Today at HP’s 2021 Securities Analyst Meeting (“SAM”), the company
reiterated its fiscal 2021 financial outlook provided at Q3 2021
earnings, and provided details on its strategy and opportunities
for long-term growth, along with its financial outlook for fiscal
2022.
“We continue to build a stronger HP. We have delivered
exceptional financial performance since our last investor day in
2019 – and we are confident in our plans to deliver sustained
revenue, operating profit, EPS and free cash flow growth,” said
Enrique Lores, President and Chief Executive Officer, HP Inc. “We
are strengthening our core business, building a more
growth-oriented portfolio, and creating a more digital company to
meet changing customer needs and capitalize on secular trends
across our categories.”
Fiscal 2022 outlook
For fiscal 2022, the company estimates GAAP diluted net EPS to
be in the range of $3.86 to $4.06 and estimates non-GAAP diluted
net EPS to be in the range of $4.07 to $4.27. Fiscal 2022 non-GAAP
diluted net EPS estimates exclude $0.21 per diluted share,
primarily related to restructuring and other charges,
acquisition-related charges, amortization of intangible assets,
non-operating retirement-related (credits)/charges, tax adjustments
and the related tax impact on these items.
Based on the current environment, HP anticipates generating free
cash flow of at least $4.5 billion for fiscal 2022.
For fiscal 2022, the company indicated that it expects to return
at least 100% of free cash flow through dividends and share
repurchases. The HP Board of Directors has approved an increase to
the planned annual dividend amount to $1.00 per share, reflecting
an approximately 29% increase from the prior dividend. The balance
is expected to be returned to shareholders through share
repurchases.
“This is a record 29 percent increase in our annual dividend,
underscoring our confidence in our ability to grow earnings and
free cash flow in fiscal 2022 and beyond,” said Marie Myers, Chief
Financial Officer. “We remain deeply committed to aggressively
returning capital to shareholders while also investing in
attractive opportunities we see to drive profitable growth and
long-term value creation.”
Webcast details
A webcast of today’s event, along with management presentations
and other materials, is available at
https://investor.hp.com/events/event-details/2021/HP-Securities-Analyst-Meeting/default.aspx.
This news release contains only a summary of some of the
information being presented at today’s event and should be read in
conjunction with the management presentations and other materials
made available on that website.
About HP Inc.
HP Inc. (NYSE: HPQ) creates technology that makes life better
for everyone, everywhere. Through our product and service portfolio
of personal systems, printers and 3D printing solutions, we
engineer experiences that amaze. More information about HP Inc. is
available at www.hp.com.
Forward-looking statements
This news release 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, the results of HP and its
consolidated subsidiaries 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 potential
impact of the COVID-19 pandemic and the actions by governments,
businesses and individuals in response to the situation;
projections of net revenue, margins, expenses, effective tax rates,
net earnings, net EPS, 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, net revenue or profitability improvements or other
financial impacts; any statements concerning the expected
development, performance, market share or competitive performance
relating to products or services; 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 or disputes;
any statements of expectation or belief, including with respect to
the timing and expected benefits of acquisitions and other business
combination and investment transactions; 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 include factors relating to
the effects of the COVID-19 pandemic and the actions by
governments, businesses and individuals in response to the
situation, the effects of which may give rise to or amplify the
risks associated with many of these factors listed here; HP’s
ability to execute on its strategic plan, 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 need to address the many challenges facing HP’s
businesses; 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 and reseller
landscape; the development and transition of new products and
services and the enhancement of existing products and services to
meet customer needs and respond to emerging technological trends;
successfully competing and maintaining the value proposition of
HP’s products, including supplies; 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; 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
HP’s uneven sales cycle; integration and other risks associated
with business combination and investment transactions; the results
of the restructuring plans, including estimates and assumptions
related to the cost (including any possible disruption of HP’s
business) and the anticipated benefits of the restructuring plans;
the protection of HP’s intellectual property assets, including
intellectual property licensed from third parties; the hiring and
retention of key employees; the impact of macroeconomic and
geopolitical trends and events, including the effects of inflation;
risks associated with HP’s international operations; 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; disruptions in operations from system
security risks, data protection breaches, cyberattacks, extreme
weather conditions, 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; potential impacts, liabilities and costs
from pending or potential investigations, claims and disputes; and
other risks that are described herein and the risks discussed in
HP’s Annual Report on Form 10-K for the fiscal year ended October
31, 2020 and that are otherwise described or updated from time to
time in HP’s other filings with the Securities and Exchange
Commission.
As in prior periods, the financial information set forth in this
release 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 Reports on Form 10-K for the fiscal years ended October 31,
2021 and October 31, 2022 and HP’s other filings with the
Securities and Exchange Commission. HP assumes no obligation and
does not intend to update these forward-looking statements. HP’s
Investor Relations website at http://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.
Use of non-GAAP financial information
To supplement HP’s financial information 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 each of these non-GAAP
financial measures to the most directly comparable GAAP financial
measures are included in the slides presented at the 2021 SAM. 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 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 provided by operating
activities or cash and cash equivalents prepared in accordance with
GAAP.
Use and economic substance of non-GAAP financial
measures
Net revenue on a constant currency basis excludes the effect of
foreign currency exchange fluctuations calculated by translating
current period revenues using monthly average exchange rates from
the comparative period and excluding any hedging impact recognized
in the current period. Non-GAAP operating margin is defined to
exclude the effects of any amounts relating to restructuring and
other charges, acquisition-related 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 include non-recurring costs that 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 HP's
operating performance in other periods.
- HP incurs cost
related to its acquisitions, 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, and
integration-related costs, as well as non-cash adjustments to the
fair value of certain acquired assets such as inventory. These
charges related to acquisitions are inconsistent in amount and
frequency and are significantly impacted by the timing and nature
of HP's acquisitions. 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 HP's 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 HP’s 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, and impacts from
other market-related factors 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
HP's operating performance in other periods.
- HP incurs defined
benefit plan settlement charges relating to HP funded pension
plans. The charges are associated with the net settlement and
remeasurement resulting from voluntary lump sum payments offered to
certain vested participants that are separated from service. 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 HP’s
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 HP's
operating performance in other periods.
- Tax adjustments
include U.S. tax reform adjustment.
- HP recorded U.S.
tax reform adjustments as one-time charges relating to the
enactment of the Tax Cuts and Jobs Act of 2017 and has completed
the accounting for the tax effects of the Tax Cuts and Jobs Act
within the one year measurement period. Additional guidance is
periodically issued by regulators and new positions taken or
elections made by HP impact the income tax expense and effective
tax rate in the period in which the adjustments are made.
- HP also recorded
other tax adjustment including tax benefits and expenses related to
the 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
HP's operating performance in other periods.
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 HP’s
operating performance in other periods.
Free cash flow is a non-GAAP measure that is defined as cash
flow from operations 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 and cash equivalents 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 and
cash equivalents, 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.
Material limitations associated with use of non-GAAP
financial measures
These 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-related charges,
non-operating retirement-related (credits)/charges, defined benefit
plan settlement charges, debt extinguishment costs and tax
adjustments that are excluded from non-GAAP operating margin,
non-GAAP net earnings and non-GAAP diluted net EPS 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 measures
HP compensates 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 robust and detailed reconciliations of each non-GAAP
financial measure to its most directly comparable GAAP measure 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
investors
HP 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 transparency 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.
Editorial contacts
HP Inc. Media
RelationsMediaRelations@hp.com
HP Inc. Investor
RelationsInvestorRelations@hp.com
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