Hp Inc. · NYSE:HPQ
Hp — Investor Presentation (February 2020)
39 slides from Hp's investor presentation, Feb 24, 2020
Slide 1: Strategic & Financial Plan for Value Creation
STRATEGIC & FINANCIAL PLAN FOR VALUE CREATION February 24, 2020 1
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS This document describes long-term trends and is not about the recently completed fiscal quarter. This document contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove inc
Slide 3: Other Important Information
OTHER IMPORTANT INFORMATION Important Information This document is not an offer to purchase or a solicitation of an offer to sell any securities. If a tender offer or exchange offer is commenced, HP will file with the SEC a solicitation/recommendation statement on Schedule 14D-9. Any solicitation/re
Slide 4: Creating Value for HP Shareholders
CREATING VALUE FOR HP SHAREHOLDERS WE PLAN TO DELIVER NON-GAAP EPS OF $3.25 – $3.65 IN FY22 TO HP SHAREHOLDERS - Executing on our operating plan: driving projected non-GAAP operating profit of $4.7 – 5.1B in FY22 and cumulative free cash flow of $10.7 to $11.7B from FY20-22 - Driving aggressive cost
Slide 5: Xerox Proposal Creates Significant Risk & Compromises HP's Future
XEROX PROPOSAL CREATES SIGNIFICANT RISK & COMPROMISES HP’S FUTURE FLAWED IRRESPONSIBLE TRANSFERS VALUE FROM VALUE EXCHANGE CAPITAL STRUCTURE HP SHAREHOLDERS Values HP’s leading Print & Capital structure creates significant Xerox $2B synergy estimates Personal Systems business going concern risk atte
Slide 6: Targeting Non-GAAP EPS Growth of 45% to 63% from FY19 to FY22
TARGETING NON-GAAP EPS GROWTH OF 45% TO 63% FROM FY19 TO FY22 PROFITABLE GROWTH & DELIVERING STRONG FREE CASH FLOW VALUE $4.7 – $5.1B $10.7 – $11.7B Projected non-GAAP Operating Profit Projected Cumulative Free Cash Flow FY22 (FY20-FY22) $3.25 – $3.65 Non-GAAP EPS ENHANCED CAPITAL RETURN & (FY22) OP
Slide 7: Executional Excellence Underscores Our Relentless Focus on Cost Savings
EXECUTIONAL EXCELLENCE UNDERSCORES OUR RELENTLESS FOCUS ON COST SAVINGS FY20-FY22 STRUCTURAL COST REDUCTION & PRODUCTIVITY SAVINGS $1.2B 7,000 – 9,000 >$1.0B Restructuring Gross 13-16% of Total HC Headcount Ongoing Productivity Run Rate Savings Reduction Savings Operating Model $400M Material cost r
Slide 8: Clear Line of Sight to ~$650M in Net Flow Through
CLEAR LINE OF SIGHT TO ~$650M IN NET FLOW THROUGH FY20 FY21 FY22 OWNERS Transition from 3 regions to 1 Commercial office Optimization of coverage Christoph Schell Operating Consolidation of Marketing functions under CMO Chief Commercial Officer Model Vikrant Batra Standardization of global processes
Slide 9: Creating Value by Advancing Leadership in Personal Systems
CREATING VALUE BY ADVANCING LEADERSHIP IN PERSONAL SYSTEMS MARKET LEADERSHIP DRIVING OPERATING LONG-TERM Revenue ($B)1 Operating Profit ($B)1 PROFIT GROWTH OPERATING MODEL +9% CAGR Growing TAM $38.7 - Large & growing $330B+ TAM5 +18% CAGR Innovation and execution $29.9 Revenue growth - Innovate & re
Slide 10: Creating Value by Advancing Leadership in Print
CREATING VALUE BY ADVANCING LEADERSHIP IN PRINT MARKET LEADERSHIP DRIVING OPERATING LONG-TERM Revenue ($B)1 Operating Profit ($B)1 PROFIT GROWTH OPERATING MODEL +3% CAGR Large TAM - Large and stable $200B+ TAM4 +1% CAGR - Growth in graphics / 3D $20.1 $18.1 Reduced cost Revenue growth $3.1 $3.2 - Dr
Slide 11: Optimizing Balance Sheet & Maintaining Commitment to Aggressive Capital Returns
OPTIMIZING BALANCE SHEET & MAINTAINING COMMITMENT TO AGGRESSIVE CAPITAL RETURNS UTILIZING BALANCE SHEET STRENGTH - Target gross leverage ratio 1.5x - 2.0x Debt / EBITDA - Deploy excess cash on balance sheet & utilize debt capacity - Commitment to maintain investment grade rating & strong balance she
Slide 12: Executing on Our Value Creation Plan: FY19 to FY22 Non-GAAP EPS Outlook
EXECUTING ON OUR VALUE CREATION PLAN FY19 TO FY22 NON-GAAP EPS OUTLOOK OPERATIONAL PLAN INCREASED CAPITAL RETURN Executing on profitable growth and cash flow generation +/- $0.45 $3.25 – $3.65 +/- $0.35 $2.90 – $3.10 +/- $0.41 $2.24 (non-GAAP) 1 FY19 non-GAAP EPS Business contribution 75% Capital Op
Slide 13: HP Has Consistently Delivered on Commitments
HP HAS CONSISTENTLY DELIVERED ON COMMITMENTS DELIVERING CONSISTENT PERFORMANCE DISCIPLINED CAPITAL RETURN BY GROWING TOP AND BOTTOMLINE Revenue Growth Profit Growth $12.9B $11.5B $10.5B Cumulative cash flow Cumulative free cash flow Beat or met 45% GAAP EPS growth from op. (Last 3 years) (Last 3 yea
Slide 14: Executing on Our Value Creation Plan
EXECUTING ON OUR VALUE CREATION PLAN We plan to deliver Experienced Additional value non-GAAP EPS of management team, creation opportunity $3.25 – $3.65 in FY22 highly confident in through consolidation our ability to deliver on our commitments OUR STRATEGY IS WORKING Advancing our leadership in Per
Slide 15: Supplemental Materials
SUPPLEMENTAL MATERIALS 15
Slide 16: Execution Across Our Portfolio of Leading Businesses
EXECUTION ACROSS OUR PORTFOLIO OF LEADING BUSINESSES 16
Slide 17: HP Is a Global Leader with a Diverse Portfolio and Global Scale
HP IS A GLOBAL LEADER WITH A DIVERSE PORTFOLIO AND GLOBAL SCALE BUILT ON A PLATFORM OF STRONG IP AND INNOVATION RECOGNIZED LEADER MARKET LEADER WITH SCALE & REACH BROADER PORTFOLIO 1 Innovation & IP # 27K+ 27% 22% Patents1 PS Desktops Print & Other Supplies Robust Ecosystem 250K #6 #11 Channel Partn
Slide 18: Creating Value by Advancing Leadership in Personal Systems
CREATING VALUE BY ADVANCING LEADERSHIP IN PERSONAL SYSTEMS PERSONAL SYSTEMS MARKET KEY DRIVERS GROWTH LEADERSHIP FOR GROWTH Revenue ($B)1 Operating Profit ($B)1 +9% CAGR 29.7% 28.4% 15.1% TAM Growth +4.3% CAGR3 $38.7 +18% CAGR Innovation & $29.9 Operational Excellence $1.9 50+ ‘Best of CES’ 2020 Awa
Slide 19: Large Market with PC Relevance Increasing
LARGE MARKET WITH PC RELEVANCE INCREASING PERSONAL SYSTEMS HIGHER PC USAGE HIGHER TAM ($B) ENGAGEMENT Hours / week Hours / week $330B+ +4.3% Create 32 27 ~$30 +27% Solutions1 Retail Solutions Collaboration 61% of PC Users are Generating Content5 Virtual Reality ~$82 PC 12.7 +45% 18.4 +8% Attach and
Slide 20: Driving Growth Through Innovation
DRIVING GROWTH THROUGH INNOVATION REINVENT GROW ACCELERATE COMPUTING EXPERIENCES LIFETIME VALUE ECOSYSTEM ENGAGEMENT World’s Most Secure PC’s Now With Privacy Camera & Privacy Screen1 World’s Lightest Compact Business OMEN X 2S Convertible2 – Under 1Kg World’s First Dual-screen Gaming Laptop6 Lifecy
Slide 21: Leveraging Position of Strength for Continued Growth
LEVERAGING POSITION OF STRENGTH FOR CONTINUED GROWTH PC MARKET SHARE SHARE IN HIGHER PC LANDSCAPE EVOLUTION VALUE CATEGORIES DIVERSIFYING: OS & CPU Scale and Innovation Driving HP’s Growth HP Under-indexed but Gaining Share HP has Industry’s Broadest Computing (IDC PC Client Unit share1) Portfolio a
Slide 22: Delivering Strong Personal Systems Performance
DELIVERING STRONG PERSONAL SYSTEMS PERFORMANCE FOUNDATION FOR VALUE CREATION LONG-TERM OPERATING MODEL TAM growth Innovation Revenue growth at or above market Profitable share gain Operating profit Improved mix 3.5 – 5.5% + Grow OP $ Cost reduction 22
Slide 23: Creating Value by Advancing Leadership in Print
CREATING VALUE BY ADVANCING LEADERSHIP IN PRINT PRINT MARKET GROW NEW GROWTH LEADERSHIP OPPORTUNITIES Revenue ($B)1 Operating Profit ($B)1 +3% CAGR >60% #1 FY16-FY19 Managed $20.1 Office2 Print Services growth3 $18.1 +1% CAGR #1 6M+ $3.2 $3.1 Subscribers Home2 Created and Scaled Instant Ink Business
Slide 24: Print Market Is Large and Stable
PRINT MARKET IS LARGE AND STABLE PRINT MARKET OPPORTUNITY PRINT PAPER MARKET (REVENUE $B) (TONS M) $213 $213 $212 $211 $210 17.2 17.2 17.2 17.0 16.9 16.9 17.0 17.1 17.1 17.0 $207 $205 $205 $207 $206 $206 $206 $206 $206 $207 16.5 16.8 16.7 16.7 16.8 Media Home Graphics Office CY10 CY24 CY10 CY24 CY20
Slide 25: Executing a Consistent Strategy
EXECUTING A CONSISTENT STRATEGY EVOLVING PRINT STRATEGY Increase MARKETPLACE Supplies Share Increase Supplies share - Execute ink share gain playbook in toner Office market is flat - Continue to build on success in growing Home market isGrow contractual declining consumer & commercial contractual bu
Slide 26: Executing Ink Share Gain Playbook in Toner
EXECUTING INK SHARE GAIN PLAYBOOK IN TONER HP SUCCESS IN EXECUTING PLAYBOOK Increase INK MARKET SHARE IN TONER Supplies Share New mechanical & toner formulation +5pts Grow Contractual Toner authentication Contractual expansion Optimize System Profitability FY12 FY15 FY19 IP enforcement Successful IN
Slide 27: HP Success in Consumer and Office Contractual Growth
HP SUCCESS IN CONSUMER AND OFFICE CONTRACTUAL GROWTH CONSUMER SERVICES: COMMERCIAL SERVICES: Increase INSTANT INK MANAGED PRINT SERVICES Supplies Share INSTANT INK SUBSCRIBER GROWTH 3X >6M+ $2.8B3 FY16 vs. FY19 Subscribers FY19 Revenue Grow Contractual - 20% higher usage per customer1 - Market leadi
Slide 28: Address Market Inefficiency & Reduce Unprofitable Customers
ADDRESS MARKET INEFFICIENCY & REDUCE UNPROFITABLE CUSTOMERS CUSTOMER PROFITABILITY Opportunity - ~25% of customers are not profitable: they don’t buy HP supplies or they Increase SNAPSHOT use imitation supplies - By shifting more business to upfront, contractual, and optimized pricing Supplies Share
Slide 29: Business Model Transition Drives Positive Financial Impact
BUSINESS MODEL TRANSITION DRIVES POSITIVE FINANCIAL IMPACT PRINT BUSINESS PROFILE Increase Supplies Share Units Evolving business models with gradual transition towards higher system value Grow Contractual ARU units over next 3-5 years Beyond FY22, units expected to grow Hardware margin with market
Slide 30: Leading the Analog to Digital Transformation in Graphics
LEADING THE ANALOG TO DIGITAL TRANSFORMATION IN GRAPHICS HP LEADERSHIP DRIVING ANALOG TO LARGE (~$50B2) AND Increase DIGITAL TRANSFORMATION GROWING OPPORTUNITY Supplies Share MARKET TRENDS & DRIVERS #1 Digital TAM CAGR (CY19-23)2 Large Format Design1 Design & Technical Production 0.5% Grow Contractu
Slide 31: Disrupt with 3D & Digital Manufacturing
DISRUPT WITH 3D & DIGITAL MANUFACTURING DISRUPT INDUSTRIAL WE ARE TANGIBLE PROOF Increase BUSINESSES WINNING POINTS Supplies Share 50% Market Share in Dental aligners Industrial Plastic1 Partnering with leading auto Most Used Industrial manufacturer Grow Contractual ~$500B 3D Printer2 Service provid
Slide 32: Delivering Strong Print Performance
DELIVERING STRONG PRINT PERFORMANCE Increase FOUNDATION FOR VALUE CREATION LONG-TERM Supplies Share OPERATING MODEL Stable TAM Increase supplies share Grow Contractual Revenue growth Grow contractual at or above market Optimize system profitability Operating profit Optimize System Profitability Grow
Slide 33: Xerox Proposal Creates Significant Risk & Compromises the Future for HP Shareholders
XEROX PROPOSAL CREATES SIGNIFICANT RISK & COMPROMISES THE FUTURE FOR HP SHAREHOLDERS 33
Slide 34: Xerox Proposal Creates Significant Risk & Compromises HP's Future
XEROX PROPOSAL CREATES SIGNIFICANT RISK & COMPROMISES HP’S FUTURE FLAWED IRRESPONSIBLE TRANSFERS VALUE FROM VALUE EXCHANGE CAPITAL STRUCTURE HP SHAREHOLDERS Values HP’s leading Print & Capital structure creates significant Xerox $2B synergy estimates Personal Systems business going concern risk atte
Slide 35: Xerox Proposal Significantly Undervalues HP
XEROX PROPOSAL SIGNIFICANTLY UNDERVALUES HP HP XEROX $59B GROWING REVENUE BUSINESS WITH $9B (AND SHRINKING) REVENUE GLOBAL AND DIVERSIFIED PORTFOLIO PRINT BUSINESS - #1 or #2 in 49 countries in PS or Print1 - Losing share in core business - Growing MPS business, >60% revenue increase FY’16–19 - No a
Slide 36: Xerox Proposal Attempts to Utilize HP Balance Sheet to Fund Acquisition
XEROX PROPOSAL ATTEMPTS TO UTILIZE HP BALANCE SHEET TO FUND ACQUISITION OF HP & CREATES SIGNIFICANT GOING CONCERN RISK HP GENERATES 75 – 80% $15 OF CASH 4.5x DEBT / EBITDA OF COMBINED COMPANY CONSIDERATION PER SHARE CREATES SIGNIFICANT EBITDA & FCF FROM HP BALANCE SHEET GOING CONCERN RISK No compani
Slide 37: Appendix
APPENDIX 37
Slide 38: FY19 GAAP to Non-GAAP Bridge
38 FY19 GAAP TO NON-GAAP BRIDGE Non- Amortization operating $ in millions, except Restructuring Acquisition- Defined benefit of Tax retirement tax rate and per GAAP and other related plan settlement Non-GAAP intangible adjustments related share amounts charges charges charges assets credits / (charg
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