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8-K - 8-K - Blue Bird Corp | craig-hallumconferencepres.htm |
Blue Bird Corporation
(Nasdaq: BLBD)
Craig-Hallum Alpha Select Conference
New York
November 16, 2016
Important Disclaimers
Forward Looking Statements
This presentation includes forward-looking statements within the meaning of the “safe harbor” provisions of the Private
Securities Litigation Reform Act of 1995. These forward-looking statements relate to expectations for future financial
performance, business strategies or expectations for our business. Specifically, forward-looking statements include statements
in this press release regarding guidance, seasonality, product mix and gross profits and may include statements relating to:
Inherent limitations of internal controls impacting financial statements
Growth opportunities
Future profitability
Ability to expand market share
Customer demand for certain products
Economic conditions that could affect fuel costs, commodity costs, industry size and financial conditions of our dealers
and suppliers
Labor or other constraints on the Company’s ability to maintain a competitive cost structure
Volatility in the tax base and other funding sources that support the purchase of buses by our end customers
Lower or higher than anticipated market acceptance for our products
Other statements preceded by, followed by or that include the words “estimate,” “plan,” “project,” “forecast,” “intend,”
“expect,” “anticipate,” “believe,” “seek,” “target” or similar expressions
These forward-looking statements are based on information available as of the date of this presentation, 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. The
factors described above, as well as risk factors described in reports filed with the SEC by Hennessy Capital Acquisition Corp. or
Blue Bird Corporation (available at www.sec.gov), could cause our actual results to differ materially from estimates or
expectations reflected in such forward-looking statements.
2
Non-GAAP Financial Measures
This presentation includes the following non-GAAP financial measures: “Adjusted EBITDA,” “Adjusted Net Income,”
“Adjusted Diluted Earnings per Share,” “Free Cash Flow” and “Adjusted Free Cash Flow.” Adjusted EBITDA is
defined as net income prior to interest income, interest expense and other expense, net and income taxes, and
depreciation and amortization, as adjusted to add back certain charges recorded each year, such as stock-
compensation expense and transaction costs, as these expenses are not considered an indicator of ongoing
company performance. Adjusted Net Income is defined as Net Income, as adjusted to add back certain transaction
costs not considered an indicator of ongoing company performance. Adjusted Diluted Earnings per Share
represents adjusted income (loss) from continuing operations divided by diluted weighted average common shares
outstanding. Adjusted Net Income from continuing operations and Adjusted Diluted Earnings per Share are
calculated net of taxes. Free cash flow represents net cash provided by continuing operations minus cash paid for
fixed assets. Adjusted Free Cash Flow represents Free Cash Flow excluding cash paid for special compensation and
other business combination expenses.
There are limitations to using non-GAAP measures. Although Blue Bird believes that such measures may enhance
an evaluation of Blue Bird’s operating performance and cash flows, (i) other companies in Blue Bird’s industry may
define such measures differently than Blue Bird does and, as a result, they may not be comparable to similarly titled
measures used by other companies in Blue Bird’s industry and (ii) such measures may exclude certain financial
information that some may consider important in evaluating Blue Bird’s performance and cash flows. This
presentation includes schedules that reconcile Adjusted EBITDA, Adjusted Net Income and Adjusted Diluted
Earnings per Share to GAAP measures.
3
Important Disclaimers
Narrowing Guidance
We are confirming and narrowing our fiscal 2016 guidance to the
following ranges (in millions):
Revenue: $931-935 (midpoint $933)
Adj. EBITDA: $70-72 (midpoint $71)
Free Cash Flow: $32-34 (midpoint $33)
All 2016 dollar figures in this presentation represent the mid-point
of our narrowed guidance range
Out latest 2016 guidance as of 3Q was provided as follows:
Revenue: $930-950
Adj. EBITDA: $70-72
Free Cash Flow: $30-35
4
Agenda
5
This presentation includes forward-looking statements, including statements regarding full-year guidance and seasonality, that are subject to risks that could cause actual results to be materially
different. Those risks include, among others, matters we have noted in our latest earnings release and filings with the SEC. Blue Bird disclaims any obligation to update information in this
presentation. Additional information regarding forward-looking statements and the use of Non-GAAP financial measures is presented in the Appendix to this presentation.
Industry Overview
Blue Bird Overview
Product Focus
Financials
Future Growth & Profit Drivers
Why Invest
Q&A
6
Industry Overview
Industry Overview
School buses are an important part of America’s infrastructure
7
26 million students daily
represents just over 50%
of total enrollment
Average passengers per
bus is about 50
Conservative estimate is
that each bus replaces at
least 20 cars per day
(each way) or over 20
million trips per day
School buses ensure that
students have a reliable
and safe way to get to
school, every day
54%
46%
Enrolled Students
50% 50%
U.S. School Buses
Industry Overview
Large number of independent customers with 50% of buses and about 54% of
students in 10 key states
8
U.S. School Bus and Student Population
~10,000
School
Districts
~3,400
Contractors
School Bus Customers
Top 10 States
258K buses
27M students
105 students/bus
Texas
New York
Illinois
Florida
Ohio
Pennsylvania
California
Georgia
Indiana
North Carolina
Other States
260K buses
24M students
92 students/bus
Sources: R.L. Polk Vehicles in Operation, March 2016; NCES U.S. Public School
Enrollment Estimates for Fall 2016 as of September 2016
37,641
34,884
23,821
15,000
20,000
25,000
30,000
35,000
40,000
1985 1987 1989 1991 1993 1995 1997 1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
Historical Registrations Projected Registrations Historical Avg. ('85-'15)
Market Recovery
FY2016 tracking ahead of prior estimates; final result available mid December
9
Type C/D School Bus Recovery
Mean: 30,530
Source: Historical results are based on RL Polk vehicle registration data, and the estimated 2014-2016 periods are based on Blue Bird management’s forecast model, which takes into account RL Polk vehicle
registration data, population of school age children forecasts from the National Center for Education Statistics and bus ridership data collected and published by an industry magazine (School Transportation News)
FY2016E:
31,500
FY2020P:
33,800
Positive Outlook
Bus sales and house price index track closely; property taxes provide
majority of funds for school bus purchases
10
-
50
100
150
200
250
0
5
10
15
20
25
30
35
40
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015E 2016E 2017E 2018E
T
h
o
u
s
a
n
d
s
o
f
B
u
s
e
s
New Registrations (North America) HPI
Source: HPI data from CoreLogic, normalized to Jan of 2005
U.S. Property Tax Revenue Growth
New School Bus Registrations vs. CoreLogic Housing Price Index
9.4%
(9.2%)
(3.0%)
6.7%
2.6%
9.2%
(15)%
(10)%
(5)%
0%
5%
10%
15%
2010 2011 2012 2013 2014 2015
G
ro
w
th
Ra
te
Total Projected U.S. Enrollment
Student enrollment growing; supporting incremental demand
11
54,731 54,790
55,132
55,380
55,671
56,010
56,343
56,684
57,023
Fall 2015 2016 2017 2018 2019 2020 2021 2022 2023
(000’s of Enrolled Students)
Source: Enrollment data from NCES projections
2015 – 2023 Enrollment Growth of +2 Million Students
Market Share Growth
Substantial share growth since FY2010
12
23%
25%
27%
30% 30% 30%
31%
46%
44%
40%
36%
35%
38%
34%
31% 31%
33%
34%
35%
33%
35%
FY2010 FY2011 FY2012 FY2013 FY2014 FY2015 TTM
August
North American Type C & D School Bus Market
BB IC TH
Market Share
Bus focused dealers; strong
customer relationships
Upgrading dealers where
required
Reduced complexity and
substantial quality gains
Clear leader in alternative fuel
Propane growth since FY2012
brings conquest share
Gas bus introduced in late
FY2016 will drive growth
Other new products
introduced in FY2016 and
FY2017
Drivers
Source: R.L. Polk Registrations
FY2016E
31-32%
13
Blue Bird Overview
Blue Bird Highlights
14
Leading Brand With Focus on Innovation
Strong Free Cash Flow Generation and Liquidity
Experienced and Committed
Management Focused on Optimizing Business
Strong Distribution Model
First-Mover Advantage in High Growth Propane Segment
Favorable Industry Dynamics
Blue Bird FY2016 Highlights
We design, build, sell and service the world’s finest school bus
15
Launched second shift
Achieved 70 units-per-day production, up TBD units-per-day compared
with FY2012
First to market with gas-powered Type C offering
Commenced shipping in September, selling over 400 units in the
month
Very promising product – customer interest remains high
First to market with Cummins ISV V8 Diesel
Introduced Type C CNG
Introduced Eaton 7-speed transmission
Introduced Blue Bird Commercial vehicles
Blue Bird Alternative Fuels
Solid business with a track record of growing and delivering results
16
IC entered propane market in 2016
Offering: Power Solutions Inc. (PSI)
Thomas entered in 2015
Offering: Powertrain Integrators
(PTI)
Blue Bird maintains dominant share
of the business with superior
Ford/ROUSH offering
7,863
2,240
406 107
Diesel Propane Gas CNG
Diesel
74%
Propane
21%
Gas
4%
CNG
1%
FY2016 Units Sales
1,605
1,793
2,753
17% 17%
26%
10.0%
15.0%
20.0%
25.0%
30.0%
35.0%
40.0%
-
500
1,000
1,500
2,000
2,500
3,000
FY2014 FY2015 FY2016
Alt. Fuel Sales (Propane, CNG, Gas) % of Mix
Alternative Fuels Growth Competition
$522
$554
$730
$802
$862
$933
$44
$44
$46
$54
$57
6,525
6,882
8,654
9,604
10,378 10,616
6,000
7,000
8,000
9,000
10,000
11,000
12,000
13,000
14,000
15,000
$-
$100
$200
$300
$400
$500
$600
$700
$800
$900
$1,000
FY2011 FY2012 FY2013 FY2014 FY2015 FY2016G
Midpoint
Bus Net Sales Parts Net Sales Bus Units Sales
Track Record of Growing Sales
Delivering solid revenue growth
17
$566
$598
$777
$856
1 Total does not sum precisely due to rounding
1
($ in millions)
$919
$80 $81 $84
Memo ASP:
$84
($ in thousands)
$83
$87 $87 $90 $89 $89 Total:
Bus
Only:
$88
18
Product Focused
Product-Focused Company
Broadest product range with many exclusive features
19
Full Product Range
Type A Buses1
Diesel
Propane
Gas
Aftermarket
Parts
6% Net Sales
Specialty Buses
5% Net Sales
Diesel
Type C Buses
66% Net Sales
Diesel
Propane
Gas
CNG (FY2017)
Type D Buses
22% Net Sales
Diesel
CNG
1 Unconsolidated Joint Venture
Note: Based on FY2015 sales. Total does not sum precisely due to rounding
Positive Press on Propane Cost Savings
Propane prices have fallen more quickly than diesel since 2014 – down nearly 40%
20
-60%
-50%
-40%
-30%
-20%
-10%
0%
10%
20%
30%
40%
% Chan
g
e
S
in
c
e
J
a
n
2
0
1
4
% Change in National Avg. Fuel Prices
Gasoline Diesel Propane CNG
2014 2014 2015
“Broward County saves over
$600,000 with Blue Bird
propane-powered buses”
School Transportation News
August 14, 2015
“Washingtonville Central
School District maintenance
costs drop 30% with propane-
powered buses”
New York State
School Boards Association
April 27, 2015
“DeKalb County adds environmentally-friendly
propane school buses”
Propane is much cheaper (than diesel), at 89 cents a gallon
District hopes to transition all buses over to propane
News Channel 15 wane.com
August 4, 2015
Source: U.S. Energy Information Administration (EIA)
Launched Four New Powertrains
Industry leader in breadth of powertrain offerings
21
Lower acquisition cost than
Type D CNG-powered school
bus
Lower fuel and maintenance
cost than diesel
Environmentally friendly
Utilizes Ford’s modern 6.8L
V10 engine
Blue Bird exclusive
Blue Bird is the only
manufacturer to offer the
Cummins ISV 5.0L V8 diesel
in a school bus
Lower acquisition cost than
other diesel offerings
Improved fuel economy
Quietest diesel engine on the
road
Better serviceability
Blue Bird is the only
manufacturer to offer a Type C
gasoline-powered school bus
Lower acquisition cost than
other fuel types
Maintenance and service is
simpler for technicians
Strong cold-weather starting
capability
Utilizes Ford’s modern 6.8L
V10 gasoline engine
Blue Bird exclusive
First dual-clutch, seven-speed
automatic transmission
available for school buses in
North America
Electronic shifting provides
optimal fuel efficiency and
smooth, continuous delivery
of torque
Accelerates and optimizes
shift points
Adds features that make bus
easier to drive
Gasoline Engine V8 Diesel Engine
Dual-Clutch 7- Speed Transmission CNG Engine
Broadest Range of Product Offerings
Already receiving orders for the new gasoline-engine bus
22
Type C
Value
Cummins ISV Diesel
Ford/ROUSH Gasoline
Type C
Traditional
Cummins ISB Diesel
Type C
Alternative Fuel
Ford/ROUSH Propane
Type D Front Engine
Traditional
Cummins ISB Diesel
Type C
Alternative Fuel
Ford/ROUSH CNG
Type D Rear Engine
Traditional
Cummins ISB/ISL
Diesel
Type D Rear Engine
Alternative Fuel
Cummins ISL-G CNG
23
Financials
Impressive Profit Growth
Consistent improvement with 3-5 year target of 10% of revenue
24
($ in millions)
$14
$17
$50
$67
$70
2%
3%
6%
8% 8% 8%
0%
2%
4%
6%
8%
10%
12%
14%
$-
$10
$20
$30
$40
$50
$60
$70
$80
FY2011 FY2012 FY2013 FY2014 FY2015 FY2016G
Midpoint
Adjusted EBITDA Adjusted EBITDA Margin
$71
Strong Cash Flow Generation
Business generates strong free cash flow
25
$15
$12
$31
$59
$45
FY2011 FY2012 FY2013 FY2014 FY2015 FY2016G
Midpoint
Adjusted Free Cash Flow
$33
($ in millions)
1Adjusted for Business Combination and Special Compensation Payments in FY2014, FY2015 and FY2016G
1
Improving Net Debt, Leverage & Liquidity
Significantly below Net Leverage Ratio covenant; liquidity strong
26
1 Liquidity is defined as cash and cash equivalents plus availability on revolving line of credit
($ Millions)
As of
July 2, 2016
Debt $ 154.3
Cash 42.7
Net Debt $111.6
Net Debt / Adjusted EBITDA (LTM) 1.5x
Net Leverage Ratio
Compared with minimum bank Net Leverage Ratio covenant of 4.5x
1.7x
Liquidity1 $ 97.6
Very Seasonal Business
School districts generally prefer to take
delivery just prior to start of new school year
27
Oct. - Mar.
(First Half)
Apr. - Sep.
(Second Half)
Industry New School Bus Registrations
Based on 3-Year Average
FY2013-FY2015*
33%
67%
* RL Polk registration data
28
Future Growth & Profit Drivers
Future Growth & Profit Drivers
Roadmap to future EBITDA growth
29
Industry Volume Upside
Growing Student Enrollment & Improved Funding
New Markets & Products
International & Commercial Buses
Higher Operating Margins
Second Shift
Drive Productivity
Deliver Parts Growth
Market Share Growth
Increasing Alternative Fuel Penetration
Continuous Product Enhancements
Dealer Network Improvements
Future
Growth &
Profitability
Long-Term Financial
Objective:
EBITDA 10%
of Sales
30
Summary
Strong Outlook
Management team is focused on delivering results
31
Fundamentals are strong
Industry is growing
Positive outlook with growing student population
Increasing house prices provide funding growth
Growing interest in replacing old buses
Blue Bird Advantages
Acknowledged leader in propane
First to market with Gasoline Bus
First School Bus OEM with Cummins ISV diesel
First School Bus OEM with Eaton transmission
Focused on “Building the Better Bus”
Blue Bird Outlook
Sales and share growth in North America
Expand customer base in international and commercial markets
Aggressive Parts sales program
Continue to grow profits and maintain strong free cash flow
32
Q&A
33
Appendix
Blue Bird Alternative Fuels
Solid business with a track record of growing and delivering results
34
Iconic and Fastest Growing School Bus Brand
Bus sales volume (units) up more than 60% since 2010
North American market share of 30% in 2015 is up 7 percentage points since 2010
Undisputed Leader in Alternative Fuel-Powered Bus Sales
Sold ~6x more alternative-fuel buses than all competitors combined since 2010
Propane-powered buses is the fastest growing powertrain segment in market and Blue
Bird is the clear leader
Achieved double-digit sales growth of propane-powered buses in FY2015
Significant Upside Potential
Mid-stage of school bus industry rebound following trough in 2011
Big growth opportunity with propane-powered buses as less than 500 customers out of
over 10,000 have purchased propane to date
Significant momentum on product with focus on affordable and exclusive differentiation
Longer term opportunity to achieve more substantial international and commercial sales
Experienced and committed management team that delivers results
Blue Bird Key Facts
We design, build, sell and service the world’s finest school bus
35
Leading independent designer and manufacturer of school buses
Over 1,800 Employees
Fabrication and assembly plants in Fort Valley, GA
Service parts distribution center in Delaware, OH
Type A small bus joint venture in Drummondville, Quebec
Almost 90% of volume is sold through an exclusive dealer network
~250 service locations throughout the U.S. and Canada
Three Primary Brands in Market
Blue Bird
IC Bus (division of Navistar)
Thomas Built Bus (division of Freightliner)
Financial Snapshot
FY2015 total revenue was $919 million with Adjusted EBITDA of $70 million
Buses: 94% of revenue with 11%+ gross margin
Parts: 6% of revenue with 36%+ gross margin
Key Senior Executives
Years Experience
Name Position Key Prior Experience
Auto
Industry
Blue Bird
Phil Horlock President & Chief Executive Officer 38 7
Phil Tighe Chief Financial Officer 39 4
John Kwapis Chief Operating Officer 30 6
Tom Roberts Chief Administrative Officer 6 6
Mark Terry Chief Commercial Officer 37 8
Mike McCurdy VP HR & External Affairs 16 16
Paul Yousif VP Legal Affairs & Treasurer 15 9
36
Iconic History
37
2016
American Securities
becomes majority
shareholder
89 Years of Innovation
Customer View of Blue Bird
Blue Bird viewed as the leader in four of the five top attributes
38
Product Attributes
Ranked in Order of
Importance1
Blue
Bird
Competitor
A
Competitor
B
#1 Safety -- --
#2 Quality, Reliability and
Durability
-- --
#3 Operating Costs -- --
#4 Acquisition Cost -- --
#5 How the Bus Drives -- --
Source: Freedonia Custom Research, Inc. 9/4/2013 (study commissioned by Blue Bird)
1 Checkmarks/Corporate Logo indicate leadership in category
FY2015 Year-End Balance Sheet
39
FY2015 Income Statement
40
FY2015 Consolidated Statement of Cash Flows
41
FY2015 Cash Flow Reconciliations
42
Memo:
(in thousands of dollars) 2015 2014 2013 4Q2015
Net cash provided by continuing operations 23,495$ 37,412$ 35,981$ 55,129$
Cash paid for fixed assets (5,190) (5,535) (4,945) (1,763)
Free cash flow 18,305$ 31,877$ 31,036$ 53,366$
Cash paid for special compensation payment 13,788 24,679 - -
Cash paid for business combination expenses 12,545 2,326 - -
Adjusted free cash flow 44,638$ 58,882$ 31,036$ 53,366$
1Primarily funded by a $13.6 million capital contribution from our majority stockholder at the Business Combination
1
The following table sets forth the reconciliations of both Free Cash Flow and Adjusted Free
Cash Flow for fiscal years 2013, 2014 and 2015:
FY2015 Adjusted EBITDA Reconciliation
43
FY2015 Net Income to Adjusted Net Income
44
FY2015 Adjusted Non-GAAP Diluted EPS
45
FY2015 Segment Revenue and Gross Profit
46
FY2016 3Q Balance Sheet
47
FY2016 3Q Income Statement
48
FY2016 3Q Consolidated Statement of Cash Flows
49
FY2016 3QYTD Adjusted EBITDA
50
FY2016 3QYTD Free Cash Flow
51
52
END