Revathi Advaithi: And the only thing I’d add is I’ll remind you that our Board recently authorized $2 billion stock authorization, right, and so we expect to continue to just return cash back to our shareholders.
Ruplu Bhattacharya: Okay. Thank you.
Paul Lundstrom: Thanks, Ruplu.
Operator: Your next question comes from the line of Samik Chatterjee from JPMorgan. Your line is now open.
Samik Chatterjee: Hi. Thanks for taking my question, and I have just two here. Just parsing through all the numbers that you’ve disclosed, when I look at 3Q guide versus 4Q implied in there, there’s a modest uptick in revenue and a modest uptick in profit that I get to and I hope I’m doing the math right here. But just wondering how much of that is the cloud customer related projects you’ve talked about? Or is there something else embedded in there in terms of recovery going from 3Q to 4Q? And any sense you can give us on the timing of those [indiscernible] projects? Are they starting in 3Q and then ramping to 4Q? Or is it more of a 4Q event in the numbers? And then I have a quick follow up? Thank you.
Paul Lundstrom: Sure, Samik. So yes, there is some ramp tailwind as we move through Q4, as we continue to ramp cloud as a piece of it. There’s a couple of others that we expect to benefit from as well. There’s a number of these new platforms that we’ve been talking about that should give us some continued growth. It’s the three areas that we’ve been talking about. It’s next gen mobility, it’s cloud as you pointed out, and health solutions should continue to do well in the smart tech device things. You mentioned margins. I do expect a little bit of a margin uptick as well as we move from Q3 to Q4. That’s really just a full quarter of restructuring tailwind.
Samik Chatterjee: Got it. And on that point, the second question was, you did mention on the core, you’re seeing about a 50 basis points margin expansion in fiscal ’24 when you sort of adjust all the Nextracker numbers out. Just wondering if you can share your thoughts about sustainability of that pace of improvement going into next year, how much of the reliability improvement through the year is on account of price increases that you start to lap in fiscal ’25? And how should we think about sustainability of that piece?
Revathi Advaithi: Yes. Samik, I would say first is margin — steady margin expansion has been a core part of our story the last four to five years, right, and through the different cycles we’ve seen. We’ve been very consistent in our ability to drive margin expansion. So I view the 50 basis points margin expansion as sustainable and continue to track in the way of margin expansion. And it comes from the things we talked about. One is definitely continued change in our mix, right? Our focus is more on growing areas like cloud, next gen mobility, digital health care, all of those that are better margins, so mix plays a role in it for sure. We have done a lot around optimization of our factories and driving productivity through automation, through CapEx investments.
So that is very sustainable. So if I look at how we’re getting margin expansion, I would say that it’s a very sustainable story. And I think it’s good that we have been able to do that consistently. And reiterating FY ’25 EPS also points in that direction.
Samik Chatterjee: Great. Thank you. Thanks for taking my questions.
Paul Lundstrom: Thanks, Samik.
Operator: Your next question comes from the line of George Wang from Barclays. Your line is now open.
George Wang: Hi, guys. Thanks for taking my questions. I have two questions, if I can. Firstly, I just want to double click on the buyback. You mentioned that authorized 2 billion buyback. Just curious about cadence, especially kind of [indiscernible] around the spin-off timing, which is kind of in the last quarter 2024? And also I was looking at the share count kind of seems to be flat based on guide for 3Q versus 2Q, obviously, you may do some buybacks to offset dilution. Just curious, any sort of color you can provide in terms of the cadence and kind of linearity of the buybacks? And should we assume a similar sort of intermittent run rate for the next few quarters or it could be some technicality around the spin-off timing?
Paul Lundstrom: Well, the good news is now quiet periods are essentially over, because it’s out in the public domain that we do intend to spin. And so that has sort of created some stops and starts over the last — really over the last two years. So that helps a little bit. We give our last quarter share count as sort of — as part of our guide. I think you’ve known us to continue to buy stock as we’ve moved through the quarters. And so that’s probably a slightly conservative view, if you want to read into that a little bit. In terms of specific cadence, I’m not going to say exactly what we intend to buy here in our third quarter or our fourth other than to say stock buyback is clearly a capital allocation priority for us.
George Wang: Got it. Thanks for that. Just to quickly follow up just in terms of the free cash flow kind of potentially could be a big driver for the share price appreciation. It’s nice to see 2Q delivered much a strong FCF versus kind of 1Q being a cash use. Just curious, if you guys are reiterating 600 million or above in terms of full year FCF, and is there any potential upside just based on the better margin providing the backup?
Paul Lundstrom: Yes, it’s a great question. And so I’ll just say predicting cash flow is a little trickier than predicting the P&L. It can kind of bounce around a little bit. But what we’re going to do is we’re going to update everyone about the free cash flow expectation targets once the separation is complete. And here’s the logic on that. There’s lots of puts and takes from Nextracker specifically. And because the timing is not perfectly certain, other than we expect it sometime in Q4, it’s just a little hard to predict. But what I want to make sure is clear. We’re definitely headed in the right direction. We’re particularly pleased with how we did in Q2. We generated — like you said, we generated north of 200 million in free cash flow.
That was up significantly both year-on-year and also sequentially. I’m quite pleased with our inventory performance as it came down again in the quarter. We inflected a couple quarters back, and I like to see the continued progress there. And that free cash generation was after 145 million in CapEx. So we’re clearly not under investing in the business. So I would say nothing has fundamentally changed. And we still expect to grow free cash flow.
George Wang: Great, thanks again. I’ll go back to the queue.
Paul Lundstrom: Thanks, George, and welcome.
Operator: Your last question comes from the line of Mark Delaney from Goldman Sachs. Your line is now open.
