Paul Oldham: Yes, I think the margin profile is similar maybe improving a bit mainly because of the comments I made earlier about the strength of our portfolio. I think the second part of that is I think the characterization is still the same, if you recognize our lead times now come down to more normalized levels of eight to 12 weeks. So, the backlog’s pretty also front-loaded, but particularly on as Steve mentioned in medical, we’re seeing backlogs filling in for the second half of the year which gives us more confidence again that at least that part of the market is maybe starting to work through their inventory issues. Thank you.
Mark Miller: Thank you.
Operator: And the next question is a follow-up from Krish Sankar TD Cowen. Please proceed with your question.
Krish Sankar: Yes, I had two quick questions. One is just on the hyperscale opportunity of. I don’t remember a few years ago when you after you took over like another renewed focus on I&M, I don’t want to use the term defocused but less of a focus on hyperscaler. But clearly, with AI and everything there’s a renewed focus on the power management for. So just curious you know you know given the fact that you compared to some of your peers like no other question that was actually a kind of lagging on that. Do you think any of that deep focus in the last two years is hurting you now because in the past I understand hyperscalers very price sensitive. And this like normal it’s extremely winning game for you. But do you think that the focus has kind of been an issue or do you think at the end of the day? It’s really about the product quality that matters for AI servers from a hyperscale standpoint.
Steve Kelley: Good question, Krish. Let me just recap. The decisions we made a few years ago were to invest heavily in semiconductor industrial medical and grow market share as fast as we could because all those products basically averages up from a gross margin standpoint. So on the data center side, we have a different a different strategy and we articulated that a few years ago and we’ve executed on it. And that is we want to improve the bottom line of that business. And then keep it there. So the good news is we improved the bottom line over the past two years in data center. And now we’re in the process of keeping that type of gross margin performance is still a lot is still above corporate average and probably never will be.
But we’re much happier with the business today because we can deal with a surge like we’re seeing this quarter without impacting our gross margin performance to any significant degree. So we’re very happy with the business. And part of that move two years ago was to start focusing our engineering teams on more differentiated opportunities. And so what we’re seeing now is some of those differential opportunities are developing tend to large scale revenue opportunities for us, which is very helpful. So less of a commodity focus and more of a differentiated focus and I think it’s paying off for us.
Krish Sankar: Got it. And then just a quick another follow-up of all. I know you didn’t give the backlog number, but it looks like it’s probably in the $350 million to $400 million range. How much of that is semi?
Paul Oldham: Yeah. I’d say it’s down slightly from last quarter. So maybe a little higher than that Krish. I would say the semi proportion is about the same as it’s been. And we’ve commented before that on semi and industrial and medical combined represent about 80% of the backlog. So I don’t think those proportions have changed very much.
Krish Sankar: Got it. Awesome. Thank you very much.
Operator: And our next question is a follow-up from Mark Miller with Benchmark. Please proceed with your question.
Mark Miller: I’m just wondering your interest income had a nice increase. Could you describe what’s going on there?
Paul Oldham: Yeah. As you know Mark, we did raise money from the convert last fall. The good news about that is we raised money at 2.5% coupon and we’ve been able to do two things. One we’ve been able to concentrate our cash globally quite effectively so that we get that cash in the places in accounts where we can invest it. And we’ve been quite successful at investing that at very good yields on money market very short term notes. And so we’re actually generating more interest income than interest expense right now. Now we’re also benefited from the fact that about two-thirds of our term loan is still under a swap agreement wherein we’re only paying 1.25% interest and that will come off for that debt amount in September. So I think you’ll see interest income and interest expense start to come a little more in balance, but we’ll still have higher income and expense but lower than we have today.
Mark Miller: Okay. So you expect somewhat lower interest expense in the second quarter?
Paul Oldham: More like the second half, this happens in September. Otherwise, second quarter auto looks very similar to first quarter when you look at total other income.
Mark Miller: Okay. But lower in the second half. Okay. Thank you.
Paul Oldham: That’s right.
Operator: Ladies and gentlemen, at this time there are no further questions. and that concludes the question-and-answer session. And that also concludes today’s teleconference. You may disconnect your lines at this time. Thank you for your participation.
