The paragraph outlines the structure and participants of the HP Inc. First Quarter 2025 Earnings Conference Call. The call is introduced by Regina, the conference moderator, who states it is in listen-only mode and recorded for replay. Orit Keinan-Nahon, Head of Investor Relations, then welcomes attendees and introduces key speakers: Enrique Lores, President and CEO, and Karen Parkhill, CFO. The call is webcast with a replay available on HP's investor site, where the earnings release and slide presentation can also be found. The presentation includes forward-looking statements, and disclaimers and potential risks are detailed in HP's SEC reports, with no obligation to update these statements.

The paragraph provides a summary of HP's financial situation and performance as discussed during an earnings call. It highlights that the financial data shared are estimates that may change, and comparisons are made on a year-over-year basis. Non-GAAP financial measures are reconciled with GAAP information in accompanying materials. Enrique Lores, who is speaking, indicates that HP had a strong start to the year with Q1 revenue growth, particularly in Personal Systems and commercial business areas. Non-GAAP earnings per share were slightly above guidance, and operating profit margins met expectations. The results reflect HP's capability to meet commitments and execute its strategy for long-term success.

Last quarter, the company emphasized its ambition to lead in the future of work, focusing on creating highly productive workforces and fulfilling employee needs. With a strong portfolio of PCs, printers, and peripherals, the company is advancing its strategy by investing in AI and software capabilities. This includes acquiring strategic assets from Humane to build an intelligent ecosystem across HP devices. The company is realigning key growth areas toward hybrid systems, workforce solutions, AI PCs, and advanced compute solutions, while gaming will shift to the core portfolio. The innovations were showcased at CES, highlighting AI-powered products like new AI PC models.

The paragraph highlights HP's advancements across various sectors, emphasizing faster decision-making and collaboration with the EliteBook Ultra and flexibility and security with the EliteBook X. The Zbook Ultra excels in handling complex tasks, while Thunderbolt Docks enhance hybrid work experiences. In gaming, OMEN AI beta optimizes performance, and HP's Smart Tank printers join their all-in subscription plans for convenience. Industrial print providers benefit from the new high-speed HP PageWide technology. HP's commitment to innovation, digital equity, and sustainability has improved its ranking on America's most JUST Companies list, largely due to investments in employees, community support, and customer relations. The company plans to further engage with customers and partners at their upcoming Amplify conference.

The paragraph discusses HP's recent achievements and strategy in the Personal Systems segment. Over the past quarter, HP experienced a 5% year-over-year revenue increase, driven mainly by commercial growth, offsetting a decline in consumer sales, particularly in China. HP made significant gains in the PC commercial Windows market, especially in high-value categories like commercial premium PCs, although consumer market share decreased. The company attributes this growth to the adoption of AI PCs and the Windows 11 refresh cycle, with worldwide PC commercial revenue growing by 10% year-over-year. HP plans to continue prioritizing AI-PCs, investing in areas like hybrid systems and advanced computing. In printing, HP achieved strong unit growth and share gains, notably in home printing with big tanks.

The paragraph discusses the company's overall performance, highlighting growth in strategic areas like A4 value and A3, despite competitive pricing and weak demand in China. Their print business saw a 1% revenue decline, but consumer subscriptions and industrial graphics experienced growth. Workforce solutions also showed momentum with significant new contracts, including Prime Healthcare. The company is addressing geopolitical changes by enhancing manufacturing resilience, diversifying its global supply chain, and planning to build over 90% of HP products sold in North America outside of China by the end of fiscal year 2025, while maintaining China as a crucial manufacturing location for other regions.

The paragraph discusses the company's strategy for managing current and potential future tariff increases by leveraging their global supply chain, cost improvements, and pricing actions. It highlights progress in their Future Ready plan, targeting $1.9 billion in structural savings by fiscal year 2025. These savings are intended to mitigate uncertainties and support strategic investments. The speaker expresses confidence in their full-year outlook and ability to lead in the future of work. Karen Parkhill then takes over, reporting satisfaction with first-quarter results, revenue growth, and progress towards financial goals, particularly in personal systems and print markets.

The company has made significant strides in its future-ready plan, achieving increased run rate savings targets for the fiscal year 2025. Despite the challenges of higher commodity costs affecting gross margins, the company managed to deliver on its EPS commitments through disciplined execution and cost management. Quarterly net revenue grew across all regions, with APJ, Americas, and EMEA showing growth in constant currency. While non-GAAP operating expenses rose due to strategic investments, these were partially offset by cost savings initiatives. The company reported a non-GAAP operating profit of $984 million and non-GAAP diluted net earnings per share of $0.74, based on approximately 960 million diluted shares. Segment-wise, personal systems saw a 5% revenue growth, driven by commercial volumes and strategic pricing actions to counter component cost increases, with a focus on leading the future of work and emphasizing commercial sales.

The paragraph outlines the company's performance across various segments. It highlights strong growth in AI PCs, advanced compute solutions, and hybrid systems, with a 10% rise in commercial revenue due to a mix shift toward premium products. The consumer market saw a 7% revenue decline due to a strategic portfolio rebalancing. Operating margins were at 5.5%, affected by increased commodity costs. In print, despite a 2% revenue drop, market share increased due to strong consumer hardware sales and double-digit growth in consumer subscriptions. Consumer segment grew 5% in revenue with 7% unit growth. The commercial segment faced a 7% revenue decline amidst competitive pricing, particularly in China. The focus remained on profitable long-term growth, gaining market share in high-value categories. Overall, there was an emphasis on maintaining favorable pricing and supply, despite minor revenue declines due to currency and usage challenges. Rigorous cost discipline helped achieve high-end operating margins.

The company is enhancing its cost reduction initiatives, increasing its savings target from $1.6 billion to $1.9 billion by fiscal year 2025, with restructuring charges expected to rise to $1.2 billion, including $400 million this fiscal year. These savings aim to mitigate macroeconomic and geopolitical risks while supporting growth and AI innovation. The quarter saw $375 million in operational cash flow and $70 million in free cash flow, impacted by seasonality and increased inventory for tariff management, which will temporarily affect cash conversion cycles. Despite anticipating negative free cash flow in Q2, full-year projections remain unchanged. The company returned nearly $400 million to shareholders and finished the quarter on target with its leverage range, while keeping an eye on geopolitical developments.

The paragraph discusses the company's strategies to mitigate the impact of current tariffs on China, particularly affecting their personal systems business, by leveraging their global supply chain and implementing cost and pricing actions. They project non-GAAP diluted EPS for FY '25 to be between $3.45 and $3.75, with GAAP diluted EPS expected to fall between $2.86 and $3.16, including restructuring costs. The company anticipates stronger EPS in the second half due to seasonal strength in personal systems, the Windows 11 refresh, and increased AI PC penetration. They aim to offset commodity costs through repricing and cost reductions, projecting EPS improvement, especially in Q4. Print revenue is expected to grow with the market, and personal systems are anticipated to outpace the market due to commercial share gains.

The company anticipates revenue growth in its premium categories, including AI PCs, and expects operating margins for personal systems to be in the upper half of the 5% to 7% range for the year. Print operating margins are expected near the top of the 16% to 19% range due to cost management and strategic planning. For Q2, non-GAAP EPS is projected at $0.75 to $0.85, and GAAP EPS at $0.62 to $0.72. Personal systems revenue should outperform typical seasonality, but margins will be in the lower half of the stated range due to tariff timing. Print revenue is expected to align with annual growth, maintaining strong margins. Corporate expenses will be higher in Q2 but lower than Q1. The company predicts free cash flow between $3.2 billion and $3.6 billion for FY '25, with better performance in the year's second half, while committing to return 100% of free cash flow to shareholders, assuming favorable gross leverage conditions.

In closing, the company reported solid progress in Q1 towards its strategic goals and full-year commitments while adapting to the dynamic geopolitical environment. They remain focused on disciplined execution and investing for the future to achieve long-term profitable growth. During a Q&A session, Joe Cardoso from JPMorgan asked about the impact of China tariffs on the company's guidance and production strategy. Karen Parkhill explained that the guidance includes the current tariff impacts, primarily affecting their PS business, and noted that less than 10% of U.S. revenue will come from China by the end of FY '25. The company is leveraging its global supply network to mitigate tariff impacts by shifting production worldwide.

The paragraph discusses HP's efforts to build a more resilient supply chain post-COVID by establishing manufacturing in multiple regions, resulting in a stronger position now than three years ago. Joseph Cardoso inquires about the drivers behind HP's positive growth outlook, specifically regarding Personal Systems (PS) growth. Enrique Lores attributes this growth to factors such as market expansion, the replacement of aging hardware, the Windows 11 refresh, and AI PC penetration. Additionally, HP's innovation and strong sales team are key contributors to their improved competitive position and progress.

The discussion revolves around businesses' decision-making regarding upgrading devices, particularly with the Windows 11 refresh as a key factor. There is an evident acceleration in device refreshes due to increased awareness and readiness among customers, who are opting for the latest generation products with AI capabilities and communication tool functionalities. The company is confident in its leading portfolio's progress in this category. Additionally, there is an inquiry about the adoption rate of AI PCs, confirming expectations of 20% of shipments this year and a significant increase to 40-60% by 2027, with a 5-10% price premium over traditional PCs.

In the paragraph, Enrique Lores discusses the expected penetration rate of AI PCs, anticipating it to reach around 25% by the end of the year and aiming for 40-50% in two years. They also expect the average selling price to be 5-10% higher, driven by AI PCs. Wamsi Mohan from Bank of America questions the significant projected earnings increase in the second half of the year compared to the first half, noting that such an increase is unprecedented even during restructuring periods. He expresses concern over uncertainties such as tariffs and disappointing PC uptake. Karen Parkhill responds by explaining her confidence in their earnings per share (EPS) guidance, citing historical second-half strength and expected improvements in revenue and costs.

The paragraph discusses the company's revenue and cost expectations, highlighting a positive outlook due to factors like increased seasonality with the PC recovery, higher demand for premium and AI PCs, reduced commodity costs, and savings from strategic plans. Enrique Lores emphasizes the confidence in revenue and cost improvements. The guidance includes current Chinese tariffs but does not account for any future changes due to their unpredictability. Wamsi Mohan seeks clarification on whether the guidance considers a full 20% tariff or just a 10% rate.

The paragraph discusses a company's strategy related to tariffs and pricing in light of changes in their supply chain. Enrique Lores mentions that the company is only including the current 10% tariff in their financial guidance and that their goal is profitable growth. The company sees tariffs as a cost factor and may use any advantage from them to adjust pricing or improve profits for investment purposes. They aim to outperform the market, specifically in the commercial and premium sectors. Karen Parkhill notes that they have a strategy for dealing with future tariffs, which will be applied to any new situations in China or elsewhere. Dylan Liu, substituting for Erik Woodring, then asks about the impact of the current commodity cycle on margins and whether savings would be kept or passed to customers.

In the article paragraph, Enrique Lores and Karen Parkhill discuss expectations for the upcoming year. They anticipate commodity headwinds impacting margins for the entire year, but expect quarter-over-quarter improvements starting in Q2. They aim for profitable growth by adjusting pricing and other factors according to the competitive environment. The company expects to continue gaining market share, especially in commercial areas, and plans to grow faster than the market. Their total market expectations have not significantly changed from the previous quarter. Michael Ng of Goldman Sachs inquires about the personal systems growth and PC market. Lores mentions improved momentum, shown by a 10% growth in commercial areas, an improvement from the previous quarter.

The paragraph discusses HP's acquisition of Humane and its impact on the company's strategy. Enrique Lores explains that the acquisition is expected to enhance HP's intelligent ecosystem beyond workforce solutions. By integrating Humane’s AI and software assets, HP aims to drive its future work strategy, improve AI deployment at the edge, and enhance product connectivity for a better user experience. The first implementation will focus on seamless integration between PCs and video conferencing rooms, addressing a major customer pain point. The paragraph ends with a question from Citigroup about the expected growth rate of the PC industry for the year, which is projected at around 4% to 5%.

In the article, Enrique Lores discusses the expected growth in the PC market, projecting mid-single-digit growth in units, with pricing expected to have a positive impact. The company anticipates growing faster than the overall market. When analyzing different segments, Lores notes that both consumer and commercial spaces showed unit growth, with consumer growth driven by low-end products and commercial growth being more balanced. The government, enterprise, and SMB segments experienced growth, whereas the education category declined. An unidentified analyst asks about the impact of the U.S. dollar's strength on the print business and potential pricing disadvantages compared to Japanese competitors, inquiring if this affects commercial contract pricing.

In the paragraph, Enrique Lores discusses the competitive nature of the print market, noting that it remains similar to recent quarters and is expected to stay that way. Despite this competition, the company has gained market share, especially in the home segment, and plans to focus on profitable growth. Karen Parkhill addresses a question regarding inventory and cash flow, explaining that the negative free cash flow for the quarter is due to taking on extra inventory to mitigate tariff impacts. This is a timing issue rather than a long-term cash flow problem. They increased finished goods inventory in the U.S. to respond to tariff changes, but this will not affect the full year's free cash flow.

In the conversation, Enrique Lores discusses the competitive landscape for the print supplies business in China, noting that there hasn't been a significant shift recently and that the business is performing well with growing market share. He also highlights strong growth in consumer subscriptions, with double-digit revenue growth and over 1 million subscribers for their premium paper delivery service. Lores mentions the expansion of offerings, including big tank products in their all-in program, which he describes as a strong market differentiator. The paragraph concludes with a transition to a question from Alek Valero of Loop Capital.

In the article, Alek Valero asks Enrique Lores about the assumptions regarding the return to office and its impact on print demand. Lores responds that they expect the situation to remain stable in the upcoming quarter without major changes. Valero also inquires about the AI PC market, specifically mentioning new entrants like NVIDIA. Lores confirms that they are collaborating with NVIDIA to incorporate their technology into AI PCs and plan to launch exciting products soon. In his closing remarks, Lores expresses satisfaction with the company's Q1 results, emphasizes their market momentum, and highlights their focus on innovation in the future of work despite challenges like China's tariffs.

The operator thanked participants for joining the call and indicated that it has ended, instructing them to disconnect.

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