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HP Q4 Tops Forecasts

November 29, 2021

HP reported fiscal 2021 net revenue of $63.5 billion, up 12.1% (up 10.2% in constant currency) from the prior-year period.

Fiscal 2021 GAAP diluted net EPS was $5.33, up from $2.00 in the prior-year period and above the previously provided outlook of $3.56 to $3.62. Fiscal 2021 non-GAAP diluted net EPS was $3.79, up from $2.28 in the prior-year period and above the previously provided outlook of $3.69 to $3.75. Fiscal 2021 non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $1,883 million, or $1.54 per diluted share, related to restructuring and other charges, acquisition-related charges, amortization of intangible assets, non-operating retirement-related (credits)/charges, defined benefit plan settlement (gains)/charges, Oracle litigation proceeds, debt extinguishment costs, and tax adjustments.

Fourth quarter net revenue was $16.7 billion, up 9.3% (up 6.9% in constant currency) from the prior-year period. Fourth quarter GAAP diluted net EPS was $2.71, up from $0.49 in the prior-year period and above the previously provided outlook of $0.82 to $0.88. Fourth quarter non-GAAP diluted net EPS was $0.94, up from $0.62 in the prior-year period and above the previously provided outlook of $0.84 to $0.90. Fourth quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $2,023 million, or $1.77 per diluted share, related to restructuring and other charges, acquisition-related charges, amortization of intangible assets, non-operating retirement-related (credits)/charges, defined benefit plan settlement (gains)/charges, Oracle litigation proceeds, and tax adjustments.

HP's EPS of $0.94, adjusted beat the $.88 EPS which was expected. On the top line, HP's revenue of $16.68 billion also beat the $15.4 billion which was expected.

“Our results reflect a growth-oriented company on its front foot and hitting its stride. We delivered a very strong quarter to close out an exceptional year of double-digit revenue, operating profit and EPS growth while returning record levels of capital to shareholders,” said Enrique Lores, HP Inc. President and CEO. “HP is at the heart of hybrid with an innovative portfolio of hardware, software and subscriptions that position the company well for sustained growth in fiscal year 2022 and beyond.”

Asset management

HP generated $6.4 billion in net cash provided by operating activities and $4.2 billion of free cash flow in fiscal 2021. Free cash flow includes net cash provided by operating activities of $6.4 billion adjusted for net Oracle litigation proceeds of $1,771 million, net investments in leases of $111 million and net investments in property, plant and equipment of $582 million. HP utilized $6.2 billion of cash during fiscal 2021 to repurchase approximately 224 million shares of common stock in the open market. When combined with the $938 million of cash used to pay dividends, HP returned 172% of its free cash flow to shareholders in fiscal 2021.

HP's net cash provided by operating activities in the fourth quarter of fiscal 2021 was $2.8 billion. Accounts receivable ended the quarter at $5.5 billion, up 1 day quarter over quarter to 30 days. Inventory ended the quarter at $7.9 billion, down 9 days quarter over quarter to 53 days. Accounts payable ended the quarter at $16.1 billion, down 12 days quarter over quarter to 108 days.

HP generated $0.9 billion of free cash flow in the fourth quarter. Free cash flow includes net cash provided by operating activities of $2.8 billion adjusted for net Oracle litigation proceeds of $1,771 million, net investments in leases of $33 million and net investments in property, plant and equipment of $172 million.

In the fourth quarter, HP returned $2.0 billion to shareholders. HP utilized $1.8 billion of cash during the quarter to repurchase approximately 61 million shares of common stock in the open market and paid a cash dividend of $219 million. As a result, HP returned 210% of its fourth quarter free cash flow to shareholders. HP exited the quarter with $4.3 billion in gross cash, which includes cash and cash equivalents and short-term investments of $5 million included in other current assets.

Fiscal 2021 fourth quarter segment results

Personal Systems net revenue was $11.8 billion, up 13% year over year (up 10% in constant currency) with a 6.5% operating margin. Consumer PCs net revenue decreased 3% and Commercial PCs net revenue increased 25%. Total units were down 9% with Notebooks units down 12% and Desktops units up 2%.

Printing net revenue was $4.9 billion, up 1% year over year (flat in constant currency) with a 17.0% operating margin. Total hardware units were down 26% with Consumer units down 28% and Commercial units down 12%. Consumer net revenue was down 6% and Commercial net revenue wasup 19%. Supplies net revenue was down 2% (down 3% in constant currency).

Outlook

For the fiscal 2022 first quarter, HP estimates GAAP diluted net EPS to be in the range of $0.92 to $0.98 and non-GAAP diluted net EPS to be in the range of $0.99 to $1.05. Fiscal 2022 first quarter non-GAAP diluted net EPS estimates exclude $0.07 per diluted share, primarily related to restructuring and other charges, acquisition-related charges, amortization of intangible assets, non-operating retirement-related (credits)/charges, tax adjustments and the related tax impact on these items.

For fiscal 2022, HP estimates GAAP diluted net EPS to be in the range of $3.86 to $4.06 and non-GAAP diluted net EPS to be in the range of $4.07 to $4.27. Fiscal 2022 non-GAAP diluted net EPS estimates exclude $0.21 per diluted share, primarily related to restructuring and other charges, acquisition-related charges, amortization of intangible assets, non-operating retirement-related (credits)/charges, tax adjustments and the related tax impact on these items. For fiscal 2022, HP anticipates generating free cash flow of at least $4.5 billion.

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