HP Inc. Reports Fiscal 2018 Second Quarter Results, Tops Estimates

Palo Alto, CA (May 29, 2018) — HP Inc. announced fiscal 2018 second-quarter net revenue of $14.0 billion, up 13% (up 10% in constant currency) from the prior-year period.

Second quarter GAAP diluted net EPS was $0.64, up from $0.33 in the prior-year period and above the previously provided outlook of $0.42 to $0.46. Second quarter non-GAAP diluted net EPS was $0.48, up from $0.40 in the prior-year period and within the previously provided outlook of $0.45 to $0.49. Second quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $0.3 billion, or $0.16 per share, related to restructuring and other charges, acquisition-related charges, defined benefit plan settlement charges, amortization of intangible assets, non-operating retirement-related credits/(charges), debt extinguishment costs and tax adjustments.

“We delivered another quarter of double-digit year over year revenue and profit growth, strong EPS and impressive free cash flow and performed well across segments and regions,” said Dion Weisler, president and CEO, HP Inc. “Our sharp focus on innovation, combined with operational excellence and driving profitable growth is paying off.”

Asset management

HP’s net cash provided by operating activities in the second quarter was $1.1 billion. Accounts receivable ended the quarter at $4.6 billion, up 3 days quarter over quarter to 30 days. Inventory ended the quarter at $5.6 billion, up 1 day quarter over quarter to 44 days. Accounts payable ended the quarter at $13.1 billion, up 7 days quarter over quarter to 104 days.

HP generated $937 million of free cash flow in the second quarter of fiscal 2018. Free cash flow includes net cash provided by operating activities and net investments in property, plant and equipment of $113 million.

HP’s dividend payment of $0.1393 per share in the second quarter resulted in cash usage of $0.2 billion. HP also utilized $0.8 billion of cash during the quarter to repurchase approximately 35.4 million shares of common stock in the open market. As a result, HP returned 110% of its free cash flow to shareholders in the second quarter of fiscal 2018. HP exited the quarter with $5.3 billion in gross cash, which includes cash and cash equivalents and short-term investments of $1.1 billion included in other current assets.

Fiscal 2018 second quarter segment results

Personal Systems net revenue was up 14% year over year (up 11% in constant currency) with a 3.8% operating margin. Commercial net revenue increased 16% and Consumer net revenue increased 10%. Total units were up 7% with Notebooks units up 7% and Desktops units up 7%.

Printing net revenue was up 11% year over year (up 9% in constant currency) with a 16.0% operating margin. Total hardware units were up 13% with Commercial hardware units up 88% and Consumer hardware units up 4%. Supplies net revenue was up 8% (up 6% in constant currency).

Outlook

For the fiscal 2018 third quarter, HP estimates GAAP diluted net EPS to be in the range of $0.47 to $0.51 and non-GAAP diluted net EPS to be in the range of $0.49 to $0.52. Fiscal 2018 third quarter non-GAAP diluted net EPS estimates exclude $0.01 to $0.02 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 2018, HP raises estimates for GAAP diluted net EPS to be in the range of $2.75 to $2.82 and non-GAAP diluted net EPS to be in the range of $1.97 to $2.02. Fiscal 2018 non-GAAP diluted net EPS estimates exclude $0.78 to $0.80 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), debt extinguishment costs, tax adjustments and the related tax impact on these items. In addition, HP anticipates generating free cash flow of at least $3.7 billion for fiscal 2018.

More information on HP’s earnings, including additional financial analysis and an earnings overview presentation, is available on HP’s Investor Relations website.

HP’s FY18 Q2 earnings conference call is accessible via an audio webcast.

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