filings.toolsItem 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
HP INC. AND SUBSIDIARIES
Management’s Discussion and Analysis of
Financial Condition and Results of Operations
The discussion of financial condition and results of our operations that follows provides information that will assist the reader in understanding our Consolidated Condensed Financial Statements, the changes in certain key items in those financial statements from year to year, and the primary factors that accounted for those changes, as well as how certain accounting principles, policies and estimates affect our Consolidated Condensed Financial Statements. This discussion should be read in conjunction with our Consolidated Condensed Financial Statements and the related notes that appear elsewhere in this document.
OVERVIEW
HP delivers innovative and sustainable devices, services, and subscriptions for personal computing, printing, 3D printing, hybrid work, gaming and other related technologies. We have three reportable segments: Personal Systems, Printing, and Corporate Investments. The Personal Systems segment offers commercial and consumer desktops, notebooks and workstations (including HP’s portfolio of AI PCs and workstations), thin clients, retail POS systems, displays, hybrid systems, software, solutions including endpoint security, and services. The Printing segment provides consumer and commercial printer hardware, supplies, solutions and services. Corporate Investments include certain business incubation and investment projects.
- In Personal Systems, our long-term strategic focus is on:
◦profitable growth through innovation, market segmentation and simplification of our portfolio;
◦enhanced innovation in multi-operating systems, multi-architecture, customer segments and other key attributes;
◦investing in endpoint services and solutions. We are focused on services, including Device-as-a-Service, as the market shifts to subscription-based solutions, and accelerating in attractive adjacencies such as hybrid systems; and
◦driving innovation to enable productivity and collaboration, with AI PCs and workstations playing a critical role in the transformation of how people live and work.
- In Printing, our long-term strategic focus is on:
◦offering innovative, intelligent printing experiences and subscription-based solutions designed to securely serve consumer and SMB customers through our Instant Ink Services and HP All-In Plan, as well as large enterprises through our Managed Print Services solutions;
◦providing digital printing solutions for industrial graphics segments and applications including commercial publishing, labels, packaging, and textiles; and
◦expanding our footprint in 3D printing across digital manufacturing and strategic applications.
We are focused on growing our AI PC, advanced compute solutions, hybrid systems, workforce solutions, consumer subscriptions, industrial graphics and our 3D and personalization businesses collectively at a rate faster than our core business with accretive margins in the longer term. We believe our ability to innovate will help us gain momentum in growth areas like AI PC, advanced compute solutions and hybrid systems, and we see significant opportunities to drive greater recurring revenues across Personal Systems and Printing. Our Workforce Solutions organization drives integration across our commercial services, software and security portfolio. We continue to build on strong portfolios like Instant Ink to grow our Consumer Subscription business. In Industrial Graphics, we are driving the shift from analog to digital in segments like labels and packaging. In 3D and Personalization, we are creating end-to-end solutions that we believe can capture more value with our differentiated technology.
We believe we are well positioned to lead the future of work with our competitive product lineup and enhanced portfolio of hybrid systems, remote-computing solutions, and intelligent print solutions. We are driving innovation by accelerating the delivery of AI across our product portfolio and focusing on growth opportunities in commercial, solutions, and premium consumer and gaming markets. We are consolidating all our software resources under the Technology and Innovation
Organization to evolve from a transactional hardware company to a more experience-led organization, further strengthening our ability to capture these opportunities.
We continue to experience challenges that are representative of the trends and uncertainties that may affect our industry, generally, and our business and financial results, specifically, and we expect these challenges to continue in the short-term. One set of challenges relates to the current macroeconomic environment and the adverse impact on demand for certain of our products. A second set of challenges relates to changes in the competitive landscape. Our primary competitors are exerting competitive pressure in targeted areas and are entering new markets, our emerging competitors are introducing new technologies and business models, and our alliance partners in some businesses are increasingly becoming our competitors in others. A third set of challenges relates to business model changes and our go-to-market execution in an evolving distribution and reseller landscape, with increasing online and omnichannel presence. Specific challenges we face at the segment level are set forth below.
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In Personal Systems, we face challenges with a competitive pricing environment, variability in commodity costs, and demand softness in certain geographic regions.
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In Printing, we face challenges from changing customer behaviors as well as competitors with a favorable foreign currency environment and non-original supplies (which includes imitation, refill, or remanufactured alternatives). We also obtain many Printing components from single source suppliers due to technology, availability, price, quality, or other considerations.
To address these challenges, we continue to pursue innovation with a view towards developing new products and services aligned with generating market demand and meeting the needs of our customers and partners. In addition, we continue to work on improving our operations and adapting our business models, with a particular focus on enhancing our end-to-end processes, analytics, efficiencies and simplification of our product portfolio. We also continue to work on optimizing our sales coverage models, aligning our sales incentives with our strategic goals, improving channel execution and inventory, production and backlog management, strengthening our capabilities in our areas of strategic focus, effective cost management, strengthening our pricing strategy, and developing and capitalizing on market opportunities.
Macroeconomic Environment
Our business and financial performance depend significantly on worldwide economic conditions. We face global macroeconomic challenges such as ongoing geopolitical conflicts (including the military conflict in Ukraine, continued instability in the Middle East, and tensions in the Taiwan Strait and South China Sea), uncertainty in the markets, volatility in exchange rates, inflationary trends and evolving dynamics in the global trade environment. We also experience seasonality in the sale of our products and services which may be affected by general economic conditions.
In February 2025, new, substantial tariffs have been imposed on imports to the United States from China and we have taken actions to mitigate the effects of these tariffs. Other substantial tariffs on imports to the United States from certain countries and regions, including Canada, Mexico and the European Union, have been proposed and we are focused on continuing to evaluate and implement further mitigating actions, including potential supply chain resiliency movements, cost and pricing measures, if needed, as the tariff environment evolves. Should these or other proposed or incremental tariffs, including potential retaliatory actions imposed by other countries, be implemented and sustained for an extended period of time, as proposed, enacted or otherwise, they may have a significant adverse impact to our results of operations and cash flows to the extent our efforts do not fully mitigate the effects of such tariffs.
We are also exposed to fluctuations in foreign currency exchange rates. We have a large global presence, with approximately 65% of our net revenue from outside the United States. For a further discussion of trends, uncertainties and other factors that could impact our operating results, see the section entitled “Risk Factors” in Item 1A of Part I in our Annual Report on Form 10-K for the fiscal year ended October 31, 2024.
Transformation Update
In November 2022, we announced our Future Ready Plan (the “Fiscal 2023 Plan” or “Future Ready”) to become a more digitally enabled company, focus investments on key growth opportunities and simplify our operating model. The Fiscal 2023 Plan, as amended on February 27, 2025, is expected to run through end of fiscal year 2025. The three key elements of our Fiscal 2023 Plan are digital transformation, portfolio optimization, and operational efficiency. We are on track to achieve our overall program savings.
Since announcing our Fiscal 2023 Plan, we have enhanced our digital capabilities in Workforce Solutions and continued to leverage AI to positively impact our products, solutions and operations. Additionally, we are reducing portfolio complexity,
improving continuity of supply, and increasing our forecast accuracy across our business to drive reduction in our cost of sales and operating expenses. We also continued to reduce our structural cost through headcount reductions and are on track to achieve our overall headcount reduction goal. We expect to continue to invest some of the savings into our growth areas and our people.
See “Risk Factors—Strategic and Operational Risks—We may not achieve some or all of the expected benefits of our restructuring plans and our restructuring may adversely affect our business” in Item 1A of Part I in our Annual Report on Form 10-K for the fiscal year ended October 31, 2024. For more information on our Fiscal 2023 Plan, see Note 3, “Restructuring and Other Charges,” to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.
CRITICAL ACCOUNTING ESTIMATES
MD&A is based on our Consolidated Condensed Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates, judgments and assumptions that affect the reported amounts of assets, liabilities, net revenue and expenses, and the disclosure of contingent liabilities. Management believes that there have been no significant changes during the three months ended January 31, 2025 to the items that we disclosed as our critical accounting estimates in MD&A in our Annual Report on Form 10-K for the fiscal year ended October 31, 2024.
ACCOUNTING PRONOUNCEMENTS
For a summary of recent accounting pronouncements applicable to our Consolidated Condensed Financial Statements see Note 1, “Basis of Presentation”, to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.
RESULTS OF OPERATIONS
Revenue from our international operations has historically represented, and we expect will continue to represent, a majority of our overall net revenue. As a result, our net revenue growth has been impacted, and we expect it will continue to be impacted, by fluctuations in foreign currency exchange rates. In order to provide a framework for assessing performance excluding the impact of foreign currency fluctuations, we supplement the year-over-year percentage change in net revenue with the year-over-year percentage change in net revenue on a constant currency basis, which excludes the effect of foreign currency exchange fluctuations calculated by translating current period revenues using monthly exchange rates from the comparative period and excluding any hedging impact recognized in the current period, and without adjusting for any repricing or demand impacts from changes in foreign currency exchange rates. This information is provided so that net revenue can be viewed with and without the effect of fluctuations in foreign currency exchange rates, which is consistent with how management evaluates our net revenue results and trends, as management does not believe that the excluded items are reflective of ongoing operating results. The constant currency measures are provided in addition to, and not as a substitute for, the year-over-year percentage change in net revenue on a GAAP basis. Other companies may calculate and define similarly labeled items differently, which may limit the usefulness of this measure for comparative purposes.
Results of operations in dollars and as a percentage of net revenue were as follows:
| Three months ended January 31 | |||||||||||||||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||||||||||||||
| Dollars | % of Net Revenue | Dollars | % of Net Revenue | ||||||||||||||||||||||||||||||||||||||||||||
| Dollars in millions | |||||||||||||||||||||||||||||||||||||||||||||||
| Net revenue: | |||||||||||||||||||||||||||||||||||||||||||||||
| Products | $ | 12,695 | 94.0 | % | $ | 12,419 | 94.2 | % | |||||||||||||||||||||||||||||||||||||||
| Services | 809 | 6.0 | % | 766 | 5.8 | % | |||||||||||||||||||||||||||||||||||||||||
| Total net revenue | 13,504 | 100.0 | % | 13,185 | 100.0 | % | |||||||||||||||||||||||||||||||||||||||||
| Cost of net revenue: | |||||||||||||||||||||||||||||||||||||||||||||||
| Products(1) | 10,194 | 80.3 | % | 9,871 | 79.5 | % | |||||||||||||||||||||||||||||||||||||||||
| Services(2) | 470 | 58.1 | % | 426 | 55.6 | % | |||||||||||||||||||||||||||||||||||||||||
| Total cost of net revenue | 10,664 | 79.0 | % | 10,297 | 78.1 | % | |||||||||||||||||||||||||||||||||||||||||
| Gross profit | 2,840 | 21.0 | % | 2,888 | 21.9 | % | |||||||||||||||||||||||||||||||||||||||||
| Research and development | 397 | 2.9 | % | 399 | 3.0 | % | |||||||||||||||||||||||||||||||||||||||||
| Selling, general and administrative | 1,459 | 10.8 | % | 1,383 | 10.5 | % | |||||||||||||||||||||||||||||||||||||||||
| Restructuring and other charges | 70 | 0.5 | % | 63 | 0.5 | % | |||||||||||||||||||||||||||||||||||||||||
| Acquisition and divestiture charges | 6 | — | % | 27 | 0.2 | % | |||||||||||||||||||||||||||||||||||||||||
| Amortization of intangible assets | 63 | 0.5 | % | 81 | 0.6 | % | |||||||||||||||||||||||||||||||||||||||||
| Total operating expenses | 1,995 | 14.7 | % | 1,953 | 14.8 | % | |||||||||||||||||||||||||||||||||||||||||
| Earnings from operations | 845 | 6.3 | % | 935 | 7.1 | % | |||||||||||||||||||||||||||||||||||||||||
| Interest and other, net | (141) | (1.1) | % | (142) | (1.1) | % | |||||||||||||||||||||||||||||||||||||||||
| Earnings before taxes | 704 | 5.2 | % | 793 | 6.0 | % | |||||||||||||||||||||||||||||||||||||||||
| Provision for taxes | (139) | (1.0) | % | (171) | (1.3) | % | |||||||||||||||||||||||||||||||||||||||||
| Net earnings | $ | 565 | 4.2 | % | $ | 622 | 4.7 | % | |||||||||||||||||||||||||||||||||||||||
(1)Products cost of net revenue as a percentage of net revenue is calculated as a percentage of product net revenue.
(2)Services cost of net revenue as a percentage of net revenue is calculated as a percentage of services net revenue.
Net Revenue
Products net revenue includes revenue from the sale of hardware, supplies, subscriptions and software licenses. Services net revenue includes revenue from our service offerings and support on hardware devices.
For the three months ended January 31, 2025, net revenue increased 2.4% (increased 3.3% on a constant currency basis) as compared to the prior-year period. U.S. net revenue increased 1.7% to $4.4 billion, and net revenue from international operations increased 2.8% to $9.1 billion. The increase in net revenue was driven by products net revenue due to Commercial PS and disciplined pricing as well as services net revenue due to support services on hardware devices, partially offset by unfavorable currency impacts.
A detailed discussion of the factors contributing to the changes in segment net revenue is included in “Segment Information” below.
Gross Margin
For the three months ended January 31, 2025, gross margin decreased by 0.9 percentage points primarily driven by products gross margin due to higher commodity costs and unfavorable currency impacts, partially offset by disciplined cost management including Future Ready transformation savings. Services gross margin decreased due to unfavorable mix shifts.
A detailed discussion of the factors contributing to the changes in segment gross margins is included under “Segment Information” below.
Operating Expenses
Research and Development (“R&D”)
R&D expense for the three months ended January 31, 2025 primarily relates to investments in innovation and people and remained flat.
Selling, General and Administrative (“SG&A”)
SG&A expense increased 5.5% for the three months ended January 31, 2025 primarily due to increased investment in people, partially offset by disciplined cost management including Future Ready transformation savings.
Restructuring and Other Charges
Restructuring and other charges for the three months ended January 31, 2025 primarily relate to the Fiscal 2023 Plan. For more information, see Note 3, “Restructuring and other charges”, to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.
Acquisition and Divestiture Charges
Acquisition and divestiture charges primarily include direct third-party professional and legal fees, integration and divestiture-related costs and non-cash adjustments to the fair value of certain acquired assets, such as inventory. Acquisition and divestiture charges for the three months ended January 31, 2025 decreased by $21 million primarily due to the fiscal year 2022 Poly acquisition and continuing integration progress during the prior period.
Amortization of Intangible Assets
Amortization of intangible assets decreased 22.2% for the three months ended January 31, 2025 primarily due to a portion of intangible assets from prior period acquisitions being fully amortized.
Interest and Other, Net
Interest and other, net expense for the three months ended January 31, 2025 primarily relates to interest expense on debt and factoring costs and remained flat.
Provision for Taxes
Our effective tax rate was 19.7% for the three months ended January 31, 2025, which did not materially differ from the U.S. federal statutory tax rate of 21%.
In December 2021, the Organisation for Economic Co-operation and Development (the “OECD”) introduced model rules for a global minimum tax framework known as (“BEPS Pillar Two”). Numerous governments worldwide have enacted or are in the process of enacting legislation to implement this framework. Where applicable, we plan to treat the tax as a period cost. As of January 31, 2025, we do not anticipate a material impact on our effective tax rate or cash tax payments in these jurisdictions for fiscal year 2025. Our assessment for future fiscal years may be influenced by additional legislative guidance and the enactment of further provisions within the BEPS Pillar Two framework.
Segment Information
A description of the products and services for each segment can be found in Note 2, “Segment Information” to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.
Personal Systems
| Three months ended January 31 | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | % Change | |||||||||||||||||||||||||||||||||
| Dollars in millions | |||||||||||||||||||||||||||||||||||
| Net revenue | $ | 9,224 | $ | 8,809 | 4.7 | % | |||||||||||||||||||||||||||||
| Earnings from operations | $ | 507 | $ | 537 | (5.6) | % | |||||||||||||||||||||||||||||
| Earnings from operations as a % of net revenue | 5.5 | % | 6.1 | % |
The components of net revenue and the weighted net revenue change by business unit were as follows:
| Three months ended January 31 | |||||||||||||||||||||||||||||||||||
| Net Revenue | Weighted Net Revenue Change**(1)** | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Dollars in millions | Percentage Points | ||||||||||||||||||||||||||||||||||
| Commercial PS | $ | 6,645 | $ | 6,045 | 6.8 | ||||||||||||||||||||||||||||||
| Consumer PS | 2,579 | 2,764 | (2.1) | ||||||||||||||||||||||||||||||||
| Total Personal Systems | $ | 9,224 | $ | 8,809 | 4.7 |
(1)Weighted Net Revenue Change Percentage Points measures contribution of each business unit towards overall segment revenue growth. It is calculated by dividing the change in revenue of each business unit from the prior-year period by total segment revenue for the prior-year period.
Three months ended January 31, 2025 compared with three months ended January 31, 2024
Personal Systems net revenue increased 4.7% (increased 5.3% on a constant currency basis) for the three months ended January 31, 2025. The net revenue increase was primarily due to a 6.1% increase in average selling price (“ASPs”), partially offset by a 1.4% decrease in PCs unit volume driven by Consumer PS. The increase in ASPs is primarily due to disciplined pricing and mix shifts towards Commercial PS, partially offset by unfavorable currency impacts.
Commercial PS net revenue increased 9.9% primarily due to a 5.7% increase in units driven by market recovery and a 4.1% increase in ASPs. The increase in ASPs is primarily due to favorable mix shifts towards premium and disciplined pricing, partially offset by unfavorable currency impacts.
Consumer PS net revenue decreased 6.7% primarily due to a 11.0% decrease in units as a result of our strategy to rebalance our portfolio to a more profitable mix, partially offset by 4.7% increase in ASPs. The increase in ASPs was primarily due to disciplined pricing and favorable mix shifts, partially offset by unfavorable currency impacts.
Personal Systems earnings from operations as a percentage of net revenue decreased by 0.6 percentage points. The decrease was driven by a decrease in gross margin while operating expenses as a percentage of revenue remained flat. Gross margin decreased primarily due to higher commodity costs, partially offset by favorable mix shifts towards Commercial PS and cost savings including Future Ready transformation savings.
Printing
| Three months ended January 31 | |||||||||||||||||||||||||||||||||||
| 2025 | 2024 | % Change | |||||||||||||||||||||||||||||||||
| Dollars in millions | |||||||||||||||||||||||||||||||||||
| Net revenue | $ | 4,269 | $ | 4,375 | (2.4) | % | |||||||||||||||||||||||||||||
| Earnings from operations | $ | 810 | $ | 872 | (7.1) | % | |||||||||||||||||||||||||||||
| Earnings from operations as a % of net revenue | 19.0 | % | 19.9 | % |
The components of net revenue and the weighted net revenue change by business unit were as follows:
| Three months ended January 31 | |||||||||||||||||||||||||||||||||||
| Net Revenue | Weighted Net Revenue Change**(1)** | ||||||||||||||||||||||||||||||||||
| 2025 | 2024 | ||||||||||||||||||||||||||||||||||
| Dollars in millions | Percentage Points | ||||||||||||||||||||||||||||||||||
| Supplies | $ | 2,826 | $ | 2,863 | (0.8) | ||||||||||||||||||||||||||||||
| Commercial Printing | 1,144 | 1,227 | (1.9) | ||||||||||||||||||||||||||||||||
| Consumer Printing | 299 | 285 | 0.3 | ||||||||||||||||||||||||||||||||
| Total Printing | $ | 4,269 | $ | 4,375 | (2.4) |
(1)Weighted Net Revenue Change Percentage Points measures contribution of each business unit towards overall segment revenue growth. It is calculated by dividing the change in revenue of each business unit from the prior-year period by total segment revenue for the prior-year period.
Three months ended January 31, 2025 compared with three months ended January 31, 2024
Printing net revenue decreased 2.4% (decreased 0.9% on a constant currency basis) for the three months ended January 31, 2025. The decrease in net revenue was driven by Commercial Printing as well as net unfavorable currency impacts. Net revenue for Supplies decreased 1.3%, primarily due to decline in the installed base and usage as well as unfavorable currency impacts, partially offset by disciplined pricing. Printer unit volume increased 4.7% primarily driven by Big Tank, partially offset by demand softness, especially in China. Printer hardware ASPs decreased 9.3% due to competitive pricing, unfavorable mix shifts, and unfavorable currency impacts.
Net revenue for Commercial Printing decreased 6.8%, primarily due to a 8.7% decrease in ASPs, while printer unit volumes remained flat. The decrease in ASPs was primarily driven by competitive pricing and unfavorable currency impacts.
Net revenue for Consumer Printing increased 4.9%, primarily due to a 7.3% increase in printer unit volume, specifically Big Tank, partially offset by a 2.4% decrease in ASP’s. The decrease in ASPs was primarily driven by unfavorable currency impacts and mix shifts.
Printing earnings from operations as a percentage of net revenue decreased by 0.9 percentage points, due to a decrease in gross margin while operating expenses as a percentage of revenue remained flat. The decrease in gross margin is primarily due to competitive pricing in Commercial Printing, partially offset by cost savings including Future Ready transformation savings.
Corporate Investments
The loss from operations in Corporate Investments for the three months ended January 31, 2025 was primarily due to expenses associated with our incubation projects and investments in digital enablement.
LIQUIDITY AND CAPITAL RESOURCES
We use cash generated by operations as our primary source of liquidity. We believe that current cash, cash flow from operating activities, new borrowings, available commercial paper authorization and the credit facility will be sufficient to meet HP’s operating cash requirements, planned capital expenditures, interest and principal payments on all borrowings, pension and post-retirement funding requirements, authorized share repurchases and annual dividend payments for the foreseeable future. Additionally, if suitable acquisition opportunities arise, the Company may obtain all or a portion of the required financing through additional borrowings. While our access to capital markets may be constrained and our cost of borrowing may increase under certain business, market and economic conditions, our access to a variety of funding sources to meet our liquidity needs is designed to facilitate continued access to capital resources under all such conditions. Our liquidity is subject to various risks including the risks identified in the section entitled “Risk Factors” in Item 1A of Part I in our Annual Report on Form 10-K for the fiscal year ended October 31, 2024 and the market risks identified in the section entitled “Quantitative and Qualitative Disclosures about Market Risk” in Item 3 of Part I of this report.
Amounts held outside of the U.S. are generally utilized to support non-U.S. liquidity needs and may from time to time be distributed to the U.S. Repatriations of amounts held outside the U.S. generally will not be taxable from a U.S. federal tax perspective but may be subject to state income or foreign withholding tax upon repatriation. As we evaluate the future cash needs of our operations, we may revise the amount of foreign earnings considered to be permanently reinvested in our foreign subsidiaries and how to utilize such funds, including reducing our gross debt level, or other uses.
Liquidity
Our cash, cash equivalents and restricted cash and total debt were as follows:
| As of | |||||||||||
| January 31, 2025 | October 31, 2024 | ||||||||||
| In millions | |||||||||||
| Cash and cash equivalents | $ | 2,880 | $ | 3,238 | |||||||
| Restricted cash | $ | 14 | $ | 15 | |||||||
| Total debt | $ | 9,691 | $ | 9,669 |
Our key cash flow metrics were as follows:
| Three months ended January 31 | |||||||||||
| 2025 | 2024 | ||||||||||
| In millions | |||||||||||
| Net cash provided by operating activities | $ | 374 | $ | 121 | |||||||
| Net cash used in investing activities | (300) | (228) | |||||||||
| Net cash used in financing activities | (433) | (708) | |||||||||
| Net decrease in cash, cash equivalents and restricted cash | $ | (359) | $ | (815) |
Operating Activities
Compared to the corresponding period in fiscal year 2024, net cash provided by operating activities increased $0.3 billion for the three months ended January 31, 2025, primarily due to a favorable cash conversion cycle.
Key Working Capital Metrics
Management utilizes current cash conversion cycle information to manage our working capital level. Our working capital metrics and cash conversion cycle impacts were as follows:
| As of | As of | ||||||||||||||||||||||||||||||||||||||||
| January 31, 2025 | October 31, 2024 | Change | January 31, 2024 | October 31, 2023 | Change | Y/Y Change | |||||||||||||||||||||||||||||||||||
| Days of sales outstanding in accounts receivable (“DSO”) | 28 | 33 | (5) | 26 | 28 | (2) | 2 | ||||||||||||||||||||||||||||||||||
| Days of supply in inventory (“DOS”) | 72 | 63 | 9 | 61 | 57 | 4 | 11 | ||||||||||||||||||||||||||||||||||
| Days of purchases outstanding in accounts payable (“DPO”) | (139) | (138) | (1) | (116) | (117) | 1 | (23) | ||||||||||||||||||||||||||||||||||
| Cash conversion cycle | (39) | (42) | 3 | (29) | (32) | 3 | (10) |
January 31, 2025 as compared to January 31, 2024
The cash conversion cycle is the sum of days of DSO and DOS less DPO. Items which may cause the cash conversion cycle in a particular period to differ from historical trends include, but are not limited to, changes in business mix, changes in payment terms and timing, timing and extent of receivables factoring, seasonal trends and the timing of revenue recognition and inventory purchases within the period.
DSO measures the average number of days our receivables are outstanding. DSO is calculated by dividing ending accounts receivable, net of allowance for credit losses, by a 90-day average net revenue. The increase in DSO was primarily due to extended payment terms and lower factoring.
DOS measures the average number of days from procurement to sale of our product. DOS is calculated by dividing ending inventory by a 90-day average cost of goods sold. The increase in DOS is primarily due to strategic buys in Personal Systems, purchases of finished goods to mitigate potential tariff impacts and higher in-transit shipments.
DPO measures the average number of days our accounts payable balances are outstanding. DPO is calculated by dividing ending accounts payable by a 90-day average cost of goods sold. The increase in DPO was primarily due to favorable changes in payment terms and incremental strategic buys in Personal Systems.
Investing Activities
Compared to the corresponding period in fiscal year 2024, net cash used in investing activities increased by $0.1 billion for the three months ended January 31, 2025, primarily due to higher investment in property, plant, equipment and purchased intangible assets of $0.1 billion.
Financing Activities
Compared to the corresponding period in fiscal year 2024, net cash used in financing activities decreased by $0.3 billion for the three months ended January 31, 2025, primarily due to a $0.4 billion decrease in share repurchases, partially offset by a $0.1 billion issuance of commercial paper in the prior period.
Share Repurchases and Dividends
During the three months ended January 31, 2025, HP returned $0.4 billion to the shareholders in the form of cash dividends of $0.3 billion and share repurchases of $0.1 billion. As of January 31, 2025, HP had approximately $9.2 billion remaining under the share repurchase authorizations approved by HP’s Board of Directors.
For more information on our share repurchases, see Note 10, “Stockholders’ Deficit”, to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.
Capital Resources
Debt Levels
| As of | |||||||||||||||||
| January 31, 2025 | October 31, 2024 | ||||||||||||||||
| Dollars in millions | |||||||||||||||||
| Short-term debt | $ | 1,418 | $ | 1,406 | |||||||||||||
| Long-term debt | $ | 8,273 | $ | 8,263 | |||||||||||||
| Weighted-average interest rate | 4.5 | % | 4.5 | % |
We maintain debt levels that we establish through consideration of a number of factors, including cash flow expectations, cash requirements for operations, investment plans (including acquisitions), share repurchase activities, our cost of capital and targeted capital structure.
Our weighted-average interest rate reflects the effective rate on our borrowings prevailing during the period and reflects the effect of interest rate swaps. For more information on our interest rate swaps, see Note 8, “Financial Instruments”, to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.
As of January 31, 2025, we maintained a $5.0 billion sustainability-linked senior unsecured committed revolving credit facility which will be available until August 1, 2029. Funds borrowed under the revolving credit facility may be used for general corporate purposes.
Available Borrowing Resources
As of January 31, 2025, we had available borrowing resources of $1.0 billion from uncommitted lines of credit in addition to funds available under the revolving credit facility.
For more information on our borrowings, see Note 9, “Borrowings”, to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.
Credit Ratings
Our credit risk is evaluated by major independent rating agencies based upon publicly available information as well as information they obtain during our ongoing discussions. While we currently do not have any rating downgrade triggers that would accelerate the maturity of a material amount of our debt, a downgrade from our current credit rating may increase the cost of borrowing under our credit facility, reduce market capacity for our commercial paper, require the posting of additional collateral under some of our derivative contracts and may have a negative impact on our liquidity and capital position and our contractual business going forward, depending on the extent of such downgrade. We can access alternative sources of funding, including drawdowns under our credit facility, if necessary, to offset potential reductions in the market capacity for our commercial paper.
CONTRACTUAL AND OTHER OBLIGATIONS
Retirement and Post-Retirement Benefit Plan Contributions
As of January 31, 2025, we anticipate making contributions for the remainder of fiscal year 2025 of approximately $28.0 million to our non-U.S. pension plans and $23.0 million to cover benefit payments to U.S. non-qualified pension plan participants and $2.0 million to cover benefit claims for our post-retirement benefit plans. Our policy is to fund our pension plans so that we meet the minimum contribution required by local government, funding and taxing authorities. For more information on our retirement and post-retirement benefit plans, see Note 4, “Retirement and Post-Retirement Benefit Plans”, to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.
Cost Savings Plan
As a result of our approved restructuring plans, we expect to make future cash payments of approximately $0.4 billion in fiscal year 2025. For more information on our restructuring activities that are part of our cost improvements, see Note 3, “Restructuring and Other Charges”, to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.
Uncertain Tax Positions
As of January 31, 2025, we had approximately $1.1 billion of recorded liabilities and related interest and penalties pertaining to uncertain tax positions. We are unable to make a reasonable estimate as to when cash settlement with the tax authorities might occur due to the uncertainties related to these tax matters. Payments of these liabilities would result from settlements with taxing authorities. For more information on our uncertain tax positions, see Note 5, “Taxes on Earnings”, to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.
Off-Balance Sheet Arrangements
As part of our ongoing business, we have not participated in transactions that generate material relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, which would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
HP utilizes certain third-party arrangements in the normal course of business as part of HP’s cash and liquidity management and also to provide liquidity to certain partners to facilitate their working capital requirements. For more information on our third-party short-term financing arrangements, see Note 6, “Supplementary Financial Information”, to the Consolidated Condensed Financial Statements in Item 1 of Part I of this report, which is incorporated herein by reference.
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