But I think we’re looking to a recovery in the second half of the year because as Satish has said, we believe that much of what’s impacting our markets at this point is temporary in nature, right? Our commercial communications customers are going to work through their inventory challenges, the major investments that we’re seeing in fab capacity they’ve been delayed, but they’re still moving forward and that includes investment for the insurance of supply for 2 and 3-nanometer, silicon photonics, silicon carbide, all of that stuff is moving forward. And on the technology side, their R&D investments continue, right? We’re going to see additional standards releases for 5G, continued investments in 6G research, AI, quantum, AV, EV, all of that stuff is moving forward.
With regard to EPS outlook again, tough, tough, tough revenue comps, but we’re a disciplined organization, the flexible business model you’ve seen that in the results that we published year-to-date. I think going forward the challenge for us is to maintain balance, right? We’re optimistic about the long-term, we’re going to continue with the investments that are going to enable us to fully participate in the recovery when it happens, while at the same time relying on our discipline to drive EPS growth. We’re certainly working to offset whatever tax impacts we can, but as you noted, the tax impacts are significant.
Satish Dhanasekaran: Just I want to also add that, you’ve seen us — Matt, you’ve seen us stay disciplined and I think at the beginning of the year I did reference that we will be accelerating some of the synergy work that we were starting to plan for anyway and we’ve executed on that very well. And you can see year-to-date, our OpEx has been flat, even accounting for a lot of the inflation environments. So as we invest in these next-generation technologies that have high customer validation and we know will position the company to outperform over the medium-to-long term, we’re also remaining prudent and disciplined towards the macro situation in the short term.
Matthew Niknam: That’s great. Thank you, both.
Operator: Thank you, Matthew. Our next question is from Chris Snyder with UBS. Your line is now open.
Chris Snyder: Thank you. So, I very much appreciate that the softer orders and the backlog burn is leading to the softer sequential revenue from Q3 to Q4. But I wanted to ask about the sequential margins. It seems like the guide puts margins maybe in the mid-28, so down 250, 300 or so basis points year-on-year — sorry, sequentially. So looking at 80% sequential decremental, it seems very steep. Can you just maybe talk through why that margin fall off is so sharp sequentially? Thank you.
Neil Dougherty: Yes. I mean, I’m not showing a quite as strong on my — as I’m looking at my pages, you might want to — with more time you might find it’s not as steep as you’re calculating at the moment. And I think I’ve highlighted the factors, we are expecting our gross margins to be down sequentially, Q3 to Q4, again volume dropping a significant portion of that. We did have — in our Q3 numbers, we did have about $0.03 of kind of one-time effect spread across OpEx and gross margin, mostly related to some favorable one-time impacts with our health care plans. That’s not expected to repeat. And then, again, we’re looking at typical sequential increases in OpEx as we move from Q3 to Q4.
Chris Snyder: I appreciate that. Thank you. And then I appreciate the guide on the tax next year for the non-GAAP 15% to 17%. I just wanted to — I guess maybe a housekeeping one. Is there any change in the cash tax rate when we think about 2024 versus 2023? Thank you.
Neil Dougherty: It’s a little bit too early to tell, that’s why I still have a range, I’ll expect to tighten up that range on rate here in three months. Outside of even the things that I listed, one of the things that could impact cash taxes is this move towards the corporate [indiscernible] tax which will go into effect for us next fiscal year. So, right now, too early to tell. I’ll make some comments in a quarter, I’ll be better able to address that.
Chris Snyder: Thank you.
Operator: Our next question is from Adam Thalhimer with Thompson Davis. Your line is now open.
Adam Thalhimer: Hey, good afternoon, guys. The revenue guidance for Q4 of minus 10% at the midpoint, do you see both segments down? Can you just help us on how that plays out between the segments?
Neil Dougherty: Just give me one second here. Yes. We certainly see — I mean, we certainly see declines across both segments, which obviously for EISG, which has grown revenues pretty significantly through all three — through the first three quarters of the year is a significant change. But we do see revenues down similar levels across both segments.
Adam Thalhimer: Okay, helpful. And then in aerospace and defense, can you talk at all about the outlook there? It’s been a well-timed acceleration offsetting some weakness in communication. Just wondering if the aerospace and defense can stay as strong.
Satish Dhanasekaran: Yes. I think the — if you look at the security environment around the world, there is no doubt that the defense budgets are getting bipartisan priorities in the US. Look at Japan, it also put out doubling of defense spend in the next five years. Europe raising defense spend and security spend as well. So I think this is a business, as we’ve always said, harder to call on a quarterly basis, but very easy to look at the long-term trend. And our goal is to continue to outperform it. So we expect Q4 to be seasonally strong generally with the end-of-the-year sort of budgets that come open.