Western Digital Corporation (WDC) Deutsche Bank 2023 Technology Conference (Transcript)

Western Digital Corporation (NASDAQ:WDC) Deutsche Bank 2023 Technology Conference August 31, 2023 4:15 PM ET

Company Participants

David Goeckeler – CEO

Peter Andrew – IR

Conference Call Participants

Sidney Ho – Deutsche Bank

Sidney Ho

Okay. Well, good afternoon, everyone. I am Sidney Ho here, covering semiconductor, semi-cap equipment and IT hardware at Deutsche Bank. The next company we have is Western Digital. It’s my pleasure to introduce Western Digital’s CEO, David Goeckeler. Welcome.

David Goeckeler

Thank you, Sidney. It’s great to be here. Thanks for having us.

Sidney Ho

Great. Before we start, I’ll turn it over to Peter to read the safe harbor.

Peter Andrew

Okay. Well, thank you, everybody. Today, we will be making forward-looking statements based on current assumptions and expectations. And I ask that you refer to our most recent annual report on Form 10-K and our other filings with the SEC for more information on the risks and uncertainties that could cause actual results to differ materially. We will also be making references non-GAAP financial measures and a reconciliation of the GAAP to non-GAAP results can be found on our Web site. So with that, let me turn it back to you.

Question-and-Answer Session

Q – Sidney Ho

Great. Well, let’s start the Q&A. I think I want to address the elephant in the room. It’s been about 15 months since you announced the strategic review. We understand you can’t talk too much about the details on the status. But at a high level, what are the priorities you’re trying to achieve? And can you give us an update as to the timing of the conclusion of the strategic review?

David Goeckeler

Yes. So first of all, the strategic review has been very active. It’s been a very thorough process for evaluating a range of options to unlock value in our business. I think at the highest level, that’s the way think about it. We believe we have two great franchises, quite frankly, over the last year and the depths of this downturn, I think we’ve even seen better performance from those versus peers. And we’re going through a range of options of how we unlock that value for all of us, I think, is the best way to think about it. As far as timing, we haven’t said a lot about timing because I am very committed to — we committed to this process, we committed to do a very thorough review, not put artificial deadlines on it and we haven’t done that and we still won’t do that. But I think it’s fair to say we’re in the home stretch at this point, right, without saying exactly what the timing is. We’ve evaluated a lot of things. We’re looking at implementation scenarios, things like that. So we’re getting there. We’re making progress. Maybe one way to think about it, question I get — kind of corollary question I get about sometimes about our balance sheet. We have some refinancing to do of a convert that’s coming due in February of ’24. We fully expect to do that in the public markets before the end of the year. And to get that done, we have to cleanse ourselves in a material nonpublic information. So we expect this all to kind of come together in the next several months.

Sidney Ho

Okay. So it’s probably realistic to think that something is going to happen before the convert is refinanced?

David Goeckeler

Yes, that’s not the driving factor in any sense of the imagination, but it’s one of the things we think about, we want to be able to do that in the public markets, it’s something that’s top of mind for us. So the strategic review is very active, driving forward, like I said, kind of entering the home stretch phase as we continue the analysis.

Sidney Ho

Okay, that’s helpful. Maybe digging just a little deeper in there, understanding there’s a lot of different options. Can you talk about the range of outcomes, should we to expect at the end of the day, there will be maybe some rationalization of capacity, is that the goal is to gain share, actually gain to increase capacity? Anything else you can add that would be good.

David Goeckeler

No, I think we — I’m sure we’ll talk as we go along. Here, we’ll talk about the two franchises. I think we’ve been doing — we’ve been making a lot of changes in our technology road map. We’ve been making a lot of changes in our cost base. We’ve been making a lot changes in the way we’re organized as a company to be more efficient. We’ve been bringing a lot of portfolio changes. We feel like the portfolio is in great shape in both businesses. I wouldn’t necessarily think of the strategic review is changing the trajectory of these things. I think that we have two great franchises. We’re thinking about like how do we structure the business in a way — is there a way to structure the business where we can unlock the value that is in those franchises. Like I said, we feel very good about where the portfolio is at this point.

Sidney Ho

Got it. Maybe one last question, and I’ll move away from this. But at a high level, what are the major moving parts that need to be settled before [indiscernible] review, the conclusion it can come together?

David Goeckeler

Well, I mean it’s just as simple as we get to develop conviction. We’re going through a large range of options for the business. It’s very robust review, lots of parties involved, we’ve evaluated a lot of options, we’ll talk about more of that when we get to the end. But there’s a lot of different moving parts in the business the size of ours, right, global operations. You got to look at all the financial implications, just make sure that when we get to a — if we get to a different answer, we have an enormous amount of conviction and we thought through all the implications of that.

Sidney Ho

Okay, that’s great. Maybe I’ll move on to some near term businesses. In terms of the end markets, can you give us an update on the various end markets since you reported earnings in July, where do you think the true demand is, how much excess inventory is out there? And it looks like NAND prices have bottomed and may have started to increase in certain markets. Can you maybe address that a little bit as well?

David Goeckeler

Okay. Let’s go through the markets and then we’ll go through the NAND piece. There’s a lot in that question. So we have a lot of visibility in the business from consumer to the OEMs and PC, smartphone, all the way to the web-scale players. Of course, the biggest data center operators in the world. If I walk through those markets, a little bit of a first in, first out kind of view of those. Consumer was kind of the first thing we saw weakness in last year. Consumer has stabilized, demand trends there are predictable. NAND pricing is still depressed, but we feel good about where our share is, where our brands are, that business is kind of operating as usual at this point. Next, PCs. PCs where the next market we saw kind of where we had depressed demand last summer. We think we’re through the inventory correction there. We’re kind of building to demand, end demand in that market. So I think that’s in good shape. Smartphone market kind of the same, right, maybe a little more lumpy given the size of the players in it. And then the cloud market is one where we’ve still got maybe another quarter or two of inventory digestion other things to go before we’re fully out of it. So that’s how we think about it.

In the cloud market, before I go to NAND, one of the things that’s going on in the HDD business as we’re driving to a build-to-order kind of model, that’s a six month lead time on what it takes us to build a drive. And so that’s giving us more visibility as we start to look into the first half of the year and given us incremental conviction in the last couple of months that we’re going to see improvement there. Now on NAND pricing. Yes, NAND pricing, first of all, cost declines. You look at our cost declines. You look at price declines over the last several quarters. We’ve gone 22, 20, 10, 6 on down. So it’s slowing down. The declines are slowing down. I think we’ll still see a little bit of decline, but we’re finding the bottom here. I think we’re going to go through a couple of quarters of the market stabilizing and then we’ll inflect up as we get supply/demand in balance. For us, in particular, I think we’ve done a very good job of kind of making sure we get our fab utilization aligned to what the demand we see in the portfolio, keep our inventory in check. One of the things you saw last quarter was a big improvement in our inventory position. So we feel good about the way the market is shaping up, increased volume, prices stabilizing, market stabilizing. And we just — when the data center market starts to come out of this, I think we’ll see a full inflection of the market.

Sidney Ho

Got it, that’s helpful. I think you addressed the next question I have, which is on the cloud digestion. It sounds like you have talked about inventory you may have a couple of quarters ago. And we’ve seen that kind of played out before and things are continue to get pushed out. The answer to that to my question seems like this is the build to order. Is there anything else that you would point to that gives you confidence that this time is real, that we will get to the bottom of it?

David Goeckeler

Yes, it has been a prolonged decline. I mean the last quarter, according to our calculations and the capacity enterprise business was the lowest TAM in that business for 70 quarters. So there’s no doubt we’re in a very severe downturn. But we believe we’re at the bottom of that. We think we’re going to see sequential improvement as we move through fiscal year ’24, as you said, our conversations with customers give us confidence in that. It’s also fair to say and I’ve said this many times before, the customers we deal with are very, very large customers or they’re idiosyncratic. They all have different strategies or different points in their own consumption and digestion cycle. But when you add it all up, we see incremental improvement from here.

Sidney Ho

Got it. That we all look forward to the bottoming of that. But one of the other questions I’m getting a lot is from AI. So there how are you thinking about AI that has an impact in the near term, in the longer term, especially when you think about some crowding out impact in the near term?

David Goeckeler

Yes. I’d say I’m extremely optimistic about it. I mean I think it’s just the classic cycle of innovation happening in a world where we have this kind of frictionless cloud distribution model of technology, I think this is very exciting for everybody in the technology ecosystem. Obviously, people are going to benefit at different points in time as this technology is rolled out. And so clearly, right now, there’s an enormous amount of energy being put into how do I get this capability into cloud infrastructure. That’s very good because the faster that happens, the faster it’s in all of our hands as individuals, the faster it’s integrated into our desktops, the faster it’s integrated into all the other use cases it’s going to be integrated into. And I think, again, in the last 10 years, the way the cloud has been built out, it just allows the world when a new technology comes along to distribute it to billions of people very, very rapidly. And we’re in the very early days of that, of generative AI, and it’s extremely exciting.

Now again, how is that going to impact different businesses? Well, if you’re in that early phase of all the processors you need and all the compute power to do those calculations, that’s going to be the first wave of deployment, and we’re seeing that. And there’s no doubt that there’s some sense of that is attracting a lot of budget. But once that gets deployed and gets in all of its hands, then for our business, I see that as we’re essentially automating the ability to create data, right? We’re putting that in everybody’s hands very quickly. So the faster this happens, the better as far as I’m concerned, because as we get all of that new technology into people’s hands, we’re going to be able to create more data. I think the way large language models works to train them on data and what’s happened in the past, that means all the data you’re generating is more valuable. So we’re going to incrementally going to — marginally going to store more of it. So I think that cycle is starting, we’re at the very early days of it, and I’m extremely excited about it, about what it’s going to — the impact it’s going to have on our business.

Sidney Ho

Okay. Maybe switching subject a little bit. We all know the current environment is pretty tough across both segments. Can you talk about some of the internal efforts you have implemented to weather the storm, whether it’s utilization cuts, OpEx cut? And I know even before that, you realigned some of the hard drive and solid state drive businesses. How does that all kind of impact your relationship with your customers going forward?

David Goeckeler

So there’s a lot to unpack there. So you need to give me a little time on this. So first of all, let’s start at the end. We organized the company in a way where we had very clear focus on the portfolio of hard drives and NAND. So the first thing I did when I came in the company, it’s been three years ago, and I was creating business units, bring in general managers and their job is to think about how am I going to organize my portfolio, how am I going to build a road map of technology that does the best job of satisfying my customer and creating value for our shareholders, right? They sit right in the intersection of that. And that’s gone extremely well. I think we’ve now had three years of executing that. And if you look at our product portfolio, it’s been as strong it’s ever been. In the HDD business, we launched 22 terabyte CMR and 26 terabyte SMR. Now we’ve launched 28-terabyte UltraSMR. So that product portfolio is emerging as a leading portfolio in the drive industry, and we’re not done. We’re going to keep going, right? We’ve got a very clear strategy of how to continue to drive that forward. In the flash business, our portfolio strategy, I think, in the downturn has shined our ability to — if you look at our gross margin performance versus the rest of the industry, there’s a significant gap. And that’s because we’ve built out a portfolio where we have a lot of optionality.

We have a very strong consumer business with very strong brands. We’ve got a great client SSD portfolio. We’ve got a great mobile portfolio. We’re building out an enterprise SSD portfolio, spent a lot of effort on gaming, that’s been a big emerging strength of the portfolio. So I think that, that change in strategy, our change in organization several years ago, that is showing big benefits now. Of those general managers have the ability to put their fingerprints and have enough time to develop products to change the trajectory of the portfolio. How does that help us navigate the downturn? The way you do that is a rigorous process of ROI analysis of what you’re going to invest in, right? So when we do have to start pulling back on investment, we know exactly where to pull back that’s going to have the minimum impact on the business. How do we stay close to our customers, where if we look at one project versus the different project, what the impact is going to be on the market to us and our customers and allows us to have a very, very good relationship with them and be able to flex that portfolio in a way that’s very predictable, and you’re going to make the best economic decisions on how you do that. So that’s a continuous exercise that never stops, you just keep repeating that over and over again.

As far as navigating this downturn more broadly, in the flash business, I think we’ve done a very good job of like understanding where demand is, what it’s going to be for our portfolio, modulating our utilization of the fab to make sure kind of the spring in between those two is inventory. And I think our inventory has been in a very good position throughout the downturn and I think we have — we’re probably in the best position in the industry as far as the amount of inventory we have and our ability to manage that. So again, to kind of understand exactly market’s product fit, where demand is going to be, then get the production in the fab, nodal transitions right to make sure those are as aligned as possible, I think we’ve done that well over the last several months and kind of the quality of the portfolio is coming through.

Same thing on the drive side. We’ve been taking down utilization, but not just taking down utilization, we’ve made the decision to just remove capacity from the system. The drive industry for the last decade has been in this transition from a client business — more than a decade, 15 years, has been in this transition between a client business and a cloud business. High number of drives, smaller number of drives that are much larger. So over the last year, we’ve removed a significant amount of unit capacity from our drive infrastructure. So just taking the fixed cost out of the system, right? So that when the volume does come back, it will be a more profitable business, it will be built on top of a smaller fixed cost infrastructure. So we’ve been pulling all those levers to navigate the downturn. We can talk about all the financial stuff we’ve done as well. But from a structural point of view, make sure we stay aligned to the market as best we can and then also reset the size of the business for where the market is at. We’ve been doing both of those.

Sidney Ho

That’s helpful. Maybe that’s a good segue to the next set of questions. I promise it won’t be 10 part questions…

David Goeckeler

That’s all right.

Sidney Ho

But I would say, if I go to the — maybe I’ll spend a little bit time on hard drive and flash, but I want to start with hard drive, because it does feel like there’s some structural changes going on. Your competitor recently talked about shifting the business more to build to orders. And they also suggested raising prices for certain SKUs even though the market is kind of not very good at this point. Do you see that as a sign that there are some changes going on in the market? And while we at that subject, as I said only two parts this time. How does the build to order any different than long term agreement that you guys are already doing right now?

David Goeckeler

Okay. You said it was only going to be two parts. Okay. First of all, let’s talk about the HDS structurally changing. I think you’re 100% correct. The industry is changing in some fundamental ways, right? Let’s start from the products. Even when I came in — I mean, this industry has been around a long time, but even when I came into the industry three and half years ago, it was kind of this — we’re going from 14 to 16 and 16 to 18 and 18 to 20, and kind of everybody went at the same pace, and there was a lot of discussion, who’s first, who’s second, is somebody a month ahead of somebody else, and it was almost like this scorecard that was being kept. That’s kind of all changed now because the industry has gotten — both on the customer side and on the supplier side and that there’s different strategies being implemented now about how to drive aerial density and how to drive capacity. Western Digital has taken a strategy of saying,look, we’re going to go from — we’re going to implement ePMR, then we’re going to implement OptiNAND, then we’re going to bet on SMR and UltraSMR, and that’s going to give us a very predictable road map as we drive up into HAMR, right? So now you’re starting to see — and then on the customer side, they are starting to say, they’re not just all taking the next cohort, there’s different strategies. Some big customers are — more and more big customers, quite frankly, are transitioning to SMR. Some are not. Some are at different capacity points. Some have hybrid drives between SMR and CMR.

So you’re seeing, in some sense, a much more complex market how to fit the pieces together. And so if you look at the market right now, we have customers consuming 18 terabyte drives all the way up to 26 terabyte drives in volume. So how you think about that market has changed, right? It is changing right before our eyes. Now on the build-to-order, that’s the big — the big piece of this transition I talked about of saying, hey, we’re just — we’re not just going to grow into this capacity we had from client, we’re now going to reset to a lower point. So now we can produce fewer drives. We want to produce the drive that the market needs. So the more insight of where our customers are going, the better we can all plan for that transition, right? So that when you need to drive, we have it available. And we don’t have too much infrastructure or not enough. So you’re right, long term agreements were a first step in that direction, right? And it was like how do we get more visibility into where our customers are going at, that was a good phase of the market. Now we’re going to a different phase, which is, hey, we’ve got to be more planful about this, maybe the downturn accentuated that. And now we’re talking to our customers, hey, it takes us six months to build a drive or more like we want to hear from you about where your demand is going to be six months from now and customers are accepting that conversation. So that is — and again, part of this fact is there’s a lot of different capacity points now. It’s not just everybody buying the same thing exacerbates that a little bit. So the industry is changing. I think will lead to a much healthier industry for everybody.

Sidney Ho

Do you think that will translate into margins at some point when all these LTAs — not LTAs, but build to orders?

David Goeckeler

It does. I mean that’s our role — the way you drive margin in a technology business is you build a better product, right? You build a value proposition that your customer values. And that’s what we’re very focused on doing. That’s why that 26 terabyte drive is going to ramp very fast this quarter because it’s a great product, and it delivers a great TCO to our customers. It’s very solid technology that we can produce at scale. And so if you do that, then you’re able to drive margin on that. So when we get past this, the volume is going to come back, right? The long term thesis on data growth hasn’t changed. We’re in a low right now because of a whole bunch of factors, over consumption during the pandemic, some efficiency changes, a little bit of crowding out, as you talked about, but that will come back. As it comes back, it’s going to be on a better cost structure business for our side. We’ve got a long road map to continue to deliver better and better innovation to our customers. As both of those things happen, it will become a more profitable business.

Sidney Ho

Okay, that’s great. Another debate that is ongoing with investors is that one of the all-flash array peers have been talking about there will not be any hard drive systems being sold in five years because the operating cost of flash is going to be so competitive. Clearly, you guys have hard drive, you have flash, so you may not be completely…

David Goeckeler

I have some insight into this question.

Sidney Ho

Yes. But curious, how do you think about that?

David Goeckeler

I don’t know it’s — where do I start? I guess, is the question. So first of all, this whole thing about power, like that’s like people need to do their homework. The amount of power that’s consumed by a hard drive and power consumed by enterprise is roughly the same. It depends if it’s an idle or read-write state, they can be differences. But when you add it all up, they’re roughly the same. So that’s not any kind of thing that’s going to drive a transition. As long as the hard drive has a innovation road map of continuing to deliver better density, it is going to be the storage mechanism, the predominant storage mechanism in the cloud, that is not going to change. And there is a long road map on being able to deliver that. And so I don’t have any concern about this issue at all, because we’re very close to our customers that buy both of these products and we know exactly how they use them in the mix, in their infrastructure and we have an enormous amount of conviction. They are complementary technologies in the data center.

This has been a confusing point since I started this conversation many, many years ago, which is there’s a tendency to conflate what happened between flash and hard drive on the device with what’s going to happen with flash and hard drive in the data center. They’re very different. On the device, they were substitutes, flash substitute the hard drives. There’s nobody debates that. In the data center, they’re highly complementary technologies. They are both growing. They’re both growing markets in the data center and that will continue for a very, very long time. And if you want to know the economic reason — if you want an economic data point of why that’s the case, if anybody that owns flash fabs believe that, they would be investing very heavily in flash fabs right now, and people are doing the opposite. So we’re trying to take investment out of flash to get supply demand balance right. So there’s all kinds of reasons we could talk about this for a very, very long time. But these technologies are highly complementary in the data center and it’s going to be that way for a very long time because they both have a very strong road map of continued innovation of bringing a better value proposition to our customers.

Sidney Ho

Got it. Speaking of [growth], so you kind of have to talk about the hard drive road map between HAMR and PMR. Your competitor has been a little more vocal about transitioning. It sounds like you guys are — it will be maybe a couple of years after that. Just curious how you think about competitive landscape if you decide to move — it won’t transition until a couple of years later, the right timing is, but love to hear your thoughts.

David Goeckeler

I think it’s — what I said earlier that the drive market is changing and the fact that you can’t — it’s not just everybody going from one capacity point to the next capacity point to next capacity to next capacity. Right now, it’s like much more full road map with lots of different technologies in there. HAMR is certainly one of them. HAMR will have — we’re believers in HAMR, right? There’s no doubt about it. We’ve been working on HAMR for 20 years, like everybody else in the industry. We have made other technology choices in our product portfolio that is going to lead us into HAMR, specifically the ones I mentioned earlier ePMR, UltraSMR, OptiNAND, that technology is being validated by the market as we speak. Every quarter we go we’re building a more profitable business, we’re taking a little bit of share, our goal is not to take share, our goal is to drive profitability. We have a more profitable business that’s growing. That means the technology strategy is working because we’re bringing a better proposition to our customers. Again, we just announced the next step in that in 28-terabyte UltraSMR. HAMR’s time will come. It will be a very technology, that transition will take years to happen. We are just starting to walk into that. Maybe as a corollary, you can go back and look at the transition to helium drives many, many years ago, which was a fundamental technology change in hard drives, and it took many, many years for those drives to penetrate into the system. So we feel like the strategy we’ve put in place is an extremely strong strategy that allows us to get there right and have all the capacity points filled in with technology that is proven and we can manufacture at scale. And our customers are telling us like they’re voting that they like that strategy. UltraSMR is being adopted by the biggest cloud vendors in the world as their technology standard.

Sidney Ho

Okay. Well, maybe staying on the technology road map a little bit as I switch over to the demand side. You officially announced BiCS 8, I think it’s 200 plus later, 218 I think in March — based on CMOS that bonded to array technology. Talk about the overall benefits of this technology and maybe how do you — give us an idea about time line of profitization?

David Goeckeler

So first of all, we’re very excited about this, right? I’ll say that I think the technology team has done an unbelievable job. This is where — I’ll say a little bit about the JV before we get there before we talk about BiCS 8. The JV is just a wonderful construct. The relationship between us and Kioxia is extremely strong. We invest together on our technology roadmap and have for 23 years, that leads to an enormous amount of benefits for us, benefits of scale, benefits of investment. And I think we’ve had a decade of sustained excellence in innovation and that technology roadmap that has supported our business. And we can talk about that from a CapEx point of view at some point maybe. The latest chapter of that story is BiCS 8, which is how are we going to continue to scale NAND technology. You continue to stack up, you continue to stack up layers. And we saw a point where in traditional circuit under array, you’re basically building the CMOS and then you’re stacking the NAND on top of that in the manufacturing process. Here, we have separated that into two separate processes. You put a wafer through for the CMOS, you put a wafer through for the NAND stack, you flip one over and you bond them together, right? That’s kind of incredible. When you see the wafer, it just looks like a regular wafer, but it’s two wafers bonded together.

So what are the benefits of that? First of all, you’re putting the wafers through the process separately so you can reduce cycle time and you can get yields to ramp faster, right? So I’m doing a simpler — each process is simpler, I’m doing them independently, I can start to ramp yields faster, I can make progress faster. Secondly, the CMOS is like higher quality because I’m not stacking stuff on top of it in the manufacturing processes. I’m sending it through, it’s brilliant quality, now I get like way faster IO speed, the quality of that product is just much, much better when I put them together. Thirdly, now that I’ve got this process perfected, I can innovate on both of them at different rates. I can pushing the stacks up or down on top of the same CMOS. I can innovate the CMOS, put that on top of a different stack and I’ve got a lot more optionality in the portfolio. So better product, higher quality, faster yield times, faster ramps. It’s just a major, I think, advance in commercialized NAND technology. We think everybody in the industry is going to have to go through this to continue to scale, and it’s behind us now.

Sidney Ho

Okay. I do want to talk about capital intensity, which you kind of predicted. But how — one of the questions I’m always getting from the investors is that it seems to be your capital intensity seems to be consistently lower than some of your competitors. How are you able to do that, how do you stay competitive in that situation?

David Goeckeler

Yes, I kind of hinted at this earlier. Maybe it wasn’t a hint. It was a foreshadow. But it is literally sustained excellence in innovation of a NAND design team that has been working together for 23-plus years now. And they’ve just generated generation after generation of NAND technology, it is a specific goal of the technology development to be capital efficient. How do we design our next node so we get the most number of bits for the least amount of dollars, right, that’s a design goal. And this team is just really good at it. And people ask us this all the time, like you must be falling behind because you’re spending so much less money — you’re spending less money than your competitors. No, we’re actually not. We’re just good at it. And if we looked at numbers for the last three years, and Peter can keep me honest here. We were like at two thirds the CapEx of the industry of what we’ve been spending to get the same — to get what we believe is a superior product out. So this goes to the power of the JV. Why do technology partnerships last for 23-plus years because they work, right? There’s a very clear value proposition in those partnerships for both players and that’s very, very clear in this one, that this is how it shows up, one of the ways it shows up.

Sidney Ho

Okay, that’s great. Maybe just follow-up on that. How should we think about CapEx for next year? I know that’s one of the topics everyone talks about.

David Goeckeler

I’m going to let Peter — I have to let Peter. [Indiscernible] Peter.

Peter Andrew

Yes, from a CapEx perspective, clearly, given the current environment, we’ve been very disciplined in terms of where we put CapEx. Now remember, when we talk CapEx, we’re talking about CapEx on a combined basis, cash CapEx for HDD and flash. And if you just take a look at fiscal year ’23, we were able to pull total cash CapEx down by about a third. So we were very proactive, very prudent, came back and tried to trim where we could in order to help the cash flow that we — to improve our cash flow generation. Now as we look at fiscal 2024, we haven’t set an exact target. All we’ve said so far is we expect a significant reduction in terms of cash CapEx. And when we say significant, we’re talking somewhere around 50% down year-over-year. Now of course, if things worsen, we’ll try to go back to the drawing board again and tighten that up a little bit more. If things get a little bit better, we might increase that slightly but there’s likely going to be a lag before we start doing that.

Sidney Ho

Okay. Yes, great. Maybe just to wrap up, what are some of the key messages you want investors to take away from this meeting? And maybe there are other areas that you think investors may have underappreciated or they may have overlooked for the story?

David Goeckeler

I think we covered here, Sidney. And again, thank you for the time today. We really appreciate it. We feel good about where the portfolios are. We’ve done a lot of work on where our businesses are not just the portfolio, it’s just a part of it. We’ve done a lot of work on getting the portfolio in market leading positions in both franchises, getting the cost structures in the right places, managing the business through this really, really severe downturn, but giving ourselves the financial flexibility. Peter and Wissam and the team have just done a fantastic job of helping us navigate through that. And we feel like the business is in a very, very good spot. We do feel like it’s underappreciated and this is where the strategic review comes in. We’re fully committed to exploring and are exploring a complete range of options of how do we unlock that value for all of us.

Sidney Ho

Okay. I think we’re out of time. Thank you for the time again.

David Goeckeler

Thank you. Appreciate it.