What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-05-07 compared with 2025-02-05 · 198 added, 98 removed, 281 unchanged (51% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations.

The following discussion and analysis of financial condition and results of operations of Blue Bird Corporation (the "Company," "Blue Bird," "we," "our," or "us") should be read in conjunction with the Company’s unaudited condensed consolidated financial statements as of and for the three months ended December 28, 2024 and December 30, 2023 and related notes appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q ("Report").

The following discussion and analysis of financial condition and results of operations of Blue Bird Corporation (the "Company," "Blue Bird," "we," "our," or "us") should be read in conjunction with the Company’s unaudited condensed consolidated financial statements as of and for the three and six months ended March 29, 2025 and March 30, 2024 and related notes appearing in Part I, Item 1 of this Quarterly Report on Form 10-Q ("Report").

Our actual results may not be indicative of future performance.

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◦ negative impacts to manufacturing operations resulting from inventory cost volatility or the supply chain due to shutdowns or other disruptions in operations.

• future impacts resulting from changes in governmental policies, programs, regulations and/or laws, which include or could include, among other effects:

◦ the imposition of new and/or revised trade policies and tariffs, which could increase the cost of components we and/or our suppliers purchase that would impact our cost to produce buses and purchase parts for resale;

increase the prices we charge for our products to pass along part or all of our increased purchase costs;

and/or impact the purchasing decisions of our customers that could result in them buying less, or none.

of our products in future periods;

◦ reductions in governmental grants, subsidies and/or other incentives, which would result in a decrease in funds that are used by school districts and fleet customers to partially, or fully, offset the higher price of alternative powered school buses and could impact the purchasing decisions of our customers that elect to buy less, or none.

of our products in future periods;

◦ changes in current or future emissions regulations, which could increase the costs of powertrain components that we purchase from major suppliers and would impact our cost to produce buses and purchase parts for resale;

increase the prices we charge for our products to pass along part or all of our increased purchase costs;

and/or impact the purchasing decisions of our customers that could result in them buying less, or none.

of our products in future periods.

These forward-looking statements are based on information available as of the date of this Report (or, in the case of forward-looking statements incorporated herein by reference, as of the date of the applicable filed document), and current expectations, forecasts and assumptions, and involve a number of judgments, risks and uncertainties.

Accordingly, forward-looking statements should not be relied upon as representing our views as of any subsequent date, and we do not undertake any obligation to update forward-looking statements to reflect events or circumstances after the date they were made, whether as a result of new information,

future events or otherwise, except as may be required under applicable securities laws.

As a result of a number of known and unknown risks and uncertainties, our actual results or performance may be materially different than those expressed or implied by these forward-looking statements.

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Throughout this Report, we refer to the fiscal year ending September 27, 2025 as "fiscal 2025," the fiscal year ended September 28, 2024 as "fiscal 2024," the fiscal year ended September 30, 2023 as "fiscal 2023," the fiscal year ended October 1, 2022 as “fiscal 2022” and the fiscal year ended October 2, 2021 as "fiscal 2021." There will be or were 52 weeks in fiscal 2025 and fiscal 2024.

The first quarters of fiscal 2025 and fiscal 2024 both included 13 weeks.

The three and six month periods of fiscal 2025 and fiscal 2024 both included 13 weeks and 26 weeks, respectively.

Impacts of Supply Chain Constraints on Our Business

During the second half of fiscal 2021, the Company, and automotive industry as a whole, began experiencing significant supply chain constraints that arose subsequent to the novel coronavirus pandemic known as "COVID-19." Additionally, the already challenged global supply chain for automotive parts was further impacted, including continuing escalating inventory purchase costs, by additional stress resulting from Russia’s invasion of Ukraine in February 2022.

These supply chain disruptions had a significant adverse impact on our operations and results during the second half of fiscal 2021 and all of fiscal 2022.

These supply chain disruptions had a significant adverse impact

on our operations and results during the second half of fiscal 2021 and all of fiscal 2022.

Specifically, they resulted in higher purchasing costs, including freight costs incurred to expedite receipt of critical components, increased manufacturing inefficiencies and our inability to complete the production of buses to fulfill sales orders, that outpaced the sales prices that we charged for the buses we sold during these periods.

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However, the cumulative increases in sales prices we charged for our buses outpaced the higher costs we paid to procure inventory, resulting in gross profit and gross margin in fiscal 2023 and fiscal 2024 that were consistent with, or better than, historic levels experienced prior to the COVID-19 pandemic.

Supply chain disruptions continued into the first quarter of fiscal 2025 as there were still occasional shortages of certain critical components as well as ongoing increases in raw materials costs, both of which impacted our business and operations by limiting the number and/or mix of school buses that we could produce and sell as well as increasing the costs to manufacture buses.

Nonetheless, the lessons learned, and resulting actions taken, by management over the past three fiscal years allowed the Company to better navigate these supply chain challenges and consistently produce buses to fulfill sales orders.

Supply chain disruptions continued into the first half of fiscal 2025 as there were still occasional shortages of certain critical components as well as ongoing increases in raw materials costs, both of which impacted our business and operations by limiting the number and/or mix of school buses that we could produce and sell as well as increasing the costs to manufacture buses.

Nonetheless, the lessons learned, and resulting actions taken, by management over the past three fiscal years allowed the Company to better navigate these supply chain challenges to consistently produce buses to fulfill sales orders.

Ongoing improvements in manufacturing operations, when coupled with periodic pricing actions taken by the Company to ensure that the increased sales prices charged for buses keep pace with increased costs to procure inventory to produce the buses, allowed the Company to report gross profit and gross margin that are materially consistent with those reported in fiscal 2024.

New bus orders during fiscal 2024 and continuing into fiscal 2025 remained robust, primarily due to a combination of (i) pent-up demand resulting from the cumulative effect of the COVID-19 pandemic when many school systems conducted virtual learning and (ii) the challenged global supply chain for automotive parts that hindered the school bus industry's ability to produce and sell buses as discussed previously above.

Accordingly, the Company's backlog remained strong at approximately 4,800 units and 4,400 units as of September 28, 2024 and December 28, 2024, respectively, despite it selling 9,000 units in fiscal 2024 and over 2,100 units in the first quarter of fiscal 2025.

Accordingly, the Company's backlog remained strong at approximately 4,900 units and 4,400 units as of September 28, 2024 and March 29, 2025, respectively, despite it selling 9,000 units in fiscal 2024 and over 4,400 units in the first half of fiscal 2025.

In general, management believes that supply chain disruptions, including those resulting from current or future military conflicts, could continue in future periods and could materially impact our results if we are unable to i) obtain parts and supplies in sufficient quantities to meet our production needs and/or ii) pass along rising costs to our customers.

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"Risk Factors," of our fiscal 2024 Form 10-K, filed with the SEC on November 25, 2024, for a discussion of the material risks we believe we face particularly related to supply chain disruptions and related constraints.

Impacts of Governmental Policies, Programs, Regulations and/or Laws on Our Business

Although changes in trade policies and tariffs did not materially impact our operations during the first half of fiscal 2025, they could materially impact our results in future periods if we are unable to (i) mitigate the increased cost of (a) procuring inventory to produce buses and (b) purchasing parts for resale and/or (ii) increase the sales prices we charge for our products to partially or fully offset these cost increases.

Actions we have taken, and/or are taking, to mitigate the impact from changes in trade policies and tariffs include increasing the volume of steel we purchase at fixed prices up to four quarters in advance, working with our suppliers to identify alternative supply chain sources to minimize the increase in inventory costs and proactively announcing price increases to partially or fully offset our increased costs to produce buses.

In addition to supply chain constraints discussed previously above, the deferral of funds relating to governmental grants, subsidies and/or other incentives that are intended to partially, or fully, offset the higher price of alternative powered school buses impacted, to a lesser extent, the mix of school buses that we produced and sold during the fist half of fiscal 2025.

Although we noted an increase in the flow of government grant money towards the end of the three months ended March 29, 2025, the timing of such payments occurred too late in the quarter to adjust our production schedule to build and sell more higher priced alternative powered school buses.

However, such funding should positively impact subsequent quarters in fiscal 2025 and/or our 2026 fiscal year.

any future decrease in such funds could impact the purchasing decisions of our customers that elect to buy less, or none, of our products in future periods.

Management believes that changes in governmental policies, programs, regulations and/or laws could materially impact our results in future periods as described previously above.

They could result in significant economic disruption and adversely impact our business during the remainder of fiscal 2025 and perhaps beyond.

Significant uncertainty exists concerning the magnitude of the impact and duration of changes in governmental policies, programs, regulations and/or laws and their potential impact on the overall economy, both within the U.S and globally.

Accordingly, the magnitude and duration of such changes and their related financial impacts on our business cannot be estimated at this time.

Critical Accounting Policies and Estimates, Recent Accounting Pronouncements

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“U.S.

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S.

GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period.

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The Company’s accounting policies that we believe are the most critical to aid in fully understanding and evaluating our reported financial results are described in the Company’s fiscal 2024 Form 10-K, filed with the SEC on November 25, 2024, under the caption “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Estimates,” which description is incorporated herein by reference.

Our senior management has reviewed these critical accounting policies and related disclosures and determined that there were no significant changes in our critical accounting policies during the three months ended December 28, 2024.

Recent Accounting Pronouncements

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Pricing may or may not be favorable to us, depending upon a number of factors impacting purchasing decisions.

Additionally, in certain cases, prices originally quoted with dealers and school districts may have become less favorable, or more unfavorable, to us given increasing inventory costs between the time the sales order was contractually agreed upon and the bus is built and delivered as a result of ongoing supply chain disruptions and general inflationary pressures.

• Buying patterns of major fleets .

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Seasonality and variations from historical seasonality have impacted the comparison of results between fiscal periods.

As discussed previously above, supply chain disruptions developing subsequent to the COVID-19 pandemic and Russia's invasion of Ukraine have significantly increased our inventory purchase costs, including freight costs incurred to deliver critical components, reflected in cost of goods sold during all of fiscal 2022 and continuing, to a lesser extent, into fiscal 2023, fiscal 2024 and the first quarter of fiscal 2025.

In response, the Company announced a number of sales price increases over this same period that applied to new sales orders and, in one limited circumstance, partially applied to backlog orders that were both intended to mitigate the impact of rising purchase costs on our operations and results.

These cumulative price increases have had a significant, positive impact on sales and gross profit during fiscal 2023, fiscal 2024 and continuing into the first quarter of fiscal 2025.

These cumulative price increases have had a significant, positive impact on sales and gross profit during fiscal 2023, fiscal 2024 and continuing into the first half of fiscal 2025.

• Governmental grants, subsidies and/or other incentives.

Funds provided by federal, state and/or local governments are often times targeted to partially, or fully, offset the higher price of alternative powered school buses.

The deferral and/or elimination of such funds can impact the buying decisions of school districts and fleet customers, including impacting the volume, mix and/or timing of school bus purchases that can directly impact our revenues during a fiscal period.

Factors Affecting Our Expenses and Other Items

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The components of our cost of goods sold consist of material costs (principally powertrain components, steel and rubber, as well as aluminum and copper) including freight costs, labor expense, and overhead.

Our cost of goods sold may vary from period to period due to changes in sales volume and/or mix, efforts by certain suppliers to pass through the economics associated with key commodities, fluctuations in freight costs, design changes with respect to specific components, design changes with respect to specific bus models, wage increases for plant labor, productivity of plant labor, delays in receiving materials and other logistical problems, and the impact of overhead items such as utilities.

Our cost of goods sold may vary from period to period due to changes in sales volume and/or mix, efforts by certain suppliers to pass through the economics associated with key commodities as well as changes in trade policies and tariffs, fluctuations in freight costs, design changes with respect to specific components, design changes with respect to specific bus models, wage increases for plant labor, productivity of plant labor, delays in receiving materials and other logistical problems, and the impact of overhead items such as utilities.

• Selling, general and administrative expenses .

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• Other expense/income, net.

This balance includes periodic pension expense or income as well as gains or losses on foreign currency, if any.

This balance includes net periodic pension expense or income as well as gains or losses on foreign currency, if any.

Other amounts not associated with operating expenses may also be included in this balance.

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While certain of the charges that are added back in the Adjusted EBITDA calculation, such as transaction related costs and major cost cutting and/or operational transformation initiatives, represent operating expenses that may be recorded in more than one annual period, the significant project or transaction giving rise to such expenses is not considered to be indicative of the Company’s normal operations.

Accordingly, we believe that

these, as well as the other credits and charges that comprise the amounts utilized in the determination of Adjusted EBITDA described above, should not be used in evaluating the Company’s ongoing annual operating performance.

Accordingly, we believe that these, as well as the other credits and charges that comprise the amounts utilized in the determination of Adjusted EBITDA described above, should not be used in evaluating the Company’s ongoing annual operating performance.

We define Adjusted EBITDA Margin as Adjusted EBITDA as a percentage of net sales.

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Management evaluates the segments based primarily upon revenues and gross profit.

Consolidated Results of Operations for the Three Months Ended December 28, 2024 and December 30, 2023:

Consolidated Results of Operations for the Three Months Ended March 29, 2025 and March 30, 2024:

Three Months Ended

(in thousands of dollars) December 28, 2024 December 30, 2023

(in thousands of dollars) March 29, 2025 March 30, 2024

$ 358,851 $ 345,915

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Other income (expense), net 444 (1,968)

Loss on debt refinancing

Income before income taxes $ 33,600 $ 32,342

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Net Sales by Segment

December 28, 2024 December 30, 2023

March 29, 2025 March 30, 2024

$ 332,712 $ 317,959

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$ 70,854 $ 63,639

Net sales were $313.9 million for the first quarter of fiscal 2025, a decrease of $3.8 million, or 1.2%, compared to $317.7 million for the first quarter of fiscal 2024.

The decrease in net sales is primarily due to Bus customer and product mix changes that were partially offset by a slight increase in Parts sales.

Bus sales decreased $5.3 million, or 1.8%, reflecting a 1.9% decrease in average sales price per unit.

In the first quarter of fiscal 2025, 2,130 units were booked compared to 2,129 units booked for the same period in fiscal 2024.

The small decrease in unit price for the first quarter of fiscal 2025 compared to the same period in fiscal 2024 was primarily due to customer and product mix changes, although both quarters were negatively impacted by supply chain constraints that limited the Company's ability to produce and deliver buses due to shortages of critical components.

Parts sales increased $1.5 million, or 6.2%, for the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024.

This increase is 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.

Net sales were $358.9 million for the second quarter of fiscal 2025, an increase of $12.9 million, or 3.7%, compared to $345.9 million for the second quarter of fiscal 2024.

The increase in net sales is primarily due to a small increase in Bus unit bookings as well as Bus customer and product mix changes that were partially offset by a small decrease in Parts sales.

Bus sales increased $14.8 million, or 4.6%, reflecting a 1.8% increase in unit bookings and a 2.8% increase in average sales price per unit.

In the second quarter of fiscal 2025, 2,295 units booked compared to 2,254 units booked for the same period in fiscal 2024.

The small increase in unit price for the second quarter of fiscal 2025 compared to the same period in fiscal 2024 was primarily due to customer and product mix changes, although both quarters were negatively impacted by supply chain constraints that limited the Company's ability to produce and deliver buses due to shortages of critical components.

Parts sales decreased $1.8 million, or 6.5%, for the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024.

This decrease is primarily attributed to slight variations due to product and channel mix.

Cost of goods sold .

Total cost of goods sold was $253.6 million for the first quarter of fiscal 2025, a decrease of $0.5 million, or 0.2%, compared to $254.1 million for the first quarter of fiscal 2024.

As a percentage of net sales, total cost of goods sold increased from 80.0% to 80.8%, primarily due to the impact of ongoing inflationary pressures relating to the procurement of inventory as well as finalizing the union contract in May 2024, which increased the labor costs for our covered production and supply chain employees.

Bus segment cost of goods sold decreased $1.2 million, or 0.5%, for the first quarter of fiscal 2025 compared to the same period in fiscal 2024.

The decrease was primarily driven by customer and product mix changes as the average cost of goods sold per unit for the first quarter of fiscal 2025 was 0.5% lower compared to the first quarter of fiscal 2024.

However, such decrease was partially offset by increases in manufacturing costs attributable to a) increased raw materials costs resulting from ongoing inflationary pressures, b) ongoing supply chain disruptions that resulted in higher purchase costs for components and c) higher labor costs resulting from finalizing the union contract in May 2024.

The $0.6 million, or 5.2%, increase in Parts segment cost of goods sold for the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024 was primarily due to increased purchased parts costs, driven by ongoing inflationary pressures and supply chain disruptions, as well as slight variations due to product and channel mix.

Total cost of goods sold was $288.0 million for the second quarter of fiscal 2025, an increase of $5.7 million, or 2.0%, compared to $282.3 million for the second quarter of fiscal 2024.

As a percentage of net sales, total cost of goods sold improved from 81.6% to 80.3%, primarily due to the impact of ongoing pricing actions taken by management that exceeded the impact of increasing costs resulting from inflationary pressures relating to the procurement of inventory as well as finalizing the union contract in May 2024, which increased the labor costs for our covered production and supply chain employees.

The improvement was also impacted by product and customer mix changes.

Bus segment cost of goods sold increased $6.7 million, or 2.5%, for the second quarter of fiscal 2025 compared to the same period in fiscal 2024.

The increase was primarily driven by the 1.8% increase in units booked discussed above as well as the 0.7% increase in the average cost of goods sold per unit for the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024.

This increase primarily resulted from increases in manufacturing costs attributable to a) increased raw materials costs resulting from ongoing inflationary pressures, b) ongoing supply chain disruptions that resulted in higher purchase costs for components and c) higher labor costs resulting from finalizing the union contract in May 2024.

The increase was also impacted by customer and product mix changes.

The $1.0 million, or 7.1%, decrease in Parts segment cost of goods sold for the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024 was primarily attributable to slight variations due to product and channel mix.

Operating profit .

Operating profit was $33.0 million for the first quarter of fiscal 2025, a decrease of $4.9 million compared to operating profit of $38.0 million for the first quarter of fiscal 2024.

Profitability was primarily impacted by a decrease of $3.2 million in gross profit as outlined in the revenue and cost of goods sold discussions above.

It was also impacted by an increase of $1.7 million in selling, general and administrative expenses, primarily due to an increase in labor costs.

Operating profit was $33.7 million for the second quarter of fiscal 2025, a decrease of $2.4 million compared to operating profit of $36.1 million for the second quarter of fiscal 2024.

Profitability was positively impacted by an increase of $7.2 million in gross profit as outlined in the revenue and cost of goods sold discussions above.

However, it was negatively impacted by an increase of $9.6 million in selling, general and administrative expenses, primarily due to an increase in a) share-based compensation expense recorded in the second quarter of fiscal 2025 relating to the retirement of our former President and Chief Executive Officer and b) labor costs.

Interest expense .

Interest expense was $1.9 million for the first quarter of fiscal 2025, a decrease of $1.7 million, or 47.3%, compared to $3.6 million for the first quarter of fiscal 2024.

The decrease was primarily attributable to a decrease in the stated term loan interest rate from 8.5% at December 30, 2023 to 6.4% at December 28, 2024, as well as lower outstanding borrowings in the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024.

Interest expense was $1.8 million for the second quarter of fiscal 2025, a decrease of $1.0 million, or 35.5%, compared to $2.8 million for the second quarter of fiscal 2024.

The decrease was primarily attributable to a decrease in the stated term loan interest rate from 7.2% at March 30, 2024 to 6.2% at March 29, 2025, as well as lower outstanding borrowings in the second quarter of fiscal 2025 compared to the second quarter of fiscal 2024.

Other income (expense), net.

Other income, net was $2.9 million for the first quarter of fiscal 2025, an increase of $4.1 million, or 338.8%, compared to $1.2 million of other expense, net for the same period in fiscal 2024.

During the first quarter of fiscal 2025, the Company recorded pension income of approximately $0.4 million compared with pension expense of less than $0.1 million for the same period in fiscal 2024.

Additionally, during the first quarter of fiscal 2025, the Company sold certain state emissions credits that it was not projecting to use for approximately $2.6 million, with no similar income recorded during the first quarter of fiscal 2024.

The proceeds from this sale were recorded in other income (expense), net in the Condensed Consolidated Statements of Operations as this transaction is not indicative of our normal revenue generating activities.

Finally, on December 14, 2023, the Company entered into an underwriting agreement with BofA Securities, Inc.

and Barclays Capital Inc., as representatives of the several underwriters and American Securities LLC ("Selling Stockholder"), pursuant to which the Selling Stockholder agreed to sell 2,500,000 shares of common stock at a purchase price of $25.10 per share ("Offering").

The Offering was conducted pursuant to a prospectus supplement, dated December 14, 2023, to the prospectus, dated December 22, 2021, included in the Company’s registration statement on Form S-3 (File No.

Other income, net was $0.4 million for the second quarter of fiscal 2025, an increase of $2.4 million, or 122.6%, compared to $2.0 million of other expense, net for the same period in fiscal 2024.

During the second quarter of fiscal 2025, the Company recorded net periodic pension income of approximately $0.4 million compared with net periodic pension expense of less than $0.1 million for the same period in fiscal 2024.

Additionally, on February 15, 2024, the Company entered into an underwriting agreement with Barclays Capital Inc., as representative of the several underwriters and American Securities LLC ("Selling Stockholder"), pursuant to which Selling Stockholder agreed to sell 4,042,650 shares of common stock at a purchase price of $32.90 per share (“February Offering”).

The February Offering was conducted pursuant to a prospectus supplement, dated February 15, 2024, to the prospectus, dated December 22, 2021, included in the Company’s registration statement on Form S-3 (File No.

333-261858) that was initially filed with the SEC on December 23, 2021.

The Offering closed on December 19, 2023.

Although the Company did not sell any shares or receive any proceeds from the Offering, it was required to pay certain expenses in connection with the transaction that totaled approximately $1.2 million during the first quarter of fiscal 2024.

There was no similar expense recorded during the first quarter of fiscal 2025,

The February Offering closed on February 21, 2024.

Although the Company did not sell any shares or receive any proceeds from the February Offering, it was required to pay certain expenses in connection with the February Offering that totaled approximately $1.9 million for the three months ended March 30, 2024.

No such expense was incurred in the three months ended March 29, 2025.

Income taxes .

Income tax expense was $8.7 million for the first quarter of fiscal 2025 compared to $8.4 million for the same period in fiscal 2024.

The effective tax rate for the three months ended December 28, 2024 was 24.4% and differed from the statutory federal income tax rate of 21%.

Income tax expense was $9.1 million for the second quarter of fiscal 2025 compared to $8.3 million for the same period in fiscal 2024.

The effective tax rate for the three months ended March 29, 2025 was 27.2% and differed from the statutory federal income tax rate of 21%.

The increase was primarily due to the impacts from state taxes and certain permanent items on the federal rate, which were partially offset by the impacts from federal and state tax credits (net of valuation allowances) and discrete period items during the quarter.

The effective tax rate for the three months ended December 30, 2023 was 25.9% and differed from the statutory federal income tax rate of 21%.

The effective tax rate for the three months ended March 30, 2024 was 25.5% and differed from the statutory federal income tax rate of 21%.

Adjusted EBITDA .

Adjusted EBITDA was $45.8 million, or 14.6% of net sales, for the first quarter of fiscal 2025, a decrease of $1.9 million, or 3.9%, compared to $47.6 million, or 15.0% of net sales, for the first quarter of fiscal 2024.

The decrease primarily relates to the $4.9 million decrease in operating profit as a result of the factors discussed above, which was partially offset by the $2.9 million of other income, net recorded during the first quarter of fiscal 2025 discussed above.

Adjusted EBITDA was $49.2 million, or 13.7% of net sales, for the second quarter of fiscal 2025, an increase of $3.5 million, or 7.6%, compared to $45.8 million, or 13.2% of net sales, for the second quarter of fiscal 2024.

The increase primarily relates to the $7.2 million increase in gross profit as outlined in the revenue and cost of goods sold discussions above, which was partially offset by a smaller increase in selling, general and administrative expenses, when adjusted for the impact of share-based compensation expense that is excluded in calculating Adjusted EBITDA, as discussed above.

The following table sets forth a reconciliation of net income to Adjusted EBITDA for the periods presented:

Three Months Ended

(in thousands of dollars) December 28, 2024 December 30, 2023

(in thousands of dollars) March 29, 2025 March 30, 2024

Net income $ 26,046 $ 26,023

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Stockholder transaction costs — 1,933

Loss on debt refinancing

Micro Bird Holdings, Inc.

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(1) Includes $0.1 million for both fiscal periods, representing interest expense on operating lease liabilities, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

(2) Includes $0.4 million and $0.6 million for the three months ended December 28, 2024 and December 30, 2023, respectively, representing amortization charges on right-of-use lease assets, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

(2) Includes $0.4 million and $0.3 million for the three months ended March 29, 2025 and March 30, 2024, respectively, representing amortization charges on right-of-use lease assets, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

Consolidated Results of Operations for the Six Months Ended March 29, 2025 and March 30, 2024:

Six Months Ended

(in thousands of dollars) March 29, 2025 March 30, 2024

$ 672,723 $ 663,575

Cost of goods sold

541,552 536,378

$ 131,171 $ 127,197

Operating expenses

Selling, general and administrative expenses

64,418 53,173

Operating profit $ 66,753 $ 74,024

Interest expense (3,728) (6,443)

Interest income 2,826 2,142

Other income (expense), net 3,360 (3,189)

Loss on debt refinancing

Income before income taxes $ 69,211 $ 64,976

Income tax expense (17,822) (16,707)

Equity in net income of non-consolidated affiliates 3,379 3,904

Net income $ 54,768 $ 52,173

Other financial data:

Adjusted EBITDA

$ 94,959 $ 93,355

Adjusted EBITDA margin

14.1 % 14.1 %

The following provides the results of operations of Blue Bird’s two reportable segments:

(in thousands of dollars) Six Months Ended

Net Sales by Segment March 29, 2025 March 30, 2024

$ 620,859 $ 611,396

51,864 52,179

Total $ 672,723 $ 663,575

Gross Profit by Segment

$ 104,806 $ 100,883

26,365 26,314

$ 131,171 $ 127,197

Net sales were $672.7 million for the six months ended March 29, 2025, an increase of $9.1 million, or 1.4%, compared to $663.6 million for the six months ended March 30, 2024.

The increase in net sales is primarily due to a small increase in Bus unit bookings as well as Bus customer and product mix changes that were partially offset by a small decrease in Parts sales.

Bus sales increased $9.5 million, or 1.5%, reflecting a 1.0% increase in units booked and a 0.6% increase in average sales price per unit.

4,425 units booked in the six months ended March 29, 2025 compared with 4,383 units booked during the same period in fiscal 2024.

The small increase in unit price for the first six months of fiscal 2025 compared to the same period in fiscal 2024 was primarily due to customer and product mix changes, although both periods were negatively impacted by supply chain constraints that limited the Company's ability to produce and deliver buses due to shortages of critical components.

Parts sales decreased $0.3 million, or 0.6%, for the six months ended March 29, 2025 compared to the six months ended March 30, 2024.

This small decrease is primarily attributed to slight variations due to product and channel mix.

Cost of goods sold .

Total cost of goods sold was $541.6 million for the six months ended March 29, 2025, an increase of $5.2 million, or 1.0%, compared to $536.4 million for the six months ended March 30, 2024.

As a percentage of net sales, total cost of goods sold improved from 80.8% to 80.5%, primarily due to the impact of ongoing pricing actions taken by management that exceeded the impact of increasing costs resulting from inflationary pressures relating to the procurement of inventory as well as finalizing the union contract in May 2024, which increased the labor costs for our covered production and supply chain employees.

The improvement was also impacted by product and customer mix changes.

Bus segment cost of goods sold increased $5.5 million, or 1.1%, for the six months ended March 29, 2025 compared to the six months ended March 30, 2024.

The increase was primarily driven by the 1.0% increase in units booked discussed above as well as the 0.1% increase in the average cost of goods sold per unit in the six months ended March 29, 2025 compared to the same period in fiscal 2024.

The increase was also impacted by customer and product mix changes.

The $0.4 million, or 1.4%, decrease in parts segment cost of goods sold for the six months ended March 29, 2025 compared to the six months ended March 30, 2024 was primarily attributable to slight variations due to product and channel mix.

Operating profit .

Operating profit was $66.8 million for the six months ended March 29, 2025, a decrease of $7.3 million compared to operating profit of $74.0 million for the six months ended March 30, 2024.

Profitability was positively impacted by an increase of $4.0 million in gross profit as outlined in the revenue and cost of goods sold discussions.

However, it was negatively impacted by an increase of $11.2 million in selling, general and administrative expenses, primarily due to an increase in a) share-based compensation expense recorded in the second quarter of fiscal 2025 relating to the retirement of our former President and Chief Executive Officer and b) labor costs.

Interest expense .

Interest expense was $3.7 million for the six months ended March 29, 2025, a decrease of $2.7 million, or 42.1%, compared to $6.4 million for the six months ended March 30, 2024.

The decrease was primarily attributable to a decrease in the stated term loan interest rate from 7.2% at March 30, 2024 to 6.2% at March 29, 2025, as well as lower outstanding borrowings in the first six months of fiscal 2025 compared to the first six months of fiscal 2024.

Other income (expense), net.

Other income, net was $3.4 million for the six months ended March 29, 2025, an increase of $6.5 million, or 205.4%, compared to $3.2 million of other expense, net for the six months ended March 30, 2024.

The Company recorded $0.9 million of net periodic pension income during the six months ended March 29, 2025 when compared with $0.1 million of net periodic pension expense recorded during the six months ended March 30, 2024.

Finally, on December 14, 2023, the Company entered into an underwriting agreement with BofA Securities, Inc.

and Barclays Capital Inc., as representatives of the several underwriters and American Securities LLC ("Selling Stockholder"), pursuant to which Selling Stockholder agreed to sell 2,500,000 shares of common stock at a purchase price of $25.10 per share ("December Offering").

On February 15, 2024, the Company entered into an underwriting agreement with Barclays Capital Inc., as representative of the several underwriters and Selling Stockholder, pursuant to which Selling Stockholder agreed to sell 4,042,650 shares of common stock at a purchase price of $32.90 per share ("February Offering," and collectively with the December Offering, "Offerings").

The December Offering was conducted pursuant to a prospectus supplement, dated December 14, 2023, and the February Offering was conducted pursuant to a prospectus supplement, dated February 15, 2024, both to the prospectus dated December 22, 2021 included in the Company’s registration statement on Form S-3 (File No.

333-261858) that was initially filed with the SEC on December 23, 2021.

The December Offering closed on December 19, 2023 and the February Offering closed on February 21, 2024.

Although the Company did not sell any shares or receive any proceeds from the Offerings, it was required to pay certain expenses in connection with the Offerings that totaled approximately $3.2 million for the six months ended March 30, 2024.

No such expense was incurred in the six months ended March 29, 2025.

Income taxes .

Income tax expense was $17.8 million for the six months ended March 29, 2025 compared to $16.7 million for the six months ended March 30, 2024.

The effective tax rate for the six months ended March 29, 2025 was 25.8% and differed from the statutory federal income tax rate of 21%.

The effective tax rate for the six months ended March 30, 2024 was 25.7% and differed from the statutory federal income tax rate of 21%.

Adjusted EBITDA .

Adjusted EBITDA was $95.0 million, or 14.1% of net sales, for the six months ended March 29, 2025, an increase of $1.6 million, or 1.7%, compared to $93.4 million, or 14.1% of net sales, for the six months ended March 30, 2024.

The increase primarily relates to the a) $4.0 million increase in gross profit as outlined in the revenue and cost of goods sold discussions above and b) $2.6 million sale of certain state emissions credits included in the other income (expense), net discussion above, both of which were partially offset by a smaller increase in selling, general and administrative expenses, when adjusting for the impact of share-based compensation expense that is excluded in calculating Adjusted EBITDA, as discussed above.

The following table sets forth a reconciliation of net income to Adjusted EBITDA for the periods presented:

Six Months Ended

(in thousands of dollars) March 29, 2025 March 30, 2024

Net income $ 54,768 $ 52,173

Interest expense, net (1) 1,066 4,515

Income tax expense 17,822 16,707

Depreciation, amortization and disposals (2)

Loss on debt refinancing

Share-based compensation expense

Stockholder transaction costs — 3,154

Micro Bird Holdings, Inc.

total interest expense, net;

income tax expense or benefit;

depreciation expense and amortization expense

Adjusted EBITDA $ 94,959 $ 93,355

Adjusted EBITDA margin (percentage of net sales) 14.1 % 14.1 %

(1) Includes $0.2 million for both six month periods, representing interest expense on operating lease liabilities, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

(2) Includes $0.8 million and $0.9 million for the six months ended March 29, 2025 and March 30, 2024, respectively, representing amortization charges on right-of-use lease assets, which are a component of lease expense and presented as a single operating expense in selling, general and administrative expenses on our Condensed Consolidated Statements of Operations

Liquidity and Capital Resources

The Company’s primary sources of liquidity are cash generated from its operations, available cash and cash equivalents and borrowings under its revolving credit facility.

At December 28, 2024, the Company had $136.1 million of available cash (net of outstanding checks) and $143.3 million of additional borrowings available under the revolving line of credit portion of its credit facility.

At March 29, 2025, the Company had $130.7 million of available cash (net of outstanding checks) and $143.3 million of additional borrowings available under the revolving line of credit portion of its credit facility.

The Company’s revolving line of credit is available for working capital requirements, capital expenditures and other general corporate purposes.

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The Term Loan Facility is subject to amortization of principal, payable in equal quarterly installments on the last day of each fiscal quarter, which commenced on March 30, 2024, with 5.0% of the $100.0 million aggregate principal amount of all initial term loans outstanding at the Closing Date payable each year prior to the maturity date of the Term Loan Facility.

The remaining initial

aggregate principal amount outstanding under the Term Loan Facility, as well as any outstanding borrowings under the Revolving Credit Facility, will be payable on the November 17, 2028 maturity date of the Credit Agreement.

The remaining initial aggregate principal amount outstanding under the Term Loan Facility, as well as any outstanding borrowings under the Revolving Credit Facility, will be payable on the November 17, 2028 maturity date of the Credit Agreement.

The Credit Facilities are guaranteed by all of the Company’s wholly-owned domestic restricted subsidiaries (subject to customary exceptions) and are secured by a security agreement which pledges a lien on virtually all of the assets of Borrower, the Company and the Company’s other wholly-owned domestic restricted subsidiaries, other than any owned or leased real property and subject to customary exceptions.

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IV Greater than or equal to 2.25x

Pricing on the Closing Date was set at Level III until receipt of the financial information and related compliance certificate for the first fiscal quarter ending after the Closing Date, with pricing as of December 28, 2024 set at Level I.

Borrower is also required to pay lenders an unused commitment fee of between 0.25% and 0.45% per annum on the undrawn commitments under the Revolving Credit Facility, depending on the TNLR, quarterly in arrears.

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Detailed descriptions of the Amended Credit Agreement are set forth under “Management’s Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources” contained in the Company’s Annual Report on Form 10-K for the fiscal year ended September 28, 2024, filed with the SEC on November 25, 2024.

At December 28, 2024, Borrower and the guarantors under the Credit Agreement were in compliance with all covenants.

At March 29, 2025, Borrower and the guarantors under the Credit Agreement were in compliance with all covenants.

Short-Term and Long-Term Liquidity Requirements

Our ability to make principal and interest payments on borrowings under our Credit Facilities, as applicable, and our ability to fund planned capital expenditures will depend on our ability to generate cash in the future, which, to a certain extent, is subject to general economic, financial, competitive, regulatory and other conditions.

Based on the current level of operations, we believe that our existing cash balances and expected cash flows from operations will be sufficient to meet our operating requirements for at least the next 12 months.

Based on the current level of operations, we believe that our

existing cash balances and expected cash flows from operations will be sufficient to meet our operating requirements for at least the next 12 months.

To increase our liquidity in future periods, we could pursue raising additional capital via an equity or debt offering utilizing a currently effective "shelf" registration statement.

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Historically, our business has been highly seasonal with school districts buying their new school buses so that they will be available for use on the first day of the school year, typically in mid-August to early September.

This has, in fiscal years prior to the COVID-19 pandemic, resulted in our third and fourth fiscal quarters representing our two busiest quarters from a sales and production perspective,

the latter ending on the Saturday closest to September 30.

This has, in fiscal years prior to the COVID-19 pandemic, resulted in our third and fourth fiscal quarters representing our two busiest quarters from a sales and production perspective, the latter ending on the Saturday closest to September 30.

Our quarterly results of operations, cash flows, and liquidity have historically been, and are likely to be in future periods, impacted by seasonal patterns.

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The following table sets forth general information derived from our Condensed Consolidated Statements of Cash Flows:

Three Months Ended

(in thousands of dollars) December 28, 2024 December 30, 2023

Six Months Ended

(in thousands of dollars) March 29, 2025 March 30, 2024

Cash, cash equivalents and restricted cash at beginning of period $ 127,687 $ 78,988

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Total cash used in investing activities (14,116) (5,643)

Total cash (used in) provided by financing activities (12,884) 995

Total cash used in financing activities (37,002) (35,020)

Change in cash, cash equivalents and restricted cash $ 3,062 $ 14,108

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Total cash provided by operating activities

Cash flows provided by operating activities totaled $26.4 million for the three months ended December 28, 2024, an increase of $26.2 million from the $0.2 million of cash flows provided by operating activities during the three months ended December 30, 2023.

The increase primarily resulted from the effect of net changes in operating assets and liabilities that positively impacted operating cash flows by $30.7 million during the three months ended December 28, 2024 when compared with the three months ended December 30, 2023.

The primary drivers in this category were favorable changes in accounts receivable and accounts payable of $43.6 million and $17.6 million, respectively, as follows:

• A shift in our customer mix resulted in an increase in the accounts receivable balance at the end of fiscal 2024 when compared with the end of fiscal 2023.

Specifically, we had a significant increase in fleet revenue towards the end of fiscal 2024 relating to school buses that were delivered to coincide with the start of the new school year, with such revenue representing the majority of sales we make on credit.

During the first quarter of fiscal 2025, the accounts receivable balances relating to fiscal 2024 fleet revenue were collected, representing a significant cash inflow (a large source of cash).

There was no similar activity during the first quarter of fiscal 2024.

• During fiscal 2023, inflationary pressures and supply chain disruptions significantly increased our purchase costs for components and freight, which, when coupled with increased production and sales volumes during the fiscal year, resulted in a significant increase in the accounts payable balance at the end of fiscal 2023.

Although inflationary pressures continued during the first quarter of fiscal 2024, they were smaller when compared to fiscal 2023.

This factor, when coupled with our production and sales volumes largely stabilizing during the period, resulted in a significant decrease in the accounts payable balance as of December 30, 2023 when compared with the end of fiscal 2023 (a large use of cash).

Although inflationary pressures continued into the first quarter of fiscal 2025, they were relatively small when compared to fiscal 2024.

This factor, when coupled with our production and sales volumes remaining relatively consistent in the first quarters of fiscal 2025 and 2024, resulted in a small decrease in the accounts payable balance as of December 28, 2024 when compared with the end of fiscal 2024, representing a significantly smaller use of cash when compared with the first quarter of fiscal 2024.

The above favorable changes were partially offset by unfavorable changes in inventory and other assets of $28.2 million and $6.1 million, respectively, as follows:

• We had a large increase in the balance of our inventory during the first quarter of fiscal 2025 when compared with the first quarter of fiscal 2024 (an increase in the use of cash).

Specifically, the bus orders that we produced during the first quarter of fiscal 2025 contained a higher mix of units for certain customers, primarily fleet and specific governmental customers, for which the sales cycle is longer when compared with sales to dealers, resulting in a significant increase in units in finished goods inventory as of December 28, 2024 when compared with December 30, 2023.

Additionally, at the end of the first quarter of fiscal 2025, we elected to strategically acquire larger quantities of certain critical components that have longer lead times and could impact our production schedule in future periods if not manufactured by our suppliers and delivered to us in a timely manner, with no similar activity in the first quarter of fiscal 2024.

This purchasing activity resulted in a large increase in our

raw materials inventory as of December 28, 2024 when compared with December 30, 2023.

There was not a corresponding increase in accounts payable for this activity in the first quarter of fiscal 2025 as we had not received the inventory as of the end of the quarter as our manufacturing and supply chain operations were closed for planned maintenance the last week in December, so we recorded the obligation relating to the purchase of this inventory within accrued expenses.

Additionally, there was not a corresponding large increase in accrued expenses in the first quarter of fiscal 2025 as the increase for the strategic acquisition of inventory discussed above was largely offset by other activity, including a decrease in the balance of bonuses accrued as of the end of fiscal 2024 that were paid in the first quarter of fiscal 2025.

• The changes in other assets were primarily driven by larger increases in certain prepaid assets (a use of cash), including prepaid software contracts and insurance premiums, in the first quarter of fiscal 2025 compared to the first quarter of fiscal 2024 given the continued increases in the costs of these services.

Cash flows provided by operating activities totaled $54.2 million for the six months ended March 29, 2025, consistent with the $54.8 million of cash flows provided by operating activities during the six months ended March 30, 2024.

Total cash used in investing activities

Cash flows used in investing activities totaled $5.1 million for the three months ended December 28, 2024 as compared to $2.9 million for the three months ended December 30, 2023.

Cash flows used in investing activities totaled $14.1 million for the six months ended March 29, 2025 as compared to $5.6 million for the six months ended March 30, 2024.

The $8.5 million increase was primarily due to an increase in spending on fixed assets, as increasing recent profitability has allowed for more capital spending.

Total cash (used in) provided by financing activities

Cash flows used in financing activities totaled $12.9 million for the three months ended December 28, 2024 as compared to $1.0 million provided by financing activities for the three months ended December 30, 2023.

The $13.9 million decrease between fiscal periods was primarily attributable to $10.0 million in purchases of Company stock in the first quarter of fiscal 2025, with no similar activity in the same period in fiscal 2024.

Additionally, as a result of executing the Credit Agreement in the three months ended December 30, 2023 with no similar activity in three months ended December 28, 2024, there was a $5.7 million net decrease in proceeds from borrowings under the Credit Agreement, which was partially reduced by the $3.1 million of costs we incurred in completing the debt refinancing in the first quarter of fiscal 2024.

Total cash used in financing activities

Cash flows used in financing activities totaled $37.0 million for the six months ended March 29, 2025 as compared to $35.0 million for the six months ended March 30, 2024, resulting in a $2.0 million increase between fiscal periods.

During the first six months of fiscal 2025, the Company purchased $30.1 million of common stock in connection with its share repurchase program with no similar activity in the same period in fiscal 2024.

Additionally, there was a $4.1 million increase in purchases of Company common stock in connection with stock award exercises in the six months ended March 29, 2025 when compared with the six months ended March 30, 2024.

During the first six months of fiscal 2024, primarily as a result of executing the Credit Agreement during this period, there was a $30.6 million increase in net term loan repayments when compared with the same period in fiscal 2025.

Additionally, we paid $3.1 million of costs in completing the debt refinancing in the six months ended March 30, 2024 with no similar activity in the six months ended March 29, 2025.

These cash disbursements were partially offset by a $1.2 million increase in cash received from stock option exercises in the six months ended March 30, 2024 when compared with the six months ended March 29, 2025.

Free cash flow

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The following table sets forth the calculation of Free Cash Flow for the periods presented:

Three Months Ended

(in thousands of dollars) December 28, 2024 December 30, 2023

Six Months Ended

(in thousands of dollars) March 29, 2025 March 30, 2024

Net cash provided by operating activities $ 54,180 $ 54,771

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$ 40,564 $ 49,128

Free Cash Flow for the three months ended December 28, 2024 was $24.5 million higher than for the three months ended December 30, 2023 due to a $26.2 million increase in net cash provided by operating activities and a $1.7 million increase in cash paid for fixed assets, both as discussed above.

Free Cash Flow for the six months ended March 29, 2025 was $8.6 million lower than for the six months ended March 30, 2024 due to a $0.6 million decrease in net cash provided by operating activities and an $8.0 million increase in cash paid for fixed assets, both as discussed above.

Off-Balance Sheet Arrangements

We had outstanding letters of credit totaling $6.7 million at December 28, 2024, the majority of which secure our self-insured workers compensation program, the collateral for which is regulated by the State of Georgia.

We had outstanding letters of credit totaling $6.7 million at March 29, 2025, the majority of which secure our self-insured workers compensation program, the collateral for which is regulated by the State of Georgia.

Quantitative and Qualitative Disclosures About Mar ket Risk.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis