Sidney Ho: Thank you. Congrats on the announcement today. Understanding you have amended the debt covenants back in June, given the announced transaction, how are you thinking about the covenants over the next few quarters, specifically with the free cash flow before the transaction is closed? And does that limit the amount of CapEx you could spend in the meantime? And I’ll follow up.
Wissam Jabre: Yes. Good morning, Sidney. Thanks for the question. The current announcement does not affect the amended credit agreements. And so from a free cash flow, from a governance perspective, we’re comfortable that we can operate effectively. We have ample liquidity. We do have ample operational flexibility to operate, so I don’t see the current announcement as impacting us in any way.
Sidney Ho: Okay. My follow-up is, if you look at the fiscal second quarter guidance, if you can walk us through your assumptions that drive 7 points of increase in gross margin, that would be great. It looks like under your utilization charges coming down, are there benefits from sales of previously written down inventory? And what are you expecting in terms of price increases in both flash and hard disk drive on a like-for-like basis. Thank you.
Wissam Jabre: Okay, maybe I’ll start a little bit on the cost side and then David could chime in on the top line side. Look, the — when — one of the bigger, obviously, levers is the underutilization. We did in Q1, around $225 million. In total, we had around $234 million to 235 million of other charges. And our guide has a underutilization at a much lower level, and so that’s one element. In addition, obviously, we continue to focus on cost reduction. We do have still, we’re still, if you exclude the underutilization aspect, we’re still taking cost out of the system on both the flash side and the HDD side. And so that’s a key lever to improve the gross margin. And then if I take it back up to the top line, we see obviously improvement on the revenue side and the improvement is coming from both sides of the house on both businesses.
So that also contributes quite well with respect to the gross margin and within that revenue also we do have a bit of a mix that’s helping us as well.
David Goeckeler: Yes, Sidney, I guess, what I would add is, if you look at the HDD business, we’re ramping new products, right? The 26-T drive is ramping rapidly. And we also have an improving pricing environment in drives, which is a nice tailwind. And then in flash, we have an improving pricing environment as well, as Wissam said, a better mix. And we expect that business to inflect a positive gross margin next quarter, which is a great milestone for us as we continue the recovery of the business.
Sidney Ho: Thank you.
Operator: Our next question comes from Tom O’Malley from Barclays. Please go ahead with your question.
Tom O’Malley: Good morning, and thanks for taking my question. I just wanted to ask on your expectations for both market demand on the NAND exabyte side for fiscal year ‘24, as well as your view of supply. I mean, you’re starting the year up almost 50% year-over-year, obviously off a very low base and sequentially up mid-20s. Some of your peers have talked about really demand here to begin the fiscal year or to begin the recovery in those — for those other guys, but kind of some slowing as guys saw the bottom ordered a bunch and then have kind of slowed down. Could you just give me your comments on if you’re seeing any of that and then your expectations for the exabyte shipments for you for the fiscal year?
David Goeckeler: Yes, so, you know, we have seen an acceleration here at the end of ‘23. We’ve raised our demand number quite a bit into the mid-teens for ’23, we’ll get to ‘24. You know, some of that, you know, there has been some strategic buys as part of that. I know that’s been a big discussion in the industry, but we’d also just see the markets returning to normal inventory levels. So for us, that’s been more of what’s been happening and a good mix across the businesses. For ‘24 we see high-teens, kind of, demand and we continue to see production significantly below that.
Tom O’Malley: Helpful, and then on the other side of the business, you talked about the, kind of, you know, varied inventory positions you have, flash going down, HDD actually going up a bit. And if you compare your results with Seagate, at least for the last couple of quarters, results have been relatively similar. Could you just talk about when we should start to see that divergence, just given the fact that you’re addressing a higher capacity point in the market today, and theoretically you should see some outside benefit. When do you think you’ll start to see that divergence in the market? Thank you.
Wissam Jabre: Divergence in what aspect, Tom?
Tom O’Malley: In terms of revenue difference.
Wissam Jabre: So we’re managing the business for profitability on HDD. I mean, I think it’s, you know, we and I think we are driving a more profitable business. So that, that’s the way we think about the business and driving back to our model, which we expect to get back to here over the next several quarters. Jamie?
Operator: Our next question comes from Srini Pajjuri from Raymond James. Please go ahead with your question.
Srini Pajjuri: Yes, thank you. Good morning, guys. David, on the HDD comments that you see growth throughout the fiscal year, just looking for some additional color, just kind of listening to some of your customers and the big hyperscalers. I think the CapEx comments have been fairly mixed and I’m just curious as to how broad-based this recovery that you’re seeing is. Is it primarily driven by the inventory work-downs or anything else that’s driving it? And also, if you can comment on by geography, I think, you said China was weak in the quarter, if you could talk about how — what’s your expectation for China business is going forward?
David Goeckeler: Yes, I think you got it there in your question. I think you have more broad-based participation in the market by the big hyperscalers as they get to the end of their inventory corrections. So that’s been part of it. Remember, we’re coming off very, very, very low numbers. So we expect improvement throughout the year by more people participating in the market and more consistent participation by the ones that have been in it on a quarter-over-quarter basis. China has been — it’s been better, but not — it hasn’t recovered as fast as we expected, so it’s still a little bit lumpy and weaker than we would like. So the smart video market has been pretty consistent and we’ve seen some good results there. But in the cloud space, it still has a little ways to go.
