This summary is based on the fourth quarter fiscal 2007 earnings call conducted by Hewlett-Packard Company (HPQ: chart) on November 19, 2007.
Chairman of the Board, Chief Executive Officer and President: Mark V. Hurd
HP Executive Vice President and Chief Financial Officer: Catherine A. Lesjak
Vice President, Investor Relations: Jim Burns
Key Investors Issues
- The earnings per share rose to 81 cents from 60 cents in the prior year.
- Quarterly revenue rose 15% over last year to $28.29 billion.
- For fiscal 2007, HP reported revenue of $104.3 billion and non-GAAP EPS of $2.93.
- For Q1 2008, the firm expects revenue in the range of $27.4 billion to $27.5 billion.
Fourth Quarter Fiscal 2007 Financial Highlights
Revenue for the fourth quarter totaled $28.3 billion, up 15% year over year or up 11% in constant currency.
Each of the firm’s regions grew in double digits, with Asia-Pacific up 20%, EMEA up 19%, and Americas up 10%. The firm continues to benefit from its broad geographic reach, with 67% of revenue coming from outside of the U.S.
Fourth quarter gross margin was 24.7%.
Compared to a year ago, gross margin was up 40 basis points, driven by a generally favorable commodity environment and disciplined pricing. Strong performance in HP software offset the negative gross margin mix impact of PSG’s strong performance at the company level.
Non-GAAP operating expenses for the quarter were $4.2 billion, or 14.8% of revenue, an improvement of 50 basis points compared with a year ago.
In absolute dollars, operating expenses grew $430 million, driven predominantly by 10 acquisitions completed in fiscal 2007 and the affects of currency, as well as investments in sales resources. Going forward, the company will continue to invest in new areas that have the potential to drive future growth while remaining focused on optimizing its cost structure.
Non-GAAP operating profit grew 27% year over year to $2.8 billion, or 9.9% of revenue.
- GAAP EPS was 81 cents, which included $132 million, or 5 cents per share in after-tax adjustments, primarily related to the amortization of purchased intangibles that were excluded from the non-GAAP results.
- Fourth quarter non-GAAP EPS was 86 cents, up 26% from the 68 cents that reported one year ago.
- Non-GAAP OI&E yielded income of $67 million, or roughly 2 cents per share.
- The non-GAAP tax rate was 20% in Q4.
HP owned inventory ended Q4 at $8 billion, or 34 days of supply, down four days compared with a year ago.
With regard to channel inventory, the firm exited Q4 in good shape. Personal systems ended the quarter with approximately four-and-a-half weeks in the channel, up a half-a-week compared with last year and well within the target range. Weeks of channel inventory for imaging and printing and enterprise storage and servers were roughly flat year over year.
- Trade receivables ended the quarter at $13.4 billion.
- DSO increased to 43 days in Q4 from 40 days one year ago.
- Accounts payable ended the quarter at $11.8 billion.
- Days payable was 50 days, down from 59 days last year.
- Property, plants and equipment was up $935 million year over year to $7.8 billion.
Gross CapEx was $813 million, down 16% year over year.
On a net basis, CapEx was $748 million, down 14% from the prior year period. Capital expenditures were primarily in IT, real estate facilities, and assets used in the leasing business. Net PP&E as a percentage of revenue now stands at 7.5% of revenue, flat year over year.
The cash flow from operations was $3.6 billion and free cash flow was $2.9 billion.
Share repurchases during Q4 totaled $2 billion in the open market or approximately 42 million shares. At the end of the quarter, the firm had roughly $2.7 billion remaining in the current share repurchase authorization. HP announced today that the board has approved an additional share repurchase authorization of $8 billion. The firm paid quarterly dividend totaling $206 million.
Performance Analysis of Segments
