Operator: Our next question comes from Jordan Levy from Truist Securities. Please go ahead with your question.
Jordan Levy: Thanks all. And thanks for all the commentary. Just a quick one for me to follow-up on a question of share. I’m just curious with the EU green deal industrial plan, have you seen any shift in the competitive environment over there? Any pop-ups of mom-and-pops trying to sell into the market or anything like that?
Raghu Belur: No, we haven’t seen. I think the competitive environment is what has been there and it’s consistent. And so — and as I mentioned earlier on the call that given our differentiated solution or reliability, customer service, et cetera, we compete very effectively. So, I don’t think that environment has changed, if I understood your question correctly.
Jordan Levy: And would you say that’s true both on the battery and micro side?
Raghu Belur: Yes, it’s a solution play, right? That’s the most important — short answer, yes, it’s a solution play. When people buy solar there, if you look at countries like Germany as an example, when they say I’m installing solar system, what they really mean is they’re installing solar and batteries and EV chargers and heat pumps. So, I think we have to provide the complete solution if you want to be an effective player in — particularly in Europe.
Jordan Levy: Great. Thanks so much for that.
Operator: Our next question comes from Mark Strouse from JPMorgan. Please go ahead with your question.
Mark Strouse: Yes, good afternoon. Thanks for taking our questions. Getting late in the day here, so I’ll just stick to one and take the rest off-line. I wanted to come back to the OpEx. The guidance for 2Q is kind of flattish quarter-over-quarter. Just from a high level, not necessarily looking for specific guidance, but from a high level, I mean, to the extent that the macro continues to deteriorate, California transition might take longer than expected. How should we think about OpEx going forward and kind of balancing near-term profitability with a lot of the investments that you’re making in geographic and product expansion and everything else?
Badri Kothandaraman: You should always think about OpEx at 15% of sales. That’s the general model. All I said in Q2 that we’re not going to be compromising on innovation. We’re not going to be compromising our international growth. We’re going to make generally the company better in other areas. But our baseline is 15% of revenue, and we don’t plan on exceeding that.
Mark Strouse: Okay. Fair enough. Thank you.
Operator: Our next question comes from Christine Cho from Barclays. Please go ahead with your question.
Christine Cho: Thank you for taking my questions. For the US manufacturing, I think you guys just said in your prepared remarks, shipments should be 4.5 million per quarter by the end of ’24, assuming robust demand in the US. But in the event that your US demand is less than that, would you still want to utilize that capacity and export the product and back out some of your production elsewhere? How should we think about that?
Badri Kothandaraman: Yes. We will most likely do that, but we don’t do things just for profitability. We do have contract manufacturing plants that are worldwide. We have worked hard to establish balanced manufacturing strategy. So we just need to be careful in looking through and making sure that we make the best decision for both profitability and balancing manufacturing.
Christine Cho: Okay. And then on the IQ8 rollout, that’s been slower than expected. Could you just go into some more detail into what’s driving that? Is it on the supply side with any of the components, or is it on the demand side, as customers sound like they’ve had to work through inventory over the last quarter or two? And I think on the last quarter call, you said you expected it to jump to 80% in 2Q. So is that still the expectation? And just with the gross margins, it’s very high this quarter and the IQ8 drove that. But your 2Q guidance is lower and batteries are lower. So that’s going to be less of a drag. So is this just conservatism, or is there anything one-off that we should be aware about in 1Q or 2Q?
Badri Kothandaraman: There’s nothing one-off. You’re right, we are — originally, I thought 90% by Q2, last earnings call, I told you 90% by Q3. That’s the number, 90% by Q3. 80% by Q2 will be okay. We are — for example, in Europe, 50% of our volumes are IQ8 right now. We’re introducing IQ8 to many more countries as we speak. Yesterday, we introduced IQ8 to Spain and Portugal. Soon, we will introduce to Poland, Germany, et cetera. We plan on doing the bulk of those introductions. In this quarter, most of them, there will be some spillover in Q3 for a few, but we very much want to achieve 90% in Q3. That’s our target.
Operator: Our next question comes from Kashy Harrison from Piper Sandler. Please, go ahead with your question.
Kashy Harrison: Good afternoon. Just one quick one for me. So you’re currently sitting on, call it, $600 million of net cash, generated around $225 million of free cash flow during the quarter. So just wondering what your thoughts are on using the free cash generated this year to perhaps more aggressively repurchase stock? Thank you.
Badri Kothandaraman: Yes. I mean, we have stated our strategy. It is unchanged. Basically, first to make sure that we have plenty of cash for the needs of the business. The capital that we need for our portion of you is manufacturing, et cetera, we’re doing exactly that. The next one we look at is — we look at are there any M&As that we should be taking advantage of now? We look at a number of companies on a weekly basis in the areas of batteries, even in power conversion, in software, in home energy management, EV charging. We look at many, many areas. And that’s the second priority. The third one is, if we — basically, if we have cash left over from number one and number two, we will buy back stock assuming the share price is below conservatively estimated intrinsic value. So we will do that. Our Board looks at it very carefully. And that’s our strategy.
Kashy Harrison: Thank you.
Operator: Our next question comes from Eric Stine from Craig-Hallum. Please, go ahead with your question.
Eric Stine: Hi, everyone. One here at the end for me. So I know a lot of moving parts. You’ve got a big revenue range on one hand, less seasonality on the other. Channel inventory that you’ve detailed, I’m just curious if you’d be willing to kind of go through a scenario that gets you to the high end of that revenue range and a scenario that gets you to the low end of that range and maybe how that breaks down between the US and international?
