Suraj Kalia : Okay. Got it. And Sam, I’ll throw a couple of things your way and I’ll post both of these together if I could. So Sam gross margins, right, and I’m specifically referring to GAAP gross margins, they seem to be sort of stuck in a 32-ish — 34-ish range. Are we in a position to sort of compartmentalize? Okay, here is the impact of supply chain these many bps FX, these many bps inflationary costs, or product mix. Just help us — walk us through — what is the more acute impact you’re seeing? And any efforts to mitigate that? And Sam if I could also throw it in there, maybe if you could just walk us through how cargo costs are currently shaping up, which are presumably embedded in your OpEx? Any color would be great. Gentlemen, thank you for taking my questions.
Sam Maheshwari: Yes. Thanks, Suraj. So, yes, in terms of specifically answering on the — from the GAAP gross margin perspective and actually these impacts pretty much apply to non-GAAP gross margin results as well. So it’s — the effect is the same for GAAP and non-GAAP. So I would say compared to pre-COVID time, our freight is running high. The freight costs — higher freight costs are impacting our gross margin by 100, even 150 basis points. In terms of costs, they are up quite a bit. Cost is up 7% to 10%. If you look at say three or four quarters ago cost versus where we are now. So, essentially, we are looking at 200 to 300 basis points cost increases, which is impacting the gross margin. So that gets you to say 35, 36 percentage gross margin, if these were not there.
But then we’ve also been increasing prices and we have been slowly realizing increased prices to offset this. But so far because the price improvement efforts have been slow, and we’ve not been fully able to mitigate the cost increases or the freight increase through price realization. So slowly we are trying to defray that and we have been somewhat successful in that, but not fully. So from a price perspective, we are looking at 100 to 200 basis points improvement back towards the higher end of the gross margin. So that is how the bridge is working in terms of freight and materials cost, and then plowing it back through price increases. So that’s that. And then your second question related to freight, as I said, freight is impacting 100 to 150 basis points.
Currently, it has been that way for last three, six, nine months, I would say. Lately, we are beginning to see some improvement in freight. But given the current supply chain situation in many areas, we are still very tight in terms of — I would not say, we are hand to mouth anymore, but things are still tight. And so we are leveraging or utilizing higher cost oriented freight modes. So freight probably will take another quarter or maybe one to two quarters for us to normalize in terms of having its effect begin to show up on gross margin.
Suraj Kalia : Thank you for the additional color.
Sam Maheshwari: Thanks, Suraj.
Operator: Our next question today is coming from Anthony Petrone from Mizuho Group. Your line is now live.
Anthony Petrone: Thanks, gentlemen and congrats on good execution here in the quarter. I’ll start with a few demand questions and Sunny, Sam, you have CT as sort of listed as neutral demand in the quarter just the backdrop in the environment. I mean, how much of that geographically is linked to the United States, Europe, how much of that is linked to China? And then when you, sort of, look at dental that’s actually more of a tailwind in 3Q. We’re hearing some mixed data points just on the backdrop of dental volumes still being impacted from labor shortages from some of the other publicly traded companies that have solutions in dental. So do you see any risk to dental slowing down in the next couple of quarters? And I’ll have a few follow-ups. Thanks.
