HP Inc (NYSE:HPQ) Q4 2018 Earnings Conference Call - Final Transcript
Nov 29, 2018 • 05:00 pm ET
Systems volume, for example, grew 7% sequentially from Q3 to Q4 and our cash conversion cycle was minus 32 days. That was better than our outlook for the year. And how that then bridges to '19? I do remain confident in delivering at least $3.7 billion for the full year. However, taking into account our strong FY18 results did pull in some upside from '19 and also given some of the comments we just made on the constraints on CPUs, I would expect that, in the first half, some of the softening of the Personal Systems revenue and constraints, we'd expect a weaker first-half free cash flow, just given the negative working capital in the Personal Systems business.
So the assumptions I discussed at SAM hold, I'd just add -- we have factored in all the respective segment level kind of business volume, including the implied slower growth in Personal Systems. And we've also seen additional opportunities to improve cash conversion cycle beyond that, the minus 32 days, primarily around a DPO. And finally, we do expect now to have other cash flow favorability in '19, including timing of certain tax and other cash items. So all together, our bottoms of outlook gives us confidence to maintain at least $3.7 billion for the full year.
Wamsi Mohan, Bank of America Merrill Lynch.
Dion, just a clarification on your answer to the prior question. You said you were seeing constraints, CPU constraints, both at the high end and the low end of the range. I was wondering if you could maybe give us some color that could help us triangulate, like is that -- either in terms of units or in terms of revenue impact in the first half of the year that you would be seeing from these CPU shortages that can help us think through the quantification of that? And I have a follow-up.
Yes. I would say it actually affects both units as well as revenue and I believe that the shortages, certainly what we are seeing today, exist both at the low end of the range as well as the high end of the range. So there is a mix. And the mix is still moving around, as Intel is working furiously to get capacity up to support demand. So it's moving around, but I expect that we will see it both in terms of units and in revenue.
Okay. And as a follow-up, are you seeing any evidence of the channel behaving differently, in terms of maybe building some inventory ahead of these tariffs? And what are you thinking about, from a broader supply chain standpoint, if there are incremental tariffs that are not included in your guidance, if those get put on, what are some of the levers that you can use? Are you thinking about moving production and working with your ODM partners to do incrementally more outside of China? If you could give some color there, that would be great?
Sure. So, in