Blue Bird Corporation

Hello, everyone. Thank you for attending today's Bluebird Fiscal 2025 First Quarter Earnings Conference Call. My name is Sierra, and I will 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, press star 1 on your telephone keypad. I would 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 2025 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, Phil Horlock, and CFO, Razvan Radulescu. Then we will take some questions. So let's get started. Phil?

Thanks, Mark, and good afternoon to everyone. It's great to be here and to share with you our financial results for our fiscal 2025 first quarter. I'm very pleased to tell you that our momentum from last year has not slowed down at all, with the Bluebird team doing a fantastic job in delivering near-record adjusted EBITDA and margin in the first quarter of fiscal 2025. Razdan will take us through the details of our 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 near-record quarterly profits in the first quarter of fiscal 2025, which is particularly impressive, as it has the fewest working days of any quarter in the year. As shown in the first box, we beat Q1 guidance and are maintaining our full-year guidance, and that's despite the impact on our business of the president's executive orders. More to come on that a little later. As we look at the driver, this terrific result Q1, it really is about continuing to deliver the plan that we laid out a couple of years ago, which focuses on making significant improvements across our entire business. Market demand for school buses continues to be very strong, and the backlog for Bluebird school buses was the healthy 4,400 units at the end of the first quarter, representing almost six months of production. This bodes well for pricing, production stability, and profit margins. Bus prices were again higher than a year ago on every combustion engine model, and we are priced competitively, as we can see from bid results and our overall win rate. You will recall that on prior earnings calls, I talked about the expected surge in EB orders toward the end of December 2024, as orders were being submitted to meet the deadline for Rams 2 and 3 the federally funded clean school bus program these rounds represent almost two billion dollars in funding for electric and propane powered buses well despite the epa subsequently allowing extensions to that ev order deadline we saw a spike in our ev orders with the back of the end of q1 standing their record 765 evs and that's 22 percent higher than at the end of fiscal 2024 and a substantial 82% above the same time a year ago. In a few minutes, I will cover where our fiscal 25 EV unit sales and backlog stand today. We continue to sell a strong mix of alternative powered vehicles and maintain our position as the undisputed leader in this segment, which we have held for more than 15 years. We're also reinvesting back into the business, too, by selectively upgrading facilities, installing lean manufacturing processes, and developing exciting new and differentiated products that will hit the market in the next two to three years. And we continue to enhance the plant working environment for employees. This investment is resulting in some of the best manufacturing performance the company has ever seen, with higher efficiencies and increased throughput. As a result of all these accomplishments, our first quarter profitability and margin was the second highest Q1 result that we've ever achieved, with an adjusted EBITDA of $46 million, just $2 million below last year's first quarter record, with an exceptional adjusted EBITDA margin of 15%. Now, since the first quarter, virtually all industries and businesses have been monitoring and responding to the executive orders issued by President Trump on January 20th, and we are no exception. We are dealing with those executive orders that could impact our business, namely the pausing of federal funding and new tariffs, which are certainly in a state of flux. And I will cover these in a couple of slides. But first, let's take a closer look at the financial and key business highlights for the first quarter on slide seven. We sold 2,130 buses in the first quarter and recorded revenue of $314 million, just about the same as last year. By the way, the first quarter volume for last year and this year were highest for more than 15 years in what is typically a seasonally challenged quarter, having just followed the start of the new school year. As I mentioned earlier, first quarter adjusted EBITDA of $46 million was just $2 million below the Q1 record we set a year ago when we had a 10% sales mix of EVs, compared with just 6% this year. More significantly, we achieved a 15% margin equal to last year with a 94% mix of combustion engine vehicles sold. While we enjoy the profit contribution of EVs, it should be noted that we achieve about the same percentage margin on all of our internal combustion powered buses or ICE vehicles as they are called. We are not reliant on EVs to achieve a 14 to 15% EV down margin and are highly profitable in all of our products. We are confident that we achieved best in industry margins, and with a 94% mix of ICE buses sold, our exceptionally strong first quarter results highlight the underlying strength and profitability of our core business. And finally, adjusted free cash flow for the first quarter was $22 million, an increase of $23 million over a year ago. Overall, we achieved outstanding first quarter financial results with a high mix of ICE buses at 94% of unit sales. Now 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 strong, with our firm order backlog today representing $760 million in revenue, reflecting a backlog of over 4,700 buses. First quarter selling prices for each ICE bus were about 6% higher than a year ago, reflecting both pricing and the richer option take. However, the lower EV mix in fiscal 25 Q1 of 6% compared with 10% last year resulted in the average vehicle selling price being close to last year at $135,000 per unit. Parts sales total $26 million in Q1, representing a solid 6% growth over last year in the typically slowest sales quarter of the year for our parts business. But into alternative powered buses, they represented a 51% mix of unit sales in Q1. This compares with typically less than a 10 to 15% mix for our major competitors. We benefit from the higher margins and higher on a loyalty of our gas and propane sales, which are exclusive to us in the industry. As previously mentioned, we have seen a spike on EV orders from late last year. And by this Monday, we had close to a combined 1000 EV sold or in our order backlog for fiscal 2025. Our latest full year forecast reflects 1,000 EV unit sales for the full year, so we are well positioned to deliver on this projection. Incidentally, the current backlog of electric vehicles represents about $250 million in revenue, which is almost double the value at the end of Q1 a year ago. Now, with the President's executive order in place to pause EPA and federal funding programs for up to 90 days to allow review of the programs, I will cover the status and confidence of funding for these EB buses on the next slide. I also have some late breaking news that was released late yesterday regarding executive order to pause federal funding programs and disbursements of funds. It is very impactful. I'll cover this shortly. I'm pleased to announce that late last year, we signed our contract with a DOE for the 50% funding of our new plant expansion in Fort Valley, representing $80 million of a total investment of $160 million. This means that the DOE funds are appropriated and we have a contractual agreement in place with the DOE. Per the president's executive order, this grant funding is presently paused, although we are confident it will proceed following review. However, The pause in funding for this program should be impacted too by the late breaking news that I just referred to. I'll cover this shortly. As a reminder, this project adds 400 well paying American jobs with clean buses built by a century old American company located in Middle Georgia, providing our children with health and safety benefits of clean air. Last month it was announced that I will be stepping down as president and CEO to enjoy my second retirement for Bluebird, And John will replace me effective February the 17th. Now John has terrific operational experience, having held senior and executive positions at automotive system suppliers Magna, Dana, and BorgWarner. He also knows Bluebird very well, having been general manager at our manufacturing location in Brantford, Canada in the past. I look forward to helping John and Bluebird in any way I can from my seat on the board. And finally, we beat first quarter guidance, which is the eighth consecutive quarter in which you've done so, and we are holding our full year guidance. With a 15% adjusted EBITDA margin and near record profits in Q1, I'm very proud of our team's accomplishments. Let's now turn to slide eight and review the potential impact of the EPA funding pause on Bluebird EV sales this year. As you can see on the left hand chart, we have about 1000 EVs either sold or in our backlog today. Our full year forecast reflects EV sales of 1000 buses for this fiscal year. Now we've analyzed the disposition of each unit in the backlog to determine if EPA funding through the Clean School Bus program has yet been distributed to the customers for these orders. On 25% of the total sold or backlog units representing 250 school buses, Customers have been fully approved for a rebate or grant from the EPA, but they have not yet received their funds. Distribution of these funds is now on pause for up to 90 days pending a review of the funding program for the president's executive order. So let me now cover the late breaking news that is highlighted in yellow in the box at the bottom of this slide. The CFO of the EPA issued a memorandum late yesterday afternoon, potentially states that the court has declared that federal fund disbursements for programs funded under the Infrastructure and Investment Jobs Act and the Inflation Reduction Act shall not be paused while litigation is ongoing or a court rules otherwise. It further states a disbursement of funds will continue. Clearly, this is good news for Bluebird, as customers will now start receiving federal funding again from this Clean School Bus program, helping to address the 250 ordered EV buses for which funds have not yet been received. Additionally, this news should apply also to the Department of Energy funding of our new plant in Fort Valley, so that the present pause in funding disbursement from the DOE will be lifted. As a reminder, funding for this program was covered by the Inflation Reduction Act. We will continue to monitor funding progress in this area and any changes in the EPA support of the Clean School Bus program. So let's continue now with the left chart on the slide and the funding disposition of our EV orders. 75% of the total units have funds in place and are either already sold or scheduled for production and delivery. Incidentally, almost 30% of the backlog represents buses that are fully funded with the help of state and local programs. With this funding uncertainty, we have taken a number of actions to support the sale of 1,000 EVs in fiscal 2025. First, we have reprioritized our production schedule to build fully funded buses first. Second, we have shifted production of buses with pause EPA funding to later in the year. Third, we are pursuing several new opportunities for EV orders utilizing state and local funding to mitigate the risk of unfunded EPA orders. And fourth, with a collaborative effort involving school bus OEMs and several fleet customers, we have garnered significant political support for the resumption of the Clean School Bus Program funding. Bottom line, we have 750 EV buses either sold or funded in the backlog today, and we're pursuing funding for at least another 250 buses, including significant state and local funding opportunities, and we are confident in our 1,000-unit sales forecast. We also remain confident that the Clean School Bus Program will be resumed as it fits the charter and the mission of the EPA. Let me now move to slide nine and assess the tariff impact of Bluebird of another President Trump executive order. The original tariff proposals are present in a state of flux, with the potential tariffs on imported Canadian and Mexican goods on hold for 30 days while negotiations are underway with the U.S. Now, Bluebird is exploring various sourcing options with suppliers to mitigate potential tariff risks. Our position is that any potential government tariffs will be passed through to the end customer, so there will be no net financial impact on Bluebird. Should the tariffs be implemented as originally proposed, we would initiate a 5% price increase on all non-EV bus orders to cover the cost increase on imported components. We will continue to monitor and respond to any changes in tariff plans. I'd now like to hand it over to Razman to walk through our fiscal 25 first quarter financial results and our guidance in more detail. Over to you, Razman.