HP Reports Fiscal 2015 Second Quarter Results

PALO ALTO, CA -- (Marketwired) -- May 21, 2015 -- HP (NYSE: HPQ)

  • Second quarter net revenue of $25.5 billion
  • Second quarter non-GAAP diluted net earnings per share of $0.87, versus the previously provided outlook of $0.84 to $0.88 per share
  • Second quarter GAAP diluted net earnings per share of $0.55, versus the previously provided outlook of $0.57 to $0.61 per share
  • Second quarter cash flow from operations of $1.5 billion
  • Returned $950 million to shareholders in the form of share repurchases and dividends in the second quarter

                                                                            
             HP fiscal 2015 second quarter financial performance            
============================================================================
                                             Q2 FY15      Q2 FY14        Y/Y
GAAP net revenue ($B)                         $25.5        $27.3        (7%)
                                                                        (1.1
GAAP operating margin                           5.6%         6.7%      pts.)
GAAP net earnings ($B)                          $1.0         $1.3      (21%)
GAAP diluted net earnings per share           $0.55         $0.66      (17%)
Non-GAAP operating margin                       8.6%         8.6%   0.0 pts.
Non-GAAP net earnings ($B)                     $1.6         $1.7        (6%)
Non-GAAP diluted net earnings per share       $0.87        $0.88        (1%)
Cash flow from operations ($B)                 $1.5         $3.0       (51%)
                                                                            

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 2015 second quarter ended April 30, 2015.

Second quarter net revenue of $25.5 billion was down 7% from the prior-year period and down 2% on a constant currency basis.

Second quarter GAAP diluted net earnings per share (EPS) was $0.55, down from $0.66 in the prior-year period and below its previously provided outlook of $0.57 to $0.61. Second quarter non-GAAP diluted net EPS was $0.87, down from $0.88 in the prior-year period and within its previously provided outlook of $0.84 to $0.88. Second quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax costs of $585 million and $0.32 per diluted share, respectively, related to separation costs, restructuring charges, the amortization of intangible assets and acquisition-related charges.

Separation update
HP provided an update on its planned separation into two independent, Fortune 50 companies. The separation remains on track and the company expects associated dis-synergies of approximately $400 to $450 million.

The company also announced new future leadership appointments for both companies: Cathie Lesjak will become Chief Financial Officer of HP Inc. Lesjak's deep expertise will best serve Dion and his team as they embark on creating a new company. With Lesjak's move to HP Inc., Tim Stonesifer will become CFO of Hewlett Packard Enterprise. Stonesifer currently serves as CFO of HP's Enterprise Group. Prior to joining HP, Stonesifer served as CFO for General Motors International Operations based in Shanghai, and held a number of finance leadership positions during his twenty-year tenure at General Electric Company.

Chris Hsu has been selected to become Chief Operating Officer at Hewlett Packard Enterprise. Hsu has proven strength in driving performance optimization across a number of key business areas, including real estate, indirect procurement, and business process improvement. As Chief Operating Officer, Hsu will expand his duties to oversee and manage the continued separation execution, as well as HP Financial Services.

Alan May will join Hewlett Packard Enterprise as Head of Human Resources. Most recently, May worked for the Boeing Company as head of HR for their commercial airplanes division. He also led HR for Boeing Defense, Space and Security and served as head of Strategy, Compensation and Benefits for the Company. Prior to Boeing, May spent many years at PepsiCo. in various global HR and business integration leadership roles.

"I'm pleased with where we ended the quarter, the continued success of our turnaround, and the progress we're making on separation," said Meg Whitman, chairman, president and chief executive officer, HP. "Despite some tough challenges, we executed well across many parts of our portfolio, sustained our commitment to innovation, and delivered the results we said we would. HP is becoming stronger as we head into the second half of our fiscal year and separation in November."

Outlook
For the fiscal 2015 third quarter, HP estimates non-GAAP diluted net EPS to be in the range of $0.83 to $0.87 and GAAP diluted net EPS to be in the range of $0.50 to $0.54. Fiscal 2015 third quarter non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.33 per share, related to separation costs, the amortization of intangible assets, restructuring charges, defined benefit plans settlement charges and acquisition-related charges.

For fiscal 2015, HP estimates non-GAAP diluted net EPS to be in the range of $3.53 to $3.73 and GAAP diluted net EPS to be in the range of $2.03 to $2.23. Fiscal 2015 non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $1.50 per share, related to separation costs, the amortization of intangible assets, restructuring charges, defined benefit plans settlement charges and acquisition-related charges.

Asset management
HP generated $1.5 billion in cash flow from operations in the second quarter, down 51% from the prior-year period. Inventory ended the quarter at $6.2 billion, up 4 days year over year to 29 days. Accounts receivable ended the quarter at $12.3 billion, down 3 days year over year to 44 days. Accounts payable ended the quarter at $14.9 billion, up 10 days year over year to 69 days. HP's dividend payment of $0.16 per share in the second quarter resulted in cash usage of $291 million. HP also utilized $659 million of cash during the quarter to repurchase approximately 19.0 million shares of common stock in the open market. HP exited the quarter with $15.1 billion in gross cash, where gross cash includes cash and cash equivalents, short-term investments, and certain long-term investments.

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