- Second quarter GAAP diluted net earnings per share ("EPS") of
$0.61 , within the previously provided outlook of$0.58 to$0.68 per share - Second quarter non-GAAP diluted net EPS of
$0.82 , within the previously provided outlook of$0.76 to$0.86 per share - Second quarter net revenue of
$12.8 billion , down 0.8% from the prior-year period - Second quarter net cash provided by operating activities of
$0.6 billion , free cash flow of$0.5 billion - Second quarter returned
$0.4 billion to shareholders in the form of dividends and share repurchases
Q2 FY24 | Q2 FY23 | Y/Y | |||||
GAAP net revenue ($B) | $ | 12.8 | $ | 12.9 | (0.8)% | ||
GAAP operating margin | 7.4% | 5.8% | 1.6 pts | ||||
GAAP net earnings ($B) | $ | 0.6 | $ | 1.1 | (42)% | ||
GAAP diluted net EPS | $ | 0.61 | $ | 1.06 | (42)% | ||
Non-GAAP operating margin | 8.8% | 8.6% | 0.2 pts | ||||
Non-GAAP net earnings ($B) | $ | 0.8 | $ | 0.8 | 3% | ||
Non-GAAP diluted net EPS | $ | 0.82 | $ | 0.79 | 4% | ||
Net cash provided by operating activities ($B) | $ | 0.6 | $ | 0.6 | (9)% | ||
Free cash flow ($B) | $ | 0.5 | $ | 0.5 | (11)% | ||
Notes to table
Information about
Net revenue and EPS results
“We delivered a solid quarter and first half, and unveiled an innovative portfolio of solutions designed for the AI and hybrid era,” said
Second quarter GAAP diluted net EPS was
Asset management
HP’s dividend payment of
Fiscal 2024 Second quarter segment results
- Personal Systems net revenue was
$8.4 billion , up 3% year over year (up 2% in constant currency) with a 6.0% operating margin. Consumer PS net revenue was down 3% and Commercial PS net revenue was up 6%. Total units were up 7% with Consumer PS units down 1% and Commercial PS units up 12%. - Printing net revenue was
$4.4 billion , down 8% year over year (down 7% in constant currency) with a 19.0% operating margin. Consumer Printing net revenue was down 16% and Commercial Printing net revenue was down 12%. Supplies net revenue was down 5% (down 4% in constant currency). Total hardware units were down 17%, with Consumer Printing units down 17% and Commercial Printing units down 17%.
Outlook
For the fiscal 2024 third quarter,
For fiscal 2024,
More information on
About
Use of non-GAAP financial information
To supplement HP’s consolidated condensed financial statements presented on a generally accepted accounting principles (“GAAP”) basis,
Forward-looking statements
This 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
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
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
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’s Investor Relations website at investor.hp.com contains a significant amount of information about
Editorial contacts
MediaRelations@hp.com
InvestorRelations@hp.com
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited) (In millions, except per share amounts) | |||||||||||
Three months ended | |||||||||||
Net revenue:(a) | |||||||||||
Products | $ | 12,043 | $ | 12,419 | $ | 12,149 | |||||
Services | 757 | 766 | 758 | ||||||||
Total net revenue | 12,800 | 13,185 | 12,907 | ||||||||
Cost of revenue:(a) | |||||||||||
Products | 9,324 | 9,871 | 9,557 | ||||||||
Services | 453 | 426 | 436 | ||||||||
Total cost of revenue | 9,777 | 10,297 | 9,993 | ||||||||
Research and development | 436 | 399 | 410 | ||||||||
Selling, general and administrative | 1,462 | 1,383 | 1,397 | ||||||||
Restructuring and other charges | 71 | 63 | 200 | ||||||||
Acquisition and divestiture charges | 22 | 27 | 74 | ||||||||
Amortization of intangible assets | 80 | 81 | 86 | ||||||||
Total cost and expenses | 11,848 | 12,250 | 12,160 | ||||||||
Earnings from operations | 952 | 935 | 747 | ||||||||
Interest and other, net | (155 | ) | (142 | ) | (160 | ) | |||||
Earnings before taxes | 797 | 793 | 587 | ||||||||
(Provision for) benefit from taxes | (190 | ) | (171 | ) | 467 | ||||||
Net earnings | $ | 607 | $ | 622 | $ | 1,054 | |||||
Net earnings per share: | |||||||||||
Basic | $ | 0.62 | $ | 0.63 | $ | 1.06 | |||||
Diluted | $ | 0.61 | $ | 0.62 | $ | 1.06 | |||||
Cash dividends declared per share | $ | — | $ | 0.55 | $ | — | |||||
Weighted-average shares used to compute net earnings per share: | |||||||||||
Basic | 984 | 995 | 991 | ||||||||
Diluted | 990 | 1,002 | 998 | ||||||||
(a) Effective first quarter of fiscal 2024, | |||||||||||
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS (Unaudited) (In millions, except per share amounts) | |||||||
Six months ended | |||||||
Net revenue:(a) | |||||||
Products | $ | 24,462 | $ | 25,193 | |||
Services | 1,523 | 1,512 | |||||
Total net revenue | 25,985 | 26,705 | |||||
Cost of revenue:(a) | |||||||
Products | 19,195 | 20,146 | |||||
Services | 879 | 858 | |||||
Total cost of net revenue | 20,074 | 21,004 | |||||
Research and development | 835 | 813 | |||||
Selling, general and administrative | 2,845 | 2,728 | |||||
Restructuring and other charges | 134 | 341 | |||||
Acquisition and divestiture charges | 49 | 158 | |||||
Amortization of intangible assets | 161 | 171 | |||||
Total cost and expenses | 24,098 | 25,215 | |||||
Earnings from operations | 1,887 | 1,490 | |||||
Interest and other, net | (297 | ) | (341 | ) | |||
Earnings before taxes | 1,590 | 1,149 | |||||
(Provision for) benefit from taxes | (361 | ) | 374 | ||||
Net earnings | $ | 1,229 | $ | 1,523 | |||
Net earnings per share: | |||||||
Basic | $ | 1.24 | $ | 1.54 | |||
Diluted | $ | 1.23 | $ | 1.53 | |||
Cash dividends declared per share | $ | 0.55 | $ | 0.53 | |||
Weighted-average shares used to compute net earnings per share: | |||||||
Basic | 990 | 990 | |||||
Diluted | 996 | 997 | |||||
(a) Effective first quarter of fiscal 2024, | |||||||
ADJUSTMENTS 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 | |||||||||||||||||||||
Amounts | Diluted net earnings per share | Amounts | Diluted net earnings per share | Amounts | Diluted net earnings per share | ||||||||||||||||
GAAP net earnings | $ | 607 | $ | 0.61 | $ | 622 | $ | 0.62 | $ | 1,054 | $ | 1.06 | |||||||||
Non-GAAP adjustments: | |||||||||||||||||||||
Restructuring and other charges | 71 | 0.07 | 63 | 0.06 | 200 | 0.20 | |||||||||||||||
Acquisition and divestiture charges | 22 | 0.02 | 27 | 0.03 | 74 | 0.07 | |||||||||||||||
Amortization of intangible assets | 80 | 0.08 | 81 | 0.08 | 86 | 0.09 | |||||||||||||||
Non-operating retirement-related credits | (3 | ) | — | (2 | ) | — | (13 | ) | (0.01 | ) | |||||||||||
Tax adjustments(a) | 35 | 0.04 | 17 | 0.02 | (616 | ) | (0.62 | ) | |||||||||||||
Non-GAAP net earnings | $ | 812 | $ | 0.82 | $ | 808 | $ | 0.81 | $ | 785 | $ | 0.79 | |||||||||
GAAP earnings from operations | $ | 952 | $ | 935 | $ | 747 | |||||||||||||||
Non-GAAP adjustments: | |||||||||||||||||||||
Restructuring and other charges | 71 | 63 | 200 | ||||||||||||||||||
Acquisition and divestiture charges | 22 | 27 | 74 | ||||||||||||||||||
Amortization of intangible assets | 80 | 81 | 86 | ||||||||||||||||||
Non-GAAP earnings from operations | $ | 1,125 | $ | 1,106 | $ | 1,107 | |||||||||||||||
GAAP operating margin | 7.4 | % | 7.1 | % | 5.8 | % | |||||||||||||||
Non-GAAP adjustments | 1.4 | % | 1.3 | % | 2.8 | % | |||||||||||||||
Non-GAAP operating margin | 8.8 | % | 8.4 | % | 8.6 | % | |||||||||||||||
(a) Includes tax impact on non-GAAP adjustments. | |||||||||||||||||||||
ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS, OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE (Unaudited) (In millions, except per share amounts) | |||||||||||||||
Six months ended | |||||||||||||||
Amounts | Diluted net earnings per share | Amounts | Diluted net earnings per share | ||||||||||||
GAAP net earnings | $ | 1,229 | $ | 1.23 | $ | 1,523 | $ | 1.53 | |||||||
Non-GAAP adjustments: | |||||||||||||||
Restructuring and other charges | 134 | 0.14 | 341 | 0.34 | |||||||||||
Acquisition and divestiture charges | 49 | 0.05 | 158 | 0.16 | |||||||||||
Amortization of intangible assets | 161 | 0.16 | 171 | 0.17 | |||||||||||
Debt extinguishment costs | — | — | 8 | 0.01 | |||||||||||
Non-operating retirement-related credits | (5 | ) | (0.01 | ) | (23 | ) | (0.02 | ) | |||||||
Tax adjustments(a) | 52 | 0.06 | (662 | ) | (0.67 | ) | |||||||||
Non-GAAP net earnings | $ | 1,620 | $ | 1.63 | $ | 1,516 | $ | 1.52 | |||||||
GAAP earnings from operations | $ | 1,887 | $ | 1,490 | |||||||||||
Non-GAAP adjustments: | |||||||||||||||
Restructuring and other charges | 134 | 341 | |||||||||||||
Acquisition and divestiture charges | 49 | 158 | |||||||||||||
Amortization of intangible assets | 161 | 171 | |||||||||||||
Non-GAAP earnings from operations | $ | 2,231 | $ | 2,160 | |||||||||||
GAAP operating margin | 7.3 | % | 5.6 | % | |||||||||||
Non-GAAP adjustments | 1.3 | % | 2.5 | % | |||||||||||
Non-GAAP operating margin | 8.6 | % | 8.1 | % | |||||||||||
(a) Includes tax impact on non-GAAP adjustments. | |||||||||||||||
CONSOLIDATED CONDENSED BALANCE SHEETS (Unaudited) (In millions) | |||||||
As of | |||||||
ASSETS | |||||||
Current assets: | |||||||
Cash, cash equivalents and restricted cash | $ | 2,517 | $ | 3,232 | |||
Accounts receivable, net | 4,319 | 4,237 | |||||
Inventory | 7,512 | 6,862 | |||||
Other current assets | 4,245 | 3,646 | |||||
Total current assets | 18,593 | 17,977 | |||||
Property, plant and equipment, net | 2,794 | 2,827 | |||||
8,590 | 8,591 | ||||||
Other non-current assets | 7,456 | 7,609 | |||||
Total assets | $ | 37,433 | $ | 37,004 | |||
LIABILITIES AND STOCKHOLDERS' DEFICIT | |||||||
Current liabilities: | |||||||
Notes payable and short-term borrowings | $ | 265 | $ | 230 | |||
Accounts payable | 14,362 | 14,046 | |||||
Other current liabilities | 10,212 | 10,212 | |||||
Total current liabilities | 24,839 | 24,488 | |||||
Long-term debt | 9,327 | 9,254 | |||||
Other non-current liabilities | 4,183 | 4,331 | |||||
Stockholders' deficit | (916 | ) | (1,069 | ) | |||
Total liabilities and stockholders' deficit | $ | 37,433 | $ | 37,004 | |||
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In millions) | |||||||
Three months ended | |||||||
Cash flows from operating activities: | |||||||
Net earnings | $ | 607 | $ | 1,054 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation and amortization | 209 | 212 | |||||
Stock-based compensation expense | 94 | 95 | |||||
Restructuring and other charges | 71 | 200 | |||||
Deferred taxes on earnings | 5 | (685 | ) | ||||
Other, net | 7 | 32 | |||||
Changes in operating assets and liabilities, net of acquisitions: | |||||||
Accounts receivable | (552 | ) | 182 | ||||
Inventory | (631 | ) | 144 | ||||
Accounts payable | 1,104 | (202 | ) | ||||
Net investment in leases | (19 | ) | (35 | ) | |||
Taxes on earnings | (177 | ) | 110 | ||||
Restructuring and other | (57 | ) | (75 | ) | |||
Other assets and liabilities | (80 | ) | (396 | ) | |||
Net cash provided by operating activities | 581 | 636 | |||||
Cash flows from investing activities: | |||||||
Investment in property, plant and equipment, net | (119 | ) | (130 | ) | |||
Purchases of available-for-sale securities and other investments | — | (1 | ) | ||||
Maturities and sales of available-for-sale securities and other investments | — | 17 | |||||
Collateral returned for derivative instruments | 70 | 113 | |||||
Payment made in connection with business acquisition, net of cash acquired | — | (5 | ) | ||||
Net cash used in investing activities | (49 | ) | (6 | ) | |||
Cash flows from financing activities: | |||||||
Payments of short-term borrowings with original maturities less than 90 days, net | (100 | ) | (210 | ) | |||
Proceeds from debt, net of issuance costs | 94 | 65 | |||||
Payment of debt | (53 | ) | (48 | ) | |||
Stock-based award activities and others | (4 | ) | (7 | ) | |||
Repurchase of common stock | (100 | ) | — | ||||
Cash dividends paid | (269 | ) | (259 | ) | |||
Net cash used in financing activities | (432 | ) | (459 | ) | |||
Increase in cash, cash equivalents and restricted cash | 100 | 171 | |||||
Cash, cash equivalents and restricted cash at beginning of period | 2,417 | 1,769 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 2,517 | $ | 1,940 | |||
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS (Unaudited) (In millions) | |||||||
Six months ended | |||||||
Cash flows from operating activities: | |||||||
Net earnings | $ | 1,229 | $ | 1,523 | |||
Adjustments to reconcile net earnings to net cash provided by operating activities: | |||||||
Depreciation and amortization | 414 | 421 | |||||
Stock-based compensation expense | 271 | 262 | |||||
Restructuring and other charges | 134 | 341 | |||||
Deferred taxes on earnings | — | (825 | ) | ||||
Other, net | (13 | ) | 36 | ||||
Changes in operating assets and liabilities, net of acquisitions: | |||||||
Accounts receivable | (106 | ) | 426 | ||||
Inventory | (678 | ) | 374 | ||||
Accounts payable | 360 | (1,933 | ) | ||||
Net investment in leases | (81 | ) | (51 | ) | |||
Taxes on earnings | (128 | ) | 330 | ||||
Restructuring and other | (144 | ) | (167 | ) | |||
Other assets and liabilities | (556 | ) | (117 | ) | |||
Net cash provided by operating activities | 702 | 620 | |||||
Cash flows from investing activities: | |||||||
Investment in property, plant and equipment, net | (277 | ) | (322 | ) | |||
Purchases of available-for-sale securities and other investments | — | (5 | ) | ||||
Maturities and sales of available-for-sale securities and other investments | — | 18 | |||||
Collateral posted for derivative instruments | — | (127 | ) | ||||
Payment made in connection with business acquisitions, net of cash acquired | — | (5 | ) | ||||
Net cash used in investing activities | (277 | ) | (441 | ) | |||
Cash flows from financing activities: | |||||||
Payment of short-term borrowings with original maturities less than 90 days, net | — | (10 | ) | ||||
Proceeds from debt, net of issuance costs | 186 | 117 | |||||
Payment of debt | (102 | ) | (587 | ) | |||
Stock-based award activities and others | (80 | ) | (86 | ) | |||
Repurchase of common stock | (600 | ) | (100 | ) | |||
Cash dividends paid | (544 | ) | (518 | ) | |||
Collateral returned for derivative instruments | — | (200 | ) | ||||
Net cash used in financing activities | (1,140 | ) | (1,384 | ) | |||
Decrease in cash, cash equivalents and restricted cash | (715 | ) | (1,205 | ) | |||
Cash, cash equivalents and restricted cash at beginning of period | 3,232 | 3,145 | |||||
Cash, cash equivalents and restricted cash at end of period | $ | 2,517 | $ | 1,940 | |||
SEGMENT/BUSINESS UNIT INFORMATION (Unaudited) (In millions) | |||||||||||||||||
Three months ended | Change (%) | ||||||||||||||||
Q/Q | Y/Y | ||||||||||||||||
Net revenue: | |||||||||||||||||
Commercial PS | $ | 6,242 | $ | 6,045 | $ | 5,916 | 3% | 6% | |||||||||
Consumer PS | 2,184 | 2,764 | 2,253 | (21)% | (3)% | ||||||||||||
Personal Systems | 8,426 | 8,809 | 8,169 | (4)% | 3% | ||||||||||||
Supplies | 2,864 | 2,863 | 3,006 | —% | (5)% | ||||||||||||
Commercial Printing(a) | 1,205 | 1,227 | 1,373 | (2)% | (12)% | ||||||||||||
Consumer Printing(a) | 299 | 285 | 357 | 5% | (16)% | ||||||||||||
Printing | 4,368 | 4,375 | 4,736 | —% | (8)% | ||||||||||||
Corporate Investments(b) | 5 | 2 | 3 | NM | NM | ||||||||||||
Total segment net revenue | 12,799 | 13,186 | 12,908 | (3)% | (1)% | ||||||||||||
Other(b) | 1 | (1 | ) | (1 | ) | NM | NM | ||||||||||
Total net revenue | $ | 12,800 | $ | 13,185 | $ | 12,907 | (3)% | (1)% | |||||||||
Earnings before taxes: | |||||||||||||||||
Personal Systems | $ | 508 | $ | 537 | $ | 431 | |||||||||||
Printing | 829 | 872 | 899 | ||||||||||||||
Corporate Investments | (30 | ) | (37 | ) | (38 | ) | |||||||||||
Total segment earnings from operations | 1,307 | 1,372 | 1,292 | ||||||||||||||
Corporate and unallocated cost and other | (88 | ) | (89 | ) | (90 | ) | |||||||||||
Stock-based compensation expense | (94 | ) | (177 | ) | (95 | ) | |||||||||||
Restructuring and other charges | (71 | ) | (63 | ) | (200 | ) | |||||||||||
Acquisition and divestiture charges | (22 | ) | (27 | ) | (74 | ) | |||||||||||
Amortization of intangible assets | (80 | ) | (81 | ) | (86 | ) | |||||||||||
Interest and other, net | (155 | ) | (142 | ) | (160 | ) | |||||||||||
Total earnings before taxes | $ | 797 | $ | 793 | $ | 587 | |||||||||||
(a) Effective at the beginning of its first quarter of fiscal 2024, | |||||||||||||||||
(b) "NM" represents not meaningful. | |||||||||||||||||
SEGMENT/BUSINESS UNIT INFORMATION (Unaudited) (In millions) | ||||||||||
Six months ended | Change (%) | |||||||||
Y/Y | ||||||||||
Net revenue: | ||||||||||
Commercial PS | $ | 12,287 | $ | 12,298 | —% | |||||
Consumer PS | 4,948 | 5,056 | (2)% | |||||||
Personal Systems | 17,235 | 17,354 | (1)% | |||||||
Supplies | 5,727 | 5,863 | (2)% | |||||||
Commercial Printing(a) | 2,432 | 2,761 | (12)% | |||||||
Consumer Printing(a) | 584 | 724 | (19)% | |||||||
Printing | 8,743 | 9,348 | (6)% | |||||||
Corporate Investments(b) | 7 | 4 | NM | |||||||
Total segment net revenue | 25,985 | 26,706 | (3)% | |||||||
Other(b) | — | (1 | ) | NM | ||||||
Total net revenue | $ | 25,985 | $ | 26,705 | (3)% | |||||
Earnings before taxes: | ||||||||||
Personal Systems | $ | 1,045 | $ | 906 | ||||||
Printing | 1,701 | 1,769 | ||||||||
Corporate Investments | (67 | ) | (71 | ) | ||||||
Total segment earnings from operations | 2,679 | 2,604 | ||||||||
Corporate and unallocated cost and other | (177 | ) | (182 | ) | ||||||
Stock-based compensation expense | (271 | ) | (262 | ) | ||||||
Restructuring and other charges | (134 | ) | (341 | ) | ||||||
Acquisition and divestiture charges | (49 | ) | (158 | ) | ||||||
Amortization of intangible assets | (161 | ) | (171 | ) | ||||||
Interest and other, net | (297 | ) | (341 | ) | ||||||
Total earnings before taxes | $ | 1,590 | $ | 1,149 | ||||||
(a) Effective at the beginning of its first quarter of fiscal 2024, | ||||||||||
(b) "NM" represents not meaningful. | ||||||||||
SEGMENT OPERATING MARGIN SUMMARY (Unaudited) | ||||||||||||
Three months ended | Change (pts) | |||||||||||
Q/Q | Y/Y | |||||||||||
Segment operating margin: | ||||||||||||
Personal Systems | 6.0 | % | 6.1 | % | 5.3 | % | (0.1)pts | 0.7pts | ||||
Printing | 19.0 | % | 19.9 | % | 19.0 | % | (0.9)pts | —pts | ||||
Corporate Investments(a) | NM | NM | NM | NM | NM | |||||||
Total segment | 10.2 | % | 10.4 | % | 10.0 | % | (0.2)pts | 0.2pts | ||||
Six months ended | Change (pts) | ||||||
Y/Y | |||||||
Segment operating margin: | |||||||
Personal Systems | 6.1 | % | 5.2 | % | 0.9pts | ||
Printing | 19.5 | % | 18.9 | % | 0.6pts | ||
Corporate Investments(a) | NM | NM | NM | ||||
Total segment | 10.3 | % | 9.8 | % | 0.5pts | ||
(a) "NM" represents not meaningful. | |||||||
CALCULATION OF DILUTED NET EARNINGS PER SHARE (Unaudited) (In millions, except per share amounts) | ||||||||
Three months ended | ||||||||
Numerator: | ||||||||
GAAP net earnings | $ | 607 | $ | 622 | $ | 1,054 | ||
Non-GAAP net earnings | $ | 812 | $ | 808 | $ | 785 | ||
Denominator: | ||||||||
Weighted-average shares used to compute basic net earnings per share | 984 | 995 | 991 | |||||
Dilutive effect of employee stock plans(a) | 6 | 7 | 7 | |||||
Weighted-average shares used to compute diluted net earnings per share | 990 | 1,002 | 998 | |||||
GAAP diluted net earnings per share | $ | 0.61 | $ | 0.62 | $ | 1.06 | ||
Non-GAAP diluted net earnings per share | $ | 0.82 | $ | 0.81 | $ | 0.79 | ||
(a) Includes any dilutive effect of restricted stock units, stock options and performance-based awards. | ||||||||
CALCULATION OF DILUTED NET EARNINGS PER SHARE (Unaudited) (In millions, except per share amounts) | |||||
Six months ended | |||||
Numerator: | |||||
GAAP net earnings | $ | 1,229 | $ | 1,523 | |
Non-GAAP net earnings | $ | 1,620 | $ | 1,516 | |
Denominator: | |||||
Weighted-average shares used to compute basic net earnings per share | 990 | 990 | |||
Dilutive effect of employee stock plans(a) | 6 | 7 | |||
Weighted-average shares used to compute diluted net earnings per share | 996 | 997 | |||
GAAP diluted net earnings per share | $ | 1.23 | $ | 1.53 | |
Non-GAAP diluted net earnings per share | $ | 1.63 | $ | 1.52 | |
(a) Includes any dilutive effect of restricted stock units, stock options and performance-based awards. | |||||
Use of non-GAAP financial measures
To supplement HP’s consolidated condensed financial statements presented on a GAAP basis,
These non-GAAP financial measures are not computed in accordance with, or as an alternative to, GAAP in
Use and economic substance of non-GAAP financial measures
Net revenue on a constant currency basis excludes the effect of foreign currency exchange fluctuations calculated by translating current period revenues using monthly 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.
- 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 becauseHP believes that these costs do not reflect expected future operating expenses and do not contribute to a meaningful evaluation ofHP '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 ofHP '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 outstandingU.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 ofHP '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 ofHP '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 ofHP '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,
Key Growth Areas
Key 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:
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 measures
These non-GAAP financial measures may have limitations as analytical tools, and these measures should not be considered in isolation or as a substitute for analysis of HP’s results as reported under GAAP. Some of the limitations in relying on these non-GAAP financial measures are:
- Items such as amortization of intangible assets, though not directly affecting HP’s cash position, represent the loss in value of intangible assets over time. The expense associated with this change in value is not included in non-GAAP operating margin, non-GAAP net earnings and non-GAAP diluted net EPS, and therefore does not reflect the full economic effect of the change in value of those intangible assets.
- Items such as restructuring and other charges, acquisition and divestiture charges, amortization of intangible assets are excluded from non-GAAP operating margin. In addition, non-operating retirement-related (credits)/charges, debt extinguishment costs (benefit) and tax adjustments are excluded from non-GAAP other income and expenses, non-GAAP tax rate, non-GAAP net earnings and non-GAAP diluted net EPS. These items can have a material impact on the equivalent GAAP earnings measure and cash flows.
HP may not be able to immediately liquidate the short-term and certain long-term investments included in gross cash, which may limit the usefulness of gross cash as a liquidity measure.
Other companies may calculate the non-GAAP financial measures differently than
Compensation for limitations associated with use of non-GAAP financial measures
Usefulness of non-GAAP financial measures to investors
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