Hp Inc Q1 FY2024 Earnings Call

Good day everyone and welcome to the First Quarter 2024 HP Incorporated Earnings Conference Call. My name is Krista and I'll be your conference moderator for today's call. At this time all participants will be in a listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference. As a reminder, this conference is being recorded for replay purposes. I will now turn the call over to Orit Keinan-Nahon, Head of Investor Relations. Please go ahead.

Good afternoon, everyone. And welcome to HP's first quarter 2024 earnings conference call. With me today are Enrique Lores, HP's President and Chief Executive Officer, and Tim Brown, HP's Interim 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 webpage 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 all for joining today's call. Let me begin by saying it was a solid start to the year. We delivered non-GAAP operating profit and non-GAAP EPS growth year-over-year, and our future ready plan is positioning us well to deliver on our long-term growth targets. I'm going to focus my remarks today on our first quarter performance, our progress against key strategic priorities, and our expectations for the market for the balance of 2024. I will then turn the call over to Tim for a deeper dive into our financials and outlook. Starting with our results, we are managing through a volatile external environment that continues to impact demand across our industry. This is reflected in our top line with net revenue down 4% year-over-year. It's worth noting that the rate of revenue decline slowed for the third straight quarter, which we see as an encouraging sign of market stabilization. We continue to make progress in our key growth areas. We're maintaining our investments in a down market to strengthen our competitive position and there are several bright spots this quarter. We grew revenue and market share year-over-year in gaming. Our Solutions delivered solid revenue growth and won several new accounts, including large global companies in the energy, retail, and telecommunication sectors, and we drove continued momentum in consumer subscriptions with Instant Ink delivering another quarter of revenue and net subscriber growth year-over-year. Alongside the progress we are making in our growth areas, we are also driving disciplined execution across the business. Non-GAAP operating profit dollars grew 5% year-over-year, and we delivered 11% non-GAAP EPS growth, which was right at the midpoint of our last quarter's guidance. This reflects our focus on managing our mix, reducing our costs, and maximizing operational efficiencies, and we remain well on track to deliver on our three-year gross annual run rate structural cost savings target of $1.6 billion by fiscal year '25. Q1 was also a quarter of strong innovation across our portfolio. I'm particularly pleased with the progress we are making on the company-wide AI strategy we shared with you previously. As you will recall, we are focused on creating new product categories, expanding our digital services and solutions and driving internal productivity. We took a big step forward this quarter at CES, where we launched our first laptops using Intel's new core ultra processors. This launch helped us to win over 100 innovation awards at CES. More importantly, this is just the start of what will be an exciting year for AI PC innovation as we bring new products to market with our silicon and software partners in the coming quarters. Alongside the PC opportunity, we continue to develop new AI applications to run on top of our installed base of more than 200 million commercial devices. The best example of this is the workforce central platform we have discussed with you previously. We have since expanded and renamed the offering, which we now refer to as the HP Workforce Experience platform. It integrates data and telemetry from our PC, printer, and poly devices into a single dashboard to improve productivity, security, and collaboration, and it is now available to all of our managed solution customers. We're also shifting more of our offerings to subscriptions in the consumer segment. This week, we will be launching our HP all-in subscription plan, which we previewed with you at our Investor Day last October. For a monthly fee, consumers will receive a printer, delivery, premium 24/7 support, and an option to upgrade their hardware every two years. This has tested extremely well in our pilots, with customer satisfaction exceeding Instant Ink's already high scores. All of this gives us great momentum heading into our Amplify Partner Conference next week. Amplify is our largest channel event of the year, drawing our top 1,500 commercial resellers from around the world. We will have several of our top silicon and software partners with us to discuss the AI-PC opportunity. And we will be launching a range of new innovations across personal systems, print, and workforce solutions. In addition to our innovation, I'm really excited about the work we are doing to elevate the HP brand. To lead this work, I am pleased that Antonio Lucio, who joined HP last month as our Chief Marketing and Corporate Affairs Officer. Antonio was our first CMO following the creation of HP Inc. in 2015. Under his leadership, we strengthened our reputation as one of the world's most trusted brands. You will see us launching new brand campaigns that are globally scalable and locally relevant. For example, earlier this month, we announced a multiyear deal with Real Madrid football club, which has millions of fans and more than 0.5 billion followers on social media. Real Madrid is one of the most loved brands, and as the club's newest technology partner, we will be collaborating to create new fun experiences. We also recently announced a global collaboration with Riot Games, one of the world's top game developers, and we will be working with them to develop future gaming products, technical innovations, and co-branded marketing campaigns. Underpinning all of this, we are continuing to advance our sustainable impact strategy, which continues to drive innovation and help us win new deals. I was proud to see HP ranked number 13 on this year's list of America's most just companies from Just Capital and CNBC. This was our fifth straight year on the list and our highest ever ranking, up 34 spots year-over-year, putting us in the top 2% of companies measured. Let me now provide some additional color on our business unit performance. The external environment remains dynamic. In Consumer, we anticipate that a post-holiday slowdown was a bit more pronounced than initially expected. Commercial customers remain cautious. While we saw signs of stabilization in the SMB and education markets, we saw a slowdown in U.S. enterprise and federal sales, especially in the month of January. We also continue to see demand weakness in China due to challenging economic conditions, partially offset by strength in India. Personal Systems net revenue was $8.8 billion in the quarter, that's down 4% year-over-year or 5% in constant currency, reflecting market dynamics and seasonality. Consistent with the industry estimate, we continue to expect the PC market to grow low-single-digits in 2024 and we expect to grow at least in line with the market. Our PS team continued to show resilience and operational rigor, delivering operating profit of 6.1%, which was solidly within our long-term target range, but slightly below our expectations. Importantly, we once again gained PC share in calendar Q4, both year-over-year and quarter-over-quarter. This shows that HP innovation is winning in the market, and we are winning in the right areas with a focus on high-value segments such as premium workstations and gaming. Print services revenue was up year-over-year with strong growth in digital services. While hybrid systems remain impacted by the current enterprise spending environment, we are investing in the portfolio for differential market recovery and long-term growth opportunity. Turning to Print. Net revenue was $4.4 billion, down 5% year-over-year, reflecting market headwinds, China softness, and the aggressive pricing environment. I am pleased with the progress we are making on pricing and share gains in supply. We continue to effectively manage our costs and mix between consumer and commercial, with operating profit of 19.9%. We're also making progress on our efforts to regain profitable share. We gained share in big tanks, both year-over-year and sequentially, and we drove sequential share gains in the office in parts of Europe, India, and China. We're also pleased with our progress in industrial graphics and 3D, both of which grew revenue year-over-year in Q1. We also saw continued recovery in labels and packaging, and we are ramping up for Drupa in May. Held every four years, this is the world's largest printing event, where we will launch a range of new innovations to accelerate our momentum in the market. Consistent with the capital allocation strategy we have shared with you previously, we resumed share repurchases in Q1, and we plan to remain active in the market for the remainder of the year. Let me now close by providing some insight into how we see the market for the balance of the year. Despite pockets of softness in Q1, we saw signs of improvement overall. While we expect the pace of recovery to be uneven across different segments, we remain confident in our ability to deliver on our full year non-GAAP EPS and free cash flow targets. As we said before, we expect performance in the second half of fiscal year '24 to be seasonally stronger than the first half. By remaining focused on things we can control and investing in our future, we have proven our ability to navigate current market dynamics while capitalizing on long-term growth opportunities. This is exactly what we did in Q1, and it what you can expect from us moving forward as we drive progress against our future trade plan. I now want to introduce Tim Brown. As you know, he took over as our interim CFO in January. For those of you that don't know, Tim is one of HP's most successful and respected financial executives. He has over 30 years of HP experience, including as CFO of Print and Personal Systems, and he is a steady hand on the wheel while we complete our CFO search process. Tim, thank you for your leadership, over to you.

Thank you, Enrique, for the kind introduction. It's great to be with you all today. We are pleased with the progress we made during Q1 toward delivering on our financial commitments this year. On a year-on-year basis, our revenue declines continued to slow sequentially, consistent with the stabilizing trends we expected heading into the year. Non-GAAP operating profit dollars grew, margins expanded in both Personal Systems and Print, and non-GAAP EPS grew double digits. We remain on track with our future-ready plan to achieve our gross annual run rate structural cost savings target for this year and continue to reinvest these savings in our growth areas. We also returned a significant amount of capital to shareholders as we actively repurchased shares during the quarter. Top line results were impacted by lower market TAMs in both Personal Systems and Print. We saw cautious commercial demand as macro challenges persisted and a bit more pronounced slowdown than initially expected in consumer following Q4. As Enrique said, HP remains focused on executing each quarter while also driving long-term shareholder value. Our overall results reflect disciplined financial management and investment for sustainable profitable growth, all while navigating a dynamic and competitive environment in the near term. We will continue to manage our business prudently while seizing opportunities to improve our market position as we continue to execute on our plan to deliver our fiscal year commitments. Now let me give you a closer look at the details. Net revenue was $13.2 billion in the quarter, down 4% nominally and 5% in constant currency, driven by declines across each of our regions. In constant currency, Americas declined 7%, EMEA declined 2%, and APJ declined 7%. APJ was impacted as soft demand in China continued. Gross margin was 21.9% in the quarter, up 1.7 points year-on-year primarily due to improved commodity and logistics costs and cost savings, partially offset by competitive pricing. Non-GAAP operating expenses were $1.8 billion or 13.5% of revenue. The year-over-year increase in operating expenses was driven primarily by investments in growth initiatives and higher marketing expenses, partially offset by lower variable compensation and structural cost reductions. Non-GAAP operating profit was $1.1 billion, up 5%. Non-GAAP net OI&E was $144 million, down primarily due to lower interest expense driven by a decrease in debt outstanding. Non-GAAP diluted net earnings per share increased $0.08 or 11% to $0.81, with a diluted share count of approximately 1 billion shares. Non-GAAP diluted net earnings per share excludes a net expense totaling $186 million, primarily related to amortization of intangibles, restructuring and other charges, acquisition and divestiture-related charges, and other tax adjustments. As a result, Q1 GAAP diluted net earnings per share was $0.62. Now let's turn to segment performance. In Q1, Personal Systems revenue was $8.8 billion, down 4% or 5% in constant currency, driven by soft demand and an unfavorable mix shift, partially offset by market share gains in both consumer and commercial, including categories such as premium notebooks and workstations. Total units were up 5% with consumer up 10% and commercial up 2%. Year-over-year growth rates for units and revenue improved sequentially in both consumer and commercial as stabilizing trends continued, consistent with our outlook for a PC market recovery this year. Drilling into the details, commercial revenue was down 5% and consumer down 1%. ASPs were flat quarter-over-quarter, driven by a favorable mix, including improved commercial premium mix offset primarily by an unfavorable mix shift in consumer. We remain focused on driving profitable revenue and share growth in both our consumer and commercial markets. Personal Systems delivered $537 million of operating profit with operating margins of 6.1%. Our margin increased 0.9 points year-over-year, primarily due to lower commodity and logistics costs and cost savings. This was partially offset by pricing and investments in growth areas. Sequentially, our operating margin declined primarily due to higher commodity costs and marketing expenses, offset in part by favorable mix towards our commercial business segment. In Print, we remain focused on improving our execution and driving rigorous cost management as we navigate a challenging and competitive print market. In Q1, total Print revenue was $4.4 billion, down 5%, both nominally and in constant currency. The decline was driven by declines in hardware. Hardware revenue was down 19%, driven by lower volumes attributable primarily to continued weak demand in China and Greater Asia and share loss largely due to aggressive pricing by our Japanese competitors. Total hardware units decreased 17% year-over-year. Industrial Graphics grew revenue again this quarter, driven by hardware, supplies and services. By customer segment, commercial revenue decreased 12% with units down 18%. Consumer revenue decreased 22% with units down 15%. The market for big tank printers continues to increase sequentially, partially offsetting continued soft demand and aggressive pricing in the traditional home ink market. In Consumer Services, Instant Ink revenue and subscribers continued to grow year-over-year. Total subscribers now exceed 13 million, including more than 700,000 subscribers to our Instant paper add-on service. Supplies revenue was $2.9 billion, flat on a reported basis and up 1% in constant currency, primarily driven by favorable pricing actions, share gains, and an easy compare, partially offset by a lower installed base. Print operating profit was $872 million, essentially flat year-over-year and operating margin of 19.9%. Operating margin increased 1 point, driven by lower hardware volumes, cost improvements, including lower variable compensation and supplies pricing, partially offset by hardware pricing headwinds. Regarding our structural cost-saving initiatives, we continued the momentum we had exiting FY '23, making progress in Q1 against our year two goals of our three-year plan. We are on track to deliver on our $1.6 billion gross annual run rate structural cost savings goal exiting 2025, including achieving approximately 30% of those savings in FY '24. Recall that we expect to generate these savings across both our cost of sales and OpEx line items, enhancing our margin performance and enabling investments in our key growth areas. Consistent with previous quarters, we continue to benefit from portfolio simplification initiatives in both Personal Systems and Print, digital transformation, automation, and process improvements, leveraging our AI capabilities and structural cost reductions across our business. We still expect to incur one-time restructuring costs of approximately $1 billion over the term of our plan, including approximately $0.3 billion of primarily cash charges in the fiscal year '24. Now let me move to cash flow and capital allocation. Q1 cash flow from operations was approximately $120 million and free cash flow was $25 million. Our results were impacted by normal seasonality associated with the timing of variable compensation payments and sequentially lower volumes in Personal Systems. The cash conversion cycle was minus 29 days in the quarter. This increased three days sequentially due to days of inventory increasing four days, days payable decreasing one day and days receivable decreasing two days. The increase in DOI was driven primarily by an increase in strategic buys and shipments during the quarter, partially offset by our progress on optimizing our operational inventory, as we have discussed in the past. In Q1, we returned approximately $775 million to shareholders, including $500 million in share repurchases and $275 million in cash dividends. We continue to prudently manage our leverage ratio and finished the quarter within our target leverage range. We resumed share repurchases in Q1, and we expect to return 100% of our FY '24 free cash flow to shareholders. As we have previously stated, we are committed to returning 100% of our free cash flow to shareholders over time, as long as our gross debt-to-EBITDA ratio remains below 2 times, and unless higher ROI opportunities arise. Looking forward to Q2 and the rest of FY ‘24, we expect the macro and demand environments will remain challenged and that our customer end markets will continue to be very competitive. We remain focused on rigorously managing costs, improving our performance, and investing in growth. Specifically, keep the following in mind related to our FY '24 and Q2 financial outlook. Given the challenging macro environment, we are modeling multiple scenarios based on several assumptions. For FY '24, we continue to see a wide range of potential outcomes, which are reflected in our outlook ranges. Consistent with the view we shared in November, we expect the performance in the second half of fiscal '24 will be seasonally stronger than the first half. Regarding OI&E expense, we continue to expect it to be approximately $0.7 billion in FY '24. We continue to expect free cash flow to be in the range of $3.1 billion to $3.6 billion in FY '24, with the second half of the year stronger than the first. Our free cash flow outlook does include approximately $300 million of restructuring cash outflows. Turning to Personal Systems, we continue to expect the overall PC market unit TAM to recover over the course of this year, increasing by a low-single-digit percent. Specifically for Q2, we expect Personal Systems revenue will decline sequentially by a high-single-digit amount, in line with typical seasonality. We expect Personal Systems margins to be solidly within our long-term target range in Q2 as the PC market continues to recover, and strong cost management and pricing actions helped to offset rising commodity costs. For FY ‘24, we expect margins to be solidly within our long-term target range, driven by improved PC market demand, a seasonally stronger second half of the year, and continued mix improvements, partially offset by higher commodity costs. In Print, we expect consumer demand will remain soft and pricing competitive, while market uncertainty continues to impact our commercial print business. Disciplined cost and mix management should help to partially offset these trends, driving flattish revenue sequentially in Q2 below typical seasonality. We expect Q2 supplies revenue to be down mid-single-digit in constant currency, and we still expect Supplies revenue will decline low to mid-single-digits for the year. Quarterly results can vary. For Q2, we expect print margins to be at the high end of our 16% to 19% range and solidly within the range for FY '24. We continue to focus on driving print operating profit dollars through new business models and rigorous cost management, including future-ready transformation savings. Taking these considerations into account, we are providing the following outlook for Q2 and fiscal year 2024. We expect second quarter non-GAAP diluted net earnings per share to be in the range of $0.76 to $0.86, and second quarter GAAP diluted net earnings per share to be in the range of $0.58 to $0.68. We expect FY ‘24 non-GAAP diluted net earnings per share to be in the range of $3.25 to $3.65 and FY '24 GAAP diluted net earnings per share to be in the range of $2.61 and $3.01. In closing, we started off our new fiscal year making solid progress against our strategic objectives and full year commitments while managing through demand and competitive challenges that have persisted in the current dynamic environment. We remain focused on disciplined execution and cost management and are confident that we have the right people, the right assets, and the right strategy to deliver for both our customers and our shareholders for the long term.

Thank you. And we will now begin the question-and-answer session. And our first questioner today will be from Samik Chatterjee from JPMorgan. Please go ahead.

Hi, thanks for taking my question. Just to clarify, you outlined expectations for the year outlined seasonally strong second half to be the driver of your full year guidance. Can you elaborate on that by geography or market segment to decide where you expect to be stronger in the second half? Thank you.

Of course, thank you, Samik, for the question. As we noted in our prepared remarks, we are expecting a stronger second half than the first half of the year, and there are multiple drivers for that. First, we expect some recovery in the commercial space. Second, traditional seasonality indicates consumer performance is typically stronger in the second half. Additionally, we will see more impact from all of our cost reduction efforts that will have a bigger effect in the second half. Regarding different segments in the PC space, we also expect to see an impact from the Windows refresh that will be happening in the coming quarters, and it will have a positive effect. On the print side, especially in commercial and industrial segments, we also expect to see some recovery.

Your next question comes from the line of Wamsi Mohan from Bank of America. Please go ahead.

Yes, thank you. Enrique, regarding the share gains you noted earlier, what would you attribute them to, particularly given the aggressive pricing environment and a weak period for print hardware? What levers are you using for these share gains?

Sure. The dynamics vary slightly by segment. On the big tank side, we've completed our portfolio, which now includes a comprehensive lineup from low-end to products working on the home office side. As we launched that into different markets, we are starting to see the impact of our innovation. On the office side, a few quarters ago, we acknowledged that we needed to address operational issues to regain market share. We have been actively working on that and started to see progress, particularly in regions like Europe, China, and India. Our goal is to continue to regain share in both categories.

Thank you.

Your next question comes from the line of Toni Sacconaghi from Bernstein. Please go ahead.

Yes, thank you. I wanted to follow-up on the expected strength in the second half. It appears you anticipate printing margins to decline notably in the second half. Given that approximately 65% of your profits are derived from that area, why are you optimistic about the second half, especially when considering your revenue projections?

Yes, let me take that, Toni. First from a general perspective on print, as you indicated, we expect to be at the high end of the margin range in Q2 and solidly within the range of 16% to 19% for the year. This is influenced by various factors. Although we are trying to drive our mix from a hardware perspective, we remain unchanged on our supply perspective, anticipating a decline in mid-single digits for the year. Our overall perspective expects the Personal Systems area to be seasonally stronger in the second half, which will contribute positively to the overall performance.

To clarify, when comparing the first half of fiscal '24 against fiscal '23, we forecast EPS growth around 7% in the first half. For the second half, we expect growth around 4% per our guidance. We do anticipate growth but at a slightly lower rate in the second half. We manage the company to grow operating profit dollars, not just solely based on margin guidance.

Thank you.

Your next question comes from the line of Brian Lu from UBS. Please go ahead.

Thank you for taking my question. What are the key drivers and milestones for AI-enabled PCs to gain traction with commercial customers? Do customers see value in these devices based on financial benefits?

Firstly, we remain very excited about the opportunity AI PCs bring in terms of customer value regarding security, latency, and cost. Milestones arise from hardware delivery, application availability from our partners, and training for both customers and sales teams. We are currently executing on all fronts. We project that three years post-launch, AI PCs will represent 40% to 60% of our total sales, with gradual growth expected. Impact will begin in '24 but will be larger in '25 and '26.

Your next question comes from the line of Erik Woodring from Morgan Stanley. Please go ahead.

Thank you for taking my question. Can you talk about the factors driving supplies performance in light of your four-box model? If we project that supplies growth is flat to growing and then anticipate a decline into mid-single digits later, what causes this projection?

Thank you, Erik. My answer will be similar to last quarter's discussion. It's best to monitor quarter-on-quarter comparisons for understanding supplies health as various factors come into play. We remain confident in our long-term projections for supplies to decline low to mid-single digits. This quarter, several factors influenced performance positively, including managing share growth, pricing adjustments, and an easy comparison due to prior declines in supplies. On the downside, we face negative impacts from usage and our shrinking installed base. Importantly, channel inventory is healthy.

Your next question comes from the line of Lauren Lucas from Evercore ISI. Please go ahead.

Could you discuss what gives you conviction for the expected recovery in the commercial space given the weaknesses seen in Q1?

Certainly. I want to begin by recognizing that our expectations align with those from industry analysts and other key industry players. Factors include the anticipated Windows refresh cycle, having a more significant impact in the second half, stable growth seen in SMB and education markets, and recent growth in Europe on the PC side. Although certain areas like China and the federal business in the U.S. are showing weakness, we still believe the overall market will improve in the second half.

Your next question comes from the line of Asiya Merchant from Citigroup. Please go ahead.

Could you elaborate on your peripherals business and how it tracks, along with the performance of your growth portions at the start of fiscal '24?

Sure. The peripherals business has been slightly impacted by the caution we've seen in the commercial market. As the commercial market recovers, we expect peripherals to rebound as well. We are continuing to invest in innovations within these categories as we view them as strong long-term growth opportunities. I'm pleased to share that several of our growth areas improved in Q1, indicating positive momentum. Both our Workforce Solutions and Consumer Services businesses saw year-over-year growth, which is crucial given their strategic importance for our future.

Your next question comes from the line of Mike Ng from Goldman Sachs. Please go ahead.

I want to follow-up on the Personal Systems pricing. What drove the pricing dynamics in the quarter, and what is the outlook for ASP for HP versus the industry for the full year?

Let me clarify. In Q1 performance, PC prices remained stable due to commercial demand. Commercial prices saw a slight rise while consumer prices faced downward pressure mainly in low-end portfolios, influenced by market softness. Moving forward, we expect an increase in PC prices due to rising commodity costs and a favorable mix towards commercial demand.

Your next question comes from the line of Krish Sankar from TD Cowen. Please go ahead.

I have a question regarding the print business. Are you seeing the pricing pressure experienced by your Japanese competitors applied to commercial and supply hardware?

So far, the pricing pressure is mainly on the consumer side. This trend mirrors what we discussed last quarter. The exchange rate dynamics are benefitting certain competitors, particularly in consumer categories. We have intentionally avoided pursuing unprofitable consumer deals. In contrast, the commercial side has shown more stability, with minor risks factored into our modeling, which is included in today's guidance.

Your next question comes from the line of Aaron Rakers from Wells Fargo. Please go ahead.

Hi, I was hoping you could provide additional context on your industrial graphics business. It appears you're seeing some momentum there. How do you see it progressing throughout the year?

Yes. We've started to observe positive momentum in our industrial graphics business, particularly within the labels and packaging sector. We're preparing for the Drupa event in May '24, a significant four-year printing industry showcase. We're set to unveil several new products and services there, anticipating a beneficial impact in the periods following the event. Overall, we are optimistic about the graphics segment moving into '24.

That concludes the question-and-answer session today. I will now turn the call back over to Enrique Lores for closing remarks.

Thank you all for joining today. To conclude, Q1 was a solid quarter and a strong start to the year, where we saw both operating profit and EPS growth. We remain positive about the outlook provided a few months ago regarding the remainder of the year, anticipating continued growth in the second half. We are confident about the long-term opportunities that AI and hybrid work present for us as we launch new innovations. Thank you again for your participation, and we look forward to staying in touch in the future.

This concludes today's conference call. Thank you for your participation, and you may now disconnect.