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. [Operator Instructions] 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 web page at investor.hp.com. As always, elements of this presentation are forward-looking and are based on our best view of the world and our businesses as we see them today. For more detailed information, please see disclaimers in the earnings materials relating to forward-looking statements that involve risks, uncertainties and assumptions. For a discussion of some of these risks, uncertainties and assumptions, please refer to HP's SEC reports, including our most recent Form 10-K. HP assumes no obligation and does not intend to update any such forward-looking statements. We also note that the financial information discussed on this call reflects estimates based on information available now and could differ materially from the amounts ultimately reported in HP's SEC filings. During this webcast, unless otherwise specifically noted, all comparisons are year-over-year comparisons with the corresponding year ago period. In addition, unless otherwise noted, references to HP channel inventory refer to Tier 1 channel inventory. For financial information that has been expressed on a non-GAAP basis, we've included reconciliations to the comparable GAAP information. Please refer to the tables and slide presentation accompanying today's earnings release for those reconciliations. With that, I'd now like to turn the call over to Enrique.

Thank you, Orit. And thank you, everyone, for joining the call today. When we 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. And 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 [covering] (ph) 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 customer 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…

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 the 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 in the quarter. We successfully completed a debt tender exceeding $1.1 billion late in the quarter that reduced our gross leverage ratio as planned. And 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…

Thank you. We will now begin the question-and-answer session. [Operator Instructions] Our first questioner today will be Amit Daryanani with Evercore ISI. Your line is open.

Good afternoon. Thanks for taking my question. 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 does that suggest that you expect these revenue headwinds that you're seeing right now persist into fiscal '24 as well?

Sure. Thank you for the question. So as we have said before, our goal for the next year is to reduce our structural cost by $1.4 billion and to achieve 40% of those in fiscal year '23. 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 our outlook for fiscal year '24, sorry, I will finish, we have our Investor Day about five weeks from now, and this is when we will be sharing our plans for '24 and kind of the overall view that we have for the company.

That's perfect. I'll wait for the Analyst Day for that one. And I guess, Marie, when I think about free cash flow generation, $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 a pretty good step-up in Q4 to achieve that. So just the levers that enable you to get that would be helpful. Thank you.

Sure, no worries. 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 very much 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 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 increased churn or maybe lower churn? I'm just wondering how that model is playing through your product line. And 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 continued to see growth in the number of enrollees, also in the revenue that we get from our subscription program. We have also continued the 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 quarter. 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 Print subscription, and we will continue the expansion after that. And important to highlight is going to become, over time, a more important part of our business, mostly because it allows us to deliver a better value proposition to our customers. This is really why not only because of the financial but also because of the return and the NPS is a critical part of our strategy going forward.

Thanks. And then I was wondering, just with Poly, maybe if you could provide 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 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 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 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 details. The Poly business has been impacted in the short term by a reduction in the term of some of the major markets. At the same time, the reaction from our partners, customers, 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, I'm sorry to use the AI term, where with AI, we can manage or produce almost the video conference, the 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 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? And then I have a follow-up, please.

Thank you. Good question, Toni. So as we -- what 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 going to be accelerating some of the cost reduction activities that we had in the plan, especially focused on home, on consumer, which is where we are seeing this pressure and things like acceleration of the simplification of the portfolio, acceleration of the business model transformation, growing more in what we call [bigging and big donor] (ph) are all the different combinations where we are accelerating our plans. And again, we will discuss this more in detail in a few weeks.

Thank you. And then if I could just follow up, it sounds like the demand environment is pretty challenging, and the pricing environment is pretty challenging. And yet 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 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, Toni. 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. As we've said in the past, we do expect to see those savings flow through both cost of sales and OpEx. And frankly, I think you're seeing the benefits of that in the rate. But obviously, there are some nuances by business. So I'll just unpack it quickly, so to give you that detail. In terms of Personal Systems, 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, it is a combination of both strategy and execution. We've got the portfolio rebalancing. I think we talked a little bit about that earlier with Shannon, plus honestly, pricing discipline and then 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, we're still very confident that for Print, the 16% to 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 the guidance that we've given about supplies in terms of the revenue decline there, the low to mid-single digit and plus a much more competitive sort of pricing in that we've seen in Consumer, and some of that is even evidenced in enterprise more recently. But I think we're overall confident that the rates are the right rates and the right ranges for us for both Personal Systems and Print. And I'll turn it to Enrique if he has anything else to add.

Not much to add, Marie. You covered it well. Maybe the last comment is, as we have 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 JPMorgan. Your line is open.

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 4Q 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 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 do we think is the 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 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, 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, just in terms of Personal Systems, it's really -- 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 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, like we have done Q3 to Q2 and as we did Q2 to Q1. I think that's important to have in mind.

Good. 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 31 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 you're 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 a 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 plant, 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 is 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 -- is a new category of PCs that are going to help us to really accelerate our growth in that country.

Thank you. Thanks for taking my questions.

Thank you.

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 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 250 million to 260 million units. How are you guys thinking about it today? And then I have a follow-up. Thank you.

Sure. Lots of questions in the question. I'll try to cover everything. Now 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 good position. In terms of TAM, we have reduced slightly the TAM for fiscal year ’24 -- for 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 maybe just a follow-up, I wanted to get back to some of your comments on PC pricing. 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, 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 -- ASP 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. Hence, I also mentioned that Consumer in Q3 and we expect in Q4 perform better than expected, and we -- 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 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 Marie will talk about the full year. 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?

Yes. So why don't I just walk you through the full year here, Sidney? So basically, as Enrique said, it's -- 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 just the drivers, I think the right way to unpack it is it's really the PC market size for the second half of calendar '23 that's smaller than expected and the industry 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 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 would 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. There are some unique ICs in Print that are still somewhat in an inflationary state. But overall, the costs have been favorable for commodities in both businesses. We do expect that, that will carry forward into Q4. So there will be additional commodity cost declines in Q4 sequentially. And in terms of how we're thinking about strategic buys, I would say -- I think I've said this in prior calls, 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 if there are strategic buys that make -- that fit that profile and that character, we'll absolutely take advantage of them. But I think the overall environment is we're seeing those positive trends. But I'd just add that the favorable trends in CPUs, 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 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 Toni's question. I'm still trying to struggle with how, kind of walk through again all the different moving factors on why PSG margins are going to be towards the high end, given a smaller sort of unit base with, 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, because I think that paints the context on how to think about Q4? So if you look at the Q3 rate, which was 6.6%, it was really a cost story. Whether we talked about just the way we manage costs, the results of sort of the structural costs that we've driven through the Future Ready program. And then I just 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. And 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 think about Q4. And then obviously, we still got -- underpinning all of that is the enterprise softness that continues to be out there in the market as well. 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 '24 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, and 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 we hit that gross leverage target or maybe still above it for a little bit?

Well, I'll just say that sort of our strategy remains the same. We intend to manage our leverage under 2. 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 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. And I think that comment is really important because I'm not sure if you caught the comments on the call, but that's just sort of how we're thinking about it. And obviously, key to us is the commitment we've made around 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 comments. First is our strategy remains the same, so no change, and I think that's important for investors to know. At the same time, the way you asked 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 restart in a prudent way. We are going to restart by compensating quarterly dilution and this is how we are going to start. And we will solidify our plans for '24 and beyond once we -- and we have conviction that we will be able to maintain the leverage ratio below 2 times, we will accelerate our plans. But we're 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 clarification.

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 unit, 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 constant currency terms? Thank you.

Yeah, I'm happy to. Hi, Asiya. So in terms of supplies, we still do expect to be in the range of low to mid for FY '23. And there's really two primary drivers. One is the usage trends and the second is the share trends. And I would say usage is very much, it's declining in line with what we expected. But what we've seen is that pricing remains resilient. And another important factor is the fact that our inventory in the multi-tiered ecosystem remains in a healthy shape. And just one thing to think about when you do the comps, 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 '22. So look over the long term, I think that's the right way to think about supplies. I don't know, Enrique, if you've got anything else to add.

Maybe add one. One additional comment. I think if we think about supplies, there are multiple drivers of supplies performance. Once clearly the number of units that is being installed, which as I told, I think it was Toni 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 year and especially share. And as we have said before, we have been growing our share of supply during the last quarter. 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 comments made on taking advantage of the yen, I 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. So 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 lower level it has been in a long time, and this clearly 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 segments like in the low end, where really are not very attractive around profitable units, we are losing share because this is not a business that we're going to go after. And based on what we see, we don't think this is going to be changing anytime soon. And 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.

And I think this was 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. And then to close, I'm really looking forward to see all of you in person or most of you in person on October 10 here in Palo Alto, where we will be talking about our plan for '24, innovation and long-term plans. So 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.