Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

HP INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations

This Management’s Discussion and Analysis of Financial Condition and Results of Operations (“MD&A”) is organized as follows:

*•*Overview. A discussion of our business and other highlights affecting the Company to provide context for the remainder of this MD&A.

• Critical Accounting Policies and Estimates. A discussion of accounting policies and estimates that we believe are important to understanding the assumptions and judgments incorporated in our reported financial results.

• Results of Operations. An analysis of our financial results comparing the three and nine months ended July 31, 2022 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.

• Liquidity and Capital Resources. An analysis of changes in our cash flows and a discussion of our liquidity and financial condition.

• Contractual and Other Obligations. An overview of contractual obligations, retirement and post-retirement benefit plan contributions, cost-saving plans, uncertain tax positions and off-balance sheet arrangements of our operations.

The discussion of financial condition and results of our operations that follows provides information that will assist the reader in understanding our Consolidated Condensed Financial Statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect our Consolidated Condensed Financial Statements. This discussion should be read in conjunction with our Consolidated Condensed Financial Statements and the related notes that appear elsewhere in this document.

HP INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

OVERVIEW

We are a leading global provider of personal computing and other access devices, imaging and printing products, and related technologies, solutions, and services. We sell to individual consumers, SMBs and large enterprises, including customers in the government, health, and education sectors. We have three reportable segments: Personal Systems, Printing, and Corporate Investments. The Personal Systems segment offers commercial and consumer desktop and notebook PCs, workstations, thin clients, commercial mobility devices, retail POS systems, displays and peripherals, software, support, and services. The Printing segment provides consumer and commercial printer hardware, supplies, solutions and services. Corporate Investments include HP Labs and certain business incubation and investment projects.

• In Personal Systems, our strategic focus is on:

◦profitable growth through innovation and market segmentation

◦enhanced innovation in multi-operating systems, multi-architecture, geography, customer segments and other key attributes;

◦investing in endpoint services and solutions. We are focused on services, including Device as a Service, as the market begins to shift to contractual solutions, and accelerating in attractive adjacencies such as peripherals; and

◦driving innovation to enable productivity and collaboration with the PC becoming essential for hybrid work, learn and play.

We believe that we are well positioned due to our competitive product lineup along with our recent acquisitions in peripherals and remote-computing solutions.

• In Printing, our strategic focus is on:

◦offering innovative printing solutions and contractual solutions to serve consumers, SMBs and large enterprises through our Instant Ink Services, HP+ and Managed Print Services solutions;

◦providing digital printing solutions for graphics segments and applications including commercial publishing, labels, packaging, and textiles; and

◦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 profit upfront units through our product offerings including HP+ and Big Tank.

We are committed to growing our peripherals, gaming, workforce solutions, consumer subscriptions, 3D and industrial graphics businesses. Our ability to innovate is helping us gain momentum in growth areas like gaming and peripherals, and we see significant opportunities to drive greater recurring revenues across Personal Systems and Printing. We have integrated and expanded our Device-as-a-Service and Managed Print Services offerings to create new Workforce Solutions that help customers manage and secure hybrid IT ecosystems. We continue to build on strong assets like Instant Ink to grow our Consumer Subscription business. In Industrial Graphics, we are driving the shift from analog to digital in segments like labels and packaging. In Personalization & 3D, we are creating end-to-end solutions that can capture more value with our differentiated technology.

We continue to experience challenges that are representative of trends and uncertainties that may affect our business and results of operations. One set of challenges relates to dynamic market trends that may adversely impact our product mix. A second set of challenges relates to changes in the competitive landscape. Our primary competitors are exerting competitive pressure in targeted areas and are entering new markets, our emerging competitors are introducing new technologies and business models, and our alliance partners in some businesses are increasingly becoming our competitors in others. A third set of challenges relates to business model changes and our go-to-market execution in an evolving distribution and reseller landscape, with increasing online and omnichannel presence. Additional challenges we face at the segment level are set forth below.

• In Personal Systems, we face challenges with industry component availability which we expect to continue to negatively impact our ability to meet demand at least in the short-term. However, as component availability improves we expect the pricing environment to get more competitive.

• In Printing, we face challenges from a competitive environment, including non-original supplies (which includes imitation, refill, or remanufactured alternatives), and we face component constraints and other supply chain disruptions particularly in printer hardware which we expect to continue to negatively impact our ability to meet demand at least in the short term. We also obtain many Printing components from single source due to technology, availability, price, quality, or other considerations. For instance, we source the majority of our A4 and a portion of our A3 portfolio of

HP INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

laser printer engines and laser toner cartridges from Canon. Any decision by either party to not renew our agreement with Canon or to limit or reduce the scope of the agreement could adversely affect our net revenue from LaserJet products; however, we have a long-standing business relationship with Canon and anticipate renewal of this agreement.

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. Russia contributed approximately $1.0 billion of total net revenue in fiscal 2021. In the third quarter of fiscal 2022, we recognized a charge of $23 million towards severance, cancellation of contract, inventory write-downs and other one-time exit charges related to our decision to wind down our operations in Russia. A significant escalation or expansion of the situation’s current scope could have an adverse effect on our business, results of operations, cash flows or financial position. We continue to be focused on the safety and security of our employees and their families in the impacted regions and we have provided, and expect to continue to provide, grants to support Ukrainian relief efforts.

Our business and financial performance also depend significantly on worldwide economic conditions. Accordingly, we face global macroeconomic challenges, particularly in light of the effects of the COVID-19 pandemic as discussed below, tariff-driven headwinds, uncertainty in the markets, volatility in exchange rates, inflationary trends and evolving dynamics in the global trade environment. The full impact of these and other global macroeconomic challenges on our business cannot be known at this time.

To address these challenges, we continue to pursue innovation with a view towards developing new products and services aligned with generating market demand and meeting the needs of our customers and partners. In addition, we continue to work on improving our operations and adapting our business models, with a particular focus on enhancing our end-to-end processes, analytics and efficiencies. We also continue to work on optimizing our sales coverage models, aligning our sales incentives with our strategic goals, improving channel execution and inventory, production and backlog management, strengthening our capabilities in our areas of strategic focus, effective cost management, strengthening our pricing discipline, and developing and capitalizing on market opportunities.

In October 2019, we announced cost-reduction and operational efficiency initiatives intended to simplify the way we work, move closer to our customers and facilitate specific investment in our business. These initiatives were further updated in February 2020. These efforts included transforming our operating model to integrate our sales force into a single commercial organization and reducing structural costs across HP through our restructuring plan approved in September 2019 (the “Fiscal 2020 Plan”). We have invested, and expect to continue to invest, a portion of the savings from these efforts across our businesses, including investing to build our digital capabilities. Over time, we expect these investments will make us more efficient and allow us to advance our positions in Personal Systems and Printing, while also disrupting new industries where we see attractive medium to long-term growth opportunities. However, the rate at which we are able to invest in our business and the returns that we are able to achieve from these investments will be affected by many factors, including the efforts to address the execution, industry and macroeconomic challenges facing our business as discussed above. As a result, we may experience delays in the anticipated timing of activities related to these efforts, and the anticipated benefits of these efforts may not materialize.

In the third year of our program, we continued to look at new cost savings opportunities and are on track to exceed $1.2 billion in gross run-rate structural cost reductions by year end. In the third quarter of fiscal year 2021, we completed the initial deployment of our SAP S/4 HANA system, one of the largest ERP implementations. Also, as part of our end-to-end business planning and forecasting efforts, we went live with our new cloud-based platform, which we believe will improve our forecasting agility as part of our digital transformation. We continue to optimize our real estate footprint, including 23 real estate actions for the nine months ended July 31, 2022, as we rebuild and modernize our key locations, focusing on collaboration and hybrid work for our employees. For more information on our Fiscal 2020 Plan, 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. As we complete the current Fiscal 2020 plan, we are currently finalizing a new multi-year transformation program that we plan to communicate in the first quarter of fiscal 2023.

We typically experience higher net revenues in our fourth 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 and the continuing impacts of the COVID-19 pandemic.

Our COVID-19 Response

We continue to closely monitor the COVID-19 pandemic, including its resurgence in key markets. We will continue promoting the health, safety, and well-being of workers and their loved ones. In response to the COVID-19 pandemic, we have established a cross-functional COVID-19 program management office that reviews the latest data from our business and site leaders and identifies and addresses emerging risks and issues, and we have put in place global policies and protocols based on

HP INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

guidance from healthcare experts and public health leaders, which we continue to review and update. We balance our company-wide approach by assessing risk and adjusting our response at the site level, taking into consideration each country’s or area’s COVID-19 case trends and related measures. We have commenced a phased approach to returning our employees onsite, which included modifications to certain of our facilities as we adapt to a hybrid work environment.

The business impact of the COVID-19 pandemic has created new and different demand dynamics in our markets. Our Personal Systems business benefited from the hybrid work environment and growth in gaming. However, these trends and consumer behavior have started to change driven by various macroeconomic factors. For the nine months ended July 31, 2022, we continued to see strong demand in Windows-based Commercial PCs, and mix shifts from low end to premium products. We saw demand weakness in Consumer PCs and Chromebook. We further anticipate the overall macroeconomic environment to adversely impact the demand for Commercial PCs in the short-term. In Printing, we continued to see gradual and uneven recovery in Commercial Print and softening of demand in Consumer Print. Also, favorable pricing and mix has contributed towards higher average selling prices (“ASPs”) in both Personal Systems and Printing which is offsetting the impact of higher cost. Industry wide commodity and component constraints, including application specific integrated circuits (“ASICs”) that are unique to our products, manufacturing disruptions in China, and logistics challenges globally, are expected to continue with some improvement, at least in the short-term.

As the COVID-19 pandemic continues and new variants of the virus emerge, we are seeing a resurgence of the pandemic in key markets including China. We have experienced and may experience future disruptions in supply, manufacturing and logistics, including particularly in Asia, and with our suppliers and outsourcing partners globally. The full extent of the impact of the COVID-19 pandemic on our business, results of operations, cash flows and financial position will depend on many factors that are not within our control, including, but not limited to: the severity, duration and scope of the pandemic, including the impact of coronavirus mutations and resurgences; the effectiveness of actions taken to contain or mitigate the pandemic and prevent or limit any reoccurrence; the development, availability and public acceptance of effective treatments or vaccines; governmental, business and individuals’ actions that have been and continue to be taken in response to the pandemic; general economic uncertainty in key global markets and financial market volatility; global economic conditions and levels of economic growth; and the pace of recovery when the COVID-19 pandemic subsides.

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, 2021.

RECENT DEVELOPMENTS

On August 29, 2022, we completed the acquisition of Plantronics, Inc. (“Poly”), a leading global provider of workplace collaboration solutions, in an all-cash transaction for $40 per share, implying a total enterprise value of $3.3 billion, inclusive of Poly’s net debt. Poly is a leader in video conferencing solutions, cameras, headsets, voice and software. With the acquisition, we aim to deliver a complete ecosystem of devices, software, and digital services to create premium employee experiences, improve workforce productivity, and provide enterprise customers with better visibility, insights, security, and manageability across their hybrid IT environments. The financial results of Poly will be included in our Consolidated Financial Statements for the year ended October 31, 2022, from the date of the acquisition.

On September 1, 2022, we consummated our offer (the “Exchange Offer”) to exchange approximately $0.5 billion of outstanding notes issued by Poly (the “Poly Notes”) for new notes issued by us with the same interest rate, interest payment dates, maturity date and redemption terms as the exchanged Poly Notes. In conjunction with the Exchange Offer, certain proposed amendments that would eliminate substantially all restrictive covenants and certain events of default and other provisions in the indenture governing Poly Notes were adopted, pursuant to a consent solicitation (the “Consent Solicitation”) conducted concurrently with the Exchange Offer.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

MD&A is based on our Consolidated Condensed Financial Statements, which have been prepared in accordance with U.S. GAAP. 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. Actual results may differ materially from those estimates. As of July 31, 2022, the impact to our business from the COVID-19 pandemic and changing macroeconomic factors continue to unfold. Additionally, HP continues to assess and evaluate impacts from the events in Russia, inflationary concerns, as well as certain supply chain disruptions. 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. Our management believes that there have been no significant changes during the nine months ended July 31, 2022 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, 2021, except as mentioned in Note 1, “Basis of Presentation.”

HP INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

ACCOUNTING PRONOUNCEMENTS

For a summary of recent accounting pronouncements applicable to our Consolidated Condensed Financial Statements see Note 1, “Basis of Presentation,” to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.

HP INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

RESULTS OF OPERATIONS

Revenue from our international operations has historically represented, and we expect will continue to represent, a majority of our overall net revenue. As a result, our net revenue growth has been impacted, and we expect it will continue to be impacted, by fluctuations in foreign currency exchange rates. In order to provide a framework for assessing performance excluding the impact of foreign currency fluctuations, we supplement the year-over-year percentage change in net revenue with the year-over-year percentage change in net revenue on a constant currency basis, which excludes the effect of foreign currency exchange fluctuations calculated by translating current period revenues using monthly average exchange rates from the comparative period and excluding any hedging impact recognized in the current period, and does not adjust for any repricing or demand impacts from changes in foreign currency exchange rates. This information is provided so that net revenue can be viewed with and without the effect of fluctuations in foreign currency exchange rates, which is consistent with how management evaluates our net revenue results and trends, as management does not believe that the excluded items are reflective of ongoing operating results. The constant currency measures are provided in addition to, and not as a substitute for, the year-over-year percentage change in net revenue on a GAAP basis. Other companies may calculate and define similarly labeled items differently, which may limit the usefulness of this measure for comparative purposes.

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

			Three months ended July 31																								Nine months ended July 31
			2022												2021												2022												2021
			Dollars						% of Net Revenue						Dollars						% of Net Revenue						Dollars						% of Net Revenue						Dollars						% of Net Revenue
			Dollars in millions
Net revenue			$	14,664					100.0		%				$	15,289					100.0		%				$	48,182					100.0		%				$	46,812					100.0		%
Cost of revenue			11,764						80.2		%				11,901						77.8		%				38,564						80.0		%				36,660						78.3		%
Gross profit			2,900						19.8		%				3,388						22.2		%				9,618						20.0		%				10,152						21.7		%
Research and development			368						2.5		%				477						3.1		%				1,211						2.5		%				1,462						3.1		%
Selling, general and administrative			1,143						7.8		%				1,408						9.3		%				4,075						8.5		%				4,267						9.2		%
Restructuring and other charges			13						—		%				56						0.3		%				163						0.4		%				216						0.4		%
Acquisition-related charges			31						0.2		%				24						0.2		%				83						0.2		%				40						0.1		%
Amortization of intangible assets			50						0.4		%				42						0.3		%				154						0.3		%				103						0.2		%
Russia exit charges			23						0.2		%				—						—		%				23						—		%				—						—		%
Earnings from operations			1,272						8.7		%				1,381						9.0		%				3,909						8.1		%				4,064						8.7		%
Interest and other, net			(70)						(0.5)		%				(55)						(0.3)		%				(141)						(0.3)		%				(106)						(0.2)		%
Earnings before taxes			1,202						8.2		%				1,326						8.7		%				3,768						7.8		%				3,958						8.5		%
Provision for taxes			(83)						(0.6)		%				(218)						(1.5)		%				(563)						(1.1)		%				(554)						(1.2)		%
Net earnings			$	1,119					7.6		%				$	1,108					7.2		%				$	3,205					6.7		%				$	3,404					7.3		%

Net Revenue

For the three months ended July 31, 2022, net revenue decreased 4.1% (decreased 1.9% on a constant currency basis) as compared to the prior-year period. U.S. net revenue decreased 10.4% to $5.2 billion, while net revenue from international operations decreased 0.2% to $9.5 billion. The decrease in net revenue was primarily driven by reduction in previously estimated sales and marketing program incentives in the prior-year period, decline in Notebooks and Supplies, and foreign currency impacts, partially offset by growth in Desktop and Workstations. The decrease was driven by unit decline, partially offset by higher ASPs in Personal Systems. Overall, units were down in both Personal Systems and Printing due to demand softness, particularly in Consumer, driven by the macroeconomic environment and inflationary trends.

HP INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

For the nine months ended July 31, 2022, total net revenue increased 2.9% (increased 3.8% on a constant currency basis) as compared to the prior-year period. U.S. net revenue decreased 3.8% to $16.3 billion, while net revenue from international operations increased 6.7% to $31.9 billion. The increase in net revenue was primarily driven by growth in Desktops, Notebooks and Workstations partially offset by decline in Supplies, foreign currency impacts and Consumer Printing. The increase was driven by higher ASPs due to favorable pricing and mix shifts, partially offset by unit decline. Overall, units were down in both Personal Systems and Printing due to demand softness, particularly in Consumer, driven by the macroeconomic environment and inflationary trends.

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

Gross Margin

For the three months ended July 31, 2022, gross margin decreased by 2.4 percentage points, primarily driven by the reduction in previously estimated sales and marketing program incentives in the prior-year period and foreign currency impacts.

For the nine months ended July 31, 2022, gross margin decreased by 1.7 percentage points, primarily driven by the reduction in previously estimated sales and marketing program incentives in the third quarter of fiscal 2021, higher commodity costs, foreign currency impacts and mix shift towards Personal Systems, partially offset by favorable pricing.

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

Operating Expenses

Research and Development (“R&D”)

R&D expense decreased 22.9% for the three months ended July 31, 2022, primarily due to lower variable compensation and increased investments in Personal Systems in the prior-year period.

R&D expense decreased 17.2% for the nine months ended July 31, 2022, primarily due to joint R&D partner funding and increased investments in Personal Systems in the prior-year period, and lower variable compensation.

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

SG&A expense decreased 18.8% and 4.5% for the three and nine months ended July 31, 2022, respectively, primarily due to lower spend on go-to-market initiatives and variable compensation.

Restructuring and Other Charges

Restructuring and other charges for the three and nine months ended July 31, 2022 related primarily to the Fiscal 2020 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.

Amortization of Intangible Assets

Amortization of intangible assets for the three and nine months ended July 31, 2022 relates primarily to intangible assets resulting from prior acquisitions. Amortization of intangible assets increased by $8 million and $51 million for the three and nine months ended July 31, 2022, respectively, primarily due to recent acquisitions including HyperX and Teradici.

Russia exit charges

For the three months and nine months ended July 31, 2022, HP recognized a charge of $23 million towards severance, cancellation of contracts, inventory write-downs and other one-time exit charges related to our decision to wind down our operations in Russia.

Interest and Other, Net

Interest and other, net expense increased $15 million and $35 million for the three months and nine months ended July 31, 2022, respectively, primarily due to issuance of senior unsecured notes.

Provision for taxes

Our effective tax rate was 7.0% for the three months ended July 31, 2022 and 15.0% for the nine months ended July 31, 2022. The difference between the U.S. federal statutory tax rate of 21% and our effective tax rate for the three and nine months ended July 31, 2022 was primarily due to tax effects of internal reorganization and favorable tax rates associated with certain earnings from our operations in lower-tax jurisdictions throughout the world.

During the three and nine months ended July 31, 2022, we recorded $132 million and $97 million, respectively, of net income tax benefits related to discrete items in the provision for taxes. These amounts included income tax benefits of $161 million and $144 million related to the filing of tax returns in various jurisdictions for the three and nine months ended July 31,

HP INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

2022, and $3 million and $34 million related to restructuring charges for the three and nine months ended July 31, 2022, respectively. The three and nine months ended July 31, 2022 also included $87 million of tax benefits related to internal reorganization. These benefits were partially offset by income tax charges of $109 million and $104 million related to uncertain tax positions and $10 million and $19 million related to audit settlements in various jurisdictions for the three and nine months ended July 31, 2022, respectively. The nine months ended July 31, 2022 also included tax charges of $55 million related to withholding taxes on undistributed foreign earnings. In addition to the discrete items mentioned above, we recorded excess tax benefits of $32 million associated with stock options, restricted stock units and performance-adjusted restricted stock units for the nine months ended July 31, 2022.

Segment Information

A description of the products and services for each segment can be found in Note 2, “Segment Information” to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference. Future changes to this organizational structure may result in changes to the segments disclosed.

HP INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Personal Systems

			Three months ended July 31																		Nine months ended July 31
			2022						2021						% Change						2022						2021						% Change
			Dollars in millions
Net revenue			$	10,089					$	10,406					(3.0)		%				$	33,817					$	31,564					7.1		%
Earnings from operations			$	695					$	869					(20.0)		%				$	2,450					$	2,337					4.8		%
Earnings from operations as a % of net revenue			6.9		%				8.4		%										7.2		%				7.4		%

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

			Three months ended July 31																		Nine months ended July 31
			Net Revenue												Weighted Net Revenue Change**(1)**						Net Revenue												Weighted Net Revenue Change**(1)**
			2022						2021									2022						2021
			Dollars in millions												Percentage Points						Dollars in millions												Percentage Points
Notebooks			$	6,574					$	7,328					(7.2)		%				$	22,729					$	22,183					1.7		%
Desktops			2,537						2,246						2.8		%				8,199						6,871						4.2		%
Workstations			537						388						1.4		%				1,565						1,177						1.2		%
Other			441						444						—		%				1,324						1,333						—		%
Total Personal Systems			$	10,089					$	10,406					(3.0)		%				$	33,817					$	31,564					7.1		%

(1)Weighted Net Revenue Change Percentage Points measures contribution of each business unit towards overall segment revenue growth. 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 July 31, 2022 compared with three months ended July 31, 2021

Personal Systems net revenue decreased 3.0% (decreased 0.3% on a constant currency basis) for the three months ended July 31, 2022, as compared to the prior-year period. The decrease was primarily driven by the prior period reduction in previously estimated sales and marketing program incentives. Unit volume declined 25.0% and ASP’s increased by 29.3%. The decrease in unit volume was primarily driven by a decline in Notebooks due to lower Chromebook mix and softening consumer demand, partially offset by increases in Desktops and Workstations. The increase in ASPs was primarily due to mix shifts to premium and favorable pricing, partially offset by foreign currency impacts. Also, units were impacted due to the continued supply chain challenges and overall macroeconomic environment.

Commercial PCs revenue increased 6.9% primarily driven by higher ASPs and unit growth in Workstations and Desktops, partially offset by unit decline in Notebooks due to lower Chromebooks. Consumer PCs net revenue decreased 19.7% driven by unit declines in Notebooks and Desktops, partially offset by higher ASPs.

Consequently, net revenue decreased 10.3% in Notebooks, increased 13.0% in Desktops and 38.5% in Workstations.

Personal Systems earnings from operations as a percentage of net revenue decreased by 1.5 percentage points, primarily due to a decrease in gross margin, partially offset by a decrease in operating expenses as a percentage of revenue. The gross margin decreased primarily due to higher costs, foreign currency impacts and a reduction in previously estimated sales and marketing program incentives in the prior-year period, partially offset by favorable pricing. Operating expenses as a percentage of revenue decreased by 1.7 percentage points primarily driven by lower variable compensation and increased R&D investments in the prior-year period.

Nine months ended July 31, 2022 compared with nine months ended July 31, 2021

Personal Systems net revenue increased 7.1% (increased 8.3% on a constant currency basis) for the nine months ended July 31, 2022, as compared to the prior-year period. The increase was driven by a 27.2% increase in ASPs, partially offset by 15.8% decrease in unit volume. The increase in ASPs was primarily due to favorable pricing and mix shifts to premium, partially offset by foreign currency impacts. The decrease in unit volume was primarily driven by a decline in Notebooks due to

HP INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

lower Chromebook sales and softening consumer demand, partially offset by increases in Desktops and Workstations. In addition, units were impacted due to the continued supply chain challenges and overall macroeconomic environment.

Commercial PCs revenue increased 17.0% primarily driven by higher ASPs and unit growth in Desktops and Workstations, partially offset by unit decline in Notebooks due to lower Chromebooks. Consumer PCs net revenue decreased 8.6% driven by unit declines in Notebooks and Desktops, partially offset by higher ASPs.

Consequently, net revenue increased 2.5% in Notebooks, 19.3% in Desktops and 33.0% in Workstations.

Personal Systems earnings from operations as a percentage of net revenue decreased by 0.2 percentage points, primarily due to a decrease in gross margin, partially offset by a decrease in operating expenses as a percentage of revenue. The gross margin decrease was primarily due to the reduction in previously estimated sales and marketing program incentives in the third quarter of fiscal 2021, higher costs including commodity costs and foreign currency impacts, partially offset by favorable pricing and mix shifts. Operating expenses as a percentage of revenue decreased by 1.2 percentage points primarily driven by joint partner funding and last year’s increased R&D investments, and lower variable compensation.

Printing

			Three months ended July 31																		Nine months ended July 31
			2022						2021						% Change						2022						2021						% Change
			Dollars in millions
Net revenue			$	4,575					$	4,882					(6.3)		%				$	14,369					$	15,249					(5.8)		%
Earnings from operations			$	911					$	857					6.3		%				$	2,748					$	2,806					(2.1)		%
Earnings from operations as a % of net revenue			19.9		%				17.6		%										19.1		%				18.4		%

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

			Three months ended July 31																		Nine months ended July 31
			Net Revenue												Weighted Net Revenue Change**(1)**						Net Revenue												Weighted Net Revenue Change**(1)**
			2022						2021									2022						2021
			Dollars in millions												Percentage Points						Dollars in millions												Percentage Points
Supplies			$	2,814					$	3,092					(5.7)		%				$	9,013					$	9,575					(3.7)		%
Commercial			1,036						1,070						(0.7)		%				3,117						3,112						—		%
Consumer			725						720						0.1		%				2,239						2,562						(2.1)		%
Total Printing			$	4,575					$	4,882					(6.3)		%				$	14,369					$	15,249					(5.8)		%

(1)Weighted Net Revenue Change Percentage Points measures contribution of each business unit towards overall segment revenue growth. 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 July 31, 2022 compared with three months ended July 31, 2021

Printing net revenue decreased 6.3% (decreased 5.3% on a constant currency basis) for the three months ended July 31, 2022, as compared to the prior-year period. Net revenue for Supplies decreased 9.0%, primarily due to a significant reduction in consumer demand driven by the challenging environment and continued normalization in Home printing, partially offset by the gradual recovery in Industrial print. Also, Supplies revenue was impacted by our decision to wind down business operations in Russia. Printer unit volume decreased 2.8% and ASPs remained flat. The decrease in printer unit volume was due to component availability and supply chain disruptions which continued to limit unit availability for both Commercial and Consumer.

Net revenue for Commercial decreased by 3.2%, primarily due to a 14.7% decrease in printer unit volume, partially offset by 10.3% increase in ASPs. The increase in ASPs was primarily driven by favorable pricing and mix shifts, partially offset by foreign currency impacts.

HP INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

Net revenue for Consumer increased 0.7%, primarily due to 1.6% increase in ASPs, partially offset by 0.8% decrease in printer unit volume. The increase in ASPs was primarily driven by favorable pricing, partially offset by foreign currency impacts.

Printing earnings from operations as a percentage of net revenue increased by 2.3 percentage points, primarily due to lower operating expenses as a percentage of revenue. Operating expenses as a percentage of revenue decreased primarily due to lower variable compensation and go-to-market initiative expenses.

Nine months ended July 31, 2022 compared with nine months ended July 31, 2021

Printing net revenue decreased 5.8% (decreased 5.5% on a constant currency basis) for the nine months ended July 31, 2022, as compared to the prior-year period. Net revenue for Supplies decreased 5.9%, primarily due to a significant reduction in consumer demand driven by the challenging environment and continued normalization in Home printing, partially offset by the gradual recovery in Industrial print. Also, Supplies revenue was impacted by China lockdowns and the decision to wind down business operations in Russia. Printer unit volume decreased 19.0% and ASPs increased 13.5%. The decrease in printer unit volume was primarily driven by decreases in both Consumer and Commercial due to component availability and supply chain disruptions. Printer ASPs increased primarily due to favorable pricing and mix shifts.

Net revenue for Commercial increased by 0.2%, primarily due to 11.3% increase in ASPs, partially offset by 11.7% decrease in printer unit volume. The increase in ASPs was primarily driven by favorable pricing and mix shifts.

Net revenue for Consumer decreased 12.6%, primarily due to a 20.0% decrease in printer unit volume, partially offset by 8.8% increase in ASPs. The increase in ASPs was primarily driven by favorable pricing and mix shifts.

Printing earnings from operations as a percentage of net revenue increased by 0.7 percentage points, for the nine months ended July 31, 2022, primarily due to lower operating expense as a percentage of revenue, partially offset by decrease in gross margin. The decrease in gross margin was driven by higher commodity and supply chain costs, partially offset by mix shifts and favorable pricing. Further, hardware gross margin was impacted by component shortages and supply chain disruptions which impacted mix and unit availability for both Commercial and Consumer. Operating expenses as a percentage of revenue decreased primarily due to lower investments in go-to-market initiative expenses and variable compensation.

Corporate Investments

The loss from operations in Corporate Investments for the three and nine months ended July 31, 2022, was primarily due to expenses associated with our incubation projects and investments in digital enablement.

LIQUIDITY AND CAPITAL RESOURCES

We use cash generated by operations as our primary source of liquidity. While the impacts of the COVID-19 pandemic were initially expected to be temporary, however, with the emergence of new variants and continued global outbreaks, there remains uncertainty around the extent and duration of the pandemic and how our liquidity and working capital needs may be impacted in future periods as a result. We believe that current cash, cash flow from operating activities, new borrowings, available commercial paper authorization and the credit facilities will be sufficient to meet our operating cash requirements, planned capital expenditures, interest and principal payments on all borrowings, pension and post-retirement funding requirements, authorized share repurchases and annual dividend payments for the foreseeable future. Additionally, if suitable acquisition opportunities arise, the Company may obtain all or a portion of the required financing through additional borrowings. While our access to the 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 sections 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, 2021 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.

On August 29, 2022, we completed the acquisition of Poly, a leading global provider of workplace collaboration solutions, in an all-cash transaction for $40 per share, implying a total enterprise value of $3.3 billion, inclusive of Poly’s net debt. We funded the transaction through a combination of cash and new debt.

On September 1, 2022, we consummated our Exchange Offer and Consent Solicitation. The approximately $0.5 billion in aggregate principal amount of our new notes mature in 2029, and an aggregate amount of $8 million in consent fee was paid in connection therewith. In addition, under the terms of our new notes, we are obligated to, within 60 days after the consummation of our acquisition of Poly, offer to purchase all or a portion of the new notes at a purchase price in cash equal to 101% of the aggregate principal amount thereof, plus accrued and unpaid interest, if any, to the repurchase date.

Our cash and cash equivalents balances are held in numerous locations throughout the world. We utilize a variety of planning and financing strategies in an effort to ensure that our worldwide cash is available when and where it is needed. Amounts held outside of the United States are generally utilized to support non-U.S. liquidity needs and may from time to time

HP INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

be distributed to the United States. The Tax Cuts and Jobs Act (“TCJA”) made significant changes to the U.S. tax law, including a one-time transition tax on accumulated foreign earnings. The payments associated with this one-time transition tax will be paid over eight years and began in fiscal year 2019. We expect a significant portion of the cash and cash equivalents held by our foreign subsidiaries will no longer be subject to U.S. income tax consequences upon a subsequent repatriation to the United States as a result of the transition tax on accumulated foreign earnings. However, a portion of this cash may still be subject to foreign income tax or withholding tax consequences upon repatriation. As we evaluate the future cash needs of our operations, we may revise the amount of foreign earnings considered to be permanently reinvested in our foreign subsidiaries and how to utilize such funds, including reducing our gross debt level, or other uses.

Liquidity

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

			As of
			July 31, 2022						October 31, 2021
			In billions
Cash and cash equivalents			$	5.4					$	4.3
Total debt			$	11.0					$	7.5

Our key cash flow metrics were as follows:

			Nine months ended July 31
			2022						2021
			In millions
Net cash provided by operating activities			$	2,559					$	3,561
Net cash used in investing activities			(673)						(612)
Net cash used in financing activities			(799)						(4,374)
Net increase (decrease) in cash and cash equivalents			$	1,087					$	(1,425)

Operating Activities

Compared to the corresponding period in fiscal year 2021, net cash provided by operating activities decreased by $1.0 billion for the nine months ended July 31, 2022, primarily driven by the changes in other assets and liabilities including lower employee compensation and benefits accruals, and sales and marketing program liabilities, partially offset by improvements in key working capital metrics noted below.

Key Working Capital Metrics

Management utilizes current cash conversion cycle information to manage our working capital level. Our working capital metrics and cash conversion cycle impacts were as follows:

			As of																		As of
			July 31, 2022						October 31, 2021						Change						July 31, 2021						October 31, 2020						Change						Y/Y Change
Days of sales outstanding in accounts receivable (“DSO”)			27						30						(3)						29						32						(3)						(2)
Days of supply in inventory (“DOS”)			63						53						10						62						43						19						1
Days of purchases outstanding in accounts payable (“DPO”)			(119)						(108)						(11)						(120)						(105)						(15)						1
Cash conversion cycle			(29)						(25)						(4)						(29)						(30)						1						—

July 31, 2022 as compared to July 31, 2021

The cash conversion cycle is the sum of days of DSO and DOS less DPO. Items which may cause the cash conversion cycle in a particular period to differ from historical trends include, but are not limited to, changes in business mix, changes in payment terms and timing, extent of receivables factoring, seasonal trends and the timing of revenue recognition and inventory purchases within the period.

HP INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

DSO measures the average number of days our receivables are outstanding. DSO is calculated by dividing ending accounts receivable, net of allowance for credit losses, by a 90-day average net revenue. The decrease in DSO was primarily due to higher factoring and lower extended payment terms offered, partially offset by a decrease in customers taking advantage of our cash discounts in exchange for paying early.

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 revenue. The increase in DOS was primarily due to higher inventory to mitigate supply chain constraints in Printing, partially offset by inventory reduction in Personal Systems.

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 revenue. The decrease in DPO was primarily due to lower purchasing volumes.

Investing Activities

Compared to the corresponding period in fiscal year 2021, net cash used in investing activities increased by $0.1 billion for the nine months ended July 31, 2022, primarily due to lower proceeds from sale of investments of $0.3 billion and increase in net investment in property, plant and equipment of $0.2 billion, partially offset by lower collateral posted for derivative instruments of $0.1 billion and lower net payments for acquisitions of $0.6 billion.

Financing Activities

Compared to the corresponding period in fiscal year 2021, net cash used in financing activities decreased by $3.6 billion for the nine months ended July 31, 2022, primarily due to our issuance of senior unsecured notes of $2.0 billion, lower payment towards debt of $1.1 billion and lower share repurchases of $0.9 billion, partially offset by payment towards commercial paper of $0.4 billion.

Share Repurchases and Dividends

During the nine months ended July 31, 2022, HP returned $4.3 billion to the shareholders in the form of share repurchases of $3.5 billion and cash dividends of $0.8 billion. As of July 31, 2022, HP had approximately $2.9 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.

Capital Resources

Debt Levels

We maintain debt levels that we establish through consideration of a number of factors, including cash flow expectations, cash requirements for operations, investment plans (including acquisitions), share repurchase activities, our cost of capital and targeted capital structure. Depending on these factors, we may, from time to time, incur additional indebtedness or refinance existing indebtedness. Outstanding borrowings increased to $11.0 billion as of July 31, 2022 as compared to $7.5 billion as of October 31, 2021, bearing weighted-average interest rates of 3.8% and 3.1% for July 31, 2022 and October 31, 2021, respectively.

In June 2022, we issued senior unsecured notes of $2.0 billion in aggregate principal amount and in March 2022, we issued senior unsecured notes of $2.0 billion in aggregate principal amount across various maturities. For more information on the new notes, see Note 9, “Borrowings,” to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.

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 July 31, 2022, we maintained the 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. Funds borrowed under the revolving credit facility may be used for general corporate purposes.

Available Borrowing Resources

As of July 31, 2022, we had available borrowing resources of $539 million from uncommitted lines of credit in addition to the revolving credit facility.

The amendment to our 2019 Shelf Registration Statement to convert to a non-automatic shelf registration statement was declared effective by the SEC on February 25, 2021 and, as of July 31, 2022, enables us to offer for sale, from time to time, in

HP INC. AND SUBSIDIARIES

Management’s Discussion and Analysis of

Financial Condition and Results of Operations (Continued)

one or more offerings, $1.0 billion, in the aggregate, of debt securities, common stock, preferred stock, depository shares and warrants.

For more information on our borrowings, see Note 9, “Borrowings,” to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.

Credit Ratings

Our credit risk is evaluated by major independent rating agencies based upon publicly available information as well as information they obtain during our ongoing discussions. 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, 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.

CONTRACTUAL AND OTHER OBLIGATIONS

Principal and Interest payments on debt

In June 2022, we issued senior unsecured notes of $2.0 billion in aggregate principal amount and in March 2022, we issued senior unsecured notes of $2.0 billion in aggregate principal amount across various maturities. As a result, our future principal payments on debt increased from $7.6 billion as at October 31, 2021 to $11.1 billion as at July 31, 2022 and future interest payments on debt increased from $2.3 billion as at October 31, 2021 to $3.1 billion as at July 31, 2022. For more information on the new notes, see Note 9, “Borrowings,” to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.

Unconditional Purchase Obligation

Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on HP and that specify all significant terms, including fixed or minimum quantities to be purchased; fixed, minimum, or variable price provisions; and the approximate timing of the transaction. These unconditional purchase obligations are primarily related to inventory and service support. Unconditional purchase obligations exclude agreements that are cancellable without penalty. As of July 31, 2022, the Company had outstanding purchase commitments of $4.3 billion. The majority of these commitments are due within five years. For more information, see Note 14, “Commitments,” to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.

Retirement and Post-Retirement Benefit Plan Contributions

As of July 31, 2022, we anticipate making contributions for the remainder of fiscal year 2022 of approximately $19 million to our non-U.S. pension plans, $13 million to cover benefit payments to U.S. non-qualified pension plan participants and $2 million to cover benefit claims for our post-retirement benefit plans. 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.

Cost Savings Plan

As a result of our approved restructuring plans, we expect to make future cash payments of approximately $0.1 billion. For more information on our restructuring activities that are part of our cost improvements, 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.

Uncertain Tax Positions

As of July 31, 2022, we had approximately $615 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. Payments of these obligations would result from settlements with taxing authorities. For more information on our uncertain tax positions, see Note 5, “Taxes on Earnings,” to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.

Off-balance sheet arrangements

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

HP INC. AND SUBSIDIARIES

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.

We have third-party short-term financing arrangements intended to facilitate the working capital requirements of certain customers. For more information on our third-party short-term financing arrangements, see Note 6, “Supplementary Financial Information,” to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.