HP Inc.

Good day, everyone, and welcome to the first quarter 2022 HP Incorporated earnings conference call. My name is Betsy, 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, 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 Orit Keenan-Nehon, Head of Investor Relations. Please go ahead.

Good afternoon, everyone, and welcome to HP's first quarter 2022 earnings conference call. With me today are Enrique Lores, HP's President and Chief Executive Officer, and Marie Myers, HP's Chief Financial Officer. Before handing the call over to Enrique, let me remind you that this call is a webcast and a replay will be available on our website shortly after the call for approximately one year. We posted the earnings release and accompanying slide presentation on our investor relations webpage 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 a discussion of some of these risks, uncertainties, and assumptions, please refer to HP's ACC reports, including our most recent form 10-K. HP assumes no obligations 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-Q for the fiscal quarter ended January 31, 2022, 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 period. 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. With that, I'd now like to turn the call over to Enrique.

Thanks, Arit, and thank you all for joining today's call. Before I discuss the quarter, I want to briefly address the unfolding situation in Ukraine. The well-being of our people, their families, and our customers and partners is our top concern. We are doing everything we can to keep them safe. We want nothing more than to see peace and stability restored to the region. We have an experienced cross-functional team in place focused on business continuity. The environment is very fluid and we are preparing for a range of scenarios. And in the meantime, In compliance with administration's recently approved sanctions, we have suspended shipments to Russia. The difficult situation in Ukraine is the latest in a series of global challenges we have faced. Time and again, our team has shown remarkable agility and determination, and I have great confidence in their ability to manage these situations. When we were last together at the end of 2021, I talked about our strategy to modernize our core, expand into valuable adjacencies, and build a more growth-oriented portfolio. And our first quarter results show the progress we are making against this plan. We continue to see very strong demand driven in large part by the secular tailwinds associated with hybrids. The way people work and live has fundamentally changed, and we see this trend continuing across our segment long past the pandemic. This creates incredible opportunities for innovation and growth. Companies are reconfiguring office space to be more collaborative, and this is requiring a refresh in their IT strategies, services, and security offerings. Consumers are investing to improve their home office setups as hybrid work becomes the norm. And when they are not working, people are looking for more immersive entertainment experiences with improved video, audio, and battery performance. Underlying all this is a growing desire from both consumers and commercial customers to buy from companies with well-developed ESG goals. Each of these trends played to our strengths, and they drove our Q1 results. We grew revenue, operating profit, EPS, and free cash flow, continuing our track record of meeting or exceeding our commitments. Let me walk through the details. For the quarter, revenue grew 9% to $17 billion. This is our highest ever quarterly revenue since separation, driven by demand for our products and services. Non-GAAP EPS grew more than twice as fast as revenue, up 20% to $1.10. And we generated $1.4 billion of free cash flow while returning 127% of free cash flow to shareholders through share repurchases and dividends. Our results were particularly strong in the key growth areas that I outlined last year. Collectively, these businesses grew double digits this quarter. This includes more than 20% growth in gaming, more than 40% growth in peripherals, and 20% growth for our industrial graphics and 3D portfolios. We are bullish in our opportunities in this area, and we expect them to become a larger part of our overall revenue and profit mix moving forward. We deliver while continuing to navigate a complex environment of industry-wide component shortages and logistical constraints. Despite steady progress against our plans To strengthen our operational processes, it will take time before the gap between supply and demand fully dissipates. We are securing more parts for products, sourcing from alternate parts suppliers and allocating available parts to optimize our product mix. This is an area of relentless focus for our team. Let me now talk about the progress we see across each of our business units. In personal systems, it was a record quarter with our highest revenue and operating profit since separation. Revenue grew 15% to more than $12 billion. We delivered OP rate above the high end of our target range. and our discipline execution and pricing strategy enabled us to manage cost and component headwinds. A big contributor to our success is the improved mix we are driving. Our leadership in the commercial PC market is a significant competitive advantage as more and more offices reopen. This is where we saw the most demand and highest profitability. Within commercial, we saw strong growth in Windows-based notebooks and mobile workstations, where our share expanded this quarter. In consumer, we continue to experience demand shift into high-value categories like premium and gaming. We also reduced our backlog quarter over quarter, and our supply chain actions are generating positive results. And as we prioritize operational execution, we continue to innovate at the heart of hybrid. Last month, we had our biggest consumer electronics show ever, launching nearly 50 new innovations that are changing the way people collaborate, create, and play. This included a major expansion of our portfolio of HP presence-enabled devices. as we strengthen our position in the large and growing video conferencing market. We also launched our latest gaming solutions and peripherals, including a new HyperX wireless headset that can last 300 hours on a single charge. Turning to print, we continue to face industry-wide supply chain challenges. As a result of component shortages and logistics disruptions, revenue declined 4% in the quarter, and our elevated order backlog increased sequentially. We now expect these dynamics to impact print throughout March of fiscal year 22. We are driving a very disciplined pricing and allocation strategy across print, and our operating profit rate of 18.2% was above the high end of our target range. We are also making good progress against our long-term priorities. We continue to modernize core print and drive HP Plus global adoption. HP Plus is a big selling point of our new Envy-inspired lineup, which we successfully launched in the US last year and roll out across Europe in Q1. And we are seeing strong demand for our commercial portfolio as companies plan for office reopenings. We are earning accolades for industry leadership in areas such as hybrid work, security, and print sustainability. It was an outstanding quarter for our industrial printing businesses. In industrial graphics, we generated another quarter of double-digit revenue growth and have built a healthy backlog of industrial presses. This illustrates the positive recovery trend from prior quarters. And we delivered significant year-over-year revenue growth in 3D printing. More than 120 million multi-jet fusion parts have been printed, and we are accelerating our strategy to create high-value, end-to-end applications in vertical markets. Along these lines, we completed the acquisition of CHOOS Packaging. CHOOS has invented the world's only commercially available zero-plastic paper bottles, and they are working with many global brands to commercialize their offerings, including large enterprises like Henkel. This acquisition complements our molded fiber solution and positions HP well in the $10 billion fiber-based sustainable packaging industry. There are more than 150 million tons of single-use plastics produced each year, and we intend to disrupt this market with fiber-based, 100% plastic-free packaging. In fact, Our focus on sustainability is driving innovation across our entire portfolio. In personal systems, we now have more than 300 products made using ocean-bound plastic. And in print, we recently launched the most sustainable toner cartridge we have ever developed. our brother ERG and sustainable impact strategy. The actions we are taking on climate, human rights, and digital equity are differentiating our brands and helping to drive our business forward. In fact, our sustainable impact agenda helped us to win more than $3.5 billion in new sales in fiscal 2021. This is a three-fold increase over the previous year, reflecting the power of our commitments. Our partners are also doubling down on sustainability. More than 10,000 channel partners across over 40 countries are now able to participate in HP Amplify Impact, a first-of-its-kind partner program aligned with our sustainable impact strategy. It is a great example of how we are leveraging our global scale to help address some of society's biggest challenges while also positioning our business for success. The progress we are making across our strategic priorities is driving strong cash flow. And we continue to be disciplined stewards of capital. We have a robust return-based approach that we are applying to every aspect of our capital allocation strategy. We expect to continue to make organic and inorganic investments in areas where we see growth opportunities, while continuing to return capital to our shareholders. And we are committed to aggressive repurchase levels of at least $4 billion in fiscal year 2022. It was an excellent start to the year. We are delivering on our commitment and creating significant value for our shareholders. We are returning highly attractive levels of capital to shareholders. And we remain confident in our ability to deliver sustained revenue, operating profit, EPS, and free cash flow growth as we build a stronger HP. Let me now turn the call over to Marie, who will take you through the details of the quarter and our fiscal Q2 outlook. Marie, over to you.