bus industry that are limiting industry production and deliveries. Now, while supply chain issues are undoubtedly easing, there are still select constraints on a couple of chassis components across the truck and bus industry that are limiting industry production and deliveries. But we are very engaged with those constrained suppliers, and with additional capacity being installed for the second half of this year, we expect some easing of those constraints as we move through this year and beyond. As I mentioned last quarter, the legacy price backlog, which hurt us in fiscal 22 and partially in the second quarter of last year, is fully behind us. All those low margin units have been sold. Every bus we are selling today and those in our order backlog reflect current pricing and we are priced competitively, which you can tell from our quote win rate and incoming orders. This is entirely different Bluebird bus revenue and gross margin structure compared with just a year ago, with bus prices up significantly. On the EV front, thanks largely to the first phase of $1 billion of funding from the EPA's unprecedented $5 billion clean school bus program, our second quarter deliveries of electric buses were a best-ever result in a quarter, more than 50% higher than last year, and represented 9% of unit sales. And we ended the second quarter with a very strong backlog of EV orders. We maintained our strong mix of alternative powered vehicles and further strengthened our leadership position in this segment. The higher margins and higher owner loyalty from these products contributed to our profit improvement in the second quarter. We'll continue to reinvest back into the business by selectively upgrading facilities and installing lean manufacturing processes and enhancing the plant working environment. And as Razvan will show you later, we're nearly doubling our engineering spending this year as we embark on several 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 that companies ever achieved. Bottom line, we are performing extremely well in a strong market. We're delivering a greater mix of higher margin, alternative powered vehicles. We are priced competitively and appropriately for today's economic environment and manufacturing efficiencies are improving. As a result of all these accomplishments, we achieved an outstanding second quarter profit for Bluebird of $46 million with an adjusted EBITDA margin of 13%. Now let's take a closer look at the financial and key operating highlights for the second quarter on slide seven. I want to begin by saying that our second quarter financial performance is transformed from just one year ago with many record highs reported. We saw 2,254 buses in the second quarter fiscal 24, which is down slightly from last year and 6% above last quarter. Those unit sales drove second quarter net revenue of $346 million. That's an all-time quarterly sales record for Bluebird and a very impressive 15% increase over last year. So, with essentially flat volume compared with a year ago, down only 50 buses, and net revenue up 15%, the impact of higher pricing and a richer mix of EVs is clearly evident in the revenue growth. Quarter 2 adjusted EBITDA of $46 million was $25 million above last year, almost double, 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 second quarter was an outstanding $54 million as we drove trade working capital improvements along with strong profits for the quarter. That's an impressive $30 million improvement compared with the same quarter last year. Overall, we had exceptional second quarter financial results and made transformational gains from last year. We are on a great trajectory. On the right-hand side of the slide, you can see some of the operating highlights for the business. As I mentioned earlier, demand continues to be exceptionally strong, with our firm order backlog at the end of the second quarter worth about $850 million in revenue, reflecting a backlog of over 5,900 buses. Importantly, that's almost 30% higher than the backlog we had at the end of the first quarter. Now, as an indication of the strength of the industry and the strength of our brand, we measured the ratio of incoming orders against our units sold for the quarter. This year's second quarter was a great quarter for us, with our incoming orders exceeding units sold by 60%. And that compares to 20% at the same time last year. That's great confirmation of the strength of our order pipeline and, again, illustrates our confidence in the continuing order and sales momentum we're experiencing. We raised prices considerably over the past two years, and the average second quarter selling price per bus in fiscal 24 was an outstanding 19% higher than a year ago. That's worth about $22,000 per bus. Part sales totaled $28 million in Q2, representing a strong 6% growth over last year, and we're up 7% through the first half. Turning to alternative powered buses, we represented about 55% of total unit sales in the second quarter. And we are running at a very strong 60% of sales mix through the first six months of the fiscal year. We continue to be the clear leader in this space. No other school bus manufacturer comes close to these numbers. EV buses are part of that alternative power mix. And in Q2, EV bookings increased by 56% over the last year as we sold a quarterly record of 210 electric school buses. That represents a very strong mix at 9% of our total sales compared with 6% in last year's second quarter. Additionally, we left the second quarter this year with almost 500 firm EV orders in our backlog, which is around an 8% share of our total backlog. That's worth approximately $155 million in revenue and 17% higher than a year ago. Incidentally, it's also 15% higher than the end of the first quarter. Clearly, we're benefiting substantially from the first year of funding from the EPA's $5 billion Clean School Bus Program. I'll cover later the status of the second year of this program, which comprises of two rounds. We also have some very exciting news regarding additional funding from the Inflation Reduction Act, which will significantly benefit EV adoption in the school bus industry. Continuing with our clean school bus successes, I am proud to report that during the second quarter, we received the second largest single order ever of propane-powered school buses. That's 255 units for Omaha Public Schools. We will build and deliver these in time for the start of the new school year later this summer. Incidentally, the largest propane order ever was also for Omaha Public Schools, where we delivered 440 propane buses back in 2013. It's great to see a repeat business of this magnitude, and it's also, and importantly, a great endorsement of the performance over time of our propane-powered buses. Staying with propane, I'm also very pleased to announce that in Q2, we renewed our exclusive engine contracts with both Ford and Roush until 2030. By that time, we will have partnered exclusively for almost 20 years, providing us with our industry-leading propane and gasoline engines. Bluebird introduced these products to the school bus market, and throughout that time, we have been the undisputed market leader. We are fast approaching 40,000 propane and gasoline-powered school buses deployed, which is a testament to our exceptionally successful partnership. And finally, on the back of our second quarter results, we are once again raising full-year guidance for net revenue, adjusted EBITDA, and adjusted free cash flow. This will be the fifth quarter in succession that we have beaten and raised our guidance. Importantly, too, we have raised our longer-term margin outlook from 12% plus to more than 14% as we continue to solidify and build on our recent operating and financial performance. With an all-time record profit for a second quarter, reflecting a 13% adjusted EBITDA margin, I am very proud of our team's accomplishments. I'd now like to hand it over to Razvan to watch our fiscal 24 second quarter financial results and updated guidance in more detail. Over to you, Razvan.