BLBD 10-K & 10-Q changes, risk factors and insider trading

•changing global workplace conditions resulting from "shelter-in-place" orders and "work from homework-from-home" employer policies.

We operate in a highly competitive domestic market. Our principal competitors are Thomas Built Bus (owned by Daimler Trucks North America) and IC Bus (owned by International Motors, LLC and former known as Navistar, Inc.), which, at the consolidated level, have potential access to more technical, financial and marketing resources than the Company. Our competitors may develop or gain access to products that are superior to our products, develop methods of more efficiently and effectively providing products and services, or adapt more quickly than we do to new technologies or evolving customer requirements. IC Bus and Thomas Built Bus both sell electric powered school buses and offer, or have announced intentions to offer, gasoline powered school buses. This brings both competitors into direct competition with several of our electricalternative powered product offerings. Our competitors may achieve cost savings or be able to withstand a substantial downturn in the market because their businesses are consolidated with other vehicle lines. In addition, our competitors could be, and have been in the past, vertically integrated by designing and manufacturing their own components (including engines) to reduce their costs. The school bus market does not have “Buy America” regulations, so competitors or new entrants to the market could manufacture school buses in more cost-effective jurisdictions and import them to the U.S. to compete with us. Any increase in competition may cause us to lose market share or compel us to reduce prices to remain competitive, which could result in reduced sales, profitability and cash flows.

Our business iscan be cyclical, which has had, and could have future, adverse effects on our sales and results of operations and lead to significant shifts in our results of operations from quarter to quarter that make it difficult to project long-term performance.

Our costs to produce, and our ability to sellsell, our products may be negatively affectedimpacted by changes in trade policies and tariffs.

Potential environmental issues have been identified at our facility in Fort Valley, Georgia, including the solid waste management units at the facility’s old landfill. Potential remediation costs and obligations could require the expenditure of capital and, if greater than expected, or in excess of applicable insurance coverage, could have a material adverse effect on our results of operations, liquidity or financial condition. We are cooperating with the Georgia Environmental Protection Division and have conducted a site-wide investigation under the current hazardous waste management law. AllSubstantially all investigations of suspect areas have been completed. Implementation of a corrective action plan has commenced, which will consist of re-surfacing the landfill cap, re-grading a portion of the lot in close proximity to the landfill, ongoing monitoring, and ground water use restrictions for the old landfill. There are currently no proposed remediation actions to be included in the corrective action plan. Based on the data generated from the latest site investigation, we believe our environmental risks have been reduced substantially, but not eliminated.

We have substantiala material amount of indebtedness. If our cash flows and capital resources are insufficient to fund the interest payments on our outstanding borrowings under our credit facility and other debt service obligations and keep us in compliance with the covenants under our debt agreements or to fund our other liquidity needs, we may be forced to reduce or delay capital expenditures, sell assets or operations, seek additional capital or restructure or refinance our indebtedness. We can provide no assurance that we would be able to take any of these actions, that these actions would permit us to meet our scheduled debt service obligations or that these actions would be permitted under the terms of our existing or future debt agreements, which may impose significant operating and financial restrictions on us and could adversely affect our ability to finance our future operations or capital needs; obtain standby letters of credit, bank guarantees or performance bonds required to bid on or secure certain customer contracts; make strategic acquisitions or investments or enter into alliances; withstand a future downturn in our business or the economy in general; engage in business activities, including future opportunities for growth, that may be in our interest; and plan for or react to market conditions or otherwise execute our business strategies.

In addition, we and certain of our subsidiaries may incur significant additional indebtedness, including additional secured and/or unsecured indebtedness. Although the terms of our debt agreements contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a number of qualifications and exceptions, and additional indebtedness incurred in compliance with these restrictions could be significant. Incurring additional indebtedness could increase the risks associated with our substantialcurrent indebtedness, including our ability to service our indebtedness.

Our dealers and customers benefit from their relationships with Huntington, which provides (i) floorplan financing for certain of our network dealers and (ii) a modest amount of vehicle lease and other financing options to certain school districts.districts and large fleet customers. Although we neither assume any balance sheet risk nor receive any direct economic benefit from Huntington, we could be materially adversely affected if Huntington was unable to provide this financing and our dealers and other customers were unable to obtain alternate financing, at least until a replacement for Huntington was identified. Huntington faces a number of business, economic and financial risks that could impair its access to capital and negatively affect its business and operations and its ability to provide financing and leasing to our dealers and certain other customers. Because Huntington serves as an additional source of leasing and financing options for dealers and certain customers, an impairment of Huntington’s ability to provide such financial services could negatively affect our efforts to expand our market penetration among customers that rely on these financial services to acquire new school buses and dealers that seek financing.

We rely heavily on trade secrets to gain a competitive advantage in the market and in the event of the unenforceability of our nondisclosure agreementsagreements, our operations may adversely affect our operations.affected.

The manufacture of our Type A school buses and commercial buses is conducted by the Micro Bird joint venture that we do not control and cannot operate solely for our benefit.

The manufacture of Type A school buses and commercial buses is carried out by a 50/50 Canadian joint venture, Micro Bird, which we do not control or consolidate. In joint ventures, we share ownership and management of a company with one or more parties who may not have the same goals, strategies, priorities or resources as we do and may compete with us outside the joint venture. Joint ventures are intended to be operated for the equal benefit of all co-owners, rather than for our exclusive benefit. Operating a business as a joint venture often requires additional organizational formalities as well as time-consuming procedures for sharing information and making decisions. In joint ventures, we are required to foster our relationships with co-owners as well as promote the overall success of the joint venture, and if a co-owner changes or relationships deteriorate, our success in the joint venture may be materially adversely affected. The benefits from a successful joint venture are shared among the co-owners, so that we do not receive all the benefits from our joint venture.

We have a substantial amount of goodwill and purchased intangible assets on our balance sheet, concentrated in our bus segment and specifically related to the dealer network and our trade name. These long-lived assets are required to be reviewed for impairment at least annually, or more frequently if potential interim indicators exist that could result in impairment. If any business conditions or other factors cause profitability or cash flows to significantly decline, we may be required to record a non-cash impairment charge, which could adversely affect our operating results. Events and conditions that could result in impairment include a prolonged period of global economic weakness,weakness; a furthersignificant decline in economic conditions or a slow, weak economic recovery,recovery; sustained declines in the price of our common stock,stock; adverse changes in the regulatory environment,environment; adverse changes in the market share of our products,products; adverse changes in interest rates or other factors leading to reductions in the long-term sales or profitability that we expect.

A cybersecurity program, leveraging industry best-practice frameworks for guidance, has been developed and maintained to help prevent and defend against these cybersecurity threats. To help cover potential damage and financial loss due to a cybersecurity incident, we maintain cybersecurity and other insurance policies that align with our disaster recovery and incident response plans. However, we can provide no assurance that our cybersecurity program is sufficient to prevent or mitigate every cybersecurity threat that exists. We can also provide no assurance that our insurance policies will cover every cybersecurity incident and/or will be adequate to cover all the costs related to significant security attacks or disruptions resulting from such attacks. Finally, such insurance policies may not continue to be available in amounts and/or on terms acceptable to us.us, or at all.

Our only significant asset is ownership of 100% of the capital stock of SchoolBlue BusBird HoldingsBody Company and we do not currently intend to pay cash dividends on our common stock. Consequently, stockholders' ability to achieve a return on their investment will depend on appreciation in the price of our common stock.

We have no direct operations and no significant assets other than the ownership of 100% of the capital stock of SchoolBlue BusBird Holdings.Body Company. We depend on SchoolBlue BusBird HoldingsBody Company and its subsidiaries for distributions, loans and other payments to generate the funds necessary to meet our financial obligations, including our expenses as a publicly traded company, and to pay any dividends with respect to our common stock, if any. Legal and contractual restrictions in agreements governing our current indebtedness, as well as our financial condition and operating requirements, may limit our ability to obtain cash from SchoolBlue BusBird HoldingsBody Company and its subsidiaries. While we are permitted to pay dividends in certain circumstances under our credit facility, as long as we are in compliance with our obligations under the credit facility, we do not expect to pay cash dividends on our common stock. Any future dividend payments are within the absolute discretion of our Board of Directors and will depend on, among other things, our results of operations, working capital requirements, capital expenditure requirements, financial condition, level of indebtedness, contractual restrictions with respect to payment of dividends, business opportunities, anticipated cash needs, provisions of applicable law and other factors that our Board of Directors may deem relevant.

On May 28, 2015 and March 12, 2020, we registered 3,700,000 and 1,500,000 common stock shares, respectively, representing the shares of common stock issuable under the Blue Bird Corporation Amended and Restated 2015 Omnibus Equity Incentive Plan (the “Incentive Plan”) and, pursuant to Rule 416(c) under the Securities Act of 1933, as amended,amended ("Securities Act"), an indeterminable number of additional shares of common stock issuable under the Incentive Plan, as such amount may be adjusted as a result of stock splits, stock dividends, recapitalizations, anti-dilution provisions and similar transactions. At September 28,27, 2024,2025, there were 594,232293,304 common stock shares remaining to be issued under the Incentive Plan.

Additionally,On onDecember November23, 16, 2021,2024, we filed aan automatic shelf Registration Statement on Form S-3 that allows the Company to sell upan toundisclosed $200.0 millionamount, in the aggregate of any combinationcombination, of several different types of securities, including shares of common stock, from time to time in one or more offerings. The number of shares is indeterminable and is dependent on whether or not common stock is a security being sold in a future offering and, if so, the amount of capital we are attempting to raise and the price at which the shares of common stock can be sold. Any such sale of shares may also be adjusted as a result of stock splits, stock dividends, recapitalizations, anti-dilution provisions and similar transactions.

The following discussion and analysis of financial condition and results of operations of the Company should be read in conjunction with the Company’s audited financial statements for the fiscal years ended September 27, 2025, September 28, 2024,2024 and September 30, 2023 and October 1, 2022 and related notes appearing elsewhere in this Report. Our actual results may not be indicative of future performance. This discussion and analysis contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those discussed or incorporated by reference in the sections of this Report titled “Special Note Regarding Forward-Looking Statements” and “Risk Factors.” Actual results may differ materially from those contained in any forward-looking statements. Certain monetary amounts, percentages and other figures included in this Report have been subjected to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated, may not be the arithmetic aggregation of the percentages that precede them.

Blue Bird is the leading independent designer and manufacturer of school buses. Our longevity and reputation in the school bus industry have made Blue Bird an iconic American brand. We distinguish ourselves from our principal competitors by dedicating our focus to the design, engineering, manufacture and sale of school buses, and related parts. As the principalonly manufacturer of chassis and body production specifically designed for school bus applications in the U.S., Blue Bird is recognized as an industry leader for school bus innovation, safety, product quality/reliability/durability, efficiency, and lower operating costs. In addition, Blue Bird is the market leader in alternative powered product offerings with its propane powered, gasoline powered, and all-electric powered school buses.

During the second half of our fiscal year that ended October 3, 2020 ("fiscal 2020") and first half of our fiscal year that ended on October 2, 2021 ("fiscal 2021"), COVID-19 materially affected demand for new buses and replacement/maintenance parts, significantly impacting our business and operations. Although demand for school buses strengthened substantially during the second half of fiscal 2021, the Company, and automotive industry as a whole, began experiencing significant supply chain constraints resultingthat from,arose among others, labor shortages duesubsequent to the ‘great resignation;’ the lack of maintenance on, and acquisition of, capital assets during the extended COVID-19 global lockdowns; significant increased demand for consumer products containing certain materials required for the production of vehicles, such as microchips, as consumers spent stimulus and other funds on items for their homes; etc.pandemic. Additionally, the already challenged global supply chain for automotive parts that began in fiscal 2021 was further impacted, including continuing escalating inventory purchase costs, by additional stress resulting from Russia’s invasion of Ukraine in February 2022 (see further discussion below).2022. These supply chain disruptions had a significant adverse impact on our operations and results dueduring tothe 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 ordersorders, that outpaced the sales prices that we charged for the buses we sold during mostthese of fiscal 2022.periods.

Towards the end ofDuring fiscal 20222023 and continuing into fiscal 2023,2024, there were slight improvements in the supply chain's ability to deliver the parts and components necessary to support our production operations, resulting in increased (i) manufacturing efficiencies and (ii) production of buses to fulfill sales orders during fiscal 2023.orders. However, the higher costs charged by suppliers to procure inventory that continued intoover fiscalthese 2023same hadperiods aand significantadversely adverse impact onimpacted our operations and results. Specifically, such cost increases outpaced the increases in sales prices that we charged for the buses that were sold during the first quarter of fiscal 2023, many of which were included in the backlog of fixed price sales orders originating in fiscal 2021 and the early months of fiscal 2022 that carried forward into fiscal 2023. During the remainder of fiscal 2023, the buses that were sold were generally included in the backlog of fixed price sales orders originating more recently (i.e., the latter months of fiscal 2022 and in fiscal 2023), withHowever, the cumulative increases in sales prices we charged for thoseour buses generally outpacingoutpaced the higher costs we paid to procure inventory, resulting in gross profit during the quarters. While theand gross margin on bus sales during the second quarter ofin fiscal 2023 laggedand thefiscal historical2024 grossthat marginwere reportedconsistent with, or better than, historic levels experienced prior to the COVID-19 pandemic, it returned to more normal historical levels during the latter half of fiscal 2023.pandemic.

Supply chain disruptions continued into fiscal 20242025 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 andto consistently produce buses to fulfill sales orders. Ongoing improvements in manufacturing operations, when coupled with periodic pricing actions taken by the Company to ensure that the increased sales prices charged for buses keptkeep pace with increased costs to procure inventory to produce the buses, allowed the Company to report gross profitsprofit and gross margins throughout fiscal 2024margin that were consistent with, or better than,than historicthose levelsreported experiencedin priorfiscal to the COVID-19 pandemic.2024.

New bus orders during fiscal 20232024 and continuing into fiscal 20242025 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 duringas thediscussed latterpreviously half of fiscal 2021 and continuing through fiscal 2024.above. Accordingly, the Company's backlog remained strong at approximately 4,6004,800 units and 4,8003,070 units as of September 30,28, 20232024 and September 28,27, 2024,2025, respectively, despite it selling over 8,500 units during fiscal 2023, the majority of which were included in the backlog that existed as of October 1, 2022, and 9,000 units in fiscal 2024.2024 and over 9,400 units in fiscal 2025.

In general, management believes that supply chain disruptionsdisruptions, 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. They have resulted, and could continue to result, in significant economic disruption and have adversely affected our business. Significant uncertainty exists concerning the magnitude of the impact and duration of ongoing supply chain constraints and their potential impact on the overall economy, both within the U.S and globally. Accordingly, the magnitude and duration of any production and supply chain disruptions and their related financial impacts on our business cannot be estimated at this time.

ImpactImpacts of Russia’sGovernmental InvasionPolicies, ofPrograms, UkraineRegulations and/or Laws on Our Business

•Pricing. Our products are sold to school districts throughout the U.S. and Canada. 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. Pricing may or may not be favorable to us, depending upon a number of factors impacting purchasing decisions. Additionally, in certain cases, prices originally quoted with dealers and school districts may have become less favorable, or more unfavorable, to us given increasing inventory costs between the time the sales order was contractually agreed upon and the bus is built and delivered as a result of ongoing supply chain disruptions anddisruptions, general inflationary pressures.pressures and/or changes in trade policies and tariffs.

•Seasonality. In the fiscal years preceding the 2020 COVID-19 pandemic, our sales were subject to seasonal variation based on the school calendar with the peak season during our third and fourth fiscal quarters. Sales during the third and fourth fiscal quarters were typically greater than the first and second fiscal quarters due to the desire of municipalities to have any new buses that they ordered available to them at the beginning of the new school year. WithSince 2020, with the COVID-19 pandemic impacting the demand for Company products and the impact of the subsequent supply chain constraints hindering the Company's ability to produce and sell buses,buses as discussed previously above, seasonality has become unpredictable. Seasonality and variations from historical seasonality have impacted the comparison of results between fiscal periods.

•Inflation. 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 expedite receipt ofdeliver critical components, reflected in cost of goods sold during all of fiscal 2022,2022 and continuing, to a lesser extent, into fiscal 20232023, fiscal 2024 and fiscal 2024.2025. Additionally, the imposition of tariffs on certain imported inventory that became effective during the second half of fiscal 2025 has further increased our inventory purchase costs. In response, beginning in July 2021, the Company announced a number of sales price increases over this same period that applied to new sales orders andand, partiallyin appliedlimited circumstances, to backlog orders that were both intended to mitigate the impact of rising purchase costs on our operationsoperations, results and results.cash Most of these price increases only began to marginally impact sales and gross profit in the latter half of fiscal 2022. Specifically, they did not offset the significant continued increase in the Company's production costs, resulting in further deterioration of the Company's gross profit during the second half of fiscal 2022 and continuing into the first quarter of fiscal 2023 as it produced and sold the oldest units included in the backlog as of the end of fiscal 2022. However, they began to have a more significant, positive impact on sales and gross profit during the remainder of fiscal 2023, as the Company fulfilled sales orders (i) from the backlog existing as of the end of fiscal 2022 that originated more recently (i.e., during the latter months of fiscal 2022) and (ii) that were taken during fiscal 2023, both of which contained most or all of the cumulative sales prices increases that have been announced.flows. These cumulative price increases alsohave continued to havehad a significant, positive impact on sales and gross profit during fiscal 2024.2023, fiscal 2024 and continuing into fiscal 2025.

•Cost of goods sold. The components of our cost of goods sold consist of material costs (principally powertrain components, steel and rubber, as well as aluminum and copper) including freight costs, labor expense, and overhead. Our cost of goods sold may vary from period to period due to changes in sales volume,volume and/or mix, efforts by certain suppliers to pass through the economics associated with key commodities,commodities as well as changes in trade policies and tariffs, fluctuations in freight costs, design changes with respect to specific components, design changes with respect to specific bus models, wage increases for plant labor, productivity of plant labor, delays in receiving materials and other logistical challenges, and the impact of overhead items such as utilities.

•Selling, general and administrative expenses. Our selling, general and administrative expenses include costs associated with our selling and marketing efforts, engineering, centralized finance, human resources, purchasing, and 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 salarycompensation 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.

•Income taxes. We make estimates of the amounts to recognize for income taxes in each tax jurisdiction in which we operate. In addition, provisions are established for withholding taxes related to the transfer of cash between jurisdictions and for uncertain tax positions taken.taken, if any.

•Other incomeexpense/expense,income, net. This balance includes periodic pension expense or income as well as gains or losses on foreign currency, if any. Other amounts not associated with operating expenses may also be included in this balance.

•Equity in net income or loss of non-consolidated affiliate(s). We include in this line item our 50% share of net income or loss from our investments in Micro Bird Holdings, Inc. and Clean Bus Solutions, LLC, our unconsolidated joint ventures.

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 inwithin cost of goods sold or selling, general and administrative expenses in our U.S. GAAP financial statements) that represents interest expense on lease liabilities; income taxes; and depreciation and amortization including the component of operating lease expense (which is presented as a single operating expense inwithin 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; as adjusted for certain non-cash charges or credits that we may record on a recurring basis such as share-based compensation expense and unrealized gains or losses on certain derivative financial instruments; net gains or losses on the disposal of assets as well as certain charges such as (i) significant product design changes; (ii) transaction related costs; or (iiiii) discrete expenses related to major cost cutting and/or operational transformation initiatives. While certain of the charges that are added back in the Adjusted EBITDA calculation, such as transaction related costs and major cost cutting and/or operational transformation and major product redesign initiatives, represent operating expenses that may be recorded in more than one annual period, the significant project or transaction giving rise to such expenses is not considered to be indicative of the Company’s normal operations. Accordingly, we believe that these, as well as the other credits and charges that comprise the amounts utilized in the determination of Adjusted EBITDA described above, should not be used in evaluating the Company’s ongoing annual operating performance.

We believe that Adjusted EBITDA and Adjusted EBITDA Margin are useful to investors in evaluating our performance because the measures consider the performance of our ongoing operations, excluding decisions made with respect to capital investment, financing, and certain other significant initiatives or transactions as outlined in the preceding paragraph.paragraphs. We believe the non-GAAP measures offer additional financial metrics that, when coupled with the U.S. GAAP results and the reconciliation to U.S. GAAP results, provide a more complete understanding of our results of operations and the factors and trends affecting our business.

Adjusted EBITDA and Adjusted EBITDA Margin should not be considered as alternatives to net income or loss as an indicator of our performance or as alternatives to any other measure prescribed by U.S. GAAP as there are limitations to using such non-GAAP measures. Although we believe that Adjusted EBITDA and Adjusted EBITDA Margin may enhance an evaluation of our operating performance based on recent revenue generation and product/overhead cost control because they exclude the impact of prior decisions made about capital investment, financing, and certain other significant initiatives or transactions, (i) other companies in Blue Bird’s industry may define Adjusted EBITDA and Adjusted EBITDA Margin differently than we do and, as a result, they may not be comparable to similarly titled measures used by other companies in Blue Bird’s industry, and (ii) Adjusted EBITDA and Adjusted EBITDA Margin exclude certain financial information that some may consider important in evaluating our performance.

We define Free Cash Flow as total cash provided by/used in operating activities as adjusted for net cash paid for the acquisition of fixed assets and intangible assets. We use Free Cash Flow, and ratios based on Free Cash Flow, to conduct and evaluate our business because, although it is similar to cash flow from operations, we believe it is a more conservative measure of cash flow since purchases of fixed assets and intangible assets are a necessary component of ongoing manufacturing operations. Accordingly, we expect Free Cash Flow to be less than operating cash flows.

We manage our business in two operating segments, which are also our reportable segments: (i) the Bus segment, which involves the design, engineering, manufacture and sale of school buses and extended warranties; and (ii) the Parts segment, which includes the sale of replacement bus parts. Financial information is reported on the basis that it is used internally by the chief operating decision maker (“CODM”) in evaluating segment performance and deciding how to allocate resources to segments. The President and Chief Executive OfficerCEO of the Company has been identified as the CODM. Management evaluates the segments based primarily upon revenues and gross profit.

OnAdditionally, on December 14, 2023, the Company entered into an underwriting agreement with BofA Securities, Inc. and Barclays Capital Inc., as representatives of the several underwriters and Americanthe Securities LLC ("2024 Selling Stockholder"),Stockholder, pursuant to which the 2024 Selling Stockholder agreed to sell 2,500,000 shares of common stock at a purchase price of $25.10 per share. On February 15, 2024, the Company entered into an underwriting agreement with Barclays Capital Inc., as representative of the several underwriters and the 2024 Selling Stockholder, pursuant to which the 2024 Selling Stockholder agreed to sell 4,042,650 shares of common stock at a purchase price of $32.90 per share (collectively, the "2024 Offerings").share.

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 sixnine months ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025 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. This discussion and analysis contains forward-looking statements and involves numerous risks and uncertainties, including, but not limited to, those discussed or incorporated by reference in the sections of this Report entitled “Special Note Regarding Forward-Looking Statements” and “Risk Factors.” Actual results may differ materially from those contained in any forward-looking statements. Certain monetary amounts, percentages and other figures included in this Report have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text may not total 100% or, as applicable, when aggregated, may not be the arithmetic aggregation of the percentages that precede them.

Blue Bird sells its buses and parts through an extensive network of U.S. and Canadian dealers that, in their territories, are exclusive to Blue Bird on Type A, C and Type D school buses. Blue Bird also sells directly to major fleet operators, the U.S. Government, state governments, and authorized dealers in certain limited foreign countries.

Throughout this Report, we refer to the fiscal year ending October 3, 2026 as "fiscal 2026," the fiscal year ended September 27, 2025 as "fiscal 2025," and the fiscal year ended September 28, 2024 as "fiscal 2024." There will be 53 weeks in fiscal 2026 and were 52 weeks in fiscal 2025. The secondthird quarters of fiscal 2026 and fiscal 2025 both included 13 weeks. The sixnine month periods in fiscal 2026 and 2025 both included 2639 weeks.

The global supply chain constraints for automotive parts that arose subsequent to the novel coronavirus pandemic known as "COVID-19" and that were further impacted by additional stress resulting from Russia’svarious invasionglobal ofmilitary Ukraine in February 2022,conflicts continued to impact our business and operations in the first halfnine months of both fiscal 2025 and 2026. Specifically, there were occasional shortages of certain critical components that impacted our manufacturing production schedule and related operational efficiencies, while increasing costs charged by suppliers to procure inventory continued during both periods. Both of these factors 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.

In addition to periodic inventory shortages and general inflationary pressures resulting from the global supply chain constraints discussed above, changes in trade policies and tariffs began to impact our business and operations in the second half of fiscal 2025 and continuing into the first halfnine months of fiscal 2026 by increasing our procurement costs for certain imported inventory. Actions we have taken, and are continuing to take, 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 and working with our suppliers to identify alternative supply chain sources to minimize the increase in inventory costs.

However, the higher inventory purchase costs that we incurred in producing and selling buses during the first halfnine months of fiscal 2025 and fiscal 2026 resulting from general inflationary pressures caused by global supply chain constraints as well as changes in trade policies and tariffs, as applicable, did not negatively impact our operating results or cash flows during these periods as such impacts were largely offset by proactive 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.

Additionally, although new bus orders during the majority of fiscal 2025 remained strong, management believes that the uncertainty in bus pricing resulting from changing tariffs temporarily impacted bus orders during the latter part of fiscal 2025 and, to a lesser extent, continuing into the first halfnine months of fiscal 2026. Specifically, 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 in the years subsequent to the COVID-19 pandemic, the Company’s backlog approximated 4,4003,900 Type C and D units as of MarchJune 29,28, 2025. Given the strong backlog in the overall school bus industry that resulted in long time lags between customers ordering and taking delivery of a school bus, when coupled with the uncertainty regarding the pricing of a school bus resulting from the inclusion of actual tariff charges in the final sales price, management believes that many customers elected to temporarily defer the purchase of buses towards the end of our fiscal 2025. As a result, the Company’s backlog decreased to approximately 3,070 Type C and D units as of September 27, 2025. However, due to the Company’s proactive communications with our dealers and customers and committing to a tariff pricing strategy that significantly addressed the volatility in bus pricing for customers, we experienced an increase in orders during the first halfnine months of fiscal 2026 that increased the backlog to approximately 3,5603,570 Type C and D units and 1,290 Type A and small and mid-sized commercial units as of MarchJune 28,27, 2026, which included overalmost 900780 electric powered units.units across all bus types. Due to the age of school bus fleets in the U.S. and Canada, which is at least partially attributable to supply chain disruptions in recent years that have left school districts with meaningful replacement needs, and the strong overall fundamentals in the school bus industry, management believes that this slowdown in orders is temporary in nature and not indicative of a broader decrease in current or future market demand.

Finally, 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 latter part of fiscal 2025 and continuing into the first halfnine months of fiscal 2026. Although we noted that government grant money continued to flow during this period, the timing of some of these payments occurred too late to adjust our production schedule to build and sell more higher priced alternative powered school buses. However, such funding should positively impact the remainder of fiscal 2026 and/or subsequent 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.

In general, management believes that the impacts from (i) supply chain disruptions, including those resulting from current or future military conflicts, and (ii) changes in governmental policies, programs, regulations and/or laws could continue in future periods and could materially impact our results if we are unable to (a) obtain parts and supplies in sufficient quantities to meet our production needs and/or (b) pass along rising costs to our customers. They could result in significant economic disruption and adversely impact our business during the remainder of fiscal 2026 and perhaps beyond. Significant uncertainty exists concerning the magnitude of the impact and duration of (i) ongoing supply chain constraints and (ii) changes in governmental policies, programs, regulations and/or laws and their potential impact on the overall economy, within both within the U.S and Canada as well as globally. Accordingly, the magnitude and duration of such matters and their related financial impacts on our business cannot be estimated at this time.

The preparation of financial statements in conformity with accounting principles generally accepted in the U.S. (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. BlueThe BirdCompany evaluates its estimates on an ongoing basis, based on historical experience and on various other assumptions that are believed to be reasonable under the circumstances. Application of these accounting policies involves the exercise of judgment and use of assumptions as to future uncertainties and, as a result, actual results could differ from these estimates.

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 2025 Form 10-K, filed with the SEC on November 24, 2025, 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 sixnine months ended MarchJune 28,27, 2026.

•Revenue mix. We are able to charge more for certain of our products (e.g., Type C propane powered school buses, electric powered buses, Type D buses, and buses with higher option content) than other products. The mix of products sold in any fiscal period can directly impact our revenues for the period.

•Inflation. As discussed previously above, supply chain disruptions developing (i) subsequent to the COVID-19 pandemic and Russia's(ii) invasionas a result of Ukraineglobal military conflicts have significantly increased our inventory purchase costs, including freight costs incurred to deliver critical components, reflected in cost of goods sold during fiscal 2025 and continuing into the first halfnine months of fiscal 2026. Additionally, the imposition of tariffs on certain imported inventory that became effective during the second half of fiscal 2025 and continued into the first halfnine months of fiscal 2026 has further increased our inventory purchase costs. In response, the Company announced a number of sales price increases that applied to new sales orders that were 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 2025 and continuing into the first halfnine months of fiscal 2026.

•Equity in net income or loss of non-consolidated affiliates. We include in this line item our 50% share of net income or loss from our investments in Micro Bird Holdings, Inc. ("Micro Bird) and Clean Bus Solutions, LLC,LLC ("CBS"), our unconsolidated joint ventures. However, as a result of (i) our acquisition of of the remaining 50% of the outstanding voting common stock of Micro Bird on April 1, 2026 and (ii) CBS nearing the completion of winding down and terminating its business, we expect minimal, immaterial activity in this account, if any, in periods subsequent to June 27, 2026.

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 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 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 amortization charges on right-of-use lease assets; as adjusted for certain non-cash charges or credits that we may record on a recurring basis such as share-based compensation expense and unrealized gains or losses on certain derivative financial instruments as well as certain charges or credits such as (i) transaction related costs or gains or (ii) discrete expenses related to major cost cutting and/or operational transformation initiatives. While certain of the charges that are added back in the Adjusted EBITDA calculation, such as certain transaction related costs and major cost cutting and/or operational transformation initiatives, represent operating expenses that may be recorded in more than one annual period, the significant project or transaction giving rise to such expenses is not considered to be indicative of the Company’s normal operations. Accordingly, we believe that these, as well as the other credits and charges that comprise the amounts utilized in the determination of Adjusted EBITDA described above, should not be used in evaluating the Company’s ongoing annual operating performance.

We manage our business in two operating segments, which are also our reportable segments: (i) the Bus segment, which involves the design, engineering, manufacture and sale of school buses and extended warranties; and (ii) the Parts segment, which includes the sale of replacement bus parts. As a result of the Micro Bird acquisition effective April 1, 2026, its financial results are included within the Bus segment for the the three and nine months ended June 27, 2026. Financial information is reported on the basis that it is used internally by the chief operating decision maker (“CODM”) in evaluating segment performance and deciding how to allocate resources to segments. The President and Chief Executive Officer of the Company has been identified as the CODM. Management evaluates the segments based primarily upon revenues and gross profit.

Consolidated Results of Operations for the Three Months Ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025:

Net sales. Net sales were $352.6$517.2 million for the secondthird quarter of fiscal 2026, aan decreaseincrease of $6.2$119.1 million, or 1.7%,29.9%, compared to $358.9$398.0 million for the secondthird quarter of fiscal 2025. Micro Bird contributed $122.9 million of net sales during the third quarter of fiscal 2026. The $3.8 million, or 1.0%, decrease in net sales for the legacy Blue Bird operations is primarily due to a 6.4%7.2% decrease in units sold resulting from timing due to a 6.7%customer decreasemix change as we produced a large number of units for certain customers that we will recognize as revenue in the number of production days in the secondfourth quarter of fiscal 2026 when comparedthe units are delivered to coincide with school resuming. Many of these units contributed to the samesignificant periodincrease in fiscalfinished 2025,goods whichinventory primarilyat resultedJune from27, the timing of holidays, and our corresponding plant shutdown, in our production calendar. As a result of producing fewer buses, we had fewer units that were available to sell.2026. However, the decrease resulting from selling fewer units was partially offset by Bus customer and product mix changes and cumulative Bus price increases, including increases that were 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 second half of fiscal 2025 and continuing into the first halfthree quarters of fiscal 2026, as well as an increase in Parts sales.2026.

Bus sales decreasedincreased $7.6$119.5 million, or 2.3%,32.1%, for the third quarter of fiscal 2026 compared to the third quarter of fiscal 2025, which included the $122.9 million of net sales that Micro Bird contributed during the third quarter of fiscal 2026. Bus sales for the legacy Blue Bird operations decreased $3.5 million, or 0.9%, reflecting a 6.4%7.2% decrease in unit bookings that was partially offset by a 4.4%6.7% increase in average sales price per unit. In the secondthird quarter of fiscal 2026, 2,1482,290 legacy Blue Bird units booked compared to 2,2952,467 units that booked forduring the same period in fiscal 2025. The increase in legacy Blue Bird unit price for the secondthird quarter of fiscal 2026 compared to the same period in fiscal 2025 was primarily due to customer and product mix changes as well as price increases implemented to offset increases in inventory costs.

Parts sales increaseddecreased $1.4$0.3 million, or 5.4%,1.2%, for the secondthird quarter of fiscal 2026 compared to the secondthird quarter of fiscal 2025. This increasesmall decrease is primarily attributed to slight variations due to product and channel mix that slightly exceeded price increases that were implemented to offset increases in inventory costs as well as higher fulfillment volumes and slight variations due to product and channel mix.costs.

Cost of goods sold. Total cost of goods sold was $282.0$413.8 million for the secondthird quarter of fiscal 2026, aan decreaseincrease of $6.0$101.7 million, or 2.1%,32.6%, compared to $288.0$312.1 million for the secondthird quarter of fiscal 2025. Micro Bird's cost of goods sold totaled $105.7 million during the third quarter of fiscal 2026. As a percentage of net sales, legacy Blue Bird total cost of goods sold improved slightly from 80.3%78.4% to 80.0%,78.2%, 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. The improvement was also impacted by product and customer mix changes.

Bus segment cost of goods sold decreasedincreased $7.2$101.6 million, or 2.6%,34.0%, for the secondthird quarter of fiscal 2026 compared to the same period in fiscal 2025.2025, which included the $105.7 million of Micro Bird cost of sales during the third quarter of fiscal 2026. The $4.1 million, or 1.4%, decrease in legacy Blue Bird cost of sales was primarily driven by the 6.4%7.2% decrease in units booked, which was partially offset by a 4.0%6.3% increase in the average cost of goods sold per unit for the secondthird quarter of fiscal 2026 compared to the secondthird quarter of fiscal 2025. The increase in average cost of goods sold per unit 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 second half of fiscal 2025 and (b) ongoing supply chain disruptions that resulted in higher purchase costs for components. The increase was also impacted by customer and product mix changes.

The $1.2$0.1 million, or 9.6%,0.8%, increase in Parts segment cost of goods sold for the secondthird quarter of fiscal 2026 compared to the secondthird quarter of fiscal 2025 was primarily dueresulted from increased product costs driven by inflationary pressures and tariffs as well as slight variations due to product and channel mix.mix, which was partially offset by the decrease in sales during the quarter.

Operating profit. Operating profit was $39.1$62.7 million for the secondthird quarter of fiscal 2026, an increase of $5.4$12.6 million compared to operating profit of $33.7$50.1 million for the secondthird quarter of fiscal 2025. Micro Bird contributed $11.4 million of operating profit during the third quarter of fiscal 2026. Profitability for legacy Blue Bird operations was positively impacted by a small decrease of $5.6$1.0 millionmillion, or 2.9%, in selling, general and administrative expenses,expenses primarilyas duewell to the significant amount of share-based compensation expense recorded in the second quarter of fiscal 2025 resulting from the retirement of our former President and Chief Executive Officer, with no similar significant expense recorded for the acceleration of vesting of stock awards in the second quarter of fiscal 2026. However, profitability was negatively impacted byas a decreasesmall increase of $0.2 millionmillion, or 0.2%, in gross profit as outlined in the revenue and cost of goods sold discussions above.

Interest expense. Interest expense was $1.5$2.0 million for the secondthird quarter of fiscal 2026, aan decreaseincrease of $0.3$0.2 million, or 14.8%,13.0%, compared to $1.8$1.7 million for the secondthird quarter of fiscal 2025. Micro Bird incurred $0.5 million of interest expense during the third quarter of fiscal 2026. The $0.3 million decrease in interest expense for the legacy Blue Bird operations was primarily attributable to a decrease in the stated term loan interest rate from 6.2%6.1% at MarchJune 29,28, 2025 to 5.5%5.6% at MarchJune 28,27, 2026, as well as lower outstanding borrowings in the secondthird quarter of fiscal 2026 compared to the secondthird quarter of fiscal 2025.

Other income (expense) income,, net. Other expense,income, net was $2.9$135.7 million for the secondthird quarter of fiscal 2026, aan decreaseincrease of $3.4$136.3 million, or 758.1%,23,494.8%, compared to $0.4$0.6 million of other income,expense, net for the same period in fiscal 2025. Micro Bird incurred $0.6 million of other expense, net during the third quarter of fiscal 2026, $0.4 million of which represented pretax costs resulting from Blue Bird's acquisition of the remaining 50% of the outstanding voting common stock of Micro Bird effective April 1, 2026.

Additionally, duringDuring the secondthird quarter of fiscal 2026, the Companylegacy incurredBlue Bird operations recorded net periodic pension expense of approximately $2.7$0.1 million compared with net periodic pension income of pretax$0.4 costsmillion relating tofor the acquisitionsame ofperiod in fiscal 2025. During the remaining 50% of the outstanding common stock of Micro Bird effective April 1, 2026, with no such costs incurred during the secondthird quarter of fiscal 2025.2026, Thethe costslegacy incurredBlue relatingBird tooperations thisalso transactionrecorded werea $19.6 million loss resulting from the settlement of the pension benefits earned by the majority of pension plan participants with no similar loss recorded in otherthe expense,corresponding net as they are not indicativeperiod of ourthe normalprior operating activities.year. See Note 1314 of Notes to Condensed Consolidated Financial Statements (Unaudited) included in Part I, Item 1 of this Report for a more detailed discussion of this transaction.

Income taxes. Income tax expense was $9.1$10.2 million for boththe three months ended June 27, 2026 compared to $12.4 million for the secondthree quartermonths ofended fiscalJune 2026 and the same period in fiscal28, 2025.

The effective tax rate for the three months ended MarchJune 28,27, 2026 was 24.9%5.2% due to the impact of the $160.5 million non-taxable gain from the acquisition of Micro Bird that was recognized during the third quarter of fiscal 2026. When excluding this non-taxable gain, the effective tax rate for the three months ended June 27, 2026 was 27.9% 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,rate as well as the impact from foreign taxes relating to Micro Bird's Canadian pretax earnings during the three months ended June 27, 2026, 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 MarchJune 29,28, 2025 was 27.2%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.

Adjusted EBITDA. Adjusted EBITDA was $50.8$71.4 million, or 14.4%13.8% of net sales, for the secondthird quarter of fiscal 2026, an increase of $1.6$12.9 million, or 3.3%,22.1%, compared to $49.2$58.5 million, or 13.7%14.7% of net sales, for the secondthird quarter of fiscal 2025. Micro Bird contributed $16.5 million of Adjusted EBITDA during the third quarter of fiscal 2026. The increase$3.6 million decrease in Adjusted EBITDA for the legacy Blue Bird operations primarily relates to the (i) $1.2 million increase in equity in net loss of non-consolidated affiliates and (ii) $3.0 million decrease in Micro Bird earnings,total wheninterest adjustedexpense, fornet; theincome impacttax ofexpense expensesor benefit; depreciation expense and amortization expense that areis excludedincluded in calculating Adjusted EBITDA as outlinedreflected in the table below, thatboth wasduring partiallythe offsetthird byquarter aof decreasefiscal 2026 when compared with corresponding period in otherfiscal income, net, when adjusted for the impact of expenses that are excluded in calculating Adjusted EBITDA, as discussed above.2025.

(1) Includes $0.2 million and $0.1 million for the three months ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025, 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 $0.6$1.2 million and $0.4 million for the three months ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025, 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 SixNine Months Ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025:

Net sales. Net sales were $685.7$1,202.9 million for the sixnine months ended MarchJune 28,27, 2026, an increase of $13.0$132.1 million, or 1.9%,12.3%, compared to $672.7$1,070.7 million for the sixnine months ended MarchJune 29,28, 2025. Micro Bird contributed $122.9 million of net sales during the nine months ended June 27, 2026. The $9.2 million, or 0.9%, increase in net sales for the legacy Blue Bird operations is primarily due to Bus customer and product mix changes and cumulative Bus price increases, including increases that were 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 second half of fiscal 2025 and continuing into the first halfthree quarters of fiscal 2026, as well as an increase in Parts sales.2026. The legacy Blue Bird Bus increases described above were partially offset by a decrease in Bus units sold resulting from timing due to a 4.3%customer decreasemix change as we produced a large number of units for certain customers that we will recognize as revenue in the numberfourth quarter of production days during the six months ended March 28,fiscal 2026 when comparedthe units are delivered to coincide with school resuming. Many of these units contributed to the samesignificant periodincrease in fiscalfinished 2025,goods whichinventory primarilyat resultedJune from27, the timing of holidays, and our corresponding plant shutdown, in our production calendar. As a result of producing fewer buses, we had fewer units that were available to sell.2026.

Bus sales increased $11.9$131.3 million, or 1.9%,13.2%, for the nine months ended June 27, 2026 compared to the nine months ended June 28, 2025, which included the $122.9 million of net sales that Micro Bird contributed during the nine months ended June 27, 2026. Bus sales for the legacy Blue Bird operations increased $8.4 million, or 0.8%, reflecting a 5.3%5.7% increase in average sales price per unit that was partially offset by a 3.2%4.6% decrease in units booked. The increase in unit price for the first sixnine months of fiscal 2026 compared to the same period in fiscal 2025 was primarily due to customer and product mix changes as well as price increases implemented to offset increases in inventory costs. This increase was partially offset by the impact of booking 4,2836,573 units in the sixnine months ended MarchJune 28,27, 2026 compared with 4,4256,892 units during the same period in fiscal 2025.

Parts sales increased $1.1$0.8 million, or 2.1%,1.0%, for the sixnine months ended MarchJune 28,27, 2026 compared to the sixnine months ended MarchJune 29,28, 2025. This increase is primarily attributed to price increases that were implemented to offset increases in inventory costs as well as higher fulfillment volumes and slight variations due to product and channel mix.

Cost of goods sold. Total cost of goods sold was $543.8$957.6 million for the sixnine months ended MarchJune 28,27, 2026, an increase of $2.3$104.0 million, or 0.4%,12.2%, compared to $541.6$853.6 million for the sixnine months ended MarchJune 29,28, 2025. Micro Bird's cost of goods sold totaled $105.7 million for the nine months ended June 27, 2026. As a percentage of net sales, legacy Blue Bird total cost of goods sold improved from 80.5%79.7% to 79.3%,78.9%, 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. The improvement was also impacted by product and customer mix changes.

Bus segment cost of goods sold increased $1.2$102.8 million, or 0.2%,12.6%, for the sixnine months ended MarchJune 28,27, 2026 compared to the sixnine months ended MarchJune 29,28, 2025.2025, which included the $105.7 million of Micro Bird cost of sales during the nine months ended June 27, 2026. The increase$2.9 million, or 0.4%, decrease in legacy Blue Bird cost of sales was primarily driven by the 3.5%4.6% decrease in units booked as discussed above, which was partially offset by the 4.5% increase in the average cost of goods sold per unit in the sixnine months ended MarchJune 28,27, 2026 compared to the same period in fiscal 2025. 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 second half of fiscal 2025 and b) ongoing supply chain disruptions that resulted in higher purchase costs for components. The increase was also impacted by customer and product mix changes. However, it was partially offset by the 3.2% decrease in units booked as discussed above.

The $1.1$1.2 million, or 4.3%,3.2%, increase in partsParts segment cost of goods sold for the sixnine months ended MarchJune 28,27, 2026 compared to the sixnine months ended MarchJune 29,28, 2025 was primarily attributable to increased product costs due to inflationary pressures and tariffs as well as slight variations due to product and channel mix.

Operating profit. Operating profit was $76.8$139.5 million for the sixnine months ended MarchJune 28,27, 2026, an increase of $10.0$22.6 million compared to operating profit of $66.8$116.8 million for the sixnine months ended MarchJune 29,28, 2025. Micro Bird contributed $11.4 million of operating profit during the nine months ended June 27, 2026. Profitability for legacy Blue Bird operations was positively impacted by an increase of $10.7$10.9 million in gross profit as outlined in the revenue and cost of goods sold discussions.discussions However,as itwell wasas negativelya impacted by an increase of $0.7$0.4 million decrease in selling, general and administrative expenses during the first sixnine months of fiscal 2026 when compared with the same period in fiscal 2025, primarily due to an increase in (a) research and development expense and (b) labor costs. However, such increases were partially offset by a significant decrease in share-based compensation expense recorded in the second quarter of fiscal 2025 resulting from the retirement of our former President and Chief Executive Officer, with no similar significant expense recorded for the acceleration of vesting of stock awards in the second quarter of fiscal 2026.2025.

Interest expense. Interest expense was $3.1$5.1 million for the sixnine months ended MarchJune 28,27, 2026, a decrease of $0.6$0.4 million, or 16.6%,7.2%, compared to $3.7$5.5 million for the sixnine months ended MarchJune 29,28, 2025. Micro Bird incurred $0.5 million of interest expense during the nine months ended June 27, 2026. The $0.9 million decrease in interest expense for the legacy Blue Bird operations was primarily attributable to a decrease in the stated term loan interest rate from 6.2%6.1% at MarchJune 29,28, 2025 to 5.5%5.6% at MarchJune 28,27, 2026, as well as lower outstanding borrowings in the first sixnine months of fiscal 2026 compared to the first sixnine months of fiscal 2025.

Other income (expense), net. Other expense,income, net was $3.1$132.6 million for the sixnine months ended MarchJune 28,27, 2026, an increase of $6.5$129.8 million, or 193.2%,4,668.2%, compared to $3.4$2.8 million of other income, net for the sixnine months ended MarchJune 29,28, 2025. Micro Bird incurred $0.6 million of other expense, net during the nine months ended June 27, 2026, $0.4 million of which represented pretax costs resulting from Blue Bird's acquisition of the remaining 50% of the outstanding voting common stock of Micro Bird effective April 1, 2026.

Additionally,The legacy Blue Bird operations recorded $0.6 million of net periodic pension expense during the secondnine quartermonths ended June 27, 2026 when compared with $1.3 million of fiscalnet periodic pension income recorded during the nine months ended June 28, 2025. During the nine months ended June 27, 2026, the Companylegacy incurredBlue approximatelyBird $2.7operations also recorded a $19.6 million ofloss pretaxresulting costs relating tofrom the acquisitionsettlement of the remainingpension 50%benefits earned by the majority of pension plan participants, with no similar loss recorded in the corresponding period of the outstandingprior common stock of Micro Bird effective April 1, 2026, with no such costs incurred during the the six months ended March 29, 2025. The costs incurred relating to this transaction were recorded in other expense, net as they are not indicative of our normal operating activities.year. See Note 1314 of Notes to Condensed Consolidated Financial Statements (Unaudited) included in Part I, Item 1 of this Report for a more detailed discussion of this transaction.

Finally, during the firstnine quartermonths ofended fiscalJune 27, 2026 and June 28, 2025, the Companylegacy Blue Bird operations sold certain state emissions credits that it waswere not projectingprojected to usebe used for approximately $0.4 million and $2.6 million, with no similar income recorded during the the first six months of fiscal 2026.respectively. The proceeds from thisthese salesales were recorded in other income, net as thisthese transaction isare not indicative of our normal revenue generating activities.

Income taxes. Income tax expense was $18.2$28.4 million for the sixnine months ended MarchJune 28,27, 2026 compared to $17.8$30.2 million for the sixnine months ended MarchJune 29,28, 2025.

The effective tax rate for the sixnine months ended MarchJune 28,27, 2026 was 24.5%10.5% due to the impact of the $160.5 million non-taxable gain from the acquisition of Micro Bird that was recognized during the third quarter of fiscal 2026. When excluding this non-taxable gain, the effective tax rate for the nine months ended June 27, 2026 was 25.6% 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,rate as well as the impact from foreign taxes relating to Micro Bird's Canadian pretax earnings during the nine months ended June 27, 2026, which were partially offset by the impacts from federal and state tax credits (net of valuation allowances) and discrete period items during the period.

The effective tax rate for the sixnine months ended MarchJune 29,28, 2025 was 25.8%25.5% 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 period.

Adjusted EBITDA. Adjusted EBITDA was $100.9$172.3 million, or 14.7%14.3% of net sales, for the sixnine months ended MarchJune 28,27, 2026, an increase of $5.9$18.8 million, or 6.2%,12.3%, compared to $95.0$153.4 million, or 14.1%14.3% of net sales, for the sixnine months ended MarchJune 29,28, 2025. Micro Bird contributed $16.5 million of Adjusted EBITDA during the nine months ended June 27, 2026. The $2.3 million increase in Adjusted EBITDA for the legacy Blue Bird operations primarily relates to the $11.7 million increase in (i) gross profit, when adjusted 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 (ii) Micro Bird earnings, when adjusted for the impact of expensesabove, that are excluded in calculating Adjusted EBITDA as outlined in the table below, that werewas partially offset by the (iiii) an$6.4 million increase in selling, general and administrative expenses, when adjusting for the impact of expenses that are excluded in calculating Adjusted EBITDA, as discussed above and (ivii) a$3.4 million decrease in other income, net, when adjusted for the impact of expensesincome and expense amounts that are excluded in calculating Adjusted EBITDA,EBITDA as discussed above.above, all during the the nine months ended June 27, 2026 compared to the nine months ended June 28, 2025.

(1) Includes $0.3$0.5 million and $0.2 million for the sixnine months ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025, 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 $1.2$2.4 million and $0.8$1.1 million for the sixnine months ended MarchJune 28,27, 2026 and MarchJune 29,28, 2025, 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.