Executive Overview

Blue Bird is the leading independent designer and manufacturer of school buses. The company distinguishes itself by dedicating its focus to the design, engineering, manufacture, and sale of school buses and related parts. Blue Bird is recognized as an industry leader for school bus innovation, safety, product quality/reliability/durability, efficiency, and lower operating costs. The company is also the market leader in alternative powered product offerings with its propane, gasoline, and all-electric powered school buses.

Blue Bird sells its buses and parts through an extensive network of U.S. and Canadian dealers that are exclusive to Blue Bird on Type C and Type D school buses. The company also sells directly to major fleet operators, the U.S. government, state governments, and authorized dealers in certain limited foreign countries.

Impact of Supply Chain Constraints on Our Business

During the second half of fiscal 2020 and first half of fiscal 2021, COVID-19 significantly impacted demand for new buses and replacement/maintenance parts. Although demand strengthened in the second half of fiscal 2021, the company and the automotive industry as a whole began experiencing significant supply chain constraints. These disruptions had a significant adverse impact on Blue Bird’s operations and results due to higher purchasing costs, increased manufacturing inefficiencies, and an inability to complete bus production to fulfill sales orders.

Towards the end of fiscal 2022 and into fiscal 2023, there were slight improvements in the supply chain’s ability to deliver parts and components. However, the higher costs charged by suppliers continued to have a significant adverse impact on operations and results, as cost increases outpaced the increases in sales prices charged for buses.

Supply chain disruptions continued into fiscal 2024, but the company was able to better navigate these challenges through improved manufacturing operations and periodic pricing actions to ensure increased sales prices kept pace with increased inventory costs. New bus orders remained robust during fiscal 2023 and 2024 due to pent-up demand and the industry’s inability to produce and sell buses during the latter half of fiscal 2021 and through fiscal 2024.

Impact of Russia’s Invasion of Ukraine on Our Business

Russia’s invasion of Ukraine in February 2022 had a significant negative impact on Blue Bird’s operations, cash flows, and results starting in the second half of fiscal 2022 and continuing into fiscal 2024. The disruption in the supply of materials like steel, oil, rubber, and resin resulted in significant volatility and increases in the prices of these commodities, which increased Blue Bird’s inventory purchase and freight costs.

Factors Affecting Our Revenues

Blue Bird’s revenues are driven by factors such as property tax revenues (a major source of school district funding), student enrollment and delivery mechanisms for learning, revenue mix, strength of the dealer network, pricing, buying patterns of major fleets, seasonality, and inflation.

Factors Affecting Our Expenses and Other Items

Blue Bird’s expenses and other line items are principally driven by cost of goods sold (materials, labor, overhead), selling, general and administrative expenses, interest expense, income taxes, and equity in net income or loss of non-consolidated affiliates.

Key Non-GAAP Financial Measures

The company uses Adjusted EBITDA, Adjusted EBITDA Margin, and Free Cash Flow as supplemental non-GAAP measures to evaluate performance. These measures provide additional financial metrics that, when coupled with the U.S. GAAP results, provide a more complete understanding of the company’s results of operations and the factors and trends affecting the business.

Segments

Blue Bird has two reportable segments: the Bus segment, which involves the design, engineering, manufacture and sale of school buses and extended warranties; and the Parts segment, which includes the sale of replacement bus parts.