Thank you for standing by. This is the conference operator. Welcome to the Westport Fuel Systems Third Quarter 2022 Results Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. [Operator Instructions] I would now like to turn the conference over to Ashley Nuell, Senior Director of Investor Relations. Please go ahead.

Good morning, everyone. Welcome to Westport Fuel Systems Third Quarter 2022 Conference Call, which is being held to coincide with the press release containing Westport Fuel Systems financial results that was distributed yesterday. On today's call speaking on behalf of Westport is Chief Executive Officer, David Johnson, and Chief Financial Officer, Richard Orazietti. Not speaking today, but joining us on our call is Bill Larkin our incoming CFO, who will assume the role following Richard’s departure on November 30th. Attendance on this call is open to the public, but questions will be restricted to the investment community. You are reminded that certain statements made in this conference call and our responses to various questions may constitute forward-looking statements within the meaning of the US and applicable Canadian securities laws, and as such, forward-looking statements are made based on our current expectations and involve certain risks and uncertainties. With that, I'll turn the call over to you, David.

Thank you, Ashley, and good morning, everyone. I'm pleased to be with you today to discuss our third quarter. Once again, our team delivered solid results as we continue to execute our strategy and showcase our pioneering hydrogen HPDI technology, to a wide audience amid the ongoing challenging macro environment. We continue to work through the industry felt headwinds and feel both prepared and poised to grow into the future. We believe that strong LPG price advantages, continued expansion in the new markets, supported the global emissions reduction requirements and further OEM conversations about hydrogen HPDI will drive growth and profitability. We remain committed to our announced $1 billion of revenue and profitability goals, but also recognize that, due to the headwinds, we faced so far this decade, and which continuing to face for at least the near-term future, the time to achieve these goals will be later this decade. The environmental, economic and regulatory requirements will not stop or wait and Westport is well positioned to respond. Today, I'll be walking you through an update from our hydrogen HPDI roadshow, where we've been promoting our technology at important industry and government event. I'll also dive into our recently announced Scania test results to clarify the import of what we've achieved. I'll discuss the rise of liquid biomethane, highlighting its growth, particularly in Europe and its increasing usage in heavy-duty transport and why Westport stands to benefit. Finally, I'll walk you through our independent aftermarket business where we see recovery through this year, which is being bolstered by the continued price advantage of LPG in many markets. In Q3, we delivered revenues of US$71 million, slightly lower than Q3 last year. As indicated in prior quarters, the Russian market has been historically important for Westport through both our aftermarket and…

Good morning and thank you, David. Despite a challenging macroeconomic and geopolitical environment, I want to start by highlighting that fundamentally, Westport delivered better performance year-over-year in the third quarter of 2022. However, this is not readily apparent due to the negative impact of foreign currency translation from the weakening of the euro against the US dollar. Total revenues for the third quarter 2022 decreased 4% to $71.2 million compared to $74.3 million in the same prior year period, primarily driven by the weakening euro. Excluding the impact of foreign currency translation, total revenues increased by 10%, mainly due to a rebound in the performance of our independent aftermarket business and the resilience and growth in the portfolio of OEM businesses like delayed OEM, electronics, and hydrogen. This is a remarkable achievement given the significant challenges presented by the impact on sales volumes on volatile LNG and CNG fuel prices, sanctions on Russian customers, inflationary pressures on production, and continued supply chain disruption. Loss from operations of $10.9 million and a net loss of $11.9 million for the third quarter of 2022 compared to a net operating loss of $8.6 million and a net loss of $5.8 million for the same prior year period. The increase in operating loss was driven mainly by a $2.6 million unrealized foreign exchange loss caused by the depreciation of the Canadian dollar and euro to the US dollar. In our adjusted EBITDA calculation, we exclude unrealized foreign exchange gains and losses to better reflect the underlying performance of our business. For the quarter, adjusted EBITDA was negative $4.5 million compared to negative $1.4 million in the same prior year period. Adjusting for the unrealized FX loss in the prior year period, the operating loss decreased by $1.2 million year-over-year due to higher gross margins…

Thank you, Richard. Before my closing remarks, I'd like to Bill Larkin to the Westport team. Bill joined us in early October, and he stepping of the role of Chief Financial Officer following Richard's resignation. Having previously served as CFO of Westport Innovations and Fuel Systems Solutions, the deep industry expertise and capabilities he brings will be instrumental in realizing our growth and profitability goals. Finally, as this will be Richard's last earnings call with Westport, I wanted to take this opportunity to thank him. Since he joined Westport, Richard has led us through a critical period and has positioned us for long-term success by strengthening our financial position. Richard has been a valuable member of our management team, and we wish him all the success in the future. Before we close, let me touch on the written notice we received from NASDAQ last week, regarding the company not being compliant with the minimum bid price requirement. As we highlighted in our press release yesterday afternoon, we have 180 calendar days to regain compliance until May 2, 2023. Let me be clear, we fully intend to resolve the deficiency and regain compliance with NASDAQ's Listing Rule. Our operations are not affected by the receipt of the notification nor is there any impact on the listing of our common shares, as we continue to trade normally. Finally, let me close on these few final points. Westport delivers market-ready transportation solutions to OEMs, fleets and individuals that deliver cleaner technology affordably right now. We remain encouraged by the long-term outlook for our business and are here as just three reasons why. Number one, low and zero emissions transportation is our future, and HPDI is our story, performance, efficiency and even better with hydrogen provides an affordable solution to the market. Second, the growth of our LPG business, which continues to address in served markets, which can afford expensive electric and non-electric vehicles, but still looking for clean solutions. And third, the growth we're seeing and we expect to see in our business in India. As a supplier of advanced fuel delivery components and systems for clean low carbon fuels, I'm confident in our ability to capture the additional market opportunities in front of us. All these factors give us optimism in our ability to meet the needs of our customers and advance towards our financial objectives. And with that, I'll turn it over to the operator to open the call for questions.

Thank you. We'll now begin the question-and-answer session. [Operator Instructions] Our first question is from Eric Stine with Craig-Hallum. Please go ahead.

Good morning, everyone.

Good morning, Eric.

Hey, so you mentioned, obviously, some interaction coming out of a number of the demonstration – demonstrations you've done conferences with some Indian OEMs on HPDI. I'm wondering if you can provide a little more detail outside of India, I don't know whether it's by number of OEMs, accelerated talks with OEMs, anything just providing more details and also how the greater break thermal efficiency plays in to those discussions?

Yes, Gladly, Eric. I think we had the chance, as you know, to bring our truck to the Long Beach show back in May, ACT Expo, and then we had our truck at the Hanover show in September. And the combination of this events was really fantastic for us. And frankly, what we've been doing with the truck, the roadshow we referenced just a moment ago, has been very effective in terms of getting the truck in the hands of key individuals at OEMs around the world. So as an example of Hanover, I spent time with nine different OEMs, at the senior executive level, sometimes CEO, sometimes CTO, and sometimes Head of Purchasing. So a really, really great audience, many times a large contingent would come from an OEM and to our stand to talk to us and review our technology. And every time these were super useful conversations, because I think in the grand scheme of things, our technology is not as well known as it needs to be. And having the truck and going to the shows is really changing things for us as we sell and offer this important technology to the industry. So those discussions, we mentioned, Indian OEMs, but also Chinese OEMs, European OEMs, North American OEMs. So we really cover all the main – main markets of the world. I also had the chance to spend a week in Japan recently meeting with OEMs there. So frankly, I think we're covering the base as well and really getting a fantastic response. And then we pile on, I would say, with our latest results with our project demonstration with the Scania engine. This is just a fantastic result. I can remember in my career many years that the US Department of Energy had hundreds…

Yeah. No, that's great. And good segue, I guess my next question was just going to be how the data points, which clearly, I mean, other OEMs are watching closely. I mean, how that gets others beyond your launch partner today to look at LNG as that interim solution, people who maybe were saying, look, I'm not going to move to each PDI utilizing LNG if I'm willing to have hydrogen in five-plus years. Are you seeing that movement, or is that something that you expect to see going forward?

We're seeing it, and we're expecting to see more of it is the short answer, but let me just expand a bit. Fundamentally, I'll tell you in the marketplace there has been so much pressure from various constituencies around the world getting basically every segment, the media, investors, OEMs, fleets, all focused just on zero, and this idea of electrification being the shiny object that we also pursue and fuel cells, the technology that we all need to move to and this idea even hydrogen equals fuel cells has pervaded the industry in every market around the world. And so when we show up with hydrogen HPDI and hand people the keys to a truck, they can see that no, no, there's another path that's really quite attractive from an economic standpoint. All of the OEMs that we're talking to around the world have billions of dollars invested in engines, in internal combustion engine manufacturing, in the supply chains for that manufacturing, in the delivery and how that engine fits in the vehicle and then meets their customers in the servicing of those engines around the world. So we have a massive installed base of capability and manufacturing capability to around the internal combustion engine. So when we show you can keep that internal combustion engine and make it run on zero carbon hydrogen and have all the power actually more power, more torque and more efficiency than you could have with a diesel engine or with a natural gas engine, that makes it very exciting. The second step in the thought process is, well, given that there isn't a massive installed base of hydrogen and this technology that Westport provides also works on methane and biomethane why wouldn't we go there now. And just on that point with respect…

Okay. Thanks, David.

My pleasure. Look forward to seeing you soon.

The next question is from Rob Brown with Lake Street Capital Markets. Please go ahead.

Good morning.

Good morning, Rob.

I think you mentioned in your script, some hydrogen revenue in the quarter or in the year. Could you kind of elaborate on the revenue you're getting from hydrogen at this point?

Yes. So we have, let's say, two areas that I would call in the category of hydrogen. So we've been talking a lot already this morning about hydrogen HPDI, and I would say our revenues right now with respect to that are really on the demonstration project. And I would say, I would categorize them as low single million dollar figures with multiple OEMs and really in a cost recovery mode. We're basically partnering with them to demonstrate like we did with Scania, our technology on their engines. The other part of our hydrogen business is, I would say, going business, as part of our growth opportunities for the company. We have been supplying hydrogen fuel system components to connect fuel storage, 700 bar and 350 bar tanks, to fuel cells. And so, we've been doing that business through our GFI brand for more than a decade, and we're seeing really great growth. And we are in this day a leader with that technology, with products available to companies like Plug Power and other fuel cell makers in both North America and China and increasingly in Europe as the European OEMs get their heads wrapped around how they're going to use fuel cells in their product mix. So that's a really important part of our business, a growing part of our business and keeps us very busy.

Okay, great. Thank you. And then, you sort of alluded to a path to profitability. I know you don't give guidance, but sort of what's your view on sort of that trajectory? Can you be profitable in 2023? And what might that depend on?

Yes. So we -- with respect to our profitability trajectory and it's been, let's say, an evidence for quite some time that our JV with Cummins ended at the end of last year. And -- so we took this kind of step function reduction in our profitability trajectory. But we see this profitability growth that will get us to profitability. And that's where I talked about our -- what we previously called our mid-decade goals being a little further out fundamentally. And so, that kind of $1 billion revenue and 20% gross profit targets were fully committed to. But clearly, after COVID supply chain and our war in Russia, we had some setbacks from the timetable. But nonetheless, we see that coming. It's fundamentally driven by growth, Rob. And so we need to see our HPDI volume growing and the hydrogen story we're telling right now will help with that. But certainly, we're also seeing now natural gas prices in global markets coming back down from the extraordinary peaks that they've seen in the follow-on aftermath, if you will, of the initiation of the war in Ukraine by Russia. So, that whole dynamic and the change in landscape of flows of natural gas with increased exports from the US and building new natural gas pipelines and LNG terminals and so forth, that takes time. And so we are seeing a decrease in natural gas prices and that will help our growth and the growth is the key to our profitability.

Great. Thank you. I'll turn it over

Thank you, Rob.

The next question is from Amit Dayal with H.C. Wainwright. Please go ahead.

Just quickly on the margin strength for the quarter relative to last quarter, is there unique this quarter than last quarter? And then going forward, should we continue to expect given the 16% level gross margins?

Why don't I handle that one, Amit? The biggest difference that we had probably quarter-over-quarter, for sure, there was increased performance in portfolio of our OEM businesses, which are electronics and hydrogen. Our fuel storage did very strong and delayed OEM. The biggest difference as well that -- which may carry forward as we were -- we had a large amount of a particular HPDI component that actually had a lower margin, and that was because of replacement of the component, and that has now gotten much better. And so in terms of the performance with regards to margins and heavy duty, that is somewhat improved. And so that should carry through somewhat. But in terms of modeling out a specific percentage, it does move around a little bit Amit. But yes, we do expect a little bit of improvement yes.

Understood. Thank you for that Richard. [Technical Difficulty] and a lot of macro challenges you guys are facing. In that context, what are the driver [Technical Difficulty]

Hey Amit. I apologize. Amit I'm really struggling to hear you. There seem to be a connectivity issue perhaps with your phone. Is there -- something you have to do on your end because I can't get your question. I heard macro-environment.

I was just trying to say if there is any solution to this ForEx pressure?

I think just talking about foreign exchange, I mean basically, as a company, we are very strongly naturally hedged. The vast majority of our revenues are in euros. The vast majority of our expenses are in euros. And so that does kind of cushion us against the bottom-line impacts of foreign exchange. Unfortunately, it doesn't do anything for the topline because we report in US dollars, and so we have all those conversions that we do make. And so that translation of that business, about 70% of our business is in Europe that translation, it will be what it will be. And so that's why we call it out when we announced our earnings, and our revenues because fundamentally, our business is about 70% in Europe, and that's the currency, what it is naturally hedged. Richard, anything you want to add?

No, I think you described it well. I mean, our functional currency, more likely than not actually is more the Euro, the Canadian dollars is what we have as our functional – main functional currency and reporting in US dollars is something we do because many and most of our shareholders are US based, but it does create this distortion in here because – and that was my comments in terms of the prepared comments. The performance of the actually underlying business was about was up 10%. And this is during a period of obviously, a lot of turbulence in both the macroeconomic and geopolitical environment. So the company actually did pretty good in this third quarter. It's something that we have not decided, IF there's no foreign exchange derivatives or instruments that we would use to modify that. It's an unfortunate part of our reporting that we've taken for investor purposes.

Understood. That's helpful.

I'm going to move on to the next caller, if that's all right. We seem to have difficulty hearing Mr. Dayal. The next question is from Colin Rusch from Oppenheimer. Please go ahead.

Thanks so much, guys. Can you talk a little bit about the progress that you're making on engineering subcomponents for the hydrogen system? Obviously, producing a vehicle is a big deal that getting ready for mass production is another level of preparation. Just curious, how that's coming along?

Yeah. Thanks for the question, Colin. So you're right that demonstrating a vehicle is a big deal. We're very happy about that. And fundamentally, to do that, we've used off-the-shelf components that are in production today for our natural gas production products. So from our perspective, those demonstrators work great. We fully recognize that there is some optimization and some development and validation cycle that we're proceeding with in this time, so that we're ready for production hydrogen products. I do think those production hydrogen products are kind of in the 2025 to 2027 time frame. And so – because the normal cycle for OEMs is going to be a full development and validation of the calibration and the hardware, including both the engine, our fuel system, the fuel storage, the whole integration on the vehicle. And – so that's kind of the cycle, but we continue to make progress and make investments, which are relatively modest because our hardware is largely the hardware that we already have in production. We expect some tweaks as you can imagine. So for example, when we develop the injector, we do CFD work to analyze the combustion system with hydrogen, and how it's different than natural gas, and then we make modifications and nozzle. And so we're already testing and developing different novel patterns that fit both with our customers' engines as well as with hydrogen fuel. And so that is, I would say, a normal part of our business, but now a little bit of uniqueness relative to hydrogen.

Okay. That's super helpful. And then maybe I missed it, but just can you just give us an update on how the HPDI 2.0 ramp in China is coming along and any signals that you're getting around inflection points on that in any way?

Yes. Thanks for asking. Fundamentally, we didn't talk much about it in the call so far. There is progress. We do see that, but we're really a bit gun shy about calling any timing on when that product might hit the market. Fundamentally, a good thing that we see globally is what I referenced earlier about natural gas commodity prices coming back down that will help the equation because fundamentally, product in China is going to be sold based only on TCO for the most part. And so we need that fuel price to come back down to make the -- any natural gas product in China commercially attractive. And so that's happening. Our customer has continued to do work to be ready to launch the product. And so we're anticipating that. But I don't have any timing that I can share with you other than to say, there's work going on. And so they wouldn't be doing the work if there was an intention to go to market at some future date.

Perfect. Thanks guys.

And maybe I should just add, Colin, we're actually are spending also a tremendous amount of our time and energy working with customers broadly in China with respect to the opportunity for hydrogen. Hydrogen in China today is already, I would say, like refueling infrastructure, more developed than the other market that I can see. So they have more than 1,000 hydrogen stations is the information that I've seen and heard about the Chinese market. And so that push towards hydrogen in China is very, very real. You've seen a number of announcements perhaps of spark ignited hydrogen engines, demonstrating and low volume and so forth. Of course, we see that with hydrogen HPDI and this is what we're talking to the OEMs in China as well as other markets, of course, about is the potential to have a much more superior product with hydrogen HPDI, more power, more torque, more efficiency than is possible with the spark ignited hydrogen product. And so we think that's an important part of what we're doing right now that will pay benefits in the future.

That's actually quite helpful. I appreciate the additional color there.

Next question is from Jeff Rossetti with Cowen and Company. Please go ahead.

Good morning.

Good morning.

David, you mentioned earlier you expect to release results from your AVL 2P demonstration at the end of Q1. And I was just wondering if you could provide any findings you might expect and how it might be differentiated from Scania? And if there was any update with testing with Cummins?

Yes, sure. Glad to talk about those, Jeff. So first of all, on AVL 2P, we have an engine in test cell with our hardware, their engine, their an "OEM" engine with our hardware and we're starting that development. Now we expect to have some results. I would tell you in every case, it's up to our partners, in this case, AVL and 2P to make the decisions on what kind of announcements we can make when. But we're hopeful to have some color, at least, if not some data to offer the market in Q1, as we said. What we expect out of that testing, I would say, is very similar to what we found with other engines, and that is that basically the application of our HPDI technology in combination with hydrogen, on an otherwise formerly diesel engine will offer about a 20% improvement in power, about a 15% improvement in torque and about a 10% improvement in efficiency. And these are really important numbers. I mean you don't typically get double-digit percentage increases in any of those parameters let alone all three, but we've done this on a number of engines already. Some you can see at YouTube, some we talked about in our press release about our Scania work. And I would tell you, we expect the same kind of increment. And hopefully, we can demonstrate even more through the contributions that TUPY is making with respect to the engine structure. So having greater engine structure in terms of pressure capability can improve the engine and then get more out of our fuel system as a result. So we're very much looking forward to bringing that development through the cycle and then sharing results when we can. You asked also about Cummins and that work is basically completed from our side. We've done the necessary studies that Cummins ask us to perform, and they are now evaluating where does hydrogen HPDII sit in their portfolio, and we look forward to some opportunity to do some more work with them.

Great. And I appreciate the detail you provided on your path to commercialization of hydrogen HPDI. Just wondering, I think you called out 25 through 27 as a potential time frame for commercialization. Are there any milestones that you are targeting for, say, 2023 to put you on that path?

Expect in 2023, you'll hear more from us with respect to developments like the kind we've already done the AVL, TUPY news, for example, I expect there'll be more OEMs that will be testing our fuel systems on their engines. I expect with the OEMs that are already worked with for like the Scania and others, there'll be next steps that will have a chance to announce. So I think you'll hear that kind of news from us in the coming quarters. But looking out further, I'm very keen on the opportunity to make some demonstration fleet, so fundamentally, you've seen this in the fuel cell world, for example, Hyundai and Switzerland has been demonstrating fuel cells. There's quite a few fuel cell applications that have been announced and so I think that same kind of activity for us would be quite straightforward. As you saw with our demonstration vehicle that we showed in Long Beach and also in Hanover. This is a driving prototype. It tows 40 tons, so 80,000 pounds of freight. It drives very, very well and all on hydrogen, zero-carbon hydrogen. So actually making demonstrator vehicles, there are some certification and exemptions and things like that, that we need to do. But I think that's the activity that maybe we'll be announcing some of that also in 2023 for deployment in 2024, 2025, 2026. So this is basically the path that we're expecting.

Thanks very much.

My pleasure.

The next question is from Chris Dendrinos with RBC Capital Markets. Please go ahead.

Hi, thank you. I just wanted to, I guess, hone in a little bit more on some of your comments around policy here. And I think one of the bigger investor concerns out there is that most of the policy and incentive programs right now are focused more on the battery side of technology. So as it relates to your discussions in Brussels and Washington, what's kind of the receptivity of policymakers to the technology that might not be exactly zero emissions. And I guess, what's their understanding of the technology today?

Yes, it's a great question, Chris, and thank you for asking it. So we feel it's very important for us to carve out the time with the truck and our team to go and speak with and inform and educate policymakers around the world because fundamentally, even just two years ago, there was no idea, no concept, no discussion around internal combustion engines with hydrogen. Primarily, I would tell you because most people, 99.9% we're thinking about a spark ignited product, which has tremendous challenges with respect to pre-ignition knock and so forth because hydrogen is so combustible. And so I would tell you that the basic mentality, policymakers and much of the public domain is around if it's hydrogen, it must be a fuel cell. And so we're having to -- we need to. It's our task to do so, educate people about the opportunity that we've unveiled and demonstrated in our test cells and with our demo trucks. And so that is what we're doing now. And I think that in all my experience in the industry, regulators like to write regulations, like, regulators write regulations, in most cases for technologies that they know can be applied to achieve that regulation. This was the work of the US DOE over decades has been let's go demonstrate this possible, so that the regulators can write a regulation forcing it to happen. And so whether it's a 50% BTE goal they had for many, many years. And so -- that's the -- I'll call it modus operandi of regulators is to write regulations for technologies that they know of, and they know can be deployed. So, therefore, as we go to DC and Brussels and help policymakers understand this is possible. Now here are the keys, drive it. Here's the…

Got it. Yeah, thank you. I guess, maybe just switching gears here really quick, focusing maybe on some of the inventory levels. I think you had previously mentioned that you were looking to monetize some of that or draw down and, I guess, have a maybe more efficient use of your working capital. Can you provide any, I guess, updates on that process? What are you thinking right now and maybe the ease of the ability to monetize some of that?

Yeah. So good question. Happy to talk about our inventory. For sure, it's too high. It's not at the level that we wish to have and we expect to sustain. So it is an active effort on our part to move that inventory and reduce our levels. I would tell you, there's two fundamental drivers in that. There's a lot of drivers, of course, but two big elements. One element is on the electronics side. You all recall, I’m sure, how chips were in short supply and still aren't so easy to get. And we had a lot of our chip suppliers come to us and say, "Listen, we need to know exactly what you need. And so, please place orders now for material 18 months out. And you can't cancel these orders, you can't change these orders. We need to know and you need to commit to it. So we're sitting on quite a bit of inventory of chips. And every day, we're working to get that last chip that's required to make that ECU or that controller that we need to make. And so, moving to a more, let's say, normalized supply chain dynamic with respect to electronics will allow us to unlock on the order of $6 million, $8 million of inventory that's on our books right now, just in electronics. So that's kind of a, I'll say, a perturbation of the market that's happened right now, whether you call it from COVID or inflation or whatever the dynamics are that cause the supply chain to do that, we're just dealing with it. And we expect to unwind that and monetize the inventory in electronics as and example going forward. The other one is our HPDI inventory. Our HPDI inventory is higher than it should be. And that's because we haven't seen the growth volume in sales that we were forecasting. And so, we were building inventory to -- not inventory, but we have the pipeline full for a certain kind of volume expectations that was pre the war with Russia and Ukraine. And so, as LNG prices have gone up and the volumes have been flattening. We've built an inventory in HPDI that we do expect to monetize and that includes expectations on our part that we will move product to China with Weichai. And so, those things, we still have on our list of things to do, and that will help us to unwind that inventory and turn it from inventory into cash.

Got it. Thank you.

My pleasure.

The next question is from Bill Peterson with JPMorgan. Please, go ahead.

Yes. Hi, good morning, guys. And, Richard, just want to say, it is nice to really working with you over the last couple of years, so good luck in your next endeavors. On conventional HDPI, sorry, I can’t even say it. Last year, you had some really nice growth in your lead customer in Europe. So I think you said you have 1,000 trucks in a road or thousands of trucks on the road. I wanted to discuss what you're seeing in terms of reliability and uptime relative to diesel. You talked about some of the performance benefits. But, I guess, was the warranty issue related to that at your lead customer? Trying to understand what the interest in these trucks could look like, should nat gas pricing start to normalize, if you can answer that? And then, I guess, to that second point about nat gas normalizing, the US still actually is a relatively less expensive place compared to other places and diesels in short supply, particularly in the Northeast. So do you see additional interest maybe stemming from that spread? Thank you.

Yes. Great questions, Bill. Thanks for joining us this morning. So with respect to the durability, reliability of our product in Europe, we have been on a, let's say, a journey from the launch in 2018 through now. And we have had a variety of challenges with the product along the way. But the team has done exceptional work to really stomp out those problems early and minimize the impact. And so, right now in the marketplace, I would tell you that people are thrilled with the durability, reliability. And the primary reason for that is because, fundamentally, we've developed the system, we've solved the early problems. And it's -- the basics of the system are based on a diesel engine. So we're not asking the engine itself to do anything that it's not used to doing. And I guess, just to contrast that, spark-ignited natural gas engine run hotter. They have challenges that diesel engines with our HPDI system don't have. And so we feel we're in a very good place. The fleets love the product. And really, all that's tempering demand at this point in time is the high price of natural gas. And so as we see that commodity price come down, we need to see that commodity price flow through all the way to the pumps so that fleets can say, let me buy more HPDI equipped trucks, so I can deliver freight and do it with a lower TCO. So, that's really the story there. With respect to US and natural gas prices and frankly, your point on scarcity of diesel, fundamentally in the marketplace for all of our products, the equation isn't so much about the price of natural gas or the price of LPG and the price of gas or the price of diesel, it's really about the delta between the two. Can I save money by using natural gas versus diesel? Can I save money by using LPG instead of petrol? It's the price differential between the two fuels. So, when diesel gets scarce and diesel prices go up, that will help our natural gas and our LPG business as people look for alternatives. And I'll say it even more broadly, fundamentally, in every market around the world, when energy gets more expensive, all energy -- electric by the way, with its natural gas, petrol, diesel -- when energy gets more expensive, people go looking for alternatives. And it's where there's that price differential that offers our customers a savings by using natural gas, bio-methane, hydrogen or LPG, that's where we win because, we're the gaseous fuel special.

Okay. Thanks for that color. I think the next one is probably for Richard, and I asked this the last quarter, too. But when we think about the cost and use of cash, OpEx -- you should be getting advantages, I guess, on OpEx the same way with the USD relative to other currencies. But offsetting that, you have inflation -- so trying to understand how we should think about OpEx trajectory looking out over the next few quarters. And then I think in terms of CapEx, you -- I think you talked about maybe around $15 million, it looks like you're going to be probably ending up a little short of that. But I guess, is this push into next year, or I guess, any color on how we should think about capital intensity as we're looking ahead to 2023 in terms of the use of cash? Thanks.

Thanks, Bill and thank you very much. Much appreciated your comments before. It's been great working with you as well. The -- with regards to per share on the foreign exchange because we do -- a lot of our engineering is done in Canada. And so we did get the benefit of that. We're in a rationalization moment right now because we're quite well aware of our liquidity and trying to be responsible, call it, fiscally discipline on that. So, next year, I mean, we're in the neighborhood between $15 million and $20 million. We're trying -- we've got, obviously, a lot of investments in the future and hydrogen being one of it and we're doing some work on LPG for Euro 7 and then there's a natural increase of capacity for HPDI. We're trying to stay in that number. And the purchasing that we're doing is in euros predominantly. So, there's a little bit of an advantage there, but we are purchasing certain equipment from the US. With regards to OpEx, we spent a little bit more money this year, probably we're trying to promote HPDI and build awareness, specifically with hydrogen. There is, we'll call it, the sort of the education process that David referred to and that's gaining a lot of actual interest within the industry. It didn't just come from us, everybody -- every major OEM is considering hydrogen ICE programs as well as part of their portfolio. And so there was a little bit of extra money that we have to spend there. But generally, the – our operating expenses will be more or less aligned, if anything, we're tightening the belt as well as the year progresses.

Thanks, Richard. Thanks for the color. Good luck.

Thank you, Bill.

This concludes the question-and-answer session. I'd like to turn the conference back over to Mr. David Johnson for any closing remarks.

Thank you very much, and thanks, everyone, for joining our call this morning. I think at the top line for our company, we've been through a very challenging time and the challenges keep coming, but we keep making progress. Fundamentally, to think about, our revenues being up 10% year-over-year on an absent foreign exchange, which is just a translation error in the context of a place where we've got high natural gas prices both CNG and LNG, a war in Russia, constrained supply of LNG. I think there's a lot of people out there that can understand in 2025 and 2030 in Europe specifically, we need to make really big improvements in CO2 of long-haul trucking, 15% by 2025, 30% by 2030. And everybody in Europe is thinking about how do we make those standards tougher. And when you think about a technology like hydrogen HPDI being able to offer a 98% reduction in carbon and do so very affordably, right? That will have a huge impact on the fleet average for those fleets. So we really see a bright future ahead. I appreciate the chance to speak with all of you today, and feed your questions, and I look forward to the chance to meet with investors at the Craig Hallum Conference next Thursday in New York City. And then, we have an upcoming Capital Markets Day that we'll do in Toronto on December 8. So I look forward to continuing the discussion and helping understand better, the future for Westport Fuel Systems. Thanks again for your time. Have a good day.

This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.