HP Inc. Reports Fiscal 2017 Second Quarter Results

PALO ALTO, CA -- (Marketwired) -- May 24, 2017 -- HP (NYSE: HPQ)

Second quarter GAAP diluted net earnings per share from continuing operations of $0.33, within the previously provided outlook of $0.32 to $0.35 per share
Second quarter non-GAAP diluted net earnings per share of $0.40, within the previously provided outlook of $0.37 to $0.40 per share
Second quarter net revenue of $12.4 billion, up 7% as reported and in constant currency from the prior-year period
Second quarter cash provided by operating activities of $0.5 billion
Second quarter returned $447 million to shareholders in the form of share repurchases and dividends

                                                                            
HP Inc.'s fiscal 2017 second quarter financial performance                  
                                                                            
                                             Q2 FY17     Q2 FY16      Y/Y   
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GAAP net revenue ($B)                      $     12.4  $     11.6         7%
GAAP operating margin from continuing                                       
 operations                                      6.6%        7.3%  (0.7 pts)
GAAP net earnings from continuing                                           
 operations ($B)                           $      0.6  $      0.7      (15)%
GAAP diluted net earnings per share from                                    
 continuing operations                     $     0.33  $     0.38      (13)%
Non-GAAP operating margin                        7.6%        7.8%  (0.2 pts)
Non-GAAP net earnings ($B)                 $      0.7  $      0.7       (2)%
Non-GAAP diluted net earnings per share    $     0.40  $     0.41       (2)%
Cash provided by operating activities ($B) $      0.5  $      1.6      (71)%

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. ("HP") announced second quarter net revenue of $12.4 billion, up 7% as reported and in constant currency from the prior-year period.

Second quarter GAAP diluted net earnings per share ("EPS") from continuing operations was $0.33, down from $0.38 in the prior-year period and within the previously provided outlook of $0.32 to $0.35. Second quarter non-GAAP diluted net EPS was $0.40, down from $0.41 in the prior-year period and within the previously provided outlook of $0.37 to $0.40. Second quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $126 million, or $0.07 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) and net tax indemnifications.

"This was a breakthrough quarter for HP, and marks the first time both Personal Systems and Print have grown in the same quarter since 2010. We're delivering solid performance across our portfolio, in all regions, and on key financial metrics," said Dion Weisler, President and CEO, HP Inc. "Our team is taking profitable share, out-executing our competitors and delivering some of the best innovation in HP's history. It's clear our reinvention is paying off."

Asset management
HP's cash provided by operating activities in the second quarter was $0.5 billion. Accounts receivable ended the quarter at $3.8 billion, up 2 days quarter over quarter to 27 days. Inventory ended the quarter at $4.8 billion, up 4 days quarter over quarter to 43 days. Accounts payable ended the quarter at $11.1 billion, up 6 days quarter over quarter to 100 days. HP's dividend payment of $0.1327 per share in the second quarter resulted in cash usage of $0.2 billion. HP also utilized $0.2 billion of cash during the quarter to repurchase approximately 13.3 million shares of common stock in the open market. HP exited the quarter with $6.2 billion in gross cash, which includes cash and cash equivalents, short-term investments, and certain liquid long-term investments.

Fiscal 2017 second quarter segment results

Personal Systems net revenue was up 10% year over year (up 10% in constant currency) with a 3.2% operating margin. Commercial net revenue increased 7% and Consumer net revenue increased 16%. Total units were up 5% with Notebooks units up 12% and Desktops units down 6%.
Printing net revenue was up 2% year over year (up 2% in constant currency) with a 17.4% operating margin. Total hardware units were up 4% with Commercial hardware units up 6% and Consumer hardware units up 3%. Supplies net revenue was up 2% (up 2% in constant currency).

Outlook
For the fiscal 2017 third quarter, HP estimates GAAP diluted net EPS from continuing operations to be in the range of $0.36 to $0.40 and non-GAAP diluted net EPS to be in the range of $0.40 to $0.43. Fiscal 2017 third quarter non-GAAP diluted net EPS estimates exclude $0.03 to $0.04 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), net tax indemnifications, net valuation allowances and discontinued operations.

For fiscal 2017, HP estimates GAAP diluted net EPS from continuing operations to be in the range of $1.42 to $1.52 and raises non-GAAP diluted net EPS to be in the range of $1.59 to $1.66. Fiscal 2017 non-GAAP diluted net EPS estimates exclude $0.14 to $0.17 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), net tax indemnifications, net valuation allowances and discontinued operations.

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