Blue Bird Corp

Blue Bird Corporation operates as the leading independent designer and manufacturer of school buses, having sold over 619,000 buses since its inception in 1927. The company’s business is structured into two reportable segments: the Bus segment, which focuses on the design, engineering, manufacture, and sale of school buses and extended warranties, and the Parts segment, dedicated to the sale of replacement bus parts. The school bus industry in the U.S. and Canada, for Type C and Type D buses, has historically averaged approximately 30,500 unit sales annually between 1985 and 2025. Unit sales in 2025 are projected to be about 31,000 ¹, representing a 30.8% increase compared to 2024 ². The company’s management believes that the year-over-year fluctuations in 2024 sales were primarily due to an isolated challenge faced by a primary competitor, rather than a decrease in overall industry demand.

Blue Bird positions itself as a leader in the industry, particularly in alternative-powered school buses, which include propane, gasoline, and electric models. The company has deployed over 40,000 alternative fuel-powered school buses since 2012 ³. Its propane engine is 90% cleaner than current federal emission standards set by the U.S. EPA ⁴, and its near-zero-emission propane buses already exceed stricter standards taking effect in 2027. Blue Bird is also noted as the first major school bus manufacturer to market electric buses and believes it is the current leader in electric bus sales among major OEMs. The company has partnered with Cummins for electric vehicle offerings and delivered its 2,000th electric school bus in fiscal 2024. The company’s competitive strengths are derived from its reputation for safety, product quality, reliability, durability, drivability, and innovative product leadership, including industry firsts like the unique school bus chassis and the first OEM-manufactured propane-powered bus.

The core business model revolves around the manufacturing and sale of school buses and related parts. Revenue is generated primarily through sales to an extensive network of 44 U.S. and Canadian dealer locations, which are exclusive to Blue Bird for Type C and Type D school buses. Additionally, the company sells directly to major fleet operators, the U.S. government, state governments, and authorized dealers in certain limited foreign countries. Approximately 92.6% of buses sold in fiscal 2025 were through distributors and dealers ⁵. The company also generates recurring revenue from extended warranties, recognized on a straight-line basis over the contract period.

The Bus segment, the larger of the two, involves the design, engineering, manufacture, and sale of Type C, Type D, and specialty buses. In fiscal 2025, the Bus segment generated net sales of $1,377.125 million ⁶, an increase of 10.8% from fiscal 2024 ⁷. This segment sold 9,409 buses globally in fiscal 2025 ⁸, comprising 9,025 school buses and 384 Government Services Administration (GSA) buses ⁹. Type C school buses accounted for 82% of unit sales, and Type D school buses for 14% ¹⁰. The Blue Bird Micro Bird by Girardin Type A bus is produced through an unconsolidated Canadian joint venture, Micro Bird Holdings, Inc., and sold through Blue Bird’s dealer network.

The Parts segment focuses on the sale of replacement bus parts, contributing 7.0% of the company’s net sales in fiscal 2025 ¹¹. This segment generated net sales of $102.974 million in fiscal 2025 ¹², a slight decrease of 1.2% from fiscal 2024 ¹³. The company maintains a parts distribution center in Delaware, Ohio, and is linked to approximately 40 suppliers that ship directly to dealers and independent service centers.

For the fiscal year ended September 27, 2025, Blue Bird reported total net sales of $1,480.099 million ¹⁴, an increase of 9.9% from fiscal 2024 ¹⁵. Gross profit for fiscal 2025 was $303.513 million ¹⁶, resulting in a gross margin of 20.5% ¹⁷. Operating profit stood at $167.166 million ¹⁸, representing an operating margin of 11.3% ¹⁹. Net income for fiscal 2025 was $127.720 million ²⁰. Basic earnings per share were $4.01 ²¹, and diluted earnings per share were $3.88 ²². Cash and cash equivalents at year-end were $229.313 million ²³. The company had long-term debt of $85.324 million ²⁴ and a current portion of long-term debt of $5.000 million ²⁵, resulting in total debt of $90.324 million ²⁶. Free cash flow for fiscal 2025 was $153.342 million ²⁷.

Comparing fiscal 2025 to fiscal 2024, net sales increased by $132.9 million ²⁸, or 9.9% ²⁹. Bus sales increased by $134.2 million, or 10.8% ³⁰, driven by a 4.5% increase in units booked and a 6.0% increase in average sales price per unit ³¹. Parts sales decreased by $1.3 million, or 1.2% ³². Gross profit increased by $47.4 million ³³, and the gross margin improved from 19.0% in fiscal 2024 to 20.5% in fiscal 2025 ³⁴. Operating profit increased by $27.8 million, or 20.0% ³⁵. Net income increased by $22.2 million ³⁶, or 21.0% ³⁷. Interest expense decreased by $3.4 million, or 31.9% ³⁸, due to a lower stated term loan interest rate (6.1% in fiscal 2025 vs. 6.9% in fiscal 2024) and lower outstanding borrowings ³⁹.

During fiscal 2024, Blue Bird announced and began implementing comprehensive safety upgrades, including three-point seat belts as standard for all student passengers starting in Q1 fiscal 2025, and the introduction of 4Front, a steering wheel-deployed airbag, starting in Q1 fiscal 2026 ⁴⁰. The company also plans to implement high-intensity LED lighting, high-resolution cameras, lighted stop arms, lighted school bus signs, strobe lights, and collision mitigation systems. In fiscal 2023, the Electric Vehicle Build-up Center, a 40,000 square foot facility, was opened at the Fort Valley, Georgia plant to meet increasing demand for electric school buses ⁴¹. In fiscal 2024, the U.S. Department of Energy (DOE) Office of Manufacturing and Energy Supply Chains (MESC) selected Blue Bird to receive an approximate $80 million grant to convert a former manufacturing site into a new facility for all powertrains, including electric and low-emissions vehicles ⁴². This grant originally represented approximately 50% of the total approximate $160 million investment ⁴³. Negotiations concluded at the end of calendar year 2024, but a review by the new presidential administration is ongoing. Blue Bird has updated its plans to increase its own investment in the project to expand the facility and capabilities. In December 2023, the company established a joint venture, Clean Bus Solutions, LLC (CBS), with GC Mobility Investments I, LLC (a subsidiary of Generate Capital, PBC), to provide a fleet-as-a-service (FaaS) offering using electric school buses ⁴⁴. The company and Generate Capital each committed to contribute up to $10.0 million for common interests and up to an additional $100.0 million for preferred interests to fund FaaS projects ⁴⁵. In the fourth quarter of fiscal 2025, Blue Bird recorded a non-cash impairment charge of $7.4 million ⁴⁶ for its equity investment in CBS due to historical and projected future losses.

Management believes that Type C and Type D school bus registrations will return to pre-pandemic levels (2016-2019) once supply chain constraints are fully addressed. The company’s models indicate that the industry has been operating below its historical long-term average of approximately 30,500 unit sales per year ⁴⁷ since the pandemic, and there are over 145,000 buses in U.S. and Canadian fleets that have been in service for 15 or more years ⁴⁸. The forecast for continued appreciation in housing prices is uncertain, but challenges are not expected to significantly affect property tax receipts in the near term due to a lag in tax authorities reflecting declining home prices, and school transportation budgets are expected to benefit from larger municipal spending budgets.

Growth is expected to be driven by the company’s leadership in alternative power options and external funding programs. The EPA’s Clean School Bus Program (CSBP) provided $5 billion in funding over five years ⁴⁹ for zero-emission and low-emission models, with $2.5 billion allocated solely for electric buses ⁵⁰ and the remaining $2.5 billion for low and zero-emission buses, including propane or electric ⁵¹. In October 2022, approximately $965 million was awarded in the first round of CSBP funding ⁵², with Blue Bird receiving orders for over 500 school buses ⁵³. The second round in January 2024 awarded nearly $1 billion for approximately 2,700 clean school buses, over 95% electric ⁵⁴, with Blue Bird receiving over 440 orders ⁵⁵. The third round in May 2024 awarded over $800 million for over 3,200 zero- and low-emission school buses, approximately 88% electric ⁵⁶, with Blue Bird receiving over 490 orders ⁵⁷. An additional $965 million was announced for a fourth round in September 2024 ⁵⁸, with award recipients expected in May 2025, though its status is uncertain due to a new presidential administration review. The Clean Heavy Duty Vehicle Program, funded through the Infrastructure Investment and Jobs Act (IIJA), announced over $380 million in funding for over 1,275 electric school buses in January 2025 ⁵⁹, from which Blue Bird has received over 50 orders ⁶⁰. State-level funding, such as California’s $375 million for zero-emission school buses and $125 million for infrastructure ⁶¹, and New York’s $500 million for electric school buses and charging infrastructure ⁶², also supports growth. The Inflation Reduction Act (IRA) authorized up to $40,000 in tax credits for zero-emission commercial vehicles (expired September 2025) ⁶³, up to $100,000 for heavy-duty charging infrastructure ⁶⁴, and $2 billion for grants to support electric and fuel cell manufacturing ⁶⁵.

The company’s operational outlook includes ongoing improvements in manufacturing operations and periodic pricing actions to offset increased inventory costs. The finalization of the union contract in May 2024 increased labor costs for covered production and supply chain employees. The company is strategically acquiring larger quantities of certain critical components with longer lead times to mitigate future production schedule impacts. The DOE MESC grant, finalized at the end of calendar year 2024, for approximately $80 million ⁶⁶ to convert a former manufacturing site into a new facility for all powertrains, is under review by the new presidential administration. However, Blue Bird has increased its own investment in the project to expand the facility and capabilities for producing buses with all powertrains.

Planned capital allocation includes continued investment in fixed assets, as increased profitability has allowed for more capital spending. The company has two share repurchase programs authorized: one for up to $60 million of common stock expiring January 31, 2026 ⁶⁷, and a second for up to $100 million expiring January 1, 2028 ⁶⁸. As of September 27, 2025, the total remaining authorization for future common stock repurchases was $110.5 million ⁶⁹. The company does not expect to pay cash dividends on its common stock in the foreseeable future, intending to retain earnings for business operations.

Management believes that supply chain disruptions, including those from current or future military conflicts, could continue in future periods and materially impact results if the company is unable to obtain sufficient parts and supplies or pass rising costs to customers. Changes in trade policies and tariffs began to materially impact procurement costs for certain imported inventory during the second half of fiscal 2025, though this was offset by sales price increases. Such impacts could affect future operating results and cash flows if mitigation efforts are unsuccessful. The deferral of funds from governmental grants, subsidies, and other incentives for alternative-powered school buses impacted the mix of buses produced and sold during the first nine months of fiscal 2025, with production deferred to subsequent periods.

The company faces material risks from ongoing supply chain disruptions, exacerbated by public health crises and military conflicts, which could lead to shortages of critical components, increased costs, and an inability to meet customer demand. Reliance on single-source suppliers for key components like engines, transmissions, and axles creates significant leverage for these suppliers and potential for costly delays or interruptions if supply is limited or reduced. General economic conditions, including housing prices, property tax levels, and municipal budgets, significantly impact demand for school buses, and a deterioration could lead to fewer orders, lower revenues, and reduced profitability. Fixed-price sales contracts without adequate price escalation clauses expose the company to reduced gross profits or losses if costs increase, particularly for raw materials like steel, rubber, aluminum, and copper, which are generally not hedged. New or changed environmental, health, and safety regulations, including GHG emission requirements, could increase costs for product development, testing, and manufacturing. Safety or durability incidents could harm the company's brand and reputation, leading to lost sales and potential product liability claims or recalls, which may not be fully covered by insurance. The company's manufacturing and distribution operations are vulnerable to disruptions from equipment failures, natural disasters, labor disputes, or cybersecurity attacks, potentially leading to unfulfilled orders and substantial capital expenditures. Disputes with the United Steel, Paper and Forestry, Rubber, Manufacturing, Energy, Allied & Industrial Service Workers International Union (USW), which represents over 1,580 employees ⁷⁰, could disrupt production and increase labor costs. Rationalization or restructuring of manufacturing facilities, including plant expansions and system upgrades, may cause temporary production capacity constraints and inventory fluctuations. The company is initiating the termination of its defined benefit pension plan in fiscal 2026, which could require significant funding due to factors like decreasing interest rates or inadequate investment returns, and will result in a material impact on profitability and financial position as deferred losses are recognized. The company's current or future indebtedness, including a $100.0 million Term Loan Facility ⁷¹ and a $150.0 million Revolving Credit Facility ⁷², imposes financial covenants (e.g., TNLR not greater than 3.00:1.00 ⁷³ and fixed charge coverage ratio not less than 1.20:1.00 ⁷⁴) that, if breached, could lead to accelerated debt repayment and adverse effects on liquidity. Changes in governmental grants, subsidies, or incentives for alternative-powered school buses could negatively impact sales of these products. The company's reliance on trade secrets, rather than patents, for competitive advantage means that unenforceability of non-disclosure agreements or independent discovery by competitors could harm its business. Foreign currency exchange rate changes could adversely affect foreign customers' purchasing ability and the company's financial results, particularly for Canadian Dollar transactions. The Micro Bird joint venture, which the company does not control, may not align with Blue Bird's exclusive benefit. The inability to attract and retain key personnel, especially manufacturing personnel, sales professionals, and engineers, could adversely affect operations.

Management's message to shareholders emphasizes Blue Bird's position as the leading independent designer and manufacturer of school buses, highlighting its iconic American brand and dedication to school bus innovation, safety, product quality, reliability, durability, efficiency, and lower operating costs. A key strategic priority is leadership in alternative-powered product offerings, including propane, gasoline, and all-electric school buses, which management believes will continue to capture market share as customers realize total cost of ownership benefits and green technology adoption grows. Management also stresses the importance of product, process, and manufacturing initiatives, such as the comprehensive safety upgrades including three-point seat belts as standard starting in Q1 fiscal 2025 and the 4Front steering wheel-deployed airbag in Q1 fiscal 2026, which are aligned with long-term objectives. Furthermore, management is focused on navigating supply chain challenges through ongoing improvements in manufacturing operations and periodic pricing actions to ensure that increased sales prices keep pace with rising inventory procurement costs, as demonstrated by the company's ability to consistently produce buses and report improved gross profit and gross margin in fiscal 2025 compared to fiscal 2024.