HP Reports Fiscal 2015 Third Quarter Results
PALO ALTO, CA–(Marketwired – Aug 20, 2015) – HP today announced financial results for its fiscal 2015 third quarter ended July 31, 2015.Third quarter net revenue of $25.3 billion was down 8% from the prior-year period and down 2% on a constant currency basis.
Third quarter GAAP diluted net earnings per share (EPS) was $0.47, down from $0.52 in the prior-year period and below its previously provided outlook of $0.50 to $0.54. Third quarter non-GAAP diluted net EPS was $0.88, down from to $0.89 in the prior-year period and above its previously provided outlook of $0.83 to $0.87. Third quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax costs of $750 million and $0.41 per diluted share, respectively, related to separation costs, the amortization of intangible assets, impairment of data center assets, defined benefit plan settlement charges, acquisition-related charges and restructuring charges.
On July 1, Hewlett Packard Enterprise filed an initial Registration Statement on Form 10 with the Securities and Exchange Commission (SEC), an important step in the separation process. The filing provides detailed information on the business and historical financial results of Hewlett Packard Enterprise. On August 10, HP filed the first amendment to the Form 10, which included the pro forma cash and debt levels for Hewlett Packard Enterprise.
With the Hewlett Packard Enterprise capital structure determined, credit ratings agencies published expected investment grade ratings for both Hewlett Packard Enterprise and HP Inc., which is in line with our objectives.
On August 12, HP introduced the expected members of the boards of directors for both Hewlett Packard Enterprise and HP Inc., effective upon the completion of the separation. Each board will include members of the current HP board, as well as several new directors chosen after a comprehensive review of personal and professional qualifications as they relate to the specific needs of the two new companies.
“HP delivered results in the third quarter that reflect very strong performance in our Enterprise Group and substantial progress in turning around Enterprise Services,” said Meg Whitman, chairman, president and chief executive officer, HP. “I am very pleased that we have continued to deliver the results we said we would, while remaining on track to execute one of the largest and most complex separations ever undertaken.”
For the fiscal 2015 fourth quarter, HP estimates non-GAAP diluted net EPS to be in the range of $0.92 to $0.98 and GAAP diluted net EPS to be in the range of $0.12 to $0.18. Fiscal 2015 fourth quarter non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $0.80 per share, related to separation costs, the amortization of intangible assets, restructuring charges, defined benefit plan settlement charges and acquisition-related charges.
For fiscal 2015, HP estimates non-GAAP diluted net EPS to be in the range of $3.59 to $3.65 and GAAP diluted net EPS to be in the range of $1.87 to $1.93. Fiscal 2015 non-GAAP diluted net EPS estimates exclude after-tax costs of approximately $1.72 per share, related to separation costs, the amortization of intangible assets, restructuring charges, defined benefit plan settlement charges, impairment of data center assets and acquisition-related charges.
HP generated $1.7 billion in cash flow from operations in the third quarter, down 54% from the prior-year period. Inventory ended the quarter at $6.7 billion, up 4 days year over year to 31 days. Accounts receivable ended the quarter at $12.8 billion, down 1 day year over year to 45 days. Accounts payable ended the quarter at $15.5 billion, up 7 days year over year to 72 days. HP’s dividend payment of $0.176 per share in the third quarter resulted in cash usage of $318 million. HP also utilized $352 million of cash during the quarter to repurchase approximately 11.0 million shares of common stock in the open market. HP exited the quarter with $17.4 billion in gross cash, where gross cash includes cash and cash equivalents, short-term investments and certain long-term investments.
Fiscal 2015 third quarter segment results
Personal Systems revenue was down 13% year over year with a 3.0% operating margin. Commercial revenue decreased 9% and Consumer revenue decreased 22%. Total units were down 11% with Notebooks units down 3% and Desktops units down 20%.
Printing revenue was down 9% year over year with a 17.8% operating margin. Total hardware units were down 2% with Commercial hardware units down 6% and Consumer hardware units flat. Supplies revenue was down 6%.
Enterprise Group revenue was up 2% year over year with a 13.0% operating margin. Industry Standard Servers revenue was up 8%, Storage revenue was down 2%, Business Critical Systems revenue was down 21%, Networking revenue was up 22% and Technology Services revenue was down 9%.
Enterprise Services revenue was down 11% year over year with a 6.0% operating margin. Infrastructure Technology Outsourcing revenue was down 13%, and Application and Business Services revenue declined 7%.
Software revenue was down 6% year over year with a 20.6% operating margin. License revenue was down 11%, support revenue was down 3%, professional services revenue was down 8% and software-as-a-service (SaaS) revenue was down 4%.
HP Financial Services revenue was down 6% year over year with a 2% decrease in net portfolio assets and a 2% decrease in financing volume. The business delivered an operating margin of 10.8%.
More information on HP’s earnings, including additional financial analysis and an earnings overview presentation, is available on HP’s Investor Relations website at http://www.hp.com/investor/home.
HP’s FY15 Q3 earnings conference call is accessible via an audio webcast at http://www.hp.com/investor/2015Q3Webcast.
HP creates new possibilities for technology to have a meaningful impact on people, businesses, governments and society. With the broadest technology portfolio spanning printing, personal systems, software, services and IT infrastructure, HP delivers solutions for customers’ most complex challenges in every region of the world. More information about HP (NYSE: HPQ) is available at http://www.hp.com.
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