HP Inc. (NYSE:HPQ) Q1 2023 Earnings Call Transcript

Ananda Baruah: Thanks. And then my quick follow-up is, Enrique, you mentioned in the prepared remarks and you just mentioned a moment ago, shifting the HP portfolio towards subscription. Is that to say the entirety of the HP portfolio, you guys have an eye on moving towards the subscription model? I just want to make sure I understand the context of those remarks? Thanks.

Enrique Lores: So this is something that we shared already in our Investor Day a couple of years ago, so it’s not new. But we see an opportunity to better serve our customers by expanding our subscription business from supplies to eventually other parts of the portfolio, our long-term direction is to enable a large part of the HP portfolio, but this is a journey that is going to take multiple quarters. You will see us making progress in the next quarters. We are now included paper. We will be including some of our PCs and printers in the coming quarters. And over time, we will continue to expand the offering.

Operator: We will take our next question from David Vogt with UBS.

David Vogt: Great. Thank you guys for taking the question. Maybe just a question for both Enrique and Marie. When I think about your comments about how the TAM develops in fiscal 2023, if I extrapolate what you’ve done in the past pre-COVID it would suggest that by, let’s say, by fiscal Q4, your PC segment could be basically flat on a year-over-year basis. Is that the right way to think about the business as it sort of plays out over the next couple of quarters? And then I have a follow-up.

Marie Myers: Yes. Maybe I can sort of talk to just the PC outlook and how to think about the guide. So obviously, a big part of this is, I think what Enrique said earlier around the channel inventory. We do expect that, that channel inventory will get cleaned up through the course of Q2 and then into Q3. And I think Enrique mentioned that some of that pressure that we’re seeing in the corporate enterprise space. And I think this is largely in line with what the industry is assuming. So at this point, if you look at the midpoint of our guide, we’re not expecting any type of macro recovery. But if you sort of group all this together, what we’re expecting is we’re going to see better PS revenue in the back half as that channel sort of corrects and cleans up.

David Vogt: Okay. And then maybe just as a follow-up. If I think about the profitability of PC for the full-year, and I kind of extrapolate your comments on revenue in the back half. That would suggest that in the second half of the year, just round numbers, quarterly profitability per quarter is going to have to be north of $0.90 per share. You’re basically flattish with last year. Do you expect €“ is that the kind of €“ if I just kind of take the midpoint of your full-year guide, is that the kind of leverage you would expect to get as the cost cuts start to flow in more in the July and October quarter from sort of where we are in the April quarter?