HP (NYSE: HPQ) Q2 Highlights:
- Second quarter non-GAAP diluted net earnings per share of $0.88, up 1% from the prior-year period, versus the previously provided outlook of $0.85 to $0.89 per share
- Second quarter GAAP diluted net earnings per share of $0.66, up 20% from the prior-year period, versus the previously provided outlook of $0.62 to $0.66 per share
- Second quarter net revenue of $27.3 billion, down 1% from the prior-year period and flat on a constant currency basis
- Second quarter cash flow from operations of $3.0 billion
- Returned $1.1 billion to shareholders in the form of dividends and share repurchases in the second quarter
- Improved operating company net cash by $1.0 billion, the ninth consecutive quarterly improvement of approximately $1 billion or more
HP fiscal 2014 second quarter financial performance
|Q2 FY14||Q2 FY13||Y/Y|
|GAAP net revenue ($B)||$||27.3||$||27.6||(1||%)|
|GAAP operating margin||6.7||%||5.8||%||0.9 pts.|
|GAAP net earnings ($B)||$||1.3||$||1.1||18||%|
|GAAP diluted net earnings per share||$||0.66||$||0.55||20||%|
|Non-GAAP operating margin||8.6||%||8.6||%||0.0 pts.|
|Non-GAAP net earnings ($B)||$||1.7||$||1.7||0||%|
|Non-GAAP diluted net earnings per share||$||0.88||$||0.87||1||%|
|Cash flow from operations ($B)||$||3.0||$||3.6||(16||%)|
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 second quarter ended April 30, 2014.
Second quarter GAAP diluted net earnings per share (EPS) was $0.66, up from $0.55 in the prior-year period and within its previously provided outlook of $0.62 to $0.66. Second quarter non-GAAP diluted net EPS was $0.88, up from $0.87 in the prior-year period and within its previously provided outlook of $0.85 to $0.89. Second quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax costs of $418 million and $0.22 per diluted share, respectively, related to the amortization of intangible assets, restructuring charges and acquisition-related charges.
Second quarter net revenue of $27.3 billion was down 1% from the prior-year period and flat on a constant currency basis.
"With the first half of our fiscal year completed, I'm pleased to report that HP's turnaround remains on track," said Meg Whitman, president and chief executive officer, HP. "With each passing quarter, HP is improving its systems, structures and core go-to-market capabilities. We're gradually shaping HP into a more nimble, lower-cost, more customer- and partner-centric company that can successfully compete across a rapidly changing IT landscape."
In May 2012, HP adopted a multi-year restructuring plan designed to simplify business processes, accelerate innovation, lower costs and deliver better results. HP previously estimated that 34,000 positions would be eliminated in connection with the plan. As HP continues to reengineer the workforce to be more competitive and meet its objectives, the previously estimated number of eliminated positions will increase by between 11,000 to 16,000.
For the fiscal 2014 third quarter, HP estimates non-GAAP diluted net EPS to be in the range of $0.86 to $0.90 and GAAP diluted net EPS to be in the range of $0.59 to $0.63. Fiscal 2014 third quarter non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.27 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 $3.63 to $3.75 and GAAP diluted net EPS to be in the range of $2.68 to $2.80. Fiscal 2014 non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.95 per share, related primarily to the amortization of intangible assets and restructuring charges.
HP generated $3.0 billion in cash flow from operations in the second quarter, down 16% from the prior-year period. Inventory ended the quarter at $5.8 billion, down 1 day year over year to 25 days. Accounts receivable ended the quarter at $14.3 billion, down 1 day year over year at 47 days. Accounts payable ended the quarter at $13.5 billion, up 6 days year over year to 59 days. HP's dividend payment of $0.1452 per share in the second quarter resulted in cash usage of $298 million. HP also utilized $831 million of cash during the quarter to repurchase approximately 26.7 million shares of common stock in the open market. HP exited the quarter with $15.4 billion in gross cash.
Fiscal 2014 second quarter segment results
- Personal Systems revenue was up 7% year over year with a 3.5% operating margin. Commercial revenue increased 12% and Consumer revenue declined 2%. Total units were up 10% with Desktops units up 6% and Notebooks units up 6%.
- Printing revenue was down 4% year over year with a 19.5% operating margin. Total hardware units were up 1% with Commercial hardware units up 3% and Consumer hardware units flat. Supplies revenue was down 6%.
- Enterprise Group revenue was down 2% year over year with a 14.4% operating margin. Industry Standard Servers revenue was up 1%, Storage revenue was down 6%, Business Critical Systems revenue was down 14%, Networking revenue was up 6% and Technology Services revenue was down 5%.
- Enterprise Services revenue was down 7% year over year with a 2.5% operating margin. Application and Business Services revenue was down 8%, and Infrastructure Technology Outsourcing revenue declined 7%.
- Software revenue was flat year over year with a 19.2% operating margin. License revenue was up 8%, support revenue was down 4%, professional services revenue was up 1% and software-as-a-service (SaaS) revenue was up 6%.
- HP Financial Services revenue was down 2% year over year with a 2% decrease in net portfolio assets and a 12% increase in financing volume. The business delivered an operating margin of 11.4%.