Blue Bird Corporation Price & Performance (BLBD)

Thank you, and welcome to Bluebird's fiscal twenty twenty five first quarter earnings conference call. The audio for our call is webcast live on bluedashbird.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 are subject to risks, 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. Bluebird disclaims any obligation to update the information in this call. This afternoon, you will hear from Bluebird's President and CEO, Phil Horlock and CFO, Blue Radioleski. Then we will take some questions. So let's get started. [indiscernible] Thanks, Mark, and good afternoon to everyone.

It's great to be here and to share with you our financial results for our I'm very pleased to tell you that our momentum from last year has not slowed down at all. With the Blue team doing a fantastic job in delivering near record adjusted EBITDA and margin in the Rasband will take you through the details of our financial results shortly, So let me get started with the key takeaways for the on Slide 6. The headline says, we achieved near record quarterly profits in the which is particularly impressive as it has the fewest working days of any quarter in the year. Shown in the first box, we beat guidance and are maintaining our full year guidance. And that's despite the impact on our business of the President's executive orders. More to come on that a little later. As we look at the drivers, this terrific result it really is about continuing to deliver the plan that we laid out a couple of years ago. Which focuses on making significant improvements across our entire business. Market demand for school buses continues to be very strong. And the backlog for Bluebird Blue buses was at a healthy 4400 units at the end of the representing almost six months of production.

This bodes well for pricing, and profit margins. Bus prices were again higher than a year ago on every combustion engine model and we are priced competitively As we can see from bid results, our overall win rate, You will recall that on prior earnings calls, [indiscernible] expected surge in EV orders toward the December, 2024 as orders were being submitted to meet the deadline for RANS two and three of the federally funded Clean School Bus program. These rounds represent almost $2,000,000,000 in funding for electric and propane powered buses. Well, despite the EPA sub subsequently allowing extensions to that EV order deadline, we saw a spike in our EV orders the backlog at the standing the record seven sixty five EVs, and that's 22% higher at the and a substantial 82% above the same time a year ago. In a few minutes, I will cover where our EV unit sales and backlog down today. We continue to sell a strong mix of alternative powered vehicles, and maintain our position as the undisputed leader in this segment which we have held for more than fifteen years. We're also reinvesting back into the business too. Selectively upgrading facilities, installing lead manufacturing processes and developing exciting new and differentiated products that will hit the market in the next two to three years.

And continue to enhance the plant working environment for employees. This investment is resulting in some of the best manufacturing performance the company has ever seen with higher efficiencies and increased throughput. As a result of all these accomplishments, our profitability and margin was the second highest coupon result that we've ever achieved with an adjusted EBITDA of $46,000,000 just $2,000,000 below last year's record, with an exceptional adjusted EBITDA margin 15%. Now since the virtually all industries and businesses have been monitoring and responding to the executive orders issued by President Trump on Jan. 20, and we are no exception. We are dealing with those executive orders that could impact our business namely the pausing of federal funding and new tariffs, which are certainly in a state of Blue, and I will cover these in a couple of slides. But first, let's take a closer look at the financial and key business highlights for the on Slide 7. [indiscernible] We sold 2130 buses in the and recorded revenue of $3.14,000,000 dollars just about the same as last year. By the way, volume for last year and this year was higher for more than fifteen years what is typically a seasonally challenged quarter As I mentioned earlier, adjusted EBITDA of $46,000,000 was just $2,000,000 below the record we set a year ago when we had a 10% sales mix of EVs compared with just 6% this year.

More significantly, we achieved a 15% margin equal to last year with a 94% mix of combustion engine vehicles sold, While we enjoy the profit contribution of EVs, it should be noted that we achieve about the same percentage margin on all of our internal combustion powered buses or ICE vehicles, as they are called. We are not reliant on EVs to achieve a 14% to 15% EBITDA margin and are highly profitable in all of our products. We are confident that we achieved best in industry margins and with a 94% mix of ICE buses sold, our exceptionally strong results highlight the underlying strength and profitability of our core business, And finally, adjusted free cash flow for the quarter was $22,000,000 an increase of $23,000,000 Overall, we achieved outstanding financial results with a high mix of ICE buses at 94% of unit sales. Now on the right hand side of the slide, you can see some of the operating highlights for the business. As I mentioned earlier, demand continues to be strong with our firm order backlog today representing 7 reflecting a backlog of over 4700 buses. Selling prices for each ICE bus about 6% higher than a year ago reflecting both pricing and a richer option take.

However, the lower EV mix of of 6% compared with 10% last year resulted in the average vehicle selling price being close to last year at $135,000 per unit. Parts sales totaled $26,000,000 in representing a solid 6% growth over last year and a typically slowest sales quarter of the year for our parts business. Turning to alternative powered buses, represented a 51% mix of unit sales in This compares with typically less than a 10% to 15% mix our major competitors. We benefit from the higher margins and higher unaloyalty of our Guess and Pro sales, which are exclusive to us in the industry. As previously mentioned, we have seen a spike on EV orders from late last year and by this Monday, we have close to a combined 1000 EVs sold or in our order backlog, for Our latest full year forecast reflects 1000 EV units sales for the full year so we are well positioned to deliver on this projection. [indiscernible] Incidentally, the current backlog of electric vehicles represents about $2.50,000,000 dollars in revenue which is almost double the value at the end of a year ago. Now with the President's executive order in place to pause EPA on federal funding programs for up to ninety days, to allow a review of the programs I will cover the status and confidence of funding for these EB buses on the next slide.

I also have some late breaking news was released late yesterday regarding executive order to pause federal funding programs and disbursements of funds. It is very impactful I'll cover this shortly. I'm pleased to announce that late last year, we signed our contract with the DOE for their 50% funding of our new plant expansion in Fort Valley. Representing $80,000,000 of a total investment $160,000,000 This means that DOE funds are appropriated and we have a contractual agreement in place with the DOE. Per the President's executive order, this grant funding is presently paused, although we are confident it will proceed following review. However, the pause in funding for this program should be impacted too by the late breaking news that I just referred to. I'll cover this shortly. As a reminder, this project adds 400 well paying American jobs with clean buses built by a century old American company located in Middle Georgia, providing our children with health and safety benefits of clean air. Last month, it was announced that I will be stepping down as President and CEO to enjoy my second retirement for Bluebird Blue, [indiscernible] replace me [indiscernible] Now John has terrific operational experience having held senior and executive positions at automotive system suppliers Magna, Dana and BorgWarner.

He also knows Bluebird very well. Covering being General Manager at our manufacturing location in Brantford, Canada in the past. I look forward to helping John and Bluebird in any way I can from my seat on the Board.

And finally, we beat guidance, which is the eighth consecutive quarter in which we've done so and we are holding our full year guidance. With a 15% adjusted EBITDA margin and near record profits in I'm very proud of our team's accomplishments.

Let's now turn to Slide 8 and review the Penn on Bluebird EV sales this year. As you can see on the left hand chart, we have about 1000 EVs either sold or in our backlog today. Our full year forecast reflects EV sales of 1000 buses for this fiscal year. Now we've analyzed the disposition of each unit in the backlog to determine the EPA funding through the Clean School Bus program has yet been distributed to the customers for these orders. On 25% of the total sold or backlog units, representing two fifty school buses, customers have been fully approved for a rebate or grant from the EPA but they have not yet received their funds. Distribution of these funds is now on pause for up to ninety days pending a review of the funding program for the President's executive order. So let me now cover the late breaking news that is highlighted in yellow in the box at the bottom of this slide. The CFO of the EPA issued a memorandum late this afternoon potentially states that the court has declared that federal fund disbursements for programs funded under the Infrastructure and Investment Jobs Act and the Inflation Reduction Act, shall not be paused while litigation is ongoing or a court Blue otherwise.

It further states disbursement of funds will continue. Clearly, this is good news for Bluebird Blue. As customers will now start receiving federal funding again from this Clean School Bus program, helping to address our two fifty audit EV buses for which funds have not yet been received. Additionally, this news should apply also to the Department of Energy funding of our new plant in Fort Valley, so that the present pause in funding disbursement from the DOE will be lifted. As a reminder, funding for this program was covered by the inflation Reduction Act. We will continue to monitor funding progress in this area and any changes in the EPA support of a clean school bus program. So let's continue now with the left chart on the slide and the funding disposition of our EV orders. 75% of the total units have funds in play and are either already sold or scheduled for production and delivery. Incidentally, almost 30% of the backlog represents buses that are fully funded with the help of state and local programs. With this funding uncertainty, we have taken a number of actions actions to support the sale of 1000 EVs in First, have reprioritized our production schedule to build fully funded buses first.

Second, we have shifted production of buses with paused EPA funding to later in the year. Third, we are pursuing several of the opportunities for EB orders utilizing state and local funding to mitigate the risk of unfunded EPA orders. And fourth, with a collaborative effort involving school bus OEMs and several fleet customers, we have garnered significant political support for the resumption of the Clean School Bus program funding. Bottom line, have seven fifty EV buses either sold or funded in the backlog today. And we are pursuing funding for at least another two fifty buses including significant state and local funding opportunities and we are confident in our 1000 unit sales forecast. We also remain confident that the Clean School Bus program will be resumed as it fits the charter and the mission of the EPA. Let me now move to Slide 9 and assess the tariff On imported Canadian and Mexican goods on hold for thirty days while negotiations are underway with The U. S. Now Bluebird is exploring various sourcing options with suppliers to mitigate the [indiscernible] Our position is that any potential government tariffs will be passed through to the end customer so there will be no net financial impact on Bluebird Blue.

Should the tariffs be implemented as originally proposed, we would initiate a 5% price increase on all non EV bus orders to cover the cost increase We will continue to monitor and respond to any changes in tariff plans. I'd now like to hand it over to Rasman, to walk through our financial results and our guidance, in more detail. Over to you, Rasman. Thanks, Phil, and good afternoon. It's my pleasure to share with you the financial highlights from Bluebird's Blue results. The quarter end is based on a close date of December '28, 2024, whereas the prior year was based on a close date of Dec. 30, 2023. We will file the 10 Q today, February '5, 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. 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 11 is a summary of the near record financial It was a great operating quarter for Blue a great start for the new fiscal year and EBITDA guidance provided in the last earnings call on all metrics.

In fact, we delivered the second best adjusted EBITDA percentage mark for Bluebird Blue, at close to 15%. The team pushed hard and continued doing a fantastic job and generated two thousand thousand one hundred and thirty unit sales volume was just above prior year level. Near record consolidated net revenue of $3.14,000,000 dollars was only $4,000,000 lower than prior year, driven by pricing actions that materialize in this quarter, which nearly offset the reduction in EV volumes as guided last time. Adjusted EBITDA for the quarter was an E record $46,000,000 driven by high margins increased parcels and margins, offset by increased labor costs due to the USW labor agreement, which is now in full effect. The adjusted free cash flow was a record Q1 of $22,000,000 and $23,000,000 higher than prior year This result was due to continued strong profitability across all parts and powertrain types and improvements in working capital. Our liquidity position at the end of this quarter was a record $2.80,000,000 dollars Moving on to Slide 12, as mentioned before by Phil, our backlog at the end of continues to be very strong.

At approximately 4400 units including the record 17% Blue. In fact, at the January,, we have now approximately 1000 EVs sold in and in backlog, as mentioned by Phil before. Breaking down the $3.14,000,000 dollars in revenue into our 2 business segments, The BaaS net revenue was $2.88,000,000 dollars down by $5,000,000 versus prior year due to lower EV mix nearly offset by increased prices across non EV products. As a result, our average BaaS revenue per unit decreased from $138,000 to $135,000 dollars or approximately 2%. EV sales in were 132 units, 74 units or 36% lower than last year [indiscernible] ARS revenue for the quarter was $26,000,000 representing a growth of $2,000,000 or 6% increase compared to the prior year. This great performance was in part due to increased demand for our parts of the fleet is aging, as well as supply chain driven pricing actions and throughput improvement. [indiscernible] Gross margin for the quarter was a near record 19.2% or 80 basis points lower than last year due to the expected impact of the USW labor agreements now in full effect. In adjusted net income was $31,000,000 or $1,000,000 higher than last year.

Adjusted EBITDA of $46,000,000 or 14.6% was slightly lower compared with prior year by $2,000,000 and 40 basis points. Adjusted diluted earnings per share of $0,.92 was up $0,.01 versus the prior Slide 13 shows the walk from adjusted EBITDA to the result. Starting on the left at $4,760,000,0.0 the impact of the Bas segment gross profit in total was negative $410,000,0.0 Split between volume, EV mix and pricing effects, net of material cost increases of positive $220,000,0.0 and operational cost increases of negative 630,000,0.0 largely driven by the USW labor agreement. A favorable development in the parts segment gross profit was $90,000,0.0 driven by higher sales and improved margins as mentioned earlier in the call.

Our fixed costs and other income were favorable year over year by 140,000,0.0 The sum total of all of the above mentioned developments drives our near record reported adjusted EBITDA result of $4,580,000,0.0 or 14.6%. Developments year over year also on the balance sheet. We ended the quarter with a record $136,000,000 in cash and reduced our debt significantly by over $40,000,000 over the last year. Our liquidity set very strong at a record $2.80,000,000 at the a $95,000,000 increase compared to a year ago. Additionally, we have executed another tranche of shares buyback of $10,000,000 during which brings us to $20,000,000 completed over the last six months with another $40,000,000 left to go on the existing share buyback program approved by our Board.

The operating cash flow was a very strong for at $26,000,000 driven by great operational execution and margins and improvements in working capital. On Slide 15, we want to share with you our updated guidance. Looking at actuals, we have beaten every metric our guidance is So we had a very strong start for the fiscal year. Recent executive orders and uncertainty of the timing for the EPA round two and three funding disbursements, drove us to reduce the upside for the AV volumes for the second half of the fiscal year. However, given our sold and backlog position of EV units at the January,, we maintained this as our target for On the adjusted EBITDA side, we are maintaining our previous guidance for and we are widening the range on the lower side by $5,000,000 each for and also due to the timing uncertainty of the impact from newly proposed 25% tariffs, on Mexico and Canada imports to The USA. We have a relatively lower exposure to China sourcing the respective 10% tariffs proposed. Nevertheless, all of our non EV new quotes issued since the January, have a conditional tariff close of 5 based on our estimated cost of goods sold increases run rate newly proposed 25% tariffs for Canada and Mexico and 10% for China.

We are also prepared to apply these tire surcharges to existing non EV orders in the backlog at the appropriate time.

On the AV side, we actually reduced our list prices by $25,000 in line with our cost improvement as a step towards getting to total cost of ownership parity with the internal combustion engine buses over time, as planned and indicated in our long term outlook. Any tariff related pricing surcharges on EVs will be evaluated and announced once we have more clarity of scope and timing we have already secured some strategic inventory of pre buy EV components at the calendar year. Saw an increase in raw inventory during We are maintaining our revenue to a range of $140,000,000,0.0 to 150,000,000,0.0 and we are confirming our adjusted EBITDA of 200,000,000 or 14% with a widened range of $185,000,000 to $2.15,000,000 dollars or 13.5% to 14.5%. We'll provide further updates at the May, after we close and gather further insights into the EPA program timing and any tariff changes. On Slide 16, we want to reiterate our thoughts on fiscal business environment and our total year guidance. We continue to have a number of both tailwinds and headwinds at play this year. The tailwinds we have strong Blue demand, stable pricing and still a very high industry backlog. We offer not only diesel, and exclusive gasoline school buses, but we have the only propane fuel school Blue in the industry with clean fuel and best in class total cost of ownership.

As mentioned last time, we are not a 1 trick pony. We are also leading in the EV segment with over 2000 EV buses on the road The state subsidies continue to be strong EV pure play competitors are going out of business and they have already approximately 1000 EVs sold and in backlog at the January,.

Blue headwinds, there is some uncertainty regarding the timing of the EPA clean School Bus program future rounds. Also supply chain, is still fragile at times while improving overall. The material costs and supply inflation pressures are still present and the newly proposed 25% tariffs on Mexico and Canada and 10% on China import Once implemented, will impact our cost of goods sold over time with both pricing countermeasures already announced and ready to be implemented as needed. In summary, we are maintaining our units and revenue midpoint guidance to 9,250 and 1,450,000,000,.00 respectively, with approximately 1000 of these. We are also confirming our adjusted EBITDA guidance of $200,000,000 or 14% with a range of $185,000,000 to $2.15,000,000 dollars and 13.5% to 14.5% margin.

Moving to Slide 17. In summary, we are forecasting an improvement year over year with revenue up to approximately $1,450,000,000,.00 adjusted EBITDA in the range of $185,000,000 to $2.15,000,000 dollars or 13.5% to 14.5%, and adjusted free cash flow of $40,000,000 to $60,000,000 The free cash flow guidance is in line with our typical target of 50% of adjusted EBITDA and it includes on top the extraordinary CapEx of $50,000,000 with our 50% of the new plant investment funded by the DOE MASK grant which is currently proceeding as planned. Moving on to Slide 18. Today, we are reconfirming the medium term outlook at 14% margin with volume of up to 10000 units generating revenue around $160,000,000,0.0 and with adjusted EBITDA of approximately $2.25,000,000 dollars Starting in 2028 and beyond, our long term target remains to drive profitable growth to higher levels. Towards $1,850,000,000,.00 to $2,000,000,000 in revenue comprising of 11000 to 12000 units and generate EBITDA of $2.70,000,000 to 300,000,000 Blue or 14.5% to 15% plus at best in class levels. The growth comes not only from improved EV mix, driven by sustained state funding, and improved individual cost of ownership over time, but also from our new Bluebird Blue chassis addressable market expansion as well as our Microboard joint venture, New Plant expansion in The U. S. We continue to be incredibly excited about Brewer's future Now I will turn it back over to Phil.

Thanks, Rasman. That was a great explanation of our results and our financial outlook. Let's now move on to Slide 20.

I've shown this slide on several earnings calls I won't spend much time here today. As our priorities and our strategy are unchanged, as they should be. The chart on the left illustrates the 3 priorities that continue to drive us. Taking care of our employees, delighting our customers and our dealers, and delivering profitable growth. The chart on the right provides more texture around the specific strategies that we are pursuing every day at Blue that both align with our priorities and drive our four year profitable growth plans. At the center is our ultimate objective to drive sustained profitable growth. As you look at the accomplishments in we restructured the business from losses to record profitability achieving a full year margin of 8%. For we achieved a transformational improvement of 6 percentage points to a 14% adjusted EBITDA margin, This was truly a breakout profit year for Bluebird where we more than doubled our profitability over We look to solidify and build on this Then over the next few years, we plan to grow our margin to 15% and beyond. So let me now start to wrap up the earnings call with our outlook for the business on Slide 21.

Rasman took you through the guidance and I'm showing some of the key metrics at the midpoint of guidance here. We are being prudent in our bookings outlook. Only increasing volume by 3% over at this time as we still deal with a few select supply chain issues. But we manage those very well in 2024 and if we can build more in we will just as we did last year.

Net revenue of $1,450,000,000,.00 will be a new record for Blue up 8% from Adjusted EBITDA guidance of $200,000,000 is 9% higher than our record results. Importantly, we are planning on a robust 14% adjusted EBITDA margin in up 40 basis points from as we look to maintain a momentum after such a surge in margin, [indiscernible] And finally, we are looking to grow EV unit sales to 1000 buses in up 42% As you can see on the right chart, there was a lot of pent up demand following the low industry sales between 2020 and 2022 and the bus fleet has aged by a couple of years, ACT is forecasting a compound annual growth rate of 6% through to 2029. And that's great news for our business and great news for our profit outlook. So let me now wrap up the call with a summary of the key messages that we want to convey today on Slide 22. Our results with 94% of our sales being traditional Intel combustion engine vehicles was exceptional. Second highest profit ever at $46,000,000 and a margin of 15%. Further, this is the lowest volume quarter of the year and additional profit growth is ahead of us.

Our margins are strong on all powertrain offerings. We enjoyed a higher unit profits from EV vehicles and will pursue this business aggressively but we are not dependent on them. Our strength is in having the broadest range of products and all having very strong margins. EV propane, [indiscernible] [indiscernible] That is how we win. We will sell around 1000 EVs this year more than 40% higher than a year ago. We have 1000 EV buses either sold or orders in hand today of which 75% have funding in place and we have more orders to come this year. We beat our guidance for the eighth consecutive quarter and we are maintaining full year guidance despite disruptive executive orders because our plans are robust. We remain confident that the Clean School Blue funding program will continue It's a bipartisan program approved by Congress in 2022 it's 100% appropriated It's been wildly successful and oversubscribed. And it provides clean air eliminates harmful tailpipe toxins for the benefit of our children, and our communities. We are maintaining our financial outlook for a sustained 14% to 15% Blue margin in the medium and longer term, with solid growth plans supporting this including the expansion of our addressable market, by supplying commercial chassis to U. S. Last mile delivery businesses and the doubling of Micro Bird JV Bus Capacity Following Its Plant Acquisition In Plattsburgh, New York late last year.

The future is incredibly bright for Bluebird Blue. We are on a trajectory of sustained profitable growth with the best team and best product offering in the industry. I want to thank our nearly 2000 employees for all their hard work and dedication in delivering a great result.

On top of a record full year profit last year. As well as our outstanding dealer body, who are critical to our success. That concludes our formal presentation today. I'd now like to hand it back to our moderator, for the Q and A session.

Thank you. We will now begin the Q and A session.

Please pick up your handset Our first question today comes from Eric Stine with Craig Hallum.

Your line is now open.

Hi, everyone. Thanks for taking the questions. [indiscernible] hey, so I can appreciate, I mean, given all the uncertainty, I certainly can appreciate taking the low end of the EBITDA guidance down, but I do notice you took the high end up. By the same amount. And so I'm just wondering if you could talk through some of the scenarios that would get you to the high end of that range?

Eric, thanks for the question. This is Rajwan. So obviously, we had a very strong We beat the upper end of the guidance we gave last time.

And we see strong momentum on several of the non EV powertrains we are selling. So at this point, we do see a scenario where we can reach above the previous two ten up to two fifteen. However, definitely, we need some higher EVs than 1000 to reach this number. But overall, we feel very good about the upper range of two fifteen being achievable at the current point is the current premise. Eric, if I can just add, Brazam is right. I mean, with the order backlog of 4700 buses we have today, we have good line of sight, right? And with the pricing increase in Oct. 0 and as the year goes by that beds in. As we start to build those units and that will come through. So and then we look at as where we are today, like Rosman said, lowest quarter of the year, lowest volume quarter of the year, great profitability, big guidance. And we project increased volume through the rest of the quarters. And so we have some confidence there. We'd like to think this latest reversal of the pause [indiscernible] President Trump had put in place, executive order is really going to help us get moving now again.

We took it down a little bit. We took the bot, we took the range cut the range down as you know. And think we're now we're feeling a lot better about what that's heading. And Minister DeSeylden, looking at the comments he's been making on his strategy and his plans, moving forward with the EPA, it gives me a lot of confidence here that we'll get this program fully up and running again. Got it. And then, I guess, I don't necessarily want to put you on the spot, but I mean I'll ask it anyways. I mean I know there's some uncertainty Because this pause is on unspent funds Blue there's some ambiguity there. Does unspent mean, I mean, is [indiscernible] Does that count as unspent? Or does allocated put it in a different category? And maybe these are questions that just can't be answered but I would love your thoughts. Yes. I mean, look, there are 2 things. First of all, we have two fifty buses out there where the EPA when they approve a customer to get their rebate or grant, they say, for an audio bus, we'll provide you with your rebate and grant.

That's what these people have done. They've ordered the buses. So it's a firm rock solid oil. I should add by the way, since the pause came in play, we're not a single cancellation. 1 order.

So that's the first part of it. But the resumption now here isn't is a resumption of the program. It's not just a resumption of disbursement, it's a resumption of a proven program that was approved by Congress in to get that moving again. So we're going to look for new orders going in now and new orders from customers and new orders coming to us and and the dispersion of funds firing up again very quickly. Got it. Maybe last 1 for me. Just on pricing. I would assume you talked about the ability if needed in response to tariffs to apply higher prices to your backlog. Is that is your ability to do that because of steps that you taken over the last couple of years? I know your pricing was really overhauled especially during COVID and coming out of COVID. Just speak to your ability to do that if needed?

Definitely, there is some precedent measures we had to put in place about two or three years ago where we had to go back on the backlog. However, the situation these days with tariffs, it's something that it will be experienced by everybody across all the goods that are crossing the borders. Should these tariffs ultimately be put in place. So in a way, it's almost like a sales stack that the government is imposing, and we are ready to do it and push it through our downstream flow and collect the money from the ultimate end customer. Would add too, Eric, we already talked to our dealer network on this. Have a great dealer network. They've been through this before, as Russ said, post COVID.

They understand this isn't this is a little different, right? This is not like rampant inflation on commodities. This is U. S. Government deciding they want to tax products that are imported. And I think you understand that's going to be pass through.

Okay. I appreciate it. Thanks.

Okay. You bet.

Our next question comes from Greg Lewis with BTIG. Your line is now open.

Hi, thank you and good afternoon and thanks for taking my questions.

I did want to follow-up on kind of the tenor pace of the EV mix in this year and the guidance you called out that I guess EVs were 6% of kind of the mix. As I think about or as you kind of talk to the thousand vehicles in the guidance, I guess that points it to maybe being 17% of full year. How should we think about the progression of the EV mix, I guess, in the final three quarters of the year?

Greg, it's Rodman. Thanks for the question. I'll take it. So our 1000 unit is about 11% of the total year volume that we are forecasting. So 11000 EVs on ninety two fifty units. And was at 6% and we are forecasting, as you can see on Slide 15, a progression going up to 200, 300, 400 respectively until [indiscernible] Greg, just a little bit of text here, just in case you're familiar, but on the last earnings call, we signaled very clearly that we're going to get a low mix in the because what happened was the round 1 of the EVRA EPA funding closed out in 2024. But the Rams two and three was just starting going right towards the end of the fiscal year of So there's a little bit of a lull between the program ending and the new 1 starting. And that's what we we knew that was going to happen. [indiscernible] [indiscernible] [indiscernible] once an order is cemented, that's when the EPA begins to process the rebate on the ground. Okay.

Yes, super helpful. And then my other question was [indiscernible] even last year in Nov. 0 when the new administration was coming in and they were flagging the potential for tariffs. It looked like and I guess we have a temporary pause or maybe a who knows when they'll be implemented. It looked like inventories and it looked like inventories went up in the the December versus the September. Could you talk a little bit about why those inventories line up? Is that kind of related to a lull or what was the company kind of maybe building up inventories ahead of some potential issues whether it was tariffs or concerns around supply chain just kind of some color around why that inventory spiked up sequentially this quarter?

Yes, Greg. Rosemar. So definitely, we took some measures to increase inventories and pre Blue some components for various reasons. Majority of the prebuy consists of EV components, batteries and some other components from the EV system. As well as some other components. So there is an aspect of ensuring supply chain stability with these measures At the same time, the threat of tariffs existed. But at that point, it was a bit unclear if and when and how much it could be. So it's more to ensure stability of supply chain than [indiscernible] Super helpful. Thank you for the time. [indiscernible] Our next question comes from Michael Slutsky with D. A. Davidson. Your line is now open. Hi. Good afternoon. This is Linda Wali on Cormac Suliski. Thank you for letting us ask questions. So my first question here is, I know we don't really have any finality on what does federal government might do with respect to the EPA program. But if they pull it tomorrow, what's your confidence level on hitting the $2.70,000,000 dollars to $300,000,000 long term guidance without as many EVs Linda, this is Rajvind. I'll take that question. So there are multiple multiple avenues of growth for our long term outlook.

Both on the top line as well as on the EBITDA. So we are standing by, as said in the prior remarks, in the prepared remarks, We are standing by by those numbers. We will drive the company up to $2,000,000,000 and to 15% Blue EBITDA. There is a certain EV mix growth that will still be driven by state and local funding, and potentially still some federal funding. We are driving down the total cost of ownership on EVs So slowly over time, they will reach parity with the internal combustion engines. We are entering a new area of addressable market with our Bluebirds commercial chassis. Which is an expansion and this will add both top line and bottom line results. And our joint venture Micro Bird we just announced in Dec. 0, we purchased a new factory in New York State. And that will over time double their production capacity. We have multiple engines of growth and we will execute on all of them and therefore we are standing by those long term targets, both for the revenue as well as the bottom line.

Got it. Thanks. And then I appreciate the clarification on the impact of tariffs. On Canada and Mexico, but I wanted to double click on the 10% tariffs on China. Could you elaborate on your level of exposure there? And if there is any impact with regards to your exposure there and yes, a bit more color would be helpful. Thank you.

Yes. So we have some limited exposure on China is the lowest of all those 3 countries mentioned. And we are monitoring it. We will assess it and we will take necessary actions Once we have a clear magnitude of those tariffs.

Yes, we don't have any major components sourced to China at all. They're all fairly it's a very small piece of our business. We understand exactly what it is, what the exposure would Blue, and we can handle that.

And maybe additionally, we are also evaluating countermeasures by resourcing parts that are currently sourced from China to potentially other Asian countries, or bring them closer Thanks for the color. And my last question good shape, what are some risks that we should be looking at for this quarter? Any concerns with regards to labor availability or I think for this quarter, we've got very good line of sight. We're obviously well in the middle of the quarter now, and I think it's going well. On plan, we expected. So think where we stand, we've got a great labor force. We know we great retention of our employees and we feel very strong about what we're doing. Supply chain is in good shape. Right now, it's the way it's running. And we're looking good.

I would also add the collaboration with USW is very good and we have feel very confident in our workforce and we have a good line of sight right now for the current quarter.

Awesome. Thank you for your time.

Excellent.

Thank you.

Our next question comes from Craig Irwin with Roth Capital Partners. Your line is now open.

Good evening and thanks for taking my questions.

First question I wanted to ask is the cost structure on your EV school buses. I know you've been working hard to explore new approaches, new avenues to take costs out of the bus. Can you maybe give us an update on the potential there over the next series of quarters? And I don't know if you have an update on tests you've been doing with potential alternate drivetrain OEMs. Anything you can share with us with us on that would be helpful.

Hi, Craig. It's Rosman. Thanks for the question. So we are now recently and it's in the prepared remarks, the fact that we reduced the price of our EV school buses by $25,000 over the prior level as mentioned repeatedly on our long term the first step towards that.

In terms of other technologies and new source I think we are not going to comment today on that. Work it's going on. And as always, work hard with all of our suppliers and partners to drive down the cost of the buses and essentially bring the total cost of ownership close to the 1 of the ICE powertrain school buses.

I would just add, Greg. I mean, This is competitive knowledge here. We are working with a number of alternative suppliers on different components right here to really help drive down our cost And I think we know that's going to be successful. We have plans in place I mean, I'll pick on 1 which you know about is the for example, we're going to be demonstrating demonstration program coming up shortly for our new commercial chassis that we're very [indiscernible] that means a different drive trend that we've used previously and we're excited about it and we'll be demonstrating that at the show with the ride and drive and customers get into that's a key growth initiative, but at a good cost point for our future. Good cost on the price.

Excellent. [indiscernible] That's good to hear.

So my second question is about The potential for a mix shift versus expectations If the executive orders actually do hold and we see funding support than previous previously expected for EV school buses. What's the potential to backfill that demand with something like propane? Do the propane customers typically wait for DERA funding or other relevant state or federal funding before they book orders with you, you. Can you talk about the potential for alternative solutions to be delivered to different school districts if we do see any real impact from the pause in EV funding. Sure. I'll pick that 1 on Craig. I mean, completely right with what you suggested. I mean, propane is a logical choice. In the marketplace. We've been delivering that our propane product with our partnership with Ford and Roche now for for the best part of I mean, after fifteen years or so, So it's a very strong product. The beauty of the propane product is it's a total lowest cost of ownership of any vehicle on the road, period. I mean, it is it will save money. There's a little bit of a premium to D [indiscernible] in terms of fuel and maintenance costs significantly every year, dollars 3,000 to $4,000 per Blue. [indiscernible] Nor subsidies are required to make that effective.

That's the beauty of that product. And it's proven. We got a lot on the road. Fantastic testimonials. That's what we'd look to also I should add, it's clean, it's ultra low emissions, It already meets the 2027 standards of NOx at point, let's exceeded actually 0.02 grams per brake horsepower hour. So it's a fantastic product and we're very pleased to have it. Of course, it's exclusive to us. So absolutely right. That would be the shift that I think would be logical for customers and certainly for ourselves to make. We've done it before. Before eBase came on the market, that was the clean product that we pushed we pushed hard and we're been very successful at it. And I think that's what we'd look to do going forward. Great. Well, thanks again for taking my questions. Thanks, Greg.

Thank you for your questions.

Our next question comes from Chris Pierce with Needham.

Your line is now open.

Hey, guys.

Good afternoon, everyone.

Can you just talk to yourself, Thomas, I see First Student, is it school district stakeholders is there any sort of working group to put together a consistent message to go to DC and kind of not necessarily lobby for these funds because it's a lot that's been passed, but I would just hear some sort of offensive measures that you're taking around disbursement of these funds if it exists at this time?

Yes, good question, Chris. I mean, we touched on that a little bit in our discussion around what we were doing to with the EPA funding and so on in our presentation. But let me give a little color on that. We absolutely do have such a consortium. We've been to Washington Blue the senators, on both sides of the party, right, Democrat and Republican, particularly Republican Blue.

And we have that our competitor part of that group. We have our customers who are in that group. It's a very it's a quite influential group. And a lot of access, a lot of recognition. And I think we made the comment in there that from all of our meetings, I can tell you we've had outstanding thoughts presented to us by all of those parties that this Clean School Bus program is the right thing to do what we need to do for our children, the clean air for our kids. So, yes, that's been going very well and we're going to keep pushing that. Just this week, that team was together in DC, for example, earlier this week exactly what you said. Presenting the case and garnering support and it's just been nothing but supportive is what I would say.

Okay.

And then just a point of clarification. Delivered 132 EU school buses You have 1000 in backlog right now. But you're only guiding to 1000 for the full year because of 75% of that 1000 is there's money in place for that and the rest is uncertainty. And that is what's driving the wider range on the adjusted EBITDA. I just want to make sure I have that buttoned up.

Yes, Chris, actually that's not correct. So what we said is we have 1000 between what we sold in Blue the backlog. So the total is 1,000 for the year right now.

Perfect. Okay.

And then just curious, why not Go on, sorry. Go ahead, Phil. Go ahead, Phil. Well, no, I mean, the Yuraj right. That's the wrong reason. Certainly, on the bottom end, we pulled it it wide well, we widened both on the top and the bottom end because you're right, 1000 units is a lot of units, right? But when we put together that forecast, we were working with a from the President Executive Order. And that the product there was no the eBay programs will be in process by the EPA on the Clean School Blue program. No customer requests will be in progress. Now just that pause has been lifted. So we'll take a look at that. We'll see what it means. But right now, we just want to recognize that this all the time that orders get put in and then the grant follow. What we were recognizing the fact when we lowered it down to the at least talk about the 1000 versus [indiscernible] that with the pause, there's a potential that all of those units may not got supported certainly within the fiscal year. So we could build them. Obviously, I think we feel a little more optimistic now of where we are today and we'll progress where this thing goes.

But certainly, we just wanted to be a little prudent in managing this correctly. But we'll update you on our next earnings call, see what happens on this. A review should be over. Of the EPA's programs by that time. And like I said before, we are very confident that this program will continue. Very confident based on the support that we've garnered, from our trips up the hill and doing up the hill there in Washington. [indiscernible] that's why we have to put the range where it is. I mentioned earlier, the high end of the range, I think also talks about this resumes more orders come in.

We can see ourselves pushing beyond original guidance that we had. So that's why the higher top end and the lower bottom end of the range is still the same midpoint.

Okay. Okay. I appreciate the detail.

And then just lastly, what would you say to investor who ask why you guys aren't more aggressive with the buyback given the multiple stocks you're hitting at? Well, I mean, we do well, we we have an agreement right now through our board of what we spend per quarter. Dollars 10,000,000 per quarter is sort of where our bulk year is, so we want to be at. That's what we've been working on. And question you raised there. It's interesting, but certainly we'll we'll we and we have to recognize we can only do this when the wind is what's called an open window comes. So that window opens two days after our earnings call. And it closes fifteen days before the So that's the wind that we have to operate in. And we manage it very $10,000,000 there in the last round and we'll do the same again this time. Okay.

Thanks for everything. Thank you.

Thank you for your questions. There are no longer questions in queue. So I will turn the conference back to Phil Horlock for any closing remarks.

Okay.

Well, thank you, Sierra, and to all of you joining us on the call today. I just want to say that I think last year you saw momentum increasing throughout the year. As profitability improved as we move through the quarters. And we've continued on the same path by delivering an impressive 15% EBITDA margin in the And that's with a 94% mix of ICE vehicle. I just want to stress that. We said before, we've got a 14% to 15% margin with a very high mix of ICE vehicles. We call that best in class.

We do appreciate Bluebird Blue we do look forward, however, to keep updating you all again 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. Just 1 more thing. On a personal note, this will be my thirty fifth and final Bluebird earnings call I step down as CEO just twelve days from now. I want to thank all of you for the time we spent together either on these calls or meeting in person with many of you. I would say the company has never been stronger than it is today and has a fantastic future as we approach our one hundredth year anniversary now just a couple of years. With John Wieskeel taking over as CEO, I know Bluebird will be in good hands. John is a seasoned business professional, a great leader and a veteran of the auto business.

And he knows Bluebird well from the time he spent here. He understands our strategy and our priorities and he's very excited to be joining us and meeting you along the way. Now with John, Razvan and Mark leading and attending the many conferences that they have, the investor conferences those be in every year, you can be assured that continued strong effective and clear communication and discussion of Bluebird's quarterly results and the business outlook. Want to thank you all again for the team here at Bluebird Have a great evening.

That will conclude today's conference call. Thank you all for your participation.

You may now disconnect your line.