Q3 2023 Blue Bird Corporation Earnings Call

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Thank you for your patient sleep at Corporation fiscal 'twenty 'twenty tracer called Johnny will begin in approximately one minute.

[music].

Hello, and welcome to the Blue Bird Corporation fiscal 2023 third quarter earnings call.

My name is Laurent Hullo Beechwood makes youku today.

There'll be an opportunity for your questions. After the end of the presentation.

If you would like to ask a question. Please press star at least by one your telephone keypad.

I will now hand, you back to hoist, Mark Benjamin head of Investor Relations to begin.

Please go ahead.

Thank you and welcome to Blue Bird's fiscal 2023 third quarter earnings Conference call.

For our call is webcast live on Blue dashboard Dot com under the Investor Relations tab.

You can access the supporting slides on our website by clicking on the presentations box on the IR landing page.

Comments today include forward looking statements that are subject to risks that could cause actual results to be materially different.

Those risks include among others matters, we have noted on the following two slides and in our filings with the SEC.

Blue Bird disclaims any obligation to update the information in this call.

This afternoon, you will hear from Blue Bird's CEO , Phil <unk>, and CFO Roswell and Roger will ask you then we will take some questions. So let's get started Phil.

Well, thank you Mark and good afternoon, everybody first let me say, it's great to be back at Blue Bird and the team here is doing a fantastic job and delivering results ahead of schedule, which will be evident as Roswell and I cover the third quarter financial results today.

To set the stage, although last earnings call you saw the 180 degree shift in our second quarter financial results compared with last year well in the third quarter I am pleased to say that we've improved on those second quarter results and had an outstanding quarter.

So let's get started with the key takeaways for the third quarter on slide six.

Market demand for school buses continues to be strong and the backlog for Blue Bird School buses was up 5200 units at the end of the third quarter now.

Now we are still dealing with supply chain constraints across the industry, which although easing is limiting industry production on deliveries, but we are managing this very well.

As reported last quarter, we are now largely through the legacy price buses in our backlog that significantly impacted profitability last year and earlier this year. The vast majority of our bus is now.

Our third quarter bookings and backlog is a current price levels.

As a reminder, we define these legacy price units as those are contractual price levels prior to October 2021.

This along with operational improvements drove the substantial increase in our third quarter financial results compared with last year.

On the EV front, thanks, largely to the EPA is unprecedented 5 billion clean at school bus program, we had more than 550 <unk> in our backlog at the end of the third quarter and EBIT deliveries in the quarter increased by nearly 150% compared with a year ago.

We also reinvested back into the business by selectively upgrading facilities and processes enhancing the plant working environment and adding electric bus capacity through our new EV production Center.

Through the efforts of the best looks both from the business strong leadership lean process improvements and sheer hard work the third quarter saw some of the best performance the company has ever achieved.

As you'll see shortly the impact of these actions shows in our outstanding third quarter financial results, while we significantly beat guidance.

Bottom line the business is performing extremely well the turnaround we have been executing is completed and ahead of schedule and profit margins have improved substantially.

Now, let's take a look at our financial and business highlights from the third quarter on slide seven.

I want to start by saying that our third quarter financial performance is massively improved from a year ago. We sold over 2100 buses, which is a substantial 24% or 411 buses above last year.

Those unit sales drove third quarter revenue of almost $300 million.

This is an exceptional 43% above fiscal 2022, that's an increase of $88 million.

Back to the pricing increases we took up of up to 25% it could recover hyper inflation together with higher unit sales and a richer mix of Evs contributed to this impressive revenue growth.

Adjusted EBITDA of $28 million was $19 million better than a year ago.

Incidentally, our third quarter results exceeded this year's second quarter by $8 million, despite selling 150 fewer buses.

Although not shown on this slide that translated into an outstanding adjusted EBITDA margin of nine 5%.

And finally, adjusted free cash flow for the quarter was $43 million, that's an impressive increase of $83 million over last year's third quarter.

Overall fantastic third quarter financial results that build on the improvements we saw last quarter RASM I'm going to take through the details later.

On the right hand side of the slide you can see some of the ongoing operating highlights for the business as.

As I mentioned demand continues to be strong our firm order backlog is extremely strong at 5200 units with over $750 million in revenue.

We raised prices considerably over the past two years and the average selling price per bus in the third quarter was up more than 17% from a year ago.

Part sales also continues to be a bright spot for us up 23% year over year, the increasing average age of buses on the road as having a material positive impact on our aftermarket business.

Turning to alternative powered buses they represented 63% of our unit sales in this quarter and <unk> eight percentage points higher than last year.

We continue to be the clear leader in this space no. Other manufacturer comes close to these numbers.

Part of the third quarter volume growth was in EV buses with bookings up nearly 150% from last year and up over 150% through the first three quarters of the year.

Additionally, we left the quarter with more than 550 firm EV orders in our backlog, which is more than a 10% share of our total backlog that's worth around $182 million in revenue clear.

Clearly we are benefiting substantially from the first phase of the Epa's Clean School bus program.

And lastly, our <unk> business in the third quarter, we launched an all new extended range battery, providing around a 30% increase in range on a single charge over a standard battery. That's an expected range of about 130 miles on one charge, which is terrific value offering for our customers by meeting the sweet spot for Daily School bus use.

Yeah.

On the leadership front in June we appointed Britain's commits as president of the company Britten has done a terrific job, leading our EV business over the past 18 months and his appointment reflects the increasing importance of electrification to our present and our future growth strategy, we've expanded Britain's responsibilities and it's great to have him and his executive.

Leadership role.

I am pleased to tell you that based on our exceptional third quarter financial results together with the continued progress we are seeing in the fourth quarter. We are again raising full year guidance on all three metrics that we report on.

<unk> will cover this thoroughly in his section later, but as a preview we are increasing the midpoint of guidance for adjusted EBITDA up from 60 million to $73 million.

That's an incredible increase of $88 million from fiscal 2022, clearly our turnaround is what we are delivering results and we have momentum across the entire business.

Turning now to slide eight we are delivering some of the best operational performance in nearly two years in several critical areas setups and throughput are up significantly as missing parts are down due to our successful efforts to improve material flow to the plant and to the production line.

Those are included adjusting our warehousing strategy by delivering supply of parts to the <unk>.

Plant Resourcing numerous problematic suppliers and breaking production constraints. This also contributed to the lowest number of hours per bus and the best manufacturing efficiencies in two years.

As an example of a measurable progress in June of last year, we took more than 40 days from initial production setup of a bus to booking the sale. We are now running at less than 20 days, which is greater plant efficiencies and even better for cash flow.

Not only is this proof that bluebird is back on track, but we are now exceeding some historic financial benchmarks for the company.

Moving onto slide nine.

This is a reminder of our key pillars around care delight and deliver our focus areas. Within these pillars include our people lean transformation, expanding our total addressable market and scaling evs.

I want to briefly touch on our progress on each of these.

Regarding our people on our last call. We cover the actions we have already implemented this calendar year, namely companywide pay increases additional paid vacation days working environment improvements and narrow span of control and the planned all have been very well received by our team members in Q3, our newly fall.

And we care team and our Fort Valley plant launched an employee suggestions ideas program that has got off to a great start with over 850 suggestions captured and more than 90% action in just the first two months of operation.

You will also recall that in May our plant employees voted in favor of unionization by the United Steelworkers I can tell you that they are working together well and are in the early stages of negotiating our first collective bargaining agreement, we want to collaborative relationship with the Union and an outcome that our employees embrace and it's also great for the company.

Going forward.

Through continued focus on lean transformation, we are seeing improvements in quality and throughput even while the supply chain environment is still far from normal.

Our commercial EBIT chassis development continues to progress toward having running prototypes early next calendar year, while we stay focused on ramping up <unk> School bus production with that in mind, let's now take a closer look at our progress in ramping up our all new EV buildup center that we told you about in our last call turning to slide 10.

We have doubled <unk> production from two to four units per shift since we began using our dedicated <unk> Center last quarter. Later this year, we've been building up to six units per shift with the opportunity to double its capacity to 12 EV buses on two shifts as demand grows and supply chain capabilities improve and expand.

<unk>, we will be unable to support throughput of 20 <unk> per day with our new footprint.

That's an annual capacity of up to 5000 Electric school buses plenty enough to meet the growing EV demand in the years ahead.

This dedicated facility is a great example of our lean production system and efficient manufacturing within Bluebird.

Let's move on now to slide 11.

This is a reminder of the Epa's Clean School bus program. This program provides 5 billion over five years in rebates all grants to customers for the purchase of clean emission school buses covering evs and propane powered buses.

2500 buses were awarded rebates in the first stage of this program, which totaled $1 billion.

It's estimated that about 2000 buses will ultimately be ordered from phase. One are some school districts have elected not to move forward with our EV orders as concerns over infrastructure readiness and overall preparedness at the district level.

The good news is that the result of rebates savings of about $185 million will be reallocated to future phases of the program.

We have received hundreds of EV orders from this program and fully expect to garner well over 550 orders for this first phase when all is said and done with at least $165 million in sales.

A long term impact of this program should be well over $1 billion in revenue to bluebird, representing more than 3000 orders.

Now the EPA recently launched phase two of this program, which is summarized on slide 12.

Phase II is a competitive grant program with $400 million anticipated to be awarded in this round applications for phase II grants will close at the end of this month to ensure we were well represented in application submissions, we established substantial resources, both internally and externally to work closely with our dealers.

Our end customers and supporting them in the detailed grant writing process.

Following an extensive review and selection process by the EPA, we anticipate all of this to begin in January 2024.

We expect the second phase to fund approximately 1000 buses and we conservatively estimate that we will get at least 250 at these.

Later this year, we anticipate the EPA will announce a further $600 million phase III program, which would complete the $1 billion a year program funding commitment for 2023.

I would now like to hand, it over to Roger to walk through our third quarter financial results in more detail as well as our updated full year fiscal 'twenty three guidance. In addition, we will be providing you with our first look at our fiscal 2024 guidance.

Although to your restaurant.

Thanks, Phil and good afternoon.

It's my pleasure to share with you the financial highlights from Bluebird fiscal 2023 third quarter results.

The quarter and is based on a close based on July one 2023, whereas the prior year was based on a close date of July <unk> 2022.

We will file the 10-Q today August nine after the market closes our 10-Q includes additional material and disclosures regarding our business and financial performance.

We encourage you to read the 10-Q and the important disclosures that it contains.

The appendix attached to today's presentation includes reconciliations of differences between GAAP and non-GAAP measures mentioned on this call as well as important disclaimers.

Slide 14 is a summary of the third quarter in yesterday's results for fiscal 2023. It was another excellent operating quarter for Blue bird with somewhat consistent supply chain challenges and with an increased number of higher margin units driving both our topline and our bottom line results.

We significantly beat the adjusted EBITDA quarterly guidance provided in the last earnings call and in fact, we delivered close to 10% margin in this quarter.

Despite taking downtime due to the union election activities in this quarter. The team has continued doing a fantastic job and generated 2137 unit sales volume, which was 411 units or 24% higher than prior year.

Consolidated net revenue of $294 million was $88 million or 43% higher than prior year.

Driven by higher unit higher part sales improved mix of electric buses and pricing actions that took quite significantly in this quarter as expected.

The adjusted free cash flow was a Q3 record of $43 million and $83 million higher than the prior year's third quarter results.

This outstanding performance was driven by the increased profitability combined with strong working capital management and supports our great liquidity position at the end of this quarter, which is over $134 million.

Adjusted EBITDA for the quarter was $28 million driven by our high volume off now profitable buses.

Parts sales and margins, partially offset by increased labor costs.

Given the transitional nature of our fiscal 2000, <unk> results, which included still a large portion of all backlog low margin boxes. Our year to date performance is still very solid at 6398 units sold net of 375 Evs.

With $830 million in revenues, which is already above full year fiscal 2002 was one full quarter still to go.

Year to date, adjusted EBITDA at $44 million, and we delivered year to date and outstanding free cash flow of $86 million.

Moving on to slide 15, and as mentioned before by Phil Our backlog at the end of Q3 continues to be very strong at 50 to 100 units and with the vast majority of these units at the current price levels.

Breaking down the Q3 $294 million in revenues into our two business segments.

<unk> net revenue was $270 million up by $84 million versus prior year.

Our average bus revenue per unit increased from 108000 to 126000, or 17%, which was largely the result of pricing actions taken over the past 18 months as well as the higher mix of electric buses.

EV sales in Q3 were at a record level of 148 unit or 88 more than last year, 147% increase.

Product revenue for the quarter was $24 million, representing a growth of $5 million or 23% compared to the prior year.

This extraordinary performance was in part due to increased demand for our part of the buses are fully back on the road in the post COVID-19 environment as well as supply chain driven pricing actions.

Gross margin for the quarter was 15% or five percentage points higher than last year due to our improved operational performance and our pricing catching up with the inflationary cost of the last 18 plus months.

In fiscal 2000, <unk> Q3, adjusted net income was positive $14 million or 17 million higher than last year.

Adjusted EBITDA of approximately $28 million or nine 5% was up compared with prior year by $19 million and five percentage points.

Adjusted diluted earnings per share of positive 44 was up 53.

Versus the prior year.

In summary, our operating performance and financial results demonstrated in this quarter and the prior quarter are clear evidence that our turnaround is complete and it sets a solid base for our future performance towards our goal of sustained profitable growth.

Moving on to slide 16, we have extremely positive developments year over year also on the balance sheet.

We ended the quarter with over $50 million in cash and reduced our debt significantly by $79 million over the last four quarters.

Our liquidity is strong at $134 million at the end of fiscal 'twenty, three Q3 with a zero balance on our revolver.

The improvement in operating cash flow and adjusted free cash flow were primarily driven by improved operations and margin and were supported by August small improvement in trade working capital in this quarter. Additionally, we had at the end of the quarter of $13 million in prepaid revenue from the phase one of the EPA Clean School bus program.

With more to come in the future.

As a reminder, at the end of November 2022, we entered into the sixth amendment to our credit facility extended the maturity date through December 31 2024 the.

The amended covenants and extended the maturity of our loan providers globally with both flexibility and stability of our business continued to recover from the COVID-19 pandemic and the associated global supply chain disruption.

As our business results already significantly improved and our trailing 12 months' net leverage ratio as well in the second half of this calendar year, we intend to explore refinancing options and debt maturity extension.

Slide 17 shows the walk from fiscal 'twenty to Q3, adjusted EBITDA to the fiscal 2003 Q3 results.

Starting on the left at $8 8 million the impact of the bus segment gross profit in total was $20 5 million split between volume and pricing effects net of material cost increases of $13 8 million and operational improvements of $6 7 million the operational improvement.

Year over year to manufacturing efficiency improvements and lower freight and cost.

The favorable development in the past segment gross profit was $3 6 million driven by higher sales and improved margins as mentioned earlier in the call.

Additionally, our micro bird joint venture results improvements were more than offset by increases in our fixed cost mainly personnel related for a net of negative $4 9 million compared to Q3, a year ago on a very tight cash conservation measures were in effect.

The sum total of all the above mentioned developments drives our strong fiscal 'twenty three Q3 reported adjusted EBITDA result of $28 million or nine 5%.

On to slide 18.

Looking at Q3 and ahead of Q4, we are happy to reiterate that we are now largely passed most of the oil backlog unit with fixed pricing strong fiscal year 2021 orders.

Our production schedule is now full for the rest of fiscal 'twenty, three and fiscal 2000 and for Q1 with some of those type D. For example, going already deep into fiscal 'twenty four.

However, as mentioned in the last earnings call supply chain and labor inflationary cost pressure still exist.

The upcoming price increases will flow to the bottom line in fiscal 'twenty three.

Given our already significant backlog, we already announced in May for fiscal year 'twenty for a moderate price increase of 2000 and $500 per bus net four new orders on all bus types that we billed after October one 2023 to cover expected inflationary and raw material cost increases.

On Slide 19, you can see once again the spot market development for steel prices.

The reduction in the second half of calendar year 2022, they started to increase again all the way through the end of May and this will offset a portion of our pricing realizations for the remainder of calendar year 2023, as I mentioned on the previous slide. However, the last few months showed easing and we'll continue to monitor the situation closely.

Please also keep in mind that we have already put in place a comprehensive steel buying strategy and we are entering in future locked contract for steel prices with certain tonnages up to 12 months forward minimizing our exposure and margin growth in the backlog.

On slide 20, looking at fiscal year 2023, we want to share with you our updated fiscal 'twenty, three Q4 and total year guidance.

A reminder, we are taking a more transparent and conservative approach. This year as it is still somewhat uncertain supply chain environment, we are facing however.

However, we have improved already all the other business levers that we could address has now demonstrated by our very strong fiscal 'twenty three Q2 and Q3 actual results.

Looking forward at fiscal 'twenty three Q4, we are maintaining our forecasted revenues in the range of $280 million to $300 million. However, we are increasing our Q4 EBITDA margins by approximately one percentage point, but on an adjusted EBITDA of 29 million or approximately 10% with a range of 26 to 32.

$2 million.

For the total year, we are raising our expectation for revenues in excess of $1 1 billion and we are significantly increasing our midpoint adjusted EBITDA guidance to $73 million or six 5% adjusted EBITDA margin with a range of $70 million to $76 million.

Moving to slide 21 in summary, we are forecasting a significant improvement year over year in all aspects with revenues up 40% to approximately $1 1 billion adjusted EBITDA in the range of $70 million to $76 million and positive free cash flow of $70 million to $80 million, partially supported by the <unk>.

Revenues from phase one of the EPA clean robust program.

On slide 22 as promised in the last earnings call. We wanted to give you today. The first look at our initial fiscal 2000 and for guidance and the expected business operating environment.

Supply chain situation is not fully stable yet and therefore, we are sharing with you a base case scenario as well as the downside and upside from there.

The base case guidance is anchored in the supply chain status quo with slight improvements and with slightly increased production levels.

Total of 8500 bus units for the year of which 750, plus our evs for a revenue projection of 115 billion and adjusted EBITDA of $85 million or seven 5% adjusted EBITDA margin.

This is an increase over fiscal 2000, you had expected results and would represent the best year ever for Bluebird and a great achievement at relatively low volumes compared to the pre Covid best years.

The downside upside scenarios listed there are dips.

And on the supply chain development throughout fiscal year, 'twenty, four and bracket, our adjusted EBITDA results to a range of 7% to 8%.

We will provide you of course with more details during our next earnings call in mid December .

On slide 23, we wanted to reiterate our long term molecule.

We are very happy about the results of our completed turnaround as demonstrated by our fiscal 'twenty three Q2 and Q3 actual results our increased fiscal 'twenty three guidance and our initial fiscal 'twenty four base case guidance.

Looking a bit beyond that one of the supply chain further normalizes, we expect to sell approximately 9500 unit, including 500 units Evs and generate a normal year of 100 million or 8% adjusted EBITDA on $1 5 billion in revenues.

Looking further to the medium term, our EV growth and operational improvements can support volumes of 10500 to 11000 units, including Evs in the range of 2500% to 3500 unit generating revenues of one five to $1 75 billion with adjusted EBITDA of 150.

200 million or 10, 311%.

Our long term target remains to drive profitable growth towards $2 billion in revenues comprising of up to 12000 units of which up to 5000, rovs and generate EBITDA of $250 million or 12%.

We are incredibly excited about <unk> future and ill turn it back over to Phil to further expand on this.

Thank you rosman, let's now move on to slide 25.

All the hard work the Bluebird team is putting to turnaround our business following the unprecedented supply chain disruptions and hyper inflation that we've seen over the past two years is now really paying off.

That's why we're again raising our full year financial guidance, we have at least one quarter ahead of original turnaround plan for the year and expect to book around 8400 units as a 23% increase over fiscal 'twenty, two and achieve a topline revenue of just over $1 $1 billion and.

An incredible 40% increase over last year.

<unk> sales will also be well ahead of plan delivering at least $92 million in revenue and that's up 20%.

We now expect adjusted EBITDA midpoint to be around $73 million, that's an outstanding turnaround of $88 million for the losses, we incurred in fiscal 2022.

EV book has continued to be on plan and we expect those to almost double year over year.

The school bus industry forecast for our fiscal 2023 continues to be supply chain constrained across all Oems and our targeted bookings will put us right, where we want to be around that 30% market share number.

As other when this was a flat to slowing down we adjust heating up with growing demand in front of us since the pandemic hit in early 2020, and virtually all schools closed for six to nine months, followed by severe industry wide supply constraints in <unk> sales for the past three years have been well off from the long term average of around 32000, new <unk>.

<unk> a year.

Consequently, the school bus fleet is aging a must be replaced this is not discretionary and we expect strong industry demand in the coming years to address this pent up demand.

<unk> is forecasting a compound annual growth rate of 10% this year through to fiscal 2027, and Thats great news for our business.

After executing a substantial turnaround across our business. The company is performing extremely well, we'll continue to improve operating performance and look forward to sustained profitable growth and a robust market ahead.

The future's incredibly bright for Bluebird, let's now turn to slide 26 as of Summer reminder of the strong investment highlights around our company.

We are a great counter cyclical play to many companies and industries being affected by the slowdown in consumer spending plus not only are the fundamentals of our industry strong. It has just started to heat up with a 10% compound annual growth with expected over the next several years.

Second there was a $5 billion commitment from the highest level of government to electrify. This country's school bus fleet with more federal and state funding available and anticipated outside of this program with more like to school buses on the U S. Rose today than anyone Bluebird will be a strong beneficiary of these programs. We also have a <unk>.

<unk> reputation as the undisputed leader in alternative powered school buses for over a decade as evidenced by more than 20000 propane powered bluebirds operating today.

Our exclusive partnership with Ford and Roush gives us a distinct performance and value advantage for this ultra low emissions product that no. One else has with propane and it has the best total cost of ownership value of any engine offering on the road today without ground support.

And on EV, our collaboration with Cummings accelerate division offers a proven partner investing billions in alternative fuel solutions.

No other electric school bus manufacturer has to offer.

As impressive as the outlook is for school buses, we are still looking for more growth and want to expand our total addressable market. Our planned commercial strip chassis offering which is under development right now could eventually add a few thousand units per year on top of our projected long term forecast more to come on this development program that we have underway.

With our lean transformation efforts, we are eliminating non value added processes and reducing standard production hours per bus.

We are always looking for ways to take cost out and at the same time increased quality or episode contingency prove in this area will never stop.

As we mentioned today, our pricing is now fully aligned to market economics, and we are now just about through the legacy priced bus issue with a significantly hotel margins in the past year.

We just achieved almost 10% adjusted EBITDA margin in the third quarter as you saw in the fourth quarter fiscal guidance, we are expecting a full 10% margin on supply constrained volume we.

We are convinced that in a normalized operating environment with supply chain constraints are minimal a sustained double digit EBITDA margin for the full year is in our reach specifically, 10% in the next two to three years and 12% in the next four to five years.

As I mentioned, the beginning of this call all the hard work by the Blue Bird team has paid off and the business is ahead of plan and even exceeding historical performance benchmarks. Our turnaround is completed I want to thank our nearly 1800 employees for all the hard work and dedication as well as our expanding dealer body.

Who sacrificed with us over the last two years, we could not have done it without them and they are and always will be critical to our success and our future.

That concludes our formal presentation today and I'd now like to hand, it back to our moderator for the Q&A session.

Thank you.

If you would like to ask a question then please press star one.

Thank you Pat.

If you change your mind please stop by.

<unk>.

We're preparing to ask your question. Please ensure that your line is on mute it lately.

As a reminder, the staff I suppose one call for question.

Our first question comes from Eric Stine from Craig Hallum, Eric. Please go ahead.

Yes, good afternoon, gentlemen, razvan its Aaron's for hall on for Eric Thanks for taking the questions.

Hi, Amit first for US can you maybe just hello.

First can you maybe just talk about some of the items that are in the supply chain that you are still seeing the constraints on kind of the efforts that are being done their outlook for improvement and then just looking at the FY 'twenty four guide just maybe talk through some of the puts and takes around that.

Yes, sure it's Phil here, Aaron because it's good to talk to you.

It's a great question I think first of all I'm going to set the scene a little bit obviously last year, we had major supply chain issues and that we have many suppliers struggled to get labor for them to get to tier tier two tier three supply support from <unk>.

Europe or from Asia struggling to meet what we need and not really hurt us last year badly it's quite dramatically different. This year. We have we do have a problematic list of suppliers. The differences this year problems or a lot less there are a lot more contained we have a lot of visibility into the issues. They are having in other words, we know weeks ahead.

Production when youre running into an issue. So we can work with them on it.

We can try and find alternative source, where we can we have time to do it and react so I won't get into NIM and those suppliers needless to say there.

So a lot of them some of the body body parts through some chassis components.

The good news is that by the time its reaching the end of what we call our finish line compared with last year and a lot of cases, we're able to find those parts. So in other words, you know a typical bus sales in online for five days once the body is being assembled.

And then it comes off the line five days later and by the time has come off the line, we find those path locate them, we put them on the bus in line. So that's why when I talked about the setup time to booking time reduction that's a big piece of it will be much better getting those Pos installed before that bus leaves in line. While then we're looking at later in a separate process. So again those are the.

As was seen in <unk>.

We are hopeful and expect continued improvement going forward just like we had this this last year.

Alright, Thanks, and then maybe just on that kind of setup to booking time, 40% to 20 days.

Whats kind of the overall goal there and any other kind of areas that you're focused on to improve that.

Yeah on that particular, one I am actually good. It's a great question to ask obviously 20 days is a heck of an improvement from where we were in June of last year at the end of that quarter, but our near term where our target is to identify 14 14 15 days. So take another let's say five days out of that.

What does that mean it means we get the cash five days earlier, which is great for cash flow again.

Great for all liquidity and that's what we plan to do so only that one and then in addition.

We sort of move some of our processes that was sort of online and might be things that we don't perform every on every single bus we've taken some actions and move them offline. So thats, what we by doing that you avoid was called Trop labor. So you reduce your labor hours, you're all the time requirement because you got to separate station handling those.

<unk> issues can be managed appropriately for the demand that day. So just a couple of examples I think of a clever lean transformation and really helping productivity.

Alright that sounds good thanks for the color I'll hop back in queue.

You bet. Thanks, Adam.

Okay.

Thank you.

As a reminder to ask a question. Please press star one on your telephone.

Pat.

Our next question comes from Mike <unk> from D. A Davidson Mike. Please go ahead.

Yes, Hello, good afternoon, and thank you for taking my questions.

I wanted to ask.

First of all on the guidance for 2024.

So bottom line is there any.

Free cash flow you can give us.

Next year do you have any investments to make in working capital or other areas, we should be thinking about.

Yes, Hi, Mike. Thanks for the question, it's still fairly early in our fiscal 'twenty four projections. However, we decided the promised in the last call could give you at least the base case outlook.

With $85 million EBITDA, we are going to ramp up our investment in capital.

For the last couple of years, we had cash considerations measures, we slowed down our capex investments and they expect to start to invest more to especially more than this year. However.

However, we don't expect any huge capital investments outlays in fiscal 2004, so there will be a very stronger free cash flow, but I don't have at this point the absolute number forgive you are still working through the operating plan and we will definitely get them back in December with our full guidance. If you will for the fiscal 2000.

Sure.

Okay. Okay.

I also wanted to ask about the different cases as soon as you put in that guidance slide.

Between.

Between the downside and the upside is this bolt lever between those two.

Brackets is it just throughout the supply chain, including a collective bargaining agreement and some of the costs and benefits around that changed and streamlined the other.

Or your overall market share or other factors or is it really all about supply chain.

Where you end up on that spectrum next year.

The primary driver between those scenarios is supply chain, but obviously, it's still very early and there are many other variables, whether it's pricing levels in the market whatever the competition does into the next year.

Inflation from the supply base potentially sell more would come from the collective bargaining agreement, but they are comfortable that between all the processes. We have in place all the pricing mechanisms. We can control for the most of those so at this point, we focus the scenarios on the health of the supply chain.

Great.

Once we know one of you about.

Your non bus EV, perhaps going forward.

There was a pretty big bankruptcy. This week one of the battery suppliers.

Let's assume the EV bus gummy provider I'm aware of but I believe it might be someone that's involved with some of those non <unk>.

Evs that delivery of Accenture.

Patton joined board for some time.

I was wondering how far along are you in the process.

We are getting company kind of prototype we're doing things in the hands of customers.

That company is still planned.

Trying to get through the the biopsy without any issues, but if they don't do you have time to make any changes.

As far as the design battery.

Before you make any major pushes into those markets.

Yes, I mean first of all lot development program I think will.

We're being very cautious and careful about it in terms of making sure. It meets the requirements that we have that fall, which obviously is not a school bus UC is quite different so, but it's progressing well we feel really good about where we're heading.

When it comes to batteries the support for that I think we feel very confident in our.

<unk> and what they can deliver for us I don't think they are in the same boat as per <unk> that's for sure much.

A much more solidly supported and capable so as far as I'm concerned I think youll see will have development vehicles. Our development chassis is running towards the end of this year will be our plan and then we'd have running prototypes over the next year that we can put in the hands of a select number of customers to put them through their paces. So that's what we do we want to get some mileage under our belt and then.

Our goal will be towards the end of next year type of product that we were able to be taken to the market, but a lot of customer interest in this.

We reviewed is obviously were key OEM, who has been building houses for almost 100 years now so we know how to do it and we've obviously got.

Some successful track record since 2018 of producing <unk>.

Electric powered buses. So I think we feel confident we'll have a product that the.

Mark is going to really like.

Okay I appreciate the discussion I will jump back in the queue. Thank you.

Thank you.

We have no further questions. So I'll now hand, okay.

The closing remarks.

Well, thanks, Lauren and thanks to all of you for joining us on the call today. We do appreciate your continued interest in Blue Bird and we look forward to updating you all again on our progress next quarter is as Roswell mentioned will will take a deep dive and a look into our 24 guidance and just make a point here that.

That obviously is our first look at this for you this year and we wanted to get ahead of time as we said we would do.

As you saw today, we've completed a significant turnaround we're ahead of schedule and I think it clearly shows in our third quarter results, which was a further improvement on our second quarter, which is obviously was well respected I would say in terms of the turnaround all key operating metrics and significantly improved from a year ago at the legacy pricing issue that we've talked about on so many years.

Earnings calls is just about behind us.

We are focused on maintaining leadership in the fastest growing alternative power segment, which represents the majority of Bluebird sales today, while continuously work on improving our manufacturing supply chain productivity that never stops in blueberry discontinuous specifically, we are very excited about our exceptional growth electric buses and there is much more to come there.

Clearly, especially since we're only a fraction of way through the.

Clean School bus program, the $5 billion program that the government and its highest level is indoors.

So the outcome of all of our efforts in the third quarter, we had an EBITDA margin just short of 10% and we're forecasting to be up 10% next quarter.

Of course, we raised full year fiscal 'twenty three guidance once more and provide you with a first look at our fiscal 'twenty full guidance.

That was about four months earlier than we've ever done in the past. So again it shows as a first look and we'll look take a look at it later and we'll know a lot more obviously the market's looking when we close the books later this year and see you all again in December but I would say that overall I think it was a terrific quarter for blue, but I am very proud of what we've done final.

To give special recognition once again to our incredible employees and our dealers for their commitment and dedication to blue, but especially for all of what they put in after the pandemic. So should you have any follow up questions. Please do not hesitate to contact our head of Investor Relations Mark Benfield, and thanks again from all of US at Bluebird have a great evening.

This concludes today's call. Thank you for joining everyone. You may now disconnect your lines.

Yeah.

Yes.

Today's call. Thank you for joining everyone. You may now disconnect your lines.