Q4 2024 Earnings Summary
- Robust EV Pipeline and Order Growth: Management expects fiscal ’25 EV deliveries to surge—with guidance for around 1,150 EV buses and strong order extensions—even if some orders are delayed due to infrastructure planning. This indicates sustained underlying demand and a compelling growth story for EVs.
- Operational Efficiency Driving Margin Expansion: Q&A responses highlighted significant productivity gains—reducing production cycle times from 40 days to only 12–14 days—which improves working capital utilization and strengthens profitability. Alongside effective pricing increases accepted by customers, these improvements support a bullish margin outlook.
- Resilient Pricing Strategy and Customer Acceptance: The company’s regular price hikes (e.g., a $3,500 increase per bus) have been well received by customers, evidenced by strong bid win rates and competitive positioning. This pricing discipline is a key driver of sustained revenue and margin growth, reinforcing the bull case.
- Dependence on federal incentives: There is significant reliance on the EPA Clean School Bus Program and related federal funding, with several Q&A responses highlighting uncertainties around rebate extensions, infrastructure-related delays, and policy changes that could affect future EV orders and deliveries.
- Uncertainty in EV delivery timing: Multiple Q&A exchanges underscored that customers’ need to secure charging and infrastructure leads to order delays and extensions, which could disrupt the expected surge in EV bus deliveries and affect near-term revenue recognition.
- Ongoing supply chain and cost pressures: Despite improvements, there remain concerns over fragile supply chain conditions and potential variable cost increases. If these cost pressures are not effectively contained or passed on to customers, overall margins could come under pressure.
-
Long-Term Guidance & CEO
Q: Why shift to 2028 and update CEO search?
A: Management explained that the long‐term target moved to 2028 because the new facility won’t ramp up until the first half of 2027, delaying capacity benefits, and they are actively searching for a successor after the planned retirement; this reflects thoughtful planning for sustainable growth. -
EPA Program Outlook
Q: Will EPA support continue post‑2027?
A: Management expects that as costs fall and battery prices decline, the EV business will stand on its own with additional state and local support, reducing reliance on EPA funding after fiscal 2027. -
CapEx Spending
Q: Is the $50M CapEx above normal levels?
A: They clarified that the $50 million is extraordinary spending above their typical $25 million CapEx, reflecting targeted investments for the new plant. -
Order Surge Timing
Q: When will the EV order surge begin?
A: Management anticipates the surge in orders to start towards the end of the second quarter, positioning delivery increases later in fiscal 2025. -
Pricing Strategy
Q: How are customers responding to price hikes?
A: Management noted that their twice‐annual pricing increases, including a recent $3,500 uptick, have been well received, as evidenced by high win rates and competitive bids. -
Parts Growth
Q: What growth rate is expected for parts in '25?
A: They are targeting low‐single‐digit revenue growth of about 5–6% in the parts segment, consistent with recent performance. -
Alternative Power Mix
Q: Will non‑EV options remain popular?
A: Management emphasized that alongside EVs, they continue to push propane buses for their best total cost of ownership, ensuring a balanced mix in the portfolio. -
Productivity Improvements
Q: How much more can production efficiency improve?
A: They highlighted significant gains, reducing production lead time from 40 days to 12–14 days, with ongoing lean manufacturing initiatives expected to further enhance efficiency. -
Seasonal Production
Q: Why is fiscal '25 guidance seasonal?
A: Seasonality is driven by holiday shutdowns, resulting in lower production in Q1 and higher capacity in Q3, which management attributes simply to the number of production weeks available. -
One-Time Expenses
Q: Are the $6M one‑time SG&A expenses recurring?
A: Management explained that these expenses stem primarily from a bonus accrual and some consulting costs, which are non‐recurring and not expected in subsequent quarters. -
Industry Share Gains
Q: Is market share increasing amid industry dips?
A: While not focusing on share explicitly, management noted that as competitors resolved earlier production issues, a surge in volume is anticipated in fiscal '25, indirectly benefiting their competitive position. -
EPA Waivers Impact
Q: How do recent EPA waivers affect funding continuity?
A: Management expressed confidence in ongoing bipartisan support and indicated that the waivers help maintain funding stability, ensuring continued program benefits.
Research analysts covering Blue Bird.