Paul Oldham: I’ll just add to that, Steve. I think our prepared comments were such that we think the inventory and the distribution channel is about right, but we’ve actually seen more sell-through. And you’re right, as market forces potentially weaken, getting broader reach is one of our primary strategies and the distribution channel is certainly a key part of that. And there’s even potential for us to expand further from a distribution channel perspective as we focused on that.
Steve Barger: Got it. Thanks. And Paul, backlog is down about 50% year-over-year to $514 million, which I think is at the high end of what you consider a more normal range. Can you talk through segment exposure in backlog, timing of delivery? And maybe talk through book-to-bill for semiconductor and Industrial and Medical?
Paul Oldham: Yes. So, you’re right, the backlog is down. Frankly, the backlog we had a year ago is extremely unusual. If you go back historically before the part shortages we saw, roughly 24 to 30 months ago, we would typically carry backlog that was 60% of quarterly revenue. And that’s because a lot of our products are relatively short lead-times, and we have many customers who don’t technically give us orders. So, there’s not really a book-to-bill because we fill revenue through jet bins or through hub pulls. And we’d expect to move back towards that situation, and that’s exactly what’s happening. I think by the end of this Q4, we’ll be back well within that $400 million to $500 million range. About $400 million is about a quarter’s worth of backlog.
That’s probably a quarter or quarter plus is kind of probably where things will run, probably a little more than they did historically. So, we think the contraction in backlog is pretty natural and it mainly just reflects those shorten lead-times and people returning to their normal ordering patterns. From that perspective, if you look at what’s in backlog, the majority of it is relatively short orders now, I’d say, within a quarter-and-half or less. It’s also still heavily weighted towards Industrial and Medical and Semiconductor. And as we look forward, again, it’s hard to say a particular book-to-bill because many of our customers don’t order that way.
Steve Barger: Got it. Appreciate the detail. Thanks.
Operator: Our next question is from the line of Mehdi Hosseini with SIG. Please proceed with your question.
Mehdi Hosseini: Yes, thanks for taking my question. Paul, I just want to go back to the backlog. When I look at commentary by some of your customers in Industrial and Semi, it seems like they don’t really have a whole lot of visibility looking into calendar year 2024. And as such, could there be a scenario where your backlog would actually move towards the low end of that $400 million to $500 million band?
Paul Oldham: Yes, I think it could. Again, our estimate there is a little bit of a — based on market factors and where things could end up. Historically, we’ve run under that level and that would be normal. So, I think as customers move back to more normalized patterns, we could certainly move towards the low end of that. That wouldn’t be a surprise. Again, that would still be about a quarter’s worth of backlog, which should be higher than the historical norm.
Mehdi Hosseini: Okay. And then just double-clicking on your semi business. If your customers are right now think — elaborate or talking about 2024 as a flat in terms of the system shipment or system revenue compared to 2023, does that imply that just some inventory refresh of components would lead to some growth in Advanced Energy’s Semiconductor business unit?
Steve Kelley: Yes, I think that’s a fair scenario, Mehdi. Like you said, the customer consensus seems to be that their end customer shipments will be roughly flat year-on-year. But we do see some room for growth in the jet bins and we see some room for growth in our new products as well. And that should push us into slight growth year-on-year.
