HP Inc. Reports Second Quarter Fiscal 2016 Results

PALO ALTO, CA — (Marketwired – May 25, 2016) – HP (NYSE:HPQ) — HP Inc. (HP) announced second quarter net revenue of $11.6 billion, down 11% (down 5% in constant currency) from the prior-year period.

  • Second quarter non-GAAP diluted net earnings per share from continuing operations of $0.41 — above the previously provided outlook of $0.35 to $0.40 per share 
  • Second quarter GAAP diluted net earnings per share from continuing operations of $0.38 — within the previously provided outlook of $0.33 to $0.38 per share
  • Second quarter net cash provided by operating activities of $1.6 billion
  • Second quarter net revenue of $11.6 billion, down 11% (down 5% in constant currency) from the prior-year period
  • Second quarter returned $518 million to shareholders in the form of share repurchases and dividends

HP Inc.’s fiscal 2016 second quarter financial performance

  Q2
FY16
Q2
FY15
Y/Y
GAAP net revenue ($B) $11.6 $13.0 (11%)
GAAP operating margin from continuing operations 7.3% 7.7% (0.4 pts)
GAAP net earnings from continuing operations ($B) $0.66 $0.73 (10%)
GAAP diluted net earnings per share from continuing operations $0.38 $0.40 (5%)
Non-GAAP operating margin from continuing operations 7.8% 7.5% 0.3 pts
Non-GAAP net earnings from continuing operations ($B) $0.70 $0.72 (3%)
Non-GAAP diluted net earnings per share from continuing operations $0.41 $0.39 5%
Net cash provided by operating activities ($B)(1) $1.6 $1.5 8%

Notes to table
Information about HP Inc.’s use of non-GAAP financial information is provided under “Use of non-GAAP financial information” below.

(1) The consolidated condensed statement of cash flows for the three months ended April 30, 2015 represents the combined cash flows of Hewlett- Packard Company prior to separation, as previously filed, and has not been adjusted to reflect the effect of the separation of Hewlett Packard Enterprise Company.

Revenue and EPS results
HP Inc. (HP) announced second quarter net revenue of $11.6 billion, down 11% (down 5% in constant currency) from the prior-year period.

Second quarter GAAP diluted net earnings per share (EPS) from continuing operations was $0.38, down from $0.40 in the prior-year period and within the previously provided outlook of $0.33 to $0.38. Second quarter non-GAAP diluted net EPS from continuing operations was $0.41, up from $0.39 in the prior-year period and above its previously provided outlook of $0.35 to $0.40.

Second quarter non-GAAP net earnings from continuing operations and non-GAAP diluted net EPS from continuing operations include after-tax adjustments of $42 million, or $0.03 per share, related to restructuring charges, the amortization of intangible assets, non-operating retirement-related credits, and tax indemnification amounts.

“This quarter we delivered strong results and solid progress towards our long term strategy,” said Dion Weisler, HP’s President and CEO. “We achieved our operational objectives, unleashed truly amazing innovations, and grew in strategic areas of our business, despite tough market conditions. I’m confident in our ability to execute and remain committed to our plan for growth.”

Asset management 
HP’s net cash provided by operating activities in the second quarter was $1.6 billion. Accounts receivable ended the quarter at $3.9 billion, unchanged quarter over quarter at 30 days. Inventory ended the quarter at $3.5 billion, down 3 days quarter over quarter to 34 days. Accounts payable ended the quarter at $9.1 billion, up 6 days quarter over quarter to 88 days. HP’s dividend payment of $0.124 per share in the second quarter resulted in cash usage of $0.2 billion. HP also utilized $0.3 billion of cash during the quarter to repurchase approximately 28.7 million shares of common stock in the open market. HP exited the quarter with $4.6 billion in gross cash, which includes cash and cash equivalents, short-term investments, and certain liquid long-term investments.

Fiscal 2016 second quarter segment results
Personal Systems net revenue was down 10% year over year (down 5% in constant currency) with a 3.5% operating margin. Commercial net revenue decreased 7% and Consumer net revenue decreased 16%. Total units were down 9% with Notebooks units down 6% and Desktops units down 10%.

Printing net revenue was down 16% year over year (down 10% in constant currency) with a 17.3% operating margin. Total hardware units were down 16% with Commercial hardware units down 12% and Consumer hardware units down 18%. Supplies revenue was down 16% (down 10% in constant currency).

Outlook
For the fiscal 2016 third quarter, HP estimates non-GAAP diluted net EPS from continuing operations to be in the range of $0.37 to $0.40 and GAAP diluted net EPS from continuing operations to be in the range of $0.34 to $0.37. Fiscal 2016 third quarter non-GAAP diluted net EPS from continuing operations estimates exclude $0.03 per diluted share, related to restructuring charges, the amortization of intangible assets, non-operating retirement-related credits and tax indemnification amounts.

For fiscal 2016, HP estimates non-GAAP diluted net EPS from continuing operations to be in the range of $1.59 to $1.65 and GAAP diluted net EPS from continuing operations to be in the range of $1.52 to $1.58. Fiscal 2016 non-GAAP diluted net EPS from continuing operations estimates exclude $0.07 per diluted share, related to restructuring charges, the amortization of intangible assets, non-operating retirement-related credits and tax indemnification amounts.

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 FY16 Q2 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2016Q2Webcast.

About HP Inc.
HP Inc. creates technology that makes life better for everyone, everywhere. Through our portfolio of printers, PCs, mobile devices, solutions, and services, we engineer experiences that amaze. More information about HP Inc. is available at 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, as well as non-GAAP operating margin from continuing operations, non-GAAP net earnings from continuing operations, non-GAAP diluted net earnings per share from continuing operations and gross cash financial measures. HP also provides forecasts of non-GAAP diluted net earnings per share from continuing operations. A reconciliation of the adjustments to GAAP results for this quarter and prior periods is 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 profit, operating margin, net earnings from continuing operations, diluted net earnings per share from continuing operations or cash and cash equivalents prepared in accordance with GAAP.

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