HP Reports Fiscal 2014 First Quarter Results

PALO ALTO, CA -- (Marketwired) -- Feb 20, 2014 -- HP (NYSE: HPQ)

  • First quarter non-GAAP diluted net earnings per share of $0.90, up 10% from the prior-year period, versus the previously provided outlook of $0.82 to $0.86 per share
  • First quarter GAAP diluted net earnings per share of $0.74, up 17% from the prior-year period, versus the previously provided outlook of $0.60 to $0.64 per share
  • First quarter net revenue of $28.2 billion, down 1% from the prior-year period and flat on a constant currency basis
  • First quarter cash flow from operations of $3.0 billion, up 17% from the prior-year period
  • Returned $843 million to shareholders in the form of dividends and share repurchases in the first quarter
  • Improved operating company net cash position by $1.6 billion, the eighth consecutive quarterly improvement of over $1 billion

HP fiscal 2014 first quarter financial performance

                                                                            
                                              Q1 FY14    Q1 FY13       Y/Y  
GAAP net revenue ($B)                       $    28.2  $    28.4        (1%)
GAAP operating margin                             7.1%       6.2% 0.9 pts.  
GAAP net earnings ($B)                      $     1.4  $     1.2        16% 
GAAP diluted net earnings per share         $    0.74  $    0.63        17% 
Non-GAAP operating margin                         8.5%       7.9% 0.6 pts.  
Non-GAAP net earnings ($B)                  $     1.7  $     1.6         9% 
Non-GAAP diluted net earnings per share     $    0.90  $    0.82        10% 
Cash flow from operations ($B)              $     3.0  $     2.6        17% 
                                                                            

Information about HP's use of non-GAAP financial information is provided under "Use of non-GAAP financial information" below.

HP today announced financial results for its fiscal 2014 first quarter ended Jan. 31, 2014.

First quarter GAAP diluted net earnings per share (EPS) was $0.74, up from $0.63 in the prior-year period and above the previously provided outlook of $0.60 to $0.64. First quarter non-GAAP diluted net EPS was $0.90, up from $0.82 in the prior-year period and above the previously provided outlook of $0.82 to $0.86. First quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax costs of $317 million and $0.16 per diluted share, respectively, related to the amortization of intangible assets, restructuring charges and acquisition-related charges.

First quarter net revenue of $28.2 billion was down 1% from the prior-year period and flat on a constant currency basis.

"HP is in a stronger position today than we've been in quite some time," said Meg Whitman, HP president and chief executive officer. "The progress we're making is reflected in growth across several parts of our portfolio, the growing strength of our balance sheet, and the strong support we're receiving from customers and channel partners. Innovation is igniting our comeback, and at a time when many of our competitors are confronting new challenges, two years of turnaround work is setting us up for an exciting future."

Outlook
For the fiscal 2014 second quarter, HP estimates non-GAAP diluted net EPS to be in the range of $0.85 to $0.89 and GAAP diluted net EPS to be in the range of $0.62 to $0.66. Fiscal 2014 second quarter non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.23 per share, related primarily to the amortization of intangible assets and restructuring charges.

For fiscal 2014, HP estimates non-GAAP diluted net EPS to be in the range of $3.60 to $3.75 and GAAP diluted net EPS to be in the range of $2.85 to $3.00. Fiscal 2014 non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.75 per share, related primarily to the amortization of intangible assets and restructuring charges.

Asset management
HP generated $3.0 billion in cash flow from operations in the first quarter, up 17% from the prior-year period. Inventory ended the quarter at $6.0 billion, down 1 day year over year to 25 days. Accounts receivable ended the quarter at $13.5 billion, down 2 days year over year at 43 days. Accounts payable ended the quarter at $12.6 billion, up 4 days year over year to 52 days. HP's dividend payment of $0.1452 per share in the first quarter resulted in cash usage of $278 million. HP also utilized $565 million of cash during the quarter to repurchase approximately 20.4 million shares of common stock in the open market. HP exited the quarter with $16.4 billion in gross cash.

Fiscal 2014 first quarter segment results

  • Personal Systems revenue was up 4% year over year with a 3.3% operating margin. Commercial revenue increased 8% and Consumer revenue declined 3%. Total units were up 6% with Desktops units down 3% and Notebooks units up 5%.
  • Printing revenue was down 2% year over year with a 16.8% operating margin. Total hardware units were up 5% with Commercial hardware units up 6% and Consumer hardware units up 4%. Supplies revenue was down 3%.
  • Enterprise Group revenue was up 1% year over year with a 14.4% operating margin. Industry Standard Servers revenue was up 6%, Storage revenue was flat, Business Critical Systems revenue was down 25%, Networking revenue was up 4% and Technology Services revenue was down 4%.
  • Enterprise Services revenue was down 7% year over year with a 1% operating margin. Application and Business Services revenue was down 4%, and Infrastructure Technology Outsourcing revenue declined 9%.
  • Software revenue was down 4% year over year with a 15.8% operating margin. Support revenue was down 2%, license revenue was down 6%, professional services revenue was down 12% and software-as-a-service (SaaS) revenue was up 6%.
  • HP Financial Services revenue was down 9% year over year with a 6% decrease in net portfolio assets and an 18% increase in financing volume. The business delivered an operating margin of 11.6%.
  • Corporate Investments revenue increased due to the sale of a portfolio of mobile computing intellectual property.

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 .

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