HP (NYSE: HPQ)
- Second quarter GAAP diluted net earnings per share ("EPS") of
$1.07, above the previously provided outlook of $0.40 to $0.50
per share
- Second quarter non-GAAP diluted net EPS of $0.80, within the
previously provided outlook of $0.73 to $0.83 per share
- Second quarter net revenue of $12.9 billion, down 21.7% from
the prior-year period
- Second quarter net cash provided by operating activities of
$0.6 billion, free cash flow of $0.5 billion
- Second quarter returned $0.3 billion to shareholders in the
form of dividends
HP Inc.'s
fiscal 2023 second quarter financial performance |
|
Q2 FY23 |
Q2 FY22 |
Y/Y |
GAAP net revenue ($B) |
$ |
12.9 |
$ |
16.5 |
(21.7)% |
GAAP operating
margin |
|
5.9% |
|
7.8% |
(1.9) pts |
GAAP net earnings
($B) |
$ |
1.1 |
$ |
1.0 |
7% |
GAAP diluted net
EPS |
$ |
1.07 |
$ |
0.94 |
14% |
Non-GAAP operating
margin |
|
8.7% |
|
8.8% |
(0.1) pts |
Non-GAAP net
earnings ($B) |
$ |
0.8 |
$ |
1.2 |
(31)% |
Non-GAAP diluted
net EPS |
$ |
0.80 |
$ |
1.08 |
(26)% |
Net cash provided
by operating activities ($B) |
$ |
0.6 |
$ |
0.5 |
25% |
Free cash flow
($B) |
$ |
0.5 |
$ |
0.4 |
54% |
Notes to tableInformation about HP Inc.'s use of non-GAAP
financial information is provided under "Use of non-GAAP financial
information" below.
Net revenue and EPS results
HP Inc. and its subsidiaries (“HP”) announced fiscal 2023 second
quarter net revenue of $12.9 billion, down 21.7% (down 18.0% in
constant currency) from the prior-year period.
“Our disciplined execution and strong innovation in a tough
macro environment allowed us to deliver non-GAAP EPS at the
high-end of our target in Q2,” said Enrique Lores, HP President and
CEO. “We are well-positioned to win in our markets and drive
long-term sustainable growth as we make continued progress against
our Future Ready plan.”
Second quarter GAAP diluted net EPS was $1.07, up from $0.94 in
the prior-year period and above the previously provided outlook of
$0.40 to $0.50. Second quarter non-GAAP diluted net EPS was $0.80,
down from $1.08 in the prior-year period and within the previously
provided outlook of $0.73 to $0.83. Second quarter non-GAAP net
earnings and non-GAAP diluted net EPS excludes after-tax
adjustments of $(269) million, or $(0.27) per diluted share,
related to restructuring and other charges, acquisition and
divestiture charges, amortization of intangible assets,
non-operating retirement-related credits and tax adjustments.
Asset management
HP's net cash provided by operating activities in the second
quarter of fiscal 2023 was $0.6 billion. Accounts receivable ended
the quarter at $4.1 billion, up 1 day quarter over quarter to 29
days. Inventory ended the quarter at $7.2 billion, up 5 days
quarter over quarter to 65 days. Accounts payable ended the quarter
at $13.3 billion, up 10 days quarter over quarter to 120 days.
HP generated $0.5 billion of free cash flow in the second
quarter. Free cash flow includes net cash provided by operating
activities of $0.6 billion adjusted for net investments in leases
of $35 million and net investments in property, plant and equipment
of $130 million.
HP’s dividend payment of $0.2625 per share in the second quarter
resulted in cash usage of $0.3 billion. HP exited the quarter with
$1.9 billion in gross cash, which includes cash, cash equivalents
and restricted cash of $1.9 billion, and short-term investments of
$3 million included in other current assets. Cash, cash equivalents
and restricted cash includes $17 million of restricted cash related
to amounts collected and held on behalf of a third party for trade
receivables previously sold.
Fiscal 2023 Second quarter segment results
- Personal Systems net revenue was $8.2 billion, down 29% year
over year (down 25% in constant currency) with a 5.4% operating
margin. Consumer PS net revenue was down 39% and Commercial PS net
revenue was down 24%. Total units were down 28% with Consumer PS
units down 34% and Commercial PS units down 23%.
- Printing net revenue was $4.7 billion, down 5% year over year
(down 2% in constant currency) with a 19.0% operating margin.
Consumer Printing net revenue was down 19% and Commercial Printing
net revenue was up 5%. Supplies net revenue was down 4% (down 3% in
constant currency). Total hardware units were down 4% overall, with
Consumer Printing units down 5% and Commercial Printing units
flat.
OutlookFor the fiscal 2023 third quarter, HP
estimates GAAP diluted net EPS to be in the range of $0.61 to $0.71
and non-GAAP diluted net EPS to be in the range of $0.81 to $0.91.
Fiscal 2023 third quarter non-GAAP diluted net EPS estimates
exclude $0.20 per diluted share, primarily related to restructuring
and other charges, acquisition and divestiture charges,
amortization of intangible assets, non-operating retirement-related
credits, tax adjustments and the related tax impact on these
items.
For fiscal 2023, HP estimates GAAP diluted net EPS to be in the
range of $2.91 to $3.11 and non-GAAP diluted net EPS to be in the
range of $3.30 to $3.50. Fiscal 2023 non-GAAP diluted net EPS
estimates exclude $0.39 per diluted share, primarily related to
restructuring and other charges, acquisition and divestiture
charges, amortization of intangible assets, debt extinguishment
costs, non-operating retirement-related credits, tax adjustments
and the related tax impact on these items. For fiscal 2023, HP
anticipates generating free cash flow in the range of $3.0 to $3.5
billion.
More information on HP's earnings, including additional
financial analysis and an earnings overview presentation, is
available on HP's Investor Relations website at
investor.hp.com.
HP's FY23 Q2 earnings conference call is accessible via audio
webcast at www.hp.com/investor/2023Q2Webcast.
About HP Inc.HP Inc. (NYSE: HPQ) is a global
technology leader and creator of solutions that enable people to
bring their ideas to life and connect to the things that matter
most. Operating in more than 170 countries, HP delivers a wide
range of innovative and sustainable devices, services and
subscriptions for personal computing, printing, 3D printing, hybrid
work, gaming, and more. For more information, please visit
http://www.hp.com.
Use of non-GAAP financial informationTo
supplement HP’s consolidated condensed financial statements
presented on a generally accepted accounting principles (“GAAP”)
basis, HP provides net revenue on a constant currency basis,
non-GAAP total operating expense, non-GAAP operating profit,
non-GAAP operating margin, non-GAAP tax rate, non-GAAP net
earnings, non-GAAP diluted net EPS, free cash flow, gross cash and
net cash (debt) financial measures. HP also provides forecasts of
non-GAAP diluted net EPS and free cash flow. Reconciliations of
these non-GAAP financial measures to the most directly comparable
GAAP financial measures are included in the tables below or
elsewhere in the materials accompanying this news release. In
addition, an explanation of the ways in which HP’s management uses
these non-GAAP measures to evaluate its business, the substance
behind HP’s decision to use these non-GAAP measures, the material
limitations associated with the use of these non-GAAP measures, the
manner in which HP’s management compensates for those limitations,
and the substantive reasons why HP’s management believes that these
non-GAAP measures provide useful information to investors is
included under “Use of non-GAAP financial measures” after the
tables below. This additional non-GAAP financial information is not
meant to be considered in isolation or as a substitute for net
revenue, operating expense, operating profit, operating margin, tax
rate, net earnings, diluted net EPS, cash (used in) provided by
operating activities or cash, cash equivalents and restricted cash
prepared in accordance with GAAP.
Forward-looking statementsThis document
contains forward-looking statements based on current expectations
and assumptions that involve risks and uncertainties. If the risks
or uncertainties ever materialize or the assumptions prove
incorrect, they could affect the business and results of operations
of HP Inc. and its consolidated subsidiaries which may differ
materially from those expressed or implied by such forward-looking
statements and assumptions.
All statements other than statements of historical fact are
statements that could be deemed forward-looking statements,
including, but not limited to, any statements regarding the impact
of the COVID-19 pandemic; projections of net revenue, margins,
expenses, effective tax rates, net earnings, net earnings per
share, cash flows, benefit plan funding, deferred taxes, share
repurchases, foreign currency exchange rates or other financial
items; any projections of the amount, timing or impact of cost
savings or restructuring and other charges, planned structural cost
reductions and productivity initiatives; any statements of the
plans, strategies and objectives of management for future
operations, including, but not limited to, our business model and
transformation, our sustainability goals, our go-to-market
strategy, the execution of restructuring plans and any resulting
cost savings (including the fiscal 2023 plan), net revenue or
profitability improvements or other financial impacts; any
statements concerning the expected development, demand,
performance, market share or competitive performance relating to
products or services; any statements concerning potential supply
constraints, component shortages, manufacturing disruptions or
logistics challenges; any statements regarding current or future
macroeconomic trends or events and the impact of those trends and
events on HP and its financial performance; any statements
regarding pending investigations, claims, disputes or other
litigation matters; any statements of expectation or belief as to
the timing and expected benefits of acquisitions and other business
combination and investment transactions (including the recent
acquisition of Plantronics, Inc. (“Poly”)); and any statements of
assumptions underlying any of the foregoing. Forward-looking
statements can also generally be identified by words such as
“future,” “anticipates,” “believes,” “estimates,” “expects,”
“intends,” “plans,” “predicts,” “projects,” “will,” “would,”
“could,” “can,” “may,” and similar terms.
Risks, uncertainties and assumptions that could affect our
business and results of operations include factors relating to the
impact of macroeconomic and geopolitical trends, changes and
events, including the Russian invasion of Ukraine and tension
across the Taiwan Strait and the regional and global ramifications
of these events; recent volatility in global capital markets,
increases in benchmark interest rates, the effects of inflation and
instability of financial institutions; risks associated with HP’s
international operations; the effects of the COVID-19 pandemic; the
execution and performance of contracts by HP and its suppliers,
customers, clients and partners, including logistical challenges
with respect to such execution and performance; changes in
estimates and assumptions HP makes in connection with the
preparation of its financial statements; the need to manage (and
reliance on) third-party suppliers, including with respect to
component shortages, and the need to manage HP’s global, multi-tier
distribution network, limit potential misuse of pricing programs by
HP’s channel partners, adapt to new or changing marketplaces and
effectively deliver HP’s services; HP’s ability to execute on its
strategic plans, including the previously announced initiatives,
business model changes and transformation; execution of planned
structural cost reductions and productivity initiatives; HP’s
ability to complete any contemplated share repurchases, other
capital return programs or other strategic transactions; the
competitive pressures faced by HP’s businesses; risks associated
with executing HP’s strategy and business model changes and
transformation; successfully innovating, developing and executing
HP’s go-to-market strategy, including online, omnichannel and
contractual sales, in an evolving distribution, reseller and
customer landscape; the development and transition of new products
and services and the enhancement of existing products and services
to meet evolving customer needs and respond to emerging
technological trends; successfully competing and maintaining the
value proposition of HP’s products, including supplies; challenges
to HP’s ability to accurately forecast inventories, demand and
pricing, which may be due to HP’s multi-tiered channel, sales of
HP’s products to unauthorized resellers or unauthorized resale of
HP’s products or our uneven sales cycle; integration and other
risks associated with business combination and investment
transactions; the results of our restructuring plans (including the
fiscal 2023 plan), including estimates and assumptions related to
the cost (including any possible disruption of HP’s business) and
the anticipated benefits of our restructuring plans; the protection
of HP’s intellectual property assets, including intellectual
property licensed from third parties; the hiring and retention of
key employees; disruptions in operations from system security
risks, data protection breaches, cyberattacks, extreme weather
conditions or other effects of climate change, medical epidemics or
pandemics such as the COVID-19 pandemic, and other natural or
manmade disasters or catastrophic events; the impact of changes to
federal, state, local and foreign laws and regulations, including
environmental regulations and tax laws; our aspirations related to
environmental, social and governance matters; potential impacts,
liabilities and costs from pending or potential investigations,
claims and disputes; and other risks that are described in HP’s
Annual Report on Form 10-K for the fiscal year ended October 31,
2022 and HP’s other filings with the Securities and Exchange
Commission.
As in prior periods, the financial information set forth in this
document, including any tax-related items, reflects estimates based
on information available at this time. While HP believes these
estimates to be reasonable, these amounts could differ materially
from reported amounts in HP’s Quarterly Reports on Form 10-Q for
the fiscal quarters ending April 30, 2023 and July 31, 2023, Annual
Report on Form 10-K for the fiscal year ending October 31, 2023,
and HP’s other filings with the Securities and Exchange Commission.
The forward-looking statements in this document are made as of the
date of this document and HP assumes no obligation and does not
intend to update these forward-looking statements.
HP’s Investor Relations website at investor.hp.com contains
a significant amount of information about HP, including financial
and other information for investors. HP encourages investors to
visit its website from time to time, as information is updated, and
new information is posted. The content of HP’s website is not
incorporated by reference into this document or in any other report
or document HP files with the SEC, and any references to HP’s
website are intended to be inactive textual references only.
HP INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED STATEMENTS OF
EARNINGS(Unaudited)(In millions, except per share amounts) |
|
|
Three months ended |
|
April 30, 2023 |
|
January 31, 2023 |
|
April 30, 2022 |
Net revenue |
$ |
12,913 |
|
|
$ |
13,828 |
|
|
$ |
16,490 |
|
Costs and expenses: |
|
|
|
|
|
Cost of revenue |
|
9,984 |
|
|
|
11,019 |
|
|
|
13,157 |
|
Research and development |
|
410 |
|
|
|
403 |
|
|
|
425 |
|
Selling, general and administrative |
|
1,398 |
|
|
|
1,331 |
|
|
|
1,464 |
|
Restructuring and other charges |
|
200 |
|
|
|
141 |
|
|
|
82 |
|
Acquisition and divestiture charges |
|
73 |
|
|
|
84 |
|
|
|
32 |
|
Amortization of intangible assets |
|
86 |
|
|
|
85 |
|
|
|
52 |
|
Total costs and expenses |
|
12,151 |
|
|
|
13,063 |
|
|
|
15,212 |
|
Earnings from operations |
|
762 |
|
|
|
765 |
|
|
|
1,278 |
|
Interest and other, net |
|
(160 |
) |
|
|
(181 |
) |
|
|
(39 |
) |
Earnings before taxes |
|
602 |
|
|
|
584 |
|
|
|
1,239 |
|
Benefit from (provision for)
taxes |
|
464 |
|
|
|
(97 |
) |
|
|
(239 |
) |
Net earnings |
$ |
1,066 |
|
|
$ |
487 |
|
|
$ |
1,000 |
|
|
|
|
|
|
|
Net earnings per share: |
|
|
|
|
|
Basic |
$ |
1.08 |
|
|
$ |
0.49 |
|
|
$ |
0.95 |
|
Diluted |
$ |
1.07 |
|
|
$ |
0.49 |
|
|
$ |
0.94 |
|
|
|
|
|
|
|
Cash dividends declared per
share |
$ |
— |
|
|
$ |
0.53 |
|
|
$ |
— |
|
|
|
|
|
|
|
Weighted-average shares used
to compute net earnings per share: |
|
|
|
|
|
Basic |
|
991 |
|
|
|
989 |
|
|
|
1,050 |
|
Diluted |
|
998 |
|
|
|
996 |
|
|
|
1,062 |
|
HP INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED STATEMENTS OF
EARNINGS(Unaudited)(In millions, except per share amounts) |
|
|
Six months ended |
|
April 30, 2023 |
|
April 30, 2022 |
Net revenue |
$ |
26,741 |
|
|
$ |
33,518 |
|
Costs and expenses: |
|
|
|
Cost of revenue |
|
21,003 |
|
|
|
26,800 |
|
Research and development |
|
813 |
|
|
|
843 |
|
Selling, general and administrative |
|
2,729 |
|
|
|
2,932 |
|
Restructuring and other charges |
|
341 |
|
|
|
150 |
|
Acquisition and divestiture charges |
|
157 |
|
|
|
52 |
|
Amortization of intangible assets |
|
171 |
|
|
|
104 |
|
Total costs and expenses |
|
25,214 |
|
|
|
30,881 |
|
Earnings from operations |
|
1,527 |
|
|
|
2,637 |
|
Interest and other, net |
|
(341 |
) |
|
|
(71 |
) |
Earnings before taxes |
|
1,186 |
|
|
|
2,566 |
|
Benefit from (provision for)
taxes |
|
367 |
|
|
|
(480 |
) |
Net earnings |
$ |
1,553 |
|
|
$ |
2,086 |
|
|
|
|
|
Net earnings per share: |
|
|
|
Basic |
$ |
1.57 |
|
|
$ |
1.96 |
|
Diluted |
$ |
1.56 |
|
|
$ |
1.94 |
|
|
|
|
|
Cash dividends declared per
share |
$ |
0.53 |
|
|
$ |
0.50 |
|
|
|
|
|
Weighted-average shares used
to compute net earnings per share: |
|
|
|
Basic |
|
990 |
|
|
|
1,066 |
|
Diluted |
|
997 |
|
|
|
1,078 |
|
HP INC. AND SUBSIDIARIESADJUSTMENTS TO GAAP NET EARNINGS,
EARNINGS FROM OPERATIONS,OPERATING MARGIN AND DILUTED NET EARNINGS
PER SHARE(Unaudited)(In millions, except per share amounts) |
|
|
Three months ended |
|
April 30, 2023 |
|
January 31, 2023 |
|
April 30, 2022 |
|
Amounts |
|
Dilutednet earningsper
share |
|
Amounts |
|
Dilutednet earningsper
share |
|
Amounts |
|
Dilutednet earningsper
share |
GAAP net earnings |
$ |
1,066 |
|
|
$ |
1.07 |
|
|
$ |
487 |
|
|
$ |
0.49 |
|
|
$ |
1,000 |
|
|
$ |
0.94 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Restructuring and other charges |
|
200 |
|
|
|
0.20 |
|
|
|
141 |
|
|
|
0.14 |
|
|
|
82 |
|
|
|
0.07 |
|
Acquisition and divestiture charges |
|
73 |
|
|
|
0.07 |
|
|
|
84 |
|
|
|
0.08 |
|
|
|
32 |
|
|
|
0.03 |
|
Amortization of intangible assets |
|
86 |
|
|
|
0.09 |
|
|
|
85 |
|
|
|
0.09 |
|
|
|
52 |
|
|
|
0.05 |
|
Debt extinguishment costs |
|
— |
|
|
|
— |
|
|
|
8 |
|
|
|
0.01 |
|
|
|
— |
|
|
|
— |
|
Non-operating retirement-related credits |
|
(12 |
) |
|
|
(0.01 |
) |
|
|
(10 |
) |
|
|
(0.01 |
) |
|
|
(35 |
) |
|
|
(0.03 |
) |
Tax adjustments(a) |
|
(616 |
) |
|
|
(0.62 |
) |
|
|
(46 |
) |
|
|
(0.05 |
) |
|
|
21 |
|
|
|
0.02 |
|
Non-GAAP net earnings |
$ |
797 |
|
|
$ |
0.80 |
|
|
$ |
749 |
|
|
$ |
0.75 |
|
|
$ |
1,152 |
|
|
$ |
1.08 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP earnings from
operations |
$ |
762 |
|
|
|
|
$ |
765 |
|
|
|
|
$ |
1,278 |
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Restructuring and other charges |
|
200 |
|
|
|
|
|
141 |
|
|
|
|
|
82 |
|
|
|
Acquisition and divestiture charges |
|
73 |
|
|
|
|
|
84 |
|
|
|
|
|
32 |
|
|
|
Amortization of intangible assets |
|
86 |
|
|
|
|
|
85 |
|
|
|
|
|
52 |
|
|
|
Non-GAAP earnings from
operations |
$ |
1,121 |
|
|
|
|
$ |
1,075 |
|
|
|
|
$ |
1,444 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating margin |
|
5.9 |
% |
|
|
|
|
5.5 |
% |
|
|
|
|
7.8 |
% |
|
|
Non-GAAP adjustments |
|
2.8 |
% |
|
|
|
|
2.3 |
% |
|
|
|
|
1.0 |
% |
|
|
Non-GAAP operating margin |
|
8.7 |
% |
|
|
|
|
7.8 |
% |
|
|
|
|
8.8 |
% |
|
|
(a) |
Includes tax impact on non-GAAP adjustments. |
HP INC. AND SUBSIDIARIESADJUSTMENTS TO GAAP NET EARNINGS,
EARNINGS FROM OPERATIONS,OPERATING MARGIN AND DILUTED NET EARNINGS
PER SHARE(Unaudited)(In millions, except per share amounts) |
|
|
Six months ended |
|
April 30, 2023 |
|
April 30, 2022 |
|
Amounts |
|
Dilutednet earningsper
share |
|
Amounts |
|
Dilutednet earningsper
share |
GAAP net earnings |
$ |
1,553 |
|
|
$ |
1.56 |
|
|
$ |
2,086 |
|
|
$ |
1.94 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
Restructuring and other charges |
|
341 |
|
|
|
0.34 |
|
|
|
150 |
|
|
|
0.13 |
|
Acquisition and divestiture charges |
|
157 |
|
|
|
0.16 |
|
|
|
52 |
|
|
|
0.05 |
|
Amortization of intangible assets |
|
171 |
|
|
|
0.17 |
|
|
|
104 |
|
|
|
0.10 |
|
Debt extinguishment costs |
|
8 |
|
|
|
0.01 |
|
|
|
— |
|
|
|
— |
|
Non-operating retirement-related credits |
|
(22 |
) |
|
|
(0.02 |
) |
|
|
(69 |
) |
|
|
(0.06 |
) |
Tax adjustments(a) |
|
(662 |
) |
|
|
(0.67 |
) |
|
|
32 |
|
|
|
0.02 |
|
Non-GAAP net earnings |
$ |
1,546 |
|
|
$ |
1.55 |
|
|
$ |
2,355 |
|
|
$ |
2.18 |
|
|
|
|
|
|
|
|
|
GAAP earnings from
operations |
$ |
1,527 |
|
|
|
|
$ |
2,637 |
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
Restructuring and other charges |
|
341 |
|
|
|
|
|
150 |
|
|
|
Acquisition and divestiture charges |
|
157 |
|
|
|
|
|
52 |
|
|
|
Amortization of intangible assets |
|
171 |
|
|
|
|
|
104 |
|
|
|
Non-GAAP earnings from
operations |
$ |
2,196 |
|
|
|
|
$ |
2,943 |
|
|
|
|
|
|
|
|
|
|
|
GAAP operating margin |
|
5.7 |
% |
|
|
|
|
7.9 |
% |
|
|
Non-GAAP adjustments |
|
2.5 |
% |
|
|
|
|
0.9 |
% |
|
|
Non-GAAP operating margin |
|
8.2 |
% |
|
|
|
|
8.8 |
% |
|
|
(a) |
Includes tax impact on non-GAAP adjustments. |
HP INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED BALANCE
SHEETS(Unaudited)(In millions) |
|
|
As of |
|
April 30, 2023 |
|
October 31, 2022 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash, cash equivalents and restricted cash |
$ |
1,940 |
|
|
$ |
3,145 |
|
Accounts receivable, net |
|
4,137 |
|
|
|
4,546 |
|
Inventory |
|
7,221 |
|
|
|
7,595 |
|
Other current assets |
|
3,725 |
|
|
|
4,515 |
|
Total current assets |
|
17,023 |
|
|
|
19,801 |
|
Property, plant and equipment,
net |
|
2,771 |
|
|
|
2,774 |
|
Goodwill |
|
8,618 |
|
|
|
8,541 |
|
Other non-current assets |
|
7,954 |
|
|
|
7,471 |
|
Total assets |
$ |
36,366 |
|
|
$ |
38,587 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
Current liabilities: |
|
|
|
Notes payable and short-term borrowings |
$ |
240 |
|
|
$ |
218 |
|
Accounts payable |
|
13,317 |
|
|
|
15,284 |
|
Other current liabilities |
|
10,477 |
|
|
|
10,651 |
|
Total current liabilities |
|
24,034 |
|
|
|
26,153 |
|
Long-term debt |
|
10,360 |
|
|
|
10,796 |
|
Other non-current
liabilities |
|
4,456 |
|
|
|
4,556 |
|
Stockholders' deficit |
|
(2,484 |
) |
|
|
(2,918 |
) |
Total liabilities and
stockholders' deficit |
$ |
36,366 |
|
|
$ |
38,587 |
|
HP INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED STATEMENTS OF
CASH FLOWS(Unaudited)(In millions) |
|
|
Three months ended |
|
April 30, 2023 |
|
April 30, 2022 |
Cash flows from operating
activities: |
|
|
|
Net earnings |
$ |
1,066 |
|
|
$ |
1,000 |
|
Adjustments to reconcile net earnings to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
|
212 |
|
|
|
193 |
|
Stock-based compensation expense |
|
95 |
|
|
|
70 |
|
Restructuring and other charges |
|
200 |
|
|
|
82 |
|
Deferred taxes on earnings |
|
(681 |
) |
|
|
(10 |
) |
Other, net |
|
32 |
|
|
|
118 |
|
Changes in operating assets and liabilities, net of
acquisitions: |
|
|
|
Accounts receivable |
|
182 |
|
|
|
(246 |
) |
Inventory |
|
136 |
|
|
|
7 |
|
Accounts payable |
|
(202 |
) |
|
|
(1,054 |
) |
Net investment in leases |
|
(35 |
) |
|
|
(21 |
) |
Taxes on earnings |
|
109 |
|
|
|
(17 |
) |
Restructuring and other |
|
(75 |
) |
|
|
(47 |
) |
Other assets and liabilities |
|
(403 |
) |
|
|
433 |
|
Net cash provided by operating activities |
|
636 |
|
|
|
508 |
|
Cash flows from investing
activities: |
|
|
|
Investment in property, plant and equipment, net |
|
(130 |
) |
|
|
(178 |
) |
Purchases of available-for-sale securities and other
investments |
|
(1 |
) |
|
|
(8 |
) |
Maturities and sales of available-for-sale securities and other
investments |
|
17 |
|
|
|
7 |
|
Collateral returned for derivative instruments |
|
113 |
|
|
|
— |
|
Payment made in connection with business acquisition, net of cash
acquired |
|
(5 |
) |
|
|
(3 |
) |
Net cash used in investing activities |
|
(6 |
) |
|
|
(182 |
) |
Cash flows from financing
activities: |
|
|
|
Payment of short-term borrowings with original maturities less than
90 days, net |
|
(210 |
) |
|
|
— |
|
Proceeds from debt, net of issuance costs |
|
65 |
|
|
|
2,021 |
|
Payment of debt |
|
(48 |
) |
|
|
(46 |
) |
Stock-based award activities and others |
|
(7 |
) |
|
|
(5 |
) |
Repurchase of common stock |
|
— |
|
|
|
(1,010 |
) |
Cash dividends paid |
|
(259 |
) |
|
|
(262 |
) |
Settlement of cash flow hedges |
|
— |
|
|
|
59 |
|
Net cash (used in) provided by financing activities |
|
(459 |
) |
|
|
757 |
|
Increase in cash, cash
equivalents and restricted cash |
|
171 |
|
|
|
1,083 |
|
Cash, cash equivalents and
restricted cash at beginning of period |
|
1,769 |
|
|
|
3,394 |
|
Cash, cash equivalents and
restricted cash at end of period |
$ |
1,940 |
|
|
$ |
4,477 |
|
HP INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED STATEMENTS OF
CASH FLOWS(Unaudited)(In millions) |
|
|
Six months ended |
|
April 30, 2023 |
|
April 30, 2022 |
Cash flows from operating
activities: |
|
|
|
Net earnings |
$ |
1,553 |
|
|
$ |
2,086 |
|
Adjustments to reconcile net earnings to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
|
421 |
|
|
|
390 |
|
Stock-based compensation expense |
|
262 |
|
|
|
203 |
|
Restructuring and other charges |
|
341 |
|
|
|
150 |
|
Deferred taxes on earnings |
|
(817 |
) |
|
|
(5 |
) |
Other, net |
|
36 |
|
|
|
304 |
|
Changes in operating assets and liabilities, net of
acquisitions: |
|
|
|
Accounts receivable |
|
426 |
|
|
|
91 |
|
Inventory |
|
354 |
|
|
|
(1,270 |
) |
Accounts payable |
|
(1,914 |
) |
|
|
981 |
|
Net investment in leases |
|
(51 |
) |
|
|
(41 |
) |
Taxes on earnings |
|
329 |
|
|
|
(23 |
) |
Restructuring and other |
|
(167 |
) |
|
|
(146 |
) |
Other assets and liabilities |
|
(153 |
) |
|
|
(555 |
) |
Net cash provided by operating activities |
|
620 |
|
|
|
2,165 |
|
Cash flows from investing activities: |
|
|
|
Investment in property, plant and equipment, net |
|
(322 |
) |
|
|
(451 |
) |
Purchases of available-for-sale securities and other
investments |
|
(5 |
) |
|
|
(8 |
) |
Maturities and sales of available-for-sale securities and other
investments |
|
18 |
|
|
|
7 |
|
Collateral (posted) returned for derivative instruments |
|
(127 |
) |
|
|
14 |
|
Payment made in connection with business acquisitions, net of cash
acquired |
|
(5 |
) |
|
|
(24 |
) |
Net cash used in investing activities |
|
(441 |
) |
|
|
(462 |
) |
Cash flows from financing activities: |
|
|
|
Payment of short-term borrowings with original maturities less than
90 days, net |
|
(10 |
) |
|
|
(400 |
) |
Proceeds from debt, net of issuance costs |
|
117 |
|
|
|
2,060 |
|
Payment of debt |
|
(587 |
) |
|
|
(96 |
) |
Stock-based award activities and others |
|
(86 |
) |
|
|
(97 |
) |
Repurchase of common stock |
|
(100 |
) |
|
|
(2,518 |
) |
Cash dividends paid |
|
(518 |
) |
|
|
(533 |
) |
Collateral returned for derivative instruments |
|
(200 |
) |
|
|
— |
|
Settlement of cash flow hedges |
|
— |
|
|
|
59 |
|
Net cash used in financing activities |
|
(1,384 |
) |
|
|
(1,525 |
) |
(Decrease) increase in cash,
cash equivalents and restricted cash |
|
(1,205 |
) |
|
|
178 |
|
Cash, cash equivalents and
restricted cash at beginning of period |
|
3,145 |
|
|
|
4,299 |
|
Cash, cash equivalents and
restricted cash at end of period |
$ |
1,940 |
|
|
$ |
4,477 |
|
HP INC. AND SUBSIDIARIESSEGMENT/BUSINESS UNIT
INFORMATION(Unaudited)(In millions) |
|
|
Three months ended |
|
Change (%) |
|
April 30, 2023 |
|
January 31, 2023 |
|
April 30, 2022 |
|
Q/Q |
|
Y/Y |
Net revenue: |
|
|
|
|
|
|
|
|
|
Commercial PS |
$ |
5,922 |
|
|
$ |
6,429 |
|
|
$ |
7,817 |
|
|
(8 |
)% |
|
(24 |
)% |
Consumer PS |
|
2,254 |
|
|
|
2,786 |
|
|
|
3,715 |
|
|
(19 |
)% |
|
(39 |
)% |
Personal Systems(a) |
|
8,176 |
|
|
|
9,215 |
|
|
|
11,532 |
|
|
(11 |
)% |
|
(29 |
)% |
Supplies |
|
3,006 |
|
|
|
2,857 |
|
|
|
3,131 |
|
|
5 |
% |
|
(4 |
)% |
Commercial Printing |
|
1,089 |
|
|
|
1,056 |
|
|
|
1,042 |
|
|
3 |
% |
|
5 |
% |
Consumer Printing |
|
641 |
|
|
|
699 |
|
|
|
790 |
|
|
(8 |
)% |
|
(19 |
)% |
Printing |
|
4,736 |
|
|
|
4,612 |
|
|
|
4,963 |
|
|
3 |
% |
|
(5 |
)% |
Corporate Investments(c) |
|
3 |
|
|
|
1 |
|
|
|
— |
|
|
NM |
|
NM |
Total segment net revenue |
|
12,915 |
|
|
|
13,828 |
|
|
|
16,495 |
|
|
(7 |
)% |
|
(22 |
)% |
Other(c) |
|
(2 |
) |
|
|
— |
|
|
|
(5 |
) |
|
NM |
|
NM |
Total net revenue |
$ |
12,913 |
|
|
$ |
13,828 |
|
|
$ |
16,490 |
|
|
(7 |
)% |
|
(22 |
)% |
|
|
|
|
|
|
|
|
|
|
Earnings before taxes:(b) |
|
|
|
|
|
|
|
|
|
Personal Systems |
$ |
445 |
|
|
$ |
497 |
|
|
$ |
794 |
|
|
|
|
|
Printing |
|
899 |
|
|
|
870 |
|
|
|
949 |
|
|
|
|
|
Corporate Investments |
|
(38 |
) |
|
|
(33 |
) |
|
|
(52 |
) |
|
|
|
|
Total segment earnings from operations |
|
1,306 |
|
|
|
1,334 |
|
|
|
1,691 |
|
|
|
|
|
Corporate and unallocated cost
and other |
|
(90 |
) |
|
|
(92 |
) |
|
|
(177 |
) |
|
|
|
|
Stock-based compensation
expense |
|
(95 |
) |
|
|
(167 |
) |
|
|
(70 |
) |
|
|
|
|
Restructuring and other
charges |
|
(200 |
) |
|
|
(141 |
) |
|
|
(82 |
) |
|
|
|
|
Acquisition and divestiture
charges |
|
(73 |
) |
|
|
(84 |
) |
|
|
(32 |
) |
|
|
|
|
Amortization of intangible
assets |
|
(86 |
) |
|
|
(85 |
) |
|
|
(52 |
) |
|
|
|
|
Interest and other, net |
|
(160 |
) |
|
|
(181 |
) |
|
|
(39 |
) |
|
|
|
|
Total earnings before taxes |
$ |
602 |
|
|
$ |
584 |
|
|
$ |
1,239 |
|
|
|
|
|
(a) |
Effective first quarter of fiscal 2023, HP realigned the Personal
Systems business units reporting structure into Commercial PS and
Consumer PS to align with its customer market segmentation. HP has
reflected this change to its prior reporting periods on an as-if
basis. The reporting change had no impact to previously reported
segment net revenue and segment earnings from operation,
consolidated net revenue, net earnings or net earnings per share
(“EPS”). |
(b) |
Effective first quarter of fiscal 2023, in connection with
organizational realignments, certain costs which were earlier
reflected under “Corporate and unallocated cost and other”, have
now been reclassified to the Personal Systems and Printing
segments. HP has reflected this change to its prior reporting
periods on an as-if basis. The reporting change had no impact to
previously reported segment net revenue, consolidated net revenue,
net earnings or net EPS. |
(c) |
"NM" represents not meaningful. |
HP INC. AND SUBSIDIARIESSEGMENT/BUSINESS UNIT
INFORMATION(Unaudited)(In millions) |
|
|
Six months ended |
|
Change (%) |
|
April 30, 2023 |
|
April 30, 2022 |
|
Y/Y |
Net revenue: |
|
|
|
|
|
Commercial PS |
$ |
12,351 |
|
|
$ |
15,674 |
|
|
(21 |
)% |
Consumer PS |
|
5,040 |
|
|
|
8,054 |
|
|
(37 |
)% |
Personal Systems(a) |
|
17,391 |
|
|
|
23,728 |
|
|
(27 |
)% |
Supplies |
|
5,863 |
|
|
|
6,199 |
|
|
(5 |
)% |
Commercial Printing |
|
2,145 |
|
|
|
2,081 |
|
|
3 |
% |
Consumer Printing |
|
1,340 |
|
|
|
1,514 |
|
|
(11 |
)% |
Printing |
|
9,348 |
|
|
|
9,794 |
|
|
(5 |
)% |
Corporate Investments(c) |
|
4 |
|
|
|
1 |
|
|
NM |
Total segment net revenue |
|
26,743 |
|
|
|
33,523 |
|
|
(20 |
)% |
Other(c) |
|
(2 |
) |
|
|
(5 |
) |
|
NM |
Total net revenue |
$ |
26,741 |
|
|
$ |
33,518 |
|
|
(20 |
)% |
|
|
|
|
|
|
Earnings before taxes:(b) |
|
|
|
|
|
Personal Systems |
$ |
942 |
|
|
$ |
1,748 |
|
|
|
Printing |
|
1,769 |
|
|
|
1,821 |
|
|
|
Corporate Investments |
|
(71 |
) |
|
|
(126 |
) |
|
|
Total segment earnings from operations |
|
2,640 |
|
|
|
3,443 |
|
|
|
Corporate and unallocated cost
and other |
|
(182 |
) |
|
|
(297 |
) |
|
|
Stock-based compensation
expense |
|
(262 |
) |
|
|
(203 |
) |
|
|
Restructuring and other
charges |
|
(341 |
) |
|
|
(150 |
) |
|
|
Acquisition and divestiture
charges |
|
(157 |
) |
|
|
(52 |
) |
|
|
Amortization of intangible
assets |
|
(171 |
) |
|
|
(104 |
) |
|
|
Interest and other, net |
|
(341 |
) |
|
|
(71 |
) |
|
|
Total earnings before taxes |
$ |
1,186 |
|
|
$ |
2,566 |
|
|
|
(a) |
Effective first quarter of fiscal 2023, HP realigned the Personal
Systems business units reporting structure into Commercial PS and
Consumer PS to align with its customer market segmentation. HP has
reflected this change to its prior reporting periods on an as-if
basis. The reporting change had no impact to previously reported
segment net revenue and segment earnings from operation,
consolidated net revenue, net earnings or net EPS. |
(b) |
Effective first quarter of fiscal 2023, in connection with
organizational realignments, certain costs which were earlier
reflected under “Corporate and unallocated cost and other”, have
now been reclassified to the Personal Systems and Printing
segments. HP has reflected this change to its prior reporting
periods on an as-if basis. The reporting change had no impact to
previously reported segment net revenue, consolidated net revenue,
net earnings or net EPS. |
(c) |
"NM" represents not meaningful. |
HP INC. AND SUBSIDIARIESSEGMENT OPERATING MARGIN
SUMMARY(Unaudited) |
|
|
Three months ended |
|
Change (pts) |
|
April 30, 2023 |
|
January 31, 2023 |
|
April 30, 2022 |
|
Q/Q |
|
Y/Y |
Segment operating
margin:(a) |
|
|
|
|
|
|
|
|
|
Personal Systems |
5.4 |
% |
|
5.4 |
% |
|
6.9 |
% |
|
— pts |
|
(1.5) pts |
Printing |
19.0 |
% |
|
18.9 |
% |
|
19.1 |
% |
|
0.1 pts |
|
(0.1) pts |
Corporate Investments(b) |
NM |
|
NM |
|
NM |
|
NM |
|
NM |
Total segment |
10.1 |
% |
|
9.6 |
% |
|
10.3 |
% |
|
0.5 pts |
|
(0.2) pts |
(a) |
Effective at the beginning of the first quarter of fiscal 2023, in
connection with organizational realignments, certain costs which
were earlier reflected under “Corporate and unallocated cost and
other”, have now been reclassified to the Personal Systems and
Printing segments. HP has reflected this change to its prior
reporting periods on an as-if basis. The reporting change had no
impact to previously reported segment net revenue, consolidated net
revenue, net earnings or net EPS. |
(b) |
"NM" represents not meaningful. |
HP INC. AND SUBSIDIARIESCALCULATION OF DILUTED NET EARNINGS
PER SHARE(Unaudited)(In millions, except per share amounts) |
|
|
Three months ended |
|
April 30, 2023 |
|
January 31, 2023 |
|
April 30, 2022 |
Numerator: |
|
|
|
|
|
GAAP net earnings |
$ |
1,066 |
|
$ |
487 |
|
$ |
1,000 |
Non-GAAP net earnings |
$ |
797 |
|
$ |
749 |
|
$ |
1,152 |
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
Weighted-average shares used to compute basic net earnings per
share |
|
991 |
|
|
989 |
|
|
1,050 |
Dilutive effect of employee stock plans(a) |
|
7 |
|
|
7 |
|
|
12 |
Weighted-average shares used to compute diluted net earnings per
share |
|
998 |
|
|
996 |
|
|
1,062 |
|
|
|
|
|
|
GAAP diluted net earnings per
share |
$ |
1.07 |
|
$ |
0.49 |
|
$ |
0.94 |
Non-GAAP diluted net earnings
per share |
$ |
0.80 |
|
$ |
0.75 |
|
$ |
1.08 |
(a) |
Includes any dilutive effect of restricted stock units, stock
options and performance-based awards. |
HP INC. AND SUBSIDIARIESCALCULATION OF DILUTED NET EARNINGS
PER SHARE(Unaudited)(In millions, except per share amounts) |
|
|
Six months ended |
|
April 30, 2023 |
|
April 30, 2022 |
Numerator: |
|
|
|
GAAP net earnings |
$ |
1,553 |
|
$ |
2,086 |
Non-GAAP net earnings |
$ |
1,546 |
|
$ |
2,355 |
|
|
|
|
Denominator: |
|
|
|
Weighted-average shares used to compute basic net earnings per
share |
|
990 |
|
|
1,066 |
Dilutive effect of employee stock plans(a) |
|
7 |
|
|
12 |
Weighted-average shares used to compute diluted net earnings per
share |
|
997 |
|
|
1,078 |
|
|
|
|
GAAP diluted net earnings per
share |
$ |
1.56 |
|
$ |
1.94 |
Non-GAAP diluted net earnings
per share |
$ |
1.55 |
|
$ |
2.18 |
(a) |
Includes any dilutive effect of restricted stock units, stock
options and performance-based awards. |
Use of non-GAAP financial measuresTo supplement
HP’s consolidated condensed financial statements presented on a
GAAP basis, HP provides net revenue on a constant currency basis,
non-GAAP total operating expense, non-GAAP operating profit,
non-GAAP operating margin, non-GAAP tax rate, non-GAAP net
earnings, non-GAAP diluted net EPS, free cash flow, gross cash and
net cash (debt). HP also provides forecasts of non-GAAP diluted net
EPS and free cash flow.
These non-GAAP financial measures are not computed in accordance
with, or as an alternative to, GAAP in the United States.
Reconciliations of these non-GAAP financial measures to the most
directly comparable GAAP financial measures are included in the
tables above or elsewhere in the materials accompanying this news
release.
Use and economic substance of non-GAAP financial
measuresNet revenue on a constant currency basis excludes
the effect of foreign currency exchange fluctuations calculated by
translating current period revenues using monthly exchange rates
from the comparative period and excluding any hedging impact
recognized in the current period. Non-GAAP operating margin is
defined to exclude the effects of any amounts relating to
restructuring and other charges, acquisition and divestiture
charges, and amortization of intangible assets. Non-GAAP net
earnings and non-GAAP diluted net EPS consist of net earnings or
diluted net EPS excluding those same charges, defined benefit plan
settlement charges, non-operating retirement related
(credits)/charges, debt extinguishment costs, tax adjustments and
the amount of additional taxes or tax benefits associated with each
non-GAAP item.
HP’s management uses these non-GAAP financial measures for
purposes of evaluating HP’s historical and prospective financial
performance, as well as HP’s performance relative to its
competitors. HP’s management also uses these non-GAAP measures to
further its own understanding of HP’s segment operating
performance. HP believes that excluding the items mentioned above
for these non-GAAP financial measures allows HP’s management to
better understand HP’s consolidated financial performance in
relation to the operating results of HP’s segments, as HP’s
management does not believe that the excluded items are reflective
of ongoing operating results. More specifically, HP’s management
excludes each of those items mentioned above for the following
reasons:
- Restructuring and other charges are (i) costs associated with a
formal restructuring plan and are primarily related to employee
separation from service and early retirement costs and related
benefits, costs of real estate consolidation and other non-labor
charges; and (ii) other charges, which includes non-recurring costs
including those as a result of information technology
rationalization efforts and transformation program management and
are distinct from ongoing operational costs. HP excludes these
restructuring and other charges (and any reversals of charges
recorded in prior periods) for purposes of calculating these
non-GAAP measures because HP believes that these costs do not
reflect expected future operating expenses and do not contribute to
a meaningful evaluation of HP's current operating performance or
comparisons to operating performance in other periods.
- HP incurs cost related to its acquisitions and divestitures,
which it would not have otherwise incurred as part of its
operations. The charges are direct expenses such as third-party
professional and legal fees, integration and divestiture-related
costs, as well as non-cash adjustments to the fair value of certain
acquired assets such as inventory and certain compensation charges
related to cash settlement of restricted stock units and
performance-based restricted stock units towards acquisitions.
These charges related to acquisitions and divestitures are
inconsistent in amount and frequency and are significantly impacted
by the timing and nature of HP's acquisitions or divestitures. HP
believes that eliminating such expenses for purposes of calculating
these non-GAAP measures facilitates a more meaningful evaluation of
HP’s current operating performance and comparisons to operating
performance in other periods.
- HP incurs charges relating to the amortization of intangible
assets. Those charges are included in HP’s GAAP earnings, operating
margin, net earnings and diluted net EPS. Such charges are
significantly impacted by the timing and magnitude of HP’s
acquisitions and any related impairment charges. Consequently, HP
excludes these charges for purposes of calculating these non-GAAP
measures to facilitate a more meaningful evaluation of HP’s current
operating performance and comparisons to operating performance in
other periods.
- Non-operating retirement-related (credits)/charges includes
certain market-related factors such as interest cost, expected
return on plan assets, amortized actuarial gains or losses,
associated with HP’s defined benefit pension and post-retirement
benefit plans. The market-driven retirement-related adjustments are
primarily due to the changes in the value of pension plan assets
and liabilities which are tied to financial market performance and
HP considers these adjustments to be outside the operational
performance of the business. Non-operating retirement-related
(credits)/charges also include certain plan curtailments,
settlements and special termination benefits related to HP’s
defined benefit pension and post-retirement benefit plans. HP
believes that eliminating such adjustments for purposes of
calculating non-GAAP measures facilitates a more meaningful
evaluation of HP's current operating performance and comparisons to
operating performance in other periods.
- HP incurs defined benefit plan settlement charges relating to
HP pension plans. The charges are associated with the net
settlement and remeasurement resulting from voluntary lump sum
payments offered to certain vested participants and transfer of
certain pension obligations. HP excludes these charges for the
purposes of calculating these non-GAAP measures to facilitate a
more meaningful evaluation of HP’s current operating performance
and comparisons to operating performance in other periods.
- HP incurs debt extinguishment costs relating to repurchase of
certain of its outstanding U.S. dollar global notes or termination
of commitments under revolving credit facilities. These costs
primarily included bond repurchase premiums partly offset by gains
from fair value hedges. HP excludes these costs for the purposes of
calculating these non-GAAP measures to facilitate a more meaningful
evaluation of HP's current operating performance and comparisons to
operating performance in other periods.
- HP recorded tax adjustments including tax expenses and benefits
from internal reorganizations, realizability of certain deferred
tax assets, various tax rate and regulatory changes, and tax
settlements across various jurisdictions. HP excludes these
adjustments for the purposes of calculating these non-GAAP measures
to facilitate a more meaningful evaluation of HP's current
operating performance and comparisons to operating performance in
other periods.
Free cash flow is a non-GAAP measure that is defined as cash
flow (used in) provided by operations activities adjusted for net
investment in leases and net investments in property, plant, and
equipment. Gross cash is a non-GAAP measure that is defined as
cash, cash equivalents and restricted cash plus short-term
investments and certain long-term investments that may be
liquidated within 90 days pursuant to the terms of existing put
options or similar rights. HP’s management uses free cash flow and
gross cash for the purpose of determining the amount of cash
available for investment in HP’s businesses, repurchasing stock and
other purposes. HP’s management also uses free cash flow and gross
cash to evaluate HP’s historical and prospective liquidity. Because
gross cash includes liquid assets that are not included in cash,
cash equivalents and restricted cash, HP believes that gross cash
provides a helpful assessment of HP’s liquidity. Because free cash
flow includes net cash (used in) provided by operating activities
adjusted for net investment in leases and net investments in
property, plant and equipment. HP believes that free cash flow
provides a more accurate and complete assessment of HP’s liquidity
and capital resources. Net cash (debt) is defined as gross cash
less gross debt after adjusting the effect of unamortized
premium/discount on debt issuance, debt issuance costs and
gains/losses on interest rate swaps.
Key Growth AreasKey Growth Areas represent HP’s
businesses which management expects to grow at a rate faster than
HP’s core business with accretive margins in the longer term. HP’s
Key Growth Areas are comprised of:
- Hybrid Systems: Video conferencing
solutions, cameras, headsets, voice, and related software
capabilities
- Gaming: Gaming PCs (Omen, Victus,
etc.), HyperX and gaming accessories
- Workforce Services & Solutions:
Managed services (Managed Print Service and Device-as-a-Service),
digital services and lifecycle services
- Consumer Subscriptions: Instant Ink,
other consumer subscriptions and consumer digital services
- Industrial Graphics: Large Format
Industrial, Page Wide Press (PWP), Indigo and Page Wide Industrial
packaging solutions and supplies
- 3D & Personalization: Portfolio of additive manufacturing
solutions and supplies including end-to-end solutions such as
molded fiber, footwear and orthotics
Workforce Services & Solutions (“WSS”), previously known as
Workforce Solutions, now aligns to the newly created WSS
organization that is focused on enabling services led product
offerings across Printing and Personal Systems. This now excludes
hardware revenues for certain transactional deals with a service
attach. Peripherals has been integrated into Gaming, and Hybrid
systems including all products and solutions acquired from
Plantronics, Inc. (“Poly”). Consumer Subscriptions was previously
known as Consumer Services.
In fourth quarter of fiscal 2022, HP had disclosed full year Key
Growth Areas revenues of “over $11 billion”. The changes to WSS
reduced the previously disclosed revenues to approximately $10
billion for the fiscal year 2022.
Material limitations associated with use of non-GAAP
financial measuresThese non-GAAP financial measures may
have limitations as analytical tools, and these measures should not
be considered in isolation or as a substitute for analysis of HP’s
results as reported under GAAP. Some of the limitations in relying
on these non-GAAP financial measures are:
- Items such as amortization of intangible assets, though not
directly affecting HP’s cash position, represent the loss in value
of intangible assets over time. The expense associated with this
change in value is not included in non-GAAP operating margin,
non-GAAP net earnings and non-GAAP diluted net EPS, and therefore
does not reflect the full economic effect of the change in value of
those intangible assets.
- Items such as restructuring and other charges, acquisition and
divestiture charges and amortization of intangible assets are
excluded from non-GAAP operating margin. In addition, non-operating
retirement-related (credits)/charges, defined benefit plan
settlement charges, debt extinguishment costs and tax adjustments
are excluded from non-GAAP net earnings and non-GAAP diluted net
EPS. These items can have a material impact on the equivalent GAAP
earnings measure and cash flows.
- HP may not be able to immediately liquidate the short-term and
certain long-term investments included in gross cash, which may
limit the usefulness of gross cash as a liquidity measure.
Other companies may calculate the non-GAAP financial measures
differently than HP, limiting the usefulness of those measures for
comparative purposes.
Compensation for limitations associated with use of
non-GAAP financial measuresHP accounts for the limitations
on its use of non-GAAP financial measures by relying primarily on
its GAAP results and using non-GAAP financial measures only
supplementally. HP also provides reconciliations of each non-GAAP
financial measure to its most directly comparable GAAP measure
within this news release and in other written materials that
include these non-GAAP financial measures, and HP encourages
investors to review those reconciliations carefully.
Usefulness of non-GAAP financial measures to
investorsHP believes that providing net revenue on a
constant currency basis, non-GAAP total operating expense, non-GAAP
operating profit, non-GAAP operating margin, non-GAAP tax rate,
non-GAAP net earnings, non-GAAP diluted net EPS, free cash flow,
gross cash and net cash (debt) to investors in addition to the
related GAAP financial measures provides investors with greater
insight to the information used by HP’s management in its financial
and operational decision making and allows investors to see HP’s
results “through the eyes” of management. HP further believes that
providing this information better enables HP’s investors to
understand HP’s operating performance and financial condition and
to evaluate the efficacy of the methodology and information used by
HP’s management to evaluate and measure such performance and
financial condition. Disclosure of these non-GAAP financial
measures also facilitates comparisons of HP’s operating performance
with the performance of other companies in HP’s industry that
supplement their GAAP results with non-GAAP financial measures that
may be calculated in a similar manner.
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