Ross Seymore: Yes, I do and it’s kind of a cyclical question. You guys are astute students of cyclicality of this whole industry. I think this is going to be including your guide the sixth quarter of negative year-over-year comps. Do you see anything that’s TI specific, that’s different this cycle, you know, pricing just got so good before, now it’s a bigger headwind, you kind of addressed the pricing dynamic a little bit before, but what’s making this duration so much longer and is any of it TI specific?
Dave Pahl: Yes, Ross, you know, I think I’ll make a comment and Rafael if you want to add anything. You know, what all cycles are the same and they’re all different right as we’ve all studied them over time. What’s clearly different this time is how the markets have behaved in the bifurcation. We saw personal electronics begin to weaken second quarter a year ago and automotive you know just we saw the sequential decline this last quarter. So in the other markets somewhere in between. So and then in addition I think that, you know, we’ve had lots of other noise that’s inside of the system, whether that’s been pricing, as you mentioned. We’ve had non-cancellable, non-rescheduled orders and other longer-term contracts that have required customers to take product that they don’t need, whether companies are using distributors more heavily than others.
So all of that adds noise into it. So I think we just need to let that noise wring itself out over the cycle. And what we’re focused on, of course, is investing in our competitive advantages, getting stronger. We believe that we’re in a great position to continue to gain share over the long-term.
Rafael Lizardi: Yes, I just want to clarify for those who maybe new on the call, when Dave talked about non-cancellable, non-returnable, or that’s not, we don’t do that. Many of our competitors have done that. So that, in our view, distorts the market. That wasn’t the case with us. And the second point, distributors, same thing. Our distributor footprint is much smaller than with many of our competitors. We’re down to 25% or so for our revenue through distribution, so 75% direct, whereas many of our competitors are the opposite, so…
Dave Pahl: Great clarification. Thank you, Ross. We’ll go to the next caller, please.
Operator: Our next question comes from the line of Joe Moore with Morgan Stanley. Pleased to see you with your question.
Joe Moore: Great, thank you. I wonder if you could talk about the Chips Act, how that’s kind of flowing through both the investment tax credit and then any thoughts you may have on timing of kind of grant issuances or things like that?
Rafael Lizardi: Yes, I’m happy to talk about that. So first, let me address the ITC first and then I’ll go to the grant. So the ITC investment tax credit 25% credit on CapEx or manufacturing in the United States. We have accrued to-date over the last year and a half or so $1.4 billion. We expect to get about $500 million of that later this year, probably in fourth quarter as far as the current law and regulations stipulate. And we’ll get the rest further down the road, mostly the following year and then after that. And we’ll continue to accrue that benefit, just again, 25% on anything we spend in the United States for manufacturing. That’s the cash side and the balance sheet. On the P&L, we’re already seeing the benefit as lower depreciation.
That benefit tends to be small, has been small so far because for example, some of that is for buildings that haven’t even started to depreciate, but it will build up over time on that front. So that’s the ITC. The grants, we submitted our application for those in December. And at this point, we will wait to hear from the Department of Commerce and see what happens there.
Dave Pahl: Is there a follow-on Joe?
Joe Moore: Yes, I did. So I think, obviously that stuff will help the cash flow down the road, but your free cash flow is below the level of the dividend. Right now, I assume it’s pretty important to keep paying the dividend. Where does that leave you in terms of share repurchases and other uses of cash?
Rafael Lizardi: Yes, first, I would point you to our operating cash. Our business model is very strong and our operating cash flow is very strong and it supports our investment for growth through the cycle. So clearly with the levels of CapEx that we have right now, that hits the free cash flow. But big picture understand and look at the operating cash, even in a depressed environment with the revenue, depressed operating cash flow is very strong. We also have very strong balance sheet. And we just finished the year at $8.6 billion. You know, when it comes to repurchases, I would take you to our objectives on capital management for cash return, and our objective is to return all free cash flow via dividends and repurchases. Each one of those has different objectives on dividends and repurchases, but we have a really good track record over many years of doing both of those.
Joe Moore: Great, thank you.
Dave Pahl: Thank you, Joe. Go to the next caller, please.
Operator: Our next question comes from the line of Harlan Sur with JP Morgan. Please proceed with your question.
Harlan Sur: Yes, good afternoon. Thanks for taking my question. Up through Q3 of last spring, the team had seen numerous consecutive quarters of increasing cancellations and push-offs, typical customer behavior in a weak demand environment. I assume, given your commentary, that the team continues to see cancellations, push-outs, activity expanding into the December quarter. You’re almost a month into March. Are you still seeing cancellations and push-outs expanding or starting to maybe see some signs of stabilization?
Dave Pahl: Yes Harlan, you know, as you would expect we have seen cancellations in the quarter and fourth quarter had remained elevated. I wouldn’t describe them as increasing, but just at higher levels. You know, and we’re still early inside of the quarter. I would say all of, you know, what’s going on with cancellations and the backlog that we see is all comprehended in our guidance and in our outlook.
