HP(HPQ) - 2025 Q1 - Quarterly Results

HP Inc. Fiscal 2025 First Quarter Financial Highlights Overall Financial Performance In the first quarter of fiscal 2025, HP Inc. reported a 2.4% year-over-year increase in GAAP net revenue to $13.5 billion, marking the third consecutive quarter of revenue growth, while profitability declined with GAAP diluted net EPS falling 5% to $0.59 and non-GAAP diluted net EPS decreasing 9% to $0.74 Q1 FY25 Financial Performance Summary | | Q1 FY25 | Q1 FY24 | Y/Y Change | | :--- | :--- | :--- | :--- | | GAAP net revenue ($B) | $13.5 | $13.2 | 2.4% | | GAAP operating margin | 6.3% | 7.1% | (0.8) pts | | GAAP diluted net EPS | $0.59 | $0.62 | (5)% | | Non-GAAP operating margin | 7.3% | 8.4% | (1.1) pts | | Non-GAAP diluted net EPS | $0.74 | $0.81 | (9)% | | Net cash provided by operating activities ($B) | $0.4 | $0.1 | 209% | | Free cash flow ($B) | $0.1 | $0.0 | 180% | - Both GAAP and non-GAAP diluted EPS for Q1 FY25 were within the company's previously provided outlook[3] - The company increased its annualized gross run rate structural cost savings target for the Future Ready plan from $1.6 billion to $1.9 billion by the end of fiscal year 2025[3][5] Management Commentary Management expressed satisfaction with the Q1 performance, highlighting the third consecutive quarter of revenue growth, attributing progress to a strong commercial business in Personal Systems and momentum in key growth areas like AI PCs - CEO Enrique Lores stated that progress was fueled by a strong commercial business in Personal Systems and momentum in key growth areas, including AI PCs[5] - CFO Karen Parkhill announced an increase in the Future Ready savings target to $1.9 billion by the end of fiscal 2025 and confirmed that the full-year outlook remains unchanged[5] Asset Management and Capital Return In Q1, HP generated $0.4 billion in net cash from operating activities and $70 million in free cash flow, while returning $0.4 billion to shareholders through dividends and share repurchases Key Balance Sheet and Cash Flow Metrics (Q1 FY25) | Metric | Value | Change (QoQ) | | :--- | :--- | :--- | | Accounts Receivable ($B) | $4.2 | -5 days | | Inventory ($B) | $8.4 | +9 days | | Accounts Payable ($B) | $16.5 | +1 day | | Net Cash from Operations ($B) | $0.4 | N/A | | Free Cash Flow ($M) | $70 | N/A | - HP returned a total of $0.4 billion to shareholders in Q1, consisting of $0.3 billion in dividend payments and $100 million used to repurchase approximately 2.7 million shares[3][8] Segment Performance Personal Systems The Personal Systems segment reported a 5% year-over-year revenue increase to $9.2 billion, driven by a 10% rise in Commercial PS revenue which offset a 7% decline in Consumer PS revenue, with total units decreasing by 1% and an operating margin of 5.5% Personal Systems Performance (Q1 FY25 vs Q1 FY24) | Metric | Q1 FY25 | YoY Change | | :--- | :--- | :--- | | Net Revenue ($B) | $9.2 | +5% | | Commercial Revenue ($B) | $6.6 | +10% | | Consumer Revenue ($B) | $2.6 | -7% | | Total Units | N/A | -1% | | Commercial Units | N/A | +6% | | Consumer Units | N/A | -11% | | Operating Margin | 5.5% | -0.6 pts | Printing The Printing segment's net revenue decreased by 2% year-over-year to $4.3 billion, with a 1% decline in Supplies revenue, as a 5% increase in Consumer Printing revenue was not enough to offset a 7% decline in Commercial Printing, while maintaining a strong operating margin of 19.0% Printing Performance (Q1 FY25 vs Q1 FY24) | Metric | Q1 FY25 | YoY Change | | :--- | :--- | :--- | | Net Revenue ($B) | $4.3 | -2% | | Supplies Revenue ($B) | $2.8 | -1% | | Commercial Revenue ($B) | $1.1 | -7% | | Consumer Revenue ($B) | $0.3 | +5% | | Total Hardware Units | N/A | +5% | | Commercial Units | N/A | 0% | | Consumer Units | N/A | +7% | | Operating Margin | 19.0% | -0.9 pts | Business Outlook Q2 FY25 Outlook For the second quarter of fiscal 2025, HP projects GAAP diluted net EPS to be in the range of $0.62 to $0.72, with non-GAAP diluted net EPS estimated between $0.75 and $0.85 Q2 FY25 EPS Guidance | Metric | Range ($) | | :--- | :--- | | GAAP Diluted Net EPS | $0.62 to $0.72 | | Non-GAAP Diluted Net EPS | $0.75 to $0.85 | Full Year FY25 Outlook HP maintains its full-year fiscal 2025 outlook, estimating GAAP diluted net EPS between $2.86 and $3.16, and non-GAAP diluted net EPS between $3.45 and $3.75, while anticipating free cash flow in the range of $3.2 to $3.6 billion Full Year FY25 Guidance | Metric | Range ($) | | :--- | :--- | | GAAP Diluted Net EPS | $2.86 to $3.16 | | Non-GAAP Diluted Net EPS | $3.45 to $3.75 | | Free Cash Flow ($B) | $3.2 to $3.6 | - HP expects that by the end of fiscal year 2025, over 90% of its products sold in North America will be manufactured outside of China, although China will remain an important global manufacturing hub[12] Consolidated Financial Statements Consolidated Condensed Statements of Earnings For the three months ended January 31, 2025, HP reported total net revenue of $13.50 billion, a slight increase from $13.19 billion in the prior-year period, with net earnings of $565 million, or $0.59 per diluted share, down from $622 million, or $0.62 per diluted share, in Q1 FY24 Q1 FY25 Statement of Earnings (in millions) | Metric | Q1 FY25 | Q1 FY24 | | :--- | :--- | :--- | | Total net revenue | $13,504 | $13,185 | | Gross profit | $2,840 | $2,888 | | Earnings from operations | $845 | $935 | | Net earnings | $565 | $622 | | Diluted net EPS ($) | $0.59 | $0.62 | Consolidated Condensed Balance Sheets As of January 31, 2025, HP's total assets were $38.93 billion, down from $39.91 billion at the end of the previous quarter, with total liabilities at $40.00 billion, resulting in a stockholders' deficit of $1.07 billion Balance Sheet Summary (as of Jan 31, 2025, in millions) | Category | Amount | | :--- | :--- | | Total current assets | $19,834 | | Cash, cash equivalents and restricted cash | $2,894 | | Inventory | $8,443 | | Total assets | $38,930 | | Total current liabilities | $27,434 | | Accounts payable | $16,483 | | Total liabilities | $40,002 | | Stockholders' deficit | $(1,072) | Consolidated Condensed Statements of Cash Flows For the first quarter of fiscal 2025, HP generated $374 million in net cash from operating activities, a significant increase from $121 million in the same period last year, resulting in a net decrease in cash of $359 million for the quarter Q1 FY25 Cash Flow Summary (in millions) | Metric | Q1 FY25 | Q1 FY24 | | :--- | :--- | :--- | | Net cash provided by operating activities | $374 | $121 | | Net cash used in investing activities | $(300) | $(228) | | Net cash used in financing activities | $(433) | $(708) | | Repurchase of common stock | $(100) | $(500) | | Cash dividends paid | $(273) | $(275) | | Decrease in cash, cash equivalents and restricted cash | $(359) | $(815) | Supplementary Information Use of Non-GAAP Financial Measures HP utilizes non-GAAP financial measures to supplement its GAAP-based financial statements, providing a better understanding of the company's ongoing operational performance by excluding items not reflective of core business results - HP provides non-GAAP metrics to offer investors greater insight into the information used by management for financial and operational decision-making[15][48] - Key adjustments to derive non-GAAP figures include the exclusion of restructuring charges, acquisition and divestiture costs, amortization of intangible assets, and certain tax adjustments[39][40] Forward-Looking Statements This report contains forward-looking statements regarding projections of revenue, earnings, cost savings, and strategic plans, which are subject to various risks and uncertainties, including macroeconomic trends, supply chain issues, competitive pressures, and geopolitical events - Forward-looking statements include projections of financial items, cost savings, management plans, and the expected performance of products and services[17] - Major risks that could affect future results include the ability to execute strategic plans, macroeconomic and geopolitical trends, supply chain constraints, and competitive pressures[18][19] Key Growth Areas HP has identified several Key Growth Areas that management expects to grow faster than the core business with accretive margins over the long term, spanning across hybrid work solutions, advanced computing, AI-enabled PCs, managed services, consumer subscriptions, industrial printing, and 3D printing technologies - HP's designated Key Growth Areas include: - Hybrid Systems (e.g., video conferencing solutions) - Advanced Compute Solutions (e.g., workstations) - AI PC - Workforce Solutions (e.g., managed services) - Consumer Subscriptions (e.g., Instant Ink) - Industrial Graphics - 3D & Personalization[42][43][45]