HP Inc has delivered its first full year of financial results, and they aren't looking good.
Profits fell 63 per cent, revenue was down 6 per cent, and its earnings per share were down over a quarter. It had been a difficult year, CEO Dion Weisler acknowledged during Tuesday's earnings call, but the company is now planning to go onwards and upwards.
"I was really proud of what the team did in Q4," he said. "We enter FY17 on an upward trajectory, which is a very different position from this time last year. I'm really convinced the best years are ahead of us."
One major change enacted this quarter has been in how HP Inc deals with its resellers. Rather than rely on a "push model" to get new products out, he said, HP Inc would be moving to a "pull model," where resellers can request stock as it's sold. This should cut costs for both parties and ensure there wasn't stock gathering dust.
Here's what Weisler told analysts on the conference call:
I would say, broadly speaking, the shift from push to pull is operating according to our expectations. I think we have much less product on promotion than we have in the past and that seen most stabilized pricing environment in an omni-channel world that is incredibly sensitive to large fluctuations in end user pricing. So that was the desired affect I think we’ve seen significantly lower grade marketing from region to region. That was also one of the key design point.
So still very early days but the signals, the right signals and the model is operating according to how we expected it to operate.
Going forward, HP Inc is looking at 3D printing to regain past glories. It's first 3D printer will be out by the end of the year and the firm has ambitious plans to crack this notoriously tricky market.
Here's a rundown of HP Inc's financial stats for the fourth quarter and the full year to October 30, 2016:
- Total revenue: HP Inc received $12.5bn in revenues in the past quarter, up 2 per cent from this time last year. For the fiscal year, the company reported net revenue of $48.2 billion, down 6 per cent.
- Net earnings: Profit-wise, HP Inc had an unpleasant quarter – earnings fell 63 per cent to $492m, compared to $1.3bn this time last year. Annual profits for HP Inc were $2.5bn, down from $4.6bn in 2015. Over the year, HP Inc took a big hit from restructuring costs and paying off retiring members of staff.
- Earnings per share: HP Inc's fourth quarter EPS of $0.30 was down 64 per cent on the year. For the full year the company showed EPS of $1.53, down 24 per cent.
- Dividends and buybacks: In 2016, HP Inc spent almost $1.2bn of its own cash reserves to buy back shares and support the price. It also returned $0.9bn to shareholders in dividends. The two payouts accounted for 72 per cent of HP Inc's free cash flow this year.
- Personal Systems: HP Inc's PC business was a bright spot in a fairly dismal set of quarterly results. Revenues grew 4 per cent in the fourth quarter, and sales were particularly strong to commercial customers. For the full year, however, revenues fell 5 per cent to $30bn.
- Printing: Printing revenues fell to $4.5bn in the last quarter of the year, down 8 per cent. For the year, revenues fell 14 per cent to $18.3bn. Hardest hit was HP Inc's lucrative supplies market, down 12 per cent for the quarter, but HP Inc did show a 1 per cent rise in hardware sales, with the commercial side showing sales up 10 per cent.
In a note to investors on Tuesday, Bernstein analysts were positive about HP Inc's financial performance, and said the biz "has discretion on how much channel inventory drawdown it will take in FY Q4 and how much it chooses to reinvest in printing."
"We encourage investors to focus on whether HP's printing investments are yielding improved unit placements; competitive dynamics in the printing business and impact of currency changes in the Japanese yen; and sustainability of 4 per cent-plus PC margins," they added. ®