Western Digital Corporation (WDC) Earnings Call Transcript & Summary

Thank you all for coming. Welcome back. I'm Toshiya Hari. I cover the semiconductor and semi-cap equipment space at Goldman Sachs. Very honored, very excited to have Dave Goeckeler, CEO; and Wissam Jabre, EVP and CFO, from Western Digital with us this morning. I've got a bunch of questions to go through, but would like to keep this interactive. [Operator Instructions] But before we do any of that, I'll hand it over to Wissam for some important statements.

Thanks, Toshiya, and thanks for having us. Good to be here. We will be making forward-looking statements, and I ask you to refer to our SEC filings for the risks associated with these statements. We will also be making references to non-GAAP financials and a reconciliation of our GAAP and non-GAAP results can be found on our website.

Great. David, I want to spend most of our time on longer-term strategic aspects of our business, but I did want to ask a couple on the near term. It's been a little over a month since you provided September quarter guidance. A lot has happened from a macro perspective, dynamics that are perhaps a little bit more specific to your business since you did provide guidance. I think on the call, you spoke extensively about your consumer-oriented businesses. But any update on what you're seeing from a cloud perspective or enterprise perspective on the quarter.

Yes. Certainly, Toshiya. Thanks for having us. It's always great to be here. We did -- we were fortunate that we are announced it a little bit later and some other folks have talked about that given how dynamic market was at the time, and how fast it was moving, allowing us to factor in, in the most recent news, what was happening in the market. Unfortunately, in the last -- the last month since we guided, things have got incrementally difficult NAND pricing environment, especially it is correcting at a pretty fast rate, probably faster than anybody has seen it at a downturn since [indiscernible] part of the business for 10 or 15 years part of [indiscernible] something change drastically. So I think incrementally that's a difficult environment [indiscernible]. We are also starting to see a little bit of cost in the hyperscale market [indiscernible] scales a little bit and each market and each customer with idiosyncratic, they're so big. There's a little bit different reason across them but I would say where we were months ago [indiscernible] market as well. And China continues to be challenging. We don't -- we haven't seen any signs of any comeback in China. So really continues to be a difficult market. That said, we continue to execute very, very well. We think the portfolio is in a better position and more of the portfolio is in a better position than it ever has. We've entered this downturn in a much stronger position as a company. We've retired this on debt in the last couple [indiscernible]. So we feel that the company is very, very well positioned. But from -- to your question from where we were a quarter ago, things are incrementally more difficult, and we'll take the appropriate actions on how we're dealing with that. Maybe you want to talk a little bit about that, Wissam?

Yes, of course. I mean as we're seeing incremental weakness in the business, we started the year with the aim to be free cash flow positive. It's starting to look like this is going to be a bit more difficult to achieve. So we may not be generating much cash this year. We may end up having a free cash flow negative here. And also actually, when we look at this quarter with the incremental weakness, it's also looking like we potentially would have a negative free cash flow. If you look at the year and put it in context, in addition, obviously, to the weakness in the business, we do have the IRS settlement payment of $600 million to $700 million back for them as well. Having said that, obviously, we're taking all appropriate actions to limit our operating expenses, 0 discretionary spend, focus on CapEx, trying to push out the reduce, et cetera, to make sure that we continue to preserve our cash and focus on the cash generation, while not sacrificing the future growth of the business. And the last thing I would say, from a liquidity perspective, we have ample liquidity. I mean, we exited the fiscal Q4 with around -- a little bit more than $4.5 billion of liquidity between our cash balances and revolving credit facility.

Got it. Just to clarify, I think some of the things that you just mentioned are NAND pricing and supply demand. You talked about your hyperscale customers being a little bit more cautious. And then as a geo, China, I guess all go through these kind of overlap with one another. But if you were to, I guess, rank order those 2 in terms of what's changed the most, is there a way to differentiate there?

Yes. I think we talked about the China situation on the call. That has not changed. I think that's just an element of -- we didn't see a lot of activity there. It continues to be very quiet. We're looking for the point where we start to see some activity. We haven't seen it yet. Very clearly, what I would [indiscernible] kind of come off. NAND pricing is probably the biggest change in the last month, and we put a little bit of incremental cost...

Sorry, should we get David a new mic? And then on shifting gears quite a bit actually. The strategic review that's ongoing based on what you guys said last week at some of the other conferences or what you didn't say. I'm guessing there's very little to say. But I guess to frame the question a little differently, I think, David, you've been very open about your focus -- how you're focused on creating value from pretty much day 1. So I don't think there was necessarily a catalyst per se that made you say somebody woke up and say, "Hey, I've got to create shareholder value." But you're going through this process. Are there any incremental things that you've learned as you go through this process? Or are your thoughts around, again, your mission pretty much the same at this point?

Yes. I think the way you described it, it's pretty much exactly where I've been since I came in as CEO, it's been 2.5 years now. Time flies. But I think any time you come into a business from the outside, you want to look at the business strategically, operationally, every dimension. And we've made an enormous number of changes to refocus the company to execute better, to build a better portfolio. I'm a big believer if you're in a technology company, you better have great products. And I think if you look at our portfolio, we have the best set of products may be that we've ever had. In the NAND business, we are qualified on enterprise SSD, which really builds out another major portfolio -- pillar of the portfolio. We have a great client SSD franchise. We're a big player in mobile. We obviously have a very gem of a consumer business with the SanDisk brands. It's very unique. And now we've built out the enterprise SSD portfolio. And in HDD, we have the 22 terabytes, the 26 terabyte drives that we announced back in May and are still, to this day, unique products in the industry that are now going through qualifications. So you got to execute better. We refocus, restructure the company to execute better, but then keep going, go beyond that and look what we can do to change the company strategically, change the playing field we're on, all those kinds of issues. It's obviously something you always look at in the background. Elliott came along and invested a significant amount in our company and pledged an additional investment in our company. And I thought from the very beginning, that was a very constructive approach and a very constructive way to go about it. We agreed to run a public process on a strategic review, which we're doing. They are participating in that, along with others. That at this point are all under NDA. So we can't really say a whole lot about the process, except that it is being taken very seriously by all parties. There's an enormous amount of detailed work going on. And when it reaches a conclusion, we'll have more to say about it. But it's very active, very detailed with very engaged people around the table. So I think unlocking the value we have in this company, we feel very, very good about our portfolio, about our place in the industry. The world is going to use more data in the future. The world is going to store more data in the future. We are the largest data storage company out there with a diversified portfolio. There's a way that we can organize this that's going to unlock more value. We're completely open to that, and we're pursuing that aggressively with multiple parties.

Got it. A couple of questions on your hard drive business before we transition to NAND. At your Analyst Day in May, you showed a long-term growth target of 4% to 6% on a CAGR basis. Clearly, in the near term, you've got market-related headwinds. But can you remind us that the construct of that 4% to 6%, how you got to that number, what you're assuming for consumer client and importantly, data center?

Yes. So I mean, it's -- we're in the last stages of the dynamics that's literally been going on for 15 years, which is this transition of the HDD business from a client business to enterprise near-line cloud business. I looked at the numbers when I came into the company and I looked at one of our media factories in Asia. And when did the first cloud or capacity enterprise media start showing up in that factory. Well, that was FY '07. And if you look at the chart all the way through FY '22 was the first time that factory was 100% cloud enterprise drives. So literally, this transition has been going on for 15 years. We're not at the end of it. Quite frankly, the pandemic led to a burst of demand for client drives. And then we had -- about a year after the pandemic started, we had the China phenomenon, which led to another burst of client drives, but that's now all in the rearview mirror, and client drives are now back to below pre-pandemic trajectory. So it's this continued decline of clients and the continued growth of cloud. And cloud, again, continues to grow. We see high 20% exabyte growth there for the foreseeable future. Our customers in the cloud tell us all the time, there's more data they would like to store if we could make it more economical. That's what leads to continued significant investment in the portfolio, as I talked about earlier, things like ePMR, OptiNAND, UltraSMR, these things are going to carry us for the next several years of continuing to increase the TCO proposition for hard drives, and then that will continue to drive a nice TAM for us. So back to the 4% to 6% when you add it all up, the exabyte growth in the cloud, the final decline of clients in the near term, next 3 years, that's what we get from growth in the overall industry. We feel very good about where we're at in the portfolio to drive that.

Got it. And then to your earlier remarks on 22 and 26 terabyte, you had a pretty big announcement the day ahead of your Analyst Day in May. Based on what you know about the competition, their road map based on what you have today and what you have in your funnel, how comfortable are you from a competitive standpoint? And I know you dislike the whole HAMR versus MAMR debate. But any concerns around, some of the comments that your competitors made on HAMR?

Yes. No concerns. I mean, I feel extremely confident where we're at. I mean I looked at this question very deeply 2.5 years ago when I came into the business, which is anytime you have a big technology base like this and you have big customers, and we're underpinning cloud growth. That's important thing to the world. Storage is 29% of that overall TAM. So we need to make sure we have a long runway on this technology. And we looked at that over the next decade and what does the road map look like? And we're very confident of that. Now if you go back about 5 years, maybe even more than 5 years ago, our technology team looked at the road map on drives, as we always do. Again, we're looking 5, 10, even 15 years into the future because this is -- this isn't a software business. I mean, I say this as a software developer. I mean, I say this in a very gentle way. You can't just write more software and build more features. This is physical sciences, material science, magnetics. These are things that are worked on for decades before they can actually be commercialized, and b, the underpinnings of the most difficult data centers in the world to run in. So long trajectory on the R&D here and very, very detailed scientific work. And our team made the calculus that basically said the industry is going to get to 20 terabytes, and it's going to kind of hit a wall, in that you kind of run out of space in the form factor. So if you look at the aerial density per platter, and you look how that's being driven forward, you see this very consistent growth from 10 to 12 to 14 to 16 to 18. You've got room to continue to put more platters and you're driving aerial density higher. But when you get to 20, you've got 10 platters in, that's pretty much the limit of the physical form factor. Obviously, you don't want to go back to your customers and start changing the form factor on something they deploy millions of per quarter. And so you have to start thinking of new ideas. So HAMR is a long-term research project. So you have to make a determination of when is this going to be available. And our team made the calculus say, look, we're going to need other innovations to step beyond 20, right? And so they started working on things like ePMR, sort of working on things like OptiNAND, started working on things like UltraSMR. And then over the last 2 years, we've been layering those into the road map and commercializing them. Starting with the commercialization of ePMR; next product generation, we commercialize OptiNAND; now we've commercialized UltraSMR. So UltraSMR, SMR has been around a long time. It usually gives you 10% more. We've made it -- you can get 20% more because you have OptiNAND on the drive. So this has allowed us to build a road map beyond 20 where we can step to 22, we step to 26. I think the calculus our engineering team made, our architectural teams made that 5, 6, 7 years ago, turned out to be 100% correct. We got to 20 and then now we can take the step to 22. We've taken the step to 26. Eventually, we'll take the step with HAMR, but we've got a whole bunch of technology on our road map that allows us to walk down that path, continue to provide a predictable TCO advantage to our customers. And again, our customers are the most sophisticated data center operators in the world. They have now commercialized this technology. They have commercialized ePMR. They've commercialized OptiNAND. Two big hyperscalers have now fully qualified SMR. So our -- I feel like our road map is in the best position it's ever been and we have that very predictable path forward. Again, we've been doing HAMR R&D for 15 years. Team made the conclusion, it's not going to be ready at 22 turned out that to be 100% correct. We have a bunch of other innovations that are going to carry us forward and carry our customers forward. And then when HAMR is ready, it will be there to pick up and carry the road map forward. So I think we're in the best competitive position we've ever been in as a company.

Very clear. Gross margins in your hard disk drive business currently in the high 20s, I believe. Your long-term target is 31% to 34%. Can you help us understand the bridge from where you are today to 31%, 34%. And it's interesting how we get the question, how come they wouldn't do better when a couple of years ago, it used to be how come they're not in secular decline. So I find that shift to be interesting. But if you can help us with the bridge and if there's upside to 31%, 34% that would be helpful.

Yes. In the first year I was in the business, it seemed like every other question was, can you ever get back to 30%. And we got back to 30%. Now we've slipped back a little bit because of COVID and a whole bunch of other things. But we feel very good about the commitment we put out there for the 31% to 34%. So how do we walk into that? So first of all, everything within that, there's a lot of engineering behind that. Platform commonality work we're doing, a lot of the innovation I just talked about, we know what our road map is going to look like. We know the innovation we're going to be able to bring to the market. We're going to be able to consolidate the portfolio more, build it in a more efficient way. So there's a lot of kind of inside baseball to a lot of that about how we build the product. We're going to get more efficient. There's a part of it that's mix quite frankly, where client is just declining as we go and cloud is increasing. So we've got that behind us. And then hopefully, at some point, we're going to be out of COVID. I mean COVID has kind of just on all the additional costs we have, whether it's logistics or keeping our employees safe for all the other kinds of things we have with COVID will essentially recede, and we'll be able to get back to the margins we expect out of the business. We're in a bit of a lull right now because of that. And then the other thing is we just have a more rational supply/demand environment. And as I said earlier, the reality is the rise of the cloud over the last 15 years has been on the back of the decline of clients. And we have had an industry that just has been persistently oversupplied in product. And now we're at a point where client -- there's not much further for client to fall. There's a little bit further for it to fall. But now we have to invest -- the whole industry has to invest CapEx to build a new head fab or expand our head fab. And so I think as we get to that point in the industry, the economics of it will become more rational and allow us to make sure we can justify all that additional CapEx investment and get out of this environment where we're consistent oversupplied in the product.

And on your most recent earnings call, you talked a little bit about reducing their footprint in hard disk drives. Can you expand on that a little bit? And is that incremental to this long-term hard disk drive gross margin target? Or is it more of an offset just given the recent demand dynamics?

Yes. So what we're doing there is we looked at where the volumes were with respect to the client hard disk drives and where they're going in the future. And it's clear that we needed to take some action from the manufacturing footprint. And so that's what we've been doing since June, July time frame and this quarter. We're resizing our manufacturing footprint to the point where we're comfortable with it going forward to continue to supply the demand that we see in the future without necessarily having to spend more on the manufacturing side as well as take the under-absorption cost. With respect to the second part of the question, it is part of the various actions that we are taking to basically drive that gross margin expansion to that 31% to 34%.

Okay. Got it. Shifting gears, moving over to [ the NAND ]. David, as you mentioned at the top, near-term cyclical dynamics are challenging, we appear to be in the relatively early innings of a cyclical downturn. I know you've been very disciplined from a guidance perspective. You do not talk about out quarters, but hoping you can kind of frame the cycle for us here in terms of how you're thinking about supply/demand. I think last week, you talked about being in touch with your joint venture partner about supply side actions if you can touch on those as well?

Yes, I was in Japan 2 weeks ago now, it was a great trip. It was my first time over since the pandemic, which means the first time there since being in this job. So we had great discussions. It's great to see the whole team in person. Yes, we -- very much a demand-driven down cycle, a very sharp and aggressive. As I said earlier, sharper than anything anybody has seen in many, many, many years that have been in this business for that long. Clearly, we're coming out of an environment where we had a pandemic-induced increase in demand, if you look at like smartphones and especially PCs and also when we have -- we're at that more elevated level. I think customers were more willing to carry inventory given the supply chain issues as well. And now we're sharply going into everybody understands demand is not going to be where they thought it was entering the year. And also the supply chain is loosening up a little bit, not completely out of the woods, but for the most part, things are incrementally better than they were last quarter and 2 quarters before that. So you have these customers were expecting something quite high, and they were carrying inventory, customers see less need to carry inventory and they're expecting less true demand, and they're trying to get from point A to point B as quickly as possible. So we're seeing a very, very sharp reduction in NAND demand. The current quarter we're in, we're seeing reduction in both pricing and bit demand. And so as we said now, I think coming into the quarter, we saw those roughly the same. Now we see pricing deteriorating faster than bits. But when you have that happen, you're going to have this very severe downturn. As Wissam said, we're doing all the things -- all the countermeasures against that, but there's no doubt we're in that environment. How long we're going to be in it? We don't quite know yet. We haven't seen the signs of when the upturn starts, but very clearly, the industry is responding aggressively with CapEx reductions to lower the bit growth for next year, and we're doing the same thing.

Right. And then I guess on the CapEx reductions, I don't expect you to give us a discrete number here, but are we talking significant reductions at this point given the environment? Anything you can add on that? And then what would you need to see for you to cut utilization rates in NAND?

So we're first going to go through the process -- we're going through the process right now. So we don't have a number for you. We'll have a number probably fairly soon. But we're going through all the bottoms-up analysis. We're looking at every market we play in. And like I said, one of the things I feel really good about where we are as a company is we have a lot of homes for our supply. We have more homes than we had before in the sense that the consumer is always a home for us. Mobile is always a home for us. Client SSD. We have the #2 share position there. And now we've opened up this enterprise SSD place we can put bits as well. So what we're doing is going through the whole portfolio looking at what we -- what node do we think is going to be needed in each part of the portfolio, what is the growth of that going to look like. We'll translate that back into what is the nodal mix in the fab. We'll obviously push out the nodal transitions, stay on the current nodes a little bit longer. That will drop the bit growth. We will also most likely push out the start of our next fab that will drop the bit growth. Again, when we get that all figured out, so it's not we'll do it from the bottoms up, we'll get that figured out, and then we'll know exactly what the number is. And if that doesn't solve what we think the bit demand is going to be, then we'll look at the utilization issues. But that's not the first lever we want to go to.

Got it. And the implications for the rate of cost downs as you think about node transitions through cycle, I appreciate you guys are still targeting 15%. And I think if anything, over the past couple of years, you've done above that. But as you think about pushing out CapEx and these adjustments, should we expect a slower rate of cost downs or...

Well, that's one of the things we'll keep our eye on. And that's why it takes a little while to go through the -- we want to take a few minutes here to go through the planning exercise because we want to keep an eye on that variable as well. We want to keep an eye on the supply, and we also want to keep an eye on how we change the nodal mix to make sure we get the right cost downs as well. So we'll get all that figured out. We'll -- let's just say we're figuring all that out in real time.

Got it. And Dave, you talked about having more homes for NAND than before. And I think the progress that you've exhibited in enterprise SSD has really stood out. You talked about doubling your market share medium to long term. Can you talk a little bit about the differentiation you have from a tech perspective relative to your peers and some of the traction that you've seen from a customer pull perspective?

Yes. So the -- it starts with the NAND itself. And again, I'll talk a little bit about the JV here and why it's so important to reinforce that. We feel like we're in a very, very good position with our base technology. I won't give the whole lecture on the charge trap cell, folks that haven't seen Siva Sivaram have that conversation at our Investor Day, I would encourage you to watch that snippet of the video -- watch the whole thing, but a special extension to that part of it. It's the fundamental element of NAND as the charge trap sell. And I think for a very, very long period of time, we feel like we've had the absolute best sell that gives us the best capital efficiency. So that allows us to build a road map that's more efficient than others. That's why we need fewer layers per node than other people in the industry as we just have fundamentally better base technology. So that's where it all starts in building any product, including an SSD that you have the right foundation in place, and we feel really good about that foundation, about the technology road map. And again, with Kioxia, we're one of the biggest providers in the market. We invest in R&D together, 50-50. So we both invest an enormous amount in that road map and work very closely together. And together, we probably supply 40% of the merchant bits in the world. So big scale position to start with, that's the key thing. Now entering the enterprise SSD market. It's a great market. It's a fast-growing market. We have entered it and where the puck is going. So all of our product is NVMe, enterprise SSD. It's a part of the TAM that's growing the fastest. So we're not invested in the trailing edge technology. We're invested in where the market is going. So in many ways, we have the right 8% of share, and we have that share at big hyperscalers. So we feel like we're in the sweet spot of the market. We broke through on the qualification. It's a very big engineering project. Engineering project went on for years and years and years. The qualification itself can go on for a year. Just to get qualified, we broke through. We broke through it the first hyperscaler at the beginning of '21. That worked very well. And then -- since then, we've now broken through it the second and the third that scale deployment will start in our future. And then, of course, obviously, we have some OEMs and then in the channel. So it's just a matter of now executing to that execution. You always have to execute. But the -- right now, we're going through the BiCS5 qualifications. So we'll see a little bit of a low in the market as we go through BiCS5 qualification. Again, last quarter, we had 105% sequential growth in enterprise SSD. I'd love to do that every quarter, but it's not -- the market doesn't quite work that way, but it does show just how well-received the product is. Now we'll go through the BiCS5 qualification that will then take us to the next leg of growth. And as we move into BiCS6, a couple of years from now, we'll expand into the compute swim lane. We're kind of in the storage swim lane now, and that will expand our TAM even more. So it's a combination of, one, get past the qualification. We're past that; two, move on to BiCS5. We're in the process of doing that now and then expand the number of use cases we can cover over the next 3 years and allow us to grow into that 16% target. And again, when you're talking about doubling your share in 3 years in a market that's growing 35% to 40%, that's a lot of growth in 3 years. So we've got an explicit plan behind it. We feel good about it. And the execution, we had a big breakthrough 1.5 years ago, and we've been taking advantage of that.

And David, from a supply perspective, the tightness in controllers had been a big issue, not just for you all, but for the broader industry. Is that getting a little less bad? Or are you seeing progress?

I think less bad is a good way to think about it. I mean it's not completely freed up. We've been able to manage through it. We're not completely out of the woods, but it's a manageable situation from where we are now.

Got it. Right. We have a little under 10 minutes left. I've got more questions, but I just wanted to pause here, see if anyone had any questions in the audience. I will keep going. And maybe one for Wissam on capital allocation. You guys have done a great job in deleveraging the balance sheet. I think you're at a point where you could potentially contemplate capital return. The macro, obviously, is very challenging. What's the debate internally in terms of timing and potential magnitude of any dividend and/or buyback?

Yes. So obviously, our capital allocation framework and approach hasn't changed. But as you mentioned, there's -- within the current macro environment, we really are focused on sort of the next few quarters, the fiscal year in terms of being able to mitigate what take the mitigating actions to protect our cash flow. But that means, obviously, potential -- that doesn't mean a change in the commitment to returning capital to shareholders. It just basically means that the timing will still be out there until we figure out how the near-term headwinds and the implications of those on our balance sheet are. Having said that, obviously, maybe I'll just remind everybody, our capital allocation framework is primarily we're focused on investing in the business, the growth of the business, so that technology investments in R&D. Our second priority is to continue to reduce debt. And we've done quite a bit over the last couple of years, more than $2.6 billion, $2.7 billion of debt reduction. And we're aiming to be at around that $6 billion to $6.5 billion of debt versus where we were at the end of last quarter was $7.1 billion. And then thirdly, we're committed to returning capital to shareholders, whether by issuing dividends or buying back stock or doing both. But the timing there is very much dependent on the next few quarters and how the headwinds that we're experiencing today will shape up.

Right. Got it. And then, Wissam, just to clarify your prior remarks about free cash flow potentially being negative. That was a fiscal year comment as opposed to a calendar year?

So that was the fiscal year '23 comment. When we started the year, we aimed at generating free cash flow for the fiscal year. Now of course, the quarter-by-quarter, there will be variations given them it depends a lot on where revenue are where revenue is versus what CapEx, et cetera. But we started off the year aiming to generate free cash flow. But with the latest incremental weakness that we're seeing in the business is starting to look much more difficult and so we're likely to experience negative free cash flow in the fiscal year '23. And also, when I look at our current quarter, it's looking like we will be in a negative free cash flow position. That said, obviously, as we said earlier, we're taking all countermeasures to ensure our cash preservation and the health of business.

Got it. Okay. Very clear. David, on the chipset and the government support that seems to be ongoing and building across the globe, you guys talked about the joint venture, receiving some funding from the Japanese government. How should we think about -- any potential benefit from the chip stack here in the United States or any follow-through on the Japan side going forward?

Yes. Well, so we're certainly very thankful for the Japanese government for their support. As you know, we have a very, very big fabs in Japan and continue to build. The support was for Y7. We're now -- we're talking about K2, our Kitakami 2, I'd say, Y7 and K2. Okay, Yokkaichi the 7 fab there and Kitakami the 2nd fab -- 7 fab in Yokkaichi and 2nd fab Kitakami. The 2nd fab in Kitakami is one we'll probably push out given the CapEx issues we're working through right now. But again, for Yokkaichi 7, we're very grateful to the Japanese government for their support. We're also very happy that chips act was passed. That was a big, big move, big incremental support for the semiconductor industry. There's a lot of research money in that as well, that I'm sure we'll -- we have some very good ideas about how we can continue to develop storage and memory technology. And there may even be some potential ways we can tap into some of the other funding. So we're staying very close to that. The JV is a great venture between 2 great partners in the United States and Japan. And I think we feel very well supported by both countries.

Correct. In the last couple of minutes we have, David and Wissam, I wanted to give you the opportunity to touch on any other aspects of the business or the markets you serve that perhaps we haven't touched upon or is overlooked, underestimated. I know you guys have been pretty busy attending conferences. So you've covered a lot of ground. But anything that, again, through your one-on-ones, you feel like people just don't understand or underappreciated about your business?

I'll just recap kind of what we talked about. I think that we're very clearly in a very difficult environment right now. I mean we're seeing the NAND industry correct at a faster pace. And I think we've seen in a very, very long time. We're also seeing some incremental caution from the U.S. hyperscalers, and we talked about China being very quiet right now. So near term, we'll manage through that. There's no doubt we're in a cyclical industry. We're feeling it right now. But we go into this process in a very different company than we were just 2 years ago. We're much more focused, I reorganized the company around business units to drive focus. And why do you need to drive focus because you need to innovate. And the way you innovate is through focus, and it's worked. We have the best portfolio that we've ever had. We talked about the HDD business. We have unique products. This is an industry from my perspective that is very much -- there's a big debate of who's 2 weeks or 4 weeks ahead of the other person on any generation of technology. We've now announced 2 new generations of technology 5 months ago, and we're in qualifications and we feel very good about where that is. And I think the road map has been very, very carefully thought through years in advance to make sure that we can continue to systematically deliver a better TCO proposition to our customers because we know that the world is going to generate an enormous amount of data, and it's our responsibility to store that and store that in an economical way. And in many ways, the more economical we can make that, we can expand the TAM. So I think on the Drive business, very, very well-planned and executed technology strategy that's put us in a very strong position, which allows us to give us a great value proposition to our customers, and we've got many, many more steps to go. I feel extraordinarily good about our road map, let's say, over the next decade. Over the next 18 months, 24 months and over the next decade, in the NAND business, again, we're in a cyclical downturn, but the portfolio is just vastly better than it was before. I mean we have more homes for our bits. You think it's something like the gaming market that has, since the last downturn, the gaming market has come into existence. And we're a very big player in that. We developed a whole new brand and consumer WD Black, which is, again, along with SanDisk, SanDisk Professional allows us to not only have outside share but get a premium for those bits that we put into the consumer market. I think something very unique about the company. We've just brought in a new operations leader this year that's now organized our operations, organization to match the business unit. So we've got flash and HDD operations organized like that. We brought in a new financial leadership here, the gentleman next to me, that's like upping our game and that part of the critical part of the business as well. And we're just a fundamentally much stronger company. We made the hard decision to invest in our balance sheet. We've reduced $2.7 billion worth of debt. We're in a cyclical downturn now. We've got an unscheduled IRS tax payment, which is going to push out our capital returns, but we're closer than we've ever been but not only getting back to capital returns, but doing it from a very, very solid foundation. And so I feel very good about where the company is. We're going to manage through some difficult times over the next couple of quarters, and we're going to come out of it stronger than ever.

Awesome. Thank you so much.

Thank you very much.

Thanks for your time.

Yes, thanks for having us.