HP Inc. (NYSE:HPQ) Q3 2023 Earnings Call Transcript

HP Inc. (NYSE:HPQ) Q3 2023 Earnings Call Transcript August 29, 2023

Operator: Good day, everyone, and welcome to the Third Quarter 2023 HP Inc. Earnings Conference Call. My name is Sarah, and I will be your conference moderator for today’s call. At this time, all participants will be in a listen-only mode. We will be facilitating a question-and-answer session towards the end of the conference. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Orit Keinan-Nahon, Head of Investor Relations. Please go ahead.

Orit Keinan-Nahon: Good afternoon, everyone, and welcome to HP’s third quarter 2023 earnings conference call. With me today are Enrique Lores, HP’s President and Chief Executive Officer, and Marie Myers, HP’s Chief Financial Officer. Before handing the call over to Enrique, let me remind you that this call is a webcast, and a replay will be available on our website shortly after the call for approximately one year. We posted the earnings release and accompanying slide presentation on our Investor Relations web page at investor.hp.com. As always, elements of this presentation are forward-looking and are based on our best view of the world and our businesses as we see them today. For more detailed information, please see disclaimers in the earnings materials relating to forward-looking statements that involve risks, uncertainties and assumptions.

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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.

Enrique Lores: Thank you, Orit. And thank you, everyone, for joining the call today. When we spoke last quarter, we said that our second half performance would be stronger than the first half. We outlined a clear plan to drive sequential improvement and this is exactly what we delivered in Q3. We grew net revenue, non-GAAP operating profit, non-GAAP EPS and free cash flow quarter-over-quarter in a tough market environment. And our Future Ready plan is enabling continued progress against our long-term growth priorities while driving structural cost savings. Today, I’m going to spend a few minutes recapping Q3. I will then talk about the market dynamics we see in each of our business units. And I will close by sharing my thoughts on the external environment heading into Q4 before handing the call to Marie.

Starting with our results, net revenue was $13.2 billion. That’s down 10% year-over-year or 7% in constant currency. Even so, third quarter net revenue was up 2% sequentially despite macro headwinds continuing to impact demand across the industry. We also made good progress in our key growth areas. While these businesses are not immune to [covering] (ph) market challenges, collectively, they delivered solid sequential growth in the quarter. This reflects the power of the portfolio we are building to meet a wider range of customer needs. And we are continuing to invest in these areas to strengthen our position and accelerate our momentum. We remain on track to deliver at least 40% of our three-year structural cost savings target by the end of this fiscal year.

And I want to thank all of our teams for driving disciplined execution and cost management across the business. Because of their work, we delivered non-GAAP EPS of $0.86. This is at the midpoint of our previously provided guidance and was up 9% sequentially. As we reduce our structural cost, it’s enabling sustained investment and innovation aligned with our long-term growth priorities. At SIGGRAPH, we launched our new Z4 Rack workstation for data scientists, content creators and engineers. With the option of our HP Anyware remote computing software, users can access the high performance power of the Z4 from any device. At Computex, we introduced our next-gen HyperX Cloud III gaming headsets, which creates immersive audio experiences for gamers.

We unveiled our new Poly Studio video solution for hybrid meeting rooms. It runs on AI-driven software that automatically detects and frames participants to enable a better experience between people in the room and colleagues connecting remotely. And we launched HP SitePrint, an innovative robotic solution that empowers workers to print the most complex construction site layout with pinpoint accuracy while achieving 10 times their productivity. I am even more excited about the progress we are making with our silicon and software partners to co-engineer new platforms that run generative AI at the edge. As I mentioned last quarter, this is a massive opportunity for PC reinvention. Being able to run AI applications locally enables lower latency as well as more robust security and privacy protection.

I am very pleased with pipeline of innovation our teams are building, and we view this as a significant driver of PC refresh in 2024 and beyond. We will be unveiling a wide range of new products and services at our first-ever HP Imagine event on October 5. This is a moment for us to showcase innovation across our portfolio, and I invite you all towards the live stream. Last quarter, we also released our annual Sustainable Impact Report. It outlines the progress we have made against our climate action, human rights and digital equity goals. We have now reduced our absolute carbon footprint by 18% since 2019. And we achieved our goal to enable better learning outcomes for 100 million people three years ahead of plan. I hope many of you were able to watch our webcast on these topics earlier this month.

This work has a positive impact on our communities and helps us to win business. Let me now turn to our business unit performance. Starting at the macro level, we continue to navigate an uneven environment, including FX headwinds. From a customer segment perspective, the picture is somewhat mixed. We are seeing enterprise spending remain cautious, with a rising cost of capital being a notable factor. The SMB segment is showing resilience. And in consumer, we continue to see softness in discretionary spending. Geographically, we see various dynamics playing out in different parts of the world. Most markets are experiencing some weakness, although at different levels. For example, we saw a downturn in the China market, where demand is not even yet back in the lower GDP recovery.

Personal Systems revenue was $8.9 billion in the quarter. That’s down 11% year-over-year or 8% in constant currency. Even so, we saw a significant improvement this quarter with PS revenue up 9% sequentially. This reflects back-to-school demand as well as higher unit volume resulting in share gains. Our PS operating margin was strong at 6.6%. Operating profit dollars grew sequentially, driven by higher volume, our disciplined cost management and structural cost reduction. We also gained share in both Commercial and Consumer while still focusing on profitable share. Year-over-year, we gained 2.9 share points while retaining our number one position in Commercial. Gaming saw a significant recovery with double-digit sequential growth. And PS services TCV grew strong double digits sequentially and year-over-year.

Turning to Print, revenue was $4.3 billion. That’s down 7% year-over-year or 5% in constant currency. We continue to see soft demand, particularly in China as well as aggressive pricing in the consumer print market and delayed enterprise spending in the industrial space. Supplies revenue was broadly flat year-over-year in constant currency, in line with our expectations. We delivered Print operating margin of 18.6%. This reflects our disciplined cost management as well the work we are doing to rebalance overall system profitability. For example, this quarter, about 60% of our shaped units where HP+ enabled or profit upfront big tank printers. And Instant Ink once again grew revenue and new enrollees year-over-year. We also see opportunities to improve our Print performance.

We are specifically focused on regaining profitable share and improving our performance in office through stepped-up execution. And given the competitive environment in home printing, we need to improve our cost structure to maintain long-term profitability. Turning to our Industrial business. The graphics and 3D markets continue to be impacted by macro environment and delayed ordering cycles. That said, they remain important parts of our plan to drive long-term growth and value creation, and we continue to innovate to strengthen our position. I also want to acknowledge the continued progress we are making in our workforce services and solutions business. We delivered solid growth in the quarter, both year-over-year and sequentially. And we are building a strong funnel as we spend time introducing our newly integrated portfolio of services with customers.

We are very encouraged by the opportunities to grow this business moving forward. Overall, Q3 was a solid quarter, given current market conditions. Our Future Ready plan is on track. We’re investing in innovation and making good progress against our long-term growth priorities, and we are doubling down on execution across every facet of our business. This is important as we expect the market to remain challenging in Q4. The macro situation is not improving as quickly as anticipated. And while we expect to deliver another quarter of sequential growth, we are moderating our expectations for Q4 and the full year, consistent with the revised market outlook. This outlook is largely driven by the continued aggressive pricing environment in PCs, sluggish demand in China and enterprise demand [Technical Difficulty].

Notwithstanding the actions we are taking to mitigate these headwinds, we believe it’s prudent to lower our outlook based on near-term market reality. Let me be clear. We will use this moment as an opportunity to double down on the things we can control. We have already begun identifying additional opportunities to further reduce our cost structure where we believe we can overdeliver on our cost saving target. This is certainly not the first time we have had to adapt market volatility. It’s something we have been doing consistently over the past few years. We know how to manage the business through this situation. And we have a strong track record, taking actions that protect our profitability and free cash flow, which is what you can continue to expect from us.

And while we clearly have some additional work to do in the near term, we remain confident in our long-term trajectory. We have consistently said that progress won’t always be linear, but we are focused on what we can control and driving disciplined execution to unlock value. We will also continue to execute the capital allocation strategy we have shared previously. We are committed to returning 100% of free cash flow to shareholders over time unless opportunities with a better return on investment arise and as long as our gross leverage ratio remains under two times EBITDA. I’m looking forward to seeing many of you in Palo Alto in October for our Securities Analyst Meeting. As many of you know, this was an event we hosted each fall prior to 2020.

We hosted it virtually in 2021 and it will be great to be back together in person. We will use the meeting to share more detail on the progress we are making against our Future Ready plan, including some of the opportunities we see to accelerate our digital transformation and structural cost reduction. We will also highlight exciting innovation across the HP portfolio. And we will talk a lot about the significant long-term opportunities we see to deliver long-term sustainable growth and value creation. With that, let me stop here and turn the call over to Marie to discuss our results and outlook in more detail.

Marie Myers: Thank you, and good afternoon, everyone. We delivered positive results in Q3 and continued to build on the progress we made during the first half of the year despite the challenging macro environment. We have increased our non-GAAP operating profit and non-GAAP EPS sequentially over the course of the year in line with our outlook. In Q3, our Personal Systems business drove high single-digit sequential revenue growth, which in turn helped drive strong free cash flow performance in the quarter. We successfully completed a debt tender exceeding $1.1 billion late in the quarter that reduced our gross leverage ratio as planned. And our Future Ready transformation plan is on track to achieve at least $560 million in gross annual run rate structural cost savings this year.

While there are pockets of our business where we are working to improve our execution, we made good progress during the quarter. Now let’s take a closer look at the details of the quarter. Net revenue was $13.2 billion in the quarter, down 10% nominally and 7% in constant currency, driven by the declines across each of our regions. In constant currency, Americas declined 8%, EMEA declined 5% and APJ declined 9%, driven by weakened demand in China. Gross margin was 21.4% in the quarter, up 1.7 points year-on-year, primarily due to lower component and logistics costs in Personal Systems and favorable mix, partially offset by currency and competitive pricing across both of our businesses. Non-GAAP operating expenses were $1.7 billion or 12.6% of revenue.

The increase in operating expenses was driven primarily by the Poly acquisition and investments in growth initiatives, partially offset by disciplined cost management, including Future Ready structural cost savings. Non-GAAP operating profit was $1.2 billion, down 15.1%. Non-GAAP net OI&E expense was $143 million, down sequentially due to lower short-term financing activity and up year-on-year primarily due to higher interest expense, driven by an increase in both debt outstanding and interest rates as well as higher factoring expenses. Non-GAAP diluted net earnings per share decreased $0.17 or 17% to $0.86 with a diluted share count of approximately 1 billion shares. Non-GAAP diluted net earnings per share excludes a net expense totaling $93 million, primarily related to restructuring and other charges, amortization of intangibles, acquisition and divestiture-related charges and other tax adjustments, offset partially by the debt extinguishment benefit and nonoperating retirement-related credits.

As a result, Q3 GAAP diluted net earnings per share was $0.76. Now let’s turn to segment performance. In Q3, Personal Systems revenue was $8.9 billion, down 11% or 8% in constant currency. Total units were up 3%. Sequentially, revenue was up 9% and total units were up 21% with Commercial up 17% and Consumer up 28%. Improved sequential demand was driven by seasonal strength with back-to-school demand. We also saw continued commercial enterprise softness driven by cautious spending and delayed purchase decisions. We improved our overall market share in calendar Q2 on both a year-over-year and sequential basis, driven by gains in both Commercial and Consumer markets. We continued to see Commercial representing approximately 70% of our revenue mix for the quarter.

Our strategy remains focused on driving profitable share growth. Our channel inventory levels are normalizing. However, our estimate is that the industry-wide channel inventory continues to remain elevated. As a consequence, ASP pressures offset volume growth, accounting for year-over-year revenue decline in Personal Systems in the quarter. Drilling into the details. Consumer revenue was down 12% and Commercial was down 11%. Increased competitive and promotional pricing drove ASPs lower, partially offset by contributions from hybrid systems revenue and higher unit volumes resulting in share gains. We increased our market share in higher-value premium categories, including Commercial Windows and Gaming. Personal Systems delivered almost $600 million of operating profit with operating margins of 6.6%.

Our margin declined 0.1 points year-over-year, primarily due to increased pricing competition, mix, currency and higher OpEx due to the Poly acquisition. This was partially offset by lower costs, including commodity costs, structural cost savings and logistics expense. In Print, our results reflect our continued focus on key initiatives as we navigated the challenges of a softer and increasingly competitive print market. In Q3, total Print revenue was $4.3 billion, down 7% nominally or 5% in constant currency. The decline was driven by soft demand in both Consumer and Commercial, market share [Technical Difficulty] currency and lower supplies revenue. Hardware revenue was down $256 million, driven by lower volumes, primarily due to China market softness and aggressive pricing competition as our Japanese competitors have leveraged the weaker yen to their advantage.

Total hardware units decreased 19%, driven by softer print demand in both home and commercial. Industrial graphics revenue, particularly hardware, remains pressured by persistent soft enterprise demand with the greatest impact seen in Europe. By customer segment, Commercial revenue decreased 6% or 5% in constant currency with units down 8%. Consumer revenue decreased 28% or down 26% in constant currency with units down 20%. ASPs were down year-over-year, driven by the promotional and competitive pricing and currency, offset partially by a favorable mix in both Consumer and Commercial. Supplies revenue was $2.8 billion, declining 2% nominally and roughly flat at constant currency, in line with expectations. The decline was driven by demand softness, particularly in China, lower usage and a lower installed base.

This was offset partially by pricing actions earlier in the year and share gains [internally] (ph). Print operating profit was approximately $800 million, down 12% year-on-year, and operating margin was 18.6%. Operating margin decreased 1.2 points, driven by competitive pricing and unfavorable currency, partially offset by structural cost savings and favorable mix. I would also like to note that we recorded accounting adjustments primarily related to a revenue contract in our Personal Systems segment. This has been reflected in our prior quarter compares which I just covered. It was not material to any of our previously filed financial statements and does not impact our current quarter results. We continue to make strong progress on our Future Ready transformation in Q3, and we expect to deliver at least 40% of our three-year gross annual structural run rate savings target of $1.4 billion for FY ’23.

As I’ve mentioned previously, we are working on a range of programs, which should enable us to achieve and potentially exceed key milestones for reducing costs across our business. Given the dynamic in Print, we are building the plan to accelerate cost reductions in that business. Let me update you on our progress in Q3. A key pillar of our transformation plan is focused on simplifying our product portfolio, significantly reducing the number of platforms we support to drive agility and operating leverage. We’ve made great progress in Personal Systems as the actions we’ve taken have positively impacted our Q3 operating profit rate performance. Specifically, we continue to make great progress standardizing our Personal Systems platforms. At the end of Q3, we were nearly halfway to our goal of reducing our total number of Personal Systems platforms by approximately one-third by the end of FY ’24.

In addition, we continue to reduce our commodity complexity, decreasing the number of client SKUs in our Personal Systems portfolio. In addition, we continue to look for new opportunities to reduce our cost structure across the organization. In Q3, for example, we optimized our media spend by consolidating our marketing programs and expanding our in-housing model further. We expect marketing will continue to deliver additional savings in headcount productivity and cost optimization as we unlock new digital solutions. We are aggressively pressing forward with our AI agenda to reinvent various functions inside the company to accelerate both our products and productivity. We are enhancing our software coding practices to accelerate code development to improve speed, efficiencies and quality reviews.

We are also leveraging our telemetry data to proactively address customer needs and to provide tailored recommendations and solutions to improve their efficiency and productivity. Shifting to cash flow and capital allocation. Q3 cash flow from operations was solid at $1 billion, and free cash flow was approximately $900 million. The cash conversion cycle was minus 31 days in the quarter. This improved two days year-over-year, primarily due to days of inventory decreasing one day and days payable increasing four days, partially offset by days receivable increasing three days. The sequential growth in Personal Systems has improved the overall cash conversion cycle as expected. Looking ahead to Q4, we expect operational improvements will help drive a sequential increase in free cash flow, including an increase in Personal Systems revenue and an improvement in working capital.

In Q3, we returned approximately $216 million to shareholders via cash dividends. In addition, we successfully completed a debt tender during the quarter, retiring greater than $1 billion of debt. Consistent with our outlook, we did not repurchase any shares in the quarter. Looking forward to Q4, we expect the challenging economic climate and continued demand softness will remain headwinds for our business near term. In particular, keep the following in mind related to our overall financial outlook. We still expect operating expenses, excluding Poly, will be down year-over-year for FY ’23. We intend to start managing dilution this quarter as we remain committed to our capital allocation strategy over the long term while maintaining our investment-grade credit rating.

For Personal Systems, the PC market size for the second half of calendar year ’23 is smaller versus prior expectations, driven mainly by demand weakness in China. We expect industry CI levels will normalize by the end of Q4, resulting in improving ASPs as the quarter progresses but by less than initially expected and that enterprise demand will be softer. We expect Personal Systems margins in Q4 to be at the higher end of our 5% to 7% long-term range, driven by sequential revenue growth, lower commodity costs and strong structural and operating cost savings. In Print, we expect overall Print revenue will rebound sequentially due to seasonality. We expect supplies revenue in FY ’23 to decline by a low single-digit in constant currency with easier year-on-year compares in Q4.

We expect Print enterprise demand softness, including industrial, which will remain under pressure due to elongated sales cycles. We expect Print margins to be above the high end of our 16% to 18% target range for Q4, driven by disciplined pricing in a competitive environment and cost management that will help to offset softened demand. Taking these considerations into account, we are providing the following outlook for Q4 and fiscal year 2023. We are lowering our FY ’23 non-GAAP EPS outlook range by $0.11 at the midpoint. The primary factors driving our guidance include our revised outlook for Q4 due to the macro challenges I discussed previously and the effect of the accounting adjustments I referenced earlier, which impacts our H1 ’23 non-GAAP EPS by $0.03.

We expect fourth quarter non-GAAP diluted net earnings per share to be in the range of $0.85 to $0.97 and fourth quarter GAAP diluted net earnings per share to be in the range of $0.65 to $0.77. We expect FY ’23 non-GAAP diluted net earnings per share to be in the range of $3.23 to $3.35, and FY ’23 GAAP diluted net earnings per share to be in the range of $2.95 to $3.07. We expect free cash flow to be approximately $3 billion for FY ’23, in line with the low end of our prior guidance range of $3 billion to $3.5 billion. And now I would like to hand it back to the operator and open the call for your questions.

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

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Q&A Session

Amit Daryanani: Good afternoon. Thanks for taking my question. I guess, Enrique, you’ve talked a fair bit about looking to optimize your cost structure. Can you just talk about what sort of cost savings are you expecting from these initiatives? And does that suggest that you expect these revenue headwinds that you’re seeing right now persist into fiscal ’24 as well?

Enrique Lores: Sure. Thank you for the question. So as we have said before, our goal for the next year is to reduce our structural cost by $1.4 billion and to achieve 40% of those in fiscal year ’23. And as Marie said in the prepared remarks, we are on track to deliver on those. And you can see the impact of those in the rates of both businesses, Personal Systems and Print, is probably the best way to see the impact of what we are seeing. I think some of the headwinds, on the second part of your question about the headwinds, we think that most of the headwinds are temporary and that is more a delay on some of the progress that we were starting to see from a pricing perspective, for example. But nevertheless, we — as we always do, we are going to be looking at accelerating some of the savings that we had in the plan to compensate for them on the short term.

In terms of our outlook for fiscal year ’24, sorry, I will finish, we have our Investor Day about five weeks from now, and this is when we will be sharing our plans for ’24 and kind of the overall view that we have for the company.

Amit Daryanani: That’s perfect. I’ll wait for the Analyst Day for that one. And I guess, Marie, when I think about free cash flow generation, $1.3 billion, give or take, for the year so far. As you think about what you need in Q4 to hit the $3 billion number, can you just talk about how much of that do you think is working capital improvement versus net income? Because it does seem like a pretty good step-up in Q4 to achieve that. So just the levers that enable you to get that would be helpful. Thank you.

Marie Myers: Sure, no worries. And, good afternoon. So first of all, I’ll just start out with sort of unpacking how to think about the free cash flow for Q4. If you take the midpoint of our revised guide, you can see that our net earnings is approximately $3.3 billion. So if you take that $3.3 billion and then you take off the $400 million of expected restructuring charges, that gets you into the $2.9 billion range. And really, the remaining, as you pointed out, Amit, it’s really coming from an improvement in CCC. So really, working capital is really one of the key drivers for cash flow in Q4, and that’s very much in line with what actually happened in cash flow in Q3.

Operator: Your next question comes from the line of Shannon Cross with Credit Suisse. Your line is open.

Shannon Cross: Thank you very much for taking my question. As you look at the, I guess, PC and Print business and subscriptions, you’ve talked about, obviously, subscription ink, you’ve had a number of different things you’re looking at on the Print side. And I know you’ve talked about it in the future on PCs. I’m just curious, as you’re looking at the market, if you’re thinking about opportunities going forward, has there been any change in maybe customer buying behavior related to subscriptions? Have you seen any changes in terms of increased churn or maybe lower churn? I’m just wondering how that model is playing through your product line. And then I have a follow-up. Thank you.

Enrique Lores: Hi, Shannon. Thank you. So no big changes in our thinking. As we have shared, this quarter, we continued to see growth in the number of enrollees, also in the revenue that we get from our subscription program. We have also continued the expansion of our paper program. As we shared a quarter ago, we wanted to expand internationally, and this is what we have done. We are now present in several countries in Europe, and the adoption continues to grow. In terms of churn, no big changes in what we have seen during the last quarter. And then our plan continues to be, as you were outlining, to integrate more and more parts of our portfolio. In the coming months, we will start having the first PC and Print subscription, and we will continue the expansion after that.

And important to highlight is going to become, over time, a more important part of our business, mostly because it allows us to deliver a better value proposition to our customers. This is really why not only because of the financial but also because of the return and the NPS is a critical part of our strategy going forward.

Shannon Cross: Thanks. And then I was wondering, just with Poly, maybe if you could provide more sort of insights into what you’ve seen since the acquisition. I’m curious if there are opportunities. I know AI gets used ad nauseam these days, but in terms of different ways that we might interact with our computers over time, I’m just wondering how you’re seeing that asset, both since you acquired it and then going forward to the extent you’ll talk about it before the Analyst Day. Thank you.

Enrique Lores: Sure. Thank you. So a couple of comments. First of all, of course, some of the macro trends that we have seen in the industry and some of the Poly competitors have shared those details. The Poly business has been impacted in the short term by a reduction in the term of some of the major markets. At the same time, the reaction from our partners, customers, as I have shared in the past, has been extremely positive. And as you are saying, there is a lot of opportunity to innovate in that space and to deliver a much better value proposition and a much better experience. We all know how painful some of the video conferences are when you have people in the room, people outside. And we just launched a solution using AI, I’m sorry to use the AI term, where with AI, we can manage or produce almost the video conference, the who will be talking frame, the different people in the room, and we are seeing really much better experience for both people in the room and people outside the room.

And when we will have both Innovation Day and our Investor Day, you will be able to see some of these solutions and see the value that they bring.

Shannon Cross: Thank you.

Enrique Lores: Thank you.

Operator: Your next question comes from the line of Toni Sacconaghi with Bernstein. Your line is open.

Toni Sacconaghi: Yes, thank you. You talked about printing and the need to really focus on trying to find incremental cost improvement, and you specifically alluded to that for printing. And I’m wondering if that statement is pointing to the fact that you see something structurally more challenged in printing than you did before? And then I have a follow-up, please.

Enrique Lores: Thank you. Good question, Toni. So as we — what we have seen in printing is that especially on the home side, we have seen a significant decline of units and it’s in the range of 20%. And this clearly will put more pressure on the Print business going forward. It’s not a short-term impact. It’s really more a medium and long-term impact. And even if in many cases, the units we have lost are low-end units which have relatively low value, clearly, there is going to be more pressure there. And this is why we mentioned that we are going to be accelerating some of the cost reduction activities that we had in the plan, especially focused on home, on consumer, which is where we are seeing this pressure and things like acceleration of the simplification of the portfolio, acceleration of the business model transformation, growing more in what we call [bigging and big donor] (ph) are all the different combinations where we are accelerating our plans.