Blue Bird Corporation soars with file FY2023 outcomes By Investing.com

Blue Bird Corporation (NASDAQ:), a number one college bus producer, has reported a record-breaking monetary efficiency for the fiscal yr 2023, surpassing its personal steering in each quarter. The firm achieved a historic revenue within the fourth quarter with a sturdy adjusted EBITDA margin of 13%. With the transition to alternative-powered autos and strategic investments in facility upgrades, Blue Bird’s full-year web income soared to $1.13 billion, marking a 41% enhance from the earlier yr. The firm’s backlog, valued at over $670 million, displays sturdy market demand for college buses, together with electrical fashions. Looking forward, Blue Bird anticipates continued progress with an adjusted EBITDA margin of 10% for fiscal yr 2024.

Key Takeaways

• Blue Bird Corporation reported a record-breaking fiscal yr with $1.13 billion in income and $88 million in adjusted EBITDA.
• The firm’s backlog stood at 4,600 models with a price exceeding $670 million.
• A shift in direction of alternative-powered autos, equivalent to electrical buses, contributed to the monetary success.
• Blue Bird plans to put money into product growth, capability enlargement, and worker advantages within the coming fiscal yr.
• The firm has introduced a mid-year value enhance for brand new bus orders to mitigate inflationary pressures.
• A three way partnership with Generate Capital, Clean Bus Solutions, is about to speed up the adoption of electrical buses.

Company Outlook

• Blue Bird forecasts income between $1.15 billion and $1.25 billion for fiscal yr 2024.
• The firm anticipates an adjusted EBITDA margin of $115 million or 10%.
• Long-term targets embrace $2 billion in income, 12,000 models bought, and EBITDA exceeding $250 million.

Bearish Highlights

• The firm bought roughly 2,500 fewer models in comparison with its greatest yr in 2019.
• Supply chain volatility stays a priority, necessitating quarterly steering ranges.

Bullish Highlights

• The transition away from legacy-priced models to alternative-powered autos is driving monetary efficiency.
• Blue Bird’s sturdy monetary outcomes have enabled it to refinance its credit score facility and cut back debt by $40 million.

Misses

• Despite file revenues, the corporate didn’t match the height gross sales quantity of 2019.

Q&A Highlights

• CEO Phil Horlock emphasised that seasonality points are mitigated by the present backlog and robust demand.
• The collaboration with Cummins (NYSE:) goals to scale back the cost of working and buying EV college buses.
• Blue Bird has utilized for the whole $400 million in federal funding for clear college buses, with the EPA to determine on recipients.
• Labor negotiations with the United Steelworkers are anticipated to proceed into 2024.

Blue Bird Corporation’s fiscal yr 2023 efficiency units a excessive bar for the trade, with its pivot in direction of environmentally pleasant transportation options and strategic partnerships inserting it on the forefront of the college bus market. The firm’s sturdy backlog and funding in innovation position it properly for sustained progress within the years to come back.

InvestingPro Insights

Blue Bird Corporation’s (BLBD) outstanding fiscal yr has been underscored by its monetary metrics and market efficiency, as mirrored in real-time knowledge from InvestingPro. The firm’s market capitalization stands at a stable $829.86 million, showcasing its important presence within the trade. This valuation is supported by a income progress of 41.49% for the final twelve months as of This autumn 2023, additional cementing Blue Bird’s profitable enlargement available in the market.

InvestingPro Tips spotlight that Blue Bird is predicted to see web revenue progress this yr, an optimistic signal for traders trying on the firm’s profitability potential. Additionally, analysts have projected gross sales progress within the present yr, which aligns with the corporate’s reported income will increase and promising outlook for fiscal yr 2024.

For traders contemplating the inventory’s present position, it is value noting that Blue Bird is buying and selling at a excessive Price / Book a number of of 20.03, suggesting a premium valuation by the market. This excessive a number of, together with a P/E Ratio of 32.55, signifies that traders are keen to pay extra for the corporate’s earnings, doubtlessly because of the anticipated progress and profitability.

As a part of the particular Cyber Monday sale, InvestingPro is providing a subscription at as much as 60% off. For these trying to delve deeper into Blue Bird’s financials and market efficiency, you should utilize coupon code sfy23 to get a further 10% off a 2-year InvestingPro+ subscription. With 15 extra InvestingPro Tips listed for BLBD on the platform, subscribers can achieve a extra nuanced understanding of the corporate’s funding potential.

Full transcript – Hennessy Capital (BLBD) This autumn 2023:

Operator: Hello, everybody. Thank you for attending Blue Bird Corporation’s Fiscal 2023 Fourth Quarter and Full Year Earnings Call. My identify is Sierra, and I’ll be your moderator at the moment. All traces will probably be muted through the ready remarks from our administration staff with a possibility for questions-and-answers on the finish. [Operator Instructions] I’d now wish to go the convention over to our host, Mark Benfield, Head of Invest Relations. Please proceed.

Mark Benfield: Thank you, and welcome to Blue Bird’s fiscal 2023 fourth quarter and full yr earnings convention name. The audio for our name is webcast reside on blue-bird.com beneath the Investor Relations tab. You can access supporting slides on our web site by clicking on the presentation field on the IR web site. Our feedback at the moment embrace forward-looking statements which can be topic to dangers that might trigger precise outcomes to be materially totally different. Those dangers embrace, amongst others, issues we have now famous on the next two slides and in our filings with the SEC. Blue Bird disclaims any obligation to update the data on this name. This afternoon, you will hear from Blue Bird CEO, Phil Horlock, and CFO, Razvan Radulescu. Then, we’ll take some questions. Let’s get began. Phil?

Phil Horlock: Well, thanks, Mark, and good afternoon, all people. First, let me say the Blue Bird staff has completed a implausible job in delivering regularly accepted outcomes as we have now moved by way of every quarter in 2023. As you will see shortly in Razvan’s part, the fourth quarter was no exception to that, the place we achieved excellent monetary efficiency. For the complete yr, we delivered file monetary outcomes throughout the board, properly forward of the transformational plan that we outlined only a yr in the past, following a really powerful yr in fiscal 2022. So, let’s get began with the important thing takeaways for the complete yr on Slide 6. As the headline says, we achieved file full-year monetary ends in fiscal 2023, and we beat steering each quarter, together with the fourth quarter. In truth, as Razvan will present you in just some minutes, the fourth quarter was an all-time file revenue for any quarter in Blue Bird’s historical past with an distinctive adjusted EBITDA margin of 13%. As we take a look at the drivers for this terrific progress in fiscal 2023, it truly is about making important enhancements throughout our complete business all year long. Market demand for college buses continues to be very sturdy and the backlog for Blue Bird college buses was at a really wholesome 4,600 models on the finish of the fourth quarter. This bodes wells for pricing, manufacturing stability, and revenue margins. Now, whereas provide chain constraints are easing, there are choose constraints throughout the trade which continues to be limiting trade manufacturing and deliveries. But we’re very engaged with these constrained suppliers with on-site help at their vegetation and we’re managing the scenario very properly. On that time, the proof is obvious with our bus deliveries in 2023 being 25% larger than final yr. I’m happy to let you know that the legacy-priced backlog, which damage us in fiscal 2022 and within the first quarter this yr, is now absolutely behind us. As a reminder, we outline these legacy-priced models as these at contractual value ranges previous to October ’21. Every bus in our order backlog now displays present pricing, and we’re priced competitively, which you’ll be able to inform from our quote win price and incoming orders. This is a wholly totally different Blue Bird bus income construction in contrast with a yr in the past. On the EV entrance, thanks largely to the primary part of funding of $1 billion from the EPA’s unprecedented $5 billion Clean School Bus Program, we had practically 600 EVs in our agency backlog on the finish of the fiscal yr and full-year deliveries greater than doubled from a yr in the past. With $4 billion nonetheless to go, this program is de facto accelerating the adoption of electrical college buses. As we have now completed for a lot of years, we once more elevated our gross sales mixture of alternative-powered autos and strengthened our management position even additional. The larger margins and better [on the loyalty] (ph) from these merchandise contributed to our revenue enchancment in fiscal 2023. We additionally reinvested again into the business by selectively upgrading amenities and processes, enhancing the plant working atmosphere and including electrical bus capability by way of our new EV manufacturing middle. Through the efforts of the very best workforce within the business, sturdy management, lean course of enhancements, and sheer onerous work, we have now been attaining a few of the greatest manufacturing efficiency the corporate has ever achieved. Bottom-line, we’re performing extraordinarily properly in a powerful market. We’re delivering a larger combine of upper margin in alternative-powered autos, we’re priced competitively and appropriately for at the moment’s financial atmosphere, and monetary outcomes are at an all-time file degree. Now, let’s take a better take a look at the monetary and business highlights for the complete yr on Slide 7. I need to begin by saying that our full-year monetary efficiency is remodeled from a yr in the past with many file highs achieved. We bought over 8,500 buses in fiscal ’23, which is a considerable 25% or almost 1,700 buses above final yr. Those unit gross sales drove full-year web income of $1.13 billion. That’s an all-time web gross sales file for Blue Bird and an distinctive 41% larger than a yr in the past. Full-year adjusted EBITDA of $88 million is one other all-time file for Blue Bird. That’s $103 million larger than final yr and $15 million above the midpoint of steering that we set at our final earnings name. And lastly, adjusted free money movement for the yr was $121 million. That’s a rare enhance of $144 million over final yr and one other all-time money movement file for Blue Bird. Overall, these are excellent full-year outcomes and transformational beneficial properties from final yr. Although not proven on this slide, it is value mentioning that within the second half of fiscal 2023, we achieved an adjusted EBITDA of $70 million, representing a margin of 12%. It’s clear we have now nice momentum going into fiscal ’24. On the right-hand aspect of the slide, you’ll be able to see a few of the working highlights for the business. As I discussed earlier, demand continues to be sturdy with our agency order backlog at fiscal year-end value over $670 million in income. We raised costs significantly over the previous two years, and the typical full-year promoting value per bus in fiscal ’23 was 15% larger than a yr in the past. Parts gross sales have been simply shy of $100 million, one other Blue Bird file, and up 27% year-over-year. The growing common age of buses on the highway is having a fabric optimistic affect on our aftermarket business and we achieve market share. Turning to alternative-powered buses, they symbolize a file 62% of our full-year unit gross sales, and that is a 4 share factors enhance in contrast with final yr. We proceed to be the clear chief on this area. No different college bus producer comes near that quantity. Now, EV buses have been a part of that blended progress with bookings greater than doubling from final yr. Additionally, we left the yr with practically 600 agency EV orders in our backlog, which is round a 12% share of our complete backlog. That’s with roughly $180 million in income. Clearly, we’re benefiting considerably from the $1 {dollars} funding from the primary part of the EPA’s $5 billion Clean School Bus Program. And final on our EV business, we did launch an all new prolonged vary battery within the second half of the yr, offering round a 30% enhance in vary on a single cost over our customary battery. That’s an anticipated vary of about 130 miles, which is a terrific worth providing for our prospects by assembly the candy spot for every day college bus use. From an operations standpoint, an amazing instance of lean manufacturing is improved throughput, trying on the time taken from initially establishing a bus chassis to receiving fee for the whole completed bus. We lower that from 40 days to twenty days in fiscal ’23. Incidentally, we have been operating it round 16 days within the first quarter of fiscal ’24. That’s an amazing efficiency by our operations staff. And lastly, we beat full-year steering, reporting file web gross sales, file adjusted EBITDA, and file adjusted free money movement for fiscal 2023. We completed the yr extremely sturdy with a 13% adjusted EBITDA margin within the fourth quarter, and I’m very happy with our accomplishments. I’d now like handy it over to Razvan to walk by way of our fiscal ’23 monetary ends in extra element. In addition, we will probably be offering our up to date fiscal 2024 steering, which an adjusted EBITDA margin of 10% is considerably larger than what we confirmed you in our final earnings name. Over to you, Razvan.

Razvan Radulescu: Thanks, Phil, and good afternoon. It’s my pleasure to share with you the monetary highlights from Blue Bird’s fiscal 2023 fourth quarter and full-year file outcomes. The quarter-end is predicated on a detailed date of September 30, 2023, whereas the prior yr was based mostly on a detailed date of October 1, 2022. We will file the 10-Okay at the moment, December 11, after market shut. Our 10-Okay contains extra materials and disclosures relating to our business and monetary efficiency. We encourage you to learn the 10-Okay and the vital disclosures that it accommodates. The appendix connected to at the moment’s presentation contains reconciliations of variations between GAAP and non-GAAP measures talked about on this name, in addition to different vital disclaimers. Slide 9 is a abstract of the fourth quarter and full-year file outcomes for fiscal 2023. It was one other excellent working quarter for Blue Bird with considerably restricted provide chain challenges and with an elevated variety of larger margin models driving each our top-line and our bottom-line outcomes. We considerably beat the adjusted EBITDA quarterly steering supplied within the final earnings name. And in reality, we delivered the very best quarter ever for Blue Bird with 13% adjusted EBITDA margin. The staff pushed onerous and continued doing a implausible job and generated 2,116 unit gross sales quantity, which was 100 models or 5% larger than prior yr. Record consolidated web income of $303 million was $45 million or 17% larger than prior yr, pushed by a better variety of models, larger elements gross sales, improved combine of electrical buses, and pricing actions that took maintain considerably on this quarter as anticipated. The adjusted free money movement was very sturdy at $35 million and $6 million larger than the prior-year fourth quarter. This efficiency was pushed by the elevated profitability mixed with sturdy working capital administration and help our nice liquidity position on the finish of this quarter, which was $163 million. Adjusted EBITDA for the quarter was a file $41 million, pushed by our excessive quantity of now worthwhile buses, elevated elements gross sales and margins, partly offset by elevated labor prices. Looking rapidly on the complete yr, we’re very proud by the staff’s efficiency in recording the very best yr ever for our firm in a number of top-line and bottom-line facets. And with solely 8,514 models bought, or roughly 2,500 models lower than the prior greatest yr of 2019. And that is regardless of the transitional nature of our fiscal ’23 Q1 outcomes, which included nonetheless a big portion of all backlog low-margin buses. Our full-year efficiency was excellent for each the top-line and the bottom-line: all-time file $1.13 billion in revenues, all-time file adjusted EBITDA of $88 million, and all-time file adjusted free money movement of $121 million. Moving on to Slide 10. As talked about earlier than by Phil, our backlog on the finish of This autumn continues to be very sturdy at roughly 4,600 models, and with all of those models at present value degree. Breaking down the file This autumn $303 million in income into our two business segments. The Bus web income was $278 million, up by $42 million versus prior yr. Our common bus income per unit elevated from $117,000 to $131,000, or 12%, which was largely the results of pricing actions taken over the previous 18 months, in addition to a better combine of electrical buses. EV gross sales in This autumn have been additionally at a file degree of 171 models or 51 greater than final yr, a 43% enhance year-over-year. Parts income for the quarter was $25 million, representing a progress of $4 million or 17% in comparison with the prior yr. This extraordinary efficiency was partly resulting from elevated demand for our elements because the fleet is getting older, in addition to supply-chain-driven pricing actions and throughput enhancements. Gross margin for the quarter was a file 16.5% or roughly 18 share factors larger than final yr resulting from our improved operational efficiency and our pricing catching up with the inflationary cost during the last 18-plus months. In fiscal ’23 This autumn, adjusted web revenue was $21 million or $43 million larger than final yr. Adjusted EBITDA of $41 million or 13% was up in comparison with its prior yr by $57 million and 20 share factors. Adjusted diluted earnings per share of $0.66 was up by $1.32 versus the prior yr. Moving on to Slide 11, and for the remaining of this presentation, we are going to concentrate on the full-year end result. Breaking down the $1.13 billion in income into our two business segments. The Bus web income crossed the $1 billion mark at $1.035 billion, up by $311 million versus prior yr. Our common bus income per unit elevated from $106,000 to $122,000 or 15%, which was largely the results of pricing actions taken over the previous 18 months, in addition to a better combine of electrical buses. EV gross sales for the yr have been at a file degree of 546 models, which is 277 greater than final yr or greater than double. Parts income for the yr was $98 million, representing a progress of $21 million or 27% in comparison with the prior yr. This extraordinary efficiency was partly resulting from elevated elements demand because the fleet is getting older, in addition to supply-chain-driven pricing actions all year long and throughput enchancment. Gross margin for the yr, together with the low-margin models from Q1, was roughly 12% or 8 share factors larger than the final yr resulting from our improved operational efficiency and our pricing catching up with the inflationary cost. In fiscal ’23, adjusted web revenue was $35 million or $71 million larger than final yr. Adjusted EBITDA of $88 million or 8% was up in contrast with prior yr by $103 million and 10 share factors. Adjusted diluted earnings per share of $1.07 was up $2.22 versus the prior yr. In abstract, our working efficiency and monetary outcomes demonstrated on this yr, and significantly within the final two quarters, are clear proof that our business transformation has been very profitable. And it units a stable base for our future efficiency in direction of our objective of sustained worthwhile progress, with adjusted EBITDA margins of 10%-plus within the short-term regular yr and with some extra provide chain normalization, adopted by 12%-plus within the medium- to long-term. Moving on to Slide 12. We have extraordinarily optimistic developments year-over-year additionally on the stability sheet. We ended the yr with almost $80 million in money, and lowered our debt considerably by $40 million during the last 4 quarters. Our liquidity could be very sturdy at a file $163 million on the finish of fiscal ’23, with a zero stability on our revolver. The enhancements in working money movement and adjusted free money movement have been primarily pushed by improved operations and margins and have been supported additionally by enhancements in commerce working capital. Additionally, we had on the finish of the yr $19 million in pay as you go revenues from Phase 1 of the EPA Clean School Bus Program, with extra to come back sooner or later. Moving to Slide 13. At the top of November 2023, we refinanced our credit score facility at important higher phrases with a five-year maturity date by way of November 2028. The new construction consists of a $100 million time period mortgage with 5% per yr amortization, and a brand new revolver line of credit score of $150 million. We want to thank BMO, who led the syndication course of, the opposite joint lead arrangers, together with Bank of America (NYSE:), and the opposite lender taking part banks for his or her help and confidence into our future. The lowered covenants and the prolonged maturity of our mortgage present Blue Bird with each flexibility and stability as our business grows profitably and we proceed to guide the college bus trade within the different gasoline area. Slide 14 reveals the magnitude of the business transformation and outcomes achieved by our staff during the last yr. We went from arguably the worst yr ever to the very best yr ever, with over $100 million adjusted EBITDA enhancements year-over-year, file income up 40% and roughly doubling our EV gross sales and file adjusted free money movement. And we achieved this with roughly 2,500 much less models than the prior greatest yr of 2019, which demonstrates our a lot decrease breakeven level we function beneath proper now. Slide 15 reveals the work from fiscal ’22 adjusted EBITDA to the fiscal ’23 end result. Starting on the left at unfavorable $15 million, the affect of the Bus phase gross revenue in complete was $86 million. Split between quantity and pricing results, web of fabric cost will increase of $66 million, and operational enhancements of $20 million. The operational enhancements encompass year-over-year manufacturing effectivity enhancements and decrease [freight-in] (ph) prices. The favorable growth within the Parts phase gross revenue of $17 million pushed by larger gross sales and improved margins, as talked about earlier within the name. Moving on, our JV Micro Bird had an impressive yr and their greatest yr ever as properly. Coming from a web revenue loss final yr to a file end result, the year-over-year enchancment was $12 million. Additionally, we up to date our adjusted EBITDA addbacks to incorporate now, resulting from materiality, our portion of the JV curiosity, taxes, depreciation, and amortization of roughly $5 million in absolute phrases and year-over-year, as final yr is netted beneath $100,000. These enhancements have been absolutely offset by will increase in our different bills and glued prices, primarily private associated, of unfavorable $17 million as we began to reinvest into our business and our groups throughout fiscal ’23. The sum complete of all the above-mentioned developments drives our file fiscal ’23 reported adjusted EBITDA results of $88 million or 8%. On Slide 16, you’ll be able to see as soon as once more the spot market growth for metal costs. After the discount within the second half of calendar yr ’22, they began to extend once more throughout the top of May, and this did offset a portion of our pricing realization for the rest of calendar yr 2023. The subsequent few months reveals some easing, however the UAW strike decision with the most important auto producers created upward pricing stress into the market. The futures, nevertheless, point out some flattening within the subsequent few months. However, please take into account that we have now already put in place a complete metal shopping for technique, and we’re getting into into future locked contracts for metal costs with sure tonnages as much as 12 months ahead, minimizing our publicity and margin danger within the backlog. Before we discuss concerning the up to date steering for fiscal ’24 and our improved long-term outlook, on Slide 17, we needed to share with you some important investments that we’re planning to start out in fiscal ’24 to make sure our worthwhile progress technique is profitable. Our engineering bills plan for fiscal ’24 are double the extent of fiscal ’23. As we begin the combination work of the subsequent technology of Ford (NYSE:) gasoline and propane engines for the subsequent degree of emission rules. Additionally, we proceed to evolve our EV providing and plan new product security enhancement options. Finally, we are going to proceed to ramp up our funding in bringing to market the business EV chassis by the top of calendar 2024. We are additionally planning to triple our capital funding into capability enlargement, manufacturing facility upgrade, high quality enhancements, and our provide chain functionality and tooling in direction of our goal of fifty buses per day or roughly 12,000 buses per yr. On the folks aspect, we skilled inflationary pressures each externally from our provide base and internally, and we proceed to offer aggressive advantages to our workers. We’re additionally launching a complexity discount initiative, and we’ll begin the upgrade of our ERP system in addition to modernization our business intelligence and monetary planning and evaluation instruments. All these prices mixed can add as much as roughly 2% of our revenues in fiscal ’24 and past. On to Slide 18. This is the final earnings name by which we are going to current this image, because it was vital previously to offer transparency to our pricing journey and consumption of the old backlog. However, we’re blissful to reiterate that we at the moment are previous all the old backlog models with fastened pricing from fiscal ’21 orders. Our manufacturing schedule is now full into fiscal ’24 Q2, with some fashions, Type D for instance, going already into fiscal ’25. As proven within the web page earlier than, provide chain and labor inflationary cost stress nonetheless exist, and we’re reinvesting closely into our product and manufacturing capabilities. Given our important backlog, we introduced for fiscal ’24 one other mid-year value enhance of $2,500 per bus web for brand new orders acquired after April 1, 2024, to cowl anticipated inflationary prices and different investments. This is along with the prior value enhance of $2,500 we took for orders beginning on October 1, 2023. On Slide 19, we need to share with you our up to date fiscal ’24 steering. As a reminder, we’re persevering with to take a extra clear and conservative method additionally this yr, however it’s nonetheless a considerably unsure provide chain atmosphere we face. However, we have now improved already all the opposite business levers that we may handle, as now demonstrated by our very sturdy fiscal ’23 Q3 and This autumn precise outcomes. Looking ahead at fiscal ’24, we’re growing our income to a spread of $1.15 billion to $1.25 billion, and we’re considerably growing our adjusted EBITDA margin to $115 million or 10%, with a spread of $105 million to $125 million. Due to provide chain volatility, at this level, we’re solely offering common quarterly ranges, with each quarter anticipated to have income between $275 million to $325 million, adjusted EBITDA within the vary of $25 million to $35 million, or 9% to 11%. We’ll present additional updates in mid-February after we shut Q1 and collect additional perception into our provide chain capabilities to help our sturdy backlog and EV combine. Moving to Slide 20. In abstract, we’re forecasting the numerous enchancment year-over-year with income up 6% to roughly $1.2 billion, adjusted EBITDA within the vary of $105 million to $125 million, and adjusted free money movement of $50 million to $60 million, in-line with our typical goal of roughly 50% of adjusted EBITDA. On Slide 21, we needed to additionally update you on our enhancing long-term outlook. We are very blissful concerning the outcomes of our business transformation as demonstrated by our fiscal ’23 Q3 and This autumn precise outcomes and our elevated fiscal ’24 steering. The 10% adjusted EBITDA margin is firmly now into our up to date new regular yr, and as soon as the provision chain additional normalizes, we count on to promote 9,500 models, together with 1,500 models EVs, and generate $135 million of adjusted EBITDA on $1.35 billion in income. Looking to the medium-term, our EV progress and operational enhancements can help volumes of 10,500 to 11,000 models, together with EVs within the vary of two,500 to three,500 models, producing revenues of $1.5 billion to $1.75 billion, with adjusted EBITDA of $165 million to $210 million or 11% to 12%. Our long-term goal stays to drive worthwhile progress in direction of roughly $2 billion in income, comprising as much as 12,000 models, of which as much as 5,000 in EV, and generate EBITDA in extra of $250 million, or 12.5%-plus. We are extremely enthusiastic about Blue Bird’s future, and now I’ll flip it again over to Phil to additional broaden on this.

Phil Horlock: Thanks, Razvan. Let’s transfer on now to Slide 23. Now, we have proven you the chart on the left earlier than, which illustrates the three priorities that drive us: caring for our workers, delighting our prospects and our sellers, and delivering worthwhile progress. The new chart on the appropriate supplies extra texture across the particular methods that we’re pursuing that each align with our priorities and drive our ahead yr progress plans. At the middle is our ultimate goal, to drive sustained, worthwhile progress. As you take a look at the accomplishments in fiscal ’23, we have remodeled the business from losses to file profitability. For fiscal ’24, we have now elevated our earnings steering to mirror a ten% adjusted EBITDA margin, after which over the subsequent couple of years, we plan to develop the margin to 11% to 12%. Our core methods concentrate on delivering these monetary objectives and are spelled out on this chart. Shown on the high of this chart, management and security, each within the office and with our merchandise, is paramount to us. Specifically with our merchandise, we search to distinguish ourselves, offering extra worth to our prospects. Our buses are purpose-built from the bottom up for transporting youngsters safely with many distinctive options that nobody else has within the trade. They’re not a spinoff of a truck chassis like most of our opponents, and our prospects perceive the worth of this. Delivering the very best and broadest vary of merchandise and options and main in high quality, sturdiness and different energy are the cornerstone of our product planning and growth. Being aggressive in cost by way of lean manufacturing and environment friendly throughput, sturdy provider relationships and sensible product design are important to competing a business the place aggressive bids are obligatory. And after the sale, we have to present nice service and make sure the highest attainable automobile uptime all through the 15 years or extra that our buses must run. This means partnering with our unique seller community that covers each nook of the United States and Canada. With a median tenure of 31 years, our devoted Blue Bird sellers know the right way to service our prospects. Frankly, you’ll be able to’t make it within the college bus business with out a absolutely succesful seller community that may attain greater than 10,000 college districts that function their very own bus fleets and three,400 impartial owner-operators of faculty buses. Following these core methods have been key to our transformation and can proceed to drive our ahead yr plans. The subsequent two slides spotlight a few key initiatives that can assist us speed up adoption of EV and propane autos in fiscal 2024 and past. Let’s flip to Slide 24 and take a look at the latest affect of the federal authorities’s Clean School Bus funding program. As a reminder, we’re within the second yr of this five-year program which supplies $5 billion of funding for electrical and propane-powered college buses. There was nonetheless over $4 billion available after the primary spherical of funding. Round two supplies $400 million in grants, and functions for this spherical shut on the finish of August this yr. It’s anticipated round 1,000 buses and related charging infrastructure will probably be funded by this grant program and we count on the grant awards to be made within the first quarter of the ’24 calendar yr. With the assistance of our in-house grant writing staff, Blue Bird supported sufficient well-qualified functions to help about 1,000 buses, so we needs to be well-positioned to capitalize on this chance. In addition, a 3rd spherical of funding was introduced late this yr, offering an additional $500 million in rebates for electrical and propane bus purchases. The utility course of is properly underway, and awards are anticipated to be made within the second quarter of ’24 calendar yr. In complete, each of those funding initiatives ought to help as much as 2,500 electrical and propane college buses and related infrastructure, which is nice for the trade and particularly, nice for Blue Bird. Continuing on the theme of accelerated adoption of Blue Bird electrical college buses, Slide 25 reveals our latest initiative that we introduced late final week. We have shaped an unique three way partnership with Generate Capital, who’s a number one sustainable funding and working firm targeted on infrastructure transition. Our new enterprise known as Clean Bus Solutions will present electrical college buses and charging infrastructure as-a-service to Blue Bird prospects for an inexpensive month-to-month payment over the lifetime of the service. This turnkey service eliminates a typical excessive upfront cost for a college district in paying for an electrical bus when grants are restricted and handles the whole charging infrastructure course of, together with set up. This recurring income business ought to speed up adoption of Blue Bird electrical buses by college districts and will probably be an amazing new gross sales device for our sellers. We will hold you posted on progress all through the approaching yr as Clean Bus Solutions begins to transact business. So, let me now wrap up the ready remarks and our outlook for the business on Slide 26. There’s not way more I can say on our fiscal ’23 outcomes, aside from we obtain file outcomes throughout each metric on which we offer steering, and it was a transformational enchancment from fiscal 2022. Razvan took you thru the raised steering of fiscal ’24, and I’m displaying you a few of these key metrics on the midpoint of steering on this slide. We are being prudent on our bookings outlook, solely growing quantity by 3% over the fiscal ’23 presently as we nonetheless take care of choose provide chain points. But we did handle them very properly in fiscal ’23, and if we will build extra in fiscal ’24, we are going to simply as we did final yr. Net income of $1.2 billion will probably be a brand new file for Blue Bird, up 6% from fiscal ’23. Adjusted EBITDA steering of $115 million is greater than 30% larger than the file $88 million we delivered in fiscal ’23. Importantly, we’re planning on a ten% EBITDA margin in fiscal ’24, up 2 share factors from fiscal ’23, which is a pair years forward of the plan that we have now been sharing with you. We trust in attaining this margin after recording a 12% adjusted EBITDA margin within the second half of fiscal ’23. As Razvan identified, we’re doubling our engineering work in fiscal ’24 in help of latest product packages, which is contained with our 10% margin outlook for fiscal ’24. And lastly, we’re trying to develop EV unit gross sales to 900 buses in fiscal ’24. That’s a 65% enhance over our 2023 gross sales. And as you’ll be able to see on the appropriate chart, there’s a number of pent-up demand following the low models of gross sales in 2020, ’21, and ’22, and the bus fleet has aged by a few years throughout that interval. ACT is forecasting a compound annual progress price of 10% by way of to fiscal ’27. And that is nice information for our business and nice information for our revenue outlook. With residual provide chain challenges nonetheless impacting the auto trade, the flexibility to build all these models close to time period just isn’t a given. But I can let you know one factor, the demand for these buses is clearly there. After executing a considerable transformation throughout our business, the corporate is performing exceptionally properly, as you’ll be able to see by our monetary outcomes. We’ll proceed to enhance working efficiency and stay up for sustained worthwhile progress within the sturdy market forward. The future is extremely brilliant for Blue Bird and we’re assured in attaining what had been our long-term objective of 12% EBITDA margin inside the subsequent couple of years. I need to thank our practically 2,000 workers for all their onerous work and dedication in delivering our file ends in fiscal ’23 and for remodeling our firm, in addition to our excellent seller physique who’re vital to our success. That concludes our formal presentation at the moment, and I’d like handy it again to our moderator for the Q&A session.

Operator: Thank you. [Operator Instructions] Our first query at the moment comes from Eric Stine with Craig-Hallum. Please proceed.

Eric Stine: Hello.

Phil Horlock: Hey, Eric.

Razvan Radulescu: Hey, Eric.

Eric Stine: Can you — hey, okay, good. You can hear me.

Phil Horlock: We can hear you, yeah.

Eric Stine: So — good. Very good. Well, clearly, nice finish of the yr, $40 million in EBITDA, and admire the fiscal ’24 and the form of high-level quarterly view. But possibly simply discuss seasonality a bit of bit. Obviously, traditionally, a really seasonal business. Now, you’ve got acquired this large backlog you are working by way of, plus you’ve got acquired sturdy trade demand. So possibly, within the context of that high-level steering that you’ve given per quarter, how ought to we take into consideration seasonality all year long?

Phil Horlock: That’s an amazing query, Eric. It’s Phil right here. Obviously, you are used to us, you’ve got seen our report numbers over many years, and seasonality was all the time one problem we handled. I feel proper now, with our backlog and with the pent-up demand we have now and the trade on the whole with coping with the identical points, seasonality is de facto not one thing that’s regarding us proper now. Now, the primary quarter will all the time be decrease. We clearly have shutdowns, vacation trip plans round Thanksgiving, across the vacation season, at Christmas time. So, these clearly impacted with much less days clearly, particularly in December. But I feel general if you take a look at us now, that predictability of trying by quarter, we’re not going to have something just like the seasonality we used to have. It’s pretty– it is pretty constant all year long, simply first quarter needs to be a bit of decrease in a quantity standpoint.

Eric Stine: Okay, that is useful. And then, you talked about Clean Bus Solutions and then you definately count on that to speed up. And I’d assume you are speaking about inexpensive by getting as near what the cost of a diesel bus could be on a month-to-month foundation for a college district. I imply, how do you — I feel within the slides you mentioned you count on it to be 10% of gross sales right here within the relative close to time period. I imply, how do you see that enjoying out? Do you assume that faculty districts are trying on the Clean School Bus Rebate Program, ready to see in the event that they get funding, if they do not, then they doubtlessly go this route and probably do it rapidly as a method to actually get buses on the highway in a reasonably fast style?

Phil Horlock: Yeah, I feel that is the best way we’re taking a look at it. Obviously, the grants for the EPA program have been terrific. I imply, they’ve helped folks actually speed up adoption and districts who in any other case wouldn’t have been capable of afford a product have had an opportunity to get a terrific grant. But there is no query when you do not have grants or you’ve restricted grants and there is a — we mentioned earlier than the value of an EV bus is often 3 occasions the value of 1 with a combustion or spark engine ignition. It’s a little bit of a sticker shock as we are saying within the auto trade. And so, having this functionality now as an alternative of a giant upfront capital expense, you’ll be able to pay what’s known as an inexpensive month-to-month payment over 12 years or 15 years or so on the lifetime of the product, makes it way more inexpensive and sooner to undertake. That’s the great thing about it. For that $350,000, to illustrate, plus value of electrical college bus, if you’re paying an ordinary month-to-month payment over 15 years, you’ll be able to afford just a few — much more of these buses proper up entrance and get to run them, get used to them. Now, I do assume on the finish of the EPA grant, I imply five-year program that is being put on the market, it may be — we count on clearly battery cost to come back down, important reductions within the value of the platform so to talk, the electrical platform, and I feel that is if you actually will see the advantages of a program like this coming by way of as a result of will probably be way more enticing than a standard upfront capital cost per college bus.

Eric Stine: Got it, and really useful. And then, final one for me. Just, I imply, clearly the margins, the value per bus, I imply, all of that transferring in the appropriate path and fairly rapidly. I imply — however would you agree with the assertion that actually that’s extra because of the value will increase you’ve got put by way of and that that is lastly labored by way of backlog reasonably than the combination of electrical buses? If I do my math, it seems to be like possibly electrical made up 6% to 7% of the combination in fiscal ’23.

Razvan Radulescu: Hi, Eric. This is Razvan. Thank you for the query. Absolutely. The greatest affect comes from the quite a few value will increase we put in place during the last almost 24 months now to maintain up with the fabric cost inflation and reposition our margins for the longer term. So sure, EV is a smaller portion of that, however all the opposite buses and particularly different energy ones are what drives our extraordinary bus margins at the moment.

Eric Stine: All proper, thanks.

Phil Horlock: Thanks, Eric.

Operator: Our subsequent query at the moment comes from Mike Shlisky with D.A. Davidson. Please proceed.

Mike Shlisky: Yes. Hi. Good afternoon, and thanks for taking my questions.

Phil Horlock: Hi, Mike.

Mike Shlisky: I suppose I need to discuss first concerning the — hello there. I need to simply contact first on the EV subsidies and EV packages for fiscal ’24. Do you anticipate that Blue Bird will proceed to form of get its fair proportion if not larger of no matter is awarded this yr’s — on this yr’s subsidies and within the broader EV bus market on the whole?

Phil Horlock: Yes, I’d. I’d count on us, Mike, to do very properly and get our fair proportion. We acquired share to the primary part and I feel we ready very properly for this. We have grant writers on our staff who work with our faculty districts, they work with our prospects, they work with our sellers. They’ll simply put collectively what I name actually legitimate functions. I imply, if you’re taking a look at a grant program, you are typically requested into take a look at the standard of that buyer, both in an attainment space, both in an space that wants electrical buses due to the air pollution that is perhaps in that space. And we have researched that very properly, gone by way of it. So, we really feel assured of the place we stand when it comes to the functions we put ahead and validity of these functions.

Mike Shlisky: And simply to comply with up there, have you ever discovered any, a big quantity or perhaps a small variety of the earlier awards get postponed as a result of the shopper did not have a charging infrastructure or different elements that have been required to get the bus?

Phil Horlock: That’s query. I’ve heard that some others about some people on the market have had cancellations on their request. I can let you know this, we have had two automobile cancellations, two in complete. Not 20, not two prospects with a number of applicant, two autos due to a buyer who was simply involved about, may he get the infrastructure in place the time he needed it. And that is it, that is for us. We’ve been very profitable when it comes to placing our grant requests in extremely validated, extremely certified. So, we be ok with that.

Mike Shlisky: Got it. One matter that wasn’t actually talked about was the organized labor in your facility. I used to be questioning should you may update us on how discussions is perhaps going together with your workers and what — if there’s a date or a attainable milestone you’ve got acquired for us to share at the moment on that. Thank you.

Phil Horlock: Okay. Well, I feel it is just about the identical as I mentioned final quarter, really. We’re collaborating properly with the United Steelworkers. We’re having very frequent negotiations. We’re not really speaking about what I name the financial phrases. It’s been extra round issues like holidays and what can we do about grievance points that is perhaps on the market. More of a typical what they name non-economic components. So, as I mentioned, going very properly, a number of good dialogue, very professionally run. And I’d say that I feel the earliest we will be speaking — we seeing a completion of this, I do not actually have a date on it, however I feel we’re speaking properly into ’24 earlier than one thing is perhaps finalized. Like I mentioned, assembly very repeatedly, we’re very thorough. This is a floor up program. I imply, you begin actually from a clean sheet of paper and work by way of every little thing with United Steelworkers. And so, I feel someday, possibly in direction of center of subsequent yr could possibly be, however once more, I’m not placing any timeframe on that. We’ll simply do it thorough — we’ll simply deal with it totally.

Mike Shlisky: Okay. Phil, thanks a lot. I admire the commentary. I’ll go it alongside.

Phil Horlock: You guess. Thanks, Mike.

Operator: Our subsequent query comes from Craig Irwin with ROTH MKM. Please proceed.

Craig Irwin: Good night, and thanks for taking my questions.

Phil Horlock: Hi, Craig.

Craig Irwin: Phil, you guys — hello. You guys have actually demonstrated management in different fuels during the last many years. And a part of that’s understanding the market. And at the moment once more on this name, you’ve got been actually clear that the long-term adoption of EV college buses, the accelerating adoption relies on the flexibility to scale back the cost of working these buses, the cost of buying these buses for the college districts which can be contemplating going electrical. Can you possibly share with us your degree of exercise, your degree of engineering concentrate on lowering the cost of EV college buses in your prospects? Maybe should you may share alternatives you see as significantly ripe or having good near-term returns? And what’s your imaginative and prescient for potential cost enchancment over the subsequent few years?

Phil Horlock: Okay. Great query, Craig. So, clearly, you take a look at the place we’re, we purchase a system from Cummins, proper, and so they’re an amazing companion of ours. We purchase our drivetrain system from them, contains the batteries, contains the controls, the management software program system, the motor, the inverters, all of the items. And we have now an everyday cadence with Cummins when it comes to the merchandise that we meet on going by way of choices to scale back design, decrease the cost, assume smarter concerning the product itself. And I’m not going to place any numbers on the desk now. Needless to say, we have now an amazing program with them. We’re continuously taking a look at resourcing, sourcing options, decrease cost methods, whether or not that features batteries, the management motor itself, can we take a look at the axles down the highway. I imply, these are all issues we take into account in collaboration with Cummins. I feel we’re nonetheless on the early phases, I’d say, when it comes to the EV functionality. And we have been in since 2018 with Cummins as our companion. But I feel down the highway, you will form of take a look at it — we’ll be trying increasingly at battery suppliers, battery options, cell suppliers as a result of frankly what’s occurred within the final with one in every of our main battery suppliers on that was a battery provider on the market who needed to declare chapter and was acquired by one other firm is an instance I consider a few of the flux that is happening there. So, we’re continuously taking a look at options for stronger companions, higher cost companions, decrease cost companions, extra environment friendly companions, and we’ll hold doing that. I feel some issues over time, you will see us in all probability carry a bit of bit extra of this in-house too as we get extra scale on our business. But we’re on the forefront of it. We’re very collaborative with Cummins. They’re an amazing companion to work with, and I feel you see it — see the result in our outcomes. I do assume that over this — over the subsequent few years you are positively seeing not solely the battery prices coming down however different parts as a extra scale and electrification of faculty buses and vans on the whole and we need to capitalize and be prepared for it. Hence, this generate capital enterprise we have completed, Clean Bus Solutions, is once more making an attempt to make it extra inexpensive on an everyday, predictable, month-to-month foundation, taking away what we name anxiousness. Anxiety for infrastructure away from the shopper and we’ll deal with it for them and handle it and make it a lot simpler for them to undertake electrical buses. That’s what we realized loads from propane. Somewhat prolonged right here the method Craig however I do know you already know our business very properly. You’ve been with us a very long time. One factor we did with propane was once we first entered that market, first query, the place do I get propane from? What tank do I want? What threading do I want? You have to clarify that and educate and practice the drivers, the shoppers about the right way to deal with these autos. I feel we do job in that regard.

Craig Irwin: Excellent. And then I suppose others have tried this query, so possibly we’ll be just a bit extra direct, proper? You have probably the most skilled bid staff on the market dealing with the EPA, proper? And you’ve got demonstrated clear management in EV college buses. Do you count on to have a larger share of the $400 million in funding coming to prospects that you simply help than what you noticed on the $1 billion that was handed out final yr?

Phil Horlock: That’s an attention-grabbing query. I can let you know this, I’m not fairly certain what is going on to occur in the long run, proper? At the top, we do not choose the precise people who’re going to get these grants. I imply, the EPA says that. I’ll let you know, I feel we ready extraordinarily properly for it. Just to reiterate, we have despatched in sufficient functions to take the whole fund. So, we expect we did — and we actually properly certified our candidates. We did not go in right here with only a, “Hey, let me simply provide you with a free alternative to have a bus that is comparatively low cost or no cost.” We really went totally by way of each college district, everybody of our prospects, a few of them have been conquest prospects, new prospects who needed to maneuver to Blue Bird. So, I suppose what I’m saying is, Craig, that the proof of the pudding will probably be within the consuming, proper, when it reveals up. But I really feel assured we ready as greatest we probably may to get each alternative to capitalize on these grants.

Craig Irwin: Okay. And then an adjoining query to that. Congratulations in your collaboration with Generate Capital. Jigar Shah can be a visionary on clear tech finance and has executed impeccably in his many alternative business ventures. Do your opponents, the businesses which have aspirations of management within the EV college bus market have access to the funding out of Generate or would they should go and discover comparable companions to set these up and supply that form of monetary help to a few of these low-income deprived communities that the President is de facto targeted on giving the chance to?

Phil Horlock: Well, our enterprise with Generate — and by the best way, I agree with you absolutely, Jigar Shah is a implausible man. I’ve met him a number of occasions over the years in on totally different occasions even previous to this three way partnership right here. But I’ll let you know that I feel we’re very well ready on this. As I take a look at it — one second. Yeah, I ought to say I simply misplaced a tone the query I’d clarify all my information of Jigar Shah simply as you have been doing. But I feel the distinctive factor for us, we have now the unique relationship with Generate Capital. They need to work with us. They see our management on this area. They have implausible access to issues that we do not actually access at the moment when it comes to tax credit, getting to each form of nook of utility understanding higher than we do across the value of electrical energy and what it actually means to a buyer. So, the reply to your query is fast. We are the one ones who can do that take care of Generate Capital, and so we’re very proud to have that distinctive relationship. The objective for us now could be to coach our complete seller community of what that is all about, what it means, the benefit it offers and provides an opportunity for all of our prospects to get a zero emissions college bus as quick as attainable.

Craig Irwin: Great. Well, congratulations on implausible efficiency. It’s acquired to really feel good to come back again to Blue Bird to drive this degree of success.

Phil Horlock: This feels nice. Thanks loads, Craig. I admire it. It’s all a staff effort although. Thanks loads.

Craig Irwin: Absolutely.

Operator: Thank you in your questions. There are at present no questions ready presently, so I’ll go the convention again over to Phil Horlock for closing remarks.

Phil Horlock: And due to all of you for becoming a member of us on the decision at the moment. We admire your curiosity in Blue Bird and we stay up for updating you once more on our progress subsequent quarter as we all the time do. As you noticed at the moment, we have accomplished a big transformation, properly forward of schedule, and it clearly reveals in our file fiscal ’23 fourth quarter and full yr outcomes. We have a very sturdy momentum going into fiscal ’24, and consequently, we raised our fiscal ’24 steering considerably, projecting a ten% adjusted EBITDA margin, which is 2 share factors above what we achieved in fiscal ’23. And we’re assured in attaining an 11% to 12% margin inside a few years as trade provide chain constraints proceed to ease. So, ought to you’ve any follow-up questions, please do not hesitate to contact our Head of Investor Relations, Mark Benfield, and thanks once more from all of us at Blue Bird. Have an amazing night. Good night time.

Operator: That concludes at the moment’s convention name. Thank you all in your participation. You might now disconnect your line.

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