HP (NYSE: HPQ)
- Third quarter GAAP diluted net earnings per share ("EPS") of
$0.65, within the previously provided outlook of $0.63 to $0.77 per
share
- Third quarter non-GAAP diluted net EPS of $0.83, within the
previously provided outlook of $0.78 to $0.92 per share
- Third quarter net revenue of $13.5 billion, up 2.4% from the
prior-year period
- Third quarter net cash provided by operating activities of $1.4
billion, free cash flow of $1.3 billion
- Third quarter returned $0.9 billion to shareholders in the form
of share repurchases and dividends
- Share repurchase authorization increased to $10.0 billion
HP Inc.'s
fiscal 2024 third quarter financial performance |
|
Q3 FY24 |
Q3 FY23 |
Y/Y |
GAAP net revenue ($B) |
$ |
13.5 |
|
|
$ |
13.2 |
|
|
2.4 |
% |
GAAP operating margin |
|
7.0% |
|
|
|
7.2% |
|
|
(0.2 |
) pts |
GAAP net earnings ($B) |
$ |
0.6 |
|
|
$ |
0.8 |
|
|
(16 |
)% |
GAAP diluted net EPS |
$ |
0.65 |
|
|
$ |
0.76 |
|
|
(14 |
)% |
Non-GAAP operating margin |
|
8.1% |
|
|
|
8.8% |
|
|
(0.7 |
) pts |
Non-GAAP net earnings ($B) |
$ |
0.8 |
|
|
$ |
0.9 |
|
|
(5 |
)% |
Non-GAAP diluted net EPS |
$ |
0.83 |
|
|
$ |
0.86 |
|
|
(3 |
)% |
Net cash provided by operating activities ($B) |
$ |
1.4 |
|
|
$ |
1.0 |
|
|
46 |
% |
Free cash flow ($B) |
$ |
1.3 |
|
|
$ |
0.9 |
|
|
50 |
% |
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 resultsHP Inc. and its
subsidiaries (“HP”) announced fiscal 2024 third quarter net revenue
of $13.5 billion, up 2% (up 3% in constant currency) from the
prior-year period.
“We are pleased with our return to revenue growth and proud of
the innovations delivered in the quarter, including the launch of
our next-generation AI PC lineup” said Enrique Lores, President and
CEO, HP Inc. “We remain focused on our strategic plan and will
prioritize opportunities that drive long-term profitable growth,
while taking decisive action to navigate a dynamic
environment.”
Third quarter GAAP diluted net EPS was $0.65, down from $0.76 in
the prior-year period and within the previously provided outlook of
$0.63 to $0.77. Third quarter non-GAAP diluted net EPS was $0.83,
down from $0.86 in the prior-year period and within the previously
provided outlook of $0.78 to $0.92. Third quarter non-GAAP net
earnings and non-GAAP diluted net EPS excludes after-tax
adjustments of $179 million, or $0.18 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 managementHP's net cash provided by
operating activities in the third quarter of fiscal 2024 was $1.4
billion. Accounts receivable ended the quarter at $4.7 billion,
flat quarter over quarter at 31 days. Inventory ended the quarter
at $7.8 billion, down 3 days quarter over quarter to 67 days.
Accounts payable ended the quarter at $15.4 billion, down 1 day
quarter over quarter to 131 days.
HP generated $1.3 billion of free cash flow in the third
quarter. Free cash flow includes net cash provided by operating
activities of $1.4 billion adjusted for net investments in leases
from integrated financing of $42 million and net investments in
property, plant and equipment of $162 million.
HP’s dividend payment of $0.2756 per share in the third quarter
resulted in cash usage of $0.3 billion. HP also utilized $0.6
billion of cash during the quarter to repurchase approximately 17.1
million shares of common stock in the open market. HP exited the
quarter with $2.9 billion in gross cash, which includes cash and
cash equivalents of $2.8 billion, restricted cash of $93 million,
and short-term investments of $3 million included in other current
assets. Restricted cash relates to amounts collected and held on
behalf of a third party for trade receivables previously sold.
Fiscal 2024 third quarter segment results
- Personal Systems net revenue was
$9.4 billion, up 5% year over year (up 5% in constant currency)
with a 6.4% operating margin. Consumer PS net revenue was down 1%
and Commercial PS net revenue was up 8%. Total units were up 1%
with Consumer PS units down 6% and Commercial PS units up 6%.
- Printing net revenue was $4.1 billion, down 3% year over year
(down 2% in constant currency) with a 17.3% operating margin.
Consumer Printing net revenue was up 2% and Commercial Printing net
revenue was down 5%. Supplies net revenue was down 2% (down 1% in
constant currency). Total hardware units were down 2%, with
Consumer Printing units flat and Commercial Printing units down
4%.
Share repurchase authorizationOn August 27,
2024, HP's Board of Directors increased HP's share repurchase
authorization to $10.0 billion in total.
OutlookFor the fiscal 2024 fourth quarter, HP
estimates GAAP diluted net EPS to be in the range of $0.74 to $0.84
and non-GAAP diluted net EPS to be in the range of $0.89 to $0.99.
Fiscal 2024 fourth quarter non-GAAP diluted net EPS estimates
exclude $0.15 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, debt extinguishment charges and the
related tax impact on these items.
For fiscal 2024, HP estimates GAAP diluted net EPS to be in the
range of $2.62 to $2.72 and non-GAAP diluted net EPS to be in the
range of $3.35 to $3.45. Fiscal 2024 non-GAAP diluted net EPS
estimates exclude $0.73 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, debt extinguishment
charges and the related tax impact on these items. For fiscal 2024,
HP anticipates generating free cash flow in the range of $3.1 to
$3.6 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 FY24 Q3 earnings conference call is accessible via audio
webcast at www.hp.com/investor/2024Q3Webcast.
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 other income and expenses,
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, other income and expenses, tax rate, net
earnings, diluted net EPS, cash 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 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, tension across
the Taiwan Strait, the Israel-Hamas conflict, other hostilities in
the Middle East and the regional and global ramifications of these
events; volatility in global capital markets and foreign currency,
increases in benchmark interest rates, the effects of inflation and
instability of financial institutions; risks associated with HP’s
international operations; the effects of global pandemics, such as
COVID-19, or other public health crises; 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 supply constraints
and component shortages, and the need to manage HP’s global,
multi-tier distribution network and 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; 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, including artificial
intelligence; successfully competing and maintaining the value
proposition of HP’s products, including supplies and services;
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, 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; our use of artificial intelligence; the
effectiveness of our internal control over financial reporting; and
other risks that are described in HP’s Annual Report on Form 10-K
for the fiscal year ended October 31, 2023 and HP’s other filings
with the Securities and Exchange Commission ("SEC"). HP’s fiscal
2023 plan includes HP's efforts to take advantage of future growth
opportunities, including but not limited to, investments to drive
growth, investments in our people, improving product mix, driving
structural cost savings and other productivity measures. Structural
cost savings represent gross reductions in costs driven by
operational efficiency, digital transformation, and portfolio
optimization. These initiatives include but are not limited to
workforce reductions, platform simplification, programs
consolidation and productivity measures undertaken by HP, which HP
expects to be sustainable in the longer-term. These structural cost
savings are net of any new recurring costs resulting from these
initiatives and exclude one-time investments to generate such
savings. HP’s expectations on the longer-term sustainability of
such structural cost savings are based on its current business
operations and market dynamics and could be significantly impacted
by various factors, including but not limited to HP’s evolving
business models, future investment decisions, market environment
and technology landscape.
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 Annual Report on Form 10-K for the
fiscal year ending October 31, 2024, and HP’s other filings with
the SEC. 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 |
|
July 31, 2024 |
|
April 30, 2024 |
|
July 31, 2023 |
Net
revenue:(a) |
|
|
|
|
|
Products |
$ |
12,750 |
|
|
$ |
12,043 |
|
|
$ |
12,422 |
|
Services |
|
769 |
|
|
|
757 |
|
|
|
774 |
|
Total net revenue |
|
13,519 |
|
|
|
12,800 |
|
|
|
13,196 |
|
Cost
of net revenue:(a) |
|
|
|
|
|
Products |
|
10,164 |
|
|
|
9,324 |
|
|
|
9,939 |
|
Services |
|
449 |
|
|
|
453 |
|
|
|
435 |
|
Total cost of net revenue |
|
10,613 |
|
|
|
9,777 |
|
|
|
10,374 |
|
Research and development |
|
413 |
|
|
|
436 |
|
|
|
354 |
|
Selling, general and administrative |
|
1,404 |
|
|
|
1,462 |
|
|
|
1,302 |
|
Restructuring and other charges |
|
46 |
|
|
|
71 |
|
|
|
75 |
|
Acquisition and divestiture charges |
|
22 |
|
|
|
22 |
|
|
|
48 |
|
Amortization of intangible assets |
|
81 |
|
|
|
80 |
|
|
|
91 |
|
Total costs and expenses |
|
12,579 |
|
|
|
11,848 |
|
|
|
12,244 |
|
Earnings from operations |
|
940 |
|
|
|
952 |
|
|
|
952 |
|
Interest and other, net |
|
(113 |
) |
|
|
(155 |
) |
|
|
(16 |
) |
Earnings before taxes |
|
827 |
|
|
|
797 |
|
|
|
936 |
|
Provision for taxes |
|
(187 |
) |
|
|
(190 |
) |
|
|
(170 |
) |
Net
earnings |
$ |
640 |
|
|
$ |
607 |
|
|
$ |
766 |
|
|
|
|
|
|
|
Net
earnings per share: |
|
|
|
|
|
Basic |
$ |
0.65 |
|
|
$ |
0.62 |
|
|
$ |
0.77 |
|
Diluted |
$ |
0.65 |
|
|
$ |
0.61 |
|
|
$ |
0.76 |
|
|
|
|
|
|
|
Cash
dividends declared per share |
$ |
0.55 |
|
|
$ |
— |
|
|
$ |
0.52 |
|
|
|
|
|
|
|
Weighted-average shares used to compute net earnings per
share: |
Basic |
|
979 |
|
|
|
984 |
|
|
|
993 |
|
Diluted |
|
990 |
|
|
|
990 |
|
|
|
1,002 |
|
(a) Effective first quarter of fiscal 2024, HP
presents consolidated net revenue and cost of net revenue
bifurcated between products and services. 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, earnings from operations, net
earnings or net earnings per share ("EPS"). Services include
revenues from support and maintenance contracts and other services,
and excludes product hardware and supplies revenues associated with
as-a-service offerings and instant ink subscriptions which are
categorized within product revenues.
HP INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED STATEMENTS OF
EARNINGS(Unaudited)(In millions, except per share amounts) |
|
|
Nine months ended |
|
July 31, 2024 |
|
July 31, 2023 |
Net
revenue:(a) |
|
|
|
Products |
$ |
37,212 |
|
|
$ |
37,615 |
|
Services |
|
2,292 |
|
|
|
2,286 |
|
Total net revenue |
|
39,504 |
|
|
|
39,901 |
|
Cost
of net revenue:(a) |
|
|
|
Products |
|
29,359 |
|
|
|
30,085 |
|
Services |
|
1,328 |
|
|
|
1,293 |
|
Total cost of net revenue |
|
30,687 |
|
|
|
31,378 |
|
Research and development |
|
1,248 |
|
|
|
1,167 |
|
Selling, general and administrative |
|
4,249 |
|
|
|
4,031 |
|
Restructuring and other charges |
|
180 |
|
|
|
416 |
|
Acquisition and divestiture charges |
|
71 |
|
|
|
205 |
|
Amortization of intangible assets |
|
242 |
|
|
|
262 |
|
Total costs and expenses |
|
36,677 |
|
|
|
37,459 |
|
Earnings from operations |
|
2,827 |
|
|
|
2,442 |
|
Interest and other, net |
|
(410 |
) |
|
|
(357 |
) |
Earnings before taxes |
|
2,417 |
|
|
|
2,085 |
|
(Provision for) benefit from taxes |
|
(548 |
) |
|
|
204 |
|
Net
earnings |
$ |
1,869 |
|
|
$ |
2,289 |
|
|
|
|
|
Net
earnings per share: |
|
|
|
Basic |
$ |
1.90 |
|
|
$ |
2.31 |
|
Diluted |
$ |
1.88 |
|
|
$ |
2.29 |
|
|
|
|
|
Cash
dividends declared per share |
$ |
1.10 |
|
|
$ |
1.05 |
|
|
|
|
|
Weighted-average shares used to compute net earnings per
share: |
|
|
|
Basic |
|
986 |
|
|
|
991 |
|
Diluted |
|
994 |
|
|
|
999 |
|
(a) Effective first quarter of fiscal 2024, HP
presents consolidated net revenue and cost of net revenue
bifurcated between products and services. 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, earnings from operations, net
earnings or net EPS. Services include revenues from support and
maintenance contracts and other services, and excludes product
hardware and supplies revenues associated with as-a-service
offerings and instant ink subscriptions which are categorized
within product revenues.
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 |
|
July 31, 2024 |
|
April 30, 2024 |
|
July 31, 2023 |
|
Amounts |
|
Dilutednet earningsper
share |
|
Amounts |
|
Dilutednet earningsper
share |
|
Amounts |
|
Dilutednet earningsper
share |
GAAP net earnings |
$ |
640 |
|
|
$ |
0.65 |
|
|
$ |
607 |
|
|
$ |
0.61 |
|
|
$ |
766 |
|
|
$ |
0.76 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Restructuring and other charges |
|
46 |
|
|
|
0.05 |
|
|
|
71 |
|
|
|
0.07 |
|
|
|
75 |
|
|
|
0.07 |
|
Acquisition and divestiture charges |
|
22 |
|
|
|
0.02 |
|
|
|
22 |
|
|
|
0.02 |
|
|
|
48 |
|
|
|
0.05 |
|
Amortization of intangible assets |
|
81 |
|
|
|
0.08 |
|
|
|
80 |
|
|
|
0.08 |
|
|
|
91 |
|
|
|
0.09 |
|
Debt extinguishment benefit |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
(115 |
) |
|
|
(0.11 |
) |
Non-operating retirement-related credits |
|
(2 |
) |
|
|
— |
|
|
|
(3 |
) |
|
|
— |
|
|
|
(12 |
) |
|
|
(0.01 |
) |
Tax adjustments(a) |
|
32 |
|
|
|
0.03 |
|
|
|
35 |
|
|
|
0.04 |
|
|
|
6 |
|
|
|
0.01 |
|
Non-GAAP net earnings |
$ |
819 |
|
|
$ |
0.83 |
|
|
$ |
812 |
|
|
$ |
0.82 |
|
|
$ |
859 |
|
|
$ |
0.86 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
earnings from operations |
$ |
940 |
|
|
|
|
$ |
952 |
|
|
|
|
$ |
952 |
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Restructuring and other charges |
|
46 |
|
|
|
|
|
71 |
|
|
|
|
|
75 |
|
|
|
Acquisition and divestiture charges |
|
22 |
|
|
|
|
|
22 |
|
|
|
|
|
48 |
|
|
|
Amortization of intangible assets |
|
81 |
|
|
|
|
|
80 |
|
|
|
|
|
91 |
|
|
|
Non-GAAP earnings from operations |
$ |
1,089 |
|
|
|
|
$ |
1,125 |
|
|
|
|
$ |
1,166 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP
operating margin |
|
7.0% |
|
|
|
|
|
7.4% |
|
|
|
|
|
7.2% |
|
|
|
Non-GAAP adjustments |
|
1.1% |
|
|
|
|
|
1.4% |
|
|
|
|
|
1.6% |
|
|
|
Non-GAAP operating margin |
|
8.1% |
|
|
|
|
|
8.8% |
|
|
|
|
|
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) |
|
|
Nine months ended |
|
July 31, 2024 |
|
July 31, 2023 |
|
Amounts |
|
Dilutednet earningsper
share |
|
Amounts |
|
Dilutednet earningsper
share |
GAAP net earnings |
$ |
1,869 |
|
|
$ |
1.88 |
|
|
$ |
2,289 |
|
|
$ |
2.29 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
Restructuring and other charges |
|
180 |
|
|
|
0.19 |
|
|
|
416 |
|
|
|
0.42 |
|
Acquisition and divestiture charges |
|
71 |
|
|
|
0.07 |
|
|
|
206 |
|
|
|
0.21 |
|
Amortization of intangible assets |
|
242 |
|
|
|
0.24 |
|
|
|
262 |
|
|
|
0.26 |
|
Debt extinguishment benefit |
|
— |
|
|
|
— |
|
|
|
(107 |
) |
|
|
(0.11 |
) |
Non-operating retirement-related credits |
|
(7 |
) |
|
|
(0.01 |
) |
|
|
(35 |
) |
|
|
(0.04 |
) |
Tax adjustments(a) |
|
84 |
|
|
|
0.08 |
|
|
|
(656 |
) |
|
|
(0.65 |
) |
Non-GAAP net earnings |
$ |
2,439 |
|
|
$ |
2.45 |
|
|
$ |
2,375 |
|
|
$ |
2.38 |
|
|
|
|
|
|
|
|
|
GAAP earnings from
operations |
$ |
2,827 |
|
|
|
|
$ |
2,442 |
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
Restructuring and other charges |
|
180 |
|
|
|
|
|
416 |
|
|
|
Acquisition and divestiture charges |
|
71 |
|
|
|
|
|
206 |
|
|
|
Amortization of intangible assets |
|
242 |
|
|
|
|
|
262 |
|
|
|
Non-GAAP earnings from
operations |
$ |
3,320 |
|
|
|
|
$ |
3,326 |
|
|
|
|
|
|
|
|
|
|
|
GAAP operating margin |
|
7.2% |
|
|
|
|
|
6.1% |
|
|
|
Non-GAAP adjustments |
|
1.2% |
|
|
|
|
|
2.2% |
|
|
|
Non-GAAP operating margin |
|
8.4% |
|
|
|
|
|
8.3% |
|
|
|
(a) Includes tax impact on non-GAAP
adjustments.
HP INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED BALANCE
SHEETS(Unaudited)(In millions) |
|
|
As of |
|
July 31, 2024 |
|
October 31, 2023 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash, cash equivalents and restricted cash |
$ |
2,878 |
|
|
$ |
3,232 |
|
Accounts receivable, net |
|
4,659 |
|
|
|
4,237 |
|
Inventory |
|
7,790 |
|
|
|
6,862 |
|
Other current assets |
|
3,988 |
|
|
|
3,646 |
|
Total current assets |
|
19,315 |
|
|
|
17,977 |
|
Property, plant and equipment,
net |
|
2,831 |
|
|
|
2,827 |
|
Goodwill |
|
8,606 |
|
|
|
8,591 |
|
Other non-current assets |
|
7,307 |
|
|
|
7,609 |
|
Total assets |
$ |
38,059 |
|
|
$ |
37,004 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
Current liabilities: |
|
|
|
Notes payable and short-term borrowings |
$ |
1,396 |
|
|
$ |
230 |
|
Accounts payable |
|
15,447 |
|
|
|
14,046 |
|
Other current liabilities |
|
10,200 |
|
|
|
10,212 |
|
Total current liabilities |
|
27,043 |
|
|
|
24,488 |
|
Long-term debt |
|
8,229 |
|
|
|
9,254 |
|
Other non-current
liabilities |
|
4,179 |
|
|
|
4,331 |
|
Stockholders' deficit |
|
(1,392 |
) |
|
|
(1,069 |
) |
Total liabilities and
stockholders' deficit |
$ |
38,059 |
|
|
$ |
37,004 |
|
HP INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED STATEMENTS OF
CASH FLOWS(Unaudited)(In millions) |
|
|
Three months ended |
|
July 31, 2024 |
|
July 31, 2023 |
Cash
flows from operating activities: |
|
|
|
Net earnings |
$ |
640 |
|
|
$ |
766 |
|
Adjustments to reconcile net earnings to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
|
208 |
|
|
|
217 |
|
Stock-based compensation expense |
|
96 |
|
|
|
91 |
|
Restructuring and other charges |
|
46 |
|
|
|
75 |
|
Deferred taxes on earnings |
|
69 |
|
|
|
51 |
|
Other, net |
|
(11 |
) |
|
|
(97 |
) |
Changes in operating assets and liabilities, net of
acquisitions: |
|
|
|
Accounts receivable |
|
(341 |
) |
|
|
(246 |
) |
Inventory |
|
(275 |
) |
|
|
(10 |
) |
Accounts payable |
|
1,082 |
|
|
|
801 |
|
Net investment in leases from integrated financing |
|
(42 |
) |
|
|
(31 |
) |
Taxes on earnings |
|
39 |
|
|
|
24 |
|
Restructuring and other |
|
(60 |
) |
|
|
(77 |
) |
Other assets and liabilities |
|
(27 |
) |
|
|
(588 |
) |
Net cash provided by operating activities |
|
1,424 |
|
|
|
976 |
|
Cash
flows from investing activities: |
|
|
|
Investment in property, plant and equipment, net |
|
(162 |
) |
|
|
(137 |
) |
Purchases of available-for-sale securities and other
investments |
|
— |
|
|
|
(1 |
) |
Collateral (posted) returned for derivative instruments |
|
(60 |
) |
|
|
9 |
|
Payment made in connection with business acquisition, net of cash
acquired |
|
(15 |
) |
|
|
— |
|
Net cash used in investing activities |
|
(237 |
) |
|
|
(129 |
) |
Cash
flows from financing activities: |
|
|
|
Proceeds from short-term borrowings with original maturities less
than 90 days, net |
|
— |
|
|
|
200 |
|
Proceeds from debt, net of issuance costs |
|
80 |
|
|
|
60 |
|
Payment of debt and associated costs |
|
(51 |
) |
|
|
(1,067 |
) |
Stock-based award activities and others |
|
13 |
|
|
|
— |
|
Repurchase of common stock |
|
(600 |
) |
|
|
— |
|
Cash dividends paid |
|
(268 |
) |
|
|
(259 |
) |
Settlement of cash flow hedges |
|
— |
|
|
|
(3 |
) |
Net cash used in financing activities |
|
(826 |
) |
|
|
(1,069 |
) |
Increase (decrease) in cash, cash equivalents and restricted
cash |
|
361 |
|
|
|
(222 |
) |
Cash,
cash equivalents and restricted cash at beginning of period |
|
2,517 |
|
|
|
1,940 |
|
Cash,
cash equivalents and restricted cash at end of period |
$ |
2,878 |
|
|
$ |
1,718 |
|
HP INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED STATEMENTS OF
CASH FLOWS(Unaudited)(In millions) |
|
|
Nine months ended |
|
July 31, 2024 |
|
July 31, 2023 |
Cash flows from operating
activities: |
|
|
|
Net earnings |
$ |
1,869 |
|
|
$ |
2,289 |
|
Adjustments to reconcile net earnings to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
|
622 |
|
|
|
638 |
|
Stock-based compensation expense |
|
367 |
|
|
|
353 |
|
Restructuring and other charges |
|
180 |
|
|
|
416 |
|
Deferred taxes on earnings |
|
69 |
|
|
|
(774 |
) |
Other, net |
|
(24 |
) |
|
|
(61 |
) |
Changes in operating assets and liabilities, net of
acquisitions: |
|
|
|
Accounts receivable |
|
(447 |
) |
|
|
180 |
|
Inventory |
|
(953 |
) |
|
|
364 |
|
Accounts payable |
|
1,442 |
|
|
|
(1,133 |
) |
Net investment in leases from integrated financing |
|
(123 |
) |
|
|
(82 |
) |
Taxes on earnings |
|
(89 |
) |
|
|
354 |
|
Restructuring and other |
|
(204 |
) |
|
|
(244 |
) |
Other assets and liabilities |
|
(583 |
) |
|
|
(704 |
) |
Net cash provided by operating activities |
|
2,126 |
|
|
|
1,596 |
|
Cash flows from investing activities: |
|
|
|
Investment in property, plant and equipment, net |
|
(439 |
) |
|
|
(459 |
) |
Purchases of available-for-sale securities and other
investments |
|
— |
|
|
|
(6 |
) |
Maturities and sales of available-for-sale securities and other
investments |
|
— |
|
|
|
18 |
|
Collateral posted for derivative instruments |
|
(60 |
) |
|
|
(118 |
) |
Payment made in connection with business acquisitions, net of cash
acquired |
|
(15 |
) |
|
|
(5 |
) |
Net cash used in investing activities |
|
(514 |
) |
|
|
(570 |
) |
Cash flows from financing activities: |
|
|
|
Proceeds from short-term borrowings with original maturities less
than 90 days, net |
|
— |
|
|
|
190 |
|
Proceeds from debt, net of issuance costs |
|
266 |
|
|
|
177 |
|
Payment of debt and associated costs |
|
(153 |
) |
|
|
(1,654 |
) |
Stock-based award activities and others |
|
(67 |
) |
|
|
(86 |
) |
Repurchase of common stock |
|
(1,200 |
) |
|
|
(100 |
) |
Cash dividends paid |
|
(812 |
) |
|
|
(777 |
) |
Collateral returned for derivative instruments |
|
— |
|
|
|
(200 |
) |
Settlement of cash flow hedges |
|
— |
|
|
|
(3 |
) |
Net cash used in financing activities |
|
(1,966 |
) |
|
|
(2,453 |
) |
Decrease in cash, cash
equivalents and restricted cash |
|
(354 |
) |
|
|
(1,427 |
) |
Cash, cash equivalents and
restricted cash at beginning of period |
|
3,232 |
|
|
|
3,145 |
|
Cash,
cash equivalents and restricted cash at end of period |
$ |
2,878 |
|
|
$ |
1,718 |
|
HP INC. AND SUBSIDIARIESSEGMENT/BUSINESS UNIT
INFORMATION(Unaudited)(In millions) |
|
|
Three months ended |
|
Change (%) |
|
July 31, 2024 |
|
April 30, 2024 |
|
July 31, 2023 |
|
Q/Q |
|
Y/Y |
Net
revenue: |
|
|
|
|
|
|
|
|
|
Commercial PS |
$ |
6,677 |
|
|
$ |
6,242 |
|
|
$ |
6,201 |
|
|
7 |
% |
|
8 |
% |
Consumer PS |
|
2,692 |
|
|
|
2,184 |
|
|
|
2,731 |
|
|
23 |
% |
|
(1 |
)% |
Personal Systems |
|
9,369 |
|
|
|
8,426 |
|
|
|
8,932 |
|
|
11 |
% |
|
5 |
% |
Supplies |
|
2,703 |
|
|
|
2,864 |
|
|
|
2,768 |
|
|
(6 |
)% |
|
(2 |
)% |
Commercial Printing(a) |
|
1,147 |
|
|
|
1,205 |
|
|
|
1,208 |
|
|
(5 |
)% |
|
(5 |
)% |
Consumer Printing(a) |
|
293 |
|
|
|
299 |
|
|
|
287 |
|
|
(2 |
)% |
|
2 |
% |
Printing |
|
4,143 |
|
|
|
4,368 |
|
|
|
4,263 |
|
|
(5 |
)% |
|
(3 |
)% |
Corporate Investments(b) |
|
7 |
|
|
|
5 |
|
|
|
1 |
|
|
NM |
|
|
NM |
|
Total segment net revenue |
|
13,519 |
|
|
|
12,799 |
|
|
|
13,196 |
|
|
6 |
% |
|
2 |
% |
Other(b) |
|
— |
|
|
|
1 |
|
|
|
— |
|
|
NM |
|
|
NM |
|
Total net revenue |
$ |
13,519 |
|
|
$ |
12,800 |
|
|
$ |
13,196 |
|
|
6 |
% |
|
2 |
% |
|
|
|
|
|
|
|
|
|
|
Earnings before taxes: |
|
|
|
|
|
|
|
|
|
Personal Systems |
$ |
599 |
|
|
$ |
508 |
|
|
$ |
592 |
|
|
|
|
|
Printing |
|
715 |
|
|
|
829 |
|
|
|
794 |
|
|
|
|
|
Corporate Investments |
|
(28 |
) |
|
|
(30 |
) |
|
|
(32 |
) |
|
|
|
|
Total segment earnings from operations |
|
1,286 |
|
|
|
1,307 |
|
|
|
1,354 |
|
|
|
|
|
Corporate and unallocated cost and other |
|
(101 |
) |
|
|
(88 |
) |
|
|
(97 |
) |
|
|
|
|
Stock-based compensation expense |
|
(96 |
) |
|
|
(94 |
) |
|
|
(91 |
) |
|
|
|
|
Restructuring and other charges |
|
(46 |
) |
|
|
(71 |
) |
|
|
(75 |
) |
|
|
|
|
Acquisition and divestiture charges |
|
(22 |
) |
|
|
(22 |
) |
|
|
(48 |
) |
|
|
|
|
Amortization of intangible assets |
|
(81 |
) |
|
|
(80 |
) |
|
|
(91 |
) |
|
|
|
|
Interest and other, net |
|
(113 |
) |
|
|
(155 |
) |
|
|
(16 |
) |
|
|
|
|
Total earnings before taxes |
$ |
827 |
|
|
$ |
797 |
|
|
$ |
936 |
|
|
|
|
|
(a) Effective at the beginning of its first
quarter of fiscal 2024, HP realigned its business unit financial
reporting more closely with its customer market segmentation. The
realignment resulted in the transfer of LaserJet printers net
revenues from Consumer Printing to Commercial Printing. HP
reflected this change to its business unit information in prior
reporting periods on an as-if basis which resulted in the
reclassification of net revenues from Consumer Printing to
Commercial Printing. The reporting change had no impact to
previously reported segment net revenue, consolidated net revenue,
earnings from operations, net earnings or net earnings per
share.
(b) "NM" represents not meaningful.
HP INC. AND SUBSIDIARIESSEGMENT/BUSINESS UNIT
INFORMATION(Unaudited)(In millions) |
|
|
Nine months ended |
|
Change (%) |
|
July 31, 2024 |
|
July 31, 2023 |
|
Y/Y |
Net revenue: |
|
|
|
|
|
Commercial PS |
$ |
18,964 |
|
|
$ |
18,499 |
|
|
3 |
% |
Consumer PS |
|
7,640 |
|
|
|
7,787 |
|
|
(2 |
)% |
Personal Systems |
|
26,604 |
|
|
|
26,286 |
|
|
1 |
% |
Supplies |
|
8,430 |
|
|
|
8,631 |
|
|
(2 |
)% |
Commercial Printing(a) |
|
3,579 |
|
|
|
3,969 |
|
|
(10 |
)% |
Consumer Printing(a) |
|
877 |
|
|
|
1,011 |
|
|
(13 |
)% |
Printing |
|
12,886 |
|
|
|
13,611 |
|
|
(5 |
)% |
Corporate Investments(b) |
|
14 |
|
|
|
5 |
|
|
NM |
|
Total segment net revenue |
|
39,504 |
|
|
|
39,902 |
|
|
(1 |
)% |
Other(b) |
|
— |
|
|
|
(1 |
) |
|
NM |
|
Total net revenue |
$ |
39,504 |
|
|
$ |
39,901 |
|
|
(1 |
)% |
|
|
|
|
|
|
Earnings before taxes: |
|
|
|
|
|
Personal Systems |
$ |
1,644 |
|
|
$ |
1,498 |
|
|
|
Printing |
|
2,416 |
|
|
|
2,563 |
|
|
|
Corporate Investments |
|
(95 |
) |
|
|
(103 |
) |
|
|
Total segment earnings from operations |
|
3,965 |
|
|
|
3,958 |
|
|
|
Corporate and unallocated cost
and other |
|
(278 |
) |
|
|
(280 |
) |
|
|
Stock-based compensation
expense |
|
(367 |
) |
|
|
(353 |
) |
|
|
Restructuring and other
charges |
|
(180 |
) |
|
|
(416 |
) |
|
|
Acquisition and divestiture
charges |
|
(71 |
) |
|
|
(205 |
) |
|
|
Amortization of intangible
assets |
|
(242 |
) |
|
|
(262 |
) |
|
|
Interest and other, net |
|
(410 |
) |
|
|
(357 |
) |
|
|
Total earnings before taxes |
$ |
2,417 |
|
|
$ |
2,085 |
|
|
|
|
|
|
|
|
|
(a) Effective at the beginning of its first quarter of fiscal
2024, HP realigned its business unit financial reporting more
closely with its customer market segmentation. The realignment
resulted in the transfer of LaserJet printers net revenues from
Consumer Printing to Commercial Printing. HP reflected this change
to its business unit information in prior reporting periods on an
as-if basis which resulted in the reclassification of net revenues
from Consumer Printing to Commercial Printing. The reporting change
had no impact to previously reported segment net revenue,
consolidated net revenue, earnings from operations, net earnings or
net earnings per share.
(b) "NM" represents not meaningful.
HP INC. AND SUBSIDIARIESSEGMENT OPERATING MARGIN
SUMMARY(Unaudited) |
|
|
Three months ended |
|
Change (pts) |
|
July 31, 2024 |
|
April 30, 2024 |
|
July 31, 2023 |
|
Q/Q |
|
Y/Y |
Segment operating margin: |
|
|
|
|
|
|
|
|
|
Personal Systems |
6.4 |
% |
|
6.0 |
% |
|
6.6 |
% |
|
0.4pts |
|
(0.2)pts |
Printing |
17.3 |
% |
|
19.0 |
% |
|
18.6 |
% |
|
(1.7)pts |
|
(1.3)pts |
Corporate Investments(a) |
NM |
|
|
NM |
|
|
NM |
|
|
NM |
|
NM |
Total segment |
9.5 |
% |
|
10.2 |
% |
|
10.3 |
% |
|
(0.7)pts |
|
(0.8)pts |
|
Nine months ended |
|
Change (pts) |
|
July 31, 2024 |
|
July 31, 2023 |
|
Y/Y |
Segment operating margin: |
|
|
|
|
|
Personal Systems |
6.2 |
% |
|
5.7 |
% |
|
0.5pts |
Printing |
18.7 |
% |
|
18.8 |
% |
|
(0.1)pts |
Corporate Investments(a) |
NM |
|
|
NM |
|
|
NM |
Total segment |
10.0 |
% |
|
9.9 |
% |
|
0.1pts |
(a) "NM" represents not meaningful.
HP INC. AND SUBSIDIARIESCALCULATION OF DILUTED NET EARNINGS
PER SHARE(Unaudited)(In millions, except per share amounts) |
|
|
Three months ended |
|
July 31, 2024 |
|
April 30, 2024 |
|
July 31, 2023 |
Numerator: |
|
|
|
|
|
GAAP net earnings |
$ |
640 |
|
|
$ |
607 |
|
|
$ |
766 |
|
Non-GAAP net earnings |
$ |
819 |
|
|
$ |
812 |
|
|
$ |
859 |
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
Weighted-average shares used to compute basic net earnings per
share |
|
979 |
|
|
|
984 |
|
|
|
993 |
|
Dilutive effect of employee stock plans(a) |
|
11 |
|
|
|
6 |
|
|
|
9 |
|
Weighted-average shares used to compute diluted net earnings per
share |
|
990 |
|
|
|
990 |
|
|
|
1,002 |
|
|
|
|
|
|
|
GAAP
diluted net earnings per share |
$ |
0.65 |
|
|
$ |
0.61 |
|
|
$ |
0.76 |
|
Non-GAAP diluted net earnings per share |
$ |
0.83 |
|
|
$ |
0.82 |
|
|
$ |
0.86 |
|
(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) |
|
|
Nine months ended |
|
July 31, 2024 |
|
July 31, 2023 |
Numerator: |
|
|
|
GAAP net earnings |
$ |
1,869 |
|
|
$ |
2,289 |
|
Non-GAAP net earnings |
$ |
2,439 |
|
|
$ |
2,375 |
|
|
|
|
|
Denominator: |
|
|
|
Weighted-average shares used to compute basic net earnings per
share |
|
986 |
|
|
|
991 |
|
Dilutive effect of employee stock plans(a) |
|
8 |
|
|
|
8 |
|
Weighted-average shares used to compute diluted net earnings per
share |
|
994 |
|
|
|
999 |
|
|
|
|
|
GAAP diluted net earnings per
share |
$ |
1.88 |
|
|
$ |
2.29 |
|
Non-GAAP diluted net earnings
per share |
$ |
2.45 |
|
|
$ |
2.38 |
|
(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 other income and expenses,
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, 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, non-operating retirement related
(credits)/charges, debt extinguishment costs (benefit), 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.
- HP incurs debt extinguishment (benefit)/costs includes certain
(gain)/loss related to repurchase of certain of its outstanding
U.S. dollar global notes or termination of commitments under
revolving credit facilities. These (gain)/loss resulting from debt
redemption transactions are partially or more than offset by costs
such as bond repurchase premiums, bank fees, unpaid accrued
interests, etc. HP excludes these (benefit)/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.
- 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 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 provided by (used in) operating activities adjusted for net
investment in leases from integrated financing 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 provided by (used in) operating activities
adjusted for net investment in leases from integrated financing 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 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
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, amortization of intangible assets are excluded
from non-GAAP operating margin. In addition, non-operating
retirement-related (credits)/charges, debt extinguishment costs
(benefit) and tax adjustments are excluded from non-GAAP other
income and expenses, non-GAAP tax rate, 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 other income
and expenses, 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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