Analysis of Reportable Segments
HP Inc. operates in 3 segments: Personal Systems; Printing; and Corporate Investments.
Segment Profit Margin
HP Inc., profit margin by reportable segment
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | |
|---|---|---|---|---|---|---|
| Personal Systems | 3.75% | 3.63% | 3.83% | 3.38% | 3.70% | 2.96% |
| Printing | 15.97% | 16.81% | 17.13% | 18.20% | 18.21% | 16.31% |
| Corporate Investments | -1,640.00% | -1,087.50% | -1,400.00% | -2,092.59% | -65.89% | -983.33% |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
The segment profit margin analysis reveals a stark contrast in profitability and stability between the company's core business units and its investment arm over the six-year period ending October 31, 2018. While the printing business serves as the primary driver of high-margin returns, the personal systems division operates on significantly thinner margins, and corporate investments consistently yield substantial negative returns.
- Personal Systems
- Profit margins for this segment remained relatively stable and low throughout the period. After an initial increase from 2.96% in 2013 to 3.70% in 2014, the margin fluctuated within a narrow band between 3.38% and 3.83%. The period ended with a margin of 3.75% in 2018, indicating a consistent but low-margin operational profile.
- Printing
- This segment demonstrated the highest level of profitability but experienced a gradual downward trend after 2014. Margins peaked at 18.21% in 2014 and remained stable through 2015 at 18.20%, before entering a steady decline to 17.13% in 2016, 16.81% in 2017, and finally 15.97% in 2018.
- Corporate Investments
- The corporate investments segment is characterized by extreme volatility and persistent negative margins. The values fluctuate aggressively, ranging from a high of -65.89% in 2014 to a low of -2,092.59% in 2015. This segment concludes the period with a margin of -1,640.00% in 2018, reflecting significant and inconsistent losses relative to its scale.
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Segment Profit Margin: Personal Systems
HP Inc.; Personal Systems; segment profit margin calculation
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Earnings from operations | 1,411) | 1,213) | 1,150) | 1,064) | 1,270) | 949) |
| Net revenue | 37,661) | 33,374) | 29,987) | 31,469) | 34,303) | 32,071) |
| Segment Profitability Ratio | ||||||
| Segment profit margin1 | 3.75% | 3.63% | 3.83% | 3.38% | 3.70% | 2.96% |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 2018 Calculation
Segment profit margin = 100 × Earnings from operations ÷ Net revenue
= 100 × 1,411 ÷ 37,661 = 3.75%
The Personal Systems segment exhibited a general upward trajectory in operational earnings and net revenue between fiscal years 2013 and 2018, characterized by a period of volatility followed by sustained growth in the latter years.
- Net Revenue Trends
- Net revenue demonstrated a fluctuating pattern, starting at US$32,071 million in 2013 and reaching a period high of US$37,661 million by 2018. A contraction was observed between 2014 and 2016, with revenue declining from US$34,303 million to a low of US$29,987 million, before recovering significantly in 2017 and 2018.
- Earnings from Operations
- Operational earnings grew from US$949 million in 2013 to US$1,411 million in 2018. While a dip occurred in 2015, where earnings fell to US$1,064 million, the segment achieved consistent year-over-year growth from 2016 through 2018, indicating an improvement in absolute profitability.
- Segment Profit Margin Analysis
- The segment profit margin saw a significant initial expansion from 2.96% in 2013 to 3.70% in 2014. Following this increase, the margin remained relatively stable, oscillating within a narrow range between 3.38% and 3.83%. This stability suggests a consistent capacity to manage operating expenses in relation to revenue fluctuations, ending the period at 3.75% in 2018.
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Segment Profit Margin: Printing
HP Inc.; Printing; segment profit margin calculation
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Earnings from operations | 3,323) | 3,161) | 3,128) | 3,865) | 4,185) | 3,890) |
| Net revenue | 20,805) | 18,801) | 18,260) | 21,232) | 22,979) | 23,854) |
| Segment Profitability Ratio | ||||||
| Segment profit margin1 | 15.97% | 16.81% | 17.13% | 18.20% | 18.21% | 16.31% |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 2018 Calculation
Segment profit margin = 100 × Earnings from operations ÷ Net revenue
= 100 × 3,323 ÷ 20,805 = 15.97%
The Printing segment experienced a period of contraction in both revenue and operational earnings between 2013 and 2016, followed by a recovery in top-line figures and operational income starting in 2017.
- Revenue and Earnings Trends
- Net revenue exhibited a steady decline from 2013 to 2016, decreasing from US$ 23,854 million to US$ 18,260 million. Earnings from operations followed a similar pattern after an initial peak of US$ 4,185 million in 2014, reaching a low of US$ 3,128 million in 2016. A reversal of this trend occurred between 2017 and 2018, with net revenue increasing to US$ 20,805 million and earnings from operations rising to US$ 3,323 million.
- Segment Profit Margin Performance
- The segment profit margin showed an initial improvement, rising from 16.31% in 2013 to a peak of 18.21% in 2014. Following this peak, the margin entered a consistent decline over the subsequent four years, falling to 17.13% in 2016, 16.81% in 2017, and ending at 15.97% in 2018.
- Analysis of Margin Compression
- A notable divergence is observed in 2018. Despite the increase in both net revenue and earnings from operations, the profit margin declined to its lowest point in the analyzed period. This indicates that the growth in revenue was achieved at a lower rate of profitability, suggesting increased operational costs or a shift toward lower-margin product mixes during the recovery phase.
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Segment Profit Margin: Corporate Investments
HP Inc.; Corporate Investments; segment profit margin calculation
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Earnings from operations | (82) | (87) | (98) | (565) | (199) | (236) |
| Net revenue | 5) | 8) | 7) | 27) | 302) | 24) |
| Segment Profitability Ratio | ||||||
| Segment profit margin1 | -1,640.00% | -1,087.50% | -1,400.00% | -2,092.59% | -65.89% | -983.33% |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 2018 Calculation
Segment profit margin = 100 × Earnings from operations ÷ Net revenue
= 100 × -82 ÷ 5 = -1,640.00%
The Corporate Investments segment consistently operated at a loss from 2013 through 2018, functioning as a cost center rather than a profit-generating unit. While the absolute value of operating losses showed a general trend toward stabilization in the latter years of the period, the segment's profitability metrics remained severely negative due to an extremely low and volatile revenue base.
- Earnings from Operations
- Operating losses were persistent throughout the six-year period. A significant increase in losses occurred in 2015, reaching a peak deficit of 565 million USD. However, a recovery trend followed from 2016 onward, with losses narrowing from 98 million USD in 2016 to 82 million USD by 2018, indicating a reduction in the operational cost burden associated with these investments.
- Net Revenue Trends
- Revenue within this segment was characterized by extreme instability and insignificance relative to operating expenses. A notable outlier occurred in 2014, where revenue spiked to 302 million USD. Following this peak, revenue collapsed to minimal levels, ending the period at 5 million USD in 2018. This suggests that the segment does not rely on steady commercial income.
- Segment Profit Margin Analysis
- The segment profit margin exhibited extreme volatility and deep negative values, reflecting the disproportion between minimal revenue and substantial operating costs. The margin reached its most severe point in 2015 at -2,092.59%, coinciding with the peak in operating losses and a sharp drop in revenue. The only period of relative stability occurred in 2014, when the margin improved to -65.89% due to the temporary surge in net revenue. By 2018, despite the reduction in absolute operating losses, the margin widened again to -1,640.00% as revenue continued to dwindle.
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Segment Return on Assets (Segment ROA)
HP Inc., ROA by reportable segment
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | |
|---|---|---|---|---|---|---|
| Personal Systems | 10.49% | 9.98% | 10.76% | 11.16% | 10.49% | 7.99% |
| Printing | 24.24% | 29.97% | 31.41% | 42.97% | 41.59% | 36.34% |
| Corporate Investments | -1,640.00% | -2,900.00% | -9,800.00% | -1,008.93% | -585.29% | -191.87% |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
The segment return on assets (ROA) reveals a significant divergence in performance and asset efficiency between the primary operating divisions and the corporate investment segment. While the operational segments maintain positive returns, the corporate investment portfolio is characterized by extreme volatility and substantial negative returns.
- Personal Systems
- A trajectory of relative stability is observed in this segment. After an initial climb from 7.99% in 2013 to a peak of 11.16% in 2015, the ROA remained consistent, fluctuating slightly to finish at 10.49% in 2018. This indicates a steady and predictable level of asset utilization efficiency over the analyzed period.
- Printing
- This segment demonstrated the highest overall efficiency, though it experienced a notable reversal in trend. ROA grew from 36.34% in 2013 to a peak of 42.97% in 2015, after which a steady decline occurred, reaching 24.24% by 2018. Despite this downward trend over the final three years, the segment's return on assets remained substantially higher than that of the Personal Systems division.
- Corporate Investments
- Returns within this segment were consistently and severely negative throughout the period. A sharp deterioration is evident between 2013 and 2016, where the ROA reached a critical low of -9,800.00%. While a relative improvement occurred in 2017 and 2018, the figures remained deeply negative, ending at -1,640.00%, suggesting significant losses or liabilities relative to the assets allocated to this segment.
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Segment ROA: Personal Systems
HP Inc.; Personal Systems; segment ROA calculation
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Earnings from operations | 1,411) | 1,213) | 1,150) | 1,064) | 1,270) | 949) |
| Assets | 13,447) | 12,156) | 10,686) | 9,534) | 12,104) | 11,870) |
| Segment Profitability Ratio | ||||||
| Segment ROA1 | 10.49% | 9.98% | 10.76% | 11.16% | 10.49% | 7.99% |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 2018 Calculation
Segment ROA = 100 × Earnings from operations ÷ Assets
= 100 × 1,411 ÷ 13,447 = 10.49%
The Personal Systems segment exhibited a general trajectory of growth in operating earnings and asset expansion between 2013 and 2018, characterized by a period of volatility in asset efficiency during the mid-cycle.
- Earnings from Operations
- Operating earnings grew from 949 million US dollars in 2013 to 1,411 million US dollars by 2018. While a contraction occurred in 2015, where earnings fell to 1,064 million US dollars, the segment maintained a recovery trend thereafter, achieving its highest operating result in the final year of the analyzed period.
- Asset Base Trends
- The asset base showed significant fluctuations, starting at 11,870 million US dollars in 2013 and peaking at 13,447 million US dollars in 2018. A notable reduction in assets was observed in 2015, with the value dropping to 9,534 million US dollars, before entering a phase of consistent annual increases through 2018.
- Segment Return on Assets (ROA)
- The Segment ROA improved from 7.99% in 2013 to a peak of 11.16% in 2015. This peak occurred despite a decline in absolute operating earnings, driven primarily by the disproportionate decrease in the asset base during that year. Following 2015, the ROA experienced a slight correction, dipping to 9.98% in 2017 before returning to 10.49% in 2018, indicating a stabilization of asset productivity around the 10% threshold.
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Segment ROA: Printing
HP Inc.; Printing; segment ROA calculation
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Earnings from operations | 3,323) | 3,161) | 3,128) | 3,865) | 4,185) | 3,890) |
| Assets | 13,706) | 10,548) | 9,959) | 8,994) | 10,063) | 10,705) |
| Segment Profitability Ratio | ||||||
| Segment ROA1 | 24.24% | 29.97% | 31.41% | 42.97% | 41.59% | 36.34% |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 2018 Calculation
Segment ROA = 100 × Earnings from operations ÷ Assets
= 100 × 3,323 ÷ 13,706 = 24.24%
The Printing segment demonstrated a cyclical trajectory in asset efficiency, characterized by a significant peak in profitability relative to assets in 2015 followed by a sustained decline through 2018. The overall trend indicates a transition from high asset productivity to a period where asset growth significantly outpaced operational earnings growth.
- Earnings from Operations
- Operational earnings reached a peak of US$ 4,185 million in 2014 before entering a period of volatility. A notable contraction occurred in 2016, with earnings dropping to US$ 3,128 million. While a gradual recovery was observed in 2017 and 2018, with earnings rising to US$ 3,323 million, the levels remained significantly below the 2014 peak.
- Asset Base Evolution
- The asset base followed an inverse trend to earnings in the early period, decreasing from US$ 10,705 million in 2013 to a low of US$ 8,994 million in 2015. Subsequently, assets expanded consistently, culminating in a sharp increase to US$ 13,706 million by 2018. This represents a substantial expansion of the segment's resource base during the final three years of the analyzed period.
- Segment ROA Analysis
- The Segment ROA climbed from 36.34% in 2013 to a maximum of 42.97% in 2015, driven by the simultaneous optimization of operational earnings and a reduction in total assets. However, from 2016 onward, a consistent downward trend emerged, with the ROA falling to 24.24% by 2018. This decline is primarily attributed to the rapid inflation of the asset base in 2018, which occurred while operational earnings failed to regain their previous historical highs.
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Segment ROA: Corporate Investments
HP Inc.; Corporate Investments; segment ROA calculation
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Earnings from operations | (82) | (87) | (98) | (565) | (199) | (236) |
| Assets | 5) | 3) | 1) | 56) | 34) | 123) |
| Segment Profitability Ratio | ||||||
| Segment ROA1 | -1,640.00% | -2,900.00% | -9,800.00% | -1,008.93% | -585.29% | -191.87% |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 2018 Calculation
Segment ROA = 100 × Earnings from operations ÷ Assets
= 100 × -82 ÷ 5 = -1,640.00%
The Corporate Investments segment has consistently operated at a loss over the analyzed six-year period, characterized by significant volatility in its asset base and resulting extreme fluctuations in the Return on Assets (ROA).
- Operational Earnings Performance
- Earnings from operations remained negative throughout the entire period. A peak loss of 565 million US dollars was recorded in 2015. However, from 2016 through 2018, a gradual recovery is observed, with operational losses narrowing from 98 million US dollars to 82 million US dollars.
- Asset Base Trends
- A substantial reduction in the asset base occurred between 2013 and 2016. Assets declined from 123 million US dollars to a low of 1 million US dollars in 2016. Since 2016, the asset levels have remained marginally low, fluctuating between 1 million and 5 million US dollars.
- Segment ROA Interpretation
- The Segment ROA exhibits extreme negative volatility, primarily driven by the shrinking denominator of total assets. While losses were high in 2015, the ROA reached its most severe point in 2016 at negative 9,800%, as the asset base contracted to 1 million US dollars against a 98 million US dollar loss. Although the ROA improved to negative 1,640% by 2018, it remains deeply negative due to the persistence of operational losses on a minimal asset base.
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Segment Asset Turnover
HP Inc., asset turnover by reportable segment
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | |
|---|---|---|---|---|---|---|
| Personal Systems | 2.80 | 2.75 | 2.81 | 3.30 | 2.83 | 2.70 |
| Printing | 1.52 | 1.78 | 1.83 | 2.36 | 2.28 | 2.23 |
| Corporate Investments | 1.00 | 2.67 | 7.00 | 0.48 | 8.88 | 0.20 |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
The analysis of segment asset turnover from 2013 to 2018 indicates distinct operational patterns across the reporting units, with varying levels of stability and efficiency in asset utilization.
- Personal Systems
- This segment demonstrated a relatively stable ability to generate revenue from its asset base, with ratios generally fluctuating within a narrow range. A notable peak in efficiency occurred in 2015, where the ratio reached 3.30, before returning to a consistent baseline of approximately 2.80 by the end of the period.
- Printing
- A clear downward trajectory is observed in the Printing segment following 2015. After reaching a peak turnover ratio of 2.36 in 2015, the ratio declined steadily each subsequent year, reaching 1.52 by 2018. This trend indicates a progressive reduction in the efficiency of asset utilization to generate revenue.
- Corporate Investments
- The Corporate Investments segment exhibited extreme volatility throughout the analyzed period. Turnover ratios fluctuated erratically, with significant spikes in 2014 (8.88) and 2016 (7.00) contrasted by sharp declines in 2013 (0.20) and 2015 (0.48). Such variance is characteristic of non-operational investment portfolios where asset bases or revenues may shift abruptly.
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Segment Asset Turnover: Personal Systems
HP Inc.; Personal Systems; segment asset turnover calculation
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net revenue | 37,661) | 33,374) | 29,987) | 31,469) | 34,303) | 32,071) |
| Assets | 13,447) | 12,156) | 10,686) | 9,534) | 12,104) | 11,870) |
| Segment Activity Ratio | ||||||
| Segment asset turnover1 | 2.80 | 2.75 | 2.81 | 3.30 | 2.83 | 2.70 |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 2018 Calculation
Segment asset turnover = Net revenue ÷ Assets
= 37,661 ÷ 13,447 = 2.80
Between 2013 and 2018, the Personal Systems segment experienced fluctuations in revenue and asset base, resulting in a variable asset turnover ratio that eventually stabilized.
- Net Revenue Trends
- Revenue exhibited a volatile trajectory, increasing from 32,071 million in 2013 to 34,303 million in 2014, before entering a two-year decline that reached a low of 29,987 million in 2016. A subsequent recovery occurred, with revenue growing consistently to reach 37,661 million by October 31, 2018.
- Asset Base Evolution
- The segment's assets remained stable through 2014 but underwent a significant contraction in 2015, dropping to 9,534 million. Following this trough, assets grew steadily over the next three years, concluding the period at 13,447 million in 2018.
- Asset Turnover Analysis
- The segment asset turnover ratio reached a peak of 3.30 in 2015. This spike was primarily driven by the sharp reduction in assets rather than an increase in revenue, as revenue had actually declined during the same period. From 2016 to 2018, the ratio normalized and stabilized between 2.75 and 2.81, suggesting that asset growth was scaled proportionally to the recovery in net revenue.
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Segment Asset Turnover: Printing
HP Inc.; Printing; segment asset turnover calculation
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net revenue | 20,805) | 18,801) | 18,260) | 21,232) | 22,979) | 23,854) |
| Assets | 13,706) | 10,548) | 9,959) | 8,994) | 10,063) | 10,705) |
| Segment Activity Ratio | ||||||
| Segment asset turnover1 | 1.52 | 1.78 | 1.83 | 2.36 | 2.28 | 2.23 |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 2018 Calculation
Segment asset turnover = Net revenue ÷ Assets
= 20,805 ÷ 13,706 = 1.52
The Printing segment experienced a period of fluctuating operational efficiency between 2013 and 2018, characterized by an initial improvement in asset utilization followed by a sustained decline in turnover ratios.
- Net Revenue Performance
- A downward trend in net revenue was observed from 2013 to 2016, with values falling from US$ 23,854 million to a low of US$ 18,260 million. This decline was followed by a partial recovery over the next two years, with revenue increasing to US$ 20,805 million by October 31, 2018.
- Asset Base Trajectory
- Segment assets initially contracted, decreasing from US$ 10,705 million in 2013 to US$ 8,994 million in 2015. However, a reversal occurred after 2015, leading to a steady increase in assets that accelerated significantly in 2018, reaching US$ 13,706 million.
- Segment Asset Turnover Analysis
- The asset turnover ratio initially trended upward, rising from 2.23 in 2013 to a peak of 2.36 in 2015. This indicates that during the early part of the period, assets were reduced at a rate that offset the decline in revenue, thereby increasing efficiency. Conversely, from 2016 to 2018, the ratio declined sharply and consistently, ending at 1.52. This deterioration suggests that the subsequent expansion of the asset base was not matched by proportional growth in revenue, leading to lower overall asset productivity.
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Segment Asset Turnover: Corporate Investments
HP Inc.; Corporate Investments; segment asset turnover calculation
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | |
|---|---|---|---|---|---|---|
| Selected Financial Data (US$ in millions) | ||||||
| Net revenue | 5) | 8) | 7) | 27) | 302) | 24) |
| Assets | 5) | 3) | 1) | 56) | 34) | 123) |
| Segment Activity Ratio | ||||||
| Segment asset turnover1 | 1.00 | 2.67 | 7.00 | 0.48 | 8.88 | 0.20 |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
1 2018 Calculation
Segment asset turnover = Net revenue ÷ Assets
= 5 ÷ 5 = 1.00
The Corporate Investments segment is characterized by extreme volatility in both revenue generation and asset utilization over the analyzed six-year period. The segment transitioned from a period of erratic fluctuations to a state of minimal operational scale by the end of the term.
- Net Revenue Trends
- Revenue experienced a significant outlier peak in 2014, reaching 302 million US dollars, compared to 24 million US dollars in 2013. Following this spike, revenue decreased sharply to 27 million US dollars in 2015 and continued a downward trajectory, concluding at 5 million US dollars in 2018.
- Asset Base Contraction
- A substantial reduction in the asset base was observed over the period. Assets decreased from 123 million US dollars in 2013 to a minimum of 1 million US dollars in 2016, before slightly increasing to 5 million US dollars by 2018. This trend indicates a significant contraction of the investment portfolio associated with this segment.
- Segment Asset Turnover Analysis
- The asset turnover ratio exhibited high instability, reflecting the disproportionate relationship between revenue and assets. A peak ratio of 8.88 was recorded in 2014, driven by the convergence of peak revenue and a reduced asset base. A secondary spike to 7.00 occurred in 2016, but the ratio ultimately moderated to 1.00 by 2018 as both revenue and assets reached negligible levels.
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Net revenue
HP Inc., net revenue by reportable segment
US$ in millions
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | |
|---|---|---|---|---|---|---|
| Personal Systems | 37,661) | 33,374) | 29,987) | 31,469) | 34,303) | 32,071) |
| Printing | 20,805) | 18,801) | 18,260) | 21,232) | 22,979) | 23,854) |
| Enterprise Group | —) | —) | —) | 27,907) | 27,814) | 28,183) |
| Enterprise Services | —) | —) | —) | 19,806) | 22,398) | 23,520) |
| Software | —) | —) | —) | 3,458) | 3,933) | 3,913) |
| HP Financial Services | —) | —) | —) | 3,216) | 3,498) | 3,629) |
| Corporate Investments | 5) | 8) | 7) | 27) | 302) | 24) |
| Total | 58,471) | 52,183) | 48,254) | 107,115) | 115,227) | 115,194) |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
Total net revenue exhibited a significant structural shift between 2015 and 2016, characterized by a sharp contraction followed by a period of consistent growth. This transition is primarily attributable to the removal of several enterprise-related revenue streams after the 2015 fiscal year.
- Personal Systems Performance
- Revenue within this segment demonstrated volatility in the early period, peaking at US$ 34,303 million in 2014 before declining to a low of US$ 29,987 million in 2016. Following this trough, a robust recovery was observed, with revenue increasing to US$ 33,374 million in 2017 and reaching US$ 37,661 million by 2018.
- Printing Segment Trends
- A sustained downward trend was observed from 2013 to 2016, with net revenue falling from US$ 23,854 million to US$ 18,260 million. This decline was reversed in the final two years of the period, with revenue recovering to US$ 20,805 million by October 31, 2018.
- Enterprise Segment Discontinuation
- The Enterprise Group, Enterprise Services, Software, and HP Financial Services contributed substantially to the top line through 2015. For instance, the Enterprise Group reported US$ 27,907 million in 2015. The total absence of reported revenue for these four categories starting in 2016 indicates a fundamental reorganization of reportable segments.
- Aggregate Revenue Trajectory
- Overall net revenue remained relatively flat between 2013 and 2014, hovering around US$ 115 billion. A significant drop occurred in 2016, where total revenue fell to US$ 48,254 million due to the aforementioned structural changes. Post-2016, a positive growth trajectory was established, with total revenue increasing to US$ 52,183 million in 2017 and US$ 58,471 million in 2018.
- Corporate Investments
- Revenue from corporate investments remained immaterial relative to core operations, peaking at US$ 302 million in 2014 before declining to US$ 5 million by 2018.
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Earnings from operations
HP Inc., earnings from operations by reportable segment
US$ in millions
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | |
|---|---|---|---|---|---|---|
| Personal Systems | 1,411) | 1,213) | 1,150) | 1,064) | 1,270) | 949) |
| Printing | 3,323) | 3,161) | 3,128) | 3,865) | 4,185) | 3,890) |
| Enterprise Group | —) | —) | —) | 3,981) | 4,008) | 4,301) |
| Enterprise Services | —) | —) | —) | 1,051) | 803) | 679) |
| Software | —) | —) | —) | 760) | 872) | 866) |
| HP Financial Services | —) | —) | —) | 349) | 389) | 399) |
| Corporate Investments | (82) | (87) | (98) | (565) | (199) | (236) |
| Total | 4,652) | 4,287) | 4,180) | 10,505) | 11,328) | 10,848) |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
The operational earnings data reflects a fundamental structural transformation occurring between 2015 and 2016. Total earnings from operations experienced a significant contraction, declining from $10,505 million in 2015 to $4,180 million in 2016. This decline is attributable to the removal of several enterprise-oriented reportable segments from the consolidated earnings profile after October 31, 2015.
- Personal Systems Trend
- A consistent upward trajectory is observed in the Personal Systems segment. Earnings grew from $949 million in 2013 to $1,411 million in 2018, representing a steady increase in operational profitability over the six-year period.
- Printing Segment Analysis
- The Printing segment remained the largest contributor to operational earnings throughout the analyzed period. However, a general downward trend is evident from a peak of $4,185 million in 2014 to $3,323 million in 2018, despite a slight recovery between 2017 and 2018.
- Impact of Structural Separation
- The disappearance of the Enterprise Group, Enterprise Services, Software, and HP Financial Services segments after 2015 marks a significant shift in the business model. Prior to 2016, these segments collectively contributed several billion dollars to total earnings, specifically with the Enterprise Group providing the highest single-segment contribution in 2013 at $4,301 million.
- Corporate Investments Performance
- Corporate Investments consistently reported negative earnings, acting as a cost center. A peak deficit of $565 million was recorded in 2015, followed by a notable improvement and stabilization of losses, reaching $82 million by 2018.
Following the reorganization in 2016, total operational earnings stabilized and showed modest growth, rising from $4,180 million in 2016 to $4,652 million in 2018. This post-separation growth was primarily driven by the expanding profitability of Personal Systems and a recovery in the Printing segment.
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Assets
HP Inc., assets by reportable segment
US$ in millions
| Oct 31, 2018 | Oct 31, 2017 | Oct 31, 2016 | Oct 31, 2015 | Oct 31, 2014 | Oct 31, 2013 | |
|---|---|---|---|---|---|---|
| Personal Systems | 13,447) | 12,156) | 10,686) | 9,534) | 12,104) | 11,870) |
| Printing | 13,706) | 10,548) | 9,959) | 8,994) | 10,063) | 10,705) |
| Enterprise Group | —) | —) | —) | 33,499) | 27,236) | 30,858) |
| Enterprise Services | —) | —) | —) | 14,354) | 13,472) | 15,229) |
| Software | —) | —) | —) | 11,226) | 11,575) | 11,868) |
| HP Financial Services | —) | —) | —) | 13,093) | 13,529) | 12,011) |
| Corporate Investments | 5) | 3) | 1) | 56) | 34) | 123) |
| Corporate and unallocated assets | 7,464) | 10,206) | 8,364) | 16,126) | 15,193) | 13,012) |
| Total | 34,622) | 32,913) | 29,010) | 106,882) | 103,206) | 105,676) |
Based on: 10-K (reporting date: 2018-10-31), 10-K (reporting date: 2017-10-31), 10-K (reporting date: 2016-10-31), 10-K (reporting date: 2015-10-31), 10-K (reporting date: 2014-10-31), 10-K (reporting date: 2013-10-31).
The total asset base experienced a significant structural contraction starting in 2016, falling from a range of 103,206 million to 106,882 million between 2013 and 2015, to 29,010 million in 2016. This sharp decline is primarily attributed to the removal of several major reportable segments from the consolidated reporting after October 31, 2015.
- Core Segment Performance: Personal Systems and Printing
- Both Personal Systems and Printing followed a similar trajectory, characterized by a decline in assets reaching a trough in 2015. Personal Systems assets decreased from 12,104 million in 2014 to 9,534 million in 2015, before initiating a steady recovery to 13,447 million by 2018. Printing assets followed a nearly identical pattern, dropping to 8,994 million in 2015 and subsequently growing to 13,706 million by 2018. By the end of the analyzed period, Printing assets marginally exceeded those of Personal Systems.
- Enterprise Segment Divestiture
- A fundamental shift in the asset composition occurred after 2015, as the Enterprise Group, Enterprise Services, Software, and HP Financial Services segments were no longer reported. Prior to their removal, the Enterprise Group represented the largest asset allocation, peaking at 33,499 million in 2015. The absence of these segments explains the majority of the reduction in total assets from 2015 to 2016.
- Corporate and Unallocated Assets
- Corporate and unallocated assets showed volatility, increasing from 13,012 million in 2013 to a peak of 16,126 million in 2015. Following the restructuring in 2016, these assets dropped sharply to 8,364 million, eventually settling at 7,464 million in 2018. Corporate Investments remained immaterial throughout the period, declining from 123 million in 2013 to 5 million by 2018.
- Overall Asset Distribution Trend
- Post-2015, the asset concentration shifted heavily toward the remaining core operations. While the total asset base shrunk, the relative importance of Personal Systems and Printing grew, with both segments exhibiting positive growth trends from 2016 through 2018, indicating a strategic refocusing of the balance sheet on these two primary business lines.
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