Good afternoon and welcome to the Blue Bird Corporation Fiscal 2022 Fourth Quarter Earnings Conference Call. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Mark Benfield, Head of Investor Relations. Please go ahead.

Thank you and welcome to Blue Bird’s fiscal 2022 fourth 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 two 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. Let’s get started. Matt?

Thank you, Mark, and good afternoon, everyone. Razvan and I are incredibly excited to share an update on the progress of Blue Bird. No doubt fiscal year ‘22, which closed on October 1, was a challenging year due to the residual effects of COVID that impacted our business, which included exhaustive supply chain disruptions and unprecedented industrial inflation. However, I am proud to say through the hard work of the Blue Bird team, we have navigated these turbulent seas and have positioned the organization for significant success in this current fiscal year 2023. On Slide 6, you can see we did that by executing our plan in several key areas, along with the added benefit of strong market fundamentals. Overall, industry demand is robust and is driving a record backlog for Blue Bird this time of the year. We also continue to hold a leadership position in alternative fuel and electric buses. Throughout the year, we aggressively increased forward pricing and we partially recovered pricing on the backlog to match inflationary economics. In addition to raising prices, we dramatically drove cost out of the business and not just for the short-term. We reorganized our functional areas to be more efficient and leaner and we eliminated several non-value-added operations across the business. Through strong leadership, tenacity, lean processes and a host of operational changes, we improved parts availability and increased our throughput and quality. Missing parts hat setup are down dramatically compared to previous quarters and the vast majority of our parts are now installed in station, reducing rework costs and improving quality. This is by far and away the best position that Blue Bird has been in since I joined the company 18 months ago. The financial performance for fiscal year ‘22 shown on Slide 7 reflects several headwinds that…

Thanks, Matt and good afternoon. It’s my pleasure to share with you the financial highlights from Blue Bird’s fiscal 2022 and fourth quarter results. The quarter end is based on a closed date of October 1, 2022, whereas the prior year was based on a closed date of October 2, 2021. We will file the 10-K today December 12 after the market closes. Our 10-K includes additional material and disclosures regarding our business and financial performance. We encourage you to read the 10-K 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 on this call as well as important disclaimers. Slide 11 is a summary of fourth quarter and full year results for fiscal ‘22. I will start with the fourth quarter results summary and I will focus on the full year results for fiscal ‘22 and guidance for fiscal ‘23 for the remaining of the presentation. It was another challenging quarter for Blue Bird with some persistent supply chain disruptions limiting our throughput and impacting our efficiency and over time with the planned and delayed inflationary cost pressures that became effective on July 1. We also had extremely high working process at the beginning of the quarter and we worked through still a large number of all backlog low margin units with older pricing. Despite all these challenges, the team has done a fantastic job and generated 2016 unit sales volume, which was 105 units or 6% higher than prior year. Consolidated net revenue of $258 million was $66 million or 34% higher than prior year, driven primarily by higher mix of electric buses and pricing actions that are starting to take hold. The adjusted free cash flow was $30 million positive, $70 million higher…

Okay. Thank you, Razvan. On to Slide 22, as detailed in the fiscal year ‘23 guidance that Razvan walked through, we still have another quarter before we start firing on all cylinders as we navigate through some older priced units in the first quarter. Still, we are forecasting fiscal year ‘23 results that are dramatically better than fiscal year ‘22. We plan on booking at least 8,000 units, a 17% increase over fiscal year ‘22 and driving a top line of nearly $1 billion, a 19% increase year-over-year. Parts revenue will continue to be a bright spot, and we see line of sight to at least $84 million in revenue, up 10%. The EBITDA performance, we expect to be up over 350% compared to fiscal year ‘22 and to be approximately $40 million. EV bookings will be a significant component of those results, and we plan to double our EV bookings to over 500. On the right hand side of the slide, you can see the ACT retail sales forecast for fiscal year ‘23. It continues to be supply chain constrained across the industry. And our targeted bookings will put us right where we want to be around that 30% market share. What is extremely exciting is the demand in front of us. With many other industries slowing down, school buses are a great place to be. Retail sales have been off from their average of 32,000 units per year for 3 years in a row now, and the national school bus lead is aging. The market was first constrained by COVID and school closures and has been held up more recently by the supply chain. These buses must be replaced, and we expect substantially robust years ahead of us to address in pent-up demand. ACT is forecasting a compound…

[Operator Instructions] Our first question is from Eric Stine with Craig-Hallum. Please go ahead.

Hi, Matt. Hi, Razvan.

Hey, Eric, how are you doing?

Doing right. Thanks for all the details, especially per quarter, very helpful. Curious, just on the EV side, first I just want to confirm, did you say that you are pretty much sold out or your production slots are full for fiscal ‘23. So, I guess that would be first. But then secondly, I mean is your goal that you would satisfy that? You mentioned another, what, 400 units to 600 units that you may get in terms of awards as part of the EPA program? And then fiscal ‘24, that’s when you would be able to be more-timely in terms of satisfying order flow?

Yes. Eric, this is Matt. I will take that. So, in terms of the EV production, so we are actually reserving slots through the back half of our fiscal year for these orders that will be coming in from this Clean School Bus Act program. So, as of right now, we are reserving slots. We have about 350 EVs in the backlog right now. But as we stated in our prepared remarks, our goal is to book well more to 500 of that for the fiscal year. And then regarding the Clean School Bus program, our estimates are we will get an additional 500 to 700 orders out of the awards that are yet to come in. And the customers have until the end of April to get those orders in.

Okay. And it was good to see the award that you put out last week. I mean I would think then – I mean do you think it’s kind of weighted back in towards April when that deadline comes, or do you think there is kind of a steady pickup between now and then?

I think with the holidays here coming up, it will be a little slower. We have already gotten some in, but we expect really the crutch of these to come in after the New Year.

Got it. And then maybe last one for me. You just mentioned the steel prices that have come down pretty substantially. And you are almost, I guess one more quarter before you really start to feel the positive impact of the price increases. As you plan out longer term, how do you feel about being able to hold price? Obviously, your customers can see the same thing that steel prices have come down. And I know you have taken a lot of steps on the pricing side. So, maybe how you think that push and pull plays out?

Yes. Thanks for the question. I will take that one. This is Razvan. So, pricing is obviously a competitive aspect of our position in the market. So, we are always watching our competitiveness, and we will adjust accordingly going forward. On the other hand, as mentioned in our prepared remarks, we have taken steps to limit our exposure on the forward codes and the sales that we have. So, we are now much more flexible than in the past. As it relates to steel, there is a time lag until the time when we can benefit from these reductions because of the forward locking that we put in place. So, we will have to take into account all these three factors and then monitor our competitiveness and our order intake. But overall, we feel very positive that our margins are very strong in the backlog, and we are collecting orders today for Q4 fiscal ‘23 also at very good margins.

Okay. Thank you.

All right. Thank you, Eric.

[Operator Instructions] The next question is from Mike Shlisky with D.A. Davidson. Please go ahead.

Hi there. This is David Johnson on for Mike. Just a couple of questions. You discussed an expansion plan for your EV manufacturing, putting it in a dedicated space on the last call. But since then, the EPA doubled the subsidies for this tranche, essentially accelerating the pace of its grants. Will Blue Bird be able to keep up with all of this? Can you accelerate your capacity expansion if you need to?

Yes. Hi, David. This is Matt Stevenson. So, we had line of sight in terms of the funding in the subsequent buses that it would eventually provide over this time period. So, this is what we took into consideration when we developed our ramp-up plan. So, you think of that 12 per day puts us roughly around that 2,500 units a year. And then we are also expanding to 20 per day by the end of calendar year ‘23. So, that at what point of capacity there based on the needs of this program.

Great. And then one more for me, can you provide an update on your non-bus program through Lightning eMotors? How has that been going? And do you have an updated timeline for the development and the product launch?

Yes. Thanks David. So, I think you are referring to the strip chassis targeted at those last mile like box delivery vans. And we are continuing to progress with Lightning, and our goal is to have demonstration units in customers’ hands by the end of calendar year ‘23.

Great. Maybe if I can slip one more in there. Can you confirm whatever EV buses you are getting from the EPA program, they are going to take an order away from your diesel business? In other words, the net deliveries you expect to make in fiscal ‘23 is unchanged?

David, this is Razvan. I will take that question. At this point, our throughput is constrained by the supply chain, primarily. So, indeed an EV new order takes out an old diesel bus off the road, but it doesn’t necessarily mean that it’s a one-for-one stop on our total volume. Our total volume currently is constrained by the supply chain.

Great. Thanks a lot. I will pass it on.

Thank you, David.

This concludes our question-and-answer session. I would like to turn the conference back over to Matthew Stevenson for any closing remarks.

All right. Thank you, Gary, and thank you to all those joining us on the call today. As you heard during our prepared remarks, the fundamentals of our market are strong and our demand is robust. And our business is back on track. And by Q2, we start firing on all cylinders. Plus, we remain the leader in electric school buses with more on the road than anyone else. We have also driven costs out of our business, increased parts availability, throughput and quality. The business has turned the corner and our bookings in the first quarter we are currently in will be the highest in over 10 years. We are very confident and excited about where the company is headed, and we look forward to updating you again on our progress next quarter. Should you have any follow-up questions, please not hesitate to contact our Head of Investor Relations, Mark Benfield. Thank you, again, for your time. And we hear at Blue Bird, want to wish you a very happy and safe holiday season. All the best.

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