Wendell Weeks: Please do.
Wamsi Mohan: On the yen, if you look beyond 2024, can you give us some sense of how much exposure is hedged and at what level, given that we are back at sort of the 150 level again? And just curious if you could give out some color on sort of maybe just beyond 2024, looking at 2025, 2026, what percent and at what level you might be hedged at? Thank you.
Wendell Weeks: So right now and I think did last quarter or maybe the quarter before, we are hedged through the end of next year, right? And beyond that, right, we have — we don’t have a significant amount of hedge in that time period. Ed, would you like to add?
Ed Schlesinger: Yeah. Two other things, Wamsi, that I would add. One, we recently raised price in Display. That’s one way for us to address the yen. We are going to certainly readdress that or rethink about that as we go into 2024. And then, secondly, given the large differential in interest rates between Japan and the United States, there’s a pretty steep forward curve yen. So if you go out a year, it’s about ¥6. So you go out another year, it’s about ¥12 and so on. So just as you think about the rate that’s out there, it’s not the 150, it’s really the forward rate that matters to us because we could actually hedge at that rate right now. So the average over the next five years is below 130…
Wendell Weeks: Yes.
Ed Schlesinger: … versus if you think about the rate yen in total being at 150. I just wanted to point that out.
Wamsi Mohan: Yeah. But it’s going to lowest [ph]. Thanks, Ed.
Wendell Weeks: So that gives you an idea of the sort of ceiling on our exposure is what would be the average rate sort of post 2024 if we reestablish long-term hedging programs. And what we are trying to do is sort of balance to see we believe that there will be an opportunity, because of the way in which the currency markets work to be able to put in place more long-term hedges at rates we like. If that doesn’t happen, we will institute an industrial fix, meaning price increase so that we maintain strong returns in this business for our shareholders and that’s the way we tend to think of it. It will either solve relatively easily in the currency markets in the timeframe or will — to an industrial solution, the first step of which you just saw this year.
Wamsi Mohan: Okay. Thank you so much.
Operator: Thank you. [Operator Instructions] Our next question comes from the line of Steven Fox with Fox Advisor. Your line is now open.
Steven Fox: Hi. Good morning. Wendell, I was wondering if you could talk a little bit more about some of the comments you made around the new revenue platforms and also some of the cyclicality in the business from two aspects. One, it seems like thinking about your comments that as you have instituted more technology, more value add into some of your served markets, you have created more cyclicality as well. I wonder if you would agree with that. And then, secondly, from my perspective, it seems like the $3 billion has somewhat disappointed over the last few years and especially as you think about how dynamics are changing maybe around demand for some of your COVID products, et cetera. Is it time to maybe look at that $3 billion and even though it has a lot of leverage, maybe pair back some of those products or see if they are better off in other places or with other companies? Thanks.
Wendell Weeks: Steve, I think that’s a really good question. First, I want to make sure we are clear and we will follow up with you more. For us, the huge bulk of that $3 billion is not in new platforms, okay?
Steven Fox: Okay.
Wendell Weeks: That’s just in like fiber optics and some of the new products in it, regaining 40% growth to trend line, it’s just like Display getting back to trend line. It’s Automotive getting back to trend line. So it’s the products you know and love, Steven, right, that you have been driving through your models for a long time, right? That is the stuff that is well below trend and that is the lion share of the $3 billion, right?
Steven Fox: Okay.
Wendell Weeks: So the new platforms, which you speak, are a pretty small amount, right, of that gainer, right? And for those, I think, what we do is, as we have learned different things, we change our profile. So whether it’s a pharmaceutical packaging, where we pivoted everything to serve COVID because we thought that was good for the world, right? Government funded a free plan for our shareholders, fine, right? Customers signed up to long-term take or pays, which we just completed sort of that take-or-pay process in quarter two for some of those things we signed up for to help deliver those lifesaving vaccines. And then we are saying, okay, so what do we pivot towards now and then we go to what’s an asset-light strategy there and that’s why we are opening up the technology stack and being able to enable other players in the industry, some of our competitors or some people like West, right, to sort of use our tech and then we return to our shareholders through a variety of mechanisms, everything from sort of licensing to go-to-market models that end up with us still capturing.
So we will do that in each of these. We are always adjusting to what we see as the opportunity without doubt, as we go through this down cycle on revenues, it’s significantly increases the skepticism, which we bring to new opportunities, right? So I think in that way, your concept is right and we will do that. But I think the thing where we are going to need to flush out for you more is it’s not those areas, it’s the $3 billion. It’s just — that’s just getting back to run rate. We have demonstrated on products and people consume every day, okay? That makes sense to you, Steve?
Steven Fox: Yeah. It does. You answered everything except for the one question on just sort of the cyclicality of the business now…
Wendell Weeks: Oh! Got you.
Steven Fox: …your current stack?
Wendell Weeks: I started to think about that at the moment, you said it. It’s super interesting, because like let’s stay on fiber, given that we are adding so much more value now for fiber tip than we did, right? So therefore, when they go down, we — when we lose a fiber tip now, it causes more revenue fall off than it used to when we were just a fiber maker.
Steven Fox: Right.
Wendell Weeks: I think that’s true. At the same time, the baseline is bigger, right? So I don’t know if it increases cyclicality. Let me think about that mathematically myself or Jeff and you have got me curious. Let me do a little bit of quantitative work and we will get back to you, Steven.
Steven Fox: Great. Appreciate all the color. Thank you.
Wendell Weeks: And one other quick thing to add on this, Steven, because one as you know, what we have done to try to fix volatility of technology substitution curves is, we take and spread across multiple markets our three core technologies and our four manufacturing engineering platforms. In that way, it sort of any given point in time, markets that don’t move together, right, think like people don’t consume smartphones related to their COVID-19 vaccination rates, right? They don’t move together or cell and gene therapy doesn’t move with buying large-size televisions, right? So even though they use some of those same core technologies we have. And one of the things, so we get a balancing effect to offset some of that cyclicality and volatility.
What happened during COVID, so in general, if you were to look at over time, what we have built is, if you think about correlation as being like negative one be negatively correlated, zero would be not correlated at all and one being highly correlated, you move the same direction. We have gotten our correlation to be down to like, I don’t know, 1.7 or so. So really relatively uncorrelated, which helps with that volatility. Then what happened in the pandemic as the pandemic sort of forced correlated a bunch of our markets that for different reasons, it don’t have a lot to do with each other and our correlation levels started to get 0.7, right? So highly correlated. And so that is — so we are seeing our markets which should be diversification effects before it’s correlated by the pandemic and what’s happened after.
