Matthew Koranda: Okay. Helpful. I’ll take the rest of my questions offline, guys. Thanks.
David Lee: Thank you.
Operator: Your next question comes from the line of Brian Nagel from Oppenheimer. Your line is open.
Brian Nagel: Good afternoon, guys.
Selwyn Joffe: Hey, Brian. How are you doing?
Brian Nagel: So my first question, just with respect to the sales disruption in the quarter, I think it’s probably a follow-up, to some extent, to the prior question. But just to get to be clear, I mean were the €“ are these sales €“ in your view, are these sales just simply delayed? Or is there a component that is lost because of this? It sounds like one competitor, the adjustments they’ve made.
Selwyn Joffe: I think they are lost. Having said that, that I think this customer will step up orders and to maintain its competitive position, well, I shouldn’t say will, are, they are to maintain their competitive position in the marketplace. And so I think we’ll see an elevation and a return with them as they increase their inventory levels. But I don’t think those are recoverable. The changeover revenue, that $17 million, that’s just a deferral.
Brian Nagel: And then so €“ and I followed you. I mean, I’ve watched your company for a while now. I don’t remember something like this happening in the past. So I guess the question is, does this happen? Is this unprecedented? In an event like this, could it be a leading indicator of something else?
Selwyn Joffe: It’s unprecedented. We have not seen it at the size before. I think it’s an indicator of strategy. And again, we can’t talk about any of our customers and their strategies. But I think it’s an indication of a short-term strategy that’s being reversed.
Brian Nagel: Got it. And shifting gears a bit, just on the supply chain. Looks like here €“ I think, David, I think you were making comments here, but just with regard to the ongoing disruptions. So I guess my question is, we’ve seen broadly speaking, supply chain challenges for your company, for your sector, even more broadly abate, but there’s still some out there. Are we still thinking that most of the supply chain issues are more or less transitory in nature? Are we getting now to the point where maybe some of these disruptions will just simply persist or have now become structural?
Selwyn Joffe: No. I think they’re transitory. We’re seeing it getting better and better. As this COVID and factories become more predictable and are able to stay open on a more predictable basis, which we had a massive outbreak of COVID in China and some delays prior to Chinese New Year and coming out of Chinese New Year, but it looks like €“ and I’m, by no means, an expert, but it looks like the COVID, while the outbreaks may be luminous, the severity of it seems to be passed. And it seems like €“ and again, it’s not over yet, but it certainly seems like for us that, as it passes over the predictability of our factory and supply chain, we’ll get much better. And we’re seeing that already. I mean I’m cautiously optimistic.
I do feel like we have to continue to watch what happens in China or in particular, both with COVID, which I think, again, we’re able to see it now. And I think it €“ hopefully, we’re getting through that. And then hopefully, there are no €“ I’m not sure what the other political ramifications will be as we go down the road, just the whole geopolitical situation in the world now is a little crazy. But I think it’s stabilizing. Freight seems to have stabilized, and that’s a transcontinental freight that seems to have stabilized. We still have a lot of headwind in local freight. And €“ but hopefully, capacity in the roads will catch up and that part of the freight equation will get better. But for now, that’s sort of a headwind and then predictability on semiconductor chips and some of these Chinese factories are still €“ there’s still some headwinds there.
