Mehdi Hosseini: Yes, thanks for taking my question. Just wanted to make clarification. David, did you say that demand is tracking to mid-teens and that compares to bid supply growth of 5%?
David Goeckeler: Yes, we see demand around mid-teens and that’s fab out. What we see is kind of fab production of mid-single digits. And obviously, there’s inventory between those.
Mehdi Hosseini: Okay. Now what got me confusing is, you also said your NAND inventory is a multi-year low, did I misunderstand you?
David Goeckeler: You did not misunderstand me.
Mehdi Hosseini: So if your inventory is at multi-year low and demand [indiscernible] have all exceeding supply so you basically are not going to ship to supply, or you are not going to ship to demand throughout the year.
David Goeckeler: We’ll ship to our share demand throughout the year.
Mehdi Hosseini: Okay. Would that impact your marker share or you are focusing on [indiscernible] more profitable than market?
Wissam Jabre: No, we don’t anticipant that to impact our market share. The stats that you mentioned on the supply and production were for our estimates and what we see from third party estimates on the overall market.
Mehdi Hosseini: Okay. That’s overall market, not reflection of [Multiple Speakers]
David Goeckeler: Go ahead, Mehdi. I’m sorry. No, please go ahead.
Mehdi Hosseini: So these are market trends, not so specific to Western Digital. And then, if I may just have a quick follow up. In terms of the NAND cost down, should we assume that long-term trend of down 10% in terms of CAGR, cost per…
Wissam Jabre: No, we’re comfortable with the 15% cost downs. We believe that if you — I mean, we’re ahead of that right now in FY 2024, quite frankly, but it’ll come back and I think when you look at the full year, you can still model 15% for the fiscal year.
Mehdi Hosseini: Okay. All right. Thank you.
David Goeckeler: Thank you.
Operator: Our next question comes from Steven Fox with Fox Advisors. Please go ahead.
Steven Fox: Hi, good afternoon. I was just wondering on enterprise SSDs, you mentioned that they’re still depressed and you’ll mix into it. But given the supply situation that you just talked about and where we are in the cycle. Like, what is your — how do you envision coming back in that market? And like, can you just remind us what a normal mix of enterprise SSDs looks like in your Flash business? Thanks.
David Goeckeler: Well, I mean, for us it was a — it’s an emerging — it’s an emerging part of the portfolio. I think, right — going right into the downturn, we got qualified at numerous or a number of cloud titans in our NVMe based enterprise SSD, and then we kind of went into a market where, quite frankly, enterprise SSD has been the most depressed part of the NAND market in the downturn and we haven’t seen that come back yet. So, as that starts to come back out of digestion, it’ll just be another opportunity for us to mix into that. How much we mix into it will be depending on what the price is on that — in that segment versus other options we have for those bits. So we don’t necessarily — we don’t necessarily have a fixed percentage we’re going for, it’s just — we have the product, it’s qualified, as demand comes back, we’ll consider that demand and part of the whole portfolio calculus.
Steven Fox: Would the big picture be that it trails enterprise HDDs by a certain amount of time in general? Like, do you have a vision for just — as enterprise spending recovers, where that product cycle would be?
David Goeckeler: Well, certainly, it is trailing enterprise HDD. I mean, enterprise — I don’t know if I could make a generalization about that, because it’s just one cycle here, but clearly there’s more inventory digestion in the hyperscale market on enterprise SSD than there was in capacity enterprise HDDs. As we talked about, we see continued growth in capacity enterprise HDDs, we started out this fiscal year projecting sequential growth throughout the fiscal year and now we’re talking about sequential growth throughout the calendar year. So we see good demand trends coming back on capacity enterprise HDD, which again is a good sign for enterprise SSDs will come back, because there’s a little — there’s more inventory digestion to get through.
Steven Fox: Got it. Very helpful. Thank you.
David Goeckeler: Thank you.
Operator: Our next question comes from Mark Miller with The Benchmark Company. Your line is now live.
Mark Miller: Your cash flow significantly improved during the quarter, but still there was an outflow. When do you expect to be positive from a free cash flow perspective?
Wissam Jabre: Yeah, Mark. So turning free cash flow positive is a top priority for us. We are very much focussed on it and we have line of site to achieving it. We expect to achieve free cash flow positive in the second half of the fiscal 2023, either this quarter on the next. As you know, we typically don’t guide for cash flow.
Mark Miller: Do you expect to — will you have to draw on your revolver or do you expect we won’t have to draw on it?
David Goeckeler: I don’t see that at this point.
Mark Miller: Thank you.
Wissam Jabre: Thanks, Mark.
David Goeckeler: Thank you.
Operator: The last question comes from Ananda Baruah with Loop Capital. Please go ahead.
Ananda Baruah: Yeah, thanks guys. Good afternoon. Thanks for taking the question. Hi, David. Thanks a lot. Just wondering do you guys have an early opinion on if NAND bit rate increases, as GenAI sort of impact, not just edge cycles, but sort of corporate cycles, Fortune 1000 and hyper scaler storage as well. And all the other sort of end market constituencies, do you have any opinion on if there’s a sort of increase to NAND supply overtime? And if you do, do you think the increase could be material and noticeable? Thanks.
David Goeckeler: It’s a good point here, which is, like — my comments earlier were about the cycle and what we see in NAND and investing in. And we’re big believers in the NAND market and there’s going to be a lot of bit growth in the future. And also the great thing about the NAND market is, you still have the ability to produce new nodes and more efficient as far as how much capital you need to put in to get that growth. So, look, the overall thesis on NAND continuing to grow, we have a long technology roadmap where we can continue to deliver cost downs, that’s still a great story and we expect — to your point, we expect generative AI to be additive to that, especially on the edge. The NAND market has really rotated — through this downturn really rotated to an edge centric market.
