HP Inc. (NYSE:HPQ) Bank of America 2023 Global Technology Conference June 7, 2023 11:40 AM ET
Company Participants
Marie Myers – Chief Financial Officer
Conference Call Participants
Wamsi Mohan – IT Hardware for BofA
Wamsi Mohan
The BofA Global Technology Conference, delighted to have you all here. Thank you all for joining us here. I’m Wamsi Mohan, IT Hardware for BofA. It’s my honor to welcome Marie Myers, CFO of HP Inc. And Marie has been in this role for a few years now and has seen the most interesting of times in recent times. So we’re delighted that she’s here.
I do want to make a forward-looking statement on HP Inc.’s behalf. Today’s discussion includes forward-looking statements that involve risk, uncertainties and assumptions which are further described in HP’s SEC filings, including HP Form 10-K and 10-Q. HP assumes no obligation and does not intend to update any such forward-looking statements. For more information, please visit HP Investor Relations web page at investor.hp.com.
Question-and-Answer Session
Q – Wamsi Mohan
And with that out of the way, Marie, it’s been a tough macro backdrop, and you just posted a quarter where revenue declined 18% in constant currency largely driven by PCs. So as a company, what actions are you really taking to navigate this kind of challenging macro backdrop?
Marie Myers
Yes, first of all, good morning, and thanks, Wamsi, for being here. And certainly, no doubt, it’s been a tough macro, and I think you’ve seen PCs decline around 29%, so we’ve been pretty much in line with market declines. I think in an environment like this we focus on controlling what we can control, right? And that’s sort of three things, cost, price, and mix. And I think in some ways on the cost side of the house, we got ahead of the cost takeout that many are focused on right now. We stayed, we started our future ready transformation program late last year and so we’re seeing the benefit of that. You’ve seen it in the quarter. In fact, we delivered, we beat consensus. Even though we declined our revenue, we beat consensus on EPS. And actually you look at our operating profit dollars, they actually grew. So we’re using those levers like cost, robust pricing, and I know we’re going to talk about pricing later today on print, and certainly also the work that we’ve done around mix, they’re all paying off.
So we’ve seen the benefits of our cost program. We’re expected to finish the year at about $560 million in terms of gross run rate annual structural savings, so we’ll see the benefits through the P&L. And I think the other, what we’re doing differently perhaps than what we’ve done in the past, is that we’re continuing to invest in growth. I think there’s no doubt that the trends around hybrid are really secular. And you can see all the debates out there in the market around what work looks like, and it looks different for different industries, but hybrid is, it’s really here to stay. And I think what’s different for us this time is that we’ve got the assets, due to acquisitions that we’ve made over the course of the last couple of years, to really pivot. So when the macro comes back, we’re in a position to really take advantage of hybrid. And I think a great example of that is, just what you see with rooms. So many of you, I’m sure, back in the office trying to figure out how to be productive. We estimate there’s around 19 million rooms out there, and only around 10% of those are really kitted out to enable productivity.
So with the assets we have with poly, with video, there’s a big opportunity out there, Wamsi. So despite this tough macro, we’re doing what we can, focused on controlling costs, managing the environment, and at the same time we’re investing in the long-term. And so I think we’re going to be really well positioned when the macro changes.
Wamsi Mohan
Okay, yes. No, it’s impressive, the margin performance in light of what’s happening on the revenue side. Maybe just to follow up on the cost topic, your Future Ready Transformation Program, can you give us an update on where you are in that process? And I know COVID has been challenging and there’s been supply chain issues and so many other things, but as investors look at HP, how should they think about restructuring charges over a longer period of time, and how much of the savings of this will really fall through to the bottom line?
Marie Myers
Sure, there’s a lot in there, Wamsi, so let me break it down. So first of all, I came back actually to do the last transformation and certainly look, these programs are one-time in nature, right? We see these costs come out of the company and they’re structural. So, put that aside and this program that we launched back in November, I think we got the timing right and the focus is right. What’s different today is that, there are new tools. We laid a lot of the digital foundation in the last transformation. We actually went from 13 ERPs down to one instance of [Indiscernible]. Big change for the company and now we’ve got that base that we can build other digital assets off and so we’re continuing to drive transformation and we’re seeing those benefits in productivity and efficiency and in fact now we’ve got AI as well, so we’re seeing new opportunities to drive increasingly greater leverage in terms of efficiency.
So that’s what these programs are really designed to do. In terms of results, really pleased with the results. I think the rates that we have on both personal business and print speak for themselves. So you can see the benefits showing up in the results, like our rate in PS despite the top macro still holding steady quarter-on-quarter. In print, we’ve been above the range and all of that is showing up in the results. Now we do expect it is going to be somewhat back-end loaded. We started the program in November, so as we get into the second half of this year we’ll continue to see the benefits of the structural savings of the program flow through the back half of the year. So I would say pleased with the results, more work to do, but plenty of opportunity. We’re a really large company. There’s always efficiency opportunities. I’ve done a lot of transformation throughout my career. When we split the company, I was involved in the split, now I came back to help lead the last round of transformation. So for me as a CFO, I really feel like you’ve got to be able to do both. You’ve got to drive efficiency and at the same time take some of those benefits flown through and find those opportunities for growth.
Wamsi Mohan
And when you think Marie about the gross level of savings versus the net level of savings, how should investors think? I mean, historically there’s not been a tremendous amount of flow-through because you have invested for future opportunities and that is showing up in results in different areas, whether it’s in 3D printing or whether it is in, Instant Ink. There are a lot of different areas where you have. So as you think about the point you made about investing, how should we think about gross versus net?
Marie Myers
Yes, no, I think the way to think about that is in terms of, and I mentioned that earlier, just that what we’re expecting in terms of exiting this year, as I said, we’re going to expect to see about 40% of the program in the results as we exit the year. Now, that’s in the guide today, and it is in both PS and print, and it’s in both cost of sales and in OpEx, so you’ll see it in both.
And I think as I commented on the earnings calls, we do expect to see PS rates get solidly in the range. And candidly, that’s one of the enablers to get us there, Wamsi. So you’ll see that in personal systems, and obviously, I think in print, the team’s done a really good job, and we’re seeing that in the rates already today. But just keep in mind, it is both cost of sales and OpEx, and we’re taking some of that capacity that we are generating, and then reinvesting in the growth areas like hybrid, and also, frankly, reinvesting and moving the model to subscription and services.
And that’s a big change. I mean, for HP, moving the model into these much more sticky type of models in terms of subscription and service revenue is a big shift, and it’s going to take time, but in the end, I think it’s going to be very beneficial for the company and very lucrative.
Wamsi Mohan
Yes, no, absolutely. Maybe shifting to PCs, can you talk a little bit about how investors should think about or how HP is thinking about the outlook for PCs? So we’ve gone through COVID, obviously, there was excess buying, we’re getting sort of the downside of that right now, $250 million or so, let’s say, this year, $250 million to $260 million PCs. In 2024, 2025, what are your thoughts around how the growth looks? There’s a lot of debate about PCs normalizing back to low single digit growth now that it’s gone back to pre-COVID levels. How are you thinking about that?
Marie Myers
Well, I’d start by saying that there’s no doubt that the size of the PC market is structurally larger than pre-COVID. So let’s just start there. I talked about hybrid, what that’s driven. Today, there are around about 400 to 600 million PCs out there that need to be refreshed. There’s no doubt that this sort of difficult macro has probably extended that refresh cycle, but that refresh cycle is going to happen. And there are some, obviously, the key drivers that are out there are the sort of usual custom characters, but then I’d add, there’s some new drivers out there today. One, people are spending more time on their PCs. I have two kids, they use Chromebooks through the, I actually have three kids, but two of them use Chromebooks. Two of them went online through the pandemic, one didn’t. She was a user of a different laptop, but two are HP Chromebook users, and so their Chromebooks are really beat up. I just put them in middle school, and they’re all HSD, big Chromebook users, and all those Chromebooks need to get refreshed at some point.
But I’d say there are two other things. My kids spend a lot more time on PCs today, good and bad, but the time spent on devices has substantially increased through this period of time. Finally, I would add, one thing that’s a very interesting driver, we’re still really, I think we haven’t seen or quantified the impact is the extent of AI. And just as you run models closer to the edge, you want your data to be secure, there’s going to be a driver for, you’re going to need more performance in your laptop to drive that. There are enough drivers out there, 1C2, I think to really substantiate the fact that the PC market is going to be substantially higher, and that refresh cycle will ultimately kick in at some point. So that gives us confidence in the outlook on PCs.
And plus, I’d say, during this time, we’ve acquired other assets in terms of the acquisitions we’ve made that bring to bear a broader portfolio. It’s not just about the PC, it’s about the peripherals and the suite that goes with it. So I just think when you add that all together, you’re talking about a much bigger ecosystem here.
Wamsi Mohan
So when you think about 24 and 25, it’s not just the unit time, you’re also talking about the revenue time being larger structurally, because you’re just getting more richly configured PCs.
Marie Myers
Yes, and the mix is moving up, right? We’re moving up the stack in terms of a richer configuration and premium and mix as well.
Wamsi Mohan
You mentioned AI in a couple of different contexts, so maybe with your CFO hat on, what are you looking — how are you looking to leverage AI in the organization from a cost productivity efficiency perspective? And then we can touch on the PC side.
Marie Myers
Sure. Right now, I’d say we’re looking at a number of use cases in the company. We have a couple of really big macro opportunities that we’re specifically looking at. I think they’re pretty well authored out there in the market. The first one is obviously software development. We see an opportunity in terms of driving efficiency with software development. And the other one is in the call centers.
We have a big customer service organization, and we’re in the midst of working on some POCs right now in call center optimization and using bots much more effectively. So two pretty significant opportunities that we see out there, and then I would say we’ve got a laundry list of a number of other use cases that we’re exploring, and we’ve been using some actually even in my finance team right now. So we’re experimenting. But look, frankly there is, like I said, HP is a big company. There’s plenty of opportunities to continue to drive efficiency across the company. And that’s just one of the tools. I would say there are other tools that we’ve been using for many years, like automation tools. So there’s a suite of tools. It’s just one of those tools.
Wamsi Mohan
And we’ve heard other companies talk about maybe 30% of back office costs going away from, or people costs going away. I mean, is there anything you can dimension?
Marie Myers
I’m not ready to put numbers on that one. I think there’s a lot of, people have a lot of different opinions out there. I think I’d say, look, there definitely is, a productivity opportunity. And some of that translates to efficiency. So you’ve got to look across the spectrum and see what that looks like.
Wamsi Mohan
And then on the device side, right, when you think about what actually could improve in terms of configuration and ASPs, what are the key things that you see getting changed and getting a benefit from AI?
Marie Myers
Well, I think the PC in itself is going to evolve. First of all, I’d say the data science stack. There’s no doubt, the data scientists need a rich configuration. We feel we’re really well positioned in terms of driving and delivering on that opportunity. Right now, we’re actually really building out a stack for data scientists that I’m really excited about. And that configuration, I think, is going to be available on the market. The second piece is just the PC itself. If you’re going to use things like Microsoft Co-pilot, you’re going to need a richer configuration inside your laptop to drive that and enable that ability. Plus, finally, we see an opportunity that’s probably differentiated around the fact that people are going to tend to work on the edge. A lot of what we’ve done has been cloud. But as data moves closer and people are really worried about privacy and security, you don’t want to necessarily, build a model and have all of that data exposed in the cloud. So there is an interesting opportunity that certainly we’re starting to explore around working on the edge and what that laptop configuration would look like in that area is quite unique and different. And that should drive, frankly, richer configuration, move up the stack in terms of mix, and then ultimately drive a better ASP.
Wamsi Mohan
Okay, that makes a lot of sense. So as we now think about where we are in the current PC cycle, obviously, there’s been a lot of channel inventory that’s created some pricing pressure as well. Where are we in the work down of that channel inventory? I know you kind of guided to pretty good, maybe high single digit sequential growth for 3Q and in excess of that for 4Q. So as we think about those moving pieces, what’s giving you the confidence to frame that?
Marie Myers
Yes, and I think you actually answered the question very well, Wamsi. But in terms of channel inventory, as I said on the call, we’ve seen really good, secular, I’d say sequential sort of bleeding off of the inventory. I think what gives us confidence, a couple of data points. First of all, we saw the sell-out was actually stronger than the selling. So that’s a really important sort of pivot in terms of seeing that strength. And that gives us confidence that the channel is there for adjusting right to the relative revenue levels. We did say we’d probably take through the better part of Q3 to see that finally normalized. But ultimately, then that gives the capacity for two important drivers in the back half, which is Q3 is typically our back to school season, which is a big driver of our PC volumes and top line.
And then finally, Q4 for us is the holiday season. So we expect to see that driver in terms of the volume and holidays. So I think net net, the key takeaway here is that we’re seeing the channel normalized. And then ultimately we’ve talked about seasonality as being not seasonal for quite a long time, we do expect to see seasonality start to return to more normalized levels in the back half of the year as well.
Wamsi Mohan
Okay, great. So and, and as far as your guidance relative to the promotional activity, would you say that you’re contemplating the increased promotional activity within that framework? And is that coming from you? Are you doing that? Are you expecting your larger competitors to do that? How should we think about that?
Marie Myers
Well, first, in terms of the promotional activity, it’s in the guide. I’d say we’ve already seen that happening in the first half. And you’ve seen the fact that our rates have still been resilient despite that. And it’s been very much driven by consumer, is what I would say. It’s sort of like a tale of two different cities, if you split out consumer, and you split out commercial. So on the consumer side of the house, we’ve definitely seen a more promotional environment. We expect that to continue through Q3.
On the commercial side of the house, we do expect the slightly different situation there, we expect to see a more flattening type of environment relative to ASPs as we get into Q3 on commercial. So slightly different nuances depending on which side of the market you’re looking at.
Wamsi Mohan
And just from a, like, competitive perspective, are you expecting some of the competitors to drive a lot of promotional activity?
Marie Myers
I’d say on consumer it’s pretty much been industry-wide. Yes, I mean I think you’ve seen all our competitors make those comments over the last few, few weeks and I think it’s just more indicative of the industry right now.
Wamsi Mohan
Right. What about PC margins? You mentioned the rates being like extremely good and they are very impressive. As you think about, in the back half of the year as you see these units start to start to increase, are you expecting there to be decent elasticity of demand such that the pricing is going to drive this like unit growth higher but the rates kind of stay flat, rates move down. How are you thinking about sort of the operating margin rates and not just for the next few quarters but really if you think about structurally over the next couple of years given the richer mix and the other things you commented is tailwinds, how should we think about the right sort of levels for it?
Marie Myers
Yes, now why don’t I just walk you through. So from a long-term perspective, we absolutely intend to stay in our range and personal systems of five to seven. From a year perspective, we expect to end the full year being solidly in the range and that’s really driven by a combination of what I mentioned earlier in terms of the benefits of the savings of the transformation. I think the pricing that we just talked about is that sort of starts to settle in the back half and then obviously the mix, right, as you mentioned both in terms of the commercial premium mix and then moreover the benefit that we’ve got from the peripherals, right.
So as I mentioned we made those acquisitions over the course of the last couple of years, they have a richer margin profile as well. So all of that together will absolutely provide support for the personal systems to be in the range, solidly in the range for the year and then inside their operating range for the rest of, you know, sort of from a long longer term perspective.
Wamsi Mohan
Okay, great. Maybe pivoting to print now and I mean obviously historically, like yes, I mean…
Marie Myers
A lot of people don’t want to talk about it. We spend most of the time talking about personal systems these days.
Wamsi Mohan
I left some time to talk about print.
Marie Myers
I’m glad you did.
Wamsi Mohan
So on the print side of the business, right, do you think now is you’re going to go back to somewhat of a framework where a significant chunk still of your profits are going to come from print in a more normalized PC environment? Do we go back to where your historical levels were maybe, 75% of EBIT coming from print or is it like more closer to like 40-60, 60-40? I mean, where do you think that settles out over the next several years?
Marie Myers
Well, look, I’d say that in terms of print we’ve been focused on shifting the model, right. You’ve heard us, I think, and I think we’ve demonstrated just in terms of the commitment we’ve made to both supplies and HP Plus and profit up front. We shipped just in the last quarter around about 50% of our shipments included HP Plus and that what’s really important to understand in terms of this mix, and I’ll get back to your question, is the fact that with HP Plus it actually drives what I talked about earlier, the subscription. So what we’re seeing is that those customers typically opt in for Instant Ink and then also we just launched another subscription service called Instant Paper. So that’s in North America, we’re planning to actually expand Instant Paper across the world. So we’re shifting, you can see that this is what I’m trying to get to is how we’re shifting the business model here.
So what you’ve seen in the past, not necessarily maybe the indicative of what we’re going to do in the future in terms of shifting the model to these different types of revenue models, right, subscriptions and then services as well. And then in terms of just the mix of PCs and print, I’d say for the year we’re not expecting it to be fundamentally different as you think about the year.
Wamsi Mohan
Yes, yes, I love Instant Ink. I mean, yes…
Marie Myers
Have you signed up for paper yet?
Wamsi Mohan
I’ve not signed up for paper yet.
Marie Myers
[Indiscernible]
Wamsi Mohan
Yes, that’s true.
Marie Myers
I don’t have a stack in the cupboard like this. So it’s…
Wamsi Mohan
I do have a big stack of paper.
Marie Myers
We like customers like you too.
Wamsi Mohan
So I guess maybe thinking about the print margins, right, you’ve had some very elevated outside your typical range margins and I think they’ve been driven by a couple of different things, right, like one is the supply chain issues and where the hardware was being priced and secondarily it’s your mix shift in your portfolio and then you’ve got all the future ready transformation. So you’ve got kind of three things here and off that would you say which parts of these are structural and secular versus what you think is more cyclical and when do you expect to revert back to sort of the 16 to 18 range?
Marie Myers
Yes, no, I’d say very good summary there actually. In terms of print, from a long-term perspective, we do expect to get back in the range of 16 to 18 for the year. I think we gave it in the guide that we’ll expect to be slightly above, but for the long-term, it’s important to take that away. I would sort of add as a caveat there, we’re focused on driving operating profit dollars. We give those ranges so that folks can help really drive their models, but what we really are focused on delivering is incremental OP dollars. Now, how we do that, to your point, combination of things. And I think in print, it’s a really good example of both strategy and execution.
So in terms of strategy, we’ve been shifting the mix in terms of where we drive the profit. We have seen a more competitive pricing environment driven by the Japanese. The yen is back at another sort of low point just recently, so we’ve seen some of the Japanese players taking that benefit and driving it into pricing. But what we have seen, to your point, is that the office has been quite resilient in terms of pricing. So we actually saw ASPs increase in the last quarter. We don’t expect that to stay for the long-term. I mean, that’s probably more of a temporal situation, so we do expect that pricing environment will normalize over time.
And then finally, I think the print team’s done a great job of driving the benefits from the future ready transformation. You’re seeing that in terms of just really prudent cost management. All of those factors combined have contributed to where we’ve been sitting in our range. Over time, though, the facts still remain that pricing will become more competitive. Supplies will continue to decline, so we do expect to get back in that range. But like I said, we’re focused on OP dollars.
Wamsi Mohan
And if you think about the incremental growth in OP dollars in print and break it out, maybe this is getting a little granular. But if you think about office versus consumer versus graphics and think about sort of the various things that are driving that incremental growth, where do you see the biggest potential for incremental OP dollar growth?
Marie Myers
I think it’s a range of different contributors, but I think I would draw your attention to the model shift. I think shifting the model the way we have with Instant Ink, we now have over 12 million subscribers. I just mentioned we’ve added Instant Paper, so there’s more opportunity there as we layer in more services into the model. I think secondly, we’ve shifted the business model in terms of just profit up front, and we’re continuing to do so. So all of those factors combined will all be net contributors to OP dollars. And then cost, which I think we’ve spent some time talking about that already.
Wamsi Mohan
And when you think about sort of the Instant Ink piece of it, like can you dimension that for us, and how large it is as part of the business?
Marie Myers
I think what we’ve sort of communicated externally, it’s more than 12 million subscribers and continues to grow. So I think a lot of folks out there in the industry really admire the success of that business. It’s been a very great business, and what we’ve seen is that customers enjoy it. If you look at our churn rates, they’re very competitive and low. What’s great about it, it’s like a basis upon which you can layer in other services. And that’s really where we’re focused, around layering in incremental services. So more to come in that space. I’d say just keep an eye out in terms of what we’ve got coming. And as I mentioned, we’re going to take Instant Paper. The pilot’s been really successful in the US, and we’re going to take that around the world now.
Wamsi Mohan
I’m also curious with the success of Instant Ink, have you seen any change within the usage of remand and refill on sort of leveraging third-party cartridges and ink versus HP’s own proprietary product? Has there been a shift in that at all, and are you seeing more people now sticking with HP? And I think you also made some hardware changes that kind of, from a business model perspective, you’ve got different options for consumers. And some which are locked, some which were kind of unlocked, so to speak. So how is that playing out?
Marie Myers
Well, I’d say first of all, customers, we’ve seen share grow in this space. And I think that has definitely been confirmed by the fact that customers like this model. The second piece I’d just add is that for a customer perspective, what really matters are things like security and sustainability. I think cyber incidences are up significantly this last year. So what you enjoy with a HP Instant Ink model, for example, is absolute confidence and security in your product and your usage. There’s no concerns that you would have, cause we invest heavily in R&D in security. Plus, we have a very sustainable model as well. And so those factors combined, I think, drive customer loyalty to these types of programs and initiatives. And certainly going forward, what we’ve seen is it’s shown up in the results, just in terms of supplies themselves. And you saw that in the last quarter.
Wamsi Mohan
Yes, I want to leave a couple minutes to see if anyone in the audience has any questions, but please do wait for the mic. No, no, we’re webcasting it, so Simon, I appreciate you.
Unidentified Analyst
Okay, yes, great, thank you very much, I appreciate you. Maybe very quickly, AI theme. So how can we find AI function among your PCs?
Marie Myers
Well I would just say that there is actually AI embedded in many of our products that you’re probably not aware of today. If you look at the cameras and the video that came from a lot of the Poly acquisition there is significant amounts of AI embedded in the camera technology. In fact I’ve sat in the room with the engineers and sort of just gone through the complex AI that you need to actually focus in on cameras etcetera. So that’s just one part of the portfolio but I think that in terms of AI there’s a lot of interest today but it’s been out there for quite a long time and as a company we’ve been using AI both in terms of efficiency for a number of years inside the company and actually it’s been in many of our products and that’s just one example of where we’ve used it.
Unidentified Analyst
Yes but to do so you have to input lots of the maybe Intel’s new CPU, AMD’s new CPU or any extra components that you are adding these days and also how you’re going to differentiate your PC versus Lenovo or Apple, lots of competitors there. So many people may say AI already commoditized, your PC was a part of the commodity product but you are saying value-added functions, so what could be the differentiation and which components you have to input more among your PC? Thank you.
Marie Myers
So I’d say two things. One you know we have a relationship with all the silicon providers and as a company we strategically always done that. That in itself is a differentiator from some of our competitors right in terms of we prefer to have that ability to have that sort of wider net let’s just say of relationships out there in the market and I just say secondly in terms of AI we’re focused on what we can do to differentiate. As I said with the camera technology that’s a lot of home grown capability that’s inside the company and it’s been going on, it’s not new, it’s something that’s not net new it’s been out there for a long time and we’re integrating it and we’re planning to integrate more of that into our product portfolio going forward like I mentioned on the data science stack.
So it’s more a focus area that we may go in terms of verticals and then enabling the capability in those verticals so that we can have sort of deep penetration, for example where data scientists need to be absolutely enabled to have machines that are very very fast and powerful we see that as an opportunity. So for example in rooms we see it as an opportunity to enable much better productive technology in the room. So these this is how we’re thinking about it in terms of AI and then obviously as I mentioned earlier another area is just in terms of sort of working at the edge what does that look like.
Wamsi Mohan
Any more questions? Well we just have a couple minutes left so Marie maybe to wrap it up I do want to ask you about free cash flow and when you think about year-to-date free cash flow, yes it’s not been very strong obviously I don’t kind of offer 1Q but your free cash flow guide for the year remained unchanged and you are still expecting post this last quarter and you’re still expecting pretty strong free cash flow for the remainder of the two quarters. What drives that? Is it something within the cash conversion cycle that you see significant improvement in? I do know obviously like your sequential growth in PCs is going to help you but as you think through the confidence in that free cash flow and just having that unchanged despite the macro being so tough can you just help us bridge that?
Marie Myers
Yes no thank you very much I think first of all pleased with the free cash flow in the last quarter definitely better than expected. I’d say secondly as you mentioned we’re expecting that sequential growth in personal systems and just by way of background the personal systems is a sort of negative drag on cash conversion cycle. So when we see sequential growth in personal systems it translates into just much stronger cash flow. So that’s one of the bigger drivers of the cash flow and that’s what really gives us confidence and in the guide which is why we reiterate the guide of three to three and a half in the back half. I would say that we’re also at the same time focused on operationally reducing our inventory levels. You’ve seen us do that quarter-on-quarter but we’re leaving the door open for economic opportunities around strategic buys, C shipments, where it makes prudent economic sense we’ll make those trade-offs but we’re focused on as well as driving inventory to down operationally as we sort of look forward to the year.
So all of those factors combined really give confidence in the cash flow guide Wamsi.
Wamsi Mohan
Yes no thank you Marie. So to wrap it up maybe it’d be helpful if you could talk to investors about why this is a good point in time for investors to consider HP as an investment. I’d be remiss to say if I didn’t mention the fact that you’re one of the few tech companies in which Warren Buffett has a huge stake so yes so well maybe maybe you want to just spend.
Marie Myers
Yes actually I was at Buffett’s event the other day so it was just an absolute pleasure. I might say to watch Warren Buffett and Charlie Munger on stage I know if any of you’ve been to the event, but it is just incredibly impressive to see those two individuals and we enjoy very much that relationship. And I’d say from an investor perspective about YHP, I think one we’re building a stronger HP. I think we’ve focused on controlling the things we can control and a tough macro and we’ve continued to beat expectations that we’ve set. We’ve basically done what we’ve said we were going to do despite the tough economic environment.
And finally, there are, when the macro returns we’ve used this time to invest in growth and you’ve seen that across the portfolio whether it’s investing in hybrid assets that are going to expand beyond just the PC with the peripheral into areas like rooms that I mentioned earlier or on the print side where we’ve shifted the model quite significantly and continue to do so or to subscription and then services.
And I think all of that gives us absolute confidence in the future and now strategy frankly is working. So thank you.
Wamsi Mohan
Thank you, Marie. Thank you so much for being here today.
Marie Myers
Thank you.
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