HP Inc. (NYSE: HPQ) has announced its financial results for Q2 2020.
For the three months ended April 30, 2020, HP generated a total net revenue of $12.5 billion. This figure is down 11.2 percent compared to the same period last year, where the company’s revenue was reported at $14 billion.
During an earnings call with analysts and investors, Enrique Lores, President & CEO of HP, attributes the decline in revenue to the effects of the COVID-19 pandemic: “Turning to our results, there is no doubt that COVID-19 is impacting our business. While some areas performed very well as people shifted to work from home, others suffered and we faced supply chain disruptions.”
“Revenue was $12.5 billion down 11% driven by macroeconomic and supply chain challenges associated with the pandemic.”
HP revenue for Q2 2020
HP’s revenue is reported over two main divisions: Personal Systems and Printing. Personal Systems includes revenues from Notebooks, Desktops and Workstations segments. Sales in Printing come from Supplies, Consumer Hardware and Commercial Hardware segments, which includes Office Printing Solutions, Graphics Solutions and 3D Printing.
Personal Systems Notebooks represents the largest segment by net revenue, accounting for $5.1 billion in Q2 2020, remaining flat compared to Q2 2019. Overall, net revenue for Personal Systems was reported at $8.3 billion, a 7 percent decline compared to $8.9 billion in Q2 2019.
| $ millions | Q2 2020 | Q2 2019 | Variance $ | % |
| Notebooks | 5,083 | 5,099 | -16 | -0.31% |
| Desktops | 2,409 | 2,940 | -531 | -18.06% |
| Workstations | 439 | 569 | -130 | -22.85% |
| Other | 382 | 313 | 69 | 22.04% |
| Personal Systems (Total) | 8,313 | 8,921 | -608 | -6.82% |
The total Q2 2020 revenue for the Printing division was $4.2 billion, compared to $5.1 billion for Q2 2019, representing an 19 percent decrease. The Commercial Hardware, which includes 3D printer sales, experienced the largest decline by 31.5 percent, falling from $1.2 billion in revenue for Q2 2019, to $808 million for Q2 2020.
| $ millions | Q2 2020 | Q2 2019 | Variance $ | % |
| Supplies | 2,841 | 3,331 | -490 | -14.71% |
| Commercial Hardware | 808 | 1,179 | -371 | -31.47% |
| Consumer Hardware | 509 | 606 | -97 | -16.01% |
| Printing (Total) | 4,158 | 5,116 | -958 | -18.73% |
During the call, Lores explains that the Printing segment was hit particularly badly with supply and demand issues, as well as slowdown due to cancelled trade shows, however did not elaborate on the impact to the 3D printing business specifically. In 2019, the company released the 5200 series, the latest line of its Multi Jet Fusion 3D printers.
“In Printing, we’re facing near-term challenges, driven by both supply and demand issues. In commercial print, including office and graphics, we saw a significant slowdown in late March as offices closed and large events and trade shows were canceled. While we believe that office and graphics usage will rebound once businesses fully reopen, we expect that Q3 will be similar to April. And thus we expect that our financial results will be more negatively impacted in Q3 than Q2.”
3D printing and the COVID-19 pandemic
Although HP did not provide further granularity on the 3D printing sales for Q2 2020, the company expressed a significant focus on the technology moving forward in the wake of the pandemic, as businesses move to implement digital supply chains: “Supply chain flexibility and resilience will be a priority topic for all companies going forward and we expect digital manufacturing will be an important part of these discussions,” explains Lores.
“This pandemic has shown the benefits of 3D printing, specifically speed, agility, and localized production. This has led to deeper more strategic engagement with customers as they evaluate their supply chain and consider more distributed manufacturing models.”
HP provided an example with its customer SmileDirectClub, which uses the company’s MJF 3D printers to produce up to 50,000 unique mouth molds per day. In April, SmileDirectClub pivoted during the pandemic from making dental aligners to producing Personal Protective Equipment.
Lores also elaborated on HP’s use of 3D printing to help provide PPE equipment for those on the front line of the COVID-19 battle: “HP and our partners have now produced roughly 2.3 million 3D printed parts for face shields, respirators, and other items for distribution to hospitals and we are now ramping up production of 3D printed nasal swabs with partners to help in the effort for mass testing.”
During the Q&A session, Lores was also asked about consolidation, particularly in relation to 3D printing, in the wake of Xerox’s failed bid to takeover the firm: “We had declared and we continue to believe that in the office space, consolidation is a value creation activity, but really we think that now what we need to do is stay focused on our business and continue to drive it forward. We are also monitoring other M&A opportunities not only on the core businesses, but also on the growth side that we think because of the crisis might be available to us, but again, our focus is on execution of our plans.”
Closing the session, Lores provided the following conclusion: “I wanted to end-up by saying that we firmly believe that HP is very well positioned for the future. Most companies are facing challenges right now. But the best companies are those that are not simply weather the storm, they’re taking advantage of the opportunities that we see and transform their company. And this is exactly what HP is going to be doing.”
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