Cathie Lesjak: Financial Update From SAM 2013

During HP’s 2013 Securities Analyst Meeting (SAM) today, members of the executive leadership team provided the investment community with an overview of HP’s FY13 financial performance and our path forward as we continue to execute against our five-year turnaround plan.  I’ve included the key financial highlights from the event in this post. The live video webcast is also available for replay.

FY13 Performance: Executing Against our Turnaround Journey

Despite both external and internal challenges facing our businesses, we accomplished much of what we set out to do in the past year:

  • The midpoint of our FY13 non-GAAP EPS outlook provided in August is above the midpoint of the outlook we provided one year ago. 
  • We made great progress bringing our costs more in line with our revenue. 
  • Our cash flow performance exceeded our expectations – on our Q3 earnings call we said we expect to approach $8 billion in free cash flow in FY13, well ahead of our outlook provided at SAM last year. 
  • Our financial results have enabled us to focus on rebuilding our balance sheet and we are nearing our goal of reducing operating company net debt to zero. 

Looking Ahead: FY 14 Outlook

Looking forward, we are focused on helping customers successfully transition to the New Style of IT and driving long-term profitable growth for HP.  We also will continue to drive efficiencies and operational excellence across our businesses.  And, we will maintain our investment in innovation, particularly in the strategic growth areas of cloud, security, big data and mobility.

Here is our FY14 outlook, which is highlighted in this infographic:

  • As we said during our third quarter 2013 earnings call, total company revenue growth is not anticipated in FY14.  However, certain businesses are expected to grow, and total HP year-over-year revenue decline is expected to be less than in FY13.
  • We estimate non-GAAP diluted EPS to be in the range of $3.55 to $3.75. 
  • Our GAAP diluted EPS is estimated to be in the range of $2.85 to $3.05. 
  • We expect to generate approximately $9 billion to $9.5 billion in cash flow from operations.  
  • We anticipate free cash flow of $6 billion to $6.5 billion. 

Based on this cash flow outlook, our capital allocation priorities for FY14 include:

  • Generating the highest risk-adjusted returns for our shareholders.
  • Returning at least 50% of free cash flow to investors in the form of dividends and share repurchases in FY14.   
  • Investing approximately $0.12 per share of savings from our restructuring program back into our business to accelerate high-growth areas and products, including 3PAR, networking, Vertica, Ink in the Office as well as cloud solutions. 
  • Prioritizing our credit rating with the long-term goal of moving back to the mid-single ‘A’ range. 

Longer term

Long-term, we still expect to be a GDP-like growth company.  We expect growth to come from our higher margin businesses and anticipate margin growth to outpace revenue growth.  And, long-term, we expect operating margins of 10-11%.

We still have work to do, but we have strengthened our financial foundation by rebuilding our balance sheet and demonstrating resilience through our results.  I believe we have the products, people, scale and customers to be the industry-leading provider of solutions for the New Style of IT.  And, we are well positioned to build on this foundation and deliver long-term growth and shareholder value.