HP(HPQ) - 2022 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Revenue grew 9% year-over-year to $17 billion, marking the highest quarterly revenue since separation [11][23] - Non-GAAP EPS increased 20% to $1.10, outpacing revenue growth [11][25] - Free cash flow reached $1.4 billion, with 127% of free cash flow returned to shareholders through share repurchases and dividends [11][32] Business Line Data and Key Metrics Changes - Personal Systems revenue increased 15% to over $12 billion, with strong growth in commercial PCs [13][26] - Print revenue declined 4% to $4.8 billion due to supply chain challenges, with hardware units down 28% [15][27] - Industrial graphics and 3D printing saw significant year-over-year revenue growth, with over 120 million Multi Jet Fusion parts printed [17] Market Data and Key Metrics Changes - In constant currency, Americas revenue declined 1%, EMEA increased 8%, and APJ increased 28% [23] - Consumer revenue in Print decreased 23%, while commercial revenue grew 9% [28] Company Strategy and Development Direction - The company aims to modernize its core, expand into valuable adjacencies, and build a growth-oriented portfolio [10] - Focus on sustainability and ESG goals is driving innovation and market differentiation [18][19] - The acquisition of Choose Packaging positions the company in the sustainable packaging industry [17] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in navigating supply chain challenges and maintaining strong demand in Personal Systems [12][34] - The ongoing situation in Ukraine is expected to impact top and bottom lines, with a projected EPS headwind of $0.02 to $0.03 for Q2 [34] - The company raised its full-year outlook for FY 2022, anticipating continued strength in revenue and EPS growth [33][36] Other Important Information - The company is committed to a capital return strategy, expecting to repurchase at least $4 billion in shares for FY 2022 [20][32] - The cash conversion cycle improved to minus 33 days, indicating effective working capital management [32] Q&A Session Summary Question: Dynamics behind ASP growth in print and PCs - Management noted favorable pricing due to supply-demand imbalances and a mix shift from consumer to commercial driving ASP increases [39][40] Question: Free cash flow dynamics and inventory management - Free cash flow of $1.4 billion was reported, with confidence in maintaining guidance of at least $4.5 billion despite supply chain challenges [42] Question: PC growth outlook for the year - Market projections indicate strong demand for PCs, with expectations of a $200 billion larger market compared to pre-pandemic levels [46] Question: Supply chain and component allocation improvements - Progress in securing components for premium categories was highlighted, with expectations of continued challenges [49] Question: Printing supply chain and page volume assumptions - Shipments were impacted by supply availability, but the supplies business performed positively with no significant shipment limitations [52] Question: Clarification on backlog changes - Personal Systems backlog decreased due to improved supply chain conditions, while Print backlog increased due to ongoing component shortages [59] Question: Price increases in printing and market reaction - Price increases for supplies did not negatively impact market share, indicating strong demand despite higher prices [83]