Securities Analyst Meeting 2017 PERSONAL SYSTEMS. Ron Coughlin President, Personal Systems

Transcription

1 Securities Analyst Meeting 2017 PERSONAL SYSTEMS Ron Coughlin President, Personal Systems

2 Forward-looking statements Today s presentations contain forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of HP Inc. and its consolidated subsidiaries ( HP ) may differ materially from those expressed or implied by such forward-looking statements and assumptions. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to any projections of net revenue, margins, expenses, effective tax rates, net earnings, net earnings per share, cash flows, benefit plan funding, deferred taxes, share repurchases, foreign currency exchange rates or other financial items; any projections of the amount, timing or impact of cost savings or restructuring and other charges; any statements of the plans, strategies and objectives of management for future operations, including the execution of restructuring plans and any resulting cost savings, net revenue or profitability improvements; any statements concerning the expected development, performance, market share or competitive performance relating to products or services; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on HP and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief, including with respect to the timing and expected benefits of acquisitions and other business combinations and investment transactions; and any statements of assumptions underlying any of the foregoing. Risks, uncertainties and assumptions include the need to address the many challenges facing HP s businesses; the competitive pressures faced by HP s businesses; risks associated with executing HP s strategy; the impact of macroeconomic and geopolitical trends and events; the need to manage third-party suppliers and the distribution of HP s products and the delivery of HP s services effectively; the protection of HP s intellectual property assets, including intellectual property licensed from third parties; risks associated with HP s international operations; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by HP and its suppliers, customers, clients and partners; the hiring and retention of key employees; integration and other risks associated with business combination and investment transactions; the results of the restructuring plans, including estimates and assumptions related to the cost (including any possible disruption of HP s business) and the anticipated benefits of the restructuring plans; the resolution of pending investigations, claims and disputes; and other risks that are described in HP s Annual Report on Form 10-K for the fiscal year ended October 31, 2016 and HP s other filings with the Securities and Exchange Commission. As in prior periods, the financial information set forth in today s presentations, including any tax-related items, reflects estimates based on information available at this time. While HP believes these estimates to be reasonable, these amounts could differ materially from reported amounts in HP s Annual Reports on Form 10-K for the fiscal years ending October 31, 2017 and October 31, HP assumes no obligation and does not intend to update these forward-looking statements. HP s Investor Relations website at contains a significant amount of information about HP, including financial and other information for investors. HP encourages investors to visit its website from time to time, as information is updated and new information is posted.

3 Use of non-gaap financial information HP has included non-gaap financial measures in today s presentations to supplement HP s consolidated financial statements presented on a GAAP basis. Definitions of these non-gaap financial measures and reconciliations of these non-gaap financial measures to the most directly comparable GAAP financial measures are included elsewhere in today s presentations. HP s management uses net revenue on a constant currency basis, non-gaap total operating expense, non-gaap operating profit, non-gaap tax rate, non-gaap net earnings, and non-gaap diluted net earnings per share to evaluate and forecast HP s performance before gains, losses or other charges that are considered by HP s management to be outside of HP s core business segment operating results. Gross cash, net cash (debt), and free cash flow are liquidity measures that provide useful information to management about the amount of cash available for investment in HP s businesses, funding acquisitions, repurchasing stock and other purposes. Net cash (debt) provides useful information to management about the state of HP s consolidated balance sheet. These non-gaap financial measures may have limitations as analytical tools, and these measures should not be considered in isolation or as a substitute for analysis of HP s results as reported under GAAP. For example, items such as amortization of intangible assets, though not directly affecting HP s cash position, represent the loss in value of intangible assets over time. The expense associated with this change in value is not included in non-gaap operating profit, non-gaap tax rate, non-gaap net earnings, and non-gaap diluted net earnings per share and therefore does not reflect the full economic effect of the change in value of those intangible assets. In addition, items such as restructuring and other charges, acquisition-related charges, non-operating retirement-related credits/(charges), defined benefit plan settlement charges, tax indemnifications, and net valuation allowance, separation taxes and adjustments that are excluded from non-gaap operating expense, non-gaap operating profit, non-gaap tax rate, non-gaap net earnings and non-gaap diluted net earnings per share can have a material impact on the equivalent GAAP earnings financial measures and cash flow. HP may not be able to immediately liquidate the short-term and long-term investments included in gross cash, which may limit the usefulness of gross cash as a liquidity measure. In addition, free cash flow, which includes net capital expenditures, does not represent the total increase or decrease in cash for the period. The non-gaap financial information that we provide also may differ from the non-gaap information provided by other companies. We compensate for the limitations on our use of these non-gaap financial measures by relying primarily on our GAAP financial statements and using non-gaap financial measures only supplementally. We also provide robust and detailed reconciliations of each non-gaap financial measure to the most directly comparable GAAP measure, and weencourage investors to review those reconciliations carefully. We believe that providing these non-gaap financial measures in addition to the related GAAP measures provides investors with greater transparency to the information used by HP s management in its financial and operational decision-making and allows investors to see HP s results through the eyes of management. We further believe that providing this information better enables investors to understand HP s operating performance and financial condition and to evaluate the efficacy of the methodology and information used byhp s management to evaluate and measure such performance and financial condition. HP s Investor Relations website at contains a significant amount of information about HP, including financial and other information for investors. HP encourages investors to visit its website from time to time, as information is updated and new information is posted.

4 LARGE AND GROWING TAM GROWING THE BUSINESS EXECUTING IN TOUGH MARKET TRANSFORMING PERSONAL SYSTEMS $334B TAM, growing at +11% revenue growth $66M YTD +4.6% 1 YTD 2 and scaling future areas incremental profit 2 Reinventing PCs, transforming portfolio (1) TAM based on HP internal analysis as of June 2017 and August IDC forecasts for PC Clients, slate tablets and detachable, and VR forecast by Digi-Capital. Projections based on currently available data and estimates. Market CAGR based on CY (2) HP Inc. Q Earnings Results, FQ1-FQ3 17 vs. FQ1-FQ3 16.

5 Unit CAGR (%) MARKET RECOVERING Quarterly PC Client Market Growth (Revenue, Y/Y %) CY15 CY16 CY17 (1) IDC WW Quarterly PC and Tablet Tracker CQ2 17. (2) Q2 17 (August) IDC PC Forecast (Includes detachables). Revenue and Unit CAGR trend lines refer to CY15-CY17 and CY17-CY20. AND PROJECTED TO BE STABLE GOING FORWARD Annual PC Client Market Size (Revenue, $B) CY % 184 CY CY % 188 CY CY19-2.6% +1.1% 191 CY20 (3) SSD Market Price Report - DRAMeXchange, TLC-256GB, CQ2 17 vs. CQ2 16, Avg. Unit price delta. (4) DRAM 4GB DDR4 Spot Pricing, CQ2 17 vs. CQ2 16, Avg. Unit price delta. (5) HP internal financial data, FY17 YTD. COST HEADWINDS IMPACTING INDUSTRY SSD Market Spot Price 3 +$18 per unit Y/Y DRAM Market Spot Price 4 +$13 per unit Y/Y Contributed to over a billion dollars in cost headwinds for HP 5

6 MITIGATING COST HEADWINDS STRONG CUSTOMER SATISFACTION INDUSTRY-LEADING REVENUE GROWTH ALL-TIME HIGH SHARE Logistics Savings 1 Net Promoter Score 2 Revenue Growth 3 HP Share (%) 5 11% YTD unit savings, Y/Y Consumer Premium PC +34% +11% 22.8% ASP Increase 1 +3% Overall PC (Comm l & Consumer) +14% Dell YTD Lenovo Other Top Vendors % CQ1 16 Premium Share: +1 pts CQ2 17 YTD variation, Y/Y FY 15 FY 16 1H 17 +8% +2% +6% #1 share, two quarters in a row (1) HP internal financial data, FQ1-FQ3 17 vs. FQ1-FQ3 16. (2) 1H 2017 vs. FY 15. Customer NPS Survey. FY 15 and FY 16 figures estimated (change in NPS vendor and panels). (3) HP, Lenovo and Dell earnings reports, FQ1-FQ3 17 vs. FQ1-FQ3 16. (4) Apple, Asus and Acer earnings reports, CQ4 16-CQ2 17 vs. CQ4 15-CQ2 16. (5) PC Unit Share - IDC WW Quarterly PC and Tablet Tracker CQ2 17.

7 CORE GROWTH Accelerate premium and gaming Gain share in core, strategic segments Commercial mobility Device as a Service Retail solutions +4 pts Premium Share growth 1 +4 pts Gaming Share growth 1 +2 pts Commercial PC Share growth 1 +1 pt Displays Share growth 1 +70% Commercial detachable Unit growth 2 Double digit growth DaaS orders Double digit growth RPOS revenue (1) IDC WW Quarterly PC and Tablet Tracker, Revenue Share growth Y/Y, CQ2 17 vs. CQ2 16; Commercial PC excludes detachables and slate tablets. (2) IDC WW Quarterly PC and Tablet Tracker, Unit growth Y/Y, CQ2 17 vs. CQ2 16.

8 2-in-1 s GAMING & VR WORKSTATION & AiO [The EliteBook x360 is] the most stunning business machine I've ever seen Elitebook x360 OMEN Family Z2 Mini The Z2 Mini easily handles workloads that other mini PCs struggle with The Spectre X2 blurs the line between modern art and a technology-stuffed PC Spectre x2 VR backpacks & HMD Envy curved AiO [the VR backpack] will let developers translate their dreams and ideas into virtual reality seamlessly

9 2-in-1 s GAMING & VR WORKSTATION & AiO Higher ASPs Elitebook x360 OMEN Family Z2 Mini Higher margins Higher customer satisfaction 1 Spectre x2 VR backpacks & HMD Envy curved AiO (1) 1H 2017 vs. FY 15. Customer NPS Survey.

10 ONE LIFE CONNECTED SECURE SMART AS A SERVICE

11 Personal Systems TAM ($B) % CAGR HP Revenue Share ( 17) Virtual Reality D Scanning 95 Commercial Phablets 3 Commercial Services Device as a Service (Svs only) 4 +10% CAGR 35.7% 4.5% Under-indexed Under-indexed Retail Point of Sales Displays & Accessories Thin Clients 10.5% Under-indexed PC Clients: 5 Workstations 2-in-1s Desktops Notebooks 0.1% Over-indexed CY2017 CY2018 CY2019 CY2020 (1) TAM based on HP internal analysis as of June 2017, August IDC forecasts for PC Clients, slate tablets, detachables, and VR forecast by Digi-Capital (see below). Projections based on currently available data and estimates. Market CAGR for CY (2) Digi-Capital: After mixed year, mobile AR to drive $108 billion VR/AR market by 2021, January (3) Phones >=5.5. Comm l Services include lifecycle services for desktops, notebooks, detachables, convertibles workstations, thin clients, tablets, smartphones, RPOS devices, & enterprise mobile mgmt. serv. (4) HP analysis based on IDC data - DaaS includes the services component only for mobility (notebooks, tablets, smartphones) and desktops, workstations, thin clients, and retail point of sale devices. (5) HP analysis based on IDC data - PC Clients includes: desktops, notebooks, convertibles, detachables, and workstations.

12 OUR STRATEGIC PILLARS REINVENT PC CORE Best price-feature value GROWTH Drive Scale TRANSFORM PORTFOLIO FUTURE Create Categories OUR STRATEGIC PRIORITIES 2-in-1s, Premium, Gaming, Workstations Thin clients, Displays and Accessories Security Device as a Service (DaaS) Retail Point of Sale (RPOS) Workflow Transformation Immersive Computing: Virtual Reality / 3D Scanning Office and Classroom of the Future OUR FOUNDATION Software, services infrastructure and security Industry-leading scale, supply chain and quality World-class go-to-market, insights, customer experience and marketing Powerful creativity, and a hard-drive for results

13 CORE COST MANAGEMENT INNOVATION ASP EXPANSION VIA PREMIUM & GAMING SECURITY DIFFERENTIATION Non-Commodity Cost Reduction 1 Sprinkles of Magic Premium and Gaming growth Best-in-class endpoint security ~10% Reduction of non-commodity costs +28% Premium & Gaming Market-reported Revenue growth 2 Sure Click Sure Start Modular Curved All-in-One w/ Privacy Camera Sure View (1) HP internal financial data, FY17 YTD cost savings. (2) NPD & GFK Sell-out data (excl. detachables): FQ1-FQ3 17 vs. FQ1-FQ3 16.

14 Premium CORE Gaming 2 EXECUTING ON STRATEGY TO GROW IN PREMIUM AND GAMING Unit Share Change 1 CQ2 15-CQ2 17 (Points) +5.4 pts +2.4 pts -1.0 pts -8.5 pts +4.2 pts +2.9 pts Others pts -6.4 pts FAIR SHARE OPPORTUNITY FOR HP IN HIGHER MARGIN SEGMENTS Other Unit Share Rank 1,2 CQ2 17 Unit Share (%) 60.6 M 13.5 M 2.4 M 9.9% 22.8% 18.5% 9.3% 15.8% 14.1% 17.0% 15.5% 20.4% 7.1% 29.2% 66.7% 32.7% 21.0% (1) IDC WW Quarterly PC and Tablet Tracker CQ / Gaming: NPD & GFK, July17. (2) NPD & GFK. CQ2 17 vs. CQ2 15. (3) Others includes Apple, Asus, Microsoft, MSI, Samsung, Toshiba, Acer and other. Revenue 1,2 Overall PC $41.6B Premium Gaming 2 $18.8B $2.0B

15 It s HP not Apple, Dell or Microsoft that s now making the best looking laptops on the market The Spectre is the MacBook Air replacement that many people have been searching for

16 Premium CORE Gaming 2 EXECUTING ON STRATEGY TO GROW IN PREMIUM AND GAMING Unit Share Change 1 CQ2 15-CQ2 17 (Points) +5.4 pts +2.4 pts -1.0 pts -8.5 pts +4.2 pts +2.9 pts Others pts -6.4 pts FAIR SHARE OPPORTUNITY FOR HP IN HIGHER MARGIN SEGMENTS Other Unit Share Rank 1,2 CQ2 17 Unit Share (%) 60.6 M 13.5 M 2.4 M 9.9% 22.8% 18.5% 9.3% 15.8% 14.1% 17.0% 15.5% 20.4% 7.1% 29.2% 66.7% 32.7% 21.0% (1) IDC WW Quarterly PC and Tablet Tracker CQ / Gaming: NPD & GFK, July17. (2) NPD & GFK. CQ2 17 vs. CQ2 15. (3) Others includes Apple, Asus, Microsoft, MSI, Samsung, Toshiba, Acer and other. Revenue 1,2 Overall PC $41.6B Premium Gaming 2 $18.8B $2.0B

17 CORE IMPORTANCE OF ENDPOINT SECURITY 80% of companies have been breached 1 Above the OS HP S SECURITY STACK Device Identity Data HP Manageability Integration Kit HP Sure View 71% In the OS HP WorkWise HP Sure Click of breaches originate from endpoint devices 2 Multiple OSs and device types Below the OS HP Sure Start Gen3 HP BIOSphere Gen3 HP Client Security Suite Gen3 w/ Multi-Factor Authentication 3 HP Sure Erase FIPS Certified Self Encrypting Drives World s most secure and manageable PCs 4 (1) Duke University/CFO Magazine Global Business Outlook Survey, June (2) Information Age: Securing the endpoint from dangerous cyber threats, May (3) HP Multi Factor Authentication requires 7th Generation Intel Core processor, Intel integrated graphics, and Intel WLAN. (4) Based on HP s unique and comprehensive security capabilities at no additional cost and HP Manageability Integration Kit s management of every aspect of a PC including hardware, BIOS and software management using Microsoft System Center Configuration. Manager as of May 2017 on HP EliteOne PCs with 7th Gen Intel Core Processors, Intel integrated graphics, and Intel WLAN.

18 GROWTH RETAIL POINT-OF-SALE Continue to grow share in RPOS WORKFLOW TRANSFORMATION Incubate modern workflow DEVICE AS A SERVICE Develop capabilities & partners to scale New product segments Channel partnerships Peripheral expansion Increased field sales coverage Curate modern experiences across devices, accessories and software / services Right devices for right job Management with insights Channel partner programs

19 GROWTH BUILD THE WORLD S PREMIER DEVICE as a SERVICE OFFERING Multi-OS, Multi Form Factor IMPORTANCE OF HP TRANSFORMATION Data from end-point devices Lifecycle management Customer Expansion Discovery & design Configure Deploy Maintain Optimize Dispose Higher refresh rates REFRESH Higher margin HP Differentiation Device management Security Channel tools MPS Infrastructure

20 GROWTH BUSINESS PROGRESS BUILDING GTM SCALE SCALED WINS +40% pipeline growth 1 51 DaaS Specialist partners Leading entertainment company Big 4 global accounting firm Double digit order growth 1 6 Global Systems Integrators Leading global airline Top 5 retail chain (1) HP internal data, FY17 (forecast) vs. FY16.

21 GROWTH FROM HARDWARE CENTRIC TO HARDWARE AS FOUNDATION FOR SERVICES & SOLUTIONS OFFERINGS Workflow transformation Device as a service (multi-os) multi-platform Industry-leading endpoint security and security services End-user optimized devices, new form factors and workspace categories Higher growth Higher value-add Higher retention Higher margins

22 FUTURE 3D SCANNING OFFICE AND CLASSROOM OF THE FUTURE VIRTUAL REALITY $9.7B market, 13% CAGR 1 40M+ huddle rooms 2 ~$22B market by (1) HP internal analysis, Industry Arc, Markets & Markets, Technavio, BCC Research; CAGR. (2) Wainhouse Research, Understanding the Huddle Room, October (3) Digi-Capital, VR Report, Jan

23 FUTURE

24 Potential Personal Systems revenue mix 1 CORE: Traditional PC FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 (1) HP internal analysis revenue mix for FY17 and beyond are projections based on currently available data and estimates.

25 Potential Personal Systems revenue mix 1 CORE: Other Pockets of Growth Premium & Gaming 1. Reinvent PC business Win in Other Pockets of Growth: 2-in-1s, Workstations, Displays & Acc. Continue Premium & Gaming growth Traditional PC Gain profitable share FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 (1) HP internal analysis revenue mix for FY17 and beyond are projections based on currently available data and estimates.

26 Potential Personal Systems revenue mix 1 Shift from Traditional PCS 3 Points (FY15-FY17) 9 Points (FY17-FY20) Future: New Categories Growth: Non PC portfolio CORE: Other Pockets of Growth Premium & Gaming Traditional PC 2. Transform portfolio Build VR franchise Establish 3D Scanning Scale Device as a Service Accelerate Retail point of sale (RPOS) 1. Reinvent PC business Win in Other Pockets of Growth: 2-in-1s, Workstations, Displays & Acc. Continue Premium & Gaming growth Gain profitable share FY15 FY16 FY17 FY18 FY19 FY20 FY21 FY22 FY23 FY24 FY25 (1) HP internal analysis revenue mix for FY17 and beyond are projections based on currently available data and estimates.

27 LARGE MARKET OPPORTUNITY CONSISTENT STRATEGY BREAKTHROUGH INNOVATION WORLD CLASS EXECUTION STRONG FINANCIAL PERFORMANCE $334B TAM 1 growing at +4.6% CORE GROWTH Pockets of growth FUTURE World class design Sprinkles of magic Quality Customer satisfaction Marketing & GTM Revenue growth Cost management Profit & cash delivery TRANSFORMING PERSONAL SYSTEMS (1) TAM based on HP internal analysis as of June 2017 and August IDC forecasts for PC Clients, slate tablets, detachables and VR. Projections based on currently available data and estimates. Market CAGR based on CY

28 THANK YOU