HP Inc.'s (HPQ) CEO Enrique Lores at Bernstein's 38th Annual Strategic Decisions Conference (Transcript)

Summary of HP Inc. Conference Call Company Overview - Company: HP Inc. (NYSE: HPQ) - Event: Bernstein 38th Annual Strategic Decisions Conference - Date: June 2, 2022 - Participants: Enrique Lores (CEO), Toni Sacconaghi (Bernstein Analyst) Key Highlights Financial Performance - HP delivered strong earnings, guiding EPS to the high end of the range, with a portfolio of five growth businesses expected to exceed $10 billion by year-end, achieving $5.6 billion in the first half [4][5] - The company plans to return approximately $1.3 billion to shareholders through dividends and share buybacks [5] Market Conditions - Europe: Notable consumer weakness observed, attributed to geopolitical tensions and energy crisis concerns, leading to increased consumer hesitancy [7] - China: Significant impact on sales due to strict lockdowns, affecting consumer purchasing capabilities [11] - Backlog Management: HP aims to reduce its backlog, which was nearly a quarter's worth of PC orders, targeting normalization by the end of the year or early next year [13] Demand Dynamics - PC Demand: Increased demand during the pandemic led to a shift from one PC per home to multiple PCs, with expectations of sustainable demand despite potential short-term declines [22][23] - Printing Demand: A decline in office printing due to remote work, with projections indicating office printing will be around 80% of pre-pandemic levels [56] Supply Chain Challenges - HP is facing component shortages impacting PC shipments, particularly due to yield issues with a key supplier [18] - The company has adapted its order management and supply chain processes to better handle the current environment [42][43] Pricing and Margins - HP experienced favorable pricing conditions due to demand exceeding supply, contributing to improved margins [26] - Future projections indicate a return to historical margin levels for printing, while PC margins are expected to remain elevated due to a focus on premium products and adjacent services [27][45] Strategic Initiatives - HP is focusing on expanding into higher-margin adjacencies such as peripherals and services to offset potential declines in PC pricing [45] - The acquisition of Poly is seen as a significant opportunity in the video conferencing market, with a large addressable market of meeting rooms [50] ESG Considerations - HP is committed to sustainability, with initiatives aimed at making printing forest positive and reducing paper usage [63] Capital Return Strategy - HP plans to return 100% of free cash flow to shareholders unless better investment opportunities arise [73] Additional Insights - The company is monitoring trends closely, especially in Europe, where CEO sentiment differs significantly from that in the U.S. [9] - HP's strategy emphasizes value creation over market share growth, focusing on profitability and premium product offerings [40] This summary encapsulates the key points discussed during the conference call, highlighting HP's financial performance, market conditions, strategic initiatives, and future outlook.