Modest Performance by HP in the First Fiscal Quarter of 2020

HP announced fiscal 2020 first quarter net revenue of $14.6 billion. The revenue was down 0.6% from the prior-year period but went up 0.5% in constant currency.

First quarter GAAP diluted net EPS was $0.46, down from $0.51 in the previous year. non-GAAP diluted net EPS was $0.65, up from $0.52. non-GAAP earnings and EPS exclude after-tax adjustments of $278 million, or $0.19 per diluted share, related to restructuring and other charges, acquisition-related charges, amortization of intangible assets, non-operating retirement-related (credits)/charges, and tax adjustments.

“Our Q1 results reflect a business that is strong and getting stronger. Our non-GAAP EPS growth of 25% was significantly above our guided range, driven by tremendous execution against our strategic priorities,“ said Enrique Lores, President and CEO of HP. “This is a team at the top of its game, combining the industry’s best innovation with disciplined execution and cost management to deliver for our shareholders. We have great confidence in our plans and are raising our full-year earnings outlook.“

HP generated $1.1 billion of free cash flow in the first quarter. That includes net cash provided by operating activities of $1.3 billion adjusted for net investment in leases of $34 million and net investment in property, plant and equipment of $198 million. HP’s dividend payment of $0.1762 per share in the first quarter resulted in cash usage of $0.3 billion.

The company also utilized $0.7 billion of cash during the quarter to repurchase approximately 33.8 million shares of common stock in the open market. As a result, HP returned 84% of its first quarter free cash flow to shareholders. The company exited the quarter with $4.5 billion in gross cash, which includes cash and cash equivalents and short-term investments of $0.3 billion included in other current assets.

Personal Systems net revenue was up 2% (up 4% in constant currency) with a 6.7% operating margin. Commercial net revenue increased 7% and Consumer net revenue decreased 7%. Total units were up 4% with Notebooks units up 2% and Desktops units up 7%. Printing net revenue was down 7% (down 6% in constant currency) with a 16.0% operating margin. Total hardware units were down 10%. Commercial hardware revenue was down 1% and Consumer hardware revenue was down 13%.