HPQ - Earnings call transcript Q1 2018

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Operator

Good afternoon and welcome to the First Quarter 2018 HP, Inc. Earnings Conference Call. My name is William and I will be your conference moderator for today's call.

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. to call, presentation Investor Steve like host to Relations. now today's for Fieler, would turn over the our I Head of Please proceed.

Steven Fieler

Inc. and first Financial quarter Steve Treasury conference HP's call welcome Good Chief Head Weisler, earnings Officer to and HP's and Dion HP, Lesjak, President you XXXX I'm to Executive I'd Officer. fiscal afternoon. the with like Chief Fieler, for of Cathie

Dion, replay Before is let this call handing to me call made A Relations over that one year. be the being you will earnings We webcast. after posted slide accompanying webpage our call of presentation the approximately remind webcast Investor this www.hp.com. shortly at the the available and on release for

are and best of As always, elements businesses of our this them and on the view based presentation today. world we looking are see as our forward

please the statements For disclaimers that more risks, materials forward-looking uncertainties involve see detailed and assumptions. relating to information, in earnings

refer and of discussion HP some a forward-looking please not Form obligation recent our assumes For SEC intend risks, no XX-K. any and of uncertainties reports, statements. update such most does including assumptions, to to these HP's

We also this information reflects could other filings. fiscal the on XX, at and information note January financial XXXX, on reported and the based HP's differ SEC Form that this time from amounts XX-Q for discussed available materially estimates ultimately call HP's the in quarter ended

to reconciliations we've earnings Dion. tables over financial comparable expressed in For basis, today's I'll presentation a information. included slide accompanying now release. hand to been Please information that to the has GAAP non-GAAP And refer it the on

Dion J. Weisler

speaks we're I've the business to out sustained our you A our ability deliver what revenue and momentum thank quarter fiscal of delivering echo of game, across earnings And growth investing returns a everyone, our business strategy go-to-market to strong playing Thank the you, regions. growth. Good afternoon remains term To our for are our every year-over-year we for doing prioritizing execution. said share profitable joining we're times, refining operational per Steve. and the framework. own us. and And core future and the our double-digit shareholder to and and excellence, portfolio great many consistent improving and year. across day strategic while we're for start Right building off long predictable gate, and and while growth consistent, in this

our are of We engineering best customers partners. to innovations some our for enhance in the history value and

overall for models range We compared evolving and to U.S. improve of customer of earned rate We profit to when $X.XX our up up non-GAAP earnings of adjust and tax diluted operating net another We quarter across tax it's share, delivered working. one many realities, Quarter ways changing benefit Even year. $X.XX in to free guided share through to dollars. $X.XX. delivered and billion And in $X nearly previously cash repurchases of our above $X.XX dividends. it shareholders of and and quarter year-over-year QX you the from we last reform, XX% of XX% the QX, for per are cost needs delivered to returned constantly $X.XX dimensions. market we're flow we match impressive structure looking business and growth year-over-year $XX.X regions top three revenue Print well line Systems billion Print. in up and growth We across as and drove with net line bottom both in Personal and in all year-over-year with XX% increases Systems Personal growth to was

competitive U.S. more Act the supported and the globally Tax U.S. our know, HP Jobs believes stimulate it quarter will help in make Cuts you economy. Congress one. the reform passed and and As tax fiscal

drive this tax higher sheet our return shareholder help We expect our and us to HP's rate. strengthen a will tax earnings, lower increase We are effective reform opportunities. believe net and balance near-term for benefit planning stakeholders go-forward

business, walk including annual in will you in employees opportunity. on tax tax back our also create our through increasing will to our a U.S. it of We by intend remarks. workforce. expect invest We incremental ongoing for bonus into to use more their our her Cathie performance reform invest details investments in savings variable capacity non-executive to portion us annual

cover Personal year-over-year, to terrific five Now growth. HP's Systems of let segment quarters consecutive me a revenue Net performance. grew XXXX. had revenue FY XX% start marking double-digit

revenue quarters quarter in XXXX repeat, the on of me year. FY growth. QX of top five Let consecutive XX% prior of this comes growth double-digit versus And

awards design, But it's to amazing profit innovation EMEA We deliver the share Electronics Performance to we and regions. OneLife, growth. Show, recognized consumer stellar have trifecta, a to as like us XX in and product job. Spectre continued growth and at that PCs is introduced a leveraging intersection that Congratulations the on products products commercial product capitalize At categories powerhouse and as experiences the desktop. lineup. these amaze. all lineup. We team streaming success commercial and and We financial revenue continue we innovation design to ultimately, and computing. our gaming announced to consumer and segments, home, with gain solutions devices G-SYNC. gains, desktops series. employee Amazon technology. most workstations, just home service continues latest we the is also for security as not with January's for took multi-OS strong a customers a capital opportunities Wave personal Systems Personal Pavilion broad-based with and with traction. service of awards announced achieved consumer as resources We enhanced and in the to And market in show, HP a continue work this to across Alexa we on create innovation. lineup including NVIDIA future up we brings and mobile. offerings our big dollar innovative the of results, in double-digit achieved the Apple shaping unrivaled innovations a being and Americas, customer our consistent supports market Device service-led to Consumer notebooks, with And positioned and market compact to Last despite support xXXX, leadership. APJ. was convertible saying our efficiencies, like well gains experience as incredible strong in drive to our and the for Underpinning deliver we X, focus insights format the to device In powerful week, XX-inch OMEN showcased gaming, new ability and OMEN leadership our free and display be IT a the such products, our manageability economy, with XXX improve DaaS EliteBook updated continue And accelerates

partners incredible gains. share region, customers quarter In our share grew and contributed to one PC our both unit growth market outpaced and every extending units four, providing We Our the focus on in market up market year-over-year. market revenue. to calendar X.X XX.X%, experiences the number to points in

continues we growth addition hardware of a the was excellence, Print said across great operational good broadly did revenue operating innovation to irrespective and Much Total before, and an across year-over-year share revenue grew our fantastic profit Print QX, be and we've across hardware, print we start. growth the XX% business. Samsung seeing supplies. transaction. placed commercial of And market units. an in up We're like of objective. regions off not Systems, consumer with is all the and In this to and Personal outcome As business more

in are the print Box Print is grew quarter we year-over-year, business how I've the talked ever. relevant in Supplies experiences more progress health business marking of Four reinventing XX% supporting to our than drive about, term. the Model another confidence substantial the and long As revenue for world in the

print year-over-year part recognized In market, our driven businesses to Print PageWide. the HP Let and me laser report highlight recent grew growth enterprise smart and by of call the and Managed S-Print with maximum most year-over-year, that share our quarter a best-in-class in we'll products excited XXXX AX color, services across are closed as continue gaining IDC's low-cost X, revenue AX, an have print sequentially. contractual number was the year-over-year And And areas PageWide few leader added as grew important PageWide print printing. we revenue Graphics strategy. for in progress HP of presses. November Indigo the as new as on for and AX forward. going and both now acquisition shift we vendor security. one and we're capability Samsung both the to uptime functionality both to market recognized IDC strategy. AX to multifunction one, largely of In

with have We will market are address key created revenue on family, in and help efforts which capabilities the now adding billion and a us AX. integration $XX along The opportunity initiatives track. larger AX print

up lower-cost color engineering XD time and this are printing functional rationalizing that TAM underlying prototype, product or opens streamlining teams, the technology onboarding grade printing Earlier spectrum a full we in a the for same both This XD portfolios, We combining business. black part industry for on more introduced creates parts enables prototyping whole the provider processes. joining white. partners, in platform. we a month, color, and milestones the new our SKUs only now new and are QX also final marked industrial first that production of importantly, including solution our

design always, I'm Dassault and very software with the to possibilities grow introduced we QX add XD the new our vitality And our key Corps. our world-leader for Systèmes, as new But Overall, product as We developers. work and of future and verticals do. we have to in to more a such also within customers business. FedEx U.S. unlock Marine pleased a collaboration continue results with voxel-level

ahead. change, and and customers. accelerate We HP's continue the market and on opportunities for to is incredible our day are opportunity never our satisfied for new and strong a to thinking embrace build we'll deliver foundation Every

how sustainability believe decades investing IP to call and categories We've the we but magic These Deep business leveraging provide HP. diversity also I'll we what provide We're and markets entered future, in the performance our DNA, come. to in lending We and an investing we do company industry our company of potential HP call and portfolio. are important turn very in for is to do, the makes focus outlook. shifts. and communities creating we From in exciting which underpin upside our you, time our accelerate the And details adjacent can operate. our to Thank of over strategies at the environment with voice and it. Cathie sprinkles world. power we're differentiation efforts and with where what benefit just it and we it's now our believe inclusion, the in the across with not our to more on societies values. in disruptive leading to in our financial we to This corporate be a

Catherine A. Lesjak

increases with strong QX revenue free per and delivered growth dollars, in earnings impressive results cash profit We Dion. and Thanks, operating year-over-year share. flow in

performance, context I many QX further specific Jobs want to into that complex our There some results. Before reform on and which authorities ongoing first much tax Cuts extensive its and government the and elements getting to impact require tax of share provide analysis, on are publications. Act Tax clarifying is as broad

call, detail today's We areas largest the later months to expect I'll I'll in our the be provisional outlook. on these highlight ahead, adjustments. in then the additional impacts summarize combination so available and financial of impact

of the gross the of code, U.S. tax-related offshore billion For net the Under payments This our over QX billion the be eight-year inclusive earnings a accounting have not gain expected a on tax accounting number, and charge starters, We made pay we U.S. to required transition billion a to previously benefits. repatriation other repatriation been are that tax recorded of $X.X GAAP-only published tax results. a charge booked gain non-cash is $X.X schedule. in with to transition repatriated repatriation new net $X.X companies

be once balance cash liability lower expect likely are the payments used. than attributes much existing as to and credits the more sheet and actual However, half reduce future will overall we by other

benefit net which accounting a positive a the effective earnings liabilities our lower at offsets netted in and QX, XX% tax. on also tax quarter, U.S. In foreign a recorded also from previously revaluing a reversing tax against result of than subsidiaries, repatriation more tax have the We deferred adjustment $X.X gross is This assets impact are provisional we rate. upon billion rate. our saw accrued which

or charges. higher shares. XX% the per XX% XX% net to $X.XX of go-to-market of tax $XX non-GAAP of $XX rate X.X of S-Print earnings diluted net range recorded. The earnings was compared the share offset acquisition-related recorded the Our to delta diluted diluted remained in me cover performance point these tax of We previously $XX diluted approximately we earnings this was non-GAAP million, charges adjusting share results. revenue And billion significantly, non-GAAP billion, currency. credits other along rate per constant a by context primarily R&D let up to the gain and was reform. excludes quarter. rate XX% as diluted was delivered strong commodity intangible now businesses our Most non-GAAP quarter million approximately XX% from retirement-related for to expenses XX% grew million, in or previously all margin XX reported up million Gross XX earnings Net compared the XX% restructuring XX%. estimated assets share billion driven for mind, with million, XX%, when in growth. tax EMEA up by per $X.XX of rate offset on partially GAAP generated incremental by impact $XX.X or Non-GAAP per constant grew OI&E the basis the adjustments across rate XX% $X.XX net With to were provided currency. addition were normal Non-GAAP was share points support down of $X.X guidance investments XX% sequentially, U.S. up in QX Regionally, and of year-over-year and XX% in the tax geographies. for our Printing, X.X QX, net tax and sequentially, year-over-year improved Gross partially and margins related net and a XX%, year-over-year, APJ points by of with the tax Personal $XX In driven billion resulting of in $X.X charges $XX costs operating basis $X.XX. of line non-operating Americas a of Net in with was of share Systems. count seasonality. amortization provisional XX.X% expense year-over-year, X%

continue the shift in revenue saw should see therefore and are on as global mitigating constant consumer workstations margins. desktops component product to $X.X up pricing, and DRAM, these remained was year-over-year and was in net is By via currency in costs costs balance commercial currency. customer expect year-over-year. execution. be and put revenue X.X% Systems QX, driven us quarter, favorability. XX%, Systems profit some our or By up category, chain We year-over-year. basis sheet, innovative segment, up operating primarily and operating by XX% dollars year-over-year XX% throughout reflecting actions the increases XX points Turning billion, up results XX% broad delivering scale sequentially very the segments, cost portfolio to to FY margin our continued supply based, and XX% increased XXXX, component to leveraging and driving grew and notebooks increases. which were was strong, up which revenue XX% enable now Personal reported XX% of The up Personal offset positive again industry-wide down pressure to Together, year-over-year. in mix commodity product We

our quarter of on include a financials Printing, add color a turning little results. since S-Print to let more Before me full

guidance the to billion include by reminder, updated impact the and last $X.X estimated revenue as non-GAAP we hardware expected, our of outlook. acquisition. share decline that, We earnings We end our in $X.XX XXXX quarter, was per S-Print's operational highlighted of added base FY and to low a revenue driven AX full supplies year full products. As net year of

business in differently, Print on our first the From before investment half. or and fiscal that the accurately globe second quickly of or the with The Samsung base end be during we faster possible. create reemphasize billion made respective during reduced already to are we this HP-branded unable all margins of described value, sales for size profitable is inorganic acquisition is collective plan. model. in result HP as S-Print to Samsung-branded in putting the also our the come half creation S-Print exactly into we It's trade-offs from direct results. intend sales the strategy unit field, plan revenue in This of the have as $X.X We that being may XXXX A Said products on a force included mode our and transitioning year, this across business. units important versus SKUs. the FY that includes would portfolio Samsung by the organic depending the integrate, pressure of is quicker overall the since already reporting hardware an commercial perspective, integrate integration revenue integrated hardware SKUs the installed combining additional into is rationalizing value actual indeed fundamental revenue QX, SKUs of we hardware the either HP-branded being XX% by and the and to our S-Print led integration and to we becoming office

to may result, hardware no at As the future, revenue In on results this is depending there a we or ownership at the these SKU-level time. time. realign consumer impact units organizational that

up performance. to back this year-over-year or million. or with units In very Total up units units quarter, up S-Print. up without billion with $XXX Printing XX% overall calendar QX, We're from the year-over-year. growth were hardware up in getting pleased was commercial Now year-over-year X the over was down points Revenue $X.X impact and XX%, X% with Print XX%. unit XX% consumer share

supplies and of channel points predictor breaking which supplies. year-over-year, supplies. was specifically, inventory QX We around includes up a stabilizing the we placements an operate made X $X.X compare. that Moving Four our and and that supplies Overall, XX% remains already due supplies Box reflect ceiling. Revenue anticipate performance, have effort below to future continue Model our of easier our sustained good has impact to hardware year-over-year believe of the would future the S-Print's that in on results quarters approximately We unit our to supplies out supplies QX billion specific progress S-Print do results integration performance. not in been

the the towards for days are of end We for we share acquisition XXXX. the optimistic both progress ahead. of at XX% and S-Print AX QX, our important HP. making by achieved AX remain in goal and of achieving units X.X% our share, steady of AX, and fiscal least In calendar hardware but early marker success of market including opportunity S-Print total confident about An is

$XX operating momentum and We year-over-year The operating points basis impact contractual are where margin quarter, million including the the points adding driver to we in subscriber XX good year-over-year the S-Print. progress base. global dollars and growing XX Ink, Instant basis offerings, Print our continue XX.X% make also grew of in with down our margin largest decline is was profit of sequentially.

We expect that QX the our for will be low year. margin operating the rate

was XX cash day weakened decrease flow a flow cycle net days and operations cash X by for QX which sales inventory. outstanding to days, and X was a We payable allocation. billion with turning position, debt million from Now in quarter. capital days $XXX finished Cash days funding minus which approximately day flow decrease the $X.X in in and $XXX million $X was S-Print. a includes X in billion sequentially in decrease free conversion Cash driven day of an days by offset X outstanding, the

down shifted as owned costs we balance sheet deliberately We our our more this balance XXXX steadily adjust specifically and and growth. these in support QX, in year, rising inventory for FY typically address we payable given beginning have to the component QX, we higher to seasonality, balances building balances. In and been accounts leveraged and

of capital our capital million total through and strategy million in $XXX reform, remains long-term a return unchanged. cash $XXX had allocation we in $XXX tax million share With QX, repurchases dividend. During

sheet. levels and global now the access the will our more with we the lower have opportunity cash to efficiently However, on of balance run cash business

and update months are quantity cash still we'll and finalizing in timing the of you to repatriated more come. We the specific

resulting supporting this into to reduce repatriation, share gross maintain after existing needs, and taking In we first, investment-grade cash position using rating. repurchases. levels, cash our addition the cash priorities operating net debt that debt are for consideration to liability credit ensuring tax repatriation, plan We our our our

opportunistically repurchase. Second, focus on with incremental a shareholders to returning capital share

and described. And including returns-based non-executive Third, as M&A. changing approach capital are our finally, investing not workforce to Dion we our in allocation, disciplined

currency keep by and outlook. we will including driven actual our Looking offsets expect continue In to forward, installed remainder supplies expect declines and cost continue total primarily Personal we the due from currency FY to for competitive on headwind now related and be up constant of X% revenue, demand in the depend the S-Print, Printing, Systems, of dynamics, we repricing inclusive market benefits. overall supplies net X% in Samsung-branded any to legacy of in memory, following XXXX. This components, gross throughout to aggregate that upon HP historical will the mind expect impact financial decrease to increase In Overall, both ultimately XXXX. to base. FY that that

expect FY to flat in the up to we overall XXXX, supplies Looking constant currency. business be slightly forward to

addition, place a expect with to we opportunistically NPV. positive In units

to deliver as initiatives For the full our guided year, expect productivity we at SAM.

expand We business, opportunities also especially at NPV costs of to to the cost TAM close the continue the with overall positive opportunity out units. environment the look of to of take and commodity S-Print,

continue also opportunities see we our to economic balance will sheet do if to We attractive so. leverage

improved between our approximately factored estimate in benefit of previously be in points, QX. have implications X diluted reform our earned is our to full the various plus full We from net rate tax earnings already year of in been rate effective This tax non-GAAP minus We or has which XX%. to per go-forward XX% XX% year FY $X.XX guided XXXX which generates outlook. $X.XX, tax share a

the X a Importantly, full outlook. or points rate XX% minus year plus is

fund GAAP-only to likely XX% to like per the lower which approximately is year reform the benefit the year $X.XX approximately just share net the rate, higher for earnings benefit in remainder will $X.XX related to the the in Partially which investment charge during an create segment's non-cash approximately diluted net performance operating now non-executives, headwind we amortization in to for tax share expected diluted perspective, in is XXXX. a share tax each recorded acquisition. bonus includes QX. a is million benefit guidance per a $X.XX From with are FY S-Print year We quarter the net earnings offsetting results. full in now our variable variations opportunities sequential saw the quarterly U.S. remaining the QX see an $XX $X.XX rate full Therefore, tax more of to be for per quarter incremental of per intangibles the

have GAAP-only recorded related the not Tax We assumed QX. other adjustments U.S. than $X.X one-time accounting other already Act to billion gain in the

reform. However, government tax our tax adjustments. QX ongoing is With mind, regularly still or which non-GAAP of diluted XXXX by range the in all model benefit to net in $X.XX to diluted range $X.XX being is authorities, guidance earnings we per $X.XX XXXX tax including clarified the tax is analysis future the share the is net accounting per earnings and result net may go-forward in impact GAAP our in $X.XX. therefore expect share from U.S. of $X.XX, that and QX

now share range to including earnings We net by share $X.XX tax XXXX And the GAAP $X.XX. range year non-GAAP XXXX net our $X.XX U.S. to from net reform. in are fiscal per year $X.XX earnings full the benefit $X. is is diluted raising full per $X.XX fiscal of diluted The our

new quarter dates reports calendar. future of so revenue with to somewhat annual few S-Print. both our I our the or the of with Q&A, depend expansion we will or and call. prospective to a complicated to and quarters are briefly across we'll quarter. summarize number segments, changes in each looking call date continue We're to our specific know and in prior Before want there on to you about had earnings year-over-year covered, changes our weeks operating on earnings topics me the move SEC. transitioning to quarterly The two dollar update to growth I profit call without earnings closer the let impressive We announce that dates

questions. our make time, We the strategy. at to and business growth continue for same shareholders. in the the capital return future progress let's committing investing to open With for to that, And call term, and we're long up the core executing

Operator

with Amit Capital be Our RBC first go questioner Daryanani Please today Markets. will ahead.

Amit Daryanani

will maybe I the expectation supplies? Maybe Box supplies sustain that to up have guys What guess. do fiscal in organic in I be you you the start in saw Model, gives talked about growth on that see one guys I questions, slightly I guess, just with, trend you you you that connect first to a Four could with the about the two organic doesn't that XXXX in flat when in supplies? think pause QX, basis X% QX help

Catherine A. Lesjak

QX Amit. would Sure, clear in just QX, constant said remarks, my me But we you growth to let the HP that what to in it's it's what make because we that supplies that Meeting, the in QX which sure is expect result on in said for And we into I on QX. currency Analyst to That [Securities] be X% and look slightly basis, that to began, X%. you a supplies really integration the a which XXXX includes the core constant top of supplies And is helping against, currency. of number, Samsung-branded the talked Security (sic) that and we to for came flat milestone was the year-to-year X% for at to is okay. about layered this at when for the that impact. And to the that, before base way plan S-Print basically FY measure X% have up at took us that we we all that that's

talked were you in XX%. up about As appropriately QX, we

can I'm points sorry, clear are about that? only quarter we and a that real in you Hold the other calculate. X it's supplies Samsung-branded on, piece probably We in which inorganic hearing that's have people QX, of guys.

We have music coming in. quite We're sure why. not

Operator

main the line. be speaker coming to looks That from

Catherine A. Lesjak

Yes, maybe.

that. about sorry Okay,

only supplies those this was view XX% again, the base. the with X supplies to quarter really year-over-year going Samsung QX, installed in of pre-acquisition supplies. from So clean in supplies growth, And QX points get we're Samsung-branded came a really because

remarks, of have XX% S-Print the rationalization my have in SKUs had As about been prepared reduced. of I we mentioned SKU

forward, going going some increasing really to is have been HP. a for so part be And of base hardware installed of S-Print would now what originally considered

us left a in clear So X% and year-over-year. there's But that with supplies QX, growth cut. not was of organic there

Dion J. Weisler

Amit, the four in each Model So the drive let team's boxes. have each Box improvements Four the that just we of me confidence high ability and of element to really add, in

to successful I Nick, Enrique, Christoph, supplies total S-Print ability expected that our supplies Box in of flat next integration the going have team's a the to business than stabilizing and earlier the Model as is up deliver so confidence forward a I Richard and presidents, delivering year. regional the think great last teams business job did the predicted. Four year is slightly in

Amit Daryanani

on you there, what you doing better? point Personal is a that could up confidence guess there especially look it given it just Is here, enabling had at is was When PCs that? overall guys have. end Systems tough revenue Maybe And follow in the the Got channel I number this you impressive performance build I isn't at side. the your happening gains compares that's it. in the demand if fairly or that share Again, segment.

Dion J. Weisler

logo four are in hardware. HP I experiencing remind HP's market, of that billion customers on one numbers helpful. Well, five I'm team, points to some that that give folks $XXX you our every in-quarter I five half for to happy you the always a which on give data picture. an to the kind of quarter still Cathie, magic. is tend it, And want would to folks And, massive this sales of traditional is be if bigger tactical the while out potential remind out missing have

And market. like liked consistent that. this this market. pretty about so I been I've always I've

that. which objective, playing last history. our portfolio I the of why portfolio think experiences engineering that the are think we're keeps we've see market, point and we a game. getting we outcome can We're shifting towards not our better, gains and we do quarter, the for upside where I consistently best we And premium want our we've amaze. profitable the sake. in to got market not share It more shown with that to while own in X share and share's of taking grew is think share we taking We're on parts we're the

execute to of also well positions continues future. that cost inventory us to well of managed. strategy but today, team's only into the not the management, channel for very Our ability be confident well our innovation, I'm

Catherine A. Lesjak

a revenue. going of Amit, did to market improved units QX. see PC QX both on in signs you and perspective, calendar see growth, growth in starting and what's PC We at if in the we in And, are look calendar some from

I this Although down analysts say traditional roughly revenue predicting be that the are PCs in will units will with year flattish.

really of Some They're for nice on repricing, But rest been we're the up products, also the price, up. mix ASPs they're we've dynamics increases. margins. going because shift market getting we in to repricing commodity better market, of the been that are cost higher a higher-end up because the are are

is that in units. helping also kind seen we so with And signs Personal Systems. some of life of versus But revenue have

Operator

be questioner today next will Please Milunovich UBS. ahead. Steve with our And go

Steven Milunovich

Thank you very much.

you You again. couldn't billion-plus raise And once year? free above why had the quarter didn't And you flow we good the a $X cash flow higher cash yet, a number expect target. Was full expected? what for

Catherine A. Lesjak

Thanks, Steve.

it cash flow and least mind we happens the the in obviously, And really components, least we free That earnings cash free that being to in mix. cash at when conversion keep us feel the And upside number. said, guidance at but free update cash flow by those $X atypical driven is for what pretty are look confident at billion very quarterly are so a in flow to flow the at we also with we're to the free $X also is cycle But of sort year. billion. business quarter. in we our very starting that some cash on basis, this still see So pleased for

Steven Milunovich

weren't Okay. the thinking you And margin And to maybe figuring this Systems see margin in improved time, an go DRAM on DRAM as new prices second rise. increasing half, the second comparisons still Should that at we the an going for half? Personal that? think degree does improved. into you you were Personal And impact to what were Systems then the looking view I

Catherine A. Lesjak

So let's expectations commodity have around costs, start first and with kind our changed. of they

they to DRAM. we that at. fiscal the Meeting, they really would Analyst and, Security expect continue that start for particularly continued kind we And to the to stay that have thought well, would And off back levels now throughout level go year. of we we at seen us, in QX increase the if So in

not But commodity I we've we've over the year-on-year But we between up margin. points to XX we offset enough ASP dilutive In for to would not cost things able able we're on saw just XXX% increases the if taken been year, incremental the basically XX commodity that XXX% one just so points definitely is cost headwind basis and be cost of quarter-on-quarter. think that terms numbers XX somewhere increases you to basis of profit currency. commodity simply we wasn't mix, are commodity the seen, increases, coming we any generate to costs, again of do. pricing increases, down and will ask were we mathematically, but the through, result our And with offset these have that as which it margin, a and mix is and of last were positive to that to able if reprice

Dion J. Weisler

give raised feel mix some me at And our evolution discussed relentless portfolio our over a at we traditional shifts high in range services see mix we the confident of time. to but margin, over just market Analyst that and as of in X% the focus shift. also and transform happen continue, you our are and to operating the which we SAM, ability that a on let our our as Security time. term the and and half end not dollars profit do result, strategy market, we And billion is context in expect the to $XXX things the will in Remember, It's other towards Meeting, shifting to like hardware. additional positive mix cost we longer-term will longer of profitable we more in medium that parts and we as of

Catherine A. Lesjak

It our And term. would going long to So to it's on in not that the profit any we margins. range we generate in But operating we that rest rate year. X% will for dilutive range. and the us also, to think because isn't we just revenue We are be after on really cash flow remain operating were ultimately, the that mind to a that in keep profit focus that go for of historical dollars, dollars X% mistake

Operator

And Merrill our with Wamsi next Please ahead. questioner be today Mohan will Lynch. go

Wamsi Mohan

from had has or you've the that anything now for the And of portfolio changes a Dion, you. Samsung I any there? you uptick And quick in for do over anticipate a quarter, you has in surprised business? had on thank follow-up you pace you have needed And some flaw that? us do any rate the demand, just Yes, anticipate can investments chip this context, making Intel or impact demand any to Cathie. give

Dion J. Weisler

X,XXX inside combined traditional a Excellence versa. family we We business going Sure. year integration and the R&D is that the engineers oversee moved Remember new from of patents. than in his He more with and of relocated our people the process R&D business incredible orgs. last vice to We've so S-Print HP into Korea. We've Look, created to than according our say family the would plan. and print we've head more Center of S-Print our I office Korea business. got added business, X,XXX to the the

with $XX billion in where accelerate operating to And one and providing as market, AX is expected, been us our we're really say quarter so business it's progress I opportunity the underpenetrated. in the the would we've and

good about feel that. I So

was? The question second

Steven Fieler

the On chip Intel flaw.

Dion J. Weisler

a to think and us broadly hard foot Intel But there, we and the that believe I reacting platform. faster very Obviously, for to appropriate a to think the front we've seen broad we're the customers, made we're to providing than is all the our No, don't impact on Intel. I it's important of our don't demand. I or sure reaction updates. PCs make demand for Security work broad to incredibly competitors.

Operator

Morgan go Huberty Please Katy be will today questioner ahead. next Stanley. with our And

Kathryn Lynn Huberty

from Good Two you. afternoon. me. Thank questions

do year? And supplies? copier where is on really then some begin exit AX when then have this I'll revenue fiscal you could my through noticeable aftermarket to pull the share first And follow-up. will ask The think and impact market

Catherine A. Lesjak

calendar So to and XXXX. had hit as at our hardware X.X% Katy, quarter up least share XX% sequentially. share in and a And know, we perspective, FY both last in you year-on-year AX from the is goal

The space. it does do big feeling take confident a reception we can from and copier bit we're impact, positive, in business to transactional a for but such with time the we So about of a are that has have making been what kind optimistic meaningful of have so and it customers we little progress.

Dion J. Weisler

The single new pipeline sign growing channel in to partners. consistently is continue every We region.

time. lot long a a underpenetrated again for an is been obviously We've is $XX of a billion this So It area we that spend market. time.

progress, making on are do, and work We track. more we're to

Kathryn Lynn Huberty

supplies (XX:XX) meaningful And impact come any still or from that is is yet, to there

Catherine A. Lesjak

meaningful in not It's time. this at point

Operator

ahead. questioner Bernstein. with our next And today Toni go Sacconaghi Please will be

Antonio M. Sacconaghi

sort for to I'm Thank you. one one for at trying Cathie. Dion of work reconcile Yes. the I forces than maybe on and have qualitatively Dion, just more supplies. anything

is MPS last quarters. indicators than And better for grown graphics leading have sound organically growing. supplies good. So is each business three of X% the growing, The the all

the several commented for about placing AX profitable ramping. is last quarters units. You've

yet, And quarters. we've All in going it of the improve that of what for appears forward. seen be softer recent may kind should supplies those than would that actually suggest guidance XXXX fiscal

sort the offsetting we some we're circle that do are there how So takes Or square of missing? here?

Catherine A. Lesjak

HP take it's laser Toni, business that core significantly, base base Samsung. I'll the and There down attach. installed just pretty is are installed Their supplies of and outside the not one. is so to their some continuing come AX maybe forces mostly pulling in low-end

And And flat when slightly that the what so had. we compare FY you currency. year this we've easy we talking that's inconsistent in up think will, at year in be XXXX, in or not to constant about been look I that with last

Dion J. Weisler

a I us, not guess is is it's mean, what to Cathie surprise saying. I

Catherine A. Lesjak

Yeah.

Dion J. Weisler

slightly that XXXX Box in Box will Model, an as predictor fed up. for of was the It to into believe as Four input it. us. Model strong and result Four And we contemplated a flat that, has supplies been the We of be outcomes a

Antonio M. Sacconaghi

Cathie, rate incremental EPS? you And Wouldn't guidance. then a both follow-up. provided quantify your expect revenue just since much And beyond currency can moved fiscal you an SAM be and tailwind then And a has that to Okay. should us? help that for XXXX? we favorably XX% more tax

Catherine A. Lesjak

rate X%, tax XXXX line be first. plus our that we expect FY FY minus last So so Yes, with in XX% will XXXX. or in question let's start the with

rates we that going now, was it's In seeing tailwind. X.X be basically also At points. the to to are And SAM, FX, like cost to we points. the exchange of points more thought QX With tailwind time revenue in saw to you're commodity of X of terms increases. right. worth But X X we kind of X basically

competitive a the And very that side. so pressure just in And there basically currency by being is the basically The that on seeing market, pressure then we're offset it's the to are market. somewhat dynamics is also such that tailwind reprice. competitive the

$X.XX. versus basically commodity the from repricing combination that so XXXX say in still assumptions And the currency the FY is about of cost XXXX and tailwind increase the

Operator

with questioner And will our next Please today be James Citi. Suva ahead. go

James Suva

Thank you so Dion. then one much. for and question Cathie One for

life extended installed PC Or average of the your forward? more? of with PC on higher, margins the XX seeing the be points else? prices operating And down, Print are going that which about selling basis believe PCs Cathie, what's segment, life solely attributable something average I to of year-over-year, or For Dion, or in then went average even going you the for current Samsung is base investing the integration the view

Catherine A. Lesjak

Thanks Jim.

So factors to the Print are start few There with margins. a let consider. me

transaction last QX on earnings first one first investment this you November full and that mode year. and we in we the S-Print, that's frankly, of is have as closed S-Print half about the X. on mentioned, is call, The S-Print what in the a talked we And quarter since of

diluting And margin, XX.X% last big so one dollars. also is quarter. operating And versus that of the only the not we XX.X% of to impacts the saw probably that but profit course that's

unit NPV is positive The the one second placement.

you order We sequentially unit in we placements. with units a on got know have significant of supplies. And recurring to revenue that course, to to the all seasonality relative get increase normal the place seen

the year of help will Samsung since So in in the point expect time, continually at will low be do over the year. it improve this will course point the because we the XX.X% that

Dion J. Weisler

And in that's large that driving, forces mobile most been acting we've say, phones other quite systems due and for see giving But we've category, upgrade. a years at been the investment sort a base of kind areas. on few part the it's to the would installed down. today, And given part. to pretty personal broadly for under in on speaking, innovation of second pressure, question, creating the reason aged We the tablets I personal of there's five-plus see in systems capacity people we

the you we it's unrecognizable at PC look If that a of probably today. make products ago, from years five

Catherine A. Lesjak

It's ugly.

Dion J. Weisler

years result yes, or It's we're sure quite ugly, unrecognizable. to I five X.X. moves whether And it not think whether or as a remains of it at that, to it four goes

as customers do we going think, lot we going personal customers of to I how we but else invigorate we of What innovators, about alive the that reason provide on giving is it is it's us do on the I else a equipment. their lot lives? incumbent, new how industry depends how not categories, So to with to engine think categories. to invent current a update keep can a for to that an only is for upgrade. businesses? it a reason their innovation their can time And can thinking spend What

Operator

go Please questioner Research. next Shannon be with ahead. our today And Cross will Cross

Shannon S. Cross

and I follow-up. much. have a very then you Thank one

as to by it's of also Thanks. how assume terms I'm about received that's services, and think we most a of sort subscription being of for contract under weighted service now but of is how as percent curious In recurring. revenue do I'd Printing, I'm PCs the your customers? curious to devices

Catherine A. Lesjak

incremental progressing. contractual at or Systems, and business, start not opportunity total of The in it just Dion a It's profit. as having as it's with Print It's a going progress, maybe pleased important the an bit the kind top create this time. Personal quite our to because does an our We're impact relatively with on our of of then there. happening, longer. line element take but it's drive It I'll can is as is meaningful line, slow to in how percentage but gradual. meaningful business bottom a So both in contractual business, our in well trend it it's terms handle for and that point

Dion J. Weisler

evidence there value motions the markets to about from are if motions to as more service. societies, we everything mega affecting more going transactional very clear where is big broadly think And that contractual they trends shift a

we country. Gen think sales a And serve everything us real it's shift and types transactional to really of up customers Z-ers different everything X small. out But markets, but quite it revenue product services, portfolio in see service, to so as to Cathie's varies of interest and the by again, device customers, our customers. investments point print to contractual managed and country the innovate a as There's only service, these want offerings an exciting we've from in-between, about our is going today, large. innovation, plays great that from but to also incredibly innovative of pipeline in funnel. terms in in a It's of of a really point, as big service to a making And in percentage it's relatively The move time. as we very everything happening that over customers small not part area. forward, got both terms in we're a

Catherine A. Lesjak

a that to now Apple announcements being Apple one have related in device service be that as you or And weeks, was this this offering. devices And multi-OS. to devices few we because really us within service big well, think, the order of really is bringing past a do able to I to made important

set. product your own be can't kind You of just

us. an so kind And additional that's forward for move of

Dion J. Weisler

regardless devices Apple very was to same has walk to hook managed have you fleet many be a service fleet of a print you managed from Apple systems personal device a strategic able as services, this well with a where managed take successful for you that true company to up of it to the be going over service services, entire different Shannon, a is as if to in And be component of you're And into comes from. enable to us know print part that vendors. The important able contract. often and

Shannon S. Cross

you. gotten Thank call and through talked Great. still then XD And I think printing. this we've not now about

customers. you Thanks. as you're from what there and curious give just kind I'm seeing update to So of what can

Dion J. Weisler

about markers business. with very wanted the you back to guys check continue Security Analyst Meeting. We that to printing XD remain we us the laid So excited we at out

couple weeks full we those of the we a we color to product product production which a One getting market into full was production, and launched portfolio. the ago, complements were of prototyping system that the have. low-cost We from and production up investment really off a get platform same way low-cost pull platform we a already and leverage that's single technology, to full It's the the that color full from all as said system. it important

We customers our continue multiple to make progress with orders. end with repeat

We have continued grow to our channel.

our grow to materials continue We partners.

plan we market is tap and $XX to over remain trillion about So according that our manufacturing time. the operating business into its ability to excited

Catherine A. Lesjak

And in same low think two the points color well Dion market. prepared with printer. And as that full I remarks his production, that, important mentioned in is, the announcement about now prototyping it's the price because XD that's platform there's as the for is, one unusual

trillion disrupt to really $XX a get got molded. design And better the part. designing other really we've a today injection starts one XD not is It's that's just so time, for placed is It's new And in a this that universities generation replacing going then to so draw. is folks XD. to the over printer away. thinking lower-price industry, to And there we're from going this saying design right to that part way if about manufacturing that's get

Operator

Rod Sachs. And will questioner today Please our with Hall go Goldman ahead. be last

Rod Hall

And share to increase afternoon. help good XXXX is of same that. I your you growing. the part supplies in to in of can supplies us AX a back time, to And idea income. hi, if the wanted slightly up, to this I at big Thanks for follow-up come is continued growth such flat Yeah question. drive a and just see AX have doesn't understand growth the since then that's net in why share

Catherine A. Lesjak

in 'XX. lift seeing. that are not the kind that FY it's the unit that we're of other good Rod, It's some AX growth factors So, offsetting provide doesn't placements, supplies the in AX

We an installed that are, declining. S-Print, have we base is with

attach doesn't just price sort the laser supplies of have have low-end We same at AX that that band. on

our up constant we're of those is have headwinds and stable, are XXXX. in we're to what currency to And so in some confident in supplies flat slightly offsetting doing ability FY

Rod Hall

any it actually underlying on NAND Okay, thanks of the sort I equation of that I second if of comment negative was not growing. pricing. through Cathie. if check wouldn't of side also the makes that us. know movement thinking I wanted checking when that on double continues then and on the to see you've just there I see have DRAM But changed. stabilizes year thinking just and to had and to all we your changed kind you're you'd And increase there. that NAND kind whether mind views when sense question

Catherine A. Lesjak

year tuned Rod, one a we'll end So time. of supplies, XXXX, at We've a talked now the at year terms talk a a time in half and about XXXX. Stay maybe or XXXX. about of at

Dion J. Weisler

that may basket biggest There teams well other NAND. basket they own be our the broad to to offset to looking selectively obviously The We from components DRAM that DRAM are that's material shouldn't of costs what are down. There inventory. memory, a headwind. move that. our from the look within leverage as and is costs obviously sheet as balance within broadly forget We non-component items that of through wherever pressure to of reprice secure know impact regard the some components with We move business. can. the some sort And other in we very some is up,

reprice what don't You have. can't you

cost do value to suppliers and our that that. I at sustainable as part takedowns. Our laid And is to secure we'll into investments we we we've very SAM. always the and priced components rational other drive at of a think higher non-component demonstrated drives important way cost continue work remain that It's relationship pursuit ability the to them, shift It's of closer DNA. our prices. out The smooth their higher-margin consistency. aggressive We'll partner to mix to in wired segments our to

Catherine A. Lesjak

of little bit are currency in we fiscal XXXX that obviously us offset. to a from And a tailwind helps getting

Dion J. Weisler

of we're Systems. I and It's QX we It's I'm would our really closing notebooks. broad-based. pleased single Printing. inside the business one overall, It's out vitality office. and accelerating It's and opportunity revenue is continuing with accelerate It's But own We happening Personal never our there much this our improvement delivering move desktops. company. portfolio. I'm our growth pill to It's that no operating work our core. exception. incredible to beginning. reinvention need and say We even our years thinking that's for convinced lie Thank and our us, within best in results, future. very say, partners embrace be the in the the always deliver all. faster, year and our initiatives is continue home. and investing We Impressive the just journey to more as the an innovate ahead year-to-year We're And think customers. no invest to We're of to our and know have It's you satisfied. leading amaze in I and across growth We're profit remain humble will customers. change do. the industry,

Catherine A. Lesjak

you. Thank

Operator

attending you for presentation. today's now is concluded. the And conference Thank

lines. You may your now disconnect

HP (HPQ) 22 Feb 182018 Q1 Earnings call transcript