The paragraph introduces the Fourth Quarter 2024 Earnings Conference Call for HP Inc., moderated by Lisa. Orit Keinan-Nahon, Head of Investor Relations, welcomes participants and mentions that Enrique Lores (CEO) and Karen Parkhill (CFO) are present. The call is available as a webcast, with a replay posted on the HP Investor Relations website. It contains forward-looking statements based on current views, and HP highlights that actual outcomes may differ due to risks mentioned in their SEC reports. All financial discussions are year-over-year comparisons unless specified otherwise.

The paragraph discusses HP's Q4 performance and 2024 full year results presentation. It highlights a 2% year-over-year revenue increase for the second consecutive quarter, driven by strong commercial unit growth and share gains in Personal Systems, as well as revenue growth in the Print division for the first time in fiscal 2021. Non-GAAP EPS grew by 3%, aligning with projections. The company accelerated cost-saving plans while investing in growth areas. The paragraph also notes HP's innovations showcased at the HP Imagine event, including AI-powered capabilities and the AI Companion app, which enhances user experiences through generative AI and partnerships with software companies.

The paragraph highlights several advancements by the company in AI and computing technologies. They are collaborating with Zoom to enhance meeting efficiency through AI, launching HP Boost for GPU sharing, and improving workforce experience with new integrations and acquisitions. In the AI PC category, they introduced the EliteBook X, a powerful business notebook with high NPU performance and security features, and the Omnibook Ultra Flip, a versatile AI-powered 2-in-1 device. Additionally, they are innovating in printing with HP Print AI, which enhances and simplifies the printing experience through intelligent features.

In the recent quarter, HP demonstrated a commitment to innovative, customer-driven solutions, achieving a 2% year-over-year revenue growth in their Personal Systems segment, primarily due to commercial strength, despite facing pressure from commodity costs. The company increased its market share in the PC sector, especially in high-value categories like commercial and consumer premium, with AI PC shipments constituting over 15% of total units. HP remains the leader in AI PCs within the Windows ecosystem and anticipates further growth in this segment, expecting a pronounced impact from Windows 11 upgrades by 2025. Growth was also seen in hybrid systems and PS services, and gaming revenue increased as expected. HP's Print division saw a 1% revenue increase, driven by strong sales in supplies and industrial graphics, despite a competitive pricing landscape. The company gained market share in both home and office printing sectors.

In the home category, the company gained market share, particularly in large tanks, and fulfilled its promise to regain office share. Growth areas such as consumer services and industrial showed strong year-over-year revenue increases, with sustainability central to their long-term strategy. The HP Renew Solutions team was recognized for facilitating access to refurbished hardware, and the company was named one of Newsweek’s World’s Most Trustworthy Companies. Revenue remained stable year-over-year, with a 3% increase in non-GAAP EPS. Despite a slow market recovery in the first half, the second half saw a strong rebound and positive momentum for the new fiscal year. Key growth areas outpaced the rest of the portfolio, contributing to 20% of the total company revenue. The company achieved robust free cash flow, returning nearly 100% to shareholders, and made significant progress with its future-ready strategy by investing in innovation, focusing on growth, and integrating AI capabilities. They also improved operational capabilities by enhancing supply chain resilience, order-to-delivery time, and customer service through AI. Overall, fiscal year 2024 marked steady progress, positioning the company well for sustained growth.

HP is positioning itself as a leader in the future of work by focusing on AI-powered capabilities and innovative solutions. The company is transitioning from a hardware-focused business to an experience-led organization through its Technology and Innovation Organization (TIO). HP aims to capture growth opportunities in commercial segments, which are expanding faster than consumer markets. Additionally, the company is focusing on profitable growth in premium consumer, gaming, and consumer services sectors, while optimizing its supply chain to support its strategic goals.

The company anticipates faster growth in the PC market for fiscal year '25, driven by factors like AI, while expecting a slight decline in the print market. Revenues for Personal Systems and print are expected to align with market performance. The company aims to capitalize on growth opportunities, especially in the commercial sector, and intends to return around 100% of free cash flow to shareholders unless higher ROI opportunities emerge. They project growth in revenue, earnings, and free cash flow for fiscal year '25. In Q4, the company saw a year-over-year increase in revenue for both Personal Systems and print, with a consistent gross margin despite rising costs. They continued investing in strategic initiatives while managing costs, achieving a non-GAAP operating profit of $1.2 billion.

The article discusses the company's financial and segment performance. Non-GAAP net other income and expenses declined due to reduced currency losses and short-term financing. Non-GAAP diluted net earnings per share increased by $0.03 to $0.93 with a diluted share count of 970 million. In the Personal Systems segment, revenue grew by 2% nominally and 3% in constant currency due to higher commercial volumes and adjusted pricing, with market gains in commercial units. However, consumer revenue fell by 4%, particularly in China. Operating margins faced pressure from higher commodity costs and strategic investments. In the Print segment, revenue increased by 1% reported and 2% in constant currency, supported by growth in supplies, industrial graphics, and consumer subscriptions. Consumer print grew by 3% with a 10% rise in unit growth and market share gains.

The paragraph discusses the company's financial performance and cost-saving initiatives. Despite a 1% revenue decline in a competitive pricing environment, unit sales increased by 9% due to a strategic focus on profitable long-term growth, excluding China. The print operating margin improved to 19.6%, driven by a favorable mix and cost-saving actions. The company is ahead of schedule on its three-year cost-saving plan with 80% of its $1.6 billion goal already achieved. Initiatives include modernizing the data infrastructure and reducing complexity across platforms. Cash flow performance was strong, with $1.6 billion generated from operations and a free cash flow of $3.3 billion for the year. The company improved its cash conversion cycle and returned approximately $3.2 billion to shareholders through repurchases and dividends.

The paragraph discusses the company's outlook and strategies for FY'25, emphasizing its intent to sustain profitable growth and leadership in a recovering market. In Personal Systems, the company projects mid-single-digit growth in the PC market, with expectations for stronger revenue in the second half of the year due to seasonality, a Windows 11 refresh, and a 25% penetration of AI PCs. Operating margins are expected to improve throughout the year as cost-reduction measures take effect. In the Print segment, the company anticipates aligning with a slight market decline but aims to stabilize pricing, improve average selling prices, and capture market share in strategic areas, especially in the contractual office segment. Supplies revenue is expected to decline slightly, consistent with long-term projections.

The company expects its operating margin to remain at the higher end of the 16% to 19% range, with disciplined cost management and Future Ready plans in place. Corporate Other expenses are anticipated to be flat year-over-year at about $1 billion, with one-third of stock compensation expenses in Q1. Non-GAAP FY'25 earnings per share are projected between $3.45 to $3.75, and Q1 earnings per share between $0.70 to $0.76. GAAP earnings for FY'25 are expected between $3.06 to $3.36, and $0.57 to $0.63 for Q1. Earnings per share are anticipated to be stronger in the second half of the year. The company forecasts free cash flow of $3.2 to $3.6 billion, with a focus on returning 100% of this to shareholders if leverage remains under 2x and no better returns are found. They are raising their annual dividend by 5% to $1.16 per share, marking the ninth consecutive increase since 2015. The call ends with an invitation for questions.

The paragraph features a Q&A session where Wamsi Mohan from Bank of America questions the company's financial guidance, highlighting a difference in expected earnings per share (EPS) for the first quarter compared to previous years. Karen Parkhill explains that seasonal volume declines and the timing of stock compensation expenses are influencing these figures. In a follow-up, Mohan queries the impact of cost optimization on future free cash flow, suggesting that share buybacks are primarily boosting EPS. Parkhill responds by expressing satisfaction with the current fiscal year's free cash flow and expects moderate growth aligned with earnings, emphasizing ongoing improvements in working capital.

In the discussion, Enrique Lores and Karen Parkhill address financial strategies and performance, particularly regarding restructuring costs, capital expenditures, and free cash flow growth in line with earnings. They emphasize that earnings per share (EPS) growth is driven by share buybacks and increased operating profit. Erik Woodring from Morgan Stanley questions Karen Parkhill about the sustained high print operating margins despite declining print revenues. Parkhill explains that they expect to maintain these margins due to strategic initiatives like reducing unprofitable units, increasing customer profitability through subscriptions, and gaining market share in valuable categories. They maintain flexibility in their margin targets to adapt to market conditions.

In the paragraph, Enrique Lores discusses the company's strategy to remain flexible in seizing opportunities to sell more hardware units, even if it temporarily pressures margins. When asked by Erik Woodring about not expecting to gain market share next year, Lores explains that the company is being conservative in its forecasts, aiming for profitable growth rather than just increased market share. The focus will be on commercial PCs, as they have been a priority. Additionally, AI PC units, which accounted for 15% of shipments in fiscal Q4, are anticipated to grow to 25% next year. Lores states that their view on AI PCs' impact on average selling prices and margins remains unchanged.

The paragraph discusses the expected impact of AI PCs on the average selling price, projecting that in three years they will constitute 40% to 60% of the product mix, with a 5% to 10% impact on the overall category. Irvin Liu asks about potential supply chain impacts due to possible new tariffs with an upcoming change in administration. Enrique Lores responds by emphasizing HP's efforts to enhance supply chain resilience through global factory expansions. He notes that while the exact nature of new tariffs is uncertain, HP is in a strong position compared to industry peers and has a skilled team to manage such environments. Toni Sacconaghi of Bernstein follows up by highlighting that most HP products are produced abroad and inquires about the company's strategy if tariffs are imposed on all imports.

In the paragraph, Enrique Lores is addressing questions from Toni Sacconaghi regarding the impact of global tariffs and manufacturing exposure, particularly with reference to Mexico. Lores mentions that HP prefers not to speculate on the final impact of tariffs and intends to manage its supply chain in response. He acknowledges that most of HP's products are manufactured outside the U.S., with a small percentage produced domestically. When asked about the specifics of HP's production in Mexico, he refrains from providing details. Regarding future expectations, Lores notes that HP anticipates a decline in supplies by 3-4% while aiming for growth in the printing business for the next year, which could potentially exert pressure on margins. He reiterates that HP's goal is to perform at least as well as the market despite anticipated revenue pressure from the print segment and that the supply decline is consistent with previous projections. The session then proceeds to the next question from Samik Chatterjee of JPMorgan.

The paragraph discusses the outlook for the PC market, specifically the commercial sector, which is expected to grow at a higher rate than mid-single digits. There is some skepticism about enterprises updating their systems due to the upcoming Windows 10 end-of-life deadline, as they may prioritize AI infrastructure investments instead. However, Enrique Lores explains that, in Q4, there was already a noticeable growth in commercial PC revenue and units. He suggests that the slower start to the Windows upgrade cycle this year could lead to more significant growth in 2025 due to increased support costs for Windows 10. Additionally, a need to refresh an aged installed base and the growing adoption of AI PCs are expected to drive further growth.

The paragraph discusses the company's financial outlook and strategies moving forward. It highlights expected revenue growth both year-over-year and for the full year, with strong performance in premium categories (PS) potentially offsetting declines in print. Earnings per share (EPS) are anticipated to improve throughout the year, with Q1 being the weakest quarter. Key factors for the improvement include PS revenue seasonality, the PC market recovery, improved PS margins, reduced corporate costs, and increased AI PC model penetration. Additionally, cost pressures from commodities in Q4 will persist in Q1, but the company plans to mitigate these through repricing and strategic component selection. Overall, these efforts support the company's financial guidance.

In the paragraph, Enrique Lores discusses the anticipated growth of their company's services, which are expected to grow faster than the overall company. Specifically, in consumer services, subscriber numbers are expected to increase, and they are expanding their service portfolio with programs like "print as a service" and "all-in program." There is solid growth in their Workforce Solutions portfolio, including conference room services, with continued growth expected next year. The company sees opportunities for growth driven by both market conditions and ongoing innovation across various categories.

The paragraph discusses the company's focus on integrating AI into their portfolio to redefine the future of work, enhancing productivity and employee fulfillment. It highlights the AI PC, which constitutes 15% of the market and is defined by IDC as PCs with a built-in NPU. The company aims to develop next-generation AI PCs characterized by more powerful NPUs, the ability to run an AI companion model for office productivity, and enhanced security features. These next-gen AI PCs have just begun shipping, and while their impact this year is limited, they hold potential for significant productivity improvements as software companies develop new solutions for them.

The paragraph discusses the impact of AI PCs and commodity cost pressures on the company's portfolio. The speaker, Enrique Lores, acknowledges the strong potential of AI PCs in the future but notes ongoing commodity cost pressures that are expected to persist into the early part of the fiscal year. He explains that although there will be price repricing and efforts to lower component costs, benefits will not be immediately visible due to the lag between cost and price adjustments. Karen Parkhill adds that the company's strategic purchases initially helped manage cost pressures, but the process of repricing and implementing cost reduction measures takes time. The operator then introduces the next speaker, David Vogt from UBS, who is expected to ask a question about the print sector amid changes in the competitive landscape influenced by the yen.

In the given paragraph, Enrique Lores and Karen Parkhill discuss the company's strategy regarding margins and capital return policy. Lores explains that despite no significant changes in the competitive print environment, the company has focused on reducing product costs as part of their Future-Ready plan, allowing them to gain market share. Parkhill addresses the capital allocation policy, stating that the company aims to return about 100% of its free cash flow to shareholders over the long term, provided more lucrative opportunities aren't available, and maintains a leverage ratio of about 2x. This ratio is reviewed annually and is deemed optimal, aligning with credit ratings and providing access to short-term liquidity.

In the paragraph, Michael Ng from Goldman Sachs asks Enrique Lores about the expectations for unit growth in print products and the impact of a PC refresh deadline in October 2025. Lores responds by stating that the print market is expected to slightly decline next year, but the company aims to grow its market share as long as units remain profitable. He mentions the challenge of predicting competitors' actions but commits to reducing costs. Regarding the PC refresh, he notes that companies typically respond to deadlines, and he anticipates an acceleration in demand by 2025, especially in the second half, due to the slower pace of current refresh cycles. Ananda Baruah from Loop Capital Markets then asks about the commercial versus consumer dynamics in the print market decline.

The paragraph involves a discussion between Enrique Lores and Aaron Rakers regarding market trends in the printing and PC sectors. Enrique discusses the expected decline in the consumer print segment by 2025, while highlighting growth opportunities in the contractual office market, which includes Managed Print Services. This area is seen as an opportunity due to the potential for better performance and a lower market share compared to other segments. Additionally, growth in the industrial print space is anticipated. Aaron Rakers from Wells Fargo then shifts the focus to the impact of the upcoming Windows upgrade cycle and queries about the aging Windows installed base and its market size. He also questions why expected PC growth in line with industry shipment expectations would not result in an average selling price benefit from AI PCs, alongside unit growth. Enrique is asked to share his thoughts on these matters.

The paragraph discusses a call involving company representatives who express optimism about future growth in revenue and operating profit, driven by analytics and partnerships, particularly with Microsoft. They anticipate continued benefit from an average selling price (ASP) growth in premium offerings, including AI-enhanced PCs. The company aims to capitalize on opportunities in redefining future work structures and boosting productivity. The call concludes with thank-yous and holiday wishes, especially for participants on the U.S. East Coast.

This summary was generated with AI and may contain some inaccuracies.