Blue Bird Corp Q1 FY2026 Earnings Call

Hello, everyone.

Thank you for attending today's Blue Bird Corporation Fiscal 2026 First Quarter Earnings Call. My name is William, and I'll be your moderator today. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. If you would like to ask a question, please press 1 on your telephone keypad. At this time, I would now like to pass the conference over to our host, Mark Benfield, Blue Bird's Head of Investor Relations. Mark?

Thank you, and welcome to Blue Bird Corporation's fiscal 2026 first quarter earnings conference call. The audio for our call is webcast live on bluebird.com under the Investor Relations tab. You can access 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. Blue Bird Corporation disclaims any obligation to update the information in this call. This afternoon, you will hear from Blue Bird's president and CEO, John Wyskiel, and CFO, Razvan Radulescu. Then we'll 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 are excited to share with you our fiscal 2026 first quarter financial results. Once again, the Blue Bird team delivered outstanding Q1 sales and adjusted EBITDA. And we are off to a great start. Razvan will take you through the details of our financial results shortly. But I will walk you through some of the key takeaways for the first quarter on Slide six. First, Blue Bird Corporation beat guidance on all metrics for the quarter. This is despite the impact and volatility associated with the administration policy on tariffs. We continue to navigate this situation well and have beat guidance for the thirteen quarters, validating the strength of our management and business model. Order intake for the period was exceptionally strong. Our Q1 order intake was up 45% from 2025, which pushed our backlog to a seasonally strong 3,400 units. This is a great start to the year, especially as we come into the order season. Operationally, we continue to perform with all metrics pointing in the right direction. The team has been able to execute on a day-to-day basis while simultaneously developing detailed manufacturing plans for the future. In terms of pricing, we remain extremely disciplined. US prices remain higher than the previous year and the previous quarter. As I've communicated before, this process is just how we manage the business. In the alt power segment, our dominance continues. Our EV backlog is now into 2027. We remain exclusive in propane, which has the lowest total cost of operation, and our gas variant continues to be a leader. Alt Power is a segment we created more than fifteen years ago and we continue to maintain our lead position. We continue to develop our investment thesis as explained before. Our manufacturing strategy encompasses many factory of the future that will be rolled into our new assembly plan. During the quarter, we completed our analysis of automation use cases and have locked in on a roadmap. The initiative has a strong return. But this strategy also creates a path for ongoing cost improvement through other industry 3.0 and 4.0 opportunities. And finally, we continue to manage the impact 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. Consistent with past communications, it is our objective to position this business to be a strong long-term investment. Let's turn the page and take a closer look at the financial and key business highlights for the quarter. On Slide seven, we sold 2,135 buses in Q1 and recorded revenue of $333 million, 6% ahead of last year. On the EV side, we sold 121 vehicles, 6% of unit volume, and our long-term outlook for EVs remains optimistic. Adjusted EBITDA for the quarter came in at $50 million, four million stronger than last year, and free cash flow came in at an outstanding $31 million. Razvan will talk more to this and her outlook later in the call. Turning to the right side of the page, I'll touch on a few points. With the strong order intake I spoke about earlier, our backlog finished the quarter at 3,400 units. This puts us in a good position coming into the order season. And I continue to reiterate that the overall market fundamentals are still there. The fleet is aging. We are coming into a heavy replacement cycle. And there have been industry supply issues the last few years, leaving pent-up demand. The horizon ahead looks very good for school bus volumes. In January, we also took our first order for commercial chassis. The market remains excited about this product. We are continuing with the testing, validation, and normal engineering change loops. We are projecting to start production in late Q4 which pushes sales into fiscal 2027. Our emphasis is to get this product right from a design, cost, and quality perspective, and not force timing that can jeopardize any one of those elements. Back to school bus, year-over-year selling price for buses was up almost $8,800 per unit. But, of course, this also includes tariff recovery as part of our margin-neutral strategy. With tariffs excluded, pricing was still up year-over-year, and part sales totaled $25 million for the quarter. All powered buses represented a strong 48% of mix per unit sales in the quarter. Our powertrain strategy is a differentiator in the market and allows us to maintain strong emergence. But we are not dependent on it. If you look at Q1, our RL power mix dipped below 50%, but there was no compromise in profitability. At the end of the quarter, we had 121 EVs booked and 855 EVs in our order backlog, pushing into 2027. Our updated guidance reflects approximately 800 EV unit sales for fiscal 2026. Again, we remain optimistic on EVs in the school bus sector. EVs are a perfect fit for school buses when you look at the duty cycle, available charging intervals, range, and the proven health benefits for our children. Rounds two and three of the EPA clean school bus program remain intact with funds flowing to our end customers. Earlier this month, it seems there was some misinterpretation of media coverage and quotes that suggested rounds four and five would be discontinued. But I will highlight from our subsequent discussions in Washington, there has been no such indication. It is our understanding that the EPA is still working through how and when these funds will be administered, and that the program is still bipartisan in support. Overall, when you look at state funding and the fleet EV mandates, we believe this market will remain relevant. Our short-term guidance is not dependent on federal funding for rounds four and five. Finally, the $80 million MES contract with the DOE remains intact. This is for their funding towards our new plant in Fort Valley. There have been a lot of rumors in the area of MassGrants, but, again, there's been no unfavorable direction provided to us from the DOE. As a reminder, this project adds 400 well-paying American jobs to a century-old company with an iconic brand to build clean school buses, providing our children with the benefits of clean air. As I've said in prior earnings calls, it's a great story. Overall, we beat guidance for the thirteenth consecutive quarter with a 15% adjusted EBITDA. This continued performance reflects the strength in the entire Blue Bird Corporation enterprise. I'm very proud of the team's accomplishments. So I'd like to now hand it over to Razvan to walk through our fiscal 2026 first quarter financial results as well as our full-year updated guidance in more detail.

Thanks, John, and good afternoon. It's my pleasure to share with you the financial highlights from Blue Bird Corporation's fiscal 2026 first quarter results. The quarter end is based on a close date of 12/27/2025 whereas the prior year was based on a close date of 12/28/2024. We will file the 10-Q today, February 4, after market close. Our 10-Q 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 includes reconciliations of differences between GAAP and non-GAAP measures mentioned on this call, as well as other important disclaimers. Slide nine is a summary of the fiscal 2026 first quarter record financial results. It was a strong operating quarter for Blue Bird Corporation, a great start for the new fiscal year, and we beat our guidance provided in the last earnings call on all metrics. In fact, we delivered the best Q1 ever for Blue Bird Corporation, with $333 million in revenue, and $50 million in adjusted EBITDA in percent margin. The team pushed hard and continued doing a fantastic job. They generated 2,135 unit sales volume, which was just above prior year level. Our record Q1 consolidated net revenue of $333 million was $19 million higher than the prior year, driven by pricing actions, including tariffs, that materialized in this quarter. Adjusted EBITDA for the quarter was a record $50 million driven by high margins, partially offset by increased labor and engineering costs. The adjusted free cash flow was also a record Q1 of $31 million, which is $9 million higher than the prior year first quarter. This result is due to continued strong profitability across all bus and powertrain types. Our liquidity position at the end of this quarter was a record $385 million. Moving on to Slide 10. As mentioned before by John, our backlog at the end of Q1 continues to be solid at 3,400 units, including a record 25% EV. In fact, at the end of January, we now have close to 1,000 EVs sold in Q1 and in backlog, with some of them scheduled to be billed and delivered in fiscal 2027 Q1. Breaking down the Q1 revenue into our two business segments, the BOSnet revenue was $308 million, up $20 million versus the prior year, due to increased prices across all products, including tariffs. As a result, our average bus revenue per unit increased by $9,000 from $135,000 to $144,000 or 6.5%. EV sales in Q1 were 121 units, just 11 units lower than last year, as planned. Revenue for the quarter was almost flat with a strong $25 million. This great performance was in part due to increased demand for our parts as the city's aging, as well as supply chain-driven pricing actions and throughput improvement. Gross margin for the quarter was a record 21.4%, or two hundred twenty basis points higher than last year due to pricing actions, manufacturing efficiencies, and quality improvement. Adjusted EBITDA of $50 million, or 15%, was higher compared with the prior year by $4 million, forty basis points. In fiscal 2026 Q1, adjusted net income was a record $32.5 million, or $2 million higher than last year, leading to an adjusted diluted earnings per share of $1, which is up 8¢ versus the prior year. Slide 11 shows the walk from fiscal 2025 Q1 adjusted EBITDA to the fiscal 2026 Q1 result. Starting on the left at $45.8 million, the impact of the bus segment gross profit in total was $11.1 million, split between volume and pricing effects, net of material cost increases, of $7 million, and operational and quality improvements of $4.1 million. The parts segment gross profit was almost flat, and our fixed costs and other income were unfavorable year-over-year by $6 million. Out of this, $2.6 million comprises EV emission credits that were sold in fiscal 2025 Q1 sale which did not repeat again so far this year. The sum total of all the above-mentioned developments drives our record fiscal 2026 Q1 reported adjusted EBITDA result of $50.1 million or 15%. 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 $242 million in cash and reduced our debt by $5 million over the last year. Our liquidity is very strong at a record $385 million at the end of fiscal 2026 Q1, a $106 million increase compared to a year ago. Additionally, we have executed another tranche of shares buyback of $15 million during fiscal 2026 Q1, $10 million of which concludes our $60 million prior stock buyback program and $5 million begins our new $100 million program with another $95 million left to go. The operating cash flow was very strong for Q1 at $37 million, driven by great operational execution and margins combined with the large advanced payment received for future EV units, which more than offset the seasonal increase in working capital. On slide 13, we want to share with you our updated fiscal 2026 guidance. Looking at Q1 actuals, we have beat in every metric our guidance past quarter, so we had a very strong start for the fiscal year. Q2 is forecasted to be a repeat of Q1, with additional cost pressures coming from tariffs and labor costs and inflation on our SG&A. We continue to plan for a strong second half at a 15% to 16% adjusted EBITDA margin with about 800 now scheduled for the year. We are maintaining our revenue guidance to a range of $1.45 billion to $1.55 billion, and given our Q1 performance, we are raising our adjusted EBITDA guidance to $225 million, or 15%, with a range of $215 million to $235 million. We will provide further updates in May after we close Q2. Moving to Slide 14, in summary, we are forecasting an improvement year-over-year to a new record, with revenue up to approximately $1.5 billion, adjusted EBITDA in the range of $215 million to $235 million, or approximately 15%, and adjusted free cash flow of $40 million to $60 million in line with our typical target of 50% of adjusted EBITDA, after accounting for the extraordinary CapEx of $75 million as our 50% fiscal 2026 portion of the new plant investment funded by a DOE grant, which is currently proceeding with the detailed planning and permitting phase. On to slide 16. Today, we are reconfirming the medium-term outlook at a 15% margin with volumes of up to 10,000 units, including 500 strip chassis, generating revenues around $1.6 billion and adjusted EBITDA of $40 million starting in 2029 and beyond. Our long-term target remains to drive profitable growth to higher levels, towards $1.8 billion to $2 billion in revenue, comprising 12,500 units, including 1,000 to 1,500 strip chassis, and generate EBITDA of $280 million to $320 million or 15.5% to 16% plus at best-in-class levels. The growth comes not only from improved EV mix, driven by sustained state funding and improved total cost of ownership over time, but also from our new global commercial chassis addressable market expansion and our Microbird joint venture's new plant in the U.S. We continue to be incredibly excited about Blue Bird's future, and now I will turn it back over to John.

Thank you, Razvan. Let's move on to slide 17. Blue Bird Corporation is off to a great start for 2026. Starting at the top, we're tracking to 9,500 units for fiscal 2026, but with a 6% CAGR projected for the school bus market, as well as entering new market adjacencies, we see our long-term volume growing to 13,500 units between school bus and commercial chassis. This translates to revenue of $1.5 billion for 2026, with an adjusted EBITDA moving up to $225 million. But when you factor our growth opportunities, our long-term outlook moves up to $2 billion in revenue and $320 million in adjusted EBITDA, expanding to over 16%. At the bottom of the page, you will see EV is still very relevant. This year, we are guiding 800 EVs, but we continue to see 750 to 1,000 units per annum in our long-term outlook. Overall, Q1 has been a great start, and with the strong fundamentals of the industry, our investment in the future, and our strength in this team, the outlook for Blue Bird Corporation is very strong. As I closed in on my one-year anniversary and returned to Blue Bird Corporation, I wanted to share a few high-level details about our updated strategy on Slide 18. It is based on four key elements and positions the company for the future. First, as an almost 100-year-old company, business continuity and long-term stability is a core element. This includes investing and updating our manufacturing facilities and products. A great example is our new assembly plant, which is scheduled to launch in 2028. Infrastructure and competitive products are an essential part of our plan. The next element is a theme that has been consistent the last few years: profitable growth. Of course, the school bus market is projected to grow over the next few years, and our new plant will allow us to capitalize on that. But for Blue Bird Corporation, it also means organically expanding our total addressable market by entering new adjacencies. The Blue Bird commercial chassis and the Microbird JV Buy America shuttle bus is a great example of profitable growth opportunities. Margin expansion is the next element. This area focuses on advancing competitiveness and cost reduction. For Blue Bird Corporation, this means continuing our industry 3.0 automation initiative as I discussed at the beginning of the call. We are on a good path in this area with a strong automation roadmap that will be incorporated into our new assembly plan. But as well, the new plant will allow us further factory of the future opportunities, including industry 4.0 initiatives. The last area is putting the balance sheet to work. Blue Bird Corporation has strong liquidity and generates solid cash flows. Our balance sheet position allows us to be strategically opportunistic. We have the ability to grow through acquisitions or exploit vertical integration. This is a tremendous area of opportunity for us. Overall, we have a balanced strategy that positions this great company for the future and delivers value to shareholders. I'll wrap it up on slide 19. This great company and iconic brand is almost 100 years old. Blue Bird Corporation has stood the test of time. We delivered outstanding results in the 2026. We continue to demonstrate credibility by delivering on our target. Looking ahead, our strategy, discipline, and demonstrated execution will set this great company up for the future and deliver value to our shareholders. As always, I want to thank our employees, our dealer network, our supply partners, and of course, our investors. All are critical to our success. I remain excited about Blue Bird Corporation, and we had a great start for 2026. This company is a great American story with such a rich history and an exciting future ahead. Thank you. So that concludes our formal presentation for today, and I'd now like to hand it back to our moderator for the Q&A session.

Thank you. We will now begin the Q&A session. If you would like to ask a question, please press 1 on your telephone keypad. As a reminder, if you are using a speakerphone, please remember to pick up your handset before asking a question. We will pause here briefly as questions are registered. Our first question comes from the line of Greg Lewis with BTIG. Greg, your line is now open.

Yeah. Hi. Thank you, and good afternoon, and thanks for taking my question. I guess I'd like to start off maybe talking a little bit about margins. It was a good quarter around margins. You called out the benefit of maybe some of the cost efficiencies you're driving, and you also called out having to kind of pass through the tariffs. Could you kind of give us some color around how much of that was pricing versus how much of that was maybe efficiencies that you've been able to squeeze out of the company?

Yeah. Hi, Greg. This is Razvan. If you look at slide 11, about two-thirds came from net pricing, and about one-third of it more or less is from better efficiency and quality. That's the split that we have. So as we look for you.

Yeah. So as we look out through the rest of the year, is that kind of how we should be thinking about the benefits of pricing? Do you think we have the opportunity to keep pushing that pricing through?

So I would say on the efficiency and quality, these are sustaining improvements that we are making on the pricing side. However, pricing is net of material cost increases, so you have the variability of the cost of goods sold, supplier inflation, and maybe volatility in tariffs. While at the same time, our last pricing action was in November for the new model year. Those pricing effects will come in the second half of this fiscal year. So it's a bit too early to tell, especially on the cost of goods sold, how the second half of the year is going to develop.

Okay, great. Thanks for that. And then I did have a question around the backlog. As we think about the outlook for EV and given some of the delays we've seen and the potential for that backlog to build, have customers kind of been shifting to the other alternatives, or is it kind of, hey. What I'm trying to understand is, as a percentage of the market, has diesel been gaining share here over the last couple of quarters?

Yeah. This is Razvan. I'll start, and then my colleagues can join in for sure. In terms of the EV, we have a very strong backlog. So, actually, between what we sold in Q1 and the backlog, we have over a thousand units. Some of these are bleeding into 2027 Q1 fiscal. This is because of the timing it takes for the infrastructure to be ready at the sites of our customers. I would say, on the EV, it's very strong, and we are already starting to 2027. In terms of diesel, we had a strong quarter for the diesel. You could notice it didn't affect our overall profitability because we have very strong margins across all our powertrains and product types. However, as people look at the emission regulations potentially for 2027, there is still some uncertainty regarding where that's going to land. So we may see a little bit of a pre-buy or a pull forward for some diesel units into this year.

Yeah. And I don't have anything to add. We've always said diesel is sticky, and as you say, you've got this potential pull forward maybe for pricing with the new regulations.

Okay. Super helpful. Thank you very much.

Sure. Thanks, Greg.

Thank you. Our next question comes from the line of Eric Stine with Craig Hallum. Eric, your line is now open.

Hi, everyone. Maybe we could just stick with that last question and maybe ask it a little bit differently. So, obviously, EV has continued to be pretty strong here. I know you've been in all fuels for, what, fifteen plus years, but I'm just curious specific to propane. I know you're exclusive there. School districts still, you know, by and large want to get off diesel. What kind of trends are you seeing, whether it's this quarter or going forward in propane? What type of advantage is that? I think that continues to resonate a bit in the market. How do you see that kind of playing out going forward?

Yeah. I'll start with a couple of comments. I think from a marketplace, they still recognize propane as the best total cost of operation. We also like the ease of converting a fleet over because with propane, you can go to a propane seller. They can install the infrastructure relatively easily, you know, as part of the contract for fuel. There's still a pretty strong acceptance, and compared to EV, they really like the infrastructure side. In terms of trends, I'm not sure I can comment anything there. Maybe my colleagues might be able to.

No significant change at this point in dynamic there.

Okay. Fair enough. Maybe just then talking about orders. I know on your last conference call, you talked about how it hadn't necessarily shown up in terms of order improvement in the quarter that you had reported. But that you were starting to see it in Q1. Obviously, that came to fruition. You mentioned a little bit about EVs, but just curious as we're part of the way into Q2, you know, maybe what you're seeing just on the overall order front and how you view as you're about to get into where orders season kind of starts to pick up. How do you feel about that? What kind of trends are you seeing?

Yeah. Great question. A couple of comments. Just, first, I mean, very strong order intake period. I think, as you know, we've mentioned a 45% increase. I think that's validation of what we did in terms of stabilizing pricing. Now giving that certainty just allowed districts to go ahead and purchase. So I think that was a strong sign. Whenever we talk about even, like, the backlog side, I'll mention a little bit just for a minute on EV. We have continued strong state funding. You know, New York, California, Illinois, and Michigan all have strong funding, 1.5 billion dollars, which all helps contribute as well. So order intake, I'd say, was a good quarter and strong validation, perhaps a little bit of catch-up from Q4 was in there as well, so again, pumping up the numbers. In terms of 45%, some of that's just catching up from orders that weren't placed. But overall, good validation.

Okay. And last one for me just on the capital allocation strategy. Obviously, the balance sheet is quite strong. You mentioned some potential acquisitions. I'm just wondering if you can just expand on your thoughts there a little bit; integration makes sense. I would assume if it's something else, it wouldn't be too far afield from what you currently do.

Yeah. This is Razvan. Thanks for the question. On capital allocation, we have a very strong balance sheet, and we continue to remain focused and evaluate opportunities strategically both on the growth side and also on the vertical integration side. So at this point, nothing special to talk about. However, our balance sheet is now stronger than it has ever been, and therefore, it enables us to look strategically at different opportunities.

Yeah. And, Eric, maybe the only thing I'll add is where we are. We can be opportunistic. Lots of options there for us in that regard. For us, safe and accretive are key elements of anything we would do in that area.

Okay. That's great. Thank you.

Thank you. Our next question comes from the line of Mike Shlisky with D.A. Davidson. Mike, your line is now open.

Good afternoon, and thanks for taking my questions here. Could you help me frame the potential impact from your comments, John, about adding more automation to the process? I was curious whether that was already baked into what you said last quarter, two quarters ago, about getting that to that 15% plus, or does adding more emissions? Is that the plus? Do you have more you can do to just sense of any kind of sense as to the size of the impact that it might have on your margins, given what you know today?

Yeah. Great question, Mike. Look. We're, I guess, the best way to say it is we've done the use case analysis. We know what the returns are. They're favorable. Everything we're putting through, and I think, you know, the way we look at it, we have a longer-term outlook there, and this fits within the outlook. Maybe it helps us in terms of being some tailwinds as we kind of move towards that. But a good story overall in terms of the manufacturing story and manufacturing strategy coming together.

Great. I also wanted to ask a question about the balance sheet and capital allocation. You know, pre-pandemic, you were operating with cash of around $50 million. Now you're at $240 million. Adding together your portion of the CapEx for the new facility, what you've got left on your buyback, other things you've got going on. What you've got probably from a cash flow for the rest of the year here, you're gonna have probably more cash than you know what to do with. I'm just curious if no M&A comes into view anytime soon, what's your kind of regular plan? Is it just to buy back more shares? Or is there some other way to use that cash?

Hey, Mike. Yeah. Thanks for the question. We outlined our capital allocation strategy in the last earnings call. We didn't repeat it here today. However, you are correct. We have the share buyback program up to $100 million approved by the board. We spent $5 million already in Q1 out of this program. We are looking at a big capital investment for the new plant of our portion of $100 million or so over two years. We are also increasing our regular CapEx spending, and we are investing also a lot in engineering with the different engineering and the emissions regulations that are coming in the next couple of years. Obviously, as time develops, at least on a yearly basis, we are going to revisit our strategy. Then potentially consider other avenues. Maybe in the future, we could evaluate a dividend program, but we are not quite there yet.

Got it. Could I just squeeze one more in here about market share going forward because of some previous issues the last year or two about one of your competitors having some issues with reducing on-time delivery or things out of the door? Were there some weird swings in market share? Do you have anything that you've done or that's on your radar screen for the rest of calendar '26 as far as any company that's been also acting strangely or new models or things like that that might affect your share one way or the other, or is it pretty steady from here?

No. I think a couple of things. As you know, one of our competitors had some supply issues. Seems like they've gotten through that, and I think it's normalized the market share that we're seeing right now. I don't know if Razvan has anything else to add.

Yeah, that's it. From what we see from order intake, I would say it's business as usual, Mike.

Okay. Outstanding. I'll pass it along. Thank you.

Thanks, Mike.

Thank you. Our next question comes from the line of Chris Pierce with Needham. Chris, your line is now open.

Hey. Just one question for me. I guess I know that it's tariff pass-throughs on pricing, but I guess I'm just curious about what you're hearing from distributors, the industry. I mean, when you talk about that $9,000 per bus, is there any sort of pushback out there from buyers? Or what are buyers saying to you? What role does pricing play as far as long-term margin guidance as well?

Yes, Chris. So our tariffs are very different between internal combustion engine buses and EVs. Our tariffs for internal combustion are now below $5,000 per bus, but the EVs are above $10,000 per bus. I'm not sure where the $9,000 is coming from, but definitely we see tariffs as a tax imposed by the government. We are working very hard with our supply chain partners to minimize those in a volatile environment where different countries go on different lists from time to time. So it's a bit difficult to come up with a consistent supply and sourcing strategy geographically in this environment. But we are working to minimize those. At the same time, we are working with our dealers and our customers and providing them certainty going forward right now all the way through June for fixed tariff pricing for future delivery. So at this point, our target remains to be margin neutral on tariffs.

Yeah. And I think maybe with that $9,000, I just want to clarify, Chris, that might come from, at the beginning, we talked about our $8,800 change in price from the prior year, which we said roughly half is tariff and half is pricing action.

Yeah, for sure. But in the end, the customer still has to pay that. I was kind of curious if you're hearing anything from distributors as far as elevated pricing, which I know is because of tariffs, but I'm just kind of curious what the market is saying.

Yeah. A couple of things. I know there could be some fatigue on the end users, and they might not be happy, but they recognize all the manufacturers are dealing with the tariffs now. The reality is, compared to the existing fleet, they recognize they have to change their fleet out, you know, as there are buses coming into that ten-year window. It becomes a matter of economics. It's easier to replace the unit than to keep it going.

Sure. Thanks, Chris.

Thank you. Our next question comes from the line of Craig Irwin with Roth Capital Partners. Craig, your line is now open.

Guys. It's Andrew on for Craig. First one for me, I kind of touched a lot provided a lot of detail on kind of the alt-fuel buses. But looks like within EVs, you guys kind of nudged up the midpoint of your annual guide. Backlog remains solid. You talked about sourcing and EPA funding flowing. So can you just provide a bit more color on what you're seeing in the overall EV market?

Yeah, Andrew. Thanks for the questions. This is Raz. Yeah, we see strong orders supported both by the EPA rounds 23 and the state funding subsidies that are out there. We raised our guidance for this year to 800 units. Part of the upside to our guidance comes from EV. To the extent that we can build more and deliver them, we will do that in this year, and this gives the upside to our guidance. On the other side, the downside to our guidance comes from tariffs and the cost coming from tariffs that we can't fully predict right now. So those are the two puts and takes for the guidance. We feel very good about the EV right now.

Yeah. Maybe just a couple of other things. Of course, there's a federal side that we just talked to with rounds one through five. But then on the state side, I always reiterate New York, California, Oregon, Illinois, Michigan—all have strong funding, about 1.5 billion in funding there. A lot of these big fleets just have mandates. They want to get to certain thresholds in terms of EVs as a portion of their fleet, and that includes both big fleets as well as states. So when you roll it all together, we've continued to say EV is relevant.

Great. Well, appreciate the color. And then, second from me, I know it's not a big driver in 2026, but I know last quarter you provided an update on the commercial chassis. You're prototyping some models with different body types. Can you just provide some additional color and an update there? Can we still kind of expect around 100 units towards the latter half of the year?

Yeah, for sure. So first of all, we took our first order, the first of '30, I guess, is the best way to say it, from one customer. This is a customer that helped us with the development and working through what they wanted to see from a field standpoint. What we're doing now is we're going through normal engineering loops, and then we're rolling up our bill and doing all that or bill materials and working that process. Our production SOP now looks like it's going to be later fourth quarter, which is going to push out units into next year. But, again, our focus on this whole thing is this is a new entry, so we want to make sure we got it right from a quality and durability perspective, from a price perspective. Getting all that right is important. It matters.

Maybe just to clarify, in terms of guidance, we substituted those 100 sales with buses for the total year, so we maintain the 9,500, but due to the timing of production, these strip chassis will start to be revenue recognized and sold for income statement purposes in fiscal 2027 Q1.

No worries. Thank you.

Thank you. There are currently no questions registered. So as a brief reminder, if you would like to ask a question, please press 1 on your telephone keypad. There are no more questions waiting at this time. So I would like to pass the conference back over to John for any closing remarks.

Yes. Thank you, William, and thanks to each of you for joining us on the call today. Blue Bird Corporation has delivered a great start for 2026 with strong results, beating expectations, and raising our guidance. This is despite a challenging environment. With the fundamentals of the industry and the key elements of our strategy, I remain very optimistic for Blue Bird Corporation and its future. We look forward to updating you on our progress next quarter. Should you have any follow-up questions, please don't hesitate to contact our head of investor relations, Mark Benfield. Blue Bird Corporation continues to be stronger than ever and has an amazing future ahead as we approach our one-hundredth anniversary next year. Thanks again from all of us at Blue Bird Corporation, and have a great evening.

Thank you. That concludes the Blue Bird Corporation Fiscal 2026 First Quarter Earnings Call. Thank you for your participation. You may now disconnect your lines.