HP Inc.

Good day, everyone, and welcome to the first quarter 2020 HP Incorporated Earnings Conference Call. My name is Chuck, and I'll be your conference moderator for today's call. At this time, all participants will be in a listen-only mode. We will be facilitating a question and answer session towards 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 conference over to Beth Howell, Head of Investor Relations. Please go ahead, ma'am.

Good afternoon. I'm Beth Howell, Head of Investor Relations for HP, Inc., and I'd like to welcome you to today's conference call. With me today are Enrique Lórez, 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 releases and the accompanying slide presentations for both our fiscal 2020 first quarter earnings and HP's value creation plan we are announcing today on our investor relations webpage at investor.hp.com. During the presentation of our value creation plan, we will be webcasting the accompanying slides. 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 the disclaimers in these materials relating to forward-looking statements that involve risks, uncertainties, and assumptions, and the other disclaimers and notes included in the materials accompanying today's presentation. 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 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, 2020-2021. and HP's other SEC filings. During this webcast, unless otherwise specifically noted, all comparisons are year-on-year comparisons with the corresponding year-ago period. For historical 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, everyone, for joining us. HP made two important announcements today. First, we shared our Q1 earnings results that demonstrate our incredibly strong foundation. We also announced a three-year value creation plan that reflects the significant opportunities ahead. We have a lot to cover today, and frankly, I've been looking forward to this call for some time. We have a winning plan. Since becoming CEO of HP four months ago, my focus has been to deliver on the strategic priorities I outlined during our investor meeting last year. When I talked you through our plans to advance, disrupt, and transform, I made clear that we have multiple levers to drive shareholder value. And this quarter's results show that our plan is working. On the call today, we will first cover Q1 earnings and then go into detail on our value creation plan. We will also talk about the Xerox proposal and why it undervalues HP and creates risk for our shareholders. But as I said, let me start with Q1. We are out of the gate very strong. Our team is on a mission to out-innovate, out-execute, and out-perform. And it was an impressive quarter for HP. We deliver non-GAAP EPS growth of 25%, significantly above our guided range. We have now beat or met on non-GAAP EPS for 17 straight quarters. That's every single quarter since separation. We grew revenue by 1% in constant currency and non-GAAP operating profit dollars by 16%. We generated $1.1 billion in free cash flow, and we returned 84% of that to shareholders through share repurchases and dividends. These results show that we have the right plans in place to create value. We are advancing our leadership in personal systems and print. Let me start with personal systems, where we grew revenue for the 15th consecutive quarter, and we delivered exceptional operating profits. We are creating amazing new experiences for customers while driving profitable growth and upgrowing the market. This theme is an execution machine, and we see runway for sustained value creation. We will discuss in more detail shortly. In print, we continued making progress against our plan. Instant Ink surpassed 6 million subscribers for the first time, and we saw another quarter of solid growth in managed print services. We're also disrupting industries by leveraging our technology and IP, particularly in graphics and 3D printing. In graphics, we announced an additional $100 million deal with ePAC. And in 3D, we continue to make progress bringing together end-to-end solutions for customers. An example is New Balance and Superfit. They are offering customized 3D printed caps for their insoles to consumers. They are using HP's feed station and multi-jet fusion printing technology. And as we advance and disrupt, we are transforming the way we work to unlock value. In the first quarter, we continue to drive operational performance by reducing costs and improving efficiency. We transition our sales force to a single commercial organization that is helping to accelerate our go-to market. This includes global harmonization in areas such as pricing, and as we saw in Q1, the ability to allocate supply more effectively across the globe. Most importantly, this transformation is bringing us closer to our customers and partners. We are aggressively operationalizing our plans to take structural costs out of the business and are executing our plan to deliver 40% of our gross savings by the end of fiscal 20. We will discuss this further in the review of our value plan. Our Q1 performance gives us great confidence in our plans for 2020 and beyond. Before I turn the call to Steve, I want to briefly address the coronavirus situation. First and foremost, the wellbeing of our employees, partners, customers, and their families is our number one priority. We are following the processes and protocols outlined by public health authorities. We are also providing resources to assist with the public health response. From a business perspective, As you all know, the situation is fluid. We are actively working to return to full production as quickly as possible. We are working with our logistic providers to ensure we get the necessary capacity to meet customer demand. Overall, we are viewing the situation as temporary in nature, and we are aggressively navigating the challenges. Let me now turn it over to Steve, to work through the financial results for Q1 and our outlook in more detail.