Nate Melihercik: Sure. Hey Alex, thanks for the question. So a couple things on the gross margin. We were about four points ahead of where we had talked about the quarter landing last quarter and so those gains were equally across four different areas. One, we had talked about potential pressure in the Suez Canal. Teams did a great job operating. There wasn’t that pressure. It didn’t manifest itself. So that was a tailwind. You also mentioned promos. Promos was a part of it as well. Going from the holiday quarter to the less holiday quarter, there’s promotional tailwinds. Costs continued to kick in. So that would be the third of the four that helped and then we had a little bit of regional mix. Europe did a little bit better.
China a little bit worse. So that provided some tailwinds as well. So that kind of helps you bridge, I think, from where we thought maybe the quarter would be and where it ended. Obviously a tremendous quarter from a gross margin perspective. Really, really happy with the performance on that front; anything to add there, Chuck?
Chuck Boynton: Yeah, I would just add on your question, Alex, is it sustainable? And the answer is yes. Our target operating model is 39% to 44%. We finished Q4 at the high end of that model. What a great quarter. Next year, if you look at the prepared materials, we outlined an approximate 41% target for next year. Could be a little higher, could be a little lower, but it is sustainable and it’s really driven on the heels of amazing cost reduction. Our operations team has just crushed it, bringing product costs down. So thank you, Prakash, Shree [ph]. That whole team has crushed it and then our go-to-market team has done an amazing job of being more disciplined on channel inventory and how we promote. So I do think that’s sustainable in the long term.
Some years might be above, closer to the high end of that model. Some could be a little lower and we could talk about those factors later if you’d like, but thank you, Alex and Hanneke, do you want to talk about B2B and video?
Hanneke Faber: Yeah. So B2B and video, obviously really important to our future and I was super pleased to see growth for the first time in many, many quarters in that segment in Q4 and I would say underneath that 2% growth, there’s a number of other green sheets for our business. We continue to lead the market in VC. So hold the number one share. Slightly grew that in the quarter as well. PWS also grew really well in the channel, close to double digit, actually, which was great to see and we had record services sales and as I said earlier, we’re a little young in B2B. So services are relatively new to us, but they’re growing fast. So I think our performance in the channel has been very good and will continue to improve. As we look at the market beyond our own execution, I think it hasn’t picked up tremendously, and that’s because office vacancies are still high, because it budgets continue to be a little stretched.
They’re probably flat corporate IT budgets from what we can see and within that, IT teams are having to prioritize AI spend. So the market isn’t quite back. Our performance in the channel is very, very strong. When that market snaps back, we’ll be really ready to take advantage of that.
Nate Melihercik: Great. Our next question is from Asiya Merchant at Citi Asia?
Asiya Merchant: Great. I hope you guys can hear me. Good morning and thank you again, Chuck, for a great partnership and for all the help over the last few quarters. Just a quick question, Hanneke. You outlined several great TAM opportunities to grow your expandable market. The cautious guide, I understand, perhaps related to temporary budget spending, but given great margins here, do you think you would need to invest with higher levels of OpEx here in the near term to drive perhaps the organic growth a little bit higher? Or do you think the model year is right sized? Thank you.
Hanneke Faber: Yeah. So, going forward, we’ve guided on our midterm model. We’ve guided on gross margins 39% to 44% and on operating margins 14% to 17%. I think OpEx won’t be super far from the 25%, but I think it’s right to not box us in, necessarily. We should always be prioritizing investment in both R&D and brand building. So you may see quarters where that’s a little higher than the 25%, and that’s okay. If we’re spending it on good cholesterol, that drives growth. What’s important is, again, that top line low single digits, accelerating the high single digits and then those gross margins and those operating income margins.
Asiya Merchant: Great. And then, just if I may, near term, given all the details in the shareholder letter that you guys, wasn’t clear to me, given the growth rate that you’re guiding for this next fiscal year, if VC is growing here or declining, given your flattish or plus 1% growth expectations, but then VC seems to be a little bit lower on that bar.
Hanneke Faber: Yes. So what I was really pleased about in Q4 is that the growth was broad based. So every region grew and every key segment, every key category grew, including VC. I think going forward, that’s what we’ll be aiming for and we’re not guiding here the exact growth rates of any of the specific categories, but I think it will and can be broad based.
Chuck Boynton: Yeah. Asiya, in the shareholder letter, we outlined and ranked the kind of high margin to lower margin, higher growth to lower growth, in VC’s in that middle range, which would indicate that our view, based on industry research, the industry prognosticators are calling flattish to slightly growing market. We’re being cautious because of the items that Hanneke mentioned. I do think this is one that when interest rates normalize, office vacancy normalizes, this is a great category that should outsize growth for the company overall long term. I think next year we’re being a little cautious.
Nate Melihercik: Thanks, Asiya. Next up from Deutsche bank is George Brown. Good afternoon, George.
George-Samuel Brown: Afternoon, guys. Thanks for taking my questions. I have two if I may. So firstly, in terms of your sales outlook for next year, if we take the midpoint and use your expectations on seasonality, this implies growth of roughly 5% in the first half, but a decline of 2% in the second half. I understand that this divergence is partly driven by improving growth trends in fiscal year ’24, but is there any other reason for the decline in the second half of the year? And then secondly, I noticed on your shareholder letter that you reiterated your long term targets on profitability, but you didn’t mention anything about your long term growth target of 8% to 10%. I’m just wondering how we should interpret this. Thanks, guys.
Nate Melihercik: I’ll do the first part. Hanneke, if you want to do the second part.
Hanneke Faber: Yeah, absolutely.
