That's down 19% nominally and 15% in constant currency. This reflects industry-wide headwinds, including corporate budget tightening that has started to impact large enterprise demand. Despite this topline pressure, we delivered non-GAAP EPS of $0.75. This is in line with our previously provided outlook, and it reflects the actions we are taking on cost as well as discipline execution on pricing and mix. The Future Ready plan we shared with you last quarter is already having an impact. As a reminder, the plan has two primary objectives. One is to further reduce our cost structure. The second is to continue to assess and optimize our overall portfolio and to develop the required operational capabilities to deliver long-term sustainable growth.

We are making clear progress in both areas. In terms of costs, our teams have done an excellent job, reducing spend and driving efficiencies. We delivered on our Q1 cost target and we are on track to deliver at least 40% of our three-year savings by the end of fiscal year 2023. This is allowing us to maintain our investments in long-term growth. Collectively, our key growth businesses grew double digits in Q1, including Poly. We are investing in a down market so we can accelerate our growth when the external environment improves. For example, new hybrid work models are fueling demand for peripherals and other collaboration solutions. We will now refer to this part of our business as Hybrid systems. Our Hybrid systems business more than doubled year-over-year and our Poly integration is going very well.

The combined HP and Poly portfolio is creating better experiences for customers and building a strong funnel. Hybrid work is a long-term secular trend driving innovation across our portfolio. We introduced more than 25 new products that earned over 50 innovation awards at CES. This included our new Dragonfly Pro series, which we co-engineer with AMD. It reflects how we are building deeper partnerships with our silicon partners to co-create better experiences for customers. In addition, we launched our new Poly Voyager wireless earbuds, with three mics per earbud they deliver higher quality voice transmission and audio experiences. We are also doubling down on services and subscriptions. There is growing demand for new consumption models that allow us to deliver a better value proposition.

And we have created dedicated teams to drive greater focus on these growth opportunities. This supports our strategy to foster lifetime customer relationships and drive recurring revenue. Last year, we created our Workforce Services & Solutions organization. It is providing customers with an integrated set of offerings and expanding our addressable market. We delivered healthy WSS revenue growth in Q1, and we drove margin expansion by shifting more of our mix to digital services and achieving cost efficiencies. We are excited about the opportunities ahead. Our investments in software, security and AI will enable us to develop new solutions. For example, our HP workstations and data science stack is accelerating machine learning and AI workflows, which is leading to the creation of a new category of high-performance PCs specifically designed for data science and AI applications.

And we are partnering closely with NVIDIA on new products and platforms for this growing use case. And this quarter, we also created a new organization focused on consumer subscriptions. It's designed to expand upon the success of Instant Ink. Our long-term goal is to ultimately offer the HP portfolio as a subscription. Let me now touch on our business unit performance, starting with Personal Systems. At the market level, we continue to see soft demand in consumer and commercial. We also see pricing pressure given elevated channel inventory across the industry. In addition, corporate budget tightening began to affect large enterprise demand. This is leading to longer sales cycles in our commercial business. Against that backdrop, Personal Systems revenue was $9.2 billion.

That's down 24% or 20% in constant currency. Sellout to our customers was higher than selling to the channel with a corresponding reduction in channel inventory. Our estimate is that end-user demand was stronger than revenue shipments. PS operating margin was better than expected at 5.4%, and we grew operating profit sequentially. This reflects our actions on cost and a favorable mix shift improving our performance. We accelerated the growth of our Hybrid systems and PS services businesses, and we remain focused on growing profitable share. In calendar Q4, we grew share sequentially in the high-value segments we have prioritized. Our commercial PC share increased by 2.8 points. And our overall PC share grew by 2.5 points as we regained the number one or number two position in all regions.

Turning to Print. Current market conditions are more stable, and we see different dynamics playing out by business. The consumer print market continues to see demand softness and pricing pressure. In supplies, the situation in Q1 was better than expected and we continue to see strong adoption of profit upfront and subscription models. The commercial print market is being impacted by macro uncertainty, corporate budget tightening and the uneven pace of return to office. Within commercial, office printing has seen improvement as the supply situation normalizes. Taking all this into account, our Q1 Print revenue was $4.6 billion. That's down 4.5% or 2% in constant currency. We delivered Print operating margin of 18.9%. Operating profit was flat year-over-year in a very tough market.

This shows that our strategy is working. Disciplined cost management and favorable pricing in office had a positive impact. Our office hardware revenue grew 13% year-over-year or 5% sequentially, and we gained share in office quarter-over-quarter in calendar Q4. Although return to office is uneven, the pages per device remain in the range of 80% of pre-COVID expected levels. We also continued to rebalance system profitability. HP+ and Big Tank printers represented 56% of printer shipments in Q1 and we gained share sequentially in Big Tank. We now offer the industry's broadest lineup of tanks from the low end of the market to the world's first and only laser tank printer. We delivered double-digit revenue growth in Instant Ink, surpassing 12 million subscribers.

And we drove early adoption of our Instant Ink with paper add-on. Industrial graphics and 3D were impacted by macro headwinds, with revenue down year-over-year. We view this as a short-term situation and we plan to continue investing in these areas to drive long-term growth and value creation. This quarter, we expanded our Jet Fusion lineup and we drove adoption of our Metal Jet solution with key customers such as John Deere and Schneider Electric. Across our business, sustainable impact remains at the core of our strategy and our leadership on important topics that climate change, human rights and digital equity is building trust in our brand, and it's helping us win new business. It's also driving innovation. Our new all-in-one lineup is a great example.

It includes the world's first PC with recycled coffee grounds, which are used in the finish of the device. The enclosure is made with more than 40% post-consumer recycled plastics. The arm stand uses 75% recycled aluminum. And the stand base uses 100% reclaimed polyester. We have also reduced the product packaging, so we can ship up to 66% more units per pallet. I am proud we were recently named America's Most Responsible Company by Newsweek for the fourth consecutive year. Let me turn to capital allocation. As we said last quarter, we plan to maintain our current capital allocation approach, and we are applying the same framework we have used the last few years. 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 2x EBITDA.

Given the volatility of the market and our growing contractual business, we believe it's important to maintain a healthy balance sheet through prudent financial management. Therefore, we moderated our share repurchase activity in Q1 as planned while maintaining a leverage ratio within our target range. Looking ahead, we are not expecting a significant economic recovery during fiscal year 2023. We continue to expect our second half performance to improve relative to the first half, driven by our cost-saving measures and as the improved channel inventory levels create a more normalized pricing environment. This is consistent with the view we shared in November. The PC market in units may regress to pre-COVID levels in the short-term, but we expect it will remain at a structurally higher level with more premium and high-value mix.

As we said last quarter, we expect the overall print market to be down low-single digits this year. This is mainly driven by the challenging macro environment and slower-than-expected return to the office. And as I said at the top of the call, we are maintaining our full-year financial outlook. To sum up, we are operating in a tough market right now. But we are taking decisive actions as part of our Future Ready plan to improve our performance, and we remain confident in our ability to deliver. By focusing on what we can control, we believe we are well positioned to navigate near-term volatility. And by maintaining investments in our growth priorities, we are strengthening the company for the future. This is what we did in Q1. And it's what you can expect from us moving forward.

Let me now hand the call over to Marie for more details.

Photo by James Jeremy Beckers on Unsplash

Marie Myers: Thank you, and good afternoon, everyone. As Enrique said, we continue to focus on what we can control and deliver on the commitments we have made. In Q1, we remain disciplined in rigorously managing our costs and investing strategically while delivering on our outlook. However, our results were impacted by ongoing soft demand. Macroeconomic challenges persisted and corporate budget tightening began to affect large enterprise demand this quarter. We are adapting quickly to the current environment, but see continued opportunity to drive further improvement in our cost structure and operational execution. Let me give you a closer look at the details. Net revenue was $13.8 billion in the quarter, down 19% nominally and 15% in constant currency, driven by the declines across each of our regions.

In constant currency, Americas declined 16%, EMEA declined 15%, and APJ declined 13%. Gross margin was 20.3% in the quarter, up 0.4 points year-on-year, primarily due to improved commodities and favorable print mix, partially offset by competitive pricing, including currency. Non-GAAP operating expenses were $1.7 billion or 12.5% of revenue. The decrease in operating expenses was driven primarily by lower variable compensation, rigorous cost management and favorable currency impacts, partially offset by the Poly acquisition. Non-GAAP operating profit was $1.1 billion, down 28.3%. Non-GAAP net OI&E expense was $183 million, up primarily due to higher interest expense driven by an increase in both debt outstanding and interest rates. Non-GAAP diluted net earnings per share decreased $0.35 or 32% to $0.75, with a diluted share count of approximately 1 billion shares.

Non-GAAP diluted net earnings per share excludes a net expense totaling $262 million, primarily related to restructuring and other charges, amortization of intangibles, acquisition and divestiture-related charges, debt extinguishment costs and other tax adjustments, partially offset by non-operating retirement-related credits. As a result, Q1 GAAP diluted net earnings per share was $0.49. Now let's turn to segment performance. Let me start with pointing out that we have changed our revenue reporting presentation for Personal Systems this quarter. We are now reporting revenue by business capability, consumer and commercial versus our previous disclosure by product category, which better aligns with how we think about and manage the business.

The composition of our consumer and commercial business capabilities remains consistent with what we have outlined in the past, with the exception of Poly, which is now included in commercial. Also note that Q1 reflects the first full quarter of Poly results. In Q1, Personal Systems revenue was $9.2 billion, down 24% or 20% in constant currency, with FX headwinds as expected. Total units were down 28% with declines in both consumer and commercial, driven by soft demand and a tough prior year compare. And while commercial constituted about 60% of our units, it represented approximately 70% of our revenue mix for the quarter. We made solid progress on reducing our channel inventory levels sequentially. However, levels remained elevated for us and across the industry.

With that, combined with improved supply availability, pricing competition intensified incrementally in the quarter. Our backlog remains consistent with pre-pandemic levels and still skews favorably towards commercial higher-value units. Drilling into the details. Consumer revenue was down 36% and Commercial was down 18%. Lower volumes, FX and increased promotional pricing were gain headwinds. Within Commercial, these were partially offset by favorable mix. During calendar Q4, we improved our go-to-market execution and grew our overall market share sequentially. We also increased our market share in high-value, more profitable segments, including commercial, desktops and notebooks. Our focus continues to be on driving profitable share growth, especially in the premium segment of our consumer and commercial markets.

Personal Systems delivered almost $500 million of operating profit with operating margins of 5.4%. Our margin declined 2.4 points year-over-year, primarily due to currency headwinds, increased promotional pricing and favorable prior period R&D partner funding. This was partially offset by Poly contributions and lower costs, including variable compensation and commodity costs. In Print, our results reflect our focus on execution and growing our NPV positive units as well as the strength of our portfolio as we navigate the supply chain environment. In Q1, total Print revenue was $4.6 billion, down 5% nominally or 2% in constant currency. The decline was driven mostly by lower supplies revenue and currency. Hardware revenue was relatively flat, driven by favorable pricing actions in Commercial, partially offset by unfavorable mix and competitive pricing actions.

Industrial Graphics and services revenue declined slightly, reflecting emerging demand weakness in the enterprise space. Total hardware units increased 2% as component availability and logistics constraints improved sequentially, augmented by better-than-expected China demand. We continued to make solid progress reducing our backlog and are largely back to our pre-pandemic level. By Customer segment, Commercial revenue increased 2% or 5% in constant currency, with units down 8%. Consumer revenue was down 3% or up 1% in constant currency with units up 3%. Consumer printer demand remained soft in the Americas and EMEA regions, driving incremental promotional activity as supply constraints continue to ease. Commercial hardware demand remained tepid due to both the slow and uneven pace at which the return to office is progressing and enterprise budget tightening.

Supplies revenue was $2.9 billion, declining 7% nominally and 6% in constant currency. The decline was driven primarily by further normalization in home printing and a gradual recovery in Commercial. This was partially offset by favorable pricing actions and continued market share gains in ink and toner. Print operating profit was $870 million, essentially flat year-on-year and operating margin was 18.9%. Operating margin increased 0.8 points driven by pricing actions and cost improvements, partially offset by promotional pricing of favorable currency and higher commodity costs. The cost improvements were largely due to lower variable comp, expense management and transformation savings. Now let me turn to our Future Ready efforts. We saw strong progress on our plan in Q1 and are on track to deliver at least 40% of our targeted $1.4 billion in gross annual run rate structural cost savings by the end of FY2023.

In Personal Systems, we are targeting structural savings by streamlining our portfolio to better target customer needs. We are increasing leverage in our product and engineering operations by standardizing on few platforms to reduce component complexity. We expect these initiatives to reduce duplication and improve our agility and response time to shifting market needs. We also took actions to optimize costs in our corporate business where we drove significant savings. We continue to optimize and reduce structural costs across our core businesses, particularly in office print and in our supplies, supply chain, including headcount reductions. In addition, we continue to see benefits from our investments to transform our customer support and services organization enhancing our capabilities to provide a more digital enabled customer-centric support experience.

We continue digitizing our customer support engagement assets using AI-based interactive voice response technology. We expect this initiative will help automate our processes to deliver a more seamless and connected support experience. Lastly, in January, as part of our Future Ready target to reduce employee headcount by 4,000 to 6,000, we announced a voluntary early retirement program in the United States. The offer provided eligible employees the opportunity to retire from HP with enhanced benefits. More than 900 participants have opted into the plan with the majority expected to exit during Q2. I continue to be confident in our ability to drive operating cost reductions consistent with our Future Ready goals, enabling investments in our key growth areas.

Now let me move to cash flow and capital allocation. Q1 cash flow from operations was nominally negative and free cash flow was an outflow of $0.2 billion, in line with our expectations. Our results were impacted by normal seasonality associated with the timing of variable comp payments as well as restructuring charges and lower volumes in Personal Systems. Additionally, our free cash flow was favorably impacted by the timing of receipts and payments related to our factoring program. This is expected to be net neutral to our full-year free cash flow. The cash conversion cycle was minus 22 days in the quarter. This increased seven days sequentially, primarily due to an increase in strategic buys driving up DOI and an unfavorable business mix impacting both DOI and DPO.

While we decreased our inventory $0.3 billion sequentially in Q1, we have more work to better align our inventory to our business volumes through operational excellence. We will, however, continue to take advantage of economic opportunities like strategic buys, or more seed transit, both of which would result in carrying more inventory. In Q1, we returned approximately $360 million to shareholders, including $100 million in share repurchases and $259 million in cash dividends. We finished the quarter towards the high end of our target leverage range. Consistent with our disciplined financial management and our strategy to prudently manage our leverage profile and maintain our credit rating in the current challenging environment, we limited our Q1 share repurchases to an amount needed to offset share dilution.

Looking forward to Q2 and the rest of FY2023, we expect the macro and demand environment will remain challenged and that our customer end markets will remain competitive. We remain focused on what we can control as we navigate these difficult market conditions. We will continue to rigorously manage costs, streamline operations and improve our performance as the year progresses while continuing to invest in our growth businesses. In particular, keep the following in mind related to our Q2 and overall financial outlook. Given the challenging macro environment, we are modeling multiple scenarios based on several assumptions. For FY2023, we continue to see a wide range of potential outcomes, which are reflected in our outlook ranges I will discuss shortly.

Consistent with the view we shared in November, we are not expecting a significant economic recovery during fiscal 2023. We will continue to focus on driving structural cost savings and efficiencies in our business consistent with the progress we made in Q1 regarding our Future Ready transformation strategy. We expect these cost savings will scale into the back half of the year. Given recent weakness in the U.S. dollar, we now expect currency to be about a 3 percentage year-over-year headwind for FY2023. Regarding OI&E expense, we now expect it will be approximately $0.7 billion for FY2023 based on Q1 as a run rate for the year. We continue to expect free cash flow to be in the range of $3 billion to $3.5 billion for FY2023, with the second half of FY2023 stronger than the first.

As a reminder, our FY2023 free cash flow outlook includes approximately $400 million of restructuring cash outflows. Turning to Personal Systems. We now expect the overall PC market unit TAM to decline by a high teens percent in FY2023. Specifically, for Q2, we expect Personal Systems revenue will remain under pressure near-term and decline sequentially by a high single-digit. We expect revenue to improve over the course of the back half of the year as elevated channel inventory levels are expected to normalize by early fiscal Q3. We expect to continue to drive improved mix shifts toward high value, more profitable units and services and expect this will help partially offset the headwinds we've discussed today. We expect Personal Systems margins to be in the lower half of our 5% to 7% long-term range in Q2 as commodities and logistics costs improved in the quarter.

But given elevated industry and HP channel inventory levels, pricing continues to be very competitive. For FY2023, we expect margins to be solidly in our target range driven by the gradual improvement in PC revenue in the back half of the year and increasing Future Ready transformation savings. In Print, we expect consumer demand softness will persist and macro uncertainty and corporate budgeting tightening will remain headwinds for commercial. Disciplined cost management and further normalization and mix as office gradually improves should help to partially offset these trends. With regard to print supply chain, similar to what we saw in Q1, we expect component shortages will continue to improve, but persist into at least Q2 particularly for office hardware, providing continued support for favorable pricing.

Regarding supplies, we expect Q2 revenue in constant currency to decline by a high single-digit versus our previous expectation to be down closer to double digits. Given its variability, we do not believe inter-quarter growth is indicative of our long-term supplies growth. We continue to expect revenue to decline in FY2023 by low to mid-single digits in constant currency. We now expect print margins to be above the high end of our 16% to 18% range for Q2, driven by continued hardware constraints. We expect FY2023 margins also will be above the high end of our range, driven by disciplined pricing, continued progress on rebalancing our system profitability 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 2023.

We expect second quarter non-GAAP diluted net earnings per share to be in the range of $0.73 to $0.83 and second quarter GAAP diluted net earnings per share to be in the range of $0.40 to $0.50. We expect FY2023 non-GAAP diluted net earnings per share to be in the range of $3.20 to $3.60 and FY2023 GAAP diluted net earnings per share to be in the range of $2.22 to $2.62. We continue to make meaningful progress against both our short and long-term strategic priorities in a demanding environment. I am confident we are taking the right actions and making the right decisions to create long-term value for our shareholders. I'll stop here so we could open the line for your questions.

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