Q2 2022 Blue Bird Corp Earnings Call
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Hello, and welcome to the.
Corporation fiscal 2022 second quarter earnings Conference call.
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So now I'd like to teleconference over to Mark Benfield has 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 dashboard Dot com under the Investor Relations tab.
You can access the supporting slides on our website by clicking on the presentations box on there.
Our landing page.
Our comments today include forward looking statements 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 FCC.
<unk> 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 Roslyn Ravi Alaska.
Then we will take some questions so let's get started.
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 Ukraine in China, which led to considerable disruptions in our supply base and high material cost inflation.
Overall, it continues to be a challenging environment, but the 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 cleaning cleaner emission school buses are creating a very exciting future for us.
On slide six.
You can see though the demand remains high for our products. Our order intake for Q2 was up 30% year over year supporting a record backlog of approximately 6600 units with 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 customer relationships. Many of these buses were priced in ordered prior to June of 2021.
We continue to make improvements in our underlying operations to prepare for higher throughput when supply chain disruptions east and look forward to reaping the benefits of these improvements in the future.
We were hopeful in the quarter, we would see improvements in the supply base and numerous shortages and delays in critical parts impacted production.
Throughout the quarter, we saw parts shortages worsen and although we built in an annual run rate of nearly 10000 buses in the month of March It came at a high cost and labor rework and that.
Expedited freight.
Many suppliers continue to have labor shortages at their facilities that seem to grow as gas prices soared in the quarter and many employees decided they can no longer afford to each of their jobs.
The supply base is generally the key is it's been a long two years with numerous challenges.
We drive deviations resource parts wherever possible to maintain production capacity, but in many cases.
There are limited viable suppliers for key components.
Previously we were forecasting a material improvement in the supply base in the back half of our fiscal year.
Given the world events, we no longer see these improvements coming in the near term.
I would expect to see stability in the supply chain is pushed out into our fiscal year 2023.
As I mentioned, we price protect the customer orders placed in the middle of 2021 that were delayed due to supply constraints.
Given the delayed production in the inflationary environment on materials and labor inefficiencies.
Due to part shortages, our margins were compressed in our second quarter.
Previously, we're forecasting a softening commodity market, but due to the Russian invasion of Ukraine, we saw commodities against spike impacting our cost base, including freight.
By record prices of diesel fuel.
We are aligning pricing and future cost and proactively taking numerous price increases, including an additional 10% we announced this week for a total of 25% since June of 2021.
However, do not fully see these actions and our results. It is the majority.
But what we are currently producing was priced prior to June of 'twenty one.
However, their average revenue per unit and our backlog has increased nearly $9000 since the start of our fiscal year as we burn off the old backlog and the new pricing takes hold.
On slide seven you can see many of the challenges I just referenced.
Our team is tenacious and the mentality. We have is we can always improve and adapt to the current situations.
On the supply chain side, we hired a new leader for the group.
Increased resources in the purchasing materials and warehousing teams.
We've also hired an outside firm to assist the team during this tumultuous environment to improve processes and eliminate waste.
We also are putting more boots on the ground it problematic suppliers to ensure they are bringing the same intensity to these issues as we are delivering on their promises.
Regarding the inflation, we are seeing in our cost base. We are passing along significant price increases who are aligned to our current and future build cost.
We're also continuing to justice steel hedging strategy.
Also due to the push to get last minute parts for production premium freight was increasing and we have developed better insights to the financial trade offs of those decisions.
There is great work being done at the manufacturing facility to adjust to the constant reality of all the parts not being there when we start production.
We have made considerable changes to our manufacturing footprint to improve offline throughput and reduced the number of hours per bus.
Offline is where we put on the majority of the parts that we're missing threw off the normal production process.
We are also adjusting our labor model Accordingly, based on our limitations of our supply base to support production and are now going to a six day eight hour shift pattern to allow an extra day for the supply base to produce parts versus the normal four or five day pattern, we would typically wrong.
Overall, I am very proud of the team and the improvements in the operations, we were making in a very difficult environment.
Slide eight has our financial results and our ongoing business highlights.
In the second quarter, we booked 19 131 units with sales of $208 million.
This was 442 units more than the second quarter of fiscal year, 'twenty, one and 43 million more revenue.
But producing those buses came at a high cost due to increasing material costs.
Typically rising freight costs and production inefficiencies due to the parts shortages as.
As well as being compounded by buses priced in the first half of the calendar year 'twenty, one, but built nearly a year later.
Now we consciously chose to price protect the contracts are dealers have with our customers to preserve these long standing relationships.
Our adjusted EBITDA was negative $11 million.
$18 million less in the second quarter of fiscal year, 'twenty, one and our adjusted free cash flow was positive $22 million.
$23 million better than the prior year.
In the quarter and since our last earnings call a number of key programs and initiatives have move forward to continue our leadership in alternative powertrain.
In late April EPA announced the details surrounding the release of the first $500 million of the 5 billion dollar leaned School bus rebate program, which is part of the infrastructure spending bill.
This first tranche should fund approximately 200 1600 school buses.
This is a great opportunity for Bluebird, and we intend to get our full share of these buses.
Touch on this program more in a few minutes.
Also we just this week, we debuted our prototype electric commercial chassis at the advanced clean Transportation Expo, which will open up new markets for the company.
We also continue to build the backlog type C and D. E V School buses with over 360 on order.
In the quarter. We also received car vehicle certification for a gasoline engine bus Bluebird is the only carb compliant gasoline school bus today in the industry, giving us a competitive advantage in states such as California.
Our alternative power presence continues to grow with 62% of our backlog now comprise non diesel powertrain.
And with our dominance in propane we are well positioned for the Queen's School bus rebate program, which also applies the buses powered by propane and which we are the leader.
Overall in a difficult quarter, we are still finding ways to drive operational improvements as well as new strategic initiatives to propel the company forward.
I will discuss additional programs in our focus areas later in the call.
But first I'll hand, it over to Roswell and walk through our financials in more detail.
Roswell.
Thanks, Martin Good afternoon. It is my pleasure to share with you the financial highlights from Bloomberg Cisco 'twenty to 'twenty two of second quarter results.
Quarter end is based on the close date of April <unk> 2022, whereas the prior year was based on April 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 'twenty to 'twenty two in fiscal 'twenty to 'twenty. One it was another tough quarter for Blue bird with a difficult operating environment as a result of continued supply chain disruptions.
<unk> impacted menu manufacturing industries.
Despite those challenges global unit sales volume of 1930 $1 million was 400 quantity of units higher than the prior year.
The extraordinary efforts from our supply chain and manufacturing teams.
But as Matt already mentioned this improvement we saw in January and February quickly reversed in March with the ramp up of the award in Ukraine.
<unk> issues, we experienced multiple components across a number of suppliers.
In addition, <unk> has a backlog of over 6600 units of CT gold and 4000 more than the end of the second quarter of fiscal 'twenty one.
At this time, our production capacity, which will remain constrained for the balance of the fiscal year is when they are feeling fiscal 'twenty three Q1 swaps.
Our ability to complete and deliver all of this union on a timely basis will depend on supply stability.
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Consolidated net revenue of 208 million was $42 million higher than the prior year.
Hope that Boston that serve new was $188 million up by $38 million versus prior year.
On average bus revenue per unit decreased from 101000 to 98000.
Which was largely the result of a higher mix of oil and gasoline powered buses, 29% this year versus 11% last year.
Apply constraints EV sales, whereas the level of 49 units.
With less than the last year.
Revenue for the quarter was $19 million, representing an improvement of $5 million compared to the prior year's second quarter.
Over the past few quarters, we have seen improvement in part sales, which is an indicator that the normal workforce.
You can get back to pre COVID-19 levels.
So there has been some disruption also in our parts business due to supplier shortages.
Gross margin for the quarter was one 5% or 970 basis points lower than the same period of last year.
As we noted on the Q1 call we expected to see significant margin compression in the second quarter raw material increases component cost pressure and the low margin backlog units that were priced nearly 12 months ago.
I'll discuss this in detail later in the presentation.
In the second quarter of fiscal 'twenty, two adjusted net income was negative 10 million or $12 million lower than last year.
Adjusted EBITDA of approximately negative 11.
11 million went down compared with the prior year by 18 million.
Adjusted diluted earnings per share of negative two one cents was down 36 cents from the prior year.
Slide 11 shows the walk from fiscal 'twenty, one second quarter adjusted EBITDA for the fiscal 2002 of second quarter results starting on the left with $7 5 million hired a bus volume in the period of additional 442 units and higher parts margin of $2 6 million resulted in a six.
5 million unfavorable impact.
Pricing net of economics was negative $12 1 million in the quarter, driven by higher steel and commodity costs and margin compression as we work through their backlog.
As we look to the balance of the year, you will more clearly see the impact of higher commodity costs.
Plant efficiencies deteriorated by $9 7 million from last year.
Run by higher freight costs, approximately $1000 more per bus and supply disruptions in parts shortages.
SG&A and engineering expenses were close to $3 million higher than last year, primarily driven by higher wages.
Recall that during the second quarter of fiscal 'twenty, one we have to pay cuts and furloughs in place in response to COVID-19 demand drop and key engineering projects were postponed.
Since then pay has been restored and also increased due to high inflation and essential regulatory engineering projects have resumed.
Additionally, in the other category, our joint venture results from micro bird weight.
Close to 1 million lower versus the prior year as they have been also affected by supply chain shortages predominantly the microchip shortage, which is impacting the chassis allocation from CT energia.
Moving to slide 12, we wanted to give you a perspective of what the underlying normalized results for Q2 would have looked like.
Absent of the supply chain constraints and margin compression from the old fiscal 'twenty one backlog.
On the volume side, our current capacity is close to 3000 units per quarter. So you could have built and sold additional 1000 units.
Wait so approximately 13 million of margin opportunity.
As I explained before in prior calls we are still working to get them back global units quoted on or about almost a year ago.
If the current prices, we put into market place would have been fully effective.
We would have picked up additional $12 million from the pricing that those economics.
Finally, the supply chain shortages drove tremendous efficiency in our manufacturing operations.
So increase the reward on offline hours and multiple schedule changes.
Absent of these effects and running with our historical efficiency.
It would not have had to spend 11 million of variances in our operations.
Operating expenses reflect the card on wage rates and fixed costs for SG&A and engineering, so no adjustments needed there.
So looking at the entire picture our underlying operating performance would have yielded approximately 25 million of adjusted EBITDA on 3000 units with price cost gap close and with most supply chain and operations performance. This is also a target level for the mid term in a normal year once the supply.
Jane is returning back to normal levels and our teams are making constant progress towards that goal.
This was also our expectation for fiscal 2000 <unk> report at the time of our last earnings call. However.
However, you will see a bit later many of the assumptions we had at the time did not flow to anymore, you have to external geopolitical and macroeconomic factors.
Moving onto the balance sheet and liquidity on slide 13, we ended the quarter with cash of $15 million that was up to 167 million 12 million lower than last year net debt or $142 million was 8 million lower than prior year and our revolver had zero balance.
Yes.
It is worth noting that we are in compliance with all covenants towards the end of the quarter. There are two active financial covenants in our credit agreement as part of that piece first.
First the trailing 12 months EBITDA as defined under the credit agreement was $12 3 million versus a minimum requirement of negative $4 5 million.
Second liquidity as defined under the credit agreement was $108 3 million versus a minimum covenant of $5 million. That's totally remained in compliance with our credit agreement covenants.
Moving on to slide 14, we have already covered the cash and debt on the previous slide.
The improvement in operating cash flow and adjusted free cash flow was primarily driven by trade working capital due to our increased production levels throughout the quarter.
On slide 15, we would like to give you some transparency regarding how you are planning to work through the backlog with oil pricing.
As an analogy it is like a snake eating the elephant.
Slow and painful at times, but we're making good progress.
The area sections on the graph represent the unit volumes by month on the left axis in White, you can see that approximately half of the volume will build and sell in fiscal 'twenty two comps from fiscal 'twenty, one order books, which in today's inflationary environment are yielding very low and sometimes even negative margins.
In light Blue, we're expecting op units ordered during fiscal 2000 till Q1, although some were quoting also during the second half of fiscal 'twenty one.
On the right taxes, those horizontal lines you can see the relative improve lung can stamp out of gross margin per unit with a 5% price increases announced in July 2021, taking corp.
Beginning in June we were planning to build and sell the first union or do you already.
Q2 fiscal 'twenty, two with the 11% price increase in place this.
Please note that the addition of a 4% pricing because they put in place in March is only now starting to affect future orders taken during Q3 of fiscal 'twenty two for builds later in the year.
The effects above combined with the improved supply chain situation in January and February and steadily decreasing steel and other raw material prices gave us confidence towards the good recovery during the second half of fiscal 'twenty two.
And then February 24th happened.
Russia decided to invade Ukraine, we start so not necessarily a quality of the orders obviously in Europe .
The human suffering and refugee situation is staggering.
One was enormous economic consequences for the world.
This conflict is driving significant an equal effect in a globally connected economy.
Ukraine provides critical new oil and gas for the worldwide chip production as well as pig iron is produced in the region and the steel manufacturing.
Oil and gas markets were also shocked by the trade War.
On slide 16, you'll see our key raw material of Samsung during February .
Steel prices were trending down and these are the stable around $3 50 per gallon in the U S.
On slide 17, you'll see how the steel price has shot back up 300 to $500 per tonne and we've got a length about $5 per gallon.
While we are lock in prices for the 20% of steel used in our own fabrication, our supplier's automotive on a quarterly raw material escalator, which will hit our bottom line with these recent increases in Q4 of fiscal 'twenty cute.
These all impacted almost immediately our shipping costs of our trucks and then general tier two or three in core supply chain disruptions, but started to unravel drove more air freight and expedited shipments.
The recent Covid lockdowns in China further compounded by supply chain disruptions.
All these events combined are slowing down and postponing our recovery, which we expected during the second half of fiscal 'twenty two.
We also had to reduce our rate of production growth for the remainder of this fiscal year.
We are taking several countermeasures to address these facts on the ground.
And now an additional 10% price increase for new orders to be built before.
I'm tempted to.
Working with our dealer partners to improved backlog margins and optimize the production mix on deliveries.
Working to improve the plant efficiency in a very difficult environment and adjust the speeds to reflect the current supply chain capabilities.
Continued to maintain very strict fixed cost control reduce where possible while still investing in critical areas for growth for example, easy and chassis to set our sales solid for success once the supply chain normalizes.
Further our pricing models and production slot manage monthly be put in place during fiscal Q3 for.
For the future orders, but reduce our margin exposure going forward.
No problem on this during our next earnings call.
On slide 18, looking at fiscal 2022 as previously discussed we had a difficult first half because of supply constraints and margin compression.
We still expect to see gradual but slower relief in Q3, because the 11% price increase begins to take effect.
By Q4, the situation is expected to further improve but volume risk still a disease and margin continuing to be under pressure with inflationary effects accelerated.
Therefore, we are reducing our adjusted EBITDA guidance for fiscal 2022 to a range of $20 million to $30 million on increased revenues of $800 million to $900 million.
The adjusted free cash flow is expected to be positive on a range of 15 to 25 million.
With that I'll now turn the discussion back to Matt who will walk you through an update on our business.
Thank you Roslyn.
I'd now like to walk through progress on our key focus areas for fiscal year 'twenty two.
Just as a reminder, on slide 20 of our three foundational objectives. The first is to take care of employees. The second is lighter customers dealers and third to deliver profitable growth.
Around each of those objectives as you can see the key metrics, we track in that business.
Within those foundational objectives. There are four key focus areas for fiscal 'twenty to.
The first area is our people.
The journey in making delivered a premier place to work.
Engaging our workforce and creating an inviting 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 areas on our lean transformation.
The goal being to implement a world class operating system that drives out cost improve quality increase the 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. These additional segments can help absorb overheads 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.
At the beginning of the 5 billion 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 transportation and infrastructure.
We have a dedicated cross functional team that is focused on preparing bluebird for this bright future and electrification.
In strengthening our leadership position.
Now, let's take a look at some of the progress on slide 21.
On the people front, we are nearing completion of transforming the leadership team at Bluebird.
Radically increasing the capabilities and energy within the team.
Two new additions to the team were made in the quarter.
Britain's Smith joined Us from KPMG as senior Vice President of electrification and our Chief strategy Officer.
Britain has over 20 years of leadership experience across multiple industries and in earlier in his career spent time at Mckinsey.
Jim also joined as our senior Vice President of supply chain.
Jim has made a career excelling and supply chain leadership, whether it's large companies like LG <unk>.
Consulting with many industrial fortune five hundreds to improve their operations.
Jim will lead the purchasing logistics warehousing and materials functions.
We also launched a comprehensive hourly and salaried employee engagement survey and developed an action plan to address areas of opportunity in the early stages of request to become a premier place to work.
The upgrades in our facilities focused on improving employee morale are continuing and.
And we're also improving the span of control of our frontline leaders hourly teammates.
Make sure those leaders at the appropriate time to provide the coaching training scheduling as well as driving the increased level of accountability and engagement.
Tony transformation and facility continues to make progress.
As I mentioned during the quarter, we spent considerable time redesigning our offline processes and it paid dividends.
As you can see the picture here, we set up 17 offline base with assigned tax time monitors and supported by parts kidding.
The result was you're able to reduce offline hours by 40%.
And doubled throughput in the process of eliminating the need for to shift offline operation.
We have also reduced overall defects per unit, 40% compared to our first quarter.
On our last earnings call, we talked about our long term goal of reducing the hours per bus inner standard by 30%.
And we have clear deliverables to tackle that.
In the quarter, we reduced 15 hours out of our standard through process improvement and Pete touch up.
I, eliminating unnecessary rework and improving our peak masking process.
When the supply chain normalizes, we'll see the benefits of this hard work.
Slide 22 focuses on our progress on expanding our total addressable market and scaling E D.
As I mentioned earlier on the call. This week, we debuted our electric commercial chassis at the advanced clean Transportation Expo.
This product is targeted at a class five and six last mile step vans and high end Motorhomes.
These two segments of the market have an opportunity to nearly double bluebirds total addressable market.
And our product launch garnered a tremendous amount of interest as it is an OEM engineered electric chassis with the after sales support of nearly 100 year old company.
Our strong dealer network throughout the United States and Canada.
We partner with Lightning E motors on developing the powertrain for this segment of the market and we expect sales in the second half of calendar year 2023.
On the EV side construction started on an existing.
40000 square foot facility on our campus for final EV powertrain installation.
It will enable us to scale up to 12 units per day by the end of fiscal year 'twenty two.
And 20 units per day by the end of fiscal year 'twenty three.
Equating to 4000 units of annual production for electric.
Our goal for this facility as a showcase world class manufacturing and a vision for what we don't want to accomplish with all Bluebird Assembly operations.
Longer term.
Our goal will be to add an additional 2000 units Amit Kapoor.
Capacity beyond this question to support volume for our long term outlook.
Now moving on to slide 23, and another exciting topic.
As I mentioned earlier in the call in late April the EPA released details around the clean School bus rebate program. It is the first $500 million of a $5 billion program and we expect this first round of <unk> 200, 1600 EV buses.
We are in the midst of the application process now and we have provided substantial resources to our dealers and customers to assist them in applying for this funding.
The application period, just from May through August of this year.
Not a money varies greatly depending upon if a customer is applying in a priority zone.
Our priority zoned as defined as a disadvantage community, where there is greater need.
Our priorities don't care received $375000 for full funding of the need of school bus and a non priority zone can receive up to 250000.
Which typically cover Supreme over a conventional internal combustion school bus.
Now, let us not forget the importance of propane.
And this program as well as it can qualify for up to half of this total funding.
And in that instance, propane received 15 to $25000 per bus depending upon if it's not a priority or a prior district.
A single lane customer cannot receive funding for more than 25 school buses and not one state can consume more than 10% of the overall funding.
40% of this funding will be targeted to priority districts and a lot of Ruby conducted to pick the winners.
The result of the lottery will occur in October of 2022, and we expect orders in the first quarter of our fiscal 2023.
Impacting our financials in the second half of 2023.
We are very excited about this opportunity and we believe we'll be able to take advantage of this program and win our fair share of new bus orders.
Slide 24 reinforces the fact that the outlook for Bluebird is incredibly positive.
We are aligning the pricing of our units to the cost to produce units in the future and are seeing a material increase in revenue per unit in the backlog and have raised prices a total of 25% in the last year.
We expect the supply chain environment to be bumpy for the remainder of the year, but we have made substantial operational improvements to manage the situation.
The lean transformation programs continue to make an impact in reducing standard hours off our production process through eliminating waste and creating more streamlined methodologies.
We are also continuing our dominance as the alternative power leader.
And are the only manufacturer do you have a carb certified gasoline school bus products.
Our backlog now stands at over 60% alternative power.
The clean school bus rebate program is starting and our goal is to continue our leadership in EEV School buses, given our proven reputation and electric and the substantial resources, we're putting in place for our dealers and customers to assist in securing funding.
In addition to this exciting $5 billion program there'll be released over the next five years, many states and provinces are not announcing plans go completely electric with school buses interstates or province.
The most recent being New York State plans that have every school bus on the road electric by 2035.
Boston has also made similar announcements plans that have all school buses electric in 2030.
In addition, Quebec has a similar timeline with all New school buses purchased in the province being electric going forward.
And we are making progress on our electric commercial chassis and have a strong interest from a number of potential customers.
Now keep in mind the impact of our commercial chassis was not even included in the long term outlook, we presented a few earnings calls ago.
Overall, the fundamentals of Bluebird a strong the.
The market demand is robust.
We are making operational improvements in the business.
The clean school bus funding is getting released and we are preparing for large scale growth in EV.
And at the same time, we are working on expanding our total addressable market.
We look forward to continue to update you on our progress in the meantime stay laser focused on our priorities and our deliverables.
I'd now like to open up the line for questions.
Thank you.
Thank you and as mentioned at this time, we will begin the question and answer session.
I'll ask a question you May press Star then one on your Touchtone phone.
If you are using a speakerphone please pick up your handset before pressing that case too.
Sorry. Your question. Please press Star then two.
At this time, we will pause momentarily to assemble the roster.
And the first question comes from Eric Stine with Craig Hallum.
Hi, everyone. Thanks for taking the questions.
Hey, Eric good afternoon.
Afternoon, So maybe just.
On the supply side I know each bus has over 1000 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 Yeah in general there arent 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 thats looking at dual or triple sourcing options and right now we're seeing a lot of I would say tier two and tier three 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 summer to just.
General dynamics in the economy and inflation.
Got it okay.
Well I mean, I guess, you've pushed it out sell it kind of remains up in the air a little bit of whack a mole but.
But anyway okay.
Maybe just turning to the funding.
The infrastructure funding, you've obviously, obviously seem pretty strong orders ahead of that and I know this is for 200 <unk> hundred 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 two ways of looking at it so if it's a priority school district.
It'll be up to 375000 for type C or D and that's usually going to cover the full cost of an EV bus.
Non priority district, it's 250000, which would be that delta over.
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 <unk>.
<unk> chain I mean, do you think obviously youre positioned for this EV ramp in it it is the 12% to <unk> hundred and Youre 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 round is going forward here over the next few years.
Yes, we're working hard with our key partner in this sense as well as our battery supplier exalt make sure we're prepared for the increases both from the supply base as well as the operational improvements, we're making to handle the production capacity.
Okay. Thank you.
Alright, Thank you Eric.
Thank you.
Once again, please press Star then one if you would like to ask a question.
And one more time pressing star then one will allow you to speak.
Alright, well at this time I would like to I was trying to floor back over to Matthew Stevenson CEO for any closing comments.
Thank you Keith I appreciate it thank.
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 got a record backlog of over 6000 units with over 700 million Euro 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 unexpected 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 Bluebird.
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 Bluebird a.
Great afternoon.
Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.