Thomas Edman: So I’ll have Dan answer the specific working capital question. I just wanted to highlight, if you look at revenues, and starting with Q4, remember that we were closing – we’ve been closing plants and shifting production, right? And also that we sold our Shanghai BPA assembly facility. So if you look at the combined impact of the closed plants and the BPA facility in the fourth quarter, that was about $25 million, right? In the first quarter, we’re looking at a combined impact of about $27 million. So if you look at our guidance, pick the midpoint, you would see that we’re growing about 5% year-on-year if you exclude those factors. So that’s really a critical point here. Now we are in the process of ramping the receiving plants.
But that takes time as we finish qualifications and begin ramp. So in the meantime, there’s a little bit of trough of revenue there. And then through the course of the year, as we have moved equipment and are ramping at the receiving facilities, we’ll be really removing that slight revenue drag. So I just wanted to highlight that on the revenue side. Dan, the working capital?
DanBoehle: Sure. Thank you. Obviously, with revenue increasing, you should have a relative increase in working capital. However, we have challenged ourselves a bit to reduce our overall working capital as we go into the next year as we budgeted this current year. Basically, AR kind of went up quite a bit at year-end. Some of that was deliveries in our IE area and A&D. So AR went up quite a bit. So we meet monthly to kind of manage that, and we’re really pushing hard to reduce where we can our AR balance, manage our inventory appropriately and then push out our average payable days to the extent we can as well. So we’re really working that hard this year. I believe, like I said, it will normally will go up with revenue increases, but I think we’re a little high now, and we’re going to challenge ourselves to bring working capital down a bit and increase our cash flow to get back to the target of 10% cash – 10% of revenues in our cash.
Mike Crawford: Great. Thank you very much.
DanBoehle: Thank you.
Thomas Edman: Thank you.
Operator: Thank you. One moment for our next question. And our next question will be coming from William Stein of Truist Securities. Your line is open.
William Stein: Great. Thanks for taking my questions. First, I just want to recognize – you already answered the question on inventory, where I mistakenly had too high inventory days calculation on my note, apologies for that. The questions relate to two areas. First, you’re guiding overall revenue for the business above seasonal. You gave the details by end market, but it’s still fairly remarkable to me considering what everyone else in the tech supply chain, especially in semis, is doing now. Any insight as to how you’re able to be guiding like this, given the way everyone else is still seeing a pretty significant correction?
Thomas Edman: Yes. Sure. Thank you for the question, Will. The – so I think, first of all, recognizing that, of course, A&D is roughly 46%, 47% of revenue. And so there, if you’re looking sequential, we’re down slightly. That’s mainly just as we – Q4 tends to be a seasonally high quarter for us in that A&D market. So that – let’s just say that that – there let’s set that one aside. So now we’re really talking about the commercial markets. Certainly, with TTM as we look at data center, that continues to be a big driver, that generative AI demand. So that’s very helpful. We do have Chinese New Year, as you know. And so sequentially, we’re always going to be down in Commercial Q4 to Q1 as plants – as we shut down plants on Chinese New Year.
In that generative AI area, of course, we’re trying to operate as much as we can during Chinese New Year. So that accounts for a little bit certainly from a TTM perspective of why that drop might not be as great, Q4 to Q1. Automotive, I think you’re seeing that with others as well is down sequentially, a little bit more than just the Chinese New Year factor. And then if you look at medical industrial instrumentation, we’re just seeing medical holding up pretty well in Q1, and portions of instrumentation getting a bit better as well. So that’s – and remember there that our North America footprint has played an important role. So while we’re shutting down in China, we are operating in our North America facilities and so able to mitigate again a little bit of that sequential decline.
And then finally, the networking area, we’re relatively flattish. Glad to see that. I think for us, that’s a function of some of our networking customers now. Still dealing with inventories, and we expect that to continue through the first half but at least they sort of hit bottom and starting to see a little bit better demand there. So again, hard for me to comment on others, Will, but hopefully, that gives you a flavor of what we’re seeing.
William Stein: As a follow-up, I’d like to ask about the margin improvement that we’re seeing, you beat in Q4. You’re guiding, you know, nicely above consensus in Q1. Can you talk about the margin improvement? If I were to split it bluntly into two categories, one is sort of the product mix and the growth in AI applications, which I’m sure is helping, but I know there’s a lot of self-help going on as well, restructuring and such. Can you potentially divide it into those two buckets? Which one is having a greater impact on your business?
