Q3 2020 Blue Bird Corp Earnings Call
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Greetings and welcome to Bloomberg Corporation fiscal 2023rd quarter earnings Conference call.
This time, all participants are in listen only mode.
A question and exercise will follow the formal presentation.
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Well I know this conference is being recorded.
My pleasure to introduce your host Mark battlefield executive director profitability and Investor Relations.
Thank you you may begin thank you and welcome to Bluebird fiscal 2023rd quarter earnings Conference call. The audio for called webcast live on Blue dashboard Dot com under the Investor Relations tab.
Access to supporting slides on our website by clicking on the presentations box.
Yeah, our landing page.
Our comments today include forward looking statements that are subject to risks that could cause actual results to be materially different.
These risks include among others matters, we had noted in our latest earnings released and filings with the FCC.
Labour disclaims any obligation to update the information in this call.
This afternoon, you'll hear from Bluebirds, President and CEO, Bill Horlock and CFO, Jeff Taylor.
And we'll take some questions so let's get started.
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Okay, well, thanks, Mark well get out for everybody and thank him joining us today for a third quarter earnings call for fiscal 2020 before jumping into the presentation I like to give you a brief introduction on how we assess all position today.
The full quarters a difficult one.
With employee concerns all the Corona Bowers pandemic and supply shutdowns called the Blue belt. The cold is planned for two weeks.
We're also closed and transportation employees, what sheltering in place.
Those what deliberate and go the plans to school stock in the fall a new bus orders were delayed significantly.
Let me state however, the blue Bloods isn't a strong financial position with ample liquidity, we have a history of robust cash generation, a culture, winning and leadership in growing segments clearly defined market growth strategy on an experienced team with a proven track record of delivering results and handling difficult times.
I'm Colby 19 has not changed any of these factors.
He called to volume will be up substantially from the third quarter, although still significantly down from last year.
The delay in new bus purchases is being driven by the uncertainty surrounding Colby 19 impact in the school classroom and consequent decision by many school district to extend online teaching at least through the first semester.
However, when schools begins to reopen for in classroom teaching, we expect to see increased demand to replace the aging school bus fleet, and we're well prepared to handle that.
Well continue to drive business structure improvements, despite the pandemic impact as evidenced by high unit revenue and lower costs in the third quarter, which has been a consistent pattern over the past two years.
We have taken to start with your matches to preserve cash and improved profitability on a quarter to liquidity, it's very strong.
100 million Dallas.
Importantly, though I'd love to get spot for recognition very credible employees for their commitment and dedication booked for blue bar during this pandemic.
Despite these unprecedented challenges I'm, so proud to the positive attitude and starting but all of the Bluebird team and ensuring we stay open for business and continued to deliver buses that we'll keep our children's safe and our company healthy.
So would that introduction, let's move on to slide four I'll take a closer look at the state to Bob business.
That's a headline say well we're dealing with market in for challenges were confident in states about company as we continue to improve our business structure.
The challenge we face during the third quarter were entirely the result, the Corona Vivus pandemic.
As a result from increasing employee concerns and supply plant closures, we elect to close out plan to nail in early April for two weeks and then after real putting we have to deal with continued supply disruption that impacted our production efficiencies, causing additional overtime rewalk an expedited freight the good news is that is now 60.
Actually behind Us.
We don't shortens the older classroom starting to fall the slower order intake continues through the first off for the quarter.
Consequently, we have lowered our industry volume outlook for fiscal 2021 to 28 to nine to 29000, new buses from the recent highs of 34000.
It's important to know these challenges were and still remain very significant but a temporary and we'll get through this well just have to deal with them and importantly position ourselves to be stronger well the answer industry recovers.
In that regard we made a number of positive strides in the third quarter.
What do you play district counter matches against Colbert 19, protecting our employees to ensuring 100% business continuity after restarting production.
We took the opportunity to move to a single production shift on June the first and this has been a seamless transition with significant productivity and quality games.
And we will expand the daily capacity by January 2021, enabling us to meet any a bust in demand increases for the second quarter fiscal 2021.
Supply chain disruptions also east significantly as we ended the third quarter, although we do continue to aggressively monitor.
That's material supply risks on a daily basis.
All three pronged margin growth strategy, namely pricing for economics, Grogan alternative fuels and reducing structural costs delivered strong results again this quarter I just have the past two years.
On the cost improvement in cash generation side. In addition to the transformational structural cost reduction. So we have discussed with you each quarter. We have initiated a significant additional plans to achieve annualized cost savings up $15 million, mainly through cutting cost you in a expenses and also cash preservation action.
Totaling a further $40 million in the second half of fiscal Twentytwenty.
I will cover this in more detail later.
And finally I can tell you that our production slots are filled for the balance of the fiscal year.
Fourth quarter unit sales are expected to be more than 40% higher than in the third quarter.
All we know we're facing up or challenges of Colby 19, and importantly, we're positioning blue about to be stronger and more efficient when demand recovers.
Let's now turn to slide five <unk> review the key financial results.
Not surprisingly and as most companies are reporting our third quarter financial results were significantly impacted by Colby 19, and went down from last year.
What about 19 hovering 50 Bucks is our unit sales were down 1400 72 units from last year, that's a decline of 43%.
No about 500 years adopt decline were result at the two we planned shutdown we were forced to take.
Similarly, net sales at Harvard now 89 million worth 39% below last year, but on a positive note our average bus selling price with a substantial 9% above last year $92070 per unit.
That girls and selling prices, a cornerstone of our margin growth strategy and it's working.
Adjusted EBITDAR of $12.5 million was $16.6 million below the same period last year more than accounted for by the lower unit sales.
Importantly, the third quarter profit was only $200000 below the second quarter, despite selling 650 fuel buses and incurring additional colby related costs of about $4 million in the third quarter.
This is strong evidence that our business structure continues to improve under our plans are working on delivering results.
Adjusted free cash flow for the quarter was 30.3 million dollar negative compared with 1.7 billion positive last year.
The under strain from last year is primarily explained by lower trade working capital as we run with higher inventory throughout the quarter to protect the supply disruption together with lower adjusted EBITDA.
Our trade working capital position and adjusted free cash flow will improve significantly it fits well into fourth quarter I'd be run down our raw material inventory.
Consistent with a declining adjusted EBITDA adjusted net income and adjusted diluted earnings per share were down $40 million.53, respectively from last year.
Operationally there were three significant results in the second quarter Bozidar Prophage, another cornerstone of our margin growth strategy.
First at 47% sales it makes for alternative fuel powered buses, we beat last year's third quarter record by one point I'm really pleased with that result in a down market and we remain the undisputed market leader in the fastest growing segment of the business.
Second we saw earlier the pricing we took in July 29 seemed to recover economics is holding and is a key contributor to our 7300 dollar increase in average unit the selling price versus last year.
I should also why do we took additional pricing of approximately 1% across all buses Oh here this month.
Third our transformation initiative to reduce structural cost encompassing purchase material bust design and manufacturing are delivering ongoing savings on are on track.
And finally, we liquidity at Harvard and $2.5 million at the end of the third quarter, we having a strong position to weather the cobot 19 pandemic.
Overall, the third quarter is extremely challenging with Colby 19 entirely responsible for the lower volume and supply disruption. However, I'm very pleased with our teams underlying operating accomplishments that will improve our business structure and importantly, make a stronger going forward.
Let's take a closer look now at alternative fuel bus sales performance on slide six.
Despite the adverse impact of Colbert 19, and slowdown in bus orders a mix of alternative fuel power buses remains strong at 48% about bookings and put them all the backlog backlog the same as last year.
Our market shares as strong as ever in this segment on is presently running at 64% for the fiscal year through June.
No as a measure of our strength in this area. Let me provide you with a market share break down by fuel type.
We're number one in propane was 75% market share.
We're number one and gasoline with 58% market share.
We're number one electric with 51% market share.
We are number two in compressed natural gas with 46% market share having sold just 12 fewer buses done a competitor.
Now, that's what I call leadership across the board.
Significantly 291 customers have purchased or all that alternative fuel buses from us for the first time ever this year.
That's on top of more than 400 customers, who tried all new alternative fuel options left yet for the first time.
Importantly, our alternative fuel powered buses have enabled us to conquest, new business from our competitors, bringing 113, new customers to the Blue Bird family. So far this year.
These are compelling facts and with a high customer loyalty, we achieve from these products, it's a great and dolphin never exclusive alternative fuel the buses the blue Bird brand and importantly, our dealer network.
So for fiscal year, we have either sold or how firm orders in hand for more than 160 electric buses and we expect more to follow with all the customer interest. We are seeing the newest addition to our alternative fuel lineup.
That's a lot of interest a buzz around electric powered vehicles being buses trucks, albeit cost.
Well, there's lot of high two from companies that haven't delivered a single product to date, well, that's certainly not the case a blue bird.
We are building and we're delivering electric buses today and have been doing so for the past two years, we have the broadest even your range in the industry with Taipei type C. N type deal offerings and we are number one in market share. This year, we're very excited about our electric bus growth opportunities going forward.
Looking ahead, the vast majority the VW mitigation funding is still ahead of us too I will help us boost sales over the next three years or so with many states your market specific funds the school bus purchases.
We're really pleased the success, we've had so far but our propane electric buses from the funds that have been issued.
So in summary.
I'm very proud of our strong it undisputed leadership position alternative fuels, we have the best partners. We have the best products on the rest lucid to blue bird with less than 15% of school districts, having purchased an alternative fuel private school bus today, we have plenty of runway ahead for continued growth in this area.
So, let's now change gears in turn to slide seven and spend some time looking at the profit improvement in cash conservation initiatives that we launched specifically to address the cobot 19 pandemic.
Oh, so let's talk shows we are implementing a cost reduction plan to generate $50 million in annualized <unk> annualized savings.
The same is comprised of two key elements on approximately 15% reduction next year in a cost targeting compensation and benefits and organizational restructuring.
We have already begun this process and expect to have this wave of any wise cost savings substantially in place by the end of this month.
The second element composite of the annual savings in production related costs with the movement to a single production shift which has implemented in June.
I mentioned, both initiatives are expected to increase profitability by $50 million annually going forward.
Turning to the right sandbox actions to conserve cash totaled $40 million and will be realized by the end of this fiscal year.
First we have drifted our capital spending plan to well below last years level and below average reduce our original plans.
Second we have been successful in securing early payment the sales to a large fleet that otherwise would have covered a a receivable for several months, that's a great effort by our treasury team.
And third we have implemented a number of compensation and benefit related reductions, including pension payments and payroll tax deferrals and lower income tax payments.
If you will see later this fiscal Twentytwenty cash austerity initiatives are a significant contributor to the stronger adjusted free cash flow outlook for the fourth quarter.
These are ongoing initiatives to partially addressed the impact of Cobiz 19 on profitability and cash today, and we will continue to a day update you on our progress.
So I'm not going to turn it over to our CFO, Jeff Taylor, who will take it through a third quarter financial results in more detail and I'll be back later to cover the fiscal 2020 full year outlook on wrap up the formal presentation.
Well, what do you Jeff.
Thanks, Phil and good afternoon, everyone on the call today, it's my pleasure to be able to share an overview of bluebirds 2023rd quarter financial details.
We closed the third quarter on July 4th 2020.
Whereas our prior year close was June 29 2019.
We expect the filed within Q by the end of day Thursday, which includes additional details on our quarterly performance and other important disclosures.
The appendix attached to today's presentation detailed reconciliations between GAAP and non-GAAP measures mentioned today as well as other important disclaimers already mentioned by Mark.
With that please refer to slide nine and I will review the key results for the quarter.
The current operating environment was unlike any that the company has faced in the past due to the global pandemic. It was a challenging quarter for us with the manufacturing operations shutdown for the first two weeks in April in response to supplier disruptions and as a precaution to protect our employees added.
Finally supply shortages and disruptions persisted throughout the quarter.
Nevertheless, we responded swiftly by taking precautions to protect the health and safety of all Bluebird employees, while concurrently taking control cost control action to protect our liquidity and balance sheet.
As Phil mentioned, we're taking additional cost control actions as the pandemic continues resulting in delays to schools reopening.
Third quarter volume was 1948 units 1472 units lower than the prior year due to the order disruption caused by covert 19.
Consolidated revenue of 189.2 million was down 119.6 million or 39% compared to the prior year quarter.
But net revenue of 180.6 million was down 111.6 million driven by lower volume.
Well, that's net revenue per unit, however was approximately $92700, which represented a strong 7300 dollar per unit increase from the prior year.
This increase was driven by three primary factors one pricing actions taken in July of 2019 to offset the impact of inflation.
To a strong mix of alternative fuel buses, notably a higher mix of electric vehicles and three a successful program that we implemented to improve the revenue on each sale.
We're pleased with the improvement in ASP as we've been able to achieve.
Barge revenue for the quarter was $8.6 million, representing a decrease of 8 million is maintenance facilities were broadly shutdown due to the carbonite team.
Gross margin at 11% was approximately 240 basis points lower than the prior year quarter.
The decline in gross margin was almost entirely the result of cost impacts in our plant caused by kobin related items, including supplier shortages in disruptions higher freight costs to expedite materials and components. The two week unplanned shutdown at the beginning of April.
Increased cost to clean and sanitize, our facilities cost a personal protective equipment for our employees and other costs related to the current operating environment.
As a comparison gross margin when adjusting for covered cost would've been approximately 15% or 150 basis points above last year at normal volumes, which is indicative of the productivity and efficiency improvements that we've implemented.
Selling general and administrative arrest DNA of 17.8 million for the quarter was down year over year by 3.2 million as a result of lower engineering expenses and cost actions implemented earlier this year.
Third quarter GAAP net income of 1.3 million was 13.3 million lower than the prior year consistent with the decline in gross profit.
On an adjusted basis net income was 4.4 million down 14 million versus last year.
Adjusted EBITDA of 12.5 million was down 16.6 million compared to the prior year, which I will cover on the next slide.
The adjusted EBITDA margin was 6.6% decrease of 280 basis points.
The deterioration versus prior year as more than explained by the reduction in volume and the impact of kind of it as previously discussed.
Diluted EPS of five cents per share was 50 cents worse than the prior year.
Adjusted diluted EPS at 16 cents in third quarter of 2020 was 53 cents worst than prior year.
Weighted average diluted shares were 27.1 million versus 26.7 million shares last year.
Liquidity was 102.5 million at the end of the third quarter.
We feel like we're well positioned in terms of liquidity to manage the business in the current environment and whether any further corona virus disruption.
We have taken a number of measures to augment our liquidity levels as discussed on the second quarter call. We amended our credit facility on may 7th the increase revolving commitments from 100 million the 141.9 million.
We got our anticipated capital spending by roughly a third and took advantage of several of the care Zach relief mechanisms that will allow us to defer payroll tax and pension pension contribution outflows. We've also got back on travel and other discretionary spending items.
Moving on to Slide 10, which is the third quarter adjusted EBITDA bridge on a year over year basis.
As you can see the volume impact of negative $20 million is the big driver and there's some other smaller impacts as well.
Pricing in economics were up 3.7 million and transformation initiative were favorable up 2.3 million.
Efficiencies in Opex were favorable by 4.6 million with Opex being the biggest portion.
As we mentioned last quarter or manufacturing operations transition to a single shift in June and we expect to capture further benefit of this change in the fourth quarter.
The government impact in the quarter was negative $7.3 million, which includes a two week shutdown supplier disruptions high rates of absenteeism, which drives increased over time and increased costs to protect our employees.
Let's now move to slide 11 talk about free cash flow.
In the current environment, we're highly focused on cash generation and maintaining a strong balance sheet.
This slide details our free cash flow bridge for the quarter.
Fiscal year, 2023rd quarter adjusted free cash flows were negative 30.3 million as compared to 1.7 million in the same period last year.
The use of cash in the quarter was the result of adjusted EBITDA was lower by 16.6 million year over year.
Higher trade working capital of 39.3 million.
This was primarily driven by higher inventory levels as we increased safety stocks to manage the supplier disruptions we were experiencing.
We expect to recover the majority of our inventory increased from the prior year end and our fourth quarter as we implemented specific initiatives to improve trade working capital.
Cash interest costs were $1.8 million in the quarter capital spending was 2.5 million down almost 5 million from the prior year quarter.
Next is where refund of $2.0 million.
Finally, the net change in other accrued expenses was a negative 1.2 million for the third quarter.
Moving to slide 12.
Cash at the end of the third quarter was $12.5 million 16.5 million lower than last year.
Yeah of 22.4 million was up by 11.5 million.
Higher debt level is more than explain by the revolver balance of $45 million at the end of the quarter compared to our 20 million dollar of auto Rep balance last year.
Net debt was $209 million at the end of the quarter, our net debt leverage ratio for the third quarter was 3.3 to one which is still below the 3.75 to one threshold. However increased in the quarter as a result of lower EBITDA.
To summarize our financial position, we're operating in an unprecedented business conditions. However, we acted quickly and decisively to lower our cost and improve our liquidity.
Actions like transitioning to a single shift manufacturing operation and expanding our revolving credit facility are proving to be impactful.
We are well positioned with ample liquidity to manage the business in the foreseeable future. The backlog is set for the remainder of this fiscal year and we remain focused on executing three key strategic elements number one improving pricing to lowering cost three alternative fuels industry leadership within.
I will turn the call back to fill Horlock cool described the outlook.
Thanks, Jeff So lets now summarize a full business priorities that we are focused on today at Blue bird.
Turning to slide 14.
First is a safety and well being of our employees, we have taken significant measure to protect our employees from Colby 19, and establish a rigid protocol for the said as well to date both in our planned on our office buildings.
We'll continue to explore new techniques and technologies to further assisted ensuring our employee safety and health or the forefront.
Needless to say, a safe and healthy workforce is key to our business continuity and we have an incredibly loyal and dedicated team of professionals.
Second these annual pricing to recover economics, and the introduction of new products and features with a 9% increase in average selling price in the last quarter, which includes pure pricing a richer vehicle makes on higher option take we're confident in our capability to price annually.
Third is our relentless focus on driving down structural costs through our transformational cost initiatives, which by the end of this year, we'll have delivered more than $50 million in savings since we started three years ago.
As you saw earlier, we're supplement in this program with targeted reductions in S. Gionee, specifically in the area of compensation and benefits an organizational restructuring.
And fourth our continued growth in the mix of alternative fuel powered school buses, we benefit from higher margins and increase on a loyalty compared with conventional fuels.
Our leadership position across all of these fuel type indicates our strategy is working and we look forward to continued strong growth in the years ahead.
And as I mentioned earlier the rapidly growing interest for electric buses is a really exciting opportunity to frozen blue bird.
Assuming these opportunities is fundamental to achieving our EBITDA margin target of at least 10% of the near term and we are setting the foundation our business structure to achieve this target while dealing with the unprecedented impact of Colby 19 today.
Let's now turn to slide 15, well covered a financial outlook for the fourth quarter and full year.
The last earnings call as many public companies have done we withdrew full year guidance because of the uncertain economic outlook.
With fourth quarter production slots now full however, we have a good visibility on the expected fourth quarter sales on full year financial outlook.
The outlook for the three metrics, which are typically provide guidance as shown on this slide.
With fourth quarter unit sales projected to be more than 40% above the third quarter fourth quarter net revenues projected to be between $250 million to $275 million with a full year outlook between 848, an $873 million.
Adjusted EBITDA for the fourth quarter is projected to be between $16 million to $20 million with the full year look between 49 and $53 million.
On the adjusted free cash flow range for the fourth quarter is forecasted a substantial $66 million to $82 million as a result of the cash generation initiatives that I covered earlier and the trade working capital improvement as inventory runs down in the fourth quarter.
The full year, okay, great to be between 60 million negative and breakeven.
So, let's now turn to slide 16 for the wrap up.
As a headline say, we're confident in our ability to weather the storm that we're all experiencing but the economic and market outlook remains uncertain. The sideline isn't unique to bluebird as we see many companies given the same message over the past few months.
But we are confident in our ability because bluebirds business fundamentals and business structure improvements continue to be strong.
Our three prong margin growth strategy, a pricing reducing costs and increasing mix of higher margin alternative fuel buses is working.
The lots of could not be accomplished without differentiated in class leading products that are market disruptive, namely our expensive and exclusive range of alternative fuel powered buses.
We successfully moved to a single shift operation late in the third quarter that will deliver increased productivity and higher quality and we'll meet future demand needs. This is a great example, a bluebird restructured lease business in response to a difficult time, I'm, making is more competitive going forward.
While the school bus industry is down this year and is likely to remain so until we see an increase resumption of in classroom teaching actual customer demand for new buses remains very high as 25% of the U.S. can and Canadian School bus fleet.
50 years of age are older.
This represents more than 150000 buses that customers want to replace with funding availability and school facility reopening being the limiting factors.
As I mentioned on the prior earnings call, it's what putting into context. The size of school bus funding. This is a total annual cost of education for K through 12 public schools.
At about $2 billion a year the annual capital outlay for deal School bus purchases typically represents less than 0.3% of the total capital expense budget of seven $700 billion for education in the United States.
I think it's important to recognize this point, let me think of funding available to for new buses with property taxes being the major source.
Very small portion of the education budget.
So in summary, despite the current industry challenges, we havent lost sight of our mission.
The growth profitability and increased EBITDA margin to at least 10% in the near term to.
So this then we'll continue to drive improvements across all elements of our business, thereby improving our underlying margins and we'll report on our progress each quarter.
That concludes our formal presentation I'll now pass it back to our moderator to begin the QNX session.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session.
If he'd like to ask a question you May press star one on your telephone keypad a confirmation total indicate your line is in the question too.
Press Star too if you would like to remove your question from the Q.
For participants hitting speaker equipment, and maybe necessary to pick up your handset before passing this.
Starkey. Our first question comes from the line of Eric Stine with Craig Hallum. Please proceed with your question.
Hi, Ron.
Eric.
Hey, so I noticed in your presentation.
It looks like you're you're planning to increase production or that it in place for the second quarter fiscal 21, and just curious.
I mean is that based on maybe feedback you're getting from your dealer network our customers or is that is that a target that you've got in place now.
And then as time goes by and is that gets closer you'll have a better indication. If that is when you start to see some pick back up again and volumes.
Or some other recovered volumes based on timing.
Any thoughts on that would be great.
Yes, Eric this is Phil here, Yeah, I mean, thats really are planned to we've got Sop production plan to increase capacity from a couple of actually we're going to take in the October shutdown in Christmas shutdown period. So we can we can really handle any search involving that will come because.
Despite the fact when this Colby 19 in Prime there's no question, there's always a surgeon second half the year and.
With some uncertainty now with obviously schools, many schools being out with online teaching them being close on those they seem to get through this.
Pandemic in case, you start to slow we know schools one to reopen we won't be ready for when when that happens because they're going to one buses when schools opened the going along buses again. So we just put it planning place recognizing the first quarter is always traditionally our lowest volume we can handle that with the current capacity, we want to be ready to meet any demand.
Just as a care from the January February time period onwards.
Understood understood Okay.
Maybe just turn into the paint shop I know that.
You've got that ramped up early on you had some issues I think it was the outside rail that perhaps you are outsourcing you cut that in.
In house and that things are going well, maybe an update on the paint shop.
And maybe is there a way to quantify what type of impact that had on on the margin strength this quarter.
Well, yes, I mean first of all the pain shelf, we've been making subtle changes all the way through this year for example.
I'll give you one comment that we have actually been running nothing we told you. This before we've been running our old pains shelf to put the primer on the bus and then put in the top call for the new paint shop, because it was up a compatibility compatibility issue, we were seeing where the quality of the pain versus the new robotic. Thanks, Joe we've overcome that now in fact this just this last.
Just six weeks, we're now completely painting every single bus through the new paint shop, both the primer and telco was color west on wet system. So it's still it's still we put up we put a primer on illustrates into the top cold we never touched abasement into coats, what we'll do in previously and so.
We were seeing definite productivity gains less three work required because of that this is what we wanted to see.
I think you're going to see the full year effected that really coming in as we get for into October wood on the fiscal year. So a few things we want to do through the October shutdown and.
That will that would that will benefit us as we go forward into next year as far as impact this year, probably a little too recent to quantify what that is I think the certainly.
A few hundred thousand dollars a benefit we're seeing from that but the big big benefits will see with will be.
As we get into next fiscal year frankly.
So with.
That is as we as we talk about plans for next few Celsion our year over year plans will sort of make an effort to talk about that as we go through our results.
Okay sounds good.
Maybe last one for me just on the price the ASP increase there and I know alternative fuels and specifically electric and maybe I missed it results or in your commentary but.
I mean was that an abnormally high level this quarter in terms of electric or is that a number based on what you see it backlog orders et cetera are that you view as a sustainable level.
I got to tell you. We are we're seeing in every quarter increased interest increase all this coming for electric.
It's gone really well for this year on in fact, our biggest I'll tell you the biggest quarter year for electric will be our fourth quarter.
So what we really feel good about what thats going I think it's.
It's resonating with customers there are grants available through the.
Through the telephone Energy Commission in California, We got to VW grants available just like anywhere else yourself on trucks or anything I need to electric vehicles sold on big products. They tend to be supported by grams, but well see the nice real uptick in that in fact, we just recently increased capacity capability even in full in the full valley plant here.
To handle more on a daily basis, so yeah, it's going well and there isn't a one off thing I think we look to this is a real real the growth opportunity for us and.
I'll be honest with the helping a little surprised by the waste taken off but now I'm not surprised anymore not keep pushing my guys for more sales. So we.
We feel good about what is going.
All right that's great. Thanks.
Okay, Hey, before I get the next next question just one thing I wanted to point I'd make one little.
Misstatement.
When I was going through slide for the slide was correct, but I said our industry volume outlook for fiscal 2021 is 28 to 29000 buses, obviously I'm in fiscal 2020, which is what the slide sets as well given an outlook or a guidance you had on 2020 wants I just want to correct that.
I missed the Mr. statement I made that thanks.
Our next question comes from the line of Craig Irwin with Roth Capital Partners. Please proceed with your question.
Hi, good evening and thanks for taking my question.
So first question is the the.
Slide 760, plus electric buses.
You may be give us a little bit color on the breakdown. There is that all for California or are you, making deliveries across the country and.
Is that for shipment exclusively in this fiscal year.
That ends in September.
Hi, obviously, California, Craig is the biggest market as far as I'd say about 75% does that.
For the California market, but we've been selling now Washington.
We sold two New York.
I know we've been looking things in.
George Alabama, just this last week told delivered a couple of buses. So it's it's all over the place Texas to we're seeing what's in a lot of states really picking up the interest here and now say that the.
The VW grant money is coming very well for his data some of those called H money as well as you can use for electric buses. So every state is really looking at it. There's no question, there's a ton of excitement around it the school districts parents, and we want to be the forefront today. So it's not just California, now, which it was for the last year, it's grown into.
It's growing across the nation now.
Okay, and then you mentioned the VW mitigation funds the Dieselgate funds right. So.
I guess around quarter that has been disbursed in the last year.
Would you expect a greater amount to be disbursed in this upcoming fiscal year. What are you hearing about the probable disbursements there and how do you feel about your competitive positioning for those awards.
Okay. So why so I think what we're probably going look at something similar to this year. This year nothing what you're going to finds a lot of districts that might be.
Wondering about my school is closed I'm doing online teaching I want to get buses when it opens again, obviously wonder grants available. They can access that really quickly. It's a very easy sell with a school board to going in say opportunity here to take some grant money. So we expect to be something similar to this year.
In terms of.
As we why we think we're well positioned.
The products in there or diesel obviously, the clean diesel that we all have now we have a great partner that would come in so I like to fill a level playing field, but obviously propane electric compressed natural gas are all part of that when it comes to propane remember why this money came about is because of.
I should just simply people were cheating on emissions that engine was just not right was not true on the money was made of a box VW is fine money became available when you look at our engines, though our propane products in particular are knocked on Knox output nitrogen oxides is 110th of the EPA standards.
So thank you know you start to think about why you why we do less money available thoughtful clean engines on the road and we have the cleanest affordable.
Tcl message out there without propane and we don't have them into market with such a clean propane products I think it's great for us It comes to electric again.
Lots of states or do not different ways somewhat normalizing get to making the same as a conventional sort of sort of product summer given our significant investments just for a few electric but obviously when you look at sheer volume thus far more assigned to propane to CNG all to gasoline and anti electric amount because electric also much.
I think I look at it our position.
The three major manufacturers in this business will the only one with electric bus on the role today, who is delivering buses. So we feel good about thats running Rx leading.
Mission propane electrics following will be on CNG, nothing I think we're not really good shape and we keep working it.
Okay, and then the $15 million in EBITDA savings right. I think you indicated that one third of that issue in the move to a single shift in the other two thirds, it's from adjustments and SGN a.
Can you just in farm for us at that was achieved in this past quarter. So the full benefit should be there in the fourth fiscal quarter and what do you see as flexible opportunities to increase that.
That cost savings cushion as we go into fiscal 21.
Maybe the school districts that remaining closed.
Just don't have the demand and you do see demand pushed out.
Over the course of next fiscal year.
Yes.
Okay, Let me hit our first Paul first you first.
Section first and so the pain shall we implemented im sorry pension they hit a single shift was during the first we put it and so you're going to get a full quarter effect in the fourth quarter that we will have just been over a month and a half into it but the question I think I said on outside in the call that we will that will be substantially implemented I said at the end of this month.
So it's certainly won't get a full quarter effective that you're going to get really just one month effective that another 50 million was it was an annualized amount I put in this year to think about your modeling next year.
I think about as today and then the single shift impact essentially over this.
Last year, there will be in the order of $50 million less the probably on the first quarter of we have one quarter this year of the.
As a single shift benefit.
Could I just haven't Craig Craig the second part of your question was really.
What's the future opportunity there for additional savings and how do we balanced that with our outlook for next year and I would say, yes, that's really a work in progress. So we're taking significant actions this quarter to.
Yeah rightfully position the company where for the environment that we're in today and we'll continue to monitor that going forward. If the environment continues to deteriorate. Then obviously, we'll we'll evaluate that for for further actions that we may need to take but remember we really want to balance.
The opportunity to recover when the market recovers and so if we if we cut too deeply then will sacrifice some of our ability to really.
Bounced back when the market bounces back and so we're taking that into account as we as we evaluate those options going forward.
Great and then last question if I may Im Ken can you guys comment maybe comp comment on the the electric school bus growth rates.
We are likely see over the next few quarters are you seeing.
No growth rates, well over 100% right now and.
Do you expect similar growth rates to continue.
Over the next handful of quarters.
Well I mean, when you look at this year I think certainly versus last year. It probably is about 100% growth versus last year, whether or not that continue I love to see that continues its hard to say really because it's so grant.
Focus right now drunk driving driven right now.
That.
Now it's just.
It's a little different the school district, just a stated I can I can just ultra all my desired new buses into electric Altron increase however, having said that.
Your points right on spot on because a full quarter.
Orders that we have the will of building in the fourth call from booking in the fourth quarter.
Got a bit above the third quarter, which is over the second quarter. So we definitely I'll see you not growth, but I don't think I don't have double double would be great, which for the see what happens.
To put it to put a number on that but I will tell you. This is going to grow.
Going to grow substantially, but double moderate a little bit optimistic right and I think we would expect to see strong growth rates return once the pandemic is cleared and and we get that.
We get that headwind really off of us.
But in the short term that'll that'll impact the overall market and and where that market grows.
But.
One thing I was that Craig if it on something really interested because when you go talk to school districts, but very familiar with diesel propylene is incredibly mainstream soliz gasoline CNG still not perfect for all market quite frankly is too expensive filling station filling infrastructure.
What were they want to talk about what do you usually when usually thoughts telemed electric buses, what's going on there what's the tcl benefit what can I expect to say, obviously cost. So theres a there was definitely a strong balls around that.
We're excited we're excited about I want to make sure that.
We're ready for hence I talked about just this last quarter, we increased our own daily capacity capability. So.
We're planning will find to be though on the gross capital as many growth opportunities.
Great just just a clarification right. So the growth of electric buses, we understand is greatly outstripping any activity.
In the regular school bus market can you confirm that we do continue to see really solid positive growth.
In electric school buses, despite co that despite the headwinds on the rest of business well, yes, I'd say, so yes, yes, we have to recognize two we're from a fully Slovak slow small amount of volume right. Now so it's easier to grow I mean, even look at what we've done with propane and gasoline over the years, we would.
20, 30% growth some years and that was selling in a good year. This year. For example would have been looking at 5000, plus those two product lines versus 160 electric buses. So somebody from the baseline is strong, but certainly percentage growth wise, yes, absolutely right.
Electric is going to outpace the rest.
Excellent. Thanks, again for taking my questions and congratulations where decent results in this difficult environment.
Thanks, Craig I appreciate it thank you.
There are no further questions I'd like to hand, it back over to Mr. Carlos for closing remarks.
Thanks, Doug and I want to thank everyone on the call today for joining US we do appreciate your interest in Blue Bird and we'll look to updating you all again on our progress next quarter before I sign a whole. Obviously you are with a final message from Bluebird today, I guess, it's sort of somewhat repetitive, but so I just want to get this this across for everybody first we are very well.
Decision to handle this unprecedented pandemic, we have ample liquidity, we're improving our business structure, which you saw certainly in the third quarter again, when I talk about that I'm talking about taking costs out can grow in their base revenue that means the underlying margin is improving and we're going to take what ever restructuring actions necessary to get through this period and.
Our plan is to continue to grow and thrive in the long run.
So let me follow up questions. Please don't hesitate to give a call to our head of profitability and Investor Relations Mark Benfield.
So thanks again from all of US a bluebird and have a great evening.
Ladies and gentlemen, this does conclude todays teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.