HP results – higher dividends and job cuts

Net revenue and EPS results
HP 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, amortisation 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.

Fourth quarter GAAP diluted net EPS was negligible, down from $2.71 in the prior-year period and below the previously provided outlook of $0.44 to $0.54 due to one-time non-cash tax adjustments. Fourth quarter non-GAAP diluted net EPS was $0.85, down from $0.94 in the prior-year period and within the previously provided outlook of $0.79 to $0.89. Fourth quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $857 million, or $0.85 per diluted share, related to restructuring and other charges, acquisition and divestiture charges, amortisation of intangible assets, Russia exit charges, non-operating retirement-related (credits)/charges, and tax adjustments.

“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.”

Results Highlights:

November 22, 2022

• Fiscal 2022 GAAP diluted net earnings per share ("EPS") of $3.05, below the previously provided outlook of $3.46 to $3.56 per share.
• Fiscal 2022 non-GAAP diluted net EPS of $4.08, within the previously provided outlook of $4.02 to $4.12 per share
• Fiscal 2022 net revenue of $63.0 billion, down 0.8% from the prior-year period
• Fiscal 2022 net cash provided by operating activities of $4.5 billion, free cash flow of $3.9 billion
• Fiscal 2022 returned $5.3 billion to shareholders in the form of share repurchases and dividends
• Fourth quarter GAAP diluted net EPS was negligible, below the previously provided outlook of $0.44 to $0.54 per share, due to one-time non-cash tax adjustments
• Fourth quarter non-GAAP diluted net EPS of $0.85, within the previously provided outlook of $0.79 to $0.89 per share
• Fourth quarter net revenue of $14.8 billion, down 11.2% from the prior-year period
• Fourth quarter net cash provided by operating activities of $1.9 billion, free cash flow of $1.8 billion
• The fourth quarter returned $1.0 billion to shareholders in the form of share repurchases and dividends.
• HP Inc. announces dividend increase of 5%
• HP Inc. announces Future Ready Transformation Plan, estimates annualised gross run-rate cost savings of at least $1.4 billion by the end of fiscal 2025, and restructuring and other charges of approximately $1.0 billion.

Asset management
HP generated $4.5 billion in net cash provided by operating activities and $3.9 billion of free cash flow in fiscal 2022. Free cash flow includes net cash provided by operating activities of $4.5 billion adjusted for net investments in leases of $155 million and net investments in property, plant and equipment of $765 million. HP utilised $4.3 billion of cash during fiscal 2022 to repurchase approximately 126 million shares of common stock in the open market. When combined with the $1.0 billion of cash used to pay dividends, HP returned 138% of its free cash flow to shareholders in fiscal 2022.
HP's net cash provided by operating activities in the fourth quarter of fiscal 2022 was $1.9 billion. Accounts receivable ended the quarter at $4.5 billion, up one day quarter over quarter to 28 days. Inventory ended the quarter at $7.6 billion, down six days quarter over quarter to 57 days. Accounts payable ended the quarter at $15.3 billion, down five days quarter over quarter to 114 days.
HP generated $1.8 billion of free cash flow in the fourth quarter. Free cash flow includes net cash provided by operating activities of $1.9 billion adjusted for net investments in leases of $61 million and net investments in property, plant and equipment of $144 million.
HP’s dividend payment of $0.25 per share in the fourth quarter resulted in cash usage of $0.2 billion. HP utilised $0.8 billion of cash during the quarter to repurchase approximately 26.6 million shares of common stock in the open market. As a result, HP returned 55% of its fourth-quarter free cash flow to shareholders. HP exited the quarter with $3.2 billion in gross cash, which includes cash and cash equivalents and short-term investments of $17 million.
The HP board of directors has declared a quarterly cash dividend of $0.2625 per share on the company’s common stock, payable on January 4, 2023. This is an increase of 5% from the prior dividend.

Fiscal 2022 fourth quarter segment results

Personal System's 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 Notebook units down 26% and Desktop 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 fiscal year 2023 Future Ready Transformation.

HP also announced the fiscal year 2023 Future Ready Transformation plan, driving significant structural cost savings through digital transformation, portfolio optimisation and operational efficiency. The company estimates that these actions will result in annualised gross run rate savings of at least $1.4 billion by the end of fiscal 2025. The company estimates that it will incur approximately $1.0 billion in labour and non-labour 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. These actions are expected to be completed by the end of fiscal 2025.