Blue Bird Corporation — Q1 Fiscal 2024 Form 10-Q
Reporting period: 13 weeks ended December 30, 2023; comparable period ended December 31, 2022. Blue Bird manufactures and sells school buses and replacement parts through Bus and Parts segments. Amounts below are in U.S. dollars.
Financial results
| Metric | Q1 FY2024 | Q1 FY2023 | Change |
|---|---|---|---|
| Net sales | $317.7 million | $235.7 million | Up 34.8% |
| Gross profit / margin | $63.6 million / 20.0% | $7.5 million / 3.2% | Margin up 16.8 percentage points |
| Operating income (loss) | $38.0 million | $(9.4) million | Improved $47.3 million |
| Net income (loss) | $26.2 million | $(11.3) million | EPS: $0.81 vs. $(0.35) |
| Adjusted EBITDA and margin | $47.6 million / 15.0% | $(3.5) million / (1.5)% | Non-GAAP measure |
| Operating cash flow | $0.2 million | $19.9 million | Down $19.7 million |
| Free cash flow | $(2.7) million | $18.8 million | Down $21.5 million |
Sales growth reflected higher bus volumes, pricing actions, and product mix. Bus-segment sales rose 37.6% to $293.4 million; Parts sales rose 7.7% to $24.2 million. Alternative-power buses generated $195.3 million in sales, versus $131.9 million a year earlier. Bus gross profit increased to $51.3 million from a loss of $3.7 million; Parts gross profit was $12.3 million, up from $11.2 million.
Cost of goods sold increased 11.3%, slower than sales growth. Management attributed the gross-margin improvement chiefly to prior pricing actions, improved manufacturing execution, and a more favorable sales mix. SG&A rose $8.8 million to $25.6 million, primarily due to labor costs. Interest expense declined to $3.6 million from $4.2 million. Income tax expense was $8.4 million, compared with a $3.0 million benefit; the current-quarter effective tax rate was 25.9%.
Liquidity, debt and financial position
- Cash was $77.3 million at quarter-end, down $1.7 million from September 30, 2023. Operating activities provided only $0.2 million, as working-capital movements—particularly accounts payable and inventory—used cash.
- At December 30, 2023, term-loan principal was $100.0 million and revolver borrowings were $36.2 million; $6.7 million of letters of credit reduced revolver availability. The company reported $107.1 million of additional revolver availability. Cash less these borrowings was approximately $58.9 million.
- A new five-year, $250 million credit agreement closed November 17, 2023, replacing the prior facility. It includes a $100 million term loan and $150 million revolving commitment, matures November 17, 2028, and is secured by substantially all specified domestic assets. Term-loan stated interest was 8.5% at quarter-end. The company reported compliance with its leverage and fixed-charge coverage covenants.
- Total stockholders’ equity increased to $75.6 million from $40.0 million at September 30, 2023. Inventories increased to $142.5 million from $135.3 million; accounts payable declined to $113.9 million from $137.1 million.
Material changes, outlook and risks
- Management reported a bus backlog of approximately 4,600 units at both December 30 and September 30, 2023, after selling 2,100 units in the quarter. Bus bookings were 2,129 units versus 1,957 in the prior-year quarter.
- The filing provides no specific full-year revenue, earnings, or cash-flow guidance. Management said occasional component shortages and raw-material cost increases continued to constrain production and raise costs, but pricing and manufacturing improvements brought quarterly gross profit and margin to levels consistent with or above pre-pandemic historical levels.
- Management warned that supply-chain disruption could continue through fiscal 2024 and beyond, limiting production, increasing costs, and affecting cash flow. It also expects the indirect effects of Russia’s invasion of Ukraine—including commodity, component, and freight-cost pressures—to persist through the remainder of fiscal 2024 and possibly longer. The duration and financial impact cannot be estimated clearly.
- Cash used in operations reflected strategic purchases of longer-lead-time components and timing of supplier payments. The company cited possible covenant pressure if future health events or supply constraints reduce profitability or liquidity; it gave no assurance that covenant relief or refinancing would be available if needed.
- Blue Bird established Clean Bus Solutions, an electric-bus fleet-as-a-service joint venture with Generate Capital. Blue Bird committed up to $20 million in preferred funding and up to $10 million toward common interests, subject to the agreement. It also issued warrants for up to 1 million shares at $25 per share; the recorded fair value was $7.4 million. The joint venture agreement includes preferred-offering and exclusivity provisions.
- A selling stockholder’s secondary offering of 2.5 million shares generated no proceeds for Blue Bird; the company incurred approximately $1.2 million of related costs, included in other expense. Debt refinancing/modification loss was $1.6 million, including previously capitalized costs and new transaction costs.
- Product-liability and other litigation remained pending; management did not expect the matters, considering insurance and its defense, to materially adversely affect the financial statements. The company reported no material environmental proceedings.
Important facts for investors to verify
- Whether backlog converts into deliveries and cash generation, given the reported component shortages and seasonality.
- Whether pricing continues to offset input, freight, and manufacturing-cost inflation, and whether elevated gross margins are sustainable.
- Working-capital trends, particularly inventory accumulation and accounts-payable movements, and their impact on operating and free cash flow.
- Interest costs, debt repayment, revolver usage, and continued compliance with the new credit agreement’s covenants.
- Actual funding needs, economics, warrant dilution, and performance milestones of Clean Bus Solutions.
- Potential changes in litigation, warranty obligations, and supply-chain or geopolitical exposures; the filing does not quantify a clear potential loss for pending litigation.