Blue Bird Corporation

Good morning or good afternoon, all. Welcome to the Bluebird Fiscal 2025 Second Quarter Earnings Conference Call. My name is Adam and I'll be your operator for today. If you'd like to ask a question at the Q&A portion of today's call, you may do so by pressing star followed by one on your telephone keypad. Go ahead now, hand the floor to Mark Benfield to begin. So Mark, please go ahead when you're ready.

Thank you. And welcome to Bluebird's Fiscal 2025 Second Quarter Earnings Conference Call. The audio for our call is webcast live on -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, John Weisgall, and CFO, Rosamond Rodrilescu. Maybe we'll take some questions. So let's get started. John.

Thanks, Mark, and good afternoon, everyone. Thanks for joining us. It's great to be here and to share with you our financial results for our Fiscal 2025 Second Quarter. As you might know, I worked for Bluebird just over 20 years ago as a general manager. It was a challenging period back then, but it was truly one of the most rewarding times in my career, and I'm excited to be back. Before I get started, I want to thank outgoing CEO, Phil Horlock, our board, and of course, our employees for welcoming me back into the company and making the transition very smooth. Likewise, it's great to be back working with our supply partners, and of course, our very dedicated dealer network. I'm really excited to be back. There is such a bright future ahead as you'll see today. Let's get to the 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 record-adjusted EBITDA in the second quarter of Fiscal 2025. Rosamond will be taking you through the details for financial results shortly. So let me get started with the key takeaways for the second quarter on slide six. Going straight to the headline, we achieved record quarterly revenue and profit in Q2 2025. As shown in the first box, we beat Q2 guidance and are maintaining our full year guidance. This despite the impact of the current administration policy on tariffs. And we'll talk more on that later in this call. We continue to execute our plan developed a few years ago, which focused on improvement across the entire business. And that focus is evident in our strong Q2 results. Now, market demand for school buses continues to be very strong. We ended the quarter with just under 5,000 units in our backlog representing over six months of production. This bodes well for operational stability and margins. A few years ago, we had to take some strong pricing action and we continue to maintain laser focus in this area. This is demonstrating our results. Bus prices were again higher in Q2 compared to a year ago on every combustion engine model. And we're still priced competitively as we can see from our bid results and our overall win rate. During the quarter, we also continued to see strong mix of alternative power vehicles. We maintain our lead position in this segment. And it's a segment we created more than 15 years ago. We are also reinvesting back into the business by selectively updating facilities, focusing on lean production systems and developing exciting new and differentiated products that will hit the market beginning as early as next year. We recognize targeted investment in our operations will lead to better performance on the manufacturing side of the business and investment in our product portfolio will grow the top line. It's our objective to position this business to be a strong long-term investment. As a result of this continued path, our Q2 profitability and margin was the highest quarterly result we've ever achieved. Adjusted EBITDAG came in at 49 million or 14%. That's .5% better compared to last year's second quarter. Similar to almost every business in the country, we are also dealing with the impacts of the administration's executive orders and the tariff volatility. We are fortunate to be well positioned to navigate the situation to a margin neutral outcome. But now let's take a closer look at the financial and key business highlights for the second quarter on slide seven. We sold 2,295 buses in the second quarter and recorded revenue of 359 million, a quarterly record in 13 million ahead of last year. On the EV side, we sold 265 vehicles, 11.5%, and we continue to have strong order intake for EVs. As I mentioned earlier, second quarter adjusted EBITDAG 49 million was a quarterly record as well. It was 3 million above the second quarter of 2024. That's a 14% margin, 50 basis points better than last year. We will talk more on our outlook later in this call. As a reminder, our margins are very balanced across our entire product line from a percentage basis, including EVs. And we think EVs are a perfect fit for the school bus market when you look at the duty cycle, available charging intervals, range, and proven health benefits to our children. But our core business in the ICE segments is equally as strong. Even with nearly 90% ICE mix, our second quarter results highlight the underlying strength in the overall business. And finally, adjusted free cash flow for the second quarter was 19 million, a decrease of 35 million over a year ago, but mainly driven by a tax carry forward benefit that we had in 2024. Overall, we achieved an outstanding second quarter financial result. 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 of 4,900 buses representing 770 million in revenue. Second quarter average selling prices for buses was up $4,000 per unit, or about 3% compared to last year. And part sales totaled 26 million in Q2. All powered buses represented a 57% mix of unit sales in Q2. This compares with a typically less than 10 to 15% mix for our major competitors. We benefit from higher margins and higher owner loyalty with our gas and propane products. And we're the exclusive supplier in the industry. At the end of the quarter, we had a combined 1100 EVs, either booked or in an order backlog. Our latest forecast reflects 800 to 1000 EV unit sales for the full year. And we are well positioned from an order standpoint to achieve our previous target of 1000 units. However, the tariff exposure is higher on EVs and it may create a scenario where we intentionally push out some of our bills. Rajbhan will cover this in more detail. The current backlog of 708 electric buses represents 233 million in revenue. Throughout the second quarter, it was very encouraging to see rounds two and three of the EPA Clean School Bus Program flowing through to our end customers. It's a good program. And this momentum provides optimism that'll continue into round four. In addition, reimbursement funds were flowing for our $80 million mess contract with the DOE. This is for their funding towards our new plant expansion in Fort Valley. As a reminder, this project adds 400 well-paying American jobs to a century old American company with an iconic brand to build clean school buses, providing our children with the benefits of clean air. It's really a great story. And finally, we beat our guidance for the 10th consecutive quarter and are holding our full year guidance. With a 14% adjusted EVW margin and record profits in Q2, I'm very proud of the team's accomplishments. But before I hand it over to Razvan to cover the financials, I would ask that you turn to slide eight so I can talk to another highlight in Q2. Earlier in March, we debuted our Bluebird commercial chassis at the Work Truck Show in Indianapolis. We are recognized OEM in this segment and the reaction to this new product was overwhelming. The chassis will be offered in propane or EV. It has some best in class features, like a 55 degree wheel cut for tight turning radiuses, the highest front axle clearance at over eight inches, galvanized frame rails, and it's designed to have fewer electrical and fluid connection points for reliability. We are now executing our manufacturing strategy, but the product is scheduled to launch in 2026 at a market competitive price. As mentioned, many company fleets, last mileers, and delivery companies express strong interest. We will be finalizing our financial projections for this new segment this year as a part of our 2026 outlook. I'm really excited about this opportunity. So I would like to now hand it over to Razvan to walk through our fiscal 25 second quarter financial results and full your guidance in more detail. Razvan.

Thanks, John, and good afternoon. It's my pleasure to share with you the financial highlights from Bluebird's fiscal 2025 second quarter and first half of the year results. The quarter end is based on a closed date of March 29th, 2025, whereas the prior year was based on a closed date of March 30th, 2024. We will file the 10Q today, May 7th, after market close. Our 10Q includes additional material and disclosures regarding our business and financial performance. We encourage you to read the 10Q and the important disclosures that it contains. The appendix attached to this presentation includes reconciliations of differences between GAAP and non-GAAP measures mentioned on this call, as well as other important disclaimers. Slide 10 is a summary of the fiscal 25 second quarter record financial results. It was another great operating quarter for Bluebird with highest ever EV volume, and they beat once again our guidance provided in the last earnings call. In fact, we delivered the best quarter ever in terms of both top line and bottom line as a testament of our continued journey of profitable growth. The team pushed hard and did once again a fantastic job generating 2,295 unit sales volume, which was just above prior year level. Record Q2 consolidated net revenue of 359 million was 13 million higher than prior year, driven by pricing actions that materialized in this quarter and increased EV volume. Adjusted EBITDA for the quarter was an all time record 49 million, driven by high boss and parts margins, partially offset by increased investments in headcount engineering and business growth areas. The adjusted fee cashflow was strong at 19 million and 35 million lower than the prior year second quarter, primarily due to increased tax expenses year over year. This result was due to continuous strong profitability across all boss and power train types, strategic cost management, and improvements in working capital. Looking on the right side, at the first half of the fiscal year, we posted all time record revenue of 673 million and all time record adjusted EBITDA of 95 million, both improved versus then record last year's first half. Moving on to slide 11, as mentioned before by John, our backlog at the end of Q2 continues to be strong at almost 5,000 units, including over 700 EVs. In fact, at the end of March, we have now 1100 EVs sold in the first half and in backlog with only 150 EPA round three units in process to be funded. Round three is slowing again, as confirmed by the EPA as well as round two. Breaking down the Q2 359 million in revenue into our two business segments, the bus net revenue was 333 million, up by 15 million versus prior year, due to higher EV mix and improved pricing across non-EV products. As a result, our average bus revenue per unit increased from 141,000 to 145,000, or approximately 3%. EV sales in Q2 were a record 265 units, double versus Q1 and 55 units, or 26% higher than last year, as planned. Bus revenue for the quarter was flat from Q1 at 26 million, representing a small reduction of 2 million compared to the prior year. This continued strong performance was in part due to increased demand for our parts, but the fleet is aging, offset by a reduction of parts used in warranty due to quality improvements made year over year. Gross margin for the quarter was 19.7%, or 130 basis points higher than last year, in line with our targets. Adjusted EBITDA of 49 million, or 13.7%, was higher by 4 million compared with prior year, and showed a 50 basis points improvement. In fiscal 25 Q2, adjusted net income was a record 32 million, or 2 million higher than last year. Adjusted diluted earnings per share of 96 cents was up 7 cents versus the prior year. Slide 12 shows the walk from fiscal 24 Q2 adjusted EBITDA to the fiscal 25 Q2 result. Starting on the left at 45.8 million, the impact of the bus segment gross profit in total was 8 million, split between volume, EV mix and pricing effects, net of material cost increases of 8.5 million, and operational small cost increases of negative 0.5 million, largely driven by the USW labor agreement now in full effect, almost fully offset by other efficiency improvements. The small unfavorable development in the part segment gross profit was negative 0.8 million, driven by lower sales of parts used in warranty, as mentioned earlier in the call. Our fixed costs and other income were unfavorable year over year by negative 3.8 million, due to increased headcount and investments into our growth areas. The sum total of all the above mentioned developments drives our all time record fiscal 25 Q2 reported adjusted EBITDA result of 49.2 million or 13.7%. Moving on to slide 13, we have extremely positive developments year over year, also on the balance sheet. We ended the quarter with a new record 131 million in cash, and further reduced our debt by approximately 5 million over the last year. Our liquidity set very strong at a new record 274 million at the end of fiscal 25 Q2, a 38 million increase compared to a year ago. Additionally, we have executed another trunche of share repurchases accelerated to 20 million during fiscal 25 Q2, which brings us to 40 million completed over the last nine months, with another 20 million left to go on the existing program approved by our board. The operating cashflow was strong for Q2 at 29 million, given by great operational execution and margins, improvements in working capital, and partially offset by increased tax payments. On slide 14, we'd like to give you an update about the impact the new administration's tariff policy already has on our business, and the respective countermeasures we put in place. To level set definitions and how they work, tariffs are taxes imposed by the government on certain goods brought in from other countries. They are paid by the importer of record, and usually are passed on to the end users. Since February, we have seen almost on a weekly basis, and sometimes even twice in the same day, new tariffs being imposed on various imports in the United States of America. And while the majority of our parts and assemblies are sourced in the US, we're also using great suppliers from Mexico and Canada, as well as a small number of components or sub parts from China and Europe. We have highlighted on this chart, the main components exposure for each tariff category. On Canada and Mexico, the good news is that at least so far, the USMCA exemptions apply for a brief period they did not. Our exposure to Europe is low, but even a 10% tariff adds up, and this is temporary and could go up based on the ongoing negotiations. The steel and aluminum 25% import tariff gave the US manufacturers the opportunity to raise prices immediately, as shown in the spot market at the end of March. The good news is that we have a robust steel hedging program covering our backlog. However, this cost increase impact will materialize in fiscal 26, if the prices stay where they are now. And now to the big elephant in the room, China. The 145% tariffs are bringing the imports to a standstill, and they are particularly exposed on our EV kit from Accelera. To give you a rough order of magnitude, we are looking at more than 10% price increase on the total value of an EV bus. Therefore, we decided to prioritize ICE buses in fiscal Q4 and reduce the number of EVs we produce until the tariff situation comes to a resolution. As you will see in our updated guidance, Q3 is proceeding as planned due to already inbound and strategic inventory we have put in place. While we are working with our supply chain partners to find alternative sources in the United States and North America, this takes time, and we are not going to compromise safety or quality during this process. As a result, we have to implement a 2% tariff increase at the end of Q2 on all units sold, as well as an additional 2% general price increase on all new orders after April 1st. This was done when China new tariffs were at only 20%. More price increases are going to be announced in the near future, reflecting the now 145% new tariff levels for China. Our goal is to provide as much advance notice as possible to our dealers and customers, while preserving the financial health of our business. Let me be clear, these unprecedented tariffs have a real effect on our business, and they will drive our prices up. On slide 15, we wanted to remind you about our quarterly guidance provided in our last earnings call. We are targeting 200 million adjusted EBITDA for the year, with approximately 1000 EVs. On slide 16, we want to share with you our confirmed fiscal 25 total year 200 million guidance, with updated Q3 and Q4, and a tariff-driven low EV number for the year of 800 to 1000 units. But first, looking at Q2 actuals, we have beat once again our guidance this past quarter, so we had a very strong and record-breaking first half for the fiscal year. There is still some uncertainty on the EPA rounds four and five due to the recent executive orders. However, the rounds two and three funding disbursements are flowing again, as confirmed by the EPA. We have booked approximately 400 EVs in the first half, and have a backlog of 700 EVs, of which now only 150 are in process of receiving funding from round three. On the adjusted EBITDA side, we are increasing slightly our guidance for Q3, given our strong business momentum, and we are lowering the bottom range by 5 million for Q4, driven by lower EVs. We are maintaining our revenue to a range of 1.4 to 1.5 billion, and we are confirming our adjusted EBITDA of 200 million, or approximately 14%, with a narrowed range of 190 to 210 million, or 13.5 to 14.5%. We'll provide further updates at the beginning of August, after we close fiscal Q3, and gather further insight into the tariff situation, especially for China and EVs. On slide 17, we want to reiterate our thoughts on fiscal 25 business environment, and our total year guidance. We continue to have a number of both tailwinds and headwinds at play this year. As tailwinds, we have strong bus demand, stable pricing, and still a very high industry backlog. We offer not only diesel and gasoline school buses, but we have the only propane fuel school bus in the industry, with clean fuel and -in-class total cost of ownership. As mentioned last few times, we are not a one-trick pony. We are also leading in the EV segment, with over 2,000 EV buses on the road. The state subsidies continue to be strong. EV pure-play competitors are going out of business, and we have already approximately 1,100 EVs sold and in backlog at the end of March. But headwinds, there is some uncertainty regarding the timing of EPA Clean School Bus Program future rounds four and five. Also, supply chain is still fragile at times, while improving overall. The material costs and supplier inflation pressures are still present, and the newly implemented tariffs are impacting our cost of goods sold over time, with bus pricing countermeasures already announced, and more to be implemented as needed. In summary, we are slightly raising our units and maintaining our revenue midpoint guidance to 9,300 and 1.45 billion respectively, with approximately 900 EVs. We are also confirming our adjusted EBITDA guidance of 200 million, or 14%, with a range of 190 to 210 million, and 13.5 to .5% margin. Moving to slide 18, in summary, we are forecasting an improvement year over year, with revenue up to approximately 1.45 billion, adjusted EBITDA in the range of 190 to 210 million, or 13.5 to 14.5%, and improved adjusted free cash flow of 60 to 80 million. The free cash flow guidance is in line with our typical target of approximately 50% of adjusted EBITDA, and it includes on top the extraordinary capex of now 30 million, with our 50% fiscal 25 portion of the new plant investment funded by a DOE mass grant, which is currently proceeding. Moving on to slide 19. Today, we are once again reconfirming the medium term outlook at 14% margin, with volumes of up to 10,000 units, generating revenue around 1.6 billion, and with adjusted EBITDA of 225 million. Starting in 2028 and beyond, our long-term target remains to drive profitable growth to higher levels, towards 1.85 to 2 billion in revenue, comprising of 11,000 to 12,000 units, and generate EBITDA of 270 to 300 plus million, or .5% to 15% plus, but best in class levels. The growth comes not only from improved EV mix, driven by sustained state funding, and improved EV total cost of ownership over time, but also from our new Bluebird commercial chassis, addressable market expansion, as well as our Microboard joint venture new plant expansion in the USA. We continue to be incredibly excited about Bluebird's future, and now I will turn it back over to John.

Thank you, Razvan. Let's move on to slide 21. We've shown this slide on several earnings calls, so I won't spend too much time on it today, as our business priorities remain consistent. The chart on the left side of the page outlines our Bluebird value system as a company, taking care of employees, delighting our customers and dealers, and delivering profitable growth. The right side of the page outlines how we get there. And of course, the objective of delivering sustained, profitable growth for our investors is at the center of it all. And when you turn to slide 22, I wanna start with Bluebird's history and resilience. After the COVID and inflationary period that affected the entire industry to epic proportions,

we really

worked hard to restructure and improve our business. So looking at 2025 and beyond, we're really coming into our moment. Razvan took you through the guidance for fiscal 25, and I'm showing some of those key metrics in the midpoint guidance here. First, we're being cautious with our bookings outlook, only increasing volume by 3% over fiscal 24 at this time. Net revenue of 1.45 billion will be a new record for Bluebird, up 8% from fiscal 24. And adjusted EBITDA guidance of 200 million is 9% higher than our fiscal 24 results. Importantly, we are planning on a robust 14% adjusted EBITDA margin in fiscal 25, up 40 basis points from fiscal 24. And finally, we're forecasting to grow EV unit sales to 900 buses in fiscal 25, up 28% from last year. On the right chart, you can see there's still a lot of pent up demand following the low industry sales over the last five years. And the bus fleet has continued to age. ACT is forecasting a compounded annual growth rate of 6% through 2030. And that's great news for our business and our profit outlook. So I'll wrap it up with slide 23. As I approach my first 100 days since rejoining the company, I really do feel good about things. This great company and iconic brand is almost 100 years old. It has stood the test of time and it's poised for the future. We delivered record sales and adjusted EBITDA for the quarter and are maintaining our full year guidance despite the challenging tariff environment. We remain confident the Clean School Bus Program will continue. It's a bipartisan initiative, it's 100% appropriated and eliminates harmful tailpipe toxins benefiting our children and communities. Over time, Bluebird has demonstrated resilience. Our performance has put us in a position to really look longer term as we invest and enter new segments and upgrade our operations. I wanna thank our employees, our dealer network and our supply partners. All are critical to our success. And I'm really glad to have rejoined Bluebird. It's been an incredible start with record results, maintaining guidance, a great history and an exciting future. Thank you. So that concludes our formal presentation for today. And now I'd like to hand it back to the moderator for our Q&A session.

Thank you. Mr. Ramada, if you'd like to ask a question today please press star followed by one on your telephone keypad now to enter the queue. I'm preparing to ask you a question. Please ensure you are unmuted locally. And our first question comes from Mike Shliskey from DA Davidson. Mike, please go ahead, your line is open.

Hi, yes, hi, good afternoon. And John, welcome. So I noticed that you didn't really change much on your outlook, your medium or long-term targets. Well, I was kind of wondering, John, it's been about two months that you've been there or a little more than two months. Does your background lend itself to any margin improvements above and beyond what's been stated? I think you might wanna change that. You probably sat down and chat with a lot of folks from the company for the last couple of months here. You can do to kind of get beyond that 50% over the long-term in your personal goals.

Thanks, Mark, thanks for the question. Thanks for welcoming me into the company. The couple of things, I think it's early. I've only been here the first 100 days. So I wouldn't wanna speculate in that area. But there's a couple of things I think from my end that can bring the company. And I think you know my background. I have a strong operational background and I can support the company in that area. Large part of my career was on the plant floor. And if you look at the last 20 years, predominantly in Magna prior, I was running large groups, large segments in the company, up to 60 plants. But probably uniquely, I have an advantage in that I've run a bus plant in Bluebird. So I have a lot of familiarity with the product and a lot of familiar with the manufacturing process. So again, I think it's a little bit early to tell what we can do, but a big part of what we're focusing on is the longer-term manufacturing strategy.

Got it, thanks for that. There also are a few comments made about the price for non-EV buses. I was wondering if you can share a little bit about the price expectations of performance for the EV buses themselves. In other words, there were plans to come down over time. That's been the whole point of all the substitute -by-step scale you need to get those prices down. But I was just kind of wondering if EV pricing is running in line with what you were targeting and do the tariffs throw all that off in the next couple of quarters here?

Hey Mike, this is Razvan. Thanks for the question. So as you might be aware, and as we discussed last time, we took the first step to reduce prices on EVs by approximately $25,000. Unfortunately, the current situation with the tariffs is moving us backwards in that goal by how much we are still evaluating. But needless to say, it's a pause in our journey to reduce the price of the EV buses and improve the total cost of ownership. However, we are optimistic that the tariff situation will clarify hopefully in the next few months, and then we'll be able to resume our journey on the price reduction for the EV.

Okay, great. I also want to clarify just kind of the broad guidance here. I mean, there are some uncertainties. It sounds like you're facing some of them. Some of them were not there last quarter, especially in the EVs, as you just mentioned. But are you saying that EVs have a couple headwinds that are taking place right now, but the ice and propane outlook is actually improved to the net seems like it's pretty much unchanged? I mean, here's just some of the big parts of the moving here that made the guidance stay roughly the exact same as it was before.

Yes, Mike. So obviously we had a very strong first half, which gives us good momentum, and it puts us in a position to strengthen our results for the total year. So that's the first thing. Second, the effects on the ice from the tariffs so far are fairly moderate, and we have taken already pricing actions to offset that. So indeed the variable now with the EV tariffs levels that will affect us mainly in Q4, and therefore we may decide together with our dealers and our customers to push some of the volume that we could build in Q4 into fiscal 26. So that's why we widened the guidance for Q4 now to 45 to 60 million, but we narrowed the guidance on Q3 towards the upper end now 50 to 55 million.

So just to clarify, Razlan, if you don't build the EVs, you've got ice and propane orders to take those build slots. Am I on the right track there?

Yeah, absolutely. So in terms of total volume, we will substitute EV with ice in Q4.

Yeah, and keep in mind we're closer to the fourth quarter as well compared to most companies, just based on our reporting period. So the risk period for us is considerably less than other companies. Most companies are closing in December, of course.

Of course. Thanks a lot for the answers. I'll pass it along.

Thanks, Mike. The next question comes from Eric Stein from Craig Hallam. Eric, your line is open. Please go ahead.

Hi, everyone. Thanks for taking the questions today. Eric. Hey, so I know that your dealer network is certainly one of your strengths. And just curious on the pricing side, I mean, obviously everyone's dealing with this tariff uncertainty, but just curious, I mean, have you gotten any pushback from your dealer network? And then I guess it's your dealer network going to the school districts, but any pushback at either level? And just curious, it seems as if they are, but curious your thoughts on some of the other market participants and whether the other two are kind of following suit and acting rationally.

Hey, Eric. This is Razvan. Thanks for the question. So we are obviously working very closely with our dealer partners and the end customers to navigate these challenging times regarding tariffs. Now, the first pricing trees we put in place was fairly moderate, approximately 2%. And this is because the majority of our supply chain is from the United States and North America, and we have smaller exposure to other markets. So the level is, while nobody likes to pay taxes or tariffs more than before, this is something that we are able to navigate and work together on. The risk right now is coming on the EV level, and especially in the Q4, because we have some exposure to China, and those dollars now are tariffed at 145%. So definitely it's a bigger number.

Yeah, and maybe just a couple other points. The Grazban says, nobody likes price increases, but it's also not inherent to us. It's an entire industry. In fact, I would say it's nationwide, first with what's going on. So relative to our peers who are in the same situation. And then maybe just one last point on the dealers. I mean, we have a really collaborative relationship. We've been talking to them right since January on this. So they're locked stock and barrel with us on this whole thing.

And then to the second part, we have seen similar actions from our competitors so far on the tariffs level.

Okay, that's great. And I know top of mind for investors clearly is the CSB funding. And I know round two and round three now flowing, and it sounds like you're hopeful on round four, but could you just update us or give your updated thoughts on how much of the funding is federal versus state and local? And then also just curious, and then I can jump back into line, but just curious, given everything going on on the EV side, whether you are seeing a noticeable uptake in interest in propane and gasoline?

So on the first question, so the level of funding and subsidies was roughly 50-50 between state and federal when we had the full Clean School Bus Program announced. Obviously over a certain number of years. Right now, the good news is that the rounds two and three are flowing as we expected last time. So there is some uncertainty on rounds four and five, but we are optimistic that round four will continue given the fact that rounds two and three are flowing. So they are still fairly balanced at this point in time, and we see continuous strength in the state level funding. So, so far I would say still a balanced equation there with rounds two and three flowing.

And then on the EV side, that's right, on the EV side, I think we're in a pretty unique position as you can appreciate. We're the only ones with this alt power segment, a segment we created, and it puts us in a great position in terms of dealers or districts that may want a cleaner solution in their product.

Yep. And you know what, maybe just one more to sneak in. So you mentioned, I think you gave the number, it was a hundred or maybe it was a little bit over in terms of what's exposed to round three in school districts just waiting on that funding. Am I correct in that thinking?

Yeah, so last earnings call, we had 250 units waiting for funding, and now we have only 150 and they are all around three and they are in process of being funded as we speak.

Okay, thank you.

The next question comes from Tyler DiMatteo from BTIG. Tyler, your line is open, please come ahead.

All right, thanks for taking the questions here and good afternoon. I wanted to follow up on some of the pricing comments here, and I guess I'm curious here, how do you think about balancing the pricing equation with some of the win rate comments? Is it as simple as, hey, if we can't sell EVs to customers, we substitute to some of the other all-hour buses as you alluded to? I guess just how do you think about kind of maybe leaning into this as an opportunity given your market leading position here?

Yeah, I'll start and then I'll hand it to Raspun. I mean, it's early to tell in terms of seeing a shift if they're gonna go from EV to propane, but I think we're well situated. I mean, we're the only ones with the product. So that leaves me, at least for Mara, and I think more comfortable. But again, early, I mean, we're only a week or so since the China tariffs were announced. So Raspun, I don't know if you have anything to add.

Yeah, on the pricing side, it appears that all the major manufacturers in the school bus industry are similarly affected by these tariffs based on what we've seen for our competitors' pricing action. So from that perspective, it seems like we are in balance, at least on the first rounds that we have put in place so far. So therefore, they did not have any material effect on our win rate.

Okay, great, thank you. And then my follow-up here is, I wanted to kind of get a little bit more color on maybe the cost sharing split here. I know, Raspun, to your point, that you've spoken a few times here to the pricing and kind of how that would flow through to customers. I guess, how do you think about that dynamic in terms of the supplier base here? Maybe what are the conversations there and kind of how do you think about that as you kind of look at the entire value chain here?

Yeah, thank you, it's a great question. And obviously, we are working very closely with our supply chain partners to first understand the exposure and then take mitigating steps, whether it's identifying alternative sources or potentially stair-stepping the cost increases over time. But this is definitely a -on-one discussion. It varies by country, by supplier, by component, by lead time, so there is no really specific discussion simple or universal answer to this.

Okay, great, thank you guys, really appreciate the time. I'll turn it back to the kill.

The next question comes from Craig Irwin from Roth Capital Partners. Craig, your light is open, please go ahead.

Thank you for taking my questions. So I wanted to ask about the change to your fourth fiscal quarter guidance. I appreciate the granularity going in and saying 100 to 300 units of EVs in the quarter, and you did tap higher, your total number of units, 2,500. If the tariff situation was to resolve the couple of hundred units of EVs that look like they may be less likely to materialize now, would that be a potential source of upside for you in the fourth fiscal quarter? Or is this something where the customers maybe are delayed into the next year, given the uncertainty that's been introduced by the tariffs?

Yes, hi Craig, this is Razvan, thanks for the question. So we do have the orders in our backlog, so there is indeed upside should the tariff EV situation solve favorably, let's call it, very soon. So there is some upside, that's why our upper end of the guide is a 210 with 300 EVs in Q4.

Okay, excellent, excellent. My next question is about the commercial chassis that you're introducing. So a year ago at Act Expo, you showed an EV chassis this year, it's propane, I know you can do gas and other drivetrains in there. When you're doing the early development work with your customers as you put together the business model to share details with investors, what drivetrain or what fuel preference are you hearing from your customers? This seems to be an area of the market that might be underserved, and you have interesting partners. Can you maybe just give us an update on the early conversations and how this is playing out into your potential investment in the different technologies that might serve you over the next number of years?

Yeah, thanks, Greg, great question. So a couple of things, I had a chance, of course, to be at the work truck show and could see firsthand the positive response, and then ACT, everything we heard similar was very favorable. Similar to you, I believe there's room in the segment, we can see that. And initial indications seem to be, I'd say there's greater interest on the propane side right now. Now, some of that may just be the sentiment that we see with EVs and people recognizing there'll be stronger tariffs in that area because of China, but certainly propane has got a great opportunity in that segment from everything we can see. And then if you couple that as well with some of the best in class features that we have, we think we're pretty well positioned.

Okay, and then lastly, if I may, I met with management from both of your leading competitors at ActExpo in Anaheim and a bunch of industry suppliers. And there seems to be some chatter out there that one of the other two will have a propane bus next year. The volumes and customer experience is obviously undefined at this moment. Can you talk about brand loyalty and how propane has helped you with existing Bluebird customers and winning new customers? Would you expect to continue to sell propane to existing Bluebird customers instead of wins? Does this really impact you or is this really them taking care of their existing brand loyal customer base?

Yeah, so Craig, thanks for the question. However, we are not aware or we do not have any confirmation of any competitive propane engine products coming into the market at this time for a school bus application. However, we are very confident in the value and the performance of our Ford propane engine together with Rausch that we've put in place several years ago. We have over 20,000 buses in operation with propane and we have a great owner loyalty and repeat customer. So we are welcome any competition in this segment if they come.

Yeah, and maybe just a couple of other things. I think our supply partner with Rausch has equity in the name and that helps us dock into that brand loyalty. And of course, it's not a retrofit. So there's a lot of benefits to that.

Yeah, excellent. Well, you've demonstrated the value of propane and that's why I think the market is paying attention. So congratulations on another strong quarter here. I'll hop back into queue.

Thanks, Craig. Thanks, Craig. The next question is from Chris Piz at Needham. Chris, your line is open. Please go ahead.

Hey, good afternoon. About three months ago, we were on this call and there was just a lot of uncertainty around clean school bus EPA. Is there any way to kind of get a sense of, then I know headlines hit and the portals were open. Is there any way to get a sense of what kind of levers within the industry kind of helped push that to happen? Or was it just with, were you guys as surprised as everyone else? And the reason I ask is just, I know no one knows what's gonna happen with round four, but just try to see how much of a topic this is within the administration and within the industry.

Hey Chris, this is Razvan. Thanks for the question. So first of all, we are not surprised because as we discussed three months ago and as we messaged in all our meetings, we were confident that rounds two and three were gonna flow because there was a legal obligation and the potential liability if they were to stop or to be stopped. So it confirmed what we were expecting. Obviously we didn't know for sure, but we had that positive sentiment that rounds two and three will be completed. So this also gives us some optimism now for round four at least was the next step, but obviously we'll have to wait and see what the EPA decides to do with round four.

Okay, but rounds four and five would follow that same logical argument that there's a law in place and repercussions and that type of thing. That's fair to say?

No, because rounds two and three were awarded. So people started to put programs in place, break ground for infrastructure. People were told to order buses. Rounds four was not awarded yet. Only the applications were collected. So they are earlier in the stage of maturity if you will.

Okay, thanks for the clarification. And then on China and EVs, because let's say round four does start flowing or state subsidies for EVs or just market-based purchases. Do you have pricing power on EVs or there's a certain spare step ASP built into the round four, round five, and that could be a headwind emergence on EVs?

So the details for round four or five, as far as what is the level of funding per bus are not yet confirmed or clarified by the EPA. We do have some idea what the prices will be based on the current tariffs, but obviously by the time rounds four are awarded, orders are put in place, we work through the backlog. It's towards the end of 2026 calendar year most likely. So by then we will know for sure the tariffs, what they are for an EV. So I would say it's literally to have this conversation for rounds four or five.

Okay, perfect. And then just lastly, with the accelerated buyback and the $20 million left, how should we think about, you know, look at that cash balance and you talked about the balance sheet, you know, what the, I guess how should investors think about that moving forward with the stock trading at the multiple set?

Yeah, so as you saw this quarter, we accelerated our previous pace. So we went up from 10 million before to 20 million now. We still have 20 million left in the current program. And we will let you know in the next earnings call what we have done during this quarter and potentially what our plans might be for the future on this topic.

Okay, thanks for everything.

Thanks Chris. This concludes today's Q&A session. So I'll hand it back to John for some closing comments.

Yeah, thank you Adam. And thanks to each of you for joining us on the call today. You know, last year you saw momentum increasing throughout the year with profitability improving as we move through the quarters. And we're continuing that theme for 2025. I think you can share my enthusiasm for Bluebird. And we look forward to updating you on our progress in the next call next quarter. Should you have any follow-up questions, please do not hesitate to contact our head of investor relations, Mark Benfield. And Bluebird has never been in a stronger position than it is today. It has a fantastic future ahead as we approach 100 years as a company. And from all of us here, thanks for joining us on the call from Bluebird and have a great evening.

This concludes today's Q&A. Thank you very much for your attendance. You may now disconnect your lines.