Blue Bird Corporation (BLBD) Q2 2016 Earnings Report, Transcript and Summary

Greetings, and welcome to the Blue Bird Corporation Second Quarter Fiscal Year 2016 Earnings Conference Call and webcast. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Mr. Jeff Merten. Thank you, you may begin.

Thank you, Darren. Welcome to Blue Bird's Fiscal Second Quarter 2016 Earnings Conference Call. The audio for our call is webcast live on blue-bird.com under the Investor Relations tab. You can access the supporting slides on our website by clicking on the presentations box on the Investor Relations landing page of our website. Our comments today include forward-looking statements that are subject to risks that could cause actual results to be materially different. Those risks include, among others, matters we have noted in our latest earnings release and filings with the SEC. Blue Bird disclaims any obligation to update the information in this call. This afternoon, you will hear from: Blue Bird's President and Chief Executive Officer, Phil Horlock; and Chief Financial Officer, Phil Tighe. Then we will take some questions. So let's get started. Phil?

Well, thanks, Jeff. Good afternoon, and thank you, all, joining us today for our second quarter earnings call. We welcome this opportunity to take you through our latest quarter results. But first, I'd like to start by giving a sense of the winning culture we are building at Blue Bird, and importantly, what we stand for at Blue Bird. So let's turn to Slide 4. We start with our experienced school bus team, where our employees have an average of 14 years of employment with us. In fact, when you exclude the new employees we've hired over the last 3 years, our average tenure is almost 20 years. That's best in industry experience in making school buses. We constantly challenge ourselves to drive the business forward and seize opportunities to improve and win in the market, while demanding innovation throughout all activities to provide Blue Bird with competitive advantages that customers want and they value. And we reward these behaviors through our management compensation process. The fact that we have the broadest array of products with many features that are exclusive to us in the industry and have been the fastest growing school bus company over the past few years are outcomes are the winning culture we are building. What we stand for is straightforward: to design, build, sell and service the world's finest school bus. Unique among the school -- the major school bus OEMs, we're exclusively focused on the school bus business, from our purpose-built chassis and body designs and right through our dealer network. This focus resonates with our customers, where in a recent blind survey that we commissioned, Transportation Direct has ranked Blue Bird #1 in our 4 priorities: safety, quality, durability and serviceability. We are proud of that fact, and we'll continue to have drive to win in the marketplace. So let's now look at our second quarter highlights on Slide 5. It's been an eventful second quarter at Blue Bird with a lot of positives. Our net sales were about 4% above last year. And although not shown on this slide, our unit sales of 2,132 buses in the second quarter were 2% higher than a year ago, and importantly, more than 50% higher than our sales in the first quarter. Our propane bus momentum continues to be very strong, with unit sales up 20% from the same period last year. And through the first half of the year, our propane bus unit sales were up a substantial 46% from a year ago. Now we'll be discussing our propane performance in a little more detail a bit later. We're continuing to see strong quarter activities through our dealer network, providing us with a solid pipeline of potential future orders, had a successful bid confirmed into a firm order in a matter of days or several months later, as school board released funds for bus purchases to support school start. Because of our strong pipeline, I can tell you now that our third quarter production slots are completely filled with firm, noncancelable orders, covering the period April through June, and unit sales will be about 20% above last year's third quarter. Now to support our expected second half surge in volume and to align our production capacity with a seasonal customer demand, we successfully launched our second shift this past quarter. We'll be hiring about 200 full-time associates this year, and today, we are scheduling and building 64 buses a day compared with our peak capacity last year of 42 buses a day. We'll continue to ramp up our capacity, and we'll reach 70 buses a day by the end of June, ensuring we can meet the important school start dates for new bus deliveries. We're committed to providing innovative and differentiated products that customers want and value. And to this end, we're progressing toward the launch of 4 exciting and brand-new powertrains this year. We are the first and only manufacturer to operate a gasoline-powered bus in the large school bus segment, and I'll cover this in more detail later. Our all new CNG-powered Blue Bird Vision bus provides a lower priced Type C bus option to go with today's CNG-powered Type C bus option. Both of these engines are from our exclusive partnership with Ford and ROUSH CleanTech, deploying Ford’s modern 6.8-liter V10 engine, and fuel systems developed uniquely by the ROUSH team, just for us. In fact, along with our class-leading propane offering, we will have 3 distinct powertrains using the same Ford engine and transmission architecture. Now this is great news for the mechanics and service techs who work on those engines. Next, we'll be first to market with Cummins' all new 5 liter V8 diesel, which is a new, lighter-weight engine offered at a lower acquisition price than any other diesel option, while delivering a pure -- improved fuel economy. Last, our new Eaton Procision Transmission option will be available on most diesel engines this year and is the first dual clutch, 7-speed automatic available on school buses in North America. It provides efficient acceleration, optimized shift points and improved fuel economy and a host of features that make the bus easy to drive. To showcase these and other new products and features, we held 2 live and drive events in Dallas and Nashville this past quarter, with all of our dealers and many of the customers in attendance. I can tell you the responses were outstanding, and there's real excitement about these all-new product set in the marketplace. On the personnel front, we brought onboard a new Chief Commercial Officer this month. Mark Terry joined us from our Dealer of the Year winner, Yancey Bus Sales of Georgia, where he was a General Manager, bringing great dealer experience into the Blue Bird family. Mark also has extensive experience at Caterpillar and is a great add to our Blue Bird leadership team. Dale Wendell has been running our sales and marketing activities for the past 5 years, and will be retiring end of this month. We wish Dale all the best in the future, and thank him for his drive and key accomplishments in growing Blue Bird sales in each of the past 5 years. Thanks, Dale, for a great job done. So it was a busy and eventful second quarter for Blue Bird. And with solid financial results in line with our expectations, our third quarter production slots filled and a strong pipeline for new orders, we are reaffirming our full year guidance for sales, profitability and free cash flow. So let's now take a closer look at our second quarter financial results on Slide 6. Second quarter net sales of $191.2 million was $8.2 million or 4% higher than the same period last year, and both booked sales and parts sales grew by about 4% in the second quarter. At $10.1 million, we recorded a solid adjusted EBITDA, which is slightly up higher than a year ago, and included higher engineering and support costs required to deliver our new powertrain initiatives. Through the first half of the year, net sales are down about 7.5%, as we've seen customers continue to shift order timing and bus deliveries to later in the year. Now a 20% growth in firm production orders in hand for the third quarter is evidence of this shift in order timing, and we are well positioned from a production capacity standpoint to accommodate customers’ second half needs and ensure our buses are delivered in time to meet school start. Turning now to Slide 7, let's take a closer look at our propane bus sales performance. Blue Bird's propane-powered Vision bus continues to be our #1 product differentiator in the marketplace, and we are the undisputed sales leader with 9x more propane buses registered and on the road today than all of our competitors combined. Now that's leadership. Our propane Vision bus also registers the highest owner loyalty in the industry. Our first half propane bus unit sales were up a substantial 46% compared with last year. And year-to-date, more than 40% of our customers are new to propane. Furthermore, 18% of our unit sales in the first half were propane buses, up from 11% mix last year. These are significant results that we're very pleased with. The advantages of propane over other fuels are clearly understood, and market sectors is growing, as customer testimonials confirm the total cost of ownership and other key benefits. As a reminder, our proven, modern efficient propane engine is exclusive to Blue Bird, and developed and supported by our partnership with Ford and ROUSH CleanTech. At Blue Bird, we believe in being first to market with differentiated products, and where we can, we strive for exclusivity. And our propane success is a great example of this. So let's now turn to Slide 8 to look at another great example of an exclusive and innovative new product launching in fiscal '16 that’s important to our continued growth. We are the first and only manufacturer to offer gasoline-powered bus in the large school bus segment. Mechanics and technicians understand gasoline engines. They're simpler to maintain, servicing costs are lower and they perform exceptionally well in cold climate conditions. As I mentioned earlier, this bus will utilize the same proven engine transmission used in our propane-powered bus and is another product from our exclusive partnership with Ford and ROUSH CleanTech. The bus will be a great choice for customers who want the lowest acquisition price of any fuel type and simpler maintenance for their technicians. We've had terrific interest from customers since we announced this engine is coming in 2016. Incoming orders are strong, and we'll begin shipping buses to customers in our fiscal fourth quarter, again in time to meet school start. We're excited about the growth potential for our gasoline-powered bus, which builds on the success we've achieved with our propane products. Now I'm going to turn it over to Phil Tighe, who'll cover our financial results. Phil?

Thank you, Phil. And good afternoon, everyone. It's my pleasure to present to you the fiscal year's 2016 second quarter results for Blue Bird Corporation. Please remember that our fiscal year for Blue Bird Corporation is a 52-53 week period, and the closing date for each quarter is the Saturday closest to the last calendar day of each quarter. The second quarter material that we are discussing today is based on a close of April 4, 2015 for the 2015 fiscal year and April 2, 2016 for the fiscal year 2016 period. If we can go to Slide #10. We added this slide to the deck to try and show you some of what's occurring on a quarter-by-quarter basis. It's a pretty simple graphic and shows you the ramp up in unit volume revenues, EBITDA and net income between the first quarter and the second quarter. As you can see, all of these 4 majors are substantially positive. Our unit volume up by about 51%, revenue up by about 46%, adjusted EBITDA was up by over 90% and net income of $1.4 million compared to a loss of $2.3 million in the first quarter. So this is further evidence of the impact of seasonality in our business. It's also evidence of the momentum going from first into second, and that momentum will grow as we move into the third and fourth quarters, which as we've explained previously, are the quarters when we generally make the majority of the money in Blue Bird. Moving to Slide 11. This slide looks at the second quarter results versus the prior year. I -- we believe the results are very encouraging. Phil Horlock has mentioned some of these, so I won't spend a lot of time repeating the data, but I'll point out a number of facts you might find useful. We've already talked about the volumes and the fact that third quarter is full. We're also now rapidly filling the fourth quarter. Revenue of $191.2 million is up by about 4.5%, that's due to both volume and an improvement of about 2.6% in bus -- in per-unit revenues on our buses. Gross margin of 13.1% is about 50 basis points better than the second quarter of last year. And as you look through the 10-Q that's been filed today, you will see margins by segment, and that second quarter bus margins are about 60 basis points higher than second quarter last year, and this is basically due to a higher mix of propane, as Phil mentioned. It's also due to a better customer mix and lower material costs. With respect to the EBITDA, we'll talk about the causal factors for the change in EBITDA on the next slide. Net income, clearly a big improvement. I would point out to you that net income in the second quarter last year did include a substantial amount of money for business combination and special compensation payments. And finally, cash is better than the same period last year, and importantly, debt is considerably lower than the same period last year. So if we can move to Slide 12, which is the bridge, which walks us from quarter 2 of 2015 to quarter 2 of 2016. The first item I'll talk about is cost reductions, the net cost reductions of about $1.6 million or about $750 a bus. While our material costs more than account for the cost reductions, Phil mentioned that during the second quarter, we launched the second shift in our assembly plant to -- it was a fairly slow ramp-up, so that we could be ready with high quality for the peak production period in third quarter and leading into the fourth quarter. That launch cost us about $800,000. So we -- our other savings were a bit higher than the $1.6 million given that we covered off the launch in the second quarter. Our volume and mix was positive by about $1.1 million. About $300,000 of that was due to volume, the balance was due to a higher mix of propane and favorable customer mix. Other includes, obviously, the higher costs for both product and launch activities associated with our new initiatives. Phil has talked to you about the powertrain upgrades. I'll hasten to point out that none of those products are earning revenue for us at this point in time. The first one that will come in will be the Cummins ISB and then the Eaton Transmission in the third quarter. And then as Phil said, in the fourth quarter, we will have sales of the gasoline engine and we are receiving quite a lot of orders for that. So that will improve our revenues in the third and fourth quarters and help offset some of the costs that we're incurring as we get ready to launch these important initiatives in Blue Bird. If we move to Slide 13. This is a look at free cash flow. You can see that we are, on a bottom line basis, positive free cash flow for the second quarter of 2016 of almost $26 million. Substantial improvement versus the same period last year of negative $11.4 million, although again, I would point out if you look at that, we had the special compensation payment, and we had the business combination expenses. So on an adjusted basis, free cash flow in '15 would have been $14 million positive, still lower than the adjusted cash flow that we have achieved in the second quarter of this year. So I think, all in all, good performance in cash flow, and we'll continue to generate cash through the balance of this year. Finally, for me, Slide 14 takes a look at our net debt leverage and liquidity. Debt was $182.7 million, net debt was $154 million after accounting for cash of about $28.6 million. Importantly, our net leverage ratio was 2.3x, which was substantially below our covenant of 4.5x, and liquidity stood at $83.5 million. So all in all, better than the covenant and strong liquidity. So we feel like we're in good shape with respect to this. So I will now pass you back to Phil to discuss the outlook for '16 and to wrap up before we go into our Q&A period. Phil?

Okay. Thanks, Phil. So what I want to do now is focus on the balance of the year and our full year guidance. So let's turn to Slide 16. The new bus registration data provided by R. L. Polk, which you've seen before in this chart, illustrates seasonality of the school bus business, and the chart on the right fully shows that. As I discussed in prior earnings calls, this seasonality is driven by the buying pattern of school districts. And traditionally, they emphasize delivery and preparation of new buses for the start of the new school year and by release of municipal budgets as well to fund them. Usually this happens in the May through July period. Obviously, it's a much higher demand in the second half of our fiscal year of April through September, causing about 2/3 of our annual vehicle registrations to occur in the second half. This is what we've seen year after year in our industry. Now as I mentioned earlier, we've taken steps to add capacity in the second half of the year to ensure that we can better accommodate the delivery needs of our customers, and we are well positioned to handle the anticipated surge in orders and to meet school start. From a sales standpoint at Blue Bird, we are maintaining our forecast through this sales projection of between 10,800 to 11,000 buses for the full year, and with first half sales of 3,540 buses already behind us, we do closely monitor seasonality of industry registrations. You can see that when you just calculate about 33% of our volume was booked in the first half of the year. So let's now take a look at our full year guidance and turn to Slide 17. Our second quarter financial results were in line with our plan, and we are reaffirming the full year guidance we provided in our earnings call in December. First, net sales revenue between $960 million to $985 million, representing an increase of 4% to 7% over the prior year; adjusted EBITDA between $72 million to $75 million, a $2 million to $5 million increase over fiscal 2015 or about a 3% to 7% growth; and free cash flow ranging from $30 million to $35 million. Now while strong as a percentage of adjusted EBITDA, this free cash flow number is down from fiscal 2015 as we are choosing to increase our investment in new products, infrastructure upgrades and growth initiatives, and importantly, we're paying more taxes in fiscal 2016. So let me now turn to wrap up on Slide 18. We have a solid result in the second quarter, with volume, net sales, gross margin, profitability and free cash flow all above last year's levels. Our results support our guidance as we expect significant growth in the second half supported by our production ramp-up through the year with addition of a second shift. Our seasonal sales pattern will match typical customer demand timing, as evidenced by our third quarter production schedule being full, and importantly, about 20% higher than last year's third quarter. Our propane leadership position continues to be strong, with a substantially higher mix of propane sales in the first half of this year, where our unit propane bus sales were up some 46% from a year ago. And we're on track to deliver 4 all-new powertrains this year, providing our customers with the broadest array of products in the industry, and our gasoline bus orders are off to a really nice start. Quote activity is well ahead of last year's levels, which bodes well for sales growth in the second half, and consequently, we are reaffirming our full year guidance. Well, that concludes our formal presentation, I'm now I'm going to pass it back to our moderator, Darren, to begin the Q&A session. Over to you, Darren.

[Operator Instructions] Our first question comes from Eric Stine with Craig-Hallum.

I was hoping to start with propane. I believe -- I just wanted to confirm, but did you say that 40% of the mix in the quarter was to new customers? I guess, confirm that first.

Yes, 40% of our sales went to new customers in the quarter, yes.

Okay. And then, maybe could you just focus on repeat customers? Just curious what you're seeing there. I mean, when you look at those customers, do you feel that it is now part of regular buying patterns of those customers, where they go propane and they're very hesitant to do anything with diesel? Or do you still feel like it's more of people dipping their toe in the water and testing a little bit more here and there, but that they have yet to really go full out on propane?

Well, I think that existing customers, Eric, we're definitely seeing folks very loyal to propane. I mentioned that in, I think, in my presentation that it's the highest loyalty product we have. It's substantially higher than -- loyalty than diesel. What I mean by that is, once a customer tries propane, invariably, they want to stick with it, and that's a very high percentage. So we've seen a lot of the higher volume business coming from new -- from our existing customer base. But we're also seeing in all the, the less than 10 units sort of levels of volume being acquired by new customers, and we like that, smaller volume. But certainly, we're seeing a very -- it's a very sticky business the way we look at it, very loyal customers for propane. It's been great for us.

When you -- maybe just turning to gasoline. When you look at gasoline, and I know that your propane launch goes back, what's, it's been 8 years, something like that.

Yes, yes.

I mean, are there any similarities that you see that maybe guide you because, I've heard the same thing in terms of the demand for the gasoline offerings coming here in fourth quarter. Any lessons you've learned or expectations you have for gasoline, given what you learned with propane?

Yes, I think, we've learned you have to go out and educate your customer base on what's it all about. Explain why we're doing it, what the advantages are, very clearly. I mean in this case, the tremendous gasoline advantage, it'll be the lowest-priced bus that we offer. It's simpler, it's a simpler product, simple to maintain. I think I would say, compared to obviously with propane, I mean, I wish everyone who operates a gasoline vehicle has had them in their own homes, so they're used to gasoline. It's not a difficult sell. It's easy to cool. When you take a long field trip with those school buses, I can easily fill up with gasoline, it's no issue. So, I think, it's certainly, what we've seen is, people get it very quickly. I also think, though, I've said, because we've seen the -- the fact that we have so much success with propane using the Ford engine and the Ford transmission, and when we point out the gasoline engine uses the same engine, the same transmission, the same partnership, the same support, it's a great product for us and an easy sell to many of our customers.

Got it. And is it fair to say that when you think of sales there, that gasoline likely takes away from diesel sales, but rather than propane, or is there...

Yes -- no, I do believe so. I mean, look, I've said all along that propane, in my opinion, is perfect in this industry, it is the lowest operating cost product in the business. We look over the life cycle, it's the most efficient. But gasoline is also very simple and very easy, and I think we are seeing a lot of folks who are -- who have had their own issues with diesel, regeneration of the diesel engine, the things -- the emissions hardware, the complexity of diesel engines, gasoline is a real simple product to get your arms around, and technicians are certainly looking forward to seeing that in the marketplace. So we feel pretty good about it.

Got it. Maybe just a last one for me. Just great you've got the visibility you do into the second half, and that the second shift’s coming on. Can you just remind us what you think that second shift means for your gross margins on the product side?

Well we haven't really publicly given that data yet. I mean, I certainly think from that standpoint of gross margin, I think, it's -- when we talk about gross margin, we mean about what comes out of the plant productions levels of gross margin. I think we look at this as being very comparable to what we saw whether operating on one shift, we pay a little bit of a shift premium, it's not that much, but at the same time, we will make a great use of our plant, and we're making great use of our labor force, our indirect labor, our plant facility, so I think we certainly see it as moving into a second shift that we're able to really get a nice, very effective gross margin contribution is the way to look at it. Obviously, we aren’t putting the same level of fixed costs in, that we got to support our first shift, so I think we feel a little bit good moving forward.

Our next question comes from Mike Baudendistel of Stifel.

Just wanted to ask you. You mentioned that ASP was up 2.6% in the quarter, and you attribute that to product mix changes. Wonder if you could tell us what it is on sort of a same equipment basis?

I'm sorry, Mike, I'm not -- can you -- could you help us out a little bit with that?

Well, I just meant if you sort of exclude the impact of the mix, I mean, on similar pieces of equipment. Is pricing flattish? Or is it going one way or the other?

Yes, I would say that the selling price was up a touch. But the way to think that through is, there was a bit of a different customer mix in the second quarter versus the first quarter. So -- and I think, we've had this discussion before. Prices tend to vary around the country, so we had a little bit of a stronger customer mix there.

Okay, and then I also wanted to ask you, I guess, the follow-up on the last analyst's question. I guess historically, have there been any special costs or productivity issues when you bring on a large number of new employees, which it sounds like you're doing here in the second -- third quarter?

Well, we've gone through a pretty -- I think, I mentioned, we took a fairly slow ramp up to this and what we neglected to mention was, we put the new employees through an extensive training program, off-line training, basically classroom, which was done with the cooperation of the State of Georgia, where we talk to them about quality, we talk to them about safety, we talk to them about good operating practice and then we introduced them into the line, while the rates were low, and they got the chance to figure it all out. So I think, in this case, the manufacturing team has done a really nice job of ensuring that the people who’d go on the line are going to produce quality buses. It can happen in these assembly environments that if you just throw people on the line without adequate training, you will get all sorts of bad habits.

Okay, good, that's good to hear. And then, last one for me is, I just wanted to see if you had any expectations for gross margins on the new products, whether it's a V8 engine or the gasoline engine, do you expect that to be sort of in line with your current diesel offering or any different?

Well, we haven't talked about it a lot. But we think as we can put a bus in the market that's a lower cost base, it should allow us to improve a bit.

Our next question comes from John Rolfe with Argand Capital.

So on the first quarter call, which was, whatever, 3 or 4 months ago, you guys had indicated that you expected first half volumes to be down about 4% to 6% year-over-year. And you ended up coming in with volumes for the first half down about 10%. You now have, I guess, production locked in for 3Q, up 20% year-to-year, which is very strong. So I guess there's 2 possible explanations that I can think of: one, the seasonality is even more pronounced than you were expecting several months ago; or alternately, possibly some production might have slipped from 2Q into 3Q. So was one of those responsible for sort of that shift? Or is it a combination of both? Or is there some sort of explanation that I'm not thinking of?

Yes, John, this is Phil Horlock. I mean, you're spot on about it being -- it's been a bit of both, really. But let's just put it in perspective here. The actually -- the actual change in the volume projection was 150 buses, and actually, we produced 150 buses. We've had a couple of customers who wanted to inspect those buses before they will release them. So while we built them in the second quarter, they'll be booked as a sale in the third. In fact, they've already been -- they're already in course of being inspected right now, and they'll be released. So it's just -- that's all I was going to say. It's just lumpiness of our business we have between quarters that we had to deal with.

And was -- not that this is even terribly relevant, but was that the technical accounting issue that was referenced in the delay of the 10-Q?

No, that was nothing -- that has nothing to do that. That was just simply some things just took a little extra time for us to get through, and that was no issue at all, to do with this, no.

Okay, okay. And so then, just to close the loop on the volumes, then if I plug in that 20% year-to-year volume growth in 3Q in order to get to the midpoint of your volume expectations for the full year, you only need to show sequential growth in 4Q on a volume basis of about 5%, which would actually be well below what you've booked for sequential growth in 4Q each of the last 2 years. So is there any additional color you can kind of give there? I mean, again, is it just this sort of lumpiness you're talking about year-to-year, and there's really nothing else material going on with the trends, with respect to seasonality?

Yes, I think that this time, it is. I mean, with diesel, it's –- we will look at it right now, and we look at what we've done to deliver in the third and the fourth quarter, and to meet that range we mentioned earlier. I think, yes, we'd like to get these buses delivered to -- earlier if possible, so schools can have time to get them all prepped and ready for school start. So it starts like -- you sort of get the job done for the year earlier, if you can. So you're all ready, by the end of August, you're nicely done, and you can worry about the next fiscal year. So, hey, if we can beat it, we'll beat it, but right now that's our projection, is around that 10,800 to 11,000 number.

Okay, great, and just one more question. It's been impressive, the increases in quoting activity. Could you address to what do you attribute these really significant increases in the quoting activity? And then secondly, any sort of qualitative color you could give on quoting activity conversion rates, I mean, have those been in line with what you would hope or what you've seen in the past? How has that been trending?

Yes, I think, I definitely think there's more, we think the industry is going to be up by about 4% to 5% this year, more mellow, like 4%. So I think there's definitely more money available out there for school districts. So -- and what we're seeing is a lot of school districts out there putting bids out, seeing what's available, encouraging all the manufacturers to bid for them. I would say also that we've got some new vehicles out there we've never had before, which is encouraging people to, hey, now let's take a look at that product. May have thought of having a diesel previously, I'm going to put a bid out, take a look at your new products out there. And we'll set probably, the last point is that we are -- we're aggressive in looking at every opportunity. We try to make sure we don't leave any stone unturned, and what we have to do is to find those bids, we go heavy on it. And we make sure we aggressively pursue every opportunity out there in every school district, in every state. Did you have a question there on conversion rate, but I didn't answer? I think he did. Okay, so he dropped off. Okay, any further questions?

Yes, our next question comes from Chris Moore with CJS Securities.

Just a couple of quick ones, most have been answered, but you talked about currently 64 buses a day, reaching 70. Is that a function of the specific buses that you're building? Can you do more diesel than you can propane? Or is there much of a difference there?

Between a basic, what I'll call a Type C diesel engine, a propane, yes, we can build that. That's a typically, I call it, typical spec type vehicle, 72 buses a day. Obviously, if we can have very complex bus, with lots of options in, a lot of content in, that skews our mix, it might be a little bit less than that. We actually plan on the number of hours. We can actually quote to building a bus every day. But 70, 70 is like the nominal level. But some days you might build 68, you might build 72, depending on the mix, but 70 is a good capacity we plan on.

Got you. Okay. With respect to the trajectory on the propane mix, obviously very big increase year-over-year. Longer term, do you think you can get this north of 30%, in the 35% range? Or any sense as to what can happen over the next year or 2?

Yes, I look at it right now, we're at 18%, as we said in the first half of the year. And we definitely think there’s potential and take it up well above 20%, and keep growing this business. So we are -- yes, I mean, we're not putting a number out there, and saying it's 30%, 35%, we're just going to keep being aggressive on it year after year, that's all I would say. But yes, so when you look at the trajectory we've been on the last few years, it's been great growth for us, and we really believe in this product, as do the customers. So I think we certainly, we see a lot of growth potential for this product for us.

If there are no further questions, I would like to turn the call back over to Mr. Phil Horlock for closing remarks.

Okay. I'll start by thanking you all for joining us on the call today. We appreciate your continued interest in Blue Bird. And I'd like you to know, I think you can see we're very focused on profitable growth, giving customers the products they want and they value, and we intend to deliver on our commitments. While we do strive to be shareholder friendly, and in this regard, Slide 21 does show our upcoming investor conferences. And we'll be more than happy to meet any of you there. Please don't hesitate to contact our Head of Investor Relations, Jeff Merten, should you have any follow-up questions. So thanks again, from all of us at Blue Bird, and wish you a good evening. Thanks.

This concludes today's teleconference. Thank you for your participation. You may disconnect your lines at this time.