HP Inc. Reports Fiscal 2017 First Quarter Results
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HP Inc. Reports Fiscal 2017 First Quarter Results

PALO ALTO, CA -- (Marketwired) -- Feb 22, 2017 -- HP (NYSE: HPQ)

                                                                            
HP Inc.'s fiscal 2017 first quarter financial performance                   
                                                                            
                                             Q1 FY17   Q1 FY16      Y/Y     
----------------------------------------------------------------------------
GAAP net revenue ($B)                       $   12.7  $   12.2           4% 
GAAP operating margin from continuing                                       
 operations                                      6.7%      7.6%   (0.9 pts) 
GAAP net earnings from continuing                                           
 operations ($B)                            $    0.6  $    0.7          (6)%
GAAP diluted net earnings per share from                                    
 continuing operations                      $   0.36  $   0.36           -  
Non-GAAP operating margin                        7.1%      7.5%   (0.4 pts) 
Non-GAAP net earnings ($B)                  $    0.6  $    0.6           -  
Non-GAAP diluted net earnings per share     $   0.38  $   0.36           6% 
Cash provided by operating activities ($B)  $    0.8  $   (0.1)         NM  
                                                                            

Notes to table
Information about HP Inc.'s use of non-GAAP financial information is provided under "Use of non-GAAP financial information" below.
NM - Not Meaningful

Net revenue and EPS results
HP Inc. ("HP") announced first quarter net revenue of $12.7 billion, up 4% (up 5% in constant currency) from the prior-year period.

First quarter GAAP diluted net earnings per share ("EPS") from continuing operations was $0.36, flat from the prior-year period and within the previously provided outlook of $0.33 to $0.36. First quarter non-GAAP diluted net EPS was $0.38, up from $0.36 in the prior-year period and within the previously provided outlook of $0.35 to $0.38. First quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $35 million, or $0.02 per share, related to restructuring and other charges, acquisition-related charges, non-operating retirement-related credits / (charges), and net tax indemnifications.

"In Q1, we delivered earnings at the high end of our outlook range with strong free cash flow, driven by relentless execution and innovation," said Dion Weisler, President and CEO, HP Inc. "We are confident in our ability to manage our business and deliver our FY17 financial commitments."

Asset management
HP's cash provided by operating activities in the first quarter was $0.8 billion. Accounts receivable ended the quarter at $3.5 billion, down 5 days quarter over quarter to 25 days. Inventory ended the quarter at $4.6 billion, unchanged quarter over quarter at 39 days. Accounts payable ended the quarter at $11.0 billion, down 4 days quarter over quarter to 94 days. HP's dividend payment of $0.1327 per share in the first quarter resulted in cash usage of $0.2 billion. HP also utilized $0.4 billion of cash during the quarter to repurchase approximately 25.5 million shares of common stock in the open market. HP exited the quarter with $6.3 billion in gross cash, which includes cash and cash equivalents, short-term investments, and certain liquid long-term investments.

Fiscal 2017 first quarter segment results

Outlook
For the fiscal 2017 second quarter, HP estimates GAAP diluted net EPS from continuing operations to be in the range of $0.32 to $0.35 and non-GAAP diluted net EPS to be in the range of $0.37 to $0.40. Fiscal 2017 second quarter non-GAAP diluted net EPS estimates exclude $0.05 per diluted share, primarily related to restructuring and other charges, acquisition-related charges, non-operating retirement-related credits / (charges), and net tax indemnifications.

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 FY17 Q1 earnings conference call is accessible via an audio webcast
www.hp.com/investor/2017Q1Webcast.

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. (NYSE: HPQ) 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, non-GAAP net earnings, non-GAAP diluted net earnings per share and gross cash financial measures. HP also provides forecasts of non-GAAP diluted net earnings per share. 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.

Forward-looking statements
This news release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of HP may differ materially from those expressed or implied by such forward-looking 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 projections of net revenue, margins, expenses, effective tax rates, net earnings, net earnings per share, cash flows, benefit plan funding, deferred tax assets, 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; any statements of the plans, strategies and objectives of management for future operations, including the execution of the restructuring plans and any resulting cost savings, net revenue or profitability improvements; any statements concerning the expected development, performance, market share or competitive performance relating to products or services; 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 or disputes; any statements of expectation or belief, including with respect to the timing and expected benefits of acquisitions and other business combination and investment transactions; and any statements of assumptions underlying any of the foregoing.

Risks, uncertainties and assumptions include the need to address the many challenges facing HP's businesses; the competitive pressures faced by HP's businesses; risks associated with executing HP's strategy; the impact of macroeconomic and geopolitical trends and events; the need to manage third-party suppliers and the distribution of HP's products and the delivery of HP's services effectively; the protection of HP's intellectual property assets, including intellectual property licensed from third parties; risks associated with HP's international operations; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by HP and its suppliers, customers, clients and partners; the hiring and retention of key employees; integration and other risks associated with business combination and investment transactions; the results of the 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 resolution of pending 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, 2016, and HP's other filings with the Securities and Exchange Commission.

As in prior periods, the financial information set forth in this release, 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 January 31, 2017 and HP's other filings with the Securities and Exchange Commission. HP assumes no obligation and does not intend to update these forward-looking statements. HP's Investor Relations website at www.hp.com/investor/home 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.

                                                                            
                          HP INC. AND SUBSIDIARIES                          
                CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS               
                                 (Unaudited)                                
                   (In millions, except per share amounts)                  
                                                                            
                                                   Three months ended       
                                            ------------------------------- 
                                             January    October    January  
                                             31, 2017   31, 2016   31, 2016 
                                            ---------  ---------  --------- 
Net revenue                                 $  12,684  $  12,512  $  12,246 
Costs and expenses:                                                         
  Cost of revenue                              10,436     10,221      9,961 
  Research and development                        296        318        292 
  Selling, general and administrative           1,017      1,075      1,037 
  Restructuring and other charges                  63         49         20 
  Acquisition-related charges                      16          7         -- 
  Amortization of intangible assets                --         --          8 
  Defined benefit plan settlement charges          --        179         -- 
                                            ---------  ---------  --------- 
    Total costs and expenses                   11,828     11,849     11,318 
                                            ---------  ---------  --------- 
Earnings from continuing operations               856        663        928 
Interest and other, net                           (81)       347        (94)
                                            ---------  ---------  --------- 
Earnings from continuing operations before                                  
 taxes                                            775      1,010        834 
Provision for taxes                              (164)      (497)      (184)
                                            ---------  ---------  --------- 
Net earnings from continuing operations           611        513        650 
Net loss from discontinued operations, net                                  
 of taxes                                          --        (21)       (58)
                                            ---------  ---------  --------- 
Net earnings                                $     611  $     492  $     592 
                                            =========  =========  ========= 
                                                                            
Net earnings (loss) per share:                                              
Basic                                                                       
  Continuing operations                     $    0.36  $    0.30  $    0.37 
  Discontinued operations                          --      (0.01)     (0.04)
                                            ---------  ---------  --------- 
    Total basic net earnings per share      $    0.36  $    0.29  $    0.33 
                                            =========  =========  ========= 
Diluted                                                                     
  Continuing operations                     $    0.36  $    0.30  $    0.36 
  Discontinued operations                          --      (0.02)     (0.03)
                                            ---------  ---------  --------- 
    Total diluted net earnings per share    $    0.36  $    0.28  $    0.33 
                                            =========  =========  ========= 
                                                                            
Cash dividends declared per share           $    0.27  $      --  $    0.25 
                                                                            
Weighted-average shares used to compute net                                 
 earnings (loss) per share:                                                 
  Basic                                         1,704      1,712      1,776 
  Diluted                                       1,721      1,729      1,785 
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
         ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,        
             OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE            
                                 (Unaudited)                                
                  (In millions, except per share amounts)                   
                                                                            
                      -------  -------  -------  -------  -------   ------- 
                       Three   Diluted   Three   Diluted   Three    Diluted 
                       Months    net     Months    net     months     net   
                       Ended   earnings  Ended   earnings  ended   earnings 
                      January    per    October    per    January     per     
                        31,     share      31,    share     31,      share   
                        2017              2016             2016      
                      -------  -------  -------  -------  -------   ------- 
GAAP net earnings                                                           
 from continuing                                                            
 operations           $   611  $  0.36  $   513  $  0.30  $   650   $  0.36 
Non-GAAP adjustments:                                                       
  Restructuring and                                                         
   other charges           63     0.04       49     0.03       20      0.01 
  Acquisition-related                                                       
   charges                 16     0.01        7       --       --        -- 
  Amortization of                                                           
   intangible assets       --       --       --       --        8      0.01 
  Non-operating                                                             
   retirement-related                                                       
   credits                (32)   (0.02)     (28)   (0.02)     (40)    (0.02)
  Defined benefit                                                           
   plan settlement                                                          
   charges                 --       --      179     0.10       --        -- 
  Adjustments for                                                           
   taxes                   (3)      --      329     0.20        7        -- 
  Tax indemnification                                                       
   credits                 (9)   (0.01)    (435)   (0.25)      --        -- 
                      -------  -------  -------  -------  -------   ------- 
Non-GAAP net earnings $   646  $  0.38  $   614  $  0.36  $   645   $  0.36 
                      =======  =======  =======  =======  =======   ======= 
                                                                            
GAAP earnings from                                                          
 continuing                                                                 
 operations           $   856           $   663           $   928           
Non-GAAP adjustments:                                                       
  Restructuring and                                                         
   other charges           63                49                20           
  Acquisition-related                                                       
   charges                 16                 7                --           
  Amortization of                                                           
   intangible assets       --                --                 8           
  Non-operating                                                             
   retirement-related                                                       
   credits                (32)              (28)              (40)          
  Defined benefit                                                           
   plan settlement                                                          
   charges                 --               179                --           
                      -------           -------           -------           
Non-GAAP earnings     $   903           $   870           $   916           
                      =======           =======           =======           
                                                                            
GAAP operating margin                                                       
 from continuing                                                            
 operations                 7%                5%                8%          
Non-GAAP adjustments       --                 2%               (1)%         
                      -------           -------           -------           
Non-GAAP operating                                                          
 margin                     7%                7%                7%          
                      =======           =======           =======           
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                    CONSOLIDATED CONDENSED BALANCE SHEETS                   
                                 (Unaudited)                                
                                (In millions)                               
                                                                            
                                                               As of        
                                                       -------------------- 
                                                        January    October  
                                                        31, 2017   31, 2016 
                                                       ---------  --------- 
ASSETS                                                                      
Current assets:                                                             
  Cash and cash equivalents                            $   6,331  $   6,288 
  Accounts receivable                                      3,478      4,114 
  Inventory                                                4,555      4,484 
  Other current assets                                     3,411      3,582 
                                                       ---------  --------- 
    Total current assets                                  17,775     18,468 
                                                       ---------  --------- 
Property, plant and equipment                              1,730      1,736 
Goodwill                                                   5,622      5,622 
Other non-current assets(a)                                3,065      3,161 
                                                       ---------  --------- 
Total assets                                           $  28,192  $  28,987 
                                                       =========  ========= 
                                                                            
LIABILITIES AND STOCKHOLDERS' DEFICIT                                       
Current liabilities:                                                        
  Notes payable and short-term borrowings              $     100  $      78 
  Accounts payable                                        10,951     11,103 
  Employee compensation and benefits                         526        759 
  Taxes on earnings                                          267        231 
  Deferred revenue                                           952        919 
  Other accrued liabilities                                5,791      5,718 
                                                       ---------  --------- 
    Total current liabilities                             18,587     18,808 
                                                       ---------  --------- 
Long-term debt(a)                                          6,688      6,735 
Other non-current liabilities                              7,244      7,333 
Stockholders' deficit                                     (4,327)    (3,889)
Total liabilities and stockholders' deficit            $  28,192  $  28,987 
                                                       =========  ========= 
                                                                            
(a)  Pursuant to Accounting Standard Update 2015-03 "Simplifying the        
     Presentation of Debt Issuance Costs" in Q1 FY17, debt issuance costs   
     has been reclassified from other non-current assets to long-term debt. 
     The change has been adopted including prior comparative periods.       
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
               CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS              
                                 (Unaudited)                                
                                (In millions)                               
                                                                            
                                                        Three months ended  
                                                            January 31      
                                                       -------------------- 
                                                          2017       2016   
                                                       ---------  --------- 
                                                            In millions     
Cash flows from operating activities:(a)                                    
  Net earnings                                         $     611  $     592 
  Adjustments to reconcile net earnings to net cash                         
   provided by (used in) operating activities:                              
    Depreciation and amortization                             84         79 
    Stock-based compensation expense                          75         61 
    Provision for doubtful accounts                           (2)        11 
    Provision for inventory                                   (2)        34 
    Restructuring and other charges                           63         20 
    Deferred taxes on earnings                                67        526 
    Other, net                                                23        (15)
    Changes in operating assets and liabilities, net                        
     of acquisitions:                                                       
      Accounts receivable                                    614        704 
      Inventory                                              (69)       202 
      Accounts payable                                      (116)    (1,104)
      Taxes on earnings                                      (75)      (534)
      Restructuring and other                                (51)       (31)
      Other assets and liabilities                          (455)      (647)
                                                       ---------  --------- 
        Net cash provided by (used in) operating                            
         activities                                          767       (102)
                                                       ---------  --------- 
Cash flows from investing activities:                                       
  Investment in property, plant and equipment               (101)      (120)
  Proceeds from sale of property, plant and equipment         69         -- 
  Purchases of available-for-sale securities and other                      
   investments                                               (56)        -- 
  Maturities and sales of available-for-sale                                
   securities and other investments                            2          9 
                                                       ---------  --------- 
        Net cash used in investing activities                (86)      (111)
                                                       ---------  --------- 
Cash flows from financing activities:                                       
  Short-term borrowings with original maturities less                       
   than 90 days, net                                          35         26 
  Proceeds from debt, net of issuance costs                    5          4 
  Payment of debt                                            (27)    (2,155)
  Settlement of cash flow hedges                              (4)       (11)
  Net transfer of cash and cash equivalents to Hewlett                      
   Packard Enterprise Company                                 --    (10,375)
  Net payments related to stock-based award activities       (34)        (3)
  Repurchase of common stock                                (386)      (797)
  Cash dividends paid                                       (227)      (221)
                                                       ---------  --------- 
        Net cash used in financing activities               (638)   (13,532)
                                                       ---------  --------- 
Increase (decrease) in cash and cash equivalents              43    (13,745)
Cash and cash equivalents at beginning of period           6,288     17,433 
                                                       ---------  --------- 
Cash and cash equivalents at end of period             $   6,331  $   3,688 
                                                       =========  ========= 
                                                                            
(a)  Pursuant to Accounting Standard Update 2016-09 "Improvements to        
     Employee Share-Based Payment Accounting" in Q1 FY17, excess income tax 
     benefit from stock-based compensation expense is no longer separated   
     from operating income tax cash flows and reported as financing         
     activity. In addition, income taxes paid on shares withheld is now     
     required to be presented as financing activity as opposed to operating 
     activity. The change has been adopted including prior comparative      
     periods.                                                               
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                             SEGMENT INFORMATION                            
                                 (Unaudited)                                
                                (In millions)                               
                                                                            
                                                   Three months ended       
                                            ------------------------------- 
                                             January    October    January  
                                             31, 2017   31, 2016   31, 2016 
                                            ---------  ---------  --------- 
Net revenue:(a)                                                             
  Personal Systems                          $   8,224  $   8,018  $   7,467 
  Printing                                      4,483      4,558      4,642 
  Corporate Investments                             2          1          3 
                                            ---------  ---------  --------- 
    Total segments                             12,709     12,577     12,112 
  Intersegment net revenue eliminations and                                 
   other                                          (25)       (65)       134 
                                            ---------  ---------  --------- 
    Total net revenue                       $  12,684  $  12,512  $  12,246 
                                            =========  =========  ========= 
                                                                            
Earnings from continuing operations before                                  
 taxes:(a)                                                                  
  Personal Systems                          $     313  $     346  $     229 
  Printing                                        716        637        787 
  Corporate Investments                           (23)       (32)       (23)
                                            ---------  ---------  --------- 
    Total segment earnings from operations      1,006        951        993 
  Corporate costs and eliminations                (28)       (39)       (16)
  Stock-based compensation expense                (75)       (42)       (61)
  Restructuring and other charges                 (63)       (49)       (20)
  Acquisition-related charges                     (16)        (7)        -- 
  Amortization of intangible assets                --         --         (8)
  Non-operating retirement-related credits         32         28         40 
  Defined benefit plan settlement charges          --       (179)        -- 
  Interest and other, net                         (81)       347        (94)
                                            ---------  ---------  --------- 
    Total earnings from continuing                                          
     operations before taxes                $     775  $   1,010  $     834 
                                            =========  =========  ========= 
                                                                            
(a)  Effective at the beginning of its first quarter of fiscal year 2017, HP
     implemented an organizational change to align its business unit        
     financial reporting more closely with its current business structure.  
     The organizational change resulted in transfer of a portion of LaserJet
     printers from commercial to consumer within the Printing segment. HP   
     reflected this change to its business unit information in prior        
     reporting periods on an as-if basis which resulted in reclassification 
     of revenues between the commercial and consumer business units of      
     Printing. The reporting change had no impact to previously reported    
     segment net revenue, consolidated net revenue, earnings from continuing
     operations, net earnings or net earnings per share.                    
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                      SEGMENT/BUSINESS UNIT INFORMATION                     
                                 (Unaudited)                                
                                (In millions)                               
                                                                            
                                      Three months ended        Change (%)  
                               ------------------------------- -----------  
                                January    October    January               
                                31, 2017   31, 2016   31, 2016  Q/Q    Y/Y  
                               ---------  ---------  --------- ----   ----  
Net revenue:(a)                                                             
Personal Systems                                                            
  Notebooks                    $   4,890  $   4,636  $   4,205    5%    16% 
  Desktops                         2,534      2,572      2,527   (1)%   --  
  Workstations                       491        489        444   --     11% 
  Other                              309        321        291   (4)%    6% 
                               ---------  ---------  ---------              
    Total Personal Systems         8,224      8,018      7,467    3%    10% 
                               ---------  ---------  ---------              
Printing                                                                    
  Supplies                         3,007      2,835      3,101    6%    (3)%
  Commercial Hardware                886      1,107        964  (20)%   (8)%
  Consumer Hardware                  590        616        577   (4)%    2% 
                               ---------  ---------  ---------              
    Total Printing                 4,483      4,558      4,642   (2)%   (3)%
                               ---------  ---------  ---------              
Corporate Investments                  2          1          3  100%   (33)%
                               ---------  ---------  ---------              
    Total segments                12,709     12,577     12,112    1%     5% 
                               ---------  ---------  ---------              
Intersegment net revenue                                                    
 eliminations and other(b)           (25)       (65)       134   NM     NM  
                               ---------  ---------  ---------              
    Total net revenue          $  12,684  $  12,512  $  12,246    1%     4% 
                               =========  =========  =========              
                                                                            
(a)  Effective at the beginning of its first quarter of fiscal year 2017, HP
     implemented an organizational change to align its business unit        
     financial reporting more closely with its current business structure.  
     The organizational change resulted in transfer of a portion of LaserJet
     printers from commercial to consumer within the Printing segment. HP   
     reflected this change to its business unit information in prior        
     reporting periods on an as-if basis which resulted in reclassification 
     of revenues between the commercial and consumer business units of      
     Printing. The reporting change had no impact to previously reported    
     segment net revenue, consolidated net revenue, earnings from continuing
     operations, net earnings or net earnings per share.                    
                                                                            
(b)  "NM"- Not Meaningful.                                                  
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                    SEGMENT OPERATING MARGIN SUMMARY DATA                   
                                 (Unaudited)                                
                                                                            
                                                         Change in Operating
                                Three months ended           Margin (pts)   
                           ----------------------------  -------------------
                            January   October   January                     
                           31, 2017  31, 2016  31, 2016      Q/Q       Y/Y  
                           --------  --------  --------  ---------- --------
Segment operating                                                           
 margin:(a)                                                                 
  Personal Systems              3.8%      4.3%      3.1%  (0.5) pts  0.7 pts
  Printing                                                             (1.0)
                               16.0%     14.0%     17.0%    2.0 pts      pts
Corporate Investments(b)         NM        NM        NM          NM       NM
    Total segments                                                     (0.3)
                                7.9%      7.6%      8.2%    0.3 pts      pts
                                                                            
(a)  Effective at the beginning of its first quarter of fiscal year 2017, HP
     implemented an organizational change to align its business unit        
     financial reporting more closely with its current business structure.  
     The organizational change resulted in transfer of a portion of LaserJet
     printers from commercial to consumer within the Printing segment. HP   
     reflected this change to its business unit information in prior        
     reporting periods on an as-if basis which resulted in reclassification 
     of revenues between the commercial and consumer business units of      
     Printing. The reporting change had no impact to previously reported    
     segment net revenue, consolidated net revenue, earnings from continuing
     operations, net earnings or net earnings per share.                    
                                                                            
 (b)  "NM"- Not Meaningful.                                                 
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                CALCULATION OF DILUTED NET EARNINGS PER SHARE               
                                 (Unaudited)                                
                   (In millions, except per share amounts)                  
                                                                            
                                                      Three months ended    
                                                  --------------------------
                                                   January  October  January
                                                  31, 2017 31, 2016 31, 2016
                                                  -------- -------- --------
Numerator:                                                                  
  GAAP net earnings from continuing operations    $    611 $    513 $    650
                                                  ======== ======== ========
  Non-GAAP net earnings                           $    646 $    614 $    645
                                                  ======== ======== ========
                                                                            
Denominator:                                                                
  Weighted-average shares used to compute basic                             
   net earnings per share                            1,704    1,712    1,776
  Dilutive effect of employee stock plans(a)            17       17        9
                                                  -------- -------- --------
  Weighted-average shares used to compute diluted                           
   net earnings per share                            1,721    1,729    1,785
                                                  ======== ======== ========
                                                                            
GAAP diluted net earnings per share from                                    
 continuing operations                            $   0.36 $   0.30 $   0.36
                                                  ======== ======== ========
Non-GAAP diluted net earnings per share           $   0.38 $   0.36 $   0.36
                                                  ======== ======== ========
                                                                            
(a)  Includes any dilutive effect of restricted stock units, stock options  
     and performance-based awards.                                          
                                                                            

Use of non-GAAP financial measures
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 operating margin, non-GAAP net earnings, non-GAAP diluted net earnings per share and gross cash. HP also provides forecasts of non-GAAP diluted net earnings per share.

These non-GAAP financial measures are not computed in accordance with, or as an alternative to, generally accepted accounting principles in the United States. Reconciliations of each of these non-GAAP financial measures to GAAP information are included in the tables above or elsewhere in the materials accompanying this news release.

Use and economic substance of non-GAAP financial measures
Net revenue on a constant currency basis assumes no change in the foreign currency exchange rate from the prior-year period. Non-GAAP operating margin is defined to exclude the effects of any amounts relating to restructuring and other charges, acquisition-related charges, the amortization of intangible assets, non-operating retirement-related credits/(charges), defined benefit plan settlement charges, and net tax indemnification amounts. Non-GAAP net earnings and non-GAAP diluted net earnings per share consist of net earnings from continuing operations or diluted net earnings per share from continuing operations excluding those same charges. In addition, non-GAAP net earnings and non-GAAP diluted net earnings per share are adjusted by the amount of additional taxes or tax benefits associated with each non-GAAP item and other tax benefits or charges as a consequence of the separation of Hewlett Packard Enterprise Company from HP Inc. (the "Separation"). HP's management uses these non-GAAP financial measures for purposes of evaluating HP's historical and prospective financial performance, as well as HP's performance relative to its competitors. HP's management also uses these non-GAAP measures to further its own understanding of HP's segment operating performance. HP believes that excluding the items mentioned above from these non-GAAP financial measures allows HP's management to better understand HP's consolidated financial performance in relation to the operating results of HP's segments, as HP's management does not believe that the excluded items are reflective of ongoing operating results. More specifically, HP's management excludes each of those items mentioned above for the following reasons:

Gross cash is a non-GAAP measure that is defined as cash and cash equivalents plus short-term investments and certain long-term investments that may be liquidated within 90 days pursuant to the terms of existing put options or similar rights. HP's management uses gross cash for the purpose of determining the amount of cash available for investment in HP's businesses, repurchasing stock and other purposes. HP's management also uses gross cash to evaluate HP's historical and prospective liquidity. Because gross cash includes liquid assets that are not included in GAAP cash and cash equivalents, HP believes that gross cash provides a helpful assessment of HP's liquidity.

Material limitations associated with use of non-GAAP financial measures
These non-GAAP financial measures may have limitations as analytical tools, and these measures should not be considered in isolation or as a substitute for analysis of HP's results as reported under GAAP. Some of the limitations in relying on these non-GAAP financial measures are:

Compensation for limitations associated with use of non-GAAP financial measures
HP compensates for the limitations on its use of non-GAAP financial measures by relying primarily on its GAAP results and using non-GAAP financial measures only supplementally. HP also provides robust and detailed reconciliations of each non-GAAP financial measure to its most directly comparable GAAP measure within this news release and in other written materials that include these non-GAAP financial measures, and HP encourages investors to review those reconciliations carefully.

Usefulness of non-GAAP financial measures to investors
HP believes that providing net revenue on a constant currency basis, non-GAAP operating margin, non-GAAP net earnings, non-GAAP diluted net earnings per share and gross cash to investors in addition to the related GAAP measures provides investors with greater transparency to the information used by HP's management in its financial and operational decision making and allows investors to see HP's results "through the eyes" of management. HP further believes that providing this information better enables HP's investors to understand HP's operating performance and financial condition and to evaluate the efficacy of the methodology and information used by HP's management to evaluate and measure such performance and financial condition. Disclosure of these non-GAAP financial measures also facilitates comparisons of HP's operating performance with the performance of other companies in HP's industry that supplement their GAAP results with non-GAAP financial measures that may be calculated in a similar manner.

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