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HP(HPQ) - 2024 Q3 - Quarterly Report
HPQHP(HPQ)2024-08-28 22:14
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Financial Performance - Total net revenue for Q3 2024 was 13,519million,a2.413,519 million, a 2.4% increase from 13,196 million in Q3 2023[12] - Gross margin for Q3 2024 was 2,906million,comparedto2,906 million, compared to 2,822 million in Q3 2023, reflecting a gross margin increase of 2.9%[12] - Net earnings for Q3 2024 were 640million,down16.4640 million, down 16.4% from 766 million in Q3 2023[12] - Earnings from operations for Q3 2024 were 940million,slightlydownfrom940 million, slightly down from 952 million in Q3 2023[12] - The diluted net earnings per share for Q3 2024 were 0.65,comparedto0.65, compared to 0.76 in Q3 2023, a decrease of 14.5%[12] - The company reported a comprehensive income of 557millionforQ32024,downfrom557 million for Q3 2024, down from 780 million in Q3 2023[14] - Net earnings for the nine months ended July 31, 2024, were 1,869million,adecreaseof18.31,869 million, a decrease of 18.3% compared to 2,289 million for the same period in 2023[21] - For the three months ended July 31, 2024, net revenue was 13,519million,anincreasefrom13,519 million, an increase from 13,196 million for the same period in 2023, representing a growth of 2.4%[109] - Net earnings for the three months ended July 31, 2024, were 640million,comparedto640 million, compared to 766 million for the same period in 2023, representing a decrease of approximately 16.5%[134] Expenses and Costs - Research and development expenses increased to 413millioninQ32024,upfrom413 million in Q3 2024, up from 354 million in Q3 2023, representing a 16.6% increase[12] - Total operating expenses for Q3 2024 were 1,966million,comparedto1,966 million, compared to 1,870 million in Q3 2023, indicating a rise of 5.1%[12] - Stock-based compensation expense increased to 367millionfortheninemonthsendedJuly31,2024,comparedto367 million for the nine months ended July 31, 2024, compared to 353 million in the prior year, reflecting a rise of 4.0%[21] - Selling, General and Administrative (SG&A) expenses increased by 7.8% for the three months ended July 31, 2024, amounting to 1.404billion,primarilyduetohigherinvestmentsinpersonnelandmarketinitiatives[167]−InterestandothernetexpensesforthethreemonthsendedJuly31,2024,were1.404 billion, primarily due to higher investments in personnel and market initiatives[167] - Interest and other net expenses for the three months ended July 31, 2024, were (113) million, compared to (16)millionin2023,showingasignificantincreaseinexpenses[109]AssetsandLiabilities−Totalcurrentassetsincreasedto(16) million in 2023, showing a significant increase in expenses[109] Assets and Liabilities - Total current assets increased to 19,315 million as of July 31, 2024, up from 17,977milliononOctober31,2023,representingagrowthof7.417,977 million on October 31, 2023, representing a growth of 7.4%[17] - Total liabilities increased to 39,451 million as of July 31, 2024, compared to 37,004milliononOctober31,2023,indicatingariseof6.637,004 million on October 31, 2023, indicating a rise of 6.6%[17] - Long-term debt decreased to 8,229 million from 9,254million,showingareductionof11.19,254 million, showing a reduction of 11.1%[17] - Cash, cash equivalents, and restricted cash decreased to 2,878 million at the end of the period from 3,232millionatthebeginning,reflectingadeclineof10.93,232 million at the beginning, reflecting a decline of 10.9%[21] - Total current liabilities were 10.200 billion as of July 31, 2024, slightly down from 10.212billionasofOctober31,2023[70]ShareholderReturns−Thecompanyrepurchased10.212 billion as of October 31, 2023[70] Shareholder Returns - The company repurchased 1,200 million of common stock during the nine months ended July 31, 2024[21] - Cash dividends paid were 523million,withadividendof523 million, with a dividend of 0.52 per common share[36] - HP returned 2.0billiontoshareholdersincashdividendsof2.0 billion to shareholders in cash dividends of 0.8 billion and share repurchases of 1.2billionduringtheninemonthsendedJuly31,2024[194]StrategicInitiatives−HP′sFiscal2023Planincludeseffortstodrivegrowththroughinvestmentsinpeopleandimprovingproductmix[9]−Thecompanyanticipatesstructuralcostsavingsdrivenbyoperationalefficiencyanddigitaltransformationinitiatives[9]−HPplanstoreduceglobalheadcountbyapproximately4,000to6,000employeesaspartoftheFutureReadyPlan,expectingtoincurpre−taxchargesofapproximately1.2 billion during the nine months ended July 31, 2024[194] Strategic Initiatives - HP's Fiscal 2023 Plan includes efforts to drive growth through investments in people and improving product mix[9] - The company anticipates structural cost savings driven by operational efficiency and digital transformation initiatives[9] - HP plans to reduce global headcount by approximately 4,000 to 6,000 employees as part of the Future Ready Plan, expecting to incur pre-tax charges of approximately 1.0 billion, with about 0.7billionrelatedtolaborcosts[42]−HP′sFutureReadyPlanaimstoenhancedigitalcapabilitiesandoperationalefficiency,withanacceleratedcumulativesavingstargetforfiscalyear2024[157]MarketPerformance−PersonalSystemssegmentnetrevenuereached0.7 billion related to labor costs[42] - HP's Future Ready Plan aims to enhance digital capabilities and operational efficiency, with an accelerated cumulative savings target for fiscal year 2024[157] Market Performance - Personal Systems segment net revenue reached 9,369 million, up from 8,932million,representinga4.98,932 million, representing a 4.9% year-over-year growth[36] - Printing segment net revenue was 4,143 million, a slight decrease from 4,263million,reflectinga2.84,263 million, reflecting a 2.8% decline year-over-year[36] - The Commercial PS segment generated 6,677 million in revenue, compared to 6,201million,markinganincreaseof7.76,201 million, marking an increase of 7.7% year-over-year[36] - The company reported a balance of 581 million in product warranty liabilities at the end of the period, down from 706millionatthebeginning,withaccrualsforwarrantiesissuedamountingto706 million at the beginning, with accruals for warranties issued amounting to 524 million[150] Legal Matters - The company has ongoing litigation related to copyright levies in European countries, which may impact future cash flows and operations[136] - HP India is involved in ongoing customs duty disputes with the India Directorate of Revenue Intelligence, with potential liabilities totaling approximately 386million[138]−HPhasbeennamedinmultiplelegalproceedingsregardingsuppliesauthenticationprotocols,withclaimsbasedonmisleadingconsumernotificationsandpotentialdamagessought[140]−HP′slitigationwithPhilipsregardingpatentinfringementhasresultedinafinaldeterminationbytheITCthatnoviolationoccurred,allowingHPtoresumelitigationinfederalcourt[138]TaxandCompliance−HP′seffectivetaxratewas22.6386 million[138] - HP has been named in multiple legal proceedings regarding supplies authentication protocols, with claims based on misleading consumer notifications and potential damages sought[140] - HP's litigation with Philips regarding patent infringement has resulted in a final determination by the ITC that no violation occurred, allowing HP to resume litigation in federal court[138] Tax and Compliance - HP's effective tax rate was 22.6% for the three months ended July 31, 2024, compared to 18.2% for the same period in 2023[54] - As of July 31, 2024, HP had gross unrecognized tax benefits of 1.2 billion, with up to 867millionpotentiallyaffectingtheeffectivetaxrateifrealized[55]−Thecompanyexpectsapotentialreductionof867 million potentially affecting the effective tax rate if realized[55] - The company expects a potential reduction of 21 million in existing gross unrecognized tax benefits within the next 12 months[55] Operational Challenges - The company anticipates continued macroeconomic challenges, including geopolitical conflicts and inflationary trends, which may impact demand for its products[156] - The Printing segment faces challenges from changing customer behaviors and competition from non-original supplies, impacting overall performance[155] - HP's operational strategies include optimizing sales coverage models and enhancing pricing strategies to address competitive pressures and market demands[155]