HP (NYSE: HPQ)
- Third quarter GAAP diluted net earnings per share ("EPS") of
$0.92, above the previously provided outlook of $0.77 to $0.81
per share
- Third quarter non-GAAP diluted net EPS of $1.00, above the
previously provided outlook of $0.81 to $0.85 per share
- Third quarter net revenue of $15.3 billion, up 7.0% from the
prior-year period
- Third quarter net cash provided by operating activities of $1.1
billion, free cash flow of $1.0 billion
- Third quarter returned $1.7 billion to shareholders in the form
of share repurchases and dividends
HP
Inc.'s fiscal 2021 third quarter financial
performance |
|
|
|
|
|
Q3 FY21 |
|
Q3 FY20 |
|
Y/Y |
|
GAAP net revenue ($B) |
$ |
15.3 |
|
$ |
14.3 |
|
7.0% |
|
GAAP operating
margin |
|
9.0% |
|
|
5.4% |
|
3.6 pts |
|
GAAP net
earnings ($B) |
$ |
1.1 |
|
$ |
0.7 |
|
51% |
|
GAAP diluted
net EPS |
$ |
0.92 |
|
$ |
0.52 |
|
77% |
|
Non-GAAP
operating margin |
|
9.8% |
|
|
6.1% |
|
3.7 pts |
|
Non-GAAP net
earnings ($B) |
$ |
1.2 |
|
$ |
0.7 |
|
71% |
|
Non-GAAP
diluted net EPS |
$ |
1.00 |
|
$ |
0.49 |
|
104% |
|
Net cash
provided by operating activities ($B) |
$ |
1.1 |
|
$ |
1.7 |
|
(34)% |
|
Free cash flow
($B) |
$ |
1.0 |
|
$ |
1.6 |
|
(38)% |
|
Notes to tableInformation about HP Inc.'s use of non-GAAP
financial information is provided under "Use of non-GAAP financial
information" below.
Net revenue and EPS results
HP Inc. and its subsidiaries (“HP”) announced fiscal 2021 third
quarter net revenue of $15.3 billion, up 7.0% (up 4.1% in constant
currency) from the prior-year period.
“Strong and sustained demand for our technology drove another
quarter of top and bottom-line growth and we more than doubled
non-GAAP EPS year over year,” said Enrique Lores, HP President and
CEO. “We are performing while we are transforming our business
models and service offerings to accelerate growth opportunities
across our portfolio. The evolving hybrid world is driving
innovation and market expansion for HP and we are well positioned
to capitalize on trends in our markets.”
Third quarter GAAP diluted net EPS was $0.92, up from $0.52 in
the prior-year period and above the previously provided outlook of
$0.77 to $0.81. Third quarter non-GAAP diluted net EPS was $1.00,
up from $0.49 in the prior-year period and above the previously
provided outlook of $0.81 to $0.85. GAAP and Non-GAAP diluted net
EPS includes a net benefit of $0.13 per diluted share, resulting
from a reduction in previously estimated sales and marketing
program incentives which was partially offset by discretionary
investments in, among other things, R&D, marketing and
investing in our hybrid work strategy. Third quarter non-GAAP net
earnings and non-GAAP diluted net EPS excludes after-tax
adjustments of $90 million, or $0.08 per diluted share, related to
restructuring and other charges, acquisition-related charges,
amortization of intangible assets, non-operating retirement-related
(credits)/charges, debt extinguishment costs, and tax
adjustments.
Asset management
HP's net cash provided by operating activities in the third
quarter of fiscal 2021 was $1.1 billion. Accounts receivable ended
the quarter at $4.9 billion, up 1 day quarter over quarter to 29
days. Inventory ended the quarter at $8.2 billion, up 8 days
quarter over quarter to 62 days. Accounts payable ended the quarter
at $15.9 billion, up 10 days quarter over quarter to 120 days.
HP generated $1.0 billion of free cash flow in the third
quarter. Free cash flow includes net cash provided by operating
activities of $1.1 billion adjusted for net investments in leases
of $40 million and net investments in property, plant and equipment
of $158 million.
HP’s dividend payment of $0.1938 per share in the third quarter
resulted in cash usage of $230 million. HP also utilized $1.5
billion of cash during the quarter to repurchase approximately 50
million shares of common stock in the open market. As a result, HP
returned 178% of its third quarter free cash flow to shareholders.
HP exited the quarter with $3.4 billion in gross cash, which
includes cash and cash equivalents and short-term investments of $8
million included in other current assets.
Fiscal 2021 third quarter segment results
- Personal Systems net revenue was $10.4 billion, flat year over
year (down 3% in constant currency) with a 8.4% operating margin.
Consumer net revenue increased 3% and Commercial net revenue
decreased 1%. Total units were flat with Notebooks units up 2% and
Desktops units down 7%.
- Printing net revenue was $4.9 billion, up 24% year over year
(up 22% in constant currency) with a 17.6% operating margin. Total
hardware units were down 4% overall, with Consumer units down 8%
and Commercial units up 29%. Consumer net revenue was up 15% and
Commercial net revenue was up 46%. Supplies net revenue was up 20%
(up 19% in constant currency).
OutlookFor the fiscal 2021 fourth quarter, HP
estimates GAAP diluted net EPS to be in the range of $0.82 to $0.88
and non-GAAP diluted net EPS to be in the range of $0.84 to $0.90.
Fiscal 2021 fourth quarter non-GAAP diluted net EPS estimates
exclude $0.02 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.
For fiscal 2021, HP estimates GAAP diluted net EPS to be in the
range of $3.56 to $3.62 and non-GAAP diluted net EPS to be in the
range of $3.69 to $3.75. Fiscal 2021 non-GAAP diluted net EPS
estimates exclude $0.13 per diluted share, primarily related to
restructuring and other charges, acquisition-related charges,
amortization of intangible assets, non-operating retirement-related
(credits)/charges, debt extinguishment costs, tax adjustments and
the related tax impact on these items. For fiscal 2021, HP
anticipates generating free cash flow of at least $4.0 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 FY21 Q3 earnings conference call is accessible via audio
webcast at www.hp.com/investor/2021Q3Webcast.
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 hp.com.
Use of non-GAAP financial informationTo
supplement HP’s consolidated condensed financial statements
presented on a generally accepted accounting principles (“GAAP”)
basis, HP provides net revenue on a constant currency basis,
non-GAAP total operating expense, non-GAAP operating profit,
non-GAAP operating margin, non-GAAP tax rate, non-GAAP net
earnings, non-GAAP diluted net EPS, free cash flow, gross cash and
net cash (debt) financial measures. HP also provides forecasts of
non-GAAP diluted net EPS and free cash flow. Reconciliations of
these non-GAAP financial measures to the most directly comparable
GAAP financial measures are included in the tables below or
elsewhere in the materials accompanying this news release. In
addition, an explanation of the ways in which HP’s management uses
these non-GAAP measures to evaluate its business, the substance
behind HP’s decision to use these non-GAAP measures, the material
limitations associated with the use of these non-GAAP measures, the
manner in which HP’s management compensates for those limitations,
and the substantive reasons why HP’s management believes that these
non-GAAP measures provide useful information to investors is
included under “Use of non-GAAP financial measures” after the
tables below. This additional non-GAAP financial information is not
meant to be considered in isolation or as a substitute for net
revenue, operating expense, operating profit, operating margin, tax
rate, net earnings, diluted net EPS, cash (used in)/ provided by
operating activities or cash and cash equivalents 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, the results of HP Inc. 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 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, 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
our 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 in HP’s Annual Report on Form 10-K
for the fiscal year ended October 31, 2020 and HP’s other filings
with the Securities and Exchange Commission.
As in prior periods, the financial information set forth in this
document, including any tax-related items, reflects estimates based
on information available at this time. While HP believes these
estimates to be reasonable, these amounts could differ materially
from reported amounts in HP’s Quarterly Reports on Form 10-Q for
the fiscal quarter ended July 31, 2021, Annual Report on Form 10-K
for the fiscal year ended October 31, 2021, and HP’s other filings
with the Securities and Exchange Commission. The forward-looking
statements in this document are made as of the date of this
document and HP assumes no obligation and does not intend to update
these forward-looking statements.
HP’s Investor Relations website at investor.hp.com contains a
significant amount of information about HP, including financial and
other information for investors. HP encourages investors to visit
its website from time to time, as information is updated, and new
information is posted. The content of HP’s website is not
incorporated by reference into this document or in any other report
or document HP files with the SEC, and any references to HP’s
website are intended to be inactive textual references only.
HP INC. AND SUBSIDIARIESCONSOLIDATED
CONDENSED STATEMENTS OF EARNINGS(Unaudited)(In millions, except per
share amounts)
|
Three months ended |
|
July 31, 2021 |
|
April 30, 2021 |
|
July 31, 2020 |
Net revenue |
$ |
15,289 |
|
|
$ |
15,877 |
|
|
$ |
14,294 |
|
Costs
and expenses: |
|
|
|
|
|
Cost of revenue |
11,901 |
|
|
12,437 |
|
|
11,901 |
|
Research and development |
477 |
|
|
514 |
|
|
359 |
|
Selling, general and administrative |
1,408 |
|
|
1,483 |
|
|
1,156 |
|
Restructuring and other charges |
56 |
|
|
39 |
|
|
59 |
|
Acquisition-related charges |
24 |
|
|
10 |
|
|
11 |
|
Amortization of intangible assets |
42 |
|
|
32 |
|
|
29 |
|
Total costs and expenses |
13,908 |
|
|
14,515 |
|
|
13,515 |
|
Earnings from operations |
1,381 |
|
|
1,362 |
|
|
779 |
|
Interest and other, net |
(55 |
) |
|
(26 |
) |
|
(28 |
) |
Earnings before taxes |
1,326 |
|
|
1,336 |
|
|
751 |
|
Provision for taxes |
(218 |
) |
|
(108 |
) |
|
(17 |
) |
Net
earnings |
$ |
1,108 |
|
|
$ |
1,228 |
|
|
$ |
734 |
|
|
|
|
|
|
|
Net
earnings per share: |
|
|
|
|
|
Basic |
$ |
0.94 |
|
|
$ |
1.00 |
|
|
$ |
0.52 |
|
Diluted |
$ |
0.92 |
|
|
$ |
0.98 |
|
|
$ |
0.52 |
|
|
|
|
|
|
|
Cash
dividends declared per share |
$ |
0.39 |
|
|
$ |
— |
|
|
$ |
0.35 |
|
|
|
|
|
|
|
Weighted-average shares used to compute net earnings per
share: |
|
|
|
|
|
Basic |
1,185 |
|
|
1,234 |
|
|
1,417 |
|
Diluted |
1,199 |
|
|
1,247 |
|
|
1,423 |
|
HP INC. AND SUBSIDIARIESCONSOLIDATED
CONDENSED STATEMENTS OF EARNINGS(Unaudited)(In millions, except per
share amounts)
|
Nine months ended |
|
July 31, 2021 |
|
July 31, 2020 |
Net revenue |
$ |
46,812 |
|
|
$ |
41,381 |
|
Costs
and expenses: |
|
|
|
Cost of revenue |
36,660 |
|
|
33,623 |
|
Research and development |
1,462 |
|
|
1,097 |
|
Selling, general and administrative |
4,267 |
|
|
3,662 |
|
Restructuring and other charges |
216 |
|
|
431 |
|
Acquisition-related charges |
40 |
|
|
14 |
|
Amortization of intangible assets |
103 |
|
|
84 |
|
Total costs and expenses |
42,748 |
|
|
38,911 |
|
Earnings from operations |
4,064 |
|
|
2,470 |
|
Interest and other, net |
(106 |
) |
|
(15 |
) |
Earnings before taxes |
3,958 |
|
|
2,455 |
|
Provision for taxes |
(554 |
) |
|
(279 |
) |
Net
earnings |
$ |
3,404 |
|
|
$ |
2,176 |
|
|
|
|
|
Net
earnings per share: |
|
|
|
Basic |
$ |
2.76 |
|
|
$ |
1.52 |
|
Diluted |
$ |
2.73 |
|
|
$ |
1.51 |
|
|
|
|
|
Cash
dividends declared per share |
$ |
0.78 |
|
|
$ |
0.70 |
|
|
|
|
|
Weighted-average shares used to compute net earnings per
share: |
|
|
|
Basic |
1,235 |
|
|
1,435 |
|
Diluted |
1,247 |
|
|
1,441 |
|
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, 2021 |
|
April 30, 2021 |
|
July 31, 2020 |
|
Amounts |
|
Dilutednet earningsper share |
|
Amounts |
|
Dilutednet earningsper share |
|
Amounts |
|
Dilutednet earningsper share |
GAAP net earnings |
$ |
1,108 |
|
|
$ |
0.92 |
|
|
$ |
1,228 |
|
|
$ |
0.98 |
|
|
$ |
734 |
|
|
$ |
0.52 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Restructuring and other charges |
56 |
|
|
0.04 |
|
|
39 |
|
|
0.02 |
|
|
59 |
|
|
0.04 |
|
Acquisition-related charges |
24 |
|
|
0.02 |
|
|
10 |
|
|
0.01 |
|
|
11 |
|
|
0.01 |
|
Amortization of intangible assets |
42 |
|
|
0.04 |
|
|
32 |
|
|
0.03 |
|
|
29 |
|
|
0.02 |
|
Debt extinguishment costs |
16 |
|
|
0.01 |
|
|
— |
|
|
— |
|
|
40 |
|
|
0.03 |
|
Non-operating retirement-related credits |
(39 |
) |
|
(0.03 |
) |
|
(38 |
) |
|
(0.03 |
) |
|
(55 |
) |
|
(0.04 |
) |
Tax adjustments(a) |
(9 |
) |
|
— |
|
|
(113 |
) |
|
(0.08 |
) |
|
(116 |
) |
|
(0.09 |
) |
Non-GAAP net earnings |
$ |
1,198 |
|
|
$ |
1.00 |
|
|
$ |
1,158 |
|
|
$ |
0.93 |
|
|
$ |
702 |
|
|
$ |
0.49 |
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP earnings from
operations |
$ |
1,381 |
|
|
|
|
$ |
1,362 |
|
|
|
|
$ |
779 |
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
|
|
|
|
Restructuring and other charges |
56 |
|
|
|
|
39 |
|
|
|
|
59 |
|
|
|
Acquisition-related charges |
24 |
|
|
|
|
10 |
|
|
|
|
11 |
|
|
|
Amortization of intangible assets |
42 |
|
|
|
|
32 |
|
|
|
|
29 |
|
|
|
Non-GAAP earnings from
operations |
$ |
1,503 |
|
|
|
|
$ |
1,443 |
|
|
|
|
$ |
878 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
GAAP operating margin |
|
9.0 |
% |
|
|
|
|
8.6 |
% |
|
|
|
|
5.4 |
% |
|
|
Non-GAAP adjustments |
|
0.8 |
% |
|
|
|
|
0.5 |
% |
|
|
|
|
0.7 |
% |
|
|
Non-GAAP operating margin |
|
9.8 |
% |
|
|
|
|
9.1 |
% |
|
|
|
|
6.1 |
% |
|
|
(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, 2021 |
|
July 31, 2020 |
|
Amounts |
|
Dilutednet earningsper
share |
|
Amounts |
|
Dilutednet earningsper
share |
GAAP net earnings |
$ |
3,404 |
|
|
$ |
2.73 |
|
|
$ |
2,176 |
|
|
$ |
1.51 |
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
Restructuring and other charges |
216 |
|
|
0.18 |
|
|
431 |
|
|
0.30 |
|
Acquisition-related charges |
40 |
|
|
0.03 |
|
|
14 |
|
|
0.01 |
|
Amortization of intangible assets |
103 |
|
|
0.08 |
|
|
84 |
|
|
0.06 |
|
Debt extinguishment costs |
16 |
|
|
0.01 |
|
|
40 |
|
|
0.03 |
|
Non-operating retirement-related credits |
(115 |
) |
|
(0.09 |
) |
|
(168 |
) |
|
(0.12 |
) |
Tax adjustments(a) |
(120 |
) |
|
(0.10 |
) |
|
(178 |
) |
|
(0.13 |
) |
Non-GAAP net earnings |
$ |
3,544 |
|
|
$ |
2.84 |
|
|
$ |
2,399 |
|
|
$ |
1.66 |
|
|
|
|
|
|
|
|
|
GAAP
earnings from operations |
$ |
4,064 |
|
|
|
|
$ |
2,470 |
|
|
|
Non-GAAP adjustments: |
|
|
|
|
|
|
|
Restructuring and other charges |
216 |
|
|
|
|
431 |
|
|
|
Acquisition-related charges |
40 |
|
|
|
|
14 |
|
|
|
Amortization of intangible assets |
103 |
|
|
|
|
84 |
|
|
|
Non-GAAP earnings from operations |
$ |
4,423 |
|
|
|
|
$ |
2,999 |
|
|
|
|
|
|
|
|
|
|
|
GAAP
operating margin |
|
8.7 |
% |
|
|
|
|
6.0 |
% |
|
|
Non-GAAP adjustments |
|
0.7 |
% |
|
|
|
|
1.2 |
% |
|
|
Non-GAAP operating margin |
|
9.4 |
% |
|
|
|
|
7.2 |
% |
|
|
(a) Includes
tax impact on non-GAAP adjustments.
HP INC. AND SUBSIDIARIESCONSOLIDATED
CONDENSED BALANCE SHEETS(Unaudited)(In millions)
|
As of |
|
July 31, 2021 |
|
October 31, 2020 |
ASSETS |
|
|
|
Current assets: |
|
|
|
Cash and cash equivalents |
$ |
3,439 |
|
|
$ |
4,864 |
|
Accounts receivable, net |
4,908 |
|
|
5,381 |
|
Inventory |
8,165 |
|
|
5,963 |
|
Other current assets |
4,091 |
|
|
4,440 |
|
Total current assets |
20,603 |
|
|
20,648 |
|
Property, plant and equipment,
net |
2,500 |
|
|
2,627 |
|
Goodwill |
6,628 |
|
|
6,380 |
|
Other non-current assets |
5,792 |
|
|
5,026 |
|
Total assets |
$ |
35,523 |
|
|
$ |
34,681 |
|
|
|
|
|
LIABILITIES AND STOCKHOLDERS' DEFICIT |
|
|
|
Current liabilities: |
|
|
|
Notes payable and short-term borrowings |
$ |
214 |
|
|
$ |
674 |
|
Accounts payable |
15,898 |
|
|
14,704 |
|
Other current liabilities |
11,555 |
|
|
10,842 |
|
Total current liabilities |
27,667 |
|
|
26,220 |
|
Long-term debt |
6,898 |
|
|
5,543 |
|
Other non-current
liabilities |
4,900 |
|
|
5,146 |
|
Stockholders' deficit |
(3,942 |
) |
|
(2,228 |
) |
Total liabilities and
stockholders' deficit |
$ |
35,523 |
|
|
$ |
34,681 |
|
HP INC. AND SUBSIDIARIESCONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOWS(Unaudited)(In millions)
|
Three months ended |
|
July 31, 2021 |
|
July 31, 2020 |
Cash flows from operating
activities: |
|
|
|
Net earnings |
$ |
1,108 |
|
|
$ |
734 |
|
Adjustments to reconcile net earnings to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
196 |
|
|
197 |
|
Stock-based compensation expense |
69 |
|
|
49 |
|
Restructuring and other charges |
56 |
|
|
59 |
|
Deferred taxes on earnings |
(143 |
) |
|
32 |
|
Other, net |
153 |
|
|
128 |
|
Changes in operating assets and liabilities, net of
acquisitions: |
|
|
|
Accounts receivable |
168 |
|
|
(157 |
) |
Inventory |
(670 |
) |
|
398 |
|
Accounts payable |
625 |
|
|
85 |
|
Net investment in leases |
(40 |
) |
|
(27 |
) |
Taxes on earnings |
118 |
|
|
(89 |
) |
Restructuring and other |
(51 |
) |
|
(75 |
) |
Other assets and liabilities |
(496 |
) |
|
333 |
|
Net cash provided by operating activities |
1,093 |
|
|
1,667 |
|
Cash flows from investing
activities: |
|
|
|
Investment in property, plant and equipment |
(158 |
) |
|
(117 |
) |
Purchases of available-for-sale securities and other
investments |
(11 |
) |
|
(230 |
) |
Maturities and sales of available-for-sale securities and other
investments |
9 |
|
|
— |
|
Collateral posted for derivative instruments |
275 |
|
|
(240 |
) |
Payment made in connection with business acquisition, net of cash
acquired |
(412 |
) |
|
— |
|
Net cash used in investing activities |
(297 |
) |
|
(587 |
) |
Cash flows from financing
activities: |
|
|
|
Payment of short-term borrowings with original maturities less than
90 days, net |
— |
|
|
(613 |
) |
Proceed from short-term borrowings with original maturities greater
than 90 days |
10 |
|
|
8 |
|
Proceeds from debt, net of issuance costs |
2,004 |
|
|
2,993 |
|
Payment of debt |
(1,066 |
) |
|
(1,662 |
) |
Stock-based award activities and others |
8 |
|
|
23 |
|
Repurchase of common stock |
(1,507 |
) |
|
(953 |
) |
Cash dividends paid |
(230 |
) |
|
(251 |
) |
Net cash used in financing activities |
(781 |
) |
|
(455 |
) |
Increase in cash and cash
equivalent |
15 |
|
|
625 |
|
Cash and cash equivalents at
beginning of period |
3,424 |
|
|
4,054 |
|
Cash and cash equivalents at
end of period |
$ |
3,439 |
|
|
$ |
4,679 |
|
HP INC. AND SUBSIDIARIESCONSOLIDATED
CONDENSED STATEMENTS OF CASH FLOWS(Unaudited)(In millions)
|
Nine months ended |
|
July 31, 2021 |
|
July 31, 2020 |
Cash flows from operating
activities: |
|
|
|
Net earnings |
$ |
3,404 |
|
|
$ |
2,176 |
|
Adjustments to reconcile net earnings to net cash provided by
operating activities: |
|
|
|
Depreciation and amortization |
585 |
|
|
593 |
|
Stock-based compensation expense |
260 |
|
|
221 |
|
Restructuring and other charges |
216 |
|
|
431 |
|
Deferred taxes on earnings |
(93 |
) |
|
146 |
|
Other, net |
254 |
|
|
281 |
|
Changes in operating assets and liabilities, net of
acquisitions: |
|
|
|
Accounts receivable |
503 |
|
|
699 |
|
Inventory |
(2,225 |
) |
|
(247 |
) |
Accounts payable |
1,140 |
|
|
(433 |
) |
Net investment in leases |
(78 |
) |
|
(112 |
) |
Taxes on earnings |
19 |
|
|
(238 |
) |
Restructuring and other |
(166 |
) |
|
(412 |
) |
Other assets and liabilities |
(258 |
) |
|
(663 |
) |
Net cash provided by operating activities |
3,561 |
|
|
2,442 |
|
Cash flows from investing
activities: |
|
|
|
Investment in property, plant and equipment |
(410 |
) |
|
(464 |
) |
Proceeds from the sale of property, plant and equipment |
— |
|
|
3 |
|
Purchases of available-for-sale securities and other
investments |
(24 |
) |
|
(533 |
) |
Maturities and sales of available-for-sale securities and other
investments |
283 |
|
|
303 |
|
Collateral posted for derivative instruments |
121 |
|
|
(240 |
) |
Payment made in connection with business acquisitions, net of cash
acquired |
(582 |
) |
|
— |
|
Net cash used in investing activities |
(612 |
) |
|
(931 |
) |
Cash flows from financing
activities: |
|
|
|
Proceed from short-term borrowings with original maturities greater
than 90 days |
22 |
|
|
19 |
|
Proceeds from debt, net of issuance costs |
2,052 |
|
|
3,051 |
|
Payment of debt |
(1,192 |
) |
|
(1,788 |
) |
Stock-based award activities and others |
(42 |
) |
|
(125 |
) |
Repurchase of common stock |
(4,495 |
) |
|
(1,767 |
) |
Cash dividends paid |
(719 |
) |
|
(759 |
) |
Net cash used in financing activities |
(4,374 |
) |
|
(1,369 |
) |
(Decrease) increase in cash
and cash equivalent |
(1,425 |
) |
|
142 |
|
Cash and cash equivalents at
beginning of period |
4,864 |
|
|
4,537 |
|
Cash and cash equivalents at
end of period |
$ |
3,439 |
|
|
$ |
4,679 |
|
HP INC. AND SUBSIDIARIESSEGMENT/BUSINESS
UNIT INFORMATION(Unaudited)(In millions)
|
Three months ended |
|
Change (%) |
|
July 31, 2021 |
|
April 30, 2021 |
|
July 31, 2020 |
|
Q/Q |
|
Y/Y |
Net revenue: |
|
|
|
|
|
|
|
|
|
Notebooks |
$ |
7,328 |
|
|
$ |
7,489 |
|
|
$ |
7,304 |
|
|
(2)% |
|
|
—% |
|
Desktops |
2,246 |
|
|
2,225 |
|
|
2,221 |
|
|
1% |
|
|
1% |
|
Workstations |
388 |
|
|
407 |
|
|
428 |
|
|
(5)% |
|
|
(9)% |
|
Other |
444 |
|
|
434 |
|
|
407 |
|
|
2% |
|
|
9% |
|
Personal Systems |
10,406 |
|
|
10,555 |
|
|
10,360 |
|
|
(1)% |
|
|
—% |
|
Supplies |
3,092 |
|
|
3,337 |
|
|
2,573 |
|
|
(7)% |
|
|
20% |
|
Commercial |
1,070 |
|
|
1,085 |
|
|
732 |
|
|
(1)% |
|
|
46% |
|
Consumer |
720 |
|
|
901 |
|
|
628 |
|
|
(20)% |
|
|
15% |
|
Printing |
4,882 |
|
|
5,323 |
|
|
3,933 |
|
|
(8)% |
|
|
24% |
|
Corporate Investments(a) |
— |
|
|
1 |
|
|
1 |
|
|
NM |
|
|
NM |
|
Total segment net revenue |
15,288 |
|
|
15,879 |
|
|
14,294 |
|
|
(4)% |
|
|
7% |
|
Other(a) |
1 |
|
|
(2 |
) |
|
— |
|
|
NM |
|
|
NM |
|
Total net revenue |
$ |
15,289 |
|
|
$ |
15,877 |
|
|
$ |
14,294 |
|
|
(4)% |
|
|
7% |
|
|
|
|
|
|
|
|
|
|
|
Earnings before taxes: |
|
|
|
|
|
|
|
|
|
Personal Systems |
$ |
869 |
|
|
$ |
710 |
|
|
$ |
570 |
|
|
|
|
|
Printing |
857 |
|
|
951 |
|
|
480 |
|
|
|
|
|
Corporate Investments |
(20 |
) |
|
(35 |
) |
|
(15 |
) |
|
|
|
|
Total segment earnings from operations |
1,706 |
|
|
1,626 |
|
|
1,035 |
|
|
|
|
|
Corporate and unallocated cost
and other |
(134 |
) |
|
(108 |
) |
|
(108 |
) |
|
|
|
|
Stock-based compensation
expense |
(69 |
) |
|
(75 |
) |
|
(49 |
) |
|
|
|
|
Restructuring and other
charges |
(56 |
) |
|
(39 |
) |
|
(59 |
) |
|
|
|
|
Acquisition-related
charges |
(24 |
) |
|
(10 |
) |
|
(11 |
) |
|
|
|
|
Amortization of intangible
assets |
(42 |
) |
|
(32 |
) |
|
(29 |
) |
|
|
|
|
Interest and other, net |
(55 |
) |
|
(26 |
) |
|
(28 |
) |
|
|
|
|
Total earnings before taxes |
$ |
1,326 |
|
|
$ |
1,336 |
|
|
$ |
751 |
|
|
|
|
|
(a) "NM" represents not
meaningful.
HP INC. AND SUBSIDIARIESSEGMENT/BUSINESS
UNIT INFORMATION(Unaudited)(In millions)
|
Nine months ended |
|
Change (%) |
|
July 31, 2021 |
|
July 31, 2020 |
|
Y/Y |
Net revenue: |
|
|
|
|
|
Notebooks |
$ |
22,183 |
|
|
$ |
18,361 |
|
|
21% |
|
Desktops |
6,871 |
|
|
7,553 |
|
|
(9)% |
|
Workstations |
1,177 |
|
|
1,461 |
|
|
(19)% |
|
Other |
1,333 |
|
|
1,190 |
|
|
12% |
|
Personal Systems |
31,564 |
|
|
28,565 |
|
|
10% |
|
Supplies |
9,575 |
|
|
8,455 |
|
|
13% |
|
Commercial |
3,112 |
|
|
2,616 |
|
|
19% |
|
Consumer |
2,562 |
|
|
1,744 |
|
|
47% |
|
Printing |
15,249 |
|
|
12,815 |
|
|
19% |
|
Corporate Investments(a) |
1 |
|
|
2 |
|
|
NM |
|
Total segment net revenue |
46,814 |
|
|
41,382 |
|
|
13% |
|
Other(a) |
(2 |
) |
|
(1 |
) |
|
NM |
|
Total net revenue |
$ |
46,812 |
|
|
$ |
41,381 |
|
|
13% |
|
|
|
|
|
|
|
Earnings before taxes: |
|
|
|
|
|
Personal Systems |
$ |
2,337 |
|
|
$ |
1,784 |
|
|
|
Printing |
2,806 |
|
|
1,782 |
|
|
|
Corporate Investments |
(82 |
) |
|
(42 |
) |
|
|
Total segment earnings from operations |
5,061 |
|
|
3,524 |
|
|
|
Corporate and unallocated cost
and other |
(378 |
) |
|
(304 |
) |
|
|
Stock-based compensation
expense |
(260 |
) |
|
(221 |
) |
|
|
Restructuring and other
charges |
(216 |
) |
|
(431 |
) |
|
|
Acquisition-related
charges |
(40 |
) |
|
(14 |
) |
|
|
Amortization of intangible
assets |
(103 |
) |
|
(84 |
) |
|
|
Interest and other, net |
(106 |
) |
|
(15 |
) |
|
|
Total earnings before taxes |
$ |
3,958 |
|
|
$ |
2,455 |
|
|
|
(a) "NM" represents not
meaningful.
HP INC. AND SUBSIDIARIESSEGMENT OPERATING
MARGIN SUMMARY(Unaudited)
|
Three months ended |
|
Change (pts) |
|
July 31, 2021 |
|
April 30, 2021 |
|
July 31, 2020 |
|
Q/Q |
|
Y/Y |
Segment operating margin: |
|
|
|
|
|
|
|
|
|
Personal Systems |
8.4 % |
|
6.7 % |
|
5.5 % |
|
1.7 pts |
|
2.9 pts |
Printing |
17.6 % |
|
17.9 % |
|
12.2 % |
|
(0.3)pts |
|
5.4 pts |
Corporate Investments(a) |
NM |
|
NM |
|
NM |
|
NM |
|
NM |
Total segment |
11.2 % |
|
10.2 % |
|
7.2 % |
|
1.0 pts |
|
4.0 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 |
|
July 31, 2021 |
|
April 30, 2021 |
|
July 31, 2020 |
Numerator: |
|
|
|
|
|
|
GAAP net earnings |
$ |
1,108 |
|
|
$ |
1,228 |
|
|
$ |
734 |
|
Non-GAAP net earnings |
$ |
1,198 |
|
|
$ |
1,158 |
|
|
$ |
702 |
|
|
|
|
|
|
|
|
Denominator: |
|
|
|
|
|
|
Weighted-average shares used to compute basic net earnings per
share |
1,185 |
|
|
1,234 |
|
|
1,417 |
|
Dilutive effect of employee stock plans(a) |
14 |
|
|
13 |
|
|
6 |
|
Weighted-average shares used to compute diluted net earnings per
share |
1,199 |
|
|
1,247 |
|
|
1,423 |
|
|
|
|
|
|
|
|
GAAP diluted net earnings per
share |
$ |
0.92 |
|
|
$ |
0.98 |
|
|
$ |
0.52 |
|
Non-GAAP diluted net earnings
per share |
$ |
1.00 |
|
|
$ |
0.93 |
|
|
$ |
0.49 |
|
(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, 2021 |
|
July 31, 2020 |
Numerator: |
|
|
|
|
GAAP net earnings |
$ |
3,404 |
|
|
$ |
2,176 |
|
Non-GAAP net earnings |
$ |
3,544 |
|
|
$ |
2,399 |
|
|
|
|
|
|
Denominator: |
|
|
|
|
Weighted-average shares used to compute basic net earnings per
share |
1,235 |
|
|
1,435 |
|
Dilutive effect of employee stock plans(a) |
12 |
|
|
6 |
|
Weighted-average shares used to compute diluted net earnings per
share |
1,247 |
|
|
1,441 |
|
|
|
|
|
|
GAAP diluted net earnings per
share |
$ |
2.73 |
|
|
$ |
1.51 |
|
Non-GAAP diluted net earnings
per share |
$ |
2.84 |
|
|
$ |
1.66 |
|
(a) Includes any dilutive
effect of restricted stock units, stock options and
performance-based awards.
Use of non-GAAP financial measuresTo supplement
HP’s consolidated condensed financial statements presented on a
GAAP basis, HP provides net revenue on a constant currency basis,
non-GAAP total operating expense, non-GAAP operating profit,
non-GAAP operating margin, non-GAAP tax rate, non-GAAP net
earnings, non-GAAP diluted net EPS, free cash flow, gross cash and
net cash (debt). HP also provides forecasts of non-GAAP diluted net
EPS and free cash flow.
These non-GAAP financial measures are not computed in accordance
with, or as an alternative to, GAAP in the United States.
Reconciliations of these non-GAAP financial measures to the most
directly comparable GAAP financial measures are included in the
tables above or elsewhere in the materials accompanying this news
release.
Use and economic substance of non-GAAP financial
measuresNet revenue on a constant currency basis excludes
the effect of foreign currency exchange fluctuations calculated by
translating current period revenues using monthly 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 unfunded 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.
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 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-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 measuresHP 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 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
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
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