HP Inc. Reports Fiscal 2020 Second Quarter Results

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

COVID-19 Response
The COVID-19 pandemic has created unprecedented global health and economic challenges. From the start of this crisis, HP’s number one priority has been the health and well-being of our employees. At the same time, we have marshalled our technology and resources to help address urgent needs in our communities. 

  • HP and its partners have to-date produced an estimated 2.3 million 3D printed parts for face shields, face masks, respirators, ventilators, and other items for distribution to hospitals.
  • We have leveraged the scale of our global supply chain to source and distribute face masks to medical facilities facing shortages.
  • We have launched a series of global education partnerships to make it easier for teachers and students to connect from a distance.
  • Together with the HP Foundation, we are donating millions of dollars in products and grants to support response and relief efforts.
  • We have also taken actions to protect the broader HP ecosystem, including a variety of relief initiatives to help our channel partners weather the operational and financial challenges they face.

Net revenue and EPS results
HP Inc. and its subsidiaries (“HP”) announced fiscal 2020 second quarter net revenue of $12.5 billion, down 11.2% (down 10.1% in constant currency) from the prior-year period.

Second quarter GAAP diluted net EPS was $0.53, up from $0.51 in the prior-year period and above the previously provided outlook of $0.46 to $0.50. Second quarter non-GAAP diluted net EPS was $0.51, down from $0.53 in the prior-year period and within the previously provided outlook of $0.49 to $0.53. Second quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $23 million, or $0.02 per diluted share, related to restructuring and other charges, acquisition-related charges (credits), amortization of intangible assets, non-operating retirement-related (credits)/charges, and tax adjustments.

“The strength of HP’s diversified portfolio, go-to-market capabilities and balance sheet position us well to navigate macroeconomic challenges and drive long-term value creation,” said Enrique Lores, HP’s President and CEO. “We are seeing strong demand from our customers in notebook PC orders and Instant Ink subscriptions, as well as growing interest in 3D printing and digital manufacturing in key verticals such as healthcare. The current environment will be a catalyst for transformation and innovation across HP.”

Asset management
HP’s net cash used in operating activities in the second quarter of fiscal 2020 was $(0.5) billion. Accounts receivable ended the quarter at $5.1 billion, up 7 days quarter over quarter to 37 days. Inventory ended the quarter at $6.4 billion, up 19 days quarter over quarter to 57 days. Accounts payable ended the quarter at $14.2 billion, up 30 days quarter over quarter to 128 days.

HP generated $(0.6) billion of free cash flow in the second quarter. Free cash flow includes net cash used in operating activities of $(0.5) billion adjusted for net investment in leases of $51 million and net investment in property, plant & equipment of $146 million.

HP’s dividend payment of $0.1762 per share in the second quarter resulted in cash usage of $0.3 billion. HP also utilized $0.1 billion of cash during the quarter to repurchase approximately 5.6 million shares of common stock in the open market. HP exited the quarter with $4.1 billion in gross cash, which includes cash and cash equivalents.

Fiscal 2020 second quarter segment results

  • Personal Systems net revenue was down 7% year over year (down 6% in constant currency) with a 6.6% operating margin. Commercial net revenue decreased 7% and Consumer net revenue decreased 7%. Total units were down 5% with Notebooks units up 5% and Desktops units down 23%.

  • Printing net revenue was down 19% year over year (down 18% in constant currency) with a 13.2% operating margin. Total hardware units were down 23% with Commercial hardware units down 25% and Consumer hardware units down 22%. Supplies net revenue was down 15% (down 15% in constant currency). 

For the fiscal 2020 third quarter, HP estimates GAAP diluted net EPS to be in the range of $0.35 to $0.41 and non-GAAP diluted net EPS to be in the range of $0.39 to $0.45. Fiscal 2020 third quarter non-GAAP diluted net EPS estimates exclude $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, tax adjustments and the related tax impact on these items.

For fiscal 2020, given the level of uncertainty around the duration of the pandemic, the timing and pace of economic recovery and the potential impact of a resurgence in cases, HP anticipates a much wider range of outcomes for the year. As a result, HP will not be providing an outlook for the fiscal year 2020.

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 FY20 Q2 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2020Q2Webcast.

About HP Inc.
HP Inc. (NYSE: HPQ) creates technology that makes life better for everyone, everywhere. Through our product and service portfolio of personal systems, printers and 3D printing solutions, we engineer experiences that amaze. More information about HP Inc. is available at 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 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 expense, operating profit, operating margin, tax rate, net earnings, diluted net EPS, cash (used in)/ provided by operating activities or cash and cash equivalents prepared in accordance with GAAP.

Forward-Looking Statements
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 results of HP Inc. and its consolidated subsidiaries 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 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, 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.  Forward-looking statements can also generally be identified by words such as “future,” “anticipates,” “believes,” “estimates,” “expects,” “intends,” “plans,” “predicts,” “projects,” “will,” “would,” “could,” “can,” “may,” and similar terms.

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