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HP Profits in Line - Revenue Light

February 28, 2019

HP reported fiscal 2019 first quarter net revenue of $14.7 billion, up 1% (up 2% in constant currency) from the prior-year period.

First quarter GAAP diluted net EPS was $0.51, down from $1.16 in the prior-year period and above the previously provided outlook of $0.46 to $0.49. First quarter non-GAAP diluted net EPS was $0.52, up from $0.48 in the prior-year period and within the previously provided outlook of $0.50 to $0.53. First quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $6 million, or $0.01 per diluted share, related to restructuring and other charges, acquisition-related charges, amortization of intangible assets, non-operating retirement-related credits/(charges), and tax adjustments.

Investors expected non-GAAP diluted earnings of 52 cents per share on revenue of $14.88 billion.

We continued to drive top and bottom line growth in Q1 and are reaffirming our non-GAAP EPS and free cash flow financial outlook for the year, said Dion Weisler, HPs President and CEO. We are benefitting from our market-leading portfolio and accelerating our transformation with momentum in services, solutions and 3D printing as we reinvent HP and position the business for long-term sustainable growth.

Asset management

HPs net cash provided by operating activities in the first quarter of fiscal 2019 was $0.9 billion. Accounts receivable ended the quarter at $5.1 billion, up 1-day quarter over quarter to 31 days. Inventory ended the quarter at $5.6 billion, down 1-day quarter over quarter to 42 days. Accounts payable ended the quarter at $14.6 billion, up 3 days quarter over quarter to 108 days.

HP generated $0.7 billion of free cash flow in the first quarter. Free cash flow includes net cash provided by operating activities of $862 million less net investments in and proceeds from the sale of property, plant and equipment of $189 million.

HPs dividend payment of $0.1602 per share in the first quarter resulted in cash usage of $0.2 billion. HP also utilized $0.7 billion of cash during the quarter to repurchase approximately 32.4 million shares of common stock in the open market. As a result, HP returned 144% of its first quarter free cash flow to shareholders. HP exited the quarter with $3.8 billion in gross cash, which includes cash and cash equivalents and short-term investments of $0.4 billion included in other current assets.

Fiscal 2019 first quarter segment results

Personal Systems net revenue was up 2% year over year (up 3% in constant currency) with a 4.2% operating margin. Commercial net revenue increased 3% and Consumer net revenue increased 1%. Total units were down 3% with Notebooks units down 1% and Desktops units down 8%.

Printing net revenue was mostly flat year over year (down 0.7% in constant currency) with a 16.2% operating margin. Total hardware units were up 3% with Commercial hardware units up 4% and Consumer hardware units up 2%. Supplies net revenue was down 3% (down 3% in constant currency).


Outlook

For the fiscal 2019 second quarter, HP estimates GAAP diluted net EPS to be in the range of $0.45 to $0.48 and non-GAAP diluted net EPS to be in the range of $0.50 to $0.53. Fiscal 2019 second quarter non-GAAP diluted net EPS estimates exclude $0.05 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 2019, HP is updating its estimate of GAAP diluted net EPS to be in the range of $2.00 to $2.10 and reaffirms its previous estimate of non-GAAP diluted net EPS to be in the range of $2.12 to $2.22. Fiscal 2019 non-GAAP diluted net EPS estimates exclude $0.12 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. HP also reaffirms its previous estimate for fiscal 2019 free cash flow of at least $3.7 billion.

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