You can think of them as evolutionary, not revolutionary changes because the foundation we’ve built for this business has never been stronger. And I’m really, really, really looking forward to the next two, three, four years to see how things shake out.
Operator: Our next question is coming from the line of Paul Chung with JPMorgan.
Paul Chung : So just on cash flow, you’ve typically seen more cash investments in 1Q, but you actually squeezed out some free cash flow this quarter. So is this more about timing or maybe less need for working capital investments kind of given elevated build last year? And any comments there in the kind of the shape of free cash flow for the year? And then also on guidance, it remains unchanged. So how are you kind of offsetting the increase in interest expense and kind of cash outlays on optimization? Or was that kind of included in your projections last quarter?
Mike Dastoor: Yes. So the free cash flow assumptions that we have today that reflect everything reflect they reflect the sort of charge that we’ve taken, the cash outlay associated with that. Don’t forget that the savings on the other side of that as well. So there is definitely everything that’s out there is reflected in the free cash flow. From a Q1 standpoint, I think it’s more timing. We’ve talked about our CapEx being in that 2.5% range. Not much changes from that 2.5% guidance that we provided in September. You’ll always have timing differences. You’ll have nuances. From a shape of the year perspective, I sort of — I’d just use shapes from previous years. I think it will be very similar to that. Obviously, timing moves things here and there a little bit. But overall, we still feel committed to our $900 million free cash flow number for the year as well.
Paul Chung : Got you. And then just a follow-up on op margins, seem very kind of good progression here over the last two years, some nice benefits from cloud consignment. But can you expand on the drivers to get to that 5% mark and kind of the pace beyond fiscal year ’23? You’re doing some cost optimization here, but will it be more a function of mix kind of efficiencies or even scale as you guys are approaching $10 billion in quarterly revenue run rate now.
Mike Dastoor: I would suggest all of you about, Paul, I think it’s definitely a mix, operational efficiency, something we always execute on. We’ve always invested in the past around automation, robotics, et cetera. So we feel good about that as well. And overall, the margin, does it go beyond 5%, 5.5% as well. We’re not stopping at 4.8%, and we’re definitely not stopping it at 5% either. So it’s something we’re actively engaged in and feel very strongly about.
Operator: Our next question is coming from the line of David Vogt with UBS.
David Vogt : I have a big picture macro question on sort of demand. And you talked about your demand characteristics being relatively consistent with 90 days ago. But I’m trying to square it with your commentary being a little bit more cautious as we move through the back half of this year. I guess my question is when you think about what’s happening in the marketplace, we’re seeing some intensity drop from a capital spend in telcos and cloud. How much of your demand visibility or your revenue visibility has to do with elevated backlogs because supply chain has been sort of elevated for quite some time versus the in-period demand that you’re seeing today from your customers? And then I have another question.
Mark Mondello : David, well first off, welcome to the group. I think you just started coverage on us, and we look forward to spending more time with you so you can better understand the business. In terms of your questions, there’s pent-up demand, but I would caveat answering your question similar to a prior question, which is I don’t want to make a blanket statement because, as an example, let’s take networking or, say, legacy telco. That part of our business today is about $3 billion on a $35 billion base. So in terms of what type of backlog we see from the telco folks or the networking folks, I guess it’s relevant. But in terms of our overall corporate results, I’m not sure how impactful that might be. I think a 100% we have seen pent-up demand and backlog across almost every single area of our business where supply chain constraints existed.
If I could paint it with a broad brush and take this with a degree of inaccuracy, I guess, because I’m trying to paint it with a broad brush across a large-scale portfolio, I think that most of the pent-up demand and the backlog, in general, will probably be alleviated by late 1Q of ’23 or into the second quarter of ’23, to say the first half of ’23. So I think most of the pockets of backlog clear and normalized as we get back — as we get to the back half of calendar ’23. Again, I don’t know if that’s helpful or not, but that’s kind of a general statement as we look across the business.
David Vogt : No, that’s helpful. What we’re trying to kind of understand is sort of the normal cadence of sort of order trajectory of the business, stripping aside what we’ve kind of lived through the last couple of years. So that’s helpful. We appreciate it. And then maybe just a final question on cash flow and capital priorities. You’ve done a great job in terms of returning shareholder capital and managing cash flow over the last couple of years. Does your commentary about the second half or maybe some of the cash used for the restructuring change any of your priorities in the balance of this year. I wouldn’t think so, but just wanted to just confirm with you.
