And then a quick follow-up, I guess, Wendell you mentioned BEAD a few times and the visibility here that it starts late in 2024. One of the suppliers reporting this morning as well is pushing out some of that expectation to early 2025, saying things are looking a bit more delayed than usual, just any more color on what’s sort of driving the confidence that it’s more 2024 than 2025. Thank you.
Wendell Weeks: Thank you. I think perhaps, my emphasis was a little wrong in talking about BEAD. We expected to start, this is what I was trying to say, it’s not going to be a big mover in 2024. I think your understanding is correct. It starts to become a much bigger mover in 2025. So if I created any dissonance with that understanding that you had, I didn’t mean to. I think you have a correct understanding of it. It’s just that it actually, it has been not there and now it’s going to be there beginning in 2024. But the bulk of it starts after that.
Ed Schlesinger: And, Samik, I’ll take the first part of your question. I want to start by just talking a little bit, we did it in our prepared remarks and then a little in Q&A, on the drivers of why we grow and why we think our first quarter is the low quarter. I think in optical, as carriers continue to deplete their inventory, that will come to an end, even if they don’t increase their deployment rates, which we think they will, but even if they don’t, that is a good demand driver for us that will start at some point this year. Okay? In display, we talked about panel maker utilization being really low in the first quarter and needing to sort of spring up from that level quite significantly. And then in Life Sciences, we’re seeing market normalization in North America and Europe and we actually started to see a little bit of that happening even in the fourth quarter, right?
So those drivers, we expect to bring our run rate up significantly as we go through the year. The timing is really hard to call. And so I think sitting here today, I would not want to leave you with a specific guide for the fourth quarter or how we exit the year, but just that we believe Q1 is the low. And if we got to levels like you spoke about, okay, that’d be awesome. And we would be well on our way to that $3 billion that Wendell talked about. But even if we don’t, we still feel very confident in that window of time that Wendell shared earlier. Does that help?
Samik Chatterjee: Yes, no, thank you. Thanks for the color. Thank you for taking the questions.
Operator: Thank you. Our next question comes from the line of Josh Spector with UBS. Your line is now open.
Josh Spector: Yeah, hi, good morning. Two quick ones. First, just on the FX side of it, understanding you’re hedging at a lower spot rate today when you look out to ‘25 and you have some industrial options. Is there really a timing or milestone we should be looking at, at some point this year where you would know what the impact might be in 2025, be it you’re doing some pricing action, you have hedging locked in, and then you might communicate what that impact would be to us?
Wendell Weeks: Yes.
Josh Spector: You’re not willing to share roughly what that timing would be?
Wendell Weeks: I thought you’d take yes.
Josh Spector: I’ll push a little further.
Wendell Weeks: Yes. And no, we’re not going to share what timing we will.
Josh Spector: All right, fair enough.
Wendell Weeks: It’s too involved with our customers. I’m not being non-responsive. That’s why I really do think that yes is about right. This is super important with our customers. And so we want to get that pretty well advanced and have a high confidence of where we’re going to end up before we share that with our shareholders, right, so that we can make sure we’re as accurate as possible. And that’s — so I’m not going to give ourselves an exact timeline, but this year, you can expect us to do that.
Josh Spector: Got it. Appreciate that. And just quickly on free cash flow, in the first quarter your guidance of up a few hundred million, it would seem that’s a pretty low bar given that there was about $0.5 billion of working capital use last year and your expectation on margins are relatively flat. So are there any offsets we should be considering in the first half of the year that maybe make that a little bit less favorable from what we could see otherwise?
Ed Schlesinger: I don’t think so. I think we expect to have a nice year on free cash flow for the year. Nothing specific I would call out.
Josh Spector: Okay. Thank you.
Ann Nicholson: Okay. We can do one more question.
Operator: Our last question comes from the line of Matt Niknam with Deutsche Bank. Your line is now open.
Matt Niknam: Hi, thanks for squeezing me in. I’ll keep it fairly brief. On the $3 billion incremental sales opportunity, maybe for — a question for Ed, can you just walk us through the incremental growth and operating margins this would come in at? And is it safe to assume there’s minimal incremental CapEx here? I’m just trying to understand, is this more opportunity to scale past existing OpEx or is there a gross margin accretion opportunity as well? And then this may be a more open-ended question, but on the macro relative to the last call three months ago, maybe for Wendell, any material changes in customer demand or spending plans across key verticals, i.e., what’s really changed would you say, if at all, over the last three months in terms of customer demands or customer conversations you’re having? Thanks.
Ed Schlesinger: Yeah, I’ll go first, Matt, on your first question. So I’ll start off with, we have the capital in place or the capacity in place to deliver the sales. So first, from a cash flow perspective, typically we would add CapEx as we add sales. So that’s a positive for free cash flow as we go forward. We also have the depreciation in our P&L for those assets. And then we also have some fixed cash costs that run through our P&L to support those assets. So generally speaking, the fixed costs are already in our P&L. So you would expect our gross margin to accrete at a higher level than our current gross margin level. So that’s one operating leverage point or leverage point, if you will. And then I think on OpEx, we can also grow without adding OpEx much from these levels and that creates a second leverage point for us. So that should accrete both gross margin and operating margin from our current levels, and you should start to see that as the volume comes back.
Wendell Weeks: On your question of, in our discussions with our customers, sort of what are the anecdotals, and it’s a really good question because sometimes highly quantitative analysis and data points one way and anecdotal evidence points the other, right? And in those situations, that’s telling you, there’s dissonance there and how do we dive deeper to make sure we have the right data set and how do we create an understanding of those things that are pointing differently. In this case, what we’re seeing is the anecdotals are in support of what we’re seeing in our deeper analytics in our understanding of being well below our long-term trends and a need for that to revert back towards those underlying huge secular trends that drive our demand over time. So basically reinforcing the opinion of the data. And that is what we tried to reflect in what we discussed with you today.
Matt Niknam: Very helpful. Thank you both.
Ann Nicholson: Thanks, Wendell. Thanks, Matt. Thank you everybody for joining us today. Before we close, I wanted to let you know that we’ll be attending the Susquehanna Financial Group 13th Annual Technology Conference on March 1st and the Morgan Stanley Technology, Media & Telecom Conference on March 5th. In addition, we will host management visits to investor offices in select cities. Finally, a replay of today’s call will be available on our site starting later this morning. Once again, thank you, and operator, you can disconnect all lines.
Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.
