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© provided through The Motley idiot HP Inc (HPQ) Q2 2021 earnings call Transcript
HP Inc (NYSE: HPQ)
Q2 2021 earnings name
may additionally 27, 2021, four:30 p.m. ET
Contents:
organized Remarks
Questions and solutions
call contributors
prepared Remarks:
Operator
first rate day every person and welcome to the second Quarter 2021 HP Inc. income conference name. My identify is Hailey and i'll be your convention moderator for modern day call. [Operator Instructions]
i might now want to flip the name over to Beth Howe, Head of Investor relations. Please go forward.
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this text is a transcript of this conference call produced for The Motley fool. whereas we try for our silly optimal, there may be error, omissions, or inaccuracies in this transcript. as with all our articles, The Motley fool does not expect any accountability on your use of this content material, and we strongly inspire you to do your own research, together with listening to the call your self and studying the business's SEC filings. Please see our terms and prerequisites for extra particulars, together with our mandatory Capitalized Disclaimers of legal responsibility.
The Motley idiot has no place in any of the shares mentioned. The Motley idiot has a disclosure policy.
Beth Howe -- Head of Investor members of the family
first rate afternoon each person and welcome to HP's 2nd quarter fiscal 2021 profits conference call. With me these days are Enrique Lores, HP's President and Chief govt Officer; and Marie Myers, HP's Chief fiscal Officer.
before handing the call over to Enrique, let me remind you that this call is being webcast. A replay of this webcast can be made available on our web page shortly after the demand about three hundred and sixty five days. We posted the earnings release and the accompanying slide presentation on our Investor family members webpage at investor.hp.com.
As always, elements of this presentation are forward-searching and are in accordance with our optimal view of the realm and our groups as we see them nowadays. For more detailed tips, please see disclaimers in the profits substances regarding ahead-looking statements that involve dangers, uncertainties and assumptions. For a dialogue of some of those risks, uncertainties and assumptions, please confer with HP's SEC experiences including our most exact
kind 10-k. HP assumes no obligation and doesn't intend to update this kind of ahead-looking statements. We additionally note that the economic suggestions mentioned on this call displays estimates in keeping with assistance available now and could range materially from the quantities in the end said in HP's form 10-Q for the fiscal quarter ended April 30, 2021 and HP's other SEC filings.
throughout this webcast unless in any other case certainly stated all comparisons are yr-over-12 months comparisons with the corresponding 12 months-ago period. For monetary counsel that has been expressed on a non-GAAP groundwork, now we have covered reconciliations to the similar GAAP tips. Please confer with the tables and slide presentation accompanying cutting-edge earnings unlock for these reconciliations.
With that i'd want to flip it over to Enrique.
Enrique Lores -- President & Chief govt Officer
Thanks Beth. decent afternoon everyone and thank you for becoming a member of the call. I want to birth with the aid of acknowledging the state of the pandemic, principally in international locations similar to India. we are doing every thing we are able to for our employees, consumers and companions throughout this intricate time. whereas some elements of the area are starting to increase and reopen, there is lots greater work to do.
Turning to our consequences. It become another wonderful quarter of double-digit good and base line boom through which we delivered smartly above our guided latitude. Our performance replicate the relevance of our know-how in an increasingly excessive degree, the resilience of our enterprise mannequin, the operational excellence of our group. apart from summarizing our results, I also wish to spotlight secular developments riding sustained demand throughout our portfolio. HP know-how and capabilities are at the coronary heart of hybrid work. we're accelerating our method to drive long-term sustainable increase. This comprises carrying on with to transform the manner we function and deploy our great cash move to maximise cost introduction.
Let me birth with the quarter. In Q2 we noticed super demand for our items and delivered record revenue of $15.9 billion, an increase of 27% with balanced increase throughout Print and personal systems. Our non-GAAP web revenue multiplied 56% to $1.2 billion and we generated $1.3 billion of free cash circulation, returning $1.eight billion to shareholders. These consequences reflect continued powerful increase in consumer in addition to improvement in our business organizations as economic exercise increased. In our client segment, we delivered 72% increase in personal programs and seventy seven% boom in Print. commercial computing device profits grew 10% and industrial print became up 34%, including 45% increase in our Industrial printing agencies.
it is vital to notice that these results are towards the backdrop of industrywide part shortages and provide chain challenges. at present there isn't ample supply to sustain with the potent demand and the resurgence of COVID in Southeast Asia is creating additional pressures on our provide chain. We expect provide constraints to continue at least throughout the end of 2021. despite the fact the environment will likely remain dynamic, we're taking moves to navigate through the challenges, enabling us to bring mighty outcomes and enhance our outlook for the 2d half.
We continue to be focused on supplying within the brief-term, we are equally focused on capitalizing and to follow long-term alternatives. It is obvious that the realm will no longer simply go returned to the manner it become earlier than COVID. there was a basic shift in the means individuals work, be trained, play and create, and this shift is here to dwell. The future of work and education could be more hybrid. in line with exact
survey, greater than 60% of employees want flexibility in where and the way they work. by this future mergers [Phonetic], it's going to open the possibility to create new items and functions for our consumers. And that buyers and companies see superior mobility comfort and value, this helps our method to accelerate new enterprise model right here through more capabilities and subscriptions enabled by using the combination of our hardware and application. Underpinning all of here is a growing to be magnitude of cyber security. 88% of IT resolution makers, tell us that cyber chance has extended throughout the pandemic. This presents a tremendous probability for us to expand our safety offerings and bring essentially the most cozy and resilient PCs and Printers.
With our large differentiated portfolio, HP is uniquely placed to capitalize on these secular traits. and that i consider I've noted this is a time for mighty groups to get improved and we're innovating throughout our portfolio to fortify and grow our organizations. In personal methods, our innovation is using boom in key segments, together with remote work, training and gaming. The notebook remains primary in everyday life. we are already capitalizing on these traits in a number of techniques. Our latest award winning pc consist of points intention-constructed for hybrid work and we are developing new services like HP Provision in join that make it more convenient for IT teams to set up and guide gadgets in employee's buildings in addition to in the workplace.
within the training market the place HP is the no 1 seller, computing device sales have more than doubled due to far flung discovering. at the identical time, youngsters, the variety of PCs per hundred college students remains in the single-digits. As an business, we nonetheless have a protracted method to head to close this digital machine and as a company, we now have a large possibility to be a part of the solution. The importance of the computing device extends some distance beyond work and college. in many situations this has turn into the enjoyment middle of the home, from streaming and content material creation to the rise of gaming and eSports. In Q2 salary growth in gaming outpaced normal buyer computer increase. we are building on this electricity to expand into alluring adjacencies, together with peripherals. we are not off course to shut a hyper acquisition in Q3. We do predict to be accretive in 12 months one.
In Printers, we are leveraging our leadership across purchaser and industrial market to supply inventive answer essential in today's hybrid world. This contains accelerating the evolution of our company mannequin and subscription functions. We currently introduced the enlargement of HP+ an instant ink which are actually in 35 countries throughout North the usa and Europe. We consider HP+ will support us to optimize gadget profitability and supply a better client journey. moreover employers are trying to find extra distributed printing ambiance which plays to HP's power in approach for printers. the new LaserJet business 400 series is designed to carry seamless faraway management for each hybrid employees and new office configurations tier [Phonetic] to our collaboration. on the same time greater staff mobility is a catalyst for our Print capabilities portfolio. within our managed Print features, we've added HP Flexworker carrier to comprise far off people and department officers into our company and PS contract. this is permitting businesses similar to conventional Motors to have superior visibility and manageability throughout the printer fleet.
In our Industrial agencies, new innovation is enabling production to be extra agile and greater customized. In industrial photos, we're seeing advancements in the market and boom in hardware installations. among the customer wins this quarter for the setting up of a a hundred Indigo Press at CCL, our leader in label protection and packaging solutions. We additionally continue to peer constant double-digit growth in Print impressions and rectangular meters. In 3D, we are developing extra vertical go-to-market options, spanning equipment software and services across industries from industrial tooling to automobile to fitness and wellbeing. for example, our molded fiber tooling answer in accordance with consumer engagement and adoption including a lot of prepaid purchases and we enable them to achieve enormous manner and cost efficiencies.
furthermore, we're partnering with Ford Motor business to lengthen the lifetime of already used 3D printed elements by turning them into auto components for the F250 vans making a closed loop on waste. With our strong and distinctive portfolio, we also proceed to generate significant free money flow. And we stay concentrated on deploying our money to maximize cost introduction. we've the flexibility to return gigantic capital to shareholders and reinvest in our organizations, whereas also exploring disciplined M&A. we will continue to search for opportunities to fortify our core, expanding to appealing adjacencies and create additional increase engine. As always, we are able to take a rigorous approach to evaluating M&A, requiring strategic fit, fascinating fiscal returns that exceed those of buying our personal inventory and a robust operational plan to execute on the price proposition. And a vital enabler of our strategy is carrying on with to radically change the enterprise to turn into leaner and extra digitally enabled.
For HP, there's a continued focus on each cutting back structural fees and for investing for the future. To support us speed up our progress, we announced three new management appointments. Didier Deltort is becoming a member of HP as a President of Personalization and 3D Printing; Greg Baxter, could be our subsequent Chief Transformation Officer; and Kristen Ludgate is joining HP as our Chief people Officer. Working at the side of our leadership crew, they'll provide a boost to our innovation capabilities and support power our lengthy-time period method. And our key a part of our method is to convey effective outcomes whereas staying proper to HP's values.
final month, we announced an bold set of local weather motion goals. by 2025, we aim to achieve carbon neutrality, zero waste in HP operations and zero deforestation for HP paper and paper-based mostly packaging. We're additionally committed to achieving net zero carbon emissions throughout our total price chain through 2040. And remaining week, we announced a new set of range and inclusion dreams. This contains our pledge to obtain 50-50 gender equality in HP leadership via 2030, making up the first Fortune one hundred tech business to make this kind of dedication. i am proud to assert our partners are joining us in these efforts. nowadays over 1,400 companions have signed the expand influence to set their own long-time period goal to drive a sustainable affect. this is where the measurement and scale of HP's ecosystem actually shines.
ordinary, i'm very happy with our efficiency this quarter and excited for what lies ahead. We proceed to pressure our relentless focal point on execution, whereas taking decisive movements to capitalize on beautiful alternatives to enhance our leadership in very own techniques and Print, extend into attractive adjacencies, to enter new market and radically change the style we operate. and that i am assured that our method will proceed to create colossal shareholder cost. i know I communicate for our greater than 50,000 employees, once I say we are not content material without difficulty conserving our present position. we have a much bigger ambition.
And with that, i will turn the call over to Marie, who will take you during the particulars of our quarter and our fiscal yr outlook. Marie, over to you.
Marie Myers -- Chief monetary Officer
Thanks, Enrique. HP's 2d quarter effect spotlight each our operational electricity and the breadth of our portfolio. we're demonstrating our ability to meet customer needs and continuing on our transformation journey all while growing to be operating profit, generating amazing free cash movement and conserving our powerful capital returns, while carrying on with to make investments in the business for our future.
Turning to the details of the 2nd quarter. Q2 web salary turned into $15.9 billion, up 27% nominally and 25% in steady foreign money. locally, in consistent forex, Americas improved 32%, EMEA expanded 19% and APJ extended 23%. The year-on-12 months boom rate benefited from the prior-yr have an effect on of COVID and provide chain disruptions. Demand persisted to outpace provide and we ended the quarter with multiplied backlog in each own programs and Printing. on the maximum considering that the break up, gross margin turned into 21.7%, up 1.7 points 12 months-on-year. The increase was essentially driven by means of favorable pricing, including historically low merchandising expense and favorable forex, partially offset with the aid of greater prices. Non-GAAP working expenses have been $2 billion or 12.6% of income, up 10 foundation facets yr-on-12 months. The increase in operating expenses become essentially pushed by greater variable compensation on account of the very effective efficiency this 12 months as in comparison to Q2 2020, in addition to expanded investments in innovation and go-to-market.
Non-GAAP net OI&E fee became $sixty four million for the quarter. Non-GAAP diluted web profits per share increased 82% to $0.93, with a diluted share count of approximately 1.2 billion shares. Non-GAAP diluted net income per share excludes web benefits totaling $70 million essentially involving other tax adjustments and non-operating retirement linked credit, partly offset by way of restructuring and other prices as well as amortization of intangible property. subsequently, Q2 GAAP diluted net salary per share became $0.98.
Turning to segment performance. In Q2, very own programs benefited from powerful demand involving working and learning from domestic. income become $10.6 billion, up 27% 12 months-over-yr. Demand for our product remained very mighty with backlog expanding once again quarter-on-quarter. Drilling into the particulars, we saw strength across purchaser and commercial with income up 72% and 10% respectively. with the aid of product category, earnings changed into up forty seven% for notebooks, down 8% for computers and down 7% for workstations. amazing demand for notebooks drove total unit growth of 44% with Chromebooks representing 20% of our complete own systems instruments because the need for technology and schooling continue to develop. We additionally noticed solid capabilities connect with certain energy in commercial and significant double-digit growth in customer peripherals. own techniques delivered $710 million in working income and working margins of 6.7%. The 12 months-over-yr growth turned into essentially as a result of favorable pricing, together with lower promotion fees as well as forex, partially offset through adverse combine and better can charge together with variable compensation, commodity charges as well as investments in innovation and go-to-market.
In Print, our results mirrored persisted center of attention on execution and the power of our portfolio. we're uniquely positioned as leader in both customer and industrial and have the hardware substances and functions to convey price in a hybrid world. Q2 total print salary become $5.three billion, up 28% and total hardware devices grew 42% to $10.6 billion. by customer section, purchaser revenue turned into up seventy seven% with instruments up 45% and business revenue and contraptions have been up 34% and 22% respectively. In business, the recovery momentum persevered with revenue up 13% sequentially, but we proceed to predict the restoration to be gradual and uneven every now and then across segments and geographies.
substances revenue changed into $three.three billion, up 17%. The year-on-year increase turned into basically driven via favorable pricing in addition to ongoing purchaser demand and improving industrial demand. Our contractual business is a key element of our print strategy in both consumer and industrial printing. In consumer our fast Ink company proceed to resonate neatly with customers with cumulative enrollees growing 7% sequentially to $9.7 million. On the industrial side, we drove growth in managed print capabilities revenues, a brand new TCP bookings for the primary time on the grounds that the pandemic took hang and robust renewal TCV bookings again this quarter.
working earnings multiplied $403 million to $951 million and working margins had been 17.9%. This yr-over-yr boost become driven by increased volume and favorable pricing throughout hardware and elements, together with less promotional rate, partially offset by adverse combine and better cost.
Let me now flip to our transformation efforts and principally our cost mark downs initiatives. in the 2d yr of our software, we endured to analyze new charge mark downs alternatives that continue to be forward of our $1.2 billion gross run price structural cost discount plan. during the quarter we persisted our efforts to optimize our manufacturing facility footprint to permit a top-quality-in-classification provide chain community and boost provide resiliency whereas decreasing our can charge constitution. moreover, we continue to increase and leverage our digital capabilities to transform techniques by which we function and carry value to our purchasers. The structural cost savings from our transformation efforts provide us the flexibleness to reinvest in our business, the long-term boom and profitability.
shifting to cash circulation and capital allocation. 2nd quarter money flow from operations and free cash flow had been enhanced than anticipated at $1.4 billion and $1.3 billion respectively. In Q2, the cash conversion cycle was minus 28 days. Sequentially, the money conversion cycle become up 2 days as growth in stock essentially as a result of strategic buys drove elevated days of inventories in part offset by means of a discount in days revenue mind-blowing and better days payable stunning. For the quarter, we again a total of $1.8 billion to shareholders, which represented 137% of free money circulate. This included $1.6 billion in share repurchases and $239 million in cash dividends. looking forward, we are expecting to continue buying back shares at elevated ranges of at least $1 billion per quarter in the coming quarters until bigger return opportunities emerge.
looking forward to the third quarter and the leisure of fiscal '21, we continue to model diverse eventualities concerning supply availability, pricing dynamics and the pace of economic reopening. In particular retain right here in intellect involving our typical fiscal outlook. From a demand viewpoint, we expect to continue to peer strong demand for our PCs, particularly in purchaser. In Print, we expect strong demand in customer and persevered improvement in industrial as places of work reopen. whereas we are expecting yr-on-year income growth at FY '21 to reflect our continued growth on our strategy, it's also essential to word the boom trends in Q3 will also mirror the more challenging yr-over-yr comparisons above all in very own techniques. We are expecting provide constraints to proceed to negatively have an impact on our ability to fulfill demand in PCs and Printers, at the least during the end of calendar 2021. We are expecting gross margin drive within the second half of the 12 months in each personal programs and Print because of multiplied charges and commodities and logistics as in comparison to Q2 tiers and as we predict to peer some more normalization in the market and pricing atmosphere. We are expecting working expenses within the 2nd half of the year to be extra corresponding to Q1 run fee. ultimately, we continue to carefully monitor the current COVID resurgence and its potential impact to our deliver chain, specifically in Southeast Asia.
Taking these concerns into consideration, we are featuring the following assistance for Q3 and FY '21. We predict third quarter non-GAAP diluted net revenue per share to be in the latitude of $0.eighty one to $0.85 and third quarter GAAP diluted web earnings per share to be n the latitude of $0.77 to $0.81. We are expecting FY '21 non-GAAP diluted web revenue per share to be within the latitude of $three.40 to $3.50 and FY '21 GAAP diluted net salary per share to be within the latitude of $3.24 to $3.34. For FY '21, we predict our free money circulate to be at the least $4 billion.
And now i would like at hand it returned to the operator and open the demand your questions.
Questions and answers:
Operator
thank you. And we will now begin the question-and-answer session. [Operator Instructions] Our first question today comes from Amit Daryanani with Evercore.
Amit Daryanani -- Evercore ISI -- Analyst
respectable afternoon. Thanks for taking my query. I actually have few. the first one I bet changed into hoping if you could talk a bit bit in regards to the Print margins in the April quarter. i'm somewhat stunned they have been down on a sequential basis with the aid of just about 200 foundation features despite the fact that the deliver mix I think became pretty good in July versus April. So could you simply contact on what came about to the Print margins and then -- in the April quarter, and the way do we believe about it in the back half of the yr?
Marie Myers -- Chief fiscal Officer
bound. No. Thanks, Amit. And respectable afternoon. So the decline we noticed within the Print operating rate became basically driven by using a couple of factors. So firstly, one of the most damaging charge in commodities, manufacturing facility and logistics and secondly by way of investments that we made in opex throughout R&D, advertising to aid future boom and higher variable comp. And look, ordinary i might simply say we now have viewed power and resiliency in our extensive -- in our Print portfolio, which truly positions us well against the competition. And as we seem to be ahead into the long run, we do predict our margins to be within the lengthy-term latitude of 16% to 18%.
And let me provide you simply a number of issues to think about as you believe in regards to the 2nd half. So obviously, the full 12 months turned into very powerful within the first half. So we predict to be toward the higher conclusion of the latitude. And simply a couple of different facets i'd add is, one of the vital first rate improvement that we saw in H1, specifically in favorable pricing will delivery to curb. And so we would are expecting that our mix as smartly would normalize because the frequently -- workplace reopens. We're prone to see greater commodity cost, logistics charges and to be able to potentially have an impact on our means to fulfill demand.
and then finally, there is some seasonal combine headwinds in Q2 as -- in substances as Q2 is typically our strongest quarter for materials. So simply preserve that in mind, as you're pondering about the 2d half, and that i'll simply conclude that we're within the company of generating incremental OP dollars.
Enrique Lores -- President & Chief government Officer
I suppose a key element for our performance for Print in this quarter is that we're basically happy of how the Print business did. whether in case you study yr-on-year evaluation, even if you look at growth, it's in reality aligned to the trends that we described last quarter, the rebalancing that we see occurring between domestic and office, the increase that we are beginning to see in one of the crucial industrial and industrial classes. So Print had a very potent quarter and we expect it to continue in the course of the leisure of the year.
Amit Daryanani -- Evercore ISI -- Analyst
received it. that is beneficial. and then if I may simply comply with-up in related dynamic definitely, Enrique I consider a large center of attention for each person is making an attempt to be mindful what is regular state EPS look like for HP over time, specially given the strong efficiency you will have had in the first half, and that i suppose your back half courses implies EPS will decline excessive single-digits 10% plus in Q3 and this fall. i am curious, i know you touched on Print, but I bet what are the other vectors which are using the slowdown in EPS, especially given the fact you're elevated backlog? and then do you think the $0.75, $0.80 implied EPS in October quarter is a illustration of what typical EPS run fee goes to look like for HP?
Enrique Lores -- President & Chief government Officer
sure, so first of all, let me speak concerning the 12 months-on-year assessment how we put things in perspective. EPS for the 2nd half is starting to be more than forty% from where we have been a year ago. So we're truly representing very strong increase. similtaneously you are saying, we proceed to look very mighty demand across all of our portfolio. We expect this to proceed to turn up throughout the 2d half, however we're going to be confined through give, given the shortages that we see in the market. And here is a fundamental half of what is driving our book. As we've achieved during the past, we're prudent after we guide, we have been during the past and we are able to continue to be. If we can do enhanced, we can, we may well be there more suitable because of greater pricing, because we might do better, on account of enhanced ability. So once again prudent book, we now have established that if we can do superior we are able to do greater, and therefore given all of the anomalies that we see and this provide confined, I do not believe we should still be the usage of the this autumn number to venture the enterprise sooner or later.
Operator
Our subsequent query comes from Shannon cross with go research.
Shannon cross -- go research -- Analyst
thanks very plenty. I had a query on inventory, each on your steadiness sheet and then inside the channel. Up about $800 million quarter-over-quarter, i'm curious, how lots of that turned into component purchasing or might be some end product just given supply chain hiccups? and then Lenovo stated today. I feel that they see two to three weeks of stock -- channel stock on PCs usually, I cannot be aware I consider it turned into six to eight weeks is their general. are you able to speak a little bit about what you're seeing within the channel and each on the computer and the printer side? and then I've a observe-up. thanks.
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Enrique Lores -- President & Chief government Officer
Let me beginning and that i think possibly earlier than Marie shares one of the most numbers, let me share one of the crucial approach that we have at the back of it. What we shared ultimate quarter, that we had been expecting probably the most provide challenges that we're seeing, we decided to operate with greater levels of HOI and here's what you see mirrored within the numbers. So Marie why do not you provide some color on whether the increase we have considered in HOI.
Marie Myers -- Chief fiscal Officer
yes. No, fully, Enrique. So let me step lower back and set some context for you Shannon. So obviously, we've viewed that strong demand across friends in Print. And as you recognize, we're also lapping the manufacturing facility closures and disruptions from those inventory drawdowns last 12 months and obviously that impacted the equipment all the way through. and then we're undoubtedly making an attempt to proceed to navigate the supply chain challenges given the continuing nature of the pandemic. so to approve assurance of give, we're carrying bigger degrees of owned inventory and as we talked about, we do this to navigate right through this time. So HOI at this element is likely to live multiplied to support enterprise boom. So -- and that contains strategic buys to reply your query, the place primarily in CPUs.
and then occurring to the 2d part of your query round channel inventory, common CI in PS, Print, hardware and supplies is presently beneath ancient stages. And our backlog is up frankly quarter-on-quarter, and that offers us self assurance on the demand that we're seeing Shannon.
Shannon pass -- go analysis -- Analyst
okay, first-rate. after which simply a question on pricing. I think you mentioned you are expecting some normalization in pricing, however what we're listening to is costs are somewhat increasing. So is that this more kind of a normal expense, so mix have an impact on or what are you seeing, as a result of if there is no provide available and demand continues to be powerful, I do not see where you could no longer have some pricing power, sorry pricing knowledge? thanks.
Enrique Lores -- President & Chief government Officer
thanks, Shannon. I feel it's price to head during the discussion company by means of enterprise. in the case of Print, we're having price raises throughout the board and you've got -- that you would be able to see in our numbers a rise in the typical cost. within the case of PCs, pricing costs are growing to be for expense in each class are going up but overall rate is happening on account of combine, because of the place we're seeing the better demand available in the market. So costs are up, but as a result of combine, you may additionally see the average cost taking place.
Marie Myers -- Chief fiscal Officer
And Shannon just to add to Enrique's comments, one of the vital favorable pricing that we noticed within the improvement in the first half is starting to abate within the 2d half as well.
Operator
Our subsequent question comes from Toni Sacconaghi with Bernstein.
Toni Sacconaghi -- Bernstein -- Analyst
yes, thanks for taking the query. I just are looking to -- simply trying to square the circle on a couple of things, especially around your assistance. So seasonally you might be typically up in EPS and you're guiding for EPS to be down about 10% sequentially. revenue is customarily up three% or 4%. Are you suggesting that salary is going to be decrease than ordinary seasonal or is that this all margin power? And the purpose I combat with the margin question is, it sounds like your backlog is even greater. make sure you be capable of promote whatever thing you have got. you've got incremental stock so that may still will let you arguably meet demand more advantageous. So when you are in a condition where individuals are alternate -- chasing demand and the mix does not basically change, why do you predict pricing to abate? So I bet a couple of questions in there. One, do you expect an have an impact on to suitable line that is diverse from standard seasonal? Or is all of it margin when it comes to your method below average seasonal EPS tips? and then how can we square that margin drive with the incontrovertible fact that there's basically amazing demand, you've got better inventory to meet that demand and also you may still be able to proceed to take price?
Marie Myers -- Chief fiscal Officer
hiya, Toni, respectable afternoon. it's Marie. So let me walk you through a way to believe about our e book and primarily i could offer you a sense of what the headwinds and the tailwinds are searching like. So first off, with appreciate to your comments on earnings. We do are expecting that income will be driven more with the aid of accessible deliver than demand and there are expanding margin headwinds versus the primary half. With all that spoke of, as Enrique noted correct at the onset of the name, we are guiding for double-digit operating profit and EPS increase in Q3. and albeit, we trust that here is a prudent ebook within the context of the latest environment. surely, if we can do more advantageous, we always will.
but let me stroll you via what we're seeing from the headwinds and tailwinds to offer you some of that color. So on the headwinds, we are seeing part expenses and logistics costs in each PS and Print, and they will be an incremental headwind each quarter-on-quarter and yr-on-yr, and people average basket of commodities, especially in panel, ICs and PS after which ICs and resins in Print. after which there are different tailwinds that we've got had in the first half round those favorable pricing dynamics. they will start to dissipate as we lap the onset of these traditionally low promoting fees. And moving into your comments on tailwinds and how we're thinking about it, demand in each PS and Print continue absolutely to be very strong as you outlined. We're seeing those tendencies of hybrid work proceed, but without doubt they're restrained by way of supply.
So -- and also, simply to sort of wrap up right here, as we mentioned, we will proceed to come capital to shareholders. So we expect that that rebuild [Phonetic] at least about $1 billion 1 / 4. So for the entire year, we expect PS margins may be a bit of above the high end of our longer term range of three.5% to 5.5% and Print for the full 12 months on the larger end of 16% to 18%. So at this aspect, we remain very assured of our book and if we can do enhanced like I noted, we are able to.
Enrique Lores -- President & Chief government Officer
and that i suppose Toni, some thing vital to having consideration this 12 months, is that in fact the company and the market is pushed by way of provide, now not with the aid of demand. So therefore comparing this 12 months with different years according to seasonality, it is going to now not work, as a result of actually the dynamics in the back of the market are very distinctive. What we continue to peer is awfully strong demand across our portfolio and this is in reality the important thing driver is how tons deliver we can get.
Toni Sacconaghi -- Bernstein -- Analyst
If I could simply observe-up on the pricing dynamics. So if I study buyer print ASPs closing quarter have been up 30%, this quarter had been up 27%. If we went to anything like zero pricing, it could truly put your working margins dramatically down in the IPG community. So I need to understand what is riding this pricing? So is that this merely an absent -- an absence of discounting? is this a -- we're no longer building lower end SKUs with lower margin and we're forcing americans to take variety of extra richly configured purchaser printers which have more desirable margin or is it we're in fact elevating price as a result of we will, as a result of demand is constrained. but most likely 27% ASP growth this quarter, 30% remaining quarter is helping your economics highly. As you suggested, it be going to be less but I need to have in mind very mainly what is using that ASP boost?
Enrique Lores -- President & Chief government Officer
I think Toni we, in a circumstance just like the one we are facing, we're doing anything else we will to optimize our business and hence we're guiding all the movements that you have been mentioning. We of route have decreased drastically our promotional coupon codes, as a result of how potent the demand is. we are nevertheless in demand toward greater margin products and naturally, within the circumstances the place we can, additionally our fees are going up because as we talked about before, we are seeing -- we live in an inflationary atmosphere and every time we do we will -- we now have multiplied prices.
Operator
Our next query comes from Katy Huberty with Morgan Stanley.
Katy Huberty -- Morgan Stanley -- Analyst
sure, thank you. good afternoon. I heard you mentioned that workstation backlog is up sequentially. Is your Print backlog additionally up versus the first quarter? and then, are you able to talk about how the makeup of backlog is changing as you go during the yr? Is there any shift from consumer to industrial from Chromebook to other PCs and just combine between hardware and materials? after which I've a observe-up.
Enrique Lores -- President & Chief government Officer
Let me take your question. hello, Katy. So the reply to the primary query is, yes, we're seeing a rise in backlog throughout each PCs and Printers. And when it comes to how can we are expecting this to evolve, is definitely aligned to where do we see demand coming all through the subsequent quarters. As we mentioned before, we expect throughout the end of the year, a rise within the demand on the industrial aspect, both on the computer aspect and also on the Print facet, and here's where -- on account of that, backlog could be entering into the path. however nonetheless we proceed to see effective demand on purchaser as i discussed before.
Katy Huberty -- Morgan Stanley -- Analyst
extraordinary, thanks. and then pc margins this quarter had been a little bit decrease than the flat sequential assistance. What have been the surprises on costs or combine in the quarter? after which may still we expect with charge inflation that computer margins return to that roughly 5% latitude from a couple of years in the past?
Marie Myers -- Chief financial Officer
yes, Katy, it's Marie. hey, first rate afternoon. So let me hit up your margin query. So sure, the margins have been potent once again at 6.7% which as you understand is above the high end of our lengthy-time period range and a few of that changed into without doubt driven by way of that potent pricing discipline that we now have spoken about in addition to some advantage from currency, however truly it turned into offset by means of mix and some of these commodity headwinds. And as we get into the whole 12 months, we do predict that margins to be a bit above the high end of our range of 3.5% to five.5% and it be going to be pushed through the Topics that you just're hearing nowadays, peculiarly around these persevered shortages in commodities and that's the reason absolutely variety of reworking into larger element expenses after which knock on cost and logistics. but -- and then i would finally just add, we are beginning to enter a duration the place the influence of favorable pricing is going to beginning to reduce as we birth to lap that length in time.
Operator
Our subsequent question comes from Tim lengthy with Barclays.
Tim lengthy -- Barclays -- Analyst
thanks. sure, two if I might. First on the Print facet, could you talk a bit bit about, you mentioned one of the crucial consumer numbers for the as-a-carrier providing each for consumer and industrial. It looks like it be pretty regular growth right here. could you speak a little bit about one of the most underlying drivers past that might be usage or anything else it really is probably displaying the strength there other than simply the consumer base? and then second, if -- you pointed out yet another quarter of very strong Chromebook. might you talk a bit bit about the affects there on the model margin ASP? after which additionally as you are expecting to look a little bit of normalization to computer increase. Is the expectation that the fast increase in Chromebook will be some thing on the way to pull again or do you feel it's whatever thing that might birth replacing different mid and reduce tiers of the of the computing device section? thank you.
Enrique Lores -- President & Chief govt Officer
Many questions in a single question. i will try to go one after the other. So ranging from Print, concerning the dynamics we're seeing are very similar to what we explained 1 / 4 in the past and the evolution is what we have been expecting. before to pre-pandemic degrees, we proceed to peer our home business to perform stronger than what we have been projecting. And here's driving the demand that we see both on-premise and additionally on supplies.
And on the office side, we've considered the opposite impact. As many places of work are nonetheless closed and individuals don't seem to be going back to the workplace, the average workplace company proceed to be below the place it was before the pandemic. during the end of the yr, we predict the circumstance to reverse as places of work will reopen, we are expecting our office enterprise to operate enhanced and at the same time greater people might be -- much less individuals could be working from domestic, we are expecting that it'll have also an affect, a negative have an impact on on our home business. So a similar style to what we anticipated in Puerto Rico.
in terms of demand on the Chromebook aspect, we continue to look very strong demand from schooling. we have -- here's what is driving the increase of Chromebooks and here's what also once we were speaking earlier than in regards to the ASPs on the computing device facet and the combine there, here's what we've in probably the most impact in the pricing on the notebook side, as a result of Chromebooks normal have lower expenditures than the rest of the pc portfolio.
Operator
Our subsequent query comes from Aaron Rakers with Wells Fargo.
Aaron Rakers -- Wells Fargo -- Analyst
sure, thanks for taking the question and congratulations on a further solid quarter. First question I have a comply with-up is, when we seem to be at the results of the commercial enterprise beginning to recover, I think you pronounced 10% growth. I think your peer suggested boom around that tonight. So i'm curious of how you're considering in regards to the again-to-work, lower back to office fashion? On the industrial laptop aspect, any techniques on sort of the installed base, the age of the installed base, simply how you believe that demand shapes up throughout the course of the yr?
Enrique Lores -- President & Chief government Officer
certain. So once again, similar to what we shared a quarter in the past, we expect the demand on the commercial side to start to get better and we are starting to see some healing as you're saying. We -- what we are seeing from our consumers is that they are realizing of the need to put money into more advantageous machine for his or her officers when personnel come again and this is really going to be assisting each the Print and the laptop business as you had been mentioning.
in terms of dynamics, we proceed to look our shift from desktops into notebooks, because even if employees can be going lower back to their office, we still see the need for agencies to offer a hybrid means of working and enabling their employees to work-from-domestic and for this reason, we expect the shift mix from computers into notebooks to proceed. we now have talked during the past, universal has a good impact for the business on account of both pricing however additionally because of the recycled -- the recycle instances at laptop that computer has in comparison to the laptop.
Aaron Rakers -- Wells Fargo -- Analyst
yes. after which as a short observe-up. simply on the free cash circulation. I suppose you might have stuck with the $four billion free cash stream or at least $4 billion for this year. you are raising EPS. i'm simply making an attempt to probably keep in mind why free money circulation wouldn't be greater and trending higher with the EPS?
Marie Myers -- Chief monetary Officer
yes, sure. Aaron. Let me go ahead and hit that one up for you. So seem, concerning free -- future free cash flow, as you know, here's always driven through our strong internet revenue. What we're pondering is that our working capital goes to be a headwind as a result of probably the most decisions we're making to elevate extra inventory. So look for '21, we proceed to stay confident undoubtedly in our outlook and assured in our ebook of at least $four billion in free money circulate.
Enrique Lores -- President & Chief government Officer
and i feel, let me add an extra remark. we're in reality happy with the growth we've made in free cash flow in Q1 and Q2. The book that we have offered is of as a minimum $4 billion for the yr and as Marie just mentioned, we're truly expecting to be at that stage.
Operator
Our subsequent question comes from Ananda Baruah with Loop Capital.
Ananda Baruah -- Loop Capital -- Analyst
hi there, thanks guys for taking the query. Congrats on the potent outcomes. Two brief ones, if I could. Enrique, in line with conversations with company shoppers and given the backlog, do you get the feel that this momentum will really proceed into calendar '22. Would love to get any up to date context there? and then I just have a quick follow-up. Thanks.
Enrique Lores -- President & Chief executive Officer
thanks for the query. And we think that the alterations that we have seen driven by using the pandemic are going to be permanent and are going to continue to have an have an impact on in 2021 and 2022. further and further individuals will have -- should be working in a hybrid method. We think that marquees will continue to be taught from govt from the time from school and here's going to proceed to have a positive have an impact on on the typical dimension of the computing device market. And hence, we expect the measurement of the market to proceed to be tremendously greater than what we were expecting earlier than the pandemic.
additionally to that as we simply described, we additionally predict to look strong commercial demand in the course of the end of the year. So, this can additionally assist and put much more -- pressure even more growth on the computer aspect.
Ananda Baruah -- Loop Capital -- Analyst
And simply sticking there, you're going returned to the questions about mix on the computer aspect, would -- you observed strengthening Chromebook and how that -- as I feel of variety of utility mix have an effect on on ASCs. Would that now not reverse as commercial, so it does not -- continue to open up, may still we no longer predict that to reverse and carry kind of into '22 the combine?
Enrique Lores -- President & Chief govt Officer
So in terms of mix, yes, we predict the mixture of industrial to go up during the next quarter. And here's why Marie become citing earlier than that we are expecting typical working earnings of non-public programs to be a little bit better than our guided latitude throughout the conclusion of the yr.
Ananda Baruah -- Loop Capital -- Analyst
that's high-quality, thanks so a good deal.
Enrique Lores -- President & Chief govt Officer
thanks.
Operator
Our subsequent question comes from Matt Cabral with credit score Suisse.
Matt Cabral -- credit score Suisse -- Analyst
sure, thanks. On the Print facet, i was wondering if you provide us an replace on the place you stand in making an attempt to fill up one of the most supplies channel stock? simply discuss how big of an element that become in the quarter and the way we may still consider about the contribution from here? and maybe greater broadly just an replace to your efforts to add visibility as we start brooding about getting under those Tier 1 and Tier 2 distributors that you have available?
Marie Myers -- Chief fiscal Officer
sure, no, bound, Matt. So maybe i'll just birth it with a quick comment on the place we see the channel at the moment relative to elements and that i suppose i mentioned earlier that our ordinary our channel inventory degrees for the company are kind of under historical stages. And that includes provide -- components and clearly we proceed to display screen that very carefully, so that we will retain a healthy appropriate stages. but this quarter given -- in case you need it lower back a year in the past, we had the form of the onset of the pandemic, so we have had that channel depletion that occurred last year. And so we did see some improvement in the yr-on-12 months evaluate. And from that have an effect on of the inventory actions, we estimate that to be approximately three% year-on-year. And as you recognize, we have a multi-tiered channel. So this is our premiere estimate in response to the records we've including our channels for product throughout the channel and use of stock.
Matt Cabral -- credit score Suisse -- Analyst
it really is effective. after which I consider it changed into ultimate week that you just guys announced the brand new head of your 3D printing business. perhaps only a broader replace on how 3D has been ramping? the place you guys stand with the push and simply maybe a much bigger image on after we should still delivery to brooding about some greater specific disclosure, simply to feel about the affect of that company extra going ahead?
Enrique Lores -- President & Chief executive Officer
sure. Let me take that one. So first of all, this quarter, we began to look or we now have considered the previous one solid growth on the 3D facet. nevertheless it grew greater than 30% which is a really solid quantity. and that i feel these confirmed one of the vital capabilities that this business had within the lengthy-time period. We had announced earlier than we are complementing our method on 3D to also focal point on some conclusion-to-end applications the place we suppose we will get much more cost than simply with the aid of promoting printers or consumables and we had been citing on our prepared remarks, the work that we're doing a molded fiber for example. however we definitely believe that further and further, we are able to have, we could be focusing on applications to catch cost during this business and here is why we chosen Didier Deltort to steer this business. He comes from the fitness and well being business. So he comes from an industry that should be disrupted with the aid of 3D and we think this could be including tremendous value to the definition of our method.
and then when it comes to after we could be extra clear on the 3D company. I think I've mentioned earlier than, there are two foremost issues. One is we need the enterprise to have bigger scale and 2nd, and doubtless most critical, we should have an improved define enterprise mannequin. And here is where this combination of marketing printer for resources are going after conclusion-to-end applications is so essential. So while we can have a complete viewpoint of where this will be going long term is after we can be proposing more visibility.
Operator
Our final query today comes from Sidney Ho with Deutsche bank.
Jeffrey Rand -- Deutsche financial institution -- Analyst
hi, this is Jeff Rand on for Sidney. can you provide us an update on the competitive ambiance to your very own systems company and the way this has changed during the pandemic and now tight provide ambiance?
Enrique Lores -- President & Chief executive Officer
sure, I think that first of all, as we now have described earlier than, in fact the efficiency of this enterprise now could be more driven by way of supply than by means of the strength of the portfolio. Now then again, we are basically pleased with the growth we now have made from a portfolio perspective. We -- in case you appear at the innovation that we now have added this quarter, we gained massive awards across both purchaser and industrial items. we now have some of the broadest portfolios available in the market, protecting from low end training products to excessive end commercial products and we're in a really solid position to proceed to develop share as we did this quarter that indicates really the relevance of our portfolio.
Jeffrey Rand -- Deutsche financial institution -- Analyst
exquisite and simply my comply with-up, how should still we suppose about your working expenses trending within the near term as cost like company commute delivery to come back?
Enrique Lores -- President & Chief govt Officer
well, I believe in case you appear at the projection that we have for the 2d half, we think we should be going back toward the same level to what we had been in Q1.
Operator
This concludes our question-and-reply session. i would want to flip the name returned over to Enrique Lores for any closing remarks.
Enrique Lores -- President & Chief government Officer
k. So let me close and thanks everyone for having joined us today. I feel the effective consequences of the quarter display the relevance of HP in this hybrid world and the way our expertise is going to be assisting customer to actually perform in a really distinct atmosphere. we are definitely glad with the boom opportunities that we see each in our core markets, in appealing adjacencies and also within the new segments that we are developing. And we are going to continue to innovate across our know-how to proceed to create and force differentiation. thank you on your time these days and looking out ahead to meet in adult someday quickly. thank you.
Operator
[Operator Closing Remarks]
length: 58 minutes
name individuals:
Beth Howe -- Head of Investor members of the family
Enrique Lores -- President & Chief govt Officer
Marie Myers -- Chief fiscal Officer
Amit Daryanani -- Evercore ISI -- Analyst
Shannon go -- move research -- Analyst
Toni Sacconaghi -- Bernstein -- Analyst
Katy Huberty -- Morgan Stanley -- Analyst
Tim long -- Barclays -- Analyst
Aaron Rakers -- Wells Fargo -- Analyst
Ananda Baruah -- Loop Capital -- Analyst
Matt Cabral -- credit Suisse -- Analyst
Jeffrey Rand -- Deutsche financial institution -- Analyst
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