“Our results once again demonstrate HP’s consistent performance with full year non-GAAP EPS growth of 22% year over year and free cash flow generation of $4.2 billion,” said Dion Weisler, President and CEO, HP Inc. “These results reflect our continued innovation across the portfolio and sharp execution across segments and regions as we position HP for continued long-term sustainable growth.”
Asset management
HP generated $4.5 billion in net cash provided by operating activities and $4.2 billion of free cash flow in fiscal 2018. Free cash flow includes net cash provided by operating activities and net investments in property, plant and equipment of $0.4 billion. HP utilized approximately $2.6 billion of cash during fiscal 2018 to repurchase approximately 112 million shares of common stock in the open market. When combined with the almost $0.9 billion of cash used to pay dividends, HP returned 83% of its free cash flow to shareholders in fiscal 2018.
HP’s net cash provided by operating activities in the fourth quarter of fiscal 2018 was $1.0 billion. Accounts receivable ended the quarter at $5.1 billion, up 2 days quarter over quarter to 30 days. Inventory ended the quarter at $6.1 billion, down 3 days quarter over quarter to 43 days. Accounts payable ended the quarter at $14.8 billion, down 3 days quarter over quarter to 105 days.
HP generated $0.8 million of free cash flow in the fourth quarter. Free cash flow includes net cash provided by operating activities and net investments in property, plant and equipment of $125 million.
HP’s dividend payment of $0.1393 per share in the fourth quarter resulted in cash usage of $0.2 billion. HP also utilized $0.6 billion of cash during the quarter to repurchase approximately 24.4 million shares of common stock in the open market. As a result, HP returned 97% of its fourth quarter free cash flow to shareholders. HP exited the quarter with $5.9 billion in gross cash, which includes cash and cash equivalents and short-term investments of $0.7 billion included in other current assets.
Fiscal 2018 fourth quarter segment results
- Personal Systems net revenue was up 11% year over year (up 10% in constant currency) with a 3.8% operating margin. Both Commercial and Consumer net revenue increased 11%. Total units were up 6% with Notebooks units up 8% and Desktops units up 2%.
- Printing net revenue was up 9% year over year (up 8% in constant currency) with a 16.1% operating margin. Total hardware units were up 11% with Commercial hardware units up 85% and Consumer hardware units up 3%. Supplies net revenue was up 7% (up 6% in constant currency).
Outlook
For the fiscal 2019 first quarter, HP estimates GAAP diluted net EPS to be in the range of $0.46 to $0.49 and non-GAAP diluted net EPS to be in the range of $0.50 to $0.53. Fiscal 2019 first 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 2019, HP estimates GAAP diluted net EPS to be in the range of $2.04 to $2.14 and 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 $0.08 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.
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.
HP's FY18 Q4 earnings conference call is accessible via an audio webcast at www.hp.com/investor/2018Q4Webcast.
About HP Inc.
HP Inc. creates technology that makes life better for everyone, everywhere. Through our portfolio of printers, Personal Computers, mobile devices, solutions, and services, we engineer experiences that amaze. More information about HP Inc. (NYSE: HPQ) is available at
http://www.hp.com.
Use of non-GAAP financial information
To supplement HP’s consolidated 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 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 profit, operating margin, net earnings, diluted net EPS, cash provided by operating activities or cash and cash equivalents prepared in accordance with GAAP.
Forward-looking statements
This news release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of HP 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 projections of net revenue, margins, expenses, effective tax rates, net earnings, net EPS, 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; any statements of the plans, strategies and objectives of management for future operations, including, but not limited to, our sustainability goals, the execution of restructuring plans and any resulting cost savings, net revenue or profitability improvements; 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.
Risks, uncertainties and assumptions include the need to address the many challenges facing HP’s businesses; the competitive pressures faced by HP’s businesses; risks associated with executing HP’s strategy; the impact of macroeconomic and geopolitical trends and events; the need to manage third-party suppliers and the distribution of HP’s products and the delivery of HP’s services effectively; the protection of HP’s intellectual property assets, including intellectual property licensed from third parties; risks associated with HP’s international operations; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by HP and its suppliers, customers, clients and partners; the hiring and retention of key employees; integration and other risks associated with business combination and investment transactions; the results of the restructuring plans, including estimates and assumptions related to the cost (including any possible disruption of HP’s business) and the anticipated benefits of the restructuring plans; the impact of changes in tax laws, including uncertainties related to the interpretation and application of the Tax Cuts and Jobs Act of 2017 on HP's tax obligations and effective tax rate; the resolution of pending investigations, claims and disputes; and other risks that are described in HP’s Annual Report on Form 10-K for the fiscal year ended October 31, 2017, and HP’s other filings with the Securities and Exchange Commission.
As in prior periods, the financial information set forth in this release, including any tax-related items, reflects estimates based on information available at this time. While HP believes these estimates to be reasonable, these amounts could differ materially from reported amounts in HP’s Annual Report on Form 10-K for the fiscal years ended October 31, 2018 and October 31, 2019 and HP’s other filings with the Securities and Exchange Commission. HP assumes no obligation and does not intend to update these forward-looking statements. HP’s Investor Relations website at
www.hp.com/investor/home contains a significant amount of information about HP, including financial and other information for investors. HP encourages investors to visit its website from time to time, as information is updated, and new information is posted.
