01—Abstract
Summary
Summary of the 10-K filed December 6, 2022. Cited figures are marked; the original filing is the authoritative source.
HP Inc. (HPQ) reported fiscal 2022 (year ended October 31, 2022) net revenue of $62.98 billiona, down from $63.49 billion in fiscal 2021, and net earnings of $3.20 billion, or $3.05 per diluted share, versus $6.50 billion in fiscal 2021.
The decline was driven by unit declines in Personal Systems and Printing, partially offset by higher average selling prices. Earnings from operations fell to $4.68 billionb from $5.30 billion. The prior-year figure included a one-time $2.3 billion gain from Oracle litigation proceeds recorded in Interest and other, net.
The filing states that consumer demand declined beginning in the third quarter of fiscal 2022, particularly for Consumer PCs, and that HP expects declines in both the Personal Systems and Printing markets in fiscal 2023. HP completed the acquisition of Plantronics, Inc. (Poly) on August 29, 2022, in an all-cash transaction at $40c per share, implying a total enterprise value of $3.3 billion. Total debt rose to $11.0 billion from $7.5 billion as of October 31, 2021, reflecting $4.0 billion of unsecured senior notes issued during the year.
Cash and cash equivalents were $3.1 billiond. HP returned $5.3 billion to shareholders through $4.3 billion of share repurchases and $1.0 billion of cash dividends, and approximately $2.1 billion remained under its repurchase authorizations at year-end. In November 2022, HP announced the Fiscal 2023 Plan, a three-year program through fiscal 2025 covering digital transformation, portfolio optimization and operational efficiency.
The company expects to reduce global headcount by approximately 4,000 to 6,000 employees and to incur pre-tax charges of approximately $1.0 billion. Russia contributed approximately $1.0 billion of net revenue in fiscal 2021, and HP recorded a $23 million charge in fiscal 2022 to wind down its Russian operations.
02—Key points
Key Highlights
- Net revenue was $62.98 billion, down from $63.49 billion in fiscal 2021; the filing attributes the decline to unit volume declines, partially offset by higher average selling prices.
- Net earnings were $3.20 billion, or $3.05 per diluted share, compared with $6.50 billion, or $5.33 per diluted share, in fiscal 2021, which included a $2.3 billion one-time Oracle litigation gain.
- Personal Systems net revenue was $44.08 billion and Printing net revenue was $18.90 billion; Printing earnings from operations were $3.65 billion, or 19.3% of net revenue.
- Acquisition of Poly on August 29, 2022 for a total enterprise value of $3.3 billion; total debt increased to $11.0 billion from $7.5 billion.
- HP returned $5.3 billion to shareholders in fiscal 2022 through $4.3 billion of share repurchases and $1.0 billion of cash dividends.
- The Fiscal 2023 Plan targets a reduction of 4,000 to 6,000 employees and approximately $1.0 billion of pre-tax charges, with completion expected through fiscal 2025.
- Management expects declines in both the Personal Systems and Printing markets in fiscal 2023 and continued foreign currency headwinds.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in FY2022, HP kept $0.05.
- Revenue$62.91B100.0%
- Cost of revenue−$50.65B80.5%
- Gross profit$12.26B19.5%
- Operating costs−$7.70B12.2%
- Operating income$4.56B7.2%
- Interest, other & tax−$1.43B2.3%
- Net income$3.13B5.0%
Where FY2022 revenue went
$62.91B- Cost of revenue: $50.65B, 81% of revenue
- Net income: $3.13B, 5.0% of revenue
- R&D: $1.65B, 2.6% of revenue
- SG&A: $5.26B, 8.4% of revenue
- Other operating costs: $787.0M, 1.3% of revenue
- Interest, other & tax: $1.43B, 2.3% of revenue
Kept 5.0% as net incomeNet income $3.13B · 5.0%Other operating costs $787.0M · 1.3%
Full revenue history →04—Financials
Financial Highlights
Figures from 10-KFY2022filed December 6, 2022Financial Statements
FY2022 against FY2021
| Line item | FY2022FY2021 | Change |
|---|---|---|
| Revenue | $62.91B$63.46B | −0.9% |
| Cost of Revenue | $50.65B$50.05B | +1.2% |
| Gross Profit | $12.26B$13.41B | −8.5% |
| R&D Expenses | $1.65B$1.85B | −10.6% |
| SG&A Expenses | $5.26B$5.73B | −8.1% |
| Operating Expenses | $7.70B$58.10B | −86.7% |
| Operating Income | $4.56B$5.36B | −14.9% |
| Interest Expense | $359.00M$254.00M | +41.3% |
| Net Income | $3.13B$6.54B | −52.1% |
| EPS (Basic) | $3.02$5.41 | −44.2% |
| EPS (Diluted) | $2.98$5.36 | −44.4% |
| Shares Outstanding (Basic) | 1.04B1.21B | −14.1% |
| Shares Outstanding (Diluted) | 1.05B1.22B | −13.9% |
05—Questions
Frequently Asked Questions
What drove the decline in HP's fiscal 2022 net earnings?
Net earnings fell to $3.20 billion from $6.50 billion. The filing notes that fiscal 2021 included a one-time $2.3 billion gain from Oracle litigation proceeds recorded in Interest and other, net. Fiscal 2022 earnings from operations also declined to $4.68 billion from $5.30 billion, and interest and other, net was an expense of $235 million.
How did HP's segments perform in fiscal 2022?
Personal Systems net revenue increased 1.7% to $44.08 billion, with earnings from operations of $2.91 billion. Printing net revenue decreased 6.1% to $18.90 billion, while its earnings from operations increased to $3.65 billion, or 19.3% of net revenue. The filing attributes Personal Systems growth to higher average selling prices, partially offset by a 16.9% decline in unit volume.
What is the significance of the Poly acquisition?
HP acquired Poly, a provider of workplace collaboration solutions, on August 29, 2022 for $40 per share in cash, implying a total enterprise value of $3.3 billion. The filing states that the acquisition adds video conferencing, cameras, headsets, voice and software capabilities, and that HP expects to complete integration by the end of fiscal 2023.
How much debt does HP carry, and how is it being managed?
Total debt was $11.0 billion as of October 31, 2022, up from $7.5 billion a year earlier. HP issued $4.0 billion of unsecured senior notes during the year. It also maintains a $5.0 billion revolving credit facility available until May 26, 2026, and was in compliance with its covenants at year-end.
What restructuring actions has HP announced?
In November 2022, HP announced the Fiscal 2023 Plan, a three-year program through fiscal 2025 focused on digital transformation, portfolio optimization and operational efficiency. HP expects to reduce global headcount by approximately 4,000 to 6,000 employees and to incur pre-tax charges of approximately $1.0 billion, of which about $0.7 billion is expected to be primarily labor-related.
06—Continue