HP Inc. (HPQ) Earnings Call Transcript & Summary

Welcome to the BoFA Global Technology Conference. Delighted to have you all here. Thank you all for joining us here. I'm Wamsi Mohan. I cover IT hardware for BoFA. It's my honor to welcome Marie Myers, CFO of HP Inc., and Marie has been in this role for a few years now and has seen the most interesting of times in recent times. So we're delighted that she's here. I do want to make a forward-looking statement on HP Inc.'s behalf. 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 Investor Relations web page at investor.hp.com.

And with that out of the way, Marie, it's been a tough macro backdrop, and you just posted a quarter where revenue declined 18% constant currency, largely driven by PCs. So as a company, what actions are you really taking to navigate this kind of challenging macro backdrop?

Yes. First of all, good morning, and thanks Wamsi for being here. And certainly, no doubt, it's been a tough macro, and I think you've seen PCs declined around 29%. So we've been pretty much in line with the market declines. I think in an environment like this, we focus on controlling what we can control, right? And that's sort of 3 things: cost, price, and mix. And I think in some ways, on the cost side of the house, we got ahead of the cost takeout that many are focused on right now. We started our future-ready transformation program late last year. And so we're seeing the benefit of that. You've seen it in the quarter. In fact, we delivered we beat consensus. Even though we declined on revenue, we beat be consensus on EPS. And actually, you look at our operating profit dollars, they actually grew. So we're using those levers like cost, robust pricing, and I know we're going to talk about pricing today on print and certainly also the work that we've done around mix, they are all paying off. So we've seen the benefits of our cost program. We're expected to finish the year at about $560 million in terms of gross run rate annual structural savings. So we'll see the benefits through the P&L. And I think the other -- what we're doing differently, perhaps than what we've done in the past is that we're continuing to invest in growth. I think there's no doubt that the trends around hybrid are really secular. And you can see all the debates out there in the market around what work looks like, and it looks different for different industries. But hybrid is it's really here to stay. And I think what's different for us this time is that we've got the assets due to acquisitions that we've made over the course of the last couple of years to really pivot. So when the macro comes back, we're in a position to really take advantage of hybrid. And I think a great example of that is just what you see with rooms. So many of you I'm sure are back in the office trying to figure out how to be productive. We estimate there's around 19 million rooms out there and only around 10% of those are really kitted out to enable productivity. So with the assets we have with Poly, with video, there's a big opportunity out there, Wamsi. So despite this tough macro, we're doing what we can, focused on controlling costs, managing the environment, and at the same time, we're investing in the long term. And so I think we're going to be really well positioned when the macro changes.

Okay. Yes. No, it's impressive, the margin performance in light of what's happening on the revenue side. Maybe just to follow up on the cost topic, your future-ready transformation program. Can you give us an update on where you are in that process? And I know COVID has been challenging, and there's been supply chain issues and so many other things. But as investors look at HP, how should they think about restructuring charges over a longer period of time? And how much of the savings of this will really fall through to the bottom line?

Sure. That's a lot in that way. So let me break it down. So first of all, I would say I came back actually to do the last transformation and certainly look -- these programs are a onetime in nature, right? We see these costs come out of the company, and they're structural, so put that aside. And this program that we launched back in November, I think we got the timing right. And the focus is right. What's different today is that there are new tools. We laid a lot of the digital foundation in the last transformation. We actually went from 13 ERPs down to 1 instance of S/4 HANA, big change for the company. And now we've got that base that we can build other digital assets often. So we're continuing to drive transformation, and we're seeing those benefits in productivity and efficiency. And in fact, now we've got AI as well. So we're seeing new opportunities to drive increasingly greater leverage in terms of efficiency. So that's what these programs are really designed to do. In terms of results, really pleased with the results. I think the rates that we have on both Personal Systems and Print speak for themselves. So you can see the benefits showing up in the results like our rate in PS despite the top macro still holding steady quarter-on-quarter. In Print, we've been above the range, and all of that is showing up in the results. Now we do expect it is going to be somewhat back-end loaded. We started the program in November. So as we get into the second half of this year, we'll continue to see the benefits of the structural savings of the program flows through the back half of the year. So I would say pleased with the results. More work to do, but plenty of opportunity. We're a really large company. There's always efficiency opportunities. I've done a lot of transformation throughout my career. When we split the company, I was involved in the split. Now, I came back to help lead the last round of transformation. So for me as a CFO, I really feel like you've got to be able to do both. You got to drive efficiency and at the same time, take some of those benefits flown through and find there's opportunities for growth.

And when you think, Marie, about the gross level of savings versus the net level of savings, how should investors think. I mean, historically, there's not been a tremendous amount of flow-through because you have invested for future opportunities, and that is showing up in results in different areas, whether it's in 3D printing or whether it is in Instant Ink. There are a lot of different areas where you have. So as you think about the point you made about investing, how should we think about gross versus net?

Yes. No, I think the way to think about that is in terms of -- and I mentioned that earlier, just what we're expecting in terms of exiting this year, as I said, we're going to expect to see around 40% of the program in the results as we exit the year. Now that's in the guide today and it is in both PS and Print and it's in both cost of sales and in OpEx. So you'll see it in both. And I think as I commented on the earnings calls, we do expect to see PS rates get solidly in the range. And candidly, that's one of the enablers to get us there, Wamsi. So you'll see that in personal systems. Obviously, I think in print, the team has done a really good job, and we're seeing that in the rates already today. But just keep in mind, it is both cost of sales and OpEx, and we're taking some of that capacity that we are generating and then reinvesting in the growth areas like hybrid. And also, frankly, reinvesting and moving the model to subscription and services. And that's a big change. I mean, for HP moving the model into these much more sticky type of models in terms of subscription and service revenue is a big shift. And it's going to take time. But in the end, I think it's going to be very beneficial for the company and very lucrative.

Yes. No, absolutely. Maybe shifting to PCs. Can you talk a little bit about how investors should think about or how HP is thinking about the outlook for PCs? So we've gone through COVID. Obviously, there was excess buying. We're getting sort of the downside of that right now. 250 million or so, let's say, this year, 250 million to 260 million PCs. In '24, '25, like what are your thoughts around how the growth looks? There's a lot of debate about PCs normalizing back to low single-digit growth now that it's gone back to pre-COVID levels. How are you thinking about that?

Well, I'd start up by saying that there's no doubt that the -- the size of the PC market is structurally larger than pre-COVID. So let's just start there. I talked about hybrid, what that's driven. Today, there are around about 400 million to 600 million PCs out there that need to be refreshed. There's no doubt that this sort of difficult macro has probably extended that refresh cycle. But that refresh cycle is going to happen. And there are some -- obviously, the key drivers that are out there are the sort of usual cast of characters, but then I'd add, there's some new drivers out there today. One, people are spending more time on their PCs. So I've 2 kids, they use Chromebooks -- I actually have 3 kids. But 2 of them use Chromebooks. 2 of them went online through the pandemic, one didn't. She was user of a different laptop, but 2 are HP Chromebook users. And so their Chromebooks are really beat up. I just put them in middle school, and they're all HID big Chromebook users. And all those Chromebooks need to get refreshed at some point. But I'd say there are 2 other things. My kids spend a lot more time on PCs today, good and bad. But the time spent on devices has substantially increased through this period of time. Finally, I would add one thing that's a very interesting driver, we're still really -- I think we haven't seen or quantified the impact as the extent of AI. And just as you run models closer to the Edge, you want your data to be secure, there's going to be a driver for -- you're going to need more performance in your laptop to drive that. So there are enough drivers out there [indiscernible]. I think to really substantiate the fact that the PC market is going to be substantially higher and that refresh cycle will ultimately kick in at some point. So that gives us confidence in the outlook on PCs. And plus, I'd say, during this time, we've acquired other assets, right, in terms of the acquisitions we've made that bring to bear a broader portfolio. So it's not just about the PC, it's about the peripherals and the suite that goes with it. So I just think when you add that all together, you're talking about a much bigger ecosystem here.

So when you think about '24 and '25, it's not just the unit TAM, you're also talking about the revenue TAM being larger structurally because you're just getting more richly configured PCs?

Yes. And the mix is moving up, right? We're moving up the stack in terms of a richer configuration in premium and mix as well.

You mentioned AI in a couple of different contexts. So maybe with your CFO hat on, what are you looking -- how are you looking to leverage AI in the organization from a cost productivity efficiency perspective and then I can touch on the PC side?

Sure. Right now, I'd say we're looking at a number of use cases in the company. We have a couple of really big macro opportunities that we're specifically looking at. I think they're pretty well sort of altered out there in the market. The first one is obviously software development. We see an opportunity in terms of driving efficiency with software development. And the other one is in the call centers. We have a big customer service organization. And we're in the midst of working on some POCs right now in call center optimization and using bots much more effectively. So 2 pretty significant opportunities that we see out there. And then I would say we've got a laundry list of a number of other use cases that we're exploring, and we've been using some actually even in my finance team right now. So we're experimenting. But look, frankly, there is -- like I said, HP is a big company. There's plenty of opportunities to continue to drive efficiency across the company. And that's just one of the tools. I would say there are other tools that we've been using for many years like automation tools. So there's a suite of tools. It's just one of those tools.

And we've heard other companies talk about maybe 30% of back-office costs going away from -- or people costs going away? I mean, is there anything you can [indiscernible] in terms of...

I'm not ready to put numbers on that one. I think there's a lot of -- people have a lot of different opinions out there. I think I'd say, look, there definitely is a productivity opportunity, and some of that translates to efficiency. So you've got to look across the spectrum and see what that looks like.

And then on the device side, right, when you think about what actually could improve in terms of configuration and ASPs, what are the key things that you see getting changed and getting a benefit from AI?

Well, I think the PC in itself is going to evolve. First of all, I'd say the data science stack. There's no doubt the data scientists need a rich configuration. We feel we're really well positioned in terms of driving and delivering on that opportunity. Right now, we are actually really building out a stack for data scientists that I'm really excited about. And that configuration, I think, is going to be available on the market. The second piece is just the PC itself. If you're going to use things like Microsoft Copilot, you're going to need a richer configuration inside your laptop to drive that and enable that ability. Plus, finally, we see an opportunity that's probably differentiated around the fact that people are going to tend to work on the Edge. A lot of what we've done has been cloud. But as data moves closer and people are really worried about privacy and security, you don't want to necessarily build a model and have all of that data exposed in the cloud. So there is an interesting opportunity that certainly we're starting to explore around working on the Edge and what that laptop configuration would look like in that area is quite unique and different. And that should drive, frankly, richer configuration move up the stack in terms of mix and then ultimately driving better ASP.

Okay. That makes a lot of sense. So as we now think about where we are in the current PC cycle, obviously, there's been a lot of channel inventory that's created some pricing pressure as well. Where are we in the work down of that channel inventory? I know you kind of guided to pretty good maybe high single-digit sequential growth for 3Q and in excess of that for 4Q. So as we think about those moving pieces, what's giving you the confidence to frame that?

Yes. And I think you actually answered the question very well Wamsi. So in terms of channel inventory, as I said on the call, we've seen really good secular I'd say, sequential sort of bleeding off of the inventory. I think what gives us confidence a couple of data points. First of all, we saw the sell-out was actually stronger than the sell-in. So that's a really important sort of pivot in terms of seeing that strength and that gives us confidence that the channel is therefore adjusting, right, to the relative revenue levels. We did say we'd probably take through the better part of Q3 to see that finally normalize. But ultimately, then that gives the capacity for 2 important drivers in the back half, which is Q3 is typically our back-to-school season, which is a big driver of our PC volumes and top line. And then finally, Q4 for us is the holiday season. So we expect to see that driver in terms of the volume in the holidays. So I think net-net, the key to take away here is that we're seeing the channel normalize. And then ultimately, we've talked about seasonality as being not seasonal for quite a long time. We do expect to see seasonality start to return to more normalized levels in the back half of the year as well.

Okay. Great. And as far as your guidance relative to the promotional activity, would you say that you're contemplating the increased promotional activity within that framework? And is that coming from you, are you doing that? Are you expecting your larger competitors to do that? How should we think about that?

Well, first, in terms of the promotional activity, it's in the guide. I'd say we've already seen that happening in the first half, and you've seen the fact that our rates have still been resilient despite that, and it's been very much driven by consumer, is what I would say. So like a tale of 2 different cities if you split our consumer and you split our commercial. So on the consumer side of the house, we've definitely seen a more promotional environment. We expect that to continue through Q3. On the commercial side of the house, we do expect the slightly different situation there. We expect to see a more flattening type of environment relative to ASPs as we get into Q3 on commercial. So slightly different nuances depending on the side of the -- which side of the market you're looking at.

And just from a like competitive perspective? Are you expecting some of the competitors to drive a lot of promotional activity?

I'd say on consumer, it's pretty much been industry-wide. I mean I think you've seen all our competitors make those comments over the last few weeks. And I think it's just more indicative of the industry right now.

Right. What about PC margins? You mentioned the rates being like extremely good and they are very impressive. As you think about -- in the back half of the year as you see these units start to increase, are you expecting there to be decent elasticity of demand such that the pricing is going to drive this like unit growth higher, but the rates kind of stay flat, rates move down? How are you thinking about sort of the operating margin rates? And not just for the next few quarters, but really, if you think about structurally over the next couple of years, given the richer mix and the other things you commented as tailwinds. How should we think about the right sort of levels for it?

Yes. And why don't I just walk you through. So from a long-term perspective, we absolutely intend to stay in our range in Personal Systems of 5 to 7. From a year perspective, we expect to end the full year being solidly in the range. And that's really driven by a combination of what I mentioned earlier in terms of the benefits of the savings of the transformation. I think the pricing that we just talked about is that sort of starts to settle in the back half. And then obviously, the mix, right, as you mentioned, both in terms of the commercial premium mix. And then moreover, the benefit that we've got from the peripherals, right? So as I mentioned, we made those acquisitions over the course of the last couple of years, they have a richer margin profile. So all of that together will absolutely provide support for the personal systems to be in the range -- solidly in the range for the year and then inside the operating range for the rest of -- sort of from a longer-term perspective.

Okay. Great. Maybe pivoting to Print now. And I mean, obviously, historically, you had...

I was hoping you get to the Print.

Yes. I mean you...

Lot of people, I want to talk about -- and we'd spend most of the time talking about Print questions these days.

I love some time to talk about Print.

I'm glad you did all of this.

So on the print side of the business, right, do you think now you're going to go back to somewhat of a framework where a significant chunk still of your profits are going to come from print in a more normalized PC environment? Do we go back to where your historical levels were, maybe 75% of EBIT coming from print? Or is it like more closer to like 40%-60%, 60%-40%? I mean where do you think that settles out over the next several years?

Well, look, I'd say that in terms of print, we've been focused on shifting the model, right? You've heard us and I think we've demonstrated just in terms of the commitment we've made to both supplies and HP Plus and profit upfront. We shipped just in the last quarter around about 50% of our shipments included HP+. And that -- what's really important to understand in terms of this mix, and I'll get back to your question, is the fact that with HP+ that actually drives what I talked about earlier, the subscription. So what we're seeing is that those customers typically opt in for Instant Ink. And then also, we just launched another subscription service called Instant Paper. So that's in North America, we're planning to actually expand Instant Paper across the world. So we're -- you can see that this is -- what I'm trying to get to is how we're shifting the business model here. So what you've seen in the past, not necessarily maybe the indicative of what we're going to do in the future in terms of shifting the model to these different types of revenue models, right, subscription and then services as well. And in terms of just the mix of PCs and Print, I'd say for the year, we're not expecting it to be fundamentally different as you think about the year.

Yes. I love Instant Ink. I mean...

Oh, good. Have you signed up for Paper yet?

I've not signed up for Paper yet.

Yes, sign up for Paper. Makes life easy. Because you don't run out of stock, you know.

Yes, that's true.

I imagine you have a stack in the cupboard like this.

I do have a bit stack of paper.

There you go. We like customers like you, too.

So I guess maybe thinking about the print margins, right? You've had some very elevated outside your typical range margins. And I think they've been driven by a couple of different things, right? One is the supply chain issues and where the hardware was being priced. And secondarily, let's see your mix shift in your portfolio and then you've got all the future ready transformation. So you've got kind of 3 things here. And off that, would you say, which parts of these are structural and secular versus what you think is more cyclical? And when do you expect to revert back to sort of the 16% to 18% range?

Yes. No, I'd say a very good summary there, I would say. In terms of Print, from a long-term perspective, we do expect to get back in the range of 16% to 18% for the year. I think we gave it in the guide that we were expected to be slightly above. But for the long term, it's important to take that away. I would sort of add as a caveat there, we're focused on driving operating profit dollars. Like we give those ranges so that folks can help really drive their malls. But what we really are focused on delivering is incremental OP dollars. Now how we do that, to your point, combination of things. And I think in Print, it's a really good example of both strategy and execution. So in terms of strategy, we've been shifting the mix in terms of where we drive the profit. We have seen a more competitive pricing environment driven by the Japanese. The yen is back at another sort of low point just recently. So we've seen some of the Japanese players taking that benefit and driving it into pricing. But what we have seen, to your point, is that the Office has been quite resilient in terms of pricing. So we actually saw ASPs increase in the last quarter. Don't expect that to stay for the long term. I mean that's probably more of a temporal situation. So we do expect that pricing environment will normalize over time. And then finally, I think the Print team has done a great job of driving the benefits from the future-ready transformation. You're seeing that in terms of just really prudent cost management. All of those factors combined have contributed to where we've been sitting in our range. Over time, though, the facts still remain that pricing will become more competitive, supplies will continue to decline. So we do expect to get back in that range. But like I said, we're focused on OP dollars.

And if you think about the incremental growth in OP dollars in Print and break it out, maybe is getting a little granular. But if you think about office versus consumer versus graphics and think about sort of the various things that are driving that incremental growth. Where do you see the biggest potential for incremental OP dollar growth?

I think it's a range of different contributors, but I think I would draw your attention to the model shift. I think shifting the model the way we have with Instant Ink. We now have over 12 million subscribers. I just mentioned, we've added Instant Paper. So there's more opportunity there as we layer in more services into the model. I think secondly, we've shifted the business model in terms of just profit upfront, and we're continuing to do so. So all of those factors combined will all be net contributors to OP dollars. And then cost, which I think we've spent some time talking about that already.

And when you think about sort of the Instant Ink piece of it, like can you dimension that for us and how large it is as part of the business?

I think what we've sort of communicated externally, it's more than 12 million subscribers and continues to grow. So I think a lot of folks out there in the industry really admire the success of that business. It's been a very great business. And what we've seen is that customers enjoy it. If you look at our churn rates, they're very competitive and low. What's great about it is it's like a basis upon which you can layer in other services. And that's really where we're focused around layering in incremental services. So more to come in that space. I'd say just keep an eye out into what we've got coming. And as I mentioned, we're going to take Instant Paper. The pilot has been really successful in the U.S., and we're going to take that around the world now.

I'm also curious with the success of Instant Ink. Have you seen the -- any change within the usage of reman and refill on sort of leveraging third-party cartridges in Ink versus HP's prior product. Has there been a shift in that at all? And are you seeing more people now sticking with HP? And I think you also made some hardware changes that kind of -- from a business model perspective, we've got different options for consumers and some which are locks and which were kind of unlock, so to speak. So how is that playing out?

Well, I'd say, first of all, customers -- we've seen share growth in this space. And I think that has definitely been confirmed by the fact that customers like this model. The second piece I'd just add is that from a customer perspective, what really matters are things like security and sustainability. I think cyber incidences are up significantly this last year. So what you enjoy with HP Instant Ink model, for example, is absolute confidence in security in your product and your usage. There's no concerns that you would have because we invest heavily in R&D, in security, plus we have a very sustainable model as well. And so those factors combined, I think, drive customer loyalty to these types of programs and initiatives. And certainly, going forward, what we've seen is it's shown up in the results just in terms of supplies themselves. And you saw that in the last quarter.

Yes. I want to leave a couple of minutes to see if anyone in the audience has any questions, but please do wait for the mic. No, no. We are webcasting it. So Simon, I appreciate you.

Great. Thank you very much. I appreciate your. Maybe very quickly, AI theme. So how can we find AI function among your PCs? AI functions among your PCs.

Well, I would just say that there's actually AI embedded in many of our products that you're probably not aware of today. If you look at the cameras and the video that came from a lot of the Poly acquisition, there is significant amounts of AI embedded in the camera technology. In fact, I've sat in the room with the engineers and sort of just gone through the complex AI that you need to actually focus in on cameras, et cetera. So that's just one part of the portfolio. But I think that in terms of AI, there's a lot of interest today, but it's been out there for quite a long time, and as a company, we've been using AI, both in terms of efficiency for a number of years inside the company. And actually, it's been in many of our products, and that's just one example of where we'd used it.

Yes. To do so, you have to input a lot of them. Maybe Intel's new CPU, AMD's new CPU, or any extra components that you are adding these days? And also the -- how you're going to differentiate your PC versus Lenovo or Apple, lots of competitors there? So many people may say AI already [ commoditized ]. But your PC was a part of the commodity product, but you are saying value-added functions. So what could be the differentiation and which components you have to input more among your PCs?

I'd say 2 things. One, we have a relationship with all the silicon providers. And as a company, we strategically always done that. That in itself is a differentiator from some of our competitors, right, in terms of we prefer to have that ability to have that sort of wider net, let's just say, of relationships out there in the market. And I'd just say, secondly, in terms of AI, we're focused on what we can do to differentiate. As I said, with the camera technology, that's a lot of home-grown capability that's inside the company and it's been going on. It's not new. It's something that's not net new. It's been out there for a long time, and we're integrating it, and we're planning to integrate more of that into our product portfolio going forward, like I mentioned on the data science stack. So it's more a focus area that we may go in terms of verticals and then enabling the capability in those verticals so that we could have sort of deep penetration, for example, where data scientists need to be absolutely enable to have machines that are very, very fast and powerful. We see that as an opportunity. So for example, in rooms, we see it as an opportunity to enable much better productive technology in the room. So these -- this is how we're thinking about it in terms of AI. And then obviously, as I mentioned earlier, another area just in terms of sort of working at the Edge, what does that look like? No problem.

Any more questions? Well, we just have a couple of minutes left. So Marie, maybe, to wrap it up, I do want to ask you about free cash flow. And when you think about year-to-date free cash flow, it's not been very strong, obviously, kind of a tougher 1Q. But your free cash flow guide for the year remains unchanged, and you are still expecting post this last quarter, and you're still expecting pretty strong free cash flow for the remainder of the 2 quarters. What drives that? Is it something within the cash conversion cycle that you see significant improvement in? I do know, obviously, like your sequential growth in PCs is going to help you. But as you think through the confidence in that free cash flow and just having that unchanged despite the macro being so tough, can you just help us bridge that?

Yes. No, thank you very much. I think, first of all, pleased with the free cash flow in the last quarter, definitely better than expected. I'd say secondly, as you mentioned, we're expecting that sequential growth in Personal Systems. And just by way of background, the Personal Systems is a sort of negative drag on cash conversion cycle. So when we see sequential growth in Personal Systems, it translates into just much stronger cash flow. So that's one of the bigger drivers of the cash flow, and that's what really gives us confidence in the guide, which is why we reiterated the guide of 3% to 3.5% in the back half. I would say that we're also, at the same time, focused on operationally reducing our inventory levels. You've seen us do that quarter-on-quarter, but we're leaving the door open for economic opportunities around strategic buys, see shipments. Where it makes prudent economic sense, we'll make those trade-offs. But we're focused on as well as driving inventory down operationally as we sort of look forward to the year. So all of those factors combined really give confidence in the cash flow guide, Wamsi.

Yes. No, thank you, Marie. So to wrap it up, maybe it would be helpful if you could talk to investors about why this is a good point in time for investors to consider HP as an investment. I'd be remiss to say if I didn't mention the fact that, you're one of a few tech companies in which Warren Buffett has a huge stake. So yes, so well, maybe you want to just spend a minute wrapping that up?

Yes. And I was at Buffetts event the other day. So it was just an absolute pleasure, I might say, to watch Warren Buffett and Charlie Munger on stage. I know many of you have been to the event, but it is just incredibly impressive to see those 2 individuals. And we enjoy very much that relationship. And I'd say from an investor perspective about why HP, I think, one, we're building a stronger HP. I think we're focused on controlling the things we can control in a tough macro. And we've continued to beat expectations that we've set. We've basically done what we've said we were going to do despite the tough economic environment. And finally, there are -- when the macro returns, we've used this time to invest in growth, and you've seen that across the portfolio, whether it's investing in hybrid assets that are going to expand beyond just the PC with the peripheral into areas like rooms that I mentioned earlier or on the Print side, where we've shifted the model quite significantly and continue to do so to subscription and then services. And I think all of that gives us absolute confidence in the future. And then our strategy, frankly, is working. So thank you.

Thank you, Marie. Thank you so much for being here today. Thank you.

Thank you, Wamsi. Appreciate it. Pleasure. Thank you.