Q3 2024 Earnings Summary
- Diversified Powertrain Portfolio: Blue Bird is uniquely positioned with a mix of propane, gasoline, and electric buses—advantages over competitors that rely mainly on diesel—which better meets the stringent 2027 emissions standards and provides cost benefits through reduced extra hardware requirements.
- Supportive Government Funding & Order Surge: The company benefits from strong federal backing, including the EPA’s Clean School Bus Program and DOE grants, which are expected to drive a robust order surge, particularly in electric buses.
- Expanding National Fleet Business & Margin Improvements: Continued success with national fleet contracts, coupled with record margins and improved pricing strategies, highlights a strong demand and profitable business mix moving forward.
- Rising cost pressures: The recent USW collective bargaining agreement is expected to increase operating costs by about 1% of revenues on a run rate basis, while continued material and labor inflation could further compress margins.
- Lower EV deliveries in the near term: Guidance indicates a reduction of about 100 EV units in Q4 and a lower production run in the first half of fiscal '25, which could negatively impact revenue growth and profitability.
- Dependence on federal funding program timelines: Delays or uncertainties in EPA rebate program orders and delivery timing—especially with orders being back-end loaded for fiscal '25 and beyond—pose risks to revenue predictability and growth.
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EV Guidance
Q: Are EV volumes conservative?
A: Management confirmed that lower EV volumes are expected in the first half of fiscal '25, with a guidance range of 1,000 to 1,300 units, anticipating a surge later in the year as delayed orders are pushed to fiscal '26. -
Long-Term Margins
Q: Can margins exceed 15% eventually?
A: They noted that while the current EV mix may lower per-bus margins, the long-term outlook is set at 15% and potentially beyond as operational improvements continue. -
Q4 Outlook
Q: Why are revenues expected to be lower in Q4?
A: Management explained that Q4 will have one less workweek due to a July 4 shutdown, combined with lower EV deliveries and the full effect of the new labor agreement adding about 1% in cost pressures, leading to slightly lower revenues compared to Q3. -
Cost Inflation
Q: How will inflation affect gross margins?
A: They mentioned that ongoing material and labor inflation, including the impact of a new collective bargaining agreement costing about 1% of revenue, adds pressure on margins, though regular price increases are expected to help counteract this. -
National Fleet Business
Q: How is your national fleet business performing?
A: Management highlighted stronger participation in national fleet business, successfully using a mix of propane, electric, and diesel solutions, with improved delivery times helping secure this business. -
Federal Funding Risk
Q: Can federal bus funding be reversed politically?
A: They expressed confidence that reversal is very unlikely given the bipartisan support and that funds have already been awarded, ensuring stability in the program. -
EPA Grant Impact
Q: What is the impact of EPA bus grants?
A: The guidance indicates that with EPA rounds two and three, Blue Bird is positioned to win roughly 30% of those orders—about 1,900 buses over fiscal '25 and '26—with many orders expected to accumulate in the second half of fiscal '25. -
Diesel Emissions
Q: How do diesel emissions affect your products?
A: Management stressed that stringent 2027 diesel emissions standards give Blue Bird an edge by offering propane, gasoline, and electric products, whereas competitors relying mainly on diesel will face higher costs and stricter requirements. -
Tracking Prototype
Q: What’s the status of your tracking prototype?
A: They reported that the prototype, which was well-received at recent trade shows, is undergoing customer validation and is expected to enter commercial production in 2025.
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