Q2 2024 Blue Bird Corp Earnings Call

Participants

Mark Benfield; Investor Relations; Blue Bird Corp

Philip Horlock; Chief Executive Officer, Director; Blue Bird Corp

Razvan Radulescu; Chief Financial Officer; Blue Bird Corp

Eric Stine; Analyst; Craig-Hallum Capital Group LLC

Mike Shlisky; Analyst; D.A. Davidson & Co.

Chris Pierce; Analyst; Needham & Company, LLC

Presentation

Operator

Hello, and welcome to the Blue Bird Corporation Fiscal 2024 second quarter earnings call. My name is Natasha, and I will be your moderator for today. If you would like to ask a question on today's call. Please do so by pressing star one on your telephone. I now have the pleasure of handing you over to your host, Mark Bentfield. Please go ahead.

Mark Benfield

Thank you, and welcome to Blue Bird's Fiscal 2024 second quarter earnings conference call. The audio for our call is webcast live on blue dash bird.com under the Investor Relations tab. You can access the supporting slides on our website by clicking on the presentations box on our IR landing page. Our 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 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 Horlock, and CFO, Razvan Radulescu, then will take some questions. Let's get started. Phil?

Philip Horlock

So thanks, Mark, and good afternoon, everybody. It's great to be here and to share with you our results for our fiscal 2024 second quarter. You'll recall in our first quarter earnings call, we reported an all-time record profit for the quarter. Well, I'm pleased to tell you that our momentum has not slowed down at all with the Bluebird team doing a great job in delivering an all-time record profit for any second quarter in our history and our second best quarter ever after the last quarter rather than we'll be taking you through the details of our financial results shortly.
So let me get started with the key takeaways for the second quarter on slide 6, as the headline says, we achieved best ever financial results for second quarter only surpassed by our 2024 first quarter profit performance as shown in the first line in the box. While we achieved a second quarter record for adjusted EBITDA. Our net sales revenue was a record for any quarter. So with the record profits and record revenue, I'm very pleased to tell you that we achieved outstanding adjusted EBITDA margin of 13% in the second quarter. And importantly, we are once again increasing our full year guidance.
As we look at the drivers for this terrific progress in Q2. It really is about maintaining and delivering the plan we laid out last year was focused on making significant improvements across our entire business market demand for school buses continues to be very strong. Our quarter-end backlog of firm orders for bluebird buses grew by nearly 30% from the first quarter should have standing 59 hundred units and that's a great endorsement of the strength of the industry and the customer demand for Blue Bird buses. This bodes well for pricing, production stability and profit margins.
Now while supply chain issues are undoubtedly easing. There was still select constraints on a couple of chassis components across the truck and bus industry that are limiting industry production and deliveries. Now while supply chain issues are undoubtedly easing. There are still select constraints on a couple of chassis components across the truck and bus industry that are limiting industry production and deliveries. But we are very engaged with those constraints suppliers with additional capacity being installed through the second half of this year. We expect some easing of those constraints as we move through this year and beyond as I mentioned last quarter, the legacy price backlog, which hurts us in fiscal '22 and partially in the second quarter of last year, is fully behind us. All those low margin units have been sold. Every bus we are selling today and those in our order backlog reflect current pricing and we are priced competitively, as you can tell from our quote win rate and incoming orders. This is an entirely different Blue Bird bus revenue and gross margin structure compared with just a year ago, with bus prices up significantly on the EV from thanks largely to the first phase of $1 billion of funding from the EPA's unprecedented $5 billion our clean school bus program. Our second quarter deliveries of electric buses were our best ever result in a quarter, more than 50% higher than last year and represented 9% of unit sales. And we ended the second quarter with a very strong backlog of reorders. We maintained our strong mix of alternative powered vehicles and further strengthen our leadership position in this segment. The higher margins and higher owner loyalty and these products contributed to our profit improvement in the second quarter. We'll continue to reinvest back into the business by selectively upgrading facilities and installing lean manufacturing processes and enhancing the plant working environment and as Russ Van will show you later. We're nearly doubling our engineering spending this year as we embark on several exciting new product programs that will hit the market in the next two to three years through the efforts of the best workforce in the business, strong leadership, lean process improvements and sheer hard work. We have been achieving some of the best manufacturing performance the company has ever achieved bottom line. We are performing extremely well in a strong market. We're delivering a greater mix of higher-margin alternative powered vehicles. We are priced competitively and appropriately, but today's economic environment and manufacturing efficiencies are improving. As a result of all these accomplishments, we achieved an outstanding second quarter profit for bluebird of $46 million with an adjusted EBITDA margin of 13%.
Now let's take a closer look at the financial and key operating highlights for the second quarter. On slide 7, I want to begin by saying that our second quarter financial performance is transformed from just one year ago with many record highs reported, we sold 2,254 buses in the second quarter of fiscal '24, which is down slightly from last year and 6% above last quarter. Those unit sales drove second quarter net revenue of $346 million. That's an all-time quarterly sales record for bluebird and a very impressive 15% increase over last year. So with essentially flat volume compared with a year ago, down only 50 buses and net revenue up 15%. The impact of higher pricing and a richer mix of EVs is clearly evident and the revenue growth. Q2 adjusted EBITDA of $46 million was $25 million above last year, almost double and well above the $25 million to $35 billion general guidance range for quarterly profits that we set our last earnings call and finally, adjusted free cash flow for the second quarter was an outstanding $54 million as we drove trade working capital improvements along with strong profits for the quarter. That's an impressive $30 million improvement compared with the same quarter last year. Overall, we had exceptional second quarter financial results and made transformational gains from last year.
We are on a great trajectory. On the right-hand side of the slide, you can see some of the operating highlights for the business. As I mentioned earlier, demand continues to be exceptionally strong with a firm order backlog at the end of the second quarter worth about $850 million in revenue, reflecting a backlog of over 5,900 buses. Importantly, that's almost 30% higher than the backlog we had at the end of the first quarter.
Now as an indication of the strength of the industry and the strength of our brand we measured the ratio of incoming orders against our units sold for the quarter. This year's second quarter was a great quarter for us with our incoming orders exceeding units sold by 60% and that compared to 20% at the same time last year. That's great confirmation of the strength of our order pipeline and again, illustrates our confidence in the continuing order and sales momentum we're experiencing. We raised prices considerably over the past two years, and the average second quarter selling price per bust in fiscal '24 was an outstanding 19% higher than a year ago. That's worth about $22,000 per box. Comp sales totaled $28 million in Q2, representing a strong 6% growth over last year. And were up 7% through the first half.
Turning to alternative powered buses represented about 55% of total unit sales in the second quarter, and we are running at a very strong 60% of sales mix through the first six months of the fiscal year. We continue to be the clear leader in this space. No other school bus manufacturer comes close to these numbers. Ev buses are part of that alternative power mix. And in Q2, EV bookings increased by 56% over last year as we sold a quarterly record of 210 electric school buses. That represents a very strong mix of 9% of our total sales compared with 6% in last year's second quarter. Additionally, we left the second quarter this year with almost 500 firm EV orders in our backlog, which is around an 8% share of our total backlog. That's worth approximately $155 million in revenue and 17% higher than a year ago. Incidentally, it's also 15% higher than the end of the first quarter. Clearly, we're benefiting substantially from the 1st year of funding from the EPA's $5 billion clean school bus program. I'll cover later the status of the 2nd year of this program, which comprises of two brands. We also have some very exciting news regarding additional funding from the inflation Reduction Act, which will significantly benefit EV adoption in the school bus industry. Continuing with our clean school bus successes. I am proud to report that during the second quarter, we received the second largest single order ever of propane powered school buses. That's total 55 units for Omaha public schools. We will build and deliver these in time for the start of the school year later this summer.
Incidentally, the largest propane order ever was also for Omaha public schools where we delivered 440 propane buses back in 2013. It's great to see repeat business of this magnitude and is also and importantly, a great endorsement of the performance over time of our propane powered buses.
Staying with propane. I'm also very pleased to announce that in Q2, we renewed our exclusive engine contracts with both Board from Roche until 2030. By that time, we will have partnered exclusively for almost 20 years, providing our industry-leading propane and gasoline engines, blue, but introduce these products to the school bus market and throughout that time, we have been the undisputed market leader. We are fast approaching 40,000 propane and gasoline powered school buses deployed, which is a testament to our exceptionally successful partnership and finally, on the back of our second quarter results, we are once again raising full year guidance for net revenue, adjusted EBITDA and adjusted free cash flow. This will be the fifth quarter in succession that we have beaten and raised our guidance. Importantly, too, we have raised our longer-term margin outlook from 12% plus to more than 14% as we continue to solidify and build in our recent operating and financial performance with an all-time record profit for second quarter, reflecting a 13% adjusted EBITDA margin. I'm very proud of our team's accomplishments.
I'd now like to hand it over to Razvan to walk through our fiscal '24 second quarter financial results and updated guidance in more detail. Over to you, Razvan.

Razvan Radulescu

Thanks, Phil. And good afternoon. It's my pleasure to share with you the financial highlights from Blue Bird's Fiscal 2024 second quarter record results for the quarter and is based on a close date of March 30, 2024 of the prior year was based on a close date of April 1, 2023. We will file the 10 Q today May 8 after market close. 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 other important disclaimers.
Slide 9 is a summary of the fiscal '24, second quarter and first half record results. It was another outstanding operating quarter for bluebird with somewhat limited and well-managed supply chain challenges and with high margin units driving both our top line and our bottom line results. We significantly beat the adjusted EBITDA general guidance provided in the last earnings call, and in fact, we delivered the best second quarter ever for bluebird with 13% adjusted EBITDA margin and second best ever quarter only after fiscal 24 Q1.
The team continue to push hard and did again a fantastic job and generated 2,254 unit sales volume, which was just shy of prior year due to volumes, but with more complex type, the NDC buses all-time record. Consolidated net revenue of $346 million was $46 million or 15% higher than prior year, driven by a high number of units higher parts sales, improved mix of Type D and electric buses and pricing actions that materialized in this quarter. As expected, adjusted EBITDA for the quarter was a Q2 record of $46 million, driven by higher margins, increased parts sales and margins, partly offset by increased labor and material costs. As expected and mentioned in our previous earnings call, the adjusted free cash flow was very strong at $54 million and $30 million higher than the prior year second quarter. This result was due to increased profitability and improved working capital. Our liquidity position at the end of this quarter was also a record level with $236 million and almost zero net debt. This performance was outstanding for both the top-line and the bottom line, all-time record for quarterly revenue was $346 million, all-time record for quarterly sales with 210 units record Q2 adjusted EBITDA of $46 million and 13% on a year to date basis in only six months, we already exceeded the entire adjusted EBITDA of last year, which was the best year ever and we deliver significant steps forward on our profitable growth path. You could safely say we have a great start for this fiscal year, but more on this later on today. In our updated mid and long-term outlook.
Moving on to Slide 10. As mentioned before, by field, our backlog at the end of Q2 has grown and continues to be very strong at over 5,900 units and $850 million, including 8% easy breaking down the record Q2 $346 million in revenue into our two business segments. The bus net revenue was $318 million, up by $45 million versus prior year. Our average bus revenue per unit increased from $119,000 to $141,000 or 19%, which was largely the result of pricing actions taken over the past 12 to 18 months as well as a higher mix of Type D and electric buses. If the sales in Q2 are also at a record level of 210 units or 75 more than last year of 55% increase year over year. We'd like to remind you that we have announced in the fiscal year two price increases for new orders won in last October and one for the end of March of $2,500 net for bus each in order to cover inflationary cost factors and significant long-term strategic investments. This price increases will start to materialize mainly in fiscal 2025, given the timing of orders received and our current production backlog. Parts revenue for the quarter was $28 million, representing a growth of $2 million or plus 6% compared to the already very strong prior year levels. This great performance was in part due to increased demand for our part of the fleet is still aging as well as supply chain driven pricing actions and throughput improvements.
Gross margin for the quarter was a very strong 18.4% or 6.5 percentage points higher than last year due to our sustained operational performance and our pricing overtaking in the last three quarters, they experienced inflationary costs in fiscal '24, Q2 adjusted net income was $29 million or $21 million higher than last year. Adjusted EBITDA of approximately $46 million or 13% was up compared with prior year by $25 million and 6 percentage points. Adjusted diluted earnings per share of $0.89 was up $0.62 versus the prior year.
Slide 11 shows the walk from fiscal '23 Q2 adjusted EBITDA to the fiscal 2014 to result, starting on the left $21.1 million, the impact of the bus segment gross profit in total was $26.5 million, split between volume and pricing effects. Net of material cost increases of $33.1 million, offset by labor cost increases of negative $6.6 million favorable development in the power segment, gross profit was $1.5 million, driven by higher sales and improved margins. As mentioned earlier, in the call. This great improvements were slightly offset by increases in our other expenses and fixed costs, mainly engineering and personnel related of negative $3.3 million of discussed in the last earnings call and with more to come in the second half of fiscal 24.
The sum of all the above mentioned developments drives our record fiscal 2014 to report adjusted EBITDA result of $45.8 million or 13%.
Moving on to Slide 12. We have extremely positive development year over year. Also on the balance sheet. We ended the quarter with $93 million in cash and reduced our debt significantly by $42 million over the last four quarters. In fact, our net debt position was close to zero at the end of this quarter. Our liquidity is very strong at a record $236 million at the end of fiscal 2014 to a $135 million increase compared to a year ago. We also paid down the revolver balance to zero during this quarter following our capital allocation strategy outlined in our previous earnings call. The operating cash flow was very strong at $55 million in this quarter, driven by an improvement in operations and margins and an improvement in our working capital $22 million.
Slide 13 shows the sustainable results achieved by our team over the last four quarters, generating almost $165 million in adjusted EBITDA or 13%. Our revenues have been growing every quarter, partially due to pricing realization combined with a quarter-by-quarter increase in easy sale. We have beat and raise our conservative guidance for the last five quarters in a row due to the outstanding execution of our plans by our teams and despite the still difficult supply chain environment with select suppliers, the last four quarters have been in the 10% to 15% adjusted EBITDA range, demonstrating that we are now delivering consistently double-digit performance.
Finally, it is important to note that our pricing curve has been ahead of our cost curve in the last three quarters, preparing us for the significant investments lined up for 2024 and our contractual inflation factors expected ahead of us, some of which already impacted our margins in fiscal '24 Q2, as expected, before we talk about the updated guidance for fiscal '24 and our updated mid and long-term outlook on Slide 14, we wanted to remind you about some significant investments that we have started in fiscal 24 to ensure that our profitable growth strategy is successful. Our updated engineering expenses planned for fiscal '24 by approximately 1.5 times the level of fiscal '23, and we expect them now to be at a level of approximately $20 million in fiscal '24 as we began the integration work for the next generation of Ford gas and propane engines for the next level of emissions regulations. We also expanded our exclusive partnership with Ford and route to 2030. As announced last week, we also continue to evolve our EV offering and planned new product safety enhancement features across our product lines. Stay tuned for exciting news this summer.
Finally, we will continue to ramp up our investment in bringing to market the commercial EV chassis by the end of calendar 2024. We are also expecting now to more than double year over year. Our capital investments into capacity expansion, production, facility upgrades, quality improvements and our supply chain capability and tooling towards our target of 50 boxes per day or 12,000 buses per year. Expected CapEx is now approximately $20 million for this year.
On the people side, we experienced inflationary pressures both externally from our supply base and internally, and they continue to provide very competitive benefits to our employees. We are also launching in June our complexity reduction initiative and have begun the upgrade of our ERP system as well as modernization of our business intelligence and financial planning and analysis tools. All this cost combined can add up to 3% of our revenue on a run-rate basis later in fiscal 24 and beyond.
On Slide 15, we wanted to share with you our updated fiscal '24 guidance. As a reminder, we are continuing to take a transparent and conservative approach also this year because it is still a somewhat uncertain supply chain environment we are facing.
Looking forward to fiscal 24, we are increasing our revenue to approximately $1.3 billion. And we are significantly increasing our adjusted EBITDA to $155 million or 12% with a range of $145 million to $165 million. This is an increase of 75% of growth over the prior year record results due to supply chain volatility. At this point, we are only providing general quarterly ranges with every remaining fiscal 24 quarter and expect it now to have higher revenue between $300 million to $350 million and maintained adjusted EBITDA in the range of $25 million to $35 million for 9% to 11%. We will provide further updates in the beginning of August after we close the fiscal Q3, and we gather further insights into our supply chain capabilities to support our strong backlog and increasing 5G and vision.
Moving to Slide 16. In summary, we are forecasting a significant improvement year-over-year with revenue up 15% to approximately $1.3 billion, adjusted EBITDA in the range of $145 million to $165 million and adjusted free cash flow of $70 million to $80 million, in line with our typical target of approximately 50% of adjusted EBITDA. As a timing update based on public float test that is required to be performed as of the end of Q2. We'll move from accelerated filer to a large accelerated filer status at the end of fiscal year 2024 which reduced our Form 10 K filing requirement from 75 to 60 days. As a result, we plan to file our 10 K and hold our fiscal year-end earnings call on Monday, November 25, 2024.
On slide 17, we wanted to also update you on our significantly raised long-term outlook and our expected path to get there. First of all, we updated the slide layout as we believe the recent sustained performance and profitable growth demonstrated in the last several quarters is more relevant for the type of company we have today and as a baseline from where we are planning to go forward.
Second, through hard work from all of our teams and great execution of our strategy, we already deliver way ahead of schedule, the 12% adjusted EBITDA margin we had previously highlighted as our long-term aspiration. Therefore, today, we are significantly raising the bar for our outlook as follows. The 12.5%. Adjusted EBITDA margin is now in our updated short-term outlook and was the supply chain further normalizes. We expect to sell approximately 9,500 units, including 1,500 units ease and generate $180 million adjusted EBITDA on $1.45 billion in revenue.
Looking to the medium term, our EV growth and operational improvements on one shift can support volumes of up to 10,000 units, including disease of 2,500 units, generating revenues of $1.6 billion and with adjusted EBITDA of $210 million or 13%. Our long-term target remains to drive profitable growth now to even higher levels towards $1.85 million to $2 billion in revenue comprising of 11,000 to 12,000 units, of which 4,000 to 5,000 ROVs and generate EBITDA of $250 million to $280 million-plus for 13.5% to 14% plus. We are incredibly excited about Dover's future, and I'll turn it back over to Phil.

Philip Horlock

Thank you, Russ Vance, as always, that was a good explanation of our Q2 results and our financial outlook.
Let's now move on to Slide 19. A couple of just flooded our prior two earnings calls, so I won't spend much time on it. Today as our priorities and our strategy are unchanged as they should be.
The chart on the left illustrates the three priorities that continue to drive us every day. Taking care of our employees, delighting our customers and dealers and delivering profitable growth.
The chart on the right provides more texture around the specific strategies that we are pursuing, that both align with our priorities and drive up quality of growth. Plans at the center is our ultimate objective to drive sustained profitable growth.
As you recall, accomplishments in fiscal '23, we transformed the business from losses to record profitability, achieving a full year profit margin of 8%. For fiscal '24, we just increased our full year earnings guidance and midpoint of range to a 12% adjusted EBITDA margin. That's a full four percentage points higher than last year. And then over the next couple of years, we plan to grow the margin 13% and then to 14% and beyond.
In the longer term, our specific strategy is focused on delivering these financial goals. And as spelled out in this chart, namely leadership and safety, both in the workplace and with our products is paramount to us. And we are investing in both engineering and CapEx in these areas in fiscal 24, best products and features as always, we seek to differentiate ourselves providing more value to our customers. As a reminder, our books is a purpose-built from the ground up for transporting children safely with many unique features that other derivative, a truck chassis like most of our competitors and our customers understand the value of this. That's why we were the first to move on propane, gasoline and EV power among our major competitors. We focused 100% on school buses. We saw the need in the school bus market for them, and we delivered them leading and quality durability and alternative power is the cornerstone of our product planning and development, and we will continue to differentiate having competitive costs through lean manufacturing and efficient throughput, strong supplier relationships and smart product design are essential to compete in a business where competitive bids are required. And after the sale, we need to provide great service and ensure vehicle uptime throughout the 15 years or more that are buses need to run. This means partnering with our exclusive dealer network that covers every corner of the United States and Canada with our dealers having an average tenure with us of over 30 years. As we have said many times in both these earnings calls and at various conferences, you cannot make it in the school bus business without a fully capable and experienced dealer network that can reach more than 10,000 school districts and operate their own bus fleets and 34 hundred independent owner-operators of school buses following these core strategies has been key to our transformation and will continue to drive our full year plans.
Let's now turn to Slide 20 and look at the latest status of federal funding for clean school buses, which is so important that help us accelerate the adoption of electric and propane vehicles in fiscal 2024 and beyond.
As a reminder, we're just starting the 2nd year of this five-year program, which provides [$5 billion] of funding of electric and propane powered school buses. But we still have $4 billion available after the 1st year of funding. The 2nd year, which I've referred to by the EPA as a 2023 program provides for two rounds of funding totaling at least $1.5 billion that's about [$500 million] more than was anticipated and the fears of an acceleration by the EPA to deploy the $5 billion in total funding.
As the left chart shows run two awards. The 2023 grant program were increased from $400 million to $965 million due to the high level of grant applications submitted a total of 27 and 37 electric and propane buses were awarded grants early this year, and the winners will have until December 25 to purchase their buses using these awards we expect bluebird bus to represent around 30% of the ultimate orders amounted to approximately 800 electric and propane school buses.
Looking at the middle chart immediately after announcing the ramp to award results. The EPA analysis run three rebate program, which is also part of the 2023 program for at least [$500 million] and potentially much higher based on the number of applications, a world where they should be notified later this month and will have until April 26th to purchase the buses and close after award. If our win rate holds at about 30%. Bluebird should expect to receive at least 450 electric and propane school bus orders from this third round. Together, both of these funding rounds to generate all this through 2025 for at least 4,300 electric and propane school buses and associated infrastructure, which is great for the industry and in particular for bluebird with about 250 orders anticipated with the deadline for bus purchases from these two rounds being as late as April 2026, orders and corresponding deliveries could be pushed back late in '25 as end customers deal first, with finalizing the charging and utility infrastructure requirements prior to ordering.
Now let me turn to the exciting new news shown in the right hand chart on April 24, this year, the EPA announced the all new 2024 clean heavy duty vehicles program, which is being funded by the inflation reduction funding for Class six and seven electric vehicles is up to a billion dollars, and the outstanding use is at 70%. That funding it's been allocated to school buses that's up to several million dollars of additional funding to accelerate the adoption of EV school buses, which goes beyond the $5 billion from the EPA's clean school bus program applications have been accepted through July 26 of this year, and awards are expected to be announced in February 25, followed by up to two years to purchase the buses. The EPA's focus on school bus is great news for our industry. Our customers and our school children with school bus recognized as having the perfect duty cycle for EV adoption. So let me now wrap up the earnings call and our outlook for the business on Slide 20. Rather than talk you through the raised guidance fiscal 24, and I'm showing some of those key metrics at the midpoint of guidance here, we have been prudent in our bookings outlook. We're only increasing volume by 3% over fiscal '23 at this time as I mentioned earlier, we're still dealing with two specific suppliers of constrained chassis components that are impacted the broader truck and bus industries, but we did manage them very well in the first half of this year, and we have line of sight to additional capacity from them later this year. And if I can build more in fiscal '24, we will just as we did last year, net revenue, $1.3 billion will be a new record for bluebird, up 15% from fiscal 23 adjusted EBITDA guidance of $155 million, a 75% increase from last year's, then record $88 million. Importantly, we're planning on a 12% EBITDA margin in fiscal 24, up four percentage points from fiscal 23, which is at least a couple of years ahead of the plan we have been sharing with you. We have confidence in achieving this margin up recording an impressive 14% adjusted EBITDA margin in the first half of this year. It should be noted the first half did benefit from an exceptional mix of EVs at 9% of unit sales within a strong total mix of alternative fuel vehicles of 60% of sales. This mix may not repeat through all quarters, especially with the extended time granted by the EPA for customers to complete the purchase and deployment of the new EV funding awards. You'll recall that as late as April 2026 further, as Robin pointed out, we are nearly doubling our engineering work in fiscal 24 in support of many new product programs, which is contained within our 12% margin outlook for fiscal 24 full year, along with the potential economic impact of our very first collective bargain agreement with the United Steelworkers later in the year.
Finally, as I mentioned earlier, we are looking to grow EP unit sales to 800 buses in fiscal '24. That's a 47% increase over fiscal '23 sales, similar to the growth we saw in Q2 as you can see on the right chart, there's a lot of pent-up demand falling the lowest sales in 2020, '21 and '22. And the bus fleet has aged by a couple of years. Act is forecasting a compound annual industry growth rate of 7% from the end of fiscal '23 through to fiscal '27. And that's great news for our business and great news for our profit outlook with residual supply chain challenges still impacting the auto industry today. The ability to build all these units near term is not a given. But importantly, the demand for school buses is clearly there. After executing a substantial transformation across our business, the Company's performing exceptionally well will begin to improve operating performance and look forward to sustained profitable growth in the robust market ahead. The future is incredibly bright for bluebird, and we're confident in achieving this year would have been our longer-term goal of 12% EBITDA margin. Consequently, we have updated our longer-term outlook to reflect an EBITDA margin of at least two percentage points higher with a minimum of 14%.
I want to thank our nearly 2000 employees for all their hard work and dedication and delivering a record profit for second quarter of bluebird on top of an all-time record profit that we delivered in the first quarter. I also want to recognize our outstanding dealer partners, what's critical to our success.
That concludes our formal presentation today, and I'd now like to hand it back to our moderator for the Q&A session.

Question and Answer Session

Operator

Thank you. If you would like to ask a question, please press star followed by one on your telephone keypad. Now if you change your mind, please press star followed by two when pet parents ask your question, please ensure your phone is unmuted locally.
We will take our first question from Eric Stine of Craig-Hallum.
Your line is now open. Please go everyone.

Eric Stine

Thanks for taking the questions. So in the last page, so last quarter, you talked about pricing being ahead of materials prices in there you thought you might have stepped down sequentially and EBITDA, which did not come to fruition. I'm curious, did you see that in that was offset by, as you said, high mix of EVs and Type D school buses? Or is that something that for whatever reason, that's more of a second half event at present quarter?

Razvan Radulescu

Mike, with that, I thank you for your question? This is Razvan. So definitely, as I mentioned, we have been much more proactive in our pricing actions in the last several quarters than we were in the past. We started to see some inflation factors into our costs, both in the cost of goods sold from the material cost as well as in our SG&A through labor inflation. But definitely, we expect more increases in the second half of this year?
So overall, yes, we saw a bit of margin compression in the end. And but in the end, the bulk of it is still to come in the second half of fiscal '24.

Eric Stine

Got it. And you're not necessarily implying a lower or a noticeably lower mix of TVs you're just guiding in that way as not to being conservative, given some of the uncertainties that are still out there, supply chain and others?

Razvan Radulescu

Yes. So we are maintaining our guidance of approximately 800 GV.s for this year. But yes, in any given quarter, the mix can vary a little bit. But overall, yes, we are confident and our guidance continue to remain conservative.

Eric Stine

Okay. That's great on maybe just turning to the federal funding, and I know that the deadlines have been pushed out versus clean school bus round one. Just curious, you talked about some pretty strong. The order trends. Are you I know it's still early. Are you seeing anything from around two or is that something that you expect throughout the remainder of the year and into 25?

Philip Horlock

Hi, Eric. It's Phil here, um. Yes, I mean, I think obviously, when you get these grant awards, you know, you're a winner in the ticket time worried about the infrastructure that they need and utility companies are charging infrastructure to. I know that's all now in progress because the award winners, certainly that first Cali, the first round of the 2nd year. That's what they're working on.
But we also do receive orders, though.
I think we got come on. I could tell you what I know we got 50 more than 50 to date. I've just come in from the from the second second round, if you like, of our total a total program to date. So that's promising. That's good So I expect during the course of the year, we'll receive modal pick up pace as people figure out there charging infrastructure needs in on maybe those customers who we work with them on that trying to accelerate our orders. So we feel we feel very confident that we're going to have a nice order book continuing through this year and a good a data read numbers sold address I mentioned to you.

Eric Stine

Yes, it's good to hear. You're starting to see it even though it's still early days. Maybe last one for me. You mentioned the EV chassis business. And I think you kind of hinted at some some things sort of stay tuned here over the remainder of 24. Just wondering if you can give a little more details, whether if it's something we need to wait on?

Philip Horlock

Yes. Okay. So obviously, we haven't gone to public in this yet, but I can tell you that we're in the pilot stage of those product program. We have chassis on the ground here that we're working with testing out Sunday, put through their rigorous and we will at a future date this year for bringing customers into take a look at it, give us feedback. And I think there's a couple of shows down the road that we're probably exhibited at two So yes, it's well under development and we're already generating customer interest and we'll take that further this year.

Eric Stine

Okay. Thanks a lot.

Philip Horlock

Good bye. Thanks.

Operator

We take our next question from Mike Shlisky of DA Davidson. Mike, your line is now open. Please go ahead.

Mike Shlisky

Hi. Good afternoon and thanks for taking my questions. Why I wanted to touch first on some kind of market share for the quarter. I see it staying somewhat flat. Shipments is pretty good. And you think about the overall industry by most accounts were down quite a quite a bit over 20% if I bring you a free pass. So I guess I was wondering when I was wondering what you ascribe what aspects would be some market share gains in the quarter. So you're able to better work with your suppliers are having challenges. Do you think the other players were just done from a corporate other with other issues with other cycles during the quarter or especially as to how you got such a great some share during your fiscal Q2?

Razvan Radulescu

Yes, Mike, this is Razvan. So thanks for the question and good to hear from you today. So what at this point, we are focusing on our deliveries and we managed to maintain this pace. The pace of deliveries despite still some select supply challenges that we see in the market. I can't speak for the other competitors. You have to ask them. But from our point of view, we maintain the speed and we improve the profitability. And that's what we are focusing on.

Mike Shlisky

And perhaps put some another way for me at this point, it may be think that the supply chain challenges in Western and Eastern Europe of improvement or future. We feel that there's a risk of things getting worse. And you'd have a full quarter this quarter, probably down 20% from what you saw, even though it's seven much closer to that, let's start with the next fiscal year.

Philip Horlock

Yes. Well, you know, let me just talk about this. I mean, when you say down 20%, I guess I don't recognize that number. I mean I can tell you this are our orders for the quarter were terrific, and we just went through and we delivered the plan we had for the quarter, we more than delivered, as you know. So we came in a lot. We beat our plan and we're seeing very strong orders our orders for the quarter, 60% more than our bookings for the quarter. You know, when all is a leading indicator of what you're going to book, certainly down the road I mean, some of those vehicles will be built in 25 model built this year.
So we're feeling we're feeling good.
I don't see we're thinking there's going to be and it's a negative along the way for us, frankly. And that's what our guidance reflects.

Mike Shlisky

Well, the guidance your guidance reflects a 20% downturn in this quarter or next quarter. So I'm surprised that would be possible given what you just what you just said. So I'm sure I square how can revenues be down 20% or down some big number?
Certainly, double digits despite it sounds like a relatively stable if the current environment has to signal either other issues, other supply chain challenges that you've had popped up more recently, I'm just trying to figure out how you can guide to a lower number in the quarter, what we just saw?

Razvan Radulescu

Yes. So in terms of sorry, in terms of revenue guidance, again, we are not giving specific quarterly guidance at this point in time for the remaining two quarters, but we raised the range from $300 million to $350 million, which is in line with the recent performance on the revenues that we had for the quarter.
So in terms of EBITDA, it is a conservative guidance, as I said also in the prepared remarks. And we have when we expect to have some more inflationary cost factors hitting the second half with increased engineering expenses, additional labor inflation, cost factors as well as some contractual price increases from select suppliers. So overall, that is what drives the EBITDA guidance for the second half, but the revenue as well as the units at 800 units for the year, essentially a model that maintains speed of our throughput.

Mike Shlisky

Right now, we have a payout on, so I'm not complaining or sounds fantastic. Maybe one last one for me about the TA program from one other EV maker earlier today, describe most of the draft directive from the UK in particular halt? Or is it kind of going down sluggish pace because of the ability of their customers to get the fall package of the charger and electricity, et cetera, offset what they can get the whole on checks from the EPA. And we probably got the wrong way of approaching that. I was curious with talks of some you're seeing some candidly of bluebird from some similar factors.

Philip Horlock

Yes, yes. Obviously, I'm not going to comment on what someone else in our industry just told you or what their what their point of view is. But I can tell you this, but we also know this system works, right? We've been through the first round in 2023. We've got the Cypress second round now for 2024. And when I look at this, so we know for a fact that when an order is granted to someone, then people start to work to finalize their infrastructure requirements, chargers, charging infrastructure requirements, and we work with our customers on that.
I mean, we don't we don't put it on an application.
And unless that cost, we believe is extremely well qualified. We show that in the 1st year when we did this for the first round of the program.
So we do that. We insure it and we're confident that during this year, we'll start getting orders and big. I think I mentioned earlier, we've already got over 50 from one that was just announced was two to three months ago, and that's pretty good and was on track with the first the 1st year we had. So we expect to continue to receive that continue to see it grow with orders coming through from our customers throughout the year.

Mike Shlisky

Outstanding it up. Great. I'll leave it there. Thank you.
Well, thanks, Mike.

Operator

Thank you. And we'll now take our next question from Chris Pierce of Needham. Chris, your line is now open. Please go.

Chris Pierce

Hey, good afternoon, everyone.
Can just touch on the doublet, the doubling of engineering spend that you had mentioned a new product. Are these new products or new iterations of existing fuel types that you have in the chassis that you referred to, the EV chassis sort of part of that? And kind of just kind of curious how you think about the net benefits from.
Thanks.

Philip Horlock

Yes, let me let me just take a quick one on that and Ron can jump in, too.
But yes, I mean, we look at engineering spend. There are certainly new features. We're introducing that. We haven't announced those yet because we don't announce too far before we launch them and they'll become into the market new things for us. New features for us, new innovations, if you like. There's also a lot of work we talk about on their support in the emissions program. You know, it isn't big emissions change coming forward in 2027, and that's cause requirements to do modifications on some of the emission controls on those products of ours.
Just reminder, our propane product, Alex, sorry, it does meet just completely meet the NOx requirements of 2027 without any changes with our further call it control systems on those vehicles.
As we move into gas, it needs a little bit of work but it's well on its way. And then of course, we we take a diesel engine to on our product.
So when we look at all that, there's a bit of work there.
But by and then there are some of our buses were put in like to transition to new features, some cosmetic changes coming on there and some functional changes too. So they're all covered among other things in our engineering bill.

Chris Pierce

Okay. And is that something that sort of helps you?
I don't want to use the word justifying the price increase, but helps kind of ease the price increases that you've been putting through? Or is that kind of just the way the industry operates, where there are consistent upgrades to features of buses just like consumer cards?

Philip Horlock

Well, a couple of things.
Obviously, we price for inflation. I mean we have to recognize raw material costs go up. Our labor costs go up. We got to just like any industry, does We price to recover that? And that's a cost of doing business and put on top of that when we bring in exciting new features, we will talk about. We want to appreciate features our customers want and they value. So we would expect to price those features as appropriate based on the value they bring to the customer and sometimes they roll it into an annual price increase or all. Sometimes we might do it separately in the middle of the model year. So we'll figure out what does the time comes.

Chris Pierce

Okay, perfec Thank you. And then on the EPA Thailand time line, can you just talk about the right way to think about this? Because we're talking about a 2023 grant. But the final application was just put through there was an increase in fiber over $500 million, but those orders don't come until 2025 So on the surface level, it might look like where halfway through the program, dollar-wise for the amount of buses that have hit your income statement is not close to halfway through is that the right way to think about it?

Philip Horlock

Yes. Yes. I mean, basically there's yes there, given that the long timeframe, the EPA's given because there's an exceptional number of buses here, obviously being sold through these grants. And they know that people have to stagger that out over the period of time for charges in place infrastructure in place. But we've got used to the rhythm of that the way call it comes in and, you know, the EPA has put it out there, but obviously, we look to go install these as quickly as we can and get the buses out there. And we'll work with our customers to do that with extended timeframe.
Just recognize there's a lot of work to be done. You can have a customer running customer this electric fleet of electric buses, let's say you have quite a bit of work to do to prepare their bus depot, if you like, for installing that and making sure we can run correctly, and that's what allows them time to do.

Razvan Radulescu

Maybe just to build on that, what Phil said and looking at the Slide 20 of our presentation. So for example, on the Round two 2023 grant program on the left, December 2025 is the deadline for these buses to be on the ground and put in operation. So deliveries will be between now and then the orders comes in as our backlog develops. So those dates are kind of the end points for the buses be up and running on the ground.

Chris Pierce

Perfect. Thank you. And then just lastly on Michael Slifirski question, I just wanted to understand, yes, we're talking about cost increase in the second half of the year. But as someone new to the story, is it correct that the second half of the year tends to be the seasonally strongest time of the year from a revenue Factive as well?

Razvan Radulescu

Yes. So before COVID, for sure, there was a cyclicality into the production levels where two thirds of the volume was down in the second half of the fiscal year and about 1/3 in the first half. However, after several years of undersupply and we still being constrained on our supply chain at this point in time, we are now at a much more steady state. So that is not a factor anymore and sort of, you know, number of weeks and a few holidays here and there. So we don't see that big gaps anymore.

Chris Pierce

I appreciate that. Thank you.

Philip Horlock

Good bye. Thank you.

Operator

As a reminder, to ask any further questions, please press star followed by one on your telephone Yes. Have no further questions. So I'd like to turn the call back to Phil Horlock for closing remarks.

Philip Horlock

Well, thank you, Natasha, and thanks, everyone, for joining us on the call today. But before I close this call, I'd like to summarize where I believe we stand today and also where we are going in the years ahead is fair to say last year, we saw you saw and we saw a momentum growing throughout the year with profitability increasing as we move through every quarter. And we've continued on the same path, but delivered an impressive record profit for second quarter with a 13% margin. That's on top of an all-time record profit for any quarter that we delivered in Q1. So this solid base behind as we raised guidance once again projecting a full-year adjusted EBITDA margin of 12% for the fiscal year, which as we know is a full four percentage points above last year. So we're in a very, very strong position using when we look at it versus where we were a year ago and certainly two years ago going forward from here, our plan to drive profitability and grow shareholder value is due to a number of extremely favorable factors. One, we have an unprecedented backlog of firm orders and strong market demand ahead of us with an aging bus fleet out there. Tube Supply chain constraints are easing, albeit there's still some way to go. But nevertheless, we're starting to see what I call the light at the end of the tunnel, at least on some near-term issues that we were experiencing three upcoming 2027 emission standards will increase the need for alternative powered vehicles. There is no question about in our mind, which is our sweet spot four, we have strong federal and state support and customer demand for electric school buses. As I said before, this is a perfect industry for deploying school buses. Our duty cycle is absolutely perfect for it, and that's one of our sweet spots as well. And five, we are achieving record profits, margins, cash and liquidity today, and that's a really strong base to grow from. So with these very positive tailwinds, we're confident in achieving a 13% margin within a couple of years. And then get into 14% and beyond in the longer term. So we appreciate your continued interest in bluebird, and we look forward to updating you again on our progress next quarter.
Should you have any follow-up questions, please don't hesitate to reach out to us or contact our Head of Investor Relations, Mark Benfield.
Thanks again from all of us here at bluebird and have a great evening.

Operator

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