Cathie Lesjak: Q4 FY13 Earnings

Overall, we’re pleased with our fourth quarter results.  Revenue declines moderated, demonstrating the quality and competitiveness of our portfolio.  At the same time, we recognize we have more work to do on continuing to align our cost structure to support profitable long-term growth.   

In the fourth quarter, we saw year-over-year revenue growth this quarter in Industry Standard Servers, Networking, Storage, and constant currency revenue growth in Printing.  Personal Systems performance was better than expected, and sales outpaced the market.  Enterprise Services was broadly in line and Software had a tough year-over-year compare, but continued to drive growth in key areas while expanding operating profit. 

In the fourth quarter fiscal 2013, we delivered:

  • Revenue of $29.1 billion, down 3% year-over-year, and down only 1% in constant currency. 
  • Non-GAAP diluted net earnings per share of $1.011
  • GAAP diluted net earnings per share of $0.73
  • Free cash flow of $2 billion1

We also returned a combined $763 million to shareholders in the form of share repurchases and dividends, and reduced operating company net debt by more than $1 billion for the seventh consecutive quarter.  As a result, we achieved our operating company net debt goals ahead of plan. 

By business, we’re very pleased with the performance of Printing. We outperformed the market for the second successive quarter, gaining 4 points of total unit market share over the prior year.  Revenue for the quarter was down 1%, but up 1% in constant currency, with a 17.7% operating margin. 

In Personal Systems, we outperformed the market with particular strength in our commercial PC business, reflecting the good progress Dion is making.  Revenue for the quarter was down 2% over the prior year, but almost flat in constant currency, with an operating margin of 3%. 

Enterprise Services performed as expected, and we continue to make progress improving the predictability of the business.  Revenue was down 9%, with an operating margin of 4.4%, while we saw good momentum in signings and had strong renewals in our expiring contracts. 

Our fourth quarter Enterprise Group results prove that we can be competitive across our portfolio, but still have work to do so that we can continue to win deals, at the right margin. Revenue grew 2% year-over-year as we saw improved sales execution, a strong Hyperscale quarter, and stabilization in blades, complimented by revenue growth in Networking and Storage.  The operating margin was 14.5%. 

In Software, revenue decreased 9% over the prior year, although we had a tough compare due to a large General Motors deal last year.  Software did grow in a number of areas, including Cloud and Automation and SAAS bookings, and saw double digit growth in Security, after normalizing for the impact of the General Motors deal.  The team did a great job managing costs and driving an operating profit of 30.8% in the quarter. 

For the full year fiscal 2013, we delivered:

  • Revenue of $112.3B, down 7% year-over-year, or down 5% in constant currency
  • Non-GAAP diluted net earnings per share of $3.56, which is at the high-end of the $3.40 to $3.60 outlook range we provided at our 2012 Securities Analyst Meeting2
  • GAAP diluted net earnings per share of $2.62
  • Free cash flow of $9.1 billion, up 21% year-over-year2

Looking forward, we continue to face a choppy macro environment and shifting competitive dynamics, as we focus on improving execution across the organization.  With that context, we expect: 

  • Q1 fiscal 2014 non-GAAP diluted net earnings per share to be in the range of $0.82 to $0.86 and GAAP diluted earnings per share to be in the range of $0.60 to $0.643
  • FY14 non-GAAP diluted net earnings per share to be in the range of $3.55 to $3.75, and GAAP diluted net earnings to be in the range of $2.85 to $3.05, as we said at our recent Securities Analyst Meeting4

 


[1]  All non-GAAP numbers have been adjusted to exclude certain items. A reconciliation of specific adjustments to GAAP results for the current and prior periods is included on slides 18 and 19 and in the GAAP to non-  GAAP slides that appear as part of the supplemental slides of the Q413 and FY13 earnings presentation available at www.hp.com/investor/2013Q4earnings. A description of HP’s use of non-GAAP information is provided on slide 3 of that presentation under “Use of non-GAAP financial information.”

[2]  All non-GAAP numbers have been adjusted to exclude certain items. A reconciliation of specific adjustments to GAAP results for the current and prior periods is included on slides 18 and 19 and in the GAAP to non-  GAAP slides that appear as part of the supplemental slides of the Q413 and FY13 earnings presentation available at www.hp.com/investor/2013Q4earnings. A description of HP’s use of non-GAAP information is provided on slide 3 of that presentation under “Use of non-GAAP financial information.”

[3] First quarter fiscal 2014 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.22per share, related primarily to amortization of intangible assets and restructuring charges.

[4]  Full year fiscal 2014 non-GAAP diluted EPS estimates exclude after-tax costs of approximately $0.70 per share, related primarily to amortization of intangible assets and restructuring charges.