Good day, everyone, welcome to the 2nd quarter 2023 HP Inc. earnings conference call. My name is Sarah, and I'll be your conference moderator for today's call. At this time, all participants will be in a listen-only mode. We will be facilitating a question and answer session towards the end of the conference. Should you need assistance during the call, please signal a conference specialist by pressing the star key followed by zero. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Orit Keinan-Nahon, Head of Investor Relations. Please go ahead. Good afternoon, everyone, and welcome to HP's second quarter 2023 earnings conference call. With me today are Enrique Lores, HP's President and Chief Executive Officer, and Marie Myers, HP's Chief Financial Officer. Before handing the call over to Enrique, let me remind you that this call is a webcast and a replay will be available on our website shortly after the call for approximately one year. We posted the earnings release and accompanying slide presentation on our investor relations webpage at investor.hp.com. As always, elements of this presentation are forward-looking and are based on our best view of the world and our businesses as we see them today. For more detailed information, please see disclaimers in the earnings materials relating to forward-looking statements that involve risks, uncertainties, and assumptions. For a discussion of some of these risks, uncertainties, and assumptions, please refer to HP's SEC reports, including our most recent form 10-K. HP assumes no obligation and does not intend to update any such forward-looking statements. We also note that the financial information discussed on this call reflects estimates based on information available now and could differ materially from the amounts ultimately reported in HP's SEC filings. During this webcast, unless otherwise specifically noted, all comparisons are year-over-year comparisons with the corresponding year-ago period. In addition, unless otherwise noted, references to HP channel inventory refer to Tier 1 channel inventory. For financial information that has been expressed on a non-GAAP basis, we've included reconciliations to the comparable GAAP information. Please refer to the tables and slide presentation accompanying today's earnings release for those reconciliations. With that, I'd now like to turn the call over to Enrique. Thank you, Orit, and thank you everyone for joining the call today. When we began our fiscal year six months ago, we were clear about two things. We said we would focus on the things we can control to navigate a demand-constrained market in fiscal year 2023, and we said we would continue driving progress against our long-term growth priorities. Halfway through the year, this is exactly what we have done, and I am pleased to say the actions we are taking as part of our future-ready plan have started to take hold. Because of this, we delivered non-GAAP EPS toward the high end of our guidance, and we have built strong momentum for the second half of the year. Today, I'm going to discuss our Q2 results and the progress against our future-ready plan. I will then provide color on our business unit performance, and I will close with some insight into how we see the balance of the year before turning the call over to Marie. Starting with our results, net revenue was $12.9 billion. That's down 22% or 18% in constant currency. As expected, the industry-wide headwinds we described last quarter continue to impact our business. Against this backdrop, our teams did an excellent job controlling our costs, managing our pricing, and shifting our mix. This allowed us to deliver non-GAAP EPS of $0.80. We also grew non-GAAP EPS and operating profit quarter-over-quarter, and we delivered on our year-to-date cost target, keeping us on track to deliver at least 40% of our three-year savings by the end of fiscal year 2023. A key part of our strategy is to reinvest savings into innovation. We are doing this in our core business and our key growth areas. We believe this is very important because even though both our core and growth markets are impacted by the current macro environment, we see opportunities to further strengthen our position during this down cycle. Our innovation was on full display at our Amplify Partner Conference in March, where we launched more than 50 new products and solutions. This was our largest channel event of the past four years, attracting more than 1,500 of our top partners from around the world. It has sparked strong energy and momentum across our sales teams, and our partners could see the significant progress we are making in our key growth areas. The benefit of our acquisition of Poly was one of our key areas of focus at the conference. Hybrid work is a long-term secular trend that we believe will continue to create attractive growth opportunities. We showed our partners how we are leveraging our combined hybrid system portfolio to create new solutions for customers. A great example is our new Poly VideoOS operating system, which uses AI-driven speaker tracking and auto-framing to enable better remote collaboration. We also showcased the progress we are making in workforce services and solutions, including the launch of HP Wolf Protect and Trace. This is the world's first digital service capable of remotely locating, locking, and erasing a PC, even if it is turned off or offline. We unveiled new advanced computing solutions through our ZBook line, including specific offerings designed for data science, AI, and machine learning applications. Let me now give you some more color on what we saw this quarter in each business. Looking first at the market level, global economic uncertainty remains elevated. The macro environment is challenging across most geographies. We continue to see cautious consumer discretionary spending, while enterprises are delaying capital investments. With that as a context, Personal Systems revenue was $8.2 billion. That's down 29%, or 25% in constant currency. Like last quarter, we estimate that the sell out to customers exceeded sell-in to the channel, which means that end user demand was stronger than revenue shipments. This helped us further reduce our channel inventory. There are still pockets where we need to improve, but we are making good progress as per our plan. Our PS operating margin was 5.4%, in line with our expectations. PS margins remained flat sequentially, reflecting our disciplined mix strategy and cost reductions in a competitive pricing environment. We delivered solid PS services growth, with particularly strong performance in digital services. We also continued to improve our execution. Our teams are showing a relentless drive to win in the market. We gained PC share in calendar Q1, both year-over-year and quarter-over-quarter. We are not simply gaining share for the sake of share. We are gaining in more profitable areas, such as commercial, where we now have the number one position and gained 2.5 share points year-over-year. We will keep acting with urgency to build on this momentum while improving our results in segments like premium and gaming. While the broader gaming market is currently challenged, it remains a massive long-term opportunity where we continue to invest. This quarter, we launched a wide range of OMEN and Victus gaming innovation, incorporating the latest NVIDIA RTX graphics technology. We're equally focused on the opportunities generative AI is starting to create for our PS business. We are actively working with our major software and silicon partners to engineer new architectures that will integrate AI applications into everyday use cases. This is a very exciting opportunity. In the same way the internet age fundamentally changed the way people use computers, I believe the age of AI will transform the role PCs play in our lives. Turning to Print, revenue was $4.7 billion. That's down 5%, or 2% in constant currency. We continue to see soft demand and aggressive pricing in the consumer print market. This was offset by favorable mix in our office business, including 10% revenue growth in commercial hardware. Supplies performed better than expected, driven by better demand in office. We delivered print operating margin of 19%. This shows the continued benefit of our disciplined cost management, as well as favorable pricing in office as we bring strong innovation to market. For example, this quarter, we launched a new lineup of LaserJet printing systems designed to help businesses maximize productivity. We also continue to make progress rebalancing overall system profitability. Our HP+ and Big Tank printers once again represented more than 50% of our shipments in the quarter. We gained share year-over-year and sequentially in Big Tank. Instant Ink grew revenue and new enrollees. Just as we have done in Personal Systems, we need to improve our execution in Print to gain share. We aim to do this in a thoughtful way, focused on winning in the right areas to drive profitable growth and increasing our mix of profitable customers. Turning to our Industrial segment, Graphics continued to be impacted by macro headwinds.... While flexible packaging and folding cartons are back to growth, this was offset by a decline in labeling. In 3D, the business returned to growth this quarter, with good momentum in both plastics and metals. We recently introduced our new HP Jet Fusion automation solutions, which simplify workflows and reduce costs for high-volume 3D production. Overall, this quarter's results show that we are making progress against our priorities. Yes, we have more work ahead, but we are continually upping our game as we execute our Future Ready plan, and our teams are playing to win. We also continue to win the right way. Next month, we will release our annual sustainable impact report. It will disclose the continued progress we are making towards our climate action, human rights, and digital equity goals. As you know, this work is integrated into how we run the company. It has been an important factor of new sales wins for the past several years, and we see this trend continuing across commercial and consumer segments. Going forward, we are taking a more comprehensive approach to measuring the total business impact of our sustainability initiatives. Specifically, we have adopted the Corporate Knights Sustainable Economy Taxonomy. This is a well-established industry benchmark to measure what's called sustainable revenue. This measure allows us to quantify revenue generated from products and services that meet leading environmental standards and reduce our environmental impact. Using the Corporate Knights methodology, sustainable revenue represented more than 60% of our total revenue in fiscal year 2022. Let me now turn to capital allocation. As we said last quarter, we plan to maintain our current capital allocation approach. We are applying the same framework we have used the last few years. We are committed to returning 100% of free cash flow to shareholders over time, unless opportunities with a better return on investment arise, and as long as our gross leverage ratio remains under 2x EBITDA. As planned, we did not repurchase any shares in Q2, given where we finished the quarter on our gross leverage ratio. Looking ahead, we continue to expect our second half performance to be stronger than the first half. We see this being driven by improved channel inventory and seasonality, primarily in personal systems, as well as the positive impact of our cost savings measures. Entering the second half of the year, we believe we have full line of sight to deliver on our structural cost reduction goal for fiscal year 2023. We remain focused on optimizing our portfolio. We have talked before about creating a simpler, more focused company. There are many ways to deliver on this, such as reducing our number of SKUs, rationalizing our portfolio, or trimming our various lines of business. We will continue to approach this work in a way that enables us to best meet customer needs while creating value for our shareholders. We are also capitalizing on infrastructure investments to become a more digital company. This is driving greater speed and efficiency across our operations while enabling new value propositions for customers as we expand our services and subscription offerings. To sum up, we are confident in our Future Ready plan. We strongly believe we have the right strategy and team in place to deliver on our priorities and drive long-term sustainable growth. Our continued execution of our plan will allow us to emerge stronger as the market improves. Let me now hand the call over to Marie to talk more about our financials and outlook. Thank you. Good afternoon, everyone. We delivered solid financial results in Q2 against the backdrop of a tough macroeconomic environment. We generated sequential growth in non-GAAP operating profit and margin, non-GAAP EPS, and free cash flow. Non-GAAP EPS was at the higher end of our guidance range, while free cash flow was better than we expected. We delivered these results by remaining focused on prudently managing costs and optimizing our cost structure further under our Future Ready plan. At the same time, we prioritized strategic investments that will help drive future growth when the macroeconomy recovers. We remain focused on what we can control in the current environment, which enabled us to deliver on our commitments for Q2. Let's take a closer look at the details of the quarter. Net revenue was $12.9 billion in the quarter, down 22% nominally and 18% in constant currency, driven by the declines across each of our regions. In constant currency, Americas declined 21%, EMEA declined 22%, and APJ declined 7%. Gross margin was 22.7% in the quarter, up 2.5 points year-on-year, primarily due to mix shift to print and lower commodity costs and personal systems, partially offset by currency and competitive pricing, particularly in consumer print. non-GAAP operating expenses were $1.8 billion or 14% of revenue. The decrease in operating expenses was driven primarily by rigorous cost management, including future-ready structural cost savings and lower variable comp, partially offset by the Poly acquisition. Recall last year, we provided aid related to the war in Ukraine. non-GAAP operating profit was $1.1 billion, down 22.4%. non-GAAP net OI&E expense was $172 million, relatively flat sequentially and up year-over-year, primarily due to higher interest expense, driven by an increase in both debt outstanding and interest rates, as well as higher factoring expenses. non-GAAP diluted net earnings per share decreased $0.28 or 26% to $0.80, with a diluted share count of approximately 1 billion shares. non-GAAP diluted net earnings per share excludes a net benefit totaling $269 million, primarily related to restructuring and other charges, amortization of intangibles, and acquisition and divestiture-related charges, more than offset by other tax adjustments and non-operating retirement-related credits. As a result, Q2 GAAP diluted net earnings per share was $1.07, mostly due to one-time non-cash tax benefits related to tax planning. Let's turn to segment performance. In Q2, Personal Systems revenue was $8.2 billion, down 29% or 25% in constant currency. Total units were down 28%, with declines in both consumer and commercial, driven by weaker economic activity as customers in both market segments were more cautious with spending. Despite this, we improved our overall market share in calendar Q1 by 1.3 points year-over-year, driven by gains in the commercial market, where we improved our share by 2.5 points. Improved market share contributed to commercial, representing greater than 70% of our revenue mix for the quarter, while constituting about 63% of our PC unit mix. We continued to make solid progress on reducing our channel inventory levels sequentially, but levels remain slightly elevated for us and across the industry. As a result, we continued to see aggressive pricing in the quarter. We estimate sell out declined less than sell-in during Q2, which means that end-user demand was stronger than sell-in shipments. Drilling into the details, consumer revenue was down 39% and commercial was down 24%. Lower volumes, FX, and increased promotional pricing remained headwinds, partially offset by contributions from hybrid systems revenue. We increased our market share in high-value, more profitable segments, including commercial and premium notebooks. Our strategy remains focused on driving profitable share growth. Personal Systems delivered almost $450 million of operating profit with operating margins of 5.4%. Our margin declined 1.5 points year-over-year, primarily due to currency, increased pricing competition, and the higher OpEx due to the Poly acquisition. This was partially offset by lower costs, including commodity costs and structural cost savings and services mix. In print, our results reflect our focus on key initiatives and improving execution within the context of a softer print market. In Q2, total print revenue was $4.7 billion, down 5% nominally or 2% in constant currency. The decline was driven mostly by lower consumer hardware and lower supplies revenue and currency. Hardware revenue was down about $100 million, driven by lower volumes and competitive pricing actions in consumer, partially offset by an increase in commercial hardware revenue. Industrial graphics revenue declined, reflecting continued demand weakness in the enterprise space. Total hardware units decreased 4%, driven by market share loss and soft home printer demand. By customer segment, commercial revenue increased 5% or 8% in constant currency, with units roughly flat. Consumer revenue decreased 19% or down 15% in constant currency, with units down 5%. ASPs were mixed. Favorable mix shift towards commercial helped to offset promotional pricing and incremental price reductions in consumer across multiple geographies to remain competitive. Supplies revenue was $3 billion, declining 4% nominally and 3% in constant currency, better than expected. The decline was driven primarily by lower usage, as expected, as home printing normalizes further, a lower installed base, and a gradual recovery in commercial. This was partially offset by favorable pricing actions last year and Lunar New Year timing, as well as continued market share gains. Print operating profit was approximately $900 million, down 5% year-on-year, and operating margin was 19%. Operating margin decreased 0.1 points, driven by promotional pricing, higher commodity costs, and unfavorable currency, partially offset by cost improvements and pricing actions. The cost improvements were largely due to lower variable comp and transformation plan-related savings. Our Future Ready transformation continues to build on our strong start through the first half of FY '23, and we remain on track to deliver at least 40% of structural run rate savings of at least $1.4 billion in FY '23. We continue to see significant opportunities to drive further structural cost reductions across our business. Let me update you on our progress in Q2. We further enhanced our digital capabilities, driving additional automation and process improvements. In our workforce solutions and services business, we harvested more proactive data insights from more connected devices with our enhanced diagnostic tools that drove repair cost efficiencies. In our supply chain, we delivered significant improvements in reducing portfolio complexity, improving continuity of supply, and increasing our forecast accuracy to facilitate material cost and profit improvements. We saw further opportunities to drive structural cost reductions through headcount reductions and driving efficiencies in our core businesses. In Print, we focused on platform consolidations and roadmap reductions in our large format business. Looking ahead, we see potentially significant and incremental opportunities to leverage AI and generative AI to positively impact both our products and solutions and how we operate. We are actively exploring opportunities, such as expanding our product portfolio to include a new category of high-performance PCs, accelerating software development productivity, and enhancing the customer service experience to drive higher value offers while optimizing pricing. Shifting to cash flow and capital allocation. Q2 cash flow from operations was solid at $0.6 billion, and free cash flow of $0.5 billion was better than expected. Free cash flow results benefited from better purchasing linearity. The cash conversion cycle was -26 days in the quarter. This improved four days sequentially, primarily due to days payable increasing 10 days, more than offsetting an increase in DSI. While we decreased our inventory by $0.1 billion sequentially in Q2, the upward pressure on days inventory was driven by strategic buys, increased sea transit mix, and a change in business mix. We have more opportunity to improve our core inventory turns and are focused on doing that. When it is economic to do so, we intend to continue to drive value via strategic buys or more sea transit, both of which would result in carrying more inventory. In Q2, we returned approximately $260 million to shareholders via cash dividends. Given where we finished the quarter on our debt to EBITDA ratio, we did not repurchase any shares in the quarter consistent with our outlook. We remain committed to our capital allocation strategy longer term, but near term, we'll continue to manage our leverage profile prudently and maintain an investment-grade credit rating in the current challenging environment. Looking forward to Q3 and the rest of FY 2023, we expect the macro environment will remain challenged, and we will remain focused on rationalizing our cost structure further while continuing to invest in our growth businesses. In particular, keep the following in mind related to our overall financial outlook. We are narrowing our FY 2023 non-GAAP EPS outlook range, reflecting greater visibility into the potential range of outcomes for H2 2023. We still expect OpEx, excluding Poly, will be down year-over-year for FY 2023. For Personal Systems, we expect our and the industry's channel inventory will normalize in Q3, and the back half of the year will be seasonally stronger from an end user demand perspective. We expect Personal Systems margins in Q3 to be in the mid-range of our 5%-7% long-term target, driven by increased volumes, the continued progress on normalizing CI levels, as well as further cost reductions and efficiencies. For FY 2023, we expect margins to be solidly in our target range, driven by the gradual improvement in PC revenue in the back half of the year and increasing future-ready transformation savings. In Print, we continue to expect Supplies revenue at FY 2023 to decline by a low to mid-single digit in constant currency, with easier year-on-year compares in the back half of the year. We expect Print margins to be above the high end of our 16%-18% target range for H2 2023, driven by disciplined pricing and cost management and continued progress on rebalancing our system profitability. Taking these considerations into account, we are providing the following outlook for Q3 and fiscal year 2023. We expect third quarter non-GAAP diluted net earnings per share to be in the range of $0.81-$0.91, and third quarter GAAP diluted net earnings per share to be in the range of $0.61-$0.71. We expect FY 2023 non-GAAP diluted net earnings per share to be in the range of $3.30-$3.50, and FY 2023 GAAP diluted net earnings per share to be in the range of $2.91 and $3.11. We continue to expect free cash flow to be in the range of $3 billion-$3.5 billion for FY 2023. Now I would like to hand it back to the operator and open the call for your questions. Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your touch tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. To withdraw your question, please press star one again. We also ask that you please limit yourself to one question and a single follow-up. Our first questioner today will be Erik Woodring with Morgan Stanley. Please go ahead. Hey, good afternoon, guys. Thank you for for taking my question, or my questions. Maybe, Enrique, if I start with you, just on some of the PC or Personal Systems commentary you made, can you help us think how you guys are viewing the PC TAM in 2023, why you have confidence in a back half recovery, you know, if you're seeing any signs of end-market demand, and specifically why you think the second half of the year could be above seasonal? Then I have a follow-up. Thanks. Sure. Thank you. Thank you, Erik. Let me start by talking about what we saw during the first half, which really helps to understand our projections for the second half. During the first half, our performance was impacted by the channel reduction that we have been driving. As I said in my prepared remarks, channel inventory continues to be slightly elevated, but we are almost there. What we saw also was that end-user demand was stronger achievement, which is what really enabled us to drive this channel inventory reduction. When we think about the second half, usually, second half end-user demand is stronger than in the first half, mostly in the consumer side and driven by things like back-to-school or the holiday season sales. When we combine both the fact that channel inventory will be normalized, which will help from a shipment perspective and also from a pricing perspective, and we expect to see more normal demand following seasonality pre-COVID, this makes us believe that the second half will be stronger than the first half, as we said during our prepared remarks. Okay, that's helpful. Thank you. Maybe, Marie, you know, I think you just posted your strongest gross margin quarterly gross margin ever, I believe. You know, at the same time, we're seeing declines in PC units, print units, supplies are declining, everything, they're all declining year-over-year. Maybe one, were there any one-time benefits that you saw in the quarter? If not, can you maybe help us understand the most important margin factors this quarter by maybe rank ordering? What was the, you know, most significant tailwind to margin strength? Maybe help us understand what was the most significant headwind? If you could quantify that would be very helpful for us. Thank you. Yeah, sure, Erik, and good afternoon. Let me sort of give you a perspective first on PS, and then I'll sort of flip to print. I mean, on the PS side of the house, I'd say, first of all, definitely we saw the strength in terms of the cost reductions. You know, we started our future-ready transformation program now a couple of quarters ago, and some of that was offset by demand, et cetera, and increased competitive pricing. In addition, we actually saw very strong commercial rates as well. You know, all of that together helped to really contribute to the strong margin performance in PS, and frankly, we expect to see that continue into the back half as well. As we get to the print side of the house, I would say you've seen very robust margins in print, this is really driven by a few factors, everything from the portfolio, strong pricing discipline. We actually saw really favorable pricing in the commercial side. Then once again, just like the PS side of the house, we've had the benefits of cost management coming from the Future Ready transformation program. That's very much on track, Erik. Let me add a comment because there are always things that we could do better, but we are very pleased with the execution of the teams this quarter, both across Personal Systems and Print, and this had a big impact in the results that we have posted. Thank you. Thank you, Erik. Your next question comes from the line of Samik Chatterjee with J.P. Morgan. Please go ahead. Hi. Thanks for taking my questions. I guess if I can start on the print side, you talked about the margin improvement you've seeing there, I'm just wondering, as you're reporting margins that are above your long-term range, it's hard to imagine that you're still seeing any benefit from supply chain constraints. You've done a lot of, sort of, you've taken a lot of actions around improving the upfront profit recognition subscriptions there. As we think about these margins, should we think of them as more sustainable going forward relative to sort of how you probably imagined them 12 months ago? Just more curious about you can sustain these margins. I have a follow-up. Samik, I'd say we're still very much committed to our long-term range of 16%-18%. You know, obviously, we've seen some of the benefits, as you mentioned, from supply chain constraints, et cetera. As I mentioned earlier with Erik, you know, we've had the benefits of the portfolio, the pricing discipline, the cost management. I just add that as we sort of think around the back half and going forward, we do expect to see, you know, some continued pricing normalization. Ultimately, we, you know, supplies revenue will continue to decline, as we've said, low to mid-single digits over time. For those reasons, you know, we expect, you know, that we will stay in that 16%-18% operating range for the long term, and it's the right range for the long term, frankly. Maybe one comment from my side. We manage the businesses to drive operating profit dollars growth. This is really what we are focused, and this is where our strategies are designed for. We provide margins because we think it will help all of you modeling the business and understanding where the business is going to go. Growth in operating profit dollars is the key priority that we have as we manage the businesses. Okay, got it. For my follow-up, it's more of a clarification and maybe a follow-up to Erik's question, partly. When I go back and look at pre-pandemic trends in PS, you've talked about, you've generally done a high single-digit quarter-over-quarter in revenue growth in PS, in the back half in both the quarters. Are you basically implying that maybe 3Q is a bit below seasonal, and then you are above seasonal in 4Q, just as you sort of get through all the inventory digestion in 3Q itself? Is that how should we reading into your guidance? Thank you. Maybe I'll take that one there. What we expect is that PS Q3 revenue is expected to be in the high single digits sequentially. We're getting back to what you typically see from a seasonality perspective. Q4, obviously, we'll see greater volumes, as Enrique pointed out, because that's our typical holiday season as well. I think the way to think about it is we're starting to see more of the normalized seasonality trends return back. Okay, good. Thank you. Your next question comes from the line of Toni Sacconaghi with Bernstein. Please go ahead. Yes, thank you for taking my question. I'm just wondering if you can comment on OpEx and SG&A sequentially from Q1 to Q2, what the forces at work were there, and how we think about the trajectory of operating expense over the course of the year. Do you expect most of the savings from your restructuring actions to actually help OpEx, or will we see that more on the gross margin line? I have a follow-up, please. Hey, Toni, good afternoon. Good to hear from you. Maybe I'll start out with the back half of the year first. We do expect OpEx to be up in the back half, and, you know, that's because it's, you know, going to be driving both our contribution to some of the growth and investments that we're doing in our growth areas and also in our people. But in terms of where the savings are going, they're going to both cost of sales and OpEx. As you look at the sequential OpEx, you asked me about sequential and year-on-year. Sequentially, we did see an increase, and that was primarily due to some external funding that we had in R&D that we received in the quarter. We had some incremental investments, we had some unfavorable currency and bad debt. Obviously, that was offset by Future Ready savings and expenses. On year-on-year, you did see a decline. That was due to expense management, the work we've done around Future Ready, and last year, we did have some one-time contributions for aid relief in the Ukraine. That's how to think about OpEx. Obviously, Future Ready, you know, we're pleased with our performance so far, and we're looking at, you know, new programs as the program continues to mature. Essentially, it's both cost of sales and OpEx. We are on track to, you know, to achieve the numbers that we talked about earlier. Thank you. If you could just clarify, when you say that OpEx will be up in the second half, is that from Q2 levels or in absolute dollars? Is that how you're thinking about? Just my follow-up is, maybe you can provide a bridge from EPS to free cash flow or from net income to free cash flow. I think your net income is going to be about $3.3 billion at the midpoint of your guide. You have restructuring charges of $400 million. I would imagine if your PC business is continuing to decline, that working capital will actually be a headwind on free cash flow. How do we get to your free cash flow range if we start from net income? What are the puts and takes, please? Thank you. Yeah, no, maybe I'll start on free cash flow, then I'll go back and answer your question on OpEx. In terms of free cash flow, Toni, let me start out by saying that obviously you saw the results in the quarter, and certainly they're better than expected. As you know, Enrique commented here a moment ago, the sequential growth in personal systems is really driven by that negative cash conversion cycle. That's a very important factor as we think about the second half. Obviously, this is going to drive a material improvement in CCC in terms of the actual business mix. As Enrique said, just with the second half, PS will have a substantially stronger, you know, Q3 and then ensuing Q4, and that will obviously drive the cash flow as well. I'll just, you know, might add, as I said in the last quarter, I think in prepared remarks, you know, we're also looking at capacity for strategic buys and sea shipments. You know, we're going to make sure that we may not see a material improvement in inventory just due to that. In terms of OpEx itself, we do expect to see an increase in the second half. As I mentioned earlier, Toni, some of that's because we're investing in some of the growth initiatives from our future-ready savings, and some of it's the investment we're making in people. You know, just a reminder that year-over-year, we still expect OpEx to be down. You know, if you think about the back half of last year, we did take some fairly significant actions. Just keep that in mind when you think about the back half compares as well. Thank you. Your next question comes from the line of Shannon Cross with Credit Suisse. Please go ahead. Shannon, you might be on mute. I was on mute. I'm so sorry. Thank you. Thank you so much for taking my questions. I'm curious, you know, the AI PC commentary, can you flesh that out a bit in terms of where you see the opportunity, you know, timing? I guess I'm a little concerned that, you know, people right now have X amount of IT dollars to spend, and obviously there's a big sucking sound coming out of all of the AI initiatives. you know, how do you see your PC offerings fit in, and, should we expect to see some benefit? I have a follow-up. Sure. Let me start by saying that we are really excited about the opportunity that this is going to bring because we really think it's an opportunity to redefine what PCs are, redesign the value that PCs bring, and be a big, big driver of refresh, both in the commercial but also in the consumer space. What we are working on is to build AI capabilities in the PC, so consumers or professionals will be able to run AI applications at the edge and will not have to run them on the cloud. The benefit this will bring is that if you're a small company and you want to use some of your private data, your confidential data, in an AI application, you will not have to upload it. You will be able to run it locally. Also, there will be advantages in cost and advantages in latency. What this requires is a new architecture of PCs that combine current processors with AI processors or GPUs. This is the work that we are doing with the key silicon providers to make sure that their new designs are integrated into our PCs and really help to drive this new value. It's going to be a significant change. Customers will start seeing some of these solutions available in 2024, about 12 months, 24 months, 20 months from now, and it's gonna be a huge opportunity to really bring energy to the category. Okay. That's helpful. In terms of the printing business, I know there's been talk about moving more to subscriptions, and, you know, you obviously are doing it for Ink, but then to start adding in hardware. I'm wondering, and maybe even talk about, you know, PCs as a service too, but I'm just curious how we should think about, as you consolidate your SKUs, how you're thinking about, you know, new, more recurring revenue business models. As we have said before, growing our subscription business is one of the priorities that we have. Over time, we want to offer the majority of our portfolio as a subscription. As you said, we started offering Ink. We have extended into toner. We are offering now also a paper subscription that has been growing very fast during the last quarters. During this year, we will start introducing the first printers as a subscription. We will start by offering that to customers that will be already in the program. We think this is really important because enables us to capture more value per customer. We do that because we offer a stronger value proposition. NPS is higher in subscription models. We really see this as an opportunity to grow and expand our businesses in the future. Thank you. Your next question comes from the line of Michael Ng with Goldman Sachs. Please go ahead. Hey, good afternoon. Thank you very much for the question. It was encouraging to hear about the continued expectation for the normalization of PC channel inventory next quarter. I was just wondering if you could talk a little bit about whether you expect sell-in to also return to growth as we approach, you know, latter part of the fiscal year. You know, what do you expect to happen from a pricing perspective, both, you know, from an industry perspective and then also for HP? Thank you. Yes, let me take the question, and maybe Marie wants to complement. From a channel inventory perspective, we expect it to be normalized in Q3, and exit Q3 with channel at normalized levels. What this will mean is, especially in consumer, where during the first half, including Q2, there have been significant promotional activity, this will have a positive impact on pricing, since those promotions will not be necessary anymore. As I said before, what we also expect is that end user demand, so what customers will really be buying, to be stronger in the second half than in the first half, following normal seasonality. From a revenue perspective, what this will imply is that second half will grow versus the first half, which will have a significant impact on free cash flow, as Marie was saying before, and is one of the key drivers of the free cash flow generation that we expect to see in the second half. I think you said it all, Enrique. Thank you. Great. Excellent. Thank you very much for that, Enrique. Just as a quick follow-up, I was just wondering if you could update us on your industry PC sell-in expectations for this year, and any comments you can make about, you know, the new size of the install base relative to pre-pandemic levels. Thank you. Sure. We have not significantly changed the expectations that we have in terms of the selling size of PC market this year. We continue to believe that it will be in the 250 to 260 million dollar range, million unit range, very similar to what it was in 2019, pre-COVID. We also think that the market is going to grow beyond that. We think that the fact that the install base is bigger than it used to be, the new applications that we see, especially driven by hybrid work, that requires better cameras, better audio, better systems, are going to be all positive drivers. In 2024 and beyond, we expect to see growth. Specifically, what we expect to see in 2024 and 2025 is something that we are working on that, and we will be sharing the details in, during the next quarter. Excellent. Thank you for all the thoughts, Enrique. I really appreciate it. Thank you. Your next question comes from the line of Wamsi Mohan with Bank of America. Please go ahead. Yes, thank you. You mentioned strategic buys a couple of times. I was wondering if you could talk about the component pricing environment for you and where you're specifically thinking about strategic buys. I have a follow-up. Yeah. Hey, Wamsi, it's Marie. Look, I think as we said last quarter, you know, even though we're focused on driving inventory declines operationally, we said we'd take advantage of strategic buys and frankly, lower sea shipments, you know, where it made economic sense. You know, we have continued to do so, and we will continue to do that, you know, in the back half of the year. I think your second part of your question was around commodities and what the outlook is on commodities. I just said for PS, you know, we do expect to see declines in sequentially into Q3. Q4, slightly different situation because, you know, we expect, as Enrique said earlier, there's going to be a bit of a demand recovery. Plus, you know, coupled with some of the comments you're seeing from commodity suppliers about potentially scaling back on production, you know, that's likely to result in some price increases in the basket of commodities. That's how we're looking at commodities in terms of the back half of the year. Let me reinforce the comment that Marie just made. Operationally, we are going to be driving HOI down because as we have said before, we increased HOIs during the pandemic. We think we can operate with lower levels of HOI. At the same time, if we see opportunities to do strategic buys or to increase the amount of product that we send by boat, which has lower cost, is something that we will do, even if it has some implications in terms of HOI, because they both have good financial return to the company, and they are both good decisions. This is something that we manage very carefully, but if we do it's because we really see the economic value behind those decisions. I'll just add to Enrique's comments, that all of that is reflected in our guide as well, too, Wamsi. Okay, thanks for that. As a follow-up, clearly, you mentioned this promotional pricing in PCs. How has the elasticity of demand responds to that promotional activity? As you think about the back half of the fiscal year, is that increase in PC growth largely coming from consumer or commercial? What kind of impact do you expect on margins? Thank you. The impact of pricing that I was mentioning before was mostly in consumer, where we saw the need to drive more promotional activities. As we look at the second half, we expect consumer pricing to slightly improve as the situation will normalize from an inventory perspective, we expect to see stability in prices on the commercial side. Yeah, I'd say just from a guide perspective, you know, if you look at PS, you know, our Q3, you know, Op Margin is in the range of 5%-7%. It incorporates, you know, what Enrique said, and plus, just to reiterate that, you know, we see very strong commercial margin rates right now, too, as well. Thank you so much. Your next question comes from the line of Amit Daryanani with Evercore. Please go ahead. Yep, thanks for taking my questions as well. You know, I guess, Enrique, maybe to start with, it's been a fair bit of talk on PCs, but, you know, as you think about the back half performance being better than the first half, can you just touch about how do you think about the print segment stacking up in the back half across both, you know, consumer, commercial, and supplies? It'd be helpful to understand how you think print ramps up in the back half, given the fact you're talking about a better, you know, stronger back half as opposed to that. Let me talk briefly about print. I think during Q2, two things to highlight. Clearly, supplies performed better than we were expecting, and this was mostly driven by stronger demand on the office side. Also, actually, we saw a bigger market in the office space than we were expecting, which is really related to the previous comment. When we project and when we look at the second half, we expect print to continue to perform at similar levels in terms of operating profit that we have seen in the first half. Some of it will be supported by stronger growth in the office side, really leveraging and being driven by the trend that I just explained. I'd just add, with respect to the margin ranges, that we also expect to see the continued impact of cost management from our transformation costs as well, in terms of supporting the margin outlook. Got it. Then, you know, I guess, Marie, when I think about the free cash flow cadence, and, you know, you sort of touched on this earlier, you know, you expect a bigger back half recovery, about $3 billion of free cash flow, I think, in H2, roughly, on better PCs, as you talked about, and a few other things. You know, maybe just talk about do we start to think about as free cash flow improves in the back half and just logically your net leverage comes down, buybacks should resume as well in the back half? Is that the right way to think about the buyback cadence, or is it different things you want to look at when it comes to deciding when to restart the buyback program? No, great question, and thanks for asking, and you're absolutely spot on. You know, we do expect that our leverage, you know, should trend down through the back half of the year. To your point, based on the real strong cash flow that we're going to have, we expect that we will actually have room and actually, you know, repurchase shares in Q4. You're absolutely spot on. Thank you. Perfect. Thank you. Your next question comes from the line of Krish Sankar with TD Cowen. Please go ahead. You might be on mute. Hi, this is Robert Mertens on for Krish. Thank you for taking my question. Just in terms of a quick question back in the channel inventory commentary, I know you talked through it quite a bit, but just in terms of when you would think normalization would happen, is that something during Q3 or something you think could happen exiting the year, this year? Then I have a quick follow-up. It will happen during Q3, so we expect to exit Q3 with normalized channel inventory levels. Great. Got it. That's helpful. Just in terms of looking at the print business, is there any sort of ramifications with the recent merger with Toshiba, how you think about strategically the print market as a whole there? No changes in our approach. I think what this still shows is a need to look for opportunities to find efficiencies, especially given that the print market, the office side, is going to be smaller than what the projections were before COVID. This is what we have been doing during the last multiple quarters. The significant part of the $1.4 billion of savings that are part of our Future Ready plan will help on the print space. Our focus is on driving growth organically. When we announced last quarter that we were creating the workforce solutions and services business, growing our office business contractually, is one of the key priorities for that team, we are making good progress there. Great. All right. Thank you very much. I appreciate it. Thank you. Your next question comes from the line of David Vogt with UBS. Please go ahead. Great. Thank you guys for taking my question, and I apologize if this was asked, my line had a bit of a problem. Maybe, Marie, just a bit of clarification. I think you mentioned that PSG margins would be sort of in the middle of the 5%-7% range in the third quarter. Enrique also mentioned, you know, you would see relatively stronger growth sequentially because of consumer, which I think has a lower segment margin. Can you kind of talk through how do we bridge the gap from, you know, 5.4% in the second quarter to something, you know, notably better in the third quarter? I'll just give you my follow-up while I have you. When I think about the second half of the year, if I think about normal seasonality, typically Q4 is up, you know, mid to high single digits versus 3Q as you build into your fiscal fourth quarter. Is that how we should be thinking about it? Because that would imply that, you know, the PC units would be down, I guess, again, year-over-year, high single digits. Is that kind of how we're thinking about the second half of the year? Thanks. Yeah. Maybe I'll take the second half of the year and then flip to the op margin question. Look, the PS revenues expect to be high single digits going into Q3, and then think about the back half as being seasonally stronger and lining up more with normal seasonality. From an op margin perspective, let me quickly go there. Just to clarify, Q3, we expect to be in the mid of the 5%-7% long-term range, the year in the range. As you go to Q3 to Q4, just take... You know, bear in mind that we're going to have the benefit of commodity cost reductions, cost management, better volumes, the impact of Future Ready, and then we're going to have stronger Q4 volumes, much stronger than Q3, and all of that will help to drive the op margin in Q4. Hopefully that gives you know, sort of some context. That, combined with what I mentioned earlier around the strong commercial margin rates as well. All of that combined will contribute to the strength that we're expecting to see in Q4, and then in terms of just the, you know, PS rate being solidly in the long-term range in the year. Got it. maybe I can slip one into, Is the high end of the guidance contemplated by, you know, the buyback picking up later this year? Is that kind of how we should think about the high end of the full year guide? the high end of the guide, basically, it reflects that you took, you saw we took $0.10 off. Originally, we had the high end actually representing the macro. the high end today just reflects the range of scenarios that we have. look, as always, it's a prudent guide. If we can do better, we absolutely will. Like I said earlier, I think to Amit, you know, we do expect we'll have capacity in Q4, based on the strong you know, free cash flow, and that's when we would expect to buy back shares. Perfect. Thank you, Marie. No worries. Thank you. Let me now take an opportunity to close the call. I wanted to, first of all, thank everybody for joining today and also share that we are currently planning for our next Analyst Day event. We will provide more in-depth information as we close the details of the plan, and we will do that as soon as we have that. Thank you, everybody, for joining. Looking forward to talk to all of you soon. Thank you. This concludes today's conference call. You may now disconnect your lines.