David Johnson: And so I think fundamentally on supply chain, we have two stories. One story is electronics and that story is somewhat improving, but not to the point that it’s going to allow us to dramatically change our inventory situation. Suppliers are still allocating products. We’re still having to put out long orders, of course, with long lead time. Used to be, you can get chips in a matter of a few months, and now it’s 18 months. So, this is really constraining our supply chain management and causing us to have to have that extra stock on hand. And we don’t see that abating significantly with respect to electronics. With respect to the rest of the supply chain, I would tell you the only battle is inflation, the inflation on material cost. And so, we see inventories going up just because material costs more. But in terms of having to hold more inventory because of supply chain problems, we don’t see so much of that other than electronics.
Operator: The next question comes from Rob Brown with Lake Street Capital Markets. Please go ahead.
Rob Brown: Good morning.
David Johnson: Good morning.
Rob Brown: If you could give some further color on the price adjustment, the OEM launch partner, was that for the old system? Or does that apply to this sort of next-generation system? And really, what was the sort of, I guess, sense of scale on what that price adjustment was?
David Johnson: Yes, thanks Rob. These are – do you want to take that, Bill?
Bill Larkin: Go ahead.
David Johnson: No, you go ahead.
Bill Larkin: I’m just – yes, we’ve been – as we’ve talked about, we’ve been dealing with inflationary pressures on our system pricing. And we’ve been in discussions with our partner for HPDI systems and came to an agreement on incremental pricing to cover offset some of those increases as a result of kind of the inflationary pressures that we’re seeing. So, that definitely helped both the top line and the bottom line kind of mitigate some of those pricing increases that we’re seeing.
Rob Brown: Okay. Great to see. And then, I guess sort of the environment is stabilizing in terms of LNG pricing, but you said there would be some timing differences in terms of demand response. I guess, what’s your latest view in when that price improvement sort of translates into demand improvement?
David Johnson: Yes, so, I think the market behavior we see, obviously, every customer does their own thing. But fundamentally, when you aggregate all that, people are quick to stop purchasing and slow to restart purchasing. So, because they – really, when you buy an asset like a truck, you want to know that it’s going to be a fruitful asset to your fleet operations over 3 to 5 years and then have a good resale value at the end. And so, when there is a price shock like we endured in 2022, there is hesitancy throughout the industry about getting back into LNG trucks. Nonetheless, they can’t stair that fuel savings and operating cost savings in the face for too long without taking action. So, we’re confident the market will come back, the kind of aberration of the market behavior we had in 2022, primarily due to the war in Ukraine.
And the disruption of LNG supplies from – or natural gas supplies from Russia really impacted the market heavily. And now, we have a normalized situation again. And this applies around the world. We’re also seeing that in China. And so, that’s really important for our business, and we already see customer interest coming back. So, we think this too shall pass. It does take some time, hence, the comments about the lags in the marketplace. We see when customers do place an order for a truck, then that truck gets scheduled and then that truck gets built and the truck gets delivered. And that takes some time. So, we do see the kind of the return being more robust in the third and fourth quarters of this year than in the second quarter.
