Blue Bird Corporation

Hello, everyone. Thank you for joining Bluebird's physical 2024 fourth quarter and full year earnings conference call. My name is Sierra, and I'll be your moderator for today. All lines have been muted during the presentation portion of the call, with an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I'd now like to pass the conference over to our host, Mark Benfield, Head of Investor Relations with Bluebird. Please proceed.

Thank you and welcome to Bluebird's fiscal 2024 fourth quarter and full year 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 to SEC. Bluebird disclaims any obligation to update the information in this call. This afternoon, you will hear from Bluebird's president and CEO, Phil Horlock, and CFO, Razvan Radulescu. Then we will take some questions. So let's get started. Phil?

Thank you, Mark, and good afternoon to everyone. First, let me say the Bluebird team has done an incredible job and delivering continually improved results as we have moved through each quarter in 2024. As you will see shortly in Razvan's section, the fourth quarter was no exception to that, where we achieved outstanding financial performance and another quarter record for Bluebird. For the full year, we delivered record financial results across the board, and once again, we beat our guidance range for each of the three metrics on which we report. So let's get started with the key takeaways for the full year on slide six. As the headline says, fiscal 2024 was an all-time record year for Bluebird. Referencing the first line in the box, I'm very pleased to report that we more than doubled our prior record profit achieved in 2023 and delivered an outstanding adjusted EBITDA margin of 13.6%. That's an impressive six percentage points higher than a year ago. As I just mentioned, we beat full-year guidance once again and we're also increasing our long-term profit outlook on the back of the structural improvements we are making. Importantly, on this call, we were providing you with fiscal year 2025 guidance above the preliminary guidance we showed at our last earnings call. Razvan will be covering these in detail later. Market demand for school buses continues to be very strong, and the backlog for Bluebird school buses at fiscal year end was over 4,800 units, and that's 6% above the same time last year. Importantly, net orders for Bluebird buses in fiscal 24 were 16% higher than last year. Now, that's a great endorsement of the customer demand for Bluebird's expansive range of buses, and this bodes well for pricing, production stability, and profit margins. Supply chain issues are undoubtedly easing, and we've done a great job in managing through a couple of constraints on some chassis components this year. We expect to see more easing as we move through 2025. Through a combination of pricing and richer vehicle makes, we increased our average bus selling price by 14% through 2024. And every bus we are selling and those in our order backlog reflect current pricing at today's economic conditions. And we are priced competitively, which we can tell from our quote win rate and incoming orders. On the EV front, we produced and delivered more than 700 electric buses, nearly 30% more than a year ago. thanks largely to the first round of a billion dollars of funding from the EPA's unprecedented $5 billion clean school bus program. Throughout the fiscal year, we maintained our very strong mix of alternative powered vehicles and further strengthened our leadership position in this segment. The higher margins and higher owner loyalty from these propane, gas, and electric buses contributed to our outstanding full-year profit improvement. We're also reinvesting back into the business, too, by selectively upgrading facilities and installing lean manufacturing processes, and we continue to enhance the plant-looking environment. And we're seeing the results of this investment in achieving some of the best manufacturing performance the company has ever seen, with higher efficiencies and increased throughput. As a result of all these accomplishments, we achieved an outstanding full-year adjusted EBITDA of $183 million with a margin of 13.6%. Now let's take a closer look at the financial and key business highlights for the full year on slide seven. As I've said on previous earnings calls, our fiscal 24 financial performance is transformed from a year ago with many record highs reported. We sold exactly 9,000 buses in the full year, which is a solid 6% above last year. Now those unit sales drove a very impressive 19% increase in sales revenue over last year. The impact of higher pricing and a richer mix of EVs is clearly evident in the revenue growth. Our full year adjusted EBITDA of $183 million was more than double last year. That's an outstanding increase of $95 million, representing a six percentage point increase in margin to 13.6%. And finally, Adjusted free cash flow of $99 million was well above the 50% of EBITDA target that we strive for. The $22 million decline versus last year is more than explained by the substantial one-time inventory reductions we took in the second half of 2023. Overall, we had breakthrough full-year results and achieved transformational improvements over last year. We are on a great trajectory. Going to the right-hand side of the slide, you can see some of the key operating highlights for the business, and there were many firsts for Bluebird. As I mentioned earlier, demand is exceptionally strong, with a firm order backlog at the end of the fiscal year, and with about $735 million in sales. That's 4,800 buses, or almost seven months of production, are the current sales rate. The full year average selling price per bus in fiscal 24 was an outstanding 14% above last year, and that's about a $17,000 increase per bus. And at $104 million, our part sales grew by 6%, and we broke the $100 million barrier for the first time in our history. With gross margins at over 50%, the parts business is a significant contributor to our results. Turning to alternative powered buses, They represented 58% of our full-year unit sales. Now, we continue to be the undisputed leader in this space, with our major competitors running at less than a 10% mix. EV buses are part of that alternative power mix, and full-year EV bookings increased by almost 30% over last year, with more than 700 sold, exactly in line with the plan we showed to you last quarter. That represented a strong and growing mix of 8% of our total sales, compared with 6% in fiscal 23. Additionally, we left the year with a record EV order backlog of about 630 buses. And that's a very strong 13% share of our total backlog. That's worth more than $200 million in sales. And remember, the vast majority of orders from Rams 2 and 3 of the Clean School Bus Program, providing more than $1.9 billion in funding, are all ahead of us. On the labor front, we completed our first collective bargaining agreement with the United Steelworkers Union earlier this year. We have a three-year contract in place, and we're off to a great start working together, and we look forward to a collaborative and stable partnership that benefits all. To help execute a $160 million expansion plan at our Fort Valley, Georgia location, in the third quarter, we were awarded an $18 million investment grant by the Department of Energy to increase EV and overall production of our Type D bus. This will create up to 400 new jobs by expanding single shift capacity from 10,000 to 14,000 school buses annually and is a significant profitable growth initiative. In the second quarter, you might recall we renewed our exclusive propane and gasoline engine contract with both Ford and Roush until 2030. By that time, we will have partnered exclusively for almost 20 years Now that's what you call a successful business partnership. And finally, we beat guidance on each of net sales, adjusted EBITDA, and adjusted free cash flow by quite a margin too. Including our updated fiscal 25 guidance being delivered today, this will be the seventh consecutive quarter in which we have beaten and raised our guidance. With a record full year profit and margin, which is more than double the previous record we set just last year, I'm incredibly proud of our team's accomplishments. I'd now like to hand it over to Razvan to walk you through our fiscal 24 fourth quarter and four-year financial results detail. We'll also be providing you guidance for fiscal 25 and an updated long-term outlook. Over to you, Razvan.