Rooted in a Legacy of Excellence
Blue Bird's journey began in 1927 when Albert L. Luce, Sr. founded the Blue Bird Body Company in Fort Valley, Georgia. Recognizing the need for safe and reliable transportation for students, Luce set out to revolutionize the school bus industry. Over the decades, Blue Bird has weathered the ups and downs of the market, emerging as a resilient and adaptable organization.
Blue Bird Body Company (BBBC), a wholly-owned subsidiary of Blue Bird Corporation, was incorporated in 1958 and has been manufacturing, assembling, and selling school buses to various municipal, federal, and commercial customers since its inception. The majority of BBBC's sales are made through an independent dealer network, which then sells buses to ultimate end users. This distribution model has allowed Blue Bird to expand its reach and maintain strong relationships with its customers.
In recent years, Blue Bird has faced significant challenges, particularly during the COVID-19 pandemic. The demand for new buses and replacement/maintenance parts was materially affected during the second half of fiscal 2020 and the first half of fiscal 2021, significantly impacting the company's business and operations. Concurrently, Blue Bird, along with the entire automotive industry, began experiencing significant supply chain constraints. These challenges led to higher purchasing costs, increased manufacturing inefficiencies, and difficulties in completing production of buses to fulfill sales orders.
The supply chain disruptions had a substantial adverse impact on Blue Bird's operations and results during the second half of fiscal 2021 and throughout fiscal 2022. The company grappled with higher purchasing costs, including freight expenses incurred to expedite the receipt of critical components, as well as increased manufacturing inefficiencies. These challenges hindered Blue Bird's ability to complete production and fulfill sales orders during this period.
However, towards the end of fiscal 2022 and continuing into fiscal 2023, Blue Bird observed slight improvements in the supply chain's ability to deliver the necessary parts and components to support its production operations. This positive shift resulted in increased manufacturing efficiencies and improved production of buses to fulfill sales orders during fiscal 2023. Despite these improvements, the higher costs charged by suppliers to procure inventory continued to have a significant adverse impact on the company's operations and results in fiscal 2023.
Financial Snapshot and Operational Efficiency
Blue Bird's financial performance has been a testament to its operational excellence. In the company's latest fiscal year (2024), it reported revenues of $1.35 billion, a 19% increase from the prior year, driven by a 6% increase in unit sales and record electric vehicle (EV) sales of 704 buses, a 29% rise year-over-year. Net income for fiscal 2024 reached $80.88 million, with operating cash flow (OCF) of $111.41 million and free cash flow (FCF) of $99.00 million.
The most recent quarter (Q4 2024) showed continued momentum, with revenue of $350.21 million, representing a 15% increase compared to Q4 2023. This growth was driven by higher volume and pricing actions. Net income for the quarter was $24.66 million. However, OCF decreased to $989,000 and FCF to -$3.51 million, primarily due to an increase in working capital, mainly accounts receivable, as the company sold a significant number of buses to fleets and the government in the quarter.
The company's profitability has also been on an upward trajectory, with the adjusted EBITDA margin reaching an impressive 13.3% in fiscal 2024, marking a significant 5.5 percentage point improvement compared to the previous year. This impressive financial performance underscores Blue Bird's ability to navigate market challenges and capitalize on emerging trends.
Blue Bird's liquidity position remains strong, with a debt-to-equity ratio of 0.71, cash balance of $88.42 million, and available credit line of $143.30 million under its $150 million revolving credit facility as of June 29, 2024. The company's current ratio stands at 1.40, while its quick ratio is 0.66, indicating a solid short-term financial position.
Diversifying the Product Portfolio
Blue Bird's product portfolio has evolved to cater to the diverse needs of its customers. While the company's core offering remains its iconic school buses, it has expanded into alternative fuel solutions, including propane and electric-powered vehicles. This strategic focus on sustainability has positioned Blue Bird as a leader in the clean transportation space, aligning with the growing demand for environmentally friendly solutions.
The company's EV offerings have been particularly successful, with Blue Bird delivering 704 electric buses in the latest fiscal year, a 29% increase from the prior period. This momentum is set to continue, as the company leverages government initiatives, such as the EPA's Clean School Bus Program, to drive further adoption of its zero-emission vehicles.
Navigating Supply Chain Challenges and Investing in the Future
Like many automotive manufacturers, Blue Bird has had to navigate the complexities of the global supply chain in recent years. However, the company's agility and proactive approach have allowed it to maintain production and meet customer demand.
Looking ahead, Blue Bird is making strategic investments to bolster its capabilities and position itself for long-term growth. The company was recently awarded an $80 million grant by the Department of Energy to expand its Type D bus and EV production capacity, further solidifying its commitment to sustainable transportation solutions.
Moreover, Blue Bird has implemented a seamless leadership transition, with Britton Smith, the company's former president, taking over as CEO from the long-serving Phil Horlock. This change in leadership, coupled with a strengthened board of directors, positions Blue Bird for continued success in the years to come.
Business Segments and Market Position
Blue Bird operates through two primary segments: Bus and Parts. The Bus segment, which is the company's core business, involves the design, engineering, manufacture, and sales of school buses. As the only principal manufacturer of chassis and body production specifically designed for school bus applications in the United States, Blue Bird is recognized as an industry leader for school bus innovation, safety, product quality, reliability, durability, efficiency, and lower operating costs.
During the nine months ended June 29, 2024, bus sales increased $162.4 million, or 21.5%, reflecting a 2.1% increase in units booked and an 18.9% increase in average sales price per unit. The increase in units sold was primarily due to slight improvements in supply chain constraints that had previously impacted the company's ability to produce and deliver buses due to shortages of critical components.
The Parts segment, which includes the purchase and sale of replacement bus parts, primarily to dealers within Blue Bird's network and certain large fleet customers, saw a $4.7 million, or 6.4%, increase in sales for the nine months ended June 29, 2024. This growth was primarily attributed to price increases driven by ongoing inflationary pressures, as well as higher fulfillment volumes and slight variations due to product and channel mix.
Blue Bird sells its products primarily in the United States and Canada, with a small portion of sales to other international markets. This geographic focus allows the company to maintain a strong market position in its core North American market while exploring opportunities for international expansion.
Future Outlook and Industry Trends
The future looks promising for Blue Bird, with ACT Research forecasting a 6% compound annual growth rate (CAGR) in the school bus market through fiscal 2027. This positive industry outlook, coupled with Blue Bird's strong market position and focus on alternative fuel solutions, positions the company for continued growth.
Blue Bird has provided guidance for fiscal year 2025, projecting net revenue of $1.4 to $1.5 billion and adjusted EBITDA of $190 to $210 million, with a midpoint of $200 million (13.8% margin). The company also expects free cash flow of $40 to $60 million, after deducting $50 million in extraordinary CapEx for a new plant expansion. This guidance represents continued strong growth, with the adjusted EBITDA midpoint $17 million higher than the fiscal 2024 record.
Looking further ahead, Blue Bird has provided an updated long-term outlook, targeting revenue of $1.85 to $2 billion and adjusted EBITDA of $270 to $300+ million (14.5% to 15%+ margin) by fiscal 2028 and beyond. This ambitious outlook includes plans to grow EV bus sales to 4,000 to 5,000 units out of 11,000 to 12,000 total units, further cementing Blue Bird's position as a leader in sustainable transportation solutions.
Conclusion
Blue Bird Corporation's rich history, financial resilience, and innovative product offerings have established it as a powerhouse in the school transportation industry. As the company navigates the evolving market landscape, it remains laser-focused on delivering safe, sustainable, and cutting-edge solutions that cater to the needs of its customers and communities.
With a strong order backlog, strategic investments, and a talented leadership team, Blue Bird is poised to capitalize on the growing demand for clean transportation and cement its position as a trailblazer in the years ahead. The company's commitment to innovation, particularly in the electric vehicle space, coupled with its strong financial performance and positive industry outlook, suggests that Blue Bird is well-positioned to drive sustainable growth and deliver value to its shareholders in the coming years.