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 2022 third quarter net revenue of $14.7 billion, down 4.1% (down 1.9% in constant currency) from the prior-year period.
“Disciplined pricing and cost management, combined with continued momentum in our key growth businesses, enabled us to deliver solid non-GAAP EPS growth while returning $1.3 billion to shareholders in Q3,” said Enrique Lores, HP President and CEO. “We are taking clear actions to mitigate near-term market headwinds and further strengthen our business for the future. I’m confident in our ability to execute against our priorities to drive long-term sustainable growth and value creation.”
Third quarter GAAP diluted net EPS was $1.08, up from $0.92 in the prior-year period and above the previously provided outlook of $0.91 to $0.96. Third quarter non-GAAP diluted net EPS was $1.04, up from $1.00 in the prior-year period and within the previously provided outlook of $1.03 to $1.08. Third quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $40 million, or $0.04 per diluted share, related to restructuring and other charges, acquisition-related charges, amortization of intangible assets, Russia exit charges, non-operating retirement-related (credits)/charges, and tax adjustments.
HP's net cash provided by operating activities in the third quarter of fiscal 2022 was $0.4 billion. Accounts receivable ended the quarter at $4.4 billion, down 2 days quarter over quarter to 27 days. Inventory ended thequarter at $8.2 billion, up 2 days quarter over quarter to 63 days. Accounts payable ended the quarter at $15.5 billion, up 3 days quarter over quarter to 119 days.
HP generated $0.3 billion of free cash flow in the third quarter. Free cash flow includes net cash provided by operating activities of $0.4 billion adjusted for net investments in leases of $53 million and net investments in property, plant and equipment of $170 million.
HP’s dividend payment of $0.25 per share in the third quarter resulted in cash usage of $0.3 billion. HP also utilized $1.0 billion of cash during the quarter to repurchase approximately 29.3 million shares of common stockin the open market. As a result, HP returned 464% of its third quarter free cash flow to shareholders. HP exited the quarter with $5.4 billion in gross cash, which includes cash and cash equivalents and short-term investments of $5 million.
Fiscal 2022 third quarter segment results
- Personal Systems net revenue was $10.1 billion, down 3% year over year (flat in constant currency) with a 6.9% operating margin. Consumer net revenue decreased 20% and Commercial net revenue increased 7%. Total units were down 25% with Notebooks units down 32% and Desktops units up 1%.
- Printing net revenue was $4.6 billion, down 6% year over year (down 5% in constant currency) with a 19.9% operating margin. Consumer net revenue was up 1% and Commercial net revenue was down 3%. Supplies net revenue was down 9% (down 9% in constant currency). Total hardware units were down 3% with Consumer units down 1% and Commercial units down 15%.
For the fiscal 2022 fourth quarter, HP estimates GAAP diluted net EPS to be in the range of $0.44 to $0.54, which includes a GAAP-only charge of approximately $0.27 towards acquisition-related charges for Poly, and non-GAAP diluted net EPS to be in the range of $0.79 to $0.89, which includes an incremental approximate $0.05 headwind driven by Poly’s debt-related expenses and other deal-related costs. Fiscal 2022 fourth quarter non-GAAP diluted net EPS estimates exclude $0.35 per diluted share, primarily related to restructuring and other charges, acquisition-related charges including charges related to Poly noted above, amortization of intangible assets, non-operating retirement-related (credits)/charges, tax adjustments and the related tax impact on these items.
For the fiscal year 2022, HP estimates GAAP diluted net EPS to be in the range of $3.46 to $3.56, which includes a GAAP-only charge of approximately $0.27 towards acquisition-related charges for Poly, and non-GAAP diluted net EPS to be in the range of $4.02 to $4.12, which includes an incremental approximate $0.05 headwind driven by Poly’s debt-related expenses and other deal-related costs. Fiscal 2022 non-GAAP diluted net EPS estimates exclude $0.56 per diluted share, primarily related to restructuring and other charges, acquisition-related charges including charges related to Poly noted above, Russia exit charges, amortization of intangible assets, non-operating retirement-related (credits)/charges, tax adjustments and the related tax impact on these items. For fiscal 2022, HP anticipates generating free cash flow in the range of $3.2 billion to $3.7 billion, inclusive of an approximately $0.3 billion headwind related to Poly acquisition costs.
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 FY22 Q3 earnings conference call is accessible via audio webcast at www.hp.com/investor/2022Q3Webcast.
About HP Inc.
HP Inc. (NYSE: HPQ) is a technology company that believes one thoughtful idea has the power to change the world. Its product and service portfolio of personal systems, printers, and 3D printing solutions helps bring these ideas to life. Visit http://www.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 thatthese 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.
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, the resultsof HP Inc. and its consolidated subsidiaries may differ materially from those expressed or implied by such forwardlooking 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, demand, performance, market share or competitive performance relating to products or services; any statements concerning potential supply constraints, component shortages, manufacturing disruptions or logistics challenges; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on HP and its financial performance; any statements regarding pending investigations, claims, disputes or other litigation matters; any statements of expectation or belief, including with respect to the timing and expected benefits of acquisitions and other business combination and investment transactions (including statements regarding the transaction between HP and Poly); and any statements of assumptions underlying any of the foregoing. Forward-looking statements can also generally be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will,” “would,” “could,” “should,” “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 riseto or amplify the risks associated with many of these factors listed here; 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; HP’s ability to execute on its strategic plan, including the previously announced initiatives, business model changes and transformation; execution of planned structural costreductions and productivity initiatives; HP’s ability to complete any contemplated share repurchases, other capital return programs or other strategic transactions; the competitive pressures faced by HP’s businesses; 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, reseller and customer landscape; the development and transition of new products and services and the enhancement of existing products and services to meet evolving customer needs and respond to emerging technological trends; successfully competing and maintaining the value proposition of HP’s products, including supplies; 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 (including the risk that cost savings, any revenue synergies and other anticipated benefits of the transaction between HP and Poly may not be realized or may take longer than anticipated to be realized, including as a result of the impact of, or problems arising from, the integration of the two companies); the results of our 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, changes and events, including the Russian invasion of Ukraine and its regional and global ramifications and 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 or other effects of climate change, 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, 2021 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 Report on Form 10-Q for the fiscal quarter ended July 31, 2022, Annual Report on Form 10-K for the fiscal year ended October 31, 2022, 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.
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