Good afternoon, and welcome to the Third Quarter 2022 Hewlett-Packard Enterprise Earnings Conference Call. My name is Chuck, 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 our conference. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the presentation over to your host for today's call, Mr. Andrew Simanek, Vice President of Investor Relations. Please proceed, sir.

Great. Thank you. Good afternoon, everyone. I'm Andy Simanek, Head of Investor Relations for Hewlett Packard Enterprise. I'd like to welcome you to our fiscal 2022 third quarter earnings conference call with Antonio Neri, HPE's President and Chief Executive Officer; and Tarek Robbiati, HPE's Executive Vice President and Chief Financial Officer. Before handing the call over to Antonio, let me remind you that this call is being webcast. A replay of the webcast will be made available shortly after the call for approximately one year. We posted the press release and the slide presentation accompanying today's earnings release on our HPE Investor Relations webpage at investors.hpe.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 the disclaimers on 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 HPE's filings with the SEC, including its most recent Form 10-K and Form 10-Q. HPE 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 at this time and could differ materially from the amounts ultimately reported in HPE's quarterly report on Form 10-Q for the fiscal quarter ended July 31, 2022. Also, for financial information that has been expressed on a non-GAAP basis, we have provided reconciliations to the comparable GAAP information on our website. Please refer to the tables and slide presentation accompanying today's earnings release on our website for details. Throughout this conference call, all revenue growth rates, unless noted otherwise, are presented on a year-over-year basis and adjusted to exclude the impact of currency. Finally, after Antonio provides his high-level remarks, Tarek will be referencing the slides and our earnings presentation throughout his prepared remarks. As mentioned, the earnings presentation can be found posted to our website and is also embedded within the webcast player for this earnings call. With that, let me turn it over to Antonio.

Well, great. Thank you, Andy, and good afternoon, everyone. Thank you for joining today's call. As we have demonstrated throughout 2022, HPE is delivering for our customers and our shareholders. In the third quarter, HPE grew revenues, increased profits and strengthened gross margins through steady operational focus and execution and despite continued tight supply conditions and unfavorable foreign exchange. In our results, you will see the customer demand for our industry leading portfolio. We continue to accelerate our recurrent revenue this fiscal year, which validates the compelling value proposition we offer our customers, and the long and the strong response to HPE GreenLake, our unified edge-to-cloud as-a-service platform. Customers continue to prioritize investments in IT. They find HPE's technology solutions to be particularly relevant in today's complex macroeconomic environment where technology innovation is critical to accelerate business transformation and deliver important business outcomes. In the third quarter, total HPE revenue increased 4% year-over-year to $7 billion, which was also above the sequential outlook we have given. New orders exceeded our expectations, despite finally starting to decelerate the growth rates, bringing our quarterly exit backlog to another record level. That is significant, considering that for the previous four consecutive quarters, we have grown orders 20% or more year-over-year. We continue to see robust customer demand in the market and a high-quality, durable sales pipeline. Our HPE GreenLake customer base is growing, and our customers are [voting] (ph) with their workloads and data. In Q3, we doubled HPE GreenLake new level of growth year-over-year, and our existing HPE GreenLake customers continue to renew and expand contracts with us. The HPE GreenLake platform has an exabyte of data under management and customers worldwide connect more than 2 million devices to it. The momentum is reflected on annualized revenue run rate up 28% and…

Thank you very much, Antonio. I'll start with a summary of our financial results for the third quarter of fiscal year 2022. As usual, I'll be referencing the slides from our earnings presentation to guide you through our performance. Antonio discussed the key highlights on Slide 1. So, now let me discuss our Q3 performance details, starting with Slide 2. We continue to see healthy demand across our differentiated edge-to-cloud portfolio. As expected, year-over-year order growth rates moderated to down 9% this quarter as we begin to lap challenging compares. As a reminder, orders were up 29% year-over-year in Q3 of fiscal year 2021. We continued to grow our backlog sequentially this quarter to a new record level that is up 96% year-over-year. Our backlog is also expected to be roughly flat next quarter and remains firm with no meaningful cancellations. This maintains our confidence in achieving both our fiscal year 2022 revenue outlook of 3% to 4% growth adjusted for currency and our longer term 2% to 4% revenue CAGR outlook provided at our 2021 Securities Analyst Meeting. In Q3, we delivered revenue of $7 billion, up 4% year-over-year and above our outlook of up low-single-digits sequentially despite an ongoing challenging supply environment and greater currency headwinds. Based on current rates, we now expect currency to be a 2.5-point headwind to revenue for the full year as opposed to the 50 basis points expected at the start of our fiscal year. We continue to be very pleased with the resiliency and expansion of our non-GAAP gross margins, despite the inflationary environment and ongoing supply chain disruptions that are driving up material and logistics costs. We delivered non-GAAP gross margin of 34.7%, up 50 basis points sequentially and flat year-over-year, driven primarily by strong pricing discipline and our continued mix…

We will now begin the question-and-answer session. [Operator Instructions] And the first question will come from Shannon Cross with Credit Suisse. Please go ahead.

Thank you very much. I wanted to talk a bit about the relative strength in your guidance and how you're thinking about your backlog and that, obviously, contrasting that with your competitor that reported last week, who had much more conservative or dire outlook on demand, frankly. So I'm curious, how have you stress tested the backlog? I mean what gives you confidence in coming out and effectively taking up guidance because there's more of a currency hit now. So just any color you can give us maybe even on a geographic basis or a vertical basis in terms of what you're hearing and seeing? Thank you.

Sure. Thank you, Shannon, for the question. I may start, and then Tarek, please feel free to add your comments. I mean, I will say, this quarter, Shannon, was characterized, in my mind, by enduring customer demand. And you see what the backlog is now. I mean, it's a record level, more than 3x normal historical seasonality in some segments. It's just amazing to see the demand momentum, think about the Aruba 20 times historical levels and even Compute five times historical levels. So that's very pleasing. And I think it's a testament of our value proposition, because GreenLake is a pull-through platform for us across every aspect of our portfolio. As we said on the supply chain, the supply chain dynamics remain largely unchanged. But what has changed for us is that over the months and the quarter, we have taken actions to dual source or to steer demand in our products and then obviously implement design changes. I think because of our combination of our portfolio and customer segments, we believe we are very well positioned to move forward through this challenge as we go into next quarter and into 2023. But we expect supply to remain challenged as we get into 2023. That said, I mean, the fact of the matter is that we believe that, ultimately, we're going to see easing signs because of the -- of what we see in the consumer space and even in automotive and industrial, which are a conversation with the suppliers as they start thinking now how to balance that supplier substrate and then obviously, enterprise is well positioned. In terms of clearing the backlog, this is going to still take quite a bit of time, and that's a good news for us, because it gave us momentum in Q4 in 2023, which is great because remember, two things have happened in that backlog. Number one is price for a strong gross margin as Tarek just went through. So in many ways, it's protected for that gross margin. And number two, we have not seen any meaningful cancellation of all.

Yes. Shannon, if I can add on a couple of comments. What we're doing is we are engineering new solutions that are less dependent on components that are experiencing shortages. We're steering demand toward those solutions, and this is across every facet of our portfolio. We are also multi-sourcing the most constrained components, and this is helping working through the backlog. But as Antonio said, this will remain a challenged environment into next year. And that is actually for us an opportunity to continue to drive revenue with high-quality margins into fiscal year 2023. I do want to pick up on your point that you made very rightly about the guidance and having absorbed 200 basis points incremental in foreign exchange terms. This is a very important point. 200 extra basis points of headwind is about $580 million of revenue. You multiply this by the OP margin, and you can really look at what impact would that have had on EPS. So we are very pleased with the performance of our business. And the fact that in spite of substantial foreign exchange headwinds, we are able to maintain the revenue guide of 3% to 4% in constant currency, and therefore, our EPS guide as a result. So thanks for pointing that out.

One more thing, Shannon, is for you to also understand is that as we continue to grow the as-a-service component of this, the solutions for storage, compute, private clouds and the like are more standardized, which give us a better predictability on that front. So that will also help us move through this supply tight environment.

Thank you.

Great. Thanks for the question, Shannon. Can we get the next one please operator?

The next question will come from Meta Marshall with Morgan Stanley. Please go ahead.

Great. Maybe building upon that question. The OpEx or kind of your EPS commentary would indicate maybe slightly higher OpEx into Q4, particularly given kind of the gross margin levers that you saw in the last quarter. So you noted some of that is FX adjusted, but I would think that there's kind of an FX tailwind on the OpEx piece. And so I just wanted to get a sense of -- is it -- are you seeing larger than expected expenses and OpEx? Is there less gross margin leverage as maybe we recognize some higher priced inventory? Just anything to note there into Q4 would be helpful. Thanks.

Of course, Meta. Thanks for asking the question. So FX is, obviously, a headwind to revenue because 55% of our revenue in the company is denominated in non-US dollar currencies. But it's -- as you point out, a tailwind to OpEx to some degree. Some of the cost that we incur is therefore lower on a dollar basis. Net-net FX is a headwind to operating profit and EPS. And so we started our cost containment in the middle of the pandemic, as you may recall, in April, May 2020. And we stay disciplined on OpEx moving forward. And this is shown to you by our gross and operating margin performance. We feel comfortable about our gross margin trend, and we believe per my script, that there is further opportunity to extract operating leverage in Q4 and beyond, thanks to the growth in high margin areas of our portfolio such as the edge. I feel pretty comfortable about the situation. If you look at our gross margins, to add more color, they're up 50 basis points sequentially and flat year-on-year. And this is in spite of an inflationary environment that would put a lot of pressure on supply chain, logistics costs and material costs, obviously, but also on labor costs. So on the whole, look for our margins and where they stand relative to those headwinds that we just discussed.

I will admit a couple of things. First of all, year-over-year, you see a slight decline in OpEx as a percent of revenue, but that OpEx that we report, obviously, large maturities, R&D and FXD. But when you look at that OpEx as a productivity lever against our orders and what we have done, you can see with the backlog we have, we have improved our productivity particular on the sales force side. And then in R&D, to Tarek's point, we started this program in Q2 2020 at the beginning of the pandemic. In fact, I will say we were the first company to come out with a resource allocation and optimization program that allow us to manage cost in a discipline way that reposition resources in the areas of growth we want to drive going forward. And so Tarek also said, we will continue to see operating leverage as we convert the backlog and we scale that revenue, which obviously, we have a significant backlog. But as a percent of the order momentum, the productivity has significantly improved.

Great. Thanks Meta for the question. Operator, can we go to the next one, please?

The next question will come from Toni Sacconaghi with Bernstein. Please go ahead.

Yes. Thank you for taking the question. I'm wondering, if you could just comment on linearity throughout the quarter in terms of orders and whether you saw any degradation. And then I was hoping you could just maybe help quantify the aggregate backlog because, as you noted, your order compares are very difficult going forward, 20% plus for the last four quarters. So if orders end up being down 10% a year for the next three or four quarters, that's $2.8 billion less in orders. My sense is, you may have $3 billion or $4 billion in incrementally higher backlog than normal. So that would still suggest reported revenue growth could grow. But I'm wondering if you can also just sort of talk to that dynamic of, the tough order comps and likely facing negative order growth and whether the backlog ultimately measures up according to the math that I outlined that should make everyone feel good about continued revenue growth. Thank you.

Sure. So this -- it's a great question, Toni. So first and foremost, I want to point out to you that our -- we don't comment and give a specific figure on the backlog. But suffice is to say that it's close to double what it used to be last year this time of the year. That's the first point to take away, and we're working through it and its firm. There are no meaningful cancellations. So that's a tailwind to revenue generation, and we are executing better and better in our global operations team to convert that backlog into revenues. Orders are there. And they are there when you really look at segment by segment, we give you in our presentation, the detail of the order growth. So you can see the order growth in the Edge, for example, which has been on relentless, we've had seven quarters in a row of substantial order growth at the Edge in double digits. And the same holds true for other parts of our portfolio. The HPC, AI has its own dynamics with futures and a substantial order book north of $3 billion. So demand is not slowing to the point where this affects our fiscal year 2023 guide that we gave you at SAM last year, and we reiterated during the course of this year. We still see continuous demand. Even in Q3, the demand was sustained across the portfolio in Compute, in Storage, in HPC, AI at the Edge. It's probably lower than what it used to be four quarters ago for obvious reasons. These are tough compares. But the way to think about it is that the tide has come up. And maybe now the tide is a little bit catching its breath, but it's still there relative to where we were at the pandemic data point.

I will say, Toni, just to add on that, we use the word steady, because, obviously, you can't use the word growth in the context of the compares here. But steady. Steady, and then within the steadiness, we have growth in some unique segments that continue. And Tarek talked about the Edge, we have a 20 times backlog in that business. And even on Compute, we still have 5 times. So -- and the other thing to remember here is that GreenLake is an accelerator of orders intake, because that creates us momentum in renewing and expanding and cross-selling across the business. So I think the original guidance we gave us at SAM last year, which was 2% to 4% over the long-term period, still absolutely true. And then when we get together at SAM here at the end of October, we're going to tell you what we're going to do specifically for 2023. But I sit here today and I feel pretty good about the momentum we have, because demand is steady, and our strategy is resonating with the pivot to as-a-service.

Thank you.

Perfect. Thanks, Toni. Next question, please.

The next question will come from Tim Long with Barclays. Please, go ahead.

Thank you. Yes, I wanted to get back to the kind of as-a-service and ARR businesses. You guys are sticking to the longer-term guide here, its a little acceleration from what we've seen this past quarter. Could you just kind of dig into that a little bit? What are you seeing that's going to sustain that level of high growth over multiple years of the new programs or new products that are going to maybe transition the model so that we can keep that 25 to – I'm sorry, 35% to 45% growth rate for ARR? Thank you.

Sure. Well, our as-a-service transformation through Edge-To-Cloud platform, GreenLake, is my number one priority and it's central to our strategy to bring that unified hybrid cloud experience that everybody is talking in the market. Ultimately, customers want to consume IT solutions in different ways. And this IT utility model is growing very, very rapidly. And I would argue, we were the first with our strategy. And so we have a little bit of head start here. And you see that in our order momentum, right, year-to-date. We grew the as-a-service bookings by 86%. And so clearly, that gives you the confidence that the 35% to 45% is absolutely achievable. But what it gives me more confidence, honestly, Tim, is the fact that, when I was at Discover just two months ago, and you look at the breadth of our solutions through the platform, and the experience that we provide, whether it's to deploy connectivity anywhere in your enterprise or where to deploy a private cloud that we came out with the new private cloud enterprise solutions, where you can run any type of workload, whether it's virtualized, containerized, or bare-metal, or whether to deploy data solutions to extract value from the data is growing. And that platform today has now more than an exabyte of data under management and 2 million devices under management as well. So our confidence to deliver the 35% to 45% is absolutely there. And remember that, at the last Security Analyst Meeting, we guided by the end of 2024 to have an ARR close to $2.3 billion, and we believe we are on track to do that. Tarek, do you have any comments on that?

I think you said very well, Antonio, we simply emphasize one thing strategically is, clearly, the word is now hybrid. Our customers have spoken, the market has spoken, the world is hybrid. For us to scale an as-a-service business in a hybrid world for any player to do so, you need to build a platform. Without the platform, you cannot scale, durably scale and take advantage of the hybrid world. And when you really look at what that means, it translates into higher margins in this business over time. The margins of this business are getting richer and richer as we add more services onto the platform and more software content onto the offerings. And we've made meaningful progress increasing our software and services mix by six point's year-over-year to the current level of about 64%. And we are targeting over 75% by fiscal year 2024 as we add more and more software content with storage data services such as Zerto, we add more softer content with networking services such as Silver Peak and new workloads. So we believe that our ARR is already well above corporate average gross margins, and we are driving it to even higher levels by adding more and more software, high-value content.

Great. Thank you very much.

Thanks for the question, Tim. Next one, please.

The next question will come from Amit Daryanani with Evercore. Please go ahead.

Thanks for taking my question. I guess, I was hoping you could talk a little bit about the October quarter guide and what you're implying here. I think the implication is margins are going to be up about 100 basis points, if not more sequentially. And Tarek, I know you talked about better mix potentially there. But maybe you can just help us understand how do you think revenues could look like sequentially versus historical seasonality in October? And then as you think about this 100 basis plus margin expansion, on the operating line sequentially, what are the big enablers of that? If you kind of call this out, that would be helpful.

Yeah. Okay. So let me try and break that down for you through the P&L, Amit. We're entering Q4 with, as Antonio said, enduring demand and a record backlog. And yes, there are still uncertainties in supply chain and the macroeconomic environment with FX. In spite of this, we believe we can grow revenue in -- by at least 5% on an as-reported basis. And this reflects above normal seasonality with some supply improvement, but we will still face also a greater currency impact. And so if you take that 5% revenue growth on an as-reported basis and you assume that gross margins will be down modestly quarter-over-quarter, you have to make that assumption because Compute margins will return to more historical ranges. You combine that with the fact that OpEx should be down modestly because of the measures we're taking and the pause we're putting on hiring and expenses that are discretionary in nature, or I&E will probably remain flat to slightly down quarter-on-quarter given the higher interest expense that we are seeing due to interest rates increasing. Tax rate will remain stable. You can assume a 14% effective tax rate as guided at SAM. You take all of that math of revenue, gross margin, OpEx or I&E and tax and you get to the guide that we gave you of $0.52 to $0.60 non-GAAP EPS for Q4 2022.

Perfect. Thank you for running the whole model to what we have here.

Appreciate. Thanks for the question, Amit. Next one please.

Next question will come from Aaron Rakers with Wells Fargo. Please go ahead.

Yea. Thanks for taking the question. I wanted to go back to kind of the operating margin sustainability and particularly around the compute segment. If we look back over the past several quarters, you've seen anywhere from high single-digit to kind of high-teens declines on a unit basis. However, ASPs have been up 10% to 20% year-over-year. So I guess my question is, how are you thinking about the durability of that profitability given that ASP uplift that we've seen over the past several quarters. And can you kind of separate the pricing uplift that you've seen between mix versus the pass-through of increased component pricing over the past few quarters? Thank you.

Yeah. Maybe I'll start and then I'll give it to Tarek. Thank you for the question. I mean, obviously, we are managing our -- the Compute business very different than our competition. And you see that in our operating margin performance, right, 13.3%, which is over 200 basis points year-over-year up. But we always guided you and the rest of the Street on an 11% to 13%. So we expect that over time to return to those levels, somewhere in that range. But at the same time, we continue to be incredible discipline in pricing. And that backlog that we have, which is now five times historical levels has been priced with that in mind, with that pricing discipline. And so that's why it gives us the confidence that as we go through the next handful of quarters here, we continue to see solid performance. But in the end, we will see, obviously, the balance between units and AUPs, because particularly, memory pricing will start taking effect. But at the same time, we are focusing also on profitable growth units in different segments of the market. And one strategy to do so is our GreenLake platform, because we are able to reach different customers with different configs with a margin that's more accretive, particularly because all the GreenLake's deals comes with the attach of Pointnext XOS. And one area you're going to see us also shifting is the software that comes with our compute platform, will be delivered also as a SaaS offering on the GreenLake platform as we have now entered or soon to be entered GEN-11. So, there is that dynamic of unit pricing and then offer configuration with us that we're going to drive through the next generation here. But that 11% to 13% is more reasonable in our mind. And clearly, we are doing so by managing our backlog and new orders intake. Tarek, do you have any comments on that?

Can I just add a little bit more color on the revenue AUP units dynamic here, right? So, I want to flag that our backlog consists of very healthy increases in both units and AUPs, right? The revenue in every quarter is more and more coming from the backlog. And specifically for Q3, regarding units and AUPs, units were down in high-teens because of supply chain tightness, but AUPs rose also in the high-teens because of richer configs. And the pricing actions that we've taken place. So, it remains a very dynamic business to watch for. Antonio flagged the need to monitor RAM prices, which we're doing on a daily basis. And we can be very quick at flipping our pricing strategy the other way should the market realign. But I think the longer-term trend that I would like you to focus on is the richer configs. These are the lead driver and the more structural driver of AUP increases rather than the pricing tools and measures that we can take. And we are very, very pleased overall with the way we're driving price margin units and mix in this compute business. And as Antonio pointed out, at 13.3% OP margins, this is by far the most profitable compute server business in the industry.

Yes. Thank you.

Great. Thanks for the question, Aaron. Next one, please.

Your next question will come from Wamsi Mohan with Bank of America. Please go ahead.

Yes. Thank you so much. Tarek, maybe just to follow-up on that pricing commentary. When you think about the structural versus the cyclical impacts, any way you can parse that on how much of that pricing you're seeing is structural versus cyclical? And as you're talking about the supply improvements, how should we reconcile that with the backlog remaining elevated? If we look into fiscal 2023, we start to see moderation over there in unit growth and AUP soften. Can you just help us think through the impact to cash flows as well? Thank you so much.

Yes. So, it's hard to really parse out what is structural by way of configs and/or pricing related with respect to what drives our overall AUP in the compute business. And the reason for it is, our own actions. We have started to steer the demand towards new configs where we do have the supply and particularly the Gen10 plus servers are very successful in the market today. And these are, by definition, higher config relative to the Gen10. And so, I would say a large chunk of the success that we have there is driven by our own engineering and the steering of the demand to be able to fulfill the orders that we have in the backlog. And then specifically for cash flow, overall, at the company level, the dynamic that you all need to take into account is starting from the revenue growth that we flagged, which would be at least 5% on a revenue basis, reported basis, applying the margins commentary that we discussed, you're going to have a certain amount of cash earnings growth in Q4 sequentially relative to Q3. But the most important driver of free cash flow in Q4 is our cash flow conversion cycle. We already started to see in Q3 as foreshadowed the working capital becoming a tailwind. And in Q4, as we turn through our backlog, and we drive, therefore, higher revenues, we're also going to drive inventory levels down. And our overall cash conversion cycle will move from a positive 18 today to a negative figure, which is favorable to free cash flow generation in Q4. That's the key dynamic that I want you to take away as we work through the inventory, the inventory has peaked in Q3, it will take longer than expected to work through that. But overall, our focus is on managing our cash flow conversion cycle, taking it back down to a negative number, which is good for free cash flow and we're going to start doing so with our team immediately in Q4, and we'll keep it there for the upcoming quarters.

So Wamsi, just a comment on the question around structural and units and the like. We have talked about this now for a number of years, I will say. And every generation that we introduced in the Compute business, call it Gen10, Gen10.5, soon Gen11, you see that, generally speaking, the rule of two-thirds, one-third stays through over time, right? Two-thirds is structural, meaning it's related to the number of options you can attach to the server platform, and that's driven by more memory and more storage and different class of storage because obviously, as you go to NVMe and then go NVMe over Fabrics and others, including SmartNIC, the content of the service becomes richer and richer and therefore, the content of Pointnext OS also becomes richer because now you have different quantities to support. So over time, when I look at the trends, it's still kind of the same two-thirds, one-third. And this business continue to be over $12 billion, no matter how you look at it. But I'm confident, as we go through here with GreenLake, the type of configuration becomes richer as well because the cloud experience that we built around it.

Great. Thanks for the question, Wamsi. Operator, I think we have time for one more, please.

The last question will come from Rod Hall with Goldman Sachs. Please go ahead.

Hi guys. Thanks for the question. Thanks for squeezing me in. I guess most of my questions have been answered. I thought maybe I would ask about financial services. That number has been down the last three quarters. Just curious, whether you guys are seeing anything within that from an origination point of view or anything else that might give us some hint as to what is going on with different -- various parts of that business. We know there are businesses outside of your own that are in there. For comparison, by the way, Dell said, they saw increased originations there because of what they're seeing in the broader macro. And I just wondered kind of whether you had any more color on that.

Yes, certainly. So yes, similarly to our competitors we're seeing originations or what we call financing volume up. It has increased 4% year-over-year. And this is driven by strong performance in GreenLake, but also whatever else we decide to finance in HPFS financial services. So the $13 billion lease portfolio is continuing to produce a substantial amount of profits and the profits come from two sources. One, it's a money-over-money business as all their financial services are, it's about spread and making sure that the spread is unaffected by rising interest rates. This continues unabated. And we also are seeing the second profitable driver of growth in HPFS, which is the fact that in this macroeconomic environment, customers tend to use their equipment for longer, which improves the realization of residual values. And so this is all ticking in the right direction. We're very pleased with this. And if you look back at the quality of the returns from HPFS, it's extremely high. Bad debt has returned to pre-COVID levels, which is remarkable. It shows the resilience of the portfolio and quality of the portfolio. And this is what stands behind a high return on equity of 19.5%, which is up 1.3 points from the prior year, and this is well above my long-term guidance for this business for an ROI of 18% plus and well above pre-pandemic levels. So very happy with the performance of HPFS.

That’s great. Thanks a lot, Tarek. Appreciate it.

Thanks, Rod, for the question. Antonio, maybe I'll turn it over to you for any final remarks. End of Q&A:

Yes. I would just make one point on the last question, which is important that you understand as well. HPFS is very strategic when you pivot to as a service because as the business grows, you're going to manage a lot of assets. And fleet management is an essential component of the strategy. And that gives us a huge advantage when you have an asset life cycle management set of capabilities and scale, because in some cases, customers will say, ' Hey, I'm okay, we're using that solution, and we will have ability to deliver faster for our customers.' So I don't want to lose that point from a strategic perspective. Now just to closing, I know some of you have to go probably to the HPQ call, but I will wrap it up saying we had another solid quarter performance as we have done throughout 2022. I think our focus on the strategy, operational execution is absolutely delivering for shareholders, and that's reflected in our results and guidance. Our pipeline is incredibly strong and our backlog is now record breaking. And that gives us the confidence to deliver against our 2022 commitments and the guide that we just provided today. But what I'm really more pleased about is HPE is becoming more-and-more relevant to our customers because of our approach. And so we have crafted a unique, differentiated strategy that address, what I call, the data first modernization challenges and the opportunity we see in the market, and that's resonated with HPE GreenLake. So very confident in our ability to deliver what we discussed today, in Q4 and into 2023. And we have a very talented management team and 60,000 employees that really driven by this purpose to pivot the company and deliver for our shareholders. So thank you for your time, and we hope to see you at the Security Analyst Meeting in late October. Thank you.

Ladies and gentlemen, this concludes our call for today. Thank you for your participation. You may now disconnect.