What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-09-11 compared with 2023-05-31 · 129 added, 125 removed, 266 unchanged (49% of the section changed)

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• Results of Operations.

An analysis of our financial results comparing the three and six months ended April 30, 2023 to the prior-year period.

An analysis of our financial results comparing the three and nine months ended July 31, 2023 to the prior-year period.

A discussion of the results of operations is followed by a more detailed discussion of the results of operations by segment.

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This discussion should be read in conjunction with our Consolidated Condensed Financial Statements and the related notes that appear elsewhere in this document.

Our prior period financial statements have been revised to reflect the correction of immaterial errors as described in Note 1, “Basis of Presentation” and Note 14, “Revision of Prior Period Financial Statements”, to the Consolidated Condensed Financial Statement in Item 1 of Part I of this report, which is incorporated herein by reference.

AND SUBSIDIARIES

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◦ expanding our footprint in 3D printing across digital manufacturing and strategic applications.

In addition to growing our subscription business, we are also focused on rebalancing system profitability to more upfront profitable hardware sales through our product offerings including HP+ and Big Tank.

In addition to growing our subscription business, we are also focused on rebalancing system profitability through our product offerings including HP+ and profit upfront Big Tank.

We are committed to growing our hybrid systems, gaming, workforce services and solutions, consumer subscriptions, 3D and industrial graphics businesses at a rate faster than our core business with accretive margins in the longer term.

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We continue to experience challenges that are representative of the trends and uncertainties that may affect our industry, generally, and our business and financial results, specifically, and we expect these challenges to continue in the short-term.

One set of challenges relates to the current macroeconomic environment and the adverse impact on demand for certain of our products and product mix.

One set of challenges relates to the current macroeconomic environment and the adverse impact on demand for certain of our products.

A second set of challenges relates to changes in the competitive landscape.

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Additional challenges we face at the segment level, and that we expect to continue facing in the short-term, are set forth below.

• In Personal Systems, we face challenges with decline in Personal Systems market due to demand softness and competitive pricing environment.

• In Personal Systems, we face challenges with decline in Personal Systems market due to the competitive pricing environment and demand softness.

AND SUBSIDIARIES

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We face global macroeconomic challenges, particularly in light of the effects of the ongoing geopolitical conflicts in Ukraine, tensions across the Taiwan Strait, tariff-driven headwinds, uncertainty in the markets, volatility in exchange rates, inflationary trends and evolving dynamics in the global trade environment.

During the first half of fiscal 2023, we observed significant market uncertainty, budget tightening by large enterprise for information technology hardware, lower consumer spending, inflationary pressures and a weakening U.S.

These market dynamics, which we expect will continue in the short-term, have created new and different demand dynamics and have had significant impacts on our financial results.

In the first half of fiscal 2023, we continued to experience overall demand weakness and elevated industry wide reseller inventory, particularly in Personal Systems due to a challenging macroeconomic environment.

This decline in revenue of Personal Systems is in line with market trends and we expect this to continue in the short-term.

During the nine months ended July 31, 2023, we observed continued market uncertainty, cautious spending by large enterprise on information technology hardware, lower discretionary consumer spending, inflationary pressures, and foreign currency fluctuations.

These market pressures, which we expect to continue in the short-term, have created new and different demand dynamics and have had significant impacts on our financial results.

Geographically, we observed these macroeconomic dynamics negatively impacting certain markets, particularly China.

However, in the third quarter of fiscal 2023 we also observed uneven recovery in other markets.

During the nine months ended July 31, 2023, we continued to experience overall demand weakness and elevated industry wide reseller inventory due to a challenging macroeconomic environment.

The decline in Personal Systems revenue is in line with market trends and we expect this to continue in the short-term.

In Printing, we continued to see gradual and uneven recovery in Commercial Printing, driven by the slow return of workers to the office.

We continued to experience a competitive pricing environment, which we expect to continue in the short-term, due to the macroeconomic environment across Personal Systems and Printing.

However, we are seeing improvements in logistics constraints and supply availability and expect these trends to continue.

In fiscal 2023, we expect both Personal Systems and Printing markets to decline as compared to fiscal 2022.

In addition to the macroeconomic dynamics, we are exposed to fluctuations in foreign currency exchange rates.

In the short term, we continued to experience a competitive pricing environment across Personal Systems and Printing.

These markets declined in the first nine months of fiscal 2023 compared to the corresponding fiscal 2022 period, and we expect this to be the case for the full fiscal year 2023 compared to fiscal 2022.

We are exposed to fluctuations in foreign currency exchange rates.

We have a large global presence, with approximately 65% of our net revenue coming from outside the United States.

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On May 31, 2022, we announced our decision to wind down business operations in Russia having already suspended all new shipments and paused our marketing and advertising activities in February 2022.

In the second half of fiscal 2022, we recognized a charge of $23 million towards severance, cancellation of contracts, inventory write-downs and other one-time exit charges related to our decision.

In the third quarter of fiscal 2022, we recognized a charge of $23 million towards severance, cancellation of contracts, inventory write-downs and other one-time exit charges related to our decision.

We typically experience higher net revenues in our fourth fiscal quarter compared to other quarters in our fiscal year due, in part, to seasonal holiday demand.

Historical seasonal patterns may not continue in the future and have been impacted by supply constraints, shifts in customer behavior, continuing impacts of the macroeconomic challenges and different demand dynamics.

For a further discussion of trends, uncertainties and other factors that could impact our operating results, see the section entitled “Risk Factors” in Item 1A of Part I in our Annual Report on Form 10-K.

For a further discussion of trends, uncertainties and other factors that could impact our operating results, see the section entitled “Risk Factors” in Item 1A of Part II of this report as well as in Item 1A of Part I in our Annual Report on Form 10-K for the fiscal year ended October 31 2022.

Transformation Update

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We continue to leverage artificial intelligence (“AI”) to positively impact both our products and solutions.

During the first half of fiscal 2023, we enhanced our digital capabilities in Workforce Solution and Services.

Additionally, we are reducing portfolio complexity, improving continuity of supply, and increasing our forecast accuracy.

We continued to reduce our structural cost primarily within our operating expenses through headcount reductions and executed a significant portion of the early retirement program in second quarter of fiscal 2023 and are on track to achieve our overall headcount reduction goal.

During the nine months ended July 31, 2023, we enhanced our digital capabilities in Workforce Services and Solutions.

Additionally, we are reducing portfolio complexity, improving continuity of supply, and increasing our forecast accuracy across Personal Systems and Printing to drive reduction in our cost of sales and operating expenses.

We also continued to reduce our structural cost through headcount reductions and executed a significant portion of the early retirement program in second quarter of fiscal 2023 and are on track to achieve our overall headcount reduction goal.

For more information on our Fiscal 2023 Plan, see Note 3, “Restructuring and Other Charges,” and Note 4, “Retirement and Post-Retirement Benefit Plans,” to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.

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The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, net revenue and expenses, and the disclosure of contingent liabilities.

As of April 30, 2023, the impact of current macroeconomic factors on our business continued to unfold.

As of July 31, 2023, the impact of current macroeconomic factors on our business continued to unfold.

As a result, many of our estimates and assumptions required increased judgment and may carry a higher degree of variability and volatility.

As events continue to evolve and additional information becomes available, our estimates may change in future periods.

Management believes that there have been no significant changes during the six months ended April 30, 2023 to the items that we disclosed as our critical accounting policies and estimates in MD&A in our Annual Report on Form 10-K for the fiscal year ended October 31, 2022, except as mentioned in Note 1, “Basis of Presentation”.

Management believes that there have been no significant changes during the nine months ended July 31, 2023 to the items that we disclosed as our critical accounting policies and estimates in MD&A in our Annual Report on Form 10-K for the fiscal year ended October 31, 2022, except as mentioned in Note 1, “Basis of Presentation”.

ACCOUNTING PRONOUNCEMENTS

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Results of operations in dollars and as a percentage of net revenue were as follows:

Three months ended April 30 Six months ended April 30

Three months ended July 31 Nine months ended July 31

2023 2022 2023 2022

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Amortization of intangible assets 91 0.7 % 50 0.3 % 262 0.7 % 154 0.3 %

Russia exit charges — — % 23 0.2 % — — % 23 — %

Earnings from operations 952 7.2 % 1,256 8.6 % 2,442 6.1 % 3,818 7.9 %

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Earnings before taxes 936 7.1 % 1,186 8.1 % 2,085 5.2 % 3,677 7.6 %

Benefit from (provision for) taxes 464 3.6 % (239) (1.4) % 367 1.4 % (480) (1.5) %

(Provision for) benefit from taxes (170) (1.3) % (64) (0.4) % 204 0.5 % (522) (1.0) %

Net earnings $ 766 5.8 % $ 1,122 7.7 % $ 2,289 5.7 % $ 3,155 6.6 %

For the three months ended April 30, 2023, net revenue decreased 21.7% (decreased 18.0% on a constant currency basis) as compared to the prior-year period.

For the three months ended July 31, 2023, net revenue decreased 9.9% (decreased 7.4% on a constant currency basis) as compared to the prior-year period.

net revenue decreased 6.7% to $4.8 billion, and net revenue from international operations decreased 11.7% to $8.4 billion.

The decrease in net revenue was primarily driven by demand softness across Personal Systems, Consumer Printing and Supplies as well as foreign currency impacts, partially offset by an increase in Commercial Printing.

For the six months ended April 30, 2023, total net revenue decreased 20.2% (decreased 16.4% on a constant currency basis) as compared to the prior-year period.

The decrease in net revenue was primarily driven by lower average selling prices (“ASPs”) in Personal Systems and Printing as well as foreign currency impacts.

For the nine months ended July 31, 2023, total net revenue decreased 17.1% (decreased 13.6% on a constant currency basis) as compared to the prior-year period.

net revenue decreased 15.0% to $13.9 billion, and net revenue from international operations decreased 18.2% to $26.0 billion.

The decrease in net revenue was primarily driven by demand softness across Personal Systems, Supplies and Consumer Printing as well as foreign currency impacts, partially offset by an increase in Commercial Printing.

The decrease in net revenue was primarily driven by demand softness and lower ASPs in both Personal Systems and Printing as well as foreign currency impacts.

A detailed discussion of the factors contributing to the changes in segment net revenue is included in “Segment Information” below.

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Financial Condition and Results of Operations (Continued)

For the three and six months ended April 30, 2023, gross margin increased by 2.5 and 1.5 percentage points, respectively, primarily driven by mix shift towards Printing, and lower commodity cost in Personal Systems and, partially offset by foreign currency impacts and competitive pricing particularly in Printing Consumer hardware.

For the three months ended July 31, 2023, gross margin increased by 1.7 percentage points, primarily driven by lower commodity and logistics cost in Personal Systems and mix shift towards Printing, partially offset by competitive pricing and foreign currency impacts.

For the nine months ended July 31, 2023, gross margin increased by 1.5 percentage points, primarily driven by mix shift towards Printing, and lower commodity and logistics cost in Personal Systems, partially offset by foreign currency impacts and competitive pricing in Personal Systems.

A detailed discussion of the factors contributing to the changes in segment gross margins is included under “Segment Information” below.

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Research and Development (“R&D”)

R&D expense decreased 3.5% for the three months ended April 30, 2023, primarily due to disciplined cost management, higher R&D partner funding and lower variable compensation partially offset by the Poly acquisition.

R&D expense decreased 3.6% for the six months ended April 30, 2023, primarily due to lower variable compensation, disciplined cost management, partially offset by the Poly acquisition and higher R&D partner funding received in the prior-year period.

R&D expense decreased 3.8% for the three months ended July 31, 2023, primarily due to disciplined cost management, partially offset by the Poly acquisition.

R&D expense decreased 8.2% for the nine months ended July 31, 2023, primarily due to disciplined cost management, and lower variable compensation, partially offset by the Poly acquisition.

Selling, General and Administrative (“SG&A”)

SG&A expense decreased 4.5% and 6.9% for the three months and six months ended April 30, 2023 respectively, primarily due to disciplined cost management including Future Ready transformation savings, lower variable compensation and higher charitable contributions in the prior-year period, partially offset by the Poly acquisition.

SG&A expense increased 13.9% for the three months ended July 31, 2023, primarily due to the Poly acquisition.

SG&A expense decreased 1.1% for the nine months ended July 31, 2023, primarily due to disciplined cost management including Future Ready transformation savings, and variable compensation, partially offset by the Poly acquisition.

Restructuring and Other Charges

Restructuring and other charges for the three and six months ended April 30, 2023 relate primarily to the Fiscal 2023 Plan.

Restructuring and other charges for the three and nine months ended July 31, 2023 relate primarily to the Fiscal 2023 Plan.

For more information, see Note 3, “Restructuring and other charges”, to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.

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Acquisition and divestiture charges primarily include direct third-party professional and legal fees, integration and divestiture-related costs, non-cash adjustments to the fair value of certain acquired assets, such as inventory, and certain compensation charges related to cash settlement of restricted stock units and performance-based restricted stock units from acquisitions.

Acquisition and divestiture charges for the three and six months ended April 30, 2023 increased by $41 million and $105 million, respectively, primarily due to the Poly acquisition.

Acquisition and divestiture charges for the three and nine months ended July 31, 2023 increased by $17 million and $122 million, respectively, primarily due to the Poly acquisition.

Amortization of Intangible Assets

Amortization of intangible assets for the three and six months ended April 30, 2023 relates primarily to intangible assets resulting from prior acquisitions.

Amortization of intangible assets increased by $34 million and $67 million for the three and six months ended April 30, 2023, respectively, primarily due to the Poly acquisition.

Amortization of intangible assets for the three and nine months ended July 31, 2023 relates primarily to intangible assets resulting from prior acquisitions.

Amortization of intangible assets increased by $41 million and $108 million for the three and nine months ended July 31, 2023, respectively, primarily due to the Poly acquisition.

Interest and Other, Net

Interest and other, net expense increased $121 million and $270 million for the three months and six months ended April 30, 2023, respectively, primarily due to higher interest expense on debt and factoring costs.

Interest and other, net expense decreased $54 million for the three months ended July 31, 2023, primarily due to the net gain on extinguishment of debt, partially offset by higher interest expense on debt and factoring costs.

Interest and other, net expense increased $216 million for the nine months ended July 31, 2023, primarily due to higher interest expense on debt and factoring costs, partially offset by the net gain on extinguishment of debt.

Provision for taxes

Our effective tax rate was (77.1)% for the three months ended April 30, 2023 and (30.9)% for the six months ended April 30, 2023.

Our effective tax rate was 18.2% for the three months ended July 31, 2023 and (9.8)% for the nine months ended July 31, 2023.

The difference between the U.S.

federal statutory tax rate of 21% and our effective tax rate for the three and six months ended April 30, 2023, was primarily due to tax effects of internal reorganization.

During the three and six months ended April 30, 2023, we recorded $636 million and $692 million, respectively, of net income tax benefits related to discrete items in the provision for taxes.

These amounts included income tax benefits of $691 million and $697 million related to one-time tax effects of internal reorganization, $36 million and $66 million related to restructuring charges, and $13 million and $27 million related to acquisition and divestiture charges for the three and six months ended April 30, 2023, respectively.

The six months ended April 30, 2023 also included $11 million of other net tax benefits.

These benefits were partially offset by income tax charges of $62 million and $58 million related to audit settlements in various jurisdictions, $34 million and $36 million related to the filing of tax returns in various jurisdictions, and $8 million and $15 million of uncertain tax position charges for the three and six months ended April 30, 2023, respectively.

During the three and six months ended April 30, 2023, discrete items in the provision for taxes and excess tax benefits associated with stock options, restricted stock units and performance-adjusted restricted stock units were immaterial.

federal statutory tax rate of 21% and our effective tax rate for the three months ended July 31, 2023 was primarily due to favorable tax rates associated with certain earnings from our operations in lower-tax jurisdictions throughout the world.

For the nine months ended July 31, 2023, the difference was primarily due to tax effects of internal reorganization.

During the three and nine months ended July 31, 2023, we recorded $32 million and $724 million, respectively, of net income tax benefits related to discrete items in the provision for taxes.

The nine months ended July 31, 2023 included benefits of $697 million related to tax effects of internal reorganization, The three and nine months ended July 31, 2023 also included benefits of $16 million and $82 million related to restructuring charges, $51 million and $15 million related to the filing of tax returns in various jurisdictions, and $10 million and $37 million related to acquisition and divestiture charges, respectively.

These benefits were partially offset by income tax charges of $2 million and $60 million related to audit settlements in various

AND SUBSIDIARIES

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Financial Condition and Results of Operations (Continued)

jurisdictions, $17 million and $32 million of uncertain tax position charges, and $27 million and $25 million related to extinguishment of debt for the three and nine months ended July 31, 2023, respectively.

During the three and nine months ended July 31, 2023, discrete items in the provision for taxes and excess tax benefits associated with stock options, restricted stock units and performance-adjusted restricted stock units were immaterial.

Segment Information

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Personal Systems

Three months ended April 30 Six months ended April 30

Three months ended July 31 Nine months ended July 31

2023 2022 % Change 2023 2022 % Change

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The components of net revenue and the weighted net revenue change by business unit were as follows:

Three months ended April 30 Six months ended April 30

Three months ended July 31 Nine months ended July 31

Net Revenue Weighted Net Revenue Change (1)

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It is calculated by dividing the change in revenue of each business unit from the prior-year period by total segment revenue for the prior-year period.

Three months ended April 30, 2023 compared with three months ended April 30, 2022

Personal Systems net revenue decreased 29.1% (decreased 24.8% on a constant currency basis) for the three months ended April 30, 2023.

The net revenue decrease was primarily due to a 27.6% decrease in commercial and consumer client PCs unit volume and decline in average selling price (“ASPs”) by 5.8%, partially offset by an increase in revenue driven by the Poly acquisition.

The decline in unit volume is due to demand softness and elevated industry-wide reseller inventory.

The decline in ASPs is primarily due to foreign currency impacts and competitive pricing partially offset by mix shift towards Commercial.

Commercial PS net revenue decreased 24.2% primarily driven by unit decline due to demand softness and lower ASPs, partially offset by an increase in hybrid systems revenue driven by the Poly acquisition.

Three months ended July 31, 2023 compared with three months ended July 31, 2022

Personal Systems net revenue decreased 11.3% (decreased 8.3% on a constant currency basis) for the three months ended July 31, 2023.

The net revenue decrease was primarily due to decline in average selling prices (“ASPs”) by 16.8%, partially offset by an increase in revenue driven by the Poly acquisition and 3.0% increase in PCs unit volume primarily driven by higher consumer notebooks.

The decline in ASPs was primarily due to competitive pricing, unfavorable mix shift and foreign currency impacts.

Commercial PS net revenue decreased 10.9% primarily driven by lower ASPs, partially offset by an increase in hybrid systems revenue driven by the Poly acquisition.

The lower ASPs were driven by unfavorable mix shift and foreign currency impacts.

Consumer PS net revenue decreased 39.3% driven by unit decline due to demand softness and lower ASPs.

The lower ASPs were driven by foreign currency impacts and competitive pricing largely due to elevated industry-wide reseller inventory, partially offset by favorable mix shifts.

Consumer PS net revenue decreased 12.4% driven by lower ASPs, partially offset by unit increase in notebooks.

The lower ASPs were driven by competitive pricing and foreign currency impacts.

Personal Systems earnings from operations as a percentage of net revenue decreased by 0.1 percentage points.

The decrease was driven by an increase in operating expenses as a percentage of revenue, partially offset by an increase in gross margin.

Gross margin increased primarily due to lower commodity cost and favorable mix shift, partially offset by foreign currency impacts and competitive pricing.

Operating expenses as a percentage of revenue increased primarily driven by the acquisition of Poly, partially offset by disciplined cost management including Future Ready transformation savings and higher R&D partner funding.

Six months ended April 30, 2023 compared with six months ended April 30, 2022

Personal Systems net revenue decreased 26.7% (decreased 22.2% on a constant currency basis) for the six months ended April 30, 2023.

Gross margin increased primarily due to lower commodity and logistics cost, partially offset by foreign currency impacts and competitive pricing.

Operating expenses as a percentage of revenue increased primarily driven by the acquisition of Poly, partially offset by disciplined cost management including Future Ready transformation savings.

Nine months ended July 31, 2023 compared with nine months ended July 31, 2022

Personal Systems net revenue decreased 22.2% (decreased 18.1% on a constant currency basis) for the nine months ended July 31, 2023.

The net revenue decrease was primarily due to a 18.9% decrease in commercial and consumer client PCs unit volume and a decline in ASPs by 7.8%, partially offset by an increase in revenue driven by the Poly acquisition.

The decline in unit volume is due to demand softness and elevated industry-wide reseller inventory.

The decline in ASPs is primarily due to foreign currency impacts and competitive pricing partially offset by mix shift towards Commercial.

The decline in unit volume was due to demand softness and elevated industry-wide reseller inventory.

The decline in ASPs was primarily due to foreign currency impacts, unfavorable mix shift and competitive pricing.

Commercial PS net revenue decreased 18.1% primarily driven by unit decline due to demand softness and lower ASPs, partially offset by an increase in hybrid systems revenue driven by the Poly acquisition.

The lower ASPs were driven by unfavorable mix shift and foreign currency impacts.

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Financial Condition and Results of Operations (Continued)

Commercial PS net revenue decreased 21.2% primarily driven by unit decline due to demand softness, and lower ASPs, partially offset by an increase in hybrid systems revenue driven by the Poly acquisition.

The lower ASPs were driven by foreign currency impacts and unfavorable mix shift.

Consumer PS net revenue decreased 30.3% driven by unit decline due to demand softness and lower ASPs.

The lower ASPs were driven by foreign currency impacts and competitive pricing largely due to elevated industry-wide reseller inventory, partially offset by favorable mix shifts.

The lower ASPs were driven by competitive pricing and foreign currency impacts, partially offset by favorable mix shifts.

Personal Systems earnings from operations as a percentage of net revenue decreased by 1.2 percentage points.

The decrease was driven by an increase in operating expenses as a percentage of revenue, partially offset by an increase in gross margin.

Gross margin increased primarily due to lower commodity cost and favorable mix shift, partially offset by foreign currency impacts and competitive pricing.

Operating expenses as a percentage of revenue increased primarily driven by the acquisition of Poly and R&D partner funding received in the prior-year period, partially offset by disciplined cost management including Future Ready transformation savings and lower variable compensation.

Three months ended April 30 Six months ended April 30

Gross margin increased primarily due to lower commodity and logistics cost and favorable mix shift, partially offset by foreign currency impacts and competitive pricing.

Three months ended July 31 Nine months ended July 31

2023 2022 % Change 2023 2022 % Change

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The components of net revenue and the weighted net revenue change by business unit were as follows:

Three Months Ended April 30 Six months ended April 30

Three Months Ended July 31 Nine months ended July 31

Net Revenue Weighted Net Revenue Change (1)

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It is calculated by dividing the change in revenue of each business unit from the prior-year period by total segment revenue for the prior-year period.

Three months ended April 30, 2023 compared with three months ended April 30, 2022

Printing net revenue decreased 4.6% (decreased 2.4% on a constant currency basis) for the three months ended April 30, 2023 .

The decrease in net revenue was driven by Consumer Printing and Supplies as well as foreign currency impacts, partially offset by Commercial Printing .

Three months ended July 31, 2023 compared with three months ended July 31, 2022

Printing net revenue decreased 6.8% (decreased 5.4% on a constant currency basis) for the three months ended July 31, 2023 .

The decrease in net revenue was driven by Consumer Printing, Commercial Printing and Supplies as well as foreign currency impacts .

Net revenue for Supplies decreased 1.6%, primarily due to decline in the installed base and usage.

Print hardware ASPs decreased 2.1% and unit volume decreased 4.0%.

Print hardware ASPs decreased primarily due to foreign currency impacts, partially offset by mix shift.

The decrease in print unit volume was primarily driven by Consumer Printing.

Net revenue for Commercial Printing increased by 4.5%, primarily due to a 9.4% increase in ASPs.

The increase in ASPs was primarily driven by disciplined pricing, partially offset by foreign currency impacts.

Net revenue for Consumer Printing decreased 18.9 % , primarily due to a 15.2% decrease in ASPs and 4.6% decrease in print unit volume.

Printer unit volume decreased 18.7% and hardware ASPs decreased 2.4%.

The decrease in printer unit volume was primarily driven by overall demand weakness.

Print hardware ASPs decreased primarily due to competitive pricing and foreign currency impacts, partially offset by mix shift.

Net revenue for Commercial Printing decreased 6.0%, primarily due to 8.0% decrease in printer unit volume and 4.4% decrease in ASPs.

The decrease in ASPs was primarily driven by competitive pricing and foreign currency impacts, partially offset by mix shift.

Net revenue for Consumer Printing decreased 28.1 % , primarily due to 20.3% decrease in printer unit volume and 10.3% decrease in ASPs.

The decrease in ASPs was primarily driven by competitive pricing and foreign currency impacts, partially offset by mix shift.

Printing earnings from operations as a percentage of net revenue decreased by 1.2 percentage points, primarily due to a decline in gross margin and higher operating expenses as a percentage of revenue.

The decrease in gross margin was primarily due to pricing pressure and foreign currency impacts, partially offset by favorable mix shift.

Operating expenses as a percentage of revenue increased primarily due to lower net revenue.

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Financial Condition and Results of Operations (Continued)

Printing earnings from operations as a percentage of net revenue decreased by 0.1 percentage points, primarily due to a decline in gross margin, partially offset by lower operating expenses as a percentage of revenue.

The decrease in gross margin is primarily due to pricing pressure, commodity cost and foreign currency impacts.

Operating expenses as a percentage of revenue decreased primarily due to lower variable compensation and disciplined cost management including Future Ready transformation savings.

Six months ended April 30, 2023 compared with six months ended April 30, 2022

Printing net revenue decreased 4.6% (decreased 2.3% on a constant currency basis) for the six months ended April 30, 2023 .

The decrease in net revenue was driven by Supplies, Consumer Printing as well as foreign currency impacts, partially offset by Commercial Printing .

Nine months ended July 31, 2023 compared with nine months ended July 31, 2022

Printing net revenue decreased 5.3% (decreased 3.3% on a constant currency basis) for the nine months ended July 31, 2023 .

The decrease in net revenue was driven by Consumer Printing, Supplies as well as foreign currency impacts, partially offset by Commercial Printing .

Net revenue f or Supplies decreased 4.2%, primarily due to decline in the installed base and usage.

Print unit volume decreased 1.2% and hardware ASPs decreased 1.5%.

The decrease in print unit volume was primarily driven by Commercial Printing.

Print hardware ASPs decreased primarily due to foreign currency impacts and mix shifts, partially offset by disciplined pricing in Commercial Printing.

Net revenue for Commercial Printing increased by 3.1%, primarily due to 11.7% increase in ASPs, partially offset by 4.0% decrease in print unit volume.

The increase in ASPs was primarily driven by disciplined pricing, partially offset by foreign currency impacts.

Net revenue for Consumer Printing decreased 11.5 % , primarily due to 10.8% decrease in ASPs and 0.8% decrease in print unit volume.

Printer unit volume decreased 7.2% and hardware ASPs decreased 1.5%.

The decrease in printer unit volume was primarily driven by overall demand weakness.

Print hardware ASPs decreased primarily due to foreign currency impacts, partially offset by pricing optimization in Commercial Printing and mix shifts.

Net revenue for Commercial Printing increased by 0.1%, primarily due to 6.4% increase in ASPs, partially offset by 5.3% decrease in printer unit volume.

The increase in ASPs was primarily driven by mix shift and pricing optimization, partially offset by foreign currency impacts.

Net revenue for Consumer Printing decreased 16.9 % , primarily due to 7.6% decrease in printer unit volume and 10.2% decrease in ASPs.

The decrease in ASPs was primarily driven by competitive pricing and foreign currency impacts, partially offset by mix shift.

Printing earnings from operations as a percentage of net revenue increased by 0.3 percentage points.

The increase was driven by lower operating expenses as a percentage of revenue, partially offset by a decline in gross margin.

The decline in gross margin is primarily driven by pricing pressure, unfavorable mix shift, commodity cost and foreign currency impacts.

Printing earnings from operations as a percentage of net revenue decreased by 0.2 percentage points.

The decrease was driven by decline in gross margin, partially offset by lower operating expenses as a percentage of revenue.

The decline in gross margin was primarily driven by pricing pressure, and foreign currency impacts, partially offset by favorable mix shift.

Operating expenses as a percentage of revenue decreased primarily due to lower variable compensation and disciplined cost management including Future Ready transformation savings.

Corporate Investments

The loss from operations in Corporate Investments for the three and six months ended April 30, 2023 was primarily due to expenses associated with our incubation projects and investments in digital enablement.

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Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

The loss from operations in Corporate Investments for the three and nine months ended July 31, 2023 was primarily due to expenses associated with our incubation projects and investments in digital enablement.

LIQUIDITY AND CAPITAL RESOURCES

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While our access to capital markets may be constrained and our cost of borrowing may increase under certain business, market and economic conditions, our access to a variety of funding sources to meet our liquidity needs is designed to facilitate continued access to capital resources under all such conditions.

Our liquidity is subject to various risks including the risks identified in the section entitled “Risk Factors” in Item 1A of Part I in our Annual Report on Form 10-K for the fiscal year ended October 31, 2022 and the market risks identified in the section entitled “Quantitative and Qualitative Disclosures about Market Risk” in Item 3 of Part I of this report.

Our liquidity is subject to various risks including the risks identified in the section entitled “Risk Factors” in Item 1A of Part II of this report as well as Item 1A of Part I in our Annual Report on Form 10-K for the fiscal year ended October 31, 2022 and the market risks identified in the section entitled “Quantitative and Qualitative Disclosures about Market Risk” in Item 3 of Part I of this report.

Amounts held outside of the U.S.

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Our cash, cash equivalents and restricted cash and total debt were as follows:

April 30, 2023 October 31, 2022

July 31, 2023 October 31, 2022

Cash and cash equivalents $ 1,673 $ 3,145

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Total debt $ 9,679 $ 11,014

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Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Our key cash flow metrics were as follows:

Six months ended April 30

Nine months ended July 31

Net cash provided by operating activities $ 1,596 $ 2,559

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Operating Activities

Compared to the corresponding period in fiscal year 2022, net cash provided by operating activities decreased by $1.5 billion for the six months ended April 30, 2023, primarily due to lower net earnings, unfavorable working capital impacts and changes in receivables from contract manufacturers, partially offset by lower variable compensation.

AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Compared to the corresponding period in fiscal year 2022, net cash provided by operating activities decreased by $1.0 billion for the nine months ended July 31, 2023, primarily due to lower net earnings and working capital movements including changes in receivables from contract manufacturers, partially offset by lower variable compensation and changes in sales and marketing program liabilities.

Key Working Capital Metrics

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Our working capital metrics and cash conversion cycle impacts were as follows:

April 30, 2023 October 31, 2022 Change April 30, 2022 October 31, 2021 Change Y/Y Change

July 31, 2023 October 31, 2022 Change July 31, 2022 October 31, 2021 Change Y/Y Change

Days of sales outstanding in accounts receivable (“DSO”) 30 28 2 27 30 (3) 3

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Cash conversion cycle (31) (29) (2) (29) (25) (4) (2)

April 30, 2023 as compared to April 30, 2022

July 31, 2023 as compared to July 31, 2022

The cash conversion cycle is the sum of days of DSO and DOS less DPO.

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DSO is calculated by dividing ending accounts receivable, net of allowance for credit losses, by a 90-day average net revenue.

The DSO remained flat.

The increase in DSO was primarily due to unfavorable revenue linearity and a marginal increase in extended payment terms.

DOS measures the average number of days from procurement to sale of our product.

DOS is calculated by dividing ending inventory by a 90-day average cost of goods sold.

The increase in DOS was primarily due to change in business mix driven by demand softness in Personal Systems, strategic buys, and increased mix towards sea shipments.

The decrease in DOS was primarily due to supply chain improvements in Printing.

DPO measures the average number of days our accounts payable balances are outstanding.

DPO is calculated by dividing ending accounts payable by a 90-day average cost of goods sold.

The increase in DPO was primarily driven by favorable purchase linearity.

The increase in DPO was primarily driven by sequentially higher manufacturing volumes in Personal Systems in the current period as compared to a decline in the prior year period.

Investing Activities

Compared to the corresponding period in fiscal year 2022, net cash used in investing activities remained flat for the six months ended April 30, 2023, primarily due to a decrease in net investment in property, plant and equipment of $0.1 billion, offset by higher collateral posted for derivative instruments of $0.1 billion.

Compared to the corresponding period in fiscal year 2022, net cash used in investing activities decreased by $0.1 billion for the nine months ended July 31, 2023, primarily due to a decrease in net investment in property, plant and equipment of $0.2 billion, partially offset by higher collateral posted for derivative instruments of $0.1 billion.

Financing Activities

Compared to the corresponding period in fiscal year 2022, net cash used in financing activities decreased by $0.1 billion for the six months ended April 30, 2023, primarily due to lower share repurchases of $2.4 billion, partially offset by issuance of senior unsecured notes of $2.0 billion in the prior-year period and higher net payment of debt of $0.1 billion.

Compared to the corresponding period in fiscal year 2022, net cash used in financing activities increased by $1.7 billion for the nine months ended July 31, 2023, primarily due to net debt repayment of $0.9 billion and $0.2 billion of collateral

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Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

posted for derivative instruments in the current year period, compared to issuance of senior unsecured notes of $3.9 billion and share repurchases of $3.4 billion in the prior year period.

Share Repurchases and Dividends

During the six months ended April 30, 2023, HP returned $0.6 billion to the shareholders in the form of cash dividends of $0.5 billion and share repurchases of $0.1 billion.

As of April 30, 2023, HP had approximately $2.0 billion remaining under the share repurchase authorizations approved by HP’s Board of Directors.

During the nine months ended July 31, 2023, HP returned $0.9 billion to shareholders in the form of cash dividends of $0.8 billion and share repurchases of $0.1 billion.

As of July 31, 2023, HP had approximately $2.0 billion remaining under the share repurchase authorizations approved by HP’s Board of Directors.

For more information on our share repurchases, see Note 10, “Stockholders’ Deficit”, to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.

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Depending on these factors, we may, from time to time, incur additional indebtedness or repay or refinance existing indebtedness.

Outstanding borrowings decreased to $10.6 billion as of April 30, 2023 as compared to $11.0 billion as of October 31, 2022, bearing weighted-average interest rates of 3.9% and 3.7% for April 30, 2023 and October 31, 2022, respectively.

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Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Outstanding borrowings decreased to $9.7 billion as of July 31, 2023 as compared to $11.0 billion as of October 31, 2022, bearing weighted-average interest rates of 4.2% and 3.7% for July 31, 2023 and October 31, 2022, respectively.

Our weighted-average interest rate reflects the effective rate on our borrowings prevailing during the period and reflects the effect of interest rate swaps.

For more information on our interest rate swaps, see Note 8, “Financial Instruments”, to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.

As of April 30, 2023, we maintained a 5-year sustainability-linked senior unsecured committed revolving credit facility with aggregate lending commitments of $5.0 billion which will be available until May 26, 2026.

As of July 31, 2023, we maintained a 5-year sustainability-linked senior unsecured committed revolving credit facility with aggregate lending commitments of $5.0 billion which will be available until May 26, 2026.

In March 2023, we also entered into a $1.0 billion senior unsecured committed revolving credit facility with a 364-day maturity.

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Available Borrowing Resources

As of April 30, 2023, we had available borrowing resources of $1.2 billion from uncommitted lines of credit in addition to the revolving credit facilities.

As of July 31, 2023, we had available borrowing resources of $1.2 billion from uncommitted lines of credit in addition to the revolving credit facilities.

In December 2022, we filed a non-automatic shelf registration statement (the “2022 Shelf Registration Statement”) with the SEC.

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While we currently do not have any rating downgrade triggers that would accelerate the maturity of a material amount of our debt, a downgrade from our current credit rating may increase the cost of borrowing under our credit facility, reduce market capacity for our commercial paper, require the posting of additional collateral under some of our derivative contracts and may have a negative impact on our liquidity and capital position and our contractual business going forward, depending on the extent of such downgrade.

We can access alternative sources of funding, including drawdowns under our credit facility, if necessary, to offset potential reductions in the market capacity for our commercial paper.

We can access alternative sources of funding, including drawdowns under our credit facilities, if necessary, to offset potential reductions in the market capacity for our commercial paper.

CONTRACTUAL AND OTHER OBLIGATIONS

Retirement and Post-Retirement Benefit Plan Contributions

As of April 30, 2023, we anticipate making contributions for the remainder of fiscal year 2023 of approximately $15 million to our non-U.S.

pension plans, $19 million to cover benefit payments to U.S.

non-qualified pension plan participants and $1 million to cover benefit claims for our post-retirement benefit plans.

As of July 31, 2023, we anticipate making contributions for the remainder of fiscal year 2023 of approximately $9 million to our non-U.S.

pension plans and $12 million to cover benefit payments to U.S.

non-qualified pension plan participants.

Our policy is to fund our pension plans so that we meet the minimum contribution required by local government, funding and taxing authorities.

For more information on our retirement and post-retirement benefit plans, see Note 4, “Retirement and Post-Retirement Benefit Plans”, to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.

For more information on our retirement and post-retirement benefit plans, see Note 4, “Retirement and Post-

AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Retirement Benefit Plans”, to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.

Cost Savings Plan

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Uncertain Tax Positions

As of April 30, 2023, we had approximately $909 million of recorded liabilities and related interest and penalties pertaining to uncertain tax positions.

As of July 31, 2023, we had approximately $938 million of recorded liabilities and related interest and penalties pertaining to uncertain tax positions.

We are unable to make a reasonable estimate as to when cash settlement with the tax authorities might occur due to the uncertainties related to these tax matters.

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Off-balance sheet arrangements

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Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

As part of our ongoing business, we have not participated in transactions that generate material relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.

HP utilizes certain third-party arrangements in the normal course of business as part of HPs cash and liquidity management and also to provide liquidity to certain partners to facilitate their working capital requirements.

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis