Good afternoon, and welcome to the Q3 2016 HP Inc. Earnings Conference Call. My name is Austin, and I'll be your conference moderator for today's call. [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, Diana Sroka. Please proceed.

Good afternoon. I'm Diana Sroka, Head of Investor Relations for HP Inc., and I'd like to welcome you to the Fiscal 2016 Third Quarter Earnings Conference Call with Dion Weisler, HP's President and Chief Executive Officer; and Cathie Lesjak, HP's Chief Financial Officer. Before handing the call over to Dion, 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 1 year. We posted the earnings release and the accompanying slide presentation on our Investor Relations web page at www.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 and Form 10-Q. 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 at this time and could differ materially from the amounts ultimately reported on HP's Form 10-Q for the fiscal quarter ended July 31, 2016. 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. And now I will hand it over to Dion.

Thank you, Diana. Good afternoon, everyone, and thank you for joining us today. I'm pleased with the progress we continue to make. This quarter's results are all about focus and execution. We continue to be disciplined to deliver in our core, gain momentum in our growth segments and hit strategic milestones in our future initiatives. Let me start with our overall performance in the third quarter. We achieved all of our financial objectives. We delivered non-GAAP net earnings per share of $0.48, above our previously provided outlook range. We delivered solid free cash flow of $1 billion as a result of strength in Personal Systems and a continued focus on working capital metrics, and we returned nearly $300 million of capital to shareholders through dividends and share repurchases. As we move towards the end of our fiscal year, we are seeing the benefits of the significant productivity initiatives and restructuring actions we put in place at the start of this year. We are on track to implement more than $1 billion of savings, providing us opportunity to invest back into our businesses to drive long-term success. In Q3, our revenue trajectory improved, down less than 1% year-over-year in constant currency, driven by strength in Personal Systems, offset by expected declines in Printing. As we previously said, we believed overall revenue declines would moderate in the second half of the year, and that is exactly what is happening. The PC market improved slightly more than forecasted, and we were well positioned with an innovative product lineup and healthy channel inventory level. We capitalized on market opportunities and gained share at the expense of our competitors, especially in the high-end premium category. The innovation in our portfolio is serving us well. We are building on a rich heritage and delivering experiences that…

Thanks, Dion. Q3 results were largely in line with our expectations. Net revenue was $11.9 billion, down 4% year-over-year as reported or down just 1% in constant currency. Our revenue trajectory improved significantly in the Americas and EMEA, and APJ continued to perform well. Gross margin of 18.3% was down 0.5 points year-over-year, driven by the unfavorable mix shift to Personal Systems and the reduction in supplies, largely due to the impact of the changes in the supplies sales model, partially offset by gross margin expansion across Personal Systems. Not fully evident in the year-over-year compare is the steady progress the teams have made improving our cost structure. Gross margin was down 1.1 points quarter-over-quarter, due primarily to unfavorable mix and competitive pricing in Printing, partially offset by favorable product premium mix in Personal Systems. Non-GAAP operating expenses of $1.1 billion were down 25% year-over-year, primarily in SG&A as we recorded gains from the divestiture of the marketing optimization software assets. Recall that we leverage these latest gains to offset the impact of the reduced supplies into the channel related to the strategic sales model changes. We also achieved year-over-year savings via the previously communicated productivity improvements and restructuring actions. With a net expense of $55 million in OI&E, a non-GAAP tax rate of 21.5% and a diluted share count of approximately 1.7 billion shares, non-GAAP diluted net earnings per share was $0.48. As compared to our previously provided outlook range, we recorded a higher gain from the divestiture as a result of closing more countries in Q3 than expected. The impact of the reduction in supplies revenue into the channel was in line with what we expected. The net of these amounted to about a $0.02 shift into Q3 from what we had forecasted for Q4. Non-GAAP net earnings…

[Operator Instructions] And our first question comes from Steve Milunovich with UBS.

Cathie, the 20.4% printer operating margin, what would that have been without the gains?

So it would've been about 3 points lower, so in line with what we saw in Q1 and Q2. And in fact, the best way to think about the shift from Q4 into Q3, because most of the gain has shown up in Q3, is to think about the halves. So in the first half, we were running in the 17% operating margin rate. And we would expect normalized across both quarters to be roughly in that same zone.

Understood. And you commented a bit on the Four Box Model being a little bit worse but still within your expectations. Could you talk about each of those boxes and what's going on?

So we don't go through each of the boxes in detail. I just want to make sure that you understood the comment. So the comment was that on a year-over-year basis, the Four Box Model showed a decline in supply. And that is roughly minus 3%, minus 4%, again in line with what we saw last quarter as well. What I did then -- what Dion then did say is that while the Four Box Model was down, it was in line with what we had expected, so again giving a proof point to the fact that the model is a good predictor of what the results are going to be.

And our next question comes from Kulbinder Garcha with Crédit Suisse.

Cathie, just going back to the previous one. If the gain was $290 million and your Printing revenues are roughly $4.4 billion, the margin -- the underlying margin would've been more like 14%. Am I doing something wrong?

Well, you didn't take the fact that we told you that we were going to take that in divestiture gains and we were going to reinvest it. We were going to reinvest it in bringing channel inventories down, supplies channel inventories down, over the course of the half by $450 million. And we were also going to increase our marketing investments. So what the real impact is, to Q3, on the upside is that we had the gain offset by half of the investment that we were going to make. But then in Q4, we're going to have the second half of the investment and almost no gain to offset it.

Okay. And so basically, if I understand it correctly, there's no reason after this quarter why you believe, going forward once we pass the next one, why margins in Printing shouldn't be in the normal range we've seen over the last few years. Is that a reasonable assumption?

That's exactly how you should think about it. It's just a shift between quarters. The half is in line with what we would expect. We've taken these gains, and we have -- as we told you we would do on the June 21 call, we have reinvested it back into getting our channel inventories lower for the new model that we're executing on as well as incremental investments we're making in marketing in order to drive better awareness and preference for HP branded supplies.

Okay. And then one final clarification. The supplies revenue base is basically depressed because of this channel inventory clear-up. That's why that normalizes at some point by end of the year.

By the end of 2017, we do expect revenue in constant currency to stabilize. So if you look at the supplies revenue decline, it's down 18% as reported, 13% in constant currency, so about 5 points of currency. And then the supplies actions that we took in Q3 contribute to another about 7 points of supplies decline. And then the remainder is, again, there was a buildup in channel inventory a year ago because we were separating the IT systems and we wanted to make sure we didn't stock out. And so that impact was there, and then also this roughly 3% to 4% decline from the Four Boxes. That makes sense?

Our next question comes from Shannon Cross with Cross Research.

I had a question as we sort of look forward with margins. When we think about Printing margins, I understand the give and takes of what's going on right now. But given what you've seen, the opportunity for incremental restructuring, are you sort of targeting around the 17% operating margin? And sort of similarly, Dion, if you can talk about your margin expectations on the PC side. Because clearly, you've been able to find profitable sales in a relatively challenged market. And then I have a follow-up.

So we don't -- Shannon, we don't have an explicit target for operating margin in Printing. Each quarter it's a combination of obviously the -- what's going to be, ultimately, the demand for supplies, given the new model that we're working on, and then also how many positive NPV units can we actually place. And so one of the things I'll call out -- even though I have said that in the second half I do think that the margins are going to be kind of in that 17% range for Printing. We are significantly, from Q3 to Q4, we are significantly increasing the amount of NPV positive units that we're placing. So that growth in units is well in excess of normal seasonality, and that does put pressure on kind of the bottom line. Certainly when you look at it sequentially, we're offsetting some of that with great cost improvement.

So I would just kind of add to that, Shannon, that the team's incredibly focused on execution. We're taking the cost out of the system so that we can effectively increase our total available market as we go after those NPV positive units. We are leveraging the strongest portfolio we've had in decades. We have real tangible differentiation in security embedded within the products. We have new business models like Instant Ink. And as those costs come out, you've seen over the course of the last 3 quarters the investment that we're making in units. In Q1, if you'll recall, we were down 20% in units. In Q2, we were down 16%. And in Q3, we were down 10%. So a 6-point improvement quarter-over-quarter as those costs come out that we place for units. To answer your second question around PC margins, I would say that our strategy has always been the same here. We're after profitable growth in this business. I think we run a very highly disciplined approach to profitable share expansion. It's about a number of things. It's taking costs out. Costs always have to come out. It's about segmenting the market. It's finding heat in the market today, anticipating where the heat is in the market in the future and skating to the puck and innovating with sprinkles of magic that allow -- enable you to differentiate the product. And so therefore, we choose where we want to play and where we don't want to play. And as a result of that, I think Ron and the team did just an outstanding job this quarter of executing to that strategy. And we yielded sort of the trifecta of growth in revenue, margin expansion and profitable share gain. And I think as a result of that, there's a range of somewhere between 3.5% to 5% that this business will deliver. But what's really important is as revenue declines abate, the negative cash conversion cycle of this business is very attractive.

Great. And just really quickly, Cathie. You mentioned Brexit. I'm curious as to what you're thinking about -- if you've seen any impact from Brexit since the announcement?

Yes. So for Q3, we saw a very, very limited impact from Brexit. And this is largely as a result of the fact that we were largely hedged by the time the Brexit vote actually happened. And so Q3 was really, it was really a nonevent. On a go-forward basis, it's unclear exactly what the impact's going to be. We are definitely seeing, and in some cases, following with our own pricing increases. What's less clear is not so much what the currency impact is and how we adjust to the currency impact, whether it's through hedges or through price increases, it's really what is going to be the impact on demand. What is GDP going to actually do, both in the U.K. and then frankly, if it spreads broader to EMEA. And it's just too early to tell. So we're going to keep, obviously, monitoring this very carefully. And as we get more information and we will share it with you.

Our next question comes from Jim Suva with Citi.

On the earlier prepared remarks, you made, I believe, a comment about some shortages in supplies. Can you help us understand that a little bit? Is that like components like, I don't know, semiconductor chips? Or is it like assembly shortages? Because it just seems like there's a bit of a lack of uncertainty in demand in the environment. And I would think any supplier would be very pleased to supply a big company like HP and give them more than their share of components. So can you help us understand that? And then the other part of the question is, your inventory actually went up quarter-over-quarter and it sounds like you're also saying that you may have to build some more inventory due to these component shortages. Was the inventory build this quarter because of that or are they 2 separate things?

Okay. Let me tackle the first question. I'll get Cathie to tackle the second. With regards to shortages in supplies, I don't believe in Q3 we saw any material shortages that we had to deal with. However, as you know, these are long supply chains, and we are seeing on the horizon some shortages, particularly around the LCDs, DRAM and flash memory. And it's not so much coming from the PC industry. It's more coming from adjacent categories, glass going into televisions, memory going into phones that are likely to double density, which is putting pressure on the overall industry. We're going to leverage the balance sheet in quarter 4 to ensure that we get our unfair share of supply as we move forward but it is something that we're tracking closely.

So Jim, to your point, our suppliers are willing to supply HP, and we're taking advantage of that and the strength of our balance sheet to do that in Q4. The increase in days of inventory quarter-on-quarter, the 3-day increase is normal seasonality. So there's nothing particularly unusual about that, whereas we are calling out specifically the fact that days in inventory -- days of inventory will go up in Q4 more than is typical seasonality because of these incremental buys that we're going to make.

Our next question comes from Simona Jankowski with Goldman Sachs.

Another PC question, which is, can you comment on how sell-in and sell-through were in the quarter? And then looking into the second half, how do you see demand shaping up for the commercial vertical and Windows 10?

So sell-in and sell-through. Sell-in is a function of our revenue, and that's obviously reported. Sell-through and sell-out is in line with our expectations. Channel inventory levels as well as aged inventory levels are well under control as something, as you know, I'm particularly focused on as we operate the Personal Systems business. Broadly speaking, I think the markets will continue to be pressured through the year. We don't broadly disagree with the analysts that predict mid- to high single-digit declines. All -- which will be a little bit worse than calendar quarter 2. However, having said that, I think we have an incredibly strong portfolio of products. Our costs are well under control. And we took a 9-point premium to the market in this quarter in Q3. And so it's that kind of execution, innovation agenda that we have, with the sprinkles of magic that are making a differentiation for our customers is what we're really focused on.

Just to clarify, did you mean that sell-through was above or below sell-in?

We did not channel inventory build last quarter.

Our next question is from Katy Huberty with Morgan Stanley.

There's a little bit of a disconnect between the lowering of the full year EPS guidance and the trifecta that you achieved in PCs and the in-line commentary about printers. So wonder if -- just to start, you can talk about what caused you to believe that the low end of the previous range was more likely? And then I have a follow-up.

Katy, the largest contributor to that was the opportunity to place more incremental NPV-positive printer units. That is what is driving us to the low end. We think that's the exactly right investment to make. And frankly, we could be at the very low end of that if, in fact, we see the Japanese broadly back off of aggressive pricing because that will open up the opportunity. [Audio Gap]

As we see that opportunity as we continue to take costs out of business, we want to invest in the future.

Understood. And then as a follow-up, you mentioned a couple of times both in PCs and printers: device-as-a-service. Is the revenue recognition and accounting impact of those type of deals different than your transactional business? And should we expect, just broadly speaking, any impact to revenue and EPS growth as a result of that go-to-market shift?

So Katy, it's highly dependent on how the deal is structured and whether or not we partner with another company. So if we actually do a device-as-a-service deal with, let's say, Hewlett Packard Enterprise Financial Services, then we don't have real differences in revenue recognition. If we, in fact, hold that same paper ourselves on our books, then yes, there is an impact to revenue recognition. It has -- it's not material at this point in time, but it certainly is, directionally, going to more contractual business. It does -- we'll call it out over time as it becomes material.

And don't forget that 80% of our business is conducted with or through the channel. That's -- probably would be closer to 87% through the end of the year. So in many cases, those deals are structured together with the channel.

And our next question comes from Wamsi Mohan with Bank of America Merrill Lynch.

Cathie, you mentioned larger TAM because of cost reduction ability on the printers because of your ability to place more NPV-positive units. Can you size this increase in addressable market in terms of how much incremental market share you can target? Or maybe just some sense of how that curve looks where, say, the ability to drive first $20 lower cost opens up like 2 points of share and the next $20 maybe opens up another 2 points. What's a way for us to think about this more numerically?

Well, I think the best way to think about it is what we said in the last call. We were going to improve our unit declines from Q1 from minus 20% to Q2 to minus 16%. And we told you that in Q3, we were going to get it to low double-digits, improving over minus 16%. In Q4, you should think about it as another step function down because the opportunity seems to be there. We grew units 6% sequentially in Q3 and we expect to be able to do very well sequentially in Q4. We also saw -- we've seen now market share improvements sequentially the last 2 quarters in Q2 and in Q3. And so those are the types of opportunities that are coming up.

Okay. And a follow-up, just any early thoughts on how we should be thinking about cash conversion cycle heading into next year?

I'm not really prepared to talk about FY '17 just yet. We will have our Security Analyst Meeting and we'll talk a lot about FY '17. But we are very pleased with the progress that we've made from a free cash flow perspective. The cash conversion cycle and the improvement that we've seen in Q3 was a result of kind of broad-based actions that we put in place coming out of Q1 that everybody in this company is very much aware of what free cash flow is and how they can improve it. But it's also, just to give credit where credit's due, we also saw very strong Personal Systems sequential performance, 7.5% growth. And that also contributed pretty significantly to the incremental decline in the cash conversion cycle sequentially.

And our next question comes from Tony Sacconaghi with Bernstein.

I think in your prepared remarks, you had mentioned that you had taken down the supplies channel inventory as anticipated by $225 million, and that you were within your target range for supplies. And can you confirm that? And given that you're going to draw down another $225 million next quarter, will you be below your target range or is that target range dynamic? And when I think about supplies trajectory, I do the same math as you, and on a sell-through basis, it looks like supplies were down about 6% or 6.5%. And last quarter, they were down about 3%. And I think there was inventory build in both Q2 and Q3 last year...

Hey, Tony. One thing at a time please. I cannot take all the questions that you're putting out on the table. So let's start with the very first one around the channel inventory levels. We were within our target levels exiting Q3, and we did the roughly $225 million worth of channel reduction that we told you we would do with the new sales model for supplies. In terms of if we do another $225 million, will we be below our ranges? We will still be within our ranges but obviously at a much lower level within our ranges. The ranges are not dynamic in the sense of we change them every quarter, kind of at the beginning of the quarter. We set our ranges at the beginning of the year. Now there's some different seasonality quarter-to-quarter, and so the ranges can flux a little bit from quarter-to-quarter depending on seasonality. And you see that in Q4 because you've got more holiday, back-to-school type stuff going on. But we should be -- we'll be in very good position when we take another $225 million out of the channel. Okay. Now what was your next question?

Well, just on the dynamic range, though. I thought you had -- when you had your call in June, you had talked about the new omnichannel model and there being a different required inventory level. So that was the reference. Is the -- within your range, that new target range, that is driven by an omnichannel model? Or is that the range that you had talked about in Q2 where you were in line?

So as we are bringing down channel inventory, we have not made the formal change to our channel inventory levels or ranges. We will do that at the beginning of FY '17 once we get through the actions that we're taking.

Okay, clear. Yes. On the follow-up. It looks like, as I think you explained on the call, if you adjust for channel inventory and for currency, it looks like supply sell-through was down 6%, 6.5%. Last quarter, it was down 3%. And I appreciate there may have been some channel build in last Q3 but I think there was in Q2 as well. The growth rates were very, very comparable. And so at least, optically, it doesn't feel like the supplies growth rate on a sell-through basis is getting better. At the margin, it actually looks like it's getting worse. Was there anything anomalous about this quarter or last quarter that would explain that? And again, I know you talked about channel inventory build. But again, looking at the reported numbers, it doesn't look like it was really a material difference between Q2 and Q3 last year.

Right. But last quarter, when we were at about negative 3%, it was adjusting for all of the channel inventory adjustments in the previous year as well as that current quarter. So on a pure apples-to-apples basis, with making all of the same adjustments, currency -- what we call the supplies push-pull or the change in the supplies model and the build in Q3 of '15, which was very significant because of the separation, the model in Q3 says we're down roughly 3% to 4%, which is roughly in line with what we saw last quarter. I also think it is important that our view isn't that it's a linear path from whatever quarter you start out to stabilization. So it's not as if you're going to make progress every single quarter because of the lumpiness with which we place units and didn't place some units at the beginning of the year because there just weren't as many positive NPV units, we are going to see some lumpiness. What's really important is that our Four Box Model is predicting each quarter what we had -- what the results would be and doing it fairly accurately. And so we believe that this model is a good predictor of the future. And it's that model that is ultimately driving our view that there's stabilization in constant currency in supplies revenue by the end of '17.

And our next question comes from Sherri Scribner with Deutsche Bank.

Dion, I just wanted to clarify, in an earlier question I think you suggested that you view the PC market as a little bit worse in calendar 3Q versus 2Q. Did I understand that correctly? Because it seems like your PC business was pretty strong this quarter.

That was a market statement, not a HP statement. So the IDCs and the Gartners of the world predict that calendar quarter 3 will be weaker than calendar quarter 2. What I then went on to say was even in calendar quarter 2 against a better market, we still took a 9-point premium to the market.

Okay. So you do agree with market expectations that 3Q will be slightly worse than 2Q?

Yes, we do.

Okay. And then I just had 2 clarifications. One, it seems like by my math, there's about $5 million of gain left from the sale. Cathie, can you tell me if that's correct? And then also, Cathie, based on your comments for the printer operating margins that suggest margins will be somewhere around the 14% range in the fourth quarter, is that correct?

Sherri, you got both of those data points exactly right.

And our next question comes from Maynard Um with Wells Fargo.

I was wondering if you can walk me through the reiteration of free cash flow. You say you have a higher inventory buy coming in the fourth quarter. If you look at your GAAP EPS, you've taken that down more than non-GAAP EPS for the year. So are those noncash charges? Or should we expect there to be some cash charges beyond the fourth quarter? And I have a follow-up.

So the biggest change to the GAAP outlook is that settlement expense related to the lump-sum offer that we've made to eligible U.S. retirees. So what we did was we've got some U.S. retirees who have chosen to take an annuity in the pension plan. And we went out to them and we offered them a lump-sum buyout. And we got -- we did this about a year ago. We got a fairly good uptick on the ones that are newly eligible. And that has a settlement expense impact of $200 million. That is not a cash impact. And that's the largest change that we made to GAAP versus the changes that we also made on the non-GAAP side. And I'm sorry, I'm not sure I understand the rest of your question.

Well, I was just going through the different puts and takes. If you've got a higher inventory buy coming, are there offsets to that, I guess, to keep that free cash flow number?

So we don't update our free cash flow outlook based on quarterly performance, so we're still in the $2 billion to $2.3 billion, but keep in mind that we've already done $2.2 billion on a year-to-date basis. But in Q4, again, one of the biggest dynamics in Q4, and I can go through all the different puts and takes, but probably the biggest dynamic in Q4 is the fact that the Printing business that has a positive cash conversion cycle is growing sequentially better than normal seasonality. And they declined in -- sequentially in Q3, whereas the Personal Systems business is, in fact, not growing as quickly sequentially and below normal seasonality, and they've got the negative cash conversion cycle. And so it's kind of a double whammy from a cash conversion cycle perspective and cash perspective in Q4. The way we think about the cash conversion cycle is that at the end of Q4, we will have a cash conversion cycle that is several days better than last year's negative 19 days but it will back up from Q3. We don't expect to have another quarter of minus 29 days, again because of this business mix impact and the fact that one of our businesses has a positive cash conversion cycle and is growing. And the one with a negative cash conversion cycle is growing but not as rapidly as it did in Q3.

Okay, great. And then just as a follow-up, on the return of cash to shareholders, you talked about being at or above your target for the full year. Are we to just take that comment literally in terms of you not then repurchasing more shares or being less aggressive in those? Or do you feel like there's opportunity for you to be in the market opportunistically to go well above that 50% to 70% target?

So the comments that we make about the 50% to 75% of our free cash flow are annual comments. And so at this point, given what we've already -- the performance year-to-date in terms of the return of share -- of cash to shareholders as well as the cash flow performance, we expect that we will be at the high end of the 50% to 75% and we may exceed it.

Our next question comes from Aaron Rakers with Stifel.

I just want to ask you -- back again on the component pricing environment. As you look at the trends on a forward basis and you increase your inventory levels, are you factoring in any expectations to the negative from a gross margin perspective from component pricing? And what do one of those trends look like in particular so far?

Aaron, with the leverage of the balance sheet that we are doing and the outlook for pricing, our view is that the component pricing environment doesn't get incrementally more difficult from Q3 to Q4. We're expecting it to be relatively flat with Q3.

And our last question comes from Rod Hall with JPMorgan.

So I wanted to ask again on supply -- this is kind of an esoteric one. But the pound is very weak and I guess, you guys called out that you're going to reprice at some point. And I guess it relates mainly to the U.K. but you can correct that if not. But does that cause people to hoard supplies on printing at all or affect your ability to adjust inventory there? Could you just comment whether that's an issue or not. Or do you have enough transparency into the channel there to avoid that? And then I have a follow-up.

So at this point, we're not seeing that impact. I will tell you that the change in the way we go to market on supplies and the lower channel inventory levels, I think, will certainly prevent some of the significant hoarding or pantry effect, which is a nicer way of saying hoarding that we've seen in the past.

There's, effectively, no incentive for them to do that. That's exactly why we moved to this demand-driven model in this omnichannel world.

Okay. It's just if they anticipate price increases, wouldn't that then drive them to potentially engage the pantry effect, as you say, Cathie? I like that term by the way.

And obviously, we're monitoring that through very carefully watching the channel inventory level. So...

Okay. So you just don't see it...

We won't allow it to happen.

Right. Okay, okay. And then the other thing I wanted to check is that you made a comment about the Chromebook mix a couple of times. And I just wondered if you could give us a little bit more color on that. Do you think that, that mix shift continues, what's driving it? Just help us understand a little bit more what you're seeing there on the enterprise side.

I would say the Chromebook mix is a trend that we do see continuing. It started first in education. I think the chrome have made significant headroom and headway in education. And that is now expanding into some other verticals such as finance and banking. We said a long time ago that we're going to be a multi-OS, multi-architecture organization. So what we need to do is, obviously, establish where the heat is in the market and bring new devices to market. And what we've done with Chromebooks is something a little different to everybody else. We not only have the lower-end cost Chromebooks, but we also have high-end Chromebooks with really attractive Z-hide [ph] ruggedized for education that's helping stabilize some of the pricing. But it is being offset by lower priced Chromebooks that we're delivering as well. So let me thank you all for taking the time to join us on our earnings call here. I'm really confident in our future. We delivered solid progress on our financial commitments. And whilst the markets remain challenged, we know we have more work to do but we're executing to our strategy of core growth and future. We're investing in category-creating opportunities for long-term success. We're almost coming up on the 1-year anniversary; 2 months left in this year to go since the separation. And we're really seeing the value of independence with the ability to run at a greater speed with more agility and more focus. It was absolutely the right thing to do. We're looking forward to seeing all of you at our Security Analyst Meeting on October 13, and thank you again for your attendance.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.