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HP Inc. Reports Fiscal 2017 Second Quarter Results

PALO ALTO, CA -- (Marketwired) -- May 24, 2017 -- HP (NYSE: HPQ)

                                                                            
HP Inc.'s fiscal 2017 second quarter financial performance                  
                                                                            
                                             Q2 FY17     Q2 FY16      Y/Y   
----------------------------------------------------------------------------
GAAP net revenue ($B)                      $     12.4  $     11.6         7%
GAAP operating margin from continuing                                       
 operations                                      6.6%        7.3%  (0.7 pts)
GAAP net earnings from continuing                                           
 operations ($B)                           $      0.6  $      0.7      (15)%
GAAP diluted net earnings per share from                                    
 continuing operations                     $     0.33  $     0.38      (13)%
Non-GAAP operating margin                        7.6%        7.8%  (0.2 pts)
Non-GAAP net earnings ($B)                 $      0.7  $      0.7       (2)%
Non-GAAP diluted net earnings per share    $     0.40  $     0.41       (2)%
Cash provided by operating activities ($B) $      0.5  $      1.6      (71)%
                                                                            

Notes to table
Information about HP Inc.'s use of non-GAAP financial information is provided under "Use of non-GAAP financial information" below.

Net revenue and EPS results
HP Inc. ("HP") announced second quarter net revenue of $12.4 billion, up 7% as reported and in constant currency from the prior-year period.

Second quarter GAAP diluted net earnings per share ("EPS") from continuing operations was $0.33, down from $0.38 in the prior-year period and within the previously provided outlook of $0.32 to $0.35. Second quarter non-GAAP diluted net EPS was $0.40, down from $0.41 in the prior-year period and within the previously provided outlook of $0.37 to $0.40. Second quarter non-GAAP net earnings and non-GAAP diluted net EPS exclude after-tax adjustments of $126 million, or $0.07 per share, related to restructuring and other charges, acquisition-related charges, defined benefit plan settlement charges, amortization of intangible assets, non-operating retirement-related credits/(charges) and net tax indemnifications.

"This was a breakthrough quarter for HP, and marks the first time both Personal Systems and Print have grown in the same quarter since 2010. We're delivering solid performance across our portfolio, in all regions, and on key financial metrics," said Dion Weisler, President and CEO, HP Inc. "Our team is taking profitable share, out-executing our competitors and delivering some of the best innovation in HP's history. It's clear our reinvention is paying off."

Asset management
HP's cash provided by operating activities in the second quarter was $0.5 billion. Accounts receivable ended the quarter at $3.8 billion, up 2 days quarter over quarter to 27 days. Inventory ended the quarter at $4.8 billion, up 4 days quarter over quarter to 43 days. Accounts payable ended the quarter at $11.1 billion, up 6 days quarter over quarter to 100 days. HP's dividend payment of $0.1327 per share in the second quarter resulted in cash usage of $0.2 billion. HP also utilized $0.2 billion of cash during the quarter to repurchase approximately 13.3 million shares of common stock in the open market. HP exited the quarter with $6.2 billion in gross cash, which includes cash and cash equivalents, short-term investments, and certain liquid long-term investments.

Fiscal 2017 second quarter segment results

Outlook
For the fiscal 2017 third quarter, HP estimates GAAP diluted net EPS from continuing operations to be in the range of $0.36 to $0.40 and non-GAAP diluted net EPS to be in the range of $0.40 to $0.43. Fiscal 2017 third quarter non-GAAP diluted net EPS estimates exclude $0.03 to $0.04 per diluted share, primarily related to restructuring and other charges, acquisition-related charges, defined benefit plan settlement charges, amortization of intangible assets, non-operating retirement-related credits/(charges), net tax indemnifications, net valuation allowances and discontinued operations.

For fiscal 2017, HP estimates GAAP diluted net EPS from continuing operations to be in the range of $1.42 to $1.52 and raises non-GAAP diluted net EPS to be in the range of $1.59 to $1.66. Fiscal 2017 non-GAAP diluted net EPS estimates exclude $0.14 to $0.17 per diluted share, primarily related to restructuring and other charges, acquisition-related charges, defined benefit plan settlement charges, amortization of intangible assets, non-operating retirement-related credits/(charges), net tax indemnifications, net valuation allowances and discontinued operations.

More information on HP's earnings, including additional financial analysis and an earnings overview presentation, is available on HP's Investor Relations website at www.hp.com/investor/home.

HP's FY17 Q2 earnings conference call is accessible via an audio webcast at
www.hp.com/investor/2017Q2Webcast.

About HP Inc.
HP Inc. creates technology that makes life better for everyone, everywhere. Through our portfolio of printers, PCs, mobile devices, solutions, and services, we engineer experiences that amaze. More information about HP Inc. (NYSE: HPQ) is available at http://www.hp.com.

Use of non-GAAP financial information
To supplement HP's consolidated condensed financial statements presented on a generally accepted accounting principles ("GAAP") basis, HP provides net revenue on a constant currency basis, non-GAAP operating margin, non-GAAP tax rate, non-GAAP net earnings, non-GAAP diluted net earnings per share and gross cash financial measures. HP also provides forecasts of non-GAAP diluted net earnings per share. A reconciliation of the adjustments to GAAP results for this quarter and prior periods is included in the tables below or elsewhere in the materials accompanying this news release. In addition, an explanation of the ways in which HP's management uses these non-GAAP measures to evaluate its business, the substance behind HP's decision to use these non-GAAP measures, the material limitations associated with the use of these non-GAAP measures, the manner in which HP's management compensates for those limitations, and the substantive reasons why HP's management believes that these non-GAAP measures provide useful information to investors is included under "Use of non-GAAP financial measures" after the tables below. This additional non-GAAP financial information is not meant to be considered in isolation or as a substitute for net revenue, operating profit, operating margin, net earnings from continuing operations, diluted net earnings per share from continuing operations or cash and cash equivalents prepared in accordance with GAAP.

Forward-looking statements
This news release contains forward-looking statements that involve risks, uncertainties and assumptions. If the risks or uncertainties ever materialize or the assumptions prove incorrect, the results of HP may differ materially from those expressed or implied by such forward-looking statements and assumptions.

All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including but not limited to any projections of net revenue, margins, expenses, effective tax rates, net earnings, net earnings per share, cash flows, benefit plan funding, deferred taxes, share repurchases, foreign currency exchange rates or other financial items; any projections of the amount, timing or impact of cost savings or restructuring and other charges; any statements of the plans, strategies and objectives of management for future operations, including the execution of the restructuring plans and any resulting cost savings, net revenue or profitability improvements; any statements concerning the expected development, performance, market share or competitive performance relating to products or services; any statements regarding current or future macroeconomic trends or events and the impact of those trends and events on HP and its financial performance; any statements regarding pending investigations, claims or disputes; any statements of expectation or belief, including with respect to the timing and expected benefits of acquisitions and other business combination and investment transactions; and any statements of assumptions underlying any of the foregoing.

Risks, uncertainties and assumptions include the need to address the many challenges facing HP's businesses; the competitive pressures faced by HP's businesses; risks associated with executing HP's strategy; the impact of macroeconomic and geopolitical trends and events; the need to manage third-party suppliers and the distribution of HP's products and the delivery of HP's services effectively; the protection of HP's intellectual property assets, including intellectual property licensed from third parties; risks associated with HP's international operations; the development and transition of new products and services and the enhancement of existing products and services to meet customer needs and respond to emerging technological trends; the execution and performance of contracts by HP and its suppliers, customers, clients and partners; the hiring and retention of key employees; integration and other risks associated with business combination and investment transactions; the results of the restructuring plans, including estimates and assumptions related to the cost (including any possible disruption of HP's business) and the anticipated benefits of the restructuring plans; the resolution of pending investigations, claims and disputes; and other risks that are described in HP's Annual Report on Form 10-K for the fiscal year ended October 31, 2016, and HP's other filings with the Securities and Exchange Commission.

As in prior periods, the financial information set forth in this release, including any tax-related items, reflects estimates based on information available at this time. While HP believes these estimates to be reasonable, these amounts could differ materially from reported amounts in HP's Quarterly Report on Form 10-Q for the fiscal quarter ended April 30, 2017 and HP's other filings with the Securities and Exchange Commission. HP assumes no obligation and does not intend to update these forward-looking statements. HP's Investor Relations website at www.hp.com/investor/home contains a significant amount of information about HP, including financial and other information for investors. HP encourages investors to visit its website from time to time, as information is updated and new information is posted.

                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
               CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS                
                                (Unaudited)                                 
                  (In millions, except per share amounts)                   
                                                                            
                                                 Three months ended         
                                        ----------------------------------- 
                                         April 30,  January 31,   April 30, 
                                           2017         2017        2016    
                                        ----------  -----------  ---------- 
Net revenue                             $   12,385  $    12,684  $   11,588 
Costs and expenses:                                                         
  Cost of revenue                           10,002       10,436       9,338 
  Research and development                     314          296         301 
  Selling, general and administrative        1,087        1,017       1,002 
  Restructuring and other charges              140           63         100 
  Acquisition-related charges                   20           16          -- 
  Amortization of intangible assets              1           --           6 
  Defined benefit plan settlement                                           
   charges                                       3           --          -- 
                                        ----------  -----------  ---------- 
    Total costs and expenses                11,567       11,828      10,747 
                                        ----------  -----------  ---------- 
                                                                            
Earnings from continuing operations            818          856         841 
Interest and other, net                        (64)         (81)         (5)
                                        ----------  -----------  ---------- 
Earnings from continuing operations                                         
 before taxes                                  754          775         836 
Provision for taxes                           (195)        (164)       (176)
                                        ----------  -----------  ---------- 
Net earnings from continuing operations        559          611         660 
Net loss from discontinued operations,                                      
 net of taxes                                   --           --         (31)
                                        ----------  -----------  ---------- 
Net earnings                            $      559  $       611  $      629 
                                        ==========  ===========  ========== 
                                                                            
Net earnings (loss) per share:                                              
Basic                                                                       
  Continuing operations                 $     0.33  $      0.36  $     0.38 
  Discontinued operations                       --           --       (0.01)
                                        ----------  -----------  ---------- 
    Total basic net earnings per share  $     0.33  $      0.36  $     0.37 
                                        ==========  ===========  ========== 
Diluted                                                                     
  Continuing operations                 $     0.33  $      0.36  $     0.38 
  Discontinued operations                       --           --       (0.02)
                                        ----------  -----------  ---------- 
    Total diluted net earnings per                                          
     share                              $     0.33  $      0.36  $     0.36 
                                        ==========  ===========  ========== 
                                                                            
Cash dividends declared per share       $       --  $      0.27  $       -- 
                                                                            
Weighted-average shares used to compute                                     
 net earnings (loss) per share:                                             
  Basic                                      1,688        1,704       1,720 
  Diluted                                    1,709        1,721       1,731 
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
               CONSOLIDATED CONDENSED STATEMENTS OF EARNINGS                
                                (Unaudited)                                 
                  (In millions, except per share amounts)                   
                                                                            
                                                 Six months ended April 30, 
                                                 -------------------------- 
                                                     2017          2016     
                                                 ------------  ------------ 
Net revenue                                      $     25,069  $     23,834 
Costs and expenses:                                                         
  Cost of revenue                                      20,438        19,299 
  Research and development                                610           593 
  Selling, general and administrative                   2,104         2,039 
  Restructuring and other charges                         203           120 
  Acquisition-related charges                              36            -- 
  Amortization of intangible assets                         1            14 
  Defined benefit plan settlement charges                   3            -- 
                                                 ------------  ------------ 
    Total costs and expenses                           23,395        22,065 
                                                 ------------  ------------ 
                                                                            
Earnings from continuing operations                     1,674         1,769 
Interest and other, net                                  (145)          (99)
                                                 ------------  ------------ 
Earnings from continuing operations before taxes        1,529         1,670 
Provision for taxes                                      (359)         (360)
                                                 ------------  ------------ 
Net earnings from continuing operations                 1,170         1,310 
Net loss from discontinued operations, net of                               
 taxes                                                     --           (89)
                                                 ------------  ------------ 
Net earnings                                     $      1,170  $      1,221 
                                                 ============  ============ 
                                                                            
Net earnings (loss) per share:                                              
Basic                                                                       
  Continuing operations                          $       0.69  $       0.75 
  Discontinued operations                                  --         (0.05)
                                                 ------------  ------------ 
    Total basic net earnings per share           $       0.69  $       0.70 
                                                 ============  ============ 
Diluted                                                                     
  Continuing operations                          $       0.68  $       0.75 
  Discontinued operations                                  --         (0.06)
                                                 ------------  ------------ 
    Total diluted net earnings per share         $       0.68  $       0.69 
                                                 ============  ============ 
                                                                            
Cash dividends declared per share                $       0.27  $       0.25 
                                                                            
Weighted-average shares used to compute net                                 
 earnings (loss) per share:                                                 
  Basic                                                 1,696         1,748 
  Diluted                                               1,716         1,758 
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
        ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,         
            OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE             
                                (Unaudited)                                 
                  (In millions, except per share amounts)                   
                                                                            
                  --------------------------------------------------------- 
                    Three     Diluted   Three   Diluted    Three    Diluted 
                    months      net    months     net      months     net   
                    ended    earnings   ended  earnings    ended   earnings 
                  April 30,     per    January    per    April 30,    per   
                     2017      share  31, 2017   share      2016     share  
                  ---------  -------- -------- --------  --------- -------- 
GAAP net earnings                                                           
 from continuing                                                            
 operations       $     559  $   0.33 $    611 $   0.36  $     660 $   0.38 
Non-GAAP                                                                    
 adjustments:                                                               
  Restructuring                                                             
   and other                                                                
   charges              140      0.08       63     0.04        100     0.06 
  Acquisition-                                                              
   related charges       20      0.01       16     0.01         --       -- 
  Amortization of                                                           
   intangible                                                               
   assets                 1        --       --       --          6       -- 
  Defined benefit                                                           
   plan settlement                                                          
   charges                3        --       --       --         --       -- 
  Non-operating                                                             
   retirement-                                                              
   related credits      (35)    (0.02)     (32)   (0.02)       (40)   (0.02)
  Tax                                                                       
   indemnification                                                          
   credits               (5)       --       (9)   (0.01)        (8)      -- 
  Adjustments for                                                           
   taxes                  2        --       (3)      --        (16)   (0.01)
                  ---------  -------- -------- --------  --------- -------- 
Non-GAAP net                                                                
 earnings         $     685  $   0.40 $    646 $   0.38  $     702 $   0.41 
                  =========  ======== ======== ========  ========= ======== 
                                                                            
GAAP earnings from                                                          
 continuing                                                                 
 operations       $     818           $    856           $     841          
Non-GAAP                                                                    
 adjustments:                                                               
  Restructuring                                                             
   and other                                                                
   charges              140                 63                 100          
  Acquisition-                                                              
   related charges       20                 16                  --          
  Amortization of                                                           
   intangible                                                               
   assets                 1                 --                   6          
  Defined benefit                                                           
   plan settlement                                                          
   charges                3                 --                  --          
  Non-operating                                                             
   retirement-                                                              
   related credits      (35)               (32)                (40)         
                  ---------           --------           ---------          
Non-GAAP earnings $     947           $    903           $     907          
                  =========           ========           =========          
                                                                            
GAAP operating                                                              
 margin from                                                                
 continuing                                                                 
 operations               7%                 7%                  7%         
Non-GAAP                                                                    
 adjustments              1%                --                   1%         
                  ---------           --------           ---------          
Non-GAAP operating                                                          
 margin                   8%                 7%                  8%         
                  =========           ========           =========          
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
        ADJUSTMENTS TO GAAP NET EARNINGS, EARNINGS FROM OPERATIONS,         
            OPERATING MARGIN AND DILUTED NET EARNINGS PER SHARE             
                                (Unaudited)                                 
                  (In millions, except per share amounts)                   
                                                                            
                                 ------------------------------------------ 
                                    Six                   Six               
                                   months    Diluted     months    Diluted  
                                   ended       net       ended       net    
                                 April 30,  earnings   April 30,  earnings  
                                    2017    per share     2016    per share 
                                 ---------  ---------  ---------  --------- 
GAAP net earnings from                                                      
 continuing operations           $   1,170  $    0.68      1,310  $    0.75 
Non-GAAP adjustments:                                                       
  Restructuring and other                                                   
   charges                             203       0.12        120       0.07 
  Acquisition-related charges           36       0.02         --         -- 
  Amortization of intangible                                                
   assets                                1         --         14       0.01 
  Non-operating retirement-                                                 
   related credits                     (67)     (0.04)       (80)     (0.05)
  Defined benefit plan                                                      
   settlement charges                    3         --         --         -- 
  Tax indemnification credits          (14)        --         (8)        -- 
  Adjustments for taxes                 (1)        --         (9)     (0.01)
                                 ---------  ---------  ---------  --------- 
Non-GAAP net earnings            $   1,331  $    0.78  $   1,347  $    0.77 
                                 =========  =========  =========  ========= 
                                                                            
GAAP earnings from continuing                                               
 operations                      $   1,674             $   1,769            
Non-GAAP adjustments:                                                       
  Restructuring and other                                                   
   charges                             203                   120            
  Acquisition-related charges           36                    --            
  Amortization of intangible                                                
   assets                                1                    14            
  Non-operating retirement-                                                 
   related credits                     (67)                  (80)           
  Defined benefit plan                                                      
   settlement charges                    3                    --            
                                 ---------             ---------            
Non-GAAP earnings                $   1,850             $   1,823            
                                 =========             =========            
                                                                            
GAAP operating margin from                                                  
 continuing operations                   6%                    7%           
Non-GAAP adjustments                     1%                    1%           
                                 ---------             ---------            
Non-GAAP operating margin                7%                    8%           
                                 =========             =========            
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                   CONSOLIDATED CONDENSED BALANCE SHEETS                    
                                (Unaudited)                                 
                               (In millions)                                
                                                                            
                                                            As of           
                                                 -------------------------- 
                                                   April 30,    October 31, 
                                                     2017          2016     
                                                 ------------  ------------ 
ASSETS                                                                      
Current assets:                                                             
  Cash and cash equivalents                      $      6,223  $      6,288 
  Accounts receivable                                   3,771         4,114 
  Inventory                                             4,756         4,484 
  Other current assets                                  3,552         3,582 
                                                 ------------  ------------ 
    Total current assets                               18,302        18,468 
                                                 ------------  ------------ 
Property, plant and equipment                           1,661         1,736 
Goodwill                                                5,622         5,622 
Other non-current assets(a)                             3,101         3,161 
                                                 ------------  ------------ 
Total assets                                     $     28,686  $     28,987 
                                                 ============  ============ 
                                                                            
LIABILITIES AND STOCKHOLDERS' DEFICIT                                       
Current liabilities:                                                        
  Notes payable and short-term borrowings        $        110  $         78 
  Accounts payable                                     11,079        11,103 
  Employee compensation and benefits                      665           759 
  Taxes on earnings                                       221           231 
  Deferred revenue                                        980           919 
  Other accrued liabilities                             5,549         5,718 
                                                 ------------  ------------ 
    Total current liabilities                          18,604        18,808 
                                                 ------------  ------------ 
Long-term debt(a)                                       6,710         6,735 
Other non-current liabilities                           7,327         7,333 
Stockholders' deficit                                  (3,955)       (3,889)
                                                 ------------  ------------ 
Total liabilities and stockholders' deficit      $     28,686  $     28,987 
                                                 ============  ============ 
                                                                            
(a) Pursuant to the adoption of Accounting Standard Update 2015-03          
    "Simplifying the Presentation of Debt Issuance Costs" in Q1 FY17, debt  
    issuance costs has been reclassified from other non-current assets to   
    long-term debt. The change has been adopted including prior comparative 
    periods.                                                                
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
              CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS               
                                (Unaudited)                                 
                               (In millions)                                
                                                                            
                                               Three months ended April 30, 
                                               ---------------------------- 
                                                    2017           2016     
                                               -------------  ------------- 
                                                                            
Cash flows from operating activities:(a)                                    
  Net earnings                                 $         559  $         629 
  Adjustments to reconcile net earnings to net                              
   cash provided by operating activities:                                   
    Depreciation and amortization                         89             85 
    Stock-based compensation expense                      48             40 
    Restructuring and other charges                      140            100 
    Deferred taxes on earnings                           138             74 
    Other, net                                             2            (76)
    Changes in operating assets and                                         
     liabilities, net of acquisitions:                                      
      Accounts receivable                               (325)           190 
      Inventory                                         (203)           520 
      Accounts payable                                   142             41 
      Taxes on earnings                                 (102)            29 
      Restructuring and other                            (46)           (37)
      Other assets and liabilities                        13            (16)
                                               -------------  ------------- 
        Net cash provided by operating                                      
         activities                                      455          1,579 
                                               -------------  ------------- 
Cash flows from investing activities:                                       
  Investment in property, plant and equipment            (75)           (86)
  Purchases of available-for-sale securities                                
   and other investments                                 (80)          (122)
  Maturities and sales of available-for-sale                                
   securities and other investments                       --              3 
  Proceeds from business divestiture                      --             61 
                                               -------------  ------------- 
        Net cash used in investing activities           (155)          (144)
                                               -------------  ------------- 
Cash flows from financing activities:                                       
  Short-term borrowings with original                                       
   maturities less than 90 days, net                      39             13 
  Payment of debt                                        (17)            (3)
  Settlement of cash flow hedges                          (5)            17 
  Net payments related to stock-based award                                 
   activities                                             22              4 
  Repurchase of common stock                            (223)          (305)
  Cash dividends paid                                   (224)          (213)
                                               -------------  ------------- 
        Net cash used in financing activities           (408)          (487)
                                               -------------  ------------- 
(Decrease) increase in cash and cash                                        
 equivalents                                            (108)           948 
Cash and cash equivalents at beginning of                                   
 period                                                6,331          3,688 
                                               -------------  ------------- 
Cash and cash equivalents at end of period     $       6,223  $       4,636 
                                               =============  ============= 
                                                                            
(a) Pursuant to the adoption of Accounting Standard Update 2016-09          
    "Improvements to Employee Share-Based Payment Accounting" in Q1 FY17,   
    excess income tax benefit from stock-based compensation expense is no   
    longer separated from operating income tax cash flows and reported as   
    financing activity. In addition, income taxes paid on shares withheld is
    now required to be presented as financing activity as opposed to        
    operating activity. The change has been adopted including prior         
    comparative periods.                                                    
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
              CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS               
                                (Unaudited)                                 
                               (In millions)                                
                                                                            
                                                 Six months ended April 30, 
                                                 -------------------------- 
                                                     2017          2016     
                                                 ------------  ------------ 
                                                                            
Cash flows from operating activities:(a)                                    
  Net earnings                                   $      1,170  $      1,221 
  Adjustments to reconcile net earnings to net                              
   cash provided by operating activities:                                   
    Depreciation and amortization                         173           164 
    Stock-based compensation expense                      123           101 
    Restructuring and other charges                       203           120 
    Deferred taxes on earnings                            205           600 
    Other, net                                             21           (46)
    Changes in operating assets and liabilities,                            
     net of acquisitions:                                                   
      Accounts receivable                                 289           894 
      Inventory                                          (272)          722 
      Accounts payable                                     26        (1,063)
      Taxes on earnings                                  (177)         (505)
      Restructuring and other                             (97)          (68)
      Other assets and liabilities                       (442)         (663)
                                                 ------------  ------------ 
        Net cash provided by operating                                      
         activities                                     1,222         1,477 
                                                 ------------  ------------ 
Cash flows from investing activities:                                       
  Investment in property, plant and equipment            (176)         (206)
  Proceeds from sale of property, plant and                                 
   equipment                                               69            -- 
  Purchases of available-for-sale securities and                            
   other investments                                     (136)         (122)
  Maturities and sales of available-for-sale                                
   securities and other investments                         2            12 
  Proceeds from business divestiture                       --            61 
                                                 ------------  ------------ 
        Net cash used in investing activities            (241)         (255)
                                                 ------------  ------------ 
Cash flows from financing activities:                                       
  Short-term borrowings with original maturities                            
   less than 90 days, net                                  74            39 
  Proceeds from debt, net of issuance costs                 5             4 
  Payment of debt                                         (44)       (2,158)
  Settlement of cash flow hedges                           (9)            6 
  Net transfer of cash and cash equivalents to                              
   Hewlett Packard Enterprise Company                      --       (10,375)
  Net payments related to stock-based award                                 
   activities                                             (12)            1 
  Repurchase of common stock                             (609)       (1,102)
  Cash dividends paid                                    (451)         (434)
                                                 ------------  ------------ 
        Net cash used in financing activities          (1,046)      (14,019)
                                                 ------------  ------------ 
Decrease in cash and cash equivalents                     (65)      (12,797)
Cash and cash equivalents at beginning of period        6,288        17,433 
                                                 ------------  ------------ 
Cash and cash equivalents at end of period       $      6,223  $      4,636 
                                                 ============  ============ 
                                                                            
(a) Pursuant to the adoption of Accounting Standard Update 2016-09          
    "Improvements to Employee Share-Based Payment Accounting" in Q1 FY17,   
    excess income tax benefit from stock-based compensation expense is no   
    longer separated from operating income tax cash flows and reported as   
    financing activity. In addition, income taxes paid on shares withheld is
    now required to be presented as financing activity as opposed to        
    operating activity. The change has been adopted including prior         
    comparative periods.                                                    
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                            SEGMENT INFORMATION                             
                                (Unaudited)                                 
                               (In millions)                                
                                                                            
                                                 Three months ended         
                                        ----------------------------------- 
                                         April 30,  January 31,   April 30, 
                                           2017         2017        2016    
                                        ----------  -----------  ---------- 
Net revenue:(a)                                                             
  Personal Systems                      $    7,662  $     8,224  $    6,990 
  Printing                                   4,743        4,483       4,637 
  Corporate Investments                          3            2           3 
                                        ----------  -----------  ---------- 
    Total segments                          12,408       12,709      11,630 
  Intersegment net revenue eliminations                                     
   and other                                   (23)         (25)        (42)
                                        ----------  -----------  ---------- 
  Total net revenue                     $   12,385  $    12,684  $   11,588 
                                        ==========  ===========  ========== 
                                                                            
Earnings from continuing operations                                         
 before taxes:(a)                                                           
  Personal Systems                      $      244  $       313  $      242 
  Printing                                     825          716         801 
  Corporate Investments                        (26)         (23)         (8)
                                        ----------  -----------  ---------- 
    Total segment earnings from                                             
     operations                              1,043        1,006       1,035 
  Corporate costs and eliminations             (48)         (28)        (88)
  Stock-based compensation expense             (48)         (75)        (40)
  Restructuring and other charges             (140)         (63)       (100)
  Acquisition-related charges                  (20)         (16)         -- 
  Amortization of intangible assets             (1)          --          (6)
  Defined benefit plan settlement                                           
   charges                                      (3)          --          -- 
  Non-operating retirement-related                                          
   credits                                      35           32          40 
  Interest and other, net                      (64)         (81)         (5)
                                        ----------  -----------  ---------- 
    Total earnings from continuing                                          
     operations before taxes            $      754  $       775  $      836 
                                        ==========  ===========  ========== 
                                                                            
(a) Effective at the beginning of its first quarter of fiscal year 2017, HP 
    implemented an organizational change to align its business unit         
    financial reporting more closely with its current business structure.   
    The organizational change resulted in transfer of a portion of LaserJet 
    printers from Commercial to Consumer within the Printing segment. HP    
    reflected this change to its business unit information in prior         
    reporting periods on an as-if basis which resulted in reclassification  
    of revenues between the Commercial and Consumer business units of       
    Printing. The reporting change had no impact to previously reported     
    segment net revenue, consolidated net revenue, earnings from continuing 
    operations, net earnings or net earnings per share.                     
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                            SEGMENT INFORMATION                             
                                (Unaudited)                                 
                               (In millions)                                
                                                                            
                                                 Six months ended April 30, 
                                                 -------------------------- 
                                                     2017          2016     
                                                 ------------  ------------ 
Net revenue:(a)                                                             
  Personal Systems                               $     15,886  $     14,457 
  Printing                                              9,226         9,279 
  Corporate Investments                                     5             6 
                                                 ------------  ------------ 
    Total segments                                     25,117        23,742 
  Intersegment net revenue eliminations and                                 
   other                                                  (48)           92 
                                                 ------------  ------------ 
  Total net revenue                              $     25,069  $     23,834 
                                                 ============  ============ 
                                                                            
Earnings from continuing operations before                                  
 taxes:(a)                                                                  
  Personal Systems                               $        557  $        471 
  Printing                                              1,541         1,588 
  Corporate Investments                                   (49)          (31)
                                                 ------------  ------------ 
    Total segment earnings from operations              2,049         2,028 
  Corporate costs and eliminations                        (76)         (104)
  Stock-based compensation expense                       (123)         (101)
  Restructuring and other charges                        (203)         (120)
  Acquisition-related charges                             (36)           -- 
  Amortization of intangible assets                        (1)          (14)
  Defined benefit plan settlement charges                  (3)           -- 
  Non-operating retirement-related credits                 67            80 
  Interest and other, net                                (145)          (99)
                                                 ------------  ------------ 
    Total earnings from continuing operations                               
     before taxes                                $      1,529  $      1,670 
                                                 ============  ============ 
                                                                            
(a) Effective at the beginning of its first quarter of fiscal year 2017, HP 
    implemented an organizational change to align its business unit         
    financial reporting more closely with its current business structure.   
    The organizational change resulted in transfer of a portion of LaserJet 
    printers from Commercial to Consumer within the Printing segment. HP    
    reflected this change to its business unit information in prior         
    reporting periods on an as-if basis which resulted in reclassification  
    of revenues between the Commercial and Consumer business units of       
    Printing. The reporting change had no impact to previously reported     
    segment net revenue, consolidated net revenue, earnings from continuing 
    operations, net earnings or net earnings per share.                     
                                                                            
                                                                            
                                                                            
                         HP INC. AND SUBSIDIARIES                           
                     SEGMENT/BUSINESS UNIT INFORMATION                      
                                (Unaudited)                                 
                               (In millions)                                
                                                                            
                                  Three months ended           Change (%)   
                          ---------------------------------  -------------  
                          April 30,  January 31,  April 30,                 
                             2017        2017        2016     Q/Q     Y/Y   
                          ---------  -----------  ---------  -----   -----  
Net revenue:(a)                                                             
Personal Systems                                                            
  Notebooks               $   4,493  $     4,890  $   3,838     (8)%    17% 
  Desktops                    2,377        2,534      2,402     (6)%    (1)%
  Workstations                  495          491        461      1%      7% 
  Other                         297          309        289     (4)%     3% 
                          ---------  -----------  ---------                 
    Total Personal Systems    7,662        8,224      6,990     (7)%    10% 
                          ---------  -----------  ---------                 
Printing                                                                    
  Supplies                    3,157        3,007      3,099      5%      2% 
  Commercial Hardware           982          886        957     11%      3% 
  Consumer Hardware             604          590        581      2%      4% 
                          ---------  -----------  ---------                 
    Total Printing            4,743        4,483      4,637      6%      2% 
                          ---------  -----------  ---------                 
Corporate Investments             3            2          3     50%     --  
                          ---------  -----------  ---------                 
    Total segments           12,408       12,709     11,630     (2)%     7% 
                          ---------  -----------  ---------                 
Intersegment net revenue                                                    
 eliminations and other(b)      (23)         (25)       (42)    NM      NM  
                          ---------  -----------  ---------                 
Total net revenue         $  12,385  $    12,684  $  11,588     (2)%     7% 
                          =========  ===========  =========                 
                                                                            
(a) Effective at the beginning of its first quarter of fiscal year 2017, HP 
    implemented an organizational change to align its business unit         
    financial reporting more closely with its current business structure.   
    The organizational change resulted in transfer of a portion of LaserJet 
    printers from Commercial to Consumer within the Printing segment. HP    
    reflected this change to its business unit information in prior         
    reporting periods on an as-if basis which resulted in reclassification  
    of revenues between the Commercial and Consumer business units of       
    Printing. The reporting change had no impact to previously reported     
    segment net revenue, consolidated net revenue, earnings from continuing 
    operations, net earnings or net earnings per share.                     
                                                                            
(b) "NM"- Not Meaningful.                                                   
                                                                            
                                                                            
                                                                            
                         HP INC. AND SUBSIDIARIES                           
                     SEGMENT/BUSINESS UNIT INFORMATION                      
                                (Unaudited)                                 
                               (In millions)                                
                                                                            
                                             Six months ended               
                                                April 30,       Change (%)  
                                          --------------------------------  
                                             2017       2016        Y/Y     
                                          ---------  ---------- ----------  
Net revenue:(a)                                                             
Personal Systems                                                            
  Notebooks                               $   9,383  $    8,043         17% 
  Desktops                                    4,911       4,929         --% 
  Workstations                                  986         905          9% 
  Other                                         606         580          4% 
                                          ---------  ----------             
    Total Personal Systems                   15,886      14,457         10% 
                                          ---------  ----------             
Printing                                                                    
  Supplies                                    6,164       6,200         (1)%
  Commercial Hardware                         1,868       1,921         (3)%
  Consumer Hardware                           1,194       1,158          3% 
                                          ---------  ----------             
    Total Printing                            9,226       9,279         (1)%
                                          ---------  ----------             
Corporate Investments                             5           6        (17)%
                                          ---------  ----------             
    Total segments                           25,117      23,742          6% 
                                          ---------  ----------             
Intersegment net revenue eliminations and                                   
 other(b)                                       (48)         92         NM  
                                          ---------  ----------             
Total net revenue                         $  25,069  $   23,834          5% 
                                          =========  ==========             
                                                                            
(a) Effective at the beginning of its first quarter of fiscal year 2017, HP 
    implemented an organizational change to align its business unit         
    financial reporting more closely with its current business structure.   
    The organizational change resulted in transfer of a portion of LaserJet 
    printers from Commercial to Consumer within the Printing segment. HP    
    reflected this change to its business unit information in prior         
    reporting periods on an as-if basis which resulted in reclassification  
    of revenues between the Commercial and Consumer business units of       
    Printing. The reporting change had no impact to previously reported     
    segment net revenue, consolidated net revenue, earnings from continuing 
    operations, net earnings or net earnings per share.                     
                                                                            
(b) "NM"- Not Meaningful.                                                   
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                    SEGMENT OPERATING MARGIN SUMMARY DATA                   
                                 (Unaudited)                                
                                                                            
                                                               Change in    
                                                               Operating    
                                 Three months ended           Margin (pts)  
                          -------------------------------  -----------------
                          April 30, January 31, April 30,                   
                             2017       2017       2016       Q/Q      Y/Y  
                          --------- ----------- ---------  -------- --------
Segment operating                                                           
 margin:(a)                                                                 
                                                              (0.6)    (0.3)
 Personal Systems              3.2%        3.8%      3.5%       pts      pts
 Printing                     17.4%       16.0%     17.3%   1.4 pts  0.1 pts
 Corporate Investments(b)        NM          NM        NM        NM       NM
                                                                       (0.5)
  Total segments               8.4%        7.9%      8.9%   0.5 pts      pts
                                                                            
(a) Effective at the beginning of its first quarter of fiscal year 2017, HP 
    implemented an organizational change to align its business unit         
    financial reporting more closely with its current business structure.   
    The organizational change resulted in transfer of a portion of LaserJet 
    printers from Commercial to Consumer within the Printing segment. HP    
    reflected this change to its business unit information in prior         
    reporting periods on an as-if basis which resulted in reclassification  
    of revenues between the Commercial and Consumer business units of       
    Printing. The reporting change had no impact to previously reported     
    segment net revenue, consolidated net revenue, earnings from continuing 
    operations, net earnings or net earnings per share.                     
                                                                            
(b) "NM"- Not Meaningful.                                                   
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                CALCULATION OF DILUTED NET EARNINGS PER SHARE               
                                 (Unaudited)                                
                   (In millions, except per share amounts)                  
                                                                            
                                                  Three months ended        
                                         -----------------------------------
                                          April 30,  January 31,  April 30, 
                                             2017        2017        2016   
                                         ----------- ----------- -----------
Numerator:                                                                  
  GAAP net earnings from continuing                                         
   operations                            $       559 $       611 $       660
                                         =========== =========== ===========
  Non-GAAP net earnings                  $       685 $       646 $       702
                                         =========== =========== ===========
                                                                            
Denominator:                                                                
  Weighted-average shares used to                                           
   compute basic net earnings per share        1,688       1,704       1,720
  Dilutive effect of employee stock                                         
   plans(a)                                       21          17          11
                                         ----------- ----------- -----------
  Weighted-average shares used to                                           
   compute diluted net earnings per                                         
   share                                       1,709       1,721       1,731
                                         =========== =========== ===========
                                                                            
GAAP diluted net earnings per share from                                    
 continuing operations                   $      0.33 $      0.36 $      0.38
                                         =========== =========== ===========
Non-GAAP diluted net earnings per share  $      0.40 $      0.38 $      0.41
                                         =========== =========== ===========
                                                                            
(a) Includes any dilutive effect of restricted stock units, stock options   
    and performance-based awards.                                           
                                                                            
                                                                            
                                                                            
                          HP INC. AND SUBSIDIARIES                          
                CALCULATION OF DILUTED NET EARNINGS PER SHARE               
                                 (Unaudited)                                
                   (In millions, except per share amounts)                  
                                                                            
                                                  Six months ended April 30,
                                                 ---------------------------
                                                      2017          2016    
                                                 ------------- -------------
Numerator:                                                                  
  GAAP net earnings from continuing operations   $       1,170 $       1,310
                                                 ============= =============
  Non-GAAP net earnings                          $       1,331 $       1,347
                                                 ============= =============
                                                                            
Denominator:                                                                
  Weighted-average shares used to compute basic                             
   net earnings per share                                1,696         1,748
  Dilutive effect of employee stock plans(a)                20            10
                                                 ------------- -------------
  Weighted-average shares used to compute                                   
   diluted net earnings per share                        1,716         1,758
                                                 ============= =============
                                                                            
GAAP diluted net earnings per share from                                    
 continuing operations                           $        0.68 $        0.75
                                                 ============= =============
Non-GAAP diluted net earnings per share          $        0.78 $        0.77
                                                 ============= =============
                                                                            
(a) Includes any dilutive effect of restricted stock units, stock options   
    and performance-based awards.                                           
                                                                            
                                                                            

Use of non-GAAP financial measures
To supplement HP's consolidated condensed financial statements presented on a GAAP basis, HP provides net revenue on a constant currency basis, non-GAAP operating margin, non-GAAP tax rate, non-GAAP net earnings, non-GAAP diluted net earnings per share and gross cash. HP also provides forecasts of non-GAAP diluted net earnings per share.

These non-GAAP financial measures are not computed in accordance with, or as an alternative to, GAAP in the United States. Reconciliations of each of these non-GAAP financial measures to GAAP information are included in the tables above or elsewhere in the materials accompanying this news release.

Use and economic substance of non-GAAP financial measures
Net revenue on a constant currency basis assumes no change in the foreign currency exchange rate from the prior-year period. Non-GAAP operating margin is defined to exclude the effects of any amounts relating to restructuring and other charges, acquisition-related charges, defined benefit plan settlement charges, amortization of intangible assets and non-operating retirement-related credits/(charges). Non-GAAP net earnings and non-GAAP diluted net earnings per share consist of net earnings from continuing operations or diluted net earnings per share from continuing operations excluding those same charges and net tax indemnifications. In addition, non-GAAP net earnings and non-GAAP diluted net earnings per share are adjusted by the amount of additional taxes or tax benefits associated with each non-GAAP item and other tax benefits or charges as a consequence of the separation of Hewlett Packard Enterprise Company from HP Inc. (the "Separation"). HP's management uses these non-GAAP financial measures for purposes of evaluating HP's historical and prospective financial performance, as well as HP's performance relative to its competitors. HP's management also uses these non-GAAP measures to further its own understanding of HP's segment operating performance. HP believes that excluding the items mentioned above from these non-GAAP financial measures allows HP's management to better understand HP's consolidated financial performance in relation to the operating results of HP's segments, as HP's management does not believe that the excluded items are reflective of ongoing operating results. More specifically, HP's management excludes each of those items mentioned above for the following reasons:

Gross cash is a non-GAAP measure that is defined as cash and cash equivalents plus short-term investments and certain long-term investments that may be liquidated within 90 days pursuant to the terms of existing put options or similar rights. HP's management uses gross cash for the purpose of determining the amount of cash available for investment in HP's businesses, repurchasing stock and other purposes. HP's management also uses gross cash to evaluate HP's historical and prospective liquidity. Because gross cash includes liquid assets that are not included in GAAP cash and cash equivalents, HP believes that gross cash provides a helpful assessment of HP's liquidity.

Material limitations associated with use of non-GAAP financial measures
These non-GAAP financial measures may have limitations as analytical tools, and these measures should not be considered in isolation or as a substitute for analysis of HP's results as reported under GAAP. Some of the limitations in relying on these non-GAAP financial measures are:

Compensation for limitations associated with use of non-GAAP financial measures
HP compensates for the limitations on its use of non-GAAP financial measures by relying primarily on its GAAP results and using non-GAAP financial measures only supplementally. HP also provides robust and detailed reconciliations of each non-GAAP financial measure to its most directly comparable GAAP measure within this news release and in other written materials that include these non-GAAP financial measures, and HP encourages investors to review those reconciliations carefully.

Usefulness of non-GAAP financial measures to investors
HP believes that providing net revenue on a constant currency basis, non-GAAP operating margin, non-GAAP tax rate, non-GAAP net earnings, non-GAAP diluted net earnings per share and gross cash to investors in addition to the related GAAP financial measures provides investors with greater transparency to the information used by HP's management in its financial and operational decision making and allows investors to see HP's results "through the eyes" of management. HP further believes that providing this information better enables HP's investors to understand HP's operating performance and financial condition and to evaluate the efficacy of the methodology and information used by HP's management to evaluate and measure such performance and financial condition. Disclosure of these non-GAAP financial measures also facilitates comparisons of HP's operating performance with the performance of other companies in HP's industry that supplement their GAAP results with non-GAAP financial measures that may be calculated in a similar manner.

© Copyright 2017 HP Development Company, L.P. The information contained herein is subject to change without notice. The only warranties for HP Inc. products and services are set forth in the express warranty statements accompanying such products and services. Nothing herein should be construed as constituting an additional warranty. HP Inc. shall not be liable for technical or editorial errors or omissions contained herein.

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