HP Inc. Reports Fiscal 2019 Full Year and Fourth Quarter Results

Notes to table
Information 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 2019 net revenue of $58.8 billion, up 0.5% (up 2.0% in constant currency) from the prior-year period.

Fiscal 2019 GAAP diluted net EPS was $2.07, down from $3.26 in the prior-year period and below the previously provided outlook of $2.31 to $2.35. Fiscal 2019 non-GAAP diluted net EPS was $2.24, up from $2.02 in the prior-year period and above the previously provided outlook of $2.18 to $2.22. Fiscal 2019 non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $257 million, or $0.17 per diluted share, related to restructuring and other charges, acquisition-related charges, amortization of intangible assets, non-operating retirement-related credits/(charges), and tax adjustments.

Fourth quarter net revenue was $15.4 billion, up 0.3% (up 1.8% in constant currency) from the prior-year period.

Fourth quarter GAAP diluted net EPS was $0.26, down from $0.91 in the prior-year period and below the previously provided outlook of $0.51 to $0.55. Fourth quarter non-GAAP diluted net EPS was $0.60, up from $0.54 in the prior-year period and above the previously provided outlook of $0.55 to $0.59. Fourth quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $511 million, or $0.34 per diluted share, related to restructuring and other charges, acquisition-related charges, amortization of intangible assets, non-operating retirement-related credits/(charges), and tax adjustments.

“2019 marks our third consecutive year of revenue, non-GAAP operating profit and non-GAAP earnings growth, with non-GAAP EPS up 11% and strong free cash flow of $4 billion,” said Enrique Lores, President and CEO, HP Inc. “We delivered an excellent Q4, with 11% non-GAAP EPS growth. Our strategy is working, and we are confident in our business heading into FY20.”

Asset management
HP generated $4.7 billion in net cash provided by operating activities and $4.0 billion of free cash flow in fiscal 2019. Free cash flow includes net cash provided by operating activities and net investments in property, plant and equipment of $0.7 billion. HP utilized approximately $2.4 billion of cash during fiscal 2019 to repurchase approximately 118 million shares of common stock in the open market. When combined with the almost $1.0 billion of cash used to pay dividends, HP returned 85% of its free cash flow to shareholders in fiscal 2019.

HP’s net cash provided by operating activities in the fourth quarter of fiscal 2019 was $0.6 billion. Accounts receivable ended the quarter at $6.0 billion, up 2 days quarter over quarter to 35 days. Inventory ended the quarter at $5.7 billion, down 3 days quarter over quarter to 41 days. Accounts payable ended the quarter at $14.8 billion, down 6 days quarter over quarter to 107 days.

HP generated $0.4 billion of free cash flow in the fourth quarter. Free cash flow includes net cash provided by operating activities and net investments in property, plant and equipment of $0.2 billion.

HP’s dividend payment of $0.1602 per share in the fourth quarter resulted in cash usage of $0.2 billion. HP also utilized $0.5 billion of cash during the quarter to repurchase approximately 25 million shares of common stock in the open market. As a result, HP returned 178% of its fourth quarter free cash flow to shareholders. HP exited the quarter with $4.5 billion in gross cash, which includes cash and cash equivalents.

Fiscal 2019 fourth quarter segment results

  • Personal Systems net revenue was up 4% year over year (up 5% in constant currency) with a 5.3% operating margin. Commercial net revenue increased 8% and Consumer net revenue decreased 4%. Total units were up 8% with Notebooks units up 9% and Desktops units up 5%.
  • Printing net revenue was down 6% year over year (down 5% in constant currency) with a 15.6% operating margin. Total hardware units were down 9% with Commercial hardware units down 1% and Consumer hardware units down 10%. Supplies net revenue was down 7% (down 7% in constant currency). 

Outlook
For the fiscal 2020 first quarter, HP estimates GAAP diluted net EPS to be in the range of $0.39 to $0.42 and non-GAAP diluted net EPS to be in the range of $0.53 to $0.56. Fiscal 2020 first quarter non-GAAP diluted net EPS estimates exclude $0.14 per diluted share, primarily related to restructuring and other charges, acquisition-related charges, defined benefit plan settlement charges, amortization of intangible assets, non-operating retirement-related credits/(charges), tax adjustments and the related tax impact on these items.

For fiscal 2020, HP estimates GAAP diluted net EPS to be in the range of $2.00 to $2.10 and non-GAAP diluted net EPS to be in the range of $2.24 to $2.32.  Fiscal 2020 non-GAAP diluted net EPS estimates exclude $0.22 to $0.24 per diluted share, primarily related to restructuring and other charges, acquisition-related charges, defined benefit plan settlement charges, amortization of intangible assets, non-operating retirement-related credits/(charges), tax adjustments and the related tax impact on these items. 

More information on HP's earnings, including additional financial analysis and an earnings overview presentation, is available on HP's Investor Relations website at www.hp.com/investor/home.

HP's FY19 Q4 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2019Q4Webcast.

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 information
To 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 operating activities or cash and cash equivalents prepared in accordance with GAAP.

Forward-looking statements
This news release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of HP and its consolidated subsidiaries may differ materially from those expressed or implied by such forward-looking statements and assumptions.

All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to any projections of net revenue, margins, expenses, effective tax rates, net earnings, net EPS, cash flows, benefit plan funding, deferred taxes, share repurchases, foreign currency exchange rates or other financial items; any projections of the amount, timing or impact of cost savings or restructuring and other charges; any statements of the plans, strategies and objectives of management for future operations, including, but not limited to, our business model and digital transformation, our sustainability goals, our go-to-market strategy, the execution of restructuring plans and any resulting cost savings, net revenue or profitability improvements; 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.

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