HP (NYSE: HPQ)
- First quarter GAAP diluted net earnings per share ("EPS") of
$0.62, within the previously provided outlook of $0.60 to $0.70 per
share
- First quarter non-GAAP diluted net EPS of $0.81, within the
previously provided outlook of $0.76 to $0.86 per share
- First quarter net revenue of $13.2 billion, down 4.4% from the
prior-year period
- First quarter net cash provided by operating activities of $121
million, free cash flow of $25 million
- First quarter returned $0.8 billion to shareholders in the form
of share repurchases and dividends
HP Inc.'s
fiscal 2024 first quarter financial performance |
|
Q1 FY24 |
Q1 FY23 |
Y/Y |
GAAP net revenue ($B) |
$ |
13.2 |
|
$ |
13.8 |
|
(4.4)% |
GAAP operating margin |
|
7.1% |
|
|
5.4% |
|
1.7 pts |
GAAP net earnings ($B) |
$ |
0.6 |
|
$ |
0.5 |
|
33% |
GAAP diluted net EPS |
$ |
0.62 |
|
$ |
0.47 |
|
32% |
Non-GAAP operating margin |
|
8.4% |
|
|
7.6% |
|
0.8 pts |
Non-GAAP net earnings
($B) |
$ |
0.8 |
|
$ |
0.7 |
|
11% |
Non-GAAP diluted net EPS |
$ |
0.81 |
|
$ |
0.73 |
|
11% |
Net cash provided by (used in)
operating activities ($B)(1) |
$ |
0.1 |
|
$ |
(0.0) |
|
NM |
Free cash flow ($B)(1) |
$ |
0.0 |
|
$ |
(0.2) |
|
NM |
Notes to tableInformation about HP Inc.'s use of non-GAAP
financial information is provided under "Use of non-GAAP financial
information" below.
(1) "NM" represents not meaningful.
Net revenue and EPS resultsHP Inc. and its
subsidiaries (“HP”) announced fiscal 2024 first quarter net revenue
of $13.2 billion, down 4.4% (down 4.9% in constant currency) from
the prior-year period.
“Our Q1 results reflect continued progress against our Future
Ready plan,” said Enrique Lores, HP President and CEO. “We are
bringing terrific innovation to our customers while driving
disciplined execution across every facet of the business. As a
result, we delivered solid earnings growth this quarter and we are
well positioned to accelerate as the market recovers.”
First quarter GAAP diluted net EPS was $0.62, up from $0.47 in
the prior-year period and within the previously provided outlook of
$0.60 to $0.70. First quarter non-GAAP diluted net EPS was $0.81,
up from $0.73 in the prior-year period and within the previously
provided outlook of $0.76 to $0.86. First quarter non-GAAP net
earnings and non-GAAP diluted net EPS excludes after-tax
adjustments of $186 million, or $0.19 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 first quarter of fiscal 2024 was $121
million. Accounts receivable ended the quarter at $3.8 billion,
down 2 days quarter over quarter to 26 days. Inventory ended the
quarter at $6.9 billion, up 4 days quarter over quarter to 61 days.
Accounts payable ended the quarter at $13.3 billion, down 1 day
quarter over quarter to 116 days.
HP generated $25 million of free cash flow in the first quarter.
Free cash flow includes net cash provided by operating activities
of $121 million adjusted for net investments in leases of $62
million and net investments in property, plant and equipment of
$158 million.
HP’s dividend payment of $0.2756 per share in the first quarter
resulted in cash usage of $0.3 billion. HP also utilized $0.5
billion of cash during the quarter to repurchase approximately 16.7
million shares of common stock in the open market. HP exited the
quarter with $2.4 billion in gross cash, which includes cash and
cash equivalents of $2.3 billion, restricted cash of $154 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 First quarter segment results
- Personal Systems net revenue was
$8.8 billion, down 4% year over year (down 5% in constant currency)
with a 6.1% operating margin. Consumer PS net revenue was down 1%
and Commercial PS net revenue was down 5%. Total units were up 5%
with Consumer PS units up 10% and Commercial PS units up 2%.
- Printing net revenue was $4.4 billion, down 5% year over year
(down 5% in constant currency) with a 19.9% operating margin.
Consumer Printing net revenue was down 22% and Commercial Printing
net revenue was down 12%. Supplies net revenue was flat (up 1% in
constant currency). Total hardware units were down 17%, with
Consumer Printing units down 15% and Commercial Printing units down
18%.
OutlookFor the fiscal 2024 second quarter, HP
estimates GAAP diluted net EPS to be in the range of $0.58 to $0.68
and non-GAAP diluted net EPS to be in the range of $0.76 to $0.86.
Fiscal 2024 second quarter non-GAAP diluted net EPS estimates
exclude $0.18 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 2024, HP estimates GAAP diluted net EPS to be in the
range of $2.61 to $3.01 and non-GAAP diluted net EPS to be in the
range of $3.25 to $3.65. Fiscal 2024 non-GAAP diluted net EPS
estimates exclude $0.64 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 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 Q1 earnings conference call is accessible via audio
webcast at www.hp.com/investor/2024Q1Webcast.
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 provided by (used in)
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 Quarterly Reports on Form 10-Q for
the fiscal quarters ending April 30, 2024 and July 31, 2024, 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.
Editorial contactsHP Inc. Media
RelationsMediaRelations@hp.comHP Inc. Investor
RelationsInvestorRelations@hp.com
|
HP INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED STATEMENTS OF
EARNINGS(Unaudited)(In millions, except per share amounts) |
|
|
Three months ended |
|
January 31, 2024 |
|
October 31, 2023 |
|
January 31, 2023 |
Net revenue:(a) |
|
|
|
|
|
Products |
$ |
12,419 |
|
|
$ |
13,045 |
|
|
$ |
13,044 |
|
Services |
|
766 |
|
|
|
772 |
|
|
|
754 |
|
Total net revenue |
|
13,185 |
|
|
|
13,817 |
|
|
|
13,798 |
|
Cost of revenue:(a) |
|
|
|
|
|
Products |
|
9,871 |
|
|
|
10,399 |
|
|
|
10,589 |
|
Services |
|
426 |
|
|
|
433 |
|
|
|
422 |
|
Total cost of revenue |
|
10,297 |
|
|
|
10,832 |
|
|
|
11,011 |
|
Research and development |
|
399 |
|
|
|
411 |
|
|
|
403 |
|
Selling, general and administrative |
|
1,383 |
|
|
|
1,327 |
|
|
|
1,331 |
|
Restructuring and other charges |
|
63 |
|
|
|
111 |
|
|
|
141 |
|
Acquisition and divestiture charges |
|
27 |
|
|
|
34 |
|
|
|
84 |
|
Amortization of intangible assets |
|
81 |
|
|
|
88 |
|
|
|
85 |
|
Total operating expenses |
|
12,250 |
|
|
|
12,803 |
|
|
|
13,055 |
|
Earnings from operations |
|
935 |
|
|
|
1,014 |
|
|
|
743 |
|
Interest and other, net |
|
(142 |
) |
|
|
(162 |
) |
|
|
(181 |
) |
Earnings before taxes |
|
793 |
|
|
|
852 |
|
|
|
562 |
|
(Provision for) benefit from
taxes |
|
(171 |
) |
|
|
122 |
|
|
|
(93 |
) |
Net earnings |
$ |
622 |
|
|
$ |
974 |
|
|
$ |
469 |
|
|
|
|
|
|
|
Net earnings per share: |
|
|
|
|
|
Basic |
$ |
0.63 |
|
|
$ |
0.98 |
|
|
$ |
0.47 |
|
Diluted |
$ |
0.62 |
|
|
$ |
0.97 |
|
|
$ |
0.47 |
|
|
|
|
|
|
|
Cash dividends declared per
share |
$ |
0.55 |
|
|
$ |
— |
|
|
$ |
0.53 |
|
|
|
|
|
|
|
Weighted-average shares used
to compute net earnings per share: |
|
|
|
|
|
Basic |
|
995 |
|
|
|
994 |
|
|
|
989 |
|
Diluted |
|
1,002 |
|
|
|
1,004 |
|
|
|
996 |
|
(a) |
Effective first quarter of fiscal 2024, HP presents consolidated
net revenue and cost of 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 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 |
|
January 31, 2024 |
|
October 31, 2023 |
|
January 31, 2023 |
|
Amounts |
|
Dilutednet earningsper
share |
|
Amounts |
|
Dilutednet earningsper
share |
|
Amounts |
|
Dilutednet earningsper
share |
GAAP net earnings |
$ |
622 |
|
|
$ |
0.62 |
|
$ |
974 |
|
|
$ |
0.97 |
|
|
$ |
469 |
|
|
$ |
0.47 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Restructuring and other charges |
|
63 |
|
|
|
0.06 |
|
|
111 |
|
|
|
0.11 |
|
|
|
141 |
|
|
|
0.14 |
|
Acquisition and divestiture charges |
|
27 |
|
|
|
0.03 |
|
|
34 |
|
|
|
0.03 |
|
|
|
84 |
|
|
|
0.08 |
|
Amortization of intangible assets |
|
81 |
|
|
|
0.08 |
|
|
88 |
|
|
|
0.09 |
|
|
|
85 |
|
|
|
0.09 |
|
Debt extinguishment costs |
|
— |
|
|
|
— |
|
|
— |
|
|
|
— |
|
|
|
8 |
|
|
|
0.01 |
|
Non-operating retirement-related credits |
|
(2 |
) |
|
|
— |
|
|
(11 |
) |
|
|
(0.01 |
) |
|
|
(10 |
) |
|
|
(0.01 |
) |
Tax adjustments(a) |
|
17 |
|
|
|
0.02 |
|
|
(294 |
) |
|
|
(0.29 |
) |
|
|
(46 |
) |
|
|
(0.05 |
) |
Non-GAAP net earnings |
$ |
808 |
|
|
$ |
0.81 |
|
$ |
902 |
|
|
$ |
0.90 |
|
|
$ |
731 |
|
|
$ |
0.73 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP earnings from
operations |
$ |
935 |
|
|
|
|
$ |
1,014 |
|
|
|
|
$ |
743 |
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Restructuring and other charges |
|
63 |
|
|
|
|
|
111 |
|
|
|
|
|
141 |
|
|
|
Acquisition and divestiture charges |
|
27 |
|
|
|
|
|
34 |
|
|
|
|
|
84 |
|
|
|
Amortization of intangible assets |
|
81 |
|
|
|
|
|
88 |
|
|
|
|
|
85 |
|
|
|
Non-GAAP earnings from
operations |
$ |
1,106 |
|
|
|
|
$ |
1,247 |
|
|
|
|
$ |
1,053 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating margin |
|
7.1 |
% |
|
|
|
|
7.3 |
% |
|
|
|
|
5.4 |
% |
|
|
Non-GAAP adjustments |
|
1.3 |
% |
|
|
|
|
1.7 |
% |
|
|
|
|
2.2 |
% |
|
|
Non-GAAP operating margin |
|
8.4 |
% |
|
|
|
|
9.0 |
% |
|
|
|
|
7.6 |
% |
|
|
(a) Includes tax impact on non-GAAP
adjustments.
|
HP INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED BALANCE
SHEETS(Unaudited)(In millions) |
|
|
As of |
|
January 31, 2024 |
|
October 31, 2023 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash, cash equivalents and restricted cash |
$ |
2,417 |
|
|
$ |
3,232 |
|
Accounts receivable, net |
|
3,804 |
|
|
|
4,237 |
|
Inventory |
|
6,928 |
|
|
|
6,862 |
|
Other current assets |
|
3,709 |
|
|
|
3,646 |
|
Total current assets |
|
16,858 |
|
|
|
17,977 |
|
Property, plant and equipment,
net |
|
2,807 |
|
|
|
2,827 |
|
Goodwill |
|
8,610 |
|
|
|
8,591 |
|
Other non-current assets |
|
7,571 |
|
|
|
7,609 |
|
Total assets |
$ |
35,846 |
|
|
$ |
37,004 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
Current liabilities: |
|
|
|
Notes payable and short-term borrowings |
$ |
359 |
|
|
$ |
230 |
|
Accounts payable |
|
13,255 |
|
|
|
14,046 |
|
Other current liabilities |
|
10,243 |
|
|
|
10,212 |
|
Total current liabilities |
|
23,857 |
|
|
|
24,488 |
|
Long-term debt |
|
9,301 |
|
|
|
9,254 |
|
Other non-current
liabilities |
|
4,328 |
|
|
|
4,331 |
|
Stockholders' deficit |
|
(1,640 |
) |
|
|
(1,069 |
) |
Total liabilities and
stockholders' deficit |
$ |
35,846 |
|
|
$ |
37,004 |
|
|
HP INC. AND SUBSIDIARIESCONSOLIDATED CONDENSED STATEMENTS OF
CASH FLOWS(Unaudited)(In millions) |
|
|
Three months ended |
|
January 31, 2024 |
|
January 31, 2023 |
Cash flows from operating
activities: |
|
|
|
Net earnings |
$ |
622 |
|
|
$ |
469 |
|
Adjustments to reconcile net earnings to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
|
205 |
|
|
|
209 |
|
Stock-based compensation expense |
|
177 |
|
|
|
167 |
|
Restructuring and other charges |
|
63 |
|
|
|
141 |
|
Deferred taxes on earnings |
|
(5 |
) |
|
|
(140 |
) |
Other, net |
|
(20 |
) |
|
|
4 |
|
Changes in operating assets and liabilities, net of
acquisitions: |
|
|
|
Accounts receivable |
|
446 |
|
|
|
244 |
|
Inventory |
|
(47 |
) |
|
|
230 |
|
Accounts payable |
|
(744 |
) |
|
|
(1,731 |
) |
Net investment in leases |
|
(62 |
) |
|
|
(16 |
) |
Taxes on earnings |
|
49 |
|
|
|
220 |
|
Restructuring and other |
|
(87 |
) |
|
|
(92 |
) |
Other assets and liabilities |
|
(476 |
) |
|
|
279 |
|
Net cash provided by (used in) operating
activities |
|
121 |
|
|
|
(16 |
) |
Cash flows from investing
activities: |
|
|
|
Investment in property, plant and equipment, net |
|
(158 |
) |
|
|
(192 |
) |
Purchases of available-for-sale securities and other
investments |
|
— |
|
|
|
(4 |
) |
Maturities and sales of available-for-sale securities and other
investments |
|
— |
|
|
|
1 |
|
Collateral posted for derivative instruments |
|
(70 |
) |
|
|
(240 |
) |
Net cash used in investing activities |
|
(228 |
) |
|
|
(435 |
) |
Cash flows from financing
activities: |
|
|
|
Proceeds from short-term borrowings with original maturities less
than 90 days, net |
|
100 |
|
|
|
200 |
|
Proceeds from debt, net of issuance costs |
|
92 |
|
|
|
52 |
|
Payment of debt |
|
(49 |
) |
|
|
(539 |
) |
Stock-based award activities and others |
|
(76 |
) |
|
|
(79 |
) |
Repurchase of common stock |
|
(500 |
) |
|
|
(100 |
) |
Cash dividends paid |
|
(275 |
) |
|
|
(259 |
) |
Collateral returned for derivative instruments |
|
— |
|
|
|
(200 |
) |
Net cash used in financing activities |
|
(708 |
) |
|
|
(925 |
) |
Decrease in cash, cash
equivalents and restricted cash |
|
(815 |
) |
|
|
(1,376 |
) |
Cash, cash equivalents and
restricted cash at beginning of period |
|
3,232 |
|
|
|
3,145 |
|
Cash, cash equivalents and
restricted cash at end of period |
$ |
2,417 |
|
|
$ |
1,769 |
|
|
HP INC. AND SUBSIDIARIESSEGMENT/BUSINESS UNIT
INFORMATION(Unaudited)(In millions) |
|
|
Three months ended |
|
Change (%) |
|
January 31, 2024 |
|
October 31, 2023 |
|
January 31, 2023 |
|
Q/Q |
|
Y/Y |
Net revenue: |
|
|
|
|
|
|
|
|
|
Commercial PS |
$ |
6,045 |
|
|
$ |
6,213 |
|
|
$ |
6,382 |
|
|
(3)% |
|
(5)% |
Consumer PS |
|
2,764 |
|
|
|
3,185 |
|
|
|
2,803 |
|
|
(13)% |
|
(1)% |
Personal Systems |
|
8,809 |
|
|
|
9,398 |
|
|
|
9,185 |
|
|
(6)% |
|
(4)% |
Supplies |
|
2,863 |
|
|
|
2,821 |
|
|
|
2,857 |
|
|
1 |
% |
|
— |
% |
Commercial Printing(a) |
|
1,227 |
|
|
|
1,281 |
|
|
|
1,388 |
|
|
(4)% |
|
(12)% |
Consumer Printing(a) |
|
285 |
|
|
|
316 |
|
|
|
367 |
|
|
(10)% |
|
(22)% |
Printing |
|
4,375 |
|
|
|
4,418 |
|
|
|
4,612 |
|
|
(1)% |
|
(5)% |
Corporate Investments(b) |
|
2 |
|
|
|
2 |
|
|
|
1 |
|
|
NM |
|
NM |
Total segment net revenue |
|
13,186 |
|
|
|
13,818 |
|
|
|
13,798 |
|
|
(5)% |
|
(4)% |
Other(b) |
|
(1 |
) |
|
|
(1 |
) |
|
|
— |
|
|
NM |
|
NM |
Total net revenue |
$ |
13,185 |
|
|
$ |
13,817 |
|
|
$ |
13,798 |
|
|
(5)% |
|
(4)% |
|
|
|
|
|
|
|
|
|
|
Earnings before taxes: |
|
|
|
|
|
|
|
|
|
Personal Systems |
$ |
537 |
|
|
$ |
631 |
|
|
$ |
475 |
|
|
|
|
|
Printing |
|
872 |
|
|
|
836 |
|
|
|
870 |
|
|
|
|
|
Corporate Investments |
|
(37 |
) |
|
|
(39 |
) |
|
|
(33 |
) |
|
|
|
|
Total segment earnings from operations |
|
1,372 |
|
|
|
1,428 |
|
|
|
1,312 |
|
|
|
|
|
Corporate and unallocated cost
and other |
|
(89 |
) |
|
|
(96 |
) |
|
|
(92 |
) |
|
|
|
|
Stock-based compensation
expense |
|
(177 |
) |
|
|
(85 |
) |
|
|
(167 |
) |
|
|
|
|
Restructuring and other
charges |
|
(63 |
) |
|
|
(111 |
) |
|
|
(141 |
) |
|
|
|
|
Acquisition and divestiture
charges |
|
(27 |
) |
|
|
(34 |
) |
|
|
(84 |
) |
|
|
|
|
Amortization of intangible
assets |
|
(81 |
) |
|
|
(88 |
) |
|
|
(85 |
) |
|
|
|
|
Interest and other, net |
|
(142 |
) |
|
|
(162 |
) |
|
|
(181 |
) |
|
|
|
|
Total earnings before taxes |
$ |
793 |
|
|
$ |
852 |
|
|
$ |
562 |
|
|
|
|
|
(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) |
|
January 31, 2024 |
|
October 31, 2023 |
|
January 31, 2023 |
|
Q/Q |
|
Y/Y |
Segment operating margin: |
|
|
|
|
|
|
|
|
|
Personal Systems |
6.1 |
% |
|
6.7 |
% |
|
5.2 |
% |
|
(0.6)pts |
|
0.9 pts |
Printing |
19.9 |
% |
|
18.9 |
% |
|
18.9 |
% |
|
1.0 pts |
|
1.0 pts |
Corporate Investments(a) |
NM |
|
NM |
|
NM |
|
NM |
|
NM |
Total segment |
10.4 |
% |
|
10.3 |
% |
|
9.5 |
% |
|
0.1 pts |
|
0.9 pts |
(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 |
|
January 31, 2024 |
|
October 31, 2023 |
|
January 31, 2023 |
Numerator: |
|
|
|
|
|
GAAP net earnings |
$ |
622 |
|
$ |
974 |
|
$ |
469 |
Non-GAAP net earnings |
$ |
808 |
|
$ |
902 |
|
$ |
731 |
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
Weighted-average shares used to compute basic net earnings per
share |
|
995 |
|
|
994 |
|
|
989 |
Dilutive effect of employee stock plans(a) |
|
7 |
|
|
10 |
|
|
7 |
Weighted-average shares used to compute diluted net earnings per
share |
|
1,002 |
|
|
1,004 |
|
|
996 |
|
|
|
|
|
|
GAAP diluted net earnings per
share |
$ |
0.62 |
|
$ |
0.97 |
|
$ |
0.47 |
Non-GAAP diluted net earnings
per share |
$ |
0.81 |
|
$ |
0.90 |
|
$ |
0.73 |
(a) Includes any dilutive effect of restricted stock units,
stock options and performance-based awards.
|
HP INC. AND SUBSIDIARIESSEGMENT / BUSINESS UNIT INFORMATION
(Revised)(Unaudited)(In millions) |
|
|
REVISED AMOUNTS |
|
AMOUNTS AS PREVIOUSLY REPORTED |
|
CHANGE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Twelve months ended |
|
Three months ended |
|
Twelve months ended |
|
Three months ended |
|
Twelve months ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan 31, 2023 |
|
Apr 31, 2023 |
|
Jul 31, 2023 |
|
Oct 31, 2023 |
|
Oct 31, 2023 |
|
Jan 31, 2023 |
|
Apr 31, 2023 |
|
Jul 31, 2023 |
|
Oct 31, 2023 |
|
Oct 31, 2023 |
|
Jan 31, 2023 |
|
Apr 31, 2023 |
|
Jul 31, 2023 |
|
Oct 31, 2023 |
|
Oct 31, 2023 |
Net revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer PS |
$ |
2,803 |
|
$ |
2,253 |
|
|
$ |
2,731 |
|
$ |
3,185 |
|
|
$ |
10,972 |
|
|
$ |
2,803 |
|
$ |
2,253 |
|
|
$ |
2,731 |
|
$ |
3,185 |
|
|
$ |
10,972 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Commercial PS |
|
6,382 |
|
|
5,916 |
|
|
|
6,201 |
|
|
6,213 |
|
|
|
24,712 |
|
|
|
6,382 |
|
|
5,916 |
|
|
|
6,201 |
|
|
6,213 |
|
|
|
24,712 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Personal Systems |
|
9,185 |
|
|
8,169 |
|
|
|
8,932 |
|
|
9,398 |
|
|
|
35,684 |
|
|
|
9,185 |
|
|
8,169 |
|
|
|
8,932 |
|
|
9,398 |
|
|
|
35,684 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Supplies |
|
2,857 |
|
|
3,006 |
|
|
|
2,768 |
|
|
2,821 |
|
|
|
11,452 |
|
|
|
2,857 |
|
|
3,006 |
|
|
|
2,768 |
|
|
2,821 |
|
|
|
11,452 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial Printing(a) |
|
1,388 |
|
|
1,373 |
|
|
|
1,208 |
|
|
1,281 |
|
|
|
5,250 |
|
|
|
1,056 |
|
|
1,089 |
|
|
|
974 |
|
|
1,064 |
|
|
|
4,183 |
|
|
|
332 |
|
|
|
284 |
|
|
|
234 |
|
|
|
217 |
|
|
|
1,067 |
|
Consumer Printing(a) |
|
367 |
|
|
357 |
|
|
|
287 |
|
|
316 |
|
|
|
1,327 |
|
|
|
699 |
|
|
641 |
|
|
|
521 |
|
|
533 |
|
|
|
2,394 |
|
|
|
(332 |
) |
|
|
(284 |
) |
|
|
(234 |
) |
|
|
(217 |
) |
|
|
(1,067 |
) |
Printing |
|
4,612 |
|
|
4,736 |
|
|
|
4,263 |
|
|
4,418 |
|
|
|
18,029 |
|
|
|
4,612 |
|
|
4,736 |
|
|
|
4,263 |
|
|
4,418 |
|
|
|
18,029 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Corporate Investments |
|
1 |
|
|
3 |
|
|
|
1 |
|
|
2 |
|
|
|
7 |
|
|
|
1 |
|
|
3 |
|
|
|
1 |
|
|
2 |
|
|
|
7 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total segment |
|
13,798 |
|
|
12,908 |
|
|
|
13,196 |
|
|
13,818 |
|
|
|
53,720 |
|
|
|
13,798 |
|
|
12,908 |
|
|
|
13,196 |
|
|
13,818 |
|
|
|
53,720 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other |
|
— |
|
|
(1 |
) |
|
|
— |
|
|
(1 |
) |
|
|
(2 |
) |
|
|
— |
|
|
(1 |
) |
|
|
— |
|
|
(1 |
) |
|
|
(2 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total net revenue |
$ |
13,798 |
|
$ |
12,907 |
|
|
$ |
13,196 |
|
$ |
13,817 |
|
|
$ |
53,718 |
|
|
$ |
13,798 |
|
$ |
12,907 |
|
|
$ |
13,196 |
|
$ |
13,817 |
|
|
$ |
53,718 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
(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. |
|
HP INC. AND SUBSIDIARIESSEGMENT / BUSINESS UNIT INFORMATION
(Revised)(Unaudited)(In millions) |
|
|
REVISED AMOUNTS |
|
AMOUNTS AS PREVIOUSLY REPORTED |
|
CHANGE |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Three months ended |
|
Twelve months ended |
|
Three months ended |
|
Twelve months ended |
|
Three months ended |
|
Twelve months ended |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Jan 31, 2022 |
|
Apr 31, 2022 |
|
Jul 31, 2022 |
|
Oct 31, 2022 |
|
Oct 31, 2022 |
|
Jan 31, 2022 |
|
Apr 31, 2022 |
|
Jul 31, 2022 |
|
Oct 31, 2022 |
|
Oct 31, 2022 |
|
Jan 31, 2022 |
|
Apr 31, 2022 |
|
Jul 31, 2022 |
|
Oct 31, 2022 |
|
Oct 31, 2022 |
Net revenue: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Consumer PS |
$ |
4,339 |
|
$ |
3,715 |
|
|
$ |
3,117 |
|
$ |
3,224 |
|
$ |
14,395 |
|
|
$ |
4,339 |
|
$ |
3,715 |
|
|
$ |
3,117 |
|
$ |
3,224 |
|
$ |
14,395 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
Commercial PS |
|
7,842 |
|
|
7,802 |
|
|
|
6,956 |
|
|
7,016 |
|
|
29,616 |
|
|
|
7,842 |
|
|
7,802 |
|
|
|
6,956 |
|
|
7,016 |
|
|
29,616 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Personal Systems |
|
12,181 |
|
|
11,517 |
|
|
|
10,073 |
|
|
10,240 |
|
|
44,011 |
|
|
|
12,181 |
|
|
11,517 |
|
|
|
10,073 |
|
|
10,240 |
|
|
44,011 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Supplies |
|
3,068 |
|
|
3,131 |
|
|
|
2,814 |
|
|
2,748 |
|
|
11,761 |
|
|
|
3,068 |
|
|
3,131 |
|
|
|
2,814 |
|
|
2,748 |
|
|
11,761 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Commercial Printing(a) |
|
1,349 |
|
|
1,317 |
|
|
|
1,322 |
|
|
1,351 |
|
|
5,339 |
|
|
|
1,039 |
|
|
1,042 |
|
|
|
1,036 |
|
|
1,108 |
|
|
4,225 |
|
|
|
310 |
|
|
|
275 |
|
|
|
286 |
|
|
|
243 |
|
|
|
1,114 |
|
Consumer Printing(a) |
|
414 |
|
|
515 |
|
|
|
439 |
|
|
434 |
|
|
1,802 |
|
|
|
724 |
|
|
790 |
|
|
|
725 |
|
|
677 |
|
|
2,916 |
|
|
|
(310 |
) |
|
|
(275 |
) |
|
|
(286 |
) |
|
|
(243 |
) |
|
|
(1,114 |
) |
Printing |
|
4,831 |
|
|
4,963 |
|
|
|
4,575 |
|
|
4,533 |
|
|
18,902 |
|
|
|
4,831 |
|
|
4,963 |
|
|
|
4,575 |
|
|
4,533 |
|
|
18,902 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Corporate Investments |
|
1 |
|
|
— |
|
|
|
— |
|
|
1 |
|
|
2 |
|
|
|
1 |
|
|
— |
|
|
|
— |
|
|
1 |
|
|
2 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total segment |
|
17,013 |
|
|
16,480 |
|
|
|
14,648 |
|
|
14,774 |
|
|
62,915 |
|
|
|
17,013 |
|
|
16,480 |
|
|
|
14,648 |
|
|
14,774 |
|
|
62,915 |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Other |
|
— |
|
|
(5 |
) |
|
|
— |
|
|
— |
|
|
(5 |
) |
|
|
— |
|
|
(5 |
) |
|
|
— |
|
|
— |
|
|
(5 |
) |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total net revenue |
$ |
17,013 |
|
$ |
16,475 |
|
|
$ |
14,648 |
|
$ |
14,774 |
|
$ |
62,910 |
|
|
$ |
17,013 |
|
$ |
16,475 |
|
|
$ |
14,648 |
|
$ |
14,774 |
|
$ |
62,910 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
— |
|
(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. |
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, 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) 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 provided by (used in) 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 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 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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