HPQ - Earnings call transcript Q2 2021

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Operator

Good day everyone and welcome to the Second Quarter 2021 HP Inc. Earnings Conference Call. My name is [Hailey] and I'll be your conference moderator for today's call. At this time, all participants will be in listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. to Investor call Relations. like Howe, to now of Head would turn over the Beth I Please ahead. go

Beth Howe

Good afternoon are everyone Marie fiscal President XXXX and Chief Myers, welcome to conference and Officer. With HP's HP's call. Chief me Officer; today Executive Enrique Financial HP's earnings Lores, and second quarter

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

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

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

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

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

year-ago webcast, unless period. corresponding year-over-year are the this During with otherwise specifically comparisons noted, comparisons all

turn to the presentation information. it to release that expressed slide basis, With those earnings that GAAP been on included information comparable Enrique. has to for I'd reconciliations financial refer non-GAAP tables today's For to a Please over accompanying and the like reconciliations. we've

Enrique Lores

particularly start want state the of acknowledging joining Good as afternoon Beth. everyone Thanks such countries the for thank you by in India. the I call. to and pandemic,

difficult doing everything time. this and our are during customers we We partners employees, for can

of work much parts and the there do. to improve to beginning world more reopen, some are While is

well we growth bottom Turning of quarter above double-digit to and which was It results. range. in top our delivered our line guided another exceptional

reflects business performance the technology relevance our in of high our the our an excellence model, of of increasingly resilience Our operational level, the team.

I work. secular demand summarizing In hybrid are technology heart results, the of HP across addition at and our want driving to trends services to our sustained also portfolio. highlight

We are This growth. we the includes long-term and strategy to substantial to to creation. drive deploy our accelerating sustainable maximize way continuing our cash flow operate value transform

an quarter. me In exceptional QX, across balanced saw record for start XX% growth with Systems. delivered demand and and the Print billion, with our increase we Let revenue of products of $XX.X Personal

enough XX% $X.X economic $X.X to and grew in cash growth consumer, billion shareholders. flow, as Print. and growth XX% generated in activity commercial our in our XX% well segment, reflect Commercial In and pressures was PC on These increased. businesses Commercial we free as continued Our delivered shortages non-GAAP consumer including billion challenges. $X.X earnings not creating Systems supply XX% in XX%, up strong we as of increased the robust in industry-wide of against to note chain. and that to COVID results printing of the and backdrop are is up businesses. our there Asia Currently It the Print important Industrial component with resurgence chain in our is supply these keep additional growth returning net Personal billion improvement to Southeast XX% demand supply results revenue is growth

least through the supply of expect We constraints at end XXXX. to continue

the second to remain to taking half. we dynamic, through environment us actions and increase challenges, our navigate outlook are the will enabling for strong likely results Although deliver the

services of we decision is enabled cyber by security. this the XX% The to not it that go tell flexibility I integration uniquely businesses. the more delivering will world simply opportunity is has work, IT on to our survey, growing risk grow driving XX% a Underpinning and businesses importance recent cyber short-term, remote of open all with] us this And I've employees daily focused a time makers and see our of and of of future PC to to increased This this According we get and to want trends. essential software. is in back remain our hardware the and to positioned more and of offerings HP capitalizing in us on on for focused secular accelerate and way mobility play, supports are pandemic. and deliver to we our long-term PCs stay. merger], our will capitalize and [future hybrid. in and The And customers. subscriptions the in key shift to as opportunities. is be has are people for a broad and including strategy Systems, strengthen during be to fundamental the they our portfolio, business this It where security across is opportunity and to is innovating think products secure most more for these portfolio the Printers. create model stronger said, way education work, value, equally strong new new expand presents COVID. than segments, learn, on differentiated and life. the attractive Personal and will With innovation growth There continues work. it and By consumers work As in convenience services In the here our the clear gaming. companies through a this [war our education to resilient how greater huge create, a was here prior been shift

these trends We are on in ways. already of a number capitalizing

the we purpose-built students the same devices of market in office. developing is IT and have award in HP for At where number it hybrid however, due education in per learning. are one features number PC services time, sales doubled like to Provision hundred the as easier more and as the winning HP Connect single-digits. remote well vendor, that include set the make homes, PC’s work In in up new PCs teams employee's for than to Our the remains latest support

work close way a in and we industry, the digital the entertainment an extends the from center streaming part eSports. have cases, become the of and to has In PC many this company, be far and As of opportunity In school. PC this device to importance big we of still growth creation consumer a home, as beyond and gaming rise a overall go QX, The the revenue growth. gaming to of solution. have outpaced content to long

this We on strength are to into building attractive peripherals. adjacencies, including expand

model the In Europe. in close experience. will North solutions and in of leadership countries to acquisition This evolution to we system We recently announced hyper an today's HP+ track America services. We and to the year do optimize leveraging our are of consumer business Printers, We market are and believe to HP+ across in needed on one. expansion Instant are provide includes QX. expect commercial across a and better world. Ink, our help be We accretive subscription hybrid accelerating in XX now profitability which us customer a provide innovative

both be [steered] for Enterprise Flexworker office in branch The time, to At are a this introduced HP's seamless the to Additionally, for across and our better Service more designed strength printer fleet. series XXX Print contract. seeing managed printing improvements among General Industrial company the LaserJet workforce as visibility agile leader XXX to Services, Indigo our and we more new installation which of management environment, to our label configurations our plays HP and incorporate personalized. the a This same distributed solutions. deliver hybrid is market is [AX in for is new to manageability remote production printer]. Within innovation more Motors employers our PS to are and installations graphics, and workers Press our for at and we In have hardware catalyst customer remote allowing in businesses, officers mobility in the Print and new have portfolio. companies enabling workers security the greater such wins packaging collaboration. In into looking quarter growth Services industrial CCL, is

software consistent see wellness. In impressions in industrial growth square tooling vertical are meters. double-digit and from to equipment Print we to services industries creating continue also spanning and and automotive We more go-to-market health solutions, to XD, across

our we and adoption, to based including solution and them fiber efficiencies. tooling engagement cost numerous enable prepaid molded purchases on and For customer achieve example, significant process

our our Ford partnering extend cash into And auto Company cash Motor With generate of the value strong XD diverse printed on [loop continue FXXX waste]. we to we deploying and flow. to In free closed portfolio, remain a with creation. used are focused turning by maximize addition, life trucks the creating already components we meaningful on them to also parts for

M&A. disciplined reinvest significant capital return We our have also the to flexibility businesses, in while exploring and shareholders to

engine. We create opportunities growth core, will adjacencies to attractive continue to look strengthen our to for and expanding additional

As become that enabled. exceed M&A, will buying transform to strong strategy approach to returns is to requiring digitally and company those fit, value a plan a enabler financial take proposition. leaner continuing the stock execute of always, And operational our and we own on important an of rigorous our evaluating attractive strategic more the to

announced drive across also to paper-based packaging. company entire joining very Today, And am have own what sustainable efforts. to leadership truly long-term Fortune our making is by zero XX-XX last This objective is strong us say with innovation achieving HP's X,XXX for these diversity operations tech set I of signed shines. make For drive and emissions where performance in key an chain for By to ecosystem and Transformation HP to new our to Greg will aim am inclusion future. XXXX, quarter Working help in our neutrality, partners deliver commitment. HP our strategy. of paper equality both scale goals. XXXX. we are Didier Last and HP's our together for us a a they the This zero Impact goals. Chief we new People Baxter, will is with carbon staying joining as leadership action strengthen for of accelerate Chief values. true of To Personalization waste XXXX, on our next results joining strategy month, we HP, achieve And XD climate and to our to as in there and our costs help part committed investing we pleased net Overall, by includes set zero their HP value capabilities over gender HP proud President carbon ahead. XXX the progress, appointments. week, Officer. while and us announced Ludgate to this Kristen the of a first We're is and achieve pledge excited size a a long-term HP three such impact. Amplify leadership the and ambitious our set team, Deltort deforestation I our announced is reducing and our Officer; focus structural partners continued Printing; our to be lies

We that will leadership our drive decisive we adjacencies, opportunities on create attractive continue know strategy capitalize and advance confident continue disrupt I way for taking Personal Systems maintaining value. into our actions operate. relentless we the our and our not in shareholder execution, more to Print, attractive when transform I market, XX,XXX say And to on I speak focus expand simply new to to our I current employees, position. am significant are content than while

you. a have through will and Marie, year turn will who our bigger that, fiscal outlook. the with I to much to quarter of details the over our And call We Marie, you take over ambition.

Marie Myers

operational HP's portfolio. second Enrique. and our quarter the both our Thanks, highlight breadth results strength of

continuing journey our cash robust the capital We operating all in our profit, to investments ability flow while generating are returns, company make and for customer on demonstrating while growing free and needs our meet future. strong our to maintaining continuing transformation

quarter. by increased XX.X%, split, primarily the low Turning EMEA details the increased At backlog Non-GAAP elevated XX%. in supply go-to-market. the The primarily higher quarter Non-GAAP margin strong favorable Printing. nominally was of ended up increased increase diluted expenses was for well costs. variable a outpace per was XX.X% restructuring of promotion XX%, APJ revenue, and billion $X.XX, XXXX, growth Personal Americas we Regionally, per QX as innovation of offset up billion, including to COVID net increase constant compensation well up driven to higher the The year-on-year. shares. XX offset retirement as and $XX to currency. was X.X highest billion net expense credits, related points a X.X XX% XX% as from Demand expenses operating prior-year basis constant and primarily to and diluted in and net or both quarter. increased currency, by favorable and were in year-on-year. was share points as million, investments other continued of count in amortization the and benefits chain revenue gross other $XX.X as operating performance earnings of disruptions. pricing, approximately with The since increased excludes with Non-GAAP year non-operating compared share the as year-on-year and currency, million adjustments $X partially supply totaling result by the Systems related diluted in share partially Non-GAAP second OI&E XX% of earnings net $XX impact this intangible assets. tax net benefited QX rate XX%, and historically by to the driven charges, very expense

QX result, net a GAAP was earnings As per share $X.XX. diluted

for working learning benefited Personal grow. respectively. QX, XX% Strong very and Demand and and year-over-year. product with of strong with up XX% total home. consumer In from our demand again for down from Turning quarter-on-quarter. Chromebooks technology drove XX% our for XX% up strong and with to category, down desktops, increasing billion, into we Systems Personal unit $XX.X X% to demand XX% Drilling need the workstations. continued related as product saw details, of to XX% for commercial representing was units performance. backlog across X% remained strength growth the segment was notebooks, Revenue Systems total education up revenue for for and notebooks By revenue

well focus particular the Personal higher strength reflected and delivered growth significant due currency, as compensation, portfolio. and year-over-year commercial to commodity The as $XXX operating our in margins variable solid services Systems and double-digit peripherals. million mix We including also as strength expenses, execution in improvement investments by go-to-market. consumer results including profit our continued saw cost, in of and X.X%. pricing, costs, and Print, as In promotion operating was with attach primarily in favorable partially offset innovation on unfavorable of well lower

segments as customer uniquely pricing, revenue a in grew up and value sequentially, XX% continue gradual XX%. XX% up Commercial, primarily in [$XX.X In segment, the but recovery at and by XX% momentum up across services recovery was with positioned XX% are deliver hybrid QX $X.X to hardware and up We well demand. expect and growth uneven and and ongoing world. revenue billion]. as commercial the revenue revenue $X.X up consumer was improving hardware continued commercial consumer XX% were and respectively. the be and with and consumer XX% supplies both geographies. we By demand XX% total units print favorable was to was billion, as leaders Supplies up have to times total Commercial The billion, units year-on-year to revenue driven units and

to X% element million. continue X.X printing. enrollees of Our with in a business key contractual and business our Commercial Ink is Consumer sequentially cumulative well Instant growing strategy customers with Consumer to print both our resonate In

On margins million This higher and million increase driven favorable supplies, unfavorable hardware year-over-year partially by to print including since pandemic the bookings revenues, quarter. strong managed new the TCP volume the a XX.X%. was for Commercial hold $XXX less this across operating first side, by and we promotional increased profit time renewal mix services and increased drove and offset expense, TCP $XXX costs. bookings and pricing took Operating growth again in were

gross In $X.X me opportunities Let our and remain second new structural we reduction transformation to our now our run rate of program, billion savings savings turn cost look specifically cost ahead and the cost efforts initiatives. our to of at continued plan. year

resiliency, best-in-class our while to structure. we a network enable quarter, chain our enhance efforts reducing to continued cost and footprint the supply optimize factory our supply During

leverage we to capabilities transformation In and cash us and structural long-term value continue business, our in and ways enhance cost transform reinvest The which in flow customers. our our we to operate allocation. profitability. Shifting digital to efforts and addition, deliver flexibility the to the capital to give our growth from savings

days days. outstanding days by from flow buys was cycle cycle partially conversion operations billion primarily better to inventories, a cash In expected the were of in inventory $X.X at in days and days Sequentially, than billion higher offset QX, cash $X.X minus cash conversion X up strategic increased free the sales XX outstanding. quarter payable flow drove growth due reduction Second was as and cash and respectively.

quarter, in the cash in shareholders, returned we $XXX and billion For of included million cash a to free of total flow. XXX% $X.X repurchases This which billion represented dividends. share $X.X

at unless to of opportunities $X emerge. back coming expect buying at the least elevated continue shares billion levels return quarters quarter we per higher forward, in Looking

to to to fiscal mind quarter in Print, and model of improvement demand in forward following to strong continue demand overall related multiple our the particularly outlook. pricing demand as XXXX, we continue reopen. of the to particular, rest PCs, the commercial continued economic dynamics our in for Looking to In solid we in From pace perspective, we reopening. expect the third availability, financial keep a and supply In and related scenarios offices consumer see consumer. expect

expect year-on-year our reflect tougher also reflect to progress comparisons, we is important also in FY Systems. in the in Personal While it on our year-over-year XXXX revenue will continued growth the to trends strategy, QX particularly note growth

We to meet and to at in PCs least our end through calendar constraints the continue impact expect negatively supply XXXX. demand Printers, ability to of

QX increased market Systems to pressure margin in normalization the to as the second gross and commodities more and some expect and year levels of see environment. Print in we logistics the We as and pricing and expect half due to both costs Personal compared in

in to similar half run the to QX the more be We year expenses operating of expect rate. second

and chain, and for into our account, FY providing its resurgence monitor Asia. Taking potential continue are supply Finally, following XXXX. we we in Southeast closely considerations QX COVID the guidance particularly impact current these to the to

net non-GAAP third per share of to to in GAAP earnings earnings quarter $X.XX the $X.XX. share net be diluted the to in quarter be and of $X.XX range diluted range to $X.XX We expect third per

We be expect GAAP in the FY be share XXXX in net the to to and range XXXX share earnings to diluted to non-GAAP diluted of range net $X.XX of earnings FY $X.XX per $X.XX $X.XX. per

to we and call $X back free would the I questions. at the now For FY your flow least cash to it And like to for operator be open expect billion. XXXX, our hand

Operator

first Evercore. [Operator you. from Instructions] with Our Thank today Amit question comes Daryanani

Amit Daryanani

guess I my afternoon. I Good Thanks few. taking for have a question.

the I margins April. one by The I'm bit points April surprised basis talk even versus fairly on supply in stable you first basis about a guess the were quarter. sequential in somewhat the hoping little Print a was if could they nearly down July though mix think I was XXX

you on we the to it in half think and the just could what in do how quarter, So, of year? Print happened April back margins maybe touch the the about

Marie Myers

Thanks, No. good Sure. and afternoon. Amit

So the decline several by was operating in we really the factors. saw Print rate driven

XX%. give really competition. our cost which as margins and Print in we to overall do have in unfavorable things the the range positions and you the few second be us future, and of well support I'd made a we ahead XX% against just of as expect And to strength variable look in some let the comp. long-term secondly higher future R&D, we think about factory, half. and about resiliency me commodities, the OpEx say And you we think And to into all, growth portfolio, look, in by just our that of first across seen investments So to logistics marketing

very full year in half. the strong was first the obviously, So,

exceptional just HX, add we higher I range. of end to couple the of would And in of So, we start favorable be some other will in diminish. points benefit expect particularly saw to toward is, that the pricing the a

the quarter logistics typically potentially mix likely then supplies. in would as – to And We're would higher for well is finally, cost, to some our seasonal will QX our in as that our supplies we normalize ability reopens. as costs, strongest impact demand. so, commodity QX meet headwinds as is there and mix expect office see And that

second and incremental So, half, just of the you're keep in just we're as dollars. about generating that conclude OP that in the mind, I'll business thinking

Enrique Lores

that we are did. quarter, Print that the in point if home we that growth, really to the we business whether key really and we office, this to is you pleased categories. aligned rebalancing performance year-on-year commercial a see look how quarter you industrial it last our some see and the for growth for Print described the comparison, of think happening is I at look that are Whether of between trends starting the at

through the Print had we strong year. expect rest a continue So of the quarter and very it to

Amit Daryanani

you EPS, Print, in I’m but QX implied in you're the for driving what Got on for And plus really it. just curious, dynamic And rate look will had fact quarter touched are I'm a is helpful. and big other EPS for I high a XX% Enrique That the the everyone like follow-up of sort you look know going think run like in representation slowdown is state what $X.XX, given really, decline think performance then trying QX. strong I I EPS the is what that especially if in of understand could especially vectors first in back single-digits to October given are focus is the elevated comparable half, and half $X.XX the I to do backlog? HP? you've implies HP think time, normal steady then over is your EPS curious guide EPS

Enrique Lores

year-on-year year first half we ago. of a about where the let things we put XX% EPS comparison more the second so growing talk from is all, how in perspective. were for Yes, me than

really representing strong are very time to all we're demand growth. as solid we At across the our continue of same saying, So, very you see portfolio.

in see market. happen this part but continue a the to fundamental guide. are driving is this our to limited the half, by second of what to is we shortages that going through given expect be supply, the And We we

better we do better we capacity. we in better could better, we If because we As of continue and be. to prudent the been past, we guide, because have we will be are will, we could better, past of have done we because can pricing, in when there the do

and that constrained, the given guide, can we to this do don't do I better if in the therefore using be and number that anomalies we we demonstrated better, again will supply should the we So, QX project we business see all the future. have prudent think

Operator

question next Shannon Research. comes with Cross Our from Cross

Shannon Cross

three very about to quarter-over-quarter, and question the channel. today, it of a curious, what channel can't within both the remember both million PC their channel weeks said two much think weeks follow-up. I see Up you. the some sheet that inventory then a on maybe I've the I you inventory, supply $XXX And bit was much. is hiccups? PCs usually, printer to had Can I end component a Thank side? or I'm chain Thank in your that then talk they you're six on think normal. how eight you just and on balance of product given And Lenovo and buying I on about then was seeing

Enrique Lores

that the and levels we were to start numbers. of of challenges decided it. strategy behind me the this last have that we we see share let me numbers, anticipating operate shares with What some reflected some in I the is what we some you higher we Marie HOI quarter, supply that are Let of seeing, the think before and maybe shared of

So, the don't on in some color increases give why HOI? Marie you whether

Marie Myers

Yes. No, absolutely, Enrique.

you step Shannon. context me some for back let So, set and

obviously drawdowns inventory we're all the through. demand then way we're strong also the the last that that And the you the year peers pandemic. we've factory system ongoing So know, and as given trying the obviously to lapping chain obviously, from nature seen impacted of in those supply challenges closures and And navigate continue to Print. disruptions across

So, do to as we owned and said, to approve we during carrying of of this navigate time. inventory levels assurance this supply, we higher are

to channel point your then this going at HOI And second to to elevated PS, on we currently supplies historical inventory, part strategic that the growth. that demand in are around on support to in answer up seeing Print, that business frankly and buys is particularly includes backlog the us confidence And of gives is below stay your overall CPUs. where, question So, CI likely levels. our And quarter-on-quarter, Shannon. is question, and hardware

Shannon Cross

a question just pricing. then And great. Okay, on

we're I normalization pricing, are you in increasing. expect noted prices think is hearing you but some what somewhat

of strong, more price, mix an might you and you. some impact what so not So, don't average there sorry remains I is pressure, out this no if supply is pricing you have seeing, are advantage? sort there demand see pricing because where Thank or

Enrique Lores

Shannon. you, Thank

In worth it's having business. price. pricing business an think increase price you are growing overall but going mix, in for up, are the our are higher the because demand seeing through pricing Print, of going case in average of in PCs, board to discussion the we can category the is across by are down In each rates the numbers of we case price go of see increases the market. price because where the in I and

the average down. are prices So, you price see up, but because may going of mix,

Marie Myers

of the half the in starting saw to half comments, favorable to in abate the we benefit just well. to in pricing as Enrique's that first some Shannon add second is And the

Operator

Our with Bernstein. next from question comes Sacconaghi Toni

Toni Sacconaghi

trying the you circle your just question. want thank I just for around of guidance. taking a couple on to Yes, particularly square – the things, to

up is typically sequentially. struggle reason is like with seasonal the EPS for you're pressure? you're X%. Are in is the to be I all down is seasonally Revenue or margin sounds is, than up and going this about suggesting normal XX% you even or And backlog guiding lower bigger. margin X% So, it your to EPS that typically be revenue question

be should have. sell you whatever able to You

better. meet should that so to demand arguably allow inventory you incremental have You

is margin couple it inventory then impact where guess seasonal the continue to price? questions demand, mix an seasonal? able you do that there that expect a square Or demand terms you better way a you're of change, of is in are why with and pricing to situation top that really your pressure strong all should EPS have And be below margin guidance? line take normal if fulfill So, normal abate? doesn't how there. people So, in chasing you we and fundamentally fact from to demand different the I in that's do One, do to you expect to

Marie Myers

Hey, Toni, Marie. It's good afternoon.

me our guide looking a walk how the you through So, the give headwinds let I'll of specifically. like. think sense and about tailwinds are what to you and

with first your on guiding we onset the as available said demand Enrique headwinds So, increasing With comments that supply the the versus right by at margin revenue, environment. are can believe half. expect respect if than we of first guide the call, will QX. you operating there do be through EPS that all and this we But that color. and seeing are what to said, tailwinds do all, double-digit for of of driven and headwinds revenue a you in better, we're we prudent walk that will. give growth profit is always in the from Obviously, we some the frankly, to me of current And let context more

Print by work we're strong supply. So comments historically we first obviously tailwinds low start particularly dissipate both are both on seeing favorable are and of but lap in logistics We're headwinds, obviously those will there quarter-on-quarter then PS we year-on-year, mentioned. hybrid constrained both to in about pricing headwind tailwinds around dynamics. half they panel, those in costs getting of Print. that how promotion in of then resins And thinking and component and PS as it, in the the the we've to and very costs Print, And and and expenses. seeing those they be continue, They on trends had and are demand and and ICs commodities, PS into incremental those basket overall the your you will onset an and be as ICs continue

said, and capital up to shareholders. know, we're going in to, we kind here, to addition, wrap you So, of just continue to as return

at least about that [repo quarter. $X expect billion So, that of] a we

So longer-term range be above high Print PS end the the expect of X.X% slightly end to our full-year X.X% for full-year, margins and of we the the for will XX% of to higher XX%. at

this at like guide point, will. remain we we confident can we if our I said, So, of better do very and

Enrique Lores

this business having I market important consideration And not by demand. the Toni, is the something supply, year, driven think and to by is really that

different. really very portfolio the the continue across years behind much year comparing with So supply is and we based see our are is will because What we this is get. really key seasonality, not therefore the it driver this demand strong other work, how very dynamics to can on market

Toni Sacconaghi

XX%. could would on were to XX%, group. if this at look ASPs zero your were consumer up quarter I down dynamics, in operating dramatically the IPG so, quarter we follow-up If like pricing the If up margins something pricing, I put it went last just print basically

people raising want to SKUs sort lower quarter this more that Is your last better an we or – purely XX% a price XX% richly printers is obviously growth this of enormously. I this we're forcing we're configured ASP margin to it because consumer discounting? this because helping with building margin take So, is is is lower So, absence actually quarter, we're of end have is what pricing? But not demand understand and driving constrained. economics can,

suggested, you to understand to I specifically but driving ASP As very is what it's going want that increase? be less,

Enrique Lores

doing are anything are business the demand mentioning. we one significantly we have in you reduced our think like facing, to all we of a promotional course are discounts, of optimize our strong We how Toni actions because we were the that can I guiding and therefore is. situation we, the

We we can living and inflationary have where an we the demand we of cases toward in as are are in seeing we whenever our prices. and course, up environment in margin prices are we because – we increased said going we higher products are will also can, still – before,

Operator

comes question Stanley. Our from Huberty with next Morgan Katy

Katy Huberty

backlog that Good makeup Print Yes, versus quarter? afternoon. the your of heard can how Is talk about up mentioned you sequentially. as the then, first is PC backlog and I from thank you. And to PCs up also mix commercial through and go supplies? between And just I a Is consumer have Chromebook any is year? backlog other to follow-up. hardware shift then the you there from changing you

Enrique Lores

Let me question. Katy. take that Hi,

first the So, to yes. is, question answer the

during terms the quarters. evolve, expect we We next in and really an Printers. do of are And coming to to we where across see increase how backlog PCs both do demand is seeing in this aligned

consumer As side, direction. still side, expect But and the an on I before, we because as this through before. where on backlog both mentioned demand of the – demand end we moving the be we of on will continue into increase commercial PC see also the the side in is and this that, the to strong on year, Print mentioned

Katy Huberty

flat What bit from And you. surprises with thank range sequential cost quarter? Great, couple this the the costs And then ago? PC PC to a we were of years should the in guidance. were than return lower quarter roughly on expect or margins a margins then mix inflation X% that that

Marie Myers

Yes, Katy, it's Hey, Marie. afternoon. good

margin your up hit question. me let So,

to higher of know we obviously and logistics. today, obviously the margins those we've continued that to into at around going some offset strong some as pricing then end benefit enter time. transforming currency, hearing slightly as by the just margins themes of particularly be but which to commodities I'd long-term of that costs a the we to start driven high do the our discipline is of X.X% above is it to commodity as about, period expect range and really well yes, X.X% was and to you lap by range on X.X%, driven that above our So component headwinds. of that going diminish And and of sort that impact and full-year, add, as where that in be we spoken high-end those were that's start cost was strong of knock to mix as and in the it's you're the into get some then shortages starting from we are by finally favorable again pricing period And

Operator

comes from Long Barclays. Tim with question next Our

Tim Long

Thank you. I Yes, two could. if

pretty the here. of that's little you potentially as-a-service then you know like that, you First underlying about usage And on bit – consumer seems the drivers user mentioned if maybe bit and or offering the just talk else about for base? than both beyond of some Print second, anything talk another talked it's, strength a some user could the side, other there the for the growth showing commercial. little steady Could you It numbers a about, you Chromebook, segment? you Is a see on as the to also you strong talk could will could start of replacing the PC margin or little something in the expectation there growth. expect a tiers Thank model will do something just mid bit that very of the be back And that other normalization ASP? rapid of Chromebook to quarter little bit about you. that's then the impacts of PC the pull think and that you growth lower

Enrique Lores

will go questions one. one to in Many I one try by question.

the what similar quarter we and we were the we So, evolution Print, starting a for are seeing are explained to what is expecting. ago from dynamics very

to side, business continue And what than the demand both on this we our seen see have on-premise on opposite effect. office the we perform And home to pre-pandemic to we Before we levels, the and see better is driving projecting. were that supplies. also

the before we reopen, an not will the are overall we business will offices on same to the our the we perform also many be better Through to business the less impact, still office, negative – be expect business. reverse from will that more our to home, of going closed it expect back people home continues be offices people to impact at office As the will office it have and a time working end expect below are the pandemic. people as year, and where situation was

we [Puerto a trend So, Rico]. to expected similar in what

to demand the terms demand continue very strong In see education. on side, we of Chromebook from

what We pricing mix because is of side is overall what about the the impact in PC also growth the rest lower side, of the Chromebooks the we were PC have the ASPs on we there, some prices is and of have PC – on in than driving portfolio. this what the the have is before the Chromebooks this when this talking and

Operator

Rakers question from Fargo. Aaron with next Our comes Wells

Aaron Rakers

taking and the on congratulations for thanks another question quarter. Yes, solid

business I reported to at when look the you recover, follow-up I question First commercial think have growth. we a XX% is, results starting of the

tonight. your that think reported growth peer I around

thinking the So, of I'm year? base, trend shapes kind through that base, installed about the to you installed think side, any of course thoughts on office back commercial the the how PC on of curious the you're the of up demand the just back-to-work, age how

Enrique Lores

Sure.

equipment are clients is to were shared again, the saying. that ago, What back we seeing So our are the to see come really as going and for their both on the the Print need you the when is to recover are side realizing start invest demand similar officers what in are to recovery we be we business employees helping expect a quarter commercial you they of to to from some we as PC mentioning. and this and better starting

to because their therefore, mix and the into to working if going continue. see shift way back to see a be desktops their hybrid we desktops into to will notebooks for enabling the offer employees expect office, still to In we terms of and our of continue from from companies dynamics, we notebooks, need even employees shift work-from-home

for We that of have past, a positive to because of the PC pricing times notebook recycle talked in the both desktop. because compared but the overall at business impact has the also has

Aaron Rakers

this year. just I free the billion Yes. think X least billion as for the follow-up, X you've on free cash cash with a at or And flow, stuck flow quick then

EPS. and with stronger raising the be flow why trending You're just cash I'm trying higher to maybe EPS? wouldn't understand free

Marie Myers

Aaron. sure. Yes,

one and ahead for you. that up Let go hit me

capital know, a working headwind is be net So What driven our flow, to you always making to as we're look, regarding the cash strong decisions that earnings. is future by to more inventory. this of going some free is due our carry we're thinking

obviously and to So look $X free flow. for confident continue XXXX, in our our in outlook in least remain of confident billion cash at we guide

Enrique Lores

add I And think, me let more comment. one

at really pleased to We of and billion guide year with the for Marie $X made in at are be expecting that level. just cash least in we the we QX. is free have have really The as QX we that mentioned, progress flow are and provided

Operator

comes question from with Baruah Our Loop Ananda Capital. next

Ananda Baruah

and the Would get with have love any customers that Congrats strong there? XXXX. quick results. for then guys Two the this I get based on updated sense And conversations backlog, ones, thanks given taking calendar question. to into momentum quick I continue the Thanks. follow-up. just will Hey, corporate you a Enrique, do could. if context on actually the

Enrique Lores

a continue an continue positive have have size from for to therefore, significantly XXXX. to expecting to the the will we learn are impact you people be a in by are and pandemic the of question. working changes impact think will hybrid XXXX school we we what that and permanent we to the More to going the expect the seen that market and before continue going from [marquees] market. on to to from We Thank is that than of PC think have And continue government the going were way. more driven be size be to And the will and – the time in this have overall pandemic. larger

end just Additionally to commercial we see the through described, expect we year. strong the to that also of demand as

side. and put growth will even the PC also even drive help more more – this on So,

Ananda Baruah

as XXXX questions the And mix there, you talked as impact just a, about to mix? not reverse up, commercial, carry reverse to continue and about the how back should on of we it just going – on to Would open you mix that, ASCs. that so doesn't Chromebook of not into that know side, sort having sticking expect strengthening sort the PC software and

Enrique Lores

before operating is in of overall Systems to our So, profit this we quarter. be during of expect Marie yes, mix next And was than up commercial that to guided higher range we the end terms Personal through of the go mentioning of slightly the why expect mix, the year.

Ananda Baruah

thanks That's so much. great,

Enrique Lores

Thank you.

Operator

with Our next Suisse. question comes Credit from Matt Cabral

Matt Cabral

you. thank Yes,

think contribution wondering the if from Tier X update and thinking there? an maybe about was as your on getting refill X where we more Just we how talk have on to and add start those how visibility you supplies out in I should an side, factor that to Tier a Print efforts stand And in the inventory? update distributors that about here? the below just broadly you big some the give about channel of trying you On was us quarter of

Marie Myers

Matt. sure, no, Yes,

I So, of on that a depletion channel for maybe that where we – that and mentioned of year. to maintain obviously overall earlier includes ago, occurred I think carefully, of levels. comment start wind we've with it can back this sort I'll that our quarter right channel now and quick channel pandemic, company we historic inventory very to we supplies a monitor a the But it just we sort given below onset that the see And the are the and appropriate continue year supplies that last levels levels. if the relative so healthy so you had had

And we some estimate as year-on-year did that see inventory you And in know, have movements, the X% approximately benefit compare. from impact be channel. And so a to that multi-tiered the we of we year-on-year.

end on is user So, including for channels this our we and product best across our have stock. estimate based our the channel data

Matt Cabral

guys That's more impact stand should start helpful. And business. that about of Where the bigger about the and then I we just think going just XD think has was to that of it to picture maybe you with a last forward? the more on been disclosure, push when thinking business some explicit new how on head printing XD your just ramping? Maybe week announced a guys you broader update

Enrique Lores

Sure.

Let me one. take that

of the these is we XD solid growth has have on the side. grew than the first number. solid a potential Perhaps previous of showed long-term. see all, this XX%, that very the to So which business more this I quarter, one think in or some seen started And we

really prepared remarks, we strategy selling than focus were that by going is XD comes fiber consumables our will some But before, industry. Didier to on molded our are and end-to-end printers we we why be more, we on health we are Deltort or work business. the announced lead example. we to had where even capture we will to on we and this we're have, in As wellness just mentioning focusing doing more complementing we this also get He value more selected as applications to think from and think value this a on business applications that and an the

business think the of XD by industry strategy. definition will on I said will comes terms adding of this end-to-end have and And model. as printers where we so we will value applications XD our before, supplies an want he One is more that in scale be And probably So, of important. to most from this there be things. better is disrupted business major we a when we or going I've higher two important, defined is, the to transparent and then business, selling combination need be have to significant think the this are after and or second,

a will of will going have when So, this we is while where will providing complete longer-term be be perspective we more visibility.

Operator

today final with from comes Bank. Ho Our Deutsche question Sidney

Jeff Rand

Personal through tight in the Hi, the you Jeff Can your for Systems us environment? now Sidney. update and and pandemic is supply competitive this a on this business has how an give changed Rand on environment

Enrique Lores

we think than by the have of portfolio. the this I is of discussed strength of more as that really driven before, now by Yes, business supply performance the first all,

we Now we the pleased from are having a made portfolio that, with have progress said really perspective.

quarter, you significant we products. If consumer across at innovation awards introduced the this we and won look commercial both that have

are as grow our We education very the from of really relevance products we market, to shows high-end portfolio. in solid low-end the have we broadest commercial and did one covering continue in portfolios the a this quarter that of products to position to share

Jeff Rand

term just about and near to we how think my return? business the follow-up, should as travel your in start trending Great cost operating like expenses

Enrique Lores

back at be to a we if you for think to have going projections were in look second that think where I half, will the we the level we QX. we similar Well,

Operator

over to like remarks. any for call turn Lores Enrique our question-and-answer to This session. concludes the I'd back closing

Enrique Lores

Okay.

today. us everybody close joined me So, you having let and for thank

to relevance strong helping customers this our really of think a of I be perform to results and the in environment. world demonstrate the HP technology very how is in quarter different the going hybrid

to both soon. core We create are in see that continue time looking are you. growth adjacencies creating. to to the our we to Thank to attractive forward And in in and also drive innovate opportunities person differentiation. we are markets, meet across technology sometime today and Thank new the with your continue pleased really in our you that for going segments we and

Operator

is now for conference today’s Thank you attending concluded. The presentation.

You may now disconnect.

HP (HPQ) 28 May 212021 Q2 Earnings call transcript