Blue Bird Corp (BLBD) Q3 2025 Earnings Call Transcript

Good afternoon. Thank you for attending the Bluebird Fiscal 2025 Third Quarter Earnings Call. My name is Matt, and I'll be the moderator for today's call. All lines be muted in the presentation portion of the call for an opportunity for questions and answers at the end. If you would like to ask a question, please press star 1 on your telephone keypad. I will not have to pass the conference over to our host, Mark Benfield, Head of Investor Relations.

Mark, please go ahead. Thank you, and welcome to Bluebird's Fiscal 2025 third quarter earnings conference call. The audio for our call is webcast live on blue-bird.com under the investor relations tab. You can access the supporting slides on our website by clicking on the presentations box on the IR landing page. Our comments today include forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters we have noted on the following two slides and in our filings with the SEC. Bluebird disclaims any obligation to update the information in this call. This afternoon, you will hear from Bluebird's President and CEO, John Weisgull, and CFO Razvan Rajulescu. Then we will take some questions. Let's get started. John?

Thanks Mark and good afternoon everyone and thanks for joining us today. It's great to be here and we're excited to share with you our financial results for our fiscal 2025 third quarter. Once again the momentum continues and the Bluebird team is doing a fantastic job and delivered record sales and adjusted EBITDA in the third quarter of fiscal 2025. Rozvon will be taking you through the details of our financial results shortly so let me get started with the key takeaways for the third quarter on slide six as shown in the first box with record sales and adjusted EBITDA we beat our Q3 guidance and increased our full year guidance as well and this is despite the impact of and challenges associated with the administration's policy on tariffs which is currently creating some uncertainty in the overall market The uncertainty in pricing translated into an overall reduction industry backlog, including ours. We will talk more to this, but despite the drop in orders, our backlog at 3,900 units is still at what we describe as in the sweet spot. During the quarter, we had strong operational execution and performance, which is a testimony to the team's dedication. But we also took the quarter to deep dive our long-term manufacturing strategy. As we've communicated prior, we are slated to build a new factory to support forecasted volume. But we're using this period to challenge our detailed plans and to ensure we can be even more competitive. We are looking at where we can apply production automation, automated material movement, and manufacturing execution systems, systems which bring shop floor connectivity and ease of data collection. The objective is to build steps of cost reduction and a manufacturing roadmap into the future. This area of the business really excites me. In terms of pricing, we remain disciplined. Bus prices remain higher than the previous year and the previous quarter. And we remain competitive as we continue to see from our bid results and overall win rate. Our track record of dominance and alternative powered vehicles continues. While EV demand softened, again with all the tariff uncertainty, the outlook in this area remains strong. Alt Power is a segment we created more than 15 years ago, and we remain in the lead position. Earlier I spoke about further developing our manufacturing strategy. As we develop that strategy, we will invest in projects that have clear and strong returns. But we also will be reinvesting back into the business by developing new product features and differentiated products that will hit the market next year and the years to come. We recognize targeted investment in our operations will lead to better performance on the manufacturing side of the business and investment in our product portfolio will grow the top line. Consistent with what I've communicated in the last call, it is our objective to position this business to be a strong long-term investment. And similar to almost every business in the country, we're also dealing with the impacts of the administration's executive orders and tariff volatility. We are fortunate to be well-positioned to navigate this situation to a margin-neutral outcome. Overall, adjusted EBITDA for the quarter came in at $58 million, or 14.7%. That's over $10 million better than compared to last year's third quarter. Now let's turn the page and take a closer look at the financial and key business highlights for the third quarter on slide 7. We sold 2,467 buses in the third quarter and recorded revenue of $398 million, a quarterly record and almost $65 million ahead of last year. On the EV side, we sold 271 vehicles, 11% of our volume, and our long-term outlook for EVs remains optimistic. As already mentioned, digested EBITDA for the quarter came in at $58 million, $10 million stronger than last year, and free cash flow came in at $52 million. Razvan will talk more to this and our outlook later in this call. Turning to the right side of the page, I will start with backlog. Backlog, of course, is a function of orders and build rate, and there is no question the volatility in tariffs is having an impact on orders. The consistent movement in tariffs just creates uncertainty. It puts school districts in the mindset to purchase when things just settle down. So with that, we have taken action to offer some certainty in our pricing into next year. Rozvan will talk to that further. But I will qualify a couple of other things. We can see that our order decrease between Q3 and the previous quarter matched the industry. So this is not a performance issue. And our orders for the quarter were 1% stronger when compared to last year's orders for the same Q3 period. More importantly, the fundamentals are still there. The fleet is aging, we're coming into a heavy replacement cycle, and there has been an industry supply issue the last few years, leaving pent-up demand. So all of this points towards this situation being temporary, rather than long-lasting or structural. And to put it in context, we have consistently said that our sweet spot is in the 4,000-unit range for backlog. Third quarter average selling price for buses was up almost $7,700 per unit. but of course this concludes the tariff recovery as part of our margin neutral tariff strategy and with tariffs excluded pricing was still up quarter over quarter and part sales totaled 26 million in q3 all powered buses represented a strong 61 percent of unit mix in q3 again this compares with a typically less than 10 to 15 percent mix for our major competitors and we benefit from higher margins and higher owner loyalty with our gas and propane products, as we are the exclusive supplier to the industry today. At the end of the quarter, we had a combined 1200 EVs either booked or in our order backlog. Our latest forecast reflects approximately 900 EV unit sales for the full year. Overall, we remain optimistic on EVs in the bus sector. evs are a perfect fit for the school bus market when you look at the duty cycle available charging intervals range and the proven health benefits to our children the current ev backlog is over 500 buses and represents 174 million dollars in revenue throughout the quarter it was very encouraging to see rounds two and three of the epa clean school bus program continuing to flow to our end customers and we are seeing rounds four and five are still in play. We are hopeful to soon hear when and how these funds will be administered. And reimbursement funds continue to flow for our $80 million MESS grant with the DOE. This is for further funding towards our new plant in Fort Valley. As a reminder, this project adds 400 well-paying American jobs to a century-old American company and an iconic brand to build school buses providing our children with the benefits of clean air as i said in our prior earnings call it really is a great story as a special note during the quarter we started production in our microbird plattsburg new york plant microbird is a joint venture between bluebird and giardin the new plant manufactures small buses primarily targeting the buy america u.s shuttle bus market. As a reminder, this new segment entry was announced in December 2024 and will double our small bus capacity. I would like to congratulate the entire Microbird team for doing an outstanding job. Similarly, we've continued to make progress on our Bluebird commercial chassis, which I spoke to last quarter. We are entering the final testing phase now and will be moving into production in 2026. This chassis is targeted to be best in class and we are excited about the opportunity. But back to the overall business. We beat our guidance for the 11th consecutive quarter and are increasing our full year guidance. With a 14.7% adjusted EBITDA margin and record profits in Q3, I'm very proud of our team's accomplishments. So I'd like to now hand it over to Razvan to walk you through our fiscal 2025 third quarter financial results and full year guidance in more detail. Rajvan.

Thanks, John, and good afternoon. It's my pleasure to share with you the financial highlights from Bluebird's Fiscal 2025 third quarter and year-to-date results. The quarter end is based on a close date of June 28, 2025, whereas the prior year was based on a close date of June 29, 2024. We will file the 10Q today, August 6, after market close. Our 10Q includes additional material and disclosures regarding our business and financial performance. We encourage you to read the 10Q and the important disclosures that it contains. The appendix attached to today's presentation includes reconciliations of differences between gap and non-gap measures mentioned on this call, as well as other important disclaimers. slide nine is a summary of the fiscal 25 third quarter record financial results it was another great operating quarter for bluebird with highest ever ev volume and they beat our guidance provided in the last turning score in fact we delivered again the best quarter ever in terms of both top line and bottom line as a testament of our continued profitable growth journey. The team pushed hard and did a fantastic job generating 2,467 unit sales volume, which was 15% above prior year level. All-time quarterly record net revenue of 398 million was 65 million or 20% higher than prior year, driven by product mix and pricing actions that materialized in this quarter. Adjusted EBITDA for the quarter was an all-time record 58 million, driven by improved bus margins, partially offset by increased investment in headcount, engineering, and business growth areas. The quarterly adjusted fee cash flow was very strong at 52 million and 56 million higher than the prior year. This result was due to continued strong profitability across all bus and powertrain types strategic cost management and small improvements in working capital looking on the right side at the first nine months of the fiscal year we crossed already the 1 billion mark and posted all-time record revenue of 1 billion 71 million and all-time record adjusted evita of 153 million both improved versus then record last year's first nine months Moving on to slide 10, as mentioned before by John, our backlog at the end of Q3 is just under our sweet spot at almost 4,000 units. While the tariff uncertainty significantly reduced orders in Q3, based on discussions with our dealers and customers and fundamental industry dynamics, we believe that this is temporary, and we expect the pace of orders to pick up in the rest of calendar 2025. Actually, with many trade deals already completed, for example, China and the European Union, and with USMCA still in effect, our line of sight to our costs has improved, and we implemented in July pricing actions that provide stability through the end of March. Our backlog at the end of Q3 includes over 500 EVs. Rounds 2 and 3 of the Clean School Bus Program are flowing again as confirmed by the epa in april and the funding for rounds four and five is still in play in the future breaking down the q3 398 million in revenue into our two business segments the bus net revenue was 372 million up by 64 million or 17 percent versus prior year due to higher ev mix and improved pricing across non-ev products as a result our average bus revenue per unit increased from 143 000 to 151 000 or approximately five percent of which approximately two percent is related to tariffs passed through ev sales in q3 were a record 271 units which is 67 units or 33 percent higher than last year parts revenue for the quarter was flat year-over-year at 26 million gross margin for the quarter was 21.6 percent or 80 basis points higher than last year in line with our targets also the team has done a great job managing the tariffs with our supplier partners and with our customers and as a result our margins have not been negatively impacted during this quarter adjusted e-vita of 58.5 million or 14.7 percent was higher by 10 million compared with the prior year and showed the 20 basis points improvement. In fiscal 25 Q3 adjusted net income was a record 39 million or 8 million higher than last year. Adjusted diluted earnings per share of $1.19 was up by 28 cents versus the prior year. Slide 11 shows the work from fiscal 24 Q3 adjusted EBITDA to the fiscal 25 Q3 result. Starting on the left at $48.2 million, the impact of the bus segment gross profit in total was $16.7 million, with volume EV mix and pricing effects net of material cost increases of $14.3 million and operational improvements of $2.4 million. Those include the USW labor agreement wage increases now in full effect, which were more than offset by other efficiency improvements, improvements, lower freight costs, and quality improvements. The par segment gross profit was flat year-over-year, staying at a very strong level. Our fixed costs and other income were unfavorable year-over-year by $6.4 million due to increased headcount and investments into our growth areas. The sum total of all of the above-mentioned developments drives our all-time record Fiscal 25 Q3 reported adjusted EBITDA results of 58.5 million or 14.7 percent. Moving on to slide 12, we have extremely positive developments year over year also on the balance sheet. We ended the quarter with a record 173 million in cash and further reduced our debt by 5 million over the last year. Our liquidity is very strong at a record 315 million at the end of fiscal 25 q3 an increase of 83 million compared to a year ago additionally we have executed another nine million dollars tranche of share repurchases which brings us to 49 million dollars completed over the last 12 months with another 11 million dollars left to go on the existing program more good news on this on the next slide the operating cash flow was very strong at 57 million driven by great operational execution and margins and small improvements in working capital. On slide 13, we would like to give you an update of our capital allocation strategy for the next two years, fiscal 26 and fiscal 27, and the new exciting share repurchase program recently approved by our board. Our capital allocation strategy balances investments for long-term profitable growth, return of value to our shareholders, and maintains a conservative cash position. On the left side, our 475 million sources of cash consists of very strong cash flow from operations after tax and interest of 300 million over two years, plus existing cash of approximately 175 million. We do not expect at this point to add new debt over this period. However, we do have borrowing capacity both on the revolver and in our long-term debt agreement should this become necessary. On the right side, we have three uses of cash, organic and inorganic growth, shareholders, and small debt repayments. As far as growth is concerned, we plan to invest approximately $150 million over two years with the MASC program for the new plant and other manufacturing expansion and automation projects. And we have a not to exceed $50 million over two years in each of these categories, R&D and engineering expenses, CapEx for growth and maintenance, and potentially small M&A activities. Moving on to shareholders category, we are very happy to announce our next stock buyback program for up to $100 million over the next two years. This is supported by our strong existing cash position and free cash flow generation, and they believe it is the best way at this point to return value to our shareholders in parallel with our profitable growth investments. Finally, in addition to the required term loan principal payment of $5 million per year, we plan to maintain a conservative cash balance at each year end in excess of $50 million. On slide 14, given our strong performance year to date, today we are raising our full year guidance for fiscal 25 to $210 million adjusted EBITDA and 14.5%. But first, looking at Q3 actuals, we have beat once again our guidance this past quarter, so we had a very strong and record-breaking first nine months for the fiscal year. On the Q4 adjusted EBITDA side, we are increasing the bottom end and midpoint of our guidance, given the higher certainty on tariffs. For the total year, we are tightening our revenue guidance to approximately 1.45 billion and we are raising our adjusted EBITDA to 210 million or 14.5 percent with a narrowed range of 205 to 215 million moving to slide 15 in summary we are forecasting an improvement year over year with revenue up to approximately 1.45 billion adjusted EBITDA in the range of 205 to 215 million or 14.5 percent and improved adjusted free cash flow of 90 to 100 million the free cash flow guidance is in line with our typical target of approximately 50 percent of adjusted EBITDA and it includes on top the extraordinary capex of now up to 10 million as our 50% Fiscal 25 portion of the new plant investment funded by the DOE MASS grant, which is currently proceeding, albeit slower than initially planned. The delay in spending is due to the comprehensive review of our manufacturing long-term strategy conducted by the team this summer under the leadership of our new CEO. We are reevaluating our strategy and its supporting manufacturing footprint for long-term success. Some new elements we are considering, for example, are opportunities for automation in the new plant, which could reduce our costs and make us even more competitive in the marketplace. On slide 16, we want to share with you our initial thoughts on fiscal 26 business environment and preliminary guidance. We continue to have a number of both tailwinds and headwinds at play this year. As tailwinds, we have strong bus demand, stable pricing, and a solid industry backlog. We offer not only diesel and gasoline school buses, but we have the only propane-fueled school bus in the industry, with clean fuel and best-in-class total cost of ownership. We are also leading in the EV segment, with over 2,000 EV buses on the road. The state subsidies continue to be strong, EV pure-play competitors have gone out of business in the U.S., and we have already over 1,200 EVs sold and in backlog at the end of June. At headwinds, there is still some demand uncertainty driven by tariffs. However, the situation has been improving and it appears to be stabilizing at reasonable levels. On the labor front, our second year of the USW union contract provides for predictable wage increases however our health care and insurance costs continue to increase year over year the material costs and supplier inflation pressures are still present and the newly implemented tariffs are impacting our cost of goods sold over time with bus pricing counter measures already announced driving to a margin neutral outcome in summary we are preliminary guiding units to 9,500, including 750 EV buses and approximately 100 propane commercial chassis, driving revenue to $1.5 billion and adjusted EBITDA of $220 million, or 14.5%. Moving on to slide 17, given our strong business momentum, today we are raising the medium-term outlook to 15% margin, with volumes of up to 10,500 units, including 500 commercial chances, generating revenue around 1.6 billion and with adjusted EBITDA of approximately 240 million. Starting in 2029 and beyond, our long-term target remains to drive profitable growth to now even higher levels, towards 1.8 to 2 billion in revenue, comprising of 12,000 to 13,500 units, including 1,000 to 1,500 units commercial chassis, and generate EBITDA of 280 to 320-plus million, or 15.5% to 16% plus at best-in-plus levels. The profitable growth comes not only from improved EV mix, driven by sustained state funding and improved EV total cost of ownership over time but also from our new Bluebird commercial chassis addressable market expansion as well as our Microbird joint venture new plant expansion in the U.S. We continue to be incredibly excited about Bluebird's future and now I'll turn it back over to John. Thank you, Rosvan. Let's move on to slide 19. We've shown this slide on several

earnings calls so I won't spend too much time on it today as the priorities remain consistent. The chart on the left side of the page outlines our Bluebird value system as a company, taking care of our employees, delighting our customers and our dealers, and delivering profitable growth. And the right side of the page shows how we get there. And of course, the objective of delivering sustained profitable growth for our investors is at the center of it all. And when you turn to page 20, I want to remind everyone again of Bluebird's history and resilience. Over its history and more recently, after the COVID and inflationary period that affected the entire industry, we restructured our commercial and manufacturing practices to improve our business. So looking at 2025 and beyond, we are really coming into our moment. Razvan took you through the guidance for Fiscal 25, and I'm showing you some of those key metrics at the midpoint guidance on this page. First, our bookings outlook shows volume increasing 3% over fiscal 2024. Consistent with the last call, net revenue at $1.45 billion will be a new record for Bluebird, up 8% from fiscal 2024. And adjusted EBITDA guidance of $210 million is just under 15% higher than our fiscal 2024 results. Importantly, we are planning on a strong 14.5% adjusted EBITDA margin in Fiscal 25, up 90 basis points from Fiscal 24. And finally, we are forecasting to grow EV unit sales to 900 buses in Fiscal 25, up 28% from last year. On the right chart, you'll see there's a lot of pent-up demand following the low industry sales over the last five years, and the bus bleed has continued to age. I spoke to the fundamentals when discussing the backlog at the beginning of the call, and ACT is forecasting a 6% compounded annual growth rate through 2030. So again, we believe the data points towards strong, long-term demand, which is great for us and the industry. So I'll wrap up with slide 21. First, this great company and iconic brand is almost 100 years old bluebird has stood the test of time and it continues to be poised for an exciting future we remain confident that the clean school bus funding program will continue it's a bipartisan initiative it's 100 appropriated with rounds four and five still in play and it eliminates harmful tailpipe toxins benefiting our children and our communities and we also remain optimistic on overall near-term and long-term school bus demands Again, we delivered record results for the quarter, increased our full-year guidance, and announced a $100 million share repurchase program coming off our previous $60 million program. And this kind of performance has put Bluebird in a position to really look long-term, as we invest and enter in new segments and upgrade our operations. As always, I want to thank our employees, our dealer network, and our supply partners. all are critical to our success similar to my message in the last call i'm excited to be back at bluebird corporation 2025 has been an incredible year with record results increased guidance a great history and an exciting future thank you so that concludes our formal presentation today and i'd like to now hand it back over to our moderator for the q a session if you would like

to ask a question please press star followed by one on your telephone keypad if for any reason you would like to remove that question please press star followed by two again to ask a question press star one as a reminder if you're using a speaker phone please remember to pick up your handset before asking your question we will pause here briefly as questions are registered first question is from the line of mike schliske with da david senior

lines now open uh yes good afternoon thanks for taking my questions here um maybe if you

could touch first on the order and backlog commentary that you that you've uh that you've

given us um i guess it's a two-part question i mean first i mean it doesn't order season doesn't doesn't start until after the holidays after like january or so when folks plan for next year it's usually a pretty slow season this summer so i was just kind of curious first if there's any um uh seasonality we should be thinking about here and we're not going to know what's really going to what's kind of really happening until january february maybe i'll just i'll just start with

does my first question yeah thanks mike but maybe i'll just touch on a couple things in general on the backlog side just uh there's some data points so first of all i want to just compare q2 to q3 and just put in context the drop you know if you compare bluebird to the industry the drop was within three tenths of a percent of each other so really it means bluebird and the industry came down And then if you look at the backlog across the year, and you go to March, we were within 3% of where we were at the start of the year. The backlog really dropped in April, and that coincides with Liberation Day and the tariff announcements. And I think our perspective is that the districts just don't know how to deal with the uncertainty due to tariffs. and you know a bit of an analogy but it's a bit like being on a plane during turbulence you know the passengers put on their seat belts they buckle up and they sit down because they just don't know what's going to happen next and the pricing certainty that we've extended into next year is like coming into smooth air so the passengers or in our case the school districts you know can unbuckle and begin begin to move around so we see this as something positive now again a couple other things here just more on the fundamentals we have an aging fleet we're coming into a heavy replacement cycle the prior year supply uh you know prior year supply was pent up because of supply issues uh and then the budgets haven't disappeared so i think from our take you know it's dropped but it's temporary we don't view this as something long term um great um just to just

up on the other part of my question then i mean all right i appreciate the age fleets out there but are the districts actually on the phone telling you in the dealerships we're just going to hold off temporarily you know for the orders until we figure out our track of the tariff situation is that verbally what they're saying or are you making that what the timing of the orders kind of suggest but there's no actual evidence from calls or discussions with your

customers. Yes, Mike, this is Razvan. So we are working very closely with our dealers and with the school district. So we know firsthand that the reason why they were not placing orders is because of the uncertainty on tariffs and pricing relates to tariffs, which we could not provide in the past due to the volatility. Now that the tariffs are stabilizing at somewhat reasonable level we have a better line of sight to our costs and therefore we extended certain pricing at least all the way through March and therefore the schools are now feeling more comfortable to start to put again orders and know what the final price of the bus is gonna be a delivery got it then just turn to the

operational side can you maybe comment on the range of operational improvements that have been made over the last bunch of quarters here, I think folks want to make sure that the margin tailwinds that you've got that appear to be continuing are the results largely of the operational improvements and not simply a change in the mix to higher EVs. Just some thoughts as to how sustainable are the current margins even if the EV volumes change

up or down from here yes my this is radvan so uh we are working in the operations and with the entire team to identify opportunities for continuous cost improvement for efficiencies we are tweaking the operations of the plants through lean manufacturing principles so many of the improvements over time and not just this year but over the last couple of years come from that angle of stabilizing operations and improving efficiency in terms of product mix we are less sensitive than in the past to product mix as i said multiple times our gross margins are roughly the same percentage point percentages across all powertrain types so therefore we are very confident that our margins are sustainable and we are projecting same or improving slightly in the near future.

Yeah, and Mike, just a couple things to add, too. I think if you look at the historical improvement we've had, say, the last couple years, it's been on the lean manufacturing or the elimination of waste side. And I think if we look ahead, based on the initiative we're kicking off now, the benefits we'll see in the future are more through automation. You know, we definitely have some opportunities in that area when we look at our manufacturing processes. So I think looking back and then looking ahead, it'll be two different sources in terms of improvements.

Yeah, John, I was going to ask that question last, and I'll kind of leave it here. As you look at the automation that's available to you and the possibilities, the margin I was talking here in your outlook is, you know, 1%, 2%. Do you feel like what you could bring with automation might be the entire 1%, 2%, and then we could add violence on top of that? It just sounds like the opportunities are much more than just one point.

Yeah, I think it's – listen, Mike, it's John. Again, I think it's early, and we're still quantifying things. So right now we're at the point where we're working with automation integrators and we're working on the business cases. What that adds up to just yet, we don't know, but I do think there'll be some margin expansion opportunities.

And, Mike, this is Razvan. So if you noticed on our long-term outlook, we went straight to 16 percent plus we skipped the 16 percent step which we've done in the past so there is definitely some more upside to our long-term outlook but as john said it's still early we're still evaluating so as things become clearer we may update it in the future all right

i'll keep my eye on that plus i appreciate the help thank you for your question next question

is from the line of greg lewis with btig your line is now open yeah hi thank you thank you and good afternoon and thanks for taking my questions uh first one's a quick one um as i look at the um you know you did a good job of laying out the backlog and the ev backlog as i kind of look at kind of what is expected in in the final quarter of the fiscal year and looking out at next year um i guess as we think about you know projected ev sales um how much visibility do we have to that related to backlog.

Thanks for the question. So where we sit today at the end of Q3, we have 500 units in the backlog at that point in time, and we are projecting to sell about 200 units in Q4. So we have 300 units per plus for next year if we don't get any orders, which is not the We still have rounds two and three flowing, so we are continuing to receive orders from We will have at some point rounds four and five coming into play. We don't know yet exactly when, but we are expecting that from the EPA. And we are working on a couple of discrete opportunities for certain fleets, for example, EV business, that each one in itself could be more than 100 units or a couple of hundred units. So while there is a range, and we put a wide range there between 500 to 1,000 for next year, We are working on opportunities to go to the upper end. So we feel very good about the 750 midpoint right now.

Okay, great. And then as I think about the EPA school bus program, beyond that, it does seem like states like, I guess, New York and California are kind of still coming, have their own incentive programs. Is that kind of where, when we think about on the EV side deliveries, is that kind of, as we look at it, beyond the EPA, which, you know, we'll see how, I guess, phases four and five come in the market. But beyond that, is there any other states we should be thinking about other than California and New York to really drive EV momentum here over the next kind of 12 to 18 months?

exclusive of EPA. Yeah, that's a great question. Yeah, no, it's a great question. So, of course, we talked about rounds four and five, and then you have state funding as well. There's about a billion dollars plus approved there. And some of the states you've already touched on, New York, California, Oregon, Illinois, Michigan, I mean, those are the prime states. And then as well, as Rozvan mentioned, some discrete opportunities as well. So I think there's definitely opportunity looking at that when you boil it down to the state side. Okay, great. And

then just one more for me, you know, kind of, you know, on the small scale, maybe look like some working capital was freed up with some inventories coming lower here. Should we be thinking about any seasonality around inventories just as kind of we move, you know, into the final kind of quarter

of the fiscal year yes greg thanks for the question so um at this point we have a fairly constant level of production that we are keeping um we don't expect significant movement in working capital i would say there are two exceptions to that that might come into play one is to the extent that we will sell a higher number of either fleet or gsa units that creates an account receivable that takes more than normal to collect the cash so that may carry from one quarter to the other and then secondly to the extent that we decide is necessary from a supply chain others either stability or tariff play we might do some pre-buy of inventory to ensure we can produce and we can lock in certain prices so those are the two things but again they come throughout the normal course of business and to the extent that they happen we will inform you about them in our next quarterly earnings course great super helpful thanks and congrats on a great

quarter okay thanks thank you for your question next question is from the one of eric stein with

Craig Holland, you're welcome. Hi, everyone. Thanks for taking the questions. Hey, so when we think about the electric school buses and obviously given battery prices and prices higher and the funding uncertainty, although reasons to be cautiously optimistic, just curious, I mean, are you seeing school districts opt to go propane? You know, maybe if you are the extent of that and any potential share gains or conquest wins from other OEMs.

Thanks for the question. So at this point, we haven't seen a direct substitution from EV to propane. However, we know our propane offers the lowest total cost of ownership for the school district. So those that are focused on that aspect choose to go the propane way. And then on the EV side, it's still at this point related to the level of subsidies that are available. And those who choose to go that route usually have significant subsidies behind them. So there isn't a lot of direct crossover at this point in time.

Okay. All right. Thanks for that. And then maybe if we could just touch on pricing, you know, as I think about COVID and coming out of COVID and all the supply chain challenges and the different pricing structure and mechanisms you had to put in your contracts to protect the company, you know, I'm thinking about that and also thinking about that you've put in stable pricing through, I believe, March. and i know that you know the tariff situation has calmed down a little bit but also know that i mean that can turn with a tweet so um you know just curious kind of the protections that you have in place or you know maybe a different approach to be able to do that to your customers while

still protecting margins yeah thank you so uh definitely we have been working a lot over the last few years to restructure the way we go to market our pricing strategy and our contract And we've demonstrated to our results that we are able to work with our customers and pass through certain increases when they happen. In terms of tariffs, we are fortunate that we are not that exposed to tariffs. Majority of our sourcing comes from North America and with USMCA still in place, so Canada and Mexico are in a good spot for us. Where we had higher exposure was on the EV, especially from China. that seems to have stabilized at the 30 percent level and also the recently the European Union at 15 percent seems to have stabilized as well. So working together with our supply chain partners and through different negotiations, we have a good line of sight to a majority of the tariff impacts at least through March and therefore we offer the certain certainty of pricing through much for our customers we are obviously monitoring the situation to the extent that something catastrophic happens we may have to revisit one or the other thing but in general we believe we can navigate this to a margin neutral outcome for us okay and then maybe last one for me just

on pricing i mean i guess you know my my question was going to be or you know always curious if there's any pushback because obviously given tariffs and everything going on you have had to raise prices quite a bit and push on price um you know do you still feel like you know pricing increase is kind of understood by the industry that not necessarily pushbacks on those increases but it's just more about the volatility than anything else

yeah so our position is very clear tariffs are a form of tax imposed tax imposed by the government and therefore it doesn't necessarily have something to do with us or neither of the major players in the industry and therefore the customers understand that we do have to

pass this on when they happen um yeah and maybe just one other point um and when you talk about pricing because one of the things we we took a look at was how the sources of funding come in which is really through property taxes and we did a study looking back you know it was basically from 2020 uh to current and what we found is our pricing has not outrun property taxes so it means that you know from our perspective there's there's room and this thing isn't fatigued

yeah maybe one more thing to add quickly in terms of the uh pushback it has more to do with the timing and the uncertainty then the level of tariffs that we have put in place and this is what created a bit of a slow down in the order intake but again with our counter measures they believe now we can unlock that and they expect orders to pick up through the end of 2025 calendar

year okay thank you thank you for your question next question is from the line of chris pierce

with Needham. You want to say open. Hey, good afternoon, everyone. On the pricing action that you're taking, is this something you're seeing across the industry or is this offensive to take share, defensive to hold share, or that's sort of neither here nor there? Hey, Chris, this is Razvan.

So, so far we have been seeing similar actions from our competitors as far as the initial level of tariffs that were put in place from what we can see from different bid steps. Our latest move was fairly recent to basically give stability through March and we have to see what the competitors will do regarding that. But overall we feel pretty good that we continue to remain competitive and at the same time able to protect our margin and be neutral on the tariff stock.

Okay and thanks for that and if I look at the long-term slide you guys consistently update you know it used to have EVs and those are sort of the idea the thought was that those were added to margins but you sort of swapped out evs for now a low level of chassis is chassis additive to margins or is that not the right way to think about it it's just the consistency you've shown that you're able to get on pricing and manufacturing gains and that's what's driving margins and is there a chassis order book that gives you confidence in these numbers or like i'm just kind of curious what happens or what gives you confidence to put these numbers out for the first

had? Yeah, so this is Razvan. So in terms of the EV projection, in terms of mix for the medium to long term, obviously with the recent changes both of the EPA and in the administration, we are not able to put fixed numbers out there that we can commit to. So however, what we said in the last couple of earnings call is we have had other engines of growth, especially on the top line, that are offsetting a potential reduction in the growth of EV that we were previously forecasting. Chassis being one of them, this brings both revenue enhancement and it comes with good margins, so it's profitable growth. And then secondly, from the microboard, our expansion in the U.S., especially now with the new plant acquired in Salzburg, New York, and addressing the shuttle bus by America segment. That will bring us additional net income, so addition to the bottom line. So overall, we have now different engines of growth that we are folding in. And in terms of the confidence for the volumes for the commercial chassis, we have been talking with several customers at different ratios, and we have strong interest from many of them regarding our products. We are coming first to market with a propane option, and we also have the EV option we have been working on for quite some time now. So definitely, we see strong interest, and therefore, we are able now for the first time to put some directional numbers in our medium and long-term outlook.

Okay, perfect. And just lastly, if round four and round five money does come back, is that thought of as a mixed shift within units? that goes back to you guys are able to drive the same margin by engine type or is that additive to units additive to margins like what's the right way to think about that yeah so so rounds four and

five didn't really go anywhere there was just some question about are they still in play and so far the answer is yes they are in terms of total units at this point we maintain our stance that we want operate on one shift and we will be able to expand our production capacity with the new plant under the MESC program that we are continuing to refine the planning of. And therefore, for the midterm, NEV will be more of a mixed change. However, for the long term and with the new plant, it could also represent an addition to the total volume.

Okay. Appreciate the detail. Thanks for everything.

Thank you for your question. Next question is from the line of Craig Erwin with Roth Capital Partners.

Good evening, and thanks for taking my questions. Hey, congratulations first on a really solid quarter here. Again, impressive execution. Definitely appreciate the discussion around pricing and parsing out the impact of tariffs and how you're able to successfully offset that. Can you maybe give us a little bit more color or remind us on your general pricing strategy? A lot of companies have a set amount of price they like to put through each year, and then they add or factor in significant changes in cost of materials or tariffs or other items. Can you maybe just walk us through your general pricing strategy and what we're likely to see out of Bluebird in the next couple of quarters?

Yes. This is Razvan. Thanks for the question. So, we have been on a pricing strategy that has a cadence of every six months, so two price increases per year over the last more than two years right now. And the level of price increase was roughly 2% each time, give or take a little bit. And this was in line with our forecasted economics, inflation, different cost of goods sold, cost of goods sold increases that we see either from our own labor with the usw contract or from our suppliers so this is the normal level that we've put in place in terms of tariffs we announced at the end of march we had roughly a two percent tariff related pricing action and now we have put another announcement in place coming october 1st we are adding another roughly one to 1.5 percentage points to that so tariffs will go up in october and then therefore they will also be constant through march so that's where we are right now understood thank you for that and then

you know another product that's of significant interest right now is your um class five six strip chassis truck um can you maybe talk about um the potential there to uh pull it forward as far as volumes. You put in a very light number as far as commitments for this next fiscal year of just 100 units. You're making it on the exact same line that you're making, or I guess you've got two lines where one, you can run it through on the production cells. And there's a hunger out there for propane, right? Your success in the school bus market has educated the broad trucking industry on the benefits, the economic benefits of that spark spread. Can you maybe talk a little bit about the ability to pull forward some of those volumes versus what you have in your forecast?

Yeah, Craig, so a couple things. So yeah, I mean, admittedly, we took a cautious view on it. But right now, we're building demos. And we're, you know, going to get those demos in the hands of people. And then it goes through some mileage accumulation. And of course, we're doing testing on the front half of the year is as rosvan mentioned earlier all the feedback is very positive we believe it's the best in class product and then just as you mentioned the differentiator being uh copain so we think there's opportunity but quite honestly i think we'll you know let's get this thing launched let's get it out in the field and then if there's more demand then we certainly have capacity and we have the opportunity to support that okay understood and then last

question if i may um sgna has seen some growth over the course of the last year now everyone understands that the business is tracking really well you've got a bunch of initiatives um that you're executing on can you maybe frame out for us what a fair expectation is on sgna proportionate to uh revenue growth over the next year should we keep should this keep climbing at a similar clip as it has in the last year or should we see this growth rate maybe taper off in the next couple

quarters that's great so definitely the growth in SG&A will taper off we have been invested investing heavily in the last couple of years in adding some headcount in strategic areas also in engineering have invested in different powertrain projects that are coming still with 2027 so i would say for 25 26 you can expect some low single digit growth in sgna but definitely the revenue growth should outpace the sgna growth understood well thanks for taking my questions and

congratulations again on another another really solid quarter thank you craig thank you for your

question there are no additional questions waiting at this time so i'll pass the call back to john

Wyscale for any closing remarks. Thank you, Matt, and thanks to each of you for joining us on the call today. So just as last year, you saw our momentum increasing throughout the year with profitability improving quarter over quarter. And while the environment may have changed for 2025, we have continued on that same theme. I remain very optimistic and enthusiastic for Bluebird and its future, and we look forward to updating you in our progress next quarter. And should you any follow-up questions please do not hesitate to contact our head of investor relations mark benfield and finally bluebird continues to be stronger than ever and has had an amazing and has an amazing future ahead as we approach our 100th anniversary in a couple years thanks again from all of us at bluebird and have a great evening that includes

the conference call thank you for your participation you may now disconnect your lines