Blue Bird Corporation Aktie

Ladies and gentlemen, thank you for joining us, and welcome to Blue Bird's Fiscal 2026 Third Quarter Earnings. [Operator Instructions]

I will now hand the conference over to Mark Benfield, Blue Bird's Head of Investor Relations. Mark, please go ahead.

Thank you, and welcome to Blue Bird's Fiscal 2026 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. Blue Bird 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, and we'll take some questions. Let's get started. John?

Thanks, Mark. Good afternoon, everyone, and thanks for joining us today. It's an exciting day today as we are going to share our strong fiscal 2026 third quarter financial results and the continued significant progress we've made with our long-term strategy, including a very special announcement we made late this afternoon.

Results for Q3 were once again very strong, and the Blue Bird team delivered outstanding sales and adjusted EBITDA, beating guidance for the 15th consecutive quarter. Razvan will take you through the details of our financial results shortly, but let's turn to Slide 6, where I will talk to some of the key takeaways for the quarter.

First, Blue Bird beat guidance on all metrics for the quarter. Again, we continue to manage the volatility associated with the administration's policy on tariffs well. Backlog for the quarter ended at 4,900 units, inclusive of Micro Bird and just under 3,600 units for Type C and D.

Operationally, metrics are pointing in the right direction, and the team has been able to execute on a day-to-day basis while simultaneously working on our long-term strategy. In terms of pricing, we remain extremely disciplined.

Bus prices remained higher than the previous year and in the previous quarter. As I continue to communicate, this process is just how we manage the business. In the Alt-Power segment, our dominance continues. Our EV backlog is just under 800 units, and we have a strong EV order book into 2027. Alt-Power is a segment we created over 15 years ago. We were pioneers in EV. Our propane powertrains have the lowest total cost of operation, and our gas variant continues to be a market leader.

With increased diesel prices at the pump, we believe Alt-Power is a great long-term play, and we continue to maintain our lead position. 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. As I've said on every earnings call, 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 7. We sold 3,525 buses in Q3 and recorded revenue of $517 million, $119 million above last year. On the EV side, we sold over 350 electric vehicles, 10% of unit volume, and our long-term outlook for EVs remains optimistic.

Adjusted EBITDA for the quarter came in at $71 million, $13 million stronger than last year, and adjusted free cash flow came in at $28 million. Razvan will talk more about this and our outlook later in this call.

Turning to the right side of the page, I'll touch on a few points. As discussed earlier, our backlog finished at a solid 4,900 units combined. As you know, backlog is a function of orders and production. Orders for the industry were up 7% on a trailing 12-month basis and Blue Bird's order intake was up 9% for the same period. We feel good about our position in the school bus market. I continue to reiterate that the overall market fundamentals are still strong.

The fleet is aging. We are coming into a heavy replacement cycle, and there's been industry supply issues in the last few years, leaving pent-up demand. The midterm horizon continues to look very good for school bus volumes.

Year-over-year selling prices for buses was up almost $10,000. But of course, this also includes increased tariff recovery as part of our margin-neutral tariff strategy. With tariffs excluded, pricing was still up year-over-year, and parts sales totaled $25.5 million for the quarter.

Alt-powered Blue Bird buses represented a strong 54% unit sales mix for the quarter. Our powertrain strategy is a differentiator in the market and allows us to maintain stronger margins. For the quarter, we had 355 EVs booked and 776 EVs in our order backlog pushing into 2027. 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 remained intact with funds flowing to our end customers. And the EPA has invited comments for 2026 funding, solidifying rounds four and five for the program, consistent with what we have been communicating. We should understand very soon how and when the EPA will administer these funds. Overall, when we look at state funding and fleet EV mandates, we believe this market will remain relevant.

In the quarter, we closed on the Micro Bird transaction. This transaction brings us consolidated revenue with the Type A school bus and future growth in the commercial shuttle bus segment. It also brings us technology with the EcoTuned integrated EV platform. This transaction represents our strategic commitment to growth outside of the school bus segment and putting the balance sheet to work.

But finally, I have another exciting item to report. We made a very big move in the chassis market. Let's turn to Slide 8, where I will talk about the exciting news we released earlier today, our expanded collaboration into the Class 5-6 chassis market with Ford Motor Company and our asset purchase of Detroit Chassis LLC's Detroit Assembly plant. Under the agreement, Blue Bird will assume design, manufacturing and sales responsibility for the next-generation F-53/F-59 commercial strip chassis. Additionally, Ford will supply to us its medium-duty next-generation Ford powertrain as part of this agreement.

Finally, Ford and Blue Bird intend to collaborate on the seamless customer transfer of fleet, RV and Specialty Body manufacturers. This collaboration with Ford will run through the end of 2033 with the extension opportunity into 2036. As part of this significant market entry, Blue Bird will also acquire Detroit Assembly plant assets of Detroit Chassis LLC, the current contract assembler for the F-53/F-59 chassis.

Detroit Chassis brings workforce, leadership, equipment, while Blue Bird brings the overall design and business enterprise expertise to support this overall arrangement. The purchase is anticipated to close in calendar Q1 2027, shortly after the current chassis ends production, and production of our new chassis is expected to start in calendar Q1 2028. For Blue Bird, this arrangement and transaction focuses on the strategic value proposition of growth, technology and collaboration.

First, it expands Blue Bird's total addressable market by $1.4 billion in a largely two-player market in both commercial delivery and RV segments. Also, the Ford-powered gas chassis is a competitive and dominant offering in this space. The collaboration will propel our market position in the strip chassis segment.

Second, this new chassis design will have considerable technical read across into our new bus design. We also see that this chassis design will be scalable and facilitate expansion into other product offerings. This technical approach will support even further growth down the road.

Lastly, a collaborative approach with Ford will support an orderly transition with customers, enabling ease of entry into the market and mitigating risk. Overall, this is a very exciting announcement and is an important part of our strategy for the company. And as I said earlier, it brings tremendous opportunity for growth, technology and collaboration. It positions us to be a growing player in the Specialty Vehicle market. It has certainly been another busy quarter with strong results and a very exciting announcement.

So, I'd now like to hand it over to Razvan to walk through our fiscal '26 third quarter financial results as well as our full year updated guidance in more detail. Razvan?

Thanks, John, and good afternoon. It's my pleasure to share with you the financial highlights from Blue Bird's fiscal 2026 third quarter and year-to-date record results.

The quarter end is based on a close date of June 27, 2026, whereas the prior year was based on a close date of June 28, 2025. We will file the 10-Q today, August 5, after market closing. 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 10 is a summary of the fiscal '26 third quarter and year-to-date record financial results. Please note that fiscal '26 Q3 is the first quarter in which we are consolidating the Micro Bird results, following our acquisition of the remaining 50% of the joint venture, which transaction closed on April 1, 2026.

It was a strong operating quarter for our company, a great continuation after the first half of the fiscal year, and we beat our consolidated guidance provided in the last earnings call on all metrics.

In fact, we delivered the best Q3 profit ever for Blue Bird with $71 million in adjusted EBITDA. The team pushed hard and continued doing a fantastic job and generated 3,525 unit sales volume, which includes 1,235 Micro Bird units. The Blue Bird unit sales were 7% below prior year level, driven by a relatively large number of GSA and fleet units in finished goods.

As a result, Q3 consolidated net revenue of $517 million was only $119 million higher than prior year, which Micro Bird consolidation contributed approximately $123 million. Adjusted EBITDA was a Q3 record $71 million, $13 million higher than prior year, and it includes the consolidation effect of Micro Bird of $8 million.

The adjusted free cash flow was a solid Q3 of $28 million and $24 million lower than the prior year, driven by a seasonal increase in working capital and finished goods inventory for GSA and fleet. Our liquidity position at the end of this quarter was strong at $259 million, and this is after the Micro Bird acquisition and paying down all the debt at close.

The year-to-date results, including the consolidated Q3 for Micro Bird are equally impressive, while units sold of 7,808 buses were above prior year by 916 units. The revenue grew 12% to $1.2 billion with record adjusted EBITDA of $172 million or $19 million above prior year.

Free cash flow was also very strong at $100 million or $7 million above prior year's level. Moving on to Slide 11. Our backlog continues to be solid at approximately 4,900 units, including approximately 1,300 Micro Bird units and a total of approximately 800 EVs. Many of the EVs are already scheduled to be built and delivered in fiscal year '27.

Let's break now the Q3 revenue of $517 million into three components.

First, the Blue Bird bus net revenue was $369 million, down 1% versus prior year due to higher finished goods inventory for GSA fleet. However, our average Blue Bird bus revenue per unit increased by $10,000.

Blue Bird EV sales in Q3 were 300 units or 29 units higher than last year. Second, parts revenue for the quarter was almost flat at a strong $25 million.

Third, this quarter, we are consolidating Micro Bird revenue for the first time, and they contributed $123 million to our results with 55 EV units sold. Gross margin for the quarter was a strong 20% or 160 basis points lower than last year due to Micro Bird consolidation, which drove 180 basis points reduction.

Adjusted EBITDA of $71 million was higher compared with prior year by $13 million, of which the Micro Bird consolidation impact was $8 million. Adjusted EBITDA in percentage was mathematically compressed year-over-year due to the consolidation of 100% of the Micro Bird revenue in Q3, while adding only 50% incremental adjusted EBITDA after the joint venture acquisition.

Excluding the Micro Bird consolidation effect, the percentage actually went up from 14.7% to a record Q3 of 16.1%. Iin fiscal '26 Q3 adjusted net income was a record Q3 at $45 million or $6 million higher than last year, with half of the delta coming from the Micro Bird consolidation. Adjusted diluted earnings per share of $1.28 was up $0.09 versus the prior year.

Slide 12 shows the walk from fiscal '25 Q3 adjusted EBITDA, the fiscal '26 Q3 results before and after the Micro Bird consolidation. Starting on the left at $58.5 million, the impact of the bulk segment gross profit in total was $0.7 million, split between volume and pricing effects, net of material cost increases of $6.2 million and year-over-year healthcare cost increases, lower overhead absorption and higher freight and costs totaling negative $5.5 million.

The bulk segment gross profit was almost flat as well as our fixed cost and other income, other expenses. However, the Micro Bird results improved year-over-year, shown here in the previous 50% joint venture format. The above-mentioned developments drive our pre-consolidation record fiscal '26 Q3 adjusted EBITDA results of $63.6 million or 16.1%.

The Micro Bird 50% joint venture consolidation added an additional $7.8 million for a total reported adjusted EBITDA of $71.4 million or 13.8%.

Moving on to Slide 13. We ended the quarter with $117 million in cash and reduced our debt by $5 million over the last year. This is after completing the Micro Bird acquisition during this quarter and paying down all the debt at close. Despite this, our liquidity remains strong at $259 million at the end of fiscal '26 Q3.

The operating cash flow was solid for Q3 at $31 million, driven by great operational execution and margins, partially offset by increases in working capital and finished goods inventory for GSA and fleet.

On Slide 14, we want to share with you our updated fiscal '26 forecast. Looking at our record Q3 results, we have beaten again our guidance this past quarter, so we had a very strong fiscal year-to-date. We continue to forecast a strong Q4 at approximately 14% adjusted EBITDA margins despite a small reduction in units sold versus the previous forecast.

We are guiding total year revenue to the same midpoint and with a range of $1.74 billion to $1.76 billion. And given our beat in Q3, we are raising our guidance for adjusted EBITDA to $247 million or approximately 14% with a range of $245 million to $250.

Moving to Slide 15. In summary, we are forecasting an improvement year-over-year to a new record with revenue up to approximately $1.75 billion, adjusted EBITDA in the range of $245 million to $250 million or 14% and adjusted free cash flow of $125 million to $135 million, in line with our typical target of approximately 50% of adjusted EBITDA.

And after accounting for the extraordinary CapEx of up to $5 million as our 50% fiscal '26 portion of the new plant investment funded by a reconfirmed DOE MESC grant, which is currently proceeding with the permitting phase.

Moving on to Slide 16. We wanted to remind you of our medium- and long-term outlook after the Micro Bird acquisition. Medium-term outlook was a $275 million adjusted EBITDA or 13.5%. Our long-term target was to generate EBITDA of $325 million to $375-plus million or 14% to 15% plus.

Moving on to Slide 17. As John mentioned before, we announced earlier today that we have expanded our collaboration with Ford into the commercial strip chassis gas-powered segment. Starting in 2028, the next generation of the F-53/F-59 chassis will be designed, manufactured and commercialized by Blue Bird with Ford powertrain. This expands our addressable market into the core of the last-mile delivery segment as well as Class A RV segment.

It represents an investment in 2027 of approximately $90 million for Blue Bird, of which $50 million is CapEx. The manufacturing will begin in early 2028 in the current Detroit assembly plant of Detroit Chassis LLC, which Blue Bird will acquire in 2027 in an asset deal after the end of production of the existing F-53/F-59 products.

This new segment is expected to grow for us to a level of approximately 10,000 units in 2030 and generate longer-term adjusted EBITDA of $100 million plus or 14% to 15%. This collaboration replaces in the first step our previous planned entry into this segment with a 10x higher potential. We are very excited about this opportunity as a further step on our profitable growth strategy.

Moving on to Slide 18, you can see our updated medium- and long-term outlook post Fort collaboration expansion. Starting with the short-term outlook, the pro forma results for 2026 and '27, including a full year of Micro Bird consolidation, indicate approximately $2 billion in revenue and approximately $260 million of adjusted EBITDA or 13%. This is before the noncapitalized portion of the Blue Bird chassis investment from the expanded collaboration as well as exciting new product investments currently in the early stages of planning.

We will provide full year and quarterly guidance for fiscal '27 in the next earnings call. In terms of capital allocation, we intend to refinance and expand our credit facility by the end of calendar year 2026 and maintain a leverage ratio under 2x adjusted EBITDA. And we continue to be opportunistic in share buybacks with approximately $90 million remaining on the existing program.

Moving to the right in time, what used to be our low-end long-term target of $2.3 billion in revenue moved now closer into midterm with $300-plus million in adjusted EBITDA. The long-term outlook is raised now to approximately $3 billion in revenue and $400 million to $500 million plus in adjusted EBITDA or 14.5% to 15% plus.

Now this is what we call profitable growth. 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 20. I want to take this opportunity to remind everyone of our long-term strategy, which consists of four 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 planned to start production in late calendar year 2028 and our commitment to a highly competitive new bus design. Infrastructure and competitive products are an essential part of our plan.

The next element is the theme that has been consistent in 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, it also means expanding our total addressable market by entering new adjacencies. The Blue Bird commercial strip chassis we announced today, and the Micro Bird Buy America shuttle bus are great examples.

Margin expansion is the next element. This area focuses on advancing competitiveness and cost reduction. For Blue Bird, this means continuing our Industry 3.0 automation initiative. But as well, the new plant will allow for further factory of the future opportunities, including Industry 4.0 initiatives.

And the last area is putting the balance sheet to work. The Micro Bird acquisition and the Detroit Chassis asset purchase are great examples of this and support our safe and accretive approach in this area. And even after these transactions, Blue Bird continues to have a pristine balance sheet, strong liquidity and solid cash flows. This will allow us to continue to be strategically opportunistic.

Overall, we have a balanced strategy that positions the company for the future and delivers value to our shareholders. Let's turn to Slide 21.

The fundamentals for the school bus segment remains strong, as shown on the left side of the page. We are moving into the replacement cycle for the high-volume period between 2017 and 2019. We know there is pent-up demand remaining from the COVID period, and there are still over 250,000 buses over 10 years old. And funding remains stable for this market. All of this contributes to a strong ACT outlook of approximately 6% CAGR over the next several years.

But with the addition of Micro Bird earlier this year, we now get the consolidation benefit of Type A school bus and the growth associated with entering the Buy America commercial shuttle bus market, as shown on the right side of the page. But adding today's big announcement for the commercial strip chassis market, these combined moves increase our total addressable market by 150% on units and over 85% on dollars from just 1 year ago.

These transactions represent our commitment to our strategy as we reshape Blue Bird from a pioneer in the school bus industry to a growing player in the Specialty Vehicle market. I'll wrap it up on Slide 22.

This great company and iconic brand is almost 100 years old. It has stood the test of time and is positioned for the future. We delivered outstanding results again in the third quarter of 2026. We continue to demonstrate credibility by delivering on our targets. We are excited about the Micro Bird acquisition made earlier this year and extremely excited about the Ford collaboration in Detroit Chassis LLC asset acquisition announced today.

These are significant components of our long-term strategy and will position us to be a growing player in the Specialty Vehicle market. And looking ahead, our strategy, discipline and demonstrated execution will set this 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 for our success. I remain excited about Blue Bird, and we continue to deliver great results and make significant progress in our longer-term strategy. 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 like to now hand it back to our moderator for the Q&A session.

[Operator Instructions] The first question comes from the line of Eric Stine with Craig-Hallum.

So, I would love to start with the Ford agreement. It certainly makes a lot of sense what you're doing. But I just want to make sure I understand it. So, did you say that this kind of becomes your primary path forward? Or should we view this in addition to the fact that you've got excess chassis capacity in Ford Valley and that you're kind of going on two paths?

Eric, it's John Wyskiel. Yes, for sure, it's our primary path. There's a lot of engineering work here to get through. And this one, we look at this as a real solid agreement as we get to break into a market and catapult into it with cooperation with Ford. So, we're excited.

Got it. And then in terms of that excess chassis capacity that you have, is there something that you're, and maybe this is TBD, but that you're thinking about that, that can be utilized for because I know that, that has long been viewed as kind of an unrealized asset that could be put to work.

Yes, we'll see down the road. I mean, right now, there's no immediate need with what we've done with Detroit Chassis, of course, purchasing their assets. Down the road, I mean, there's some geography that could come into play. But again, it's not the immediate play we'll make.

Okay. Just on a follow-up, so it starts in fiscal '28. And I know that you talked about in fiscal '30 that you're thinking 10,000 units, a little under half the addressable market. Should we think about that as a bit of a ramp from the start to that 10,000? Or I guess you just talked about thinking you may hit the ground running.

So, Eric, this is Razvan. So, the SOP is in the middle of is call '28, thereabout. So, 2028 is a partial year of the ramp-up. And then 2029, we also consider it as a ramp-up year. But as you know us, we are conservative. So, to the extent that we can accelerate the path to 10,000, we will. But at this point, we want to show a ramp to the 10,000 level, and there is upside potential longer term above this 10,000 for sure.

Yes. And just another comment, Eric. I think you know this is largely a two-player market. So, we view that favorably, obviously, coming into the space. And the F-53/F-59 was hugely successful in this marketplace. So, us having the opportunity to take it over, we think, is a great opportunity.

The next question comes from the line of Michael Shlisky with D.A. Davidson.

Congratulations. To follow up on those last question or two there about the Ford's strict chassis production. Over the last 10 years, they've actually averaged over 15,000 a year. And you're only saying 12,000 that maybe would be a full production in your slide here. I guess, is that just being conservative? Or have you heard of any fleet that switched over, for example, Amazon going to the EV that they work on with Rivian or other folks just not using as many as they did? Or is this just, we'll see how it goes, but 12,000 is at least a large step of the way to full production.

Mark, this is Razvan. Yes, we are conservative. So, there is room for higher numbers. But at this point, we want to have a conservative business case also for entering into the market, and we have to execute on it, grow it. And as you know, also, there is some cyclicality into this market when you look at the RV business that can have its ups and downs. And then also based on the large fleet acquisitions on the last mile delivery, you can also have some cyclicality. So, look at this as our base case with upside potential from here.

Okay. Great. You also mentioned that they'll be ramping their production in the first part, very early 2027, it sounds like. Over the last bunch of quarters, they did a ton of these vehicles. The ramp up like 5x what they were making at the trough of the cycle.

But once the deal is completed, I'm guessing that between now and then they're going to build a ton more of these and they can sell off them during the time when they stop making them and you're starting to ramp up, if I'm wrong, but correct me there. But I guess once they stop producing them, who will be in charge of selling that inventory down through the 2028, 2029 ramp-up of the new model? And are you as part of the purchase price or part of the purchase buying all that inventory? Or is that going to be all still held by Ford until they're down to zero?

Yes. No, Mike, I'll clarify a couple of points. So, the current F-53/F-59 will be managed by Ford Motor Company. So, they'll handle all of that. They're going to work with Detroit on the build-out. They'll have the inventory. They'll manage everything. We won't be involved with any of that part of the transaction. Where we step in is with the new design with the new engine that will come out. The new engine comes out, of course, next year, and the chassis will come out with the new engine in 2028. So, we're stepping in post Ford exiting, and Ford will have all the responsibility with the current design.

So just so I'm clear, the next-gen product will it be roughly the same dimensions, just a different engine and roughly the same layout. So, you have to do a lot of collaboration with the outfitters? And then also, will you be able to do propane in this facility that comes from the Ford ROUSH system as well?

Yes, great question. So, first part of the question, yes, similar dimensions, obviously, the same space, Class 5-6. So I don't anticipate any changes there. For sure, there won't be any changes there. There will be, of course, some integration changes with this because you have to accommodate the new engine. It's got a wider bank for water cooled jackets, et cetera.

So, there'll be things that we'll do, obviously, to accommodate the new powertrain and there'll be a level of carryover as well of the current chassis. And then as far as propane, initially, we're going to get into gas. I mean that's the whole announcement really is working with Ford with, and of course, the acquisition of Detroit putting in the gas chassis or redesigning and launching the new gas chassis.

Down the road, we'll see what we do with propane. But for sure, there's an opportunity there. We have a great history with ROUSH. And then as well, ROUSH and Ford and Blue Bird have worked together on the current propane. So, for sure, it's a great opportunity down the road.

The next question comes from the line of Chris Pierce with Needham.

Can we just shift back to the school bus market for a second? I guess I just want to understand, what are you hearing from distributors or distributors hearing from customers as you enter the fourth quarter, given where gas prices they are with, I think you've quoted Blue Bird units down 7% in the third quarter. But I want to make sure that it was the school bus also.

Yes. Chris, this is Razvan. So, the year-over-year volumes were down, and this is because we had a relatively high number of finished goods inventory. So, in Q3, we'll build a large number of GSA and fleet units, and this will take a longer time until they are revenue recognized. So, we build the units, but they will be rev rec during Q4.

And also, we will build some more of this in Q4, which will play into fiscal '27. So that's the 7% year-over-year explanation. In terms of the general backlog, our backlog is fairly stable. We are solid into Q4 right now. And obviously, we are taking order for next year at this point.

Okay. Perfect. And then I think in the press release, I don't see a price paid for the transaction. I think you referenced an asset swap on the call. I don't want to think about dilution.

It's in the 8-K, the asset acquisition, it's $7 million with cash. There is no dilution.

Okay. So, you acquired the manufacturing facility for $7 million.

Yes.

Assets.

Yes, inventory. There is no other exchange with Ford directly in terms of the entering the segment. The collaboration act not an M&A percentage.

But to your point, Chris, it is a pretty low-cost entry into the space.

In terms of M&A it's a $90 million investment.

Correct. Understood. So, under $100 million at this point in time, it looks like for something that could generate $70 million in adjusted EBITDA in 2030 based on Slide #17.

Okay. And then can you just last for me, just kind of talk about it being a two-player market, kind of like how should we think about, is it similar to the school bus market where you've got sort of a very warm handoff to customer orders? And like I'm just kind of thinking what could go wrong or what, I'm not thinking about some sort of a known unknown where this doesn't just sort of become, I'm assuming the end customer doesn't technically care what chassis they have. They just want their vehicles. So, I just want to make sure I'm thinking about the market correctly.

Yes. I mean, look, it's a two-player market, I think you know Ford's history in this space. They've been very successful with the gas chassis. And on the RV side, in particular, I think they practically own the market in this space. So, the carryover, we think, is a great opportunity. Now the other part of this agreement is we will work with Ford Pro on continuity of the customer base.

So that's with the fleets, the body builders, the RV manufacturers, all of that. Ford and Blue Bird will work hand-in-hand. And we think that mitigates risk. We also think it gives us a great opportunity coming into the market and not having a lag. So, we think from our perspective, it's a lot of risk mitigated and really, I think, should catapult us into this space pretty well.

And that was actually trying to kind of squeeze your way in with your own chassis. Is that fair to say like this is a pivot?

Apologies, we got a fire alarm went on. We got a little bit of noise in the background. Even the fire alarms are excited about this transaction. But no, we were working on our chassis, but simultaneously, we were working with Ford on this opportunity. And when things started to heat up and got a lot closer, of course, we took the Ford path to bring this to market.

Chris, as I said in my remarks, this is a 10x bigger opportunity to enter the segment. So, we had to pivot, take this one, and then we will come back to the propane and also EV later on as the market develops that way as well.

The next question comes from the line of Ben Summers with U.S. Bancorp.

So just curious, kind of you guys mentioned some read-across or read-throughs to the bus market. Just kind of curious on where you see that and potentially any more color on the synergies you potentially expect with the New Ford collaboration.

Yes, for sure. I'll talk a little bit about that. Look, I think one of the areas for sure that will be an opportunity to read across will be the EE architecture. And then you also get things like ADAS that will read across. And there's likely going to be legislation in the school bus market down the road in the near future for ADAS as well. So, we see those things as read across.

Additionally, we see in terms of the scalability, some real opportunities there. We're in a position right now, we're redesigning next-generation bus. We're redesigning or designing this current chassis. And I think that brings almost like building blocks of opportunities down the road that we could scale this thing into other vehicle opportunities or other body opportunities. So, lots of, I think lots of exciting things down the road. First step is launch, of course. We'll be able to get this gas chassis to market, but good things to come down the road for sure.

Super helpful. And then back to the school bus market. So, I think in the past, you guys have said something around like 3,000 to 4,000 units in the backlog is kind of that sweet spot. I know if we net out the Micro Bird units in the backlog, that's kind of where we sit today. So, I am kind of curious about how we think about that target backlog range now with Micro Bird integrated into the platform.

Yes. So definitely, we have to look at both of them combined. For Micro Bird, the backlog between 1,000 to 1,500 units, it's something that we like to see. But their backlog is a lot more seasonal than our bus backlog has been for the last couple of years. So, as we work together, we will determine the desired levels of backlog based on seasonality.

Right now, for the Type C and D, our backlog is fairly stable. It's around 3,500 units or so. And we'd like to keep it that way. For us, the lower end is about 3,000, which is the point where it could get a bit more challenging to work with the supply chain on lead times. But you have to remember, we worked pre-COVID with 1,500 units backlog or under 2,000. So, it can be done. It's just a matter of setting the appropriate supply chain expectations right as well. So overall, we feel good about our backlog, and we are executing now on Q4 and working to bring this fiscal year to a strong end.

The next question comes from the line of Mike Shlisky with D.A. Davidson.

You can't get enough of this announcement, which we really appreciate. Well, there's two topics here. There's Ford and there's also the core Blue Bird. And I want to ask and ask a couple of questions here about the core Blue Bird business. I guess, first, a little bit more about the $10,000 average ASP increase in the core, in the Blue Bird C&D business. How much of that without being calc, how much of that was mix of EV? How much of it was just inflation? How much of it was features and other things? Just a little more detail there.

Yes. The majority is year-over-year price increases. There are some increased tariff recovery elements in that, and there is also a bit of EV mix. So those are the three main elements. So, we're not going to split them out in more details right now.

Okay. Fair enough. And then I know it's only August here and orders don't even really heat up for well over a quarter, if not more than that. Any thoughts on what you're hearing from your major dealers or large school districts about their plans to buy buses in the coming school year?

Yes. I mean we're coming into our business planning process now. So, we're looking at the order book for next year. But look, a couple of things remain the same. The fundamentals are all there. If you have an aging fleet over 250,000 of these buses are greater than 10 years old. We're coming into a replacement cycle. The average volume between 2017 and '19 was 36,000 units a year. Those buses are coming up for replacement.

Then during the COVID period, there was pent-up demand. So, I think from our perspective, when we look at that, we have great fundamentals there and the funding is still there as well from property taxes. So overall, I think coming into the business plan and as we start to prepare for next year, we believe things should be fairly solid coming into the next season.

There are no further questions at this time. I will now turn the call back to John Wyskiel for closing remarks.

Thanks, Percy, and thanks to each of you for joining us on the call today. Just a quick announcement before I wrap up. Earlier today, we were notified by the Georgia Chamber of Commerce that Blue Bird's Vision Electric School Bus won the 2026 Coolest Thing Made in Georgia contest.

The Coolest Thing Made in Georgia contest is a program designed to celebrate and showcase the great State of Georgia's outstanding innovation and craftsmanship.

Blue Bird is a pioneer and a leader in EV space. And I think this award is a recognition of the amazing work and success of the team. So, congratulations to the entire Blue Bird team.

So back to the wrap-up. Blue Bird has delivered great results for Q3 2026, meeting expectations and raising our guidance. We also continue to deliver exciting announcements on new opportunities like the Micro Bird acquisition and the Ford commercial strip chassis collaboration announced today.

With the fundamentals of the industry and the key elements of our strategy, I remain enthusiastic for Blue Bird and its future, and we look forward to updating you on our progress next quarter.

Should you have any follow-up questions, please do not hesitate to contact our Head of Investor Relations, Mark Benfield. Blue Bird continues to be stronger than ever and has an amazing future ahead as we wrap up or as we approach rather a 100-year anniversary next year. Thanks again from all of us at Blue Bird and have a great evening.

This concludes today's call. Thank you for attending. You may now disconnect.

Ladies and gentlemen, thank you for joining us, and welcome to Blue Bird's Fiscal 2026 Second Quarter Earnings Call.

[Operator Instructions] I will now hand the conference over to Mark Benfield, Bluebird's Head of Investor Relations. Mark, please go ahead.

Thank you, and welcome to Blue Bird's Fiscal 2026 Second 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 2 slides and in our filings with the SEC. Blue Bird 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. Thanks for joining us today. It's an exciting day today, and we're going to share our strong fiscal 2026 second quarter financial results and the significant progress we've made with our long-term strategy.

Results for Q2 were once again very strong, and the Blue Bird team delivered outstanding sales and adjusted EBITDA, beating guidance for the 14th consecutive quarter. Razvan will take you through the details of our financial results shortly, but let's turn to Slide 6, where I will talk to some of the key takeaways for the quarter.

First, Blue Bird beat guidance on all metrics for the quarter. Again, we continue to manage the volatility associated with the administration's policy on tariffs well. Backlog for the quarter ended at just under 3,600 units. And operationally, all metrics are pointing in the right direction. And the team has been able to execute on a day-to-day basis while simultaneously developing detailed manufacturing plans for the future, which I will talk more to later in this call.

In terms of pricing, we remain extremely disciplined. Bus prices remain higher than the previous year and the previous quarter. As I've communicated prior, this process is just how we manage the business.

In the Alt. Power segment, our dominance continues. Our EV backlog is over 900 units extending into 2027. We remain exclusive in propane, which has the lowest total cost of operation, and our gas variant continues to be a leader. Again, Alt. Power is a segment we created more than 15 years ago, and we continue to maintain our lead position.

Our manufacturing strategy is coming into focus, and I will talk more to that later in this presentation. It's focused on building our new plant, automating where we can get good financial returns and ensuring production contingency, all of which builds a safe path for ongoing cost improvement through 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 the situation to a margin-neutral outcome.

As I said on every earnings call, 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 7. We sold 2,148 buses in Q2 and recorded revenue of $353 million, slightly below last year.

On the EV side, we sold 201 electric vehicles, just under 10% of unit volume, and our long-term outlook for EVs remains optimistic. Adjusted EBITDA for the quarter came in at $51 million, $2 million stronger than last year, and free cash flow came in at an outstanding $40 million. Razvan will talk more about this and our outlook later in this call.

Turning to the right side of the page, I will touch on a few points. As discussed earlier, our backlog finished at a solid 3,600 units, so we remain close to the sweet spot. As you know, backlog is a function of orders and production. And if you look at the first half of the year, order intake was up 7% from the same period last year versus the market, which was down almost 4%.

So overall, we are feeling good about our performance in the market. And I continue to reiterate the overall market fundamentals are still strong. The fleet is aging. We are coming into a heavy replacement cycle, and there's been industry supply issues the last few years, leading pent-up demand. The horizon ahead continues to look very good for school bus volumes.

Year-over-year selling price for buses was up almost $6,400. But of course, this also includes tariff recovery as part of our margin-neutral tariff strategy. With tariffs excluded, pricing was still up year-over-year and part sales totaled $28 million for the quarter.

Alt powered buses represented a strong 41% of mix of unit sales for the quarter. Our powertrain strategy is a differentiator in the market and allows us to maintain stronger margins.

For the quarter, we had 201 EVs booked and 912 EVs in our order backlog pushing into 2027. 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 2 and 3 of the EPA Clean School Bus Program remains intact with funds flowing to our end customers. And the EPA has invited comments for '26 funding, solidifying rounds 4 and 5 of the program consistent with what we've been communicating. We should understand very soon how and when the EPA will administer these funds.

Overall, when you look at state funding and the fleet EV mandates, we believe this market will remain relevant. But finally, I have two very exciting items to report for the quarter.

First, the $80 million MESC contract with the DOE has been officially reconfirmed for funding, solidifying our manufacturing strategy and new plant.

And second, we announced the acquisition of our Micro Bird 50-50 JV. Similarly, this transaction is another key component of our profitable growth strategy.

So, let's turn to Slide 8. Micro Bird has a rich history with 3 main segments: Type A school bus, commercial shuttle bus, and integrated EV powertrains. The acquisition was a safe and accretive play that brings with it two plants, 950 people and best-in-class quality products. For Blue Bird, the transaction focused on a strategic value proposition for growth, technology and efficiency.

First, the transaction will allow us to consolidate sales and critical growth outside of the school bus segment by accessing the Buy America commercial shuttle bus segment, expanding our total addressable market.

Second, it brings critical integrated EV technology through ECOTube, expanding our product offering, bringing vertical integration opportunities and ensuring supply stability.

And lastly, this transaction brings efficiencies through critical integration, which has already begun both organizationally and in business processes.

Overall, this is an excellent transaction for the company, and it brings a tremendous opportunity for growth, technology and efficiency.

It has certainly been a busy quarter with strong results and some exciting announcements. So, I would like to now hand it over to Razvan to walk through our fiscal '26 second quarter financial results as well as our full year updated guidance in more detail. Razvan?

Thanks, John, and good afternoon. It's my pleasure to share with you the financial highlights from Blue Bird's fiscal 2026 second quarter and year-to-date record results.

The quarter end is based on a close date of March 28, 2026, whereas the prior year was based on a close date of March 29, 2025.

We will file the 10-Q today, May 6, 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 10 is a summary of the fiscal '26 second quarter and first half record financial results. It was a seasonally strong operating quarter for Blue Bird and a great continuation for the first half of the fiscal year, and we beat our guidance provided in the last earnings call on all metrics.

In fact, we delivered the best Q2 profit ever for Blue Bird with $51 million in adjusted EBITDA. The team pushed hard and continued doing a fantastic job and generated 2,148 unit sales volume, which was just below prior year levels, driven by a lower number of production days in this fiscal quarter due to the way holidays fell in the year.

As a result, Q2 consolidated net revenue of $353 million, was $6 million lower than prior year. Adjusted EBITDA for the quarter was a Q2 record of $51 million, driven by high margins, partially offset by increased year-over-year health care costs.

The adjusted free cash flow was also a record Q2 of $40 million and $21 million higher than the prior year second quarter. This result was due to continued strong profitability across all bus and powertrain types.

Our liquidity position at the end of this quarter was a record $418 million. The first half results are equally impressive. While units sold of 4,283 buses were just slightly below prior year by 143 units, the revenue grew to $686 million with adjusted EBITDA of $101 million, both record first half results.

Free cash flow was also very strong at $71 million or $30 million above prior year's level. Moving on to Slide 11. As mentioned before by John, our backlog increased versus Q1 and continues to be solid at approximately 3,600 units, including over 900 EVs, a record 25% EV backlog mix. Some of them are already scheduled to be built and delivered in fiscal '27 Q1.

Breaking down the Q2 $353 million in revenue into our two business segments, the bus net revenue was $325 million, down $8 million versus prior year due to slightly lower volumes. However, our average bus revenue per unit increased by $6,000 from $145,000 to $151,000 or 4.3%.

EV sales in Q2 were 201 units or 64 units lower than last year as planned. Parts revenue for the quarter was up at a strong $28 million. This great performance was in part due to increased demand for our parts as the fleet is aging as well as supply chain-driven pricing actions and throughput improvements.

Gross margin for the quarter was a seasonal record 20% or 30 basis points higher than last year due to pricing actions, manufacturing efficiencies and quality improvement.

Adjusted EBITDA of $51 million or 14.4% was higher compared with prior year by $1.6 million and 70 basis points. In fiscal '26 Q2, adjusted net income was a record Q2 of $32.5 million or $1 million higher than last year. Adjusted diluted earnings per share of $1 was up $0.04 versus the prior year.

Slide 12 shows the walk from fiscal '25 Q2 adjusted EBITDA to the fiscal '26 Q2 results. Starting on the left at $49.2 million, the impact of the bus segment gross profit in total was $1.7 million, split between volume and pricing effects, net of material cost increases of $4.3 million and year-over-year health care cost increases and lower overhead absorption of $2.6 million. The parts segment gross profit was flat and our fixed costs and other income expenses were also almost flat.

The sum total of all the above-mentioned developments drives our record fiscal '26 Q2 reported adjusted EBITDA result of $50.8 million or 14.4%.

Moving on to Slide 13. We have extremely positive development year-over-year also on the balance sheet. We ended the quarter with a record $276 million in cash and reduced our debt by $5 million over the last year. Our liquidity is very strong at a record $418 million at the end of fiscal '26 Q2, a $144 million increase compared to a year ago.

Additionally, we have executed another $5 million tranche of shares buyback during fiscal '26 Q2, part of our new $100 million program with $90 million left to go. The operating cash flow was very strong for Q2 at $48 million, driven by great operational execution and margins and with almost flat working capital.

On Slide 14, we want to share with you our updated fiscal '26 forecast prior to the Micro Bird acquisition and consolidation. Looking at Q2 actuals, we have beaten again in every metric our guidance this past quarter, and we had a very strong start for the first half of the fiscal year. We continue to forecast a strong second half at 15% to 16% adjusted EBITDA margins. We are increasing our EV to $900 million for the fiscal year and our pre-deal forecasted revenue to a range of $1.515 billion to $1.565 billion. And given also our beat in Q2, we are raising our forecasted adjusted EBITDA to $230 million or 15% with a range of $220 million to $240 million.

These numbers are prior to the Micro Bird acquisition and second half consolidation. On Slide 15, we want to share with you our updated fiscal '26 guidance post close on April 1 of our acquisition of the remaining 50% of the Micro Bird joint venture. As you can see on this slide, the first half of the year remains reported as unconsolidated JV.

However, in the second half, we are now going to consolidate 100% of the revenue and the remaining 50% of the adjusted EBITDA for Micro Bird. Building on the updated forecast for the year from the prior page, in Q3 and Q4, we are guiding to increase consolidated total revenue of $500 million and $560 million, respectively, driving the total year to $1.725 billion to $1.775 billion in revenue.

For adjusted EBITDA, the Q3 midpoint is increased by $5 million and Q4 midpoint is increased by $10 million for a total year guidance of $245 million with a range of $235 million to $255 million. Due to consolidation of 100% of the Micro Bird revenue for the second half and only 50% of the adjusted EBITDA, the adjusted EBITDA margin percentage is being updated to approximately 14% for the year.

Moving to Slide 16. In summary, we are forecasting an improvement year-over-year to a new record with revenue up to approximately $1.75 billion, adjusted EBITDA in the range of $235 million to $255 million or approximately 14% and adjusted free cash flow of $100 million to $125 million, in line with our typical target of 50% of adjusted EBITDA and after accounting for the extraordinary CapEx of $25 million was our 50% fiscal '26 portion of the new plant investment funded by a reconfirmed DOE MESC grant, which is currently proceeding with the permitting phase.

Moving on to Slide 17. We wanted to remind you of our medium- and long-term outlook prior to the Micro Bird acquisition. Medium-term outlook was a $240 million adjusted EBITDA, which included $25 million for our 50% portion of Micro Bird results. Our long-term target was to generate EBITDA of $280 million to $320 million, which included Micro Bird with $30 million to $35 million.

Moving on to Slide 18. We want to remind you of the growth potential we see for Micro Bird , especially in the commercial shuttle bus segment in the U.S. with Buy America certification. We are driving towards $450 million in revenue midterm with $60 million in adjusted EBITDA. The long-term outlook is for $500 million to $550 million in revenue and $75 million to $90 million in adjusted EBITDA.

Moving on to Slide 19. You can see our updated medium- and long-term outlook post Micro Bird acquisition. What used to be our long-term target of $2 billion in revenue moved to midterm with approximately $275 million in adjusted EBITDA. The long-term outlook is raised now to $2.5 billion in revenue and $325 million to $375-plus million in adjusted EBITDA or 14% to 15% plus.

Now this is what we call profitable growth.

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 to Slide 21. I want to take this opportunity to remind everyone of our long-term strategy, which consists of 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 I will talk to further in a couple of minutes. Infrastructure and competitive products are an essential part of our plan.

The next element is a theme that has been consistent in 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 Bluebird, it also means expanding our total addressable market by entering new adjacencies. The Blue Bird commercial chassis and the Micro Bird Buy America shuttle bus are great examples.

Margin expansion is the next element. This area focuses on advancing competitiveness and cost reduction. For Bluebird, this means continuing our Industry 3.0 automation initiative. But as well, the new plant will allow for further factory of the future opportunities, including Industry 4.0 initiatives.

And last area is putting the balance sheet to work. The Micro Bird acquisition was a great example of this. And even after this transaction, Blue Bird continues to have a pristine balance sheet, strong liquidity and solid cash flows. This will allow us to continue to be strategically opportunistic. We continue to have the ability to grow through acquisition or exploit vertical integration.

Overall, we have a balanced strategy that positions the company for the future and delivers value to our shareholders.

Let's turn to Slide 22. Earlier in the presentation, I spoke about the DOE MESC grant. And now that it has been reconfirmed, I think it's a good time to provide some more details about our manufacturing strategy and our new plan.

First, the new plant will be just under 1 million square feet and an overall total of investment of over $300 million, replacing our current 75-year-old plant. The $80 million mess grant will contribute towards this, and we are scheduled to start production in Q4 calendar year 2028. We thank the DOE for the consideration and confirmation of this project. This increased investment was a result of shifting our manufacturing strategy to build Type C buses in the new plant at a capacity of 9,000 buses per year on 1 shift.

The original scope over a year ago was to build Type D. The shift to Type C is critical as Type C is 90% of the market, 80% of our sales and 70% of our people. This allows us to align our investment and improvements with the biggest, most competitive segment of the market. Our successful Type D bus will remain in the current facility. And critically, we have identified a number of automation use cases with strong returns that will be incorporated into the new plant at the start of production.

But we will also maintain Type C capacity in the current plant to protect volume as a start-up contingency. This will allow us to ramp up production at the new plant while production winds down at the old plant during an overlap period. This new plant will also enable further Industry 3.0 and 4.0 opportunities, providing a road map to continue our long-term cost competitiveness. This investment in critical infrastructure is part of the business continuity and long-term stability component of our strategy.

We're very excited about the new plant and what it will bring to us in decades to come. Lastly, I want to finish up with the strong outlook we have for the business on Slide 23. As we've shown before, the fundamentals of the school bus segment remains strong, as shown on the left side of the page.

We are moving into the replacement cycle for the high-volume period between 2017 and '19. We know there is pent-up demand remaining from the COVID period, and there are still over 180,000 buses over 10 years old. And funding remains stable for this market.

All of this contributes to a strong ACT outlook of approximately 6% CAGR over the next several years. But with the addition of Micro Bird, we now get the consolidation benefit of Type A school bus and the growth associated with entering the Buy America commercial shuttle bus market, as shown on the right side of the page. Combined, this move increases our total addressable market by 78%, and when you add other contributors for growth like the commercial strip chassis, the outlook will get even stronger.

Profitable growth is a key component of our strategy. I will wrap it up on Slide 24. This great company and iconic brand is almost 100 years old. It has stood the test of time. We delivered outstanding results again in the second quarter of 2026, and we continue to demonstrate credibility by delivering on our targets.

We are excited about the Micro Bird acquisition and the new plant that we discussed today. Both are key components of our very important long-term strategy. And 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, and we've had a great start to the first half of 2026. This company is a great American story with such a rich history and 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.

[Operator Instructions] Your first question comes from the line of Eric Stine with Craig-Hallum.

So maybe I just wanted to start with Micro Bird, timely since it is recently closed. So, I know that the Plattsburgh plant that, that is a big deal. And I know a big part of this and why now is the fact that in addition to Type A, you can go after this Buy America fleet market. Just curious, I mean, is that, are you already going after that market? Is that an initiative that we need to see a few steps before that plays out? Or how should we think about when that starts to contribute?

Eric, yes, I'll start for sure. So, there's 3 main segments. There's FTA, that's one segment. Then there's large fleets and then there's retail. So, the retail side has already started. We've been working through that with dealers. And then on the FTA, which is the biggest segment, we've been working there to get on contracts. These are cooperative contracts as well as state contracts. So, activity has begun. We have won some contracts, and we're starting to work through that process. And that puts us on a list for like a bid, essentially a list for purchase orders to be materialized. So the process is on its way.

Got it. I mean is that, since you are on that list, is that something that it's fairly, I mean, it is a near-term event. It would have to ramp, but it is a near-term event.

Yes, it will do just what you said. It will ramp. And keep in mind, not every state is open as well in terms of contracts. So, there's like a phase-in period, like some contracts are in their second year of 5 available. So all of this process will take some time to ramp up, but it's coming.

And maybe just to complement that, Eric, if you look at our long-term growth chart for Micro Bird on Slide 18, you see kind of the ramp-up between the current forecast midterm and long term. And the majority, the vast majority of that growth comes from the shuttle bus segment. So you can also correlate that.

Got it. Okay. That's helpful. And then I guess for my follow-up, just on EPA funding, I mean, I know it's kind of in that comment period and a lot of discussions and certainly get questions from investors on it. I mean, how do you see that playing out in line with the administration? Is it potentially more skewed to propane? Does it stay kind of as is? Or any thoughts there would be helpful.

Yes, I'll start and then Razvan or Mark may want to chime in. I think a couple of things. I don't want to speculate because we don't know what will happen. But certainly, propane would be a great opportunity, especially since we're the only company that builds propane school buses. So, I think that's a possibility. And then EV, who knows what they do with funding. Right now, they fund essentially the entire price of the bus. Maybe they reduce that.

And if they do, then it would be applicable to a larger number of buses, spreading it across more units, which would be advantageous as well.

Our next question comes from the line of Mike Shlisky with D.A. Davidson.

I was curious, you didn't change your margin outlook all that much despite 90% of the buses going to this new facility, which I assume would be state-of-the-art with some substantial margin opportunities. So, I'm just kind of curious why you didn't do that. And just as part of this whole process, do you do any CapEx in the old plant to accommodate those larger types? Is this all one big package of CapEx? Or are your comments strictly about the brand-new building?

Yes. So, I'll start and then Razvan will probably provide a little more color. So, we look at the automation, and first of all, we have a number of use cases that will go into start-up on this plant. And we look at the automation as the plus side of our longer-term outlook. So you'll see that, you'll see the plus side, and that's really what it's referring to. It's one of our opportunities. And then probably the big one as well, Mike, is I spoke earlier about the contingency that we put in here.

And I want to just highlight that for a moment because this has been an area where competitors have stumbled because they didn't have the ability to have contingency on start-up with a more mechanized or automated factory. So we've got that in place as well, which is a protect. So we see upside. And then we see with our contingency probably an ability to protect any downside. Razvan?

Yes. Maybe in terms of the CapEx for the old building, we, it does not require any additional CapEx because essentially, it's already tooled up to produce today both Type C and Type D. Once the Type C moves to the old plant, the Type D will remain there. And then it will also make room for more capacity in terms of strip chassis that we could ramp up at that point in time. So the CapEx we talk about is for the new plant in this.

Okay. Great. Just maybe a quick broad question about market share. Do you, is your, do you believe that Blue Bird may have gained market share so far this year from what has been delivered? And orders you've taken in the last month, the last couple of months, do you think you may have gained market share of the next few quarters?

Yes, I'll start and the guys can chime in. I mean our order intake has been positive. I mean the market was down, we were up. And then I think from that aspect, it was positive. But I wouldn't try to read into that much deeper. We know that's only half a year. So from my perspective, I would probably limit to that. And it's something we don't chase. We don't chase market share. That's been always our philosophy.

Yes. And also, we operate now almost at max capacity on one shift. So the production, I think, is more of a gating factor at this point in time.

Our next question comes from the line of Chris Pierce with Needham.

Sort of following along the lines of that last question. If you look at the Alt. Power mix has kind of come down a little bit over the past couple of years, is that you guys are able to at the plant, deliver what the market wants and those sort of Alt. Power sort of out of favor right now to an extent versus prior years, but you guys can, or should we think of it as short-term share fluctuations that is kind of you guys are delivering more diesel buses?

Yes, I'll start, probably more short-term share fluctuation. Diesel is also probably a little bit heavier now in terms of market share, maybe because of the new legislation coming in, and that could have an impact with some prebuy. So I think there's a little bit of consideration that has to be given to that. And fortunately, we're strong in diesel, too. Like if you look at our numbers, we're up. So it's proving we're competitive in this segment.

Okay. And then just if I look at the absolute bus backlog like this second quarter versus second quarter '25, second quarter '24, I know that in the past, you described the elevated backlog as unhealthy. Can you sort of remind us where a healthy backlog should be and what's expected in backlog as you came out of sort of that large aggressive ordering period and what things look like going forward?

Yes. I think a couple of things. So we always look at 3,000 to 4,000 as a sweet spot, too shallow and it's hard to schedule. And then if it's too deep, then you're vulnerable to the cost side for inflation, tariffs, et cetera. And I think the industry had, if you look at the post-COVID period, had very unusually high backlogs, and they were problematic, where we are now is probably more normalized. And I think COVID may have helped in regards to how the backlog is structured. I think some of that seasonality has been flattened out, which helps the industry. I think it's good for quality. It's good for production. It's good for people, all those things. So in that regard, it may have helped the industry a bit.

Chris, I'll add for us, 1 to 2 quarters of production visibility is really the way to think about that sweet spot in backlog.

Okay. And if I could just ask one more. Can you just touch on Section 232 tariffs and like raw materials and things like that, hedging you guys have in place or just able to pass through pricing? Like how do those pieces sort of fit together? And then I'll pass it along.

Yes, Chris, thanks. This is Razvan. So definitely, we are dealing with a myriad of tariffs in the last year plus, and Section 232 is one of them. We are managing that very well. We are targeting a margin-neutral outcome, as you can see from our results. And we are working on one hand with the dealers and customers on the pricing side to price some of those tariffs. And at the same time, we are working hard with our suppliers to mitigate or resource to minimize other type of tariffs.

There are no further questions at this time. I will now turn the call back to John Wyskiel for closing remarks.

Thank you, Paige, and thanks to each of you for joining us on the call today. Blue Bird has delivered a great start to the first half of 2026 with strong results, meeting expectations and raising our guidance. And this is despite a challenging environment.

With the fundamentals of the industry and the key elements of our strategy, I remain very enthusiastic for Bluebird and its future. And 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. And Bluebird continues to be stronger than ever and has an amazing future ahead as we approach our 100-year anniversary. Thanks again from all of us at Blue Bird and have a great evening.

This concludes today's call. Thank you for attending. You may now disconnect.

Hello, everyone. Thank you for attending today's Blue Bird Fiscal 2026 First Quarter Earnings Call. My name is William, and I will be your moderator today. [Operator Instructions]

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's Fiscal 2026 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 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 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 6. First, Blue Bird beat guidance on all metrics for the quarter. This is despite the impact and volatility associated with the administration's policy on tariffs. We continue to navigate this situation well and have beat guidance for the last 13 quarters, validating the strength in our management and business model. Order intake for the period was exceptionally strong. Our Q1 order intake was up 45% from the first quarter of 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. And 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. Bus 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 15 years ago, and we continue to maintain our lead position.

We continue to develop our investment thesis, as I explained before. Our manufacturing strategy encompasses many factory of the future concepts that will be rolled into our new assembly plant. During the quarter, we completed our analysis of automation use cases and have locked in on a road map. 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 7. 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, $4 million stronger than last year, and free cash flow came in at an outstanding $31 million. Razvan will talk more to this and our 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 the overall market fundamentals are still there. The fleet is aging. We are coming into a heavy replacement cycle, and there's been industry supply issues in 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 parts sales totaled $25 million for the quarter.

Alt powered buses represented a strong 48% of mix for unit sales in the quarter. Our powertrain strategy is a differentiator in the market and allows us to maintain stronger margins, but we are not dependent on it. If you look at Q1, Alt 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 2 and 3 of the EPA Clean School Bus Program remains 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 4 and 5 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 fleet EV mandates, we believe this market will remain relevant, and our short-term guidance is not dependent on federal funding for rounds 4 and 5.

And finally, the $80 million MESC contract with the DOE remains intact. This is for their funding towards our new plant in Fort Valley. There's been a lot of rumor in the area of MESC grants, 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 13th consecutive quarter with a 15% adjusted EBITDA. This continued performance reflects the strength in the entire Blue Bird 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 '26 first quarter financial results as well as our full year updated guidance in more detail. Razvan?

Thanks, John, and good afternoon. It's my pleasure to share with you the financial highlights from Blue Bird's fiscal 2026 first quarter results. The quarter end is based on a close date of December 27, 2025, whereas the prior year was based on a close date of December 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 9 is a summary of the fiscal '26 first quarter record financial results. It was a strong operating quarter for Blue Bird, 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 with $333 million in revenue and $50 million in adjusted EBITDA, 15% margin. The team pushed hard and continued doing a fantastic job and generated 2,135 unit sales volume, which was just above prior year level. Record Q1 consolidated net revenue of $333 million was $19 million higher than 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 and $9 million higher than the prior year first quarter. This result to the 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% EVs. In fact, at the end of January, we have now close to 1,000 EVs sold in Q1 and in backlog with some of them scheduled to be built and delivered in fiscal '27 Q1. Breaking down the Q1 $333 million in revenue into our two business segments, the bus net revenue was $308 million, up $20 million versus 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. Parts revenue for the quarter was almost flat at a strong $25 million. This great performance was in part due to increased demand for our parts as the fleet is aging as well as supply chain-driven pricing actions and throughput improvement. Gross margin for the quarter was a record 21.4% or 220 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 prior year by $4 million and 40 basis points. In fiscal '26 Q1, adjusted net income was a record Q1 at $32.5 million or $2 million higher than last year. Adjusted diluted earnings per share of $1 was up $0.08 versus the prior year.

Slide 11 shows the walk from fiscal '25 Q1 adjusted EBITDA to the fiscal '26 Q1 results. 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 $6.6 million. Out of this, $2.6 million comprises of EV emission credits that were sold in fiscal '25 Q1, sale which did not repeat again so far this year. The sum total of all the above-mentioned developments drives our record fiscal '26 Q1 reported adjusted EBITDA result of $50.1 million or 15%.

Moving on to Slide 12. We have extremely positive development 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 '26 Q1, a $106 million increase compared to a year ago. Additionally, we have executed another tranche of shares buyback of $15 million during fiscal '26 Q1, $10 million of which concludes our $60 million prior stock buyback program and $5 million began 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 '26 guidance. Looking at Q1 actuals, we have beat in every metric our guidance this 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 15% to 16% adjusted EBITDA margin with 800 EVs now scheduled for the year. We are maintaining our revenue to a range of $1.45 billion to $1.55 billion. And given our beat on Q1, we are raising our adjusted EBITDA to $225 million or 15% with a range of $215 million to $230 million. We will provide further updates at the beginning of 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 and after accounting for the extraordinary CapEx of $75 million as our 50% fiscal '26 portion of the new plant investment funded by a DOE MESC grant, which is currently proceeding with the detailed planning and permitting phase.

Moving on to Slide 15. Today, we are reconfirming the medium-term outlook at 15% margin with volumes of up to 10,500 units, including 500 strip chassis, generating revenues around $1.6 billion and with adjusted EBITDA of $140 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 of 12,000 to 13,500 units, including 1,000 to 1,500 strip chassis and generate EBITDA of $280 million to $320-plus 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 Blue Bird commercial chassis addressable market expansion as well as our Micro Bird joint venture new plant expansion 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 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 a 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 16% plus. And at the bottom of the page, you will see EV is still very relevant. This year, we are guiding 800 EVs, but 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 is very strong.

So, as I close in on my one-year anniversary and return to Blue Bird, I wanted to share a few high-level details about our updated strategy on Slide 18. It is based off of 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 for 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, it also means organically expanding our total addressable market by entering new adjacencies. The Blue Bird commercial chassis and the Micro Bird 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, 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 road map that will be incorporated into our new assembly plant. But as well, the new plant will allow us to further factor in the future opportunities, including Industry 4.0 initiatives.

And the last area is putting the balance sheet to work. Blue Bird 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 has stood the test of time. We delivered outstanding results in the first quarter of 2026. We continue to demonstrate credibility by delivering on our targets. And 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, 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.

[Operator Instructions] Our first question comes from the line of Greg Lewis with BTIG.

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've also called out the 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?

Yes. Greg, this is Razvan. If you look at the Slide 11, about 2/3 came from pricing and about 1/3 more or less is from better efficiency and quality. That's I think the split that we have.

So, yes. So, as we look out through the rest of the year, is that kind of how we should be thinking about the benefit of pricing, i.e., does it seem like we have the opportunity to kind of 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, this is pricing net of material cost increases. So you have the variability of the cost of goods sold, supplier inflation, maybe volatility in tariffs, while at the same time, our last pricing action was in November for the new model year, and 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. And then I did have a question around the backlog. I know that there's -- as we look at -- as we think about the outlook for EV and just given some of the delays maybe we've seen in the potential for that backlog to build, have customers kind of been shifting to the other alternatives? Or is it kind of, hey, we -- I guess 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?

Yes, 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 1,000 units. And we said already some of these are bleeding into 2027 Q1 fiscal. And this is because of the timing it takes for the infrastructure to be ready at the sites of our customers. So, I would say on the EV, it's very strong, and we are already starting to fill 2027.

In terms of diesel, we had a strong quarter for the diesel, which 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 prebuy or a pull forward for some diesel units into this year.

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

Our next question comes from the line of Eric Stine with Craig-Hallum.

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. And I know you've been in all fuels for, what, 15-plus years. But I'm just curious specific to propane. I know you're exclusive there. School districts still, by and large, want to get off diesel. So what kind of trends are you seeing, whether it's this quarter or going forward in propane? What type of advantage is that? I would think that, that continues to resonate quite a bit in the market. And how do you see that kind of playing out going forward?

Yes, I'll start with a couple of comments. I think from a marketplace, they still recognize propane as the best total cost of operation. They also like, I guess, the ease of converting a fleet over because with propane, you can go to a propane seller, they can install the infrastructure relatively easily as part of the contract for fuel. So there's still a pretty strong acceptance. And I guess, 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.

There's no significant change at this point in dynamics 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, maybe what you're seeing just on the overall order front? And then what -- how you view -- as you said, you're about to get into where order season kind of starts to pick up. So how do you feel about that? What kind of trends are you seeing?

Yes, great question. So a couple of comments. Just, first, I mean, very strong order intake period. I think, as you know, we've been mentioned 45% increase. And I think that's validation of what we did in terms of stabilizing pricing. giving that certainty just allowed districts to go ahead and purchase. So I think that was a strong sign. And then look, whenever we talk about even like in the backlog side, I'll talk a little bit just for a minute on EV, continued strong state funding. New York, California, Oregon, Illinois, Michigan, all have strong funding, $1.5 billion. All of that helped contribute as well.

So, order intake, I'd say, good quarter, 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, balance sheet quite strong. You mentioned some potential acquisitions. I'm just wondering if you can just expand on your thoughts there a little bit. vertical integration makes sense. I would assume if it's something else, it wouldn't be too far afield from what you currently do.

Yes. This is Razvan. Thanks for the question. So, 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, but also on the vertical integration side. So, at this point, nothing special to talk about. However, our balance sheet is now stronger as it has ever been. And therefore, it enables us to look strategically at different opportunities.

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

Our next question comes from the line of Mike Shlisky with D.A. Davidson.

Can you help me frame the potential impact from your comments, John, about adding more like automation to the process. I was curious whether that was already baked into what you said last quarter or two quarters ago about getting to that 15% plus? Or does adding more emission is that's a plus? Do you have more you can do? And just sense of -- just any kind of sense as to the size of the impact that it might have on your margins given what you know today?

Yes. 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, anything we're putting through. And I think 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 -- manufacturing strategy rather coming together.

Great. I also wanted to ask a question about the balance sheet and capital allocation. Pre-pandemic, you were operating with cash of like $60 million. And now you're at $240 million. And adding together your portion of the CapEx for the new facility, what you've got left on your buyback and other things you've got going on and what you've got probably from a cash flow for the rest of the year here, you're going to have probably more cash than you know what to do with.

I'm just curious if no M&A new M&A comes into view anytime soon, what is your kind of regular plan? Is it just to buy back more shares or some other way to put that cash to use? I'm just not sure what else you could do if you don't find a deal going forward.

Mike, thanks for the question. So 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. And we are looking at a big capital investment for the new plant of our portion of $200 million or so over two years.

We also are increasing a bit our regular CapEx spending. and we are investing also a lot in engineering with the different engineering projects and the emissions regulations that are coming in the next couple of years. But obviously, as time develops, at least on a yearly basis, we are going to revisit that strategy and then potentially consider other avenues. Maybe in the future, we could evaluate a dividend program, but we are not quite there yet.

Got it. I just squeeze one more in here about market share going forward. Because of some previous issues in the last year or two about one of your competitors having issues with producing on time and getting things out the door, there were some weird swings in market share. Do you have anything that's on your radar screen for the rest of calendar '26 here 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 maybe a couple of things. As you know one of our competitors had some supply issues. It seems like they've gotten through that. And I think it's maybe normalized the market share that we're seeing right now. I don't know if Mark or Razvan has anything else to add.

Yes. I'd say from what we see from order intake, I would say, business as usual, Mike.

Our next question comes from the line of Chris Pierce with Needham.

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 kind of what are buyers saying to you? And then what role does pricing play as far as long-term margin guidance as well?

Yes, Chris, our tariffs are very different between internal combustion engine buses and EVs. So our tariffs for internal combustion are now below $5,000 per bus, but the EVs are above $10,000 per bus. So I'm not sure where the $9,000 is coming from. But definitely, we see tariffs as a tax imposed by the government, and 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. And 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.

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

Yes, for sure. But in the end, the customer still has to pay that price. So I just 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.

Yes. Well, look, a couple of things. And I know there could be some of -- we were 45% up for the quarter on order intake. Some of that may be catch-up from the prior year. But the reality is, unfortunately, there's tariffs now that they're all dealing with. But in terms of -- if you were to compare it to, is there any fatigue maybe there's -- they're not happy, but at the end of the day, they recognize all the manufacturers have them.

And then I think the other side of it is they recognize they have to change the fleet out. There are buses that are coming into that 10-year window right now, a heavy number that they simply have to change and it becomes a matter of economics. It's easier to -- or more effective to replace the unit than to keep it going.

Our next question comes from the line of Craig Irwin with ROTH Capital Partners.

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

Yes, Andrew, thanks for the question. This is Razvan. Yes, we see strong orders supported both by the EPA rounds 2 and 3 and their state funding subsidies that are out there. And yes, we raised our guidance for this year to 800 units. And I would say part of the upside to our guidance to go higher on both revenues and EBITDA for the year is -- comes from EV. So 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, and we feel very good about the EV right now.

Yes. And maybe just a couple of other things. The -- of course, there's the federal side that we just talked to rounds 1 through 5. But then on the state side, I always reiterate New York, California, Oregon, Illinois, Michigan, there's about $1.5 billion in funding there. And then 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, I appreciate the color. And then second for me, I know it's not a big driver in '26. But I know last quarter, you provided an update on the commercial chassis, you're prototyping some models with some different body types. Can you just provide some additional color and update there and if we can still kind of expect around 100 units towards the latter half of the year?

Yes, for sure. So, first of all, we took our first order, first of 30, I guess, is the best way to say it, from one customer. And 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 kind of rolling up our bill and doing all that our bill materials and working that process. Our production SOP now looks like it's going to be, I would say, 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 quality, from a durability perspective, from a price perspective, -- getting all that right is important. It matters.

And maybe just to clarify in terms of guidance, we substituted those 100 sales with buses for the total year. So we maintained the 9,500. But due to the timing of production, these strip chassis will start to be revenue recognized and sold for the income statement purposes in fiscal '27.

Thank you. There are currently no questions registered. [Operator Instructions] 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 has delivered a great start for 2026 with strong results, beating expectations and raising our guidance, and 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 and its future, and 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 continues to be stronger than ever and has an amazing future ahead as we approach our 100th anniversary next year. Thanks again from all of us at Blue Bird, and have a great evening.

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

Good afternoon, and thank you for attending today's Blue Bird Fiscal 2025 Fourth Quarter and Full Year Earnings Call. My name is Jayla, and I'll be your moderator for today. [Operator Instructions] At this time, I'd like to pass the conference over to our host, Mark Benfield. Please proceed.

Thank you, and welcome to Blue Bird's Fiscal 2025 Fourth 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 2 slides and our filings with the SEC.

Blue Bird 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're excited to share with you our fiscal 2025 fourth quarter and full year financial results. The Blue Bird team did an outstanding job once again delivering record sales and adjusted EBITDA for the year. Razvan will be taking you through the details of our financial results shortly. So let me get started with some of the key takeaways for the fourth quarter and full year on Slide 6.

As shown in the first box, Blue Bird beat guidance on all metrics and delivered a record year. And this is despite the impact and challenges associated with the administration's policy on tariffs, which continues to create some pricing uncertainty in the overall market. This uncertainty, coupled with the fourth quarter typically being the lightest order period, reduced our backlog to 3,100 units.

We will talk further on this, but we would consider 2025 4th quarter ending backlog as still in the range. And in fact, today, our backlog is up to nearly 4,000 units and 850 EVs. Once again, we had a strong operational execution and performance for the quarter, which is a testimony to the team's dedication.

During the quarter, we also furthered our long-term manufacturing strategy by beginning scope development and automation business cases for our new factory. Once again, we are looking at where we can apply production automation automated material movement and manufacturing execution systems, which will bring shop floor connectivity and ease of data collection.

As I explained before, this fits into our manufacturing road map which will result in cost reduction steps for the future and will improve our overall long-term competitiveness. In terms of pricing, we remain extremely disciplined. Bus prices remained higher than the previous year and the previous quarter.

This process is very much how we manage the business. Our track record and dominance in alternative powered vehicles continues. Our EV demand is stable despite the tariff pricing uncertainty and EPA funding. The outlook in this area, though, remains strong. Alt Power is a segment we created more than 15 years ago, and we continue to maintain our lead position.

During the quarter, we also looked at our long-term investment thesis and have further defined our road map for both manufacturing and product. Again, we will invest in projects that have a clear and strong returns profile, and I look forward to sharing more in our next earnings call. We recognize investing in our operation and product portfolio will improve the overall business.

Consistent with what I communicated in the last 2 calls, it's our objective to position this business to be a strong long-term investment. And finally, we continue to manage 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 came in at $221 million for the year or 15% of revenue. That's $38 million better compared to last year's record year. Let's turn the page and take a closer look at the financial and key business highlights for the year on Slide 7. We sold 9,409 buses in 2025 and recorded revenue of $1.48 billion, a record year and $133 million ahead of last year.

On the EV side, we sold 901 electric vehicles, 9.6% of volume, and our long-term outlook for EVs remains optimistic. As already mentioned, adjusted EBITDA for the year came in at $221 million, $38 million stronger than last year, and free cash flow came in at an outstanding $153 million. Razvan will talk more to this and our outlook later in the call.

Turning to the right side of the page, I'll start with backlog. Our backlog finished the year at 3,100 units. This drop was a function of industry volatility and the period itself. Fiscal fourth quarter is typically and historically the lightest order period for Blue Bird. Our 2025 order intake for the quarter was in line with the 10-year prior average, validating the renewal performance issues during the quarter.

More recently, we are also seeing our strategy on providing pricing stability into June and next year paying off. Our backlog has increased some 800 units since year-end. Overall, the fundamentals are still there. The fleet is aging. We are coming into a heavy replacement cycle and there has been industry supply issues the last few years, leaving pent-up demand.

So all of this continues to point towards this situation being more temporary than long-lasting or structural. Year-over-year selling prices for buses was up almost $8,300 per unit. But of course, this also includes tariff recovery as part of our margin-neutral strategy.

With tariffs excluded, pricing was still left year-over-year and part sales totaled $103 million for the year. Alt-powered buses represented a strong 56% of mix unit sales for the year. Again, this compares with the typically less than 10% for our major competitors and we benefit from higher margins and higher owner loyalty with their gas and propane products as we are the exclusive supplier to the industry today.

At the end of the quarter, we had 901 EVs booked and 680 EVs in our order backlog. Our latest guidance reflects approximately 750 EV unit sales for fiscal 2026. Our EV backlog is deep enough that it will push some bookings into fiscal 2027. 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 to our children.

Similar to last quarter, we continued to see rounds 2 and 3 of the EPA clean school bus program flowing to our end customers. And we continue to see that rounds 4 and 5 are still in play. The government shutdown has created some delay, but we are hopeful to soon hear when and how these funds will be administered.

And reimbursement funds continue to flow for a $80 million mess contract with the DOE. This is for their funding towards our new plant in Fort Valley. There's been a lot of rumor in the areas of best grants, but there has 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 American company with an iconic brand to build clean school buses, providing our children with the benefits of Clean Air. As I have said in prior earnings calls, it is really a great story. Overall, we beat our guidance for the 12th consecutive quarter and for the full year. With an overall 15% adjusted EBITDA margin and record profits in Q4 for the full year, I'm very proud of our team's accomplishments.

So I'd like to now hand it over to Razvan to walk through our fiscal '25 fourth quarter and full year financial results as well as our full year guidance in more detail. Razvan?

Thanks, John, and good afternoon. It's my pleasure to share with you the financial highlights from Blue Bird's fiscal 2025 fourth quarter and year-end record results. The year-end is based on a close date of September 27, 2025, whereas the prior year-end was based on a close date of September 28, 2024.

We will file the 10-K today November 24, after the market close. Our 10-K includes additional material and disclosures regarding our business and financial performance. We encourage you to read the 10-K 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 9 is a summary of the fiscal '25 fourth quarter and full year record results. It was another outstanding operating quarter for Blue Bird, we significantly improved volume and with high-margin units across all powertrains driving both our top line and our bottom line results. We beat the adjusted EBITDA quarterly guidance provided in the last earnings call. And in fact, we delivered the best quarter ever for Bluebird with $68 million adjusted EBITDA margin. The team continued to push hard and did again a fantastic job and generated 2,517 unit sales volume, which was 51 units above prior year Q4 volumes. All-time quarterly record consolidated net revenue of $409 million was $59 million or 17% higher than prior year, driven by increased prices and the higher number of EV units.

Adjusted EBITDA was a quarterly record of $68 million, driven by higher volumes and EV units, improved pricing and operational improvements in efficiencies and quality. The adjusted free cash flow was $60 million, a $10 million increase versus the prior year fourth quarter, driven by strong operating margins and working capital improvements. John covered already the record fiscal '25 year-end key figures with 9,409 units, $1.48 billion in revenue, $221 million or 15% in adjusted EBITDA and a record $153 million in free cash flow, close to 70% of the adjusted EBITDA. I will provide more details on our full year results later in the presentation.

Moving on to Slide 10. As mentioned before by John, our backlog at the end of Q4 has softened at just over 3,000 units, including 680 EVs. This was due to the uncertainty of bus pricing driven by the tariffs over the last 6 months. Our mitigation actions, combined with us recently locking our tariff charges for new orders with deliveries until the end of June 2026 drove an improved order intake during fiscal Q1, as expected, with our backlog currently sitting at nearly 4,000 units, including over 850 EVs.

Breaking down the quarterly record $409 million in revenue into our 2 business segments. The bus net revenue was $384 million, up by $61 million versus prior year. Our average bus revenue per unit was up $21,000 at $153,000 per unit, which was largely the result of pricing actions taken over the past year and higher EV product mix. EV sales in Q4 were 233 units as expected or 149 units higher than last year.

Parts revenue for the quarter was slightly down year-over-year at $25 million. This continued great performance was in part due to strong demand for our parts as the fleet is still aging. Gross margin for the quarter was 21% or 4.1 percentage points higher than last year, due to our sustained operational performance and our pricing overtaking the inflationary costs, including the effects of tariffs.

In fiscal '25, Q4 adjusted net income was $43.4 million, an outstanding $17.6 million or 68% improvement year-over-year. Adjusted EBITDA of $68 million or 16.6% was up compared with prior year by $26.6 million for a 64% improvement. Adjusted diluted earnings per share of $1.32 was up $0.55 versus the prior year. Slide 11 shows the walk from fiscal '24 Q4 adjusted EBITDA to the fiscal '25 Q4 results.

Starting on the left, at $41.3 million. The impact of the bus segment gross profit in total was $27.6 million, split between volume and pricing effects, net of material cost increases of $23.3 million, plus efficiency and quality improvements of $4.3 million. The bus segment gross profit was slightly down by $0.8 million driven by slightly lower sales, as mentioned earlier in the call.

Overall, the SG&A and other income expenses were flat year-over-year. The sum of all of the above-mentioned developments drives our record fiscal '25 Q4 reported adjusted EBITDA result of $67.9 million. Moving to Slide 12. I will cover some more details regarding our full year record results.

Breaking down the $1.48 billion revenue into our 2 business segments. The bus net revenue was $1.377 billion, up by $134 million or 11% versus prior year. Our average bus revenue per unit was $146,000 and an increase of $8,000 per unit versus the prior year, which was largely the result of pricing actions taken over the past year and improved EV product mix. EV sales for fiscal '25 were 901 units as expected, an increase of 197 units or another 30% improvement versus last year and the same percentage growth of the year before.

Parts revenue for the year was flat at $103 million maintaining the already very strong prior year levels. This performance was in part due to increased demand for our parts of the fleet is still aging. Gross margin for the year was a record 20.5% or 1.5 percentage points higher than last year due to our sustained operational performance and our pricing overtaking the inflationary costs year-over-year including the tariff effects.

In fiscal '25, adjusted net income was $144 million, a $29 million improvement year-over-year for a 25% improvement. Record adjusted EBITDA of $221 million or 15% was up compared with the prior year by $38 million for a 21% improvement. Adjusted diluted earnings per share of $4.38 was up $0.92 versus the prior year.

Slide 13 shows the walk from fiscal '24 adjusted EBITDA to the fiscal '25 results. Starting on the left at a prior record of $183 million. The impact of the bus segment gross profit in total was $48 million, driven mainly by the volume and pricing effects, net of material cost increases. On the operations side, the labor and health care cost increases were offset by improved efficiencies and quality improvements.

For segment gross profit was slightly down just under $1 million year-over-year due to slightly lower sales. These great improvements were offset by planned increases of $9 million in our fixed costs, mainly personnel and fringes/healthcare related, SG&A and engineering as we continue to invest into our business and our people.

The sum of all of the above-mentioned developments drives our new record fiscal '25 adjusted EBITDA result of $221 million or 15%. I would like to remind you that 15% adjusted EBITDA was our long-term target not too long ago, and we delivered it ahead of the plan and with relatively low units sold under 9,500 compared to the pre-COVID.

Moving on to Slide 14. We have extremely positive development year-over-year, also on the balance sheet. We ended the year with $229 million in cash and this is after we repurchased $40 million worth of shares during the year. Our liquidity stand at a record $371 million at the end of fiscal '25, a $100 million increase compared to a year ago. The operating cash flow was a very strong $176 million in this year, driven by an improvement in operations and margins and improvements in working capital. The adjusted free cash flow was also a new record at $153 million in fiscal '25 or a 70% conversion from adjusted EBITDA of $221 million.

On Slide 15, we want to share with you our confirmed fiscal 2016 guidance. We have a number of both tailwinds and headwinds, and we maintain a cautious stance given the volatility of tariffs and other government policies related to EVs. As tailwinds, we have an aging fleet driving strong demand, stable pricing and still a solid industry backlog.

We offer not only diesel and gasoline school buses but we have the only propane fuel school bus in the industry with clean fuel and best-in-class total cost of ownership. We are also leading in the EV segment. and are confident that the still upcoming orders from rounds 2 and 3 of the EPA in school bus program will improve our already very strong EV backlog.

Additionally, at the end of fiscal '26 we are planning to bring to market our new commercial chassis product. But headwinds the tariffs are still unpredictable at times and the material costs, people and health care costs as well as supply inflation pressures are still present. The backlog is lower year-over-year. However, it is still significantly above pre-COVID levels for this time of year. And finally, we expect to deliver a much higher number of EVs in the second half versus first half, similar to fiscal '25.

In summary, we are maintaining our units and revenue midpoint guidance to 9,500 and $1.5 billion, respectively, and given our record fiscal '25 results, we are also maintaining our adjusted EBITDA guidance of $220 million or 14.7%, with a range of $210 million to $230 million and 14.5% to 15% margin.

Moving to Slide 16. We laid out for you the quarterly guidance for fiscal '26 and also shown the actuals by quarter for fiscal '25. Essentially, we are targeting a repeat of our all-time record fiscal '25 performance in fiscal '26 despite the unfavorable tariff environment and slightly lower EV volumes. Starting in Q1 with the seasonal lowest number of production weeks in the year due to year-end holidays, we expect to sell approximately 2,100 units, including 100 EVs and generate $325 million in revenue with adjusted EBITDA of $40 million to $45 million.

In Q2, we expect our total volume to go up to approximately 2,200 units including 150 EVs and generate $350 million in revenue with adjusted EBITDA of $45 million to $50 million. In Q3 and Q4, we expect an increased number of total units with 225 EVs in Q3 and 275 EVs in Q4, driving quarterly revenue around $400 million to $425 million and adjusted EBITDA of $60 million to $70 million per quarter as shown.

On Slide 17, in summary, our fiscal '26 guidance for net revenue is $1.45 billion to $1.55 billion with adjusted EBITDA of $210 million to $230 million and free cash flow of $10 million to $30 million after deducting $100 million in extraordinary CapEx for the new plant. We expect fiscal '26 to be another strong year for Blue Bird on our path of profitable growth.

Speaking of profitable growth, let's look again on Slide 18 at some of our principles for running the business and touch on some capital allocation points. We strongly believe that revenue is vanity, profit is sanity and cash is king. Let's cover these points one by one.

On the revenue side, we are focusing on executing our organic growth with an emphasis on alternative fuels. However, we do still offer diesel for those that continue to request it. We are not chasing market share, yet we are reengaging with some of the national large fleets as already shown in fiscal '25. While we continue to be laser-focused on our core school bus business, we have planted the seeds for adjacent market growth in the commercial step and chassis business as well as with Micro Bird with the new plant launched this summer in New York State. Looking at profit, we continue to be very disciplined in our margin management. We have implemented a price increase of $3,500 per bus for all orders received after November 18, 2025, to cover for new standard safety features, for example, industry-first driver airbag and the expected variable cost increases, and we continue to execute on our margin-neutral tariff strategy. We continue to monitor our backlog and keep it above one quarter of production, providing us with the ability to schedule our mix and manage our supply chain efficiently.

Finally, we work relentlessly on reducing our variable costs through continuous cost improvements, quality improvements, lean manufacturing on one shift, supply chain management and still forward buys. Looking at cash, we plan to invest over the next 2 years up to $200 million into our future manufacturing capabilities while also returning value to our shareholders through stock buybacks. We already completed $50 million buyback through fiscal '25 Q4.

We expect another $10 million in the current quarter, and we have a new program announced in the last earnings call for up to $100 million over the next 2 years. And we plan to achieve this while maintaining great liquidity and a strong cash position, and we have flexibility in case we decide to pursue strategic and focused attractive M&A opportunities.

Moving on to Slide 19. Given our strong business momentum and record results of fiscal '25, today, we are reconfirming the medium-term outlook at 15% margin with volumes of up to 10,500 units, including 500 commercial chassis, 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 billion to $2 billion in revenue, comprising of 12,000 to 13,500 units, including 1,000 to 1,500 commercial chassis and generate EBITDA of $280 million to $320-plus million or 15.5% to 16% plus at best-in-class 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 Blue Bird commercial chassis addressable market expansion as well as our Micro Bird joint venture new plant expansion in the U.S.A., which went live this summer. 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 21. We've shown this slide on several earnings calls, so I won't spend much time on it today as our priorities remain consistent. The churn on the left side of the page outlines the Blue Bird value system as a company, taking care of our employees, delighting our customers and our dealers and delivering profitable growth. The right side of the page outlines how we get there.

And of course, the objective of delivering sustained profitable growth to our investors is at the center of it all. And when you turn to Page 22, it really summarizes what a great year 2025 was and what a bright future the company has. As we invest in the business with a longer-term perspective, we see our outlook only getting stronger.

Starting at the top, we built 9,409 units for fiscal 2025. 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. Our revenue for fiscal 2025 was up 10% from the prior year, ending at just under $1.5 billion, and our profitability soared 21% in 2025 to $221 million adjusted EBITDA.

But when you factor in these growth opportunities, our long-term outlook shows the company reaching $2 billion in revenue and $320 million or 16% plus in adjusted EBITDA. And at the bottom of the page, you will see EVs are still very relevant for us. This year, EV sales grew 28% to 901 units and our long-term outlook shows 1,000 units plus.

Overall, the achievements in 2025 were simply outstanding. But with the strong fundamentals of the industry and with our investment in the future, the outlook for the company is nothing but promising. There is a lot to be excited about.

So I'll wrap it up on Slide 23. First, this great company and iconic brand is almost 100 years old. Blue Bird has stood the test of time, and it continues to be poised for an exciting future. We delivered an outstanding 2025 with just under $1.5 billion in revenue and $221 million or 15% in adjusted EBITDA.

We remain confident that the Clean School Bus funding program will continue. A bipartisan initiative, it's 100% appropriated and eliminates harmful tailpipe toxins benefiting our children and communities. And we remain optimistic on overall near- and long-term volume. The fundamentals of this industry are solid.

And this kind of performance has put bluebird in a position to focus longer term as we invest and enter new segments and upgrade our operations and products. 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. Similar to my message in the last calls, I remain excited about Blue Bird.

2025 has been an incredible year with record results and beating guidance. This company has such a rich history and an exciting future. 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.

[Operator Instructions] Our first question comes from Mike Shlisky with the company, D.A. Davidson Companies.

I want to get a little bit more detail on the federal EV bus program, if you could. How important is that to the fiscal '26 guidance? Do you have to see money flow in again for you to make the business that you put in there for EVs for the year.

Can you update us also on whether the state and local subsidy programs that are out there across a lot of different states. Have they increased over the last 3 months or so? And has state and local kind of overtaken federal as the driver of EV demand?

Mike, thanks very much for the question. I would say that when you look at everything we have, EVs are relevant and 2 and 3 is flowing, as you know. But I don't think it's contingent when we look at our outlook to have -- having to have rounds 4 and 5 come through. We have strong outlook I think it's stable, yes. So I think it's -- with the state mandates that we see out there, I think it supports demand. I don't know if Razvan has anything to add.

Yes. So for fiscal '26, it does not rely on any round 4 or 5. And we also have a very strong backlog. So we feel very good about the 750 guidance of EV and there is some upside potential up to 1,000 units in this year.

Great. And then just looking at the '26 outlook, I know that most years, the real order season, if you would start after Christmas break, and I know it's only November here. So I guess, I mean, look, being flat at a very high level is probably not the worst in the world coming up here, but do you -- are you kind of taking a conservative stance until you start hearing from people ordering after the Christmas break.

And do you think maybe we'll get a much better picture of what your demand is on the next earnings call -- just kind of looking at the slide that you just talked about, John, at the end there. The industry outlook for retail sales is quite a bit higher -- a little bit higher at least for 2026 and 2025, but your numbers don't really imply that at this time. So just kind of help us kind of reconcile the broader industry, the order season and your outlook that you put forth today.

Yes. Thanks, Mike. No, we have maybe a couple of things. Yes, certainly, when you look at the demand in the out years, it's strong. I mean, we know the fundamentals, right? The replacement cycle is coming due. When you look at things like student enrollment, it's stable, there's a lot of things that support the demand going up.

And then from our end, of course, we have capability of producing some extra demand as well and that includes, of course, in a couple of years, our new factories. So we'll be able to support that. But overall, Yes, I don't -- I have probably less of a wait-and-see type of approach with this one that you kind of alluded to in the beginning.

I think everything there is underneath. And everything we can see, including our backlog in the last quarter seems strong. So I feel comfortable. I don't know if, again, Razvan or Mark, if you guys have anything to add.

Take that as a -- my next question here, if you don't mind. So my last one here is on the commercial chassis project that you guys are working on. Just give a little bit more detail there, what number of customers are testing it? What kind of customers, what the initial -- what the early reactions have been and your confidence that there's a real ramp in '27 to place here?

Yes, I'll comment on a couple of things. First, we've got a couple of prototypes that have been built and bodies have been mounted and they're now going through calibration as well as some early testing or I'll say some testing in general. The product has been well received by the customers that looked at it.

They seem to be favorable. The market we know is open to another competitor. And then, as you know, we have capacity. So I think more to come as we start getting past the hurdle of release, if you will, but indications seem good for the product.

Next question comes from Eric Stine with the company, Craig-Hallum.

So maybe just sticking with, I guess, the commercial chassis, but also tagging into fiscal '26. I mean is it -- I know that you expect some contribution in Q4 or fiscal Q4? I mean is it fair to say, though, that, that is a pretty minimal contribution. That's really not a driver of low end to high end as we think about the year?

Yes, you are correct, this is Razvan. We have in our guidance approximately 100 commercial chassis and in terms of moving from low end to high end of guidance, they are not material at this point in time.

Okay. Got it. And so then thinking about the guide, I mean, yes, you're factoring in tariffs are still an issue, but I guess, arguably maybe calm down a little bit year-over-year. I know you are seeing some benefit from the stable pricing that you've got at least through a portion of fiscal '26. Then you also mentioned the price increase. And so I would assume that, that's more for the second half.

So I mean, clearly, you are guiding to a bit of a ramp throughout the year. I know you've talked about that really with the backlog, even if it's down a little bit, there's not that typical seasonality that would have been seen in years past. So I mean, is pricing kind of the main determinant here and the reason for that ramp? I mean, other than EV mix, I guess?

Yes, it's Razvan. So we have a couple of factors. I mean, first of all, it has to do with the number of production weeks that are in the year, Q1 is the lowest number of weeks, Q2 is slightly up and then Q3 is the highest one. And then Q4, again, goes down a little bit. So you have the production seasonality. The new price increase, I talked about, the $3,500 per bus, this is for new orders and it will materialize in Q3 a little bit and then into Q4 because they go most likely at the end of the backlog and is for new orders.

In terms of tariffs, we are monitoring the situation. We have provided tariff charge stability to our customers and orders all the way through June right now. So depending how the reality of tariffs materializes until then, there is still a little bit of risk. And therefore, we are probably conservative in terms of the guidance for the first half and then we expect to ramp in the second half.

Got it. All right. That is helpful. And then maybe last one for me, just coming back to the order environment, and I do appreciate that after the holidays, that's when things pick up, but a nice bounce back here, I guess, as of a week ago.

I mean as you talk to dealers, it sounds like you feel that, that is sustainable and that those are trends that maybe are more normalized after that period where there was a lot of tariff uncertainty and that really impacted the orders. Is that a fair characterization of your view?

Yes, for sure, it is, Eric. When you look at it, if you go back to the beginning of the year, there was constant change in tariffs, and I think it had some impact in terms of maybe district seizing up on some orders. So we're just waiting to see. But you can certainly see it now.

It's starting to stabilize, like you said, we have pricing out to the end of -- or to June, rather for this firm. And I think all of those suggest just what you indicated is that there's some stability coming back into the order cycle.

Our next question comes from Greg Lewis with the company, BTIG.

If I was thinking about the backlog and just on Slide 7, you kind of outlined what has happened quarter to date for the total backlog, but you didn't kind of -- you didn't update the EV side. Not sure if we have that information, but just kind of as we think about the backlog as a percentage of the fleet on the EV side, is kind of the bookings that were done or the order book growth quarter-to-date.

Does it kind of mirror what we have in the current order book? Or was there a little bit of overperformance or underperformance on EVs with quarter-to-date earnings or orders?

Greg, this is Razvan. Thanks for the question. I had it actually in my remarks. The EV corresponding number is 850 so we had an increase also in EV throughout the quarter.

Okay. And on a percentage basis, about the same rate. And then the other question I had was, I'm not sure if it was today or last week, but I guess New Jersey came out with updated -- an updated incentive program, ZIP. I guess they released $37 million for additional buses. Kind of curious, was that something that Blue Bird and the market was expecting? Did it kind of come out of nowhere?

And just as we think about what New Jersey did or announced. Should we be thinking about -- and I know you kind of talked about it in the remarks, but should we be thinking about other states kind of following through with updated programs that you're at least tracking or watching? Or is this kind of just like a one-off?

Yes, Greg, I think each state is different in terms of how they apply funds, but it's a testimony to the state funding. It's there. It's real and it's flowing. And we know there are certain states that are aggressive in this area in terms of EV mandates.

Okay. So was this largely expected? Or was this something that we kind of knew it was going to happen, we didn't know the timing of it?

This particular program, I would say, wasn't a cornerstone of our communications here, but it's the trend we see across the country and what we talk about on these calls is that outside of the federal side, there is real demand at the state level. So we continue to see a general trend of growth in these types of state-level programs.

Yes. I was going to say from a macro level, we knew that things would flow, but we don't really necessarily get into each state and the analysis of each single brand.

Our next question comes from Sherif El-Sabbahy with the company Bank of America.

I guess just looking at the midpoint of guidance, it seems to indicate a little bit of a lower price mix in the second half of the year versus the first half. Understand there's the chassis product coming in the fourth quarter and likely some tariff impact given the second half weighting of EVs. But I was just wondering if there's any other puts and takes we should be considering with regards to the first half versus second half price and mix?

Sherif, this is Razvan. So as I mentioned before, the price increase I talked about will come only at the tail end of the fiscal year. And then you have numerous other factors. You have the product mix, you have the fleet mix. So all of them are baked into our detailed bottom-up forecast.

But overall, I would say, in general, we look at pretty flat pricing other than the price increase I talked about. And the wild card is still the tariffs at this point in time. We have not communicated Q4 tariffs charges yet because we are waiting and monitoring what will be the development on the cost side, on the government policy related to tariffs by then.

So overall, I would say, still, we are forecasting very strong EBITDA margins in the 15% and 16%, and we will update the guidance as needed in the next quarters to come.

Our next question comes from Craig Irwin with the company ROTH Capital Partners.

Razvan, the last several years, Blue Bird has provided on a quarterly basis, the dollar value of the backlog and for a number of years, also the dollar value of the EV backlog. You gave us the 680 and 850 and obviously, the 3,068. Do you have those 2 financial metrics for us on this call?

Yes. I mean definitely, we can provide those in our follow-up calls if you request this level of detail. And right now, we focus more on the units at this point in time. But definitely, those are available if requested.

Fantastic. I'll definitely ask for that.

Our next question comes from Chris Pierce with the company Needham.

I just wanted to ask 2 questions on industry competitive dynamics. I know you have peers that are owned by companies that sell Class A trucks into the U.S. and that are seeing Section 232 tariffs that are talking about losing share of that part of the business. Do you think we'll see or is it too early to talk about potential competitive shifting dynamics in the school bus market as they may be try to make up for lost units in other parts of their business? Or is that kind of too early to tell? Or have you seen anything along those lines?

Chris, this is Razvan. I think it's too early to tell, and that's probably more of a question that you have to ask them how they manage between the different sections of the business. But so far, we haven't seen any meaningful change from that.

Okay. And then I know in your prepared remarks, you talked about student enrollment numbers. I guess there are smaller competitors that are kind of working on optimizing school bus schedules. So it looks like there's less -- just more throughput on the buses that run versus running a total number of routes.

Is that something you're seeing kind of do you have software like that? When you kind of bid on larger contracts in larger school districts or school districts maybe trying to reduce the number of buses and increase students per bus? Or is that also kind of early days?

No. That's not something that we generate or produce, but obviously, we worked with fleets or providers that do have that software. I mean there's -- and you know some of them that are out there, but it's not something we do.

Yes. But in terms of impact to the order or general demand, we haven't seen anything meaningful at this point in time coming out through higher utilization of full buses, if this was your question.

Okay. Thank you. No questions registered in queue. I would like to pass the conference back over to our hosting team for closing remarks.

Right. Thank you, Jayla, and thanks to each of you for joining us on the call today. Blue Bird has delivered another year of record results, beating guidance and demonstrating credibility rather. And this is despite a challenging environment, with the fundamentals of the industry remain enthusiastic for Blue Bird in its future, and we look forward to updating you on our progress next quarter.

Should you have any questions, please don't hesitate to contact our Head of Investor Relations, Mark Benfield. Blue Bird continues to be stronger than ever and has an amazing future ahead as we approach our 100th anniversary in a couple of years. Thanks again from all of us at Blue Bird, and have a great evening.

That will conclude today's conference call. Thank you for your participation, and enjoy the rest of your day.