Mike Dastoor: David, let me answer your second question first. The answer is, yes, it excludes Mobility. So, when we’re looking forward to FY ’25, the 3% growth is on the non-Mobility piece. As it relates to Q1 margin, there’s a couple of dynamics going on. We talked about consignment in the cloud, that has a little bit of an impact for margins in Q1 and for all of FY ’24 as well. Our mix continues to shift into the higher mix end markets, the higher margin end markets. There is a shift taking place there, which is working for us. I think I highlighted, and Kenny talked about it as well, 70% of our non-Mobility business now is going to be in those four end markets. There’s no major change in the Mobility piece other than some — I think I called out a couple of pieces, I called out the consignment piece and I called out some shift of work content which is more bill of material driven rather than anything else.
There’s no manufacturing change at all and the value add that we provide is still the same, but it was just a bill of material moving upstream rather than through us. So that has a little bit of a positive impact on margin. And then last but not least, we did — we signed a preliminary agreement on 27th of August. On the 27th of August, we triggered an asset held for sale sort of accounting treatment under U.S. GAAP. In Q4, there wasn’t much of an impact at all. There was zero impact on the P&L. There was some tax that we had to provide for — under GAAP for Q4. But in Q1, there is about a $40 million, $50 million pickup because we’re pulling out depreciation as part of this accounting treatment for assets held for sale. I called it out in my prepared remarks, I mentioned there’s about a $0.25 improvement because of this, but don’t forget, through the year, this sort of improvement gets offset by stranded costs that will take time to pull out towards the end of the year.
But in Q1, there’s quite a few dynamics moving around whereby our revenue looks lower, but it’s not because it’s mainly bill of material driven and there’s some other dynamics as well.
David Vogt: Mike, just to clarify, so is the stranded cost and this sort of triggered gain embedded in the core non-GAAP projections, or is that just strictly in the GAAP numbers for ’24?
Mike Dastoor: No, the asset held for sale, the depreciation is embedded in our core. I think I mentioned that specifically when I was talking about the core EPS, there was a $0.25 impact. The stranded costs are also included in core. We’ve got stranded costs towards the end of the year. We’ll only be able to get to restructure those in maybe Q3 or Q4 well after the transaction closes.
David Vogt: Great. Thank you. That’s helpful. I appreciate it. Thanks, guys.
Operator: Thank you. Next question is coming from George Wang from Barclays. Your line is now live.
George Wang: Hey, guys. Thanks again for taking my question, and congrats on the quarter and the strong guide. Yeah, just a couple of quick questions. Firstly, can you kind of talk about share gains? Just maybe pass out kind of what are you seeing in terms of the continued share gains, whether that’s mostly from new markets or existing growth markets you guys already in right now?
Kenny Wilson: Yeah. Hey, George, nice to talk to you. Yeah, so what we’re seeing is, I think we’re seeing some offset in markets right now. So, if you look at the consumer, for example, we call that Network and Storage, that’s down. So, we’re not losing market share there. But in the markets that we’re focused on, like in automotive and healthcare, renewables, for sure, we’re gaining share in those areas. So that is allowing us to offset some softness in consumer, for example, and still be able to grow — normally grow our business. So you see, we are seeing sheer gains in those targeted areas.
George Wang: Okay, great. And also, I kind of want to double-click on the opportunities out of China, especially given the reshoring trends and maybe kind of specifically in Eastern Europe, kind of on the EV production side and also Mexico. Would you like to call out a few other regions kind of outside of China, also in particular vertical, like that could drive incremental growth as this reshoring trend continues?
Kenny Wilson: Yeah, okay. So, let me just — if this doesn’t satisfy your question, just let me know, George. But — so, we have a phenomenal capability and a really robust footprint in China. We leverage a lot of capabilities across the company from our footprint there. What we do see is that we see opportunities in China for China. We think that whether it’s in EVs or multiple different end markets, we think our facilities are full and we’re adding more demand in our China facilities. So, when we talk about regionalization, we’re not — it’s not cannibalizing our footprint in China. And we think that the demand is going to increase for us there in the longer term, which is great because the teams and the people we have in China are absolutely outstanding.
But to answer your other question, yeah, we see — look at reshoring in Europe and North America, it’s a big part of what we’re doing and what you see growth in our targeted end markets. The good thing about our company and our capability is that we have standard processes. We have a consistent culture, of course nuanced in different parts of the world. We have a standard unified ERP system. So, what it means is, it means our ability to take capabilities and products and move them around the world and build them in the same — different geographies at the same time. I would argue that we’re among the best in the world at that. So, we see — our focus is on China to support China market and also for export, but also we see leveraging those capabilities in different parts of the world is something that’s going to help us grow in the longer term.
So, I guess, in summary, the regionalization, as we call it, or reshoring, is — that’s a net positive for us. So, we’re feeling pretty confident about that in the future.
George Wang: Okay, great. Thank you. Congrats again. I will go back to the queue.
Kenny Wilson: You’re Welcome.
Operator: Thank you. Next question is coming from Samik Chatterjee from JPMorgan. Your line is now live.
