Greetings, and welcome to Blue Bird Corporation Fiscal 2021 First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Operator Instructions: Please note, this conference is being recorded. I would now like to turn the conference over to your host, Mark Benfield, Executive Director, Profitability and Investor Relations. Thank you. You may begin.

Thank you. And welcome to Blue Bird's fiscal 2021 first quarter earnings conference call. The audio for our call is webcast live on blue-bird.com under the Investor Relations tab. You can access the supporting slides on our website by clicking on the presentations box on our IR landing page. Our comments today include forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters we have noted in our latest earnings release and filings with the SEC. Blue Bird disclaims any obligation to update information on this call. This afternoon, you will hear from Blue Bird's President and CEO, Phil Horlock; and CFO, Jeff Taylor. Then we will take some questions. So let's get started. Phil?

Thanks, Mark. Well, good afternoon, and thank you all for joining us today for our first earnings call for fiscal 2021, where we will review first quarter results. Before I jump into our financial performance, I'd like to give you an assessment of how I see our business environment today and importantly how we are adapting to the market conditions and prioritizing our plans going forward. So let's turn to slide four. As the headline says, in a challenging market, we continue to drive business structure improvements, and importantly for our future, substantially increasing our focus on the growing electric vehicle business. From an industry standpoint, not surprisingly, the first quarter was another challenging one as we dealt with about 40% of students attending only virtual classes, with a fairly even split between in-classroom teaching and hybrid programs. As I have stated on previous earnings calls, one fact is clear and obvious: when schools are closed, buses aren't being ordered. The good news is that when schools are open, it's business as usual, with school bus orders being placed. That's great for us to know as we move forward. Following the recent holiday break, however, we have been seeing more schools resuming in-classroom teaching, and that's led to increased Q activity for our new buses. This is a leading indicator the industry recovery is on the horizon, bolstered by increasing deployment of the COVID vaccine and the new administration’s declared intent to open all schools within the first 100 days of its term. As we've consistently stated, it's our expectation that the industry recovery will begin in the second half of fiscal 2021 in support of the next school year start. Shifting now to Blue Bird. Our first quarter results were solid, despite dealing with COVID as we continue to improve our business structure and underlying margins. We significantly improved working capital in the quarter compared with last year as we drove down inventory, operating at much leaner levels than in prior years. At 46% of total sales we had another first-quarter record mix of alternative powered bus sales, maintaining our strong leadership position. And we were number one in trailing 12-month market share for both electric and propane-powered buses. Now today, you're going to hear a lot about our electric vehicle results and our plans on this earnings call. But needless to say, we're excited with the comments made by the new administration on supporting electrification of 500,000 school buses that transport our children every day. We're significantly increasing our focus on resources in the electric bus segment where we are the market leader as customer interest and percentage growth in zero-emission vehicles is outpacing every other segment of our business. In this regard, I'm pleased to announce today it's our intention to offer Blue Bird electric chassis to the class 3 through 7 truck market. Now this is a new business opportunity for us that we will launch later in 2021 and is an obvious outcome from having the broadest range of alternative-powered chassis in the business led by a zero-emissions electric and low-emissions propane products, all of which I should remind you are built in our factory. So, overall Blue Bird is well positioned for profitable growth as schools resume classroom teaching and the industry recovery begins. We plan to remain at the forefront of the inevitable and exciting industry shift towards zero-emission student transportation. Let's now turn to slide five, and we'll cover the first quarter financial highlights. Our first quarter is always a seasonally low quarter of the year following school starts in the prior quarter. Now despite this fact and the impact of COVID-19, our financial results were solid. At 1,255 buses, our unit sales were down 205 from last year, representing a decline of 14% entirely due to the pandemic, but well below the 23% volume decline we saw in the fourth quarter of fiscal 2020. Similarly, net sales of $130 million were 15% below last year. Adjusted EBITDA of $5.8 million was $2.2 million over the same period last year, more than explained by the lower unit sales. Now, while adjusted free cash flow was negative $13.9 million in the quarter, which reflects seasonality of our business, this was a substantial $77 million improvement over last year. We certainly saw the benefits of our stringent inventory and cash management controls that we've been deploying, which have now been institutionalized in our company. All three of these financial results should provide guidance, namely, net sales, adjusted EBITDA, and adjusted free cash flow were in line with our plan. As I talked earlier about improving our business structure and underlying margins, we delivered on many operational fronts, which is summarized on the lower half of this slide. As you can see, these achievements reflect our three-pronged margin growth strategy that we have communicated consistently on prior earnings calls, namely, bus selling price, increase in mix of alternative powered vehicles and reducing structural costs. So let's now turn to slide six and review our major operating achievements to date. And importantly, see the specific results of the margin growth initiatives that I just mentioned. We continue to drive transformational initiatives to improve efficiencies, quality and capacity. Let me give you a great example of this. By the end of the first quarter, we substantially completed all of our content creation actions necessary to ensure we can build as many vehicles on a single production shift as we used to build on two shifts. That's great for efficiency, quality and gross margins, especially as industry volume recovers. As a reminder, we have now delivered more than $50 million in savings from these transformational initiatives since we started three and a half years ago. Next, we increased our average selling price of bus power by about $2,000 or 2% over last year, primarily reflecting the impact of the annual pricing to recover economics that we took late in fiscal 2020. I'm particularly pleased with this accomplishment in the lowest volume quarter of the year. Now we have a lot of activity going on in alternative powered vehicles. So that's the number announced publicly today. We’ve just renewed our exclusive partnership with Ford Motor Company for several more years for the supply of our market-leading gasoline and propane engines. With Ford and ROUSH we're enjoying an exclusive and successful three-way partnership that's lasted more than 10 years, and we see no sign of it ending. In early spring, as I mentioned on our prior earnings call, we'll be launching our next generation exclusive propane and gasoline engine for Ford and ROUSH. We will use the 7.3-liter V-8 engine. It brings more power, it's more compact, it has more torque, and it delivers more fuel economy. As our tagline says, the best just got better. Our combined alternative power mix was a record 46% of unit sales for the first quarter. That's 7% above last year, and with higher owner loyalty and higher margin we generate from these unique products, it's great business for Blue Bird. As I covered earlier, the rapidly growing interest in electric buses is a very exciting opportunity for us and will generate significant growth in the years to come. On a trailing 12-month basis, which in this case covers calendar year 2020, our electric bus market share was an outstanding 63%. This compares with 25% market share in 2019. So I'm really pleased with this growth trajectory. Fiscal year-to-date, we now have 107 electric buses either sold or in our firm order backlog and that number is up 24% from the same time last year. That's really nice growth in a down industry and it's just the beginning for electric vehicles. And finally, when you look at the total number of electric vehicles we have either sold or are in the pipeline since we started EV production just three years ago, it's more than 400 buses that cover all school bus configurations: Type A, Type C and Type D. No one matches our breadth of EV products and our market leadership in the school bus industry. In summarizing our operating achievements in one word, I would say that we have momentum. Even in an industry significantly impacted today by COVID-19, costs are down, average selling prices are up, alternative fuel mix is higher. And we have exciting new growth opportunities ahead with electric vehicles and chassis. Let's now take a quick look at where I think we are heading on alternative powered vehicles on slide seven. On the previous slide, I mentioned that our alternative powered bus mix in the first quarter was a record 46% of total sales. Well, that's grown. It's now at 50% reflecting second quarter bookings today, and our third-quarter backlog. That's another record mix for Blue Bird at this time of the year, five points above a year ago. But it's all the more impressive when it's achieved during the pandemic that's impacting the entire industry. As we've covered on prior earnings calls, our range of buses attracts new customers who have never tried an alternative powered bus, and many are new to the Blue Bird family. We saw this feature yet again in the first quarter. These are compelling facts. And with the highest customer loyalty we enjoy from these products, it's a great endorsement of our exclusive alternative powered buses, the Blue Bird brand and our great dealer network. And we're off to a terrific start in our electric buses this year. As a reminder, we're not new at the EV business, nor are we a start-up that has achieved only a handful of deliveries. We've been building and delivering zero emission school buses for nearly three years now. We have the broadest EV range in the industry with Type A, Type C and Type D offerings on the road today. We're number one in market share, and are preparing to deliver 400 electric buses in the coming months. From a grant funding standpoint, the vast majority of the Volkswagen mitigation funding is still ahead of us and will help us boost sales over the next three years or so, with many states earmarking specific funds for school bus purchases. We've had great results so far with our propane and electric buses from the funds that have been issued. And the recently announced $100 million Bezos Earth Fund grant to the World Resources Institute also provides a boost with its unique carve-out for zero emission school buses. In summary, I'm very proud of our strong and undisputed leadership position in alternative powered bus sales. We have the best partners, the best products, and they're unique to Blue Bird. And with less than 20% of school districts having purchased an alternative powered school bus today, we have plenty of runway ahead for continued growth. Now I'll show the right-hand box from our last earnings call and you can see how far we've come in the last four years. I'm looking ahead; we don't see this growth stopping. We project that four years from now between 60% to 70% of all Blue Bird buses sold will be powered by a fuel alternative to diesel. That's an increase of up to 3,000 alternative powered buses over this year. We're bullish about this growth opportunity and we're investing in the business, and we see electric and propane power as the way forward in alternative power as we drive toward low and zero emission products. Because of its astounding growth potential, however, and the unprecedented interest in zero emission transportation, electric power is a priority focus for us. So let's take a deeper look at our EV strategy and plan turning to slide eight. As we learned from our propane success, when we bring an entirely new product to market, it takes more than just a great product to win year after year. Customers want turnkey solutions that take care of their issues and their questions. In the case of propane it was: where do we buy propane fuel? How do we lock in the fuel price? What fueling infrastructure is required? What's the best vehicle configuration for my duty cycle? What are the total lifecycle benefits and so on? In the case of electric vehicles, we call this the EV ecosystem, carefully selecting the best partners in the business, working with us to handle each aspect of the acquisition and ownership experience to make it easy for our customers. As a graphic in the left-hand box shows, we are well on our way to confirming our EV ecosystem, our partners and their participation with us. We'll be sharing this with you at upcoming earnings calls and EV conferences. Turning to the right side of the slide, we show our key growth initiatives. First, continued leadership in delivering electric-powered school buses. With more than 500,000 school buses on the road, that's an addressable market of more than $100 billion in the years ahead, as we move along the inevitable journey to zero emissions. You may have seen recently, both the State of California and General Motors have declared their intent to phase out combustion engines by 2035. Those are bold statements, but the shift is happening. Second, using our strengths in chassis manufacturing, and breadth of powertrain choices, we can provide EV chassis to producers of commercial vehicles who seek a proven OEM chassis and factory-installed electric powertrain. With more than 150,000 buses on the road today, Blue Bird buses and chassis cover about 1.5 billion miles annually. And we are now accumulating over 2 million miles each year with our EV buses. That experience and know-how gives confidence to our customers. We're looking forward to our EV growth journey. And we'll fill you in on our progress as we move ahead. As we look to expand beyond school buses, let me just show you how we match up against the truck industry classification for chassis, turning to slide nine. From our large to small buses, our chassis fit the requirements of truck classifications three through seven. That covers gross vehicle weight rating demands from 10,000 pounds to 33,000 pounds, which is an extensive range. And with our factory-installed electric powertrains addressing every one of these truck classes today, we're well positioned for this growth opportunity in chassis sales. I would also be remiss if I didn't mention that we can also provide propane, CNG, gasoline and diesel power for these classifications. We're in a great position. I'll now turn it over to our CFO, Jeff Taylor, who will take you through the financial results in more detail. And I'll be back later to cover outlook on fiscal 2021 guidance. Over to you, Jeff.

Thanks, Mark. And good afternoon, everyone. It's my pleasure to share with you the financial highlights from Blue Bird's first quarter of fiscal 2021. The quarter end is based on a close date of January 2, 2021, whereas the prior year first quarter was based on the January 4, 2020 close date. We will file the 10-Q tomorrow, February 11, which includes additional material and disclosures regarding our business and financial performance. We encourage you to read the 10-Q and the important disclosures that it contains. The appendix attached to today's presentation reconciles differences between GAAP and non-GAAP measures mentioned on this call, as well as other important disclaimers already mentioned. With that, please refer to slide 11 and I will review the key results for the quarter. Overall it was a solid quarter for Blue Bird, especially considering it was a seasonally slow quarter, which was further impacted by lower demand due to the global pandemic. Everyone across the company executed well, but our operations areas deserve to be highlighted for their outstanding performance. First quarter volume of 1,255 units was down 14% compared to the prior year period, and lower industry volumes due entirely to the COVID pandemic. Net revenue of $130 million was $23 million or 15% lower year-over-year for the quarter. Bus net revenue of $118 million was down $17 million on lower volume. Bus average selling price, or ASP, was $93,900 per unit, a year-over-year increase of $1,600 per unit due to favorable product mix and option content, in addition to price increases to offset inflationary cost pressures. Our alternative fuel mix was 46% in the first quarter, which is up seven percentage points over the same quarter last year. Very strong performance. Parts revenue for the quarter was $12.6 million, representing a decrease of $5.8 million year-over-year, as many maintenance facilities were shut down due to the virus and inconsistent in-person schooling. Gross margin of 11.1% was 280 basis points lower than the prior year period. The deterioration in margin in the first quarter was almost entirely the result of lower fixed cost absorption through the lower volume, higher cost associated with COVID and lower mix from the parts segment. Selling, general and administrative was $14.7 million, which was down $5.8 million on reduced spending and cost control actions in our management and engineering areas. Once again, very strong performance. GAAP net loss was $1.6 million as compared with $0.4 million for the first quarter of 2020. On an adjusted basis net income was $0.1 million, down approximately $2 million versus last year. Adjusted EBITDA of $5.8 million was down by $2.2 million compared with the prior year quarter, which I will cover in more detail on the next slide. Our adjusted EBITDA margin was 4.4%, a decrease of approximately 80 basis points. Diluted EPS of negative $0.06 per share was $0.04 per share lower than prior year. Well-adjusted diluted EPS was $0.00 per share or $0.07 per share lower than the prior year quarter. Weighted average diluted shares were $27.1 million during the first quarter versus $26.5 million in the same period last year. Liquidity was approximately $121 million as our revolver balance was untapped and fully available at quarter end. Looking at the first quarter on slide 12, the year-over-year adjusted EBITDA bridge, starting on the left of the chart, lower bus volume of 205 units and lower parts volume of approximately 32% were partially offset by favorable mix and lower freight and warranty expense. All of these factors combined to decrease adjusted EBITDA by $4.2 million, with volume being the primary factor. Pricing and transformational initiatives, such as strategic sourcing and product redesign projects, added $1.8 million combined. Lastly, operating expenses were lower due to cost controls, while manufacturing costs were unfavorably impacted by lower fixed cost absorption on lower volume, partially offset by improved efficiency that resulted in adjusted EBITDA of $5.8 million for the quarter. Moving on to free cash flow on slide 13. The table shows both first quarter free cash flow and adjusted free cash flow. The first quarter is normally a seasonally low quarter for free cash flow due to low demand and building working capital. First quarter adjusted free cash flow was negative $13.9 million, a year-over-year improvement of $77 million, largely on $64 million lower trade working capital. While free cash flow was negative $14.8 million, an $80 million improvement year-over-year. I couldn't be happier with the control of trade working capital this quarter, and particularly the supply chain organization managing inventory in a difficult environment. Looking at net debt and leverage and liquidity on slide 14, net debt of $147 million was $61 million lower versus prior year, due to lower borrowing on the revolver, approximately $35 million, significantly improved trade working capital, required term loan payments over the past year of approximately $10 million, and increased cash balances year over year of approximately $16 million. Our net leverage ratio for the first quarter was 3.1 times. While the net leverage covenant is suspended for 2021 under the amended credit agreement, it is still relevant to set the rate of interest on our outstanding borrowings. We have two active financial covenants for the period. First, the trailing 12 months EBITDA as defined under the credit agreement was $48.7 million versus a minimum requirement of $24.5 million. Second, liquidity was $121 million at quarter end versus a minimum covenant of $15 million. Our liquidity continues to remain strong as our cost controls, working capital discipline and structural margin improvement are clearly paying dividends. Furthermore, we are continuing all of these activities for the foreseeable future to further protect our cash and liquidity. In conclusion, the first quarter was a good start to the year and a smooth quarter from the perspective of supplier disruptions and COVID impacts. However, the operating environment has gotten more choppy in the second quarter, with a higher level of supplier issues and disruptions, as well as high levels of absenteeism. However, our team is rising to the challenge and addressing these on a daily basis. We continue to execute our margin growth strategy, as Phil discussed. And finally, there are positive trends regarding COVID vaccinations that should allow schools to reopen for a fall 2021 school start, if not sooner. We continue to be optimistic the school bus demand will recover in the second half of the year. I will now turn the discussion back to Phil, who will describe the outlook for the second quarter and give his closing remarks. Phil?

Thanks, Jeff. So let me now summarize the outlook that we see for the balance of this year and beyond. Turning to slide 16. We all want to see the resumption of safe in-classroom teaching. It's good for students. It's good for parents, and it's good for industry. We have the vaccine being distributed and we're seeing more schools gradually reopening. These are great signs that the initial recovery is beginning. I thought it would be worth reminding all of us, however, of the new administration stance on this topic. You can see the supportive comments highlights from various speeches given by President Biden in recent weeks. It's clear that the administration's commitment to reopening schools safely within 100 days, and converting America's largest mass transportation system of more than 500,000 buses to electric power is great news for our industry and for our business. So now let's turn to the outlook for Blue Bird’s business on slide 17. Our emphasis at Blue Bird is on delivering superior operating performance. We can't change the industry outcome this year, but we can focus on improving every element of our business so that we're well positioned when the industry rebounds, as it inevitably will, so that we also rebound. That means executing our margin growth strategy by improving the selling price, alternative powered bus mix and cost structure. As I mentioned earlier, an example of structural change that drives superior operating performance was our move to a single-shift production schedule. We know we build a bus more efficiently and with better quality when our entire team is working together on the same single shift. That's great news for us as the industry recovers. We have established electric vehicle leadership and growth as a top priority, and we're organizing the EV business as a unique division within Blue Bird. We'll be offering our chassis to the commercial vehicle industry later this year with our factory-installed electric powertrain at the forefront. Moving into the external environment, there are a number of factors that will influence the industry outlook, the most important being the return to in-classroom teaching. We know that when children are in the classroom, school buses are needed to transport children safely. And we see demand for new buses. The positive recent developments in COVID vaccine distribution and President Biden's 100-day goal to open schools should impact the school bus industry favorably. Additionally, with 25% of the North American school bus fleet being 15 years or older and aging, there is great demand for new buses from school districts. It's not a question of if the industry rebounds, but a question of when, and we expect to see improvements later in fiscal 2021. With so much uncertainty and speculation on when schools are fully resuming classroom teaching, however, we are maintaining the wide guidance range we provided in the last earnings call. We are prepared however for a surge in orders should the industry recover faster. Let's turn to our guidance range now on slide 18. This slide shows key metrics which we provide guidance on and is unchanged. Net sales revenue we're forecasting a range of between $750 million and $875 million. Adjusted EBITDA between $40 million and $65 million and adjusted free cash flow between $5 million negative and $20 million positive. Now our guidance reflects industry assumptions ranging from 26,000 to 30,000 buses, with the lower end assuming COVID causes increased disruption to classroom teaching and minimal industry recovery in the second half of fiscal 2021. The higher industry outlook of 30,000 units reflects resumption of in-classroom teaching in fiscal 2021 and an increase in orders in support of a 2022 school start. As the heading says, we believe it's important to plan prudently and somewhat conservatively, while aggressively pursuing operational improvements. We’ll narrow guidance as the control of the pandemic becomes clearer and keep you informed. As I did on the prior earnings call, I'd now like to share our view on when we expect to get back on track to achieving our goal of at least a 10% EBITDA margin. Let's turn to slide 19. This slide illustrates the adjusted EBITDA impact of COVID-19 on fiscal 2020 and 2021. We were on track to achieve original guidance last year until the pandemic hit in the third quarter. While we do expect some industry recovery in the second half of fiscal 2021, we expect a significant industry rebound to all pre-COVID levels in fiscal 2022 commencing with the school start. And as the volume recovers, we plan to resume our glide path towards at least a 10% adjusted EBITDA margin in the fiscal 2022 and 2023 timeframe. So despite the COVID challenges, and its impact on today's school bus industry, we haven't lost sight of our mission: to grow profitability and increase EBITDA margin to at least 10% in the near term. To this end, we'll continue to drive improvements across all elements of our business, thereby improving our underlying margins and we'll report our progress to you each quarter. That concludes our formal presentation. I'm now going to pass it back to our moderator to begin the Q&A session.

At this time, we will be conducting a question-and-answer session. Operator instructions will follow. Our first question comes from Eric Stine with Craig-Hallum. Please proceed with your question.

Hi, everyone.

Hi, Eric.

Hey, maybe just starting on the commercial truck opportunity. And then clearly, you're making this move with insight into the market opportunity. Curious what kind of interest levels you're seeing from OEMs and how the pipeline's developing across various end markets. And maybe, I mean is this because this is chassis only—is this kind of above and beyond the 1,000 or so electric buses that you can produce a year?

Yes, good questions, Eric. These are early days yet, so I want to set expectations that we intend to launch later in 2021. When we look at the commercial truck industry, you're looking at a large addressable market—250,000 vehicles and more. Not all OEMs will elect to install electric powertrains themselves. In the discussions we've had with a number of potential customers, we have heard real interest in what I call an OEM solution: an electric drivetrain fully installed by an OEM. There are many conversions out there—smaller companies taking gasoline chassis, removing the engine and installing an electric drivetrain. Those buyers are telling us they want a factory-built solution with OEM support. They like the robustness of a factory-installed system and they value our chassis experience. I don't want to overstate the pipeline at this point; it's early and I don't have a robust pipeline to share yet. We will have more to tell you on the next earnings call. Regarding capacity, we can scale up pretty easily. The 1,000 units I referenced earlier were very much in the context of school buses, but we have a lot of excess production capacity and we're able to ramp up well beyond that number if we get the demand. We'll be ready.

Okay, that's great. And I realize it is early, but on capacity just for school buses—given developments like vehicle-to-grid or third-party ownership that would lease buses to districts or utilities supporting fleets—when might you reach higher capacity levels? How are you thinking about it from a high level?

We are building out our EV ecosystem and are engaging many different partners. For example, virtually every bus we sold in California is vehicle-to-grid capable. We're working with utilities to enable those capabilities. Financing and third-party ownership models are also under discussion with several partners to reduce upfront acquisition costs and address residual risk. Today, there are significant funding programs available for electric buses, particularly in California but across the nation. As battery costs come down over the next five to seven years, financing will become even more attractive. We'll continue to solidify relationships with financing partners and some may be exclusive to us. We're excited about these opportunities and we'll keep you updated as we progress.

Got it. No, that's great. And then maybe this last one for me: I want to drill into Jeff's comment about the second quarter—higher levels of supplier disruptions and absenteeism at the plant. Can you give some color? Where does that stand today? Do you feel you have it under control? Could it be a factor in that wide guidance range?

I think it's something we have a handle on. We all know COVID cases escalated later in the fall and around the holidays. When people returned after the holidays we saw cases peak and some choppiness. We monitor supplier health daily and work with them to resolve issues, which sometimes requires expedited freight or temporary changes when a supplier's allocation is reduced. We've been able to work through these with minimal interruption so far. We did see higher absenteeism for the first two weeks in January, which has largely subsided, and now levels are much more normal. It was a choppy period, but our team has addressed it well. Jeff, do you want to add any specifics?

Phil covered the key points. The first quarter (October through December) was actually pretty smooth for us. It was when we returned from the holidays that we saw increased choppiness. Suppliers are facing similar dynamics, and we incur costs to keep production running—expedited parts, occasional rework, and productivity impacts from absenteeism. The team has done a fantastic job managing through it and keeping the plant running, but the second quarter has been a bit choppier than the first quarter.

Okay, thanks a lot.

Thanks, Eric.

Our next question comes from Craig Irwin with ROTH Capital Partners. Please proceed with your question.

Hi, good evening, and thanks for taking my questions. So on your class 3 to class 7 chassis that you're going to supply into the market with Cummins electric drivetrain—can you frame out what you've been doing on the marketing side to launch into the market, and what types of customers you're directly marketing these to? Many EV companies are getting granular around expectations—can you share reasonable boundaries for short-term and long-term volumes for these chassis? Also on traditional electric school buses—400 is a great number—can you set expectations for electric school bus deliveries in fiscal 2021 versus last year? What are the growth rates and units we should be looking for?

When we started this initiative we did a lot of industry research to understand demand for electric chassis. Many current electric products in the market have been conversions from conventional vehicles, but we've heard strong interest in a factory-built OEM solution that stands behind the chassis and drivetrain. On bookings, year-over-year our electric bookings are up about 24% at this point and that number is increasing. A reasonable planning assumption today is roughly 25% growth in electric bookings versus last year. We expect continued growth given the industry dynamics and the funding environment. Regarding marketing, we've done outreach across commercial end markets that use truck class 3 through 7 chassis—delivery vans, shuttle operators, municipalities, utilities, and other vocational users. Our chassis expertise, built over decades, and our breadth of Type A, C and D EV products, gives us confidence to pursue those markets.

Can you talk about capacity if we see a strong changeout of the legacy school bus fleet? How many electric drivetrains can you produce per year? How many can Cummins supply so you can deliver finished electric school buses? Are we talking several hundreds? Could you flex into the thousands? What sort of commitments do you have around capacity from your primary battery supplier?

We believe we have plenty of capacity and flexibility. Our manufacturing model is relatively manual and flexible; increasing output is typically a matter of adding people and shifts rather than heavy CapEx. We can scale up from the 1,000-unit reference for school buses and flex into multiple thousands as demand grows. Cummins is a terrific partner and has the ability to scale its electric drivetrain production to meet demand. Battery suppliers also have capacity to ramp with demand. We will place orders as demand materializes and partners will scale accordingly. So, in short: yes, we can flex well beyond current volumes as the market ramps.

Great. Thanks for taking my questions.

You bet. Thanks, Craig.

Our next question comes from Jon Lopez with Vertical Group. Please proceed with your question.

Hi, can you hear me okay?

Yes, Jon. We can hear you.

Great. Thank you. I had three questions; I'll go one at a time. First, can you talk about what a market recovery could look like procedurally? The industry normally ran a couple thousand more buses per year pre-COVID. On the one hand that suggests a natural upward tendency when COVID clears, but on the other hand budgeting cycles and logistics complicate a direct snapback. How quickly do you think we can get back to 2017–2018 levels procedurally?

I expect a snapback later this year into 2022 school start. As we get more vaccinations and schools reopen, I expect a surge in orders in anticipation of the 2022 school year. We provided an industry range of 26,000 to 30,000 buses in our guidance—this is below the 35,000 peak we saw in recent years, but the market should improve into 2022. Funding mechanisms like property taxes, which typically fund school bus purchases, remain in place and property values are generally stable or higher, which supports replacement demand. The average school district buys perhaps two to three buses a year, but the aggregate need is meaningful because a large cohort of buses is older than 15 years. We are seeing pockets of accelerated funding—for example, Georgia recently announced a significant program that will add over 500 buses on top of typical replacement levels. So we see strong demand when schools reopen and funding is made available. It won't be instantaneous across every district but I expect a meaningful recovery into fiscal 2022.

That's helpful, thanks. Second question: the Biden administration actions are recent and could change district plans. Are you seeing districts rethinking their future mixes—i.e., planning fewer diesel purchases and more EV purchases? Does that complicate the recovery in any way?

I don't think it complicates recovery. There is still substantial funding for EVs—for example, VW settlement funds and state-level programs, especially in California. Many districts are motivated to pursue low- or zero-emission options and those programs often provide grants or rebates that make EVs or propane vehicles affordable. In the first quarter we had strong demand across all fuel types and strong interest in EVs. We're seeing increased quote activity and pockets of orders from districts reopening. The Biden administration's statements about electrification and reopening schools reinforce district interest but this is a multiyear journey, not something that changes overnight. We are prepared for the transition and the funding mechanisms in many places support EV adoption today.

Got it. Last question: I think in fiscal 2019 you did about 50 electric buses delivered and last year about 150—an increment of roughly 100. If you do 25% more this year, that might be about 200 buses—only an incremental 40. That seems modest relative to the opportunities you discussed. Are there other constraints—supplier, manufacturing, or the need to educate the ecosystem—that limit faster growth? Why might the incremental number be relatively small?

A couple points there. The 100-bus increase last year was impacted by COVID in the back half of the year—demand slowed when schools closed. Today we have a backlog in hand for electric buses and bookings are up about 24% year-over-year. The first half of the fiscal year is seasonally light and more impacted by COVID, so we are prudent in our near-term forecasting. The bigger opportunity is in the second half of the year and into fiscal 2022 as schools reopen and funding accelerates. So while short-term increments may look modest, the trajectory is positive and we expect larger increases as the market normalizes and grant funding is deployed. We'll continue to provide updates each quarter.

Got you. Thanks so much for the detail.

You bet. Thanks, Jon.

And with that, we reached the end of our question-and-answer session. And I would like to turn the call back over to Phil Horlock for closing comments.

Okay. Well, thanks, Dave, and I will thank everybody for joining us on the call today. Those were great questions by the way—they got us all thinking and I really appreciate the interest. We look forward to updating you on our progress next quarter. As a whole, we are managing this unprecedented pandemic very well and there's no question the industry will rebound. School districts run their own fleets; kids need to get to school and parents need to get to work. This is a temporary disruption and we will recover. In the meantime, remember what we do: we're improving our business structure and our underlying margin. You may not see all of it yet because volume is low and overhead absorption is a factor, but our real underlying margins are improving and we'll capitalize on that as volume bounces back. We are driving leadership in alternative power—it's exciting. We've led this race for the last 10 years and we haven't stopped. Propane leadership and gasoline alternatives have been important for us, and now zero-emission electric vehicles and electric chassis are top of mind as we see the significant growth potential and changing landscape of transportation. That's what we'll focus on and what we'll talk about on the next earnings call. I also want to recognize our incredible employees in Fort Valley and Macon, in Drummondville, Quebec and in Columbus, Ohio. They are a great set of folks and we couldn't be where we are without them. For questions please don't hesitate to contact Mark Benfield, Head of Profitability and Investor Relations. Thanks again from Blue Bird. Have a great evening.

This concludes today's teleconference. You may now disconnect your lines at this time. Thank you for your participation, and have a wonderful day.