BLBD Earnings Call

PercyLadies and gentlemen, thank you for joining us and welcome to Bluebird's fiscal 2026 third quarter earnings. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. I will now hand the conference over to Mark Benfield, Bluebird's Head of Investor Relations. Mark, please go ahead.

Mark BenfieldThank you and welcome to Bluebird's fiscal 2026 third quarter earnings conference call. The audio for our call is webcast live on blue-bird.com under the Investor Relations tab. You can access 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 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, John Wyskiel, and CFO, Razvan Radulescu. Then we'll take some questions. Let's get started. John.

John WyskielThanks, Mark. Good afternoon, everyone, and thanks for joining us today. It's an exciting day today as we're going to share our strong fiscal 2026 third quarter financial results and the continued significant progress we've made with our long-term strategy, including a very special announcement we made late this afternoon. Results for Q3 were once again very strong, and the Bluebird team delivered outstanding sales and adjusted EBITDA, beating guidance for the 15th consecutive quarter. Razvan will take you through the details of our financial results shortly, but let's turn to slide 6 where I will talk to some of the key takeaways for the quarter. First, Bluebird beat guidance on all metrics for the quarter. Again, we continue to manage the volatility associated with the administration's policy on tariffs well. Backlog for the quarter ended at 4,900 units inclusive of Micro Bird and just under 3,600 units for Type C and D. Operationally, metrics are pointing in the right direction and the team has been able to execute on a day-to-day basis while simultaneously working on our long-term strategy.

John WyskielIn terms of pricing, we remain extremely disciplined. Bus prices remain higher than the previous year and the previous quarter. As I continue to communicate, this process is just how we manage the business. In the All Power segment, Our dominance continues. Our EV backlog is just under 800 units and we have a strong EV order book into 2027. AltPower is a segment we created over 15 years ago. We are a pioneer in EV. Our propane powertrains have the lowest total cost of operation and our gas variant continues to be a market leader. With increased diesel prices at the pump, we believe AltPower is a great long-term play. And we continue to maintain our lead position. And finally, we continue to manage the impact 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. As I've said on every earnings call, it is our objective to position this business to be a strong long-term investment.

John WyskielLet's turn the page and take a closer look at the financial and key business highlights for the quarter on slide 7. We sold 3,525 buses in Q3 and recorded revenue of $517 million, $119 million above last year. On the EV side, we sold over 350 electric vehicles, 10% of unit volume, and our long-term outlook for EVs remains optimistic. Adjusted EBITDA for the quarter came in at $71 million, $13 million stronger than last year. And adjusted free cash flow came in at $28 million. Razvan will talk more about this and our outlook later in this call. Turning to the right side of the page, I'll touch on a few points. As discussed earlier, our backlog finished at a solid 4,900 units combined. As you know, backlog is a function of orders and production. Orders for the industry were up 7% on a trailing 12-month basis and Bluebird's order intake was up 9% for the same period. We feel good about our position in the school bus market, and I continue to reiterate the overall market fundamentals are still strong.

John WyskielThe fleet is aging, we are coming into a heavy replacement cycle, and there's been industry supply issues the last few years leaving pent-up demand. The midterm horizon continues to look very good for school bus volumes. Year-over-year selling prices for buses was up almost $10,000, but of course this also includes increased tariff recovery as part of our margin-neutral tariff strategy. With tariffs excluded, pricing was still up year over year, and parts sales totaled $25.5 million for the quarter. Alt-powered Bluebird buses represented a strong 54% unit sales mix for the quarter. Our powertrain strategy is a differentiator in the market and allows us to maintain stronger margins. For the quarter, we had 355 EVs booked and 776 EVs in our order backlog pushing into 2027. Again, we remain optimistic on EVs in the school bus sector. EVs are a perfect fit for school buses when you look at the duty cycle, available charging intervals, range, and the proven health benefits for our children.

John WyskielRounds 2 and 3 of the EPA Clean School Bus Program remain intact with funds flowing to our end customers. And the EPA has invited comments for 2026 funding, solidifying Rounds 4 and 5 for the program, consistent with what we've been communicating. We should understand very soon how and when the EPA will administer these funds. Overall, when you look at state funding and fleet EV mandates, we believe this market will remain relevant. And in the quarter, we closed on the Micro Bird transaction. This transaction brings us consolidated revenue with the Type A school bus and future growth in the commercial shuttle bus segment. It also brings us technology with the EcoTuned integrated EV platform. This transaction represents our strategic commitment for growth outside of the school bus segment. And putting the balance sheet to work. But finally, I have another exciting item to report. We made a very big move in the chassis market.

John WyskielLet's turn to slide 8, where I will talk about the exciting news we released earlier today. Our expanded collaboration into the Class 5 and 6 chassis market with Ford Motor Company and our asset purchase of Detroit Chassis LLC's Detroit assembly plant. Under the agreement, Bluebird will assume design, manufacturing, and sales responsibility for the next-generation F-53/F-59 commercial strip chassis. Additionally, Ford will supply to us its medium-duty next-generation Ford powertrain as part of this agreement. And finally, Ford and Bluebird intend to collaborate on the seamless customer transfer of fleet, RV, and specialty body manufacturers. This collaboration with Ford will run through the end of 2033 with the extension opportunity into 2036. As part of this significant market entry, Bluebird will also acquire Detroit assembly plant assets of Detroit Chassis LLC, the current contract assembler for the F-53/F-59 chassis.

John WyskielDetroit Chassis brings workforce, leadership, equipment, while Bluebird brings the overall design, and business enterprise expertise to support this overall arrangement. The purchase is anticipated to close in calendar Q1 2027, shortly after the current chassis ends production, and production of our new chassis is expected to start in calendar Q1 2028. For Bluebird, this arrangement and transaction focuses on the strategic value proposition of growth, technology, and collaboration. First, it expands Bluebird's total addressable market by $1.4 billion in a largely two-player market in both commercial delivery and RV segments. Also, the Ford-powered gas chassis is a competitive and dominant offering in this space. The collaboration will propel our market position in the stripped chassis segment. Second, this new chassis design will have considerable technical read-across into our new bus design. We also see that this chassis design will be scalable and facilitate expansion into other product offerings.

John WyskielThis technical approach will support even further growth down the road. And lastly, our collaborative approach with Ford will support an orderly transition with customers, enabling ease of entry into the market and mitigating risk. Overall, this is a very exciting announcement and is an important part of our strategy for the company. And as I said earlier, it brings tremendous opportunity for growth, technology, and collaboration. It positions us to be a growing player in the specialty vehicle market. It has certainly been another busy quarter with strong results and a very exciting announcement. So I'd now like to hand it over to Razvan to walk through our fiscal '26 third quarter financial results as well as our full year updated guidance in more detail. Razvan.

Razvan RadulescuThanks, John, and good afternoon. It's my pleasure to share with you the financial highlights from Bluebird's fiscal 2026 third quarter and year-to-date record results. The quarter end is based on a close date of June 27th, 2026, whereas the prior year was based on a close date of June 28th, 2025. We will file the 10-Q today, August 5th, 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. 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 10 is a summary of the fiscal '26 third quarter and year-to-date record financial results. Please note that fiscal '26 Q3 is the first quarter in which we are consolidating the Micro Bird results following our acquisition of the remaining 50% of the joint venture, which transaction closed on April 1st, 2026.

Razvan RadulescuIt was a strong operating quarter for our company, a great continuation after the first half of the fiscal year, and we beat our consolidated guidance provided in the last earnings call on all metrics. In fact, we delivered the best Q3 profit ever for Bluebird with $71 million in adjusted EBITDA. The team pushed hard and continued doing a fantastic job and generated 3,525 unit sales volume, which includes 1,235 Micro Bird units. The Bluebird unit sales were 7% below prior year level, driven by a relatively large number of GSA and fleet units in finished goods. As a result, Q3 consolidated net revenue of $517 million was only $119 million higher than prior year, to which Micro Bird consolidation contributed approximately $123 million. Adjusted EBITDA was a Q3 record $71 million, $13 million higher than prior year, and it includes the consolidation effect of Micro Bird of $8 million. The adjusted free cash flow was a solid Q3 of $28 million and $24 million lower than the prior year, driven by a seasonal increase in working capital and finished goods inventory for GSA and Fleet.

Razvan RadulescuOur liquidity position at the end of this quarter was strong at $259 million, and this is after the Micro Bird acquisition and paying down all their debt at close. The year-to-date results, including the consolidated Q3 for Micro Bird, are equally impressive. While units sold of 7,808 buses were above prior year by 916 units, the revenue grew 12% to $1.2 billion with record adjusted EBITDA of $172 million or $19 million above prior year. Free cash flow was also very strong at $100 million or $7 million above prior year's level. Moving on to slide 11, our backlog continues to be solid with approximately 4,900 units, including approximately 1,300 Micro Bird units and a total of approximately 800 EVs. Many of the EVs are already scheduled to be built and delivered in fiscal year '27. Let's break now the Q3 revenue of $517 million into 3 components. First, the Bluebird bus net revenue was $369 million, down 1% versus prior year due to higher finished goods inventory for GSA and fleet.

Razvan RadulescuHowever, our average Bluebird bus revenue per unit increased by $10,000. Bluebird EV sales in Q3 were 300 units, or 29 units higher than last year. Second, parts revenue for the quarter was almost flat at a strong $25 million. Third, this quarter we are consolidating Micro Bird revenue for the first time, and they contributed $123 million to our results with 55 EV units sold. Gross margin for the quarter was a strong 20% or 160 basis points lower than last year due to Micro Bird consolidation, which drove 180 basis points reduction. Adjusted EBITDA of $71 million was higher compared with prior year by $13 million of which the Micro Bird consolidation impact was $8 million. Adjusted EBITDA in percentage was mathematically compressed year over year due to the consolidation of 100% of the Micro Bird revenue in Q3 while adding only 50% incremental adjusted EBITDA after the joint venture acquisition. Excluding the Micro Bird consolidation effect, the percentage actually went up from 14.7% to a record Q3 of 16.1%.

Razvan RadulescuIn fiscal '26 Q3, adjusted net income was a record Q3 at $45 million, or $6 million higher than last year, with half of the delta coming from the Micro Bird consolidation. Adjusted diluted earnings per share of $1.28 was up 9 cents versus the prior year. Slide 12 shows the walk from fiscal '25 Q3 adjusted EBITDA to the fiscal '26 Q3 result before and after the Micro Bird consolidation. Starting on the left at $58.5 million, the impact of the bus segment gross profit in total was $0.7 million, split between volume and pricing effects, net of material cost increases of $6.2 million, and year-over-year healthcare cost increases, lower overhead absorption, and higher freight-in costs totaling negative $5.5 million. The parts segment gross profit was almost flat, as well as our fixed cost and other income, other expenses. However, the Micro Bird results improved year over year, shown here in the previous 50% joint venture format.

Razvan RadulescuThe above-mentioned developments drive our pre-consolidation record fiscal 2026 Q3 adjusted EBITDA results of $63.6 million, or 16.1%. The Micro Bird 50% joint venture consolidation added an additional $7.8 million for a total reported adjusted EBITDA of $71.4 million or 13.8%. Moving on to slide 13, we ended the quarter with $117 million in cash and reduced our debt by $5 million over the last year. This is after completing the Micro Bird acquisition during this quarter and paying down all their debt at close. Despite this, our liquidity remains strong at $259 million at the end of fiscal '26 Q3. The operating cash flow was solid for Q3 at $31 million, driven by great operational execution and margins, partially offset by increases in working capital and finished goods inventory for GSA and Fleet. On slide 14, we want to share with you our updated fiscal '26 forecast. Looking at our record Q3 results, we have beaten again our guidance this past quarter, so we had a very strong fiscal year to date.

Razvan RadulescuWe continue to forecast a strong Q4 at approximately 14% adjusted EBITDA margins despite a small reduction in units sold versus the previous forecast. We are guiding total year revenue to the same midpoint and with a range of $1.74 to $1.76 billion. And given our beating Q3, we are raising our guidance for adjusted EBITDA to $247 million or approximately 14% with a range of $245 to $250 million. Moving to Slide 15. In summary, we are forecasting an improvement year over year to a new record with revenue up to approximately $1.75 billion, adjusted EBITDA in the range of $245 to $250 million, or 14%, and adjusted free cash flow of $125 to $135 million, in line with our typical target of approximately 50% of adjusted EBITDA. And after accounting for the extraordinary CapEx of up to $5 million, as our 50% fiscal '26 portion of the new plant investment funded by a reconfirmed DOE MASP grant, which is currently proceeding with the permitting phase.

Razvan RadulescuMoving on to slide 16, we wanted to remind you of our medium and long-term outlook after the Micro Bird acquisition. Medium-term outlook was a $275 million adjusted EBITDA or 13.5%. Our long-term target was to generate EBITDA of $325 to $375+ million or 14% to 15% plus. Moving on to slide 17. As John mentioned before, we announced earlier today that we have expanded our collaboration with Ford into the commercial strip chassis gas-powered segment. Starting in 2028, the next generation of the F-53/F-59 chassis will be designed, manufactured, and commercialized by Bluebird with Ford powertrain. This expands our addressable market into the core of the last-mile delivery segment as well as Class A RV segments. It represents an investment in 2027 of approximately $90 million for Bluebird, of which $50 million is CapEx. The manufacturing will begin in early 2028 in the current Detroit assembly plant of Detroit Chassis LLC, which Bluebird will acquire in 2027 in an asset deal after the end of production of the existing F53 and F59 products.

Razvan RadulescuThis new segment is expected to grow for us to a level of approximately 10,000 units in 2030 and generate longer-term adjusted EBITDA of $100 million plus, or 14% to 15%. This collaboration replaces in the first step our previous planned entry into this segment with a 10 times higher potential. We are very excited about this opportunity as a further step on our profitable growth strategy. Moving on to slide 18, you can see our updated medium and long-term outlook post Ford collaboration expansion. Starting with the short-term outlook, the pro forma results for 2026 and '27, including a full year of Micro Bird consolidation, indicate approximately $2 billion in revenue and approximately $260 million of adjusted EBITDA, or 13%. This is before the non-capitalized portion of the Bluebird chassis investment from the expanded Ford collaboration, as well as exciting new product investments currently in the early stages of planning.

Razvan RadulescuWe will provide full year and quarterly guidance for fiscal '27 in the next earnings call. In terms of capital allocation, we intend to refinance and expand our credit facility by the end of calendar year 2026 and maintain a leverage ratio under 2x adjusted EBITDA. And we continue to be opportunistic in share buybacks with approximately $90 million remaining on the existing program. Moving to the right in time, what used to be our low and long-term target of $2.3 billion in revenue moves now closer into midterm with $300+ million in adjusted EBITDA. The long-term outlook is raised now to approximately $3 billion in revenue and $400 to $500 million plus in adjusted EBITDA or 14.5% to 15% plus. Now this is what we call profitable growth. We continue to be incredibly excited about Bluebird's future, and now I will turn it back over to John.

John WyskielThank you, Razvan. Let's move on to slide 20. I want to take this opportunity to remind everyone of our long-term strategy, which consists of 4 elements and positions the company for the future. First, as an almost 100-year-old company, Business continuity and long-term stability is a core element. This includes investing and updating our manufacturing facilities and products. A great example is our new assembly plant, which is planned to start production in late calendar year 2028, and our commitment to a highly competitive new bus design. Infrastructure and competitive products are an essential part of our plan. The next element is the theme that has been consistent in the last few years, profitable growth. Of course, the school bus market is projected to grow over the next few years, and our new plant will allow us to capitalize on that. But for Bluebird, it also means expanding our total addressable market by entering new adjacencies.

John WyskielThe Bluebird Commercial Strip Chassis we announced today and the Micro Bird Buy America Shuttle Bus are great examples. Margin expansion is the next element. This area focuses on advancing competitiveness and cost reduction. For Bluebird, this means continuing our Industry 3.0 automation initiative, but as well, the new plant will allow for further Factory of the Future opportunities, including Industry 4.0 initiatives. And the last area is putting the balance sheet to work. The Micro Bird acquisition and the Detroit Chassis asset purchase are great examples of this. And support our safe and accretive approach in this area. And even after these transactions, Bluebird continues to have a pristine balance sheet, strong liquidity, and solid cash flows. This will allow us to continue to be strategically opportunistic. Overall, we have a balanced strategy that positions the company for the future and delivers value to our shareholders.

John WyskielLet's turn to slide 21. The fundamentals for the school bus segment remain strong, as shown on the left side of the page. We are moving into the replacement cycle for the high-volume period between 2017 and 2019. We know there is pent-up demand remaining from the COVID period, and there are still over 250,000 buses over 10 years old. And funding remains stable for this market. All of this contributes to a strong ACT outlook of approximately 6% CAGR over the next several years. But with the addition of Micro Bird earlier this year, we now get the consolidation benefit of Type A school bus and the growth associated with entering the Buy America commercial shuttle bus market, as shown on the right side of the page. But adding today's big announcement for the commercial strip chassis market, these combined moves increase our total addressable market by 150% on units and over 85% on dollars from just one year ago.

John WyskielThese transactions represent our commitment to our strategy as we reshape Bluebird from a pioneer in the school bus industry to a growing player in the specialty vehicle market. I'll wrap it up on slide 22. This great company, an iconic brand, is almost 100 years old. It has stood the test of time and is positioned for the future. We delivered outstanding results again in the third quarter of 2026. We continue to demonstrate credibility by delivering on our targets. We are excited about the Micro Bird acquisition made earlier this year and extremely excited about the Ford collaboration in Detroit Chassis LLC asset acquisition announced today. These are significant components of our long-term strategy and will position us to be a growing player in the specialty vehicle market. And looking ahead, our strategy, discipline, and demonstrated execution will set this company up for the future and deliver value to our shareholders.

John WyskielAs always, I want to thank our employees, our dealer network, supply partners, and of course our investors. All are critical for our success. I remain excited about Bluebird, and we continue to deliver great results and make significant progress in our longer-term strategy. This company is a great American story with such a rich history and an exciting future ahead. Thank you. So that concludes our formal presentation for today, and I'd like to now hand it back to our moderator for the Q&A session.

PercyWe will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster.

PercyThe first question comes from the line of Eric Stine with Craig-Hallum. Your line is open.

Eric StineHi everyone, thanks for taking the questions.

Eric StineEric.

Razvan RadulescuHi Eric.

Eric StineHey, um, so would love to start with the, uh, the Ford agreement. Um, it certainly makes a lot of sense what you're doing, uh, but just want to make sure I understand it. So Did you say that this kind of becomes your primary path forward, or should we view this in addition to the fact that you've got excess chassis capacity in Fort Valley and, you know, that you're kind of going on two paths?

Razvan RadulescuHi, Eric.

John WyskielIt's John Wyskiel. Yeah, for sure. It's our primary path. You know, there's a lot of engineering work here to get through. And this one, we really, you know, we look at this as a real solid agreement as we get to break into a market and catapult into it with cooperation with Ford. So we're excited.

Eric StineGot it. And then in terms of the, you know, that excess chassis capacity that you have, is there something that, you know, you're— and maybe, you know, maybe this is TBD, but that you're thinking about that can be utilized for? Because I know that, you know, that has long been viewed as kind of an unrealized asset that could be put to work.

John WyskielYeah, we'll see down the road. I mean, right now there's no immediate need with what we've done with Detroit Chassis, of course, purchasing their assets. Down the road. I mean, there's some geography that could come into play, but again, it's not the immediate— not the immediate play we'll make.

Eric StineOkay. We're just on a follow-up. Is this—. Yeah, so it starts in Fiscal '28, and I know that you talked about in Fiscal '30 that you're thinking 10,000 units, you know, a little under half the addressable market. Should we think about that as a bit of a ramp from the start to that 10,000, or— and I guess you you just talked about thinking you may hit the ground running.

Razvan RadulescuSo the— hi Eric, this is Razvan. So the SOP is in the middle of the fiscal '28, they're about— so 2028 is a partial year as a ramp-up, and then 2029 we also consider it as a ramp-up year. But as you know us, we are conservative, so to the extent that we can accelerate the path to 10,000, we will. But at this point, we want to show a ramp to the 10,000 level, and there is upside potential longer term above this 10,000 for sure.

John WyskielYeah, and just another comment, Eric, I think you know this is largely a two-player market, so we view that favorably, obviously, coming into this space. And the F-53, F-59 was hugely successful in this marketplace, so us having the opportunity to take it over, we think, is great opportunity.

Eric StineYep. Got it. Okay. Thank you very much.

John WyskielThanks, Eric.

PercyThe next question comes from the line of Michael Shlisky with DA Davidson. Your line is now open.

Michael ShliskyYes. Hi. Thank you and congratulations. To follow up on those last, the last question or two there about Ford's strip chassis production. Over the last 10 years, they've actually averaged over 15,000 a year, and you're only saying 12,000. That's maybe what would be a full production in your slide here. I guess, is that just— I guess, is it just being conservative, or have you heard of any fleets that have switched over? For example, Amazon going to the EV that they work on with Rivian or other folks just not using as many as they did, or is this just, you know, we'll see how it goes, but 12,000 is at least a large step of the way to full production?

Razvan RadulescuHi, Mike, this is Razvan. Yes, we are conservative, so there is room for higher numbers, but at this point we want to have a conservative business case also for entering into the market, and we have to execute on it, grow it, and as you know, also there is some cyclicality into this market. When you look at the RV business, that can have its ups and downs. And then also based on the large fleet acquisitions on the last mile delivery, you can also have some cyclicality. So look at this as our base case with upside potential from here.

Michael ShliskyOkay, great, great. You also mentioned that they'll be wrapping up production in the first part, very early 2027, it sounds like. Um, over the last bunch of quarters, they've been making a ton of these vehicles. They ramped up like 5x what they were making at the trough of the cycle. Um, but once the deal is completed, I'm guessing that between now and then they're going to build a ton more of these and they can sell off them during the time when they stopped making them and you've started to ramp up. If I'm not— if I'm wrong, correct me there. But I guess once they stop producing them Who will be in charge of selling that inventory down through the 2028-2029 ramp-up of the new model? And are you— as part of the purchase price or part of the purchase buying all that inventory, or is that going to be all still held by Ford until they're down to, you know, zero?

John WyskielYeah, no, hey, Mike, I'll clarify a couple points. So the current F-53, F-59 will be managed by Ford. Ford Motor Company, so they'll handle all of that. They're going to work with Detroit on the build-out. They'll have the inventory. They'll manage everything. We won't be involved with any of that part of the transaction. Where we step in is with the new design, with the new engine that'll come out. The new engine comes out, of course, next year, and the chassis will come out with the new engine in 2028. So we're stepping in post-Ford exiting, and Ford will have all the responsibility with the current design.

Michael ShliskyJust so I'm clear, the next-gen product, will it be roughly the same dimensions, just a different engine, roughly the same layout? So, we have to do a lot of collaboration with the upfitters? And then also, will you be able to do propane in this facility? That comes from the Ford Roush, you know, system as well?

John WyskielYeah, great question. So, first part of the question, yeah, similar dimensions, obviously the same space, Class 5 and 6, so don't anticipate any changes there. For sure there won't be any changes there. There will be, of course, some integration changes with this because you have to accommodate the new engine. It's got a wider bank for water-cooled jackets, etc. So there'll be things that we'll do, obviously, to accommodate the new powertrain, and there'll be a level of carryover as well of the current chassis. And then as far as propane, initially we're going to get into gas. I mean, that's the whole announcement really, is working with Ford and of course the acquisition of Detroit, putting in the gas chassis and redesigning and launching the new gas chassis. Down the road we'll see what we do with propane, but for sure there's an opportunity there. We have a great history with Roush, and then as well, Roush and Ford and Bluebird have worked together on the current propane.

John WyskielSo for sure it's a great opportunity down the road.

Michael ShliskyOkay, I'll hop back in the queue. Thank you.

John WyskielThanks, Mike.

PercyThe next question comes from the line of Christopher Pierce with Needham. Chris, your line is open. Please go ahead.

Christopher PierceHey guys, how you doing tonight? Can we just shift back to the school bus market for a second? I guess I just want to understand, or I guess, what are you hearing from distributors? What are distributors hearing from customers as you enter the fourth quarter, given, you know, get where gas prices where they are with I think you quoted Bluebird units down 7% in the third quarter, but I want to make sure that was just school bus also.

Razvan RadulescuYeah. Hi, Chris. This is Razvan. So, the year-over-year volumes were down, and this is because we had a relatively high number of finished goods inventory. So, in Q3, we built a large number of GSA and fleet units, and this takes a longer time until they are revenue recognized. So, we build the units, but they will be rev-rec during Q4. And also we will build some more of this in Q4, which will bleed into fiscal '27. So that's the 7% year over year explanation. In terms of the general backlog, our backlog is fairly stable. We are solid into Q4 right now, and obviously we are taking orders for next year at this point.

Christopher PierceOkay, perfect. And then I think you— in the press release, I don't see a price paid for the transaction. I think you referenced an asset swap on the call. I just— I don't want to think about dilution.

Razvan RadulescuNo, it's in the 8-K. The asset acquisition is $7 million.

Razvan RadulescuWith cash. There is no dilution.

Christopher PierceOkay, so you're acquiring the manufacturing facility for $7 million?

John WyskielYes, the assets.

Razvan RadulescuThe assets, yes, in Detroit.

Christopher PierceOkay, and then can you just talk about no other exchange with, uh, Ford directly in this in terms of the entering the segment.

Razvan RadulescuThe collaboration agreement is not an M&A transaction.

John WyskielBut to your point, Chris, it is pretty low-cost entry into the space.

Razvan RadulescuIn terms of M&A perspective?

Christopher PierceYes.

Razvan RadulescuBut it's a $90 million investment.

John WyskielCorrect.

Christopher PierceUnderstood. So under $100 million at this point in time, it looks like, versus for something that could generate $70 million in adjusted EBITDA in 2030 based on slide 17.

John WyskielThat's right.

Christopher PierceYou got it. Okay, and then can you just— can you just last for me just kind of talk about it being a two-player market? Kind of like, how should we think about, you know, is it similar to the school bus market where you've got sort of a very warm handoff to customer orders? And like, I'm just kind of thinking what could— what could go wrong, or what— I'm not thinking about some sort of unknown unknown where this doesn't just sort of become— because I'm assuming the end customer doesn't technically care what chassis they have, they just want their vehicle. So I just want to make sure I'm thinking about the market correctly.

John WyskielYeah, I mean, look, it's a two-player market. I think, you know, you know Ford's history in this space. They've been very successful with the gas chassis and on the RV side in particular. I think they practically own the market in this space. So the carryover, we think, is a great opportunity. Now, the other part of this agreement is we will work with Ford Pro on continuity of the customer base. So that's with the fleets, the bodybuilders, the RV manufacturers, all of that. Ford and Bluebird will work hand in hand, and we think that mitigates risk. We also think it gives us a great opportunity coming into the market and not having a lag. So we think from our perspective, it's, you know, a lot of risk mitigated and really I think should catapult us into this space pretty well.

Christopher PierceAnd that was actually trying to kind of squeeze your way in with your own chassis, is that fair to say? Like this is a pivot?

John WyskielOh, apologies, we got a fire alarm went off. We got a little bit of noise in the back. Even the fire alarms are excited about this transaction. But no, I mean, Look, we were working on our chassis, but simultaneously we were working with Ford on this opportunity. And when things started to heat up and got a lot closer, of course we took the Ford path to bring this to market.

Razvan RadulescuAnd Chris, as I said in my remarks, this is a 10 times bigger opportunity to enter the segment. So we had to pivot, take this one, and then we will come back to the propane and also EV later on. As the market develops that way as well.

Christopher PierceI get it. Okay. No, that makes sense. That all makes sense. Thank you for the detail, and good luck with all of this. Of course. Talk to you in a little bit. Thank you.

John WyskielYeah. Thanks, Chris.

PercyThe next question comes from the line of Ben Summers with U.S. Bancorp. Ben, your line is now open.

Ben SummersHey, good afternoon. Thanks for taking my questions and congrats on all the progress. So just curious, kind of, you guys mentioned, you know, some read across or read-throughs to the bus market. Just kind of curious on where you see that and potentially any more color on the synergies you potentially expect with the new Ford collaboration.

John WyskielYeah, for sure. I'll talk a little bit about that. Look, I think, you know, one of the areas for sure that'll be an opportunity for, read across will be the EE architecture. And then you also get things like ADAS that will read across, and there's going to be likely legislation in the school bus market down the road in the near future for ADAS as well. So, we see those things as read across. Additionally, we see in terms of the scalability some real opportunities there. We're in the position where right now we're redesigning next-generation bus. We're redesigning or designing this current chassis, and I think that brings almost like building blocks of opportunities down the road that we could scale this thing into other vehicle opportunities or other body opportunities. So lots of, I think, lots of exciting things, you know, down the road. First step is launch, of course. We got to get this gas chassis to market, but good things to come down the road for sure.

Ben SummersSuper helpful. Then back to the school bus market. So I think in the past you guys have said something around like 3,000 to 4,000 units in the backlog is kind of that sweet spot. I know if we net out the Micro Bird units in the backlog, that's kind of where we sit today. So I guess kind of curious about how we think about, you know, that target backlog range now with Micro Bird integrated into the platform.

Razvan RadulescuYeah, so definitely we have to look at Both of them combined, for Micro Bird, the backlog between 1,000 to 1,500 units, it's something that we like to see, but their backlog is a lot more seasonal than our bus backlog has been for the last couple of years. So as we work together, we will, you know, determine the desired levels of backlog based on seasonality. Right now for the Type C and D, our backlog is fairly stable. It's around 3,500 units or so. And we like to keep it that way. For us, the lower end is about 3,000, which is the point where it could get a bit more challenging to work with the supply chain on lead times. But you have to remember, we worked pre-COVID with 1,500 units backlog or under 2,000. So it can be done. It's just a matter of setting the appropriate supply chain expectations right as well. So overall, we feel good about our backlog and we are executing now in Q4 and working to bring this fiscal year to a strong end.

Ben SummersSuper helpful. Thank you for taking my questions.

John WyskielOf course.

PercyThe next question comes from the line of Mike Shlisky with DA Davidson. Mike, your line is open.

John WyskielMike, we like this. You can't get enough of this announcement, which we really appreciate.

Michael ShliskyWell, there's two topics here. There's the, there's the, there's the Ford and there's also the core Bluebird. And I wanted to ask, I'm going to ask a couple questions here about the, about the core Bluebird business. I guess first a little bit more about the, about the $10,000 average ASP increase in the core, in the, in the Bluebird C&D business. How much of that, without being calculated, how much of that was, mix of EV, how much of it was just inflation, how much of it was features and other things? Just a little more, you know, detail there.

Razvan RadulescuYeah, the majority is year-over-year price increases. There are some increased tariff recovery elements in that, and there is also a bit of EV mix. So those are the three main elements. So we're not going to split them up in more details right now.

Michael ShliskyOkay, okay, fair enough. And then, um, I know it's only August here, uh, and orders don't even really heat up for well over a quarter, if not more than that. Any, any thoughts what you're hearing from your major dealers or large school districts about their plans to buy buses in the coming school year?

John WyskielYeah, I mean, we're coming into our business planning process now, so we're looking at the order book for next year, but Look, a couple things remain the same. The fundamentals are all there. You have, um, an aging fleet. Over 250,000 of these buses are greater than 10 years old. We're coming into a replacement cycle. The average volume between 2017 and '19 was 36,000 units a year. Those buses are coming up for replacement. And then during the COVID period, there was pent-up demand. So I think from our perspective, when we look at that, we have great fundamentals there, and the funding is still there as well from property taxes. So overall, I think coming into the business plan and as we start to prepare for next year, we believe things should be fairly solid coming into the next season.

Michael ShliskyOkay, I will leave it there. Thank you so much.

John WyskielThanks, Mike.

PercyThere are no further questions at this time. I will now turn the call back to John Wyskiel for closing remarks.

John WyskielThanks, Percy, and thanks to each of you for joining us on the call today. Just a quick announcement before I wrap up. Earlier today, we were notified by the Georgia Chamber of Commerce that Bluebird's Vision Electric school bus won the Coolest Thing Made in Georgia contest. The Coolest Thing Made in Georgia contest is a program designed to celebrate and showcase the great state of Georgia's outstanding innovation and craftsmanship. Bluebird is a pioneer and a leader in the EV space, and I think this award is a recognition of amazing work and success for the team. So congratulations— congratulations, rather, to the entire Bluebird team. So back to the wrap-up. Bluebird has delivered great results for Q3 2026, beating expectations and raising our guidance. We also continue to deliver exciting announcements on new opportunities like the Micro Bird acquisition and the Ford commercial strip chassis collaboration announced today.

John WyskielWith the fundamentals of the industry and the key elements of our strategy, I remain enthusiastic for Bluebird and its future. And we look forward to updating you on our progress next quarter. Should you have any follow-up questions, please do not hesitate to contact our Head of Investor Relations, Mark Benfield. Bluebird continues to be stronger than ever and has an amazing future ahead as we wrap up— or as we approach, rather, our 100-year anniversary next year. Thanks again from all of us at Bluebird, and have a great evening.

PercyThis concludes today's call. Thank you for attending. You may now disconnect.