Q2 2020 Earnings Call

[music].

Please standby we're about to begin.

Good day, everyone and welcome to the Blue Bird Corporation fiscal 2022nd quarter Earnings Conference call. As a reminder, today's conference is being recorded at this time I would like to turn the conference over to Mr., Mark Benfield Executive director of profitability and Investor Relations. Please go ahead Sir.

Yeah.

Our call.

Like cash on our website.

We dashboard dot com under the Investor Relations.

You can access to supporting slides on our website.

On the presentations portion.

Oh comments today includes forward looking statements are subject to risks that could cause actual results to materially.

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It was which include among others matters with noting a wage arrangement and filings that's usually.

Labor disclaims any obligation to update the information that's cool.

Good afternoon, you'll hear from Bloomberg, President and CEO. So.

Sure.

And we will take some questions.

Let's get started.

Thanks Mark.

No one wants something to John's yesterday for a second quarter earnings call fiscal 2012.

This presentation I wasn't getting this introduction on how our social dishing today.

Well I was trying to jump this quarter gardens, calling Johnny what I'm disappointed about normal times, but wasn't just state.

His wife position the wasn't sometimes it doesn't some damage or was it could you just to go well I can along with them.

We're in a very strong financial position the uncle liquidity, just pretty robust cash generation, a culture of women leadership and going segments.

Just on most growth strategy I'm experienced team, but of course in truck Black dog.

I'm Tom Tom.

Coal would not be does not change Stockbridge, Michigan show, we did a great second quarter himself.

What's the cost of all the little bit down from last year. It's no surprise given all the slogan school inflows since they've lost shelf placement agent stoppage slightly U.S. Jonathan.

However, since we opened a school transportation cheaper chunky work, we expect to see news. That's all this increase was harder for water production in school system. So.

Yes, strong business fundamentals as evidenced by a year over year.

Each of the past seven consecutive quarters are you getting I'll start with too much just stupid Josh.

Look we saw revolving credit facilities mushrooms measure.

Yes, we want its logically projector employees into school supply chain sort of the continues to build and build the buses block customers.

Uh huh.

In particular, I'd love to get stuck it been solely clinical employees for their commitment dedication.

Oh, so leach.

The cooling abolish the important almost every watch football catalogs, all finished with personal consultant there's no not at all they can I know whats your limit you control.

Despite these of course, but it's all just I'd be so probably the positive attitude, let's stop and go out with me but.

Sure you spend because the business as it used to what the buses that much about children sorry about companies.

So the southern deductions, let's move to slide four up as opposed to look at this stage ball business.

I said headlines trends, we are confident in the state of all companies and all business outlook just spot fields, such as we hope they should.

We delivered strong financial results for the second quarter substantial growth, but I'm not sure age.

It goes away. So we thought it would suggest that's hard to your would go but that's a combination and paulson under which the mix upon of course.

Process, which is a more Mitch Walter.

Total savings from our ongoing sounds much initiatives, although I wouldn't call is palpable strategy, namely questions Bluffton all mixed gold medal. So just curious how would you sort of structural cost.

So once again this quarter or the top.

That's two years if it doesn't help evolves, we took decisive action to address including employee concerns over the goal number grown deposits changed since the middle Georgia.

All the puts and takes years beds, despite what the flip over dog huge interest among them.

Additionally, since syllable supplies are being forced to show them the operations until the decision to suspend production for three weeks commencing in the last week of launch.

Oh pitching employees what flow since it doesn't apply to federal and state unemployment benefits. During this period, where does it sort of student achievement classification as an essentially business if they Georgia.

Well false disappears and sensors location, we're able to lead stuff people got some unable its ones yet.

We've instituted split most just because it's all the rest of employees, especially on the plane, which other couple of late.

I can tell you employee morale and then usually I will be a bunch of what has been outstanding Oh. This month, we increased don't like the goal with the Pasi $100 million $242 billion are we know ample liquidity, obviously, there's some certain.

Also implement that number I'll start with too much is to preserve Josh including eight human capital expenditures virtually eliminating travel a significant S DNA reductions.

Oh, because our business continuity options now still talk about substrates you know what you don't believe airport. The swaps couple in July two in September.

Turning to the industry outlook on the Pleasant Malki generally not surprisingly cold we don't you saw them impact.

So it's been malts, we'll see the income involves the school bus is that's a lower rental car you should not come as a spot aneel schools being closed and such and placement rates being widespread.

Oh, that's the case and supported by the views about people not yet is that the older right who's doing a stage, we opened on school transportation employees, the chance or what other demands to be bosses must install significant.

Nevertheless, we believe it or watch as opposed to understand what we told us to the park walk Us 11.

Thousand Bucks, it's not just at the industry of between 1000.

1000 buttons, well change to 12% below the quite Oh, yes.

We do expect if somebody is required to school style will spill over into the first quarter fiscal 2021.

Lower order rates over the past several weeks, so I'm not really covered by school still.

Bottom line well prepared to manage I was just come down, but certainly put 50 economics out requires that we would all guidance at this time.

We expect all the clearly what's the outlook for the next won't just six months space was open and school transportation to change the jumped to work.

Let's now turn to slide five <unk> chief financial results for the second quarter.

We have to postpone second quarter financial performance adjusted EBITDA out of $12.7 million. So millions dollars over last year until something all these calls, but this quarter in more than 10 years.

Importantly, this company to the production cost spend all sorts of about $3 million due to colder Duncan.

As I mentioned Bill Yes. This is also lost seven consecutive quarter, what profits increased over the prior year.

And then it sells almost 2600 bumps as well, it's 15% above last year.

Net sales rep substantial 21% hi than a year ago.

Oh, what others best selling price grew by 7% represents an increase of more than $6000 per unit.

So overall this was a really strong revenue growth.

I just briefly touching the second quarter and stuff like on $2 million I'm encouraged about $25 million, Oh, well last year.

Just about anything up $2.8 million adjusted diluted earnings per share of 10 cents.

$1.1 billion.05, respectively from the other day.

Fortunately they just switching gears to jump mistakes in the second call. So that's adult is another cornerstone lots of growth strategy.

Yes, I felt it was a sense cells much that's relative to your private school buses.

He wants Mississippi best of luck, but seven points, then obviously the ball people either in the fastest growing segments of the business.

Such as you saw.

I wasn't able to July 20, Nike and sort of total economics and told and others are keeping the 6100 dollar increase in average but selling clubs.

I'm still well it sounds much initiatives some of you structural cost encompassing purchase material most easily among actually although the ongoing savings on their own truck.

Hi, this is going to set the bar and it's called leasing initiative represents all key strategies to drive ongoing for margin improvement.

I was finally wherever the strong liquidity position so one of the cold analogy on Duncan.

I'm going to second quarter, all liquidity that $97.2 billion.

Since lessons about positioning for the past $2 billion increased in all revolving credit line.

Overall I'm.

Second quarter production sites, which we achieved despite difficult seems like the cold did not see any particular, okay and the wind up having accomplished.

There's nothing to close look about second quarter financial results on slide six.

I touched on many of these projects as I said earlier they went through the details later I'll provide more texture beyond the overall numbers.

Yes, it's another story, but I say that the second quarter I'm pretty close.

EBITDA I left shows revenue up from last year.

Business office business.

Yes, let me mention we have something after the first home, placing bets sales were up 11%.

EBITDA was up 7%.

Six months or the year.

Turning now to slide seven that's a kitchen liquid alternative fuel cells performance.

Despite this in parts of Colby, Don King I mean, how we sold on the bus. So there's a mix of bookings and backlog was supposed to tool called losses remain stronger only 6%.

It's a wash geographical mix this time of the year.

Our market share remains a strong exactly the segments and especially the running at about 65% led by both things of that show almost eight cents up second.

Significantly towards the subsidy customers plus you have so all of it sounds it feels buses from us, but just on ever this year.

That's impossible for customers, who taught alternative fuel oxfords once you put up based on.

Importantly, alternative fuel called doses of an evidence the conquest business come off the but it's really nice young ecosystem, that's sort of me, but so far this year.

Those often problem spots a with the heart of custom along as you would see from these products. It's a great endorsement of exclusive alternative fuel buses, we broke ground not dealing outlook.

So, it's clearly not slowing down to the segments of the industry No. Other school bus mum touch the comes close to alternative fuel sales mix for our market share.

Oh this fiscal year, I guess, either sold or else there most of them, but more than a whole different Turkey electric bus orders and we expect more to follow with all the customers, but you have seen but to me as this implies sort of a few alignment.

So this number will go to mobile homes are consistent because by the end of this week, it's a better than not much older process to be up like.

Looking forward, that's the joke with the visa and litigation funding. It's still ahead of US well that was this sales over the next would you ever so let me state multi specific problems the state of purchases.

These are the success you've had so far can be summed it up in issue.

You know why disposable says it you're probably best is the most maybe even hopefully gasoline CNG agent in the English.

Yes, you got sneeze, its a beauty before it starts in partnership with Ford allegedly Doug.

<unk> leadership position in low Nox emissions.

One position to capitalize on the because on the other growth opportunities going forward.

In summary about it started off strong understood the leadership position in Mckenzie units.

That's a 50% stays this that's how they purchased an alternative deals out of school bus today.

That's a runway ahead, particularly good.

That's not changed somewhat and take a slide I spent some time looking at how the coldest Duncan I.

I didn't talk to anybody on the importantly, how we are dealing with it.

Skinny isn't one of the special situations to react to the comes down with a flawless installing amongst 15.

Yes, just bought over 90% the U.S. stage the Canadian provinces have closed all their school.

Since then almost all regions.

Schools will be close into the next still yet.

Not surprisingly school close your southern doesn't make a disruption to our business and we've seen a significant slogan School bus August for mid March depressed.

Can you give us.

This is that school students this stuff what confirmed yet to come home.

School bus service operations came to the stem cells.

They should still be movies were eliminated so Olympic Didnt agendas, some cosby, if youve education and school, we're really not much of Selic appeal of the school buses, but instead, it's beginning to where young from some big Medicaid and shelters pleasantly switches to deal with it we're not assuming a return to work and increased interestingly quotes.

The new buses how school starts the judgment stop focus on the school bus needs to school style.

We do you anticipate significant step up in demand has needless all this place was couldn't stop deliberately I'm guessing the supported by the spark Commscope population directors.

Oh, the slogans August the more than two months. However, if you can speak about the deliver all bus needs to school starts.

Consequently, the municipal bus business in fiscal 2020 is not focus to be in the 30000 31000 units spread some 10% to 12% below prior forecast.

We do anticipate additional cells in the first quarter fiscal 2012 won't however, I supposed to work is believed to be made this thing and stuff.

No it's simply too much uncertainty around the economic consulting impact of coated 19, such that as I mentioned earlier, we always sold financial guidance, but it looks like fiscal flight to quality at this time, we should have a clearer picture in the next four to six Leach business was huge.

Let me now to slide nine to cover both response to the colder done too on them.

Well I was just an essential business simple children, Ohio, along with virtually all of our dealerships Oh final objectives its business continuity.

As you can see on this slide sensor business continuity requires three critical elements.

On the safety and well being of our employees.

[laughter] continues production on Tommy we'll see some material gamal supply goods I'm, sorry, sufficient liquidity, a robust lots of generally opposite catch up little bit.

Yes, so all three of these elements.

Yes, well.

Well the calls I'm pleased to ensure a safe that.

It's a molecular temperature checkers only give us isn't as it applies to each day worries of mass consumer business in the plant environment. We are also what pivoted George and actually we don't have all do but onsite employee is tested buckled at 19, that's a big let me comment or a plus employees have been tested.

To reduce follow this applies to address critical inventory needs. This doesn't that you'd expedited shipping as needed.

Lastly, the production sequencing.

Tom Paulson component deliveries I really don't both victims supply it no practical.

I'm, sorry are almost never seems likes to preserve cash including significant capital of the study for deductions on expense cuts from all the essential items.

No we production employees during the shutdown well facilitate state and federal claimants, although unemployment benefits I'm, increasing liquidity for our revolving credit loan.

All of these actions are helping us the money through this difficult time with employee wellbeing I'm business continuity has the major objectives.

Oh I'm.

Certain times, we haven't taken a focus away from driving cost reductions, let's not take a closer look I thought it sounds to mention the system critical steps, Jeff So help us today and in the future, let's turn to slide say.

We show the slide to the us to Evans calls, but it goes to actually because actually products conservation initiatives over the past two years I live because thats what to 22.

You can see this was appealing to the page where additional process no tools are being added as we strive to drive down costs.

We began phase one in fiscal 2018, and there's just focusing on reducing purchase material cost and services through a combination of initiatives, including new commercial agreements with suppliers resource with minimal product design change since hobby lobby called it just looks like you assume you'll recall that said as of all the 22 million.

Some of these actions.

We see them to pursue this initiative because it's going to Nancy.

What design changes to our process. So that you just cost without compromising quality.

The second phase lots of focus heavily on the based loans testing the validation of our old you invested eight sort of to its also must have to take you plug the arrangements to optimize our process.

Let's see the just to say this $18 million in fiscal 2009 soon and these actions continue into fiscal 2012.

Consistent with its once you go beyond phase now substantially all the processes.

Cost of production.

Let's talk about it pays facility has been focused on productivity initiatives.

I will you have to make you pay facilities provides the opportunity to reduce what do you work with the Christmas time run capability to reduce labor and material costs are about the dealt with it I mean.

What you said as we won't get spent I wanted to let the highest straight time deposits.

We are probably going to bring the source it all comes design.

Capability targeted at reducing production cost and improve quality only what.

Confident that achieving significant efficiencies are amongst I missed it had.

No more efficiency actions apply them over the next few years.

This is Dennis.

It's a great example cost over multiple years, it seems to delivering high gross profit on EBITDA margins well continue to show the results would move not caught me on this call.

I'll now turn in older adults all I still think nationals, another bucket government, but still 0.1.

Oh gosh almost presentation.

You bet.

Thank you. So good afternoon, everyone. It's my pleasure to be able to shield either to meet some details we believe second quarter push the tweets in twoq.

The material that we are discussing today.

The closing so April core Twentytwenty.

And not stated 2001 team.

This weekend.

Can you tell material was available units in Q, which was filed study.

We encourage you to read the teams you need important disclosure so the tonnage.

Not that we have included two new items and that team too far.

So just as a discussion about the potential impact it has a monkey.

Including both in the money in.

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[noise] Niger, receiving labor than most other companies.

Sites. These uncertainties on many levels demand availability it sounds to buy products safety people in supplies components.

So this has mentioned the uncertainties supports the student profile system tweets between.

We also included in subsequent event in sales is already touched on this new build on due to other things seem to fit so an increase to own distant revolver.

We have recently successfully closed second amended revolver is now at about 100 to me.

By 42, moving from the cost of living.

We see this is prudent planning to ensure adequate liquidity most tend to just environments.

The appendix attached to today's presentation deals with reconciliation between GAAP and moved up mentioned as mentioned in this review.

Well, it's important to scoring is already mentioned bundle.

They were not as significant accounting pronouncement adopted in the second quarter or just the 20.

So now let's move to slide 12, and take a look it's a summary of key results for the second pool.

So this slide summarizes some important GAAP and non-GAAP measures. So second call them took some to last year.

Good day, there's no there was the steps remains very focused on an ongoing margin growth strategy.

In closing L. King the two weeks, including revenue, even if we get Leach boss.

<unk> expense for transformational cost, which [noise].

Yes.

As you've seen the slide wants to 50 soft pull me up 43 point <unk> 28, 21, BC when she wants to college basketball unit 323 weeks is worth about 28.

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And with our strategy to handle bustling meeting.

16, which constitute the bond.

17, whether you see each bus sold which translates into about $6100 to the bus revenue per unit increase was due to cross connections.

While it's on can you walk.

Function.

As well as the holiday weeks of electricity bills.

Vehicles and the successful program.

So soon.

We try to include when you get on so.

Gross margin you can see was one point or shutting down about 290 basis points lenses.

The deterioration in margin is almost entirely the result of employee costs that isn't too second pool, including the impact of Jade and launch cost associated with win.

The weighted email assembly facility.

We'll talk more about this teachers logs.

He did reduce the net loss incurred in Q2 second quarter fiscal year 2000, tweaking to about six times.

Oh improved EBITDA was largely offset by higher interest costs higher depreciation.

Less than <unk> tax.

On an adjusted basis net income was 2.1 down 1.1. This is lost.

Adjusted EBITDA was 12.7 with up on top and tape call you details will be discussed them slot.

EBITDA margin was spot sales.

Any deterioration versus prior years more than he explained by the abuse elections.

That we previously stopped.

Ladies and ended in Q1 was a loss of two cents.

And this is once he doesn't call you.

Adjusted diluted earnings per share change.

Since second quarter.

Five see less.

Along the poly either.

How should we ended the second quarter was 34.1 meeting.

This does that I saw the compared to last June.

At the end of the second quarter, we've had stayed in the room on the ball, let's just 20 months to you.

Ultimately this names to scoop and publishing steeply vulnerable.

That was prior to the Clinton.

Recently.

Had approving some thanks.

Did that debt was 200 might point sixmillion.

This was down about one point screen, including additional Oh.

Oh.

In conclusion.

We made good progress on improving top line, rather than an important new revenue pretty bustle like good focus on generating cash.

Even with quite confidence.

In these critical covered one thing environment.

We still have a way to go to get out cost of production using a lot direction again, we'll talk about that.

Slogs [noise].

We have moved to slide certain.

This slide shows keep clauses and change of adjusted EBITDA.

Second quarter fiscal you weren't in the second quarter.

She can you take away audience market segments.

These are volumes product mix pricing customer mix in pop styles and improved by 10 million versus the prior year.

Volume was up by about 323 units this was with 3.6.

The balance of improvement.

Pricing product and customer mix.

We continue to benefit from the fact that makes it seem like quite a coatings and pricing we continued tight.

This is busy but clearly very positive impact on our results.

Transformational cost initiatives added about 3 million second quarter.

And we continue to gain to benefit from these aggressive cost reduction actions on their own more to come as you progress since.

Okay factors have substantially impact on the second call about 6 million, but I considered to be probably bonds. It's just the 20 twond.

Launch costs due to continuing inefficiencies until all of the plants and so we'll see changes every place to Michael's achievement full benefits, so many financial and other point range than that citizens.

We expect these things they sort of just to be obsolete completed during the second clump <unk> between tones.

[noise] type of 19 clinical since caused us to close the points.

During the last week as much and sort of close to the Tonight.

CACI costumed 30.

<unk> cost to continuously sanitized points.

Checked it needs to work is equivalent to monetize winter temperatures and I used to the point.

<unk> expenses to support our employees to shutdown and a loss of us and change.

In addition, JV point in Canada was also qualys almost the whole marks.

Oh by the ones that caused all the local as well and then just.

He wants to.

The loss that we've seen.

The second quarter.

Lets instances and other cost one size fits the 20 I'm not <unk>. So it is worth about 16.

This including higher health care costs.

A clean up of obsolete scrap material as he had moved all about inventory from the four valley facility to a central warehouse Lincoln 13 movie, though.

Deep dive hometeam obsolete scrap material you have written that offsetting that's mugs in Congress I.

I mean pilots on and novel Labor costs.

Importantly, we've experienced improved efficiencies since the point started already began on April 20, and the team is working on claims that improvement actually calls through the balance sheet.

We continue to work on improving Boston per unit cost structure reasons to deny balloons and achieving along some of the chips.

Results in the second quarter College towns and despite the impact on then moved Boston.

Plus revenue the Union as he said was up $6100 ingredients and soon.

Transformational initiatives continue to resulting cost reductions and we needed but since that seems improve plus cost bye bye.

[music].

These activities continue to move into new actions.

Now.

And finally manufacturing efficiencies since the point, where young Tony I wanted to ask more about 19% compared to the mid nineties.

Weights.

Second pool.

Let's move to slide 14, and turn it on teaching and free cash flow.

Generation cash in maintaining adequate liquidity is quite critical at any comedy business, that's one of them.

But it's even more so doing either unusually tongue success, the president and.

Fiscal year, 2022nd quarter adjusted free cash flow was 38.2 as compared to 13 point.

So are you lost.

This was a significant improvement and she said.

Test was also was 32.9 million between 23.3, new better than the pie.

The sizable results and so thats why were lots of people normalize I assume.

Trade working capital.

Oh, sorry, working capital is very seasonal and fluctuates with.

That's cool loans three long saw good.

Hello.

We typically see attached or anything this quarter due to normal volumes and assemble holiday shutdown as operation who is using the normal level second quarter, two things, we see our traditional negative working capital model.

Providing us.

Incremental capex for [noise].

With us more interesting soon and balancing that accounts payables seven or.

Over.

The same in second quarter.

This included no telling you see the supply of tons and tons amongst others.

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Question.

Mm Hmm.

The night, we reduced our catch up pause and capital spending rather you might say and Texas <unk> too.

During the disruption caused by called one thing that strengthen the focus on tax untouched.

Three items one.

On the side one of our senior employees to take charge in the past concentrations in covering all aspects of that business.

This was an important step and the team is present chugs delivering about when you've identified Texas.

Second.

Well the please.

We have adopted a setting they test forecasting purposes.

Cash sources and uses a weak in the wireless and then the analysis of cash you spoke last.

Finally number three as Weve discussed, we added 42 million to our existing revolver of 100.

Last one addresses improving debt.

And putting in slide 16, the colder than it was at 97.2, so cool.

After giving effect to the 90 Sevens amendment to the credit facility, which increased eligible with all of our 41.

Pro forma liquidity wouldnt have hundreds.

Holden.

We believe that we are well positioned things and equipment.

Well, that's a little disruptions from ours.

We took a three week shutdown and a lot in velocity that mobs in place to survive.

Holds the majority of accessing points during that period, new continued payments to suppliers, which amounted to weekly notes piston Tony.

Our boss Assembly operation, we saw them on April 20, Onea now see normalized cash receipts.

So the combination of the we opened even put on production and having an order backlog now so too early July provides a steady predictable revenue stream.

Increasing our revolver.

As well.

Taking a clean.

And significant cash conservation actions with up to 40 or so.

She and even though.

We believe the combination of they treat the fact is provides us with a strong outlook on liquidity balance.

And I know Ninetys estimate all available guys.

Importantly, net leverage ratio for the second quarter student to all the one which is called and.

7.1 threshold.

Debt outstanding Holdings to 200 move on seems to be down 1.3, New instance price spikes. In addition, the team I'm involved.

Right.

I'll now turn the discussion back to send a whole some important confidence that the outlook for the balance of because 20.

And the actions.

Okay.

Thanks, Bill so let's not forget it does go talk to 24 that outlook.

Turning to slide seven said.

Oh, I don't say, we accomplished our that the weather the storm while experiencing after about a market outlook remains uncertain.

I want you need something but I just see many companies given the same message over the past holdings.

But we accomplished our ability because as a second quarter results show, we built the business fundamentals remain strong as it continues to deliver on our profit growth strategy as we have done so over the past two years.

[laughter] a mall, it's worth noting that coupled with demand remains beverage.

The school buses as 20 people like that started in the USA.

That's just optically of age older.

It does most of the hundred 50000 buses that customers want to replace.

So this is the Dod is very high limiting factor is funding availability.

Well certainly values of property taxes separately to be the major funding mechanism for school buses and expect to remain strong the near to the impact of wall space sales taxes on state income taxes could impact overall, so some of the presentation, which includes school bus.

The precise impact potentially other government assistance is unclear.

Obviously test on the auction.

$60 billion anyway.

To assist in education is a K 12 public schools.

However, it's not because that's the size of school bus expenditures, what's the total annual cost of education, the K through 12 public schools.

About $2 billion.

I'm only topic was like the new school bus purchases typically represents less than zero point suite per se.

The total capital expense budget of $700 billion for education, the United States.

Hi, this is important to recognize the small courses every cancer, but you have it used to put the school buses each year with property types of being a major themselves.

It remains to be seen.

Instead to allocate the funding all.

Oh immediate focus.

But you know, it's always say somebody thats your business continuity.

This is the dog modelo production ready to Jim while meeting the slow incoming order rate even seen since mid malls when schools close insulted place mandates in the set.

We will now be doing a lot more corporate production slots are we expect a significant increase in all of us in the problem with a school transportation stop it sounds a full time work as focused on the bus needs, but still style.

That's at least an increase in corporate then I'm going to fill quality fall wasn't down from last year because of the small done in orders over the past several weeks. We also expect strong.

Quarter fiscal 2021 with the recent delayed all the school buses calls a deliberate spill over into the next fiscal year.

Like many public companies. However, we always on guidance at this time as I mentioned, the only other expense up let me tell it better clarity on the outlook for the next four to six weeks of states and provinces open up a business was units.

Well, let me start sort of business like deployment is obviously 30000 to 31000 buses all 10% to 12% below prior forecast.

Noting that the school buses to see if I'll just about 31000 units a year over the past 30 years.

I think itself.

All parts of the context.

Most of the songs newsprint, all test even in difficult times.

In response to the loans to forecast.

Today, we have 10 system before Odell plan, so ruthless single chip production, a steadier from two ships today, and where people have assumption on to us.

We believe this to be approved.

Crude cost because she was just don't fall.

This will require before operating.

Moving from one time, our production that we have two shifts today to five to 10 hour.

On one ship straight time.

Looking forward, we'll be investing production capacity constraints in the first quarter fiscal 2021 to ensure we can be second LPC not next year with a sustained single chip production study.

This is a great example, we bought and structures business I'm supposed to be difficult times are making us more competitive.

Sure.

In conclusion, I just want to lens of my comment that I made at the beginning of this call.

You bet is well positioned to whether this unprecedented pandemic.

We have ample liquidity.

Business fundamentals are strong we.

We'll take that everyone's got if you've got seems on us so to get through this period.

It continues to grow and fly in the longer.

That concludes our formal presentation.

Moderator, so they're going to kitchenaid session.

Thank you Sir if he would like to ask a question. Please press star one on your telephone keypad, if you're using a speaker phone. Please make sure. Your mute function is turned off to allow your signature.

Recharge equipment.

Once again, not a star one if you would like to ask a question.

And first of all hear from Eric Stine with Craig Hallum.

Everyone. Thanks for taking the questions.

Right.

So you just mentioned it a little bit on the funding side and I know that.

Near term.

Some of the some of the issues, it's more about timing rather than availability, but.

Even though it's a small part of spending school spending talking about school buses.

Or your thoughts long term given.

Municipal budgets scratched given what's going on right now.

Is that something that you feel like would be relatively insulated.

From maybe some of the other new to the municipality, Oh or how do you think about that.

Well I think that's why we talk about what will withdraw and guidance at this time switch off the society. What we are as you know there. So just started for reopened state so reopening shelter in place of being lifted it is going to see what the outlook is you know the federal government.

Talk to support the stage, because obviously states have lost significant amounts of close sales taxes with Oh watched a couple of months or so stay think it's actually been a obviously impacted too. So I just don't feel about plays out.

Sure.

Small piece it but.

School budgets for for a bus purchases over just to get a reference point there because you know all major funding by 70% of school bus funding, it's still for property taxes.

They'll stay high housing prices are still holding up you all the collection of those phones is critical for our bus business. So we just put it that we could go see how these drugs out obviously you have taken out.

10% to 12% this year from a full industry outlook. So that's the near term look like it's going to see how the government reaction.

No one bucket shop to get released but for some of that will be.

One time typically that's what I became CEO budgets for schools offsets and approved by school boards I love that triggers the buying a boxes like in the city to school schools.

It should start to see bottlenecks.

You know four weeks or so I'm going to replace that Youve appalled you're right now.

Got it Yeltsin just we just we can conjecture that can try and do a forecast, but we have just limited information at this point 'cause ships.

So rapidly logs.

I do I get that.

I do feel confident into the ball. So this year that we will you'll see up and increasing volume and increasing though.

Quite is coming through from getting all this to support schools felt the need for the buses or anything that will happen.

Okay. Thanks for that and maybe just turning to cash generation.

Obviously, you're pulling guidance and your previous guidance you've been talking about after the last three quarters of the year generating I think $120 million plot.

I mean, I know you know would that withdrawn guidance lot of uncertainty, but just.

Any commentary on the cash generation expectation going forward I mean, clearly that's still.

A big objective and very likely for you is that fair to say.

Hi, Eric This is Phil we also.

So.

You know cash generation.

The good traditional sole switches styles.

We'll be down.

As we go through it makes this at least for third quarter.

Fourth quarter is still a little hard to predict as Phil said.

And you know we want you.

We want to get a water in court on that until we.

Some of the school budgets stopped to sort themselves out.

Oh, we did meet you read the colder Weve reported to you didn't place too long.

Reduce a law that cash spending.

The balance of the deep.

Got a target of 40 million initially and identified all the ought to get to that pockets show with <unk>, we're very comfortable I will succeed.

And you know if they will.

We've got a bit more.

I suppose.

Positive cash.

The second half.

Discount critic because we work like that.

Oh, I get that I'd be but at the itself I mean, yes uncertainty but.

From a high level the typical pattern of.

You know that first quarter, there's a big.

Usage, and then that flips for the remainder of the or it sounds like that's still in place.

Yep.

Okay.

Maybe one for me thank you.

Good.

I'll, just say once it out because you're not going well.

Down people combination or more volume, but we would not be working on these cash preservation cost constellation and make sure. It's a cash generation yourself called Oh.

Oh, well calls this degree or cash flow positive. This year. We don't anticipate you know what worries me into our outbreaks you know outbreaks coal business. We all we've got the deposit because this year and a.

Got it unfolds.

We are public let's do that and that's the goal.

Okay got it.

For me one of the unintended consequences of cold, but I think it's just more of a focus on the environmental upside that you know any thoughts about.

Given your leadership position in alternative fuels ability to pick up share.

As things quote unquote normalize whatever that looks like going forward.

Well, we certainly always want to try and pick up share nothing when you look at the accurate or even a enough in a bumpy last month of the year last quarter. We just had we spoke to lease up we've got quite a bit conquest business, which frankly share growth for us.

Next on the call it.

65% market share or else and.

I'll turn to feel actually what we talk a little bit from last year, and we're almost 80% on appropriate. So yeah, we always probably emphasize or product because it's great to the environment. It's great to the children, regardless, if it's the right thing to do and all the time, we grow yet again.

Significant seven percentage points up and alcohol mix in this last quarter I think you know bodes well for us. So yeah, we intend to keep chronicle fall under the let's see the topic of share because what I call in school district business, that's all bread and butter business.

Probably directly to our schools throughout dealer channel to the school districts, what got struggled to keep pushing my luck because keep pushing on that.

Okay. Thanks.

Thanks, Eric.

And once again as a reminder that is star one if he would like to ask a question.

Next we'll hear from Craig Irwin with Roth Capital partners.

Good evening and thanks for taking my questions.

So your prepared remarks seem to point to your confidence in a V shaped recovery.

And Ah you know.

Strong inflection up out of.

What you've been working through right now can you maybe share websites. The specific data points. Thank you either confidence and this Ah Ah optimism about the at the next few months and second part of the question is what portion of your production slots for the fourth fiscal quarter.

Covered by orders in hand, and how does that compare to last year.

Well, let let's say, what's what I'll give a specific because they want to get to smoke specific on what we call our bookings and backlog on what we started today.

I think he didn't look at the declines were showing in the industry.

Projected that's pretty much what we see right now in L. bookings and backlog, that's what's really happening last couple of months as much time them. If it really taken hold so that that number of people said, 10% to 12%, it's probably about where we paid care we would.

Looking to be down and that's what we'll see right now that pace.

We're trying to where we are filling all slots were a word to July. So we have not me I went off.

Third quarter, we know what we have to build their all fall through June or July right. Now. So we go August September and.

About three weeks in July so could go that's really all.

When it comes to optimism I want to look out you know that's a former if you're talking about the victory Brexit I mean, the guys who are out there every day, but if you could say from the other guys. A buyout buses are you already got to talk to that school boards about the what their needs are and what you thought dealer network as well she told the ground up there.

As a real hard data points are we look at a property values or we call like our business call, it's very closely with property taxes.

Ladies home still state heart, what was only to watch and watched couple of months.

We remain optimistic about not being met your funding mechanism.

So before they become known as well could not be overall state budgets 'cause it clear lost sales tax revenue. The most state income tax revenue, we don't quite know the federal governments Gonna do anticipate that what we found interesting work you know last week of April as I mentioned on my in my comments earlier that gets funded allocate $16 billion to address.

Okay sure, but public school took pretty powerful policy do not so quickly in this time dynamic process. So I think what can adopt house prices talking again perfect threat to the most of the wait to see.

June unfolding here and what school boards approval.

Budgets.

Well, it's up but it's coming here that's the most important virtually all states.

Finalize their budgets through June and release funds in July we get into July. So that's kind of support a six weeks I talked about.

With that will become very clear for us.

Great. Thank you for that so the most important question on the minds of your largest shareholders and the institution.

Stock.

Are the parallels back to the financial crisis.

789, it took a few years actually a handful of yours.

As for us to actually scraping the bottom in overall school bus sales in the market.

Is there anything that you would point to specifically that would have the speed of shorter duration.

The obvious onset of totally pandemic and.

Work from home for everybody has obviously been much more abrupt, but can you point to anything that would.

Point to a more rapid bottoming process and potentially a.

Much shorter process.

Finally find in the bottom in the market than than that handful of your shoot similar to last time.

<unk>.

Yeah, what do you want to take that one off will fill a lesson comments on that silly, but there's no when's the last crisis happened in 2008.

It was river really been spiking financial crisis, I'll be that's where I learned about credit default swaps and also things going on.

The was about a you know people probably mortgage for closing and that took a while to actually better than I was partially precipitously fell between the 2812 hours was 2011, we watch significant because it took a it took a good three years how's products to hit the bottom and that was.

This full quotas are increasingly difficult from all these uh huh.

People defaulting on the call loans on the also see we don't we often that situation here that because that is the major Hong connective school buses. So once property taxes felt we saw eventually over that three to precipitous drop from the 35000 units. We sold in 2007 to about 24000 unit industry.

In 20 elaborate about we clawed our way I was about us housing prices recover the difference is here.

I see a precipitous drop in housing crisis, we just don't see that youre talking about not be research that we've talked some of those expert so what could that thing. It's a different issue I just about probably done but that's a that's true business down significantly for the last two months I look at that way and we're all trying to get out different states we open.

I think the other factor is the most of the city what the federal government does I mean, the federal government lactic quickly what a stimulus package.

Supported the educational quickly about 60 billion dollar injection from the care Spondon I think shows a willingness to work to support economy aggressively probably more so than in the past. So I think that's what we do it is quite a different situation here. We're in right now that will work in the 2000.

And I know I've said lumpy cuprum, all business standpoint, when we walk into 2008, the average age of a school books in that fleet I talked about 600000 Bucks within North America.

What about eight years of age that's about half the duration of a buck similar bus lots for about 50 million stuff so useful life.

Total operating costs get too hot is likely to US right now it's 11 years.

I don't know symmetrical. This 150000 buses still over 15 years of age that's a lot of Costa Ramos one of the somebody issue bundled buses forgot does bode well for what I would say.

Good argument one school bus except to say, we got a carve out money at the school buses going to get these old Dirty buses off the road I'm a place that because up so there's a lot thing to do in the with children a lot in those products, so coupon bonds, including.

I think you on that you just want to start really what's different between now and what we got back in the last downturn.

Okay looks like so I'll be able to say okay.

[noise] sorry.

I'll pick up after the first one button.

Okay.

I think I think.

And you you covered it filled but there's a really big difference between tight funding.

From a central states coffers, driven by sales tax income tax.

The property tax funding.

So I mentioned the property taxes that 70%.

The fund.

Oh School buses.

The reason that took so long to come back in the last one isn't one property taxes bottomed. It took some needs to get back to the prior levels and and quite frankly, you know we are a little ahead of the prior levels now.

We think that with the state.

You can come in sales tax.

Not that can come back pretty quickly as long as.

As long as states can get up and running.

Email relatively.

Shorter time.

That there's no doubt that no other probably be less it'd be lot of businesses could get hurt, but the majority of it should should get up and running much more quickly than the and the cool pool and the the rebound on property taxes, which which took as well as you rightly pointed out through.

Well use.

That's it.

Thank you for that thank you. So my last question I wanted to ask it's about the ability to flex I'm spending so you've obviously been really proactive in managing your expenses and a you know the machine a number in the in the March quarter, something she testimony tightening the screws and doing what you need to do.

Can you maybe talk specifically about whether or not you sought a waiver from the EPA for the environmental obligation you'd have to meet next year with a new engine package one of the things that you've been investing in.

And whether or not you've made a decision yet about whether you would do for the investment in the nextera generation, but actually the lower cost to manufacture of high reliability design that Youve guys. You guys have been working around for.

The last.

Number quarter since as you design for the future.

That's a very specific competitive a question too was around you know given out talking about public filings. All you want to try we try to stay clay legato and that's things I've already.

I will tell you. This we talk to the peer regularly and talk to Cobb regularly let me look with our products without problems as affordable luxury tech.

Obviously connected very close it so yes, we do whatever it takes to a you know I'm sure we'd be taller qualms will lead them on a on a on a basis that recognizing environment. We operate it. That's all you want to say I'm not much of it sounds like you know it's a good comedy Abbas. Unfortunately, I am I talking to the too much details for the competitive reasons I'm not one.

<unk> completely understood congratulations for the strong deliveries number and you guys should be commended for the proactive stance on a.

Cost controls and positioning for for this market. So congratulations again for the for the core.

Thanks, very much appreciate that.

<unk>.

And there are no further questions at this time Mr. HELOC, we'll turn the conference back over to you for any additional for closing remarks.

Yes, Thank you blender and thanks to all of your gummies on the call. Today. We appreciate your continued infested Blue book as you can see bio second quarter results. We made significant progress on multiple fronts I will what we will work our way through this the cold igniting pandemic adopting it will be structure, that's needed I will continue to thrive.

And grow profitably over the long term I have no doubts about that we've got a great team whose focus.

Before I got off the call though.

So to the fact, my colleague and friend for more than 25 years, because on the call today filled side.

After eight years, a CFO blue, but still within stepping down from this role at the end of May.

It's been a real plugs into but on this call Jody with Phil taken blue, but from a privately held company through a public company in 2015.

I'm ought to be a logical outside of Philadelphia, leaving us, but we'll just staying on consulting capacity working wouldn't be handled leadership team all strategic issues and special topics.

I will effect. So please endless number of contributions during this time with Blue book I want to wish him all the best when do you go on the call got to know so well over the past few years and I'm sure you share my sentiment.

Please feel free to getting mcallen. Thank him right. It has done for us.

Source fill moves on I'm pleased to recognize that Jeff Taylor will become a game as the <unk> CFO effective through the first.

Jeff with enjoyed muddy as a public company at CFO. Most recently I see I called Wabash I'm not sure was on our call today, Jeff will be a great toss it to our company and I'm sure. Many of you well the meeting him over the coming months.

Thanks, Phil terrific sort of its a blue bird and welcome to after the school bus business.

Thanks to all of you for joining the call today, we're well positioned for the oldest pandemic that takes reserves and we'll look forward to continue profitable long term growth.

So please go head to get the concept of profitability in Investor Relations Mop Benfield, because you have any follow up questions.

I forget them all to see our Blue book I'd have a great even.

That does conclude today's conference. We thank you for your participation you may now disconnect.

Uh huh.

Sure.

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And ER.

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