Karl Ackerman: Gianluca, it’s encouraging to see an improving gross margin trajectory but it doesn’t appear to be driven by price yet. Given our mass capacity suggests that price per terabyte did fall low single digits sequentially and year-over-year. Could you perhaps address whether we should expect previous actions to raise prices across the channel may occur over the next couple of quarters? I have a follow-up, please.
Gianluca Romano: Well, I would say, you can see the good improvement in our profitability. A good part of that is actually coming from pricing. Of course, you need to check into the like-for-like pricing. The mix has, of course, always a major impact on the average. We are very happy with what we are doing, both on pricing and on cost. This quarter show a fantastic improvement in profitability, both gross margin and operating margin. And if you look at our guidance, this imply another strong improvement in profitability. So Pricing is a good part of that. Mix is another part of that improvement. And we will continue to do exactly execute a strategy and we are really we are very glad with the outcome so far.
Dave Mosley: Yes. I would say, Karl, the raw demand is still not what it was 2 years ago. And so — and we have a supply chain that’s not entirely healthy yet. We have to go continue to work on those actions. But I do think over time, especially incentivizing transitions to newer mass capacity drives. And then if there’s price raises, it tends to be more on legacy and to the extent that everyone is under the same strain throughout the entire ecosystem, this is the trend that we’re seeing, I think we’ll probably take advantage of it. My sense is that in the next year or 2, we’ll get to the point where we get high enough of the ramp that we can be very predictable. And then I think things will stabilize quite a bit. But we’re not at a place where the industry has enough demand relative to the capacity that has online yet.
Operator: And our next question today comes from Kevin Cassidy of Rosenblatt Securities.
Kevin Cassidy: Congratulations on the great results. You implemented a build-to-order program with your customers. Can you give an update on that? Is that still active? And how is it giving you visibility?
Dave Mosley: Yes. Thanks very much. It is and it’s transitioned from my last comments as well because the industry just at the levels that we’re at, to build on my last comment is just can’t fund the investment disease make an areal density and exabyte growth over time with the revenue and margins where it was and what helps us is to run factories is the improved visibility and the predictability towards that in demand. And so I think that’s why the HDD industry has changed fairly dramatically through this cycle, the last 6 or 8 quarters because capacity did come at the same time that people were that demand was down. And the industry is, therefore, underinvested in capital and lead times are going up, as we’ve talked about before.
So we need this build-to-order framework to just get back to a healthy industry. And we are rewarding predictability with our customers and we’re incentivizing that predictability and where the people aren’t predictable and they come in at the last minute for product that either we don’t have it or they have to pay for our flexibility. I think that’s the way we’re thinking about it and then making sure that we stabilize the supply base as well because it’s not just ourselves as the HDD supplier but we have numerous upstream supplies that need to be stabilized as well. So it’s still going to take some time.
Kevin Cassidy: Okay. Great. And you mentioned vertical integration of your laser technology. Is that a cost savings? Or is it more controlling the supply chain?
Dave Mosley: Yes. I think at this point, it’s been a long time coming and we definitely value the suppliers that have helped us get HAMR products to market. We also feel like given how intricate this silicon photonic circuitry is, is that we needed our own capability to control but right now, it’s more of a technology second sourcing, if you will. And so we’re going to continue to run with a few sources. I think over time, there should be the opportunity to go drive the cost down and balance all things with multiple sources and the ability to control the investments that we make in capital, for example and things like that. But it’s been a long time coming and part of the reason we’re talking about it as part of Mozaic because it’s very relevant as we get the 4-terabyte platter and 5 terabyte platter I think also there’s been some noise out there in the industry about, well, as goes the ramp of that supplier so goes the Seagate ramp and that’s clearly not true.
Operator: And our next question today comes from Stephen Brian Fox with Fox Advisors, LLC.
