Blue Bird Corporation — Form 10-Q Summary
Reporting period: Second quarter and six months of fiscal 2024 ended March 30, 2024. The comparable periods ended April 1, 2023. Fiscal quarters were 13 weeks. Blue Bird manufactures and sells school buses and replacement parts.
Financial performance
| Metric | Q2 FY2024 | Q2 FY2023 | Six months FY2024 | Six months FY2023 |
|---|---|---|---|---|
| Net sales | $345.9 million | $299.8 million | $663.6 million | $535.5 million |
| Gross profit | $63.6 million | $35.6 million | $127.2 million | $43.1 million |
| Gross margin | 18.4% | 11.9% | 19.2% | 8.1% |
| Operating profit | $36.1 million | $12.4 million | $74.0 million | $3.1 million |
| Net income (loss) | $26.0 million | $7.1 million | $52.2 million | $(4.2) million |
| Diluted EPS | $0.79 | $0.22 | $1.59 | $(0.13) |
| Adjusted EBITDA and margin | $45.8 million; 13.2% | $21.1 million; 7.0% | $93.4 million; 14.1% | $17.6 million; 3.3% |
Sales and profitability: Q2 sales rose 15.4%; bus revenue increased 16.3% and parts revenue 6.1%. For the first half, sales rose 23.9%; bus revenue increased 25.6% and parts revenue 6.9%. Management attributed growth to higher average selling prices, product and customer mix, and improved bus volumes in the first half. Q2 bus units booked were 2,254 versus 2,304 a year earlier; first-half bookings were 4,383 versus 4,261.
Gross margin improved as pricing actions and manufacturing improvements helped offset higher input costs. Average bus cost of goods sold per unit remained higher year over year—up 9.6% in Q2 and 6.2% for the first half. SG&A increased, primarily due to labor costs. Lower debt balances and interest rates reduced interest expense. Q2 and first-half results also included costs related to secondary share offerings by a selling stockholder; the company received no proceeds.
Cash flow and liquidity: First-half operating cash flow was $54.8 million, versus $44.7 million; capital spending was $5.6 million versus $3.7 million; and management-defined free cash flow was $49.1 million versus $41.0 million. Cash ended at $93.1 million, up from $79.0 million at fiscal year-end. Inventory increased to $145.4 million from $135.3 million, partly reflecting strategic purchases of longer-lead-time components and anticipated supplier model-year changes.
Debt: At March 30, term-loan principal outstanding was $98.8 million ($97.3 million net carrying value); there were no revolver borrowings. The company reported $143.3 million of additional revolver availability, after $6.7 million of letters of credit. The November 2023 credit agreement has a November 2028 maturity and is secured by substantially all eligible domestic assets. The company reported covenant compliance at quarter-end.
Outlook, risks, and notable items
- Management reported a bus backlog of approximately 5,900 units at March 30, 2024, versus 4,600 at September 30, 2023, despite delivering nearly 4,400 units in the first half. No specific full-year financial guidance is provided in the supplied filing text.
- Management said supply-chain constraints and occasional critical-component shortages continued to limit production, while raw-material and freight costs remained risks. It cautioned that constraints could persist through fiscal 2024 and beyond, with their duration and financial effects uncertain. Pricing actions and manufacturing improvements supported first-half margins.
- Demand is affected by school funding, enrollment, product mix, dealer and fleet purchasing, and seasonality. Management noted that seasonality and working-capital patterns remain less predictable following pandemic-era disruptions.
- In December 2023, Blue Bird established Clean Bus Solutions with Generate Capital to offer electric-bus fleet-as-a-service. The company committed up to $20 million of capital, subject to agreement terms, including an annual limit of $10 million without its consent. It also issued Generate Capital warrants for up to 1 million shares at $25 per share; the recorded fair value was $7.4 million.
- Secondary offerings in December and February involved sales by an existing stockholder, not new company shares; Blue Bird received no proceeds but recorded approximately $3.2 million of related expenses in the six-month period. The new credit agreement also generated a $1.6 million first-half loss on debt refinancing or modification.
- Management said pending product-liability and other litigation, and current environmental matters, were not expected to have a material adverse effect, while noting outcomes cannot be assured. The company cited potential covenant and refinancing risks if future supply-chain or health-related disruptions reduce profits or liquidity.
Investor verification points
- Track whether backlog converts to deliveries and revenue, particularly given component shortages and the normal seasonal concentration of sales in the second half.
- Check whether price increases and manufacturing execution continue to offset material, freight, labor, and supplier cost pressures.
- Monitor inventory, accounts payable, operating cash flow, and capital spending; first-half cash generation benefited from earnings and a $3.0 million Micro Bird dividend, while working-capital changes were a use of cash.
- Review debt reduction, variable interest rates, revolver availability, covenant headroom, and required term-loan amortization.
- Assess the Clean Bus Solutions venture’s funding, execution, and potential warrant dilution, as well as the effects of the selling-stockholder offering expenses.