Operator: Our next question comes from Raji Gill from Needham & Company. Please go ahead with your question.
Raji Gill: Thanks, and congrats on good results in light of a very volatile market. John, a question on the order trends. I know last quarter, you did see order volatility and lead times came in specifically around the home and life, and then you also kind of mentioned in the industrial commercial, some of the customers were more of in a holding pattern. I wanted to get a sense of what’s changing now in terms of where you’re seeing greater–where you’re seeing more order stability over the last few weeks. Do you see any potential risk as the lead times come in, as more supply comes online, that you kind of return back to some sort of order volatility that you saw in the last quarter?
John Hollister: Raj, thanks. It’s hard to call it on the last point. Of course, we could see more volatility, but we’re very encouraged by the strength of the design win momentum. As we’ve said, that is the best indicator we see of continued strong revenue performance. The supply chains are normalizing. We continue to see pockets of shortage, but we have nodes that are really more in balance between demand and supply now – that’s a good outcome and allows us to serve the demand. Back to the top of your question, simply put, we’ve seen more stable order patterns in the last several weeks. I wouldn’t say it’s completely, quote, back to normal, but getting better and we’re encouraged by that as we see it.
Raji Gill: And on the gross margins, the gross margins have been kind of above plan for several quarters, above your long term plan. You did mention that this year, the growth will be less dependent on ASPs, more on unit growth. Wanted to understand how we should think about gross margins trending throughout the year, and with respect to that, what are your expectations for wafer costs? Is your main foundry, TSMC increasing capacity for Series 2 products? Just any thoughts in terms of your wafer cost expectations and how to think about the gross margins. Thank you.
John Hollister: Yes, thanks Raji, that’s good. As we said at the beginning of last year, we had a one-time effect, if you will, in the first quarter of 2022 that then bled off through the course of the year, and we saw gross margin sequentially declining throughout the year. We see a very similar pattern this year with a more modest version of that, but I guess similar effect as we see a lift in the first quarter, we expect that to moderate sequentially as we work our way through the year. We’ll have to stay tuned to the overall input cost landscape. Not aware of more forthcoming – that could change, but at this point we believe we’re reaching a degree of stability on the cost side as well.
Raji Gill: And just on the capacity coming out of your foundry, maybe you could just elaborate on that? Thank you.
Matt Johnson: Yes, I can comment on the capacity side. It’s important, first of all, to mention that we still have supply constraints in the coming quarters, so as John said, it’s more mix. In some lines, we’re at parity, and in some lines we’re not, so we’re still working through that. Big picture, one thing that maybe more unique to us than the industry is because of our rate of growth, we’re hyper-focused on that capacity and supply not just this year, but in the coming years. Because of that design win momentum, one of the things that’s critical to our customers is an assurance that we can provide the supply that comes with that business. We’ve been fortunately very successful at partnering with our suppliers. As we said in the remarks, we’ve actually seen our relationships with our customers and suppliers improve over the last couple years through all this challenge, and that’s allowed us to position ourselves to continue scaling very quickly in the coming years, which is a key component to a lot of these wins.
We couldn’t secure some of this business unless we could give our customers assurance that we’ll be able to do that. Never take it for granted. We’re watching it closely, we’re paranoid about it because of the rate of growth, but we do see a path and our customers see that path as well.
Raji Gill: Appreciate it.
Operator: Our next question comes from Blayne Curtis from Barclays. Please go ahead with your question.
Blayne Curtis: Hey, thanks for taking my question. I just want to follow up on Raji’s gross margin question. I thought last year, you had some one-time charges, you got some benefit, so I’m just kind of curious, in that 63, because I think you said limited pricing increases but you’re seeing two points of gross margin uplift, so is that just timing like you saw the prior year, and is there any kind of one-time benefit as well?
John Hollister: Yes Blayne, thanks for the question. No, there’s not a one-time aspect of that. It’s very similar to what we saw one year ago.
Blayne Curtis: Got you, and then I wanted to ask, not to keep asking on pricing, but you do give the annual metric in the carryout. I was wondering if you would give us for the year in ’22, if you have that number for units and ASPs.
John Hollister: Yes Blayne, the contribution for revenue growth is mainly on ASP, which has a couple of components, as we talked about, both in terms of cost, input driven, price increase, as well as value, higher ASPs on strong product and customer mix, but it is fair that more than half of the contribution on revenue is from ASP.
Blayne Curtis: Great, and then if I could just ask one last question on home and life, you mentioned the smart home down the most. I’m assuming there’s some component of inventory correction because that segment is down 19% sequentially. I’m just kind of curious, your projected margin said both down, so has that kind of correction that you saw in December cleared through and it’s more normal seasonal for the business? Just some color on that correction, particularly in the smart home.
Matt Johnson: Yes, sure. This is Matt. I think the most accurate and honest answer I can give you is that it varies quite a bit. We see some customers that are sitting on a lot of inventory and working their way through it. We see other customers who managed this really well and they’re still worried about their demand and working through that. But on a whole, we definitely see our customers in that space working down their inventory, but the key there is what does the demand profile look like and how long is that going to take for them to work through that. But like I said, pretty variable customer to customer, depending on how they’ve managed it and how their end markets are doing.
Blayne Curtis: Got you, thanks.
