Blue Bird Q3 2025 Earnings Report

Blue Bird EPS Results

• Actual EPS: $1.19
• Consensus EPS: $0.90
• Beat/Miss: Beat by +$0.29
• One Year Ago EPS: $0.91

Blue Bird Revenue Results

• Actual Revenue: $398.01 million
• Expected Revenue: $377.64 million
• Beat/Miss: Beat by +$20.37 million
• YoY Revenue Growth: +19.40%

Blue Bird Announcement Details

• Quarter: Q3 2025
• Date: 8/6/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, August 6, 2025
• Conference Call Time: 4:30PM ET

Blue Bird (NASDAQ:BLBD), together with its subsidiaries, designs, engineers, manufactures, and sells school buses in the United States, Canada, and internationally. The company operates through two segments, Bus and Parts. It offers Type C, Type D, and specialty buses; and alternative power options through its propane powered, gasoline powered, compressed natural gas powered, and electric powered school buses, as well as diesel engines. The company also sells replacement bus parts; and provides financing services and extended warranties related to its products. Blue Bird Corporation sells its products through drop ship and a network of dealers, as well as directly to fleet operators, the United States government, and state governments; independent service centers; and maintains a parts distribution center. Blue Bird Corporation was founded in 1927 and is headquartered in Macon, Georgia.

Blue Bird Q3 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Blue Bird delivered record Q3 results with 2,467 unit sales, $398 million in revenue, and $58.5 million of adjusted EBITDA, exceeding guidance for the eleventh consecutive quarter.
• Positive Sentiment: The company raised its full-year guidance to $210 million of adjusted EBITDA (14.5% margin) and narrowed revenue estimates around $1.45 billion, reflecting strong momentum.
• Neutral Sentiment: Industry backlog dipped to approximately 3,900 units due to tariff uncertainty, but it remains in the company’s “sweet spot” and is expected to recover as pricing stabilizes.
• Positive Sentiment: Management is advancing a manufacturing transformation initiative focused on automation, material handling upgrades, and shop‐floor connectivity to drive future cost reductions and competitiveness.
• Positive Sentiment: Alternative-powered buses represented 61% of unit mix (271 EVs sold) with over 500 EVs in backlog, and a new $100 million share repurchase program was authorized to return capital to shareholders.

Presentation

[Operator]

Good afternoon. Thank you for attending the Blue Bird Fiscal twenty twenty five Third Quarter Earnings Call. My name is Matt and I'll be the moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to our host, Mark Benfield, Head of Investor Relations. Mark, please go ahead.

[Mark Benfield, Executive Director of Profitability & Investor Relations at Blue Bird]

Thank you, and welcome to Blue Bird's fiscal twenty twenty five third quarter earnings conference call. The audio for our call is webcast live on blue bird dot 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.

[Mark Benfield, Executive Director of Profitability & Investor Relations at Blue Bird]

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 Weiskull and CFO, Rozvan Rajulescu. Then we will take some questions. Let's get started. John?

[John Wyskiel, President, CEO & Director at Blue Bird]

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 twenty twenty five third quarter.

[John Wyskiel, President, CEO & Director at Blue Bird]

Once again, the momentum continues and the Blue Bird team is doing a fantastic job and delivered record sales and adjusted EBITDA in the 2025. Rozvan will be taking you through the details of our financial results shortly. So let me get started with the key takeaways for the third quarter on Slide six. As shown in the first box, with record sales and adjusted EBITDA, we beat our Q3 guidance and increased our full year guidance as well. And this is despite the impact and challenges associated with the administration's policy on tariffs, which is currently creating some uncertainty in the overall market.

[John Wyskiel, President, CEO & Director at Blue Bird]

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 described 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.

[John Wyskiel, President, CEO & Director at Blue Bird]

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.

[John Wyskiel, President, CEO & Director at Blue Bird]

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 fifteen years ago, and we remain in the lead position.

[John Wyskiel, President, CEO & Director at Blue Bird]

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 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.

[John Wyskiel, President, CEO & Director at Blue Bird]

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 $58,000,000 or 14.7%. That's over $10,000,000 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 seven.

[John Wyskiel, President, CEO & Director at Blue Bird]

We sold 2,467 buses in the third quarter and recorded revenue of $398,000,000 a quarterly record and almost $65,000,000 ahead of last year. On the EV side, we sold two seventy one 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 $58,000,000 $10,000,000 stronger than last year, and free cash flow came in at $52,000,000 Razwan 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.

[John Wyskiel, President, CEO & Director at Blue Bird]

The consistent movement in tariffs just creates uncertainty. It puts school districts in the mindset to purchase when things just settle down. So with that, we have taken action to offer some certainty in our pricing into next year. Rasvan will talk to that further. But I will qualify a couple of other things.

[John Wyskiel, President, CEO & Director at Blue Bird]

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.

[John Wyskiel, President, CEO & Director at Blue Bird]

We're coming into a heavy replacement cycle, and there has been an industry supply issue the last few years, leaving pent up demand. So all of this points towards this situation being temporary rather than long lasting or structural. And to put it in context, we have consistently said that our sweet spot is in the 4,000 unit range for backlog. Third quarter average selling price for buses was up almost $7,700 per unit. But of course, this concludes the tariff recovery as part of our margin neutral tariff strategy.

[John Wyskiel, President, CEO & Director at Blue Bird]

And with tariffs excluded, pricing was still up quarter over quarter, and part sales totaled $26,000,000 in Q3. All 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.

[John Wyskiel, President, CEO & Director at Blue Bird]

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 $174,000,000 in revenue. Throughout the quarter, it was very encouraging to see Rounds two and three of the EPA Clean School Bus program continuing to flow to our end customers, and we are seeing Rounds four and five are still in play.

[John Wyskiel, President, CEO & Director at Blue Bird]

We are hopeful to soon hear when and how these funds will be administered. And reimbursement funds continue to flow for our $80,000,000 MES 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.

[John Wyskiel, President, CEO & Director at Blue Bird]

As a special note, during the quarter, we started production in our MicroBird Plattsburgh, New York plant. MicroBird is a joint venture between Blue Bird and Giordon. The new plant manufactures small buses, primarily targeting the Buy America U. S. Shuttle bus market.

[John Wyskiel, President, CEO & Director at Blue Bird]

As a reminder, this new segment entry was announced in December 2024 and will double our small bus capacity. I would like to congratulate the entire MicroBird team for doing an outstanding job. Similarly, we've continued to make progress on our Bluebird commercial chassis, which I spoke to last quarter. We are entering the final testing phase now and will be moving into production in 2026. This chassis is targeted to be best in class and we are excited about the opportunity.

[John Wyskiel, President, CEO & Director at Blue Bird]

But back to the overall business. We beat our guidance for the eleventh 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 Rosvan to walk you through our fiscal twenty twenty five third quarter financial results and full year guidance in more detail. Razvan?

[Razvan Radulescu, CFO at Blue Bird]

Thanks, John, and good afternoon. It's my pleasure to share with you the financial highlights from Blue Bird's fiscal twenty twenty five third quarter and year to date results. The quarter end is based on a close date of 06/28/2025, whereas the prior year was based on a close date of 06/29/2024. 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.

[Razvan Radulescu, CFO at Blue Bird]

We encourage you to read the 10 Q and the important disclosures that it contains. The appendix attached to today's presentation includes reconciliations of differences between GAAP and non GAAP measures mentioned on this call as well as other important disclaimers. Slide nine is a summary of the fiscal twenty twenty five third quarter record financial results. It was another great operating quarter for Blue Bird with highest ever EV volume, and they 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.

[Razvan Radulescu, CFO at Blue Bird]

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 $398,000,000 was $65,000,000 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 $58,000,000 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 $52,000,000 and $56,000,000 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.

[Razvan Radulescu, CFO at Blue Bird]

Looking on the right side at the first nine months of the fiscal year, we crossed already the $1,000,000,000 mark and posted all time record revenue of 1,071,000,000.000 and all time record adjusted EBITDA of $153,000,000 both improved versus then record last year's first nine months. Moving on to slide 10. As mentioned before by John, our backlog at the end of Q3 is just under our sweet spot at almost 4,000 units. While the tariff uncertainty significantly reduced orders in Q3, based on discussions with our dealers and customers and fundamental industry dynamics, we believe that this is temporary, and we expect the pace of orders to pick up in the rest of calendar 2025. Actually, with many trade deals already completed, for example, China and the European Union, and with USMCA still in effect, our line of sight to our costs has improved, and we implemented in July pricing actions that provide stability through the March.

[Razvan Radulescu, CFO at Blue Bird]

Our backlog at the end of Q3 includes over 500 EVs. Rounds two and three of the Clean School Bus program are flowing again, as confirmed by the EPA in April, and the funding for Rounds four and five is still in play in the future. Breaking down the Q3 $398,000,000 in revenue into our two business segments, the bus net revenue was $372,000,000 up by $64,000,000 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 two seventy one units, which is 67 units or 33% higher than last year.

[Razvan Radulescu, CFO at Blue Bird]

Parts revenue for the quarter was flat year over year at $26,000,000 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 $58,500,000 or 14.7% was higher by $10,000,000 compared with the prior year and showed a 20 basis point improvement. In fiscal twenty twenty five Q3, adjusted net income was a record $39,000,000 or $8,000,000 higher than last year.

[Razvan Radulescu, CFO at Blue Bird]

Adjusted diluted earnings per share of $1.19 was up by $0.28 versus the prior year. Slide 11 shows the walk from fiscal 'twenty four Q3 adjusted EBITDA to the fiscal 'twenty five Q3 results. Starting on the left at $48,200,000 the impact of the bus segment gross profit in total was $16,700,000 with volume, EV mix and pricing effects net of material cost increases of $14,300,000 and operational improvements of $2,400,000 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 Par segment gross profit was flat year over year, staying at a very strong level. Our fixed costs and other income were unfavorable year over year by 6,400,000.0 due to increased headcount and investments into our growth areas.

[Razvan Radulescu, CFO at Blue Bird]

The sum total of all of the above mentioned developments drives our all time record fiscal 'twenty five Q3 reported adjusted EBITDA result of 58,500,000 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 $173,000,000 in cash and further reduced our debt by $5,000,000 over the last year. Our liquidity stood very strong at a record $315,000,000 at the end of fiscal twenty twenty five Q3, an increase of $83,000,000 compared to a year ago.

[Razvan Radulescu, CFO at Blue Bird]

Additionally, we have executed another $9,000,000 tranche of share repurchases, which brings us to $49,000,000 completed over the last twelve months, with another $11,000,000 left to go on the existing program. More good news on this on the next slide. The operating cash flow was very strong at $57,000,000 driven by great operational execution and margins and small improvements in working capital. On Slide 13, we would like to give you an update of our capital allocation strategy for the next two years, fiscal twenty twenty six and fiscal twenty twenty seven, 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.

[Razvan Radulescu, CFO at Blue Bird]

On the left side, our $475,000,000 sources of cash consists of very strong cash flow from operations after tax and interest of $300,000,000 over two years, plus existing cash of approximately $175,000,000 We do not expect at this point to add new debt over this period. However, we do have borrowing capacity both on the revolver and in our long term debt agreement should this become necessary. On the right side, we have three uses of cash: organic and inorganic growth shareholders and small debt repayments. As far as growth is concerned, we plan to invest approximately $150,000,000 over two years with the MES program for the new plant and other manufacturing expansion and automation projects. And they have a not to exceed $50,000,000 over two years in each of these categories: R and D and engineering expenses, CapEx for growth and maintenance and potentially small M and A activities.

[Razvan Radulescu, CFO at Blue Bird]

Moving on to shareholders category. We are very happy to announce our next stock buyback program for up to $100,000,000 over the next two years. This is supported by our strong existing cash position and free cash flow generation, and they believe it is the best way at this point to return value to our shareholders in parallel with our profitable growth investments. Finally, in addition to the required term loan principal payment of $5,000,000 per year, we plan to maintain a conservative cash balance at each year end in excess of 50,000,000 On Slide 14, given our strong performance year to date, today we are raising our full year guidance for fiscal 'twenty five to $210,000,000 adjusted EBITDA and 14.5%. But first, looking at Q3 actuals, we have beat once again our guidance this past quarter, so we had a very strong and record breaking first nine months for the fiscal year.

[Razvan Radulescu, CFO at Blue Bird]

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 1,450,000,000.00 and we are raising our adjusted EBITDA to $210,000,000 or 14.5%, with a narrowed range of $2.00 5,000,000 to $215,000,000 Moving to slide 15. In summary, we are forecasting an improvement year over year with revenue up to approximately $1,450,000,000 adjusted EBITDA in the range of $2.00 5,000,000 to $215,000,000 or 14.5% and improved adjusted free cash flow of 90,000,000 to $100,000,000 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 $10,000,000 as our 50% fiscal 'twenty five portion of the new plant investment funded by the DOE MAS 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.

[Razvan Radulescu, CFO at Blue Bird]

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 twenty twenty six business environment and preliminary guidance. We continue to have a number of both tailwinds and headwinds at play this year. As tailwinds, we have strong bus demand, stable pricing and a solid industry backlog. We offer not only diesel and gasoline school buses, but we have the only propane fueled school bus in the industry, with clean fuel and best in class total cost of ownership.

[Razvan Radulescu, CFO at Blue Bird]

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 June. But headwinds, there is still some demand uncertainty driven by tariffs.

[Razvan Radulescu, CFO at Blue Bird]

However, the situation has been improving, and it appears to be stabilizing at reasonable levels. On the labor front, our second year of The U. S. Double Union contract provides for predictable wage increases. However, our health care and insurance costs continue to increase year over year.

[Razvan Radulescu, CFO at Blue Bird]

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 seven fifty EV buses and approximately 100 propane commercial chassis, driving revenue to $1,500,000,000 and adjusted EBITDA of $220,000,000 or 14.5 percent. 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 $1,600,000,000 and with adjusted EBITDA of approximately $240,000,000 Starting in 2029 and beyond, our long term target remains to drive profitable growth to now even higher levels towards 1,800,000,000.0 to $2,000,000,000 in revenue, comprising of 12,000 to 13,500 units, including 1,000 to 1,500 units commercial chassis and generate EBITDA of $280,000,000 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.

[Razvan Radulescu, CFO at Blue Bird]

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

[John Wyskiel, President, CEO & Director at Blue Bird]

Thank you, Rasvan. Let's move on to Slide 19. We've shown this slide on several earnings calls, so I won't spend too much time on it today as the priorities remain consistent. The chart on the left side of the page outlines our Bluebird value system as a company, taking care of our employees, delighting our customers and our dealers and delivering profitable growth. And the right side of the page shows how we get there.

[John Wyskiel, President, CEO & Director at Blue Bird]

And of course, the objective of delivering sustained profitable growth for our investors is at the center of it all. And when you turn to Page 20, I want to remind everyone again of Bluebird's history and resilience. Over its history and more recently after the COVID and inflationary period that affected the entire industry, we restructured our commercial and manufacturing practices to improve our business. So looking at twenty twenty five and beyond, we are really coming into our moment. Rozvan took you through the guidance for fiscal twenty twenty five, and I'm showing you some of those key metrics at the midpoint guidance on this page.

[John Wyskiel, President, CEO & Director at Blue Bird]

First, our bookings outlook shows volume increasing 3% over fiscal twenty twenty four. Consistent with the last call, net revenue at $1,450,000,000 will be a new record for Blue Bird, up 8% from fiscal twenty twenty four. And adjusted EBITDA guidance of $210,000,000 is just under 15% higher than our fiscal twenty twenty four results. Importantly, we are planning on a strong 14.5% adjusted EBITDA margin in fiscal twenty twenty five, up 90 basis points from fiscal twenty twenty four. And finally, we are forecasting to grow EV unit sales to 900 buses in fiscal twenty twenty five, up 28% from last year.

[John Wyskiel, President, CEO & Director at Blue Bird]

On the right chart, you'll see there's a lot of pent up demand following the low industry sales over the last five years, and the bus 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 02/1930. 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.

[John Wyskiel, President, CEO & Director at Blue Bird]

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 Best Funding program will continue. It's a bipartisan initiative. It's 100% appropriated with rounds four and five still in play, and it eliminates harmful tailpipe toxins, benefiting our children and our communities. And we also remain optimistic on overall near term and long term school bus demand.

[John Wyskiel, President, CEO & Director at Blue Bird]

Again, we delivered record results for the quarter, increased our full year guidance and announced a $100,000,000 share repurchase program coming off our previous $60,000,000 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.

[John Wyskiel, President, CEO & Director at Blue Bird]

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 and A session.

[Operator]

First question is from the line of Mike Schlisky with D. A. Davidson. Your line is now open.

[Michael Shlisky, MD & Senior Equity Research Analyst at D.A. Davidson]

Yes. Good afternoon. Thanks for taking my questions here. Maybe if you could touch first on the order and backlog commentary that you've that you've that you've given us. I guess it's a two part question.

[Michael Shlisky, MD & Senior Equity Research Analyst at D.A. Davidson]

Mean, first, I mean, it doesn't or it doesn't doesn't start until after the holidays after, like, January or so. We focus plan for next year. It's usually a pretty slow season this summer. So was just kinda curious first if there's any seasonality we should be thinking about here. Are we not gonna know what's really gonna what's kinda really happening until January, February?

[Michael Shlisky, MD & Senior Equity Research Analyst at D.A. Davidson]

Maybe I'll just I'll just start with that as my first question.

[John Wyskiel, President, CEO & Director at Blue Bird]

Yes. Thanks, Mike. 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 Bluebird to the industry, the drop was within 03% of each other.

[John Wyskiel, President, CEO & Director at Blue Bird]

So really, means Bluebird and the industry came down. And then if you look at the backlog across the year and go to March, we were within 3% of where we were at the start of the year. The backlog really dropped in April and that coincides with Liberation Day and the tariff announcements. And I think our perspective is, that the districts just don't know how to deal with the uncertainty due to tariffs. And, you know, a bit of an analogy, but it's a bit like being on a plane, during turbulence.

[John Wyskiel, President, CEO & Director at Blue Bird]

You know, the passengers put on their seat belts, they buckle up, and they sit down because they just don't know what's gonna happen next. And the pricing certainty that we've extended into next year is, coming into smooth air. So the passengers, or in our case, the school districts, you know, can unbuckle and begin to move around. So we see this as something positive. Now again, a couple other things here, just more on the fundamentals.

[John Wyskiel, President, CEO & Director at Blue Bird]

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, you know, it's dropped, but it's temporary. We don't view this as something long term.

[Michael Shlisky, MD & Senior Equity Research Analyst at D.A. Davidson]

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

[Razvan Radulescu, CFO at Blue Bird]

Yes, Mike. This is Rajvan. 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.

[Razvan Radulescu, CFO at Blue Bird]

And, therefore, the schools are now feeling more comfortable to start to put again orders and know what the final price of the bus is gonna be at delivery.

[Michael Shlisky, MD & Senior Equity Research Analyst at D.A. Davidson]

Got it. 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 I I think folks wanna make sure that the margin tailwinds you've you've that you've got, the the clearly continuing are the results largely of the operational improvements and not simply a change in the mix to higher EV. Just some thoughts as to how how just how sustainable are the current margins even if the EV volumes change up or down from here?

[Razvan Radulescu, CFO at Blue Bird]

Yes, Mike. This is Rodvan. 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 plants 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.

[Razvan Radulescu, CFO at Blue Bird]

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

[John Wyskiel, President, CEO & Director at Blue Bird]

Yeah. And hey, 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. You know, we we definitely have some opportunities in that area when we look at our at our manufacturing processes. So I think looking back and then looking ahead, it'll be two different sources in terms of improvements.

[Michael Shlisky, MD & Senior Equity Research Analyst at D.A. Davidson]

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

[John Wyskiel, President, CEO & Director at Blue Bird]

Yeah. I think it's it's listen, Mike. It's 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, we're working on the business cases.

[John Wyskiel, President, CEO & Director at Blue Bird]

What that adds up to just yet, we don't know. But I do think there'll be some margin expansion opportunities.

[Razvan Radulescu, CFO at Blue Bird]

And, Mike, this is Rajvan. So, if you noticed on our long term outlook, we went straight to 16% plus. We skipped 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.

[Razvan Radulescu, CFO at Blue Bird]

We are still evaluating. So as things become clearer, we may update it in the future.

[Michael Shlisky, MD & Senior Equity Research Analyst at D.A. Davidson]

Alright. I'll keep an eye on that plus. Appreciate the help. I'll pass it along.

[Operator]

Thank you for your question. Next question is from the line of Greg Lewis with BTIG. Your line is now open.

[Gregory Lewis, Managing Director at BTIG]

Yes. Hi. Thank you and good afternoon and thanks for taking my questions. 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.

[Gregory Lewis, Managing Director at BTIG]

As I kind of look at kind of what is expected in the final quarter of the fiscal year and looking out at next year, I guess as we think about projected EV sales, how much visibility do we have to that related to backlog?

[Razvan Radulescu, CFO at Blue Bird]

Hi, Greg. It's Erasmus. 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. We have So 30 300 units surplus for next year if we don't get any orders, which is not the case.

[Razvan Radulescu, CFO at Blue Bird]

We still have rounds two and three flowing, so we are continuing to receive orders from those. We will have, at some point, rounds four and five coming into play. We don't know yet exactly when, but we are expecting that from the EPA. And we are working on a couple of discrete opportunities for certain fleets, for example, EV business, that, each one in itself could be more than a 100 units or a couple of 100 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.

[Razvan Radulescu, CFO at Blue Bird]

So we feel very good about the seven fifty midpoint right now.

[Gregory Lewis, Managing Director at BTIG]

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

[John Wyskiel, President, CEO & Director at Blue Bird]

That's a great question. Yes. No, it's a great question. So of course, we talked about rounds four and five, and then you have state funding There's about a billion dollars plus improve approved there.

[John Wyskiel, President, CEO & Director at Blue Bird]

And some of the states you've already touched on, New York, California, Oregon, Illinois, Michigan, I mean, are the the prime, states. And then as well, as Rosvan mentioned, some discrete opportunities well. So I think there's definitely opportunity looking at that when you boil it down to the stateside.

[Gregory Lewis, Managing Director at BTIG]

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

[Razvan Radulescu, CFO at Blue Bird]

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.

[Razvan Radulescu, CFO at Blue Bird]

I would say there are two exceptions to that that might come into play. One is to the extent that we will sell a higher number of either fleet or GSA units, that creates an account receivable that takes more than normal to collect the cash. So that may carry from one quarter to the other. And then secondly, to the extent that we decide is necessary from a supply chain, others either stability or tariff play, we might do some pre buy of inventory to ensure we can produce and we can lock in certain prices. So those are the two things.

[Razvan Radulescu, CFO at Blue Bird]

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 calls.

[Gregory Lewis, Managing Director at BTIG]

Great. Super helpful. Thanks and congrats on a great quarter.

[Razvan Radulescu, CFO at Blue Bird]

Okay. Thanks, Greg.

[Operator]

Thank you for your question. Next question is from the line of Eric Stine with Craig Hallum. Your line is now open.

[Eric Stine, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Hi, everyone. Thanks for taking the questions.

[Michael Shlisky, MD & Senior Equity Research Analyst at D.A. Davidson]

Hey, Hey.

[Eric Stine, Senior Research Analyst at Craig-Hallum Capital Group LLC]

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, you seeing school districts opt to go propane, maybe if you are the extent of potential share gains or conquest wins from other OEMs?

[Razvan Radulescu, CFO at Blue Bird]

Eric, this is Razwan. 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.

[Razvan Radulescu, CFO at Blue Bird]

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.

[Eric Stine, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Okay. All right. Thanks for that. 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.

[Eric Stine, Senior Research Analyst at Craig-Hallum Capital Group LLC]

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.

[Razvan Radulescu, CFO at Blue Bird]

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 to our results that we are able to work with our customers and pass through certain increases when they happen.

[Razvan Radulescu, CFO at Blue Bird]

In terms of tariffs, we are fortunate that we are not that exposed to tariffs. Majority of our sourcing comes from North America. And with USMCA still in place, so Canada and Mexico are in a good spot for us. Where we had higher exposure was on the EV, especially from China. That seems to have stabilized at the 30% level.

[Razvan Radulescu, CFO at Blue Bird]

And also, the 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 offer the 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.

[Razvan Radulescu, CFO at Blue Bird]

But in general, we believe we can navigate this to a margin neutral outcome for us.

[Eric Stine, Senior Research Analyst at Craig-Hallum Capital Group LLC]

Okay. 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 pushbacks on those increases, but it's just more about the volatility than anything else?

[Razvan Radulescu, CFO at Blue Bird]

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

[John Wyskiel, President, CEO & Director at Blue Bird]

Yeah. And maybe just one other point. And And when you talk about pricing, because one of the things we we took a look at was how the sources of funding come in, which is really through property taxes. And we did a a study looking back, you know, it was basically from 2020 to current. And what we found is our pricing has not outrun property taxes.

[John Wyskiel, President, CEO & Director at Blue Bird]

So it means that, you know, from our perspective, there's there's room, and this thing isn't fatigued.

[Razvan Radulescu, CFO at Blue Bird]

Yeah. 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 2025 calendar

[Operator]

Thank you for your question. Next question is from the line of Chris Pearce with Needham. Your line is now open.

[Chris Pierce, Senior Analyst at Needham & Company]

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

[Razvan Radulescu, CFO at Blue Bird]

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

[Chris Pierce, Senior Analyst at Needham & Company]

Okay. And thanks for that. And if I look at the long term side you guys consistently update, you know, it used to have EVs and those are for the idea. The thought was that those were added to margins, but you sort of swapped out EVs for now a low level of chassis. Is chassis additive to margins or is that not the right way to think about it?

[Chris Pierce, Senior Analyst at Needham & Company]

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 kinda curious what happens or what gives you confidence to put these numbers out for the first time.

[Razvan Radulescu, CFO at Blue Bird]

Yeah. So this is Razvan. So in terms of the EV projection, in terms of mix for the medium to long term, obviously, with the recent changes both to 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 are previously forecasting. Chassis being one of them, this brings both revenue enhancement and it comes with good margins, so it's profitable growth.

[Razvan Radulescu, CFO at Blue Bird]

And then secondly, from the Microboard, our expansion in The US, especially now with the new plant acquired in Plattsburgh, New York, and addressing the shuttle bus by America segment, that will bring us additional net income, so addition to the bottom line. So overall, we have now different engines of growth that we are folding in. And in terms of the confidence for the volumes for the commercial chassis, We have been talking with several customers at different ratios, and they 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, 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.

[Chris Pierce, Senior Analyst at Needham & Company]

Okay. Perfect. And just lastly, if round four and round 20 round five money does come back, is that thought of as a mix shift within units and that goes back to you guys are able to drive the same margin by engine type, or is that additive to units, additive to margins? Like, what's the right way to think about that?

[Razvan Radulescu, CFO at Blue Bird]

Yeah. So so rounds four and five, didn't really go anywhere. There was just some question about are they still in play, and so far, the answer is yes, they are. In terms of total units, at this point, we maintain our stance that we want to operate on one shift, and we will be able to expand our production capacity with the new plant under the MES program that we are continuing to refine the planning of. And therefore, for the midterm, NEEV will be more of a mix change.

[Razvan Radulescu, CFO at Blue Bird]

However, for the long term and with the new plant, it could also represent an addition to the total volume.

[Operator]

You for your question. Next question is from the line of Craig Irwin with ROTH Capital Partners. Your line is now open.

[Craig Irwin, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Good evening and thanks for taking my questions. Congratulations first on 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?

[Craig Irwin, MD & Senior Research Analyst at Roth Capital Partners, LLC]

A lot of companies have a set amount of price they like to put through each year, and then they add or factor 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?

[Razvan Radulescu, CFO at Blue Bird]

Yes. Hi, Craig. This is Razvan. Thanks for the question. So we have been on a pricing strategy that has a cadence of every six months.

[Razvan Radulescu, CFO at Blue Bird]

So two price increases per year over the last more than two years right now. And the level of price increase was roughly two percentage time, give or take a little bit. And this was in line with our forecasted economics, inflation, different cost of goods sold cost of goods sold increases that we see either from our own labor with the USW contract or from our suppliers. So this is the normal level that we've put in place. In terms of tariffs, We announced at the March, we had roughly a 2% tariff related pricing action.

[Razvan Radulescu, CFO at Blue Bird]

And now we have put another announcement in place coming October 1. We are adding another roughly one to 1.5 percentage points to that. So tariffs will go up in October, and then, therefore, they will also be, constant through March. So that's where we are right now.

[Craig Irwin, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Understood. Thank you for that. And then another product that's of significant interest right now is your Class five, six 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.

[Craig Irwin, MD & Senior Research Analyst at Roth Capital Partners, LLC]

You're making it on the exact same line that you're making or I guess you've got two lines where one, you can run it through on the production cells. And there's a hunger out there for propane, right? Your success in the school bus market has educated the broad trucking industry on the benefits, the economic benefits of that spark spread. Can you maybe talk a little bit about the ability to pull forward some of those volumes versus what you have in your forecast?

[John Wyskiel, President, CEO & Director at Blue Bird]

Yeah, Craig. So a couple of things. So, yeah, I I mean, admittedly, we took a a cautious view on it. But right now, we're building demos, and we're, you know, gonna 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.

[John Wyskiel, President, CEO & Director at Blue Bird]

As as Rozvan 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.

[John Wyskiel, President, CEO & Director at Blue Bird]

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.

[Craig Irwin, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Okay. Understood. And then last question, I may. SG and A has seen some growth over the course of the last year. Now everyone understands that the business is tracking really well.

[Craig Irwin, MD & Senior Research Analyst at Roth Capital Partners, LLC]

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 and 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?

[Razvan Radulescu, CFO at Blue Bird]

It's Chris. So definitely, the growth in SG and A will taper off. We have been invested investing heavily in the last couple of years in adding some headcount in strategic areas, also in engineering, have invested in different powertrain projects that are coming still with 2027. So I would say for '25, 2026, you can expect some low single digit growth in SG and A, but definitely the revenue growth should outpace the SG and A growth.

[Craig Irwin, MD & Senior Research Analyst at Roth Capital Partners, LLC]

Understood. Well, thanks for taking my questions and congratulations again on another really solid quarter.

[Operator]

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

[John Wyskiel, President, CEO & Director at Blue Bird]

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. And should you have any follow-up questions, please do not hesitate to contact our Head of Investor Relations, Mark Benfield.

[John Wyskiel, President, CEO & Director at Blue Bird]

And finally, Blue Bird continues to be stronger than ever and has an amazing future ahead as we approach our one hundredth anniversary in a couple of years. Thanks again from all of us at Blue Bird, and have a great evening.

[Operator]

That concludes the conference call. Thank you for your participation. You may now disconnect your lines.

Participants

Executives

• Mark Benfield, Executive Director of Profitability & Investor Relations
• John Wyskiel, President, CEO & Director
• Razvan Radulescu, CFO

Analysts

• Michael Shlisky, MD & Senior Equity Research Analyst at D.A. Davidson
• Gregory Lewis, Managing Director at BTIG
• Eric Stine, Senior Research Analyst at Craig-Hallum Capital Group LLC
• Chris Pierce, Senior Analyst at Needham & Company
• Craig Irwin, MD & Senior Research Analyst at Roth Capital Partners, LLC