HP Inc. (HPQ) 2022 Citigroup Global Technology Conference (Transcript)

Financial Data and Key Metrics Changes - The company experienced a change in the macro environment during Q3, with weakness observed on the consumer side, particularly in Europe and North America, influenced by inflation and rising energy prices [5][8] - Despite macro changes, the company was able to deliver on EPS goals, indicating strong financial discipline and cost management [7][8] - The company expects to exceed its commitment to return $16 billion to investors by the end of 2022, through a combination of dividends and share buybacks [26] Business Line Data and Key Metrics Changes - The PC market size is now expected to be around 300 million units, significantly lower than earlier expectations, with the consumer segment being the most affected [13][14] - The commercial side remains strong, with enterprises actively investing in office equipment, although there is a noted caution in spending [15][16] - In the print segment, profitability improved due to strategic changes made three years ago, focusing on rebalancing profitability between hardware and supplies [18][20] Market Data and Key Metrics Changes - The economic slowdown has had a more pronounced impact in Europe and North America, while Asia continues to perform well [14] - The company noted that the low-priced categories in the PC market are more affected than premium categories, driven by inflation and energy price increases [14] - The print segment has seen a significant increase in the adoption of subscription models, with over 11 million subscribers to the HP Instant Ink program [22][23] Company Strategy and Development Direction - The company aims to protect businesses impacted by the economic slowdown while focusing on growth opportunities in identified growth businesses expected to generate over $10 billion in revenue [11] - The strategy includes modernizing core businesses and expanding into adjacent markets, such as gaming and industrial printing [63] - The company emphasizes a rational pricing strategy, focusing on profitability rather than market share for the sake of growth [36][60] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the current economic environment as temporary and emphasizes the importance of balancing cost management with growth opportunities [41][55] - The company expects the structural changes in the PC market, such as hybrid work, to sustain demand for PCs in the long term [43][44] - Management is cautious about predicting the impact of China's economic situation on future market conditions, indicating that guidance for 2023 will be provided in Q4 [51] Other Important Information - The company has successfully introduced models that require only HP supplies, significantly increasing profitability in the print segment [19][20] - The capital allocation strategy remains focused on maintaining investment-grade status while returning 100% of free cash flow to investors [25][26] Q&A Session Summary Question: How are competitors reacting to pricing pressures in the PC market? - The company noted that while some areas still face component shortages, pricing pressure has increased in consumer PCs and low-end commercial segments due to high inventories [28][29] Question: What is the pace of improvement in the supply chain? - The supply chain situation is improving, with expectations to resolve current shortages by Q4 or early Q1 [30][31] Question: How do structural changes in the PC market affect future demand? - Management believes that structural changes, such as hybrid work, will sustain demand for PCs, leading to a larger market than pre-pandemic levels [43][44] Question: What is the company's pricing strategy in the PC market? - The company focuses on profitability rather than chasing market share, selectively targeting segments with higher opportunities [59][60] Question: What are the long-term growth opportunities for the company? - The company is expanding into adjacencies and modernizing its core businesses, with significant growth expected in areas like 3D printing and managed services [63]