HP Inc.

Good day, everyone, and welcome to the fourth quarter 2019 HP, Inc. earnings conference call. My name is Gary, and I'll be your conference moderator for today's call. At this time, all participants will be in listen-only mode. We will be facilitating a question and answer session toward the end of the conference. Should you need assistance during the call, please signal a conference specialist by pressing the star key followed by zero. As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to Beth Howe, Head of Investor Relations. Please go ahead.

Good afternoon. I'm Beth Howe, Head of Investor Relations for HP, Inc., and I'd like to welcome you to the Fiscal 2019 Fourth Quarter Earnings Conference Call with Enrique Lores, HP's President and Chief Executive Officer, and Steve Feiler, HP's Chief Financial Officer. Before handing the call over to Enrique, let me remind you that this call is being webcast. A replay of the webcast will be made available on our website shortly after the call for approximately one year. We posted the earnings release and the accompanying slide presentation on our investor relations website at investor.hp.com. As always, elements of this presentation are forward-looking and are based on our best view of the world and our businesses as we see them today. For more detailed information, please see disclaimers in the earnings materials relating to forward-looking statements that involve risks, uncertainties, and assumptions. For discussion of some of these risks, uncertainties, and assumptions, please refer to HP's SEC reports, including our most recent Form 10-K and Form 10-Q. HP assumes no obligation and does not intend to update any such forward-looking statements. We also note that the financial information discussed on this call reflects the estimates based on information available now and could differ materially from the amounts ultimately reported in HP's Form 10-K for the fiscal year ended October 31, 2019, and HP's other SEC filings. During this webcast, unless otherwise specifically noted, all comparisons are year-over-year comparisons with the corresponding year-ago periods. For financial information that has been expressed on a non-GAAP basis, we've included reconciliations to the comparable GAAP information. Please refer to the tables and slide presentation accompanying today's earnings release for those reconciliations. And now I'll turn it over to Enrique.

Thank you, Beth, and thank you for joining us today. HP delivered another strong earnings quarter, reflecting the strength of our innovation and execution the progress we are making against our strategic priorities, and the multiple value creation engines across our company. In Q4, we grew revenue 2% in constant currency. We grew non-GAAP operating profit dollars 5%, and we delivered non-GAAP EPS of 60 cents, an increase of 11% and above our guided range. This represents the ninth consecutive quarter where we have grown revenue, non-GAAP OP dollars and non-GAAP EPS. The fourth quarter capped off a very solid year in which we exceeded our targets for non-GAAP EPS growth and free cash flow. Our strategy is working and we are confident about our business outlook heading into fiscal year 2020. For the full fiscal year 19, we grew revenue 2% in constant currency our third consecutive year of growth. We grew long gap EPS 11% with double digit increases for the last two years. We generated $4 billion in free cash flow above our full year outlook, and we returned 85% of that to shareholders through share repurchases and dividends. We continue to lead in our core market with strong discipline execution, finishing the year shipping roughly one in every four PCA units and two out of every five printers. These results demonstrate that we have multiple levers to drive operating profit dollars and create shareholder value. And I want to be very clear. Our focus remains on creating value for all of our shareholders and delivering for our customers, partners, and employees. I have great confidence in the strategy that we shared at our securities analyst meeting. It is confirmed by the progress we have already started to make in the five key strategic moves I laid out. Let me recap each of them and share initial examples of the progress we are making. The first move is implementing a new operating model and driving digital transformation. On November 1st, we went live with our new operating model and the creation of a single commercial organization to simplify our go-to-market structure. We have taken out the regional layer of the organization. This helps us to reduce costs, accelerates decision-making, and be closer to customers. We have also introduced a new business management system to streamline accountability. Second, we are delivering new compute experiences. HP is delivering the best innovation in the market. Recently, we launched our latest commercial notebook, the Elite Dragonfly. With an ultra-bright screen and HP SureView privacy, this device is purpose-built for the modern workforce, which demands flexibility to work anywhere. It is also the world's first laptop made using ocean-bound plastic, reflecting our continued commitment to environmental sustainability. It's another example of how we continue to set new standards in the PEC category. In addition, We continue to strengthen our commitment to security with the acquisition of Bromium, an innovator in endpoint security. Our belief is that every device decision is a security decision. With Bromium, we will be able to provide comprehensive protection against the most sophisticated malware and enhance our firmware and BIOS security layer. Third, we are evolving print business models. Our contractual business continues to grow with NPS and Instant Ink each up double digits. And with over 5 million subscribers, the momentum in Instant Ink continues to build. At the same time, our Bake Ink and Big Toner products extended the rollout launching in Latin America and Central Europe. Importantly, the new transactional business model we introduced at SAM, which offers customers either a flexible or a full end-to-end HP system, is on track to launch new products by the end of fiscal year 20. And remember, this model will evolve over time. Fourth, we are expanding our industrial businesses. In graphics, we see steady growth in pages printed. In fiscal year 19, in 3D and digital manufacturing, we more than doubled the number of parts produced, with over 18 million final production parts across a widening range of applications. We remain on track to double the number of parts by the end of fiscal year 20. And we just helped Volkswagen produce 10,000 precision metal parts in just a few weeks, to support the launch of their IDC electric vehicle. And finally, we are executing on our restructuring. We have initiated a voluntary early retirement program in the United States, and the take rate increases my confidence in our ability to deliver on our savings goals. Let me now make a few comments on our business segment performance. In Q4, personal systems delivered another strong performance of revenue, operating profit and share growth. Revenue grew 5% in constant currency and operating profit increased 48%. These results reinforced the strength of our innovation and disciplined execution against our strategy. we continued to outperform the PC market with broad-based growth across all regions and product categories. In calendar Q3, we grew faster than our competitors, gaining 1.2 points of share. While we are proud of these results, share gain continues to be an outcome, not an objective. We are delivering these results despite the ongoing industry constraints on CPU capacity, which are now expected to continue into the first half of 2020 and to be more impactful in Q1. Turning to print, we continue to execute our strategy. In Q4, total revenue declined 5% in constant currency. As we had anticipated, Supplies revenue remained soft. We're executing against both the operational and strategic plans we laid out in prior quarter. And as we head into fiscal year 20, we expect our new commercial organization will drive better global best practices and consistency in supplies execution. In fact, Elements of the design and implementation of the new commercial organization are expressly focused on addressing some of the operational issues and leadership changes in EMEA. As always, maximizing the value of our installed base is a core objective. We are driving preference for HP original supplies with targeted marketing campaigns that ensures that customers understand the quality, sustainability, and security benefits of HP original supplies compared to the alternative. We expect the combination of these actions to show improvement as we get further into fiscal year 20 and we remain focused on maximizing the value of our installed base. In graphics, We recently closed another key win with IPAC flexible packaging for an additional 24 HP Indigo digital presence, as they continue the disruption of the global flexible packaging market. Looking at 3D and digital manufacturing, we finished the year strong. Our business continues to grow and the market acceptance of our new industrial 5200 solution has been positive. We are expanding our alliance ecosystem and broadening production applications across key verticals, including automotive, industrial, consumer, and healthcare. I am pleased with our progress and look forward to delivering even more disruptive solutions in fiscal year 2020. In closing, we delivered another good quarter, demonstrating our track record of execution. These results and the progress we are making give me confidence in our strategy and the upside opportunities HP has for even greater value creation. Our plans to advance, disrupt and transform provide us with three powerful engines of value creation and support a clear and compelling investment thesis. We believe that the powerful combination of our scale, channel reach and incredible brand combined with our track record of execution and innovation will create significant value for our customers and our shareholders. Now, Before I turn the call over to Steve, let me note that we will not be expanding on our previous public comments with regards to Xerox's proposal. Accordingly, we ask that you please keep your questions focused on the business and our results during the Q&A portion of this call, as we will not be commenting on Xerox or its proposal. Now, I will turn it over to Steve to go through more details and provide our financial outlook.