Rob Mionis: That’s a good question. What I can tell you is that 400G is strong throughout the year. 800G is starting to ramp in the first half of the year, very strong in the back half of the year and certainly picking up into ‘25. That would lead me to believe it’s a little bit of a blend, but to be frank with you, I’m not entirely sure.
Mandeep Chawla: One of the things that we are seeing, Dan, is that within some of our customers’ CapEx spending, they are shifting CapEx towards AI applications, and so making a decision to refresh certain data centers over other data centers. In addition to that, what we’re also seeing is that for some of the customers, as silicon becomes available, they’re looking for 400G solutions while they wait for 800G to be available in 2025 as it goes through the design cycle, etc. So we are seeing a shift of investment towards AI applications, and sometimes that’s at the expense of more traditional cloud applications.
Daniel Chan: Appreciate it. Thanks for that. And the final question, you also mentioned the ramp up of some of these sites. Just wondering whether you have enough capacity to deal with the near-term demand that’s coming in throughout this year and how those discussions are going on your ability to service some of that demand? Thank you.
Rob Mionis: Yeah. Thanks. We’ve been interlocking with our customers and been investing forward on capacity expansions, mainly in Thailand. We have a couple of phases, and also in Malaysia, a phase is coming online in February, we’ve been cutting, frankly. So yes, we do have enough capacity, and it’s coming online, very much aligned with the demand state, I would say. And these are also highly automated factories, highly automated test centers, so they’re really producing a lot of productivity.
Daniel Chan: Great. Thanks.
Operator: Thank you. We have our next question coming from the line of Matt Sheerin from Stiefel. Please go ahead.
Matt Sheerin: Yes. Thank you. Good morning. My first question just wanted to go circle back to the guidance for CCS and understanding sort of lack of visibility into the back half. But just looking at Q2, I know you have some visibility. Obviously, you’re going to be up in enterprise high-60s year-over-year. And I know there’s a lot of lumpiness in that business where you’re up double-digits one quarter and then there’s a digestion period. So what should we think about, Mandeep, in terms of modeling at least sort of the first half into Q3 in terms of seasonality and obviously there’s not a lot of seasonality, it’s different, but how should we think about that, the cadence there?
Mandeep Chawla: Yeah. Good morning Matt. So we do have from our legacy OEM accounts a little bit of seasonality in our first quarter. And as such, I think you can think about the first quarter revenue number being the low point for the year. We are looking for sequential improvement as we go into the second quarter. And then again, just wanted to maybe clarify some of the wording, which is, we do have an interlock with our customer base in the back half of the year. And that interlock gives us the confidence to be able to say the outlook that we’re getting, which is right now we believe the 8.5 billion should be the floor. What we have seen though is that after the interlocks, requests from customers to say, can you give me actually more product and can you give it to me sooner than what I had originally asked for?
And so that’s what’s filling in right now Q1 and Q2. And so the conversations with the customers are around have you changed your outlook for the back half of the year and what is driving that? Is it because you’re accelerating data center deployments? Is it because there is a better level of availability (ph) which is happening? And then how does that impact the last two quarters the way it’s impacting the first two quarters? So positive conversations for sure. And we do have a level of visibility is to really see if we can increase the numbers or not.
Matt Sheerin: And so based on that, would you expect the Q2 to be up sequentially then again?
Mandeep Chawla: On a revenue basis, yes.
Matt Sheerin: What’s that?
Mandeep Chawla: Yes. We would expect higher revenues in Q2 than we do in Q1.
Matt Sheerin: Pro CCS, okay. Perfect. And then the capacity adds in Thailand and Malaysia. Rob, could you give us a ballpark in terms of the revenue production capacity in each of those or combined? And is that incremental revenue where there are basically new programs or new capacity versus shifting from another region?
Rob Mionis: Look, what I can tell you, Matt is, how much square foot we’re adding and that the capacity improvements are a couple of folds. One, phase 1, if you will, which is coming online this quarter is about 28,000 square feet of manufacturing space. It’s really a AI/ML testing facility. So it’s a test farm — for fully automated test farm for all AI/ML products. So that’s coming online right about now. And then phase 2 will be the first half of 2025 and that’s a combined productivity play of where we’re combining all our warehousing in Thailand into one facility to save on space and drive productivity and also adding about 156,000 I mean 130,000 of plus of manufacturing space, which is going to support existing and new customers as well largely around AI/ML. And we think those capacity expansions should take care of us through the next couple of years of growth.
Matt Sheerin: Okay. And just lastly, Mandeep, you talked about you basically increased your cash flow guidance for the year while keeping everything else intact. What are the reasons for that? Is that a function of the inventory reduction and working capital reduction and the cash flows from that or anything else?
Mandeep Chawla: Yeah. So we continue to be encouraged that the material environment is stabilizing and improving. We’re seeing lead times right now, not necessarily at pre-pandemic levels for both passes (ph) and semis, but we are seeing them drop pretty close to that level and they’ve been improving quarter-to-quarter. We have been unwinding inventory as a result, so we’re pleased that we’re able to reduce some of that cash. Really strong finish 2023, $194 million, we believe that that is the right goal as a minimum for next year on the back of increasing profitability and an inventory environment that we think is going to continue to improve. And so we think the goal of $200 billion or more reflects a good level of conversion and is the right target at this time.
Matt Sheerin: Okay. Thank you.
Mandeep Chawla: Thanks, Matt.
Operator: Thank you. We have our next question coming from the line of Todd Copeland from CIBC. Please go ahead.
Todd Coupland: Hi. Great. Thanks, and good morning, everyone. I want to step back from these detailed questions and just ask a question on the hyperscaler market, data — the global data center market. What’s your view on how much of the data center hyperscaler market has been upgraded to support generative AI and large language model processing needs? How far into that cycle would you think we are at this point?
