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Item 2. Management’s Discussion and Analysis

2025-08-06 compared with 2025-05-07 · 126 added, 114 removed, 365 unchanged (40% 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 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").

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 nine months ended June 28, 2025 and June 29, 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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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 three and six month periods of fiscal 2025 and fiscal 2024 both included 13 weeks and 26 weeks, respectively.

The three and nine month periods of fiscal 2025 and fiscal 2024 both included 13 weeks and 39 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 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.

Supply chain disruptions continued into the first nine months 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.

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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 4,900 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.

Accordingly, the Company's backlog remained strong at approximately 4,900 units and 3,900 units as of September 28, 2024 and June 28, 2025, respectively, despite it selling 9,000 units in fiscal 2024 and almost 6,900 units in the first nine months 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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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.

Changes in trade policies and tariffs only began to materially impact our procurement costs for certain imported inventory during the three months ended June 28, 2025.

However, such higher inventory purchase costs did not negatively impact our operating results or cash flows during this same period as such impact was offset by increases in the sales prices we charged for our products.

However, they could materially impact our operating results and cash flows 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.

Although we noted an increase in the flow of government grant money during the three months ended June 28, 2025, the timing of some of these 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.

Nonetheless, 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.

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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 six months ended March 29, 2025.

Recent Accounting Pronouncements

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Increases or decreases in the number of school bus riders have a direct impact on school district demand.

Evolving protocols for public health concerns and/or continued technological advancements could shift the future form of educational delivery away from in-person learning on a more permanent basis, with increased remote learning reasonably expected to decrease the number of school bus riders.

Evolving protocols for public health concerns and/or continued technological

advancements could shift the future form of educational delivery away from in-person learning on a more permanent basis, with increased remote learning reasonably expected to decrease the number of school bus riders.

• Revenue mix .

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Our products are sold to school districts throughout the U.S.

Each state and each Canadian province has its own set of regulations that governs the purchase of products, including school buses, by their school districts.

Each state and each Canadian province has its own set of regulations that govern the purchase of products, including school buses, by their school districts.

We and our dealers must navigate these regulations, purchasing procedures, and the districts’ specifications in order to reach mutually acceptable price terms.

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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 half 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 half of fiscal 2025.

Additionally, the imposition of tariffs on certain imported inventory that became effective beginning in the third quarter of fiscal 2025 has further increased our inventory purchase costs.

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

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 nine months of fiscal 2025.

• Governmental grants, subsidies and/or other incentives.

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Our selling, general and administrative expenses include costs associated with our selling and marketing efforts, engineering, centralized finance, human resources, purchasing, information technology services, along with other administrative matters and functions.

In most instances, other than direct costs associated with sales and marketing programs, the principal component of these costs is salary expense.

In most instances, other than direct costs associated with sales and marketing programs, the principal component of these costs is compensation expense.

Changes from period to period are typically driven by the number of our employees, as well as by merit increases provided to experienced personnel.

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Adjusted EBITDA is defined as net income or loss prior to interest income;

interest expense including the component of operating lease expense (which is presented as a single operating expense in selling, general and administrative expenses in our U.S.

GAAP financial statements) that represents interest expense on lease liabilities;

interest expense including the component of operating lease expense (which is presented within cost of goods sold or selling, general and administrative expenses in our U.S.

GAAP financial statements) that represents interest expense on operating lease liabilities;

income taxes;

and depreciation and amortization including the component of operating lease expense (which is presented as a single operating expense in selling, general and administrative expenses in our U.S.

and depreciation and amortization including the component of operating lease expense (which is presented within cost of goods sold or selling, general and administrative expenses in our U.S.

GAAP financial statements) that represents amortization charges on right-of-use lease assets;

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

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

Consolidated Results of Operations for the Three Months Ended June 28, 2025 and June 29, 2024:

Three Months Ended

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

(in thousands of dollars) June 28, 2025 June 29, 2024

$ 398,011 $ 333,367

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Interest income 1,483 990

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

Other expense, net (580) (2,729)

Income before income taxes $ 49,234 $ 35,882

Income tax expense (12,375) (9,938)

Equity in net income of non-consolidated affiliates 1,575 1,942

Equity in net (loss) income of non-consolidated affiliates (404) 2,767

Net income $ 36,455 $ 28,711

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Net Sales by Segment

March 29, 2025 March 30, 2024

June 28, 2025 June 29, 2024

$ 372,240 $ 308,037

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$ 85,928 $ 69,353

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.

Net sales were $398.0 million for the third quarter of fiscal 2025, an increase of $64.6 million, or 19.4%, compared to $333.4 million for the third quarter of fiscal 2024.

The increase in net sales is primarily due to an increase in Bus unit bookings, Bus customer and product mix changes and cumulative Bus price increases, including an increase that was intended to mitigate the impact of increased procurement costs for certain of our imported inventory as a result of the imposition of tariffs beginning during the third quarter of fiscal 2025, as well as a small increase in Parts sales.

Bus sales increased $64.2 million, or 20.8%, reflecting a 14.7% increase in unit bookings and a 5.4% 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.

In the third quarter of fiscal 2025, 2,467 units booked compared to 2,151 units booked for the same period in fiscal 2024.

The increase in unit price for the third quarter of fiscal 2025 compared to the same period in fiscal 2024 was primarily due to customer and product mix changes as well as price increases implemented to offset increases in inventory costs.

Parts sales increased $0.4 million, or 1.7%, for the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024.

This increase is primarily attributed to price increases implemented to offset increases in inventory costs that were partially offset by slight variations due to product and channel mix.

Cost of goods sold .

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.

Total cost of goods sold was $312.1 million for the third quarter of fiscal 2025, an increase of $48.1 million, or 18.2%, compared to $264.0 million for the third quarter of fiscal 2024.

As a percentage of net sales, total cost of goods sold improved from 79.2% to 78.4%, primarily due to the impact of ongoing pricing actions taken by management that exceeded the impact of increasing costs resulting from inflationary pressures and the imposition of tariffs 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.

Bus segment cost of goods sold increased $47.5 million, or 18.9%, for the third quarter of fiscal 2025 compared to the same period in fiscal 2024.

The increase was primarily driven by the 14.7% increase in units booked discussed above as well as a 3.7% increase in the average cost of goods sold per unit for the third quarter of fiscal 2025 compared to the third 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 and the imposition of tariffs beginning during the third quarter of fiscal 2025, 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.

The $0.5 million, or 4.2%, increase in Parts segment cost of goods sold for the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024 was attributable to increased product costs due to inflationary pressures and tariffs, which were partially offset by slight variations due to product and channel mix.

Operating profit .

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.

Operating profit was $50.1 million for the third quarter of fiscal 2025, a increase of $10.3 million compared to operating profit of $39.7 million for the third quarter of fiscal 2024.

Profitability was positively impacted by an increase of $16.6 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.

However, it was negatively impacted by an increase of $6.2 million in selling, general and administrative expenses, primarily due to an increase in a) research and development expense in the third quarter of fiscal 2025 and b) labor costs.

Interest expense .

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.

Interest expense was $1.7 million for the third quarter of fiscal 2025, a decrease of $0.4 million, or 17.5%, compared to $2.1 million for the third quarter of fiscal 2024.

The decrease was primarily attributable to a decrease in the stated term loan interest rate from 7.2% at June 29, 2024 to 6.1% at June 28, 2025, as well as lower outstanding borrowings in the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024.

Other income (expense), net.

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 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.

Other expense, net was $0.6 million for the third quarter of fiscal 2025, a decrease of $2.1 million, or 78.7%, compared to $2.7 million of other expense, net for the same period in fiscal 2024.

During the third 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 May 23, 2024, eligible members of the United Steelworkers Union ("USW") voted to ratify a three-year collective bargaining agreement ("CBA") with Blue Bird Body Company ("BBBC"), a wholly-owned subsidiary of Blue Bird Corporation.

Among other items, the CBA requires the payment of a (i) lump-sum payment to certain employees who were not eligible for an annual wage increase because their hourly wage rate exceeded the rate required by the terms of the CBA as well as (ii) one-time $750 signing bonus to the approximate 1,500 covered production workers in our Fort Valley and Perry, Georgia facilities at the time the CBA was executed.

During the third quarters of both fiscal 2025 and 2024, the Company paid the above applicable amounts to those employees covered by the CBA as well as similar amounts to a small number of hourly employees not covered by the CBA so that their total compensation was competitive with that of unionized employees performing comparable job functions.

These payments totaled $1.1 million and $2.7 million for the three months ended June 28, 2025 and June 29, 2024, respectively, and were recorded in other expense, net because such compensation is not reflective of wages paid for services provided by the direct and indirect employees who support our operating activities and is expensed within cost of goods sold.

Income taxes .

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%.

Income tax expense was $12.4 million for the third quarter of fiscal 2025 compared to $9.9 million for the same period in fiscal 2024.

The effective tax rate for the three months ended June 28, 2025 was 25.1% 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 March 30, 2024 was 25.5% and differed from the statutory federal income tax rate of 21%.

The effective tax rate for the three months ended June 29, 2024 was 27.7% and differed from the statutory federal income tax rate of 21%.

Adjusted EBITDA .

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.

Adjusted EBITDA was $58.5 million, or 14.7% of net sales, for the third quarter of fiscal 2025, an increase of $10.2 million, or 21.2%, compared to $48.2 million, or 14.5% of net sales, for the third quarter of fiscal 2024.

The increase primarily relates to the increase in gross profit, when adjusting for the impact of expenses that are excluded in calculating Adjusted EBITDA, as outlined in the revenue and cost of goods sold discussions above that was partially offset by a smaller increase in selling, general and administrative expenses, when adjusting for the impact of expenses that are 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) March 29, 2025 March 30, 2024

(in thousands of dollars) June 28, 2025 June 29, 2024

Net income $ 36,455 $ 28,711

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Share-based compensation expense

Stockholder transaction costs — 1,933

Micro Bird Holdings, Inc.

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14.7 % 14.5 %

(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 $0.3 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

(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 within cost of goods sold or 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 June 28, 2025 and June 29, 2024, respectively, representing amortization charges on right-of-use lease assets, which are a component of lease expense and presented within cost of goods sold or selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

Consolidated Results of Operations for the Nine Months Ended June 28, 2025 and June 29, 2024:

Nine Months Ended

(in thousands of dollars) June 28, 2025 June 29, 2024

$ 1,070,734 $ 996,942

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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

(in thousands of dollars) Nine Months Ended

Net Sales by Segment June 28, 2025 June 29, 2024

$ 993,099 $ 919,433

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$ 217,099 $ 196,550

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.

Net sales were $1,070.7 million for the nine months ended June 28, 2025, an increase of $73.8 million, or 7.4%, compared to $996.9 million for the nine months ended June 29, 2024.

Bus sales increased $73.7 million, or 8.0%, reflecting a 5.5% increase in units booked and a 2.4% 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.

6,892 units booked in the nine months ended June 28, 2025 compared with 6,534 units booked during the same period in fiscal 2024.

The increase in unit price for the first nine months of fiscal 2025 compared to the same period in fiscal 2024 was primarily due to customer and product mix changes as well as price increases implemented to offset increases in inventory costs.

Parts sales increased $0.1 million, or 0.2%, for the nine months ended June 28, 2025 compared to the nine months ended June 29, 2024.

This small increase is primarily attributed to price increases implemented to offset increases in inventory costs that were partially offset by 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.

Total cost of goods sold was $853.6 million for the nine months ended June 28, 2025, an increase of $53.2 million, or 6.7%, compared to $800.4 million for the nine months ended June 29, 2024.

As a percentage of net sales, total cost of goods sold improved from 80.3% to 79.7%, primarily due to the impact of ongoing pricing actions taken by management that exceeded the impact of increasing costs resulting from inflationary pressures and the imposition of tariffs 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.

Bus segment cost of goods sold increased $53.1 million, or 7.0%, for the nine months ended June 28, 2025 compared to the nine months ended June 29, 2024.

The increase was primarily driven by the 5.5% increase in units booked discussed above as well as the 1.4% increase in the average cost of goods sold per unit in the nine months ended June 28, 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.

The $0.2 million, or 0.4%, increase in parts segment cost of goods sold for the nine months ended June 28, 2025 compared to the nine months ended June 29, 2024 was primarily attributable to increased product costs due to inflationary pressures and tariffs, which were partially offset by 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.

Operating profit was $116.8 million for the nine months ended June 28, 2025, an increase of $3.1 million compared to operating profit of $113.8 million for the nine months ended June 29, 2024.

Profitability was positively impacted by an increase of $20.5 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.

However, it was negatively impacted by an increase of $17.5 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, b) labor costs and c) research and development expense.

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.

Interest expense was $5.5 million for the nine months ended June 28, 2025, a decrease of $3.1 million, or 36.1%, compared to $8.6 million for the nine months ended June 29, 2024.

The decrease was primarily attributable to a decrease in the stated term loan interest rate from 7.2% at June 29, 2024 to 6.1% at June 28, 2025, as well as lower outstanding borrowings in the first nine months of fiscal 2025 compared to the first nine 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.

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 the first six months 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.

Other income, net was $2.8 million for the nine months ended June 28, 2025, an increase of $8.7 million, or 147.0%, compared to $5.9 million of other expense, net for the nine months ended June 29, 2024.

The Company recorded $1.3 million of net periodic pension income during the nine months ended June 28, 2025 when compared with $0.1 million of net periodic pension expense recorded during the nine months ended June 29, 2024.

Also, 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 the first nine months of fiscal 2024.

The proceeds from this sale were recorded in other income, net as this transaction is not indicative of our normal revenue generating activities.

Additionally, on May 23, 2024, eligible members of the USW voted to ratify a three-year CBA with BBBC.

These payments totaled $1.1 million and $2.7 million for the three and nine months ended June 28, 2025 and June 29, 2024, respectively, and were recorded in other expense, net because such compensation is not reflective of wages paid for services provided by the direct and indirect employees who support our operating activities and is expensed within cost of goods sold.

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

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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.

No such expense was incurred in the nine months ended June 28, 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%.

Income tax expense was $30.2 million for the nine months ended June 28, 2025 compared to $26.6 million for the nine months ended June 29, 2024.

The effective tax rate for the nine months ended June 28, 2025 was 25.5% 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%.

The effective tax rate for the nine months ended June 29, 2024 was 26.4% 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.

Adjusted EBITDA was $153.4 million, or 14.3% of net sales, for the nine months ended June 28, 2025, an increase of $11.8 million, or 8.4%, compared to $141.6 million, or 14.2% of net sales, for the nine months ended June 29, 2024.

The increase primarily relates to the a) increase in gross profit, when adjusting for the impact of expenses that are excluded in calculating Adjusted EBITDA, 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 expenses that are 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

Nine Months Ended

(in thousands of dollars) June 28, 2025 June 29, 2024

Net income $ 91,223 $ 80,884

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Depreciation, amortization and disposals (2)

12,858 12,253

Loss on debt refinancing

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Adjusted EBITDA margin (percentage of net sales) 14.3 % 14.2 %

(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

(1) Includes $0.2 million and $0.3 million for the nine months ended June 28, 2025 and June 29, 2024, respectively, representing interest expense on operating lease liabilities, which are a component of lease expense and presented within cost of goods sold or selling, general and administrative expenses on our Condensed Consolidated Statements of Operations.

(2) Includes $1.1 million and $1.3 million for the nine months ended June 28, 2025 and June 29, 2024, respectively, representing amortization charges on right-of-use lease assets, which are a component of lease expense and presented within cost of goods sold or 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 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.

At June 28, 2025, the Company had $173.1 million of available cash (net of outstanding checks) and $141.7 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.

Credit Agreement

On November 17, 2023 (the “Closing Date”), Blue Bird Body Company ("Borrower"), a wholly-owned subsidiary of Blue Bird Corporation, executed a $250.0 million five-year credit agreement with Bank of Montreal, acting as administrative agent and an issuing bank;

On November 17, 2023 (the “Closing Date”), BBBC ("Borrower") executed a $250.0 million five-year credit agreement with Bank of Montreal, acting as administrative agent and an issuing bank;

several joint lead arranger partners and issuing banks, including Bank of America;

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

At June 28, 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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The following table sets forth general information derived from our Condensed Consolidated Statements of Cash Flows:

Six Months Ended

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

Nine Months Ended

(in thousands of dollars) June 28, 2025 June 29, 2024

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

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Total cash provided by operating activities

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.

Cash flows provided by operating activities totaled $111.1 million for the nine months ended June 28, 2025, an increase of $55.3 million from the $55.8 million of cash flows provided by operating activities during the nine months ended June 29, 2024.

The increase primarily resulted from the effect of net changes in operating assets and liabilities that positively impacted operating cash flows by $62.7 million during the nine months ended June 28, 2025 when compared with the nine months ended June 29, 2024.

The primary drivers in this category were favorable changes in accounts receivable and accounts payable of $59.4 million and $17.3 million, respectively, that were partially offset by an unfavorable change in inventory of $14.0 million, as follows:

• A shift in our customer mix resulted in an increase in the accounts receivable balance towards the end of fiscal 2024, including at the end of the third quarter 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 nine months ended June 28, 2025, the accounts receivable balances relating to fiscal 2024 fleet revenue were collected, representing a significant cash inflow.

There were no similar significant collections of fiscal 2023 accounts receivable balances during the nine months ended June 29, 2024.

• There was an increase in accounts payable (a source of cash) and a larger net increase in inventory (a use of cash) during the nine months ended June 28, 2025 when compared with the nine months ended June 29, 2024.

These changes were driven by an increase in the volume of buses we are producing in fiscal 2025 when compared with fiscal 2024 as well as an increase in the cost of procuring inventory that is attributable to inflationary pressures resulting from ongoing supply chain disruptions and the imposition of tariffs beginning during the third quarter of fiscal 2025.

Finally, during the third 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 third quarter of fiscal 2024.

Total cash used in investing activities

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.

Cash flows used in investing activities totaled $19.1 million for the nine months ended June 28, 2025 as compared to $10.1 million for the nine months ended June 29, 2024.

The $8.9 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 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.

Cash flows used in financing activities totaled $46.7 million for the nine months ended June 28, 2025 as compared to $36.2 million for the nine months ended June 29, 2024, resulting in a $10.5 million increase between fiscal periods.

During the first nine months of fiscal 2025, the Company purchased $39.0 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 nine months ended June 28, 2025 when compared with the nine months ended June 29, 2024.

During the first nine 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 nine months ended June 29, 2024 with no similar activity in the nine months ended June 28, 2025.

Free cash flow

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

Six Months Ended

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

Nine Months Ended

(in thousands of dollars) June 28, 2025 June 29, 2024

Net cash provided by operating activities $ 111,096 $ 55,760

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$ 92,881 $ 45,623

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.

Free Cash Flow for the nine months ended June 28, 2025 was $47.3 million higher than for the nine months ended June 29, 2024 due to a $55.3 million increase in net cash provided by operating activities that was partially offset by an $8.1 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 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.

We had outstanding letters of credit totaling $8.3 million at June 28, 2025 that secure our a) self-insured workers compensation program and b) performance obligations relating to certain environmental matters, the collateral for both of which is regulated by the State of Georgia.

Quantitative and Qualitative Disclosures About Mar ket Risk.

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What changed 10-Q

Item 2. Management’s Discussion and Analysis