01—Abstract
Summary
Summary of the 10-K filed December 14, 2017. Cited figures are marked; the original filing is the authoritative source.
HP Inc. (formerly Hewlett-Packard Company) reported fiscal 2017 net revenue of $52.06 billiona, up from $48.24 billion in fiscal 2016, with net earnings of $2.53 billion, compared with $2.50 billion a year earlier.
Earnings from continuing operations were $3.52 billionb, and diluted EPS was $1.48. Growth was led by Personal Systems, where net revenue rose 11.3% to $33.37 billion, and Printing, where net revenue rose 3.0% to $18.80 billion. Gross margin declined to 18.4% from 18.7%, mainly due to higher commodity costs in Personal Systems and unfavorable foreign currency impacts.
Restructuring and other charges rose to $362 millionc, and Selling, general and administrative expense increased 14% to $4.38 billion. Balance sheet and cash flow: cash and cash equivalents were $7.0 billion and total debt was $7.8 billion at October 31, 2017. Net cash provided by operating activities was $3.68 billion.
HP returned cash through $1.41 billiond of share repurchases and $894 million of dividends paid, and it had about $2.5 billion remaining under its $3.0 billion repurchase authorization. Stockholders' deficit was $3.41 billion. Approximately 63% of net revenue came from outside the United States.
Subsequent events and risks: on November 1, 2017, HP made a $1.1 billion cash payment to Samsung Electronics in connection with the acquisition of its printer business. The filing also discusses ongoing legal matters, including the Oracle judgment (approximately $3.0 billion awarded to HP, under appeal) and the Autonomy-related litigation. Key business risks cited include intense competition, commodity cost pressures, reliance on single-source suppliers such as Canon, Intel and AMD, and foreign currency exposure.
02—Key points
Key Highlights
- Net revenue rose to $52.06 billion in fiscal 2017 from $48.24 billion in fiscal 2016.
- Personal Systems net revenue increased 11.3% to $33.37 billion, driven by Notebooks and Desktops, while Printing net revenue increased 3.0% to $18.80 billion.
- Gross margin fell to 18.4% from 18.7%, reflecting higher commodity costs in Personal Systems and unfavorable foreign currency impacts.
- Net earnings were $2.53 billion, or $1.48 diluted EPS; earnings from continuing operations were $3.52 billion.
- Operating cash flow was $3.68 billion, and HP returned capital through $1.41 billion of share repurchases and $894 million of dividends.
- Total debt was $7.8 billion against $7.0 billion of cash and cash equivalents at October 31, 2017.
- On November 1, 2017, HP paid $1.1 billion to Samsung Electronics for its printer business, and the $3.0 billion Oracle judgment remains under appeal.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2017, HP kept $0.05.
- Revenue$52.06B100.0%
- Cost of revenue−$42.48B81.6%
- Gross profit$9.58B18.4%
- Operating costs−$6.21B11.9%
- Operating income$3.37B6.5%
- Interest, other & tax−$842.0M1.6%
- Net income$2.53B4.9%
Where FY2017 revenue went
$52.06B- Cost of revenue: $42.48B, 82% of revenue
- Net income: $2.53B, 4.9% of revenue
- R&D: $1.19B, 2.3% of revenue
- SG&A: $4.53B, 8.7% of revenue
- Other operating costs: $488.0M, 0.9% of revenue
- Interest, other & tax: $842.0M, 1.6% of revenue
Kept 4.9% as net incomeNet income $2.53B · 4.9%Other operating costs $488.0M · 0.9%Interest, other & tax $842.0M · 1.6%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2017filed December 14, 2017Financial Statements
FY2017 against FY2016
| Line item | FY2017FY2016 | Change |
|---|---|---|
| Revenue | $52.06B$48.24B | +7.9% |
| Cost of Revenue | $42.48B$39.24B | +8.3% |
| Gross Profit | $9.58B$9.00B | +6.4% |
| R&D Expenses | $1.19B$1.21B | −1.6% |
| SG&A Expenses | $4.53B$3.83B | +18.2% |
| Operating Expenses | $48.69B$44.69B | +8.9% |
| Operating Income | $3.37B$3.55B | −5.1% |
| Interest Expense | $309.00M$273.00M | +13.2% |
| Net Income | $2.53B$2.50B | +1.2% |
| EPS (Basic) | $1.50$1.44 | +4.2% |
| EPS (Diluted) | $1.48$1.43 | +3.5% |
| Shares Outstanding (Basic) | 1.69B1.73B | −2.4% |
| Shares Outstanding (Diluted) | 1.70B1.74B | −2.4% |
05—Questions
Frequently Asked Questions
How did HP's revenue and profitability change in fiscal 2017?
Net revenue grew to $52.06 billion from $48.24 billion, and net earnings were $2.53 billion versus $2.50 billion. Gross margin narrowed to 18.4% from 18.7%, primarily because of higher commodity costs in Personal Systems and unfavorable foreign currency effects. SG&A rose 14% to $4.38 billion.
Which segment drove growth?
Personal Systems, where net revenue increased 11.3% to $33.37 billion, led growth, with Notebooks rising to $19.78 billion. Printing net revenue increased 3.0% to $18.80 billion, driven by Supplies, which rose to $12.42 billion.
How strong is HP's balance sheet and liquidity?
HP had $7.0 billion of cash and cash equivalents and $7.8 billion of total debt at October 31, 2017. Stockholders' deficit was $3.41 billion. Management stated that internally generated cash flows are generally sufficient to support operations, capital expenditures, dividends and share repurchases.
How is HP returning capital to shareholders?
HP paid $894 million in cash dividends and repurchased $1.41 billion of common stock in fiscal 2017. As of October 31, 2017, about $2.5 billion remained under the $3.0 billion repurchase authorization approved in October 2016.
What are the main risks highlighted in the filing?
The filing cites intense competition with aggressive price pressure, dependence on single-source suppliers such as Canon, Intel and AMD, commodity cost increases, foreign currency fluctuations (about 63% of revenue came from outside the United States), and ongoing litigation, including the Autonomy-related matters and the Oracle appeal.
06—Continue