Harsh Kumar: Yes, Mohan, I had a question on China. So you’re in a fairly unique position of reporting in last quarter. So you can talk about things that times that other companies cannot. So I was curious what you’re seeing. Obviously, everything looks kind of dire right now, but you sound pretty optimistic on China coming back in the back half. I was curious what you’re seeing that might drive your optimism about China coming back. And just any kind of color would be helpful?
Mohan Maheswaran: Yes. I think it’s more harsh that when you look at some of these segments and some of the regional kind of balance here. We’ve seen pretty weak China now for several quarters. And so I think certainly, Q3 and Q4 for us in our fiscal quarters and now we’re also seeing it in Q1. So after three quarters of sequential decline, one anticipates that we are probably nearing the bottom. I would say, Q1 or maybe Q2 is going to be close. And then I expect it to start to go the other way. We’re also seeing — I mean, as I mentioned, bookings are starting to trend upwards a little bit. We’re starting to see some design-in activity that’s been fairly quiet in China in some areas. And so just generally, I would say that things are looking a little bit more positive coming off a very low base, though, right?
Harsh Kumar: Fair enough, Mohan. And then on your Sierra Wireless integration, I mean, it seems like you guys have made tremendous progress on synergies already in a short time frame. I was curious in terms of maybe you could update us strategically on products or anything else, any kind of positive or negatives that come to mind that you think are worth mentioning?
Mohan Maheswaran: Well, it’s early days, Harsh. Again we’re just obviously in integration process, and we’re also in the roadmap planning process. I would say that the teams are getting together now and looking at how we can do things kind of quickly and kind of the more longer-term integration plans. But the strategic fit and the philosophy and the kind of the reason why we did the deal are all still there, and we’re very excited about it. It’s just a question of now how quickly we can bring out some of the new products and some of the new capabilities and how quickly we can engage customers and get things moving. I would say it’s going to take six to nine months for us, maybe even a year. And this year, FY ’24 is definitely going to be a year of just kind of consolidation and getting the road maps in line in the portfolio kind of cleaned up and just make sure we position ourselves really for a really strong FY ’25 and FY ’26.
Harsh Kumar: Understood. Thanks, Mohan.
Operator: Our next question is from Tore Svanberg with Stifel. Please proceed.
Tore Svanberg: Thank you. I was hoping to ask the China question a little bit differently. Just because it’s so weak, Mohan — I mean I think by now, we would have expected to see some stabilization, but it just keeps coming down every quarter. So is there an element here of some demand destruction just given the political climate or anything like that? Or should we just purely think of this as sort of weak demand, inventory correction and so on and so forth?
Mohan Maheswaran: Yes. I think it’s more of the latter, Tore. I mean it depends on what you mean. I mean, for example, I can tell you that the data center business in China is very weak. Some of that — some of the big data center players in China have been pushing out their demand. So we know it’s there. We know that they want to deploy. We know that the government is still supportive. But I think there is an element of kind of well, is the government really supportive of large data center companies and things like that. So it’s a little bit of both of what you said, but I don’t think there’s any reason to believe that there’s a loss of demand. I think it’s more pushing out. And we’re anticipating that, that will come back. Everything will come back.
Tore Svanberg: That’s fair. And a question for Emeka. When it comes to gross margin. So you mentioned 150 basis points a quarter. First of all, would that be fairly linear over the next, I don’t know, six to eight quarters? And then how do the three elements of gross margin improvement really play out? I assume mix kind of comes later, but if there’s anything that you could share with us as far as the 150 basis point comment coming from the three elements that you mentioned in your prepared remarks?
Emeka Chukwu: So Tore, I think for this year, same for the rest of the year, I expect to see 100 to 150 basis points. Most of that is probably going to come through just the Semtech Organic business, rebounding as we go through the year. That is still the expectation. We expect that in the second half of the year, a lot of the inventory probably would have made its way through, and that will start to will start to ship again up to the level of consumption. We also have some material cost synergies, that we have identified, but we’ll have to see how the demand rose in, so that should also be a driver of the gross margin expansion for this year. I think the three points that I made before was probably not more reflective of what we expect on a long-term basis.
We know that as the market recovers and the Semtech Organic business recovers and the growth drivers come in, those are very high gross margins. Those would definitely be accretive to the current levels of gross margin. The proliferation of lower end points, from the combination with Sierra, like Mohan just mentioned, getting the product road map and developing the customer business development and everything and that is probably more of a two-year sort of window before we start seeing it so. And then the managed connectivity on LoRa Cloud services is probably also about probably 24 months out and things like that. So the 3 drivers was probably a little bit more for the long-term gross margin target level of 58% to 63%. When we announced the deal, we said we expect that you will see probably five years’ time, see us making progress towards the low end of that range.
And we still believe that is the case that are probably five years from now, we should be much closer to the low end of that target range.
Tore Svanberg: Good. Just one last one and still for you, Emeka. So just based on the P&L and the interest expense, is it fair to say that the breakeven point would be around $240 million. Is that sort of a good number to use?
Emeka Chukwu: I think, yes, about $240 million, $245 million, yes, that would be a good number to use.
Tore Svanberg: Great. Thank you so much.
Operator: Our next question is from Quinn Bolton with Needham & Company.
