Srini Pajjuri: Thank you. And then a cash flow question for Wissam. I guess, I’m just curious, you had an IRS payment due during the quarter. Did you make that payment? I see like a $300 million impact from the tax. And then if you could walk us through some of the puts and takes in terms of free cash flow for next quarter, I think that would be helpful. Thank you.
Wissam Jabre: Yes, sure. So on the tax payment, in Q1 we made a $523 million payment with respect to the IRS settlement. This covers the years 2008 through 2012. And so this is why you see when you look at our free cash flow that we reported for fiscal Q1 at a negative $544 million, in that we had that $523 million payment. On the — it was partially offset by the sale and lease back of the Milpitas facilities of around $191 million. So all in all, we’re around the negative $200 million for the quarter. As we look forward, obviously, the key is the continuous improvement of the profitability and of the business, working capital management. You’ve seen our transition on the inventory side, for instance, in Q1. We continue to manage inventory very, very closely on both flash and HDD.
So I expect that inventory to continue to decline gradually in this coming quarter and the next. And then the continued focus on CapEx for the fiscal year. Would it say that for fiscal ‘24 we expect our cash CapEx to be significantly lower than fiscal 2023. So, you know, free cash flow is, and cash flow is very important to us, big focus, and we’ll continue to focus on it. And as we look into the second-half of fiscal ‘24, we’re projecting to be cash flow positive on a quarterly basis in the second-half of this fiscal year.
Srini Pajjuri: Thank you.
Operator: Our next question comes from Karl Ackerman from BNP Paribas. Please go ahead with your question.
Karl Ackerman: Yes, thank you. Good morning.
David Goeckeler: Good morning, Karl.
Karl Ackerman: Hey, good morning. When do you anticipate NAND underutilization charges to abate? And then second, you indicated that NAND and HDD bit shipments will recover in December. I guess for NAND, will that be primarily tied to consumer applications, or do you expect enterprise to be the larger driver over the next couple of quarters? Thank you.
David Goeckeler: Yes, I’ll take the second part of that, and Wissam can comment on the underutilization charges. Look, we expect bits to be up slightly in the December quarter. It’s a strong consumer quarter for us, although we don’t really break out by mix. But I mean, I think that’s one way to think about it. We expect an improving price environment and bits to be slightly up.
Wissam Jabre: Yes, and with respect to underutilization, Karl, we do manage our supply very dynamically. And so we guided this quarter based on what we see today. We do expect underutilization to continue in the third fiscal quarter, maybe a little bit lower than here, but it’s a bit too early to cover the quarters beyond the next one.
Karl Ackerman: Thank you.
Operator: Our next question comes from Vijay Rakesh from Mizuho. Please go ahead with your question. Actually the next question comes from Timothy Arcuri from UBS. Please go with your question.
Timothy Arcuri: Thanks a lot. David, at the bottom of slide four, you did say that the board remains open to considering other alternatives should they become available. So since you put that in the presentation, can you talk about what other options could be available? Is this a reference to the collapse of the JV that Hynix commented about or was asked about on its call? Is this in reference to an outright sale of the NAND business? Can you just talk about that a little more?
David Goeckeler: No, it’s not in reference to any particular thing. It just says that we think this is the best next step for the business to unlock value. We think that, you know, we put the business in a position to go through this right now. It’s all the reasons we talked about from the portfolio to where we are on efficiency point of view to where we are on the work we’ve done to retire debt. And also going into an improving market. But I think any company is always open to other strategic options should they become available and we’ll consider them at that time. Although I do want to be very clear that the strategic review is completed and any conversations that were going on as a part of that have ended. And we’re very excited about this step forward.
We think it’s the best next step for the business. But I think in any business, you’re always going to be open. If there’s other strategic options that become available, we will thoroughly consider those at the time.
Timothy Arcuri: Got it. And then, Wissam, for you, so the underutilization charges of $120 million at the midpoint, how do they split for December? I would think that more of its now in the HDD business, but how does that split things?
Wissam Jabre: Yes, the split of the underage utilization is two-thirds flash and one-third HDD.
Timothy Arcuri: Great, thank you, Wissam.
Wissam Jabre: You’re welcome.
Operator: And our next question does come from Vijay Rakesh from Mizuho. Please go ahead with your question.
Vijay Rakesh: Yes, hi. Just a quick question if you went to it already. When you look at the hard disk size, I’m wondering if you had, you know, what the exabyte growth was for the last two years and what you’re seeing as you look forward with this, seems like a little bit of a bounce coming through. What do you expect for fiscal ‘24, fiscal ‘25, or calendar ‘24, let’s say, yes.
David Goeckeler: So yes, we, I mean, coming off such a high on ‘22, ‘23 will be down, but then we expect to get back to, we expect a consistent exabyte growth in this business in the mid to high-20 range on an ongoing basis.
Vijay Rakesh: Got it. And the same on the NAND side, with the spin-off, do you see any change in the technology roadmap? How do you see the 218 BiCS, next generation BiCS coming? And if you can also give us your expectation on NAND bit growth for ‘23 and ‘24?
David Goeckeler: Yes, no, we don’t expect any change in the technology roadmap. The JV is very strong, very solid, very productive. Teams work together on a day-by-day basis. We’ve talked a lot about that. We’re very happy with where it’s at. The relationship is very strong. The technology roadmap, we think, as we talked about last time with BiCS8 and wafer bonding, we’ve made a huge step forward there. You know, we’ve always been able to produce NAND at a better capital intensity than the rest of the industry. Our measures over the last several years are up to a third less capital intensity for the business. So the JV has been strong for ‘23 plus years and we expect it to be strong for very, very far into the future. So we feel very good about that.
