Sandisk Corporation ($SNDK)

All right. Good morning, and welcome again to JPMorgan's 54th Annual Technology Media and Communications Conference. My name is Harlan Sur. I'm the semiconductor and semiconductor capital equipment analyst for the firm. I'm very pleased to have Dave Goeckeler, Chief Executive Officer and Chairman; Luis Visoso, Executive Vice President and Chief Financial Officer of Sandisk here with us this morning. As we're all witnessing, storage technology is a critical part of unlocking the full potential of AI, right, especially -- as the frontier model builders are now focused on monetization and therefore, a significant unlock of inferencing-based workloads, which are definitely more memory and storage intensive, right? But in the edge and client devices and consumer applications, more and more intelligence, real-time responsiveness also translates into more storage demand as well. Sandisk is at the forefront of delivering these high-performance flash-based storage solutions to all of these markets. And so David is going to kick us off with some opening comments. A quick review of the March quarter results, June quarter guidance. and then we'll kick off the Q&A. But gentlemen, thank you for joining us this morning. And Dave, let me turn it over to you.

All right, Harlan, thank you. It's -- we're very happy to be here. I think Luis is going to get us kicked off with a few statements, and we'll go from there.

Thank you for being here. We will be making forward-looking statements in today's discussions based on management's current assumptions and expectations, including with respect to our technology and product portfolio, our business plans and performance our capital allocation priorities, market trends and opportunities and our future financial results. These forward-looking statements are subject to risks and uncertainties. We assume no obligation to update these statements, please refer to our annual report on Form 10-K, our quarterly reports on Form 10-Q and our other filings with the SEC for more information on the risks and uncertainties that could cause actual results to differ materially from expectations. We will also be making references to non-GAAP financials and a reconciliation of GAAP to non-GAAP results can be found on the Investor Relations section of our website.

Thanks, Luis. Harlan, again, it's great to be here. Just a few opening comments, look, it's a very dynamic time in the business. Absolutely. A lot of fun stuff going on. Look, we're a technology business. I think it always starts with the technology. The portfolio is just in great shape. BIC is an unbelievable technology node. We've talked a lot about that in the past. I think everybody knows we've been very focused on our data center business. We have a great consumer business, great edge business. We've been focused on really driving product strategy and data center. I think this quarter, -- we saw over 200% sequential growth in our data center business, 25% of our mix. So I think we're getting -- we still expect that to grow going forward, but I think we're getting a really, really solid balanced portfolio across the board at this point. Obviously, the demand situation is very dynamic. And I think one of the most interesting thing that's going on in the business right now is it gives us the opportunity to change the business model. I think this is a business that's been a very transactional business in the past. That's led to a lot of dynamics, a volatile business. But we're at a point now where we can start to change those practices with our customers. I think everybody is a winner in that process, and it's a lot of fun to go through it. We made some very big strides in the last quarter that I'm sure we'll talk about here today.

Yes, absolutely. And that's a great segue into my first question because you talked about all of the transformational dynamics that are happening in the flash memory segment of the market. But it reminds me interestingly enough of another segment of the storage market. And obviously, Dave, you were a part of that as well, right? And I'm going to rewind back a couple of years, because it was under your leadership at Western Digital, POWERHOUSE and hard disk drive-based storage, flash-based storage, which is now the Sandisk franchise as we know it today, right? But the dynamics that the team was seeing in its HD franchise, time period is exactly what Sandisk has been seeing over the past 12 months, right? Back then, you were seeing an HDD market that was becoming more dominated by data center and AI compute customers that appreciated the technology and performance leadership in nearline drives and a strong exabyte demand profile, right, 20%, 30% per year type CAGR. That was accelerating within a structurally constrained supply environment, right? Under your tenure, I mean, you drove the build-to-order model with your HD customers. You then drove the initial multi-quarter customer agreements, which then more formalized under multiyear agreements, which looks very similar to the agreements you're locking in with your customers today with your flash-based customers. Your customers get multiyear predictability and assurance of supply and return. Sandisk gets predictability on the demand curve and financials. But is much of what Sandisk and the team is architecting today via your new business model, MBM, multiyear agreements. Was that a page taken out of the HDD playbook, which has proven to be so successful in the HDD industry today and was kind of spearheaded by you and the team back a couple of years ago.

I think we're taking some pages out of a lot of playbooks, right? And I think it's really about really understanding your business, what the value drivers are, how your customers use your technology and really getting business models aligned where it's best for sustained investments, sustained value delivery and customers get -- they get the sustained benefit of your products on an ongoing basis. And so the markets are similar in the fact that really being focused on how you supply those markets and being careful about really understanding supply dynamics and don't oversupply the market is going to lead to better economics and better kind of consistent business. But the agreement -- the NAND business is a little bit different than the HCD business. HCD business is a great. Those years I think the changes we made, I think the companies are doing a I think it's there very well-managed companies with tremendous technology and great futures. It starts with that like the technology is extraordinarily in plate, right? I think we build a technology that is extraordinarily important for the world. I think the NAND industry, that is a very broad set of customers across devices, across consumer, across the cloud -- these are all -- like there's a lot of diversity in our customer base, a lot of demand drivers, I think that makes it a really great business. I think the technology is spectacular. I think in the NAND business, we have this huge advantage in that our technology is extraordinarily scalable. We can deliver enormous amounts of incremental supply through R&D and productivity gains. It's not just adding more capacity all. And so what this is really about is one, getting a fair return for that technology and that investment. And again, it's a big investment. We don't just invest in the IP side of it of building the NAND nodes. We also invest in the CapEx side of it of having the production. We really have everything from defining the NAND itself, the fundamental node to manufacturing that, to then have the systems teams are building the SSDs, having the back end, all of it. Like as a franchise, we own all of that and we've built that over the last 20, 25 years. And so -- in the current environment, it's about -- we're always thinking about how do we align our business model with our customers' business model. And how do we get those aligned, because that's going to lead to better economics for both of us. In the NAND industry, what I'd argue that these models have not been very well aligned. Our business model, Luis and I constantly are making decisions on investing on like a 10-year time. When you build a fab, you need to get a return from it for a very long time. The market has been traditionally a market where the economics are determined on a quarterly basis, right, a lot of volatility. And that leads to there's -- somebody is always feels like they're not getting what they deserve in that equation. Either the economics aren't really attractive enough to drive this long-term investment or there's people feel like there's not enough product for me to do everything I want to do to run my business. So we think very deeply about that, like how do we get these business models aligned. And that's really what these new business models are all about. That's why we call them NBM agreements. Is about how do we get our business model, which is an unnatural thing, I think, for our customers. We invest for the long term. We're investing for growth, right? We're investing for mid- to high teens growth. That means we run a fab, every single day, there's more wafers than the day before. Like there's more wafers tomorrow. There's more bits tomorrow than there was yesterday. And that's true every single day. So we have to sell those every single day. You build a huge asset, you turn it on and the idea is you don't want to turn it all. It's very expensive to turn it off. That's not necessarily our customers' business model. They don't really think about, hey, how do I consume on a very predictable basis? How do I consume where I grow all the time? How do I -- it's just in the way the market has worked that out in the past to say, well, every quarter, we'll just decide what the price is. And then we'll have this clearing price and then you get all this volatility and then you get all the cyclicality. So what we're trying to do is really 3 things. I think running a technology franchise. Number one, we're trying to get a fair return for our products, right? That's like always the #1 thing when you run a technology business, you want to get a fair return for what you've built. Last quarter, we drove 78.4% gross margin. We guided for slightly higher than that. I think we can say we're in an attractive neighborhood as my friend, Luis would say. So that's attractive return. Number two, we want to get rid of the cyclicality or at least dampen the cyclicality -- or at least when the cyclicality comes have different techniques to deal with it than we have in the past. The traditional way to deal with the cyclicality is I've got to turn my inventory into cash because I need cash to run my business. We want to get out of that model. So what are we doing? We're strengthening our balance sheet. We're building cash reserves. We're putting contracts in place where when that moment happens, if it happens, there's a financial benefit to us and it's not just we're like wondering what to do in that moment. So get a fair return for your product deal with the cyclicality. And then the third thing in any scale technology franchise, you need to grow, right? I think all of you here, that's what you want. You want to invest in growing businesses, those are fun. And I think one of the big advantages of our technology -- our business is it's going to grow, right? That's not the debate. The debate is how fast it's going to grow. Well, the issue is, depending on how fast you grow it, the other 2 get all out of whack, right? So it's how do you balance these 3 things. And that's what we're doing with these new business models. So it's a little different than other markets. We take pages out of those markets, right? Both Luis and I have run a lot of software businesses, quite frankly, to run a lot of high-scale recurring revenue software business. We take lessons out of those. Those are very attractive models, right? They get a slightly different multiple than we do today. So we're taking pages out of all of those in constructing a business model for our business with the technology franchise we have. That technology franchise is spectacular. It's important to almost every other technology that's built in the world. It's very scalable. It's difficult to do. We have a lot of expertise -- and we're putting a business model around that, that aligns better with our customers, so we can get those 2 things aligned. And we have more visibility to not just demand but economics of those demand. and that demand is growing. And we're doing that in a way where we can balance that equation. We get the right economics, we deal with the cyclicality, which has traditionally been extremely corrosive to the industry, in my perspective. I won't speak for the industry, I'll speak for our business, but extremely aggressive to our business, and then we want to grow. We want to do all 3 of those things, and we're balancing that equation. And I think these business models that we're putting in place do exactly that. And it's extremely exciting because I think the place we're going to and we're kind of we're on that journey. We haven't been on it for very long, but it's rapidly changing, and that's a lot of fun. We're in a business that's been around for a very long time. It's a very big business, and we're able to change the business model in a way where our customers are very happy with these agreements, right, because they want predictability of supply. And we're very happy because we want to supply. That's the business we're in. They want to buy NAND and it turns out we want to produce NAND. And so that's a great marriage. And the issue is how do we get the business model in place that allows us both to do that and both to be happy. And so I think we have a very willing partner that's going down that path with defining those models.

That's perfect. And we'll discuss more about the new business model transformation. But I want to rewind back last year to your February Analyst Day. The team, the industry was still in the midst of a somewhat oversupplied environment in NAND. I clearly remember this, you put a stake in the ground at the Analyst Day and articulated a demand profile that would rise above supply, the inflection would happen. You said the inflection is going to happen in the second half of '25 and continue to be undersupplied through 2026 and kudos to you and the team and the crystal ball for nailing this supply-demand inflection, right? Your team always does a great job of understanding the demand drivers and the industry supply dynamics, integrating some of the new business model, constructs that you just talked about, but putting on that same cap, putting on the crystal ball, leveraging your your team, I mean, how does the team seem to see the supply-demand environment as we move through 2027?

So first of all, thank you for the kind remarks. I mean we do a tremendous amount of work. like we're in the market every day. There's a lot of people that observe this market, and I have a lot of respect for people that are trying to observe this market and draw conclusions. I can say it's very hard to do. But we're in the market. So we think we have unique insights and we talk to our customers and we understand the dynamics, and we build our own supply-demand models. And you're right. In February, when we got on stage and launched the company, we had a very clear point of view that the market was going to inflect in the second half of the year. You could say there might have been some skepticism of that afterwards, but that was fine. We had our conviction and we went often executed it. And we still have the same level of conviction. We see this market undersupplied for a long period of time. It's a very dynamic market now. At that point, we said through the end of '26 because Frankly, that's the visibility we had. I mean, at that point, it was February of '25 through the end of '26 was a long time away in this market, but we had conviction through that. And I think we can say through the end of '27, we have that same level of conviction now. And that, what we're going to do is use that period to, one, produce tremendous products they focused on delivering friends products. That's always the #1 thing we need to do. If you don't do that, then you can't do any of the rest of it, but also use that period to kind of get this business models aligned with our customers so that we can predictably drive this business forward for our mutual benefit for a long period of time.

The new business model, multiyear agreements with customers. Clearly, the centerpiece are a strong part of the strategic transformation of the company since bringing out. You've signed 5 multiyear supply partnerships with what you've described as committed supply for customers, committed financials for the Sandisk team, backed by firm financial guarantees the longest contract is 5 years. More importantly, you've said over 1/3 of fiscal '27 bits are now under these -- covered under these firm customer commitments. So first, -- can you just walk us through the conversation that you have that unfolds, right? The practical mechanics, how do these MBM conversations unfold? What's the typical customer journey from first conversation to sign contracts. And typically, like how long does it take to wrap something like this up?

Yes. So the conversations have been very a win-win kind of relationship with our customers. In most cases, our customers are approaching us. And the single first thing they say is, how can you ensure there will be supply -- it's not a price. It's first of all, can you give us -- can you guarantee supply. And those conversations, they take time, right, because you're not buying something for a year for a quarter, for -- that's the huge amount of money involved. So we go through a lengthy conversation to really understand their needs and the conversations start with how many years of commitment are you willing to make? Some customers are more comfortable committing to 3 years, more comfortable going to 5. Some have less visibility and willing to start small. Now most of these conversations are, hey, we want to go longer. We just don't have that visibility at this point in time. The second conversation is how many bits are you willing to buy -- and normally, what we see is the procurement teams are being a little bit more cautious than what they are hearing from their engineering teams. And we go through these negotiations. And an important feature we want is we want to bet with strategic and winning customers. And we define that by customers that are growing faster than the bids that we're producing. So faster than the mid-teens and therefore, they will be taking a higher percentage of our business. And then the conversation is about price. And we're not talking about prices. We're talking about what is the price that we think makes sense for us and what price makes sense for them. And as we've talked -- in the shorter term, we define those prices mostly fixed. And as you go out into the future, there are some variable components. Think about mostly kind of a floor and ceiling concept in which this floor is attractive for us and the ceiling obviously would be even more attractive. And the reason we do that is because prices will fluctuate -- we don't know in which direction they will be in 5 years. And we know one of us is going to be unhappy if we fix the price. If the price goes higher, we would be unhappy because we would have left money on the table. If the prices go lower, our customers would be unhappy. So we want to make sure that each of us can capture some of that volatility, not all of it because we're signing a contract and we don't want that 100% volatility. But we're getting -- we can capture some of that value. And the last component is we need to make sure that if the customer, for some reason, walks away, there is a financial guarantee where we are in a very good position. So we've been negotiating financial instruments through which it's very clearly defined that if they walk away, the funds will flow through us. The funds are either with us or with a third-party financial institution. And the criteria has been predetermined. Think about as a prenote although I hate that consent but an easy way to understand. It just said at the very beginning, low lawsuits, no discussions. It's just a very simple procedure.

That makes a lot of sense. Now I appreciate the framework and how the team sort of thinks about it. As of the earnings call in late April, you had 5 MBMs committed to the first 3 that you signed in the March quarter have a total lifetime contracted value, $42 billion. Has the team signed more MBM since earnings? And of the total or cumulative MBMs that you've now signed, what is the total lifetime contracted value and/or percentage of bits that are covered as you think about your shipment profile in fiscal '27.

Yes, I will give you an update in a few weeks when we report or 1.5 months when we report our earnings. It's a little bit premature at this point. We just had our earnings call. But as we mentioned, we're in active negotiations with additional customers and we're in conversations across different end markets, and we will give you an update soon.

So if you look across your MBM engagements signed or in discussions, right? And are you seeing an interest level across your data center edge/client business, consumer customers. In other words, breadth of customers by end market. Is that there? And when you're not signing an MBM with customer who comes to the table? What's the typical reason? And is there any concern that those customers reduced their relationship with Sandisk over time as you preferentially allocate to your MBM partners.

Yes. So if you think about the 3 end markets, this new business model really does not apply to consumer to what we call on, right? So that's a different type of business. We love that business. We're committed to it. We'll continue to drive it. But these new business models really don't apply there, but we are in active conversations across the other 2 end markets. And we believe that -- now you're asking me a very difficult question, which is what are the cases where a new business model has failed. And I'll tell you that hasn't been the case, we are either -- we closed the deals we've closed and we're in active conversations in all the conversations we started, and we'll give you an update when we have more news to share. Maybe a few comments on that. So we think it's very important. We think long-term value creation in this franchise diversity is a big partner. So optionality. So we're not going to exit any markets to favor other markets. So we want customers across our whole portfolio right? We have a great consumer business. We've talked about that. We have a great edge business, device business, right? -- very large share there. We have just tremendous innovation over the years. So we want demand in those markets to keep those products world class. And we've talked a lot about data center, our products we now have world-class products, and demand is driven for those. So across these agreements, our desire would be to have different time frames, because you don't want everything ending at the same time, you want diversity, portfolio theory. You want different end markets because that keeps the engine running inside the pay -- and we're going to construct that portfolio. right? And then we'll go back to those customers and extend them or whatever we need to do. Now there are a set of customers that are not ready to opt into this model. That's fine. We have stunning customers. All of our customers are incredible companies. They all do amazing things. They build incredible products, and it's a privilege to work with all of them. If they're not ready for this model or they don't think it's right for them, that's fine. -- we're still going to have a percentage of our business that we engage in the typical -- there are some customers just aren't big enough right? There's a tail of customers that don't -- they're not driving this much demand that are wonderful customers and they're great businesses to be in. So as we get there, we'll talk more about it, about where we land. On what percentage of our business is covered under these agreements. But clearly, the amount of our supply that's left available for this quarterly negotiation is going to go down to -- and that's a good thing, right? We want -- and again, it's just more part of this diversity. We want a broad diversity of how we do business, but what we really want is a major part of the portfolio where we understand the economics years into the future because that, again, go back to these 3 things we're trying to sell. We want great economics. We want to deal with the cyclicality in a very different way than we've dealt with it in the past, which is just episodic where it's like, "Oh my god, like all of a sudden, we have all these situations where we've got to turn inventory into cash, and we've got to do all these kinds of things. We're leaving that world behind, right? It doesn't mean that the world is still going to have recessions. Things are still going to change. Stats going to go up and down. The issue is how we respond to it. We're going to be in a very, very different position in our ability to respond to that and make it as short as possible, way more flexibility. And then we want to grow -- and like I said, we got the growth lever taken care of. Again, to me, is a long-time technology manager, like that's the hardest 1 is to grow, right? Because usually, when you get to highly profitable businesses, that are large, you run out of market and you stop growing, and then you got to go do a whole bunch of other stuff to grow. But we got that 1 taken care of. I think the debate is, well, could you grow faster. Yes, maybe we could grow faster, but we want to do all 3 of these things at the same time. we think that's kind of the way we want to structure the portfolio. And it's extremely exciting because we think that's within our grasp. And the customers that we need to do that with are coming down that path willingly. They're pulling us down that, right? We're just trying to -- we have to innovate around, again, back to this. How do we get our business model which is an unnatural thing, right? You build a fab, you turn it on, wafers just come out, you better sell them with their business model, how do we get those 2 things aligned in a way it works for both of us. We've made, I think, really good progress on that, and we're continuing to having more discussions.

And as you rightly pointed out, growth is a paramount sort of focus issue -- the great thing about these MBMs, in general, whether customers sign or not, you're getting them to the table. You're having them unveiled what they think is their outlook for storage demand for the next sort of several years, right? As you aggregate all of this, I mean, has this changed your views? And then you have a segment of the market data center, which wasn't that big of a driver a few years ago, which is clearly going to become a very significant driver of the franchise going forward. But whether it's bringing all these customers to the table, you've got this new demand driver from data center. As you aggregate all of this, has this changed your views on driving mid- to high teens type bit supply growth profile over the next few years?

I'm going to go back to kind of the way I've been framing it. So there's always a debate -- the debate always seems to be around could you grow faster? Or should you grow faster? And what -- what we're trying to do is balance all 3 of these things. And traditionally, the issue in this market is, if you start growing faster, then the other 2 get messed up very quickly. And so we're very conscious of that. And it's about getting more visibility. So as we get more visibility into the portfolio, I think the answers to these questions will be easier. But right now, -- we -- again, we got on stage, it was only February last year where you started this question. We got on stage and we said the market is going to grow mid- to high teens, and we think pricing is going to inflect up in the second half. And everybody told us we were wrong, right? And they gave our company a $7 billion valuation -- that was only a little over a year ago. And now it's like, well, you should grow faster. And you should do it all other stuff's like, "Hey, look, we have a model and we believe in that model and that we believe that mid- to high-teens bit growth is sustainable over time." As our customers come to us and they're willing to make longer commitments that will give us more visibility into what the future looks like. And that's a good thing for everybody.

Yes. And on the economic front, on the economic profile front, given the strong pricing environment and margin expansion as a result of the rather tight supply, environment. There hasn't been as much focus on cost downs by the market as it relates to Sandisk's execution. However, as you negotiate these MBMs, I mean the economic framework is important. And so -- there are certain assumptions, Luis that I assume that you're baking in from a cost down perspective, right, as you think about the overall economics to Sandisk, but you have laid out cost profile, cost per bit, cost down profile of low teens type of annualized, right? So first of all, is the low teens annualized rate kind of still the way to think about how you're driving your cost per bit profile? And then maybe if you can just level set us year-to-date, like what has been your cost per bit decline trajectory and your outlook for this fiscal year?

Yes. So first of all, we will always focus on costs. right? That's our job, and we'll continue to drive that. The cost downs are less than they used to be. And frankly, it's not who we want to focus the conversations with our customers, right? It's about the value we create, the value they create with our products, but we'll always keep on working on.

But it's a part of the economic -- I mean, your customers don't focus on it. But as you think about your economics, you obviously have to in, right?

Right. When we told you that the deals we signed will be consistent with the gross coins we guided, -- all of that is taking into account the current cost structure or everything we see and that -- so that's factored in. but we don't talk about costs.

Harlan, this is, I think, 1 of the most interesting things for me in the last 1.5 years. So when we launched the company, I remember, I got on stage and I just said, I'm going to stop talking about cost down. Like every earnings call, what's your cost down this quarter? What's it going to be next quarter? -- we're going to stop talking about this, right? I've never seen an industry where people tell you what their costs are like it's -- the business was managed from the cost side of it. Oh, if we drive our costs down, the economics are work. We're just going to stop talking about that. It's been kind of interesting over the last year people stop asking about -- it's been great.

They've stopped asking about it, partially because pricing has done well. But from my perspective, cost is important because it's a reflection of the team's execution right? It's a part of the reason why Sandisk has the best-in-class manufacturing technology, right? That and that's part of the reason why I'm asking that question.

You're 100% correct. I appreciate the question, and I appreciate the comments. Like look, 1 of the things I said at the beginning, 1 of the things I'm so excited about this business -- we have an enormous amount of R&D productivity in the tank, right? We know what the VIX road map is going to be years into the future. And you're right, we can increase productivity. We can drive more bits. We don't need to do -- we don't need to build a whole bunch of greenfield and all this kind of stuff because we get the productivity through R&D and a consequence of those additional supply is they are at a lower cost, right? So that is true. It's just not -- that's our side of the equation to keep. And as Luis said, every business drives more productivity. Every business provides more productivity. That's our job. We have -- to your point of your question, we have a big lever that a lot of people don't have it driving productivity, which also drives growth. It's an amazing thing for the financial model of this franchise. It's incredible. So Luis' point, we're still very focused on it. It's just not the way we run the business anymore, which it used to be the way we run the business, which was Hey, there's infinite elasticity if we just lower the cost, everybody will make money. It turns out that was never really true. I don't think it was ever -- maybe it was true with 2D era. It was never really true in the 3D era, and now we're getting to a different way of running the business which is the value -- the intrinsic value of the technology being recognized supply, discipline, matching supply to attractive demand, not just, hey, we can drive the cost down, we should supply more into the market. It doesn't mean that it's not still there. It is still there. We just don't -- it's not something where we -- we're not really highlighting that number at this point.

Let's focus on the area of performance and differentiation. You've said it many times, Dave, -- but your customers' willingness to enter into these MBMs, these multiyear agreements is, first and foremost, driven by differentiation, right? -- performance differentiation. And I think 1 of the areas where the team has done an outstanding job relative to the last 20 years plus that I've covered Sandisk stand-alone Sandisk is a part of WD, Sandisk stand-alone again is the team has made significant improvements in your data center, enterprise SSD portfolio, right? And success in data center solutions, as you guys know, is not just based on having the best-in-class world performance like base NAND manufacturing technology, right? Success in enterprise SSD is also that plus I have to have a great silicon controller technology. And then even more importantly, in some cases, I've got to have the right software and firmware, right? And so with the dramatic growth in your enterprise SSD business, along with share gains. I mean, what has the team done to architect a better controller chip design, what has the team done to enhance the firmware, software, which are all key determinants and very strong success factors for your customers?

So again, I appreciate the the kind words. I mean 1 of the things I've always appreciated about this business, whether it was part of WD or now as a separate business, is the R&D team. We just have incredible R&D capability incredible existing IP portfolio and in a world where you have AI now, which is like the most exciting technologies, when you have this unbelievable R&D team, they're going to come up with new ideas and be able to innovate. And that's leading to all kinds of other projects. We probably won't have time to talk about like HBF. But -- so why the progress on enterprise deal a sudden, right? So when you look at -- I kind of look at Sandisk, maybe a couple of very big arcs of stands. Sandisk was a great consumer business. The WD era was really about the client, and that's not surprising because the SSD was controlling the H, you knew the customers. You knew the use case, you knew the requirements. And so that was kind of the rise of that portfolio. And then towards the end of that era, new management team came in with more of an enterprise background, obviously, the rise of the cloud in both franchises, all that technology expertise that had first like done all this incredible controller work in consumer and then done all this incredible controller work in client. That team was moved on to enterprise over the last 3 to 4 years. You run that process for 3 or 4 years with focus of people that understand how to be in these markets and you end up with great products. And so we haven't forgotten how to do the other one. So it's an accumulating thing. And now we're at a point where we've got, first of all, great underlying NAND technology. That's the JV story, right? That's the foundation of that. We just signed another contract. We're through 34, we're partners with Kioxia, we're super happy about that. That gives us unbelievable NAND. So the wafer comes out of the fab, what are you going to do with it? Now we have this unbelievable team. They built a great portfolio in consumer. That team then built a great portfolio in client. Now that team has built a great portfolio in enterprise. And we got exactly the right products. at exactly the right time. Market is exploding, a lot of demand from data center. We've got incredible NAND technology, to your point, it's differentiated, wafer bonding, better performance, all these kinds of issues. And we've built clean sheet architectures that we're just starting to ship of new enterprise -- new class of enterprise SSD right at the moment when that market is really pulling on those products. That's the story of what's happening right now, and we're wrapping a whole new business model around it so that this franchise looks very different going forward than it looks going backwards from a financial model perspective.

I appreciate the insights, Dave, Luis, thank you very much. Looking forward to continuing to monitor the execution of the team as the year unfolds. Thanks, Harlan.

I appreciate being here.

Thank you.