Net revenue and EPS results
HP Inc. and its subsidiaries (“HP”) announced fiscal 2021 second quarter net revenue of $15.9 billion, up 27.3% (up 25.4% in constant currency) from the prior-year period.
Second quarter GAAP diluted net EPS was $0.98, up from $0.53 in the prior-year period and above the previously provided outlook of $0.82 to $0.88. Second quarter non-GAAP diluted net EPS was $0.93, up from $0.51 in the prior-year period and above the previously provided outlook of $0.84 to $0.90. Second quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $70 million, or $0.05 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.
“We delivered another strong quarter, with double-digit top and bottom line growth. HP technology is increasingly at the heart of hybrid work and we are benefitting from exceptional demand for our products and services,” said Enrique Lores, HP Inc. President and CEO. “Our performance and our positive outlook for the full year reflect the relevance of our innovation, the resilience of our business model, and the operational excellence of our teams.”
HP's net cash provided by operating activities in the second quarter of fiscal 2021 was $1.4 billion. Accounts receivable ended the quarter at $5.0 billion, down 2 days quarter over quarter to 28 days. Inventory ended the quarter at $7.5 billion, up 5 days quarter over quarter to 54 days. Accounts payable ended the quarter at $15.2 billion, up 1 day quarter over quarter to 110 days.
HP generated $1.3 billion of free cash flow in the second quarter. Free cash flow includes net cash provided by operating activities of $1.4 billion adjusted for net investments in leases of $21 million and net investments in property, plant and equipment of $121 million.
HP’s dividend payment of $0.1938 per share in the second quarter resulted in cash usage of $239 million. HP also utilized $1.6 billion of cash during the quarter to repurchase approximately 53.5 million shares of common stock in the open market. As a result, HP returned 137% of its second 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 $12 million included in other current assets.
Fiscal 2021 second quarter segment results
- Personal Systems net revenue was $10.6 billion, up 27% year over year (up 25% in constant currency) with a 6.7% operating margin. Consumer net revenue increased 72% and Commercial net revenue increased 10%. Total units were up 44% with Notebooks units up 63% and Desktops units down 5%.
- Printing net revenue was $5.3 billion, up 28% year over year (up 27% in constant currency) with a 17.9% operating margin. Total hardware units were up 42% with Consumer units up 45% and Commercial units up 22%. Consumer net revenue increased 77% and Commercial net revenue increased 34%. Supplies net revenue was up 17% (up 17% in constant currency).
For the fiscal 2021 third quarter, HP estimates GAAP diluted net EPS to be in the range of $0.77 to $0.81 and non-GAAP diluted net EPS to be in the range of $0.81 to $0.85. Fiscal 2021 third quarter non-GAAP diluted net EPS estimates exclude $0.04 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 $3.24 to $3.34 and non-GAAP diluted net EPS to be in the range of $3.40 to $3.50. Fiscal 2021 non-GAAP diluted net EPS estimates exclude $0.16 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 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 Q2 earnings conference call is accessible via audio webcast at www.hp.com/investor/2021Q2Webcast.
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 (used in)/ provided by operating activities or cash and cash equivalents prepared in accordance with GAAP.
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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 ended April 30, 2021 and 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.
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