HP reports fiscal 2022 full year and fourth-quarter results
HP Inc. announced fiscal 2022 net revenue of $63.0 billion, down 0.8% (up 0.7% in constant currency) from the prior-year period.
Fiscal 2022 GAAP diluted net EPS was $3.05, down from $5.33 in the prior-year period and below the previously provided outlook of $3.46 to $3.56. Fiscal 2022 non-GAAP diluted net EPS was $4.08, up from $3.79 in the prior-year period and within the previously provided outlook of $4.02 to $4.12. Fiscal 2022 non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $1.1 billion, or $1.03 per diluted share, related to restructuring and other charges, acquisition and divestiture charges, amortization of intangible assets, Russia exit charges, non-operating retirement-related (credits)/charges, and tax adjustments.
Fourth quarter net revenue was $14.8 billion, down 11.2% (down 8.0% in constant currency) from the prior-year period.
“We had a solid end to our fiscal year despite navigating a volatile macro-environment and softening demand in the second half. In Q4 we delivered on our non-GAAP EPS target, while also completing our three-year value creation plan and exceeding our key metrics,” said Enrique Lores, HP President and CEO. “Looking forward, the new Future Ready strategy we introduced this quarter will enable us to better serve our customers and drive long-term value creation by reducing our costs and reinvesting in key growth initiatives to position our business for the future.”
Fiscal 2022 fourth quarter segment results
- Personal Systems net revenue was $10.3 billion, down 13% year over year (down 9% in constant currency) with a 4.5% operating margin. Consumer net revenue decreased 25% and Commercial net revenue decreased 6%. Total units were down 21% with Notebooks units down 26% and Desktops units down 3%.
- Printing net revenue was $4.5 billion, down 7% year over year (down 6% in constant currency) with a 19.9% operating margin. Total hardware units were down 3% with Consumer units down 4% and Commercial units up 5%. Consumer net revenue was down 7% and Commercial net revenue was up 1%. Supplies net revenue was down 10% (down 10% in constant currency).
The company’s 2023 Future Ready Transformation Plan, expected to be completed by the end of fiscal year 2025, including “significant structural cost savings through digital transformation, portfolio optimization, and operational efficiency. The company estimates these actions will result in annualized gross run rate savings of at least $1.4 billion by the end of fiscal 2025. The company estimates it will incur approximately $1.0 billion in labor and non-labor costs related to restructuring and other charges, with approximately $0.6 billion in fiscal 2023, and the rest split approximately equally between fiscal 2024 and 2025. The company expects to reduce gross global headcount by approximately 4,000-6,000 employees.”
HP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions, except per share amounts)
| Three months ended | |||||||||||
| October 31, 2022 | July 31, 2022 | October 31, 2021 | |||||||||
| Net revenue | $ | 14,801 | $ | 14,664 | $ | 16,675 | |||||
| Costs and expenses: | |||||||||||
| Cost of revenue | 12,084 | 11,764 | 13,410 | ||||||||
| Research and development | 382 | 368 | 445 | ||||||||
| Selling, general and administrative | 1,189 | 1,143 | 1,474 | ||||||||
| Restructuring and other charges | 70 | 13 | 29 | ||||||||
| Acquisition and divestiture charges | 235 | 31 | 28 | ||||||||
| Amortization of intangible assets | 74 | 50 | 51 | ||||||||
| Russia exit charges | — | 23 | — | ||||||||
| Total costs and expenses | 14,034 | 13,392 | 15,437 | ||||||||
| Earnings from operations | 767 | 1,272 | 1,238 | ||||||||
| Interest and other, net(a) | (94 | ) | (70 | ) | 2,315 | ||||||
| Earnings before taxes | 673 | 1,202 | 3,553 | ||||||||
| Provision for taxes(a) | (675 | ) | (83 | ) | (454 | ) | |||||
| Net (loss) earnings | $ | (2 | ) | $ | 1,119 | $ | 3,099 | ||||
| Net earnings per share: | |||||||||||
| Basic | $ | — | $ | 1.09 | $ | 2.75 | |||||
| Diluted | $ | — | $ | 1.08 | $ | 2.71 | |||||
| Cash dividends declared per share | $ | — | $ | 0.50 | $ | — | |||||
| Weighted-average shares used to compute net earnings per share: | |||||||||||
| Basic | 998 | 1,024 | 1,128 | ||||||||
| Diluted | 1,009 | 1,035 | 1,142 | ||||||||
(a) Interest and other, net and Provision for taxes includes a gain and corresponding tax expense, respectively, from the one time Oracle litigation proceeds for the three months ended October 31, 2021.
HP INC. AND SUBSIDIARIES
CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS
(Unaudited)
(In millions, except per share amounts)
| Twelve months ended | |||||||
| October 31, 2022 | October 31, 2021 | ||||||
| Net revenue | $ | 62,983 | $ | 63,487 | |||
| Costs and expenses: | |||||||
| Cost of revenue | 50,648 | 50,070 | |||||
| Research and development | 1,593 | 1,907 | |||||
| Selling, general and administrative | 5,264 | 5,741 | |||||
| Restructuring and other charges | 233 | 245 | |||||
| Acquisition and divestiture charges | 318 | 68 | |||||
| Amortization of intangible assets | 228 | 154 | |||||
| Russia exit charges | 23 | — | |||||
| Total costs and expenses | 58,307 | 58,185 | |||||
| Earnings from operations | 4,676 | 5,302 | |||||
| Interest and other, net(a) | (235 | ) | 2,209 | ||||
| Earnings before taxes | 4,441 | 7,511 | |||||
| Provision for taxes(a) | (1,238 | ) | (1,008 | ) | |||
| Net earnings | $ | 3,203 | $ | 6,503 | |||
| Net earnings per share: | |||||||
| Basic | $ | 3.09 | $ | 5.38 | |||
| Diluted | $ | 3.05 | $ | 5.33 | |||
| Cash dividends declared per share | $ | 1.00 | $ | 0.78 | |||
| Weighted-average shares used to compute net earnings per share: | |||||||
| Basic | 1,038 | 1,208 | |||||
| Diluted | 1,050 | 1,220 | |||||
(a) Interest and other, net and Provision for taxes includes a gain and corresponding tax expense, respectively, from the one time Oracle litigation proceeds for the twelve months ended October 31, 2021.
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 months ended | |||||||||||||||||||||||
| October 31, 2022 | July 31, 2022 | October 31, 2021 | |||||||||||||||||||||
| Amounts | Diluted net earnings per share |
Amounts | Diluted net earnings per share |
Amounts | Diluted net earnings per share |
||||||||||||||||||
| GAAP net (loss) earnings | $ | (2 | ) | $ | — | $ | 1,119 | $ | 1.08 | $ | 3,099 | $ | 2.71 | ||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||
| Restructuring and other charges | 70 | 0.07 | 13 | 0.01 | 29 | 0.02 | |||||||||||||||||
| Acquisition and divestiture charges | 235 | 0.23 | 31 | 0.03 | 28 | 0.02 | |||||||||||||||||
| Amortization of intangible assets | 74 | 0.07 | 50 | 0.05 | 51 | 0.04 | |||||||||||||||||
| Russia exit charges | — | — | 23 | 0.02 | — | — | |||||||||||||||||
| Oracle litigation proceeds | — | — | — | — | (2,304 | ) | (2.01 | ) | |||||||||||||||
| Defined benefit plan settlement gains | — | — | — | — | (37 | ) | (0.03 | ) | |||||||||||||||
| Non-operating retirement-related credits | (34 | ) | (0.03 | ) | (33 | ) | (0.03 | ) | (38 | ) | (0.03 | ) | |||||||||||
| Tax adjustments(a) | 512 | 0.51 | (124 | ) | (0.12 | ) | 248 | 0.22 | |||||||||||||||
| Non-GAAP net earnings | $ | 855 | $ | 0.85 | $ | 1,079 | $ | 1.04 | $ | 1,076 | $ | 0.94 | |||||||||||
| GAAP earnings from operations | $ | 767 | $ | 1,272 | $ | 1,238 | |||||||||||||||||
| Non-GAAP adjustments: | |||||||||||||||||||||||
| Restructuring and other charges | 70 | 13 | 29 | ||||||||||||||||||||
| Acquisition and divestiture charges | 235 | 31 | 28 | ||||||||||||||||||||
| Amortization of intangible assets | 74 | 50 | 51 | ||||||||||||||||||||
| Russia exit charges | — | 23 | — | ||||||||||||||||||||
| Non-GAAP earnings from operations | $ | 1,146 | $ | 1,389 | $ | 1,346 | |||||||||||||||||
| GAAP operating margin | 5.2 | % | 8.7 | % | 7.4 | % | |||||||||||||||||
| Non-GAAP adjustments | 2.5 | % | 0.8 | % | 0.7 | % | |||||||||||||||||
| Non-GAAP operating margin | 7.7 | % | 9.5 | % | 8.1 | % | |||||||||||||||||
(a) Includes tax impact on non-GAAP adjustments.
HP INC. AND SUBSIDIARIES
SEGMENT/BUSINESS UNIT INFORMATION
(Unaudited)
(In millions)
| Three months ended | Change (%) | ||||||||||||||||
| October 31, 2022 | July 31, 2022 | October 31, 2021 | Q/Q | Y/Y | |||||||||||||
| Net revenue: | |||||||||||||||||
| Notebooks | $ | 6,454 | $ | 6,574 | $ | 8,339 | (2 | )% | (23 | )% | |||||||
| Desktops | 2,537 | 2,537 | 2,510 | — | % | 1 | % | ||||||||||
| Workstations | 535 | 537 | 492 | — | % | 9 | % | ||||||||||
| Other(a) | 741 | 441 | 454 | 68 | % | 63 | % | ||||||||||
| Personal Systems | 10,267 | 10,089 | 11,795 | 2 | % | (13 | )% | ||||||||||
| Supplies | 2,748 | 2,814 | 3,057 | (2 | )% | (10 | )% | ||||||||||
| Commercial | 1,108 | 1,036 | 1,097 | 7 | % | 1 | % | ||||||||||
| Consumer | 677 | 725 | 725 | (7 | )% | (7 | )% | ||||||||||
| Printing | 4,533 | 4,575 | 4,879 | (1 | )% | (7 | )% | ||||||||||
| Corporate Investments(b) | 1 | — | 2 | NM | NM | ||||||||||||
| Total segment net revenue | 14,801 | 14,664 | 16,676 | 1 | % | (11 | )% | ||||||||||
| Other(b) | — | — | (1 | ) | NM | NM | |||||||||||
| Total net revenue | $ | 14,801 | $ | 14,664 | $ | 16,675 | 1 | % | (11 | )% | |||||||
| Earnings before taxes: | |||||||||||||||||
| Personal Systems(a) | $ | 458 | $ | 695 | $ | 764 | |||||||||||
| Printing | 903 | 911 | 830 | ||||||||||||||
| Corporate Investments | (46 | ) | (58 | ) | (14 | ) | |||||||||||
| Total segment earnings from operations | 1,315 | 1,548 | 1,580 | ||||||||||||||
| Corporate and unallocated cost and other | (99 | ) | (89 | ) | (164 | ) | |||||||||||
| Stock-based compensation expense | (70 | ) | (70 | ) | (70 | ) | |||||||||||
| Restructuring and other charges | (70 | ) | (13 | ) | (29 | ) | |||||||||||
| Acquisition and divestiture charges | (235 | ) | (31 | ) | (28 | ) | |||||||||||
| Amortization of intangible assets | (74 | ) | (50 | ) | (51 | ) | |||||||||||
| Russia exit charges | — | (23 | ) | — | |||||||||||||
| Interest and other, net | (94 | ) | (70 | ) | 2,315 | ||||||||||||
| Total earnings before taxes | $ | 673 | $ | 1,202 | $ | 3,553 | |||||||||||
(a) Includes numbers for Poly since acquisition date (Aug 29, 2022).
(b) “NM” represents not meaningful.