At the core, this formula uses the fact that the SUBSTITUTE function understands "instance", supplied as an optional fourth argument called "instance_num". This means you can use the SUBSTITUTE function to replace a specific instance of a character in a text string. So:
replaces only the 2nd instance (2 comes from D4) of "x" in text in B4, with "~" character. The result looks like this:
Next, FIND locates the "~" inside this string and returns the position, which is 7 in this case.
Note: we use "~" in this case only because it rarely occurs in other text. You can use any character that you know won't appear in the text.