HPQ
#I'm <UNK> <UNK>, Head of Treasury for HP, Inc
, and I’d like to welcome you to the fiscal 2017 second quarter earnings conference call with <UNK> <UNK>, HP's President and Chief Executive Officer, and Cathie <UNK>, HP's Chief Financial Officer
Before handing the call over to <UNK>, let me remind you that this call is being webcast
A replay of the webcast will be made available shortly after the call for approximately one year
We posted the earnings release and the accompanying slide presentation on our investor relations webpage at www
com
As always, elements of this presentation are forward-looking and are based on our best view of the world and our businesses as we see them today
For more detailed information, please see disclaimers in the earnings materials relating to forward-looking statements that involve risks, uncertainties and assumptions
For a discussion of some of these risks, uncertainties and assumptions, please refer to HP's SEC reports, including our most recent Form 10-K
HP assumes no obligation and does not intend to update any such forward-looking statements
We also note that the financial information discussed on this call reflects estimates based on information available at this time and could differ materially from the amount ultimately reported in HP's Form 10-Q for the fiscal quarter ended April 30, 2017 and HP's other SEC filings
For financial information that has been expressed on a non-GAAP basis, we’ve included reconciliations to comparable GAAP information
Please refer to the tables and slide presentation accompanying today's earnings release
And now, I will hand it over to <UNK>
Thank you, <UNK>
Good afternoon, everyone, and thank you for joining us today
I'm very pleased with our quarterly performance
It was a breakthrough quarter where we delivered year-over-year growth in both Personal Systems and Print
As a company, we’re performing across our portfolio, our regions and our key financial metrics
Over the last six quarters, we've been building momentum, improving our business fundamentals and delivering on what we said we would do
We’re taking profitable share, out-executing our competitors and delivering some of the best innovation, design and execution in HP's history
Our goal is to consistently deliver on our financial commitments every quarter, while setting the company up for long-term success
We are strengthening our core business and delivering our milestones in our growth and future initiatives
I'm proud of the results this quarter
Let me talk through a few of the highlights
We delivered non-GAAP diluted net earnings per share of $0.40, at the high end of our outlook range
We grew net revenue by 7% year-over-year to $12.4 billion, driven by growth in Personal Systems and Print – the first time we’ve delivered growth in both segments during the same quarter since Q4 2010. We delivered free cash flow of approximately $400 million for the quarter and $1.1 billion for the first half of the fiscal year
Through the same year-to-date time period, we’ve returned approximately $1.1 billion to shareholders through share repurchases and dividends
Looking at the business segment performance, Personal Systems continued to deliver and demonstrate how playing our game drives strong results
The team once again drove revenue growth year-over-year and market share expansion
We saw a small increase in operating profit dollar year-over-year at a time when significant component costs headwinds have pervasive across the industry
This is a great example of how segmenting market opportunities, innovating and executing can yield amazing results
For the second consecutive quarter, Personal Systems revenue grew by 10% year-over-year
And importantly, once again, this is broad-based growth across all three regions, both consumer and commercial audiences and in notebook and workstation categories
In calendar quarter one, we beat the year-over-year PC market unit growth by 12 points, once again outperforming all key competitors and the market as a whole
We achieved 21.7% global market share and regained the number one PC market position globally
Remember, the market share leadership is an outcome, not an objective
Our ability to gain profitable share is one of the true measures of success
Today, security is top of mind for consumers and the boardroom alike
Just look at the cybersecurity events over the past couple of weeks
With this backdrop, we continue to deliver the most secure and manageable PCs in the world, with powerful new commercial notebooks and desktops, including EliteBook x360 with HP Sure View and HP Sure Click
As part of our world-class security stack, Sure View defends customers from visual hacking, with a built-in electronic privacy screen
HP Sure Click protects customers and organizations from Web-based security threats, including malware and other viruses that we are all seeing daily in the news
We also announced HP Sure Start, the world’s only integrated browsing solution, which protects our devices from malware
In addition to security, mobility is a top priority for our customers and a differentiator for HP
At Mobile World Congress, we introduced the latest HP Pro x2 with the design, security and productivity features tailored for today's mobile workforce
This discerning audience took notice, honoring the Pro x2 with several important awards, including a Category Best of Show, Top Pick and Top Innovation
While the PC market has been healthier than expected during the past few quarters, the market remains highly competitive and volatile
Regardless of market conditions, I remain confident in our team's ability to deliver consistent results through a relentless focus on innovation, market segmentation and cost management
And whether it's a Virtual Reality Backpack, an OMEN gaming system, a DreamColor display or a premium PC, we are winning hearts and minds with the sleekest and most desirable products we have ever created
I'm truly proud of what we've achieved in Personal Systems and energized by the focus, energy and talent of our people who know how to combine innovation with incredible execution
Shifting to Printing, Enrique and his team had a breakthrough quarter, with strong performance across multiple dimensions – total revenue, supplies revenue, units, market share and operating profit
Printing revenue grew 2% year-over-year, with both hardware and supplies revenue growing in the same quarter for the first time since Q2 of 2011. Units also grew year-over-year as did our market share, while delivering operating profit expansion
It's been a long time since we've been able to say that, especially in a single quarter, and we’re excited to be igniting a real renaissance in Printing
With solid progress on our productivity initiatives, which lowers our overall cost structure, we remain better positioned to competitively price and place more units with a positive NPV
Due in part to our continued operational progress, hardware units were up 4% in Q2, our third consecutive quarter of year-over-year unit growth
The overall print hardware market was up slightly in calendar quarter one, a bit better than expected
We continue to grow faster than the market with year-over-year profitable share gains in both our home and office businesses
I'm pleased that our supplies performance strengthened this quarter, with revenue up 2% year-over-year
We continue to pull the levers within the four box model; and when combined with our operational progress, both are having a favorable impact on the business
In addition to improvements in our core Printing business, we have built momentum in strategic growth areas
Our Graphics business delivered another strong performance with year-over-year revenue growth in constant currency for the 15th consecutive quarter
We saw balanced hardware revenue growth across the portfolio as well as in graphic supplies and services
Similarly, we saw growth in contractual printing with continued increases in new total contract value for management services
We also grew consumer enrollment in Instant Ink and continue to expand into new geographies
At the end of Q2, we began shipping our disruptive portfolio of A3 multifunction printers
In contrast to the established copier players, our A3 portfolio is expected to transform the popular experience for customers and service professionals
Our differentiation includes a lower total cost of ownership, improves serviceability and the most advanced security and device uptime
Our journey is just beginning and we are aggressively on-boarding new partners and attacking new opportunities in the $55 billion A3 copier market
The acquisition of Samsung's printing business will further accelerate our A3 portfolio
We expect the transaction to close in the second half of 2017, subject to regulatory approval and other customary closing conditions
Turning to 3D printing, this was our second quarter of product shipments and the feedback from our customers and partners is very encouraging
Across the board, we’re building momentum and advancing the entire ecosystem
This month, at Rapid, the largest 3D printing conference in the world, we announced a series of important milestones, including a reseller program with more than 30 partners, more than a dozen 3D reference and experience centers across North America and Europe, a growing roster of manufacturing service bureaus and product development customers implementing HP jet fusion 3D printing systems for production and new applications, and we expanded our Open Materials platform to include new partners like Henkel, a global leader in high-performance adhesive technologies
Also, just this past weekend, at the inaugural 3D printing industry awards, HP's Multi Jet Fusion technology was recognized as the innovation of the year
Disrupting the $12 trillion manufacturing sector and transforming industries is a long-term vision and one that we are making concrete strategic progress on today
This is a multi-year journey and I'm confident in this team's ability to bring disruptive innovation to market, create and empower an ecosystem and redefine the economics of production manufacturing
To summarize, Q2 was a breakthrough quarter for us, with strong year-over-year performance across our segments and regions
We’re executing, meeting our commitments and capitalizing on our momentum
We’re also making the right investment decisions for the long-term
However, our work never ends
Every single day, we must continue to amaze our customers and partners with the most competitive and disruptive portfolio in our industry and provide them with meaningful value and opportunity
Change is a constant in our business
And to us, change equals opportunity
We know how to operate up and down markets that we will continue to face and are prepared to tackle the opportunities and challenges that lie ahead
By embracing change, we have an opportunity to accelerate, to innovate, to improve and, ultimately, to reinvent for our customers, partners, employees and shareholders
I’ll now turn the call over to Cathie to provide more details and our financial outlook
