Blue Bird Corporation Aktie

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.

Good afternoon. Thank you for attending the Blue Bird Fiscal 2025 Third Quarter Earnings Call. My name is Matt, and I'll be the moderator for today's call.

[Operation Instructions] I would now like to pass the conference over to our host, Mark Benfield, Head of Investor Relations. Mark, please go ahead.

Thank you, and welcome to Blue Bird's Fiscal 2025 Third Quarter Earnings Conference Call. The audio for our call is webcast live on blue-bird.com under the Investor Relations tab. You can access the supporting slides on our website by clicking on the Presentations box on the IR landing page.

Our comments today include forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters we have noted on the following 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 will take some questions. Let's get started. John?

Thanks, Mark, and good afternoon, everyone, and thanks for joining us today. It's great to be here, and we're excited to share with you our financial results for our fiscal 2025 third quarter. Once again, the momentum continues, and the Blue Bird team is doing a fantastic job and delivered record sales and adjusted EBITDA in the third quarter of fiscal 2025. Razvan will be taking you through the details of our financial results shortly.

So let me get started with the key takeaways for the third quarter on Slide 6. As shown in the first box, with record sales and adjusted EBITDA, we beat our Q3 guidance and increased our full year guidance as well. And this is despite the impact and challenges associated with the administration's policy on tariffs, which is currently creating some uncertainty in the overall market. The uncertainty in pricing translated into an overall reduction in industry backlog, including ours. We will talk more to this, but despite the drop in orders, our backlog at 3,900 units is still at what we describe as, 'in the sweet spot.'

During the quarter, we had strong operational execution and performance, which is a testimony to the team's dedication. But we also took the quarter to deep dive our long-term manufacturing strategy. As we've communicated prior, we are slated to build a new factory to support forecasted volume. But we're using this period to challenge our detailed plans and to ensure we can be even more competitive. We are looking at where we can apply production automation, automated material movement and manufacturing execution systems, systems which bring shop floor connectivity and ease of data collection. The objective is to build steps of cost reduction and a manufacturing road map into the future. This area of the business really excites me.

In terms of pricing, we remain disciplined. Bus prices remain higher than the previous year and the previous quarter, and we remain competitive as we continue to see from our bid results and overall win rate. Our track record of dominance in alternative powered vehicles continues. While EV demand softened again with all the tariff uncertainty, the outlook in this area remains strong. Alt Power is a segment we created more than 15 years ago, and we remain in the lead position.

Earlier, I spoke about further developing our manufacturing strategy. As we develop that strategy, we will invest in projects that have clear and strong returns. But we also will be reinvesting back into the business by developing new product features and differentiated products that will hit the market next year, and the years to come. We recognize targeted investment in our operations will lead to better performance on the manufacturing side of the business, and investment in our product portfolio will grow the top line.

Consistent with what I've communicated in the last call, it is our objective to position this business to be a strong long-term investment. And similar to almost every business in the country, we are also dealing with the impacts of the administration's executive orders and tariff volatility. We are fortunate to be well positioned to navigate this situation to a margin-neutral outcome. Overall, adjusted EBITDA for the quarter came in at $58 million or 14.7%. That's over $10 million better than compared to last year's third quarter.

Now let's turn the page and take a closer look at the financial and key business highlights for the third quarter on Slide 7. We sold 2,467 buses in the third quarter and recorded revenue of $398 million, a quarterly record and almost $65 million ahead of last year. On the EV side, we sold 271 vehicles, 11% of our volume, and our long-term outlook for EVs remains optimistic. As already mentioned, adjusted EBITDA for the quarter came in at $58 million, $10 million stronger than last year, and free cash flow came in at $52 million. Razvan will talk more to this and our outlook later in this call.

Turning to the right side of the page, I will start with backlog. Backlog, of course, is a function of orders and build rate, and there is no question the volatility in tariffs is having an impact on orders. The consistent movement in tariffs just creates uncertainty. It puts school districts in the mindset to purchase when things just settle down. So with that, we have taken action to offer some certainty in our pricing in to next year. Razvan will talk to that further. But I will qualify a couple of other things. We can see that our order decrease between Q3 and the previous quarter matched the industry. So this is not a performance issue. And our orders for the quarter were 1% stronger when compared to last year's orders for the same Q3 period. More importantly, the fundamentals are still there.

The fleet is aging. We're coming into a heavy replacement cycle, and there has been an industry supply issue in the last few years, leaving pent-up demand. So all of this points towards this situation being temporary rather than long-lasting or structural. And to put it in context, we have consistently said that our sweet spot is in the 4,000 unit range for backlog.

Third quarter average selling price for buses was up almost $7,700 per unit. But of course, this includes the tariff recovery as part of our margin-neutral tariff strategy. And with tariffs excluded, pricing was still up quarter-over-quarter, and part sales totaled $26 million in Q3. Alt powered buses represented a strong 61% of unit mix in Q3. Again, this compares with a typically less than 10% to 15% mix for our major competitors. And we benefit from higher margins and higher owner loyalty with our gas and propane products, as we are the exclusive supplier to the industry today.

At the end of the quarter, we had a combined 1,200 EVs either booked or in our order backlog. Our latest forecast reflects approximately 900 EV unit sales for the full year. Overall, we remain optimistic on EVs in the bus sector. EVs are a perfect fit for the school bus market when you look at the duty cycle, available charging intervals, range and the proven health benefits to our children. The current EV backlog is over 500 buses and represents $174 million in revenue.

Throughout the quarter, it was very encouraging to see rounds 2 and 3 of the EPA Clean School Bus program continuing to flow to our end customers. And we are seeing rounds 4 and 5 are still in play. We are hopeful to soon hear when and how these funds will be administered. And reimbursement funds continue to flow for our $80 million MESC grant with the DOE. This is for further funding towards our new plant in Fort Valley. As a reminder, this project adds 400 well-paying American jobs to a century-old American company and an iconic brand to build school buses, providing our children with the benefits of clean air. As I said in our prior earnings call, it really is a great story.

As a special note, during the quarter, we started production in our Micro Bird, Plattsburg, New York plant. Micro Bird is a joint venture between Blue Bird and Girardin. The new plant manufactures small buses, primarily targeting the Buy America U.S. shuttle bus market. As a reminder, this new segment entry was announced in December 2024 and will double our small bus capacity. I would like to congratulate the entire Micro Bird team for doing an outstanding job.

Similarly, we've continued to make progress on our, which I spoke to last quarter. We are entering the final testing phase now, and we will be moving into production in 2026. This chassis is targeted to be best-in-class, and we are excited about the opportunity.

Back to the overall business. We beat our guidance for the 11th consecutive quarter and are increasing our full year guidance. With a 14.7% adjusted EBITDA margin and record profits in Q3, I'm very proud of our team's accomplishments.

So I'd like to now hand it over to Razvan to walk you through our fiscal 2025 third quarter financial results and full year guidance in more detail. Razvan?

Thanks, John, and good afternoon. It's my pleasure to share with you the financial highlights from Blue Bird's fiscal 2025 third quarter and year-to-date results. The quarter end is based on a close date of June 28, 2025, whereas the prior year was based on a close date of June 29, 2024.

We will file the 10-Q today, August 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 9 is a summary of the fiscal '25 third quarter record financial results. It was another great operating quarter for Blue Bird with highest ever EV volume, and we beat our guidance provided in the last earnings call. In fact, we delivered again the best quarter ever in terms of both top line and bottom line as a testament of our continued profitable growth journey. The team pushed hard and did a fantastic job generating 2,467 unit sales volume, which was 15% above prior year level.

All-time quarterly record net revenue of $398 million was $65 million or 20% higher than prior year, driven by product mix and pricing actions that materialized in this quarter. Adjusted EBITDA for the quarter was an all-time record $58 million, driven by improved bus margins, partially offset by increased investments in headcount, engineering and business growth areas.

The quarterly adjusted free cash flow was very strong at $52 million and $56 million higher than the prior year. This result was due to continued strong profitability across all bus and powertrain types, strategic cost management and small improvements in working capital.

Looking on the right side at the first 9 months of the fiscal year, we crossed already the $1 billion mark and posted all-time record revenue of $1.071 billion and all-time record adjusted EBITDA of $153 million, both improved versus then record last year's first 9 months.

Moving on to Slide 10. As mentioned before by John, our backlog at the end of Q3 is just under our sweet spot at almost 4,000 units. While the tariff uncertainty significantly reduced orders in Q3, based on discussions with our dealers and customers and fundamental industry dynamics, we believe that this is temporary, and we expect the pace of orders to pick up in the rest of calendar 2025. Actually, with many trade deals already completed, for example, China and the European Union and with USMCA still in effect, our line of sight to our cost has improved and we implemented in July pricing actions that provide stability through the end of March. Our backlog at the end of Q3 includes over 500 EVs. Rounds 2 and 3 of the Clean School Bus program are flowing again as confirmed by the EPA in April, and the funding for rounds 4 and 5 is still in play in the future.

Breaking down the Q3 $398 million in revenue into our 2 business segments. The bus net revenue was $372 million, up by $64 million or 17% versus prior year due to higher EV mix and improved pricing across non-EV products. As a result, our average bus revenue per unit increased from $143,000 to $151,000 or approximately 5%, of which approximately 2% is related to tariffs pass-through.

EV sales in Q3 were a record 271 units, which is 67 units or 33% higher than last year. Parts revenue for the quarter was flat year-over-year at $26 million. Gross margin for the quarter was 21.6% or 80 basis points higher than last year, in line with our targets. Also, the team has done a great job managing the tariffs with our supplier partners and with our customers. And as a result, our margins have not been negatively impacted during this quarter.

Adjusted EBITDA of $58.5 million or 14.7% was higher by $10 million compared with the prior year and showed a 20 basis point improvement. In fiscal '25, Q3 adjusted net income was a record $39 million or $8 million higher than last year. Adjusted diluted earnings per share of $1.19 was up by $0.28 versus the prior year.

Slide 11 shows the walk from fiscal '24, Q3 adjusted EBITDA to the fiscal '25, Q3 results. Starting on the left at $48.2 million, the impact of the Bus segment gross profit in total was $16.7 million with volume, EV mix and pricing effects, net of material cost increases of $14.3 million and operational improvements of $2.4 million. Those include the USW labor agreement wage increases now in full effect, which were more than offset by other efficiency improvements, lower freight costs and quality improvements.

The Parts segment gross profit was flat year-over-year, staying at a very strong level. Our fixed costs and other income were unfavorable year-over-year by $6.4 million due to increased headcount and investments into our growth areas. The sum total of all of the above-mentioned developments drives our all-time record fiscal '25, Q3 reported adjusted EBITDA result of $58.5 million or 14.7%.

Moving on to Slide 12. We have extremely positive developments year-over-year also on the balance sheet. We ended the quarter with a record $173 million in cash and further reduced our debt by $5 million over the last year. Our liquidity is very strong at a record $315 million at the end of fiscal '25 Q3, an increase of $83 million compared to a year ago.

Additionally, we have executed another $9 million tranche of share repurchases, which brings us to $49 million completed over the last 12 months with another $11 million left to go on the existing program. More good news on this on the next slide. The operating cash flow was very strong at $57 million, driven by great operational execution and margins and small improvements in working capital.

On Slide 13, we would like to give you an update of our capital allocation strategy for the next 2 years, fiscal '26 and fiscal '27 and the new exciting share repurchase program recently approved by our Board. Our capital allocation strategy balances investments for long-term profitable growth, return of value to our shareholders and maintains a conservative cash position.

On the left side, our $475 million sources of cash consists of very strong cash flow from operations after tax and interest of $300 million over 2 years, plus existing cash of approximately $175 million. We do not expect, at this point, to add new debt over this period. However, we do have borrowing capacity, both on the revolver and in our long-term debt agreement, should this become necessary.

On the right side, we have 3 uses of cash: organic and inorganic growth, shareholders, and small debt repayments. As far as growth is concerned, we plan to invest approximately $150 million over 2 years with the MESC program for the new plant and other manufacturing expansion and automation projects. And we have a not to exceed $50 million over 2 years in each of these categories, R&D and engineering expenses, CapEx for growth and maintenance and potentially small M&A activities.

Moving on to shareholders category. We are very happy to announce our next stock buyback program for up to $100 million over the next 2 years. This is supported by our strong existing cash position and free cash flow generation, and we believe it is the best way at this point to return value to our shareholders in parallel with our profitable growth investments. Finally, in addition to the required term loan principal payment of $5 million per year, we plan to maintain a conservative cash balance at each year-end in excess of $50 million.

On Slide 14, given our strong performance year-to-date, today, we are raising our full year guidance for fiscal '25 to $210 million adjusted EBITDA and 14.5%. But first, looking at Q3 actuals, we have beat once again our guidance this past quarter. So we had a very strong and record-breaking first 9 months for the fiscal year.

On the Q4 adjusted EBITDA side, we are increasing the bottom end and midpoint of our guidance given the higher certainty on tariffs. For the total year, we are tightening our revenue guidance to approximately $1.45 billion, and we are raising our adjusted EBITDA to $210 million or 14.5% with a narrowed range of $205 million to $215 million.

Moving to Slide 15. In summary, we are forecasting an improvement year-over-year with revenue up to approximately $1.45 billion, adjusted EBITDA in the range of $205 million to $215 million or 14.5% and improved adjusted free cash flow of $90 million to $100 million. The free cash flow guidance is in line with our typical target of approximately 50% of adjusted EBITDA, and it includes on top the extraordinary CapEx of now up to $10 million with our 50% fiscal '25 portion of the new plant investment funded by the DOE MESC grant, which is currently proceeding, albeit slower than initially planned.

The delay in spending is due to the comprehensive review of our manufacturing long-term strategy, conducted by the team this summer under the leadership of our new CEO. We are reevaluating our strategy and its supporting manufacturing footprint for long-term success. Some new elements we are considering, for example, are opportunities for automation in the new plant, which could reduce our costs and make us even more competitive in the marketplace.

On Slide 16, we want to share with you our initial thoughts on fiscal '26 business environment and preliminary guidance. We continue to have a number of both tailwinds and headwinds at play this year. As tailwinds, we have strong bus demand, stable pricing and a solid industry backlog. We offer not only diesel and gasoline school buses, but we have the only propane 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 with over 2,000 EV buses on the road. The state subsidies continue to be strong. EV pure-play competitors have gone out of business in the U.S., and we have already over 1,200 EVs sold and in backlog at the end of June. As headwinds, there is still some demand uncertainty driven by tariffs. However, the situation has been improving, and it appears to be stabilizing at reasonable levels.

On the labor front, our second year of the USW union contract provides for predictable wage increases. However, our health care and insurance costs continue to increase year-over-year. The material cost and supplier inflation pressures are still present, and the newly implemented tariffs are impacting our cost of goods sold over time, with bus pricing countermeasures already announced, driving to a margin-neutral outcome.

In summary, we are preliminary guiding units to 9,500, including 750 EV buses and approximately 100 propane commercial chassis, driving revenue to $1.5 billion and adjusted EBITDA of $220 million or 14.5%.

Moving on to Slide 17. Given our strong business momentum, today, we are raising the medium-term outlook to 15% margin with volumes of up to 10,500 units, including 500 commercial 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 units 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.

We continue to be incredibly excited about Blue Bird's future. And now I'll turn it back over to John.

Thank you, Razvan. Let's move on to Slide 19. We have shown this slide on several earnings calls, so I won't spend too much time on it today, as the priorities remain consistent. The chart on the left side of the page outlines our Blue Bird value system as a company, taking care of our employees, delighting our customers and our dealers and delivering profitable growth. And the right side of the page shows how we get there. And of course, the objective of delivering sustained profitable growth for our investors is at the center of it all.

When you turn to Page 20, I want to remind everyone again of Blue Bird's history and resilience. Over its history and more recently, after the COVID and inflationary period that affected the entire industry, we restructured our commercial and manufacturing practices to improve our business. So looking at 2025 and beyond, we are really coming into our moment.

Razvan took you through the guidance for fiscal '25, and I'm showing you some of those key metrics at the midpoint guidance on this page. First, our bookings outlook shows volume increasing 3% over fiscal 2024. Consistent with the last call, net revenue at $1.45 billion will be a new record for Blue Bird, up 8% from fiscal 2024. And adjusted EBITDA guidance of $210 million is just under 15% higher than our fiscal '24 results. Importantly, we are planning on a strong 14.5% adjusted EBITDA margin in fiscal '25, up 90 basis points from fiscal '24. And finally, we are forecasting to grow EV unit sales to 900 buses in fiscal '25, up 28% from last year.

On the right chart, you'll see there's a lot of pent-up demand following the low industry sales over the last 5 years, and the bus fleet has continued to age. I spoke to the fundamentals when discussing the backlog at the beginning of the call, and ACT is forecasting a 6% compounded annual growth rate through 2030. So again, we believe the data points towards strong long-term demand, which is great for us and the industry.

So I'll wrap up with Slide 21. First, this great company and iconic brand is almost 100 years old. Blue Bird has stood the test of time, and it continues to be poised for an exciting future. We remain confident that the Clean School Bus Funding program will continue. It's a bipartisan initiative. It's 100% appropriated with rounds 4 and 5 still in play, and it eliminates harmful tailpipe toxins, benefiting our children and our communities. And we also remain optimistic on overall near-term and long-term school bus demand.

Again, we delivered record results for the quarter, increased our full year guidance and announced a $100 million share repurchase program coming off our previous $60 million program. And this kind of performance has put Blue Bird in a position to really look long term, as we invest and enter new segments and upgrade our operations.

As always, I want to thank our employees, our dealer network and our supply partners. All are critical to our success. Similar to my message in the last call, I'm excited to be back at Blue Bird Corporation. 2025 has been an incredible year with record results, increased guidance, a great history and an exciting future. Thank you.

So that concludes our formal presentation today, and I'd like to now hand it back over to our moderator for the Q&A session.

[Operator Instructions] First question is from the line of Mike Shlisky with D.A. Davidson.

Maybe you could touch first on the order and backlog commentary that you've given us. I guess it's a 2-part question. I mean, first, I mean, doesn't order season doesn't it start until after the holidays, after like January or so, when folks plan for next year. It's usually a pretty slow season in summer. So I was just kind of curious, first, if there's any seasonality we should be thinking about here? And we're not going to know what's going to -- what's kind of really happening until January, February. Maybe I'll just start with that as my first question.

Yes. Thanks, Mike. Look, maybe I'll just touch on a couple of things in general on the backlog side, just for some data points. So first of all, I want to just compare Q2 to Q3 and just put it in context. The drop -- if you compare Blue Bird to the industry, the drop was within 0.3% of each other. So really, it means Blue Bird and the industry came down. And then if you look at the backlog across the year, and you go to March, we were within 3% of where we were at the start of the year.

The backlog really dropped in April, and that coincides with liberation Day and the tariff announcements. And I think our perspective is that the districts just don't know how to deal with the uncertainty due to tariffs. And a bit of an analogy, but it's a bit like being on a plane during turbulence. The passengers put on their seatbelts, they buckle up and they sit down because they just don't know what's going to happen next. And the pricing certainty that we've extended into next year is like coming into smooth air. So the passengers or in our case, the school districts, can unbuckle and begin to move around. So we see this as something positive.

Now again, a couple of other things here, just more on the fundamentals. We have an aging fleet. We're coming into a heavy replacement cycle. The prior year supply was pent-up because of supply issues. And then the budgets haven't disappeared. So I think from our take, it's dropped, but it's temporary. We don't view this as something long term.

Great. Just to follow up on the other part of my question then. I appreciate the aged fleet out there, but are the districts actually on the phone telling you and the dealerships, we're just going to hold off temporarily for the orders until we figure out the tariff situation. Is that verbally what they're saying? Or are you making -- is that what the timing of the orders kind of suggest that there's no actual evidence from calls or discussions with your customers?

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

Then just turning to the operational side. Can you maybe comment on the range of operational improvements that have been made over the last bunch of quarters here? I think folks want to make sure that the margin tailwinds that you've got that appear to be continuing are the result largely of the operational improvements and not simply a change in the mix to higher EV. Just some thoughts as to how, just kind of -- how sustainable are the current margins even if the EV volumes change up or down from here?

Yes, Mike, this is Razvan. So we are working in the operations and with the entire team to identify opportunities for continuous cost improvement for efficiencies. We are tweaking the operations of the plant to lean manufacturing principles. So many of the improvements over time and not just this year, but over the last couple of years come from that angle of stabilizing operations and improving efficiency.

In terms of product mix, we are less sensitive than in the past to product mix. As we said multiple times, our gross margins are roughly the same percentage point, percentages across all powertrain types. So therefore, we are very confident that our margins are sustainable, and we are projecting same or improving slightly in the near future.

Yes. And Mike, just a couple of things to add, too. I think if you look at the historical improvement we've had, say, the last couple of years, it's been on the lean manufacturing or the elimination of waste side. And I think if we look ahead, based on the initiative we're kicking off now, the benefits we'll see in the future are more through automation. We definitely have some opportunities in that area when we look at our manufacturing processes. So I think looking back and then looking ahead, it will be 2 different sources in terms of improvements.

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

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

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

Next question is from the line of Greg Lewis with BTIG.

First one is a quick one. As I look at the -- you did a good job of laying out the backlog and the EV backlog. As I kind of look at -- kind of what is expected in the final quarter of the fiscal year and looking now at next year, I guess, as we think about projected EV sales, how much visibility do we have to that related to backlog?

Greg, it's Razvan. Thanks for the question. So where we sit today at the end of Q3, we have 500 units in the backlog at that point in time, and we are projecting to sell about 200 units in Q4. So -- we have 300 units surplus for next year if we don't get any orders, which is not the case. We still have rounds 2 and 3 flowing. So we are continuing to receive orders from those. We will have, at some point, rounds 4 and 5 coming into play. We don't know yet exactly when, but we are expecting that from the EPA.

We are working on a couple of discrete opportunities for certain fleets, for example, EV business that each one in itself could be more than 100 units or a couple of hundred units. So it's -- while there is a range, and we put a wide range there between 500 to 1,000 for next year, we are working on opportunities to go to the upper end. So we feel very good about the 750 midpoint right now.

Great. And then as I think about the EPA school bus program, beyond that, it does seem like states like, I guess, New York and California are kind of still coming -- have their own incentive programs. Is that kind of where -- when we think about on the EV side deliveries, is that kind of -- as we look at it beyond the EPA, which we'll see how, I guess, Phases 4 and 5 come in the market. But beyond that, is there any other states we should be thinking about other than California and New York to really drive EV momentum here over the next kind of 12 to 18 months, exclusive of EPA?

Yes. No, it's a great question. So -- of course, we talked about rounds 4 and 5, and then you have state funding as well. There's about $1 billion plus approved there. And some of the states we've already touched on, New York, California, Oregon, Illinois, Michigan, I mean those are the prime states. And then as well, as Razvan mentioned, some discrete opportunities as well. So I think there's definitely opportunity looking at that when you boil it down to the state side.

Great. And then just one more for me. Kind of on the small scale, maybe looked like some working capital was freed up with some inventories coming lower here. Should we be thinking about any seasonality around inventories just as we move into the final quarter of the fiscal year?

Yes, Greg, this is Razvan. Thanks for the question. So at this point, we have a fairly constant level of production that we are keeping. We don't expect significant movement in working capital. I would say there are 2 exceptions to that, that might come into play. One is to the extent that we will sell a higher number of either fleet or GSA units, that creates an account receivable that takes more than normal to collect the cash. So that may carry from one quarter to the other.

Then secondly, to the extent that we decide is necessary from a supply chain, either stability or tariff play, we might do some prebuy of inventory to ensure we can produce and we can lock in certain prices. So those are the 2 things. But again, they come throughout the normal course of business. And to the extent that they happen, we will inform you about them in our next quarterly earnings call.

Congrats on the great quarter.

Next question is from the line of Eric Stine with Craig-Hallum.

So when we think about the electric school buses and obviously, given battery prices and prices higher and the funding uncertainty, although reasons to be cautiously optimistic. Just curious, I mean, are you seeing school districts opt to go propane? Maybe if you are the extent of that and any potential share gains or conquest wins from other OEMs?

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

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

Yes, Eric, thank you. This is Razvan. So definitely, we have been working a lot over the last few years to restructure the way we go to market, our pricing strategy and our contract and we've demonstrated through our results that we are able to work with our customers and pass through certain increases when they happen. In terms of tariffs, we are fortunate that we are not that exposed to tariffs. Majority of our sourcing comes from North America. And with USMCA still in place, so Canada and Mexico are in a good spot for us. Where we had higher exposure was on the EV, especially from China, that seems to have stabilized at a 30% level. And also recently, the European Union at 15% seems to have stabilized as well.

So working together with our supply chain partners and through different negotiations, we have a good line of sight to a majority of the tariff impact, at least through March. And therefore, we offered a certain certainty of pricing through March for our customers. We are obviously monitoring the situation to the extent that something catastrophic happens, we may have to revisit one or the other thing. But in general, we believe we can navigate this to a margin-neutral outcome for us.

And then maybe last one for me. Just on pricing. I mean, I guess my question was going to be or always curious if there's any pushback because obviously, given tariffs and everything going on, you have had to raise prices quite a bit and push on price. Do you still feel like pricing increases kind of understood by the industry that not necessarily pushback on those increases, but it's just more about the volatility than anything else?

Yes. So our position is very clear. Tariffs are a form of tax imposed by the government, and therefore, it doesn't necessarily have something to do with us or neither of the major players in the industry. And therefore, the customers understand that we do have to pass this on when they happen.

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

Yes. Maybe one more thing to add quickly. In terms of the pushback, it has more to do with the timing and the uncertainty than the level of tariffs that we have put in place, and this is what created a bit of a slowdown in the order intake. But again, with our countermeasures, they believe now we can unlock that, and they expect orders to pick up through the end of 2025 calendar year.

Next question is from the line of Chris Pierce with Needham.

On the pricing action that you're taking, is this something you're seeing across the industry? Or is this offensive to take share, defensive to hold share or that sort of need here or there?

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

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

Yes. So this is Razvan. So in terms of the EV projection in terms of mix for the medium to long term, obviously, with the recent changes, both at the EPA and in the administration, we are not able to put fixed numbers out there that we can commit to. So however, what we said in the last couple of earnings call is we have had other engines of growth, especially on the top line that are offsetting a potential reduction in the growth of EV that we were previously forecasting. Chassis being one of them, this brings both revenue enhancement and it comes with good margins. So it's profitable growth.

Then secondly, from the Micro Bird, our expansion in the U.S., especially now with the new plant acquired in Plattsburg, New York and addressing the shuttle bus Buy America segment, that will bring us additional net income, so addition to the bottom line. So overall, we have now different engines of growth that we are folding in.

In terms of the confidence for the volumes for the commercial chassis, we have been talking with several customers at different ratios, and we have strong interest from many of them regarding our products. We are coming first to market with the propane option, and we also have the EV option we have been working on for quite some time now. So definitely, we see strong interest. And therefore, we are able now for the first time to put some directional numbers in our medium- and long-term outlook.

Perfect. And just lastly, if round 4 and Round 5 money does come back, is that thought of as a mix shift within units and that goes back to you guys were able to drive the same margin by engine type? Or is that additive to units, additive to margins? Like what's the right way to think about that?

Yes. So rounds 4 and 5 didn't really go anywhere. There was just some question about are they still in play? And so far, the answer is yes, they are. In terms of total units, at this point, we maintain our stance that we want to operate on one shift. and we will be able to expand our production capacity with the new plant under the MESC program that we are continuing to refine the planning of. And therefore, for the midterm, NEV will be more of a mix change. However, for the long term and with the new plant, it could also represent an addition to the total volume.

Next question is from the line of Craig Irwin with ROTH Capital Partners.

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

Yes. Craig, this is Razvan. Thanks for the question. So -- we have been on a pricing strategy that has a cadence of every 6 months, so 2 price increases per year over the last -- more than 2 years right now. And the level of price increase was roughly 2% each time, give or take, a little bit. And this was in line with our forecasted economics, inflation, different cost of goods sold, increases that we see either from our own labor or with the USW contract or from our suppliers. So this is the normal level that we've put in place.

In terms of tariffs, we announced at the end of March, we had roughly a 2% tariff-related pricing action. And now we have put another announcement in place coming October 1. We are adding another roughly 1 to 1.5 percentage points to that. So tariffs will go up in October. And then therefore, they will also be constant through March. So that's where we are right now.

And then another product that's of significant interest right now is your Class 5, 6 strip chassis truck. Can you maybe talk about the potential there to pull it forward as far as volumes? You put in a very light number as far as commitments for this next fiscal year of just 100 units. You're making it on the exact same line that you're making -- or I guess you've got 2 lines where, one, you can run it through on the production cells. And there's a hunger out there for propane, right? Your success in the school bus market has educated the broad trucking industry on the benefits, the economic benefits of that spark spread. Can you maybe talk a little bit about the ability to pull forward some of those volumes versus what you have in your forecast?

Yes, Craig. So a couple of things. So yes, I mean, admittedly, we took a cautious view on it. But right now, we're building demos, and we're going to get those demos in the hands of people and then they go through some mileage accumulation. And of course, we're doing testing on the front half of the year. As Razvan mentioned earlier, all the feedback is very positive. We believe it's a best-in-class product. And then just as you mentioned, the differentiator being propane. So we think there's opportunity. But quite honestly, I think we'll -- let's get this thing launched, let's get it out in the field. And then if there's more demand, then we certainly have capacity and we have the opportunity to support that.

And then last question, if I may. SG&A has seen some growth over the course of the last year. Now everyone understands that the business is tracking really well. You've got a bunch of initiatives that you're executing on. Can you maybe frame out for us what a fair expectation is on SG&A proportionate to revenue growth over the next year? Should we keep -- should this keep climbing at a similar clip as it has in the last year? Or should we see this growth rate maybe taper off in the next couple of quarters?

Craig, this is Razvan. So definitely, the growth in SG&A will taper off. We have been investing heavily in the last couple of years in adding some headcount in strategic areas, also in engineering. We have invested in different powertrain projects that are coming still with 2027. So I would say for '25, '26, you can expect some low single-digit growth in SG&A. But definitely, the revenue growth should outpace the SG&A growth.

Congratulations again on another really solid quarter.

There are no additional questions waiting at this time. So I'll pass the call back to John Wyskiel for any closing remarks.

Thank you, Matt, and thanks to each of you for joining us on the call today. So just as last year, you saw our momentum increasing throughout the year with profitability improving quarter-over-quarter. And while the environment may have changed for 2025, we have continued on that same theme. I remain very optimistic and enthusiastic for 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. And finally, 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 concludes the conference call. Thank you for your participation. You may now disconnect your lines.