Good day, everyone, and welcome to the Third Quarter 2023 HP Inc. Earnings Conference Call. My name is Sarah, and I will 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 Third 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 One 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 spoke last quarter, we said that our second half performance would be stronger than the first half. We outlined a clear plan to drive sequential improvement, and this is exactly what we delivered in Q3. We grew net revenue, non-GAAP operating profit, non-GAAP EPS, and free cash flow quarter-over-quarter in a tough market environment. Our Future Ready plan is enabling continued progress against our long-term growth priorities while driving structural cost savings. Today, I'm going to spend a few minutes recapping Q3. I will then talk about the market dynamics we see in each of our business units, and I will close by sharing my thoughts on the external environment heading into Q4 before handing the call to Marie. Starting with our results, net revenue was $13.2 billion. That's down 10% year-over-year, or 7% in constant currency. Even so, third quarter net revenue was up 2% sequentially, despite macro headwinds continuing to impact demand across the industry. We also made good progress in our key growth areas. While these businesses are not immune to current market challenges, collectively, they delivered solid sequential growth in the quarter. This reflects the power of the portfolio we are building to meet a wider range of customers' needs, and we are continuing to invest in these areas to strengthen our position and accelerate our momentum. We remain on track to deliver at least 40% of our three-year structural cost savings target by the end of this fiscal year. And I want to thank all of our teams for driving disciplined execution and cost management across the business. Because of their work, we delivered non-GAAP EPS of $0.86. This is at the midpoint of our previously provided guidance and was up 9% sequentially. As we reduce our structural costs, it's enabling sustained investment and innovation aligned with our long-term growth priorities. At SIGGRAPH, we launched our new Z4 Rack workstation for data scientists, content creators, and engineers. With the option of our HP Anyware remote computing software, users can access the high-performance power of the Z4 from any device. At Computex, we introduced our next-gen HyperX Cloud III gaming headset, which creates immersive audio experiences for gamers. We unveiled our new Poly Studio video solution for hybrid meeting rooms. It runs on AI-driven software that automatically detects and frames participants to enable a better experience between people in the room and colleagues connecting remotely. We launched HP Site Print, an innovative robotic solution that empowers workers to print the most complex construction site layouts with pinpoint accuracy while achieving ten times the productivity. I am even more excited about the progress we are making with our silicon and software partners to co-engineer new platforms that run generative AI at the edge. As I mentioned last quarter, this is a massive opportunity for PC reinvention. Being able to run AI applications locally enables lower latency, as well as more robust security and privacy protection. I am very pleased with pipeline of innovation our teams are building, and we view this as a significant driver of PC refresh in 2024 and beyond. We will be unveiling a wide range of new products and services at our first-ever HP Imagine event on October fifth. This is a moment for us to showcase innovation across our portfolio, and I invite you all to watch the live stream. Last quarter, we also released our annual Sustainable Impact Report. It outlines the progress we have made against our climate action, human rights, and digital equity goals. We have now reduced our absolute carbon footprint by 18% since 2019, and we achieved our goal to enable better learning outcomes for 100 million people, three years ahead of plan. I hope many of you were able to watch our webcast on these topics earlier this month. This work has a positive impact on our communities and helps us to win business. Let me now turn to our business unit performance. Starting at the macro level, we continue to navigate an uneven environment, including FX headwinds. From a customer segment perspective, the picture is somewhat mixed. We are seeing enterprise spending remain cautious, with the rising cost of capital being a notable factor. The SMB segment is showing resilience, and in consumer, we continue to see softness in discretionary spending. Geographically, we see various dynamics playing out in different parts of the world. Most markets are experiencing some weakness, although at different levels. For example, we saw a downturn in the China market, where demand is not even yet backing the lower GDP recovery. Personal systems revenue was $8.9 billion in the quarter. That's down 11% year-over-year or 8% in constant currency. Even so, we saw a significant improvement this quarter, with PS revenue up 9% sequentially. This reflects back-to-school demand, as well as higher unit volume, resulting in share gains. Our PS operating margin was strong at 6.6%. Operating profit dollars grew sequentially, driven by higher volume, our disciplined cost management, and structural cost reduction. We also gained share in both commercial and consumer, while still focusing on profitable share. Year-over-year, we gained 2.9 share points while retaining our number one position in commercial. Gaming saw a significant recovery with double digits sequential growth, and PS services TCV grew strong double digits sequentially and year-over-year. Turning to print, revenue was $4.3 billion. That's down 7% year-over-year or 5% in constant currency. We continue to see soft demand, particularly in China, as well as aggressive pricing in the consumer print market and delayed enterprise spending in the industrial space. Supplies revenue was roughly flat year-over-year in constant currency, in line with our expectations. We delivered print operating margin of 18.6%. This reflects our disciplined cost management, as well as the work we are doing to rebalance overall system profitability. For example, this quarter, about 60% of our shipped units were HP Plus-enabled or Profit Upfront big tank printers. And Instant Ink once again grew revenue and new enrollees year-over-year. We also see opportunities to improve our print performance. We are specifically focused on regaining profitable share and improving our performance in office through step-up execution. And given the competitive environment in home printing, we need to improve our cost structure to maintain long-term profitability. Turning to our industrial business, the graphics and 3D markets continue to be impacted by macro environment and delayed ordering cycles. That said, they remain important parts of our plan to drive long-term growth and value creation, and we continue to innovate to strengthen our position. I also want to acknowledge the continued progress we're making in our workforce, services, and solutions business. We delivered solid growth in the quarter, both year-over-year and sequentially. We are building a strong funnel as we spend time introducing our newly integrated portfolio of services with customers. We are very encouraged by the opportunities to grow this business moving forward. Overall, Q3 was a solid quarter given current market conditions. Our Future Ready plan is on track. We're investing in innovation and making good progress against our long-term growth priorities, and we are doubling down on execution across every facet of our business. This is important, as we expect the market to remain challenging in Q4. The macro situation is not improving as quickly as anticipated, and while we expect to deliver another quarter of sequential growth, we are moderating our expectations for Q4 and the full year, consistent with the revised market outlook. This outlook is largely driven by the continued aggressive pricing environment in PCs, sluggish demand in China, and enterprise demand softening. Notwithstanding the actions we are taking to mitigate these headwinds, we believe it's prudent to lower our outlook based on near-term market reality. Let me be clear, we will use this moment as an opportunity to double down on the things we can control. We have already begun identifying additional opportunities to further reduce our cost structure, where we believe we can over-deliver on our cost-saving targets. This is certainly not the first time we have had to adapt to market volatility. It's something we have been doing consistently over the past few years. We know how to manage the business through this situation, and we have a strong track record taking actions that protect our profitability and free cash flow, which is what you can continue to expect from us. While we clearly have some additional work to do in the near term, we remain confident in our long-term trajectory. We have consistently said that progress won't always be linear, but we are focused on what we can control and driving disciplined execution to unlock value. We will also continue to execute the capital allocation strategy we have shared previously. 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. I'm looking forward to seeing many of you in Palo Alto in October for our securities analyst meeting. As many of you know, this was an event we hosted each fall prior to 2020. We hosted it virtually in 2021, and it will be great to be back together in person. We will use the meeting to share more details on the progress we are making against our Future Ready plan, including some of the opportunities we see to accelerate our digital transformation and structural cost reduction. We will also highlight exciting innovation across the HP portfolio, and we will talk a lot about the significant long-term opportunities we see to deliver long-term sustainable growth and value creation. With that, let me stop here and turn the call over to Marie to discuss our results and outlook in more detail. Thank you, and good afternoon, everyone. We delivered positive results in Q3 and continued to build on the progress we made during the first half of the year, despite a challenging macro environment. We have increased our non-GAAP operating profit and non-GAAP EPS sequentially over the course of the year, in line with our outlook. In Q3, our personal systems business drove high single-digit sequential revenue growth, which in turn helped drive strong free cash flow performance this quarter. We successfully completed a debt tender exceeding $1.1 billion late in the quarter that reduced our gross leverage ratio as planned. Our Future Ready transformation plan is on track to achieve at least $560 million in gross annual run rate structural cost savings this year. While there are pockets of our business where we are working to improve our execution, we made good progress during the quarter. Now, let's take a closer look at the details of the quarter. Net revenue was $13.2 billion in the quarter, down 10% nominally and 7% in constant currency, driven by the declines across each of our regions. In constant currency, Americas declined 8%, EMEA declined 5%, and APJ declined 9%, driven by weakened demand in China. Gross margin was 21.4% in the quarter, up 1.7 points year-on-year, primarily due to lower component and logistics costs in Personal Systems and favorable mix, partially offset by currency and competitive pricing across both of our businesses. Non-GAAP operating expenses were $1.7 billion or 12.6% of revenue. The increase in operating expenses was driven primarily by the Poly acquisition and investments in growth initiatives, partially offset by disciplined cost management, including Future Ready structural cost savings. Non-GAAP operating profit was $1.2 billion, down 15.1%. Non-GAAP net OI&E expense was $143 million, down sequentially due to lower short-term financing activity and up year-on-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 17 cents or 17% to 86 cents, with a diluted share count of approximately 1 billion shares. Non-GAAP diluted net earnings per share excludes a net expense totaling $93 million, primarily related to restructuring and other charges, amortization of intangibles, acquisition and divestiture-related charges, and other tax adjustments, offset partially by the debt extinguishment benefit and non-operating retirement-related credits. As a result, Q3 GAAP diluted net earnings per share was 76 cents. Now, let's turn to segment performance. In Q3, Personal Systems revenue was $8.9 billion, down 11% or 8% in constant currency. Total units were up 3%. Sequentially, revenue was up 9% and total units were up 21%, with commercial up 17% and consumer up 28%. Improved sequential demand was driven by seasonal strength with back-to-school demand. We also saw continued commercial enterprise softness, driven by cautious spending and delayed purchasing decisions. We improved our overall market share in calendar Q2 on both a year-over-year and sequential basis, driven by gains in both commercial and consumer markets. We continued to see commercial representing approximately 70% of our revenue mix for the quarter. Our strategy remains focused on driving profitable share growth. Our channel inventory levels are normalizing. However, our estimate is that the industry-wide channel inventory continues to remain elevated. As a consequence, ASP pressures offset volume growth, accounting for year-over-year revenue decline in Personal Systems this quarter. Drilling into the details, consumer revenue was down 12% and commercial was down 11%. Increased competitive and promotional pricing drove ASPs lower, partially offset by contributions from hybrid systems revenue and higher unit volumes resulting in share gains. We increased our market share in higher-value premium categories, including commercial workstations and gaming. Personal Systems delivered almost $600 million of operating profit with operating margins of 6.6%. Our margin declined 0.1 points year-over-year, primarily due to increased pricing competition, currency mix, and higher OpEx due to the Poly acquisition. This was partially offset by lower costs, including commodity costs, structural cost savings, and logistics expense. In Print, our results reflect our continued focus on key initiatives as we navigated the challenges of a softer and increasingly competitive print market. In Q3, total Print revenue was $4.3 billion, down 7% nominally or 5% in constant currency. The decline was driven by soft demand in both consumer and commercial, market share loss, currency, and lower supplies revenue. Hardware revenue was down $256 million, driven by lower volumes, primarily due to China market softness and aggressive pricing competition, as our Japanese competitors have leveraged the weaker yen to their advantage. Total hardware units decreased 19%, driven by softer print demand in both home and commercial. Industrial graphics revenue, particularly hardware, remains pressured by persistent soft enterprise demand, with the greatest impact seen in Europe. By customer segment, commercial revenue decreased 6% or 5% in constant currency, with units down 8%. Consumer revenue decreased 28% or down 26% in constant currency, with units down 20%. ASPs were down year-over-year, driven by the promotional and competitive pricing and currency, offset partially by a favorable mix in both consumer and commercial. Supplies revenue was $2.8 billion, declining 2% nominally and roughly flat in constant currency, in line with expectations. The decline was driven by demand softness, particularly in China, lower usage, and a lower installed base. This was offset partially by pricing actions earlier in the year and share gains in toner. Print operating profit was approximately $800 million, down 12% year-on-year, and operating margin was 18.6%. Operating margin decreased 1.2 points, driven by competitive pricing and unfavorable currency, partially offset by structural cost savings and favorable mix. I would also like to note that we recorded accounting adjustments primarily related to a revenue contract in our Personal Systems segment. This has been reflected in our prior quarter compares, which I just covered. It was not material to any of our previously filed financial statements and does not impact our current quarter results. We continue to make strong progress on our Future Ready transformation in Q3, and we expect to deliver at least 40% of our three-year gross annual structural run rate savings target of $1.4 billion for FY 2023. As I've mentioned previously, we are working on a range of programs, which should enable us to achieve and potentially exceed key milestones for reducing costs across our business. Given the dynamic in Print, we are building the plan to accelerate cost reductions in that business. Let me update you on our progress in Q3. A key pillar of our transformation plan is focused on simplifying our product portfolio, significantly reducing the number of platforms we support to drive agility and operating leverage. We've made great progress in Personal Systems as the actions we've taken have positively impacted our Q3 operating profit rate performance. Specifically, we continue to make great progress standardizing our Personal Systems platforms. At the end of Q3, we were nearly halfway to our goal of reducing our total number of Personal Systems platforms by approximately one-third by the end of FY 2024. In addition, we continue to reduce our commodity complexity, decreasing the number of client SKUs in our Personal Systems portfolio. In addition, we continue to look for new opportunities to reduce our cost structure across the organization. In Q3, for example, we optimized our media spend by consolidating our marketing programs and expanding our in-housing model further. We expect marketing will continue to deliver additional savings in headcount, productivity, and cost optimization as we unlock new digital solutions. We are aggressively pressing forward with our AI agenda to reinvent various functions inside the company to accelerate both our products and productivity. We are enhancing our software coding practices to accelerate code development to improve speed, efficiencies, and quality reviews. We are also leveraging our telemetry data to proactively address customer needs and to provide tailored recommendations and solutions to improve their efficiency and productivity. Shifting to cash flow and capital allocation. Q3 cash flow from operations was solid at $1 billion, and free cash flow was approximately $900 million. The cash conversion cycle was minus 31 days in the quarter. This improved two days year-over-year, primarily due to days of inventory decreasing one day and days payable increasing four days, partially offset by days receivable increasing three days. The sequential growth in Personal Systems has improved the overall cash conversion cycle as expected. Looking ahead to Q4, we expect operational improvements will help drive a sequential increase in free cash flow, including an increase in Personal Systems revenue and an improvement in working capital. In Q3, we returned approximately $260 million to shareholders via cash dividends. In addition, we successfully completed a debt tender during the quarter, retiring greater than $1 billion of debt. Consistent with our outlook, we did not repurchase any shares in the quarter. Looking forward to Q4, we expect a challenging economic climate and continued demand softness will remain headwinds for our business near term. In particular, keep the following in mind related to our overall financial outlook. We still expect operating expenses, excluding Poly, will be down year-over-year for FY 2023. We intend to start managing dilution this quarter as we remain committed to our capital allocation strategy over the long term while maintaining our investment-grade credit rating. For Personal Systems, the PC market size for the second half of calendar year 2023 is smaller versus prior expectations, driven mainly by demand weakness in China. We expect industry CI levels will normalize by the end of Q4, resulting in improving ASPs as the quarter progresses, but by less than initially expected, and that enterprise demand will be softer. We expect Personal Systems margins in Q4 to be at the higher end of our 5% to 7% long-term range, driven by sequential revenue growth, lower commodity costs, and strong structural and operating cost savings. In Print, we expect overall Print revenue will rebound sequentially due to seasonality. We expect Supplies revenue in FY 2023 to decline by a low single digit in constant currency, with easier year-on-year compares in Q4. We expect Print enterprise demand softness, including industrial, which will remain under pressure due to elongated sales cycles. We expect Print margins to be above the high end of our 16% to 18% target range for Q4, driven by disciplined pricing in a competitive environment and cost management that will help to offset softened demand. Taking these considerations into account, we are providing the following outlook for Q4 and fiscal year 2023. We are lowering our FY 2023 non-GAAP EPS outlook range by $0.11 at the midpoint. The primary factors driving our guidance include our revised outlook for Q4 due to the macro challenges I discussed previously, and the effect of the accounting adjustments I referenced earlier, which impacts our H1 2023 non-GAAP EPS by $0.03. We expect fourth quarter non-GAAP diluted net earnings per share to be in the range of $0.85 to $0.97, and fourth quarter GAAP diluted net earnings per share to be in the range of $0.65-$0.77. We expect FY 2023 non-GAAP diluted net earnings per share to be in the range of $3.23 to $3.35. FY 2023 GAAP diluted net earnings per share to be in the range of $2.95-$3.07. We expect free cash flow to be approximately $3 billion for FY 2023, in line with the low end of our prior guidance range of $3 to $3.5 billion. 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 Amit Daryanani with Evercore IS- sorry, Evercore ISI. Your line is open. Yep, good afternoon. Thanks for taking my question. You know, I guess, Enrique, you've talked a fair bit about looking to optimize your cost structure. Can you just talk about what sort of cost savings are you expecting from these initiatives? And, you know, does that suggest that you expect these revenue headwinds that you're seeing right now persist into fiscal 2024 as well? Sure. Thank you for the question. So as we have said before, our goal for the next few years is to reduce our structural cost by $1.4 billion and to achieve 40% of those in fiscal year 2023. And as Marie said in the prepared remarks, we are on track to deliver on those. And you can see the impact of those in the rates of both businesses, Personal Systems and Print, is probably the best way to see the impact of what we are seeing. I think some of the headwinds on the second part of your question about the headwinds, we think that most of the headwinds are temporary and that is more a delay on some of the progress that we were starting to see from a pricing perspective, for example. But nevertheless, we, as we always do, we are going to be looking at accelerating some of the savings that we had in the plan to compensate for them on the short term. In terms of- Got it. Our outlook for fiscal year 2024. Sorry, I will, I will finish. We have our Investor Day in about five weeks from now, and this is when we will be sharing our plans for 2024 and kind of the overall view that we have for, for the company. That's perfect. I'll wait for the analyst day for that one. I guess, Marie, when I think about free cash flow generation, you know, $1.3 billion, give or take, for the year so far, as you think about what you need in Q4 to hit the $3 billion number, can you just talk about how much of that do you think is working capital improvement versus net income? Because it does seem like, you know, a pretty good step up in Q4 to achieve that. So just the levers that enable you to get there would be helpful. Thank you. Sure. No worries, Amit, and good afternoon. So first of all, I'll just start out with sort of unpacking how to think about the free cash flow for Q4. If you take the midpoint of our revised guide, you can see that our net earnings is approximately $3.3 billion. So if you take that $3.3 billion, and then you take off the $400 million of expected restructuring charges, that gets you into the $2.9 billion range. And really the remaining, as you pointed out, Amit, it's really coming from an improvement in CCC. So really, working capital is really one of the key drivers for cash flow in Q4, and that's, you know, very much, you know, it's in line with what actually happened in cash flow in Q3. Your next question comes from the line of Shannon Cross with Credit Suisse. Your line is open. Thank you very much for taking my question. As you look at the, I guess, PC and print business and subscriptions, you've talked about, obviously, subscription ink. You've had a number of different things you're looking at on the print side, and I know you've talked about it, you know, in the future on PCs. I'm just curious, as you're looking at the market, if you're thinking about opportunities going forward, has there been any change in maybe customer buying behavior related to subscriptions? Have you seen any changes in terms of, you know, increased churn or maybe lower churn? I'm just wondering how that model is playing through your product line? A nd then I have a follow-up. Thank you. Hi, Shannon. Thank you. So no big changes in our thinking. As we have shared this quarter, we continue to see growth in the number of enrollees, also in the revenue that we get from our subscription program. We have also continued expansion of our paper program. As we shared a quarter ago, we wanted to expand internationally, and this is what we have done. We are now present in several countries in Europe, and the adoption continues to grow. In terms of churn, no big changes in what we have seen during the last quarters. And then our plan continues to be, as you were outlining, to integrate more and more parts of our portfolio. In the coming months, we will start having the first PC and printer subscription, and we will continue the expansion after that. And as I say- And then- Important to highlight, is gonna become over time a more important part of our business, mostly because it allows us to deliver a better value proposition to our customers. So this is really why not only because of the financials, but also because of the return. And then PS is a critical part of our strategy going forward. Thanks. Then I was wondering, just in with Poly, maybe if you could provide, you know, more sort of insights into what you've seen since the acquisition? I'm curious if there are opportunities. I know AI gets used ad nauseam these days, but, you know, in terms of different ways that we might interact with our computers over time, I'm just wondering how you're seeing that asset, both, you know, since you acquired it and then going forward to the extent you'll talk about it before the Analyst Day? Thank you. Sure. Thank you. So a couple of, a couple of comments. First of all, of course, some of the macro trends that we have seen in the industry and some of the Poly competitors have shared those, those details. The Poly business has been impacted in the short term by a reduction in the term of some of the, of the major markets. At the same time, the reaction from our partners, customers, as I, as I have shared in the past, has been extremely positive. And as you are saying, there is a lot of opportunity to innovate in that space and to deliver a much better value proposition and a much better experience. We all know how painful some of the video conferences are when you have people in the room, people outside, and we just launched a solution using AI, and sorry to use an AI term, where with AI we can manage or produce almost the video conference, the ones who will be talking, frame the different people in the room, and we are seeing really much better experience for both people in the room and people outside the room. And when we will have both Innovation Day and our Investor Day, you will be able to see some of these solutions and see the value that they bring. Thank you. Thank you. Your next question comes from the line of Toni Sacconaghi with Bernstein. Your line is open. Yes, thank you. You talked about printing and the need to really focus on trying to find, you know, incremental cost improvement. And you specifically alluded to that for printing, and I'm wondering if that statement is pointing to the fact that you see something structurally more challenged in printing than you did before? I have a follow-up, please. Sure, thank you. Good question, Tony. So as we, w hat we have seen in printing is that, especially on the home side, we have seen a significant decline of units, and it's in the range of 20%. And this clearly will put more pressure on the print business going forward. It's not a short-term impact. It's really more a medium and long-term impact. And even if, in many cases, the units we have lost are low-end units, which have relatively low value, clearly there is going to be more pressure there. And this is why we mentioned that we are gonna be accelerating some of the cost reduction activities that we had in the plan, especially focused on home, on consumer, where we are seeing this pressure. Things like acceleration of the simplification of the portfolio, acceleration of the business model transformation, growing more in what we call big ink and big toner, are all the different combinations where we are accelerating our plans. Again, we will discuss this more in detail in a few weeks. Thank you. And then if I could just follow up, you know, it sounds like the demand environment is pretty challenging, and the pricing environment is pretty challenging, and yet, you know, the margins that you're experiencing in both businesses and that you're guiding for in Q4 are actually above what your longer term targets are. And so I was wondering if you could reconcile that, and are those targets too low for printing and for PCs? Or what, why in the face of, you know, pricing pressure and volume pressure, are you not seeing margins go down into the range, and what are the trigger points for margins going back down into the range on print and more in the middle of the range on PCs? Hey, Tony, good afternoon. It's Marie. So why don't I go ahead and comment on the margin ranges for both business and sort of unpack some of the drivers there. But first of all, I'd start out by saying you are seeing some of the benefits that we've spoken about today and in prior calls of the Future Ready transformation. You know, as we've said in the past, we do expect to see those savings flow through to both cost of sales and OpEx, and frankly, I think you're seeing the benefits of that in the rate. But, you know, obviously there are some nuances by business, so I'll just unpack it quickly to give you that detail. In terms of personal systems, you know, we are expecting to see quarter on quarter, sequentially, some gradual improvement in pricing as we start to see some of that normalization of CI. So there is a factor of that in the rate as well, combined with the impact of lower commodity costs, and then both structural and operating costs that we spoke about earlier, and obviously that's offset by some of the enterprise softness. With respect to print, you know, it is a combination of both strategy and execution. You know, we've got the portfolio rebalancing, I think we talked a little bit about that earlier with Shannon, plus honestly, pricing discipline, and then, you know, the cost management from our transformation. So it's all those factors combined, but you can see there that certainly cost is a key element. And then I think from a, in terms of the long term, you know, we're still very confident that for print, that, you know, the 16-18... is the right long-term rate, and that's because there are a number of different forcing functions there, particularly as you look at, you know, the guidance that we've given about supplies in terms of the revenue decline there in the low to mid single-digit, and plus a much more competitive sort of pricing environment that we've seen in consumer. And some of that is even evidenced in enterprise more recently. But I think we're overall, you know, confident that the rates are the right rates and the right ranges for us, for both Personal Systems, Print Alternative, Enrique, anything else to add? I mean, no, not much to add, Marie, you covered it well. Maybe the last comment is, as we had mentioned before, we don't manage the businesses for the rates. We manage them for operating profit dollars, and this is really what we care the most. We provide ranges because we know it's important for all of you to be able to model, but our goal is to grow operating profit dollars for the company. Thank you. Thank you. Your next question comes from the line of Samik Chatterjee with J.P. Morgan. Your line is open. Yep. Hi, thanks for taking my question. I guess if I can start off with a question more in relation to the moderation of the sequential improvement into Q4 that you're outlining because of the macro. And maybe if you can flesh out how to think about how much of that impact is volume or unit driven versus a more promotional environment in the segments than you anticipated at this time? Just trying to get a sense of how much of this relates to sub-seasonal PC volume growth versus maybe just a more promotional environment than you were anticipating? And I have a quick follow-up. Thank you. Yeah, perfect. Thank you. And really thank you for the question, because this was one of the most important things we wanted to, to clarify in the call. Let me start by saying that the biggest driver of the change of guide we have made is that we are not expecting PC prices to recover sequentially as much as we were expecting one quarter ago. And this is really driven by what we think is a channel situation at the market level. Because even if we have mostly normalized our channel inventories, our estimate is that the industry continues to have significant channel inventory, and therefore, we will continue... We need to continue to expect aggressive prices, aggressive promotions through Q4. And this is really what is the major driver behind that. There are other changes that maybe, Marie, you want to, to explain as well? Yes, absolutely. So why don't I just give a little bit more context in terms of what Enrique commented on, Samik? I think if you think about the Q4 guide, you know, obviously the macro is in there, and we've talked about that, I think, in our prepared remarks around those headwinds that we've seen, including the sluggish recovery in China. But in addition, and just in terms of Personal Systems, it's really, you know, the way to think about it is the market size and the opportunity, and it's driven by sort of both ASP pressure that we talked about in terms of that CI, and then also the softer demand that we've seen in the enterprise. And then finally, there's also some pressure on the Print business just in terms of the enterprise softness, and that's really in industrial, where we're seeing today just elongated sales cycles due to that, due to that pressure. So let me maybe add two final things. First of all, is even if our expectation is that most of these changes are really temporary, we are not standing still, and this is why we mentioned that we are going to be accelerating some of the future-ready cost reductions to compensate for this. And then to close, I think it's also important to remember that despite of this change, we expect the performance of the company to improve once more sequentially, Q4 to Q3, as we have done Q3 to Q2, and as we did Q2 to Q1. I think that's important to have in mind. Okay. And for my follow-up, if I can just ask, the India market, they have instituted a ban, I think, or proposed a ban since, from October 31st on PC imports. How are you thinking about sort of the implementation of that, or, what are you assuming in your guide relative to that impact? I know it's not a big market overall, but just in terms of what are you assuming and what are you seeing in terms of how to navigate that situation? Thank you. Yes. So we don't think there is going to be much impact of the potential ban in India in the short term. And in the long term, we had already been working for a while to increase our manufacturing capacity in India. You know, in parallel to the ban, they launched also the local production plan, the PLI 2.0 plan. We have applied to participate on that, and we are working with them to ramp our manufacturing capacity there. India is not a huge market, but it's a very important market for us, where we see a lot of long-term potential, and this is why we are reacting to that. And in fact, maybe just to close, only this week, we announced with Jio the launch of the first cloud PC that we have been working with them for a while, which we think is going to, It's a new category of PCs that are going to help us to really accelerate our growth in that country. Okay. Thank you. Thank you. Thanks for the presentations. Your next question comes from the line of Erik Woodring with Morgan Stanley. Your line is open. Great. Thank you for taking my questions this afternoon. Enrique, maybe can you dig into some of the PC channel inventory comments a bit more? Meaning, you know, how should we think about the specific regions where channel inventories might be more elevated than others? Are there any regions where channel inventories have normalized? Maybe how to think about that with traditional PCs versus Chromebooks, if there is any difference. And then ultimately, how that does impact your view on the 2023 PC TAM. I think last quarter you talked about 250to 260 million units. How are you guys thinking about it today? Then I have a follow-up. Thank you. Sure. Lots of questions in the question. I'll try to cover everything. So in terms of channel inventory, we are really pleased with the progress we have made normalizing our inventory. We are almost there, and I say almost because the area where we still have channel inventory is actually what you mentioned about Chromebooks. As you know, Google is going to be increasing the royalty prices in the coming weeks, and therefore, we saw at the very end of the quarter, some increased orders and pull-up demand of customers and partners that wanted to take advantage of lower prices. So we ship those, and this is the area where we still have some high inventory, but for the rest, we are now in a very good, in a good position. In terms of TAM, we have reduced slightly the TAM for fiscal year 2023. Most of the reduction is coming from the new TAM in China. That is really as the market has not grown as much as we were expecting, this has created some impact on the overall TAM. And then we have seen also a slight change between the mix of consumer and commercial, where consumer has been performing better. And especially because of more sluggish demand on the enterprise side, we have seen the commercial projection reducing. Thank you. Super. That's helpful. Thank you very much, Enrique. And then, you know, maybe just to follow up, I wanted to get back to some of your comments on PC pricing. You know, maybe can you just talk about, again, some of those underlying factors in terms of relative to the July quarter, how we should think about the intensity of promotions, mix shift, and ultimately, you know, I interpreted from your comments, we should be thinking about PC ASP growth sequentially, just at a lower rate. I just want to make sure that's the takeaway we should be taking away, from your comments? Thanks so much. So let me start there. So yes, our current assumption is that price ASPs for PCs will grow Q3 to Q4, but the growth will be more moderate than we were expecting a quarter ago. And again, the major driver of this is the fact that at the market level, we continue to see, or our estimate is that channel inventory is higher than what it should be, and therefore, we are going to continue to see pressure from a promotional perspective. There is also an element of mix, since I also mentioned that consumer in Q3, and we're expecting Q4, perform better than expected, and the reverse happen on the commercial side. And as you know, usually ASPs for commercial are better than ASPs for consumer. Now, what I think is important to highlight is our PC business grew from Q3 to Q4. From Q3 to Q2, we expect it to grow also from Q4 to Q3. So the recovery of the business is happening. Super. Thanks so much for the extra color. Thank you. Your next question comes from the line of Sidney Ho with Deutsche Bank. Your line is open. Thank you. I want to ask about the full year EPS guidance. The midpoint is coming down by $0.11, and I assume most of that is coming out of fiscal Q4. Based on your answer to a previous question, is it fair to assume most of that is coming from lower revenue? How big of an impact is lower margin also a factor? And then are there other offsets that we should be thinking about? Let me start talking about Q4, and then I think Marie will talk about the full year. Yeah. So in Q4, as I said before, the majority of the impact comes from the change in the expectation that we have in PC pricing. We expect it to improve Q3 to Q4, but less than we were expecting before, and this has a significant impact on margin. There are other smaller factors, like the size of the market in China, the enterprise performance, where we have seen a slowdown of orders, driven by Industrial Print. That also is a segment where we have seen an impact, but the majority of it comes from the price, the change in price assumptions for PCs. And then Marie, for the full year? Yeah. So I want to just walk you through the full year here, Sidney. So basically, as Enrique said, it's the Q4 is $0.08, and then we had a $0.03 adjustment for an accounting correction in the first half. So really, just in terms of the drivers, I think the right way to unpack it is it's really the PC market size for the second half of calendar 2023 that's smaller than expected. And the industry, you know, CI comments that Enrique talked about. But I think the key is we're going to see those improving ASPs as the quarter progresses, but it's, you know, less than we initially expected. So if you look at that, plus the enterprise demand in PS and Print, that's really what are the drivers of the $0.08 in Q4. Okay, that's helpful. Maybe as a follow-up, last quarter, you guys talked about commodities pricing being a tailwind for you in fiscal Q3, which seems to be the case, but fiscal Q4 could be different. Can you give us an update there? How long do you think those strategic buys that you have done be able to shield you from commodity price increases? Any way you can quantify that, that'll be helpful. Thanks. Sure. So to give you some context there, Sidney, as you rightly said, we have seen the benefit of commodity costs in Q3 across both businesses, frankly, both Personal Systems and Print. You know, there are some unique ICs in Print that are still somewhat in an inflationary state, but overall, you know, the costs have been favorable for commodities in both businesses. We do expect that will carry forward into Q4. So there will be additional, you know, commodity cost declines in Q4 sequentially. You know, in terms of how we're thinking about strategic buys. You know, I would say, I think I've said this in prior calls, you know, we do feel it's really important to be operationally excellent, but frankly, we're going to take advantage of opportunities that make financial sense. So, you know, if there are strategic buys that make, you know, that fit that profile and that character, we'll absolutely take advantage of them. But I think the overall environment is, you know, we're seeing those positive trends, but I'd just add that the favorable trends in CPUs, you know, we're starting to expect to see those to flatten out. Thank you. Your next question comes from the line of David Vogt with UBS. Your line is open. Great. Thank you guys for taking my question. Can I just go back to the margin dynamic, Marie, given all of the moving pieces, particularly around, you know, lower, obviously, PC sales, smaller TAM, and sort of the mix, I guess, away from Chromebooks in the fiscal fourth quarter? I guess I'm still going back to Tony's question. I'm still trying to struggle with how. Let me kind of walk through again, all the different moving factors on why PSG margins are going to be towards the high end, given a, you know, a smaller sort of unit base with, you know, obviously pricing pressure that's leading to maybe a slower uptick in price in the fourth quarter than you had originally expected. And then I have a follow-up. So why don't I walk you through Q3? First, what happened, and then through Q4, 'cause I think that paints the context and how to think about Q4. So if you look at the Q3 rate, which was 66, it was really a cost story, whether we talked about, you know, just the way we manage costs, the results of sort of the structural costs that we've driven through FR, you know, through our Future Ready program, and then I just, you know, spoke about with Sidney, about the commodity costs. So we saw that cost benefit clearly in personal systems in Q3. Much of that is, frankly, going to be a rinse and repeat into Q4, and there's just a couple of additional sort of drivers in there that help to sort of buffer the rate into the higher end of the range. That is, I think what Enrique clearly articulated was that gradual improvement in pricing that we expect to happen Q3, Q4, and that's really due to the stabilization of the CI level. So that's sort of like an additional factor over and above what we had in Q3, and that's really sort of, I think, the best way to think about, the rates, particularly in personal systems, as you, you know, you think about Q4. Then obviously, we've still got underpinning all of that is the enterprise softness, that continues to be out there in the market as well, but, but that's really what's driving it. I hope that provides you some more context. Okay. Okay, thank you. And then on capital allocation, I know you took down some debt in the third quarter, and I think if I heard you correctly, and I jumped on late, I apologize, but it sounds like you're going to restart the buyback in the fourth quarter. I guess from a cadence perspective, does that suggest that you think you'll be under the gross leverage target in fiscal 2024, that you have sort of laid out there, that two turns of gross leverage, given the cost initiatives that you talked about in the prior remarks? We should expect sort of a more consistent capital return going forward, or could we see another situation where maybe there's a bit of a pause if, you know, we hit that gross leverage target or maybe, you know, you know, go above it for a little bit? Well, well, I'll just say that, you know, sort of our strategy remains the same. You know, we intend to, you know, manage our leverage under two, and I'd say we should also look at it over the longer term and not just sort of quarter to quarter. Obviously, we're pleased with where we landed Q3, and, you know, we're slightly under two times debt to EBITDA. And in terms of then how to think about leverage and share repurchasing, just you might have missed the call, so let me just clarify. We said in the call that we expect to start to buy back shares to start to manage dilution in Q4. I think that comment's really important because I'm not sure if you caught the comments on the call, but that's just the sort of how we're thinking about it. And obviously, key to us is the commitment we've made around, you know, returning 100% of our free cash flow to shareholders. So I'll turn it over to Enrique to probably... I know he's got some thoughts around this as well. Yes. I think two, two comments. First is our strategy remains the same, so no change, and I think that's important for, for investors to know. At the same time, the way you ask the question, I think, is the right way to ask it. We are not managing our leverage ratio for one quarter. We need to manage it for the long term, and therefore, we think it's important to, to restart in a prudent way. We are going to restart by compensating quarterly dilution, and this is how we are going to start. And as we will solidify our plans for 2024 and beyond, when we, have conviction that we will be able to maintain the leverage ratio below two, we will accelerate our plans. We are going to restart prudently, which we think, given the environment where we are, is the right thing to do. Great, that's helpful. Thanks for the clarification. Mm-hmm. Our next question comes from the line of Asiya Merchant with Citigroup. Your line is open. Great. Thank you for the opportunity. If you could just unpack a little bit of what's going on on the supply side, given that the print hardware units, I think even on the inkjet side, on the consumer side, are guided down, what gives you some confidence that supplies revenue is, I guess, unchanged here, I think down low digits in, you know, constant currency terms? Thank you. Yeah, I'm happy to. Hi, Asiya. So in terms of supplies, you know, we still do expect to be in the range of low to mid for FY 2023, and there's really two primary drivers. One is the usage trends, and the second is the shared trends. And you know, I would say usage is very much declining in line with what we expected, but what we've seen is that pricing remains resilient. And, you know, another important factor is the fact that our inventory in the multi-tiered ecosystem remains in healthy shape. So just one thing to think about when you do the comps, you know, don't look for the sort of year-on-year, because last quarter we had a relatively easy compare because we had a tough Q4 in 2022. So look over the long term. I think that's the right way to think about supplies. Enrique, if you've got anything else you want to add. Maybe just one, and one additional comment. I think if we think about supplies, there are multiple drivers of supplies performance. One, clearly, the number of units that is being installed, which as I told, I think it was Tony before, this is going to create some pressure as well, as we are saying. On the other side, we also have the levels of price, which is something that has been working for us during the last years, and especially share. And as we have said before, we have been growing our share of supplies during the last quarters. It continued to happen this quarter, and this is also a part of our strategy going forward. Great. And then just on the Japanese competitors, anything, I think there was some comment made on, you know, taking advantage of the yen. I may have misheard that, but if you could just kind of talk to us about the competitive dynamics in print and how you guys are kind of thinking about that over the next couple of quarters? Yes. We have clearly seen an increase of aggressive pricing from some of our Japanese competitors. Of course, if you look at the currency rate between dollar and yen, is at one of the lowest levels it has been in a long time, and this clearly gives them, gives them an advantage. Our strategy has not changed. We think we need to continue to sell positive NPV units, units that will not create unprofitable customers. And this is why in some areas of the segment, like in the low end, where really are not very attractive are unprofitable units, we are losing share because this is not a business that we're going to, that we're going to go after. And based on what we see, we don't think this is going to be changing anytime, anytime soon. This is why we also mentioned that we are going to be accelerating our cost actions in print, both to be more competitive in the short term, but especially also to be able to maintain our profitability, going forward. Thank you. Thank you. I think these were the last question, so let me use this opportunity to close. First of all, I think we delivered a solid quarter in Q3 in a clearly tough environment, where we continued to improve our sequential performance while also continuing to invest in the future. And we—this is really at the core of our Future Ready plan that is enabling to do both savings that we can use to continue to invest, and also to respond to short-term challenges. Then to close, I'm really looking forward to see all of you in person, or most of you in person, on October 10th, here in Palo Alto, when we will be talking about our plan for 2024, innovation and long-term plan. Thank you for joining the call, and looking forward to see all of you in a few weeks from now. Thank you. This concludes today's conference call. We thank you for joining. You may now disconnect your lines.