HP(HPQ) - 2024 Q1 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported net revenue of $13.2 billion for Q1 2024, down 4% year-over-year and 5% in constant currency, indicating a continued decline in revenue but at a slowing rate for the third consecutive quarter [8][22][24] - Non-GAAP operating profit dollars grew by 5% year-over-year, with non-GAAP EPS increasing by 11%, reflecting effective cost management and operational efficiencies [9][22][24] - Gross margin improved to 21.9%, up 1.7 points year-over-year, primarily due to better commodity and logistics costs [24] Business Line Data and Key Metrics Changes - Personal Systems revenue was$ 8.8 billion, down 4% year-over-year, but the company gained market share in premium workstations and gaming segments [16][25][27] - Print revenue was $4.4 billion, down 5% year-over-year, driven by hardware revenue decline of 19% due to weak demand in China and aggressive pricing competition [18][27] - Instant Ink revenue and subscribers continued to grow year-over-year, with total subscribers exceeding 13 million [28] Market Data and Key Metrics Changes - In the Americas, revenue declined by 7%, while EMEA declined by 2%, and APJ also saw a 7% decline, with China being a significant factor in the softness [23][24] - The company noted stabilization signs in the SMB and education markets, but a slowdown in U.S. enterprise and federal sales was observed, particularly in January [15][19] Company Strategy and Development Direction - The company is focused on a future-ready plan aimed at achieving$ 1.6 billion in gross annual run rate structural cost savings by fiscal year 2025, with approximately 30% expected in FY 2024 [9][29] - There is a strong emphasis on innovation, particularly in AI, with new product categories and digital services being developed [10][11][12] - The company is shifting more offerings to subscription models, enhancing customer engagement and satisfaction [12][65] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism about a stronger second half of fiscal year 2024, driven by expected recovery in commercial demand and traditional seasonality in consumer markets [19][41] - The company anticipates that the overall PC market will grow in low-single digits in 2024, with expectations to grow at least in line with the market [16][35] - Management acknowledged ongoing macroeconomic challenges but remains focused on disciplined execution and cost management [22][32] Other Important Information - The company resumed share repurchases in Q1, returning approximately $775 million to shareholders, including$ 500 million in share repurchases and $275 million in dividends [19][32] - HP ranked number 13 on the list of America's most just companies, reflecting its commitment to sustainable impact and innovation [14] Q&A Session Summary Question: Expectations for the year and geographic performance - Management expects a stronger second half driven by recovery in commercial space and traditional seasonality in consumer markets [40][41] Question: Share gains in print despite aggressive pricing - Share gains attributed to a complete product lineup and operational improvements in specific regions [44] Question: Concerns about print margins in the second half - Management expects print margins to be at the high end of the range, driven by mix improvements and cost management [47][49] Question: Key drivers for AI-enabled PCs - Key drivers include delivering hardware, supporting applications, and training for customers and sales teams [51] Question: Factors impacting supplies performance - Supplies performance influenced by share management, pricing adjustments, and a favorable comparison to the previous year [57] Question: Recovery in the commercial space - Recovery expected due to stability in SMB and education markets, along with a positive impact from the Windows refresh cycle [60] Question: Industrial graphics business momentum - Positive momentum noted in labels and packaging, with expectations for growth following the upcoming major printing event [74]