Talking about the long-term agreement model disclosed in SanDisk's previous financial reports is also the core that can change the business logic and valuation logic of storage vendors. The core of SanDisk's recently promoted "New Business Models" (NBMs) is to sign multi-year long-term supply agreements with major customers (mainly data centers, cloud service providers, etc.), no longer relying on quarterly spot price negotiations like traditional storage industries, but using strong binding contracts to lock in production capacity, revenue, and risk. During the previous earnings conference call, the CEO personally responded to market doubts, clearly stating that the client not only had advance payments, but also provided billions of dollars in collateral, which would immediately be converted into compensation in case of default. Based on the SanDisk earnings conference call and 10-Q document disclosure. Sort out the long-term agreement terms signed between SanDisk and its clients 1. Contract size and coverage 1) We have signed 5 multi-year supply agreements (up to a maximum of 5 years). 2) These agreements have locked in more than one-third of NAND shipments for the 2027 fiscal year, and the CEO stated that with the progress of subsequent signings, this proportion is expected to exceed 50%. 2) Among them, only three contracts signed in the third quarter had a minimum remaining performance obligations (RPO) of approximately $42 billion. 2. Prepayments 1) Some customers have already made direct cash advance payments. As of the end of the third quarter, prepayments reflected on the balance sheet amounted to approximately $400 million. This advance payment directly improves SanDisk's cash flow and reduces the production capacity investment risk for suppliers. 3. Collateral/Financial Guarantees 1) The total financial guarantee exceeds 11 billion US dollars (total of 5 agreements). 2) Except for the $400 million advance payment, the rest is realized through various financial instruments managed by third-party financial institutions, such as letters of credit, guarantees, collateral, etc. These guarantees cover the entire contract period (valid throughout the entire lifecycle) and are not one-time. 3) Key constraint: If the customer fails to fulfill their quarterly procurement obligations, the relevant financial guarantees will immediately automatically convert into default compensation, directly compensating SanDisk's losses. 4. Price mechanism and hybrid mode: Short term fixed prices and long-term floating prices are introduced, providing customers with a certain price buffer and allowing SanDisk to make additional profits when market prices rise. CEO Goeckeler's original words: "Sometimes the outside world questions whether these agreements can be implemented. I can say clearly that the actual situation is completely opposite. Our clients are truly using billions of dollars in collateral as collateral - through various financial instruments managed by third-party financial institutions, which are valid throughout the entire contract period. If they fail to fulfill their obligations on a quarterly basis, the corresponding financial compensation will be immediately paid to us Why did it become a long-term agreement with strong binding force 1) The main reason is that AI driven data centers have become the largest demand side for NAND, and the market has shifted from a "buyer's market" to a "seller's market". 2) SanDisk has achieved significantly improved revenue visibility and controllable risks through these "toothed" long-term contracts, while also incentivizing itself to expand investments in advanced production capacity such as HBF (high bit flash memory). 3) If we don't do this, suppliers will hesitate to invest in production capacity, supply will be limited, and the impact will still be on downstream customers' own business. 4) In the past, the storage industry used to rely on quarterly spot trading with significant price fluctuations, but now storage vendors have lingering fears about this. Samsung also made it clear at its previous financial report that the new contract, which includes prepayment, minimum income guarantee, and financial collateral, has much greater binding force than the old model based on mutual trust. Hercules also has this action. Gradually, this long-term agreement with advance payment and collateral may become a common practice in the storage industry. We need to pay attention to the model of "long-term agreement+advance payment+collateral", which is not just about simply locking production capacity, but turning the contract into a framework of strong legal and financial binding: if customers want to obtain stable sources of goods, they must endorse with real money (advance payment+guarantee); SanDisk gains stable cash flow and a minimum income threshold, with both parties sharing risks. More importantly, this long-term agreement mechanism can make the business growth of storage vendors in the coming years very certain and greatly improve transparency.