Tore Svanberg: Sounds good. Thank you.
Operator: Our next question will be coming from Gary Mobley of Wells Fargo. Your line is open.
Gary Mobley : Hi, guys. Thanks for taking my question. I wanted to make sure I have the impact of the inventory reduction squared away in my head. So, you talked about $200 million worth of perhaps excess inventory or said differently, roughly a quarter’s worth of revenue. And you’re guiding the fourth quarter revenue down $120 million sequentially, roughly. So that is what, roughly 60% of it being digested in the fourth quarter? And then maybe 40% digested into the first quarter? And to what extent does this $85 million revenue guide reflect lower turns assumption just given the lack of visibility as your lead times have shortened?
John Hollister : Yes, Gary. We’re working through this as best we can to navigate the inventory situation at our customers. I guess on your question long-terms, we duplicate. So, we definitely have seen very low turns in the business. That’s really at the roots of what is going on here. Turns have been quite low for multiple weeks, and that is really underpinning the weakness in our guidance. And it is exactly that. that we look to first, as the first indicator of a recovery emerging as customers clear inventory as the inventory clearance events, we should see turns improve. I hope that’s answering your question. That’s kind of the best half-way right now.
Gary Mobley : Okay. Fair enough. All right. And so, I wanted to ask about the flexibility of the buyback. I think you have listed in your PowerPoint deck on your Investors section of your website, $100 million left in the buyback. How much flexibility do you have to ramp that up, considering the cash on the balance sheet, the lending capability, and whatnot? And to what extent are you willing to borrow at today’s interest rate environment to buy back stock at these levels?
John Hollister : Yes. We do have flexibility up and down, Gary, to the point of being opportunistic on it but also being mindful of our overall liquidity. These are all factors at work as we cover in the best way to approach that. But we’re not locked in, so to speak, we do have flexibility [indiscernible].
Gary Mobley : All right. Thank you, guys.
Operator: Our next question will be coming from Quinn Bolton of Needham. Your line is open.
Quinn Bolton : Thanks, for taking my questions. Just wanted to follow up on Gary’s question there. You kind of went through the math of the inventory clearance, maybe a clear 50%, 60% in Q1 — sorry, Q4. It would seem that Q1, while you’re guiding it up is still going to have a significant inventory effect. And then hopefully, by the end of Q1, maybe you’ve cleared most of that and you start to get back to better sequential growth rates. Just wondering if I’m thinking about the shape of the trajectory, right, or if you would think it’s a different trajectory off the bottom?
Matt Johnson: Yes. Quinn, thank you. This is Matt. I’m not sure about that trajectory. If we step back, I think just looking at it big picture, to be clear, our internal inventory, we are definitely growing that by design, intentionally strategically in support of the future business and ramps we’ve secured and it’s important for our customers. We are sole source on a majority of our products, the primary silicon, and a lot of our products. And our customers have just been through this whole supply chain math that we have to make sure that we are ready to support this business that we keep securing. So that’s one piece. The distribution or channel piece is obviously separate. And in that case, that’s I think it’s around 90 DSI.
So higher. But at the end of the day, we’re carrying about quarters worth at suppressed revenue levels. So, as we’ve said in the last few quarters, it’s higher than our historical but not alarming to us and definitely manageable as we look forward and with what we know that’s coming down the road. I think our biggest challenge is our end customers and what they are carrying in their lines and supply chain. And being able to — that’s high, higher than it’s historically been. And at the same time, they thought their demand was going to be much stronger. And the compounding or confluence of those two things coming together is extremely impactful. And that’s what we’re seeing in Q4.
John Hollister : Yes, Quinn, this is John. Let me try to address what I think you and Gary are both asking and say this — we are not saying that all inventory will be cleared in the fourth quarter. Matt indicated that we’ve got a mix of customers and based on the best we have, and is very imperfect information, do see some of them with inventory levels that would require more time to clear in the first quarter, some even beyond first quarter. So, I’m trying to respond to what you and Gary are progressing on.
Quinn Bolton : Yes. I guess that’s what I started to drive that as it feels like, obviously, a low guide for the fourth quarter but it doesn’t look like you’re clearing all of that quarter’s worth of inventory at customers. And so, I’m kind of assuming that the March quarter, I know you’re not guiding, but the March quarter probably isn’t all that different from the December levels, and then hopefully, by the end of March, you will have gotten through most, maybe not all, but most of that inventory buildup at customers. And then we’ll just have to see sort of where end demand is and how quickly the consumption rates recover, I guess, is the way I’m thinking about it.
Matt Johnson: Yes. I’m going to reiterate, but I understand the comment question now. I think the easiest way to frame it is what we’ve said is, one, definitely not saying when we’ll get through all of it, and very imperfect, right? This is — there’s no reports for this. This is just a lot of discussions with customers on the phone and trying to get a feel for what that level is and their moving-in target. But we believe that in Q4 based on their expectations, their levels, we’ll get through — easy way to think of it as a majority of that, but there’s still going to be some to work. And that’s what gives us the confidence in saying, we see that as our bottom. And it’s not only the inventory, but it’s a big factor moving forward.
It’s also those ramps on the other side of it that are helping as well. But — it’s a massive hit in Q4, and that inventory is a huge piece of that. So, it’s important that we’re clear about that. But the data says that will work through a big chunk of it.
