01—Abstract
Summary
Summary of the 10-Q filed August 29, 2024. Cited figures are marked; the original filing is the authoritative source.
HP Inc. reported net revenue of $13.52 billiona for the three months ended July 31, 2024, up 2.4% (3.0% on a constant currency basis) from $13.20 billion a year earlier.
Net earnings were $640 millionb, or $0.65 per diluted share, versus $766 million, or $0.76 per diluted share, in the prior-year quarter. For the nine months, net revenue decreased 1.0% to $39.50 billion, and net earnings fell to $1.87 billion, or $1.88 per diluted share, from $2.29 billion, or $2.29 per diluted share. Personal Systems revenue grew 4.9% in the quarter, led by Commercial PS, while Printing revenue fell 2.8%, reflecting demand softness and competitive pricing.
Operating cash flow improved to $2.13 billionc for the nine months from $1.60 billion, and the company returned $2.0 billion to shareholders through $1.2 billion of share repurchases and $0.8 billion of dividends. The balance sheet shows a stockholders' deficit of $1.39 billion at July 31, 2024. Total debt was $9.6 billion, and the company entered a new $5.0 billion revolving credit facility on August 1, 2024.
On August 27, 2024, the Board increased the share repurchase authorization to $10.0 billiond in total, against approximately $0.8 billion remaining at quarter end. Management concluded that disclosure controls were not effective because of a material weakness in internal control over financial reporting tied to information technology general controls for software affecting net revenue. Remediation is ongoing.
The filing also describes several significant legal matters, including patent litigation with Nokia and Access Advance pool members, a dispute with R2 Semiconductor over an adverse German judgment, and the Autonomy-related proceedings in which HP seeks damages exceeding $5 billion from former Autonomy management, with the amount ultimately awarded not yet determined and no adjustment recorded. The company states that it does not believe any of these matters is reasonably likely to result in a material loss in excess of amounts already recognized.
02—Key points
Key Highlights
- Q3 FY2024 net revenue rose 2.4% to $13.52 billion (up 3.0% on a constant currency basis), driven by Commercial Personal Systems; nine-month net revenue declined 1.0% to $39.50 billion.
- Net earnings fell to $640 million ($0.65 diluted EPS) in the quarter from $766 million ($0.76), and to $1.87 billion ($1.88 diluted EPS) for the nine months from $2.29 billion ($2.29).
- Printing net revenue decreased 2.8% in the quarter and 5.3% for the nine months, with printer unit volume down 12.2% year to date, while Personal Systems net revenue grew 4.9% in the quarter.
- Operating cash flow for the nine months was $2.13 billion, up from $1.60 billion, supporting $1.2 billion in share repurchases and $0.8 billion in dividends.
- The Board increased the share repurchase authorization to $10.0 billion on August 27, 2024, versus about $0.8 billion remaining at July 31, 2024.
- Management disclosed a material weakness in internal control over financial reporting related to IT general controls for revenue-affecting software, and concluded disclosure controls were not effective.
- A new $5.0 billion five-year revolving credit facility replaced the existing $5.0 billion facility on August 1, 2024; total debt was $9.6 billion at quarter end, and stockholders' deficit was $1.39 billion.
03—One dollar
Follow one dollar
Of each $1.00 of revenue in Q3 FY2024, HP kept $0.05.
- Revenue$13.52B100.0%
- Cost of revenue−$10.61B78.5%
- Gross profit$2.91B21.5%
- Operating costs−$1.97B14.5%
- Operating income$940.0M7.0%
- Interest, other & tax−$300.0M2.2%
- Net income$640.0M4.7%
04—Financials
Financial Highlights
Figures from 10-QQ3 FY2024filed August 29, 2024Financial Statements
Q3 FY2024 against Q3 FY2023
| Line item | Q3 FY2024Q3 FY2023 | Change |
|---|---|---|
| Revenue | $13.52B$13.20B | +2.4% |
| Cost of Revenue | $10.61B$10.37B | +2.3% |
| Gross Profit | $2.91B$2.82B | +3.0% |
| R&D Expenses | $413.00M$354.00M | +16.7% |
| SG&A Expenses | $1.40B$1.30B | +7.8% |
| Operating Expenses | $1.97B$1.87B | +5.1% |
| Operating Income | $940.00M$952.00M | −1.3% |
| Interest Expense | $111.00M$134.00M | −17.2% |
| Net Income | $640.00M$766.00M | −16.4% |
| EPS (Basic) | $0.65$0.77 | −15.6% |
| EPS (Diluted) | $0.65$0.76 | −14.5% |
| Shares Outstanding (Basic) | 979.00M993.00M | −1.4% |
| Shares Outstanding (Diluted) | 990.00M1.00B | −1.2% |
05—Questions
Frequently Asked Questions
How did HP's revenue and earnings perform in the third quarter of fiscal 2024?
Net revenue was $13.52 billion, up 2.4% from $13.20 billion a year earlier, or 3.0% on a constant currency basis. Net earnings declined to $640 million, or $0.65 per diluted share, from $766 million, or $0.76 per diluted share. Earnings from operations were $940 million compared with $952 million in the prior-year quarter.
Which segments drove the results?
Personal Systems net revenue increased 4.9% to $9.37 billion in the quarter, driven by Commercial PS, which grew 7.7%. Printing net revenue decreased 2.8% to $4.14 billion, reflecting lower Commercial Printing and Supplies revenue and demand softness, particularly in China. Printing earnings from operations were $715 million, compared with $794 million a year earlier.
What is the status of the material weakness disclosed in the filing?
Management concluded that disclosure controls and procedures were not effective as of July 31, 2024, due to a material weakness related to undue reliance on information from certain software solutions affecting net revenue without effectively designed IT general controls for user access and change management. The filing states the weakness did not result in any errors, and it will not be considered remediated until enhanced controls operate for a sufficient period and testing confirms their effectiveness.
How much capital did HP return to shareholders, and what are its remaining repurchase authorizations?
During the nine months ended July 31, 2024, HP returned $2.0 billion to shareholders, consisting of $1.2 billion in share repurchases and $0.8 billion in cash dividends. As of July 31, 2024, approximately $0.8 billion remained under repurchase authorizations. On August 27, 2024, the Board increased the total authorization to $10.0 billion.
What significant litigation exposures does the filing describe?
The filing describes several matters, including Nokia patent infringement suits in the U.S., Germany, the European Unified Patent Court, and Brazil, where a preliminary injunction against HP Brazil's sale of certain products was denied interlocutory appeal on August 14, 2024. It also describes an adverse German judgment in the R2 Semiconductor matter, Access Advance pool patent suits, and the Autonomy proceedings, in which HP seeks damages of more than $5 billion from former management, with any award to be shared equally with Hewlett Packard Enterprise. The filing states HP believes its defenses are valid and that no material loss beyond recorded amounts is reasonably possible.
06—Continue