HP Inc. (HPQ) Earnings Call Transcript & Summary

Hello, everyone, and thank you so much for joining us here. My name's Jim Suva, the IT hardware analyst here at Citigroup Investment Research. Well, this is our tech conference, and we have over 200 technology companies hosting fireside chats and presentations this week. We're doing this virtual due to coronavirus, and we do hope our future bus tours and tech conference will be live. But until then, we're happy to come to you virtually. A few housekeeping items. First of all, this is the fireside chat for HP Inc. Stock ticker, HPQ. Today's discussion includes forward-looking statements that involve risks, uncertainties and assumptions, which are further described in HP's SEC filings, including HP Form 10-K and 10-Q. HP assumes no obligation and does not intend to update any such forward-looking statements. For more information, please visit HP's Investor Relations website at investor.hp.com. I'll also note that there is no media and no press allowed on this. So if you're media or press, you're expected to disconnect immediately. If you are an investor who is subject to MiFID II, please ensure you have the applicable research agreements in place. And finally, there are disclosures associated with this on Citi's website and have been disseminated. Let me know if you need those. We do note -- on the side of your screen, you can press, Ask a Question, and those will be e-mailed to me. And I will then add them all together if we have time and ask the question on your behalf without disclosing your identity. I'm very pleased to welcome Marie Myers. She's the Chief Financial Officer of HP Inc., and I'm very pleased to host this fireside with her. So Marie, thank you so much for joining us here today.

And to kick things off, I got to tell you, it's kind of a weird time in the world right now, not only with coronavirus, but your PC trends were [ en fuego ] off the charts and on fire and now the recent data out of Taiwan comes in a little more concerning. Can you help us understand about the demand overall, and just talk to us about kind of those trends, especially with consumer spending.

Absolutely, Jim, and well, good afternoon, and thank you for the opportunity. Delighted to be here at my first Citi Conference, and I'll put a quick plug in. We've got our security investor meeting coming up in October, so look forward to seeing you all and many of you then as well. So to sort of knock it out of the park about demand. So overall, look, the pandemic, as we all know, has impacted everywhere we live and work. And I think Jim and I, you and I were just talking before we started around what it's like to even see our grandparents these days. We've all accepted that, I think hybrid -- I think up until about a quarter ago, we thought a hybrid was a term that potentially would describe the way we would work. Now it's become the way we do work. It's pretty much the new normal. So what we're seeing is that, that secular trend has really influenced and driven phenomenal demand for us, both across print and PS, I might add. And I think that really plays to HP's portfolio. It's great that we have a portfolio that cuts across consumer, commercial. But look, that demand is really continuing. Hybrid has been an amazing catalyst for our growth, and you saw that in our last quarter. EPS was $1 compared to $0.49 last year. So -- and on top of that, revenue grew 7%. So overall, I'd say we continue to see that strong demand in PS -- particularly our Personal Systems side play out. And what we're seeing right now is a lot of companies, as you know, are continuing to announce their intentions to support this flexible way of working. You would have seen recently some of the tech companies are really not even going to give a date to go back to the office. So with that, folks need to have the right setup to work effectively at home. So we're seeing a great opportunity for us, not just in our PS space but also in our peripherals. So overall, we still see a very strong demand environment and a strong demand outlook. What I would say that's important is this demand is being hampered by supply. And that's really -- one thing to take away today is just that the supply scenario is really hampering the -- really putting a sort of a lid to the demand that we're seeing out there in the market today.

Well, I guess the big question is some of the unemployment checks or at least the boost on it has kind of come off now. Is the demand outlook being impacted by supply constraints or demand?

Look, I'd say a couple of things to bear in mind. So to your point about the stimulus checks and how to think about that. So for us, in terms of consumer demand, it's still -- we still see consumer demand remains solid. I think what we have seen is that the Chrome area, particularly in the U.S., this is much more of a U.S. phenomenon, we see that Chrome has definitely slowed down. And that Chrome was really linked to the stimulus actions that we're expecting here that we'll get past fairly shortly and that we expect many of the state governments will put in orders for education. Now with respect to that, the balance out there is really the strength that we're seeing around refresh cycles coming out of Win 11 and such. And so we expect that the Win 11 is going to have a very significant impact on the demand profile here coming up in the next quarters. As you know, there's around about 400-plus million units of PCs out there that are all that all need to get refreshed. So from a demand perspective, certainly, it continues to ebb and flow. As you know, we're in a really volatile environment still here. You see different parts of the world, the pandemic is playing out unevenly. And obviously, that impacts the portfolio as well. But overall, we still continue to see good demand for our products.

And component shortages, is it on both segments or just one side of the business?

Yes. Great question, Jim. So let me sort of unbundle that one. Because a lot of folks initially when they think about our business, I think they quickly go to PCs and sort of -- the impacts here are both in PCs and in our print business, and particularly in ICs. ICs both the PS and also for print. But also actually, there's things like resin that actually impact the print business as well. So as a result of that, we have backlog today, Jim, of about 1/4 on PS, and we actually have backlog on print as well. And sometimes folks aren't as aware of the backlog and the impact that we've seen on component shortages impacting our print business. But definitely, it's actually hitting across both businesses, Jim.

I think that kind of, I think, caught most investors off guard, including myself, was that the announcement you made as CFO about the change in incentives. Can you walk investors through about what that was? My understanding, if I can sum it up is you're going to be less promotional going forward because there's no need to and that should help out margins. Other people think there are some accounting game or something going on. Can you walk people through kind of an English or at a kindergarten level what exactly were those incentives and not necessarily the dollar amount or what it was, but maybe like an example so they can understand.

Yes. No, thanks, Jim. And by the way, I think you did a great job yourself of describing it at a very granular level. But I'm going to try the kindergarten level, but I'm an ex accountant, so I'm not sure I'll do the best job at it. But look, to give you some context here, we look at these estimates every quarter. So -- and what the estimate is, and you kind of got part of it right there in terms of promotions, but it's actually all of our sales and marketing incentives. So every quarter, we look at our sales and marketing incentives, which include things like promotions. And we basically look at them and make a judgment -- an accounting judgment around those estimates. And it's -- what's important to understand is it's based on a number of factors, which includes everything from the history. What's the history of the promotions or the marketing programs that we're running? What do we expect the customer behavior? Usually, that reflects in things like take rates. What are the customers accepting in terms of those rates? And then the other -- the key factor, which I think has been a big driver of why you saw that change in estimate in the quarter were the market conditions. And as we all know, COVID has caused significant volatility. Henceforth, market conditions in themselves have been very volatile. And as a result of that, what we've seen is that we just didn't need a lot of the promotions that we thought we were going to use. We just didn't use them, Jim. And typically, they have several -- their promotions -- you have to wait because customers take a long time sometimes to fill in claims forms, so you have to keep those incentives on your books for several months. So that's important to understand because some of these programs go all the way up to 12 months for partners to claim. So what we saw in the quarter is actually the impact here was a result of those lower claims. And it became clear to us that the estimate itself, it was an unusually large change that we had to make. So that's why we thought it was important to talk about it in our earnings call. So hopefully, Jim, that was at a kindergarten enough level. But I think the way you articulated it was perfect. And what it does imply, which I think is actually the really important point is that going forward, we're simply not going to need that level of promotions and sales incentive structure to really sell our products. And that's really important because that -- it should influence directly the profitability of our businesses. And I would say that the change in estimate, it was felt in both businesses, both in PS and print, but mostly PS.

So mostly PS, but in both you mentioned. Is there any concern about -- or legitimacy of concern by investors who may think that they may see some share loss if you don't put up these promotions? Or because the supply is limiting demand, maybe it just doesn't matter?

It's really the latter. I would say we're really in an environment where the laws of -- that intersection of supply and demand applies very well because we continue to be in a supply-constrained environment. You know where the demand curve lies that allows us then to price very favorably in the market. And that's one of the lessons that we've actually learned from this pandemic is how to really price very effectively. So these are some of the structural drivers of how we're really running the business today. And it's very important as we think about the business going forward into '22.

Marie, maybe if we can break it from big company-wide to each segment, maybe PCs first and then print second. So if we look at PCs, can you explain to us why this cycle, which has been very strong for multiple quarters, is not different than past cycles, which have seen a past -- a big drop off. Is there something different about this cycle?

You mean in terms of the opportunities that we see for both PS and print?

Mostly for PCs at this point. Units traditionally for PCs don't see double-digit growth without a big fall off afterwards.

Yes. Now, I hear you. So look, I think it starts where we sort of started the conference, which is demand continues to be strong. Our backlog, as I said, is about 1/4 or so. We continue to see that strength both in commercial and consumer. And as a result, that's generated that favorable pricing environment that I just spoke about. So we see that the TAM also -- so in addition to that, the TAM for PCs has really expanded. We're at about [3 50], [3 60], which is a significant increase in TAM. And I believe that really presents a great opportunity for us to capitalize on in the future. In addition, what I'd say on PCs, as you would have seen in the last quarter, we actually acquired a company called HyperX, which really sort of helps us expand our adjacencies and our play into peripherals, which is a great category with very strong profit margin as well. So putting all of this into context, I think this gives us great confidence around the outlook on PS relative to our rates. So as I mentioned on our earnings call, we expect PS that those rates to be similar to what we've seen in the first half of '21. So it will be above our long-term range. But obviously, we'll talk more about those PS rates as we get to SAM. But certainly strong outlook here as we get into the quarter.

Marie, you mentioned the word backlog, so I'd like to focus on that word a little bit about what you're seeing there. Is there any concerns about double ordering or inventory digestion, especially when like Chromebooks were super strong for you in the first half of this calendar year and then it slowed down? And I don't know if that's a factor of education and children getting back to school. Or if you can talk about backlog, that would be great.

Yes. No, I'd start up by saying, look, we've got very good confidence in our backlog. And I think as we said earlier, it is about a quarter. And we closely monitor that backlog across the segments, across all the different businesses that we operate in, across products. And as you rightly mentioned, Jim, and I think it came up earlier on the call. We have seen that pause, and we call it a pause in that demand for Chromebooks. So -- and in fact, we did actually see some cancellations in Chrome orders in the last quarter. But this is very much aligned to the government funding. This is very much a U.S. comment I might add, too. So it's very much aligned to the government funding. And we do expect that, that overall demand for education, it's going to pick up as we get into '22. So even though our Q3 PS backlog increased quarter-on-quarter, even with that pause in demand for Chrome. So what that means is that there's underlying strong demand for commercial and consumer notebooks, and even desktops, frankly. So we haven't seen -- so I'll just wrap up and say, we haven't seen any significant cancellations or double ordering that's impacting our backlog at this moment. And Jim, we watch this thing like hawk. I'll be honest with you. We have operational calls very, very frequently throughout the weeks, and the backlog is reviewed very, very carefully and intensively.

But if I look at your balance sheet, Marie, I believe your inventory dollar amount is higher now than before pre-pandemic. So what's all sitting there? Why you need to carry so much inventory?

Jim, that's one of the strategies. I think Enrique commented on in our earnings script. In terms of just navigating this supply-constrained environment, we did make decisions, and we continue to make decisions to carry more inventory on our balance sheet. And frankly, it's probably likely to stay elevated at this point. It's really for an assurance of supplies to help us ensure because what goes into a PC is what we call a match set. So you need to get that match set right. So carrying that additional levels of inventory helps us to ensure that we get the right match sets at the right time. So expect, Jim, that's going to go on for a little while, I guess.

Okay. In Chromebooks, you saw a lot of strength in the first half of the calendar year and then recently mentioned a little bit of some cancellations. Do you expect trends to remain kind of subdued in Chromebooks or come back if government stimulus gets clarified and actually distributed?

I'd say it's very much the latter of your comment, Jim. And maybe let me make a point just around EDU overall. Certainly, we expect that with the government funding likely to kick in here through the sort of the remainder of the calendar year, that should definitely create opportunities for Chromebook going into probably fiscal '22. And then I would just add, we are the industry leader in this space and in EDU. So EDU is going to continue. We expect to see strong demand in EDU going forward. But certainly, the government funding is going to be a significant enabler of Chrome. Honestly, that should probably happen as we get to the end of the calendar year. And frankly, we have about 30% unit share in that space, so very strong leadership position as well.

And before we switch over to commercial and enterprise, last thing on education. Is it seasonal, like if we don't get distribution of government funding relatively soon, we're going to push out until the children go on holiday next summer? Or how should we think about the timing of education and the stimulus that may be distributed or not?

I think, first of all, in terms of its -- in terms of the stimulus, we expect late in calendar year, but these are really long-term secular drivers that are at stake. If you think about it, Jim, I've got a couple -- I got 3 kids, 2 twins that learned how to use Chromebooks over the course of the pandemic. And now, I must admit, very avid users of their Chromebook. So -- and in fact, the education, they went back to school, Jim, for the first time in 1.5 years. And as part of their curriculum now, they're actually using their Chromebooks. It's become an integrated element of the curriculum. So we expect government stimulus is going to be really important for the U.S. EDU spend. But I think underneath that, what's important to take away, there are secular trends that are going to stay. And I give you that example of my twins that prior to the pandemic, they're 9 years old, Jim. They -- thankfully, we didn't have them in front of Chromebooks. But now, that's it. I mean they are going to be permanent users in their classroom of Chromebooks. So with that said, there's still lots of other schools and kids out there across the world that don't have that opportunity. So we expect those -- there's still opportunity to penetrate across the globe. If you think about many school systems and other countries, they were using the TV, Jim, to learn. And that's the opportunity for this industry to help provide the platforms for many of the kids across the world who did not get access to Chromebooks and laptops through some of the height of the pandemic.

Can we switch over to the enterprise side of PCs before we get to print. On the enterprise side, a lot of the corporates have different demand specs than, say, the education side. Are you well inventoried for that? Or is there a handoff that's going to take a little bit of a gap or time while we transition from education strength to enterprise strength?

Yes. No, look, I think it's -- the PS overall outlook just continues to be strong. And commercial, I must admit, the enterprise space, as you called it, is very exciting, and there are a lot of great drivers out there that are really going to stimulate our business. Obviously, like I said, we still got a quarter of backlog out there. But just to give you a couple of stories, and a couple of points to kind of bear in mind. First of all, I'd say that there is this absolute shift to notebooks. We're seeing that shift from notebooks from desktops. And what's important to take away is that notebooks actually have a much faster refresh cycle. So you can imagine that. So not -- we've got notebooks. And now within desktops, we're seeing the acceleration of the refresh cycle as well. And that's -- you think about it today, you've got a PC, you need that PC to be optimized for if you're a Zoom user, if you're a Teams user, and you need to be able to have all your browsers opened. You can't be running at a slow speed. And a lot of that is going to be driving the refresh. I was looking at some of the sort of underlying tech support for Win 11. Win 11 is going to enable a lot of what we expect in this hybrid world that we're in, Jim. So whether it's the Zoom enablement, the Teams enablement. And we're starting to see that, that is going to have a massive impact on the refresh. We talked a little bit about the pending Windows 11 refresh overall. There's some nice accelerants in there. And then also the other piece is security. We've all seen cybersecurity sort of become a very much a headline through the course of the pandemic. And it's at the top of everybody's minds. And so with a high emphasis on security, folks are also looking at how do I really optimize my environment to make sure that I'm not getting compromised from a security perspective. And then finally, just an interesting story that I want to close on. I want to share with you the other day. So I always reflecting on. Imagine if you're in the world of sales, right? And the story I got told is that literally, 3 out of 4 people, I'm sure some of the folks are doing it today. You judge the person by the quality of the audio and the video. So just imagine that. You're in sales, today, more than likely, you're selling virtually and your ability to be successful, your ability to close that deal is based, Jim, on your -- how you show up and how you sound across a call, whether it's a Zoom call, a Teams call or any other platform that you use. So you could imagine that folks are going to be really interested in radically improving that experience. So that's why we're starting -- that's another driver of why we're seeing these refresh cycles also speed up. So Win 11 is just a great catalyst. But overall, I think there are a lot of drivers out there that will really enhance that overall refresh cycle.

And last thing on PCs before we switch to print. If you're doing away with the aggressive promotions because they're not needed, and you've got a backlog, I think you said over a month -- I'm sorry, over a quarter, over a quarter. Does that mean that these margins that we're seeing now are sustainable because I think they're above historical and maybe even above your trends? How should we think about margins of the PC segment?

Yes. Certainly, as I said in the earnings call, we expect PS operating margins kind of pulling this all back together to be very much like what we've seen in terms of the first half of '21. And then I'll have more to say on the outlook for PS margins as we get into SAM in October. So we're really going to take that opportunity when we get together for our first analyst meeting, I think in almost 2 years, to really give you some perspective there. But I'd say, look, we've got confidence in our ability to drive operating dollars in PS. And I think you've seen the kind of performance that we've had this year is very much indicative of the confidence we have.

Well, I'm looking forward to that Investor Day. I don't know if it's in-person or virtual, but either way, we'll be attending it.

Yes.

But I can say if we switch over now to print, the recovery in print during COVID, I bought another printer at home, so I had my own one and my family had their own printer. Can you talk about overall what's going on with print, especially if one thinks about offices are kind of now partly open. Sometimes you can come in, sometimes you can't. But then people have kind of learned a shift to be a little bit more digital. Or how should we think about demand drivers for print hardware and supplies.

Yes, absolutely. Thanks for that one. And actually, I'm in the office today, Jim. So I know some of us -- I think you said you're in New York. So some of us are starting to migrate back into the office. So look, I'd say we've talked a lot about PS here today. But I'd say in print equally, we see a significant opportunity to really advance the leadership that we've developed in both the home and in the office. And certainly, the catalyst for home has been the hybrid environment that we've all very much experienced and now gotten extremely used to. So we've seen -- shown up in a different way, we've got Instant Ink. We're over 10 million subscribers. Instant Ink has been a -- had great momentum during the pandemic. We also have the new offerings, one of those ones is called Flexworker. I'm not sure how many folks are familiar with that. But that's a managed print offering that we have that allows the connectivity of print for people that may be working for home in an enterprise situation. And then in the office, as you mentioned, we're starting to see the sort of gradual and uneven recovery. We talked about it in the call, but we're really starting to see that it's extending into '22. As I said earlier today, some companies have come out and not even given a date for office return. But we are seeing companies moving to more distributed, smaller form factors for print solutions. And I would just want to say that we don't expect office pages to return to pre-COVID levels. But we are moving to sort of much more of what is sort of a normalized level of hybrid work. So I would say that combined with all of that together, our print strategy, I think we've talked about this in the past is very much on the whole system profitability. We don't look at it in isolation, Jim. So it's about how do we really expand the services, consumer, commercial; continue to improve our supply share; grow areas like graphics, 3D. And then finally, cost. I know we haven't talked much about it, but we have had our transformation efforts ongoing to continue to drive cost. And we're expecting to hit about 75% of that $1.2 billion of cost. So all of that combined together, I think, sets us up very well for our print business. And our long-term plans don't require supplies to grow to achieve our objectives. So you can see we're putting in place all those building blocks to really ensure that print's success is predicated across a number of different pillars. And I'm hoping we get a chance here to talk a little bit about some of the things -- exciting things that are going on in 3D and such as well.

Well, I was hoping we could actually transition straight to that and talk about the opportunities in 3D print or even graphics print because it seems like it's an area that just doesn't get a lot of airtime despite likely higher growth.

You're right, Jim. I mean, 3D and graphics are certainly very -- and I would say, look, we're really focused on transforming those industries and those businesses. And maybe I'll give you a couple of nuggets as to how we're thinking about it. On the 3D front, we've shifted to really focus on the verticals, and we're looking at some key areas, particularly around health, wellness, automotive and industrial. And in fact, just a couple of weeks ago, I had a chance to sit down with one of the teams that's working on a new orthotic solution called Arize. I'm not sure if anybody here has used orthotics. I actually got my own orthotics from our new product called Arize. I got to tell you, they're some of the best orthotics I've ever had, Jim. In the past, I've always had these really thick clunky things. You go and stand there in this sort of this white plast, you put your foot in. You set a cast. You wait about 4 or 5 weeks. They come back. And usually, they're too thick. They don't work. What was amazing, Jim. I went on a digital scanner. They scanned my foot. Less than 14 days later, I had this ultrathin, flexible, new orthotic solution that came to my house, all delivered to me in person. I didn't need to see anybody. It was a very easy process and involving a scan. So that's just an example of how we're thinking about disrupting some very traditional sort of verticals out there in the space using our 3D technology. So I want to share that with you because I thought it was just so exciting. And industrial graphics also plays an important role in our long-term strategy. And certainly, as I mentioned in the last earnings call, we've seen just really strong performance across our packaging and labeling space coming out of the last quarter as well. So some real green shoots there, and more to come. At the Security Analyst Meeting. We'll have some of the folks actually talk specifically about these opportunities. So please stay tuned and please join our Security Analyst Meeting to hear more about these 2 areas.

And Marie, I already asked you about margins in the PC segment. What about margins in the print segment? Because it sounds like you mentioned the change of the reserves that you took was across both segments.

Yes. No. So let me talk a little bit about print. So print impacted -- for us, in print, we had about [indiscernible]. In terms of the operating profit, it was up 5.4 points year-on-year. So that increase was primarily driven by favorable pricing. Now we talked a lot about just how we really have seen the benefit of favorable pricing throughout the year. Plus high volumes in commercial and like what I just mentioned about industrial, what we've seen in graphics and large format. And also, as I mentioned, there was about a point there in terms of the reduction in estimated incentives. Obviously, what we have seen, we've had to grapple with the higher commodities and the factory costs that we've talked about, and we've made some OpEx investments. So overall, as we think forward into the year, we expect our operating profit to be probably towards the higher end of our 16% to 18% long-term range. And I would say more to come on print overall as we get to SAM. But overall, I'd say, look, we're seeing the strength and the resiliency of our broad print portfolio. And obviously, our leadership space that we've got really puts us in a great position relative to our competitors. And I believe that you see it showing up in our results in terms of our print numbers. Obviously, a year ago from now, we had a pretty a tougher -- an easier compare in terms of suppliers if we look back last quarter. But this time, we'll be lapping a tougher compare and a particularly strong Q4 that we saw in FY '20. So for us, the focus is really on generating that incremental operating profit dollars, and we'll continue to execute our strategy in this space and drive more operating profit dollars.

Marie, as Chief Financial Officer, you actually are very important to talk about the capital allocation framework or your capital returns. HP Inc. has a dividend. It has an active stock buyback. Can you talk a little bit about how investors should think about your capital returns program? Is it all going to be funded organically? Or do you need to issue some debt and leverage up the company? There are some statements pre-COVID about leveraging up the company a lot and COVID has changed some things. How should we think about your capital allocation strategy?

Yes. Thanks, Jim. And certainly as the CFO, this is one area we spend a lot of time on. I'd start out by saying we are absolutely committed to significant and aggressive capital return. And I believe that you've seen that so far to date in our year-to-date performance. And just to sort of reflect on a couple of things. If you look at Q3, we returned over $1.7 billion of cash to shareholders. And that's actually 178% of free cash flow that we generated. So very, very strong results. And if you look at the year itself, we've returned over $5.2 billion of capital to shareholders. And we repurchased $4.5 billion in shares in the year. And we've exceeded our commitments by at least $1 billion. So I think in all that they are just great proof points, Jim, as they say, the proof is in the pudding. And I think you can see that our results sort of speak for themselves in that regard. So we -- and I think I said in the earnings call also that we remain committed to this quarter to at least about $1.5 billion of share repurchases in Q4. So overall, I think a very strong story in that regard. Now to turn to your question specifically around leverage and how we're thinking about leverage. So a couple of comments. So let me start out with right now, our gross debt to EBITDA is about 1.17%. Now candidly, yes, that is below our stated goal of where we want to get. Right now, we want -- as we committed to in our value plan, we want to head more towards 1.5 to 2 leverage ratio. And we expect to continue to achieve the leverage consistent with our target range over time. Now obviously, this has been driven by the strong free cash flow performance that we've had over several quarters. Now we will obviously spend time on this in the Security Analyst Meeting as we're starting to prep. This is absolutely an area that I intend to provide all of you an update on. But the sort of caveat to that is we are still in a very fluid environment. As you've heard throughout the call today, just the pandemic is evolving. We see the returns to the office as being uneven. We're in a highly constrained supply situation across both PS and print. So we do expect to maintain a reasonable cash balance. And I will provide more color on capital allocation as we get to our Analyst Day. So in all, I think we just -- we continue to maintain a pretty prudent cash balance while things continue to be as dynamic as they are, Jim.

I got e-mailed in a question asking about, hey, didn't HP buy a gaming company, I think it was called HyperX. And any thoughts around, I think, China recently rolled out a limitation for the number of hours that like miners can play? Will that materially impact that segment or business?

So Jim, overall, yes, and I did see the restrictions that China is placing. I believe it's on hours of spent in front of screens. It's probably a pretty broad category actually in terms of just overall screen. So in terms of peripherals, as I mentioned, Jim, already, it's a very exciting space for us. We are a very, very strong player across the whole PS space. And part of the intention around peripherals is not just the whole 1 PC per person, but actually it's to drive that attach to the PC. And certainly, the pandemic has really accelerated our peripheral strategy. You just think today, Jim, right, I mean, I'm sure we all need to have better headsets, better cameras, all the peripherals that candidly, before the pandemic, I thought they were like a nice to have, but today, they literally a must-have. And I'm not sure about you, but I was cleaning up the family closet the other day, and I was counting the number of headsets that we have in our house because I have 3 kids online throughout most of last year, even my husband was online. And there were probably about 6 or 7 different headsets. And I can tell you 2 years ago, we were lucky to have 1 or 2 headsets in our cupboard. So certainly, it's a very different environment today. The PC is essential. It is part of not just your work life, it's part of your home life. Many people listen to Netflix or stream across their PCs. So in order to get a better experience, you need better peripherals. And peripherals tend to require constant -- the refresh cycle of peripherals is also very important. So a very exciting business. We have, frankly, been very much under-indexed in peripherals. And by really combining our existing assets with HyperX, it allows us to scale into this business. And it's -- I think we have a very strong right to play. If you think about the ability to attach to our current devices, it should provide an enormous opportunity for us to really accelerate peripherals across the space, both across the gaming as you pointed out and then also into the commercial side. So peripherals, to answer your point about gaming, yes, absolutely, there's a space in the gaming. But then actually we're looking at peripherals from a much broader strategic lens. And also, I'd just add that the peripherals' TAM is pretty exciting and very attractive. And this market is actually going to grow about -- to about $12.2 billion by 2024. So very exciting. And then I finally conclude that, well, a lot of our peripherals, as the CFO, the margin is highly accretive and is very attractive and a very nice add to our portfolio. So overall, very, very excited about peripherals and where we can go in this space.

So Marie, we've got 2 minutes left. Can you maybe talk about 1 or 2 things you want to leave investors with about why they should be buying HPQ stock.

Thank you, Jim. Well -- and thank you, everybody, for your time here today. Look, let me just wrap up in saying overall, very excited about our future. I believe we have a great opportunity. We see very strong demand, secular trends, such as hybrid that we've discussed today are very much here to stay. And with the strength of our portfolio that we have both across consumer, commercial, print and PS, it provides a very strong platform for future growth. And finally, I would just add that there has been, I think, great opportunities in some of the adjacencies that we're seeing in peripherals. And more to come on areas such as in 3D and graphics when we get to our Security Analyst Meeting in October. So let me just wrap up by saying thanks for the opportunity, Jim. And I look forward to seeing everybody in October very shortly.

[indiscernible] Marie Myers. Thank you so much, Marie and, HP Inc.

Thank you, Jim.