HP Inc. Reports Hewlett-Packard Co. Fiscal 2015 Full-Year and Q4 Results

PALO ALTO, Calif.—November 30, 2015—HP Inc. has announced Hewlett-Packard Co. financial results for fiscal 2015 and the fourth quarter ended Oct. 31, 2015. These results include Hewlett Packard Enterprise Co. ("Hewlett Packard Enterprise"), Hewlett-Packard Co.'s former enterprise technology infrastructure, software, services and financing businesses, which separated from Hewlett-Packard Co. on Nov. 1, 2015. In connection with this separation, Hewlett-Packard Co. changed its name to HP Inc. effective as of Oct. 31, 2015. Accordingly, references to "HP" in this news release refer to Hewlett-Packard Co. with respect to events occurring on or prior to Oct. 31, 2015, and to HP Inc. with respect to events occurring after Oct. 31, 2015.

• Fiscal 2015 net revenue of $103.4 billion, down 7 percent from the prior-year period and down 2 percent on a constant currency basis
• Fiscal 2015 non-GAAP diluted net earnings per share of $3.59, within the previously provided outlook of $3.59 to $3.65 per share
• Fiscal 2015 GAAP diluted net earnings per share of $2.48, above the previously provided outlook of $1.87 to $1.93 per share
• Fiscal 2015 cash flow from operations of $6.5 billion, down 47 percent from the prior-year period
• Returned $4.1 billion to shareholders in the form of share repurchases and dividends in fiscal 2015, which was in excess of 100 percent of fiscal 2015 free cash flow
• Fourth quarter net revenue of $25.7 billion, down 9 percent from the prior-year period and down 3 percent on a constant currency basis
• Fourth quarter non-GAAP diluted net earnings per share of $0.93, within the previously provided outlook of $0.92 to $0.98 per share
• Fourth quarter GAAP diluted net earnings per share of $0.73, above the previously provided outlook of $0.12 to $0.18 per share
• Fourth quarter cash flow from operations of $2.6 billion, down 3 percent from the prior-year period
• Returned $0.6 billion to shareholders in the form of share repurchases and dividends in the fourth quarter
• Operating company net cash of $3.1 billion, a sequential improvement of $1.2 billion

HP fiscal 2015 full-year and fourth quarter financial performance

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

Fiscal 2015 net revenue of $103.4 billion was down 7 percent from the prior-year period and down 2 percent on a constant currency basis.

Fiscal 2015 GAAP diluted net earnings per share (EPS) was $2.48, down from $2.62 in the prior-year period and above the previously provided outlook of $1.87 to $1.93 per share. Fiscal 2015 non-GAAP diluted net EPS was $3.59, down from $3.74 in the prior-year period and within the previously provided outlook of $3.59 to $3.65 per share. Fiscal 2015 non-GAAP net earnings and non-GAAP diluted net EPS exclude (i) net income tax benefits of $0.8 billion and $0.44 per diluted share, respectively, related to one-time, non-cash entries comprised of a number of different tax items, including the reversal of a previously recorded U.S. tax valuation allowance and (ii) after-tax costs of $2.8 billion and $1.55 per diluted share, respectively, related primarily to separation costs, restructuring charges and the amortization of intangible assets.

Fourth quarter net revenue of $25.7 billion was down 9 percent from the prior-year period and down 3 percent on a constant currency basis.

Fourth quarter GAAP diluted net EPS was $0.73, up from $0.70 in the prior-year period and above the previously provided outlook of $0.12 to $0.18 per share. Fourth quarter non-GAAP diluted net EPS was $0.93, down from $1.06 in the prior-year period and within the previously provided outlook of $0.92 to $0.98. Fourth quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude (i) net income tax benefits of $0.8 billion and $0.45 per diluted share, respectively, related to one-time, non-cash entries comprised of a number of different tax items, including the reversal of a previously recorded U.S. tax valuation allowance and (ii) after-tax costs of $1.2 billion and $0.65 per diluted share, respectively, related primarily to separation costs, restructuring charges and the amortization of intangible assets.

Asset management
HP generated $2.6 billion in cash flow from operations in the fourth quarter, down 3 percent from the prior-year period. Inventory ended the quarter at $6.5 billion, up 3 days year over year to 30 days. Accounts receivable ended the quarter at $13.4 billion, up 3 days year over year to 47 days. Accounts payable ended the quarter at $16.0 billion, up 7 days year over year to 74 days.

HP's dividend payment of $0.176 per share in the fourth quarter resulted in cash usage of $337 million. HP also utilized $301 million of cash during the quarter to repurchase approximately 10.8 million shares of common stock in the open market. HP ended the quarter with $17.7 billion in gross cash.

HP generated $6.5 billion in cash flow from operations in fiscal 2015. HP utilized almost $2.9 billion of cash during fiscal 2015 to repurchase approximately 82 million shares of common stock in the open market. When combined with the $1.2 billion of cash used to pay dividends in fiscal 2015, HP returned over 100 percent of its free cash flow to shareholders in fiscal 2015.

Fiscal 2015 fourth quarter segment results (Segment results related to Hewlett Packard Enterprise will not be included going forward)

• Personal Systems revenue was down 14 percent year over year with a 3.8 percent operating margin. Commercial revenue decreased 15 percent and Consumer revenue decreased 12 percent. Total units were down 12 percent with Desktops units down 17 percent and Notebooks units down 5 percent.
• Printing revenue was down 14 percent year over year with a 17.4 percent operating margin. Total hardware units were down 17 percent with Commercial hardware units down 23 percent and Consumer hardware units down 14 percent. Supplies revenue was down 10 percent.
• Enterprise Group revenue was up 2 percent year over year with a 14.0 percent operating margin. Industry Standard Servers revenue was up 5 percent, Storage revenue was down 7 percent, Business Critical Systems revenue was down 8 percent, Networking revenue was up 35 percent and Technology Services revenue was down 11 percent.
• Enterprise Services revenue was down 9 percent year over year with an 8.2 percent operating margin. Application and Business Services revenue was down 5 percent and Infrastructure Technology Outsourcing revenue declined 11 percent.
• Software revenue was down 7 percent year over year with a 30.1 percent operating margin. License revenue was down 6 percent, support revenue was down 9 percent, professional services revenue was down 3 percent and software-as-a-service (SaaS) revenue was down 2 percent.
• HP Financial Services revenue was down 11 percent year over year with a 2 percent increase in net portfolio assets and a 4 percent decrease in financing volume. The business delivered an operating margin of 10.8 percent.

Outlook for HP Inc.
Beginning in the first fiscal quarter of 2016, HP Inc. will make a reporting change related to non-operational pension and post-retirement items. Specifically, the change relates to the expected market-driven performance of the plan assets and interest rate movements and infrequent events in determining pension and post-retirement benefit income or expense. These items include interest cost, expected return on plan assets, amortized actuarial losses or gains, and curtailments and settlements. The company considers these market-related items to be outside the operational performance of the business and will exclude them from the non-GAAP financial presentation.

Accordingly, for fiscal 2016, HP estimates non-GAAP diluted net EPS to be in the range of $1.59 to $1.69 and GAAP diluted net EPS to be in the range of $1.50 to $1.60. Fiscal 2016 non-GAAP diluted net EPS estimates exclude after-tax costs estimated to be approximately $0.09 per share, related primarily to the exclusion of non-operating pension and post-retirement benefit income, as well as restructuring charges, separation costs and the amortization of intangible assets.

For the fiscal 2016 first quarter, HP estimates non-GAAP diluted net EPS to be in the range of $0.33 to $0.38 and GAAP diluted net EPS to be in the range of $0.27 to $0.32. Fiscal 2016 first quarter non-GAAP diluted net EPS estimates exclude after-tax costs estimated to be approximately $0.06 per share, related primarily to the exclusion of non-operating pension and post-retirement benefit income, as well as the restructuring charges, separation costs, and the amortization of intangible assets.

The free cash flow outlook is updated to be $2.4 billion to $2.7 billion for fiscal 2016, down $100 million due to the payment of separation costs that moved from fiscal 2015 to fiscal 2016.

"In these challenging markets, we are taking decisive actions that will protect our core business which generates the majority of our cash flows," said Dion Weisler, president and CEO, HP Inc. "We firmly believe in our strategy and, given our scale, innovation, channel reach and brand, we are well positioned to gain profitable share in the markets where we choose to play."

More information on HP Inc.'s earnings, including additional financial analysis and an earnings overview presentation, is available on HP Inc.'s Investor Relations website at www.hp.com/investor/home.

About HP Inc.
HP Inc. creates technology that makes life better for everyone, everywhere. Through its portfolio of printers, PCs, mobile devices, solutions and services, it engineers experiences that amaze.

Source: HP Inc.