Matt Niknam: Hey. Thank you for taking the question. Just one high level one and then one follow-up on Optical. First, from a high level, I mean, obviously, it sounds like you have got significant conviction in the longer term outlook. I mean, with that in mind, how do you think about the potential for accelerating share buybacks given where valuation sits today. And then just to go back to Optical, I am just wondering if you can talk to what sort of visibility you have into next year, particularly as we are sort of in a higher for longer interest rate environment. It would seem that although we have seen a 7% CAGR over the last decade, if we are, in fact, in a different rate dynamic, it may actually temper a lot of the enthusiasm relative to what we had seen a couple of years ago from some of your larger service providers. So just curious on any visibility into 2024 there? Thanks.
Ed Schlesinger: Hey, Matt. This is Ed. I will take a first question. So, first of all, the most important thing for us has been focused on improving our profitability and cash flow, obviously, if we improve our profit, that also improves our cash flow and I think we have done a nice job of that over the last several quarters. Our cash flow conversion was up nicely in Q2 and Q3 and we expect it to be up again here in Q4. So I think that’s first things first. And then I think if you remember back earlier this year, we made the last payment to Samsung on the buyback we did back in 2021. So as we go forward, we will certainly have more firepower to do things like share buybacks. We haven’t need any announcements. So we will come back and we will talk a little bit more about our plans next year, but I think you should feel good about where we are from a balance sheet and a cash flow perspective.
Wendell Weeks: I will take part two, I just want to add a little bit to Ed’s answer to part one. We get that $3 billion plus revenue run rate back. Our shareholders are going to have a lot of fun. The incrementals on that are going to be really, really stunning, because they don’t take much additional cash investment, it’s really minimal, right? And because of our operating leverage, we are going to like that and we are going to have a ton of flexibility to do capital allocation that favors our shareholders. So does that make sense to you Matt before I jump to Opto visibility?
Matt Niknam: It does. It does. Thank you.
Wendell Weeks: Okay. So Opto visibility, it’s a great question. We are in the midst of our — a detailed process with each and every one of our major carrier customers, just trying to figure out the answer to just that, right? What exactly are your deployments, what are your deployment plans, let’s roll that forward sort of quarter-by-quarter detail-by-detail. Because of the privileged position that we have, they are willing to work with us at that level of detail. That is not complete yet. When it’s complete, that will improve our visibility in that segment of our revenues. So more to come, I don’t have the answer right now, but more to come. As you step back from that, which is really answering the question of when exactly does it return, right?
Next year though. Will we return to trend? We are highly convicted. You saw what those trend lines are. We showed you over the last 10 years. I can go back 20 years. I can go back 30 years, right? We can keep going back, and you will see that trend line, right, because basically, that’s what you see when you have an ascendant technology. We just keep entering markets with S-curves as fiber optics becomes the more economical way, as photons become more economical than electrons as bandwidth distance economics change and as more bandwidth goes up over shorter distances, basically more fiber goes in and that’s why you see those type of long-term technology trend line. So will it return to trend? Absolutely, we are seeing Optics actually enter strongly markets that hasn’t been before, right?
And like wireless and we are seeing new applications like generative AI, which you need more fiber optic connections, right, for a given sort of compute power. So we feel good about the long-term trends. When? We are still working on it, Matt.
Matt Niknam: Appreciate it. Thank you both.
Wendell Weeks: Thanks.
Operator: Thank you. Our next question comes from the line of Wamsi Mohan with Bank of America. Your line is now open.
Wamsi Mohan: Yes. Thank you. Good morning. Wendell, appreciate the charts and your comments on long-term trends in Optical, but you are calling out inventory digestion right now across cloud, and so clearly, that implies there was an inventory buildup. So your trend lines through 1Q 2023 embed some over shipment as well and I understand that’s true even in historical cycles. But why do you think that the mean reversion wouldn’t mean a lower steady state level, for instance, I think, in the PC market as an analogy, people thought $250 million was sustainably going to $300 million to $350 million and now we are back to $250 million and growing at low singles. So I am just kind of curious as to whether you think that there is a reset that happens to a lower level given, perhaps, overbuild over a longer period of time? And I have a follow-up.
Wendell Weeks: Okay. So first, where we are seeing the inventory draw down right now is primarily the carriers. I think you said cloud, but I think it’s just misspoke. It’s in carriers where we are seeing the drawdown occur, okay? Cloud is operating now more in balance. Does that make sense to you?
Wamsi Mohan: Yes.
Wendell Weeks: Okay. Good. So what drives those trend lines is, you are right, you would see that through the industry, it dipped above the line in 2022 and then you are seeing that adjustment below the line now, right? And you will see that throughout the entire time cycle and you are just looking at the fit against that, that gives you the CAGR. And what actually makes up that will always be sort of slightly different pieces of the network will be being built out at one point in time or another. We don’t see anything that is reducing the application space for fiber. Everything we are seeing is increasing the application space for fiber, right? And that’s just because rates, right, so I think line rates of how much bandwidth you need is going up.
And that’s across even short distances in places like hyperscale cloud, right? And because of that, you are seeing from a technology perspective, links which used to be copper or low fiber count, okay, become high fiber count all optical. And even going down to now our latest technology work, you see glass packaging, right, to be able to get right from the ASIC to optics as fast as possible, mainly because that’s the most economical way to handle that communications to get to photon as quick as possible and we see this in market after market. So I don’t see a collapsing market opportunity, I see a growing market opportunity and that’s what drives those long-term CAGRs. So I would — that’s how we think about it. To your notebooks and PCs, I mean that’s an interesting analogy.
We could have done that market here because we track that. Our CAGRs, right, would have had that surge up, but we would have integrated the decades of experience we have in notebooks would have taken our forward projection rather than the — what it did rather than the towards long-term at 300 basing [ph] 350. We would have been because of the way these trend lines work, we would have been well below because you don’t have enough cumulative time at that 300 level, the 350 level to offset all that time that you have had well below that. Does that make sense to you?
Wamsi Mohan: Yeah. Yeah. It does, Wendell. I appreciate the color. I guess as a follow-up in the spirit of looking at the long-term here.
