Hello, and welcome to the Blue Bird Corporation Fiscal 2022 Second Quarter Earnings Conference Call. [Operator Instructions]. Please note, today's event is being recorded. I would now like to turn the conference over to Mark Benfield, Head of Investor Relations. Sir, please go ahead.

Thank you. Welcome to Blue Bird's Fiscal 2022 Second Quarter 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 IR landing page. 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 on the following 2 slides and in our 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 CEO, Matthew Stevenson; and CFO, Razvan Radulescu. Then we will take some questions. So let's get started. Matt?

Thank you, Mark, and good afternoon, everyone. The second quarter of our fiscal year 2022 began on a positive note with an improving supply chain environment and softening futures on commodities. But these early gains were disrupted by world events in the Ukraine and in China, which led to considerable disruptions in our supply base and higher material cost inflation. Overall, it continues to be a challenging environment, but team is still making considerable improvements in our operations as well as our strategic initiatives to drive the company forward. The overall fundamentals of our customer base remains strong and the new grant funding mechanism for clean and cleaner emission school buses are creating a very exciting future for us. On Slide 6, you can see though that demand remains high for our products. Our order intake for Q2 was up 30% year-over-year, supporting a record backlog of approximately 6,600 units worth over $700 million. Given supply chain is limiting our production, we price protected units we built and delivered in Q2 in order to safeguard our dealer and customer relationships. Many of these buses were priced and ordered prior to June of 2021. We continue to make improvements in our underlying operations to prepare for higher throughput when supply chain disruptions ease and look forward to reaping the benefits of these improvements in the future. We are hopeful in the quarter, we would see improvements in the supply base, but numerous shortages and delays in critical parts impacted production. Throughout the quarter, we saw part shortages worsen, and although we built an annual run rate of nearly 10,000 buses in the month of March, it came at a high cost in labor, rework and expedited freight. Many suppliers continue to have labor shortages at their facilities that seem to grow…

Thanks, Matt, and good afternoon. It is my pleasure to share with you the financial highlights from Blue Bird's Fiscal 2022 second quarter results. The quarter end is based on a closed April 2, 2022, whereas the prior year was based on our April 3, 2021, close date. We will file the 10-Q today, May 12, after the market closes. Our 10-Q includes additional material and disclosures regarding our business and financial performance. We encourage you to read the 10-Q and the important disclosures that it contains. The appendix attached to today's presentation includes reconciliations of differences between GAAP and non-GAAP measures mentioned in this call as well as important disclaimers. Slide 10 is a summary of second quarter results for fiscal 2022 and fiscal 2021. It was another tough quarter for Blue Bird with a difficult operating environment as a result of continued supply chain disruptions that have impacted many manufacturing industries. Despite those challenges, global unit sales volume of 1,931 units was 442 units higher than prior year due to the extraordinary efforts from our supply chain and manufacturing teams. As Matt already mentioned, this improvement we saw in January and February quickly reversed in March with the ramp-up of the war in Ukraine. Supply issues were experienced for multiple components across a number of suppliers. In addition, Blue Bird had a backlog of over 6,600 units at quarter end, 4,000 more than at the end of the second quarter of fiscal '21. At this time, our production capacity, which will remain constrained for the balance of the fiscal year is full, and we are feeling fiscal '23 Q1 slots. Our ability to complete and deliver all of these units on a timely basis will depend on supply stability of key components. Consolidated net revenue of $208 million…

All right. Thank you, Razvan. I would now like to walk through progress on our key focus areas for fiscal year '22. Just as a reminder, on Slide 20, our 3 foundational objectives: the first is to take care of employees, the second to delight our customers and dealers and third is to deliver profitable growth. Around each of those objectives, you can see the key metrics we track in the business. Within those foundational objectives, there are 4 key focus areas for fiscal '22. The first areas are people. The journey in making Blue Bird a premier place to work, better engaging our workforce and creating an reviving environment where our employees look forward to the opportunity to share their passion and ideas. The ultimate goals are to improve our cost, quality and reduce absenteeism and attrition. The second major focus area is on our lean transformation. The goal being to implement a world-class operating system that drives out cost, improves quality, increases throughput and improves the working environment for our teammates. The third area is to expand our total addressable market. School buses are core, yet there are some markets that take a chassis so similar to our school bus that I would call them an extension of our core competency of building great chassis rather than a market adjacency. We have excess chassis capacity and these additional segments can help absorb overhead, offset the seasonality of the school bus business and assist us in retaining a more consistent workforce. Our final major focus area is scaling up EV. The beginning of the $5 billion in incentives recently approved in the infrastructure spending bill is here and will dramatically increase the demand for electric school buses. This increased EV demand impacts everything from our sales strategy, sourcing, production,…

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

So maybe just on the supply side, I know each bus has over 1,000 components, and I think you said that on average, 24 were an issue. And I know last quarter, you thought you kind of had your arms around it or some visibility. And so just looking for some details on these new issues that have emerged specific parts potentially. And then, obviously, you've pushed out the timing recovery or when things start to normalize, but just maybe confidence levels that you can get ahead of it.

Yes, Eric. Thanks for the question. Yes, in general, there aren't any specific components in the past. We had an issue around an ABS module that was limiting production. So our goal is to mitigate any supply disruptions as much as possible, whether that's looking at dual or triple sourcing options. And right now, we're seeing a lot of, I'd say, Tier 2 and Tier 3 type components. So these are like small electrical components or connectors being slowed down coming out of China as well as just seeing general domestic supply base have shortages of labor back to some of the just general dynamics in the economy and inflation.

Got it. Okay. But in -- well, I mean, I guess, you've pushed it out. So it kind of remains up in the air a little bit of [indiscernible], but anyway, it's okay. Maybe just turning to the funding, the infrastructure funding. You've obviously seen pretty strong orders ahead of that. I know this is for 1,200 to 1,600 buses, but just curious, do you think people -- I mean, obviously, people are waiting on this. And where do you see the market expectation, whether this would be for the incremental cost over a diesel bus or the full price of a diesel bus?

Yes, Eric. So kind of 2 ways of looking at it. So if it's a priority school district it will be up to $375,000 for a type C or D, and that's usually going to cover the full cost of an EV bus. On nonpriority district, it's $250,000, which would be that delta over in the ICE engine. And 40% of the overall funding is targeted to go to priority districts.

Okay. Got it. And maybe last thing. I mean, I guess just coming back to the supply chain, I mean do you think -- obviously, you're positioned for this EV ramp, and it is the 1,200 to 1,600, you're going to get your fair share of that. Do you feel like that the supply chain, even with all its issues that it is positioned or that you've got a handle on being able to meet that demand for this first round, let alone the next rounds going forward here over the next few years?

Yes, we're working hard with our key partner in this, Cummins, as well as our battery supplier, EXALT, make sure we're prepared for the increases both from a supply base as well as the operational improvements we're making to handle the production capacity.

[Operator Instructions]. All right. Well, at this time, I would like to turn the floor back over to Matthew Stevenson, CEO, for any closing comments.

Thank you, Keith. I appreciate it, and thank you to all those joining us on the call today. And as you heard during our prepared remarks, demand for our buses remained strong. We've got a record backlog of over 6,000 units worth over $700 million. We're continuing our dominance in alternative powered buses and making significant improvements in our operations through our lean transformation initiatives. We're also incredibly excited about our growth potential in EV through the Clean School Bus Act, and our recently debuted EV chassis, which is effectively doubling our total addressable market. And although the supply chain disruptions are continuing, we are adapting our business to be nimbler and putting more resources to mitigate these impacts wherever possible. We have raised prices accordingly to existing and expected costs and our margins will improve as we work through the backlog that was ordered prior to the majority of the price increases taking place. We look forward to updating you again on our progress next quarter and appreciate your continued interest in Blue Bird. Should you have any follow-up questions, please don't hesitate to contact our Head of Investor Relations, Mark Benfield. And thanks again from all of us at Blue Bird. Have a great afternoon.

Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.