Mandeep Chawla: No. Relatively flat on a sequential basis, Dan. But I’d point maybe to a couple of things. One is, again, outside of capital equipment, we are seeing good growth across all of our end markets, but we are also facing tough comps. If you just look at the fourth quarter of last year, ATS grew by 29% organically. So it was a very strong fourth quarter of last year. But we are glad to see that this peak revenue that we are seeing currently in ATS, which I believe is at a record level is holding going into the fourth quarter.
Daniel Chan: Okay. That’s good to hear. And then if we just switch gears to the HPS business, one of the strongest sequential growth we have ever seen out of the business. Are AI programs being migrated to HPS engagements or is there something else driving that strength?
Rob Mionis: We are seeing some HPS proprietary compute programs being migrated to HPS. That is still in the early stages. The drivers of the HPS growth is really a starting of some increased network demand, as one of the earlier caller mentioned. We are seeing a couple of our hyperscalers starting to buy more and more networking gear, which is HPS gear as well.
Mandeep Chawla: Yeah. So going into next year, Dan, we are expecting growth in HPS and there’s two nice drivers that are happening. One is the 800G switches now starting to come online and some of those are HPS products that will be towards back end of the year. And then there is some compute products as well in our HPS portfolio, which are tied both — you could tie both of those to overall AI.
Daniel Chan: Great. Thank you.
Mandeep Chawla: Thanks Dan.
Operator: Your next question comes from the line of Thanos Moschopoulos from BMO. Please go ahead.
Thanos Moschopoulos: Hi. Good morning. Generally speaking, it seems like macro conditions have deteriorated the last couple of months. Are you seeing any signs of that in any of your end markets or no because of the specific ramps and markets you are involved in?
Rob Mionis: Hi, Thanos. I would say, overall, our markets are holding pretty tight. We are not very exposed to consumer markets or things that are very interest rate sensitive. Just going around the markets within A&D. A&D business continues to be strong. We have a very healthy backlog. It’s tool availability is really pacing our ability to support demand there and going into next year we see some incremental growth coming out of defense programs supporting what’s happening in the world. Within an industrial, I would say, across the Board we are seeing a little bit of a slowdown in the EV charger portion of our portfolio. Again, that’s a very small portion of our portfolio, 2%. But the other portions of our industrial portfolio are growing very nicely.
Industrial is having very robust growth this year and very strong double-digit growth going into next year as well. And then we also talked about, more broadly speaking, proprietary compute and all of our products that support AI growth, very strong growth going into 2024 versus 2023, and 2023 is also having some stupendous growth as well.
Thanos Moschopoulos: Great. Cash cycle days were up due to higher receivables. Can you provide some color on the dynamic there?
Mandeep Chawla: Yeah. Hey, Thanos. I’d say quarter-to-quarter dynamics, sometimes they are just account specific. Overall though, if we look at free cash flow, we are happy with the conversion that we have been seeing $110 million year-to-date. That’s kind of double what we did at the same time last year and then as you saw in our prepared remarks, we are increasing our free cash flow target for this year to $150 million, at the beginning of the year it was $100 million. So we are starting to see some good working capital movements. We do expect to see a strong conversion going into the fourth quarter and into next year as well. So while the cash cycle days may have a little bit on some of the specific accounts, it will normalize as we go into the next few quarters.
