HP Inc. Releases Q2 2017 Financial Results

Yesterday, May 25, 2017, HP Inc. released their Q2 2017 financial results. Overall, given the continued decline of the printer market and relative to competitive printer manufacturers, HP Inc.’s results were quite good as Figure 1 below shows.

Figure 1

The following are Photizo’s takeaways from the HP’s earnings conference call and presentation on May 24, 2017:

HP Overall Performance

  • HP grew net revenue by 7% year-over-year (Y/Y) to $12.4 billion, driven by growth in Personal Systems and Print, the first time HP has delivered growth in both segments during the same quarter since Q4 2010.
  • For the second consecutive quarter, Personal Systems revenue grew by 10% (Y/Y).
  • Importance of security to HP – announced HP Sure Start, the world’s only integrated browsing solution which protects HP’s devices from malware.
  • In Q2, HP began shipping its disruptive portfolio of A3 multifunction printers.
  • Graphics business delivered another strong performance with year-over-year revenue growth in constant currency for the 15th consecutive quarter.
  • Growth in contractual printing, with continued increases in new total contract value for Managed Print Services.
  • Grew consumer enrollment in Instant Ink and continued to expand into new geographies.
  • Second quarter of 3D product shipments, building momentum, new 3D reseller program with 30 partners to date.
  • Gross margin of 19.2% was down 0.2 points (Y/Y).

HP Printer Business Performance

  • Revenue was $4.7 billion in the quarter, up 2% (Y/Y).
  • Hardware unit shipments were up 4% (Y/Y), with growth in our Consumer and Commercial categories, up 3% and 6%, respectively.
  • HP Sprocket handheld photo printer continued to have strong demand and contributed to year-over-year performance.
  • Graphics had another strong quarter, growing revenue across all regions and nearly in all product categories, with strong Indigo performance.
  • Managed Print Service’s revenue was up again year-over-year.
  • Total supplies revenue was up 2% nominally and in constant currency, the first quarter of year-over-year constant currency growth since Q2 2013.
  • Printing operating profit at 17.4% in Q2, up 0.1 point year-over-year and 1.4 points sequentially primarily due to a mix shift to the high end of Consumer and ongoing cost structure improvements, partially offset by increased marketing spend and investments in key growth initiatives.

Okay, so everything sounds great, right?  Well, given that the print industry is declining and that HP has shown great performance particularly relative to other 1st tier printer manufacturers, yes. However, when you look at HP’s business by quarter over 3 years, there is some concern as Figures 2 and 3 show.

Figure 2
Figure 3

HP’s initiatives in looking outside the traditional printing box (3D, etc.) are great but they need to be accelerated to avoid continued decline in revenue and margins over time.

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